03 March 2012

MCX IPO: Likely shares allocation for retail category (tentative)

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MCX IPO: How many shares should retail category expect to get?

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Strategy: Philosophical questions but logical outcomes ::Kotak Securities (PDF link)

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily29022012.pdf

Strategy: Philosophical questions but logical outcomes
` Owners and beneficiaries of natural resources - we, the people of India
` Low cost of output for Indian citizens or revenue maximization for the
Government?
` Too many mistakes in the past: coal blocks, mines and spectrum; auction in
future
` Coal, minerals and telecom: nothing for free in future, and pay for the past,
as well

Senxex update by ICICI securities

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Previous Week : Sensex was down by 286.77 points for the week to settle at 17,636.80 levels.

Market traded choppy with high volatility as the key benchmark indices closed the week with second consecutive weekly losses. The market reacted adversely as slowdown in GDP growth to 6.1% in the third quarter of 2011-2012 fiscal marking a seventh successive quarter of slowdown. Nifty started the week on an extremely bearish note closing below 5300 levels on Monday's trade but managed to bounce back and spend the rest of the week broadly within Monday's bear candle's range of 5450-5268 levels. Foreign institutional investors (FIIs) continues to remain net buyers in the cash market taking total for 2012 to more then 33,000 crores (till March 1), as per provisional d! ata from the stock exchanges.

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DOWNGRADE United Phosphorus : Target Price: Rs 172 ::Emkay PDF link

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United Phosphorus

Reco: ACCUMULATE

CMP: Rs 142

Target Price: Rs 172

Downgrade to Accu on management’s lowered guidance

· UPL has revised its topline growth guidance downward from 35-40% to 25-30% due to extended winters in key markets like North America and Europe

· Q4FY12 may report muted revenue growth with PAT decline of ~27%. Muted revenue growth is despite ~8% currency benefit and 5-8% price increase in Q4FY12

· We have downgraded our FY12/FY13 est by 15.3%/13.8% to Rs13.6/Rs17.2. Consensus est was building 35% revenues growth in FY12 and also likely to be revised downward

· Despite attractive valuations of 8.3x FY13 est we expect stock to remain laggard. Downgrade to Accumulate from BUY with revised price target of Rs 172

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What is an ETF ? Kotak Securities explains..

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ETFs

An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. ETFs first came into existence in the USA in 1993. It took several years for them to attract public interest. But once they did, the volumes took off with a vengeance. About 60% of trading volumes on the American Stock Exchange are from ETFs. The most popular ETFs are QQQs (Cubes) based on the Nasdaq-100 Index, SPDRs (Spiders) based on the S&P 500 Index, iSHARES based on MSCI Indices and TRAHK (Tracks) based on the Hang Seng Index.

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India Strategy Assembly Elections: Will it break the political logjam? 􀂄 BofA Merrill Lynch,

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India Strategy
Assembly Elections: Will it
break the political logjam?
􀂄 Assembly elections: weak impact on markets
Over the next few weeks, India will have a series of assembly elections including
the politically important state of Uttar Pradesh (UP). The results of the elections
will be announced on March 6th. Unlike the result of the Lok Sabha elections
which have led to large swings in the market, assembly elections have historically
had a very low impact on equity markets. We think this time too markets are
unlikely to swing sharply on election day irrespective of the outcome of the
elections.
So why the assembly election results are important?
There are 2 reasons for this:
1. Confidence booster to Congress: The Congress over the past 18 months
has been hit by a series of corruption scandals and a perceived loss in
popularity. A good performance in the assembly elections will provide a
morale booster to the Congress party.
2. Improved numerical strength in Parliament: Congress hopes to be a
“king-maker” in UP and is widely expected to help a regional party (probably
Samajwadi Party) form the state government. The quid pro quo could be that
they provide unconditional support to the UPA Government at the Center.
This could help the UPA Government improve their razor thin majority. It may
be easier to push reforms in that case.
How will the parties fare in the assembly elections?
The good news for the Congress is that they have a very low base to contend with
in the 3 important states of UP, Punjab and Uttarakhand. BSP is the ruling party in
UP and BJP in Uttarakhand & Punjab with Congress being placed 4th in the UP
assembly polls last time. In the Lok Sabha elections, the Congress performed
better than the BJP in all these 3 states. Opinion polls indicate that Congress
should win the assembly elections in Punjab and Uttarakhand while it should do
better than the BJP in UP.

National Opinion Polls: UPA still losing grounds
Meanwhile India Today did their opinion poll on what would be the Lok Sabha
seat position if elections were held today. The Congress-led UPA continues to
lose ground. However, the negative news for BJP is that they are not gaining too
many seats. The gainers are the regional parties. If the opinion poll proves to be
correct, this could mean both the Congress-led UPA as well as the BJP-led NDA
will need to seek more coalition partners ahead of the next elections in 2014.

India Strategy March: An “Eventful” Month but oil as important 􀂄 BofA Merrill Lynch

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India Strategy
March: An “Eventful” Month
but oil as important
􀂄 Focus on the 3 events ….
Over the next couple of weeks, 3 events will be important for markets. Given the
sharp rally in markets, expectations are high and the market could be vulnerable
to a correction on any disappointment. However, price of oil may be as important
as these events in determining the market direction (and of course will affect two
of these events).

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PRE BUDGET NOTE - FEBRUARY 2012 :: Kotak Securities

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http://www.kotaksecurities.com/pdf/dmb/MorningInsight29022012.pdf

PRE BUDGET NOTE - FEBRUARY 2012
The Finance Minister will present the FY2012-13 budget in the backdrop of a
sharp rise in the fiscal deficit for 2011-12. Interest rates have risen sharply in
FY12 and budget provisions are expected to largely determine future
monetary actions, we opine. Thus, the FM's priority in the 2012-13 budget
will be fiscal rectitude, we believe. Revised FRBM targets may also be set for
the next few years. While the nominal GDP for FY12 will likely grow at the
budgeted pace, the composition between real growth and inflation is quite
different as compared to expectations. Improving the real GDP growth rates
will also invite the FM's attention.

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Reduce TRACTORS INDIA LTD (TIL) : TARGET PRICE: RS.310 :: Kotak Securities (PDF Link)

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http://www.kotaksecurities.com/pdf/dmb/MorningInsight28022012.pdf

TRACTORS INDIA LTD (TIL)
RECOMMENDATION: REDUCE
TARGET PRICE: RS.310
FY13E P/E: 8.5X
q TIL has been observing sluggish demand across power system and construction divisions. Muted public spending in various infrastructure
projects viz. roads, power, mining has been affecting company's business.
q Construction and mining division has been severely affected and have resulted in substantial increase in finished goods inventory. Working capital has been soaring through 9MFY12 on account of increasing debtor
days.
q Managements expects operating margins to remain under pressure over
the next two quarters due to 1) volatility in raw material prices 2) inability of the company take price hike on Caterpillar products.
q Demand in Material handling division (MHS) has been resilient through

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India Strategy: Mid-cap List Adding DITV and INFTC ::Morgan Stanley Research,

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Adding DITV and INFTC
We are adding Dish TV and Infotech Enterprise to
our Mid-cap list. Effectively, we are increasing the
number of stocks in our mid-cap list to 12 from 10.
Continue to favor stock picking
Our sector calls remain narrow given our view that
this is a stock-pickers’ market. We reiterate our
preference for domestic over global cyclicals.
Consumer Discretionary is our favored rate-sensitive
sector. We continue to choose mid-caps over large
caps given the valuation gap. Top avoids remain
Materials and SOE Banks.

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India Strategy: Mid-cap List Adding DITV and INFTC ::Morgan Stanley Research,

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Real Estate/Property - India 50 bps cut = 3-4% price cut; BofA Merrill Lynch,

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Real Estate/Property - India
50 bps cut = 3-4% price cut;
not enough to attract demand
􀂄 50 bps cut = 3-4% price cut only
Our economist expects a 50 bps rate cut in 2QCY12. Developers are holding
prices primarily hinged on this rate cycle turn for demand to return. However, our
analysis shows a 50 bps rate cut equates to mere 3-4% reduction in cost of
acquisition; which we believe will not be enough to attract demand.
Waiting for 100bps cut in FY13 might be too late
We believe, with poor cash flows, developers will disappoint the market on volume
and cash flows in FY13 also if they decide to wait out for demand to return once a
total of 100 bps is cut in FY13.

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GAIL (India): Not enough gas in the tank ::Kotak Securities (PDF link)

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily29022012.pdf

GAIL (India): Not enough gas in the tank
` Lower transmission volumes to reflect decline in domestic gas supply
` Downgrade to ADD with a revised SOTP-based target price of Rs435 (Rs485
previously)
` Revise earnings for lower gas transmission volumes and higher crude prices

United Phosphorus - Adverse weather killjoy; company update; Buy ::Edelweiss PDF link

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United Phosphorus (UNTP IN, INR 136, Buy)

Adverse weather conditions have delayed the start of cropping season in United Phosphorus’ (UNTP) key geographies viz Europe and the US. Management has, therefore, lowered revenue guidance for FY12 to 25-30% against 30-40% earlier. However, UNTP maintains that it will realize most of the lost sales of Q4FY12 in Q1FY13. As we are already at the lower end of the earlier revenue guidance, we have factored in only a slight cut in revenues for FY12 and FY13, while we maintain our EBITDA margin estimates; our EPS estimates are down 7% and 4% for FY12 and FY13, respectively. While lower revenue guidance is weighing on the stock price, we believe current valuations are attractive and, hence, maintain ‘BUY’ with a revised target price of INR177 (INR185 earlier).

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INITIATING COVERAGE- ‘BUY’ : MUTHOOT FINANCE LIMITED:: Hedge Research

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Business Summary
Muthoot Finance Limited (MFL) is India’s largest gold loan financing company (in terms of loan portfolio with an AUM of Rs.22694 crores) and a market share of 19.5% of the total gold loan market in India. At the end of 9MFY12, MFL had branch network and employee strength of 3480 and 23219 respectively.
Investment Rationale The gold loan market is generating a lot of goodwill with the fast changing perception of gold loans. Besides only 10% of the total gold loan stock in the country has found its way into the gold loan market thereby offering plenty of scope for its growth potential. MFL is a consummate proxy on the burgeoning gold loan market in India. It has generated ample experience and goodwill for over 7 decades, has a branch network of 3480 branches that is becoming of a large PSU bank and is the market leader with an AUM of Rs. 22694 crores and a market share of 19-20%. MFL has a host of customer engagement practices that generate strong goodwill. In addition to that it has also been diversifying its product offerings and geographical presenc. We have employed a weighted average valuation approach of determining our share target price of Rs.197. We have assigned 40% weights to our DCF and PBV targets with a 20% weight for the PE target. Our buying level of

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Strategy: Now for the hard work ::Kotak Securities (PDF link)

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily28022012.pdf

Strategy
Strategy: Now for the hard work
` Model Portfolio: High concentration of high-quality stocks notwithstanding
global liquidity
` Fiscal consolidation, though positive, is unlikely to be painless
` We expect the Government to target 4.7% GFD/GDP in FY2013
` Painful or not, the Government may have to bite the fiscal prudence bullet

LIC Housing Finance - Near term slip, medium term fillip; visit note; Hold ::Edelweiss PDF link

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LIC Housing Finance (LICHF IN, INR 254, Hold)

We met the LIC Housing Finance (LICHFL) management for its view on NHB’s clarification on the uniformity in lending rates circular. Since clarification makes uniformity mandatory for fresh disbursements (post October 19, 2011) and does not apply to special schemes, the management is awaiting the clarification for existing borrowers which is still under examination by NHB. We also wanted to understand if the company is on course to achieve its aggressive Q4FY12 guidance on margins (3%) and corporate developers disbursements (INR10bn). LICHFL’s NIMs are likely to settle much lower than the guided range due to rise in wholesale rate in Q4FY12 plus slower build up of high yielding corporate developer loan book. We maintain ‘HOLD’ with TP of INR275.

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Syndicate Bank : TP: ` 120 Accumulate ::Dolat Capital

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We had a meeting with the bank’s management (Mr. Basant Seth, present
CMD and Mr. M G Sanghvi, Chairman Designate); followings are the key
takeaways of the meeting:
􀁺 The in-coming CMD (Mr. Sanghvi) appeared confident of expanding bank’s
credit book faster than the banking industry; he expects credit growth in a
range of 22-24% in FY13. There is a change in stance as the present
bank’s management continued with moderate credit book expansion
at 16-17% and the in-coming CMD expects credit expansion higher
than industry pace at 22-24% YoY. The latter believes that there is
significant scope to accelerate retail and MSME loan books.
􀁺 Credit composition could re-balance in favor of retail credit; its composition
could further increase by 200—300 bps to 23-24% by end-March’13 (from
21% as on end-March’11).
􀁺 Margin is expected to moderate in FY13 in declining interest rate scenario,
but the in-coming CMD indicated that fresh equity capital and containment
of liabilities cost would lead to marginal drift in margin.
􀁺 Fee income growth would enhance further on the back of strong loan growth
and levying processing charges diligently across the loan book.
􀁺 The in-coming CMD said there is a scope of improvement on treasury front
as well. He indicated that in declining interest rate scenario and with serious
efforts in place, the bank could make handsome gains.
􀁺 On gross NPL front, both the people (the current CMD and in-coming CMD)
indicated that net addition to GNPL would be negligible; GNPL would not
rise hereon by the end-FY13.
􀁺 The bank’s management expects write-back on tax provision due to writeoff
done in agriculture debt waiver & relief schemes, though this matter
requires further clarity.
Overall, the in-coming CMD sounded quite positive on credit growth (particularly
opportunities in retail credit), fee income growth, treasury gains and past overprovisioning
on employee expenses (below the line) & NPLs.

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Coal India Ltd. (CIL) – Q3FY12 results higher-than-expectations; Aditya Birla Money

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Coal India Ltd. (CIL) – Q3FY12 results higher-than-expectations; recent PMO
directive not as bad as it seems; maintain Accumulate rating with a revised target
price of `367

Coal India Ltd. (CIL) Q3FY12 results were above our expectations on account of higher-thanexpected
realisations from e-auction sales
Key Highlights
 CIL’s consolidated net sales grew 21.0% YoY to `15.3bn. Production increased 0.7% YoY to
114.6mn tonnes. Dispatch declined 0.5% YoY to 110.0 mn tonnes. The YoY increase in net
sales was on account of the price increases taken in February 2011 and higher realisations
from e-auction coal sales. E-auction coal realisations increased 17.1% QoQ to `2852 per
tonne
 CIL’s consolidated EBITDA grew 33.6% YoY to `45.5bn on account of increase in coal
realisations. Provisioning for wages were to the tune of `7.5bn
 CIL’s consolidated adjusted PAT grew 53.4% YoY to `40.3b on account of higher EBITDA
and non-operating income. Non-operating income increased 48.4% YoY to `18.6bn.
Outlook and Valuations
 Revise FY12E EPS upwards and FY13E EPS downwards: On account of less-than
expected coal production and sales volume for 9MFY12 (production decline of 2.7% to
291.2mn tonnes and almost flattish sales of 299.6mn tonnes), we reduce our production and
sales volume assumptions for FY12E by 2.0% and 4.6% to 427mn tonnes and 433mn
tonnes respectively. On account of higher-than-expected e-auction realisations, though, our
adjusted FY12E EPS increases by 3.2% to `23.7. For FY13E, we reduce our production
volume assumption by 2% to 448mn tonnes and slightly increase our sales volume
assumption by 0.2% to 466mn tonnes. On account of lower e-auction sales, though, our
FY13E EPS decreases by 4.4% to `26.9.
 Recent PMO directive to sign FSA’s with LoA based power projects at 80% penalty
trigger level is not as bad as it seems: We estimate incremental coal supply obligation
from the PMO’s directive for CIL at ~62.3mn tonnes for FY13E. We believe that CIL would
be able to meet it through (1) release of inventory, (2) diversion of e-auction coal, (3)
diversion of coal from existing FSA’s where it is supplying higher than the threshold,
and 4) increase in coal production. However, CIL is likely to face a production
shortfall of ~18-20mn tonnes annually from FY14E onwards to meet the likely coal
supply obligation from the PMO’s directive as the benefit of sale of excess inventory
wouldn’t be available in FY14E. This shortfall is likely to be met through coal imports,
which, we believe will be a pass through for CIL (Refer Page-2 for details)
 Valuations: With the revision of earnings estimates, likely higher coal production through
faster MoEF clearances over the medium-to-long term and incorporation of a lower risk free
rate of 8.25% from 8.75% earlier – decreasing the cost of equity to 12.8% from 13.25%
earlier -- our 1 year forward DCF value increases by 5.0% to `367 from `350 earlier. Note
that we have already factored in the full impact of the 26% profit sharing provision of
the MMDR bill (17.2% of our 1 year forward DCF value of CIL). Our target price implies
a potential upside of 13.9% from the CMP. We, thus, retain our Accumulate rating on
Coal India.

Sector Consumer products: Bazaar Bytes #3 ::Kotak Securities (PDF link)

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily28022012.pdf

Sector
Consumer products: Bazaar Bytes #3
` Bajaj Almond needs to watch Dabur Almond carefully
` Titan ‘Mia’ stock out
` HUL’s idli dosa ready-to-cook mixes under ‘Modern’ brand
` Nirma relaunch: check out the new ads with ‘new gen’ models

Ranbaxy Laboratories: Lipitor FTF opportunity drives growth:: Centrum

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Lipitor FTF opportunity drives growth
Ranbaxy Laboratories’ (RLL) Q4CY11 numbers were better than our
expectation but forex loss was higher. RLL benefited from FTF opportunity of
generic Lipitor in the US, which could have generated revenues of $310mn
(Rs14.50bn) during the quarter. We expect generic Lipitor to contribute
significantly in Q1CY12 also. RLL revenues grew by 79%YoY and EBIDTA
margin by 1190bps during Q4CY11. However, net loss declined sharply from
Rs975mn to Rs29.83bn. We reiterate Hold on the scrip with a revised target
price of Rs460 (based on 23x CY13 EPS+FTF).
􀂁 US business records good growth: During the quarter, RLL reported 79%YoY sales growth
from Rs20.91bn to Rs37.43bn. The domestic business declined by 21%YoY from Rs6.40bn to
Rs5.07bn due to market slowdown. The company’s global sales grew by 123%YoY from
Rs14.51bn to Rs32.36bn due to FTF opportunity of generic Lipitor in the US. Generic Lipitor
could have generated sales of $310mn (Rs14.50bn) during the quarter. RLL also capitalised on
the authorised generic (AG) opportunity of Caduet in the US during the quarter.
􀂁 EBIDTA margin improves by 1190bps: RLL’s EBIDTA margin improved by 1190bps from
10.8% to 22.7% due to high margin generic Lipitor. Material cost declined by 1210bps from
40.9% to 28.8% of total revenues due to change in product mix. Personnel expenses were
lower by 740bps from 18.0% to 10.6% due to higher sales growth. Other expenses went up by
760bps from 30.3% to 37.9% due to high share of Teva for generic Lipitor. RLL’s other income
grew by 112%YoY from Rs771mn to Rs1,632mn due to operational forex gain of Rs947mn.
The company’s net profit before EO items improved by 341%YoY from Rs1.14bn to Rs5.03bn.
RLL provided Rs26.48bn ($500mn) for settlement of US FDA and Department of Justice (DoJ)
liabilities. Net loss after EO items went up from Rs975mn to Rs29.83bn.

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Buy Supreme Infrastructure: Q3FY12 Result Update:: BP Equities

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Results Highlights
 The company has registered a robust revenue growth of 70.4% yoy to Rs. 4,106 mn, showing
superior execution strength of the company. This strong execution was seen in the building segment
as well as in the road projects viz., Manor Wada Bhiwandi, Nagar Kopargaon and Patiala
Malerkotla.
 EBIDTA margins remained under pressure and declined by 34 bps yoy at 16.9%. This was mainly
due to marginal rise in cost of materials as a percentage of sales by 332 bps yoy. Going ahead
we expect the margins to remain between 16.5% to 17%.
 At the PAT level we saw a decline in margins by 179 bps yoy at 6.1%. The decline was mainly
due to rise in interest cost as a percentage of sale by 185 bps yoy at 6.2% and in addition to that
we also saw increase in cost of deprecation by 58.5% yoy which further dented the margins.
 Average cost of borrowing stands between 13% to 13.5%.

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Buy Supreme Infrastructure: Q3FY12 Result Update:: BP Equities

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NBCC IPO in March; Co keen to expand overseas (money control)

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State-owned National Buildings Construction Corp (NBCC) is hopeful its initial public issue will hit the markets before the end of current financial year. Once cleared by market regulator SEBI, this will only be the second public float by the government this fiscal afterPower Finance Corp . Government is also selling 5% stake in ONGC via auction.

The government is divesting 10% of its stake via NBCC IPO, and the company will not get any proceeds from the public offer of 1.20 crore shares. 1.20 lakh shares of the issue will be reserved for the company's employees. The price band of the issue will be announced in March.

NBCC is primarily involved in project management consultancy services for civil construction projects (PMC), civil infrastructure for power sector and real estate development.

Both the power sector as well as real estate have seen significant slowdown over the last one year. The power sector growth has been hampered with issues like shortage of coal and delays in land acquisition and there are no clear signs of pickup yet. Real estate sector too has been hit by a demand crunch, especially in cities like Mumbai and Delhi.

But the company is unfazed when quizzed about these problems.

Vishnu Das, NBCC's CMD says 90% of the business comes from PMC and the entire PMC business is related to state and central government projects and so he is not concerned much.

In the PMC segment, the company now aims to focus on projects having an order value of over Rs 100 crore. Apart from 35 ongoing projects in India, NBCC is executing a PMC project in Maldives and is keen to expand further overseas.

"As part of our strategy for future growth and expansion, we intend to take advantage of the significant growth opportunities by diversifying into new locations outside India," NBCC said.

Meanwhile, in real estate development too, most of its projects are related to building housing colonies for government and public sector employees, and commercial projects like government hospitals and educational institutions like IITs and NITs, and so it hasn't been affected much by the slowdown, compared with other real estate developers, Das said.

As of January 15, NBCC had completed 8 real estate projects. It has 4 residential and 3 commercial ongoing projects. It also has 6 forthcoming housing projects, and 6 forthcoming commercial projects. It had land reserves of about 127.918 acre as of Jan 15.

"We intend to secure lands available with central and state government agencies for our real estate development projects. We also intend to continue to selectively enter into joint venture agreements to increase the amount of land or land development rights available to us for development," Das said.

As of September 30, NBCC had an order book of Rs 10,622 crore, of which Rs 10,302 crore worth orders were from the PMC segment and Rs 320 crore orders in the infrastructure space.

For the first six months of this fiscal (Apr-Sept), NBCC had a net profit of about Rs 75 crore on total income from operations of Rs 1,276.6 crore. The company says its profit after tax has increased at a compounded rate of 15.9% over fiscal 2007-2011 and income from operations is up at a CAGR of 21.3%.

However, the growth has come at the cost of PAT margin, which has declined from 7.9% in fiscal 2009 to 4.3% in fiscal 2011.

That apart, NBCC also has direct tax disputes amounting to near Rs 34 crore. There are also 33 legal notices involving NBCC with an aggregate monetary value of Rs 3.19 crore.

Das dismissed these issues stating such cases were very common in real estate business.

IDBI Capital Market Services and Enam Securities are book running lead managers to the NBCC IPO

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Strides Arcolab:: TP: INR716 Buy : Motilal Oswal

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Strides Arcolab's 4QCY11 operational performance was below estimates. Key highlights are:
 Topline grew 51% YoY led by higher licensing income which grew 123% YoY to INR1.7b (v/s estimate INR466m)
and 126.2% YoY growth in Pharma business to INR4.1b led by business in Africa. Specialty sales (ex licensing
income) declined 31% YoY to INR1.02b due to lower revenues from Brazil due to change in distribution model.
 EBITDA grew 25.8% YoY to INR972m (v/s estimate of 53% YoY growth to INR1.18b) led by higher licensing
income. However, it was pulled down by INR310m write-off in Brazil operations due to business restructuring.
Adjusted for this, EBITDA would have been INR1.28b. EBITDA margins contracted 280bp YoY to 14.2% (v/s
estimate of 17.8%) largely on account of the Brazil write-off.
 We estimate adj PAT at INR197m (v/s estimate of INR483m) impacted by lower than estimated operational
performance and higher than estimated taxes. However, reported PAT stood at INR684m on account of INR800m
extraordinary gain due to re-statement of investments related to Ascent Pharma.
Strides is set to emerge as a specialty products company with revenue contribution from this segment rising from
28% in CY09 to 75% in CY13. Large manufacturing capacities are in place to support revenue scale-up, coupled with
strong marketing partners like Pfizer and GSK. We believe the sale of Ascent Pharma to Watson at an attractive
valuation will lead to significant reduction in debt. It may unlock further value from the sale of remaining Pharma
business as its focus remains on specialty business. Based on our revised estimates, we expect Strides to post 28%
EPS CAGR over CY11-13, led by (1) revenue ramp-up from steriles, and (2) substantial reduction in interest cost
owing to repayment of debt. Core EBITDA margin will expand in line with changing product mix and higher
capacity utilization. Debt-equity will decline from 2x in CY10 to 0.6x in CY13. The stock trades at 11.5x CY12E and
10.3x CY13E EPS. Maintain Buy with revised target price of INR716 (14x CY13E EPS), an upside of 36%.

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Hold Ranbaxy Laboratories :Target Price: Rs 419 :: Tata Securities

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Exceptionals wipe off operating gains
Ranbaxy’s 4QCY11 numbers were a mixed bag. The company capitalized on its
launch of generic Lipitor and AG version of Caduet to clock net sales slightly
ahead of our estimates at Rs37.3bn (up 79.2% YoY). While operating EBITDA
was up 273.6% YoY at Rs8.6bn, the pre-exceptional PAT of Rs5.0bn was more
than offset by extraordinary items – the DoJ settlement provision of Rs26.4bn
and loss on derivative positions of Rs8.3bn - resulting in a net reported loss of
Rs29.8bn.
We raise CY12 EPS estimates to Rs36.6 due to higher market share garnered in
generic Lipitor (currently at ~42%) and introduce our CY13 EPS estimate at
Rs29.9. This assumes Ranbaxy will be able to launch generic Provigil and Diovan
during CY12. We upgrade the stock from a Sell to a Hold with a target price of
Rs419, valuing the company at 14x CY13.
Key highlights
 Ranbaxy wrote off inventory amounting to Rs621mn during the quarter.
Other expenses increased significantly by ~123% YoY to Rs14.3bn, as a
result of payments made to Teva in connection with generic Lipitor sales
(details not disclosed). However, the impact on EBITDA was mitigated by
higher margin sales from FTF opportunities. The company recorded an
impairment charge on a fermentation facility of Rs820mn, which resulted in
depreciation spiking up by 63.2% YoY to Rs1.6bn.
 Sales in the domestic market were up 16% YoY to Rs3.9bn i.e. marginally
above market growth. The OTC business, which is 16% of total domestic
sales, grew at a brisk 20% YoY during CY11; however, Ranbaxy saw lower
than anticipated growth in its anti-infectives portfolio.
 The North America region sales grew at a staggering 201.5% YoY to
US$407, on the back of generic Lipitor and Caduet sales. Management
stated that price erosion in Lipitor was ~65% and the company had a
market share of ~42% at end-CY11.
 Pursuant to its consent decree with US FDA/ Department of Justice (DoJ),
Ranbaxy made a provision of Rs26.4bn and agreed to forfeit three FTF
opportunities. However, management claimed that the loss of these
opportunities would not impact sales growth significantly.

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Budget 2012: Parliamentary panel recommends hiking income tax exemption limit to Rs 3 lakh ::ET

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The Parliamentary standing committee on finance has recommended an increase in basic tax exemption limit to Rs 3 lakh and another Rs 3.20 lakh rebate for eligible investments and spending in its report on the direct taxes code, or DTC. The panel is not for any relief for corporate tax payers and has recommended retaining the corporate tax rate at 30% as against 25% proposed.

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MCX IPO allotment details by SMS / email !

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Get MCX IPO allotment details by SMS / email (courtesy registrar Karvy)

1) Either fill inform below:

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Hold Crisil :: PPFAS

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Ÿ Good operating performance for the quarter & year ended December 2011
Ÿ IREVNA & Pipal Research report sustained growth
Ÿ Rating business was supported by BLR & SME ratings as bond issuances remain sluggish due to high
interest rates & liquidity constraints
Ÿ Margins have taken a hit on account of rising staff & other expenses
CRISIL Limited has reported a good set of numbers for the quarter ended December 2011. The company clocked a
3% Q-Q & 23% Y-Y growth in its consolidated total income to `2,175Mn from ` 2,111Mn in September 2011 &
`1,774Mn in December 2011 respectively. Growth in the current quarter is on the back of sustained performance of the
Research (Irevna, Pipal), Ratings and Advisory businesses.

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WIPRO LIMITED: Some improvement, but still risky :: Barclays Capital

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WIPRO LIMITED
Some improvement, but still risky
Wipro continues its organisational revamp focused on improving its account mining
process. Steps have been taken to simplify reporting structures, standardise back-end
processing and external consultants have been asked to bring the best practices. We
find confidence returning to management that the company will be able to match
peers’ growth going forward despite the uncertainty in the demand environment.
However, we believe that the turnaround could take more time and that the execution
risks are not correctly priced. The stock is trading at a P/E of 15.7x for FY13 (7%
discount to Infosys) and, hence, is not inexpensive. We maintain our 3-UW rating.
Simplifying organisational structure: Reporting lines have been restructured so that
sales and delivery primarily report to vertical heads. Senior level hires are being made to
improve processes in both sales and delivery.
End-demand improvement in specific pockets: Wipro has seen end-demand stability
since the beginning of the calendar year with traction in BPO and IT Infrastructure. Oil &
Gas, BFSI, Retail and Healthcare are the key focus areas and likely growth drivers.
Acquisition-led strategy to continue: According to management, Wipro’s acquisitions
through the decade have had 2.2ppts accretion on the revenue CAGR with an IRR of 22%.
With 20% of the current FY revenues from acquisitions, the company is unlikely to relent
on its strategy and could continue to focus on smaller acquisitions.
Execution risk makes us cautious: The strong focus on top-line growth could imply a
reduced margin focus near term. Given volatile environment and the changing
organisational structure, there remains risk to earnings growth, in our opinion. Valuations
at a P/E of 15.7x also do not provide much support. We retain 3-UW with PT of Rs360.

As ONGC share sale flops, government shuts selloff counter (ET)

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Bruised by the messy auction of ONGC's shares, the government has put on hold all forms of stake sales for the time being, although officials put up a brave front and said divestment will bounce back with big-ticket deals next fiscal.

The auction of ONGC shares on Thursday nearly collapsed as there were virtually no takers for the offer for a long time and the weak response was magnified by a glitch in the system. But state-owned Life Insurance Corporation ( LIC), being run by an acting chairman for over nine months, intervened and bailed out the floundering share auction with wholesale purchases. The government's stake sale plan, with a target of Rs 40,000 crore this fiscal, was expected to accelerate after ONGC's auction with more such sales.

While the auction was in progress, the Cabinet also allowed cash-rich public sector units to buy back their own shares, giving the government another route to sell equity in companies such as BHEL and Oil India. But after the setback in ONGC's auction, further sale of equity is under a cloud, at least in the current fiscal. An official in the finance ministry said the government would be preoccupied with budget preparations.

"There is hardly any time to embark on share sale through any means, including buyback or selling strategic stake of one company to another," said the official, who did not want to be identified. The government has so far raised about Rs 14,000 crore from stake sales, including.Rs 1,145 crore from selling shares in Power Finance Corporation. Another Rs 100-120 crore is expected from the initial public offering of the National Buildings Construction Corporation (NBCC) this month.

Khan said the government had several options to sell stake - follow-on offer, auction, buyback and selling stake to another staterun firm. "Disinvestment is part of the economic reforms programme. The process to be followed will be chosen depending on market conditions," Khan said. The government received bids for 42.04 crore shares of ONGC at an average price of Rs 303.67 against the floor price of Rs 290. Initially, there were bids for 54 crore shares at an average price of Rs 307.3 but many bids were cancelled, official data showed. Finance Minister Pranab Mukherjee said the government would study the auction process before selling stakes in other companies.

The plan to sell ONGC's shares was put off last November, when bankers expected the government to raise Rs 9,000 crore. While it has mopped up a much higher amount now, the poor response from private institutions is widely seen as a setback. Disinvestment Secretary Haleem Khan told ET he was satisfied with the auction as it had fetched the government Rs 12,776 crore, and it didn't really matter who participated in the auction.

"For me, it is not important who is bringing (in) money. What is important is at what price money is flowing in. We could not have received this type of money in this type of market through any other process," he said.

Havells - Upbeat outlook 􀂄 Raising PO on higher EPS and re-rating :: BofA Merrill Lynch

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Havells
Upbeat outlook
􀂄 Raising PO on higher EPS and re-rating
Our management meeting left us increasingly confident about margin expansion and
20%+ revenue growth. We have raised PO by 15% to Rs625 driven by (1) increase in
our EPS for FY13 and FY14 by 5% and 8% respectively, and (2) increase in valuation
basis of India entity by 10% to PE of 16.5x FY13E earnings owing to higher profitability.
Our FY13 and FY14 EPS estimates are higher than consensus by 10% and 13%
respectively. Stock at PE of 12.7x FY13E is attractive. Buy.

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Buy Rain Commodities:: Target Price: Rs 49 :: Tata Securities

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Good performance continues, maintain Buy
Rain Commodities Ltd (RCL) reported 4QCY11 results above our expectations,
with revenues of Rs16.2bn (our estimate was Rs15.4bn) and EBITDA of Rs4bn
(our estimate was Rs2.9bn). This was mainly led by higher-than-expected CPC
volumes and profitability. Cement segment reported a weak performance with
an EBITDA of Rs637/ton in 4QCY11.
Given the sustained improvement in CPC segment’s profitability and reduction in
net debt-to-equity ratio, current valuations are attractive. We introduce CY13
estimates for the company. The stock trades at a PER and EV/EBITDA of 2.7x
and 3.3x CY13 estimates respectively. We maintain a Buy rating with a target
price of Rs49.

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BHEL opposed to buyback but open to FPO/auction: Sources (Money control)

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On Thursday, the cabinet allowed cash-rich state companies to buy back shares and participate in the government's divestment programme. But, the government's buyback process may not be suited for BHEL .
Government sources say, the company is opposed to a share buyback, but is open to 5% follow on public offer (FPO) or auction.
Further, the share sale can happen only when the stock markets recover.