11 March 2012

India Economics - What Do We Expect from Budget F2013? Morgan Stanley Research,

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India Economics
What Do We Expect from
Budget F2013?
Two important issues we are watching for in
Budget F2013: The government is scheduled to
present the annual budget F2013 on March 16.
Considering the current weak macro trend, investors are
building hope that the government will recognize the
need to relay its commitment to reviving the growth
outlook with budget measures. We would watch the
budget announcement in the context of two most
important issues:
• A credible plan to cut government expenditure
growth
• Policy measures to encourage private investment
Market implications: According to our India Strategist,
Ridham Desai, “history does not favor the market in the
following 3-4 weeks. The markets are usually flat in the
month ahead of the budget and, in two out of three years,
fall in the month following it. In the past 15 years, the
market has been positive in the following years: 1997,
1999, 2004, 2006, 2009, 2010 and 2011 – there does
not seem to be a great correlation between market
performance and a market-friendly budget. We continue
to be buyers of Indian equities from a 12- to 18-month
perspective, though seek protection from a correction in
the near term.”
Industry-specific expectations: Our analyst team
expects the budget to be a clear positive for
infrastructure and utilities. We do not see any policy
measures that hurt consumption, but we believe any
credible plan to reduce government revenue
expenditure growth or oil subsidies will hamper the top
lines of some consumer industries in the near term.

Realty's expectations from Budget ::Business Line

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We have approached the government to extend income tax benefits for developers in the affordable segment. HARSH VARDHAN PATODIA, PRESIDENT, BENGAL CHAPTER OF CREDAI
The Confederation of Real Estate Developers' Associations of India (CREDAI) is looking forward to the Centre as well as the State Budgets to help the sector address the needs of the home buyers. In an interview toBusiness Line, Mr Harsh Vardhan Patodia, the President of the Bengal chapter of CREDAI, representing more than 160 developers, talks of the industry in West Bengal, its budget expectations, the status of the sector in the State, the problems the sector faces, and the way forward for developers. Excerpts from the interview:
What are CREDAI's Budget expectations?
In case of the national budget, we are expecting benefits and incentives for the affordable housing segment. We have approached the government to exempt certain taxes and extend income tax benefits for developers who are into the affordable segment, and to consider reducing service tax for the segment.

FY13 BUDGET PREVIEW Budgeting for fiscal consolidation ::Edelweiss

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We expect FY12 fiscal slippages to breach the 1% of GDP mark. Indeed,
elevated fiscal deficit over the past couple of years has partly contributed
to high inflation and sluggish investments. Therefore, fiscal consolidation
is likely to be Union Budget 2012‐13’s central theme. FY13 provides a
good window of opportunity to take some tough decisions as state
elections are behind us and general elections are not due until 2014,
although below par performance of Congress in state elections implies
that UPA will be on the defensive.
In our view, the Finance Minister (FM) is likely to roll back tax sops on the
excise front fully, expand services tax base etc., to boost revenue.
However, expenditure control while politically difficult will also be
crucial—reining in subsidies, controlling social sector spending and going
slow on implementation of food security act. These measures could trim
deficit to ~5.2% of GDP, a mild consolidation over 5.7‐5.8% in FY12 (E).
Fiscal slippages could cross 1% of GDP in FY12
The government’s performance on the fiscal front has been below par in FY12. Against
the budgeted ~4.6%, we expect the actual fiscal deficit to be around 5.7‐5.8% of GDP, a
staggering ~1% slippage. Barring 2009‐10, this has been the highest slip in recent years.
Slower‐than‐expected growth, unfavourable market conditions and elevated energy
and other commodity prices contributed to such large slippages.
FY13 Budget: Consolidation to take centre stage
Going into FY13, the situation is no less challenging. We believe the FM will be focused
on two key themes in the forthcoming Budget—initiate the fiscal consolidation process
(without much tinkering of tax rates) and boost declining investments through policy
actions. For fiscal tightening, the FM is likely to rely on both revenue enhancement and
expenditure cuts.
On the revenue front, the government is expected to roll back excise rates to pre‐crisis
levels and introduce negative list in services which will improve the service tax
buoyancy. Moreover, sizeable telecom auction revenues and aggressive disinvestment
target are likely to boost non‐tax revenues. In terms of expenditure cuts, the thrust is
likely to be subsidy rationalisation, and controlling growth in social sector spending.
Infra, power sector likely to get a boost
The budget is likely to be supportive of infra sector. To allay the funding concerns in the
infra space the government may most likely increase tax exemption limit under Section
80 CCF while allowing for banks to raise funds through tax free bonds. Further, the
SEBs are dealing with a multitude of issues and any roadmap to address them will be
keenly awaited.

TATA MOTORS SAAB bid to drain cash flows ::Edelweiss

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As per media reports, Tata Motors has placed a bid for assets of the
bankrupt Swedish carmaker, SAAB for around USD350mn. According to
SAAB officials, the company has received at least five bids, mostly from
outside Sweden. Tata Motors declined to comment. SAAB, a premium car
maker, has been in losses for over a decade now and its CY10 volume of
28,284 units is 1/5th of the peak achieved before the credit crisis. If Tata
Motors goes ahead with the acquisition, it would strain cash flows of JLR
in the near to medium term as it has to invest heavily in product
development. However, long term benefits would accrue from building
scale for Jaguar+SAAB and expanding the geographical reach.
About SAAB
GM sold SAAB to Spyker in 2010 for cash and shares worth USD400m. Spyker, however,
filed for bankruptcy following the failure of a Chinese consortium to complete the
purchase of the company since it was blocked by GM which opposed the transfer of
licenses for patents and technology to Chinese companies. Its peak sales volume was
~140k units with 78% coming from Europe and 19% from North America. It has been
making losses for a decade now. In CY10, it sold 28,284 vehicles with an average
realization of ~EUR29,000. The company posted EBIT losses of ~EUR252m. It had a net
debt of EUR551m as on Sep 2011.
Our view: Likely drag on cash flow in near term
The rationale for the acquisition appears to be building scale for the Jaguar business
given the fact that the premium car business requires heavy investment (which cannot
be justified without scale). Lack of scale led to the decline of SAAB. Ford had invested
heavily in JLR in product development hence the turn‐around was also easier. SAAB
would require heavy investments in product pipeline and future platform sharing. In
our view, this would drain the cash flow of Tata Motors in the near to medium term.
Long term benefits, however, could flow through platform sharing and achieving
economies of scale. It is difficult to take call on price (at USD350mn, the company is
valued at 1x EV/CY10 sales) given current sales does not show true potential. We have a
‘HOLD’ rating on Tata Motors with a target price of INR272.

The Absolute Return Letter March 2012

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The Protein Bomb
Farmland on the rise Question for you: Which distinctly British asset class has offered the most attractive returns over the past decade? Central London property? Not even close, even if it has done rather well. UK farmland is the answer, having more than tripled in value over a decade which will otherwise not be remembered for its outsized returns (see story here). The rise in farmland values is not only a British phenomenon. All over Northern Europe and North America farmland values have responded well to higher commodity prices. Last year alone, farmland prices in the US Midwest appreciated by 22% on average (details here).
Now, if ‘rental income’ on farmland is going up as measured by higher crop prices, it is only logical that the value of the land appreciates, similar to the dynamics in the commercial property sector. However, I have long been puzzled by the fact that you find virtually no exposure to farmland in institutional portfolios despite the supremely attractive yields on offer when compared to commercial property. Pension funds happily buy office buildings, earning a return of 4-5%, maybe 6%, yet few have ventured into farmland where yields can be as high as 10% if the farm is big enough and run professionally enough.
In this month’s Absolute Return Letter we will take a closer look at agriculture. Should you be exposed to agriculture in the first place? Is it too late to buy farmland? Are there other and better ways to be exposed to agriculture? These and other questions I will address in the following.
Calories versus proteins Let’s begin with some numbers to set the stage1. There are approximately 7 billion people in the world today. FAO (the food and agriculture organisation of the United Nations) expects that number to grow to approximately 8.3 billion by 2030. The average person consumes 2,780 kcal per day but the average masks a significant gap between the developed and the developing world. Whereas people in developed countries consume 3,420 kcal per day, people in developing countries consume no more than 2,630 kcal per day. By 2030 the average calorie intake is expected to have risen to 3,050 kcal per day, driven primarily by rising living standards in developing countries.
Adding these numbers up, global daily calorie consumption is approximately 19.5 trillion kcal, growing to an estimated 25.3 trillion kcal by 2030 – an increase of about 30%. An increase of that magnitude should, on its own, be quite manageable; however, things are not quite so straightforward. Here is the problem. Whereas diets in developing countries consist primarily of grains (rice, corn, wheat, etc.), diets in the wealthier parts of the world are dominated by protein, fat and sugar.
As the poor get wealthier, they will want more protein - mainly chicken, pork and beef. Converting a grain rich diet to a more protein rich diet will increase overall demand for grain significantly as livestock is inefficient in terms of converting grain to energy. It takes 2-3 kilograms of grain to produce 1 kilogram of chicken, about 4 kilograms of grain to produce 1 kilogram of pork and as much as 7-8 kilograms of grain to produce 1 kilogram of beef.

MTN GROUP Growth pangs in Africa ::Edelweiss

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MTN Group (MTN) announced CY11 results and reported constant currency
revenue growth of 9.7% YoY. EBITDA margin, adjusting for its tower deal,
remained stable at 43.9%. We discuss below the company’s performance in
markets relevant for Bharti Airtel (Bharti). Nigeria, a key market for both
MTN and Bharti, saw aggressive tariff wars with relatively lower elasticity.
Competitive pressures in Africa
MTN competes with Bharti in some key markets like Nigeria (33% of Airtel Africa
revenue), Uganda (18%), Zambia (10%) and Ghana (3%). The company provides financial
details on Nigeria and Ghana (35% of its revenue). The company’s business in Nigeria was
impacted as the regulator imposed stringent KYC norms. Its Airtime and subscription
revenues rose 3.7% and EBITDA margin declined 120bps due to 25% increase in diesel
costs. Its ARPU declined 5.3% in constant currency as aggressive tariff wars (led to 23%
reduction in RPM) failed to produce the desired elasticity with outgoing MOU increasing
by just 15%. Subscriber base grew 7.7% to 42mn in 2011. It incurred capex of USD880mn
(USD650mn in 2010) in Nigeria. Bharti is reported to have spent USD600mn in 2011. MTN
expects to add 4mn customers in 2012, implying subscriber growth of 10%.
In Ghana, subscriber growth was 16.5%, leading to 14% growth in airtime and subscription
revenue. In local currency terms, ARPU rose 3.5%. While RPM declined 4% in USD terms,
MOU increased 4% exhibiting perfect elasticity. But, EBITDA margin declined 620bps to
38% as it lost market share, which led to higher net inter‐connection costs. The company
expects to add 950,000 customers in Ghana in 2012, implying a growth of 10%.
CY11 results in a snapshot
It reported consolidated revenue of USD17bn, EBITDA of USD7.4bn and net income of
USD3.3bn. While consolidated revenue grew 9.7% YoY in constant currency, it was aided
by strong handset sales in South Africa (added 1% to the 6.3% reported currency revenue
growth) and 55% increase in interconnect revenue in Nigeria. It generated FCF of USD
1.4bn, holds cash of USD 5bn and has raised dividend payout to 70%.
Outlook: Arduous journey for Bharti in Africa
Bharti management gave a guidance of achieving revenue of USD5bn and EBITDA of
USD2bn by 2013 in Africa based on expectation that affordability would drive usage. The
expected elasticity has not played out and Bharti plans to tweak its business model. We
believe, Street expectations are moderate and the company is expected to achieve its
targets in FY15. Thus, there is no significant risk of disappointment. Maintain ‘BUY’.

Coal blocks review highlights risks of delay ::Edelweiss

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The review of captive coal blocks by the Ministry of Coal implies risks of a
delay in the commencement of JSPL’s Utkal‐B1 mine (linked to 6x135MW
power plant). Hindalco and NALCO might also be issued show‐cause
notices for certain mines, but we have assumed no benefit of the mines in
our valuation and forward estimates.
MOEF likely to issue guidelines for clearance of “no‐go” area mines
Ministry of Coal noted that even as the “go”/”no‐go” area concept was dropped in July
2011, state level offices of MOEF are not processing “no‐go” related applications. MOEF
is expected to issue guidelines to these offices to enable the processing of such
applications. State governments were also asked to expedite the process of land
acquisition, improve law and order and processing of forest/environmental clearances.
JSPL: Risks of delay in captive coal mine for Angul power plant
Jindal Steel & Power’s (BUY, CMP: INR547, target price: INR661) Utkal‐B1 coal mine in
Orissa will supply fuel to 6x135MW captive power plant as part of the Angul Project.
With the Orissa govt insisting on 33% free power from captive coal‐linked projects,
mining lease is yet to be signed for Utkal‐B1 while the land acquisition is pending. This
reduces the visibility of timely commencement of mining. We have assumed it to start
by Jan‐13 as against the management guidance of Sep‐12 for the mine. Ministry has
also found progress on this and other coal blocks (Amarkunda, Urtan North, Ramchandi
and Jitpur) of JSPL to be unsatisfactory. Show‐cause notice may be issued for Jitpur coal
block of JSPL, but such a notice has also been previously issued in October 2010.
NALCO, Hindalco may get show‐cause notices
Progress of Auranga coal block allotted to Hindalco‐Tata Power and the Utkal‐E coal
block allotted to NALCO was found to be unsatisfactory, forcing the Ministry of Coal to
decide to issue show‐cause notices on why these coal blocks should not be deallocated.
In case of Hindalco (BUY, CMP: INR132, target price: INR197), the coal block
is for the 0.359mtpa Jharkhand aluminium smelter. Around 740 acres of land have been
acquired and another 1,000 acres would be acquired by May 2012. We have not
considered this project/coal mine in our estimates or valuation. NALCO (REDUCE, CMP:
INR59, target price: INR50) has already spent ~INR1bn on its Utkal‐E coal block and paid
for the land. No impact is seen on our estimates and valuation, like Hindalco.
Outlook & valuations : Closer monitoring of captive coal blocks
We see risks of a delay in the commencement of captive coal mine for the 6x135 MW
power plant of JSPL in Angul. We have ascribed a valuation of INR 26/share to this
project; we currently have a BUY/SO recommendation on JSPL with a target price of
INR661. With the coal shortage escalating, we see a closer monitoring of coal blocks by
the Ministry of Coal; hence a higher risk of de‐allocation for non‐compliance.

CESC Tariff hike: Better late than never ::Edelweiss

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West Bengal Electricity Regulatory Commission (WBERC), in its tariff
order dated March 6th 2012, has approved a tariff hike of 13.3% which
will increase the average realization for CESC from INR5.19/kWh to
INR5.88/kWh. The hike which has been pending for long is a definite
positive for the company as it eliminates the regulatory risk of delay in
tariff approvals. Maintain BUY with TP of INR 399/share.
Much awaited tariff hike a breather
CESC, in its 2011‐12 tariff petition filed in July 2011, had demanded a hike of INR1.11
(i.e. hike of 21%) per unit on various heads, but WBERC has allowed a hike of 69 paisa
(i.e.13.3%) with retrospective effect from April 2011. Arrears for the past 12 months
would have to be recovered via 48 monthly installments, going forward. The hike
which was much needed due to increase in costs has come at a time when the
company was mulling legal recourse as the last resort. The tariff order is a definite
positive given that the State, under political duress, has been strongly resisting any
increase in power tariffs.
Outlook and valuations:Cloud over cashflow vanishes;maintain ‘BUY’
With the current tariff hike, the near term overhang of regulatory approvals and its
impact on cash flows has been addressed. However, clarity on FDI in multi‐brand retail
will provide the much awaited impetus for the stock. We have revised our numbers to
incorporate the tariff revision (expect the company to book a differential income of
INR5.86 bn during Q4FY12) that will enable recovery of its fixed costs for the year. The
company has also stepped up its capex program for distribution entity from earlier INR
5bn to INR 6.5bn annually which will enhance earnings. With the regulatory risk easing
off we have revised our P/B multiple for regulated equity to 1.2x from 1.1 earlier.
Maintain ‘BUY/UP’ with revised SOTP of INR 399/share (INR 372/share earlier).

Cable Distribution – Immense growth potential 􀁺 PINC

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Cable Distribution – Immense growth potential
􀁺 Since 2003 the government has become serious about the implementation of digitisation
of cable network. Government is even ready to put off the signals in the Metros post
sunset date in metros.
􀁺 DAS roll out is inevitable but it may possibly be delayed by 2 to 3 months.
􀁺 Landed cost of an STB is Rs1400, MSOS has started giving the STB at a subsidised
rate of Rs750-Rs800 per box, lower than what DTH players are offering.
􀁺 For Phase I and Phase II cities, the fibre optic laid is capable enough of carrying the
digital feed, Phase III and IV towns may require some new cables to be laid.
􀁺 DTH Vs Digital Cable – in the long run Digital is expected to outperform as it can carry
more channels, can offer broadband services and is more cost competitive relatively to
DTH .
􀁺 For the FTA channels, the industry is pitching for a charge of Rs50 for 30 FTA channels,
and the minimum basic package should not exceed Rs150 excl. of taxes.
Challenges in Implementation
􀂄 Huge Capex - Approximately 10-12mn boxes will be required for Phase-I digitisation,
resulting in a capex of ~Rs11bn to be made by MSOs.
􀂄 Availability of STBs to capture the opportunity may be a problem as order for STBs
need to be placed minimum 3 months in advance.
􀂄 Execution Risk at the end of MSOs : Business model will change from B2B to
B2C.
􀂄 No clarity on revenue sharing between the stakeholders of the value chain.
Radio - Bleak performance
Radio advertising growth was sluggish in 2011 as it grew mere 2%. Radio has been and
will always be a dependant form of media. An advertiser looks at radio from an angle of
what more it can offer than just advertising.
Outlook for 2012
Advertising on radio is expected to grow at 5% in 2012. The belief is that radio will always
be a dependant media. Also, phase-III may not pump in as much revenues as the industry
desires because the ad rate in the smaller towns would be very low and even niche channels
will not be able to demand a high rate per se considering that the ad rate in major metros
and mass music channels playing bollywood music is also in the range of Rs1,500-Rs2,000
per 10 seconds.
Outdoor Media - Blank period
Outdoor advertising de-grew 10% in 2011. Mumbai contributes 30-40% of oudoor advertising
in India. 2011 was not a good year for outdoor advertising in Mumbai with most of the
hoardings going empty. Non FMCG spending had dropped considerably.
Outlook for 2012
Outdoor Advertising will grow at a modest 5%. The focus is shifting to small towns where
it’s doing well and the most of the growth will be contributed from those regions. Also,
digital and premium outdoor advertising is on the rise like high bids being sold for airport
sites especially in Mumbai. Non- FMCGs are spending very less, even if they spend, they
would look for efficiencies which are better defined on Print and Television compared to
Outdoor.

Edelweiss Securities Portfolio: Portfolio for March 2012 ::Edelweiss

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Long Portfolio Wts
HDFCBANK 50.9%
TATAMOTORS 14.7%
HINDUNILVR 12.7%
AXISBANK 11.2%
ONGC 3.8%
M&M 3.7%
BHARTIARTL 2.9%
Total weight 100%



Short Portfolio Wts
ICICIBANK 20.7%
RELIANCE 19.2%
INFY 17.7%
LT 15.0%
HDFC 11.8%
SBIN 11.1%
ITC 3.2%
TCS 1.3%
Total weight 100%

MPHASIS Too much too soon ::Edelweiss

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Mphasis’ Q1FY13 numbers fell short of expectations. While revenue
declined 3% QoQ at USD266mn, net profit came in flat QoQ at INR1.84bn.
HP revenue channel continues to trend down (4% QoQ decline), but
direct business growth posted healthy traction (9% QoQ). Operating
margin (EBITDA) continued to inch up with 60bps improvement to 18.5%,
in line with expectation. We note that due to cash flow hedge accounting,
the company does not benefit from weaker rupee in the same quarter.
While the weak result does not impact our earnings estimate, the strong
stock performance over the past three months (up 40%) post our upgrade
to ‘BUY’ does not leave any upside. Hence, we downgrade our
recommendation to ‘HOLD’ with target price of INR390.
HP ES business decline impact to be limited
Mphasis has gained traction in HP non‐ES businesses—printing and imaging, R&D,
technology consulting (SI)—leading to stronger order book. While in Q1FY13, revenue
from this segment was impacted due to delays, for the full year it is expected to
contribute USD75mn‐80mn. Further, significant sales efforts to grow direct business
are already seeing healthy trend with the past two quarters’ CQGR close to 10%. We
expect this to offset the weakness in the HP ES segment (we have factored 10% decline
in FY13) that continues to be impacted due to market share loss by parent HP.
Margin turnaround expected to sustain
The company’s operating margins have improved 310bps to 18.5% over the past two
quarters. This was led by cost and efficiency related initiatives, which will continue. We
further note that Mphasis will benefit from the weak rupee with a lag and hence we
expect EBITDA margin to sustain over 18.5% going forward.
Outlook and valuations: No upside left: downgrade to ‘HOLD’
In our note titled Favourable risk‐reward, dated December 2, 2011, we had upgraded
the stock to ‘BUY’. Post that, the stock has rallied 40%, also supported by the
anticipated buy‐back and delisting related news, leading to P/E expansion to 11.8x
FY13E. At CMP of INR434, we believe there is no upside left. Hence, we are
downgrading our recommendation to ‘HOLD’ from ‘BUY’ with target price of INR390.

Budget 2012-13 (Power Equipment): Import duty hike will provide limited respite ::Business Line

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A hike in import duty on power equipment to 19 per cent is on top of the Budget wish list of boiler turbine and generator (BTG) makers led by BHEL. This comes after at least five years of steadily increasing competition from Chinese and Korean players in India. Right now, the duty is 5 per cent for projects with less than 1,000 MW capacity and nil for projects over 1,000 MW.
Even as this levy is being debated, domestic equipment manufacturers may be up against challenges. Intense competition and lower profit margins are here to stay; the quantum of import duty notwithstanding. And here's why.
For one, it is not just the Chinese players but increasing local competition that has hurt domestic players, especially BHEL, the most. At least eight Indian players, through joint ventures with established overseas players, have entered the BTG space in the last 3-4 years. Others, such as Korean player Doosan, are setting up fully-owned units locally.

Olympic Cards - IPO: Avoid ::Business Line

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Most Indian weddings, it is true, are grand affairs with no expense spared. But the Initial Public Offer of Olympic Cards, which derives half its revenues from the marriage market by way of wedding cards, is unappealing on many counts.
The business of printing wedding cards is an unorganised one with low entry barriers. Each city usually has one or two reputed companies that makes customised wedding cards.
Therefore, efforts by this company, with presence in two southern cities to bank on the brand ‘Olympic' to break into other markets (not named), could thus face impediments.
Further, the brand ‘Olympic' is not owned by Olympic Cards, but used on licence from a promoter group entity. This leads to conflict of interests as the brand is also being used by relatives of the promoter for another wedding card business. At the upper end of the price band of Rs 30-32, the offer price values the company at 20 times annualised earnings for FY-12 on a post-issue equity.
This places it at a stiff premium to closest comparable Archies, which trades at nine times trailing per-share earnings.

Hoping for a re-charge ::Business Line

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India's power sector is ending the current Five-Year Plan on a not so happy note. Power sector woes have exacerbated over the last few years due to fall in merchant power realisations, sharp jump in imported fuel costs, lower availability of domestic coal, inability to pass on the fuel hikes to the buyers and lower off-take and delayed payments by the troubled distribution sector.
As we enter the Twelfth Plan (2012-17), there are issues that need immediate attention. Some of these issues can be addressed in the current year's Union Budget. Restructuring of the distribution sector, a cut in import duty of coal, extension of tax holiday (80IA) for the upcoming power projects and encouraging higher investments in this sector by enhancing the limits of infrastructure bonds are the key expectations. Private sector players, however, may need to watch out for any import duty hike on power equipment and increase in minimum alternate tax.

March 2012: The alternative insights monthly ::Edelweiss

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March view: High voltage month; sharp moves ahead
Make or break month for markets
UP exit polls hint at significant gains for SP
Budget expectations: What’s inside the Pandora’s box?
Liquidity blues: CRR cut on board; rate cuts still some time away
Cement: States go after cement industry
Telecom: Battle for subscribers to get aggressive

Olympic Cards IPO Analysis: VS Fernando in Moneycontrol

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Notwithstanding Crisil's poor rating, Olympic Cards ' IPO pricing does not look untenable considering the company's dividend record, promoter's long standing track in business and OLYMPIC brand's popularity in South India.
OFFER AT A GLANCE
Name
OLYMPIC CARDS LTD
Offer Quantity
78.1 to 83.3 lakh shares of Rs 10 each
% on Total Equity
47.8 to 49.4%
Offer Price
Rs 30 to Rs 32
Offer Amount
Rs 25 cr
Application Quantity
200 & Multiples of 200
Offer Opens
March 9, 2012
Bid/Offer Closes
March 13, 2012
Rated By
CRISIL
Rating
1 out of 5
Lead Managers
Ashika Capital
Registrars
Cameo Corporate Services









THE PHOENIX MILLS Enhances stake in Chennai projects :Edelweiss

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The Board of Phoenix Mills (PHNX) has approved acquisition of 32% stake
in two Chennai SPVs in a marginally value‐accretive transaction. We
maintain ‘BUY/SO’ rating on the stock.
Phoenix raises stake in Chennai SPVs
PHNX will enhance its stake in two Chennai SPVs, Classic Mall Development and Classic
Housing Projects, to 63% and 66% respectively by purchasing 32% stake in each of
them for INR 1.06 bn from Kshitij Venture Capital Fund. PHNX currently holds an
effective economic interest of 31% in Classic Mall Development [1 msf mall;
operational in Q3FY13E; Satyam (Multiplex Operator), Pantaloon & Lifestyle has
commenced fit‐out activity) and a 0.25 msf residential development in Chennai (0.25
msf launched in H1FY12; sold ~70%)] and 34% in Classic Housing Projects (executing
0.25 msf residential development in Chennai).
Acquisitions marginally NAV accretive
We have valued the combined equity in these SPVs at INR4.8bn against the implied
deal valuation of INR3.3bn, implying that the deal is marginally NAV accretive. Payment
of the acquisition will be staggered, with INR0.3bn payable within 90 days and the
balance at the end of 15 months from the date of the execution of the share purchase
agreement. Kshitij will continue to own 32% in the SPVs (entitling it to receive
dividends, if any) till Q1FY14E. PHNX will control majority stake post payment of final
tranche against minority stakes currently.
Outlook and valuations: Value accretive; maintain ‘BUY’
Post acquisition, we revise our NAV marginally upwards to INR249/share from
INR246/share to factor in the stake enhancement at a discount to fair value. Near‐term
triggers are: Shangri‐La Hotel becoming operational in H1FY13 and commencement of
the Chennai mall. We reiterate ‘BUY/SO’ rating on the stock, with target price of
INR249/share at par with FY13E NAV.

THE PHOENIX MILLS Enhances stake in Chennai projects :Edelweiss

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The Board of Phoenix Mills (PHNX) has approved acquisition of 32% stake
in two Chennai SPVs in a marginally value‐accretive transaction. We
maintain ‘BUY/SO’ rating on the stock.
Phoenix raises stake in Chennai SPVs
PHNX will enhance its stake in two Chennai SPVs, Classic Mall Development and Classic
Housing Projects, to 63% and 66% respectively by purchasing 32% stake in each of
them for INR 1.06 bn from Kshitij Venture Capital Fund. PHNX currently holds an
effective economic interest of 31% in Classic Mall Development [1 msf mall;
operational in Q3FY13E; Satyam (Multiplex Operator), Pantaloon & Lifestyle has
commenced fit‐out activity) and a 0.25 msf residential development in Chennai (0.25
msf launched in H1FY12; sold ~70%)] and 34% in Classic Housing Projects (executing
0.25 msf residential development in Chennai).
Acquisitions marginally NAV accretive
We have valued the combined equity in these SPVs at INR4.8bn against the implied
deal valuation of INR3.3bn, implying that the deal is marginally NAV accretive. Payment
of the acquisition will be staggered, with INR0.3bn payable within 90 days and the
balance at the end of 15 months from the date of the execution of the share purchase
agreement. Kshitij will continue to own 32% in the SPVs (entitling it to receive
dividends, if any) till Q1FY14E. PHNX will control majority stake post payment of final
tranche against minority stakes currently.
Outlook and valuations: Value accretive; maintain ‘BUY’
Post acquisition, we revise our NAV marginally upwards to INR249/share from
INR246/share to factor in the stake enhancement at a discount to fair value. Near‐term
triggers are: Shangri‐La Hotel becoming operational in H1FY13 and commencement of
the Chennai mall. We reiterate ‘BUY/SO’ rating on the stock, with target price of
INR249/share at par with FY13E NAV.

Media: Demystifying IRS Q4 2011: still with the top guns ::Kotak Securities, PDF link


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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily09032012.pdf

Media
India
Demystifying IRS Q4 2011: still with the top guns. We stick with the top guns of the
Indian print media despite sub-optimal trends in IRS Q4 2011. Our positive view on
Hindi/regional print is driven by (1) robust advertising dynamics, (2) limited inter-media
competition supported by (3) attractive valuations and (4) steady cash flows/dividends
(~3.5% for Jagran and ~2% for DB Corp). Our analysis of IRS Q4 2011 (survey period
Oct 2010 – Sep 2011) reveals: (1) continued readership growth in Indian print media
(English/Hindi), (2) leading print companies consolidating their position in core markets,
(3) Mid-Day flourishing under Jagran and (4) HT consolidating its runner-up position in
Mumbai. We focus on yoy changes in readership from a trend perspective.

Budget 2012-13 (Infrastructure): Better fund availability ::Business Line

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Infrastructure – or the lack of it — has taken a good deal of blame in stifling growth. This Budget, then, is likely to address allocations and better utilisation of these funds across segments.
That the coming fiscal will be the first year of the Twelfth Five-Year Plan is also another factor that can push infrastructure spending.
Measures to improve availability of finance for infrastructure projects also take prime position this Budget.

Technical: United Spirits, SB & T International, Dish TV, Agro Tech Foods, Pratibha Industries, MOIL, Tecpro, ::Business Line

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Please explain the short- and medium-term trend of United Spirits and SB & T International.
Thariath Kurian
United Spirits (Rs 530.7): United Spirits moved close to the long-term trough at Rs 425 formed in January 2009 and the stock continues to hover above this level. This level can act as a stop-loss for both short- as well as medium-term investors. If this level is breached, the supports at Rs 362 and then Rs 288 will come into play.
Short-term targets for the stock are Rs 750 and Rs 925. The zone between Rs 900 and Rs 950 is also a key medium-term resistance. Inability to move above this zone will mean that the stock will vacillate between Rs 500 and Rs 950 over the upcoming months.
Medium-term view will turn positive only on a strong close above Rs 950. Subsequent targets for the stock are Rs 1,068 and Rs 1,215.

Aptech (Rs 90.1): Buy ::Business Line

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We recommend a buy in the stock of Aptech from a short-term perspective. It is seen from the charts of the stock that in early January this year, it took support from its long-term base at around Rs 65 and reversed its direction. This reversal was helped by a positive divergence in daily relative strength index. Since then, the stock has been on a modest medium-term uptrend. But following a small correction, the stock took support at Rs 83 in the previous week and started to move higher.
On March 7, the stock surged 4.5 per cent breaching its 21- and 50-day moving averages. With this up move, the stock appears to be resuming its uptrend. We notice that there has been an increase in volumes over the past three trading sessions. Both daily and weekly relative strength indices are inching higher in the neutral region towards the bullish zone.
The daily price rate of change indicator has entered into the positive terrain and weekly indicator is featuring in this terrain implying buying interest. We are bullish on the stock from a short-term perspective. We anticipate its current up move to continue and touch our price target of Rs 93 or Rs 96 in the ensuing trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 87.5.

52-WEEK FLOP: PANACEA BIOTECH ::Business Line

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Pan

52-WEEK BLOCKBUSTER: HAVELLS INDIA ::Business Line

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An increased share in the retail cables segment, entry into home appliances, higher demand for compact fluorescent lamps in the market and the successful restructuring of Sylvania-Havells' European subsidiary, helped the stock of Havells India climb 61 per cent in the last one year.
For the nine months of FY12, the company has reported a 22 per cent growth in net sales on a standalone basis. Net profits reported a year-on-year growth of 15 per cent.