Technology: Don't miss the forest for the trees : Kotak Sec, PDF link

Technology
India
Don’t miss the forest for the trees. The sharp qoq ‘realization’ drop at Infosys was
indeed an important trigger for our Tier-I downgrade last week; however, it was not the
only one. Sharp deterioration in yoy growth trajectory across the sector, failure of Re
depreciation benefits to show up in margins for Tier-Is, and several anecdotes we have
heard from our channel checks on pricing pressure on large deals all contributed to our
increased caution. Over-analyzing Infosys’ realization drop is fraught with the risk of
missing the forest for the trees. We would prefer erring on the side of caution. Material
pick-up in deal-signing momentum is the key risk to our call.

Industrials: T&D: PGCIL ordering remains buoyant; foreign vendors taking away lion's share : Kotak Sec, PDF link

Industrials
India
T&D: PGCIL ordering remains buoyant; foreign vendors taking away lion’s share.
PGCIL awarded Rs60 bn of orders in the seasonally weak 1Q with award of 3,000 MW
HVDC terminal. The trend of more than 50% of equipment ordering going to foreign
vendors has sustained and in 1QFY13 even substation ordering has followed the trend.
The competitive intensity continues to increase with entry of new players in substations
(New North East Electric, China and East Green Power, Singapore) and towers (NCC
Saudi Arabia). 765 KV transformer pricing does not show any pick-up with recent ABB
bid of Rs100 mn/unit.

Banks/Financial Institutions: Risk on and risk off : Kotak Sec, PDF link

Banks/Financial Institutions
India
Risk on and risk off. Analysis of off-balance sheet exposures (both public and private
banks) indicates a fairly stable ratio at 1.1-1.2X since FY2009. Private banks (3.3X loans)
dominate as compared to public banks (0.7X loans) despite a lower share in funded
business. Significant off-balance sheet exposure is currently towards infrastructure and
construction verticals, but we expect these ratios to come down as investment activity
in these sectors is slowing down. Risks remain similar to funded exposure though banks
focus on existing clients to mitigate the same.

Havells India: Taking stock of off-balance sheet items - Part 2 : Kotak Sec, PDF link

Havells India (HAVL)
Others
Taking stock of off-balance sheet items – Part 2. We again compute cash flows for
the company adjusting for off-balance sheet items after fresh management inputs.
Takeaway: Both at the standalone and consol. levels, the company has not generated
free cash flow (after capex and adjusting for off-balance sheet items) in FY2011 and
FY2012. We have no discomfort with regard to the off-balance sheet items as they are
usual financial instruments used by companies; we want to highlight that cash flows of
the company are unlike a consumer business and hence, discount to pure-play consumer
valuations is justified. Maintain ADD as we see limited upside to our earning estimates.

Zee Entertainment Enterprises: FY2012 annual report analysis: FCF impacted by large jump in film investments : Kotak Sec, PDF link

Zee Entertainment Enterprises (Z)
Media
FY2012 annual report analysis: FCF impacted by large jump in film investments.
Zee reported weak FCF/PAT despite robust operating cash flows due to (1) large jump in
film/movie rights inventory and (2) increased capex led by launch of 4 HD channels.
The content investments are needed to stem loss in network market share and likely to
continue; however, the large working capital/cash flow impact is unlikely going ahead
given stability in film investments (Rs3.3 bn in FY2012 and Rs2.5-3.5 bn in the future).
ADD (unchanged) with 12-month forward FV of Rs160 (unchanged).

Tata Steel: FY2012 annual report: Subsidiaries a drag on profits : Kotak Sec, PDF link

Tata Steel (TATA)
Metals & Mining
FY2012 annual report: Subsidiaries a drag on profits. Tata Steel’s FY2012 annual
report highlights (1) subsidiaries were a drag on profits, contributing Rs58 bn of the
earnings swing; (2) book value increased by Rs74/share, contributed by a Rs52/share
increase in foreign exchange translation reserves; (3) conversion costs increased by 19%
for the India steel business, which is a concern and (4) movement in items of pension
fund of TSE requires clarification. This is our preliminary read through; we may follow
this up with a detailed update. We maintain our ADD rating.

Bajaj Finserv: NBFC continues to be the sole growth driver : Kotak Sec, PDF link

Bajaj Finserv (BJFIN)
Banks/Financial Institutions
NBFC continues to be the sole growth driver. Bajaj Finserv reported 15% yoy
growth in adjusted profits on the back of modest (4% yoy) growth in earnings of the
life insurance business. Bajaj Finance reported strong performance: 60% yoy loan
growth, stable collections, market share gain in consumer durables finance on the back
of buoyant retail demand. We await better operational trends from the insurance
businesses; retain REDUCE with target price of Rs680.

NIIT Technologies :ICICI Securities, PDF link

NIIT Technologies  :ICICI Securities, PDF link :  Q1FY13

Economy: Keep your eyes glued on 'core' inflation :: Kotak Sec, PDF link

Economy
Inflation
Keep your eyes glued on ‘core’ inflation. We take note of the lower-than-expected
June headline inflation print of 7.25%, but continue to stay focused on the core
inflation which for the fourth month remained sticky at ~5%. The lower print has been
mostly due to lower ‘fuel and power’ and ‘non-food articles’ inflation. While the latest
inflation reading opens up a debate whether RBI will now be ready to ease monetary
policy, we are not as sure as the inflation mix remains problematic. With CPI inflation in
double digits too, we maintain our stand for a ’wait-and-watch‘ policy from RBI till the
fiscal policy starts to complement monetary policy or if growth slides significantly lower.

Strategy: See you in three or 18 :: Kotak Sec, PDF link

Strategy
India
See you in three or 18.  The Indian market may not hold up over the next 2-3 months
unless we see improvement in macro factors and end of policy paralysis in India.
Investors’ negative perception of India is hardly visible in valuations, with most largecap. names trading at rich valuations in the context of earnings growth and companyspecific issues. It would seem the market is already discounting positive events in the
next 2-3 months but largely ignoring the risks from continued policy ‘drift’ in India.

Mindtree: Operationally weak, on expected lines; retain ADD on 'margin of safety' :: Kotak Sec, PDF link

Mindtree (MTCL)
Technology
Operationally weak, on expected lines; retain ADD on ‘margin of safety’. Not
completely immune from industry-wide growth deceleration, MT delivered a soft
quarter on revenue growth. Sharp qoq Re depreciation drove both solid operating profit
as well as net profit growth. We raise our EPS estimates on the back of revised margin
assumptions even as we cut our revenue estimates to reflect our increased caution on
the sector. We retain ADD and raise TP to Rs710/share (Rs685 earlier). MT continues to
fit our ‘reasonable margin of safety on multiples on conservative assumptions’ criterion.

Axis Bank: Headwinds remain : Kotak Sec, PDF link

Axis Bank (AXSB)
Banks/Financial Institutions
Headwinds remain. Axis Bank’s reported earnings were marginally ahead of estimates
even as revenue growth showed signs of slowdown—in line with expectations.
Sequential rise in NPLs reflects weak recoveries. Restructuring was high even as
slippages were at normalized levels. Delay in capital raising remains the key concern,
especially in current volatile markets, while infrastructure exposure is an overhang.
We see earnings growth under pressure over the next few quarters and hence retain
cautious stance on the stock. We retain ADD largely backed by valuations.

Castrol India: Volumes versus margins :: Kotak Sec, PDF link

Castrol India (CSTRL)
Energy
Volumes versus margins. Castrol reported 2QCY12 net income at `1.21 bn (-15.2%
yoy, -1.6% qoq), lower than our estimate of `1.29 bn. The sequential improvement in
sales volume to 56.7 mn liters (+7.8% qoq) has been largely negated by a sharp increase
in operating costs. We reiterate our SELL rating on Castrol stock noting (1) expensive
valuations at 27.3X CY2012E EPS and 25.2X CY2013E EPS and (2) potential downside
of 23% to our revised target price of `425 (`400 previously).    

HDFC Bank: Consistent but expensive :: Kotak Sec, PDF link

HDFC Bank: Consistent but expensive
` Well-placed among peers but expensive valuations driving the downgrade
` Earnings growth maintained at 30%; best revenue growth seen in recent
quarters

technicals: M & M, Chennai Petro, United Spirits, Dishman Pharma, Wire & Wireless, NHPC, :: Business Line

INDEX OUTLOOK - Stocks hit pause button :: Business Line

Number Crunch: Measuring monsoon :: Business Line

Axis Bank: BUY :: Business Line

Long-term investors continue to bet on India: KKR

There has been a turnaround in investor sentiment and long-term investors continue to bet on the India growth story, KKR's India head Sanjay Nayar told CNBC-TV18. "I think there is no doubt that the sentiment is better," he adds. 

According to him, foreign investors love India. "The strategic investors have always liked India," he adds.

He expects the deal environment to pick up in another six months.

Nayar expressed interest in sectors such as retail and healthcare, however he ruled out investing in aviation.

ING VYSYA Bank - Credit Profile & Asset Quality to Boost Growth: Karvy

ING Vysya Bank – the only Indian bank with an MNC setup – is likely to sustain
earnings growth of 27% on the back of higher‐than‐industry growth in credit,
stable NIMs, ushering in of operational leverage, and while enjoying one of the
best asset qualities in domestic banking space. We initiate coverage on the Bank
with “BUY” recommendation with a target price Rs. 465 per share.

Shriram Transport Finance to raise Rs 300 cr thru bond sale :: Business Line

Shriram Tansport Finance Company said it plans to raise about Rs 300 crore by issuing non-convertible debentures (NCDs).

The NCD offering will open on July 26 and end on Aug 10. The face value of each NCD will be Rs 1,000.

The company said 80 per cent of the offering is reserved for retail investors and 20 per cent will be issued to corporates. For retail investors, 50 per cent of the issue will be reserved for investors with an investment cap below Rs 5 lakhs and the rest will be allotted to investors with investment of Rs 5 lakhs and above.

Is the monsoon, a non-event? :: Business Line

Four reasons behind Maruti Suzuki's Manesar problems: ET

The bad old days of militant trade unionism are back. The violence at Maruti Suzuki's Manesar factory, which killed one senior employee and injured close to 100 others, bodes ill for the future of not just Maruti but also the industrial hub of NCR. This is not the first time that Maruti is fighting trouble in Manesar. 

Last year, labour unrest resulted in a loss of over Rs 2,500 crore for the company. So, what's causing Maruti such big problems at Manesar? ET Magazine looks at four reasons that could have resulted in the simmering tension between the management and workers at Maruti Suzuki. 

Stock Strategy: Consider going short on Educomp, SAIL :: Business Line

Pivotals – Infosys, SBI, Tata Steel, Reliance Industries :: Business Line

Come into my parlour… :: Business Line

Price gains hard to come by? Bet on dividends :: Business Line