Fitch must be regretting outlook upgrade of India: CLSA

Indian markets have been resilient on the back of global liquidity conditions, so long-term investors may still find the ongoing correction attractive, says Rajeev Malik of CLSA.

The "band-aid" measures taken to address current account deficit (CAD) and  protect the free falling rupee have failed to yield desired result making India vulnerable to ratings downgrade, says Rajeev Malik of CLSA.  Finance minister P Chidambaram's promise on Wednesday to contain fiscal deficit (FD) at 4.8 percent in FY14 appears far-fetched since India's fiscal deficit in the April-June quarter came in at 48.4 percent compared to 37.1% in the previous year. It remains to be seen if the present rate of inflows can add  the USD 80 billion projected by the finance minister.

“The government has to take stern steps to fix the underlying rupee problem. Given macro economic mess we don’t need temporary solutions. Relative to the issues faced, the steps undertaken have been inadequate. Fitch must be regretting its outlook upgrade," he told CNBC-TV18 in an interview.

In June, Fitch had upgraded India's sovereign ratings outlook to "stable" from "negative" citing government measures to contain the budget deficit and the progress made in improving investment and economic growth.

However, he added that Indian markets have been resilient on the back of global liquidity conditions, so long-term investors may still find the ongoing correction attractive.

Meanwhile, CLSA maintains its 2014-end rupee target at 65/USD. Malik believes that rupee’s deprecation may not stop there. The Indian currency has tumbled 9 percent in the last one quarter against the US dollar.

India Strategy- A Portfolio Manager’s Delight or Nightmare? ::JPMorgan

Dispersion galore: The most common grumble from
portfolio managers is that the street and the market is
pushing them to buy the same set of stocks – the
winners of the past five years – stocks which continue to
command rising and premium valuations. Ordinarily,
there is no issue with buying past winners. Indeed, our
factor work shows momentum is a winning style in the
long term. However, the opposite spectrum of the
market is very attractively valued and the risk of
concentrated portfolios is not lost on fund managers.
The point goes beyond portfolio risk. The fact is that the
stocks, which have delivered the best performance over
the past five years and now trade at significant premium
valuations (Exhibit 1), have not really delivered outsized
relative fundamental performance versus the past
(Exhibit 2 and 3). The gap in trailing earnings growth
and ROE of India’s best companies with the worst is in
line with history and, yet, the P/E and P/B gap of their
stocks is the highest ever (ex-the tech bubble). What
explains this?

Religare Institutional Research | India Economics: India July Mfg. PMI at 50.1 - Downtrend continues; worse times ahead

India July Mfg. PMI at 50.1
Downtrend continues; worse times ahead
India’s mfg. PMI at 50.1 in July is now barely above the 50-mark,
down from 50.3 in June. Output and new order growth continue to
fall on slowing export orders, with the weak INR raising
inflationary pressures. The RBI’s recent rate-based measures to
curb FX volatility will take time to show results, if any, and a
calibrated rollback, as intended by the central bank, looks unlikely
at least over the next two quarters. We now expect a rate cut only
by Q4 (25bps at best) depending on global macro dynamics.
Growth implications are obvious; we see downside risk to our
FY14 industrial estimate of 3.0%.
A quick look at global mfg. PMI data signals a mixed bag with
Eurozone, Germany and the US showing improvement, while all
other regions recorded declines.

SBI, Tata Steel, Reliance Industries, Infosys, Technicals- Aug 4th: Business Line

Index Outlook: Staring down the barrel :: Business Line

Buy Multi Commodity Exchange (MCX) TP: INR860 : Motilal Oswal

 MCX’s 1QFY14 revenue at INR1.23b (flat YoY, 1.8% QoQ) was in line with our

estimate. EBITDA margin at 51.5% was below our estimate of 56.2% due to higher

staff and admin costs. PAT at INR601.2m (-7.1% YoY and -21.5% QoQ) was lower

than our estimate of INR635.4m, driven by lower operating profit.

 Flattish revenue YoY and marginal growth QoQ was on the back of total volumes

value of INR37.5t, growth of 4% QoQ and 3% YoY.

 Volumes were driven by contrasting trends in gold and silver during the quarter.

Volumes in gold were up 20% QoQ and 15% YoY, while silver volumes declined

13% QoQ and 25% YoY.  Gold and silver together contributed 51% to overall

volumes on the exchange, down ~5pp YoY. Crude oil (21% concentration)

volumes were up 20.5% QoQ and 19.5% YoY.

 CTT became effective from July 1st and hence the impact of the same does not

reflect in 1QFY14. However, going forward, we expect MCX’s volumes to be

severely impacted (ADV down ~43% in July v/s 1HCY13).

 Following the imposition of CTT, average daily volumes in July fell ~43%,

compared to the average daily volumes in the first six months of CY13. We factor

this as the trend in volumes going forward; our current estimates for FY14E and

FY15E do not assume any benefits from factors such as FCRA.

 Earnings are expected to decline significantly going forward and we estimate 40%

decline in FY14E EPS, corresponding to a 30% decline in FY14E volumes. We value

MCX using the SOTP method  – adding the potential value from sale of stake

through direct holding and warrants in MCX-SX, to the exchange’s business.

 We value the exchange at 20x FY15E EPS  – arriving at INR750 per share, and

another INR110 per share from stake in SX (valued at INR15b, ~37% of that

accruing to MCX). Maintain Buy.

Business Line, Explaining the NSEL crisis

With confusion about spots versus forwards, settlement cycles and exchange regulation, the crisis on the National Spot Exchange this week had our collective heads spinning. Therefore, we decided to address the questions most often asked by investors on the issue.

In what contracts has the trading been suspended by NSEL?

NSEL has suspended trading in all contracts but for the ones on the e-series. E-series contracts will continue to trade on the exchange.

Why did NSEL suspend trading in its contracts and defer settlement?

National Spot Exchange had several contracts where settlement was done beyond eleven days. In fact, some worked to a T+25 and T+35 day settlement cycle.

The Forward Market Commission also found that there was short selling in some of these contracts where an individual sold the contract without actually owning the underlying commodity.

Settlement beyond 11 days and short trades were both not permitted by regulators on spot market transactions. So the regulator sent a notice to NSEL few weeks ago, asking it to immediately bring down the settlement period in its contracts and move all of its existing contracts to ‘trade-for-trade’, meaning every trade has to be settled the same day and couldn’t be netted out. The exchange immediately complied. But as the news triggered panic among traders and many of them wanted to close out their positions immediately, the exchange had to defer settlements.

How were forward trades allowed in a spot market?

Spot exchanges were allowed to conduct forward trading in one-day contracts (where an individual can keep the contract open for two days), through a special Government notification in early 2008. NSEL used this exemption to launch one-day forward contracts with a settlement cycle of 20-30 days.

But this exemption on forward trades came with the condition that the respective exchanges should not allow short selling.

Who was making money?

Talking to people who actually traded in the NSEL’s platform, we understand that high net worth investors and speculators were using the forward contracts to make money.

The forward contracts first involved a set of commodity stockists selling warehouse receipts to investors for an immediate payment. They also entered into a buyback arrangement whereby the investor would sell back the commodity to the stockist after a 25 day or 35 day period, with a ‘return’ element of 12-14 per cent.

Thus the stockist received financing while the investor got his return. But this soon morphed into a system where speculators actually sold commodities without proof of underlying stock and entered into similar buybacks arrangements. They drew in affluent investors who didn’t understand the markets but lent money to fund such trades.

As most of these trades happened in commodities such as raw wool and castorseed that were not widely traded, there was limited public information on them which investors could rely on to check if these trades were indeed working.

With settlement having been deferred, is there a risk of payment default by the exchange?

This will be evident only on settlement day. The MD and CEO of NSEL Anjani Sinha has said the exchange deferred settlement by 5 months because it needed time to estimate the total amount required for the payouts. He estimates that Rs 6,200-crore worth of stocks are lodged in the NSEL’s warehouses, in addition to the settlement guarantee fund.

On settlement day, traders who speculated on the exchange may not be able to cough up the full value of the contract because they probably traded on leveraged positions/ margins. Also, when the exchange liquidates stocks to meet commitments, there is the question of whether the actual price that the commodities fetch would match the estimated value.

Why did the stock of MCX fall? Do traders on this exchange too run a risk?

There is no direct connection between MCX and NSEL, except that both share a promoter — Financial Technologies. However, as MCX too operates in commodities trading, this event could lead to tighter regulatory scrutiny of the latter.

What is the way forward for NSEL?

The Government is said to be readying new regulations to govern spot exchanges to plug these loopholes. Until then NSEL will not be allowed to launch any new contract. The structure of the now suspended contracts could change based on the new regulation. Meanwhile, SEBI has sought details from various brokers on their exposure to contracts on NSEL.

Bharti Airtel: Jun-13—Pricing power visible; expect strong earnings growth ::Credit Suisse

● Bharti reported strong Jun-13 quarter numbers with 2% beat each
on revenues/EBITDA, and 11% adj. PBT beat. Higher taxes and
one-time non-cash costs led to reported profit miss of 14%.
Adjusted for exceptionals, profits came in-line. Full report.
● The results show that the business momentum in India has
definitely turned – with RPM increasing 4% QoQ without any loss
of minutes. The pricing improvement flowed through into
profitability with a 180 bp margins increase (QoQ). Management
comments and our channel checks indicate such pricing
improvement could continue in coming quarters.
● Cash flow is growing, with the company generating $470 mn in
free cash in Jun-13, compared to $750 mn in the whole of FY13.
RoCE – which has been falling ever since the Africa acquisition,
bottomed out and improved for the first time.
● Our estimates go down 1-4% on building the quarter's
exceptionals and higher taxes. We expect consensus upgrades to
Bharti in the near future, and retain our OUTPERFORM rating

India: Weak growth, rising price pressures :Nomura

 India's manufacturing PMI fell to 50.1 in July from 50.3 in June, due to a continued contraction in output and new orders.
Export orders remain expansionary, but moderated in July.
 Price pressures have surfaced again as the input price index rose due to rising imported inflation pressures (weak INR).
The output prices index also rose, albeit at a slower pace, which suggests margins are under pressure.
 Overall, the PMI data suggest that, even as domestic demand remains weak, price pressures are rising. Apart from the
external sector stress, this is another reason for the RBI to remain cautious.
The manufacturing PMI fell to 50.1 in July from 50.3 in June, its lowest level since April 2009 and just above the contraction/
expansion threshold of 50. The decline was due to continued weakness in the output and the new orders sub-indices.
 Weaker demand: Both domestic and external demand weakened in July (Figure 1). The new orders sub-index fell to 49.5
in July from 49.7 in June, reflecting weak domestic demand, while the new export orders index fell to 52.4 from 54.4.
Sectoral data suggest the decline in new orders was mainly in the intermediate and investment goods sectors.
 Output contracts, inventory lowered: The output sub-index remained below the 50 threshold for the third straight month
(even as it rose to 49.8 from 49.1), which indicates that weak demand, increased competition and persistent supply-side
pressures are forcing manufacturers to cut production. The new orders/inventory ratio reversed after seven straight
months of decline and rose marginally to 0.99 from 0.97, as manufacturers lowered inventories - the finished goods
inventory sub-index fell to 50.1 from 51.0.
 Price pressures resurface: The input price sub-index surged to 60.6 from 55.9, reflecting higher imported price pressures
due to a weak INR (Figure 2). More importantly, the output price sub-index, which has a lagged correlation with core WPI
inflation, rose to 53.4 from 50.9, as firms attempted to pass on higher costs, albeit at a slower pace, which suggests
margins are under pressure.
Bottom line: The PMI data suggest that, even as domestic demand remains weak, price pressures are rising. Apart from the
external sector stress, this is another reason for the RBI to remain cautious. We are negative on India‟s economic outlook due to
continued external sector pressures, tighter liquidity conditions, weak growth and political risks ahead of elections (see India:
Turbulent times ahead, 19 July 2013). In our baseline scenario (70% likelihood), we expect repo rates to remain on hold this fiscal
year and GDP growth at a below-consensus 5.0% y-o-y in FY14 (year-end March 2014), the same as in FY13.

Hindustan Unilever - Back to business - Near-term volume growth challenges persist :: JPMorgan

Post the closure of open offer by parent Unilever (stake rises to 67.3% from
52.5%), we believe investor focus will now shift towards underlying business
trends. While we are still optimistic about the long-term growth outlook for the
company, near-term risks to growth rates persist on account of vol growth
weakness and moderating price/mix growth. While recent sharp rupee
depreciation and uptick in palm oil prices threaten to limit GM expansion in 2H,
we believe company could consider pricing actions to counter that. We remain
Neutral with a new Mar’14 PT of Rs550. Valuations will likely be supported by
lower float and expectations of further buybacks/creeping acquisition.

Religare Research | Bharti Airtel : Solid India performance; Africa remains a drag – Hold

Solid India performance; Africa remains a drag – Hold
Bharti reported a strong Q1 as India ARPM increased by a sharp 4% QoQ,
shoring up wireless margins by 185bps QoQ. Africa remained sluggish (-5%
QoQ), impacted by lower interconnect even as margins rose 130bps QoQ.
While we already build in a margin recovery in FY14, Bharti’s ability to take
more price hikes without hurting volumes remains the key to further
upgrades. Growth in Africa remains below-par, with the underperformance
weighing on EBITDA upgrades. We adjust our estimates to factor in a better
India wireless performance and raise our TP to Rs 370 (from Rs 320). HOLD

Reserve Bank of India Meeting - Governor Subbarao: Out with a whimper ::Credit Suisse

● In what will probably be Subbarao’s last meeting as Governor of
India’s central bank, all interest rates were left unchanged. This,
however, follows two intra-meeting moves designed, successfully,
to tighten liquidity conditions. Clearly, the RBI deemed these to be
sufficient for the time being.
● In fact, the Reserve Bank’s statement was surprisingly dovish,
hinting that rates would have been cut again if it hadn’t been for the
depreciation of the currency, while the tightening measures will be
unwound as and when rupee stability is deemed to have returned.
● The central bank once again urged the government to tackle
India’s current account deficit problem via structural measures. It
seems increasingly likely, however, that the deficit is being
exaggerated by an under-invoicing of export receipts and an overinvoicing of import costs. The authorities should perhaps focus on
this issue as well.
● Given the inherent unpredictability of the rupee and the prospect
of a new Governor, the outlook for policy interest rates is nothing if
not highly uncertain. At this stage, we believe the best forecast is
for an unchanged repo rate by the end of the calendar year.

Jaiprakash Ass. - ICICI Directj

Asset monetisation need of the hour!!!
JAL’s reported net profit in Q1FY14 was above our expectations on
account of one-time profit of | 395.3 crore (pre-tax) from sale of shares of
Jaypee Infratech during the quarter. However, the net profit after
adjusting for profit on sale works out to | 24.8 crore (decline of 82% YoY).
In the cement division, volumes grew 3.1% YoY to 3.7 MT while the
realisation improved by | 90/tonne at | 4160/tonne and the EBITDA
declined by | 55/tonne to | 884/tonne in Q1FY14. Going ahead, with the
interest coverage ratio (0.9x in Q1FY14) – lowest in the last seven years,
de-leveraging of balance sheet through asset monetisation is the need of
the hour and would act as a key catalyst for the stock performance.
Disappointing Q1FY14 results…
JAL’s adjusted net profit declined 82% YoY to | 24.8 crore due to lower
margins (22.9% in Q1FY14 vs. 26% in Q1FY13), and higher interest and
depreciation cost (grew 26.8% and 10.2% YoY to | 590 crore and | 194.3
crore, respectively). The standalone cement division volumes grew 3.1%
YoY to 3.7 MT in Q1FY14. On a sequential basis, while the
realisation/tonne improved by | 89.9 to | 4160.4, the EBITDA declined
| 55 to | 884/tonne in Q1FY14. On the positive side, real estate revenues
grew 175.2% YoY to | 454.3 crore, which led to revenue beat.
Interest coverage ratio at 0.9x, debt reduction need of the hour…
The interest coverage ratio at 0.9x in Q1FY14 is at the lowest level in the
last seven years. The interest expenses pressure is expected to weigh on
earnings till some meaningful debt reduction is seen. The management
has continued to maintain that it is looking to reduce ~| 6000 crore debt
by FY14 end through asset monetisation.
Balance sheet de-leveraging holds key for stock performance…
With the interest coverage ratio (0.9x in Q1FY14), lowest in the last seven
years, de-leveraging of balance sheet through asset monetisation is the
need of the hour and would act as key catalyst for the stock performance.
We have assigned a BUY rating with an SOTP based target price of | 50
purely on the valuation (currently trading at 0.6x FY14E P/BV).

Shree Cement - Q4FY13 Result Update - Centrum

Operationally in-line results, maintain Buy
Shree Cement’s Q4FY13 result was in-line with our estimates on operational
parameters with EBITDA at Rs3.8bn (vs. est. Rs3.7bn) and OPM at 26.3% (vs.
est. 26.4%). Revenue during the quarter was at Rs14.4bn against our estimate
of Rs14.1bn primarily due to higher power sales volume of 795mn units (est.
680mn units). However, despite operational results being in-line with our
estimates, adjusted profit was at Rs2.8bn (vs. est. Rs1.5bn) due to lower
depreciation (Rs1.3bn vs. est. Rs1.95bn) and lower tax rate of 5.3% (vs. est.
20%). Cement demand and realization has recently been under pressure due
to slowdown in housing and infrastructure activities. Going forward, we
expect cement demand to recover in 2HFY14E, which should help the
manufacturers pass on the rise in input cost to consumers. The company aims
to double its cement capacity in the next five years with the help of free cash
flows. It has industry leading op. margin in the cement business (op. margin
of 25.9% in Q4FY13) and power business’ profitability has also improved in
recent quarters. Though we have reduced our EPS estimates by 3.6%/3.7% for
FY14E/FY15E considering low realization during the quarter, we prefer the
stock due to its lean cost-structure, ability to generate free cash flow and
consistent improvement in power business’ profitability. We maintain Buy
rating on the stock with a one year price target of Rs4,879 (earlier: Rs5,109).
Decline in cement segment’s revenue and higher depreciation impact profits:
Revenue of the company declined 1% YoY to Rs14.4bn led by 11% YoY decline in
cement segment’s revenue. Revenue from the power segment increased 78.2% YoY to
Rs3.1bn. Led by 33.9% decline in op. profit from the cement business, the company
reported 21.1% YoY decline in op. profit to Rs3.8bn and op. margin declined 6.7pp YoY
to 26.3%. Depreciation was up 62.8% YoY to Rs1.3bn. Lower op. profit and higher
depreciation resulted in 19.1% YoY decline in adj. PAT to Rs2.8bn.
Cement segment’s profitability impacted due to lower volume and realization:
Revenue from the cement segment declined 11% YoY to Rs11.4bn driven by 6% YoY
decline in sales volume to 3.2mt and 5.3% YoY decline in blended realization to
Rs3,602/tonne. Operating cost/tonne increased 7.7% YoY to Rs2,668/tonne due to
increase in raw material, freight, employee and energy costs. OPM of the cement
segment declined 8.9pp YoY to 25.9%. EBITDA/tonne was at Rs934 against
Rs1,326/tonne in Q5FY12.

Reliance Capital - Q1FY14 Result Update - Centrum

Strong traction in insurance businesses
RCap reported healthy set of numbers for Q1FY14 with insurance businesses
(life & general) witnessing healthy traction in premium flows. Commercial
finance saw smart NIM expansion while the company has contained balance
sheet growth. Voluntary stoppage of gold related businesses has impacted
distribution business and may hit FY14 earnings. We maintain our positive
stance on the stock led by easing of sector specific challenges for each
business.
Commercial finance: Net Interest Income grew by a robust 23% helped by
sequentially higher NIM (+100bps) though loan book was flattish YoY. From a
segmental perspective, SME was the key driver (4% YoY), while the Auto segment
saw loan book contracting by 14% YoY. Asset quality challenges persisted as GNPA
inched up higher by 50bps sequentially to 2.2% (90-day basis) and by 30% on
absolute basis QoQ. A large part of the incremental stress is coming from CV&CE
portfolio, which the company is confident, will recover shortly.
Asset management: Led by favourable response to debt schemes, the debt AUM
surged by 38% YoY and 9% QoQ. Total AUM grew by 22% YoY and 3% QoQ to
Rs1.8bn though rise in income was far steeper at 39% YoY. Expenses shot up by
44% YoY. Consequently, PBT grew by 32% YoY.
Life insurance: The life insurance business continued to face tough operating
environment though Q1FY14 saw 105% growth in new business premiums
resulting in higher market share of 10.5% (among private players). Notably, RLife
has stepped up efforts to protect its market share and penetrate Top 10 cities as is
evident by the second consecutive quarter of agent additions.
General insurance: Q1FY13 saw ticket size coming down as GWP growth of 25%
trailed 40% growth in policies issued. While the business remains profitable for the
last three quarters, PAT saw a decline of 40% QoQ; however, the combined ratio
has been maintained at ~113%. For FY14, RGEN’s share in motor pool losses is
limited at Rs650mn (vs Rs1840mn in FY13) and would represent the last obligation.
Given this, the management expects the combined ratio for FY14 to head towards
100% from 115% currently.
Broking and distribution: The performance of broking business was weak as
Q1FY14 was impacted by weakness in volumes as well as lower deliveries.
Bottomline reflects a 92% YoY drop as expenses remain sticky. Meanwhile,
distribution business saw a strong 104% growth in topline (low base effect) though
it was down 28% QoQ. Importantly, gold distribution moderated by 36% QoQ as
the company has taken the product off-market on a temporary basis.
Consequently, the distribution business registered a loss of Rs8mn for the quarter.

Bank of Baroda- Sharp correction provides an entry point :: JPMorgan

We reiterate BOB as Overweight, with 52% upside implied by our Mar-14
Rs850 PT. The stock has corrected sharply in recent weeks, and FY14E
valuations are close to historic lows at 0.6x P/BV and 4x P/E. We see two
distinct triggers – a) easy money market conditions cushioning asset yield
pressures and margins therefore holding up, and b) some relief on asset
quality via aggressive recoveries. We believe the recent correction was
more driven by broad market conditions (particularly the currency) and
there has been no significant worsening of fundamentals to support this.

IndusInd Bank 4Q13: Solid quarter, treasury drives surprise :: JPMorgan

IndusInd Bank reported Rs 3.35bn 1Q14 PAT, +42% y/y and 10%>JPMe.
The main surprise was driven by treasury and forex fees, despite an
Rs500m floating provision. Overall, operating numbers remain solid with
margins and asset quality holding up and strong savings momentum
continuing. We raise our PT to Rs550 on better LT growth outlook, and
maintain OW. We see IndusInd as a strong secular pick – the strong retail
asset franchise is now being supplemented by deposit momentum. Product
(and hence risk) diversification is helping raise ROAs and improve
earnings quality, all of which support the valuations of 3x FY14 PB.

JaiPrakash Associates - Angel

For 1QFY2014, Jaiprakash Associates (JAL) posted a mixed set of numbers with
decent performance on the revenue front while adjusted earnings were lower than
our estimate owing to lower-than-expected operating performance and high
interest cost. The decent performance on the revenue front was owing to cement
revenue surprise. However, lower-than-expected performance of the construction
segment and high input cost pressure led to a decline in the blended EBITDAM.
High interest cost dents profitability: On the top-line front, the company reported
a revenue of `3,315cr for 1QFY2014, registering a growth of 10.2% yoy, which is
slightly higher than our estimate. The real estate and construction segments
posted a growth of 175.2% and 2.9% yoy respectively; however, the cement
segment’s revenue declined by 1.5% yoy. The blended EBITDA margin declined
by 345bp yoy to 23.7% and was below our expectation of 26.2%. This was mainly
due to a subdued performance in the construction segment. The interest cost
stood at `590cr a jump of 26.8%/7.5% on a yoy/qoq basis and was higher than
our estimate of `560cr. On the bottom-line front, the company reported a PAT of
`335cr, a growth of 140.9% yoy, owing to an exceptional gain of ~`395cr which
accrued on account of sale of equity shares. Adjusting to this gain, the company
has reported a loss of `61cr in 1QFY2014 vs a profit of `138cr in 1QFY2013.
This is mainly due to a lower-than-expected operating performance and high
interest cost.
Outlook and valuation: Going forward, we believe deleveraging the balance sheet
through monetization of land parcel and stake sale in cement business would help
the company in reducing its huge debt, which continues to remain an overhang on
the stock. Hence closure of such a deal would be positive for the company. We
recommend a Buy rating on the stock with a SOTP target price of `53.

Punjab National Bank Ltd. Q1FY14 result:: Microsec Research

Punjab National Bank Ltd. announced its Q1FY14 result on 26^th July 2013.

The Bank’s total income increased by 5.99% QoQ and 7.99% YoY to INR5249.56 crores, driven by 5.80% and 14.90% YoY growth in its Net Interest Income (NII) and Other Income respectively. Whereas, Profit After Tax (PAT) increased by 12.78% QoQ and 2.38% YoY to INR1275.32 crores. The Bank has decreased its provision by 27.83% QoQ to INR1066.48 crores which has pushed up its bottom line.

During the quarter, the Bank's loan book and total deposits expanded by 3.60% and 2.97% YoY to INR305065.56 and INR396828.11 crores respectively. On the asset quality front, the Bank’s asset quality is still the matter of concern. Net NPA and Gross NPA increased by 63 and 57bps QoQ and 130 and 150bps YoY to 2.98% and 4.84% respectively. Moreover, Net Interest Margin (NIM) marginally improved by 1bps QoQ while, decreased by 8bps YoY to 3.52%. The Bank’s Capital Adequacy Ratio (CAR) stood at 12.44% which is 3.44% higher than the regulator’s stipulated norm.

Q1’14 (INR Crores)	Consensus	Actual	Variance %
Total Income	4757.4	5249.56	10.35%
PAT	1203.7	1275.32	5.95%

Punjab National Bank Quarterly-[INR-Crores]
DESCRIPTION	Q1'14	Q4'13	Q1'13	QoQ%	YoY%
Interest Earned	10404.54	10376.63	10553.96	0.27	-1.42
Interest Expended	6497.03	6600.13	6860.83	-1.56	-5.30
NII	3907.51	3776.50	3693.13	3.47	5.80
Other Income	1342.05	1176.21	1168.01	14.10	14.90
Total Income	5249.56	4952.71	4861.14	5.99	7.99
Operating Expenses	2275.76	2101.00	2020.25	8.32	12.65
Operating Profit before Prov.& Cont.	2973.80	2851.71	2840.89	4.28	4.68
Provisions and Contingencies	1066.48	1477.70	1032.49	-27.83	3.29
PBT	1907.32	1374.01	1808.40	38.81	5.47
Tax	632.00	243.21	562.73	159.86	12.31
Profit After Tax	1275.32	1130.80	1245.67	12.78	2.38
Adj Calculated EPS	36.08	32.91	36.73	9.63	-1.77
Advances	305065.56	308725.21	294467.89	-1.19	3.60
Deposits	396828.11	391560.06	385374.73	1.35	2.97
	Q1'14	Q4'13	Q1'13	QoQ (bps)	YoY(bps)
Capital Adequacy Ratio Basel II	12.44%	12.72%	12.57%	-28	-13
% of Net NPAs	2.98%	2.35%	1.68%	63	130
% of Gross NPAs	4.84%	4.27%	3.34%	57	150
NIM %	3.52%	3.51%	3.60%	1	-8
Provisions Coverage%	54.67%	58.83%	62.81%	-416	-814
C/D ratio	76.88%	78.84%	76.41%	-197	47
C/I Ratio	43.35%	42.42%	41.56%	93	179
OI/TI	56.65%	57.58%	58.44%	-93	-179

Regards,

Team Microsec Research