Rainfall Trend above Normal, But... ::Morgan Stanley Research,

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India Economics
Quick Comment: Rainfall
Trend above Normal, But...
Rainfall trend in India remained above normal
during the week ended June 29: On a weekly basis,
the total country-wide rainfall weighted by cropped area
was 10% above normal for the week ended June 29
compared to 23% above normal for the week ended
June 22. According to IMD, on an all-India
area-weighted basis, cumulative rainfall was 11% above
normal up to June 29, the same as the previous week.
However, spatial distribution remains uneven: On
an unweighted basis, rainfall for the week ended
June 29 was below normal in the southern (-26%),
western (-6%), and eastern (-5%) regions, and above
normal in northern (+74%) region. The states affected
by below-normal rainfall include Gujarat, Maharashtra,
and Andhra Pradesh, amongst others. Considering that
many of the states have less-developed irrigation
facilities, it will be crucial to monitor the progress of
monsoons over the coming weeks and the crop-sowing
pattern.
Cropped area affected by below-normal rainfall at
22.1%: The most important measure of cropped area
affected by below-normal rainfall stood at 22.1% as of
the week ended June 29 compared to 21.1% as of the
week ended June 22.
Some concern on crop outlook emerging: While
rainfall trend so far is above normal, the uneven spatial
distribution has raised some concerns about the
summer (Kharif) crop outlook. We think that we will have
a better picture of the monsoon trend by around mid-July,
as the bulk of the sowing is done in this month. Hence,
we believe that the first clear assessment of likely
agricultural growth for the year can be made only after
mid-July.

India January-March balance of payments: Current account deficit lower than expected, but capital account worsens :: Goldman Sachs

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The current account deficit declined to 1.1% of GDP in the January-March quarter, well below the 2.1% of
GDP in the previous quarter. The deficit number fell sharply to US$5.4 billion from an upwardly revised US$10.0
billion in the last quarter. The deficit was lower than Bloomberg consensus expectation of US$6.0 billion, and our
expectation of US$10.2 billion. For FY11, the current account deficit came in significantly lower than expected at
2.6% of GDP, from 2.8% of GDP in the previous fiscal year.
A lower trade deficit caused the improvement. The merchandise trade deficit fell to US$29.9 billion from a
US$31.5 billion in the October-December quarter, driven by higher exports, and was the main reason for the
significant improvement in the current account. The invisible surplus also rose by US$3 billion, mainly due to robust
growth from software and transport services. Net exports of non-software services improved but continued to
remain in deficit at US$2.2 billion. This is being driven by business and financial services imports. Remittances
were largely flat (see Exhibit 1).
A significant slowdown in capital inflows. Portfolio investment s fell meaningfully to a US$0.2 billion compared
to US$6.3 billion in the last quarter. Net FDI also remained subdued at US$0.6 billion, same as the previous
quarter. Net external commercial borrowing moderated to US$2.4 billion from a US$3.8 billion in the OctoberDecember quarter. Overall, capital inflows fell to US$8.2 billion as compared to US$13.4 billion in the previous
quarter, lead to a small increase of US$2 billion in reserves.
External ratios remained high. Total external debt increased to US$305.9 billion in end-March from US$261
billion in end-March 2010, an increase of 17.2% in 12 months. Of the total, short-term debt of less than 1-year
maturity has risen by some 20% in the last year, and short-term debt to gross reserves has increased to 21.3%.
Gross reserves, in months of imports have remained at 7 from a peak of well over 10 months in June 2009.
We think the sharp and unexpected improvement in the current account deficit, provides comfort on a key
macro risk. From a high of 4% of GDP in 2QFY11, the quarterly deficit has come down to under 2% of GDP. That
said, we think the ‘underlying’ deficit is more in the region of 3% of GDP, as the last two quarters did not reflect
higher oil prices due to deferred payments. Indeed, the trade deficit has widened significantly in recent months from
a monthly average of US$7 billion in 4QFY11 to US$9 billion in April and US$15 billion in March. Our forecast for
the current account deficit in FY12 is at 3.4% of GDP.
The composition of capital flows and the rise in external indebtedness remain a bit of a concern. FDI fell
sharply by 62% in FY11 compared to FY10, while total external debt increased by 17%, driven by external
commercial borrowings. We would like to see a much more liberalized regime for FDI, and especially movement on
allowing FDI in multi-brand retail to improve the composition of inflows. Although the external debt ratios are still
not very high, we would continue to watch their evolution carefully for signs of latent vulnerability.
The smaller overall balance of payments surplus despite the decline in the current account deficit,
suggests that there are no clear directional pulls for the INR. We have been surprised by the resilience of the
INR against the USD in 2011 despite sharply higher oil prices. However, it has underperformed the region, and has
fallen on a trade-weighted basis. Currently, we think the movement of the INR may remain range-bound as the
overall balance of payments situation remains roughly balanced, with neither a high deficit nor a surplus.

Cairn India - Still no end to uncertainty ::RBS

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Cairn India
Still no end to uncertainty
Cairn-Vedanta deal has been approved subject to royalty cost recoverability. We
maintain Hold and lower our TP to Rs310 to reflect the royalty claim. Using the
current Brent futures curve provides a higher valuation (Rs354), but growth
prospects remain vulnerable to the timing of government approvals.

TVS Motor June 2011 volume: Scooters / mopeds drive growth: Standard Chartered Research,

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 Overall volume up 14% yoy to 182,455.
 Total 2W volume up 14% yoy to 178,633, driven by 21%
yoy growth in scooters and mopeds each; motorcycles
grew at a much slower 7% yoy.
 3W volume up 27% yoy to 3,822 units led by strong
export sales.  
 1Q FY12 volume up 16% yoy to 0.5m units.
 TVS Motor appears the most vulnerable to lose market
share in a rising competitive environment.
 Fully valued at 10.1x FY12E earnings and at 5x
EV/EBITDA. Maintain IN-LINE

TD-LTE: gearing up to cover 2.7bn people in Asia by 2013 ::Goldman Sachs

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TD-LTE: gearing up to cover 2.7bn people in Asia by 2013
TD-LTE adoption is gaining momentum among global carriers
In our view, TD-LTE is becoming the global solution for unpaired spectrum
due to its 3G interoperability, large data capacity, and leverage of the FDDLTE ecosystem. Verizon’s successful launch of FDD-LTE in the US should
further accelerate the conversion of WiMAX to TD-LTE. In June, two more
carriers have joined the TD-LTE camp, which now totals 12 carriers. China
Mobile, Bharti, and Softbank, three major carriers covering 39% of the
global population, look on track to roll out some TD-LTE services in late
2012 or early 2013, and the significant potential of these markets should
attract increasing R&D investment into TD-TLE technology, in our view.
Qualcomm and STE lead in multi-mode LTE/3G semiconductors
Unlike TD-SCDMA, TD-LTE has broad support from various leading global
technology companies and should enjoy a smoother ride, in our view.
Qualcomm’s newly launched MSM8960 is the first mobile processor with
an integrated modem supporting TD-LTE/FDD-LTE/EVDO/WCDMA, and
should significantly simplify the multi-mode LTE/3G handset design. STEricsson’s M7400 is a multi-mode modem that supports TD-LTE/FDDLTE/HDPA+/TD-SCDMA. Our channel checks indicate MSM8960 and M7400
supporting TD-LTE should become commercially available in early or mid-
2012. Also, we note more than 10 other semiconductor firms have invested
in TD-LTE, a much strong line-up than for TD-SCDMA. We expect ZTE and
Huawei to launch multi-mode TD-LTE smartphones by the end of 2012.
Potential winners/losers from a smooth TD-LTE transition by 2013
We view TD-LTE as a disruptive technology similar to FDD-LTE, and that if
it gained sufficient critical mass with successful commercial launch on a
quality smartphone, we think China Mobile could recover its market share
of high-ARPU users at the expense of China Unicom and China Telecom
from 2013. This scenario would be especially negative to China Unicom’s
long-term story of strong operating leverage after reaching 100mn 3G sub
in 2014-2015. In India, Bharti Airtel would likely be the main beneficiary of
TD-LTE due to its strong existing subs base. In Japan, Softbank is the only
carrier adopting TD-LTE. We estimate TD-LTE capex to reach US$15-$20bn
and 40mn terminals over 2012-2014 — with Qualcomm and ST-Ericsson
benefitting as leading multi-mode LTE/3G semiconductor suppliers today.
ZTE should enjoy higher market share in TD-LTE than in 3G, in our view

JPMorgan: Ishaan Real Estate -FY11 results: Portfolio gaining in completed assets; now needs visibility on exits

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Ishaan Real Estate Plc
Neutral
ISH.L, ISH LN
FY11 results: Portfolio gaining in completed assets;
now needs visibility on exits


 FY11  results: Ishaan  reported  adjusted  FY11  NAV/share  of  95.4p  down
2% from  Sep-10 NAV of 97p primarily on adverse FX. Portfolio valuation
(cap  rate  11-11.5%,  WACC  of  16%)  after  adjusting  for  the  construction
expenditure has remained largely unchanged since Sep-10. Ishaan’s stake in
the portfolio as per C&W is valued at £251M vs. its investment of £160M.
 Visbility on exits as yet low: Ishaan now has close to 6 msf of completed
area  and  will  reach  close  10  msf  over  the  next  two  years  (completion  of
under-construction assets). However, visibility on exits of rental generating
assets  remains  low  given  that  demand  for  such  space  in  India  has  not
matured. Vivarea (Mumbai residential project) is scheduled for completion
next  year, and  potential  flow-through  of that to shareholders is the earliest
possible fundamental catalyst for the stock price.
 Lease momentum is  overall  healthy  with  0.75msf  of  space being leased
over the last 6 months. This takes overall leasing to 6.9msf  or 66% of the
ongoing  projects  (11msf).  In  addition to this,  Ishaan has LoIs in  place  for
1.5msf  of space. While incremental leasing moderated in 2H FY11 vs. 1H
(0.7msf in 2H vs. ~2.3msf in 1H); overall FY11 was the best year for Ishaan
(~3msf  leased)  since  the  launch  of  these  projects  in  Mar-07.  Avg  rentals
remained stable  at  30-35psf.  Execution  too  progressed  well  with  rentyielding area doubling to 4.4msf in FY11 (from 2.1msf at FY10 end) and an
additional  1msf  to  be  operational  by  Mar-12.  Assuming  avg  rental  of
Rs35psf, this should generate annualized rental income of Rs2.3B (~£32M).
 Funding  position  is  comfortable with  debt  facilities in  place to  fund  the
construction  of the  entire  under-construction  portfolio. Most  of the  debt is
rent discounting debt so there is limited cash flow stress on projects. Further
net cash of ₤13.6M places it in a comfortable position to start work on future
projects.  Debt  to  portfolio  value  was  reasonable  at  0.4x.  Interest  costs,
however, increased by 200-300bp to 12-13%.
Maintain Neutral: We revise our PT marginally to 76p (vs. 72p earlier) as
we roll forward our timeframe to Mar-13 and factor in revised development
timelines. Our PT is based  on a 25% discount to  our SOTP estimate  given
the lack of trading liquidity on the AIM Market. The pace of office leasing
recovery is a key upside/downside risk to our PT and rating

Grey market premium, July 1, 2011: Indian IPOs and NCDs (bonds)

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Company Name	Offer Price (Rs)	Expected Listing Price Premium
Shriram Transport Finance  Bond	1,000	3% - 4%
IFCI Bonds	10,000	2% - 3%
Birla Pacific Medspa	10 to 11	Discount
Rushil Decor	72	Discount
Readymade Steel	90 to 108	1- 2