DLF Debt pangs ::Edelweiss

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DLF’s Q2FY12 revenue and PAT were ahead of estimates due to higherthan-
expected asset sales. However, net debt increasing by INR10bn QoQ
on account of delayed receipts from asset sales and sluggish sales/leasing
activity were major setbacks. While inflow from asset sales/launches in
H2FY12 may improve the cash flow scenario, we do not see any material
debt reduction. In the absence of near-term triggers, we maintain
‘HOLD/SP’ rating with target price of INR240/share.
Asset sales lift revenues, profits, but sales volume/leasing sluggish
DLF’s Q2FY12 revenues at INR25.3bn and PAT of INR3.7bn were ahead of our estimates
of INR22.0bn and INR3.4bn respectively, largely due to higher-than-expected bookings
from FSI sales of INR6.2bn. Although EBITDA margins remained healthy at 46%, QoQ
rise in interest costs and higher tax rate of 29% resulted in low PAT margins of 15%.
Sales volumes of 1.3 msf were weak due to the absence of new launches and net
leasing was tepid at only 0.21 msf. However, the company maintains guidance of ~7-8
msf of launches in H2FY12 through projects in Gurgaon, Panchkula and Mullanpur.
Debt remains elevated; asset sales not good enough
Net debt rose by INR10bn QoQ to INR225bn because of weak volume, high
dividend/tax payments of ~INR8.3bn and capex/land purchase of INR2.3bn. While
receipts from asset sales of ~INR10bn in H2FY12 may prop up cash inflows, we believe
that DLF is having a ’treadmill effect’ as these sales may only serve to bring back net
debt to Q1FY12 levels (INR215bn) hence closure of Aman deal (INR20bn) becomes key.
Outlook and valuations: Debt reduction crucial; maintain ‘HOLD’
While DLF has made progress on the asset monetization front, weak
volumes/operational cash flows in its core business seems to have negated its debt
reduction plan. We believe that a noticeable pick-up in volume in H2FY12, driven
through launches and Aman hotels deal sailing through may improve DLF’s cash flow
profile. However, given the adverse macro-environment, any slip-ups may dent debt
reduction plans. Therefore, we maintain ‘HOLD/SP’ rating on DLF with a target price of
INR240 (INR255 earlier) on FY12E NAV.

Bear phases in the Indian market ::Business Line

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A look at the corrective phases in Indian market in the past decade and what caused them.

Sensex has lost 676 points in last five trading sessions resulting in loss of Rs 1.25 lakh crore for investors. The stocks of BHEL, Hindalco Industries, ICICI Bank, Larsen & Toubro and Tata Steel are at 52-week lows now. But, this is not the first time the bears have come out on a prowl.

The Indian stock market has been through many corrective phases before and the stock exchange archives even report instances of Sensex closing on a down-circuit freeze by falling up to 10 per cent in a day! May 17, 2004, May 22, 2006 and October 17, 2007 will always be remembered as dark days in Indian stock market history, for the markets did the unimaginable by hitting the 10 per cent lower circuit.

We take a look at the corrective phases in Indian market since 2000, when they happened and what caused it. Lessons from history perhaps bring back hopes that the current phase shall too pass by.

2000: DOT-COM BUBBLE

The frenzied buying in tech stocks saw equity markets across the globe peak out in the year 2000.

Any company with a business plan in internet technology received venture capital funding effortlessly and got a free-door entry to the capital markets with investors willing to bet on them at any price.

The climax however came sooner than expected. The tech-heavy US Index NASDAQ crashed in April 2000 as technology companies were caught in a cash crunch situation. The problems in the US echoed in India too.

Technology companies back home were beaten up badly on concerns that they will not be able to keep up with the growth expectations, as the US, their key export market, had run into troubles.

From a high of 6,150 in February-2000, Sensex dropped to 3,943 in May-2000. In the same period, the BSE IT index fell by 71 per cent. Other sectors such as- auto, capital goods, healthcare and metal were sparred with losses of 20-40 per cent.

DSQ Software, one of the heavily traded tech stocks then was among the ones to be worst hit (the stock has been suspended and it doesn't trade in the exchanges now).

2004: POLITICAL UNCERTAINTY

The correction that started in February 2000 ended in September 2001 with Sensex touching a low of 2,600.

Post that, Sensex started edging up steadily till it took a halt in April 2004 (at 5,926) when political uncertainty in the country brought troubles for the market.

With the BJP government's defeat in Central elections, the UPA led by Congress came to power in 2004.

But, with the decision of who will sit in the Prime Minister's chair itself hanging in air for many days, there were doubts about the coalition-led UPA government's ability in addressing economic woes of the country.

Foreign institutional investors pulled out money from India stocks and the markets went into a sharp correction.

On May 17, trading was halted twice in Sensex with the index dropping more than 10 per cent (Sensex fell 842 points intraday and closed 565 points lower for the day) and hitting down-circuit.

Stocks in engineering, infrastructure and capital goods space that are largely dependant on government spending faced investor wrath. Crompton Greaves, Engineers India, SAIL were among the worst performers on May 17 falling over 20 per cent.

2006: DTAA WORRIES

As the new government settled in the centre Sensex began its uphill journey. On May 10, 2006, Sensex touched a new high of 12,612.

But after that celebrations didn't last. In the global markets, metal prices faced correction on slowdown in Chinese demand.

This set in a panic in equity markets across globe and FIIs started pulling out cash from Indian equities too.

Meanwhile, the pressure on the ruling government from the Left Parties to rethink levying long-term capital gains tax on equity investments and scratching the double taxation avoidance agreement (DTAA) with Mauritius also started to weigh on investor sentiments.

On May 22, the Sensex fell 1,111 points intraday and hit down circuit. The consumer durables and metal stocks were the worst hit.

The BSE Metal index was down 7 per cent for the day; Hindustan Zinc dropped 20 per cent.

Large-caps such as Reliance Industries (dropped 5 per cent to Rs 466), ICICI Bank (fell less than one per cent) and Bajaj Auto (dropped 2.5 per cent) contained losses.

2007AND 2008: REGULATORY ACTION

The markets which were moving at a steady pace hit a block in 2007 when SEBI proposed to curb participatory notes.

On October 17, 2007 Sensex hit a down-circuit by dropping over 1,700 points in minutes of opening of trade as FIIs pressed the ‘sell' button in panic. But this phase too passed and the markets rallied to cut 20K mark by end October, 2007.

And from here the index edged up to 21K in January 2008. But that was the end of the good times, as the rest of year was only a nightmare for investors. The row of bankruptcy filing by US' big mortgage banks on sub-prime losses shocked the whole world.

Global equity indices faced sharp corrections. The Indian benchmark Sensex plunged, drifting lower and lower every month; the index hit a low of 8160 in March 2009.

From the lows of March-2009, Sensex recovered to touch 21K again in November 2010.

But it was not long before the index lost its gains to negative news developments. Doubts over the recovery in the US, continuing pain in the debt-ridden Europe, falling rupee, put together have managed to turn the tide. Last Friday, Sensex closed at 15695.

Jubilant Lifesciences :Gaining strength; 2QFY12 significantly strong: Nomura Research

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Strong sequential improvement in sales
2QFY12 sales of INR10.5bn (23% y-y, 10.7% q-q) were significantly
higher than our expectations. The key surprise was a strong pick-up in
the generics business, which increased by US$24mn sequentially. As
per company, growth in the generics segment was driven by new
launches, market share gains in existing products (including some
opportunistic market share gain on supply disruptions from the
competition) and some price increases. The company expects to sustain
the current momentum in the business.
Outlook growth positive
Management sounded positive on the growth outlook for 2HFY12. It
expects growth to be driven by new capacities and higher capacity
utilisation. The company recently commissioned a 10000 TPA
Niacinamide and intermediate facility at SEZ in Gujarat. The facility
presents peak sales potential of US$75mn, as per the company, which is
1.76x the FY11 segment sales. The generic and API segment growth is
expected to be driven by patent expiries. Sartans will likely be a key
growth driver in the near term as patents expire over the next 24 months.
JOL has installed one of the largest generic sartan capacities. The
capacity is expected to generate a turnover of US$60mn at full utilisation
at current prices, which is almost 80% of current sales, according to
management.
Margin improvement trend sustains in the quarter
The EBITDA margin in the Life Sciences product business recorded a
substantial improvement of 366bps q-q. The Services business margins
were stable at mid-high teens. The gross margin at 63.16% was the
highest in the last 10 qtrs. A pick-up in volumes, better capacity
utilisation, cost rationalisations and some price increases all contributed
to outperformance at the EBITDA level. EBITDA at INR2.38bn was the
highest ever recorded by the company and substantially higher than our
expectations of INR1.85bn.
MTM losses of INR426m in the quarter
Excluding the unrealised MTM losses in the quarter, the company
reported PAT of INR1.42bn. The company hasn’t taken any hedging
position and hence should benefit if the INR remains at the current level.
As per the company, every INR1 depreciation in the USD/INR exchange
rate can add approximately INR150mn to EBITDA.
Estimates are under review
With 1HFY12 EBITDA at 58% of our full-year projection and an expected
stronger 2HFY12F aided by favourable currency movement, our
estimates are under review. We retain our Buy rating.

Adani Power - Good 2Q as merchant sales allowed & didn’t provide MAT � �� BofA Merrill Lynch

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Adani Power Ltd.
Good 2Q as merchant sales
allowed & didn’t provide MAT
�� 2Q beat on pre-PPA merchant sales & lack of MAT prov.
APL had a good 2Q as Rec PAT grew by 137%YoY (+44%QoQ) beating
consensus by 13% as APL won case v/s GUVNL to sell power on merchant
before PPA start, and volumes +122%YoY. Fuels cost rose 8%YoY on INR
depreciation. Cut PO to Rs112 (124) on cut in our FY12-14E EPS by 9-13% to
factor in 2 months delay at most sites, generation loss on lower PLF in FY12E on
start-up issues and higher coal costs at Tiroda on allocation of lower linkages by
CIL. Buy APL on (1) a +3x in capacity by FY13E via an unregulated model and (2)
3.1x EPS over FY11-13E on 77% power pre-sold at good tariffs, low cost
imported coal from parent, secure funding, location advantage & business model
(shift to PPAs from FY13E Chart 7). Stock many go sideways till coal linkages at
Mundra / Tiroda plants in 4QF’12.
2Q EBIT margin fell 180bps on inefficiency & higher fuel costs
APL 2Q gross generation at 3.3bn kWh +121%YoY. PLF of its Chinese plants
was poor @~75% v/s JSPL 92% (Chart 2). 2Q was led by a) ASP grew 18% on
570%YoY (+295% QoQ) growth in merchant volume (higher ASP @ Rs4.7/kWh)
as APL won case v/s GUVNL to sell power in merchant market before PPA starts,
and b) volumes +122%YoY as capacity 2x (1.98GW vs 990MW). Fuels cost rose
8%YoY on INR depreciation. EBIT margins fell 180bps. APL didn’t provide MAT of
Rs450mn under-protest. Including-MAT rec. PAT would have been up 95%YoY.
Competitive advantages - coal, location and visible scale-up
APL has secured low-cost fuel via coal linkages (25% of capacity) and contracts
with parent (42%). It has 86% of capacity located in the West - highest peak
power deficit (14.7%) vs India (9.8%) in FY11. These competitive advantages and
good pre-sales tariffs at ~Rs2.9 (Table 2) make APL the top margin (54% FY13E)
and RoE (20%) earner in our IPP universe. Risks: Delivery of coal in-line with
linkage letters of Ministry of Coal / with contract of ADE, imported coal - exposes it
to country, currency & freight risks and fall in power rates on lower power deficit.

Bank of India :TP: INR415 Neutral :Motilal Oswal

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Bank of India's 2QFY12 results were below expectations, led by disappointing asset quality performance. While, NII was
marginally lower than our estimate of INR19.4b, the disappointment came from higher than expected provisions. Strong
growth in non-interest income (20% above our estimate, led by trading gains and recoveries) and write-back of tax
(INR940m; utilized MAT credit of INR770m) aided profitability.
 Slippages disappoint: Gross slippages during the quarter were INR28.2b (annualized slippage ratio of 6.1% v/s
3.8% in 1QFY12 and 1.8% in FY11). Of the overall slippages, ~57% were on account of loans below INR1m (led by
system-based NPA recognition) whereas INR4.3b slipped from restructured loans.
 Aggressive write-offs - GNPA up 13% QoQ: In 2QFY12, BOI aggressively wrote off INR16b of loans as against
INR1.5b in 1QFY12 and INR8.8b in FY11. As a result, PCR (calculated) declined to ~35.2% v/s 53.5% in 1QFY12.
PCR including technical write-offs was 59.1% v/s 66.8% in 1QFY12.
 NIM improves QoQ: Reported domestic NIM improved 34bp QoQ to 2.8%. However, post adjustment for one-offs in
1QFY12 (other interest income of INR1.8b - impact of ~15bp), NIM would have been higher. During the quarter, the
bank reversed interest income of INR1b as against INR1.8b in 1QFY12 on account of higher slippages, which further
aided NIM.
 Muted business growth: Loans grew just 1% QoQ (18% YoY), whereas deposits grew ~2% QoQ (24% YoY).
Domestic CD ratio stood at 64.6%, providing adequate liquidity in the balance sheet.
Valuation and view: Volatile asset quality performance remains the biggest concern. On several occasions in the past,
BOI has disappointed on asset quality performance. In the last two quarters, we have downgraded our earnings estimates
for FY12 and FY13 by over 25%. We now expect RoA of ~0.7%, RoE of 15-17% and earnings CAGR of ~14% over FY12-
13. The stock trades at 1x FY12E and 0.9x FY13E BV. Maintain Neutral.

Voltas: 2QFY12 Conference Call Takeaways Citi Research

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Voltas (VOLT.BO)
Alert: 2QFY12 Conference Call Takeaways
We attended the Voltas 2QFY12 conference call. The following are the key takeaways.
 What’s New? (1) Voltas has recently secured LoI for a large retail project in Abu Dhabi
of ~Rs5bn, which is not included in its order book; (2) Management expects margins in
the international business to be under pressure for the next two quarters due to cost
overruns in the Qatar projects; (3) Rohini subsidiary may marginally miss its EBIT
breakeven in FY12; (4) Competitive intensity in the AC industry remains high, largely
due to adverse weather, higher Japanese competition and higher inventory levels.
 Electro-mechanical Projects – Management mentioned that there were difficulties in
the Qatar projects due to faster execution and consequent cost escalations. The
company is hopeful of settling certain variations towards the end of the execution. The
~Rs9bn Sidra project is ~60% completed and is expected to be finished by June 2012.
The ~Rs5.5bn Barwa City project is ~90% complete, and is expected to be finished by
March. The reduction in order inflows has resulted in lesser customer advances. The
company is also seeing a lengthening in debtor days. Voltas mentioned that it was
bidding with margins of ~7-8% in domestic and ~5% in international orders, and will try
to improve margins to ~7% by cost cutting, economies of scale, better design and
procurement.
 Engineering Products & Services – Revenues declined by ~5% YoY largely due to
the transfer of the material handling business. Management mentioned that margins in
the mining and construction business were under pressure due to the recent interest
rate hikes. Delay in securing environmental clearances for mines has also resulted in
lower sales and commissions.
 High Competition in Unitary Cooling Products – Management mentioned that there
has been a sharp industry-wide decline in volumes due to the adverse weather. This
has been compounded by (1) Renewed Japanese competition with aggressive price
cuts – Daikin by ~40%, Hitachi by ~10% and Panasonic by ~15%; (2) High inventory
maintained by other competitors anticipating ~30% YoY volume growth. Strategies to
counter the same – Voltas has limited the impact to ~18% drop in volumes
(maintaining its #2 position in the AC market) and ~7% drop in revenues by (1)
increased focus on water coolers and commercial refrigerators, (2) expanding
distribution network into Tier II and Tier III towns, (3) increasing ad spends, (4) and
leveraging its brand to maintain price levels.

Tata Steel: Near-term negatives loom, better bet with 12-month view:: Kotak Sec,

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Tata Steel (TATA)
Metals & Mining
Near-term negatives loom, better bet with 12-month view. Tata Steel have a lot of
catalysts going from a 12-month view such as (1) commissioning of integrated 3.2 mtpa
brownfield steel expansion, (2) start of shipments from overseas raw material projects,
and (3) likely continuation of strong performance in the domestic market. However, all
these may get drowned in the noise related to likely weak 3QFY12E performance and
continued negative news flow from Europe. BUY with a 12-month view but be
prepared to weather near-term negatives.

Lanco Infratech: Operational challenges in power compensated by construction segment ::Kotak Securities

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Lanco Infratech (LANCI)
Utilities
Operational challenges in power compensated by construction segment. Lanco’s
operational challenges in the power and coal business were compensated by higher
contribution from external projects executed by the construction business. However,
higher interest cost, elimination of profits and forex losses marred reported profits.
Operational performance notwithstanding, resolution of contractual issues and
litigations is key to stock performance. Maintain BUY with revised PT of Rs39/share.

Coal India: Spot coal remains firm, wage provisions contained::Kotak Securities

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Coal India (COAL)
Metals & Mining
Spot coal remains firm, wage provisions contained. Coal India Ltd (CIL) continues
to report improved realizations (Rs1,403/ton in 2QFY12) aided by e-auction sales which
now command a 100% premium over notified prices. Provision for wage increases was
contained (+17% qoq), partially allaying concerns of an exorbitant revision in the ongoing
negotiation process. We maintain our ADD rating with a revised PT of Rs420
(Rs454 previously) factoring production slippages due to mine development constraints.

Tele-tracker – November :: ICICI Securities

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S u b s c r i b e r   a d d i t i o n  c o  n t  i n u e  s   t o   r  i s  e …
Subscriber addition rises again…
After falling for six straight months till August 2011, subscriber addition
has risen for two straight months, though not significantly. Industry added
7.1 million GSM subscribers in October 2011 as against 6.5 million in
September 2011. The total GSM subscribers for the industry stood at
625.4 million. The subscriber addition is still considerably below the
October 2010 number, which was 14.7 million.
Uninor – continues to surprise brilliantly
After being the highest net adder in September 2011, Uninor continued
the trend by adding 2.7 million subscribers against 1.9 million in
September 2011. The share of net adds for Uninor was 37.4% - highest
for any operator in October just like in September.
Top 3 fail to impress!
While Bharti Airtel and Vodafone reported a marginal rise in their
subscriber addition, Idea reported a decline. Bharti Airtel, Vodafone and
Idea added 0.9 million, 0.9 million and 1.6 million as against 0.9 million,
0.8 million and 1.6 million, respectively, in September 2011. Idea had the
second highest share in net adds at 23.0%, which was lower than 26.6%
in September 2011. While the share in  net adds declined for Airtel from
14.3% to 13.3%, it remained flat for Vodafone at 13.0%.
Others
The subscriber addition for Aircel fell from 0.6 million in September to 0.5
million in October 2011. Other operators in the industry reported a decline
in their subscriber base by 0.1  million in October 2011 as against a
negligible subscriber addition in September 2011.
Industry Outlook
The net adds have shown a slight improvement. However, they continue
to be on the lower side. The recent price hike by telcos has already
started showing in the ARPM but its full effect is yet to be seen. We
expect ~2 paisa improvement in ARPM by FY13 across players on the
back of the recent price hike. ARPM expansion would aid the margins.
However, rising amortisation cost, 3G rollout costs and rising interest cost
would exert downward pressure on profitability.
Trai has recently suggested reducing call termination charges from 20
paisa to 10 paisa a minute from January 2012 and doing away with it by
January 2014. Such a move could bring down the mobile tariffs further
and hurt Bharti and Vodafone as they are currently a net earner of
termination charges. Idea would see no such impact as they are currently
more or less neutral on call termination charges.
The telecom ministry announced the  draft of the New Telecom Policy
2011. The draft did take cognizance of the need for enhanced broadband
penetration in the country and need for additional spectrum. However, it
lacked clarity when it came to one-time spectrum fees and pricing along
with spectrum re-farming. Both Bharti Airtel and Idea Cellular (under our
coverage universe) would be impacted the most by one-time spectrum
fees and spectrum re-farming. However, till further clarity emerges, we
maintain our BUY rating on Bharti Airtel and HOLD on Idea Cellular and R
Com with a target price of | 450, | 99 and | 84, respectively.

Buy Petronet LNG - Stretched operable capacity at 11.0 mtpa; Edelweiss,

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Petronet LNG (PLNG IN, INR 155, Buy)

We believe that Petronet LNG (PLNG) is frequently importing ~11.0mtpa LNG in H2FY12, higher than ~10.5mtpa clocked in Q2FY12. To incorporate higher volume, we have increased our FY12E import volume from 10.46mtpa to 10.60mtpa while maintaining FY13E import volume at 10.90mtpa. Changes in FY12/13 import mix in favour of self and third party cargo have led to higher blended marketing margins of ~USD0.32/mmbtu. Collectively, this has resulted in an increase of 3.9%/2.6% in our FY12/13 EPS estimates. Maintain ‘BUY’ and TP of INR194/share. PLNG remains our favourite in the O&G mid-cap segment.

Hiking FY12E import volume to 10.60 mtpa (vs 10.46 mtpa)

Based on our discussion with the PLNG management, we believe that the company has been clocking ~11.0mtpa (run-rate) of LNG imports so far. This is clearly a positive as PLNG’s H2FY12 import volume will be higher than those estimated by ourselves as well as consensus. To account for higher volume in H2FY12, we are increasing our FY12E import volume to 10.6mtpa (10.46mtpa earlier) while maintaining FY13E volume at 10.9mtpa. Most of this incremental LNG, we believe, is being supplied to price-insensitive sectors like industrials and CGD.

Blended FY12E marketing margins at USD0.32/mmbtu

Along with changes in total volume, we have also revised our sales mix in favour of self and third party spot volume (34.0% against 32.4% earlier) for FY12E. This has led to an improvement in profitability since PLNG earns marketing margins along with re-gasification charges on the same. We peg FY12/13 blended marketing margins at ~USD0.32/ mmbtu.

Outlook and valuations: Positive on volume; maintain ‘BUY’

We are revising our FY12E and FY13E EPS to INR13.7 and INR14.0 (INR 13.2, INR13.6 earlier) to include higher volume and operating leverage (low internal consumption). However, we are maintaining our DCF based TP at INR194, upsides to which will come from: (a) possible benefits of Section 80IA IT benefit and (b) valuation of a 26% stake in Dahej solid cargo port. We maintain our ‘BUY/Sector Outperformer’ rating on the stock. At CMP of INR155, PLNG trades at 11.3x/11.1x our FY12E/FY13E EPS. Start of Kochi terminal could be a trigger for the stock.

SHREE RENUKA SUGARS Huge forex loss rubs it in ::Edelweiss

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Adjusted consol. PAT of Shree Renuka Sugars (SHRS) in Q4FY11 was
significantly below estimates (at loss of INR460mn) owing to a huge
disappointment in Brazilian operations. Heavy forex loss further added to
losses at the reported level. Brazilian operations are likely to be weak for
few more quarters and coupled with high debt levels, the outlook is
negative for SHRS. We lower our FY12E EPS to INR4.2/share (earlier
INR8.5/share) and downgrade the stock from ‘HOLD’ to ‘REDUCE’.
Poor Brazilian operations, huge forex loss dent profitability
SHRS reported loss of INR6,158mn in Q4FY11 owing to huge forex loss of INR5,698mn
(on account of INR and Brazilian real (BRL) depreciating against USD by 9.5% and 18.8%
respectively, impacting the debt in Brazilian subsidiaries). Even after adjusting for forex
losses, the company reported a loss of INR460mn for Q4FY11 largely due to adverse
Brazilian weather conditions that damaged cane yields and the capacity utilization.
EBITDA margin for Q4FY11 came at 10.5%, 340 bps dip YoY.
Key highlights
• SHRS cut its earlier guidance of USD300mn EBITDA from Brazilian subsidiaries for
April 2011‐March 2012 period to USD160mn.
• Weather conditions in Brazil (with attacks of frost and drought‐like conditions)
affected cane yield by ~31% YoY for SHRS (vis‐à‐vis 22% dip for industry), owing to
which SHRS lowered its cane crushing guidance from 10.5 mn MT to 8.3 mn MT.
• Due to INR depreciation against USD, even on a standalone basis, SHRS had a
forex loss of INR728mn. Considering the significant amount of repayment done to
creditors in Q4FY11, we believe that some of this forex loss has been realized.
Outlook and valuations: Challenges galore; downgrade to ‘REDUCE’
Considering the high debt levels coupled with additional capex requirements and
issues on operating performance in Brazilian subsidiaries (which we expect to continue
for at least two more quarters), we see low probability of an improvement in near
future. Moreover, unhedged USD loan exposes the company to the exchange rate risk
in the current volatile environment. Factoring in weak Brazilian operations and higher
interest costs, we lower our FY12E EPS to INR4.2/share. Based on 6x FY13E EV/EBITDA,
we lower our target price to INR41/share (previously INR72/share) and downgrade our
recommendation on the stock to ‘REDUCE’ from ‘HOLD’.

Anant Raj Industries: TP: INR92 Buy :: Motilal Oswal

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 Anant Raj 2QFY12 results are in line with estimates. Revenue de-grew 31% YoY to INR913m (v/s est INR956m).
EBITDA declined 19% YoY to INR509m (v/s est INR526m); EBITDA margin stood at 56% (v/s 59% in 1QFY12). PAT
declined 28% YoY to INR347m (v/s est INR321m).
 The company witnessed steady momentum in affordable housing projects (at Sector 91, Gurgaon and Neemrana,
Rajasthan) with ~0.6msf (INR1.6b) of sales in 2QFY12 as against 0.3msf (INR1b) in 1QFY12.
 ARCP witnessed ~INR20m increase in quarterly rental income on the back of commencement of operation in Kirti
Nagar mall. However incremental leasing in its ongoing commercial projects such as Manesar and Rai remained
subdued.
 The recently acquired Golf Course Road (Sector 63A) integrated township project is yet to receive LOI, although it
has received the notification for R-zone. The company expects to receive LOI over next 1 month.
 Net debt increased to ~INR9.5b as against INR8.2b in 4QFY11, implying a net DER of 0.25x.
 The stock trades at 6.4x FY13E EPS of INR8, 0.4x FY13E BV and at ~61% discount to our NAV of INR131. Maintain
Buy.

Economy: Growth headwinds strong, investment revival key ::Kotak Sec

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Economy
National Accounts
Growth headwinds strong, investment revival key. We lower our FY2012E and
FY2013E estimates for GDP growth to 7.1% and 6.9% from our previous estimates of
7.3% and 7.9%, respectively. The near and medium-term growth outlook remains hazy
with domestic and global uncertainties limiting headroom for a ‘big push’ increase in
investment expenditure. The long-term potential of the economy, however, stays
healthy, backed by favorable demographics and a healthy domestic savings rate. We
remain hopeful that the policy makers will finally have to bring in some hard reforms to
push up the economy, which will translate into long-term gains—something akin to
early 1990s reforms in India.

CUMMINS INDIA Market leader feels the heat ::Edelweiss

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Cummins India (CIL) reported flattish revenues for the quarter on the
back of slowdown in power generation business even as higher costs
impacted EBIDTA margins which dipped 350 bps+ YoY. The management
has further toned down its growth guidance from 15% earlier to a lower
number of 5%‐10% with a 100 bps decline in PBT margins over 1HFY12
levels. We trim our earnings for FY12E and FY13E by 16 % and 20 %,
building in lower volumes in domestic market and lower margins.
Sharp drop in power generation market impacts profitability
Cummins reported a 5% YoY decline in domestic business whereas export grew 14%
YoY. In the domestic market, power generation declined 20% YoY while industrial
business fell 6% YoY with auto reporting a sharp growth of 50% YoY albeit on a lower
base. Change in revenue mix with increasing share of low KVA engines coupled with
rising input costs impacted CIL’s OPMs which declined severely by 350 bps YoY and 140
bps QoQ.
Management cuts revenue, margin guidance
The management has cut revenue guidance from 10%-15% for FY12E to 5%-10% on the
back of a slowdown in the domestic business, largely in HHP (high horse power) power
generation business. It also expects 2HFY12 PBT margin to be lower from 2QFY12 levels
due to continued cost pressures and adverse revenue mix. While a pickup in demand
and stabilization of inflationary pressures could provide some comfort to profitability,
the management expects near term margins to remain under pressure. However, with
respect to pricing (even amid a market growth slowdown), the management has shown
confidence to sustain pricing across product range despite intensifying competition.
Outlook and valuations: Near‐term slowdown; maintain ‘BUY’
While the near term outlook for Cummins remains weak, given the slowdown in
domestic business, we remain optimistic about its long term business prospects due to
the strong demand dynamics in diesel and gas engines market. We maintain our
BUY/S0 rating for Cummins with a revised TP of INR 407(+ 15% upside).

Aviation: Glimmer of hope ::Kotak Securities

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Aviation
India
Glimmer of hope. As per news articles, Kingfisher has cancelled ~40% of its daily
flights (370 per day) on account of cash flow problems. As per the management, these
were loss-making routes. This is a significant development in the sector which has been
reeling under losses. Kingfisher accounts for 19% of domestic capacity. If the company
is not able to sustain operations in the seasonally strongest quarter when cash flows are
strongest, it could get even worse in the coming months in absence of fresh fund
infusion. Evolving scenario could reduce competition in the sector and augurs well for
existing players (not strained for cash). We reiterate our BUY call on Spicejet and Jet
Airways with a price target of Rs50 and Rs500, respectively.

GMR INFRASTRUCTURE ‘Extraordinaries’ galore ::Edelweiss

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GMR Infrastructure reported Q2FY12 loss of INR625mn against our
estimate of INR285mn mainly due to higher interest costs at DIAL,
deferred tax liability in power and airport projects, admin expenses in
overseas units and lower PLF at one of its power plants (marginally offset
by forex gains); adjusted for these, loss would have been INR403mn.
Operational performance continues to be robust and with the regulatory
approval for its airport assets on the anvil, we expect an upsurge in
earnings. Maintain ‘BUY’ with target price of INR47
Pax growth robust, but PLFs dip due to seasonal factors
The traffic growth across airports remained strong (23% in DIAL, 20% in Istanbul and
15% in HIAL). However, there are early signs of impact from global economic weakness
as sequentially, pax has fallen in the range of 2% – 7% in India. Power plants operated
at PLF of ~58% against 65% last year and 75% in Q1FY12 mainly due to the
maintenance shutdown at Vemagiri and lower merchant realisation at Kakinada.
Sinar Mas stake purchase in Q3; EPC margins to stabilize at 5‐6%
The management has indicated that it will acquire 30% stake in Sinar Mas, the
Indonesian coal mining company, through the latter’s proposed IPO and subsequent
stake buys. As part of the deal, it would be eligible to receive 1 MT of coal which will
gradually increase to 9 MT over a period of time at 6%‐8% discount to the benchmark
index. The EPC business ‐ entirely captive ‐ is likely to deliver 5%‐6% EBITDA margins
over the life of project.
Outlook and Valuation: Regulatory clarity likely; Maintain ‘BUY’
The management has indicated that the airport regulator is in an advanced stage of
deciding on both ADF and tariffs for Delhi and Hyderabad which we believe would
alleviate the regulatory concern on the stock. We have factored in Ahmedabad –
Kishangarh mega road project and the Island Energy gas project in our valuation which
stands at INR47/share (INR 56/share earlier). We are confident on an improvement in
GMR’s financial performance and management’s stated objective of greater focus on
cash flows. At CMP of INR 26/share, the stock is trading at 1.1x and 1.0x FY12E and
FY13E P/BV. Maintain ‘BUY’.

Infosys Technologies: Guidance blues ::Kotak Sec

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Infosys Technologies (INFO)
Technology
Guidance blues. Infosys reiterated its FY2012E guidance after Dow Jones newswire
reported that the company may not achieve the upper end of its guided revenue
outlook. We believe that, slowdown or not, Infosys’ guidance at the upper end is
aggressive given its recent struggles and deteriorating macro outlook. We and the
Street are, in any case, building in a miss at the upper end. The aggressive guidance
should not distract from likely improvement in execution that will help close the gap in
growth with peers. BUY.

IRB INFRASTRUCTURE Firmly on track ::Edelweiss

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Led by a strong performance from the EPC segment, IRB Infrastructure
(IRB) reported a Q2FY12 PAT of INR1.1bn (up 11% YoY), ahead of ours as
well as consensus estimates. Toll collection from BOT assets remained
steady with a traffic growth of around 6% in most assets. We expect the
company to focus on project execution rather than winning new projects
in the near term. Maintain ‘BUY’ with revised target price of INR
207/share.
Steady traffic growth in most assets, EPC does well
EPC revenues jumped up 79% YoY riding a strong execution in Surat-Dahisar project,
which is now complete by nearly 95%. EBITDA margins in the EPC business remained
strong at 23%. Toll revenue in BOT projects at INR2.4bn (up 17% YoY) was broadly in
line with our estimates. Traffic growth was steady at 6% in most assets (excluding
Bharuch-Surat project where traffic growth was ~3%-4%).
Earnings outlook for H2FY12 subdued, Robust growth in FY13
We expect a significant pick up in execution in H2FY12 and FY13 in Amravati-Talegaon,
Jaipur-Deoli and Amritsar-Pathankot projects. Despite this, we expect EPC revenues to
decline ~20% YoY in H2 on high base of last year, given that execution on Surat-Dahisar
and Kolhapur projects is now almost over. Also, IRB will start providing depreciation on
Surat-Dahisar in H2. We estimate a net loss of INR680mn for Surat-Dahisar in FY12. IRB
has raised INR7bn via ECB at Libor plus 4.5% for under-development projects, which
will help contain overall interest costs.
Outlook and valuations: Attractive; maintain ‘BUY’
Management expects competition in road project awards to ease going forward. They
indicated that they are bidding with minimum threshold IRR of 18% now. We have
revised our SOTP based TP to INR207/share (earlier INR 212) to factor in a higher
project cost (and correspondingly debt) in the Surat-Dahisar project. EPC arm
contributes INR83 while BOT projects provide INR129 per share with the balance
coming from cash and real estate. We maintain ‘BUY’.

Pantaloon Retail :: Motilal Oswal

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Pantaloon Retail's (PF) 1QFY12 core retail results were below our estimates with core retail PAT down 22.8% YoY at
INR330m. Although EBITDA rose 18.6%, led by a 50bp margin expansion, a 40% higher interest burden and 31% higher
depreciation, impacted PAT growth.
 SSS growth in both the value and lifestyle segments declined 4% QoQ. Home retailing SSS growth improved to
1.3% v/s a decline of 4.5% in 4QFY11. SSS growth in value retailing dipped below the level reached during the
slowdown of 2008-09. Lifestyle SSS growth of 7% was disappointing given an extended discount period of one week
and a 16-18% price increase. We estimate same store volume decline in mid-single digits.
 Standalone sales were up 8.8%, gross and EBITDA margins increased 140bp. EBITDA was up 25% but a 57%
increase in the interest burden and 31% in depreciation ensured 29% PAT decline despite a decline in tax rate by
12%. Value retailing reported a 15.2% increase in sales and 13.4% increase in EBITDA as margins declined 20bp.
A 26% higher interest burden and 32% higher depreciation led to 18% decline in PAT.
 PF added another 0.45msf of retail space, taking the total to 15.7msf. Big Bazaar and Pantaloon have not had store
additions but rather store closures. E-zone and Food Bazaar stores are lower by six and seven stores over 4QFY11
due to closures. PF saw a major area increase in Home Town, Central and KB Fair Price Shops. It is a rare instance
of zero area addition in Big Bazaar and a decline in Food Bazaar stores.
 We believe the decline in SSS growth poses a serious challenge to PF due to high debt of INR49b and inventory of
INR36b in the core retail business as on 30 June 2011. PF may be forced to close more stores if the slowdown in
SSS growth persists in coming quarters.
 We are disappointed with the slow progress in PF's exit from non- core businesses. We believe sustaining operations
would be a challenge given poor consumer sentiment, high leverage and rising interest rates.
 We are downgrading FY12 EPS to INR8.5 (INR12.4 earlier) and FY13 EPS to INR11 (INR16.1 earlier), a downgrade
of 32%. Although the stock has corrected sharply, a slew of factors like deteriorating SSS growth, high debt and low
inventory turns limit the upside. We place our rating Under Review.

What to do in bear markets ::Business Line

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The sombre market mood now could hardly be more different from the euphoria around this time last year when the Sensex hit 21,000.

Now that we're in a bear market with portfolios shining red, what should you, as a young investor, be doing?

If you want your portfolio to participate in the next bull market, it will need a thorough overhaul on the following lines.

Take profits in sectors and stocks that featured big gains in the last two years — FMCGs, mid- and small-cap consumer plays.

Sell stocks of companies that have seen their earnings being hit by galloping interest costs.

Those that have looming FCCB redemptions should also go. The lag effect of interest rates may impact their prospects for a few quarters.

Switch from high PE to low PE stocks while avoiding the above risks. Not sure how to do that? Buy into index exchange traded funds, value funds or diversified mutual funds with a good record. That will ensure participation in any rebound.

Here's what you should not do.

Don't jump in with all your surpluses at one go. Set aside a proportion of your savings towards equity investments and don't lose your nerve if markets fall.

The only investment that can help you recoup losses suffered in equities is equity itself. Whether it's a bullish market or a bearish one, it is best to allocate a fixed proportion of your portfolio to equities and balance it with safer investments such as fixed deposits.

If your equity exposure is already past the 70 per cent mark, it is advisable not to go overboard on buying more stocks.

Don't scrounge for penny stocks. Blue-chips may not multiply in a month, but they offer far greater certainty of long-term returns than penny stocks.

Don't wait for the market to ‘bottom out' if you're investing after a market fall. That's a level which is evident only in hindsight. If you are a long-term investor, don't make too fine a point of timing.

When you hear news that the Sensex has broken through a key ‘support', it is addressing traders who want to make a quick buck over a day or a week. Not the retail investor who buys a stock for 5 years.

SHORTING

Don't try shorting stocks. Despite all the wise-sounding counsel on television, believe us, no one has a clue on where the markets are headed in the short term.

Predictions about where the Sensex is headed over a trading day are often wrong.

That's why you should never be tempted into ‘shorting' a falling market or stock. The problem with short selling is that the price has to fall immediately for you to make money on the trade.

When you buy a stock and it refuses to move up you can always hold on to it, in the hope that you will be proved right in a month or even a year's time.

However, when you short-sell a stock, you don't have that luxury. To square up the position, you will need to buy the stock at a higher price if need be. Shorting is a sure way to lose your shirt in a whimsical market.

Outlook 28th Dec week: Pivotals: Infosys, RIL, SBI, Tata Steel:: Business Line

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 Infosys (Rs 2,600.6)

Infosys was choppy and plunged Rs 139 or 5 per cent with good weekly volumes last week. It conclusively penetrated the key support at Rs 2,660. Inability to move above Rs 2,660 will be a cue for initiating fresh short position while maintaining stop-loss at same level. Downside targets are Rs 2,550 and Rs 2,450.

However, only on a strong move above Rs 2,700 will be the sign for initiating fresh long positions. In that case, the stock can rally to Rs 2,850 and then to Rs 2,900. An emphatic penetration of the key resistance at Rs 3,000 will lift the stock higher to Rs 3,500 in the medium-term.

Reliance Industries (Rs 754)

Reliance Industries slumped 6.7 per cent with above-average weekly volumes . It breached the crucial short-term trend-deciding level of Rs 785 and reached our first price target of Rs 760 and is on its course to reach the next at Rs 740. Its short-term trend is down. Short-term traders can consider holding their short positions with stop-loss at Rs 773. Targets for the stock are Rs 740 and Rs 728. As long as the stock trades below Rs 825, its short-term trend remains down. On the other hand, if the stock makes a strong jump above Rs 785, we cannot rule out a pullback rally to Rs 800 and then to the Rs 820-825 resistance zone. Next key resistance is at Rs 860.

With the stock's decline last week , its medium-term down trend that is in place, is getting strengthened. However, the presence of significant long-term support in the zone between Rs 700 and Rs 750 makes the week ahead more crucial. A decisive breach of Rs 700 will pull the stock down to Rs 670 in the medium-term.

State Bank of India (Rs 1,690.7)

Friday's 2.3 per cent gain trimmed the weekly losses to 2 per cent for SBI. The stock breached the Rs 1700-mark in the early part the week and marked its 52-week low at Rs 1,629 on November 24. The stock has moved marginally to close below the Rs 1,700-mark and is still testing this support. For a conclusive breakthrough of this support, the stock needs to close below this for another week with an emphatic decline.

Both medium and short-term trends are down for the stock and it is hovering well below its 21- and 50-day moving averages. Daily as well as weekly indicators continue to feature in the bearish zone. As long as the stock trades below Rs 1,830, its short-term downtrend stays active. Immediate resistance for the stock is at Rs 1,765. Failure to exceed this level will confine the stock's trading range between the Rs 1,629 and Rs 1,765 bands. Resistances are at Rs 1,765, Rs 1,830, Rs 1,900 and Rs 2,000.

On the downside, breach of Rs 1,629 will pave the way for a decline to Rs 1,510 in the medium-term.

Tata Steel (Rs 374.1)

The stock tumbled 4.7 per cent last week accompanied with good weekly volumes, indicating an emphatic breach of key support band between Rs 390 and Rs 400. Since October peak of Rs 491, the stock has been on a short-term downtrend. It is hovering well below its 21- and 50-day moving averages. Both the daily and weekly indicators are hovering in the bearish zone. Traders with short-term horizon can continue to hold their short position with stop-loss at Rs 387. The stock can decline to Rs 353.

Significant resistances for the week are at Rs 400, Rs 423 and Rs 437. A strong move above Rs 450 is needed to reverse the short-term downtrend and lift the stock higher to Rs 490. The stock has been on a medium-term downtrend since early July this year. A fall below Rs 353 will pull the stock down to its next key support at Rs 326 in the medium-term.

Outlook remains negative for IFCI, Shipping Corporation:: Business Line

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IFCI: The long-term as well as short-term outlook remains negative for IFCI as the stock breached its all-important support level.

The stock now finds resistance at Rs 24 and support at Rs 17.

If the bearish trend sustains, the possibility of the stock touching the support level is not ruled out.

In the short-term, the stock could see a narrow movement between Rs 20 and Rs 24.

F&O pointers: The counter accumulated fresh short positions. This is one of the counters that witnessed heavy rollovers, particularly on the short side.

The rollover was 91 per cent to the December series. Low cost of carry indicates trader unwillingness to carry over the position. At the same time, higher annualised volatility signals caution.

Strategy: Traders can consider bear put spread or short strangle. We recommend short strangle for IFCI. This can be initiated by selling 25 call and 20 put that closed at Rs 0.85 and Rs 0.65 respectively.

While the maximum profit in the strategy is the premium collected, the loss could be unlimited if IFCI swings wildly in single direction. Besides writing (selling) options involves high margin commitments. The maximum profit will occur if IFCI settles between Rs 25 and Rs 20 on the expiry day. The market lot is 4,000 shares. This strategy is for high-risk appetite traders only.

Shipping Corporation: The long-term as well as medium-term outlook remains negative for the stock, as it closed below an important support level.

Only a close above Rs 117 would change the outlook to positive for the stock.

Shipping Corporation now finds an immediate resistance at Rs 72 and support at Rs 49. It now appears the stock is heading towards its support level. It finds its next support at Rs 36.

F&O pointers: The Shipping Corporation December futures did not see much accumulation.

Rollover of open position from November to December stood at 87.5 per cent, which is slightly lower than the three-month average. Rollovers with fall in share price indicate negative bias for the stock. Options are not active.

Strategy: Traders can consider going short on Shipping Corporation.

The stop-loss can be placed at Rs 62.5 for an initial target of Rs 49. Investors with long-term perspective can keep the stop-loss at Rs 72.

Follow-up: We had recommended a long on Siemens, but the recommendation turned negative, as the stock hit its stop loss.

However, recommendation of writing 2,200 call provided profit opportunities.

27 Nov: News Round-up �� :Kotak Sec

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Economy News
4 Food inflation, measured by the Wholesale Price Index (WPI) fell to nearly
four-month low of 9.01% for the week ended November 12. It was
10.63% in the previous week. It was 11.38% in the corresponding period
in 2010 (ET).
4 Foreign direct investment (FDI) of up to 51 per cent has been allowed in
multi-brand retail. Simultaneously, the Cabinet also gave the nod for
upping the FDI limit in single-brand retail ventures to 100 per cent (BL).
4 The cabinet on Thursday approved the Companies Bill 2011, a draft law to
comprehensively amend the 55-year-old Companies Act 1956 (BS).
Corporate News
4 Ranbaxy said to be close to a deal with USFDA, could pay $350-400 m
penalty to settle outstanding issues. This brightens its prospects of
launching the low-cost version Lipitor in the US next week. (ET).
4 KEC International has sold its 7.63-acre land block located in Trans-
Thane Creek Industrial Area between Thane and Navi Mumbai to
Vodafone Shared Services for Rs725 mn (ET).
4 BEML Limited is looking at a turnover of Rs 20bn from the mining and
construction equipment business during the current fiscal (2011-12), a
growth of 25 per cent over last fiscal (BS).
4 Motherson Sumi Systems (MSSL) has completed acquiring 80% stake
in Germany's Peguform Group for EUR141.5 million from Cross Industries
AG.Besides. It has bought 50% stake in Wethje Carbon Composite GmbH
and Wethje Entwicklungs Gmbh from Cross Industries AG (ET).
4 Polaris has announced plans to completely acquire Indigo Tx Software
Private Limited, a software as a service (SaaS) player. The company, in
March 2010, had acquired 51 per cent equity shares of Chennai-based
IndigoTx Software (BS).
4 Kingfisher Airlines would be returning two aircraft to leaser AerCap
Holdings as both the parties not agree on extension terms. These two
aircraft were coming up for renewal of lease contract in the next three
months (ET)
4 Jindal Saw has received orders to the tune of Rs. 10 bn. These orders are
to be executed over the next one year. The orders provide hope as Jindal
Saw's financial performance for the first two quarters of this fiscal has
been quite lacklustre (MINT).
4 Hindustan Construction Company (HCC) has bagged Rs 9.8 bn order
to build the superstructure of the Bogibeel rail-cum-road bridge over the
Brahmaputra in Assam in consortia with two other firms (BL).


News Round-up
�� Food inflation was back in single-digit territory after five weeks at a four-month low
of 9.01% for the week ended November 12. (BSTD)
�� Seven years after it was first proposed, the cabinet approved the Companies Bill
2011, a draft law to comprehensively amend the 55-year-old Companies Act 1956. It
will be tabled in Parliament during the current session. The Bill aims at the
modernization of corporate regulation. (BSTD)
�� Private equity & venture capital funds will not be clubbed with promoters, a
relaxation that the capital market regulator SEBI announced to lend greater flexibility
to these financial investors as well as cos. planning to mop up funds. (ECNT)
�� RBI has bought USD 1.81 bn in govt. bonds through open market operations, slightly
lower than the target of USD 1.92 bn, in a move aimed at easing liquidity. (ECNT)
�� Total FII investment flow into the country in 2011 turned negative as foriegn fund
managers took another USD 314.2 mn off the table on Thursday.
�� The steel demand growth in the first seven months of the current financial year was
just 2.9%, but the steel ministry is confident the sector would be able to post, at
least, 6% growth rate. (BSTD)
�� Defying stiff opposition from various quarters and sending a bold pro-reforms signal,
the UPA government approved 51% foreign direct investment (FDI) in multi-brand
retail and allowed 100% foreign ownership in single-brand retail, up from the
current 51%. (FNLE)
�� Walmart may be 1st global player to enter India. Future group's talks with global
retailers to fructify; Tesco to get a leg up. (BSTD)
�� M&M's (MM IN) Kinetic Motors buyout yet to reap benefits 3 years on. Its losses are
up, sole motorcycle has sputtered & performance bike is not ready yet. (FNLE)
�� L&T Infra to raise USD 211 mn via tax-saving infrastructure bonds. (BSTD)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.

Sizzling Stocks: Aban Offshore, Steel Authority of India:: Business Line

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 Aban Offshore (Rs 345.6)

Aban Offshore nosedived 12.4 per cent accompanied by above-average weekly average volumes in the previous week. However, it is currently testing its key medium-term support band between Rs 330 and Rs 340, from with the stock had rebounded in mid August and early October this year. An upward reversal from the aforesaid support band can take the stock higher to Rs 390 or to Rs 430 in the medium-term. Key resistance above Rs 430 is at Rs 500. The stock is trading well below its 21- and 50-day moving averages. Both its daily and weekly indicators are featuring in the bearish zone.

Nevertheless, breach through the support band will reinforce the long-term downtrend and drag the stock down to Rs 300 and then to Rs 225 in the ensuing months. Investors should avoid initiating fresh long position if the stock breaches the key support band as the stock can turn volatile and decline steeply.

Steel Authority of India (Rs 82.2)

SAIL continued its decline and plunged 12.2 per cent with above average volumes last week. However, the stock is just trading above its significant longer-term support zone between Rs 74 and Rs 80.

The stock has been on a long-term downtrend ever since peaking out from its April 2010 peak of Rs 258. A reversal up from the stock's significant longer-term support zone will take the stock northwards to Rs 90 and then to Rs 100 in the medium-term. On the other hand, conclusive penetration of the key support will pave way for a decline to Rs 65 and then to Rs 55 (November 2008 low) in the medium-term.