Bharti Infratel -Passive play on aggressive data rollout  Standard Chartered Research

 We initiate coverage on Bharti Infratel (BIL) with an Outperform rating and PT of INR 240. Potential re-leveraging and one-off dividends provide upside triggers.
 BIL offers investors a low risk option to gain exposure to the ongoing wave of data network rollout.
 Robust free cash generation capacity and potential for higher dividends will lead to a re-rating notwithstanding the moderate EBITDA CAGR (~9% over FY12-15E).
 Strong parentage provides superior visibility to tenancy even as stability in telecom tariffs might alleviate any pricing pressure on rentals.

Good growth across business verticals Biocon:: Centrum

Good growth across business verticals
Biocon’s results for Q3FY13 were better than our expectations. The company
reported 24%YoY growth in revenues, 90bps fall in EBIDTA margin and 8%YoY
growth in net profit. The sales growth was across all verticals. Notably among
them were, 22%YoY growth in biopharmaceuticals and 27%YoY growth in
contract research. Biocon’s Itolizumab has received DCGI permission and is likely
to be launched in India in FY14. The company’s recombinant human insulin has
successfully completed phase III trials in Europe. The company has entered into an
agreement with Bristol Myers Squibb (BMS) for its oral insulin IN-105. We have a
Buy rating for the scrip with a target price of Rs344 (based on 16x FY14E EPS).
Good sales growth: Biocon reported 24%YoY growth in revenues from Rs5.20bn
to Rs6.43bn. The biopharmaceutical business (64% of revenues) grew by 22%YoY
from Rs3.36bn to Rs4.09bn. Its branded formulation business (14% of revenues)
grew by 19%YoY from Rs720mn to Rs860mn. The contract research business (22%
of revenues) grew by 27%YoY from Rs1.1bn to Rs1.4bn.
Margins decline due to rise in material cost: Biocon’s margin for Q3FY13
declined by 90bps from 24.3% to 23.4% of total revenues due to the rise in material
cost. Its material cost increased by 200bps from 40.1% to 42.1% of net sales due to
the change in product mix. Personnel cost and other expenses declined by 50bps
each. The margin was also affected due to Rs310mn licensing development
income in Q3FY12.

Torrent Pharma, Mixed bag of performance.... IndiaNivesh Securities

Slow growth in International business linked with 3% decline in Brazilian
business, while domestic business was in-line with industry.
On the back of a) 44% y-o-y increase in US business, b) 14% y-o-y increase in Europe
(Excluding Heumann), CIS & ROW business and c) 15% y-o-y growth from Heumann
(Germany) & d) 3% y-o-y decline in Brazilian business linked with government
program for Losartan & Metformin, International business grew merely 16% y-o-y
to Rs 4.49 billion in Q3FY13. Domestic branded formulation business grew in-line
with the industry and reported 13% y-o-y growth to Rs 2.60 billion. CRAMs business
declined 4% y-o-y to Rs 587 million due to lower supply of Insulin to its customer.
Hence, overall business grew 14% y-o-y (2.9% q-o-q) to Rs 7.69 billion below our
estimates. ( V/s Rs 8.04 billion)

IOB- Asset Quality concerns continue :: Karvy

Asset Quality concerns continue
In Q3FY13, Indian Overseas Bank’s (IOB) profits grew 7.6% YoY (down
26.5% QoQ) to Rs1.2 bn. Lower than our estimates of Rs1.8 bn on account
higher NPA provisions. NII grew 13.1% YoY (up 11% QoQ) to Rs 13.8 bn
and pre provision profits increased 23.7% YoY to Rs10.1 bn (up 26% QoQ)
higher than our estimate of Rs 8.8 bn. During the quarter, NIM improved
sequentially owing to increase in yield on advances and decline in cost of
deposits. However, asset quality continued its downward trend.
 Loan Growth remains robust: Advances grew at 18.8% YoY (up 3.1%
QoQ), while deposits grew at a slower pace of 11.1% YoY (down 1.9%
QoQ). Consequently, C‐D ratio increased 403 bps sequentially to 83.4%.
CASA ratio remained flat at 25%.
 Asset quality alarming: IOB’s asset quality continued to deteriorate
further owing to fresh slippages to Rs 10.9 bn (delinquency ratio of 2.8%).
Gross NPA increased 26 bps QoQ to 4.1% and net NPA increased 8 bps
QoQ to 2.3% It also restructured loans worth Rs 12.9 bn taking the
cumulative value of the restructured book to Rs 156 bn (10% of gross
loan book). Credit cost increased to 2.5% from 1.3% sequentially, while
its provision coverage ratio remained flat sequentially at 59%.
 NIM bottoms out: NIMs improved by 18bps sequentially to 2.51% as
yield on advances improved 32 bps QoQ to 10.5%; this was further
complimented by decline in cost of deposits by 10 bps QoQ to 7.58%.
Outlook & Valuation
We believe, IOB’s asset quality pressures are yet to bottom out which would
continue to weigh on the banks profitability. At the CMP, the stock is trading
at 5.7x and 4.5x FY14E and FY15E earnings respectively, while the P/ABV is
trading at 0.7x and 0.6x FY14E and FY15E respectively. We have
downgraded our earnings estimates for FY14 and FY15 by 18% and 14%
respectively, owing to heightened asset quality concern. We therefore reduce
our price target by 19% to Rs 78 valuing the stock at 0.6x FY15E P/ABV and
maintain our SELL rating.

Engineers India reported a bad set of numbers : IndiaNivesh Securities

Engineers India reported a bad set of numbers. The reported top-line of the
company was at Rs 6.0 bn way below our expectations of Rs 7.4 bn. Reported
top-line declined by 23.7% on year-over-year basis (32.8% & 10.4% fall in
Turnkey & Consultancy business, respectively).
 At the EBITDA front, company reported an EBITDA of Rs 1.3 bn against our
expectations of Rs 1.9 bn. On other hand, reported EBITDA margins of the
company were at 21.7% (vs. 23.0% a year ago & 25.3% in previous quarter).
 32.8% fall in year-over-year Turnkey business top-line led to 44.1% fall in the
year-over-year sub-contracting charges (to Rs 871.8 mn). Increased
contribution of Consultancy business (47.9% in Q3FY13 vs. 40.8% in Q3FY12)
coupled with marginal cool-down in raw material prices, translated to 25.3%
year-over-year fall in construction materials (to Rs 1.9 bn).
 If we look at Q3FY13 segment-wise EBIT margins, both, Consultancy & Turnkey
business on a year-over-year basis, witnessed margin compression scenario.
Unadjusted EBIT margins of Consultancy business declined from 45.0% a year
ago to 41.5% in Q3FY13. Further, Turnkey business witnessed 261 bps
unadjusted EBIT margin compression on a year-over-year basis to 7.6%.
 EIL reported a PAT of Rs 1.3 bn, below our expectations of Rs 1.7 bn. Despite
EBITDA margin compression, PAT margins expanded on a year-over-year basis
by 279 bps to 21.9%. PAT margin expansion has been on a/c of (1) 50.6%
surge in other income (to Rs 669.3 mn), (2) 12.8% decline in tax expenses (to
Rs 632.9 mn).
Update on Order Book
During the quarter EIL reported Rs 544 mn of Order Inflows (OI’s). In the first nine
months of FY13E, EIL has reported OI to the tune of Rs 12.8 bn. With 1 more quarter
to go in FY13E, EIL would have a daunting task of reporting OI’s in the range of
Rs 17.2-22.2 bn to attain its FY13E OI guidance of Rs 30-35 bn. In our opinion the
company will miss-out on the guidance if no quick decission is taken by various
govt. agencies, through which it gets orders

Bad times for Crompton Greaves (CG) continue : IndiaNivesh Securities

Bad times for Crompton Greaves (CG) continue, as the company continued
disappointing across most of the areas.
Standalone business
 CG reported a top-line of Rs 17.4 bn, which is up 7.5% on a year-over-year
basis. Increased traction from fans & appliances contributed to 20.6%
year-over-year growth in Consumer products (~34.8% of Q3FY13 revenues)
top-line. Power systems (~38.4% of Q3FY13 revenues) witnessed 4.5%
year-over-year decline. Decline in segment revenues was mainly due to 20
days shut-down of Nashik factory. In management’s view this shut-down
resulted in a top-line loss of Rs 270 mn.
 EBITDA margins declined 320 bps on a year-over-year basis to 7.6% in Q3FY13.
Increased competition in the domestic power segment has led to project
executions at lower margins. Surge in year-over-year material (10.9% up to
Rs 13.1 bn) & other expenses (14.4% up to Rs 1.9 bn) led to EBITDA margin
compression.
 In line with EBITDA margin movement, PAT margins declined from 7.8% in
Q3FY12 to 6.1% in Q3FY13. PAT margin compression was restricted, as other
income increased by 92.2% to Rs 259.7 mn.
Consolidated business
 CG reported a consolidated top-line of Rs 29.7 bn against our expectations
of Rs 29.7 bn. The reported top-line numbers declined 1.9% on a year-over-year
basis. However, they were up 1.6% sequentially. Sharp slow-down in
International Power business led to 9.9% decline in Power Systems (61.2% of
Q3FY13 revenues) top-line.
 CG reported an EBITDA of Rs 20.1 mn against our expectations of Rs 1.3 bn.
From EBITDA margins perspective, EBITDA margins declined from 6.0% a
year-ago to 0.1% in Q3FY13. Such decline in year-over-year EBITDA margins is
mainly on account of 46.5% increase in other expenses (to Rs 4.7 bn). Other
expenses during the quarter included ~Rs 1.0 bn of restructuring expenses
(of this ~Rs 830 mn is for Q3FY13 and the remaining ~Rs 250 mn is for Q1FY13
and Q2FY13).
 The company reported a net loss of ~Rs 1.9 bn against our PAT expectations
of Rs 377 mn. The reported PAT margins were at negative 6.4% (vs. positive
2.5% a year ago). In Dec, 2012, CG completed restructuring exercise at their
Belgium plant. As part of restructuring initiative, 199 employees were laid
down and paid Rs 1.2 bn as retrenchment expenses (shown under exceptional
item). On adjusting for the same, the net loss margins of the company were
at 2.3%. Management claims that the restructuring process at their Mechelen
Plant, Belgium is completed & now they would end up saving annually Euro
~14-15 mn. Recent ZIV acquisition, mostly funded through debt, in our view
led to 89.3% increase in year-over-year interest expenses (to Rs 212.6 mn).
 International Industrials business (i.e. Emetron subsidiary) reported positive
operating performance, while forex loss dragged down the overall segment’s
EBIT margins from negative 8.4% a year-ago to negative 9.0% in Q3FY13.

Asset quality concerns refuse to die- BoI :: Centrum

Asset quality concerns refuse to die
BoI’s Q3FY13 core performance came largely in line though bottom-line
performance was below our expectations led by a spike in provisions. Though
slippages eased QoQ, it remained high at ~2% but was offset by aggressive
write-offs, optically improving %GNPA. We maintain Neutral rating with our
revised fair value estimate on the stock as we expect the stock to
underperform the sector and broader markets due to volatility in the asset
quality matrix.
NIM stable QoQ: The in line NII performance (up 11.7% YoY) was driven by a
sequentially flattish NIM along with 15.5% advances growth YoY. NIM stood
flattish QoQ as the benefit of lower cost of funds was offset by 35bps
contraction in loan yields (due to interest income reversal). While NIM can
improve in quarters to come, big-ticket restructuring or slippages remain a
key risk. We retain our conservative NIM assumptions (10 bps contraction over
an already weak NIM in FY12).
Asset quality, a mixed bag: Asset quality matrix remained a mixed bag with
%GNPA coming off by 34bps QoQ though led by high write offs (explaining
spike in provisions as well). The slippage rate at 1.9%, though lower than ~7% in
the previous quarter, is still high. Standard restructured assets now form 6.5% of
global loans though domestic restructured assets as % of domestic advances is
high at 8.4%. We maintain our view that the restructured assets are likely to rise
further in quarters ahead, though the quantum may be lesser. The management
once again exuded confidence over improving asset quality matrix though we
remain cautious.

Pidilite Industries' 3QFY13 :: Motilal Oswal

 Pidilite Industries' 3QFY13 standalone sales grew 21.6% to INR8.3b (est
INR8.4b); EBITDA margins expanded 80bp to 18.1% (est 18.8%), adjusted PAT
grew 20% YoY to INR1.04b (est INR1.1b) supported by higher-than-expected
other income of INR164m (est INR100m). Reported PAT grew 67.2% as it
included a) forex gains of INR89.3m, against a forex loss in base and
b) reversals of INR109.9m in interest expense due to FCCB conversion.
 Consumer Bazaar segment registered 16% volume growth in 3QFY13.
 PIDI reported healthy gross margin expansion of 200bp on account of sustained
easing of VAM prices. Despite healthy gross margin expansion and savings in
staff cost by 60bp, the steep increase in other expenses (up 180bp) curtailed
EBITDA margin expansion to 80bp to 18.1%.
 During the quarter it benefited from FCCB conversion as 104 bonds with a
face value of USD0.1m per bond were converted into equity shares. Hence,
PIDI reported a forex income of INR89mn v/s forex expense of INR25m in
3QFY13.
 Consumer & Bazaar sales were up 23.9% led by double digit volume growth
(16%). EBIT margins expanded 30bp YoY to 23.4%.
 Industrial Products reported 15% growth in sales; EBIT declined marginally
by 12bp to 11%.
 The stock trades at 21.2x FY14E and 18x FY15E EPS, we roll forward to FY15 and
maintain Buy with a revised target price of INR275 (23x FY15E EPS). We value
PIDI at 20% discount to Asian Paints.

Gruh Finance: Strong Financials –A play on the growing rural housing demand ::Axis Direct

Investment Rationale
􀂄 Niche presence in the semi-urban and rural areas of Gujarat and Maharashtra
􀂉 Overall, the company operates 121 retail offices across seven states
􀂉 Gujarat and Maharashtra also accounted for +75% of the disbursements in FY12, with the balance coming from states like Madhya
Pradesh, Karnataka, Rajasthan, Tamil Nadu and Chhattisgarh
􀂄 Riding on strong housing demand, the company provides sustainable growth trajectory
􀂉 Disbursements have grown at a CAGR of 26% and PAT at 32% over the last 5 years.
􀂄 Well managed Asset Quality with 100% Loan coverage (Gross NPA of 0.52% and Net NPA – Nil)
􀂄 Robust NIMs backed by consistent operating performance
􀂉 NIMs at ~ 5% in the last 2 years are amongst the best in the industry
􀂉 Cost to Income Ratio at less than 20% is lowest among its peers following branch based business model
􀂄 Best in class Return Ratios
􀂉 ROA in excess of 3%
􀂉 ROEs of ~ 30%
􀂄 Stable Borrowing Mix
􀂉 Apart from conventional bank borrowings and re-finance facilities from NHB, the company has regularly tapped other financing sources
such as NCDs, commercial paper and public deposits. In the last few years, GRUH has reduced its reliance on bank borrowings in favor of
facilities from NHB The change in borrowing mix will help in drastically bringing down the borrowing cost for the
6
NHB. composition of the company and hence aid the company in maintaining its robust margins in the years to follow

SJVN: A miss on the generation front :: Prabhudas Lilladher

! Q3FY13 generation down by 16.1% YoY, flattish PAT: SJVN’s reported revenue
de-grew by 3.3% YoY, as the generation dipped by 16.1% on the back of a 20.5%
YoY dip in water discharge. However, realisation per unit was up by 15.1% YoY,
leading to a lower sales de-growth at Rs3.6bn. PAT came in at Rs1.9bn which
was flat YoY on account of lower interest charges. PAF for the quarter stood at
105% (approx) and for 9MFY13 was at 108%. Incentives for 9MFY13E were
Rs1.2bn, mainly on account of higher-than-expected UI charges.
! FY13E ‐ a lower generation year: The river discharge in October has been lower
on account of snow and thus, in FY13E, the generation will not surpass the MOU
target of 6612MUs in a big way. Also, the incentives on secondary charges will
be lower to that extent. This is as per our expectation (at the beginning of the
year) and hence, there will be no impact on our PAT estimates.
! Updates: SJVN has Rs4bn outstanding from Delhi, UP and HP SEBs. The company
has chalked out plan for adding 47.6MWs of wind power for which the orders
are being placed and COD is expected in Q2FY14E. Capital expenditure outlay for
FY14E is Rs9bn and CWI is at Rs26bn. Additional ROE of 1% is not applicable to
NJHEP. Cash stands at Rs24bn.
! Valuation and Recommendation: Rampur HEP in FY14E will aid FY15E and to
some extent, FY14E earnings as well. The generation this year will be a
dampener on the earnings; however, the impact on the stock price would not be
material as it provides a steady state dividend yield play. The stock is trading at
1x FY14E. We maintain ‘Accumulate’ on the stock.

Reliance Power: On a steady track:: Elara Capital

On a steady track
Operational efficiency at ROSA boosts revenues
The 1200 MW ROSA operated at an availability of 103% and a PLF of
~91% but on the back of higher tariffs (~ INR 5.6/unit) due to
escalated coal costs. Being a cost plus model, this acted as a blessing in
disguise and aided the 220% increase in operating revenue YoY. The
receivable position at ROSA seems to be under control with less than 2
months of outstanding.
Butibori continues its previous quarter run rate
Though the 2nd phase of 300MW has just been synchronized and the
1st 300MW already commissioned and in spite of no coal supply from
WCL, Butibori plant seems to continue with its power „trading‟
arrangement under the already signed PPA. The plant reported ~INR
320mn of profits this quarter as well. It is expected to start generation
from April 1, 2013, while the short term sales to Reliance Infra would
continue till April 2014. The company has already filed a petition with
MERC to convert the plant in to a „cost-plus‟ basis which would
mitigate the fuel risk.
Increased visibility: Chhatrasal stage 1 clearance and SASAN
expansion
The 5MTPA chhatrasal mine has received stage 1 forest clearance and
the management expects stage 2 clearance to come by in the next 8
months. This has increased the visibility of Chitrangi plant. With
regards to the TATA Power case pending at the Supreme Court, we
learn that the date for the 1st hearing has not been scheduled yet.
Added to this, the 1st 660MW unit at SASAN is expected to get
synchronized in next few days. The coal mining operations for the
same has been stabilized.
Valuations
With all approvals in place for the 3 mines at Indonesia and land
acquisition in progress for ID-2, we are comfortable assigning an INR
10/share value to the entity. We maintain our target price at INR
110/share and re-iterate our positive stance on the scrip with an
„Accumulate‟ rating.

3QFY2013, Indoco Remedies:: Angel Broking,

For 3QFY2013, Indoco Remedies (Indoco)’s revenues as well as net profit were
lower than expected. The company posted a sales growth of 6.0% yoy, while the
net profit growth came in lower than expected, de-growing by 10.7% yoy. This
was mainly on account of lower-than-expected sales. The OPM was resultantly
impacted, which came in at 10.8%. While FY2013 has witnessed an overall lower
sales growth, FY2014 is likely to witness a robust growth, both on the back of
exports and domestic formulations. We recommend Buy with a revised target price
of `78.
Results lower than expected: Indoco reported net sales of `150cr (`142cr in
3QFY2012), up 6.0% yoy, but lower than our expectation of `185cr for
3QFY2013. The growth for the quarter came in mainly on the back of domestic
business, which grew by 8.8% yoy. The domestic formulations grew by 11.0% yoy.
The gross margin came in at 57.8%, ie higher than our expectations. Also, the
OPM came in at 10.8%, below our expectations of 16.4%, and contracting by
214bp on a yoy basis, mainly on back of lower sales during the quarter.
Consequently, the net profit for the quarter came in at `7.0cr, 60.0% below our
estimate of `18cr.
Outlook and valuation: We expect net sales to post a 17.4% CAGR to `784cr and
EPS to post a 24.8% CAGR to `7.8 over FY2012-14E. At `62, the stock is trading
at 10.8x and 7.9x FY2013E and FY2014E earnings, respectively. We recommend
Buy on the stock with a revised target price of `78.

RELIANCE CAPITAL Core business metrics to the fore:: Edelweiss

Reliance Capital’s (RCap) Q3FY13 PAT of INR1bn was all about core
business operations – after being volatile in the past few quarters due to
one‐offs (stake sale in core businesses, investment write‐offs and third
party motor claim reserves in general insurance). General insurance
turned profitable in Q3FY13; however, NPLs in the consumer finance
space posted a slight uptick. AMCs revenues and expenses were volatile
due to new income recognition guidelines and upfronting of marketing
expenses. Profitability of other verticals was steady. Taking cognizance of
inherent value in its life insurance and asset management businesses,
coupled with scale up in consumer financing and stability in general
insurance, we maintain ‘BUY’.
• Commercial finance: Disbursements were steady, up 16% YoY, leading to just 4.2%
YoY increase in AUMs to INR160bn. While NIMs improved 10bps to 4.2%, gross
NPLs surged 30bps QoQ to 1.9% due to two accounts. Management tagged
Q3FY13 as an exception in asset quality and guided for recoveries going forward.
• Asset management: AUMs rose 5% QoQ to INR906bn led by 12% surge in debt
funds. Revenue increased after SEBI’s new guidelines on income recognition, but
upfronting of marketing expenses on retail debt kept PBT mute (up 1% QoQ).
• Life insurance: Weighted received premium came in flat QoQ (down 9% YoY), in
line with industry trend. NBAP sustained at 15%. Persistency in check at 54%.
• General insurance: Reported positive PBT of INR156mn for the first time as it had
provided for entire FY13 third party motor claim reserves in H1FY13 itself.
Outlook and valuations: Earning visibility improves; maintain ‘BUY’
RCap’s earnings have been volatile over the past few quarters due to stake sale and
consolidation of group entities. After being in consolidation phase, the company’s core
businesses viz., AMC and commercial financing, have stabilised a tad or improved.
Moreover, third party motor claim reserves in general insurance have been booked
upfront in Q2FY13 and adequate provisioning has been made on its investments,
thereby improving earnings visibility. The drag on earnings has been securities and
distribution business. We maintain ‘BUY/SO’ with SOTP of INR548.

Container Corporation, Results in line: :: Motilal Oswal

 Results in line: CCRI's 3QFY13 results were in line with our expectations,
with EBITDA down 5% YoY at INR2.6b (our estimate: INR2.8b). Revenue grew
3.5% YoY to INR10.8b (our estimate: INR11.7b), while net profit declined
1.8% YoY to INR2.4b (our estimate: INR2.3b).
 Volumes remain under pressure: Volumes in TEU terms remained under
pressure. EXIM volumes declined 5.8% YoY to 0.52m TEU while domestic
volumes declined ~5.2% YoY to 0.1m TEU. Overall volumes declined 5.7% to
0.64m TEU. While volumes declined in TEU terms, in tonnage terms, YTD
volumes grew ~7.5% YoY, implying higher share of bulk goods in the cargo.
 EBITDA margin under pressure: EBITDA margin was 24.3%, down 219bp YoY
and 11bp QoQ. Margins were negatively impacted on account of higher
empties cost (up 20% YoY at INR570m) and CCRI's inability to pass on the
entire haulage charge increase (70% passed on) by Indian Railways. CCRI has
managed to successfully pass on ~70% of the price hike (~12.5% fare hike v/
s cost hike of 18%); it is hopeful of passing on the remaining cost hike in a
phased manner over the next few quarters.
 Valuation and view: We are revising our revenue estimates by -3.9%/-7.8%/
-7.6% for FY13/FY14/FY15 and net profit estimates by 0.2/-6%/-5% for FY13/
FY14/FY15. CCRI trades at 12.6x/11.4x FY14E/FY15E earnings. We maintain Buy
with a revised DCF-based target price of INR1,322 (upside of 42%).

Index Outlook: Investors waver at higher levels :: Business Line

Operating performance disappoints; Maintain Buy Ashok Leyland :: Centrum

Operating performance disappoints; Maintain Buy
Ashok Leyland’s (ALL) 3QFY13 operating results were lower compared to our
expectations with EBITDA margins at 4.3% vs. est. 7.8%. Operating deleverage
coupled with higher other expenditure led to weak operating
performance. As a result, the company reported adjusted loss of Rs.587mn
(adjusted for exceptional item of Rs.1.6bn) and managed to post PAT of
Rs.741mn. Despite disappointing 3QFY13 results, we believe that favorable
macro impetus and expected interest rate down cycle (we expect 100-125bps
cut in interest rates for FY14E) should augur well for the M&HCV business in
FY14E. Also our metals analyst expects mining-related issues to be resolved
leading to court orders for resumption of closed mines. Mining activity has a
significant bearing on the freight market, especially in south India where ALL
has a strong market. We continue to maintain our Buy rating on the stock with
a target price of Rs.31.
Operating performance disappoints: Net revenues stood at Rs.24bn
registering a YoY/QoQ drop of 17%/28%. Net revenues were lower by 4% on
account of lower realizations (drop of 5% vs. our expectations of drop by 1%).
Driven by operating de-leverage and higher other expenditure, EBITDA
margins stood at 4.3% vs. our estimate of 7.8%. As a result, the company
reported a loss of Rs.587mn (excluding the exceptional item of Rs.1.6bn).
Including the exceptional item, the company managed to post PAT of
Rs.741mn.
Conference call highlights: 1) the management indicated that it had
withdrawn plans to raise funds through QIP worth Rs.5bn; instead it will raise
funds through divestment from un-related areas and could also look at
liquidating its stake in IndusInd bank. 2.) total long term borrowing was at
Rs.35bn and short term loans at Rs.15bn. 3.) Total capex and investment
planned for FY13E stands at Rs.9bn (Rs.5.5bn incurred thus far) 4.) Production
from UTK plant stands at 6,700 units compared to 7,200 units in 2QFY13 (it
targets volumes of 32k in FY13E and 42k in FY14E) 5.) Dost’s supply side
constraints related to gear boxes were resolved a few months back
(management is targeting 11-12k in 4QFY13) 6.) Discount levels have moved
up to Rs.100k from 80k in 2Q and 50k in 1Q).

Strong operating performance - Lupin :: Centrum

Strong operating performance
Lupin’s results for Q3FY13 were better than our expectations. The company
reported 37%YoY growth in revenues, 360bps improvement in EBIDTA
margin and 43%YoY growth in net profit. The sales growth was across all
major geographies. Notably among them were, 68%YoY growth in the US
market and 48%YoY in Japanese market. The higher growth in US was due to
the launch of generic Tricor. The company’s 22 of the 43 generic products are
market leaders in the US. Lupin has entered the US generic market in the oral
contraceptive (OC) segment with a basket of eight products. We have a Buy
rating for the scrip with a target price of Rs699 (based on 22x FY14E EPS).
Excellent sales growth: Lupin reported 37%YoY growth in revenues from
Rs18.20bn to Rs25.01bn due to excellent growth in major markets. The sales
growth in various geographies is as follows: US formulations 68%YoY, Japan
48% (due to the acquisition of I’rom), S. Africa 43%, India formulations 14% and
RoW 8%. However, revenues from Europe declined by 7%YoY.
Higher tax rate: Lupin’s tax rate has gone up from 22.6% to 38.1% due to the
expiry of EOU benefits and unrealised profit on inventory lying with the
subsidiary. The management has guided a tax rate of 34-35% for FY13 and
FY14.

PNB: Consistency is the key :: Centrum

Consistency is the key
PNB’s tepid core performance during Q3FY13 was in line though bottom-line
surprised positively on lower provisions as asset quality was largely stable.
Contained slippages (0.5% annualised), 5bps QoQ improvement in %GNPA
and 200bps expansion in PCR provided relief to heightened asset quality
concerns. While we welcome the stability in asset quality matrix, we remain a
tad cautious led by high GNPA at 4.6% and large outstanding standard
restructuring at ~9%. We remain Neutral on the stock given the limited upside
to our revised target price of Rs950.
Asset quality stable QoQ, improvement awaited: Asset quality matrices for
PNB stabilised during the quarter with delinquency contained at 0.5% duly
complimented by equivalent recoveries leading to stable GNPA in absolute
terms while implying a 5bps easing in relative terms. While provisions dipped
by 25% QoQ, PCR expanded by 200bps sequentially to 46% (w/o write offs).
Meanwhile, standard restructured assets inched up further to 9.4% as the
quarter saw inclusion of Suzlon and additional disbursement to DISCOMs
under agreed restructuring package. While we welcome the stability in asset
quality matrix, we remain a tad cautious led by high GNPA at 4.6% and large
outstanding standard restructuring at ~9%.
Tepid core performance: The core performance, though in line, was tepid with
flattish YoY. NII growth stood at a tepid 6% YoY led by stable NIM sequentially
and a moderate 14% credit growth. The quarter saw interest income reversal of
Rs800mn which suppressed loan yields, though this was offset by lower cost of
funds led by shedding of bulk deposits and easing in rates on the same. The
management continues to guide for better NIM going ahead.

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

Greaves Cotton (Rs 82.1): BUY :: Business Line

JBF Ind, Allahabad Bank, Reliance Capital, Mahindra Satyam, United Spirits, jindal poly films, :: Business Line

 

Guarding against a weak rupee :: Business Line

If you want to shield your portfolio against the risk of a tumbling rupee, there are essentially three ways to do this.

EXPORTER STOCKS

‘Buy export-oriented companies’ — may be the first suggestion that crops up. But looking through the actual performance of exporting companies over the past five years shows that randomly buying exporters’ stocks and expecting them to gain from a weakening rupee would be futile.

Sure, combined profits of the listed software companies rose by some 30 per cent between March and December 2011, as the rupee depreciated 16 per cent.

But the same companies reported a 3 per cent profit drop in the June 2012 quarter though the rupee weakened by 8.6 per cent to a dollar.

Pharma companies as a class have proved an uncertain hedge against a sliding rupee too.

Their aggregate profits actually fell both during the 2011 and 2012 episodes of rupee depreciation.

With the risk of client defaults, pricing pressure and derivative losses, smaller export oriented companies from textiles and gems and jewellery have proved even more risky when global markets are shaky.

They have limited scale and bargaining power relative to the global giants they supply to.

The problem with expecting exporters to shield your portfolio from a sliding rupee is that, episodes of rupee weakness usually coincide with turmoil in global markets.

In such cases, a lower exchange rate may help realisations of exporters, but this is often overshadowed by shaky prospects for their core business, in the form of fewer deal wins, pricing pressures or clients going bust. Exporters who have foreign currency borrowings may find gains on realisations offset by bloated debt obligations.

On a stock specific basis, a few leading companies that have benefited from rupee weakness in the past are pharma names such as Sun Pharma, Ipca Labs, Cipla and IT companies such as HCL Technologies.

SELECT GLOBAL FUNDS

For those who are unable to make such tricky stock-specific choices, equity funds that invest in stocks listed overseas make a good rupee diversifier.

These global funds, as a category, have fared much better than funds investing in Indian stocks during phases of rupee depreciation.

In the market crash of 2008, even as the CNX 500 fell by 57 per cent and domestic equity funds crashed by 55 per cent on an average, international funds contained losses at 41 per cent. That may not sound impressive, but must be seen in the light of the global meltdown in equities.

Between June and December 2011, another period of sharp rupee depreciation, global funds got away with a 3 per cent loss, while Indian markets lost 20 per cent and the average equity fund 18 per cent.

However, when it comes to diversifying your risk, you need to be selective about global funds too.

Funds focussed on themes such as emerging markets and commodities have tended to give way quite easily during global crises, proving an uncertain hedge against a sliding rupee.

It is funds playing on US markets (Motilal Oswal Nasdaq ETF) or asset classes such as real-estate that have weathered the turmoil much better.

OBVIOUSLY, GOLD!

However, one investment that has consistently proved its mettle as a hedge against rupee weakness is gold exchange traded funds.

With gold holding up very well during periods of global turmoil and a strong dollar adding to these returns, holders of gold exchange traded funds have had a whale of a time whenever the rupee has slipped over the last five years.

Based on your preferences therefore, you can mix and match stocks, global funds and gold ETFs to make up your anti-rupee portfolio.

Remember that this is only a diversifier. Allocate 10-15 per cent of your long-term portfolio to investments that can keep you safe from a sliding rupee.

V-Mart Retail - IPO: INVEST AT CUT-OFF :: Business Line

When consumers cut back on purchases in the face of rising costs, as is the scenario currently, apparel is among the first in the firing line.

Most listed branded apparel players have been struggling for several quarters on end. The vast unbranded — and unorganised — market, which is also cheaper often benefits as a result.

V-Mart Retail derives a good chunk of revenues from unbranded apparel retail. The company is also cushioned by being a retailer of household and grocery staples too.

Using equity infusions to fund the majority of its expansion leaves it with low debt. Sticking to Tier II and Tier III towns where competition is minimal, and which allows sourcing efficiencies is another advantage.

The company’s initial public offer (IPO) is priced between Rs 195 and Rs 215. The offer discounts estimated earnings for FY-14 by 15.3 to 16.8 times on a post-issue equity.

But the company is not immune to consumers deferring purchases, with revenues taking a severe hit in the previous slowdown. Consumer confidence is now ebbing across the board, with even staple FMCG sales witnessing a squeeze, and this is not restricted to urban cities alone.

The retail space is rife with over-priced stocks, and V-Mart’s IPO valuations are already on a par with closest comparable peers. Further, the company has limited scale of operations and will sport a small-cap tag, post-listing.

Given the risks and the high valuations, only those investors with stomach for high risk and a medium term perspective can subscribe to the IPO. Investors are also advised against taking a large exposure in the IPO.

GOOD PRODUCT MIX

Apparel is the single biggest revenue contributor at 60-68 per cent over the past five years. The segment also offers the highest margins (around 34 per cent), which have remained steady over the years.

The next largest contribution is from FMCGs, personal care products and household care. The share of this segment has fluctuated between 19 and 30 per cent over the years.

But V-Mart does not have the kind of trade terms with FMCG distributors which organised retailers usually have, that entail higher margins and special incentives.

The segment has the lowest margins (around 13 per cent). These margins have also been steadily declining.

The remaining revenues come from home merchandise and accessories such as shoes, bags, toys, stationery and so on. Such a mix of discretionary and staple products could tone down the effects of consumers tightening purse-strings.

SMALL-CITY FOCUS

V-Mart has a chain of 62 stores, concentrated in the northern and western parts of the country. It will utilise Rs 70 crore, most of which will come from the IPO and a pre-IPO issue, to open 60 stores by FY-15.

New stores are set to be opened in smaller towns and cities in regions such as West Bengal, Assam and Uttarakhand where the company has no presence yet, besides existing markets such as Uttar Pradesh, Gujarat and Rajasthan.

Such a strategy of focusing on smaller towns is quite sensible. For one, it will have a first-mover advantage in establishing presence and its brands since national retailers are yet to tap into these markets.

Two, lease rentals here will be lower than in Tier I cities. Three, the company bunches store locations of about 150-200 km from each other, allowing economies in sourcing and distribution. Four, competition is relatively lower than Tier I cities.

But consumers in these cities are still vulnerable to rising costs, and the weak consumer confidence now will have an effect.

Same-store sales growth, or the growth in sales for stores open more than a year, dipped sharply in FY-12 and has shown only a slight improvement in the eight months to November 2012.

GOOD GROWTH

Revenues have grown at an annualised 25 per cent over the past three years to Rs 282 crore in FY-12. In the same period, net profits have doubled annually on economies in staff costs and other expenses to Rs 11 crore.

Operating margins meanwhile improved from 6 per cent in FY-09 to 10 per cent in FY-12. Margins are on par with retail peers.

Debt-equity ratio was at 0.6 times at end-November 2012, lower than most retail peers. Post the issue, debt-equity will go down to 0.21 times.

This leaves the company in a comfortable position with regard to funding expansion outside the scope of the issue objects.

Interest costs also don’t weigh too much. Net profit margins for the eight months to November ’12 stood at 5 per cent due to higher depreciation and taxes.

Given the working-capital intensive nature of the business, the company plans to utilise Rs 10 crore towards funding working capital for this fiscal.

Working-capital cycle has remained more or less steady over the years, and is on a par with its retail peers.

The company will also spend Rs 4.4 crore on developing distribution centres, either by expanding the current four centres or adding to this number.

ISSUE DETAILS

The offer is open till February 5. On offer are 44.96 lakh shares, of which 17.35 lakh shares are an offer for sale by a private equity investor.

Anand Rathi is the lead manager to the issue.

From this issue, the company will raise around Rs 88-97 crore, (including the offer-for-sale).

Avoid investing in poor quality and penny stocks :: Business Line

I am a long-term investor, currently investing Rs 15,000 equally in IDFC Equity Premier, HDFC Mid Cap Opportunities and HDFC Top 200. I wish to increase my investment by Rs 5,000 a month and my adviser has given three schemes to choose from: ICICI Prudential Bluechip Equity, UTI Opportunities and Reliance Equity Opportunities.

Please help me in choosing the right fund among the above or anything that is more suitable.

Vijay Kumar

Cotton futures poised near resistance :: Business Line

In this week's dissector we take a closer look at the cotton No 2 futures traded on the Intercontinental Exchange (ICE). It is the benchmark for the global cotton trading community. It closed at 82.9 cents a pound on Friday. Cotton prices advanced 10.3 per cent in January, marking the biggest monthly gain since August 2012, on cues of higher demand in China. But it was the worst performer among the agricultural commodities tumbling 18 per cent.

LONG-TERM VIEW

Cotton futures peaked out in March 2011 at the high of 227 cents a pound. Since then, the contract has been trending downwards. It has been in a long-term downtrend, shaping lower peaks and troughs. While trading down, cotton futures decisively broke through its significant long-term support at 145 cents with a downward gap and 115 cents in July 2011. Nevertheless, its next key long-term support band between 66 and 70 cents arrested its downtrend in June 2012 and provided base for the commodity.

A conclusive downward breakthrough of the long-term support band between 66 and 70 cents will reinforce bearish momentum and pull cotton futures downwards to 60 cents or even the subsequent support at 50 cents in the long-term. Important long-tem supports below 50 cents are positioned at 40 and 30 cents.

On the other hand, cotton futures faces long-term resistance at 85 cents. Decisive rally above this resistance will encounter subsequent resistance in the range between 96 and 100 cents.

MEDIUM-TERM VIEW

Key resistances above 96 and 100 cents band are pegged at 115 and 145 cents. A strong rally above 145 cents is required to alter the long-term downtrend and take the fibre northwards to 170 cents in the long-term.

Cotton No 2 futures continued its downtrend after breaking through its key support at 85 cents in May 2012. However, the presence of significant long-term base in the range of 66 and 70 cents arrested its downfall in June 2012. Thereafter, cotton futures took support consistently from the aforementioned base zone and began to trend higher.

Over all, cotton futures has been in a broad sideways consolidation phase in the price band of 66 and 85 cents. Cotton futures is trading well above its 50- and 200-day moving averages. Conversely, it is likely to encounter resistance at 85 cents ahead. Though cotton futures could fail to breach this resistance in the initial attempts, a strong break out will pave way for an up move to 94 cents and then to 100 cents in the medium-term.

Inability to surpass 85 cents will confine the commodity moving sideways between 80 and 85 cents band. Short-term support for cotton futures is at 75 cents. Key resistance above 94 cents are at 100 cents and then at 115 cents.

ICICI Pru Top 200: Hold :: Business Line

Look beyond Section 80 C for tax-saving instruments :: Business Line

With the fiscal year moving closer to its end, its time you squeezed in some tax-saving investments while there is time. The more obvious one is the tidy sum of Rs 1 lakh deduction available under Section 80 C.

While most of us are familiar with the deduction under Sec 80 C, let’s quickly recap. This section covers investment in eligible securities, expenditures, payments such as life insurance premium, contribution made under employee's provident fund scheme, contribution to public provident fund (PPF), Post office saving bank, any notified savings certificate (NSCs), Unit Linked Insurance Plan (ULIPs), notified Mutual funds, tuition fees. This, along with Sec 80 CCC (Premium Paid for Annuity Plan of LIC or Other Insurer.), 80 CCD (Contribution to Pension Account up to 10 per cent of salary), provides deduction up to Rs 1 lakh.

WHAT’S IN AND OUT

Last year, you had an additional Rs 20,000 deduction under Sec 80 CCF for investment in long term infrastructure bonds. This is not available for the assessment year (AY) 2013-14 (Current year). However, this year, under a new Sec 80 CCG, if your annual income is less than Rs 10 lakh, you can invest in Rajiv Gandhi Equity Saving Scheme (RGESS) scheme up to Rs 50,000 and claim a deduction of 50 per cent of the investment. Additionally, under Sec 80TTA introduced in the Budget 2012, if your income includes interest income on deposits in savings account (not time deposits) with a bank, co-operative society or post office, then this is also allowed as deduction, up to a maximum of Rs 10,000.

MEDICLAIM BENEFITS

Among other existing deductions, you should start looking at some medical insurance policies, if you don’t have one already. While they cover your medical bills, the premium you pay is tax deductible from your income as well. Under Sec 80 D deduction of medical insurance is available up to Rs 20,000 for senior citizens and up to Rs 15,000 in other cases for insurance of self, spouse and dependent children. Additionally, a deduction for insurance of parents is available to the extent of Rs 20,000 if parents are senior citizens and Rs 15,000 in other cases. From AY 2013-14, within the existing limit, a deduction of up to Rs 5,000 for preventive health check-up is available.

If you have taken an educational loan for pursuing higher studies, you can claim the entire interest you pay on such loans as deduction under Sec 80 E. Remember that the provision is also available for higher education of a relative. Any donation you make to certain funds or charitable institutions as specified under Sec 80G is also available for deduction. The amount eligible for deduction is up to 100 per cent or 50 per cent as provided in Sec 80G.

HOUSING

You can also claim deduction for the rent you pay for accommodation. The expenditure you incur, in excess of 10 per cent of total income for payment of rent to the extent of Rs 2,000 a month or 25 per cent of total income, whichever is less, is allowed under Section 80GG.

Finally, under Sec 24 the amount of interest you pay on loan taken for acquiring, constructing, repairing or renewing of a housing property can also be claimed as deduction subject to the limits stated. This is outside the deduction available for principal repayment on the loan available under Sec 80C.

Remember, the exemptions mentioned above are not exhaustive but only indicative of other avenues you must look at. You can also look at other provisions that apply to you, before you compute your tax this year.

Bear call spread in Nifty :: Business Line

Traders can consider initiating a bear call spread in options of Nifty February series. This option strategy can be set by selling Nifty 6,000 call option and by buying Nifty 6,100 call options. These options were trading at Rs 102 and Rs 53.1 at the end of Friday session. Since it is a bear call spread there will be an initial inflow which in our case comes at around Rs 48.9 (Rs 102 minus Rs 53.1). This will also be the maximum profit from this strategy.

If Nifty declines further, both the call options will be worthless and the net premium collected of Rs 48.9 can be retained.

If Nifty trades above 6,149, this strategy will lose money. The maximum loss will be capped at Rs 51.1 (6100 minus 6000 minus 48.9).

Traders can close their positions if nifty declines from current levels.

India VIX, that measures the expected volatility in Nifty, closed at 13.7 compared with 14.7 last week.

Follow up: Last week we recommended bear call spread by selling Nifty 6,200 call option and buying 6,300 February call option. The strategy is already profitable.

How the rupee’s movements can wreck your portfolio :: Business Line