19 June 2013

GS INDIA :: INR depreciation helps IT, energy stocks but hurts telecom, infra, cement

$46bn in foreign debt for our coverage
Given the continued depreciation of INR vs. USD
(6% since April 1, 2013), we analyze the impact on
our coverage in an extension of our publication
India: Across the Board: Examining the impact of
forex on financials for our India coverage, dated
May 22, 2012. Our coverage (ex-financials) has
aggregate foreign debt of US$46bn (35% of
overall debt). Eighty-six percent of this foreign
debt is concentrated across just 11 firms, mainly
from the telecom, infrastructure and energy
sectors.
Scenario analysis to measure forex impact
In this note, we run a scenario analysis to
measure the impact of forex fluctuations
assuming a direct P&L impact (1Rs depreciation
impacts FY14E EPS for our coverage by -10% to
+6%). Reality may differ from our assumptions as
we have limited visibility on hedging strategies
and note that there is no uniform way in which
companies are accounting for forex fluctuations
(some reflect this on their P&L, while others
directly capture this on their balance sheets).
Three types of impact for our coverage
First – and worst hit – are companies with material
foreign debt or significant imports and no natural
hedge in the form of export revenue.
Second, we highlight companies with foreign debt
and/or import costs, but where the impact is
blunted by a natural hedge in the form of foreign
revenues or pass through mechanisms.
Third are companies that benefit from a) material
export revenues denominated in US$, b)
translational gains from overseas subsidiaries
with revenues in US$ and c) minimal foreign debt.
We highlight 14 firms with potential 10%-
23% EPS impact if current rates prevail
While this note provides granularity on our entire
coverage, we highlight 14 situations (both positive
and negative) where the EPS impact – on a full
year basis – could be from 10%-23% if exchange
rates were to remain at current levels. Buy-rated
stocks that we see benefiting from INR
depreciation include ESRO.BO, HCLT.BO (CL),
RELI.BO, SATY.BO, and TEML.BO.

LIC Housing Finance :Falling bond yields and improving project approvals to drive margin recovery in FY14: JPMorgan

We think LICHF’s net interest margins are poised for a recovery in FY14.
We believe this will be driven by sharply lower wholesale funding costs
and improving project approvals, resulting in a better share of higher
yield developer portfolio. LICHF also has a higher share of fixed floating
loans relative to peers, and hence on a relative basis benefits more. We
think incremental spreads for F14 will continue to be well above average
on book spread, resulting in higher NIM. Maintain Overweight.

Bata India - TP:INR975 Buy :: Motilal Oswal

All the right steps
Expect strong earnings and growth visibility
 Restructuring leads to sales CAGR of 14.7% over CY05-12, with EBITDA and PAT growth
of 47.6% and 51.6%.
 Focus on aggressive growth by expanding presence in Tier II, III cities and rural India.
 Outsourcing, K Stores expansion to contain employee cost; Margins set to increase.
 Bata India (BATAIN) trades at a PE of 26.4x/20.8x/16.5x CY13E/14E/15E EPS. We value
the stock at 25x CY14E EPS and arrive at a target price of INR975, with a Buy rating.

‘Default on loans could be habitual’ :: Business Line

A lot of variables go into building the credit score. In cases of no history, parameters including behavioural aspects of customers influence the score.
With banks becoming more and more vigilant about whom they lend to, services provided by credit bureaus, which rate a customer’s credit-worthiness, have become indispensable. In an interview to Business Line, Sanjay Patel, MD and CEO of Equifax Credit Information Services (India), dwells on these aspects and talks about the prospects of the credit scoring business.
There are already a couple of credit scoring agencies in India. Is there room for another player?
CIBIL began offering its services in 2005 and Experian and Equifax came later in 2010. So yes, we are a late starter. Almost 100 per cent of the market was catered to by CIBIL in the initial years.
But whenever new incumbents come, the overall industry gets better in terms of ability to understand the customers and provide the services they need. There is enough room for all of us. If you consider credit card as a parameter, the penetration is only 3-4 per cent compared to the 90-100 per cent penetration in US. So we have a long way to go.

Which is the better pension plan? :: Business Line

Should the new offerings from life insurance companies be your investment vehicle for retirement income? Here’s an analysis — and the bottom line.
Work hard, save a lot and retire early seems to be the dream of many belonging to the Indian salaried class today. But truth is, even if you manage the first two actions, the third may prove difficult because there are very few pension products available in the market today for those who need a regular income.
After a long hiatus, life insurance companies have recently begun to re-launch their pension plans, with assured returns as mandated by the insurance regulator. But should the new offerings be your investment vehicle for retirement income? We analyse them.
LIC and HDFC Life have recently launched plans that are designed as deferred annuity products. You pay premiums for a number of years to accumulate a corpus. After retirement, the corpus is used to purchase an annuity with the same insurer, which allows you to draw a pension after retirement. While LIC’s is a traditional plan, HDFC Life’s is a unit linked pension plan. A couple of other large life insurance companies too are expected to launch their offerings shortly.

Karur Vysya Bank - TP: ` 590 Buy ::Dolat

KVB’s 8% YoY rise in net profit to ` 1.6bn was driven by the 19% growth in net
interest income, treasury income and tax write-back as operating expenses
and provisions rose. Overall asset quality showed improvement with QoQ fall in
gross and net NPLs and stable provisioning coverage.
Fresh NPL formations declined from ` 14.4bn in Q3 to ` 9.6bn in Q4. One
account amounting to ` 650mn contributed to the bulk of this quarter’s fresh
NPLs. The bank restructured loans of ` 3.3bn , of which ` 1.25bn pertained to
TNSEB.
As per the management, the expansion in branch network and human resource
during H2FY13 was the primary driver for the sharp rise in operating expenditure.
As branches take around 9-12 months time to break-even, a significant number
of branches opened during the past five quarters should start becoming more
productive and contribute to the overall operational performance going forward.
This should also help moderate the high cost/income ratio.
Provision on restructured loans and on investment book were the main drivers
for the sharp rise in provisions. Provisioning coverage ratio was stable at 75%.
Loan book grew by 23% YoY driven by the high growth in loan against jewellery,
agriculture and personal loan segment as the bank slowed down the growth in
the corporate loan segment. Going forward, the growth would be driven by
loans to SME, agriculture and personal loans.
We believe that the bank should be able to deliver much higher than industry
growth with stable asset quality. In our view, stable asset quality; faster
improvement in productivity, moderation in pace of expansion should aid in
maintaining the ROA, at time when NIM can see near term pressure. We remain
positive on the stock with Buy rating and target price of ` 590 (based on PBR
of 1.8x on FY14 BVPS forecast).

Angel Broking - Apollo Tyres - Event Update

 
Acquisition of Cooper Tire – Ambitious move
Apollo Tyres (APTY) and Cooper Tire and Rubber Company (CTB) have announced a definitive merger agreement, under which APTY will acquire CTB in an all cash transaction valuing the firm at US$2.5bn (including minority interest). APTY will acquire 100% equity of CTB for an equity valuation of US$2.2bn, ie at a 43% premium to CTB’s 30 day volume weighted average price. The acquisition would be funded entirely through debt. The deal value of US$2.5bn translates into an implied EV/EBITDA multiple of 4.4x (TTM basis), which is broadly in-line with the global average. Post the acquisition, the combined entity will be the 7th largest tyre company in the world with combined revenues of US$6.6bn. The company expects to close the transaction in the next four months.     
  
Kindly click on the following link to view the Report.
 

Tax Talk - June 19 :: Business Line

After my husband’s retirement, he had gifted me some money (from his terminal benefits) and a deed of gift has been prepared accordingly. I am doing some business with that money. Is the income generated out of this money considered as my income or my husband's income for calculation of tax? Is there any limit for offering gift in a financial year?
— Ruma Dasgupta
According to the Income-tax laws, any sum of money received from a relative (which includes spouse) as gift is exempt from tax. Hence, the sum gifted to you by your husband shall be tax exempt in your hands. There is no limit on the amount which can be given as gift to the spouse.
Clubbing provisions would apply in respect of income accruing or arising to you, from any sum gifted to you by your spouse. Hence, the business income arising from the amount invested by you from the gifted sum will be clubbed in your spouse’s hands. Please note that according to the judicial precedents, the second generation of income, i.e. income from the invested income shall be taxable in your hands and not your husband’s.
My wife is diabetic and I am hypertensive and both of us are senior citizens. We periodically undergo check-ups as out-patients to consult the concerned doctors. Please advise whether expenses for these check-ups can be claimed under deduction of 5,000 u/s 80D of I-T Act for preventive health check-ups.
— K. Nageswara Rao
According to section 80D of the Income-tax Act, 1961, deduction up to Rs 5,000 is allowed in a financial year, on expenses made for preventive health check-up for self, spouse, dependent children and parents of the individual. The law has not clearly defined the term preventive health check-up. However, the same can be understood to mean any check-up related to medical cost, which is essentially to prevent or keep a tab on occurring of a disease or adverse medical situation. Since, in your case your check-up costs pertain to keeping a tab on your blood sugar-level / blood pressure levels, in order to prevent your medical condition getting adverse, the same may get covered under the ambit of preventive health check-ups.
It is pertinent to note that the deduction of Rs 5,000 is allowable within the overall limit of deduction applicable under section 80D for health insurance premium i.e. if you are already claiming deduction of Rs 20,000 for health insurance premiums paid by you for you and your wife (senior citizens), then you would not be able to claim an additional deduction of Rs 5,000 for preventive health check-ups.

NSE bulk deals 18-Jun-2013

DateSymbolSecurity NameClient NameBuy / SellQuantity TradedTrade Price /
Wght. Avg.
Price
Remarks
18-Jun-2013AHMEDFORGEAhmednagar Forgings LtdCRESTA FUND LTDBUY7,31,586105.00-
18-Jun-2013AHMEDFORGEAhmednagar Forgings LtdWARHOL LIMITEDSELL7,33,449105.00-
18-Jun-2013AMARAmar Remedies LimitedCHORON DIAMONDS (I) P LTDSELL1,47,7687.10-
18-Jun-2013AMARAmar Remedies LimitedSANJAY RAGHUNATH AGGARWALBUY1,50,0007.10-
18-Jun-2013DHANUSDhanus Technologies LimitWADA DEALCOM PRIVATE LIMITEDSELL41,63,1070.10-
18-Jun-2013IVRCLINFRAIVRCL LimitedAMBIT SECURITIES BROKING PVT. LTD.BUY18,34,05415.98-
18-Jun-2013IVRCLINFRAIVRCL LimitedAMBIT SECURITIES BROKING PVT. LTD.SELL21,14,04915.96-
18-Jun-2013MAHINDFORGMahindra Forgings LimitedDEUTSCHE SECURITIES MAURITIUS LIMITEDBUY5,96,78468.88-
18-Jun-2013NUCENTNucent Finance LimitedAJAY KUMAR GUPTASELL1,62,00015.12-
18-Jun-2013NUCENTNucent Finance LimitedJAIN NISHASELL74,00015.15-
18-Jun-2013NUCENTNucent Finance LimitedMRIDUL SECURITIES PRIVATE LIMITEDBUY2,38,37015.13-
18-Jun-2013SADBHAVSadbhav Engineering LimitCONSOLIDATED INFRASTRUCTURE COMPANY PVT. LTDSELL8,50,000100.00-
18-Jun-2013SADBHAVSadbhav Engineering LimitMOGRA INVESTMENTS PVT. LTD.SELL15,00,000100.00-
18-Jun-2013SADBHAVSadbhav Engineering LimitVISHNUBHAI MAFATBHAI PATELBUY23,50,000100.00-
18-Jun-2013ZANDUREALTZandu Realty LimitedAJAY ASSET MANAGEMENT PRIVATE LIMITEDBUY5,0481034.92-
18-Jun-2013ZANDUREALTZandu Realty LimitedAJAY ASSET MANAGEMENT PRIVATE LIMITEDSELL4,4201032.75-
18-Jun-2013ZANDUREALTZandu Realty LimitedASHWIN STOCKS AND INVESTMENT PRIVATE LIMITEDBUY5,7601038.33-
18-Jun-2013ZANDUREALTZandu Realty LimitedASHWIN STOCKS AND INVESTMENT PRIVATE LIMITEDSELL5,2601036.92-

BSE Bulk deals 18/06/2013

Deal DateScrip CodeScrip NameClient NameDeal Type *QuantityPrice **
18/06/2013531866Aagam CapS R JUTE TRADERS PRIVATE LIMITEDS29,49381.6
18/06/2013513335Ahmednagar ForgWARHOL LIMITEDS733,449105
18/06/2013513335Ahmednagar ForgCRESTA FUND LTDB732,424105
18/06/2013530245Aryaman FinPANKAJ PIYUSH TRADE AND INVESTMENT LTDS115,00013.4
18/06/2013530245Aryaman FinGANGA DEVI BANSALB115,00013.4
18/06/2013531648Croitre IndsKARAN SATPALSINGH WALIAS95,0007.2
18/06/2013531648Croitre IndsBUDDHAN SINGHB65,0007.2
18/06/2013531648Croitre IndsTOPWELL PROPERTIES PRIVATE LIMITEDB100,0007.2
18/06/2013524754Gujarat MediTRIMURTHI FINVEST LIMITEDS21,80014.4
18/06/2013511682IFL PromotersRAJEEV KUMARS123,00015.1
18/06/2013511682IFL PromotersVALUE PLUS SHARES N SECURITIES PRIVATE LIMITEDB100,00015.1
18/06/2013511682IFL PromotersRAGHBIR SINGH INDER SINGH MATTAB50,00015.1
18/06/2013506041Mahesh AgriBINA ATUL CHAUHANS3,87721.2
18/06/2013506041Mahesh AgriINVESTOR INCB4,20021.19
18/06/2013530497Marvel CapitalJAGDISH SUDHAKAR KADAMS68,0007
18/06/2013530497Marvel CapitalSURESH LAXMAN MANDAVKARB68,0007
18/06/2013531680Mayur LeatherAKHILESH PODDARB43,20017
18/06/2013531680Mayur LeatherSANJIV KUMAR AGARWALS136,20017
18/06/2013531680Mayur LeatherMAYUR GLOBAL PRIVATE LIMITEDB65,00017
18/06/2013531680Mayur LeatherAMITA PODDARB28,00017
18/06/2013503685Mediaone GlobalYUVARAJA YUVARAJAS94,04119.94
18/06/2013513613PRESHA METNEERAJ PRAKASHS131,90050.15
18/06/2013531893Sawaca BsnsSHREE BHUVNAKARAM TRADINVEST PRIVATE LTDS173,00021
18/06/2013514264Seasons Tex-$NEERAJ GUPTA HUFB45,00010
18/06/2013514264Seasons Tex-$SUDHIR KUMARB65,72110
18/06/2013514264Seasons Tex-$CAMEL FOODS PRIVATE LIMITEDB40,00010
18/06/2013514264Seasons Tex-$VIZWISE COMMERCE PRIVATE LIMITEDS250,00010
18/06/2013514264Seasons Tex-$INVESTOR INCB110,34610
18/06/2013519031Shah FoodsDIPAK VINODCHANDRA SHAHB3,00022.8
18/06/2013519031Shah FoodsVORA CONSTRUCTION LTDS3,05022.8
18/06/2013531909Swagruha InfraAMARESH RAO GAIKWADS41,93245.05
18/06/2013526139Transgene BioGEETANJALI INVESTMENTSB3,445,3501.95
18/06/2013512279Visisth MercRAHUL DILIP SHAHS27,00059.9

* B - Buy, S - Sell 
** = Weighted Average Trade Price / Trade Price