14 January 2014

TVS Motors Competitive pressures continue; Sell :: Anand Rathi

TVS Motors
Competitive pressures continue; Sell
Key takeaways
Weak demand continues. During 3QFY14, TVS Motors’ sales of mopeds
were down 10.1% yoy. Motorcycles and scooters fared better, registering
1.7% and 9.4% yoy sales growth, respectively, on a lower base. The threewheeler segment displayed a strong growth trajectory, up 49.7% yoy. Threewheelers have been up consistently, while two wheelers continue to struggle.
3QFY14 results to be decent. On a lower base the previous year, 3QFY14
results are expected to be decent, with 10.2% yoy revenue growth (0.2%
volume growth yoy and 10% yoy realisation improvement), to `19.8bn. The
EBITDA margin is expected to be 5.9% (flat yoy and qoq). We expect 8.5%
yoy EBITDA growth. As we expect lower interest expense yoy, we anticipate
profit to grow 15.3% yoy, to `605m. Our profit margin expectation is 3%
(10bps higher yoy, 10bps lower qoq).
Per-unit parameters lower qoq. We expect EBITDA per vehicle to be 8.3%
higher yoy (lower 3.3% qoq), while the contribution per vehicle is expected to
be up 9.2% yoy (2.3% qoq). Profit per vehicle is expected to be 15.1% higher
yoy (lower 4.2% qoq).
Our take. Restrained domestic and overseas sales resulted in TVS Motors
reporting lower 1QFY14 results yoy. In 2Q, the performance was much
better, driven by higher realizations. While intense competition, subdued
domestic demand and lower overseas sales curtailed potential for yoy growth
in 1HFY14, demand recovery is likely in FY15. The 1QFY14 volume decline
was 4.7% (after a 7.5% yoy decline in FY13), while 2Q and 3Q growth at
4.3% yoy and 0.2% yoy respectively was also subdued. In view of the recent
run-up in the stock price, we downgrade to a Sell. Risks. Above-expected
demand and operating performance, possibility of a technology tie-up or
partnership with a foreign partner, which would lead to faster product
development and new product launches.

Eicher Motors Royal Enfield does well, CVs dip again; Sell :: Anand Rathi

Eicher Motors
Royal Enfield does well, CVs dip again; Sell
Key takeaways
Royal Enfield’s performance steadfast. The operating performance at
Royal Enfield (RE) is expected to be strong, helped by robust sales and
operating leverage. Following ~70% yoy volume growth, we expect income
to grow ~76% yoy, to `5.2bn. EBITDA margin is expected to be 18%, up
750bps yoy. As a result, we expect Eicher Motors’ standalone profits to be
`705m, up 2x yoy.
Lower CV sales to hit VE Commercial Vehicles’ performance. For the
subsidiaries, we expect ~14% decline in revenues and 39% yoy decline in
EBITDA. We expect EBITDA margin to be 4.4% (lower 120bps qoq, and
180bps yoy). Due to higher depreciation, profit is expected to decline 70%
yoy to `114m.
Consolidated profits to be led by RE. Consolidated revenues would be
impacted due to the current slump in M&H CV sales, but strong standalone
performance is likely to undo a lot of the damage. We expect revenues to
grow 2.1% yoy in the consolidated results. On weaker CV sales, we expect
EBITDA margin to come at 8.6% (down 70bps qoq). We expect the adjusted
net profit to be `819m, up 12.6% yoy.
Our take. Royal Enfield continues to be robust due to greater capacity and
sustained demand. The M&H CV slide, however, is expected to result in a
lower growth rate for VECV. The recent run-up in the stock price has
rendered valuations rich. While we are optimistic from a long-term
perspective, we downgrade the stock to a Sell to reflect the premium
valuations. Our target price is `4,220. At the ruling price, the stock trades at a
PE of 29.6x CY14e. Risks. Upside: Sequential improvement in operating
performance, recovery in the CV cycle in CY15, and quicker revenue
accretion from the engine plant.

Ashok Leyland Weak demand persists; Sell :: Anand Rathi

Ashok Leyland
Weak demand persists; Sell
Key takeaways
Sales down yoy and qoq. Ashok Leyland’s 3QFY14 sales were poor, down
18.4% yoy, capping a weak 9MFY14. The decline is all encompassing, as
LCVs dipped 4.1% yoy and M&H CVs were down 26.4% yoy. A near-term
recovery is unlikely, although 3Q may mark the bottom in absolute volumes.
A full-fledged cyclical recovery is likely only in 2HFY15.
Revenues to dip. For a fifth consecutive quarter, AL’s revenues are expected
to decline in 3QFY14. Moreover, we do not expect any respite for the
company in 4Q either. On the 18.4% yoy volume decline, and an expected
1% yoy dip in realisations, we expect AL’s 3Q revenues to be `19.2bn, lower
19.3% yoy and 24.6% qoq.
Losses to sustain for third successive quarter. On low operating leverage,
we expect 3Q EBITDA margin to be 1%, while there would be an adjusted
loss of `1.1bn. Sale of 1.8m IndusInd Bank shares would provide a boost to
the reported profit in 3Q.
Our take. With the company at the wrong end of the CV cycle, the poor
performance is likely to continue in 1HCY14. Although its LCV, Dost, was
faring better, its recent performance has been a bit restrained. The bread-andbutter M&H CV segment continues to sputter. We have a Sell on the stock
because of the ongoing downswing in the M&H CV cycle, with a short-term
recovery appearing unlikely. While the low 2HFY13 base would arrest the fall,
recouped volumes based on swelling demand are likely only in 2HFY15. On a
positive note, the company is taking steps to de-leverage the balance sheet,
which is a long-term positive; in the near-term, the cyclical downturn would
be an overbearing factor. The stock quotes at 12x FY15e EV/EBITDA. Our
target of `13 is based upon a target EV/E of 10.5x FY15e. Risks. Strong
economic growth, rise in freight rates, more-than-expected LCV profitability

Hero MotoCorp. Decent quarter, but valuations fair; Sell :: Anand Rathi

Hero MotoCorp.
Decent quarter, but valuations fair; Sell
Key takeaways
Demand scenario was decent. Hero MotoCorp.’s 3QFY14 numbers were
decent, and on a lower base the company reported yoy growth for a second
successive quarter (after a yoy decline for the preceding four quarters). Twowheeler sales were up 6.9% yoy and 18.7% qoq. Consequent on the weak
demand environment in the auto industry and keener competition, we expect
this challenging industry scenario to continue into 4QFY14.
3Q likely to be good. We expect 11.1% yoy income growth, to `68.7bn, and
29.7% yoy EBITDA growth, to `10.1bn. Our expected EBITDA margin is
14.7% (21bps higher yoy, and 20bps higher qoq). We expect the 2Q tax rate
to have come at 26%. We expect 22.7% yoy profit growth, to `6bn.
Laying groundwork for future. The company has started work on building
a new R&D centre at Kukas, Rajasthan. This would be a `4.5bn project,
slated to commence operations in 1QCY15. The existing R&D centres at
Gurgaon and Dharuhera would also be shifted to Kukas once it is complete.
Kukas would be the hub for developing models for domestic and export
markets. Besides, the company is setting up a manufacturing plant and a
global parts centre at Neemrana, both of which would start operations in
2014. Overall investment in the three projects in Rajasthan would be to the
tune of `13bn.
Our take. In FY13 and 1QFY14, the company reported yoy decline in
profitability. A lower base and yoy margin improvement from 2QFY14 could
arrest this movement for now. However, the prevailing weak demand
environment is likely to continue. The new R&D centre could, though, be a
long-term positive. We maintain a Sell with a target of `1,897 (based on the
value of core earnings at 13.5x Mar’15 to `1,693 and the value of cash and
investments at `204. Risks. Above expected volumes and recovery in rural
growth, lower royalty expense

Maruti Suzuki Margins to improve, but premium valuations; Sell :: Anand Rathi

Maruti Suzuki
Margins to improve, but premium valuations; Sell
Key takeaways
Vehicle sales lower. Maruti Suzuki’s 3QFY14 sales volume was weak, as it
declined 4.4% yoy to 288,151 units. We expect it to grow 2.4% in FY14
against 3.3% in FY13, yoy. In early Jun’13, the company had to control
production at its diesel plant, which till last year was running at full utilisation.
We estimate residual growth of 7.5% for the rest of the year.
Decent results expected. We expect 1.8% yoy revenue decline (4.4%
volume decline and 2.5% growth in realisations) to `110.03bn. Our EBITDA
margin expectation is 12% (up 400bps yoy, 60bps lower qoq). Our EBITDA
growth estimate is 47.5% and our profit growth estimate is 38.6% yoy, to
`6.9bn. Profit growth in 3QFY14 is also inflated due to Suzuki Powertrain
merger in 4QFY13, which has not been accounted for in the base for 3Q.
New lines onstream. The new diesel engine plant at Gurgaon and the third
assembly facility at Manesar went on stream during Jul-Sep’13. With this,
capacity for vehicle assembly is now 1.5 million vehicles per annum.
Our take. In FY14, a favourable exchange rate and low base for its vehicle
sales would benefit the company. Most carmakers are looking to increase
prices 1-2% in Jan’14 to compensate for increasing input costs, higher
overheads and the impact of a depreciated rupee. Nevertheless, headwinds
from curtailed demand for passenger cars and from launches by competitors
would be the rough road in the next two quarters. We believe the price
factors in the short-term positives, while possible downgrades in sales
estimates have not yet been fully captured. Even the pick-up in exports is not
likely in the near term. Hence, we retain a Sell, with a target of `1,476. Our
target price is based upon 13.5x FY15e EPS. At CMP, the stock trades at
16.2x FY15e EPS. Risks. Above-expected volume growth, currency-related
benefits, lower commodity costs, possibility of stake increase by Suzuki.

Bajaj Auto Valuations attractive; Buy :: Anand Rathi

Bajaj Auto
Valuations attractive; Buy
Key takeaways
Weak demand. In 3QFY14, demand for Bajaj Auto’s motorcycles remained
weak owing to intense competition. During the quarter, its total sales were
down 11.9% yoy; motorcycles declined 10% and three wheelers 25.1%, yoy.
We expect stability in volumes hereon, with the worst part of volume decline
likely to be over. We expect better exports in CY14, along with arresting of
the slide in market share.
Stable EBITDA margin. We expect a 2.1% dip in income, to `53bn, but a
17.7% yoy improvement in EBITDA to `11.9bn. Our EBITDA margin
expectation is 22.5% (380bps higher yoy, stable qoq). We expect the
EBITDA per vehicle to grow 33.6% yoy, but decline 1.6% qoq. The
contribution per vehicle is expected to be higher 32.1% yoy. Our tax-rate
expectation is 31%, which would be 80bps higher yoy. We also expect nonoperating income to be lower 10% yoy. This would lead to a relatively lower
11.8% yoy growth in the adjusted profit, to `9.2bn, with a 17.3% net profit
margin (up 220bps yoy). The adjusted profit per vehicle is expected to be
26.8% higher yoy.
Our take. For 4QFY14, the demand outlook remains unexciting (residual
growth estimate 3.5%). Dec ‘13 performance indicates that motorcycle market
share loss persisted (423bps lower in Apr-Nov ’13). However, we believe that
the worse performance is now factored in the estimates and stock price. The
key positives are sustained better export realisations yoy and a higher share of
exports in the product mix. Recovery in three-wheeler sales ahead would be
an added positive. We have a Buy recommendation on the stock. At our price
target, the stock would trade at PE of 15.8x FY15e. The stock is also trading
lower to its past three-year average EV/EBITDA multiple. Risks. Later-than
expected demand recovery, problems in export destinations, unfavourable
forex movements, and higher commodity prices.

Mahindra & Mahindra Tractors to drive growth; Buy :: Anand Rathi

Mahindra & Mahindra
Tractors to drive growth; Buy
Key takeaways
Tractors the growth driver. After a robust performance in FY13, Mahindra
& Mahindra’s (M&M) automotive division volumes have been constrained in
9MFY14 (in 3QFY14 9.5% lower yoy). This was more than made up for by
robust tractor volumes; in 3QFY14 (as in 1HFY14), these were prolific
(growing 21% yoy). Among the automotive segments, pick-up sales were up
0.7% yoy, UVs were lower ~16% yoy, and three-wheelers were down 4.1%
yoy). M&M’s overall volumes in 2QFY14 dipped marginally, by 0.1% yoy.
3Q likely to be good. For 3Q, on yoy flat volumes, we expect 1% yoy
income dip to `106.7bn and 14.5% EBITDA growth to `13.9bn. Our
EBITDA margin expectation is 13.5% (up 230bps yoy, 70bps qoq). The
higher share of tractors in the product mix qoq could result in EBITDA
margin improving qoq. We expect the quarter’s profit, at `9.4bn, to be up
12.4% yoy.
FES to drive EBIT margins. We expect 9% EBIT margin for the
automotive division (50bps higher yoy, 40bps lower qoq) and 16.8% for the
farm-equipment segment (130bps higher yoy, 20bps lower qoq). EBIT per
tractor is expected to be 9.5% higher yoy, while EBIT per vehicle in the
automotive division is expected to be 2.8% higher yoy.
Our take. Tractors have recorded a strong recovery in 1H, with a good
trajectory in 3Q as well. For the segment, 1HCY14 should also be decent.
The higher tractor-segment growth would also result in a better operating
performance for M&M. The consolidated performance should also be good,
but Systech, and the two-wheeler business would be drags on profitability. We
have a Buy rating, with a sum-of-parts-based target of `1,037. The stock
trades at ~10.6x FY15 consolidated earnings. Risks. Downside: Delay in
rural demand recovery, keener competition, diesel price hike, negatives on the
merger of the truck business.

Tata Motors Domestic weakness, JLR strong; Hold :: Anand Rathi

Tata Motors
Domestic weakness, JLR strong; Hold
Key takeaways
3Q results likely to be good. For 3QFY14, we expect Tata Motors’
consolidated profits to register 90.3% yoy growth, chiefly following the good
performance at JLR. The Indian operations are, however, expected to
continue to be a drag due to the slump in CV sales and lower PV sales. We
expect consolidated sales to grow 31.8% yoy to `607.7bn, with a 15.5%
EBITDA margin and 90.3% yoy profit growth, to `34.3bn.
Standalone numbers to disappoint. Following a sharp volume drop in
3QFY14, on the back of incrementally worse demand environment vis-a-vis
1H, we expect losses to sustain. We expect EBITDA margin at 0.5% and
losses at `6.5bn.
JLR to be the key growth driver. JLR’s 3Q volumes are estimated to have
grown 19.6%. Unlike FY13 however, Jaguar is the key growth driver, not
Land Rover. Backed by good volume growth, we expect JLR to report 32.7%
yoy revenue growth, to £5bn. Our EBITDA margin expectation is 16.6% (up
260bps yoy), with 71.2% growth in profit to £443m (net profit margin of
8.8%, which is up 200bps yoy).
Our take. The cyclical M&H CV slowdown would continue to heap
pressure on Indian operations. Other divisions too are shifting to a lower
trajectory. The demand context for M&H CVs in 1HFY14 has been
challenging. Better performance in the standalone operations is likely only in
FY15. For JLR, good volume growth and continued demand are the clearest
positives at present, with the margin expected to improve ~180bps in FY14.
We currently have a Hold recommendation. Our target is `402, based on
Mar’15 estimates (`362 for JLR, `40 as the value of the India operations and
other investments and subsidiaries). Risks. Downside: Dip in Chinese
demand, negative surprises at JLR; Upside: Better M&H CV and car demand.

LIC Housing Finance: BUY :: Business Line


India Autos Margin expansion to drive profit growth :: Anand Rathi

India Autos
Margin expansion to drive profit growth
Key takeaways
Revenue growth decent. Auto volumes in most segments were under
pressure in 3QFY14, with the weak continuing to struggle. In four wheelers,
CVs registered a decline of >25%, while PVs were marginally negative yoy.
Two wheelers were the better performing segment due to a lower base as well
as sustained scooter demand. A robust performance at JLR would result in
the sector revenues growing 17.2% yoy and 7.3% qoq.
EBITDA margin improvement. A period of heavy discounting and slump
in demand has led the top two CV companies to record low single-digit
EBITDA margins in ytd FY14. For Tata Motors, however, the trigger is
sustained sales growth and robust EBITDA margins at JLR, which would
render the losses at India operations irrelevant. Hero MotoCorp. and Bajaj
Auto are faring much better, with the latter’s performance also being boosted
by higher export realizations. Among the PV companies, M&M has been able
to compensate for the slowdown in UV sales with robust performance in the
lower realization but higher profitability in tractors. MSIL has had margin
recovery on a favourable rate in imports and absence of labour strife this year.
As a result, despite CV companies dragging down sector margins, yoy
improvement in the other companies would lead to the auto sector’s
EBITDA margins improving 246bps yoy. Our profit growth expectation is
46.5% in 3Q (ex Tata Motors, it is 17.5%).
Our take. The sector valuations normally suffer during periods of weak
demand. However, the current valuations are at a significant premium to
historical averages and appear to ignore the weak underlying demand (except
in Tata Motors, where domestic demand is not a factor). Other stocks like
Hero MotoCorp., Maruti Suzuki, and Ashok Leyland are trading at significant
premium to fair valuations. Top picks. M&M, on a favourable tractor cycle,
subsidiaries adding substantial value to the SOTP and bottoming out of UV
demand. On a long-term perspective, Tata Motors and Wabco India look
good. Among others, we like Bajaj Auto and Motherson Sumi Systems

Premium valuations to sustain; Initiate coverage on DB Corp with a BUY:: Centrum

Premium valuations to sustain
We initiate coverage on DB Corp with a BUY rating and believe the company’s
leadership footprint in high growth markets across North, Central and Western
India offers robust growth in regional advertising market, economies of scale,
larger share of national advertising and lower newsprint purchase cost. Focus on
urban and monetizable readers has helped the company achieve industry leading
margins. It was able to expand on the back of strong cash flows, management
focus and well defined plan on gaining readership and becoming number one
from the first day of launch. We believe premium valuations will sustain given the
company’s industry leading revenue growth, strong profitability, healthy balance
sheet and strong return ratios against competitors.
 Leadership inkey regional and high growth markets:We believe DB Corp is one
of the few players to reap success and build scale in every market it is present.
Large footprint and geographical reach offer robust growth in regional advertising
market, economies of scale, larger share of national advertising and lower
newsprint purchase cost. Even distribution of readership across states helps the
company mitigate the risk of slowdown in any particular market. Rising advertiser
interest in tier II and tier III cities, we believe will help DB Corp as it is strategically
located in high growth markets of MP, Gujarat, Chandigarh, Maharashtra, Haryana
and Chhattisgarh that have above national average GDP growth.
 Strong focus on urban & monetizable readers:DB Corp has strategically planned
the expansion of its readership base to urban and semi-urban consumers where
readers can be monetised and attract advertisers’ interest. It has always stayed
away from chasing overall readership which cannot be monetised in the medium
term and hence is the leader in urban readership on pan India basis, even ahead of
English dailies. Hence, DB Corp is overall No2 player in Rajasthan but is a leader in
key urban markets by a vast majority. Similarly, Divya Bhaskar is overall No2 player
in Gujarat but the leader in the biggest urban market of Ahmedabad.
 Strong organic expansion track record: We believe the company has been able
to successfully expand on the back of its strong cash flows, management focus and
well defined plan on gaining readership and becoming number one from the day
of launch. It has repeatedly achieved No1 or No2 positions in most markets post
launch on the back of its unique strategy of reaching out to readers, conducting
surveys pre-launch, strong editorial backing along with marketing campaigns. It
targets high growth markets with low print penetration coupled with complacent
incumbents. DB Corp has been the most aggressive player in terms of expansion in
the last decade and in the past four years the company has started operations in
Jharkhand and Maharashtra and is poised to launch its Bihar operations soon.
 Valuations & Risks: DB Corp is currently trading at 19.4x FY14E and 16.8x FY15E
EPS of Rs15.2 and Rs17.6 respectively. We believe these premium valuations will
sustain, given the company’s industry leading revenue growth, strong profitability,
healthy balance sheet and strong return ratios against competitors. On the back of
diversified readership across multiple states and languages, dominant position in
fast growing markets, proven execution & expansion strategy and strong cash
flows, we initiate coverage on the stock with a BUY rating and target price of Rs380
(19x Dec 2015 EPS). Key risk to our call would be increase in newsprint prices,
aggressive competition and execution risk in new markets

J. P Morgan - Indian Equities The Risk Spectrum

Indian Equities
The Risk Spectrum

· Cautious start to the New Year; exporters outperformed last week
· Liquidity situation improves; FX reserves above May levels.
· Growth indicators are subdued
· CMIE quarterly new projects announced “value” increases to a six quarter high; number of projects remain at a decade low
· Off the three key drivers of current rally – Political hope, Earnings surprise and FII buying support – political hope has turned more uncertain
· FII flows in 2004 and 2009 did not show any notable slowdown before the national election; the extent of FII over-ownership and relative growth outlook vs. EM peers is a risk
Cautious start to the New Year. Three-year old problem of low macro visibility in India is continuing. The main driver of current equity rally – political hope – is facing renewed uncertainty. The expected result of the national election has become more uncertain with the recent political development around a newly formed party. Also, uncertainties related to the policies ahead of the national election have made investors risk averse. The other key drivers - growth and inflation indicators - suggest continued challenges. The first week of the year started with a marginal decline in Indian equities; Sensex lost 2%. High beta sectors corrected. Exporters - IT Services and Health Care – gained over the week.
Growth indicators disappoint. Government attempts to revive corporate confidence and growth momentum continues. Last week, FIPB approved investment proposals by Tesco and Voadfone, Government announced a hike in petro product prices and CCEA announced an amendment in the mega power policies. These measures are incrementally positive but the real growth indicators do not reflect any signs of a notable improvement. Unsurprisingly, FY14 consensus earnings expectations for MSCI India were cut by a marginal 0.2% last month. Key indicators are:
1. December vehicle sales were weak. Domestic car sales declined 2% oya. Two-wheelers sales increased 8% oya, led by Honda and Yamaha.
2. CMIE quarterly new projects announcement increased to Rs.1.5 trn, a six-quarter high. The number of projects announced remains at a decade low, indicating no change in cautious corporate confidence.
3. December PMI manufacturing declined marginally from 51.3 to 50.7. Details indicate that the new orders to inventory ratio declined month-on-month but remained above one, mainly supported by the export orders.
4. Deposit growth increased to 17% oya, largely led by RBI’s special FX windows. Credit growth is relatively lower at 15% oya. Leading banks have lowered mortgage rates last month. Indians banks have been risk averse and are exploring growth opportunities in retail assets. In the last one year, banks’ housing credit growth rate has accelerated from 15% to 18%. Note that housing asset accounts for 10% of Indian banks credit outstanding.
Liquidity situation improves; stable currency. The preparatory phase of QE tapering is over. The actual start has been well-handled by the Central Bank. INR has been one of the better performing EM currencies since the announcement on tapering (chart below). Going ahead, the continuous announcement of QE tapering should continually be complemented with a lower twin deficits in India and lower inflation to ward off the currency risk. India’s FX reserves increased to US$268bn, which is higher-than-the May level. Liquidity situation within the banking system has improved significantly. The amount under the daily LAF window has reduced toa comfortable Rs.200 bn. Long bond yields have been stable at ~ 8.80% level. Next week’s inflation prints would be important. Vegetable prices have corrected sharply and a 30% correction would reduce CPI by 1.6%.
The risk spectrum. Indian equities’ Sept – December rally has been aided by: 1. Effective policies on INR and RBI’s supportive policy bias. 2. Better-than-expected quarterly earnings 3. Political hope. 4. Continued FII buying. A quick review of how these drivers are appearing and related risks:
1. INR risk appears manageable for now, in our view. The side effect of the QE tapering - rising yields in DM - is a risk and the RBI will have to closely monitor that. Central Bank’s positive surprise in the December policy meeting was based on the expectation that 1. Vegetable price inflation is likely to stabilize lower, and 2. Disinflationary implications of a stable INR and weak growth. The first has materialized but there is hardly any room for complacency given the level of core CPI inflation and elevated inflation expectations.
2. After a better-than-expected last quarter, expectations are higher now from global sectors. Domestic business environment has been challenging with adouble digit CPI inflation and weak growth. A stable currency and rates markets, however, provided some relief over the last quarter.
3. Political environment will continue to exert significant influence on Indian equities. The recent political developments of a new entrant with a different ideology can be argued to be constructive from a specific (anti-corruption) perspective. But the implications on the investment cycle and concerns on fiscal deficit are unlikely to be favorable for Indian equities in the short term.
4. Over dependence on FIIs has been a perennial risk for Indian equities. Retail investors are still disinterested in equities here. Two risks need to be watched closely, 1. Flows shift towards DM exporters 2. FII behavior around the national election. The first did happen over the last quarter with Korea and Taiwan attracting increased flows. The extent of current FII over-ownership of Indian equities (180 bps as on end-November as per EPFR) and relatively challenging outlook on growth differential vs. EM peers are not as favorable currently. The trend of FII flows before the national election in 2004 and 2009 does not indicate any marked slowdown in flows before the national election.
Figure 1: Exchange rate vs. US$ - Since the start of QE tapering
Source: Bloomberg
Figure 2: MSCI India: Sectoral 14-day RSI


Regards

Infosys -Core svcs growth sloweven considering offshore shift:: Centrum,

Core svcs growth sloweven considering offshore shift
We expect near-term margins to improve, but expect downward pressure in
medium-term from aggressive pricing, renewed S&M investments and wage hikes.
Though margin improved much ahead of expectations, we see some worrying
signs with 62.3% of incremental rev. coming from Lodestone and vol growth of
just 0.7% for IT Svcs incl. Consulting (excl. BPO and Finacle). We continue to
believe that Infosys will lag peers in terms of revenue growth over FY15E, we think
that the sharp de-rating we had worried about is not imminent given the margin
improvement this qtr and upgrade to HOLD with a 1-Year TP of Rs3,490.
 Offshore shift, headcount cut, S&M cost cuts, help push margins up: Margins
were significantly ahead of our expectations with price realization improvement a
pleasant surprise, we were surprised at the 1.1% decline in HC and S&M employee
costs that have (at USD84.3Mn) gone back to absolute levels seen in 1QFY14
(USD83.8Mn). Near-term margins can expand further with utilization and fresher
intake; large deal pursuits will involve increasing S&M spending as these typically
involve bid spends of 1-1.5% of TCV (total contract value).
 Lodestone-driven growth disappoints despite USD24Mn offshore shift drag:
We note that even as Lodestone added USD21Mn even over 3QFY13, Consulting &
Pkg implementation added only USD13Mn, suggesting a decline in existing run
rate (though perhaps partly explained by offshore shift). Also disappointing was the
USD11Mn decline in US run rate and only USD6Mn addition in Europe excl.
Lodestone. It was disappointing to see vol growth at just 0.7% for IT Svcs &
Consulting excl. BPO and Finacle (in 3QFY13 it had organic vol. growth of 1.5%).
 Sales and employee pyramid broadening strategy tough to execute: Given the
new focus on large deals, we had expected there will be some senior hires in the
sales side as well as the technical workforce. But comments from the mgmt.
suggest sales investments at the bottom of the sales pyramid and for technical
workforce, the fresher heavy-hiring pattern continues. We think thatskills needed
to bid, structure and manage large IT Outsourcing deals are more of an art that take
years of exp. and more lateral hiring will be needed than currently.
 No de-rating worries for now:Given the sharp margin and pricing improvements,
we increase our margin estimates for FY14E and FY15E even as we reduce rev.
estimates marginally. We remain concerned about its ability to win large ITO deals
and in new areas of discretionary spending and expect the P/E discount to TCS will
widen given the growth differential. But with pricing and margin improvement, we
think a sharp de-rating is not imminent and increase our target P/E to 14x (earlier
12x) and arrive at a new 1-Year TP of Rs3,480. Key upside risk is large wins, while
downside risk is pressure on margins through billing rate declines or wage hikes.

BSE / NSE - MULTIPLE PAY-IN / PAY-OUT ON - 16TH JANUARY, 2014 (THURSDAY)


Dear Customer,
On account of Bank Holiday on Tuesday, January 14, 2014 the multiple Settlements have been scheduled on Thursday, January 16, 2014 and Pay-in /pay-out timing for multiple settlement schedules are as under:

Please intimate all the concern for the following schedule changes:
BSE / NSE - MULTIPLE PAY-IN / PAY-OUT ON - 16TH JANUARY, 2014  (THURSDAY)
TRADING DATE
NSE
BSE
NORMAL SETTLEMENT
AUCTION SETTLEMENT
 SETTLEMENT (N) TIMING                           Pay-in / Pay-out
Settlement Number
Settlement Number
Pay-in / Pay-out Date
Pay-in / Pay-out Date
10/01/2014
2014008
1314198
15/01/2014
16/01/2014
Payin     10:50 am
Payout  12:30 pm.
13/01/2014
2014009
1314199
16/01/2014
17/01/2014
Payin     09:50 am
Payout  12:30 pm.
14/01/2014
2014010
1314200
16/01/2014
20/01/2014
Payin     01:50 pm
Payout  03:30 pm.
15/01/2014
2014011
1314201
17/01/2014
20/01/2014
Payin     10:50 am
Payout  12:30 pm.
AUCTION ROLLING PAYIN TIMING - BSE 9.30 AM and NSE 10.50 AM.
Shares purchased on Monday, 13/01/2014 cannot be sold on Tuesday 14/01/2014 (NSE 2014 009 to 2014 010 and BSE 1314 199 to 1314 200) both day trading Pay-in /Pay-out will be settled separately. As per the NSDL deadlines mentioned above. No square-up between these days.

The Schedules are applicable for T Groups also. (NSE Trade-for-Trade and BSE Trade-to-Trade)

There wouldn’t be any shortages adjustment possible between above settlements in NSE and BSE. All the Shortages will have to be marked as Confirm Short.

All are requested to kindly note that the change in Pay-in & pay-out activities for above Settlement and accordingly convey Dealers and client’s Trades.

The Shortages of NSE Normal settlement Number 2014 010 and 2014 011 shall be assigned to Auction Normal 2014 011.

Kindly go through BSE & NSE Notices and Circulars for further details

Regards,

IRFC TF Bonds and Muthoot Finance/SREI Infrastructure Finance/Manappuram Finance Ltd - NCD public issue collection figures at 2.30 p.m. as on 13-01-2014

Dear All,




Thanks & Regards
____________________

Subscription Figures for Ongoing Issues as on Jan 13, 2014 @ 11.00 AM

Please find below Subscription Details for IRFC Tax Free Bonds and Muthoot, Manappuram, SREI NCD.

IRFC Tax Free Subscription Details as on Jan 13, 2014 @ 11.00 AM
Categories
Bucket Size (in Crs)
No. of Bonds Subscribed
Amount Subscribed (in Crs)
% Subscribed for Category
Unsubscribed Amount
Category I
866.3
                               16,03,000
160.30
18.50%
706.00
Category II
2598.9
                               49,47,272
494.73
19.04%
2104.17
Category III
1732.6
                               40,97,385
409.74
23.65%
1322.86
Category IV
3465.2
                               75,45,211
754.52
21.77%
2710.68
Total Issue Size (in Crs)
8663
                  1,81,92,868
1819.29
21.00%
6843.71

Muthoot NCD Subscription Details as on Jan 13, 2014 @ 11.00 AM
Categories
Bucket Size (in Crs)
No. of Bonds Subscribed
Amount Subscribed (in Crs.)
% Subscribed for Category
Unsubscribed Amount
Category I
25
                                               -  
0.00
0.00%
25.00
Category II
25
                                     35,525
3.55
14.21%
21.45
Category III
450
                               38,39,233
383.92
85.32%
66.08
Total Issue Size (in Crs)
500
                     38,74,758
387.48
77.50%
112.52

Manappuram NCD Subscription Details as on Jan 13, 2014 @ 11.00 AM
Categories
Bucket Size (in Crs)
No. of Bonds Subscribed
Amount Subscribed (in Crs)
% Subscribed for Category
Unsubscribed Amount
Category I
20
                                               -  
0.00
0.00%
20.00
Category II
40
                                        1,030
0.10
0.26%
39.90
Category III
40
                                  2,36,957
23.70
59.24%
16.30
Category IV
100
                               16,18,509
161.85
161.85%
0.00
Total Issue Size (in Crs)
200
                     18,56,496
185.65
92.82%
14.35

SREI NCD Subscription Details as on Jan 13, 2014 @ 11.00 AM
Categories
Bucket Size (in Crs)
No. of Bonds Subscribed
Amount Subscribed (in Crs.)
% Subscribed for Category
Unsubscribed Amount
Category I
20
                                     41,950
4.20
20.98%
15.81
Category II
20
                                        2,100
0.21
1.05%
19.79
Category III
60
                                  2,52,669
25.27
42.11%
34.73
Total Issue Size (in Crs)
100.00
296719.00
29.67
29.67%
70.33


Thanks & Regards
____________________