Search Now


Wednesday, December 13, 2006

Lumax Auto Technologies Ltd.

  • Lumax Auto Technologies Ltd. (LATL) was incorporated as Lumax Auto-Electricals Pvt. Ltd. in year 1981. Subsequently, it became a public company and changed its name to Dhanesh Auto Electricals Ltd. in year 1988. In year 2006 it again changed its name to present one.
  • LATL is a part of the DK group of companies. It manufactures automotive components like sheet metal products and lighting systems for two and three wheelers. Its product range includes headlamps, tail lamps, blinkers, fog lamps, engine lamps, chassis assembly, petrol tank and silencers.
  • The company has five manufacturing facilities. All facilities are located in Maharashtra, one each at Bhosari and Chakan and three units at Waluj.
  • Its customer base includes eminent players like Bajaj Auto Ltd., Maharashtra Scooters and its group company Lumax Industries Limited. Almost 80% of its production is catered to Bajaj Auto Ltd.
  • LATL has acquired 100% stake in its group company, Lumax DK Auto Industries Ltd. (LDK) in year 2006 and it became a 100% subsidiary of the LATL. LDK is mainly engaged in manufacturing and supplying of automotive parts for four-wheelers manufacturers.
  • Post-issue promoters shareholding will reduce to 59.28% from existing 79.99%.
Objects of the issue:
  • To invest in its subsidiary, LDK
    • To set-up automotive lighting unit at Pantnagar for Rs. 23.43 crore.
    • To set up leveling motor unit at existing Manesar unit in Haryana for Rs. 3.90 crore.
    • To enhance infrastructure at Manesar unit for Rs. 0.79 crore.
  • To Set up chassis assembly unit at Bhosari for Rs. 11.87 crore.
  • Expansion and modernization of existing manufacturing unit at Chakan for Rs.6.58 crore.
  • Modernization of development centre at Chinchwad for Rs. 1.15 crore.
  • To meet issue expenses of Rs. 2.50 crore.
  • LATL has customers like Bajaj Auto, Maharastra Scooters, Maruti Udyog, who have been associated with for quite some time.
  • Indian Auto component sector has been growing at a CAGR of 16% for past 7 years and is expected to grow at the same rate.
  • The company has negative cash flow since FY 2002.
  • LATL’s major customer is Bajaj Auto Ltd, which accounts for 80% of its production. This limits the pricing power of the company.
  • Upward trend of raw material like steel sheet, tubes and polymers can put significant pressure on operating profit margin.
  • The unorganized sector is very large and a threat to reputed brand because of their low pricing.
  • The net sale of the company has increased at a CAGR of 42.72% to Rs. 117.23 crore in FY06 from Rs. 40.32 crore in FY03. Net profit has also increased at a CAGR of 76.47% to Rs. 3.83 crore for the same period.
  • Return on net worth has reduced to 28.92% in FY06 from 40.14% in FY05. Current net worth of the company as on 30 June’06 is Rs. 14.51 crore. Return on net worth for the same period is 10.80%.
  • The book value per share as on 30th June 2006 is Rs.16.84
  • Post issue annualised EPS based on 30th June 2006 is Rs. 5.39. The shares are being offered for a fixed price of Rs. 75/-. Post issue P/E multiple comes out to be 13.91. Industry average P/E is 21.50.
  • However, the results of FY05 and FY06 are not comparable, as LATL has acquired LDK on Jan’06 and results for FY06 are given on consolidated basis.

Shree Ashtavinayak Cine Vision Ltd.

  • The company was incorporated in the year 2001 as Ashtavinayak Cine Vision Pvt. Ltd. to carry on the business of producing television serial. Subsequently in the year 2004 company’s name was changed to Ashtavinayak Cine Vision Ltd. (ACVL) with shifting focus from producing television serial to production, distribution and exhibition of films.
  • ACVL is an integrated player in the commercial motion picture segment with presence from production to distribution to exhibition. Company had produced four films and distributed 23 films till Oct 2006. Company has tied up with 31 theatres across Mumbai Territory for exhibition of films.
  • ACVL has entered into an agreement with K Sera Sera Production ltd and Studio 18 a division of Network 18 Fincap Pvt. Ltd. for films production and cost sharing for films.
  • For the financial year 2006 film production, distribution and exhibition constitutes 51.66%, 44.35% and 1.43% of topline while for the month ending 31st July it was 60.2%, 39.3% and 0.7% respectively.
  • Post issue share holding of the promoters will be at 67.1% from 100% at present.
Objects of the issue:
  • To finance the estimated expenditure for Production of three films.
  • To Purchase equipment for Film Production.
  • For general corporate purposes.
  • To meet issue expenses
  • Presence of company in the entire key segments of film value chain i.e. Production, Distribution and Exhibition allows ACVL to be free from external dependence.
  • ACVL’s PAT for the month ended 31st July 2006 stood at Rs. 6 crores and is 80.5% of PAT earned for the financial year 2006. Company is already earned substantial PAT as compare to PAT in 2006 and is expected to report whopping bottomline for FY 2007.
  • Proceeds from the IPO will be used to prepay high interest loan that will lead to reduction of interest expenses.
  • The company has an established distribution network only in Mumbai Territory. and hence ACVL is largely dependent on revenues from Mumbai territory.
  • CRISIL has assigned a “Grade 2” to the proposed initial public offer of Shree Ashtavinayak Cine Vision Ltd. Grading are on a five point scale from 1 to 5, with IPO Grade 5 indicating strong fundamentals and IPO Grade 1 indicating weak fundamentals.
  • The shelf life in the nature of commercial theatrical screening of the films has reduced from more than one year to less than 6 weeks.
  • Company face competition with corporate houses like Mukta Arts Ltd, Pritish Nandy Communications Ltd, Sahara One Entertainment Ltd among others. With a number of corporate houses diversifying into film production and distribution and liberalization of FDI norms in film industry the competition may significantly increase.

  • ACVL has shown 620% increase in topline from FY 2004 to FY 2006. Mainly because of increased revenue from production segment. However company has produced only four films till now.
  • ACVL’s net worth as on 31st July 2006 stood at Rs. 30.75 crores. While the book value was increased from Rs. 39.58 on 31st march 2006 to Rs.48.40 as on 31st July 2006.
  • Post issue EPS based on 31st March 2006 earnings comes out to be Rs. 7.45. Shares are being offered in the price band of Rs. 140 to Rs. 160. The stock is priced at 18.8x at the lower band and 21.5x at the upper band. Industry is trading at an average P/E of 50.2.

Pyramid Saimira Theatre Ltd.

  • Pyramid Saimira Theatre Ltd. (PSTL) was incorporated in June 1997 as ‘Pyramid Films International Pvt Ltd’. It was converted into a Public Ltd. company in August 2000. Subsequently its name was changed to the present in August 2004.
  • PSTL was initially engaged in the production of Tamil films and releasing them on various modes including theatre. Besides this, the company was engaged in procurement of other film contents and exporting the same. The company has also exported television software to various countries such as Singapore, Malaysia, Mauritius, France and United Kingdom.
  • PSTL has produced 10 films, however, in 2004 the company took a strategic decision to discontinue the film production line and decided to concentrate on exhibition sector, more specifically in the field of ITES to exhibition sector.
  • The company is in the process of creating a nationwide chain of theatres under its management and operational control. The project has been christened as the ‘Mega Digital Theatre Chain’, launched in November 2005.
  • Promoter’s shareholding pre issue is 69.26%. Post issue shareholding is yet to be ascertained as Promoter’s contribution to the issue has not been announced.
Object of the issue:
  • To create a theatre chain having a tie up with theatres and multiplexes on long lease and invest in infrastructure up-gradation of the theatres.
  • To convert theatres into digital exhibition systems by installing digital projectors, servers, VSAT terminals and such other audio & video equipments as needed.
  • To invest in a central network operating system control center which will enable service provisioning for and including content conversion, transmission, rights management, theatre management & networked collection / revenue management.
  • To meet expenses of issue and general corporate expenses.
  • PSTL is having presence in all categories of theatres including mall, multiplexes, cine-plexes and standalone theatres. It has been acquiring theatres on long-term leases and improving their infrastructure to bring it on par with modern standards to offer a high quality viewing experience.
  • The company is in the process of establishing an integrated network operating center, which will convert films into digital formats and transmit them using satellites to various theatres across India in a secured encryption mode. This would exhibit films without a physical print. This process will save Rs.60,000 – Rs.70,000 per movie per theatre and approximately save Rs.20 lakhs per theatre per annum.
  • PSTL would create a vertically integrated theatre chain by moving a step up the value chain and taking over the responsibility of distribution of films. This will create a content supply chain through agglomeration of content and the elimination of intermediaries, thus saving costs.
  • Bennet, Coleman & Co. (BCCL) has subscribed to 5 lakh equity shares of the company at a price of Rs.80 per share for 2.52% of pre issue share capital. The company has also entered into an advertising agreement with BCCL wherein PSTL has agreed to place advertisements of its products, services and brands amounting to Rs.400 lakh in print publications and non-print media of BCCL.
  • Total income increased 70.96% from Rs.291.89 lakhs in FY05 to Rs.499 lakhs in FY06. The company has achieved over FY06 revenue in the first 6 months of FY07 i.e. Rs.5,253 lakhs as on September 30, 2006.
  • Similarly, Net Profits of the company increased exponentially to Rs.171.54 lakhs in FY06 from Rs.1.05 lakhs a year ago. 185.43% of profits of FY06 have been attained in 6 months ending September 30, 2006 at Rs.489.63 lakhs.
  • The technology being used by PSTL for transmitting and exhibiting films is unique and not tried and tested. The company proposes to use a satellite based distribution mechanism of films, which is relatively new. Besides, it is exposed to risks such as satellite link failures, hardware and software failure of the servers, delays in conversion of the film negatives into digital formats and other such risks, which could lead to delays in distribution of the films and other content to the theatres in the chain.
  • Out of 148 screens in the chain, 110 screens are located in Tamil Nadu. Currently PSTL predominantly exhibits Tamil language films with a comparatively lower number of Hindi and English films being screened. Thus the company’s market is currently restricted to the Tamil speaking market and is not completely diversified.
  • The company faces competition from some of the large and established players in the industry like PVR, Inox Leisure, Adlabs.

  • PSTL intends to raise Rs.84.44 crore from the issue for a project cost of Rs.111.19 crore.
  • Income of the company has grown at a CAGR of 56.97% from Rs.82.19 lakh in FY2002 till FY2006. Similarly, net profits have grown at a CAGR of 236.37% from Rs.1.34 lakh during the same period.
  • Post issue EPS, annualized for September 30, 2006 results, will be in the range of Rs.3.33 – Rs.3.46, while P/E will range from 26 – 29 for a price band of Rs.88/- to Rs.100/-. Industry average P/E is 108.55.
  • Net worth of the company is Rs.19.35 crore in FY06 and Rs.39.4 crore for six months ending September 30, 2006. Return on Networth is 8.86% and 12.43% respectively.

Cairn India Ltd. IPO

  • Cairn India Ltd (Cairn) is a newly incorporated Indian company promoted by Cairn Energy PLC, a crude oil and natural gas exploration and production company of UK. Its core area of focus is South Asia: it holds material exploration and production rights in India, Bangladesh and Nepal.
  • Cairn was incorporated on 21 August 2006 to consolidate Cairn Energy’s business and interests in India. Cairn is acquiring its assets and business through acquisition of Cairn’s subsidiaries: Cairn Energy Australia Pvt Ltd (CEA), Cairn Energy hydrocarbons (CEH) and Cairn Energy India Holdings B.V (CEIH).
  • Cairn India has been exploring and operating in India for over 12 years in partnership with the GoI, state governments, regulators and key industry participants such as ONGC. Cairn has working interest in various oil and gas blocks spread primarily across the Cambay Basin, the Krishna Godavari (KG) Basin and Rajasthan. In addition to this, Cairn has bid for around 12 blocks (eight deepwater, one shallow water and three onshore).
  • For the six months ended 30 June 2006, the total gross production rate from fields in which Cairn operates was approximately 87,500 boepd (barrels of oil equivalent per day) of which company had a working interest in 24,000 boepd. It currently operates 12 offshore platforms, approximately 250 km of sub-sea pipelines and 3 processing plants.
  • Rajasthan block development’s first commercial production at Mangala will start during 2009. The commencement of production from the Bhagyam and Shakti fields will be within six months and the Aishwariya field within 12 months of commencement of production from the Mangala field. All of the major regulatory clearances have already been obtained.
  • Cairn has made a pre IPO placement at Rs.176.48 per share to PETRONAS International Corporation Ltd (10%), Merrill Lynch International Investment Funds & ABN AMRO Bank N.V., London Branch (0.72% each) & 0.43% to other domestic players (excluding green shoe option).
  • Post-issue the total number of shares of the company will increase from 122.7 crore to 176.5 crore, bringing down the stake of the promoter (Cairn Energy Plc.) to 69.5%, excluding the exercise of the green-shoe option by the company.
Objects of Issue:
  • For development in the Rajasthan block and additional drilling activities in Ravva and Cambay blocks with an investment of Rs.5,525 crore (approx.)
  • For exploration and appraisal activities with an investment of Rs.691crore.
  • For cash consideration to be paid to Cairn UK Holdings Ltd as consideration for shares of Cairn India Holdings Ltd.
  • Estimated total gross proved plus probable (‘‘2P’’) reserves from the fields in which Cairn India has interests is 754 mmboe (million barrels of oil equivalent) approx. and its net working interest in these 2P reserves is 472 mmboe. Most of the 2P reserves are estimated to be in the Rajasthan block, in which Cairn has 70% working interest. Also, the gross contingent resources attributable to these fields are 413 mmboe.
  • Cairn India will operate approximately 20% of India’s oil production by 2010. Cairn’s share of gross oil production would increase from around 21,500bopd (barrels of oil and condensate per day) to over 125,000 bopd (without considering the profit oil share of the government) over the next four to five years. A 5.8 times increase from existing production.
  • Cairn India has long and proven exploration expertise in India, It has made 30 hydrocarbon discoveries since 1994, including three of the seven landmark discoveries of India.
  • Cairn India commenced natural gas production of the Lakshmi field in the Cambay Basin in less than 30 months following discovery and, at the Ravva field in the KG Basin, Cairn India increased crude oil production from an initial 3,700 bopd to 35,000 bopd in 26 months and ultimately to the current plateau of 50,000 bopd in 1999. Hence, has a proven track record in efficient exploration activities.
  • Cairn India is also an established low cost operator in India. The average combined direct field operational expenditure at all the production facilities was less than U.S. $1 per boe in the first half of 2006. The cost of producing oil from the Mangala field of Rajasthan will be around USD 3.5- USD4 (bopd).
  • India is currently the sixth largest consumer of oil and gas, a net importer of crude oil and natural gas. In 2005, India consumed 115.7 million tonnes of crude oil, yet it produced only 36.2 million tonnes. Thus, domestic demand for hydrocarbons far exceeding supply in recent years, and expected to continue to do so. The International Energy Agency has predicted that between 2003 and 2030 India will experience an average annual oil demand growth rate of 2.7%, in contrast, the predicted world growth rate is expected to be 1.4%.
  • Crude from the northern fields is of waxy nature, which tends to solidify quicker than is commonly the case for most producing oil fields. This presents both extraction and transportation risks.
  • According to a leading daily, Oil Corporation (IOC) has sought heavy discounts from Cairn for buying crude oil from Rajasthan to compensate for lower quality of crude to the tune of USD 5-USD10 per barrel.
  • MRPL to purchase crude oil under the Rajasthan Block has challenged before SEBI some disclosures made by the company regarding building a pipeline to evacuate crude. GOI has appointed MRPL the official nominee whereas ONGC (promorter MRPL) maintained that it would be ready to buy crude from Barmer only if it is economically feasible.
  • Since the commencement of significant investment in the exploration and appraisal of the Rajasthan Block in 2002 and, in the near future, due to the development of the Mangala field and other fields in the Rajasthan Block, Cairn India is expected to be cash flow negative.


The offer price band is Rs 160-Rs 190. Based on the consolidated financials of CEA, CEH and CEIH for the year ended December 2005, profit after tax (PAT) stands at Rs 92 crore. Based on existing financials, there is no significant EPS. However, companies like Cairn are valued based on projected earnings and cash flow & discovered reserves. Hence, the current PE ratio is irrelevant.

On a comparative valuation basis, Cairn’s is being offered at much higher EV multiple of 13.3-15.8 compared to just 0.4 of ONGC. However, in case of ONGC the company's huge subsidy burden in the form of the under-recoveries tends to act as a drag on its stock's valuations. But the offer is also at a substantial premium to the other listed exploration companies.

Tanla Solutions Ltd.

  • Tanla Solutions Ltd. (TSL) incorporated in the year 1995 as Maruti dairy products Ltd. The name of the company was changed to Prism foods Ltd in the year 1996.Subsequently it changed its name to the present one in the year 2000 and became a telecom solution provider from a dairy company.
  • TSL is in the business of providing integrated telecom solutions and products for the wireless market. TSL operations are segregated into three categories viz telecom signalling solutions, aggregators services (Messaging Applications & Billing services) and offshore services.
  • Operators of mobile communications network use company’s telecom signalling products and TSL`s aggregate services facilitate content providers in connecting to mobile operators.
  • Company came out with its IPO in 1996 and company’s shares are already listed on Hyderabad Stock Exchange (HSE), Ahmedabad Stock Exchange (ASE) and Madras Stock Exchange (MSE).
Objects of the issue:
  • For Setting up infrastructure facility for a development centre at Hyderabad.
  • For Setting up the infrastructure facilities for a backup / disaster recovery centre at Bangalore.
  • To Establish overseas marketing offices.
  • For expansion & Upgradation of Existing Research & Product Development facilities.
  • To fund regional / global expansion and acquire and invest in strategic business.
  • For general corporate purposes.
  • To meet Issue expenses.
Strengths: Mobile communication market can be classified into voice segment and non-voice segment. The major businesses of company are in the Non-Voice Market segment, which is expected to grow at a CAGR of 25.38% till 2009. Going forward growth in telecom business will come from the non-voice segment.

  • Tanla is India's first company to make SMSC (Short Messaging Service Centre) and VMS (Voice Mail System) indigenously. These are accepted as robust products by several leading cellular operators from India and abroad and have already been deployed with prestigious clients like Reliance, BPL, Hexacom, Airtel and Essar.
  • TSL offers end-to-end solutions to mobile network operator clients and aggregator service clients who do not have extensive internal technological capabilities. End-to-end solutions also help company’s clients in quickly getting their new service offerings to market.
  • TSL has been flexible in offering pay-for-use and revenue sharing pricing options to many customers. By this TSL facilitate its clients to convert large fixed costs into variable costs.
  • In coincidence with marketing and selling of products and services overseas, company maintains substantial portion of its cost base in India. It facilitates TSL to earn better margins.
  • The company operates in a highly competitive market, which is rapidly changing. Competitors, especially outside India, with greater brand name & superior technology can adversely affect the operational efficiency & financial condition.
  • Significant percentage of TSL consolidated revenue (98%) in FY 2006 and approximately 99% of its consolidated revenue in half year ended September 30, 2006 was earned in foreign currency. Going forward company expect to earn substantial amounts of our revenue in foreign currency. Any adverse movement in foreign exchange rates may adversely affect its financial performance.
  • Collection period of the company for FY 2006 was 127 days and is considerably high from 38 days and 56 days in FY 04 and FY 03. It reflects high bargaining power of TSL`s customers.
  • There are no comparable listed companies in India doing the same business. TSL`s total income (unconsolidated) has been increasing at a robust CAGR of 168% from Rs. 0.86 crores in FY 2002 to Rs. 41.9 crores in FY 2006. Consolidated total income of the company increased by 178% to Rs. 63.12 crores in FY 2006 from Rs. 22.72 crores in FY 2005. Total income for the half-year ended September 2006 stood at Rs. 87.1 crores.
  • OPM and NPM of the company have been increased from 15.58% and 6.49% in FY 03 to 68.26% and 62.15% in FY 06. However it was 70.79% and 66.85% in the FY 05.
  • TSL`s return on capital employed and return on Networth have been increasing at a robust pace and reported at 75.89% and 70.17% for the FY 06.
  • Company’s net worth as on 30th September 2006 stood at Rs. 58.7 crores. While the book value was at Rs.17.48 for the same period.
  • Post issue Annualized EPS based on 30th September 2006 earnings comes out to be Rs. 14.28. Shares are being offered in the price band of Rs. 230 to Rs. 265. At P/E multiple of 16.1 to 18.5.

Fem Care Pharma: Sharekhan Stock Idea dated December 13, 2006

Fem Care Pharma
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs500
Current market price: Rs358

A name FEM(mes) trust

Key points

  • Leadership position in a niche category: Fem Care Pharma Ltd (FCPL) has a dominant market share (around 65%) in the niche segment of bleach cream. It is also among the leading players in the liquid soap and hair-removing categories. To boost its overall growth, the company has introduced several product variants at various price points to effectively tap the expected growth in the FMCG industry, especially the fast growing beauty treatment and skin care segments.
  • Incremental growth from exports: In FY2006, FCPL acquired a US-registered premium bleaching cream brand, Jaquline, which has an established presence in the UAE and Middle-East markets. The company plans to utilise it as an umbrella brand to introduce skin care and beauty products, and boost the overall growth of its export business.
  • Margins to firm up: The introduction of high-margin premium products has positively affected its operating margins. The company has also commissioned a new manufacturing facility in the tax-blessed region of Baddi, Himachal Pradesh. The fiscal incentives in the form of income tax and excise duty exemptions are further boosting its overall profitability.
  • Consolidation of its marketing arm: The distribution of FCPL's products is done exclusively by its 60% subsidiary, Mirasu Marketing. FCPL is expected to acquire the remaining 40% stake (held directly by the promoters) in Mirasu Marketing over the next one year. The consolidation is likely to result in marginal dilution in its equity base (about 1-1.5% on the higher side) but would be earnings accretive.
  • Attractive valuation: The consolidated revenues and earnings are estimated to grow at a CAGR of 17.5% and 48.3% respectively during FY2006-08. Currently the stock trades at 9.9x FY2007E and 8x FY2008E earnings. We recommend a Buy on FCPL with a price target of Rs500
Download here

Wednesday Capita Telefolio Volume No 5, Issue No 25 dated Wednesday, 13th Dec 2006

Wednesday Capita Telefolio Volume No 5, Issue No 25 dated Wednesday, 13th
December 2006.

The following recommendation is based on price as on Wednesday, 13th
December 2006.

BUY: Satyam Computer Services at Rs 448

Now full details:

BUY : Satyam Computer Services at Rs 448
BSE Code : 500376
Face Value: Rs 2

After the expected sequential drop in profits in the Sep.'06 quarter, Satyam
is set to report smart growth rates going forward.

Actual EPS for year ended March 2005 : Rs 10.8
Actual EPS for year ended March 2006 : Rs 15
Projected EPS for year ended March 2007: Rs 21.3

End of Wednesday Capita Telefolio Volume No 5, Issue No 25 dated Wednesday,
13th December 2006.

IDBI Capital - Balakrishna Industries

Download here

IDBI Capital - Dr Reddy's Lab

Download here

KKR in talks with ADAG

Kohlberg Kravis Roberts & Co (KKR), one of America's top private equity funds, has begun talks with the Anil Ambani group to try to form a partnership that will bid for Hutchison-Essar, India's third-largest GSM operator and the most sought-after acquisition in the telecom sector.

Investment bankers familiar with the development said that KKR, whose controversial buyout of the storied RJR Nabsico in 1988 was derided as an example of predatory capitalism at its worst, is keen to get a foothold in the world's fastest-growing telecom market by buying Hutchison's India wireless operations.

The New York-based KKR will thus join Texas Pacific Group and Blackstone, who have also been holding talks with the Anil Ambani group for a similar partnership. “It is very preliminary as of now. There are a number of unknowns in a transaction of this type,” a person familiar with the talks said. The R-ADAG group spokesperson was not available for comment.

KKR's move and the eagerness shown by both Blackstone and Texas Pacific intensify the suspense surrounding Hutchison-Essar. Hutchison Whampoa, the Hong Kong-based owner with a 67% stake, is believed to have shown an inclination to sell, but any buyer will have to contend with the Essar group, which owns the remaining 33%.

Last week, Texas Pacific along with Malaysia's Maxis made a bid for 100% of Hutchison-Essar at an enterprise value of $13.5 billion. The bidders approached Canning Fok, chairman of Hutchison Telecom International, the parent of Hutchison Essar, who was in India on a brief visit. The bid was turned down.

TPG then sought talks with the Anil Ambani group. The only unknown factor is the motive of the Essar group. The ships-to-steel conglomerate has a right of first refusal in Hutchison-Essar, which means that Hutchison Whampoa will first have to offer its stake to the group before selling it to others

Close: a bounce off the lows..but there is still caution in the air !

After two days of carnage the market showed signs of recovery today. But in the early sessions of trading the market traded volatile swinging between the negative and positive territory. The market looked dangerous to enter as there was heavy selling on one side while buying on the other came in spurts. Weak global cues added more fuel to it. Buying interest from the investors was seen in the later sessions as the index heavyweights saw some level of value buying. Some attempts to book profits at the higher levels were seen but then investors are now used to recoveries. The negative news has been digested. Reliance Communications, Dr.Reddy's and SBI led the rally on the Sensex. Asian markets ended mixed while Europe markets were trading in green.

Sensex closed up by 186 points at 13181.34. It was helped up by gains in RCVL (433.15,+7 percent), Grasim (2650,+6 percent), Dr.Reddy (792.5,+5 percent),SBI (1230.9,+4.3 percent) and Bharti Tele (600,+6 percent). Restricting the gains were ONGC (787.9,-2.2 percent), HLL (219,-2.1 percent), Hero Honda (711.9,-2 percent), Tata Steel (434.55,-1.3 percent) and Cipla (238.05,-1 percent). topnew.gif (1104 bytes)

Zee to get delisted; Century Textiles in action; Markets still not out of woods! Performance was good.

Zee Telefilms the media giant has clarified the proposed demerger of its news and cable businesses. The shareholders of Zee as on the relevant record date would get shares in three separate companies which would be independently listed on stock exchanges. They are Zee Telefilms Ltd (to be renamed Zee Entertainment Enterprises Ltd (ZEEL), Zee News Ltd (ZNL), Wire and Wireless India Ltd (WWIL), ASC Enterprises Ltd [to be renamed Dish TV India Ltd (Dish)]. Shareholders of the company would receive 45 shares of ZNL and 50 shares of WWIL for every 100 shares held in the Company. Both companies would be listed independently. Listing is likely to be in January 2007. Demerged ZTL (including the Direct Consumer business undertaking) would continue to trade on the stock exchanges. The stock was up by 7% while its peers UTV (8%) and NDTV (up 4%) also closed strong.

Century Textiles & Industries reported that in the voluntary retirement scheme (VRS) which was introduced at its Mumbai textile mill has been accepted by 6300 workers of total staff strength of 6600. The company in order to sustain viability on a reduced scale initiated reduction in the manufacturing operations at the mill in Worli Mumbai, due to which the operations have become almost stagnant. The stock ended 8% up. Clearly there are plans for the property there. Its 65 acres of land and valued at Rs 1000 crores we believe. Could be more if developed for commercial purposes.

Technically Speaking: Market was in a volatile mood with no clear direction where it was headed all day but in the last session buying interest by investors saw the market close in the positive territory up 186 points. . Sensex rallied between the channels of 12830 - 13223 level. However, the breadth had been in the favor of Advances as they were 2.19 times the Decliners. If the market sustains 13200 levels we could see more of long positions but if it fails then level of 12600 could be seen.

Market recovers amid choppy trade

Bargain-hunting after a steep fall, aided the bourses in what turned out to be a day of immense volatility. Buying was rampant in telecom, cement, banking shares and pharma pivotals.

Select side-counter surged, which kept the market-breadth to stay robust. Deccan Aviation (up 12% to Rs 133.85), Gateway Distriparks (up 11% to Rs 181.70), Moser Bear (up 10.8% to Rs 255), Unitech (up 10% to Rs 451.60), Forbes Gokak (up 9.8% to Rs 506), Divi’s Lab (up 9% to Rs 2744), Bombay Rayon (up 9% to Rs 224.95), Welspun Gujarat (up 8% to Rs 89.90), Nagarjuna Construction (up 8% to Rs 203), GTC Industries (up 10% to Rs 218.95), KEI Industries (up 10% to Rs 431.20), Gemini Communications (up 10% to Rs 285.85) Spanco Telesystems (up 9% to Rs 168.50), Vivimed Labs (up 9% to Rs 165), UTV Software (up 8.9% to Rs 256) and, Four Soft (up 8% to Rs 58.45) had surged.

The BSE Sensex rose 186.32 points (1.4%), to settle at 13,181.34. It also hit an intra-day high of 13,223 at the fag end of the trading session at 15:24 IST. The S&P CNX Nifty gained 48.30 points (1.3%), to end at 3,765.20.

Trading was characterised by extreme volatility today. The Sensex swung over 1,400 points between some vital intra-day tops and bottoms. It also swung 392.62 points between the day’s low of 12,830.38 and high of 13,223.

For 1,652 shares rising on BSE, 849 declined. As many as 68 shares were unchanged. Gainers outpaced losers by a ratio of nearly 2:1. The breadth improved substantially in the last half an hour of trade. It kept vacillating between positive and negative throughout.

The BSE clocked a turnover of Rs 4,404 crore, compared to Tuesday’s Rs 4,931 crore.

Unwinding of long positions in the derivatives accentuated the fall on the bourses, and the Sensex lost 977 points in three trading sessions, between 8 December and 12 December. The market wide-open interest in derivatives declined 6.4% in a single trading session on Tuesday (12 December). Aggressive offloading happened in frontline stocks, where the total open interest declined 9% that day, according to a domestic brokerage.

A lower-than-expected industrial output growth for October 2006 caused a 404-point fall in the Sensex on Tuesday (12 December), after the barometer index lost 400 points on Monday (11 December) following a surprise hike in the cash reserve ratio (CRR) by the RBI, which raised fears of a rise in interest rates.

After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which is due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results. More so, given that strong earnings growth has been a key driver of the bull-run on the bourses.

Market men will also be watching FII allocations for India for calendar year 2007.

`In the last one hour of trade today, there was a good pull back. Traders were seen covering short positions and fresh new long positions were being taken as well. More appreciation is expected in mid-caps as compared to the large-caps. In the previous two or three sessions, mid-caps have taken a heavy battering and some select mid cap stocks now look quite attractive at their current valuations’, said Rajeev Nainani of Anagram Stock Broking.

Niranjan Shekhawat of HDFC Securities expects correction on the bourses tomorrow. `In the last two or three days, the banking sector has been instrumental in directing the markets and tomorrow, they might again play a influential role in pulling the markets down’, Shekhawat said.

In today’s trade, Reliance Communications surged 7% to Rs 432.90, following media reports that it is in talks with three US private equity groups, for buying the Indian operations of Hutchison Telecommunications International in a deal worth more than $14 billion. The stock rose on a heavy volume of 38.6 lakh shares on BSE.

Bharti Airtel surged 4% to Rs 601. As many as 3.2 lakh shares changed hands in the counter on BSE.

Reliance Industries rose 2.6% to Rs 1,240.50. As many as 15.5 lakh shares changed hands in the counter on BSE. Multiple block deals of 1,02,196 shares were executed in the scrip at Rs 1,231.75 a piece, on BSE. The government on Tuesday approved RIL's plan for a $5.2 billion deep-sea gas field, which will pump 80 million cubic metres per day.

Bank shares edged higher after the US Federal Reserve on Tuesday kept US interest rates unchanged. SBI surged 4% to Rs 1,230.90, ICICI Bank 2.7% to Rs 828 and HDFC Bank added 1.9% to Rs 1,050.

Cement shares rose on renewed buying at the lower level. Grasim gained 5.7% to Rs 2,650, ACC rose 3.9% to Rs 1,010 and Gujarat Ambuja Cements advanced 3.9% to Rs 135.

Pharma pivotals firmed up. Dr Reddy’s Lab surged 5% to Rs 792.50 and Ranbaxy rose 2.3% to Rs 368.

Software bellwether Infosys made a solid intra-day rebound in the last half an hour of trade. The stock rose 0.1% to Rs 2,166. Earlier, the scrip had dropped as much as 1.5% to a low of Rs 2,131.30 at 14:50 IST.

ONGC was down 2% to Rs 787.90. As per reports, ONGC is talking to France's Total SA and Royal Dutch Shell over offering a 10 - 15% stake in two Nigerian blocks.

Tata Steel lost 1.3% to Rs 434.55, on growing concerns of a bidding war with Brazil’s CSN, for acquiring Anglo-Dutch steelmaker Corus. Media speculates that Tata Steel may raise its bid to 550 pence per Corus share, raising the price to over $10 billion, to trump Companhia Siderurgica Nacional's offer of 515 pence per share.

L&T rose 2.2% to Rs 1,425, on news that L&T Infotech, the software and services arm of construction major Larsen & Toubro, on Wednesday had signed an agreement to acquire US-based GDA Technologies Inc, an electronics design services firm.

Glenmark Pharmaceuticals jumped 7.8% to Rs 552.35, after the company said on Wednesday it had applied for clinical trials for a new pain-relieving compound to be launched in 2011. Its Swiss subsidiary has applied for the first phase of clinical trials in Europe, Glenmark said in a statement. "The pain market is amongst the largest and presents an excellent opportunity," Managing Director Glenn Saldanha said.

Elecon Engineering jumped 10% to Rs 394.75, following reports that the company expects revenue of Rs 750 crore in 2006/07, up 70% from last year, riding the orders' tide, chiefly from power, cement and steel sectors.

McNally Bharat Engineering Company jumped 10% to Rs 137.20, after the company got an order for an ash handling system worth Rs 39.92 crore from Vedanta Aliminium.

Century Textiles jumped 8% to Rs 634, after the company said on Wednesday that 6,300 workers, of 6,600 working in the company's Mumbai mill, have opted for a voluntary retirement scheme floated earlier. The scrip rose on a high volume of 13.4 lakh shares on BSE.

Laxmi Precision Screws lost 4.4% to Rs 117.45, after the company said its board approved a preferential issue of equity shares at Rs 101 a share.

Flawless Diamond jumped 5% to Rs 51.45, after the firm said it had secured an order worth Rs 17.8 crore from a Swiss company

Raymond lost 1.2% to Rs 422. The company said on Wednesday, one of its units will form an equal joint venture with US-based AJ Rose Manufacturing Co for a sheet metal components facility in India. The facility is estimated to cost Rs 16.60 crore.

Britannia Industries dropped nearly 1% to Rs 1,091. The company said on Wednesday, it agreed to buy stakes in two bakeries belonging to a Middle East-based group.

Rolta India rose 1.6% to Rs 239, after the company disclosed on Wednesday that Citigroup, Mauritius, bought 0.27% stake. Citigroup Global acquired 2,18,396 shares on 5 December 2006, raising its stake to 5.19%, the company said.

i-flex was flat at Rs 2,016.50. A block deal of 1 lakh shares was executed in the scrip on BSE at Rs 2,020.50. Orcale had recently raised the open offer price as well as targetted stake in i-flex. It has raised the open offer price to Rs 2,100 from earlier Rs 1,475.

Andhra Bank jumped 8% to Rs 82, after the state-run bank said the cash reserve ratio (CRR) hike will impact annual earnings only marginally.

Simplex Infrastructure was down 1.4% to Rs 370. A block deal of 1,53,146 shares was struck in the counter on BSE, at Rs 365.75.

Jain Irrigation rose 6% to Rs 373. A block deal of 1,68,220 shares was struck in the counter on BSE, at Rs 358.

Greaves Cotton rose 2.8% to Rs 315. A block deal of 3,5,310 shares was struck in the counter on BSE, at Rs 290.

CESC lost 7% to Rs 312. A block deal of 1,87,962 shares was struck in the scrip on BSE, at Rs 290.

Solar Explosives rose 3.6% to Rs 125, after JF Asset Management purchased 2.89% stake. JF Asset Management acquired 5 million shares on November 29, Solar Explosive informed.

European shares were in the green in opening trade on Wednesday. Key benchmark indices in London, Germany and France were up by between 0.01% to 0.1%. Asian markets were mixed. Key benchmark indices in Hong Kong, Singapore and Taiwan were down by between 0.1% to 1%. Key benchmark indices in Japan and South Korea were up by 0.3 - 0.4%.

Nymex crude was little changed at about $61 a barrel.

Emkay - Tata Elxsi

Download here

FII: +Rs 95 Cr & MF - Rs 517 Cr

FII Gross purchases Rs 3088.4 Cr Gross Sellers Rs2993.2 Cr Net buyers Rs 95.2Cr
MF Gross Purchases Rs 649 Cr Gross Sellers Rs 1167 Cr Net sellers Rs 517 Cr.

Macquarie - Indian IT

Download here

Thanks Bharat

52 Week Lows

Download here

Karvy - Bank of India

Download here

Sensex recovers smartly and gains 186 points

After posting losses of over 800 points in the last days, the Sensex witnessed an intra-day swing of 393 points during the trading session. The Sensex began the trading session 16 points above its last close. The index soon eased on profit taking and slipped below the 12850 mark to touch an intra-day low of 12830. The Sensex was range-bound with a positive bias in the afternoon and ended the session with gains of 186 points at 13181. The Nifty advanced 48 points to close at 3765.

The breadth of the market was positive. Of the 2,565 stocks traded on the BSE, 1,646 stocks advanced, 863 stocks declined and 56 stocks ended unchanged. Among the sectoral indices the BSE Bankex advanced 2.97% and the BSE CG index gained 2.26%. The BSE CD index, the BSE Oil & Gas index, the BSE Teck index, the BSE PSU index, the BSE HC index and the BSE IT index closed with steady gains. However the BSE FMCG index closed in negative territory.

Banking stocks advanced sharply. Karnataka Bank at Rs116, Union Bank of India at Rs113, Andhra Bank at Rs81 and Indian Overseas Bank at Rs111 gained around 7% each. However Centurion Bank of Punjab and Allahabad Bank were down with marginal losses.

Reliance Communication led the upmove in the index and surged 7.36% at Rs433. Grasim Industries spurted 4.29% at Rs2,614, SBI soared 4.09% at Rs473, Dr Reddy’s advanced 3.95% at Rs784, Bharti Airtel gained 3.75% at Rs599, ACC advanced 3.61% at Rs1,008 and ICICI Bank was up 3.07% at Rs830. Among the other strong gainers, Moser Baer surged 11.41% at Rs257, Century Textiles jumped 7.78% at Rs630 and BRPL rose 7.31% at Rs45. However ONGC, HLL, Tata Steel and Cipla were down around 1-2% each.

Garware Offshore at Rs212.95, Simplex Trading at Rs78.80, Millars India at Rs116.70, Shivaji Securities at Rs53.75, Bombay Paint at Rs50.65, Mefcom Agriculture at Rs90.45, Vipul at Rs2,025.05 and Insul Electronics at Rs147.40 touched new intra-day highs on the BSE.

Over 39.74 lakhs Parsvnath shares changed hands on the BSE followed by Reliance Communication (38.74 lakh shares), SAIL (34.09 lakh shares), Tata Steel (29.08 lakh shares) and Zee Telefilms (20.14 lakh shares).

Value-wise Reliance Industries clocked a turnover of Rs193 crore on the BSE followed by Parsvnath (Rs176 crore), Reliance Communication (Rs138 crore) and Tata Steel (Rs125 crore).

Sobha Developers Allotment

See here

Sensex gets adrenaline to flow again

Buying in telecom, cement, banking shares and pharma pivotals triggered a recovery on the bourses in what turned out to be a day of immense volatility. The Sensex’s provisional closing was 13,209.88, a gain of 214.86 points. It also hit an intra-day high of 13,223 at 15:24 IST.

Select side-counter surged and the market-breadth was quite strong. For 1,652 shares rising on BSE, 849 declined. As many as 68 shares were unchanged. Gainers outpaced losers by a ratio of nearly 2:1. The breadth improved substantially in the last half an hour of trade. Earlier, the market-breadth swung between positive and negative throughout the day.

Trading was characterised by extreme volatility today. The Sensex swung over 1,400 points between some vital intra-day tops and bottoms. It swung 392.62 points between the day’s low of 12,830.38 and high of 13,223.

The BSE clocked a turnover of Rs 4,404 crore.

Reliance Communications surged 7% to Rs 432.90, following media reports that it is in talks with three US private equity groups, for buying the Indian operations of Hutchison Telecommunications International in a deal worth more than $14 billion. The stock rose on a heavy volume of 38.6 lakh shares on BSE.

Bharti Airtel surged 4% to Rs 601. As many as 3.2 lakh shares changed hands in the counter on BSE.

Reliance Industries rose 2.6% to Rs 1,240.50. As many as 15.5 lakh shares changed hands in the counter on BSE. Multiple block deals of 1,02,196 shares were executed in the scrip at Rs 1,231.75 a piece, on BSE. The government on Tuesday approved RIL's plan for a $5.2 billion deep-sea gas field, which will pump 80 million cubic metres per day.

Bank shares edged higher after the US Federal Reserve on Tuesday kept US interest rates unchanged. SBI surged 4% to Rs 1,230.90, ICICI Bank 2.7% to Rs 828 and HDFC Bank added 1.9% to Rs 1,050.

Cement shares rose on renewed buying at the lower level. Grasim gained 5.7% to Rs 2,650, ACC rose 3.9% to Rs 1,010 and Gujarat Ambuja Cements advanced 3.9% to Rs 135.

Pharma pivotals firmed up. Dr Reddy’s Lab surged 5% to Rs 792.50 and Ranbaxy rose 2.3% to Rs 368.

Software bellwether Infosys made a solid intra-day rebound in the last half an hour of trade. The stock rose 0.1% to Rs 2,166. Earlier, the scrip had dropped as much as 1.5% to a low of Rs 2,131.30 at 14:50 IST.

Unwinding of long positions in the derivatives accentuated the fall on the bourses, and the Sensex lost 977 points in three trading sessions, between 8 December and 12 December. The market wide-open interest in derivatives declined 6.4% in a single trading session on Tuesday (12 December). Aggressive offloading happened in frontline stocks, where the total open interest declined 9% that day, according to a domestic brokerage.

European shares were in the green in opening trade on Wednesday. Key benchmark indices in London, Germany and France were up by between 0.01% to 0.1%. Asian markets were mixed. Key benchmark indices in Hong Kong, Singapore and Taiwan were down by between 0.1% to 1%. Key benchmark indices in Japan and South Korea were up by 0.3 - 0.4%.

Nymex crude was little changed at about $61 a barrel.

Sharekhan Highnoon dated December 13, 2006

Download here

Ruchira Papers Allotment

See here

5 Intra-day Stock Ideas

In view of the unexpected carnage in the market in the last two days, we would refrain from making any intra-day calls. Investors are advised to remain cautious as there might be fresh selling. Wait for things to settle down before resuming one's buying spree.


After weak start, bears may loosen grip

Experience is what you get when you don't get what you want.

What an experience the last couple of days has been. We've had a Ferocious Friday, a Manic Monday and a Terrible Tuesday. Going by the cues, we’ll have a Weak Wednesday at least at start. In the interim, the Sensex has shed around 1,000 points. Last week's euphoria over the benchmark BSE index hitting 14k has gone for a toss. What's worse, levels of 12K are being talked about. We expect some sort of a rebound later after a savage correction. The undertone remains pretty grim. If you have been booking profits, enough investment opportunities are available. For the near term we continue to advocate caution.

The heartening thing today is that the Federal Reserve, as expected, has left its benchmark rate unchanged, as the US economy is slowing. But, the US central bank remains on guard for any surprising spikes in inflation.

Another positive for the market today is that FIIs were net buyers in the cash segment over the last couple of days even as the key indices were getting pummeled. On Monday, foreign funds pumped in Rs4.22bn while the provisional data shows that yesterday too they were net buyers of Rs2.59bn.

Most of the selling in the last few sessions has come from the derivative segment. On Monday, FIIs pulled out Rs13.84bn from the F&O segment, But, yesterday they were net buyers of Rs3.4bn on the derivative side of the market. Foreign funds were net sellers of Rs4.15bn in Index Futures yesterday while in Stock Futures they pumped in Rs4.8bn.

Interestingly, Mutual Funds withdrew a whopping Rs6.02bn from the cash segment on Monday. A financial daily reports that a large domestic Mutual Fund has been selling over the past few sessions, especially the mid-caps, to buy cheap for its newly launched fund. Tuesday’s Mutual Fund data will be released only after today's close of trade. What is also not known is the level of Mutual Fund activity in the F&O segment, as no data is readily available.

US stocks fell on Tuesday after the Fed said that inflation is still a threat to the world's largest economy and earnings at Nucor Corp. and Best Buy missed analysts' consensus estimates.

The S&P 500 Index closed nearly unchanged at 1411.56. The Dow Jones lost 12.90 points, or 0.1%, to 12,315.58. Shares of General Electric rose after the conglomerate said that its 2007 profit will be higher than some analysts anticipated. The Nasdaq dropped 11.26 points, or 0.5%, to 2431.60.

Fed policy makers reiterated that some inflation risks remain in a statement after keeping their benchmark interest rate unchanged at 5.25%. The view disappointed investors, some of whom had been betting that the central bank will signal a rate cut.

Steel companies' shares tumbled after Nucor, the second-largest US producer of the metal, said that profit this quarter will be less than anticipated because of lower prices, higher inventories and record imports. Retailers fell after disappointing earnings from Best Buy, the largest US consumer-electronics chain.

US light crude oil for January delivery lost 20 cents to settle at $61.02 per barrel on the New York Mercantile Exchange. The front-month contract was quoting 7 cents lower at $60.95 per barrel in extended trading in Asia this morning.

Bond prices rose, lowering the yield on the benchmark 10-year note to 4.49%, from 4.52% late on Monday. The dollar slipped against the euro and the yen. Gold prices fell $3.10 to $631.70 an ounce.

European shares closed slightly higher. The pan-European Dow Jones Stoxx 600 index gained 0.4% to 359.72. The French CAC-40 closed virtually unchanged at 5,426.82 while the German DAX Xetra 30 advanced 0.1% to 6,476.17 and the UK's FTSE 100 dipped 0.1% to 6,156.40.

In emerging markets, the Bovespa in Brazil fell by 0.6% to 43,018 while the IPC index in Mexico gained 0.3% to 25,828 and the RTS index in Russia added 0.2% to 1841.

Asian exporter stocks rose on Wednesday, led by Toyota and Samsung, after crude oil fell to a two-week low and gains in the dollar improved the outlook for overseas earnings.

The Morgan Stanley Capital International Asia-Pacific Index, rose 0.1% to 136.66 as of 11:09 a.m. in Tokyo. Stock benchmarks also advanced in New Zealand, South Korea, Taiwan and China, whose Shanghai Composite Index touched its previous record.

Japan's Nikkei 225 Stock Average was down 6 points at 16,631 while the Hang Seng tumbled by 202 points to 18,705. The Kospi in Seoul advanced 6 points to 1383 while the Straits Times in Singapore lost 28 points to 2865.

Banks, including Sumitomo Mitsui Financial Group, fell on concern that profits will be curbed because the Bank of Japan will not increase interest rates when it meets next week.

Major Bulk Deals:
Reliance MF has bought Deepak Fertilizers while Carlson Fund has sold the stock; ABN AMRO Bank and Bear Stearns have picked up Federal-Mogul Goetze (India) while HDFC MF has sold it; Blackstone Asia has purchased more of Indo Tech Transformers; Govt of Singapore has bought Nitco Tiles; Birla Sunlife MF has picked up NIIT Tech; DWS Investment has bought OBC while Merrill Lynch has sold it; Citigroup Global has purchased Vijaya Bank but Goldman Sachs has sold the stock; Reliance MF has picked up Voltamp; ABN AMRO Bank has sold Webel SL Energy Systems.

Insider Trades:
The Great Eastern Shipping Co. Limited: Bharat K Sheth, Deputy Chairman and Managing Director has purchased from open market 17650 equity shares of The Great Eastern Shipping Co. Limited on 5th December, 2006.

Kirloskar Oil Engines Ltd: Vikram Shreekant Kirloskar, Director has sold in open market 15000 equity shares of Kirloskar Oil Engines Ltd from 6th December to 7th December, 2006.

Market Volumes:
The turnover on NSE was up by 18% to Rs111bn. BSE PSU index was the major loser and lost 4.39%. BSE Capital Good index (down 4.14%), BSE Metal index (down 3.90%), BSE Bank index (down 3.23%), BSE Auto index (down 3.13%) and BSE Pharma index (down 3.14%) were among the other major losers.

Volume Toppers:
Reliance Communications, SAIL, Zee Telefilms, India Cements, Reliance Industries, ITC, Indiabulls, Tata Steel, Gujarat Ambuja, HLL, Hindalco, Polaris, GMR Infrastructure, Indian Hotels, Unitech, IDBI, Satyam Computer and Lanco Infratech.

Lower Circuit Filters:
ACE, Atlanta, Adani Enterprises, Anant Raj Industries, Ambalal Sarabhai, Inox Leisure, Gulf Oil Corp, Flex Industries, Shaw Wallace, Hindoostan Spinning, NEPC India and Nirlon.

Delivery Delight:
Britannia and Dabur

Brokers Recommendations:
Mahindra Gesco – Outperform from Kotak

Long Term Investment:
Hindustan Construction

Major News Headlines:
Satyam signs MoU with Egypt to set up development center
ONGC to consider interim dividend on December 23rd
Anant Raj Industries to raise Rs12.25bn through share sales
HPCL to consider interim dividend on December 20th
3i Infotech ties up with Oracle to develop technology center in Chennai
Tata Steel may raise Corus bid to 525 pence per share: reports
Bihar Tubes secures export orders
Garware Offshore to consider raising FII limit to 60% on December 20th
Bajaj Hindusthan signs US $80mn ECB contract
BSEL Infrastructure's UAE unit raises US$25mn


Spicejet plans to raise US$118.5mn through a preferential allotment of equity shares to a clutch of foreign and domestic investors. The potential investors include Tata Group companies, Texas Pacific Group Ventures, Istithmar PJSC and Goldman Sachs amongst others, Spcejet has said.

Jet Airways would kick off flights to the US next year, as it aims to boost overseas revenues to 50% by 2009. International operations account for 20% of Jet Airways' turnover currently.

Grasim is reportedly planning to acquire a majority stake in Austrian cellulose-fibre maker Lenzing AG.

Deutsche Bank would invest an additional Rs 11.25bn (about US$250mn) in its Indian operations to cash in on the booming financial services business in Asia's fourth-largest economy.

US antitrust authorities have approved a proposal by Tata Steel Ltd. to acquire the Anglo-Dutch steel major.

The index of Industrial Production (IIP) grew by just 6.2% in October as against 9.8% in the same month last year, the Government said on Tuesday. In September, the IIP had expanded by 11.4%. Manufacturing growth declined to 6% in October from 10.9% in the corresponding month a year earlier.

ANG Auto Ltd has entered into a definitive agreement with Carl Stover to form joint venture companies in United States and India.

Mid-Day Multimedia Ltd. and Bennett, Coleman & Co. Ltd. have announced a business co-operation partnership to share their printing and distribution network.

The Nasdaq Stock Market has formally launched its 2.7bn pound (US$5.3bn) hostile bid for the London Stock Exchange Group Plc. (LSE) after Europe's largest exchange spurned a friendly offer three weeks ago.

From Research Desk - IVRCL

IVRCL Infrastructures & Projects Ltd. BUY CMP: Rs379

IVRCL is the biggest player in the water management vertical in India, accounting for 46% of the company’s revenues in FY06. With continued focus on this vertical by certain states, we expect this vertical to contribute to 50.5% of IVRCL’s turnover in FY07 and 53.1% in FY08. The award of India’s first desalination project to be constructed in Chennai, is testimony of IVRCL’s strong position in the segment. We assign a value of Rs6 per share to this project.

IVRCL’s 51.4% controlling stake in Hindustan Dorr-Oliver (HDO) enables access to HDO’s expertise to be leveraged for EPC projects in the water segment, completing the value chain in this segment. We include this investment in our target price calculations at the present market value of IVRCL’s equity of Rs1,640mn, translating into Rs13.7 per share.

IVRCL has a well diversified portfolio with an order backlog of Rs67bn at present, translating into 4.5x its FY06 sales, which is among the highest in the construction space. The order intake/execution is at a healthy 2.5x, signifying high growth in FY07 and FY08.

With three toll based road BOTs valued at Rs10.8bn, either having achieved or nearing financial closure, IVRCL plans to bid for some more and foray in BOTs in power T&D as well. We foresee IVRCL as a major player in the BOT space in future and value these three projects at Rs15.6 per share of IVRCL.

The sale of the balance 25% residential land in Hyderabad is expected to fetch Rs1.65bn in FY07. Around 40% of the 11.83 acres commercial portion is expected to be sold in FY08 and the balance in FY09. We value the commercial portion at the market price of unsold land post 25% discount, giving Rs29.7 per share of IVRCL.

How Market Fared

Some recovery likely

The free fall continued on the bourses as the benchmark Sensex further lost 400 points wiping off over 900 points in three trading session. Sharp fall in the industrial output and further heavy sell off’s in the heavy weights like ABB, ACC, SBI, BHEL, RIL and ONGC dragged NSE Nifty by over 130 points. The Capital Good and the Banking index led the sharp fall, with BSE Capital Goods index dropping 4.14% and BSE Bank index down 3.23%. Finally, the BSE benchmark Sensex lost 404 points to close below the 13000 mark at 12995. NSE Nifty dropped 132 points to close at 3716.

Aurobindo Pharma lost 4.2% to Rs641 after the company secured MEB Netherlands nod for Simvastatin. The scrip touched an intra-day high of Rs685 and a low of Rs632 and recorded volumes of over 3,00,000 shares on NSE.

Airways dropped 5.3% to Rs596. The company announced that they would start flights to US, China next year. The scrip touched an intra-day high of Rs690 and a low of Rs552 and recorded volumes of over 4,00,000 shares on NSE.

ICICI Bank was down 2% to Rs803. The Board of Directors of the company approved the merger of The Sangli Bank Ltd. with itself. Deloitte Haskins & Sells have recommended a share exchange ratio of 100 shares of ICICI Bank for 925 shares of Sangli Bank. The scrip touched an intra-day high of Rs832 and a low of Rs772 and recorded volumes of over 16,00,000 shares on NSE.

Bank of India plunged by over 10% to Rs164. The company would buy more than 50% stake in Indonesia's PT Bank Swadesi. The scrip touched an intra-day high of Rs185 and a low of Rs158 and recorded volumes of over 51,00,000 shares on NSE.

Capital Good index was the major loser, the index lost by 4.14%. L&T, Siemens, ABB and Punj Lloyd were among the major losers.

Metal stocks further lost their shine. National Aluminum dropped 4.5% to Rs198, Hindalco declined 3.5% to Rs167, SAIL was down 2.1% to Rs82 and Sterlite industries fell 5.4% to Rs502.

Pharma stocks were bad health. Glaxo slipped 5.6% to Rs109; Ranbaxy lost over 4.3% to Rs359, Cadila was down 3% to Rs315 and Cipla declined 1% to Rs240.

Cement stocks also were under the bear attack. ACC dropped over 6.5% to Rs968, Gujarat Ambuja slipped 4.4% to Rs131, India Cement lost over 11% to Rs190 and Grasim plunged over 7.2% to Rs2507.

Banking stocks continued its downtrend after RBI hiked CRR by 50 basis points yesterday. SBI fell 5.1% to Rs1181 and ICICI Bank lost 2% to Rs803. Among the Mid-Cap stocks Union Bank, Bank of India and Canara bank were among the major losers losing over 10% each.

Telecom stocks were also ringing low. Index heavy weight Bharti Airtel dropped 5% to Rs575, Reliance Communication dipped 6.2% to Rs403, VSNL was down 5% to Rs381 and MTNL lost 2.6% to Rs127.

Oil & gas stocks also ended lower. HPCL dipped 2.8% to Rs258 and BPCL fell over 2 % to Rs318. Oil Exploration stocks like ONGC and Reliance Industries were among the major losers.

IDBI Capital - Morning Alert + Emkay Morninger

IDBI Capital Morning Notes

Emkay Morning Notes

Shree AshtiVinayak Cine Vision

Weakness may persist

Unwinding of long positions in derivative segment caused sharp fall on the bourses in the past two days. Open interest in derivatives segment declined by 2.4% on Monday (11 December) and it would have fallen further on Tuesday (12 December), dealers said. A lower-than-expected industrial output growth for October 2006 caused 404-point fall in Sensex on Tuesday, after the barometer index had lost 400 points on Monday (11 December) following a surprise hike in cash reserve ratio (CRR) by the RBI, which raised fears of rise in interest rates.

The near 1000-point fall in Sensex in the past three trading sessions has triggered fears of margin calls. Margin calls are normally triggered when markets show hyper volatility or witness abnormal slides.

During the current market fall, FIIs were net buyers in the cash segment even as they pressed heavy sales in index-based futures. As per provisional data released by stock exchanges, FIIs were net buyers to the tune of Rs 259 crore on Tuesday. Their net inflow was Rs 422 crore on Monday 11 December.

FIIs were net sellers to the tune of Rs 415 crore in index-based futures on Tuesday 12 December. In contrast, they made net purchases of Rs 480 crore in individual stock futures on that day. FIIs were net sellers to the tune of Rs 1250 crore in index based futures on 11 December. They were net sellers to the tune of Rs 1,087 crore in index-based futures on 8 December.

US stocks slipped on Tuesday after the Federal Reserve kept interest rates unchanged as expected, but its statement recognized a substantial cooling off in the housing market. The Dow Jones industrial average declined 12.90 points, or 0.10 percent, to clsoe at 12,315.58. The Standard & Poor's 500 Index slipped 1.48 points, or 0.10 percent, at finish at 1,411.56. The Nasdaq Composite Index dropped 11.26 points, or 0.46 percent, to close at 2,431.60.

Asian markets were mostly in the red in Wednesday. Key benchmark indices in Hong Kong, Japan, South Korea and Taiwan were down by between 0.04% to 1%.

On the New York Mercantile Exchange, US crude oil for January delivery fell 20 cents, or 0.33 percent, to settle at $61.02 per barrel on Tuesday.

India’s infrastructure sector output grew 9 percent in October from a year earlier, slower than revised annual growth of 9.6 percent in September. Output rose an annual 7.4 percent in October 2005. Infrastructure output in the April-October period rose 7.5 percent from a year earlier.

ABN Amro - CRR Hike

Download here

Thanks Vishesh

Make Money & Save On Tax

Except for Equity Linked Savings Schemes (ELSS), all tax saving investments are fixed return. It is interesting to see how in the peak of a bull run, fixed return investments are scorned by investors. Why park your money in a place that gives you a meagre return when the bulls are galloping ahead to give you 60 per cent per annum?

Go back to the five-year period from 1998 to 2002. The Sensex rose wildly and then fell to almost the same level. During these five years, your money would have stagnated in the stock market. If, instead, you had invested in a fixed deposit where you were earning 11 per cent or 12 per cent per annum (which was the rate then), you would have seen your money go up by about 75 per cent.

However lucrative the stock market, it is risky. So in every portfolio it makes sense to allocate some amount of money to fixed return instruments. And, if you can avail of the tax benefit while doing so, so much the better.

Five-Year Bank Deposits
Lock-in period: Minimum 5 years
Safety: High
Instrument: Fixed return
Annual return: Depends on market interest rates
Limit: None

This has been the latest addition to Section 80C. And, for those who love depositing money in the local bank, this one is a real boon. But do make careful note that any deposit with a tenure of less than five years will not be valid for the tax benefit.

As of now, you can expect around 8 per cent on such a deposit. Senior citizens will get 0.5 or 1 per cent more. So while this option scores high on convenience and safety, the hitch is that interest earned on bank deposits is taxed.

Public Provident Fund
Lock-in period: 15 years
Safety: Highest
Instrument: Fixed return
Annual return: 8%
Limit: Rs 500 (min) to Rs 70,000 (max) per FY

Though its interest rate has dropped from 12 per cent to 8 per cent per annum, it is still the darling of the tax saving instruments.

To add to its sheen, it also boasts of the exempt-exempt-exempt criteria, popularly referred to as EEE. What this means is that there is a tax exemption on contributions (when you deposit money), tax exemption on interest earned and tax exemption on withdrawals.

It can't get better than this though it can certainly get worse. In the future, the taxation methodology would shift to EET -- exempt-exempt-taxed -- which means that the withdrawals would be taxed.

National Savings Certificate
Lock-in period: 6 years
Safety: Highest
Instrument: Fixed return
Annual return: 8%
Limit: Rs 100 onwards. No upper limit

On the face of it, this one is identical to the PPF but with a lower tenure. While NSC offers the same interest rate of 8 per cent per annum, it is computed on a half-yearly basis, while PPF on an annual basis. On this point NSC scores.

Let's say on April 1, 2006, you invest Rs 30,000 in both, PPF and NSC. A year down the road, you would have Rs 32,400 in your PPF account but Rs 32,448 in your NSC. As the years go by, the difference becomes all the more pronounced.

But this benefit is nullified when you take the tax benefit of PPF into account. The interest you earn on NSC is taxed but is also eligible for a deduction under Section 80C.

Generally, it is advisable to declare accrued interest on NSC on a yearly basis. So, over the period of six years, you could declare the interest income for each year. In such a case, it does not amount to a huge sum. If the above does not appeal to you, then you can claim the entire amount in the year of maturity under Section 80C.

While PPF is an ongoing account, NSC is a one-time investment available in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000.

Employees' Provident Fund
Lock-in period: Dependent on the employment
Safety: Highest
Instrument: Fixed return
Annual return: 8.5%
Limit: 12% of monthly salary with employee given the option to increase contribution

The EPF is a retirement benefit scheme available to salaried employees. Under this scheme, a stipulated amount decided by the government (currently 12 per cent) is deducted from the employee's salary and contributed towards the fund with the employer making an equal contribution.

The flexibility exists for an employee to contribute more than the stipulated amount if the scheme allows for it. However, the employer is under no obligation to increase his contribution. Let's say the employee decides that 15 per cent of his salary must be deducted towards the EPF. In this case, the employer is not obligated to pay any contribution over and above the amount as stipulated, which is 12 per cent.

The amount accumulated in the PF is paid at the time of retirement or resignation. If you have worked continuously for a period of five years, the withdrawal of PF is not taxed.

PF can be transferred from one company to the other if one changes jobs. Even if you have not worked for at least five years but are transferring the PF to the new employer, it is not taxed. What's more, the tenure of employment with the new employer is included in computing the total of five years.

The message: If you withdraw it before completion of five years, you pay tax. Unless your employment is terminated due to ill-health.

Infrastructure Bonds
Lock-in period: Dependent on the bond, three years minimum
Safety: High
Instrument: Fixed return
Annual return: Depends on current market interest rates
Limit: None

The party is over for these. At one time, it was mandatory to invest in them. And financial institutions like ICICI and IDBI garnered phenomenal amounts of money due to this stipulation. Now that the investor has the flexibility to bypass this investment, this is exactly what is being done. And the financial institutions too have not been coming out with issues.

Of course, if you are very risk averse and want your money back as quickly as possible, this one seems to be the only tax saving option suited to both those requirements. Provided of course, the financial institutions do come out with an issue.

Sharekhan Eagle Eye (equities) & Derivatives Info Kit for December 13, 2006

Download here

IDBI Capital - Shree Ashtivinayak Cine Visions Ltd - IPO

Download here

Kalpataru - Trade4Profit Newsletter

Download here

Sharekhan Investor's Eye dated December 12, 2006

IIP for October 2006 dips to 6.2%

The Index of Industrial Production (IIP) grew by 6.2% year on year (yoy) for October 2006, as compared to an 11.4% growth in September 2006 and a 9.8% growth in October 2005. The growth was significantly lower than the consensus estimate of 9.6%.

Key points

  • The slowdown is not broad-based as basic goods are up 9.9% yoy, capital goods are up 8.2% yoy and intermediate goods are up 8.1% yoy.
  • The slowdown is mainly in the consumer goods sector, which reported a 0.5% year-on-year (y-o-y) growth, with durables up only 2.4% yoy and non-durables down 0.4% yoy.
  • The slowdown in the consumer goods production has largely been influenced by the festive season falling in the month October in the current fiscal compared to November in the previous fiscal.
  • The decline in non-consumer durables production is somewhat strange as leading fast moving consumer goods (FMCG) companies have reported that the growth rate is normal. Further if we take a cue from the beverages and tobacco category which grew by 11.5% yoy the decline in non-durables remain a surpirse.


Nucleus Software Exports
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs680
Current market price: Rs497

Product play

Key points

  • Niche player with established presence: Nucleus Software Exports Ltd (NSEL) is a niche player offering software products and services to companies in the banking and financial service space. It has established itself globally with product installation base of over 250 application modules in more than 30 countries.
  • Product business drives growth: The product business grew exponentially in FY2006, on the back of some impressive order wins like the $12-million multi-year deal with GMAC. Apart from this, it added 21 new clients and bagged orders for 38 new installations in FY2006. In the first half of FY2007 also, the company added 14 new clients and continued to grow its pending order book that stood at Rs135 crore as on September 2006. Consequently, we expect the product revenues to grow at a CAGR of 67% over FY2006-08.
  • Margins are sustainable: In spite of the cost pressures and the aggressive employee addition targets for this year, the company is likely to sustain its overall profitability. The growing contribution from the high-margin product business is expected to mitigate the adverse impact of the rising wage bill and the expansion-related pressures in the intermediate term.
  • Alliance could throw positive surprises: The initiatives to forge joint marketing alliances with global technology giants and develop a network of channel partners could result in higher-than-expected order bookings. The partnership model has already started yielding results.
  • Valuation: Revenues and earnings are estimated to grow at CAGR of 38% and 40% respectively over FY2006-08E At the current price the stock trades at 11x its FY2008 earnings, which is relatively cheaper compared with the peer companies. We recommend a Buy on NSEL with a one-year price target of Rs680.


Bank of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs185
Current market price: Rs165

Acquiring 76% stake in an Indonesian bank

Key points

  • Bank of India (BoI) is set to acquire a majority 76% stake in Indonesian bank, P T Bank Swadesi Tbk, at an estimated cost of Rs111.3 crore ($25 million). The deal will be completed in another couple of months, as certain clearance issues need to be sorted out.
  • The Indonesian bank is a mid-sized bank, listed on the Jakarta Stock Exchange and has been operating in Indonesia for the last 38 years. It has an asset base of Rs445 crore ($100 million), a deposit base of Rs333.8 crore ($75 million) and a net worth of Rs48.9 crore ($11 million).
  • The Indonesian bank has four branches, two each in Jakarta and Surayaba, and five sub-branches. International business contributes approximately 20% of BoI’s assets as on September 30, 2006.
  • BoI has been operating in Indonesia for the last 33 years through a representative office and hence its management felt that acquiring a local bank would be a better deal than setting up a bank in Indonesia as the capital requirements for setting up a new bank are high at Rs1,335 crore ($300 million).
  • Since 20% of BoI’s assets are from foreign operations, we feel that the deal would add value to the bank’s overall operations considering the financials of the bank (refer table below). The bank acquired has an asset base of Rs445 crore (2% of BoI’s international assets and 0.4% of BoI’s total assets as on March 31, 2006) which we feel is fairly manageable.


Fund Analysis: December 2006

An analysis has been undertaken on equity and mid-cap funds' portfolios, indicating the favourite picks of fund managers for the month of November 2006. Equity funds comprise of all diversified, index, sector and tax planning funds, whereas mid-cap funds include a universe of 17 funds such as Reliance Growth, Franklin India Prima Fund, HDFC Capital Builder, Birla Mid-cap Fund etc

Download here