Citigroup - India Economics

Download here

FII: -Rs 673.4 Cr & MF +Rs 10.6 Cr

FII Gross purchases Rs 1580 Cr Gross Sellers Rs 2253.5 Cr Net Sellers Rs 673.4 Cr MF Gross Purchases Rs 663.79 Cr Gross Sellers Rs 653.10 Cr Net buyers Rs 10.69 Cr.

The FII sales numbers is in line with the provisional data for yesterday.. However the more important number is the provisional figure for today. Clearly the FIIs have pressed the sell button. This will weigh on markets tomorrow.

Close: its unlike the old days now ! ship changing direction ??

After yesterdays bloodshed Indices winessed yet another day of profit booking. Market started in positive territory but soon witnessed selling pressure in heavyweights which pushed indices to end in red. A volatile session dfor the indices as it swung between the negative and positive territory. Thailand reversed its diktat on Baht controls but really and that all of Asia in Green. However Indian Markets are a bit different. It has been a dream run and valuations a bit on the excessive side. Despite, positives in global markets Indian indices slipped into red. Recovery in the the afternoon session was sharp and strong but selling pressure once again wrapped up the indices towards the end of the day closing it in red. FII numbers have come in negative and the provisional figures too are negative which sets the tone negative for tomorrow. Heavyweights like Suzlon Energy, Tata Power and Hero Honda contributed big way to the fall. Europe markets were trading in green at the time of writing this.

Sensex ended down by 42 points at 13340.21. Weighing on the Sensex were losses in Tata Motors (835.95,-3 percent), Hero Honda (730.55,-3 percent), HLL (218.45,-3 percent), Wipro (555.45,-2 percent) and HDFC Bk (1017.55,-2 percent). Losses were restricted by gains in TISCO (465.1,+2 percent), Maruti (923,+2 percent), ONGC (858.8,+1 percent), HDFC (1571.4,+1 percent) and ITC (170.65,+1 percent). topnew.gif (1104 bytes)

Shobha lists with a bang; Is the ship changnig direction ? Performance was good.

As per the news.. The Department of Telecommunications (DoT) is likely to recommend a single levy regime for telecom service providers in the budget recommendations to the finance ministry. Presently, the telecom service providers have to pay a large number of levies imposed by both the central and state governments. Besides this some state governments are also levying stamp duty on installation of towers. DoT feels that the tax structure should be simple and transparent. This will save the telecom industry from unnecessary red tapism and will reduce administrative burden on the government. The department is also considering a proposal by the operators on reduction of licence fee. Telecom stocks traded mostly weak the key losers being VSNL (-3%) and Reliance communication (-1.1%) while Bharti Airtel was marginally up.

Real estate firm Sobha Developers got listed on the Bombay Stock Exchange with a premium of 74% over its issue price of Rs 640. The stock ended at a huge premium of 46% to its allotment price but not before listing at a high of over 80% gains. It settled down at lower levels. The real estate companies are the flavour of the season currently and hence vulnerable to extreme valuations. Among its peers both Parsvnath Developers and Unitech ended lower by more than 3%.

The November Trade data was encouraging with Exports up by 33.6% valued at $9.8 Bn (yoy) while the imports also grew by 42.99% at $15.88 Bn (yoy). The country?s Trade Deficit was seen higher at $6.20 bn for November Vs $3.87 bn the previous year. Good growth in exports is creditable. However the imports have also grown and the deficit is high. Crude is a big reason for the jump in imports.

When a ship changes direction it throws out the waste. likewise when the mkt tries to change direction there are wild swings on either side. The markets swings seem to be indicating that. Markets tend to be volatile as it struggles between value buying and profit taking. Near term triggers are lacking. Some more advance tax numbers have come in and they may fuel some speculation on the profits for this year. The only worry near term remains from the cash crunch. We feel things could still get tougher. Markets are for now headed down lead by heavyweights where valuations are on the higher side. Mid caps could get cheaper and thats where one should look for value.

Technically Speaking: Market was in a volatile mood with no clear direction where it was heading to. Sensex rallied between the channels of 13232 - 13568 level. However, the breadth had been in the favor of Decliners as they were 1.34 times the Advances. Tomorrow is important. Sensex seems to found some support at 13200 levels. Whether it holds needs to be seen. The market could forming a base near 13200 - 13300 levels which could help Sensex to rally upto 14k. However if this does not hold 12800 could be tested.

Market tumbles amid volatility

The Sensex began the trading session 71 points above its previous close at 13453, and moved up initially to touch an intra-day high of 13568, up 186 points. The market exhibited volatility in the first half of the session, but lost its initial momentum and slipped. The sentiment turned bearish and the index slipped to the day's low of 13233. After exhibiting considerable volatility throughout the day the Sensex ended the session with losses of 42 points at 13340 while the Nifty was down 16 points at 3816.

The market breadth was weak. Of the 2,613 stocks traded on the BSE, 1,423 stocks declined, 1,108 stocks advanced and 82 stocks ended unchanged. The sectoral indices were mixed. The BSE CD index, the BSE HC index, the BSE Metal index, the BSE Oil & Gas index and the BSE PSU index ended in positive territory. On the other hand the BSE Bankex, the BSE Auto index, the BSE CG index, the BSE FMCG index, the BSE IT index and the BSE Teck index exhibited weakness.

Among the losers Tata Motors dropped 3.12% at Rs836, Hero Honda shed 2.96% at Rs731, HLL dipped 2.80% at Rs218 and Wipro lost 2.03% at Rs555. HDFC Bank, Grasim, Reliance Energy, Bajaj Auto, ICICI Bank, SBI and Satyam Computers also closed in negative territory. Among the gainers Tata Steel surged 2.32% at Rs465, Maruti Udyog added 1.51% at Rs923, ONGC jumped 1.45% at Rs847, ITC gained 1.41% at Rs1,571 and Cipla was up 1.31% at Rs244. Infosys and ACC reported steady gains.

Carol Info at Rs56.60, Nelco at Rs114.85 and Texmaco at Rs1,094.35 hit the upper circuit while Sonata Software at Rs67.50 and Atlanta at Rs1,192.70 hit the lower circuit on the BSE.

Over 73.38 lakh Sobha Developers shares changed hands on the BSE followed by Reliance Communication (23.50 lakh shares), Sterling Biotech (24.26 lakh shares) and RPL (22.70 lakh shares).

Sobha Developers made its debut on the BSE. The stock touched an intra-day high of Rs1,179 before profit taking dragged it to a low of Rs918. The company had sold the shares at Rs640 in the initial public offering. The stock finally closed at Rs969. Over 73.38 lakh shares were traded on the BSE.

Immense volatility on the bourses

The market settled in the red after witnessing high volatility throughout the day’s trading session, moving between positive and negative zone. However, metal stocks were in demand led by Tata Steel.

The Sensex settled 41.80 points lower at 13,340.21. It swung sharp 335 points for the day from an intra-day low of 13232.56 and intra-day high of 13568.09.

The S&P CNX Nifty lost 16.45 points to 3815.55

The total turnover on BSE amounted to Rs 4383 crore, compared to Tuesday’s Rs 4183 crore.

The market breadth was negative on BSE, as selling emerged for small-cap and mid-cap stocks. On BSE with 1465 shares declined as compared to 1094 that advanced. 83 remained unchanged. The BSE Mid-Cap index was down 0.38% or 21.38 points at 5574.40 while the BSE Small-Cap index lost 0.21% or 13.94 points to 6,620.86.

Among the Sensex pack, 21 advanced while the rest declined.

Tata Steel was the top gainer, up 2.30% to Rs 465 on 15.75 lakh shares. It recovered from low of Rs 450.10. The stock advanced after Britain's takeover watchdog set a 30 January deadline on Tuesday for Tata Steel and Brazil's CSN to make revised offers for Anglo-Dutch steelmaker Corus Group.

Cipla (up 1.24% to Rs 244), Maruti Udyog (up 1.73% to Rs 925) and HDFC (up 1.97% to Rs 1580) edged higher.

Diversified conglomerate, ITC rose 1.13% to Rs 170.25 on 15.09 lakh shares after reports that it will expand its fruit and vegetable retail and wholesale business by opening 54 new outlets in select metros in next three years. The company would target metropolitan cities for these wholesale-cum-retail stores. Currently, there are 6,500 e-Choupal kiosks in over 38,000 villages in nine states.

PSU engineering company Bhel settled 0.46% lower at Rs 2276.10 on volume of 3.28 lakh shares after touching a low of Rs 2232. It had lost close to 10% in the past two trading sessions.

Tata Motors was the top loser, down 3.22% to Rs 835.10 on 5.46 lakh shares. It had hit a high of Rs 880.40 in early trade

HLL (down 3.14% to Rs 217.70), Grasim (down 2.29% to Rs 2655) and HDFC Bank (down 1.82% to Rs 1019) edged lower.

Index heavyweight Reliance Industries (RIL) finished 0.24% lower at Rs 1250.10 on high volumes of 13.29 lakh shares. It had recovered from low of Rs 1231.15.

Sobha Developers settled at premium at Rs 968.75 on BSE, compared to its IPO price of Rs 640 per share. The scrip debuted at Rs 1111.25 on BSE and hit a high of Rs 1179. Its low was Rs 918.10. The counter saw high volume of 73.38 lakh shares on BSE. Sobha Developers’ IPO was subscribed over 100 times.

Ruchira Papers finished at discount at Rs 20.95 on BSE, compared to IPO price of Rs 23 per share. The stock listed on BSE at 5.86% premium at Rs 24.35 per share, which was also its intra-day high. It touched a low of Rs 20.65. The counter saw volumes of 41.17 lakh shares on BSE.

The BSE Metal index gained 0.45% or 38.76 points at 8644.17 as buying resumed for metal shares. JSW Steel (up 5.41% to Rs 350), NALCO (up 0.43% to Rs 211), Hindustan Zinc (up 0.51% to Rs 835), Jindal Stainless (up 0.31% to Rs 112.50) and Jindal Steel & Power (up 1.03% to Rs 2180) advanced.

Telecom software provider Tech Mahindra jumped 7.18% to Rs 1238.10 on renewed buying in anticipation of strong financial performance for Q3 December 2006. The scrip hit a high of Rs 1285, which is a lifetime high for the counter. Also there are reports that the company has bid for UK operations of Tiscali with the bid amount pegged at over 600 million pounds. Tiscali has 1.4 mln broadband users in UK.

iGate Global Solutions surged 16.66% to Rs 305 after the company announced board meeting on 10 January 2007, to take on record Q3 December 2006 results.

A block deal of 20 lakh shares was struck on Reliance Petroleum at Rs 63.25 per share. The stock was down 0.16% to Rs 63 on total volumes of 22.66 lakh shares.

MRF rose 0.91% to Rs 4325 after surging to an intra-day high of Rs 4495. It reported net sales of Rs 4248.3 crore for the year ended September 2006 as compared to Rs 2966.20 crore last year. Net profit jumped to Rs 79.90 crore (Rs 40.30 crore).

Mid-sized software firm Four Soft jumped 4.33% to Rs 71.10 after the company’s board approved the acquisition of Denmark's Transaxiom Holdings A/S for $10 million in a cash and stock deal. The Danish company, which provides software services for transportation and logistics services providers, would help expand Four Soft's presence in Scandinavia, Australia and Hong Kong, Four Soft said. The integration of the acquired company would begin next month. Transaxiom's annualised revenues of its current operations would be around $8 million.

Peninsula Land plunged 7.91% to Rs 629 after the company priced placement of shares with qualified institutional buyers at Rs 600 a share, a discount of 12% to Tuesday's closing price of Rs 683.05.

Indiabulls Financial Services rose 0.57% to Rs 541.10 after it acquired 100% shareholding in Noble Realtors. Noble Realtors is engaged in the business of construction and development of real estate projects.

Essar Oil rose 1.85% to Rs 46.70 after the refiner said it had begun exporting oil products from its refinery in Gujarat.

Pioneer Embroideries surged 5% to Rs 229.35 after the company said it would invest Rs 100 crore over the next three years to widen its retail presence in the country. Around 30% of these stores would be company owned and the balance through franchisees.

Gitanjali Gems advanced 2.50% to Rs 219.30 after the company announced on Tuesday that it has acquired a majority ownership interest in Samuels Jewelers Inc. from funds managed by DDJ Capital Management. Samuels operates 97 retail jewelry stores in 18 states throughout the United States.

Volatility is expected to remain high in the next few days ahead of expiry of December 2006 derivatives contracts next Thursday (28 January).

The near term trigger for domestic bourses is Q3 December 2006 results. Market men expect December 2006 quarter to be another strong quarter in terms of earnings growth. The Q3 results would start trickling in from about 12 January 2007.

Asian shares rallied from the biggest drop in a month after Thailand scrapped day-old penalties on stock investments. Toyota Motor Corp. and NEC Corp. gained after the yen fell, boosting the value of Japanese exports. Japan's Nikkei 225 Stock Average gained 1.4% to its highest since 9 May. Markets rose across the region, except in the Philippines and India. Benchmarks in New Zealand and Australia climbed to records.

PTT Pcl and Advanced Info Service Pcl led Thailand's SET Index to an 11% gain, rebounding from a 15% slump yesterday, its worst in 16 years. It spurred recoveries in emerging-market stocks after the Thai government abandoned rules imposed on 18 December to lock up 30% of foreign-currency deposits for a year on funds earmarked for equities. PTT, Thailand's biggest energy company, jumped 15% to 214 baht after plummeting 17 percent yesterday. Advanced Info, its largest mobile-phone operator, jumped 14% to 76 baht, recovering from a 21 percent drop.

The Nikkei share average topped 17,000 for the first time in seven months on Wednesday as shares of Toyota Motor Corp. and other exporters gained after the yen fell to a record low against the euro and neared a one-month low against the dollar. The Nikkei 225 index was up 1.40% at 17,011.04, breaking above 17,000 for the first time since 11 May.

Hang Seng index was up 1.45% to 19,240.12

European markets also opened positive, with Spain’s Madrid General being exception. The FTSE 100 index gained 0.44%.

FIIs were net sellers in three out of four trading sessions from 13 December to 18 December and that weighed on market sentiment. Their net outflow was Rs 182.70 crore on 18 December. As per provisional data, FIIs were net sellers to the tune of Rs 823 crore on Tuesday (19 December). They were also net sellers to the tune of Rs 831 crore in index-based futures on that day.

The Dow Jones industrial average finished at a record high on Tuesday, spurred by a rise in oil prices that boosted shares of Exxon Mobil Corp. But the Nasdaq fell as technology stocks dropped after disappointing financial results from industry bellwether Oracle Corp. The Dow Jones industrial average rose 30.05 points, or 0.24%, to end at a record 12,471.32. The Standard & Poor`s 500 Index advanced 3.07 points, or 0.22%, to finish at 1,425.55. But the Nasdaq Composite Index slipped 6.02 points, or 0.25%, to close at 2,429.55.

Oil continued to trade above $63 a barrel Wednesday with slight fluctuations as traders awaited a weekly report that was expected to show a drop in U.S. oil inventories. Light sweet crude for February delivery was down 15 cents at $63.31 a barrel in electronic trading on the New York Mercantile Exchange. At London's ICE Futures exchange, oil prices also moved slightly lower, with Brent crude for February delivery down 17 cents to $62.64 a barrel.

ENAM - ONGC

Download here

Sharekhan Highnoon dated December 20, 2006

Download here

Kotak - Jammu & Kashmir Bank

Download here

Thanks Dunbaka

Sharekhan Commodities Buzz dated December 20, 2006

Download here

Emkay Morning Notes - ACC Limited

Download here

IDBI Capital - Morning Alert - Dec 20

Download here

Market looks edgy

After correcting sharply in yesterday's trades, the market is likely to witness sideways movement. However, on the other hand, the undertone still looks bearish on the back of strong selling by the FIIs. For the Nifty, the key resistance level is at 3850 and has a likely support at 3760 on the downside. The Sensex has a likely support at 13237 and resistance at 13430.

US indices finished on a flate note on Tuesday. As a result, the Dow Jones surged by 30 points at 12471 while the Nasdaq was down 6 points at 2430 respectively.

Indian ADRs were largely weak on the US bourses. VSNL led the downfall by 3.95% followed by Satyam, Dr Reddy's and MTNLwere down nearly 2% each while Infosys, Wipro, Tata Motors, ICICI Bank, HDFC Bank & Rediff were declined by 1% each. However, Patni Computers was only closed in positive territory.

In the crude oil front, the Nymex light crude oil for february series surged by 67 cents at $63.46 a barrel. In the commodity segment, the Comex gold for February delivery advanced $7.50 to settle at $625.40 an ounce.

Market to recover

Thailand government’s late night decision on Tuesday to partially roll back currently control measures and a record closing for Dow Jones Industrial Average on Tuesday would trigger a rebound on the domestic bourses today. Thailand will exclude equities investments from a central bank measure aimed at curbing speculation in the baht, Thailand’s Finance Minister Pridiyathorn Devakula said on Tuesday after the stock market suffered its worst fall in 16 years. The news sent Thailand’s stock market up 8.8 percent at the open on Wednesday.

Asian stock markets rebounded on Wednesday as worries about Thailand eased after the government reversed restrictions on foreign investments in its share market. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.78% to 1.1%.

Sensex had tumbled 349 points on Tuesday (19 December) in a broad based decline in Asian markets after Thai central bank's currency controls heightened concern about emerging markets. As per provisional data, FIIs were net sellers to the tune of Rs 823 crore on that day. They were net sellers to the tune of Rs 831 crore in index-based futures and they net sold Rs 49 crore in individual stock futures.

FIIs were net sellers in three out of four trading sessions from 13 December to 18 December. Their net outflow was Rs 182.70 crore on 18 December compared to an outflow of Rs 46 crore on Friday 15 December. FII activity is likely to be muted till the end of this month, as foreign fund managers will be on vacation for Christmas and New Year.

Volatility may remain high in the next few days ahead of expiry of December 2006 derivatives contracts next Thursday (28 January).

Technical analysts feel that the Nifty has a strong support at 3,700 and Sensex at 12,800-12,900.

The near term trigger for domestic bourses is Q3 December 2006 results. Market men expect December 2006 quarter to be another strong quarter in terms of earnings growth. The Q3 results would start trickling in from about 12 January 2007.

The Dow Jones industrial average finished at a record high on Tuesday, spurred by a rise in oil prices that boosted shares of Exxon Mobil Corp. But the Nasdaq fell as technology stocks dropped after disappointing financial results from industry bellwether Oracle Corp. The Dow Jones industrial average rose 30.05 points, or 0.24 percent, to end at a record 12,471.32. The Standard & Poor's 500 Index advanced 3.07 points, or 0.22 percent, to finish at 1,425.55. But the Nasdaq Composite Index slipped 6.02 points, or 0.25 percent, to close at 2,429.55.

US crude oil for January delivery rose 94 cents, or 1.5 percent, to settle at $63.15 a barrel on the New York Mercantile Exchange on Tuesday. The rise in oil prices was attributed to expectations that US crude inventories fell in the past week due to shipping delays along the coast of the Gulf of Mexico. US oil inventory data will be released on Wednesday.

1,100 cos hit 52-wk lows during bull run

Skeptics of the stock market rally never tire of pointing out that only a handful of shares have participated in the recovery between June till now.

In the past 100 trading sessions, even as benchmark equity indices continued to soar, 1,100 companies listed on the BSE hit 52-week lows. But, supporters of the bull run argue there is a strong reason for the market to have ignored these companies. A majority, if not all, of these companies have seen their earnings decline over the past one year.

For the purpose of analysis, recent listings and companies whose comparative net profit figures were unavailable were excluded, leaving a total of 946 companies. These firms were categorised in the different groups and their group-wise four-quarter trailing net profit from September 2005 to September 2006 was analysed.

The hardest hit has been companies in the B2 Group comprising 420 companies, followed by B1 with 172 and S Group having 149 firms. At the same time, these B2 group companies posted a combined 24% decline in net profit over the past four quarters. This included 50 companies whose bottomlines slipped into the red during this period.

The combined net profit of the 946 companies has shown an increase of 23%, but that is mainly because high profits by a handful of them. In the A group, the combined net profit has risen by 28% from Rs 4,805 crore to Rs 6,157 crore. Here again, the increase is due to companies like National Aluminium, Canara Bank and Dena Bank, which together comprised about Rs 1,750 crore of increase in profit.

Similarly, the combined 25% rise in net profits in the B1 group was mainly because of companies like EID Parry and UB Holdings that together posted a net profit of over Rs 500 crore. In the Z group, the increase of 140% is due to the effect of one or two companies.

Harendra Kumar, head-research, ICICIDirect, says, “When a company hits a 52-week low, there is something fundamentally wrong with it. Just because the rally is happening, it does not mean that all companies in the industry are performing accordingly. There are large numbers of them unable to catch up with the growth witnessed by the industry.

Their stock prices could have tumbled down due to various reasons like rising operational costs, increasing input costs and margin pressures, lacklustre sales growth and lack of entrepreneurial skill sets et al. It is the big companies that benefit first when the growth in the economy takes place.”

He says some of these stocks also provide an opportunity as investment candidates. This cannot be interpreted as a buy signal, but there are many stocks that represent value and investing opportunity for those who complain that they have missed the bus.

“There has been a sharp increase in the profitability of large companies like information technology, financial and financial services like banking that witnessed a four-month rally, beginning late July on the back of falling bond yields, lower loan losses and investment provisions, as seen in the September quarter profits. Many small industries have not been able to catch up with the productivity factor and that is reflecting the stock prices of these companies,” says another analyst.

Morgan Stanley - ITC

Download here

Thanks Bharat

Thai currency control measures to have limited impact

The market plunged in a broad based decline in Asian markets after Thai central bank's currency controls heightened concern about emerging markets but market men see limited impact of the development for the domestic bourses.

The Thai situation is very localized and all the Asian markets would recover to levels that their fundamentals command individually and this shouldn’t take a long time, said Shaheena Mukadamm, head of research, IDBI Capital Market.

The Thai development came at a time when the market sentiment was cautious after the provisional data showed substantial FII sales of Rs 369 crore on Monday (18 December), the day when Sensex had risen 116 points in volatile trade.

The current fall, in fact, offers a buying opportunity for medium term and long term investors, Mukadamm reckons. Sensex plunged 349 points or 2.5% today to settle at 13,382.01. Thailand’s central bank said international investors will have to pay a 10% penalty on funds withdrawn out of the country within a year.

The near term trigger for domestic bourses is Q3 December 2006 results. Market men expect December 2006 quarter to be another strong quarter in terms of earnings growth. The Q3 results would start trickling in from about 12 January 2007.

But volatility may remain high in the next few days ahead of expiry of December 2006 derivatives contracts next Thursday (28 January). At the beginning of today’s trading session, the market wide open interest in derivatives was about Rs 52500 crore.

FII activity is likely to be muted till the end of this month, as foreign fund managers will be on vacation for Christmas and New Year.

Technical analysts feel that the Nifty has a strong support at 3,700 and Sensex at 12,800-12,900.

Ashtavinayak Cine Vision IPO

Shree Ashtavinayak Cine Vision (SACVL) was incorporated on 23 October 2001 to produce television serials. It was taken over by current promoter 24-year-old Dhilin Mehta on 1 April 2002. The company discontinued producing television serials and commenced production of full-length films and subsequently entered film distribution with a strong hold in the Mumbai territory, i.e., Mumbai city, Gujarat, Western Maharashtra and Northern Karnataka. It has also distributed a film in the Delhi territory. SAVCL has entered exhibition with tie-up with 31 theatres across Mumbai Territory. The company has distributed 23 films, the last being Jaan-e-man, and produced five films including Bhagam Bhag releasing on 22 December 2006.

SAVCL had earlier entered into an agreement with K Sera Sera Production to produce 10 films. The tie-up was terminated on 16 October 2006 due to non-compliance of obligations. The company had to repay Rs 3.05 crore. Similarly, the company has a memorandum of understanding (MOU) with Studio 18 to produce four films.

The net proceeds from the issue are to finance the estimated expenditure of Rs 45.90 crore to produce three films of about Rs 45.90 crore, to purchase Rs 14.12-crore equipment for film production, and for general corporate purposes and prepayment of debt.

Strengths

• The Indian film Industry’s is expected to double its present valuation of Rs 6800 crore by 2010. The country has about 12,000 single-screen theatres. Multiplexes are expected to grow from 328 screens in 2005 to over 1,000 screens by 2008. The revenue of the film industry is expected to grow at a CAGR of 18%. Territorial break-up of domestic theatrical sales of the industry shows that the Mumbai territory contributes the highest, at about 36%, and the northern territory 33%.

• The management is targeting producing at least one film in every quarter. SAVCL’s recent production Bhagam Bhag will be released on 22 December 2006. The company plans to produce eight films over a period of two years and has signed some directors, writers and actors for the same. The management has indicated it will release one more movie in March 2007.

Weaknesses

• The revenue and profitability are dependent on movie releases. The revenue tends to rise/fall depending on the number of films released and the success of these films in a financial year. Investors should be prepared for sharp volatility in revenue and profit quarterly as well as yearly.

• The shelf life of a commercial theatrical screening of films has reduced from more than a year to less than six weeks. With many players planning large-scale production of films, value and success rate of films are bound to come down.

Valuation

In FY 2006, SAVCL produced one film and distributed eight films. Film production accounted for 52%, distribution 45%, and exhibition 1% of the sales revenues. In the four months ended July 2006, the company produced one film and distributed three. Film production contributed 60% and distribution 40% of the revenue. Going forward, the release of Bhagam Bhag on 22 December 2006 will drive the production revenue in the remaining part of FY 2007. Financials of FY 2006 and the four months ended July 2006 were impacted by loss in securities trading: Rs 97.59 lakh and Rs 2.64 lakh, respectively. The company has indicated this would not recur.

The FY 2006 EPS on post-issue equity works out to Rs 10.6. At the price band of Rs 140- Rs160, PE works out to 13.2–15.1. Though this is substantially lower than TTM PE of around 40 for the entertainment and media sector, one should bear in mind the volatile nature of its profit. Stock market’s experience with similar companies in the past has been far from encouraging. Mukta Arts, Pritish Nandy Communications and K Sera Sera are trading below their IPO offer prices.

Karvy - REI Agro

Download here