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Saturday, January 13, 2007

IDBI Capital IPO Notes

Akruti Nirman

Cinemax India

Global BroadCast News

House of Pearl Fashions

Pochiraju Industries

Redington Industries

Technocraft Industries


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IPO - Cinemax India

Cinemax India, the leading theatre-chain operator, is promoted by the Kanakia group, with a track record of over 20 years in real-estate development. It operates six multiplexes, two multi-screen theatres, and two single-screen theatres. Of the 33 screens and 9,220 seats in its 10 properties, Mumbai and Thane accounts for 30 screens. With 21 screens spread over 146,242 sq ft area, the company is the largest owners of multiplexes.

Cinemax has forayed into the gaming business, under the brand name, Giggles-The Gaming Zone, at Eternity Mall, Thane. The 13,000 sq-ft area offers around 50 state-of-the-art games. It intends to open seven new gaming zones at its multiplexes by FY 2009. Further, the company has developed over 200,000 sq ft at the Eternity mall, Thane. The company is currently, developing a 100,000 sq-ft mall at Nagpur and 30,000 sq-ft phase-II of Eternity mall at Thane. Both are expected to become operational by FY 2007 and FY 2008, respectively.

The net proceeds of the issue are to be utilized for setting up 19 new theatres at identified key locations with approximately 63 screens and 15,864 seats at an estimated cost of Rs 110.69 crore. The theatres will be in Indore, Guwahati, Nagpur, Nashik, Faridabad, Panipat, Hyderabad, Kolkata, Ahmedabad, Ghaziabad, Siligudi, Ludhiana, Bangalore, Pune and Mumbai.


  • Cinemax India has developed a strong patronage in the last couple of years. The number of patrons has grown from 2.40 lakh in FY 2004 to 3.67 million in FY 2006. The figure has reached 2.73 million in the half-year ended September 2006. From one screen in 2004, the company is adding 11 screens at five properties by March 2007, 50 screens at 15 locations by March 2008, and another 47 screens at 12 locations by March 2009. The number of screens is to grow from 33 screens at 10 locations to 141 screens at 42 locations by FY 2009.
  • The Indian multiplex industry is on a high-growth trajectory, with its increasing share of the overall box office collections. The growth of multiplexes is fuelled by the rise in disposable incomes, a boom in organized retail, entertainment tax benefits given by several state governments, and the corporatisation of the Indian film industry.
  • From an ownership model, Cinemax India is switching over to a lease model, which would lead to a lower capital expenditure, going forward. The company expects to break even at 20% occupancy.


  • The multiplex business enjoys a relatively low breakeven due to higher ticket rates and entertainment tax benefits. However, tax benefits are for a limited period and ticket rates can be regulated by the states as has been done recently in Tamilnadu.
  • The poor success rate of Hindi films, inadequate enforcement of anti-piracy laws in India, and increasing home viewing options such as DVD and cable TV/DTH may constrain the growth in the number of cinema patrons. Also, the company will face competition from established companies such as PVR, Adlabs Films, and Inox Leisure.


The consolidated FY 2006 EPS on the post-equity of Rs 28 crore works out to Rs 2.7. At the price band of Rs 135 – Rs 155, PE works out to 49.2 – 56.5. For the first half of FY 2007, the consolidated non-annualised EPS is Rs 1.5. Due to the seasonality of the business, the EPS cannot be annualised. However, in view of the big releases since September 2006, the second half will be much better.

Also by FY 2009, Cinemax India plans to quadruple the number of screens from the current 33 in 10 locations to about 141 across 42 locations. Also, the company has a 1,00,000 sq-ft mall under construction at Nagpur. It will be leased out going forward as also 30,000 sq ft of property at Eternity Mall, Thane (phase II).

The companies in the peer group, i.e., PVR, INOX Leisure and Adlabs Films, are trading at 101.1, 50.8 and 64.7 times their FY 2006 EPS.

IPO - House of Pearl Fashions

Promoted by the Seth family, House of Pearl Fashions (HOPF) is a ready-to-wear apparel company operating in three distinct business streams: manufacturing, marketing and distribution, and sourcing of garments. HOPF has 10 ready-to-wear apparel manufacturing facilities; six of them are in north India, one in south India, two in Bangladesh, and one in Indonesia.

The portfolio of HOPF’s products comprises knits, woven sweaters and bottoms in basic as well as complex designs. The company has marketing and distribution offices in the UK, the US and Hong Kong to oversee marketing and merchandising teams across Canada, Europe, Hong Kong, the UK and the US. It also owns warehousing and processing units in the UK and the US. HOPF has a sourcing business in Hong Kong with offices in China, Bangladesh and India. Besides design and product development teams in the UK, the US, India and Hong Kong, the company has fabric development centers in China and India.

The five distribution companies of HOPE in the US, the UK, Canada, Hong Kong and Spain get orders from these markets. Apart from its manufacturing facilities, over 150 third-party manufacturing units in China, Bangladesh and India cater to these orders. This constitutes around 70% of the company’s revenue. The company’s brands in the US, DCC and Kool Hearts, constitute around 8% of the revenue.

HOPF plans to double its manufacturing facilities in India and Bangladesh from the present 20 million pieces per annum to 40 million pieces per annum by 2010. The total cost of this expansion is around Rs 111.7 crore. Of this, Rs 57.5 crore will be raised through the issue, and the balance financed through debt. The company will spend Rs 14.30 crore for a design center and corporate office. Of this, Rs 3.80 crore will be diverted from the issue, and the remaining Rs 10.5 crore raised through debt. The Rs 14.30 crore required for setting up an integrated information technology system will be entirely met from the issue proceeds and so also pre-payment of a term loan of Rs 55.04 crore. An amount of Rs 51.07 crore, to be paid to subsidiary companies as part of group restructuring, will eventually to go to promoters. The retail foray of the company will cost Rs 73.33 crore. Of this, Rs 54.50 crore will be used from the issue. The acquisition of an existing brand in the UK or the USA for a retail thrust outside India will require Rs 40 crore. This, too, will be financed through the issue.


  • HOPF has a derisked and scalable business model.
  • Unlike most Indian garment manufacturers, the company derives 70% of its revenue through sourcing tie-ups. This is not mere trading revenue, but from its own design. In the apparel business, design is critical. Its strong design development capability is being leveraged to supply to global chains and source from reliable low-cost locations.


  • The global textile trade is highly competitive and over dependent on the US market. Economic slowdown in the US and depreciation of the US dollar will intensify pressure on profit margin.
  • The consolidated cash flow from operations was negative Rs 70 crore in the six months ended September 2006. HOPF seems to be extending large credits to buyers as well as suppliers.
  • The Union government has reduced export incentives under the Target Plus scheme. These will reduce further in future, putting pressure on profit.
  • In its present form, the company has come into existence after restructuring of group businesses and has only six months’ history of financial performance. Comparable proforma financials for the past are not provided and hence it’s impossible to assess how the HOPF has grown over the past.


The consolidated annualised EPS in the period ended September 2006 will be Rs 22.9 if the green-shoe option is exercised, resulting in a price to earning (PE) multiple of 22.9 to 26.2 times at the lower and upper band of Rs 525 to Rs 600. HOPF has a listed subsidiary Pearl Global in the same business (but much smaller). In spite of the fall in profit and lackluster sales growth in the September 2006 quarter, the Pearl Global stock has shot up 30% in the past one month and now trades at Rs 147 (TTM PE: 14.5). The nearest comparable listed company is Gokaldas Exports (which focuses on exports of own-manufactured garments only), which trades at a TTM P/E of 16.

IPO - Global Broadcast News

Capitalising on the success of CNN-IBN

Global Broadcast News (GBN), part of the TV18 group, owns and operates one of India’s leading 24-hour English language news and current affairs channel CNN-IBN. Since its launch in December 2005, CNN-IBN has become one of India’s leading English language news channels. In the five weeks ended 2 December 2006, it led the English news genre with an average weekly market share of 37.55% (closest competitor’s share was 35.37%), according to TAM Viewership Data. The company holds 15% equity of Web 18 Holdings, which operates the portal business of the TV18 group.

GBN has an agreement with CNN for an exclusive, limited, non-transferable right to use and reproduce, inter alia, the CNN name and principal logo. The company will pay licensing fee equivalent to 3.5% of net revenue of the channel CNN-IBN or the minimum guarantee that is in the range of US$ 5,00,000 to US$ 850,000, whichever is less. Further in consideration of the archived content licensed to the company, GBN is required to pay US$ 2,500,000 at the end of the third year.

Recently, GBN entered into a share-subscription-cum-shareholder agreement with the Gupta family, BK Fincap Pvt Ltd and Jagran TV Pvt Ltd, and acquired 49% equity shareholding in BK Fincap, which holds 82.1% of Jagran TV, which owns IBN 7, a 24-hour Hindi language news and current affairs channel, for Rs 68 crore.

The net proceeds from the issue are be utilised to pay the balance Rs 34.35 crore to BK Fincap, and a Rs 11.50- loan from B K Fincap and Rs 25 crore from ICICI Bank.


  • According to the Indian Entertainment and Media Industry Report by FICCI PreicewaterhouseCoopers, dated March 2006, the overall revenue of television broadcasters is expected to register a compounded annual growth rate of approximately 24% from Rs 12870 crore in 2004 to Rs 42700 crore end 2010. The advertising revenue of the industry is to grow to Rs 10500 crore by 2010 and television subscription revenue projected to rise by 29% compounded annually to reach Rs 30600 crore in 2010.
  • Since its launch in December 2005, CNN-IBN’s share in the English language news genre has increased from 18.75% to 37.55% in the five weeks ended 2 December 2006, according to TAM Viewership Data. Further, in this period, GBN had an average weekly reach of 11.17 million viewers and was available in 87.60% of the households with access to cable and satellite.
  • Through ‘IBN 7’, GBN has entered the Hindi language news genre. IBN 7’s average weekly market share increased from 7.61% in the five-month period ended 3 June 2006 to 9.14% in the six-month period ended 2 December 2006, according to TAM Viewership Data.
  • With the conditional access system (CAS) rolled out, GBN will derive subscription of Rs 2.25 per viewer, boosting its revenue going forward. It is also foraying the international markets by entering Nepal.


  • Part of the proceeds of the issue is to be invested in acquiring 49% shareholding in BK Fincap. As GBN will hold less than 51%, it may not be able to exercise control over the operations of the company.
  • The Hindi news genre, where it has yet to makes its mark, has huge competition. Its channel IBN 7 holds only 9.14% market share, as per the last TAM Viewership data. The competitors are Aaj Tak, India TV, NDTV India, Star News, Tez and Zee News.
  • The electronic news industry is highly competitive and faces tremendous employee cost pressures.


GBN made a loss of Rs 46.5 crore on revenue of Rs 6 crore in FY 2006 and a loss of Rs 26 crore on revenue of Rs 24 crore in the six months ended September 2006. The company can make losses for a few more quarters.

Currently more than 90% of the revenue of GBN comes from sale of advertising slots. There is generally a time lag of six-eight months between the popularity to translate into demand for advertising slots. With its English news channel CNN-IBN gaining viewers and attaining the top position, the company can see significant increase in advertising revenue going forward. In the CAS regime, broadcasting companies will now get a share of subscription, further boosting revenue. All packages offered by cable operators contain CNN-IBN. However, in the short run, there can be disruptions in advertisement revenue during the transition to pay channel and becoming CAS-compliant.

The current issue cannot be subscribed by FII/NRI. However, post issue, as per company sources, FIIs/NRIs will be able to buy up to 18% of the equity capital of GBN.

IPO - Technocraft Industries (India)

Promoted by the Saraf family, Technocraft is a diversified company with three divisions: drum closures, pipe, and yarn.

Technocraft is among the largest manufacturers and exporters of drum closures with an annual production of 25 million sets exported to 60 countries in the world.

The pipe division produces 3,500 tonnes per month of hot dip galvanised ERW steel tubes used extensively in irrigation, construction and transportation of gas, water, and chemicals. To enhance value addition, the company took a strategic step towards forward integration into scaffoldings. It developed Technocraft Scaffolding System to meet international standards with unique concepts like T Scaffoldings.

The drum closures division accounted for 27% of FY 2006 sales and 40% of FY 2006 profit before interest and tax (PBIT). The pipe division contributed 42% of FY 2006 sales and 26% of FY 2006 PBIT. The yarn division garnered 26% of FY 2006 sales and 28% of FY 2006 PBIT. Exports accounted for 89% of total sales.

Technocraft plans to upgrade the drum-closure plant and set up a new plant with a capacity of 9 million sets per annum. The company is set to increase the production of scaffolding systems in the pipe division and add a range of new products for the infrastructure and construction industries. About 25,200 spindles are to be added in the yarn division to increases its capacity to 61,104 spindles, and so also a 15-MW captive plant. Technocraft is entering the retail garment segment by opening 100 stores by 2007.

Between FY 2003 to FY 2006, consolidated sales registered a CAGR of 22.5%. But CAGR of net profit was only 3%. The consolidated FY 2006 EPS on the post-equity works out to Rs 9.7. At the price band of Rs 95- Rs 105, PE is 9.8-10.8. The first-half annualised consolidated EPS stands at Rs 13.5, and PE 7 - 7.8. Technocraft’s businesses attract poor PE. Being a diversified company, the applicable PE will be even lower.

Buying may continue

The market is expected to gain further, as buying is likely to continue in the forthcoming week. So far, results have been as per market expectations.

Also the strong data of India's industrial production (IIP), which rose 14.4% in November compared to the same month a year ago, suggests that the slowdown seen in October was temporary, and will help to dispel misgivings. Industrial growth in the first eight months of the current fiscal year, which ends in March 2007, rose to 10.6% from 8.3% in the same period a year earlier, the commerce and industry ministry said in a statement.

A month ago, the government reported 6.2% growth in October, stoking fears that the economy can be slowing.

Crude oil prices have also cooled sharply, with the US crude futures declining below $52, hitting a fresh 19-month low as selling by funds intensified.

TCS, HCL Technologies, Bajaj Auto, Wipro, Reliance Industries, Ranbaxy and Satyam Computer are the major Q3 results scheduled next week.

Aban Offshore, Reliance Industrial Infrastructure, CMC, Anant Raj Industries, Aztec Software, Jammu & Kashmir Bank, Container Corporation of India, Geometric Software Solutions, Rajesh Exports, Tulip IT Services, Triveni Engineering & Industries, Patel Engineering, HT Media, New Delhi Television, NIIT Technologies, Infotech Enterprises, Lupin, 3i Infotech, Canara Bank, Reliance Energy, Liberty Shoes, Siemens, Ultratech Cement, Tech Mahindra, JET Airways (India), Hindustan Construction Company and Dabur India, will also be announcing their December quarter results in the coming week.

Dramatic bounce back for the market

There was some dramatic action in the market this week. While the market saw significant falls on three consecutive days starting Monday, it bounced back with a vengeance on Thursday by posting robust gains of 268 points. There were some fears of we heading for a serious correction when the Sensex lost round about 500 points from last Friday’s close till Wednesday’s close. In the light of these developments, the 268 points gain on Thursday came as a breather. Friday’s gains were all the more euphoric. The Sensex and the Nifty both touched their all time highs on the day gaining 425.82 points and 110.20 points respectively at closing.

The Sensex closed Friday at 14056.53, up 196.01 points over last Friday’s closing. The Nifty closed at 4052.45, up 69.05 points over the week.

On Monday, January 8, the Sensex corrected 208.37 points to settle at 13652.15. There was correction across all Asian indices on the day and our bourses were not spared either. The fall in the BSE Mid-mid cap index was comparatively less severe at 0.4% as against Sensex’s 1.5%. We had the BSE Small-Cap index actually rising on the day by 0.8%. This can be seen symbolic of the action moving from large cap stocks to small caps and mid caps, something that market men have been anticipating for a while. IT, telecom and auto shares came down sharply on Monday.

The correction phase extended to Tuesday as well with the Sensex losing a further 85.82 points to close at 13652.15. The IT sector again played a role in the fall. With the rupee appreciating, there were concerns about companies in the sector being able to maintain their profitability levels. Many felt that it was purely a technical correction and expected the markets to pull back on Wednesday after two days of sluggishness. But they were proved wrong, as there was a further decline of 204.17 points or 1.5% in Sensex on Wednesday. There have been reports about hedge funds selling Asian equities to offset the losses incurred by them on account of a sharp 9% fall in oil price since the beginning of 2007. On the day, Nifty’s strong resistance at 3900 was broken and the closing was well below that level at 3850.30, down 1.5% over the previous day’s close.

The correction sentiment reversed finally on Thursday when the Sensex gained 268 points. The gains were based on short covering of positions and market men opined that one could not infer the bull run having resumed on the basis of Thursday’s gains. But come Friday, and the Sensex sky rocketed to close above the psychological mark of 14000 while Nifty too crossed its psychological 4000 mark. And this time the gains were not defensive. They came on a build up of fresh new long positions.

On Friday, the BSE Small Cap index closed at 7278.33, posting a gain of 180.15 points over last Friday’s closing. The BSE Mid Cap index closed Friday at 5974.64 points gaining 38 points over the week.

Among individual stocks, Infosys was in the news for its quarterly results. The results were as per market expectation but over the week, the stock has been a loser by Rs.52.45. The stock closed Friday at Rs.2222.35.

Index heavy weight Reliance Industries gained 4% over the week to close at 1340.10. Its Q3 results are to be announced on January 18.

Reliance Communications was down Rs.13.40 over the week. It closed Friday at Rs.433.75. On Wednesday, the company’s board approved a foreign currency convertible bonds (FCCBs) of up to $1 billion in one or more tranches.

ICICI Bank’s dollar-denominated, three-tranche debt offering reportedly received strong response. The transaction, expected to raise at least $300 million, has attracted orders worth over $2 billion. The stock rose by Rs.59.70 over the week to close at Rs 970.10.

HDFC Bank came out with its third quarter results on Thursday. It has reported 31.7% growth in net profit for Q3 December 2006 at Rs 295.64 crore. The net profit was within market expectations. Net interest income has risen a 38.4% to Rs 928.63 crore (Rs 670.61 crore), beating market expectations. The stock closed flat at 1.63.25, just 0.87% above its previous week’s close.

Despite falling crude prices, ONGC stood at Rs.924.85 on Friday, up Rs.28.90 over its previous week closing. Other oil PSUs HPCL and BPCL also did well. HPCL closed at Rs.304.15 up Rs.6.80 while BPCL was up by Rs.16.95 at Rs.368.70. The last trading day of the week was particularly good for the oil companies.

IFCI soared this week on the back of it selling a part of its stake in NSE for $160 million. The company plans to utilize the money for lending to AAA rated companies. The stock shot up to Rs.21.82, gaining 67% over last Friday’s close of Rs.13.06.

TV Today gained 15% over its previous week’s close to settle at 96.85. The gains came following a bulk deal amounting to a stake of 1.3 per cent in the company.

Zee Telefilms demerged its news business to Zee News Limited (ZNL) and the cable business of the company and that of Siti Cable Network, to Wire & Wireless (India) Limited (WWIL). Zee News closed the week at Rs 29.95 while Wire & Wireless settled at Rs 122.10.

In the IPO segment, Cairn India got listed on Tuesday, January 9. It listed at Rs.140, which is 12.5% below its issue price of 160. The stock traded at a discount through out the day to finally close the day at Rs.137.50. The issue had not got a good response on subscription and the down beat sentiment was reflected in its listing as well.

On the other hand, Shri Ashtavinayak Cine Vision, which got listed a day after the Cairn India IPO did quite well. Its IPO price was Rs.160. The stock did well despite the bearish market sentiment on the day. It closed the day 66.50 points above its IPO price at 226.50. The company is in the business of movie distribution and is said to have a good track record.

As per data available till Thursday, mutual funds were net sellers in equities to the tune of Rs 887.20 crores. FIIs until Wednesday, were net sellers to the tune of Rs.4549.80 crores.

Stocks you can pick this week

Hindustan Zinc
CMP: Rs 806.50
Target price: Rs 1,160

Macquarie Securities has retained its ‘outperform’ rating on Hindustan Zinc with a 12-month price target of Rs 1,160 following the company’s strong third-quarter numbers. “Given the bullish view on zinc prices in FY08 and expected 50% volume growth in FY09, we estimate sustained high profitability.

We expect earnings upgrades to drive the stock price,” the Macquarie note to clients said. “HZL — with one of the best mining assets, and huge possibility to add more reserves — is trading below its NPV (net present value) of Rs 804 and is one of the cheapest on this basis among its global peers,” the note added.

Reliance Industries
CMP: Rs 1,340.10
Target price: Rs 1,660

Goldman Sachs has upgraded its rating on Reliance Industries to ‘buy’ from ‘neutral’, saying the company’s new exploration and production (E&P) and organised retail ventures are of materially higher value than the market is currently factoring in.

“In our view, the current price factors in the company’s estimated total capex of $8 billion for these new ventures till FY2010E, but is not giving full value to the potential upside this expansionary capex could bring to the stock,” the Goldman note to clients said.

CMP: Rs 159.75
Target price: Rs 198

HSBC Securities has rated Hindustan Construction Company as ‘overweight’, with a price target of Rs 198. “Our valuation is based on sum-of-the-parts method, with the real estate business contributing 30% to total value,” the HSBC note to clients said.
“HCC is in a sweet spot, with the core construction business on a growth trajectory, driven by infrastructure investments.

To add to this, its foray into real estate would provide added value to the overall company,” the HSBC note to clients said. “

We expect HCC’s core earnings to record a CAGR of 41% over FY06-08(estimated), driven by 27% revenue CAGR (compounded annual growth rate) over the same period, and stable margin,” the note added.

Reliance Comm
CMP: Rs 433.75
Target price: Rs 508

JM Morgan Stanley Securities has raised its target price for Reliance Communications to Rs 508 from Rs 435, citing higher net subscriber additions, average realisations per unit, and higher data revenue. Between FY06-09, the brokerage expects the company’s operating profit to rise 69.3% 157.5%, respectively per year. Morgan Stanley is bullish on the telecommunications sector as a whole.

“Indian wireless penetration has risen 81% last year and is only 13% so far, versus China at 34%. Stable regulation, innovative products, increased capex by operators and falling equipment prices are key growth drivers,” the Morgan Stanley note to clients said.

Anagram - Cement Sector

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K R Choksey - Tea Industry

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RPL (Reliance Petroleum) - Media Release

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Morgan Stanley - Equity Fund Analysis

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Sharekhan Eagle Eye (equities) & Derivatives Info Kit for January 15, 2007

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WSJ - Rakesh Jhunjhunwala

Indian Mogul Rises to Status Of Money Icon Hunt for Undervalued Now Goes to the Mall; Like Warren Buffett

Rakesh Jhunjhunwala, often referred to as "India's Warren Buffett," built his fortune over the past 20 years by shopping for undervalued local companies. Now he's shopping for shopping malls.
He is keen on the malls, and the consumer goods flying off the shelves there. There is "a big explosion of purchases in India," especially in areas like construction and jewelry, he said recently, sitting in his 15th-floor office here in Mumbai, India's financial capital, his back to the Arabian Sea just beyond the window.Mr. Jhunjhunwala, a chain-smoking, diamond-ring-wearing 46-year-old money manager, is idolized in India by millions of small investors who dream of following in his footsteps. He is a fixture on Indian television, talking up his bull-market views, and on the lecture circuit -- addressing groups like the "Millennium Mams," an organization targeting housewives who want to learn about business. He makes headlines when buying 2% of a company's shares, sits on 10 boards of directors, and regularly finds fellow investors chasing his stock picks.
His investments map the arc of India's recent economic emergence. The son of a tax commissioner, Mr. Jhunjhunwala says he toyed with becoming a pilot but went into accounting instead. In the mid-1980s, he began playing the market with 5,000 rupees (just over $100 at today's exchange rates), and never looked back. One of his first investments: Tata Tea Ltd., which quickly took off. (Years later, Tata Tea would acquire British tea giant Tetley.) He subsequently moved into mining, where he made his first million rupees in iron-ore exporter Sesa Goa.
In this nation of castes and sometimes rigid tradition that can limit social and economic mobility, his is a relatively unusual story of self-created wealth. Today, he has amassed a $700 million fortune. While that pales in comparison with the real Buffetts of the world, it's a fortune in a country where average annual income is measured in hundreds of dollars. Mr. Buffett's fortune has been valued at more than $40 billion, though he is giving away big chunks of that to charity. Like India's stock market itself, Mr. Jhunjhunwala has had his share of setbacks. Last year, the Securities and Exchange Board of India cleared him and his wife in an investigation into stock-price manipulation. The case dealt with how some big trades from his firm a few years ago affected stock prices.
Mr. Jhunjhunwala's colleague, Utpal Sheth, says they are pleased with the outcome of the case and found regulators "sensible and fair." Mr. Jhunjhunwala certainly isn't the only Indian investor to benefit from the run-up in local markets in recent years. Many other value investors there have also become famous for spotting cheap stocks. And last May, when the Bombay Stock Exchange's benchmark 30-stock Sensitive Index, or Sensex, plunged amid a sharp retreat in emerging-markets stocks world-wide, Mr. Jhunjhunwala's portfolio tumbled along with it. He endured another big hit just a few weeks ago, when a dramatic downturn in Thailand's stock market rippled through India's market as well. Local newspapers blared headlines like "Blood Baht in Thai markets," a reference to a decline in Thailand's currency, the baht. India's shares fell 3% that day. The next day Mr. Jhunjhunwala, sitting in front of five computer screens in his office in the Nariman Point financial district, scribbled trades in a small notebook and barked orders to his assistants in Hindi to fetch tea and sell some shares.
"The market is on the weaker side today," Mr. Jhunjhunwala muttered -- an understatement -- sitting with his collared shirt untucked.
As the day unfolded, he found time to eat an elaborate Indian lunch and chat with a friend about bringing a bottle of whiskey that weekend to his house in the hills outside of Mumbai, formerly Bombay, which features a karaoke studio and gym. In his office, his assistants serve drinks on coasters printed with a quote stressing the importance of integrity and hard work that is attributed to John Bogle, Vanguard Group's founder. Displayed nearby are images of Hindu deities, as well as sketches of billionaires Mr. Buffett and George Soros. He built his private investment company, Rare Enterprises (the name merges the "Ra" from his first name with "Re" from his wife's name, Rekha), by investing mostly in smaller Indian stocks. His rise has differed from other Indian investing icons who made their names through speculation and fraud during the technology bubble of the 1990s.
One of his best recent moves was selling part of his stake in Indian rating company Crisil Ltd. to McGraw-Hill Cos.' Standard & Poor's Corp. for more than four times what he bought it for. S&P acquired a majority stake in the company last year. These days he is buying land in the south India city of Secunderabad, where he plans to build shopping malls, and backs private equity and other investments in a dredging firm, a radio station, a school and a security company.
"In Mumbai, he's very widely known" as a "bit of a blunt guy," says Pradeep Dokania, head of the global private-client group for DSP Merrill Lynch. However, "sometimes people may feel he's overconfident" about the markets. So far, his optimism has paid off. The Sensex has quadrupled in the past five years, and such growth is attracting foreigners. In just the past week, New York Stock Exchange parent NYSE Group Inc. and others said that they are buying a stake in India's National Stock Exchange.
And Mr. Jhunjhunwala is sticking to his guns. By 2010, he predicts India's gross domestic product growth will have hit 10% for at least one year. In a slide show that outlines his investment philosophies, he says: The bull market in India "will really need God's wrath for it to be reversed prematurely."

WOW - Broker Rap - Kotak - Reliance Communication

In its Report Dated 8th January, 2007 Kotak Securities (Kotak) initiates a coverage on Reliance Communications as an Underperform with CMP of Rs.435 and a 12-months Target Price of Rs. 375.

Kotak Securities (Kotak) mentions that Reliance Communications limited (RCL), a part of the Reliance Anil Dhirubhai Ambani Enterprises Group, is India''s second largest wireless operator in terms of subscribers. Its also has a strong positions in the long distance (ILD) and broadband segments. RCL has grown its subscriber base and earnings strongly over the past few quarters led by its strong management and solid execution. Kotak informs that RCL''s strategy to grow revenues and earnings is to expand the reach of its wireless and broadband services and exploit its extant long distance (both national and International) infrastructure.

Kotak anticipates that pricing will deteriorate in all key segments of the India telecom sector-wireless, LD and data. In the critical wireless segment, kotak views increased price competition as a result of the proliferation of new players in new circles, RCL''s GSM expansion, a potential industry slowdown and the eventual introduction of mobile number portability (MNP).

Kotak points out that two areas of positive surprise could sustain RCL''s stock price above kotak''s fair value.
(1) Benign price competition in the key wireless segment may result in higher than expected prices (revenue per minute or RPM) and hence, higher-than-expected profitability.
(2) Continued high liquidity in the Indian market may result in the street continuing to focus on relative valuation of RCL versus its key comparable, Bharti Airtel, rather than on the validity of absolute valuations of either stock.

Kotak model''s that RCL''s EPS to grow to Rs32.5 in FY2010E from Rs12.5 in FY2007E led by
(1) strong growth in wireless subs (70 mn at end-FY2009 from 28.6 mn at end-November 2006) and
(2) moderately strong growth in long distance (LD) and broadband segments. RCL''s GSM expansion strategy is a big variable for the Indian wireless market and its financials.

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WOW India - Broker RAP - - ITC

In its report dated 10th Jan, 2007 Man Financial (Man) upgrades ITC to Neutral at a CMP of Rs. 163 with a 12 month target price of Rs.185.

Based on Man''s various probabilistic scenarios, without offsetting price hike the expected impact of VAT on ITC''s earnings could be 11%-12% but the actual impact would depend upon the price hike that ITC can take to offset this.

Man states that the expectations treadmill has also slowed down with better appreciation of increasing challenges in agri-retailing and inflationary concerns on NCFMCG.

Man points out that after a significant re-reacting over the past couple of years, valuation stretch has reduced significantly. 1-year forward PE and EV/EBITA have declined by 30% and 32%, respectively from their highs in May ''06.

Man believes that after the recent price under performance, the stock is trading at closer to fair valuations. It trades at 18.6XFY08E one year forward EPS. According to Man''s expectations 20.2% EPS CAGR for FY07E-FY09E, the stock is trading at a PEG of 1.1x. Man believes that this reflects the risks and rewards of the Business composition quite fairly and initiates a coverage with Neutral rating.

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Industry Update: Sharekhan Mutual Funds Report dated January 12, 2007

Robust NFO collections boost equity AUM and cash levels

The assets under management (AUM) for equity funds increased by 5.7% to Rs143,619 crore in December 2006. The rise in the equity AUM was substantially higher than the market movement of 0.7%.

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Goldman Sachs - Reliance Industries

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SLR flexibility to be RBI's new tool: Sharekhan Special dated January 12, 2007

SLR flexibility to be RBI's new tool

The Union Cabinet on January 11, 2007 approved the promulgation of an ordinance to amend the statutory liquidity ratio (SLR) for banks to ensure greater credit flow to the industry. To achieve this, the government intends to empower the Reserve Bank of India (RBI) to set lower SLR floors from the existing 25% on the net demand and time liabilities ie deposits.

The average yield on the advances for public sector undertaking (PSU) banks is above 9% after the prime lending rate (PLR) hike while the current yield on investments is in the range of 7.2-7.5%. For private banks the average yield on the advances is in the vicinity of 10% while the average yield on investments is below 7%. This provides a significant opportunity for the banks in the longer term to improve their earnings based on a small realignment of their balance sheet composition as we don't expect the RBI to cut the SLR at this point of time

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Prabhudas Lilladher - KS Oils

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Prabhudas Lilladher - Eastern Silks

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Citigroup - India IT Services

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Citigroup - JP Associates

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Citigroup - India Banks

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