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Tuesday, February 06, 2007

FIIs gungo on PFC

Powered by overwhelming support from foreign institutional investors (FIIs), the Power Finance Corporation (PFC) public issue got over-subscribed by over 72 times.

This is the largest over-subscription an issue got in recent times, said a market source. In an issue targeted at mobilizing Rs 1000 crore, the PFC raked in close to Rs 75,000 crore, said company sources.

Qualified Institutional Buyers (QIBs) put in bids exceeding 102 times as against the allotted quota. “The huge response demonstrates the confidence reposed by global investors in the Indian economy in general and power sector in particular” said Power Finance Corporation (PFC) chairman and managing director Dr V.K.Garg.

When reports came in last, the institutional sources said that cheques collected at the Ahmedabad counter were yet to be sorted out. PFC had fixed the price band at Rs 73-85 per share.

Meanwhile, the IPO of Indian Bank received 17.01 crore bids for its offer of 8.59 crore equity shares representing 1.98 times subscription, stock exchange data showed.

The price band of the issue has been fixed between Rs 77 to 91. The issue will close on February 9.

The bank has reserved 10 per cent of the issue (86 lakh shares) for employees, while 60 per cent is to be allotted to Qualified Institutional Buyers. The balance 30 per cent is open to retail investors.

Another IPO, which opened for subscription on Monday, of infrastructure company C & C Constructions, received 22,220 bids for its offer of 42,69,451 equity shares of Rs 10 each.

The price band for the issue, which will close on February 9, has been fixed at Rs 270 to Rs 291. The issue would comprise 23.38 per cent of the fully diluted post-issue capital of the company.

The issue proceeds would be used to fund investments in capital equipment, toll projects and enhance working capital.

Indian Bank

Issue details

Bid/Issue opens: Feb 05, 2007
Bid/Issue closes: Feb 09, 2007
Price Band: Rs 77-91
Minimum application: 75 shares and in multiples of 75 shares thereof
Maximum Retail Bid Amount: Rs 100,000

Capital Structure

Authorised Capital: 1,500,000,000 equity shares of Rs 10 each

Equity shares outstanding prior to issue: 343,820,000 equity shares of Rs 10 each

Equity shares outstanding after the issue: 429,770,000 of Rs 10 each

Present Issue: 85,950,000 equity shares

Employee Reservation Portion: Up to 8,595,000 equity shares

Net Issue to the public:77,355,000 equity shares


Indian Bank is a leading public sector bank with the largest network of branches in Tamil Nadu. As on Sept 30, 2006, it had 1,408 branches in India spread over 26 states and 3 union territories. They also have a branch in Singapore and a branch and foreign currency unit in Colombo, Sri Lanka. The Indian Bank Ltd, the predecessor of Indian Bank, was founded as a “Swadeshi Bank” due to the efforts of Sri V Krishnaswami Iyer and others. The bank was incorporated on March 5, 1907 and commenced operations on August 15, 1907.

Indian Bank has three subsidiaries – Ind Bank Housing Ltd, Indbank Merchant Banking Services Ltd and Indfund Management Ltd. The housing and merchant banking subsidiaries are already listed on BSE.

Objectives of the issue

The main objectives of the issue are:


To augment its capital base to meet future capital requirements arising out of the implementation of the Basel II standards and growth in assets, primarily loan and investment portfolio due to the growth of the Indian economy

To fund other general corporate purposes including meeting the issue expenses

Key Points

Improving asset quality
Net non-performing assets (NPAs) have come down to an impressive 0.45% at the end of Sept 2006, from as high as 8.30% in FY02. Recovery in bad debts w/off has been continuously rising from Rs.63.2 crore in 2002 to Rs. 181.4 crore in FY06.

Restructured capital base
In Sept 2006, during a restructuring of its capital base, aggregate accumulated unabsorbed losses of Rs 3,830 crore were netted against the paid-up capital of Rs 4574 crore end March 2006. The retention of the balance Rs 743.82 crore was Rs 400 crore in perpetual non-cumulative preference share capital and Rs 343.82 crore in equity share capital.

Going rural through financial inclusion
Indian Bank has traditionally a strong presence in the rural and semi-urban areas. There is substantial potential for expanding business by increasing their focus and leveraging its strength in these areas, including rolling out new products and services and increasing the accessibility of products. Bank has been focusing on playing an active role in providing micro-finance through self-help groups (SHGs). We believe that financial inclusion would pave the way for marketing of our products and services to people who do not have access to banking services.

Growing advances
Advances have grown at a CAGR of 26.16% over FY04 to FY06. The bank has recently carved out small and medium enterprises (SMEs) as a separate segment and as at Sept 30, 2006, this segment accounted for 19.76% of its total outstanding advances of Rs 26,192 crore.

Maintaining spreads
Spreads have improved to 3.43% as at end Sept 2006, from 3.32% in FY04. However with rising cost of funds, spreads will come under pressure as most of its deposits are in form of term deposits and its CASA is at around 35%.


Indian Bank’s net interest income grew by 15.84% from Rs 1303.62 crore in FY05 to Rs 1,510.17 crore in FY06. Over the same period, net profits rose 53.56% from Rs. 318.7 crore to Rs 489.4 crore. For the six- month period ended Sept 2006, PAT increased 42.37% to Rs 334 crore from Rs 234.6 crore. Deposits and net advances have grown at a CAGR of 15.77% and 26.16%, respectively during the last three fiscal years. Total assets have grown from Rs 35,040.7 crore in FY04 to Rs 50,813 crore in Sept 2006. As on Sept 30, 2006 , the bank’s net worth was Rs 26,01.6 crore.

MindTree Consulting Ltd.

Issue details

Bid/Issue opens: Feb 09, 2007
Bid/Issue closes: Feb 14, 2007
Issue Size: 5,593.300 equity share of Rs 10 each
Reservation for employees, business associates: 652,560 equity shares of Rs 10 each
Net Issue: 4,940,740 equity shares of Rs 10 each
Price Band: Rs 365-425
Minimum application: 15 shares and in multiples of 15 shares thereof
Maximum Retail Bid Amount: Rs 100,000

Capital Structure

Authorised Capital: 796,200,00 shares of Rs 10 each
Equity shares outstanding prior to issue: 316,952,370
Equity shares outstanding after the issue: 372,885,370

MindTree Consulting was promoted by Ashok Soota (president of Wipro Infotech from 1984 to 1999) and nine other industry professionals in 1999. The company is involved in IT Services and R&D. It has a comprehensive range of offerings spanning IT strategic consulting, application maintenance, package implementation, product engineering, testing, data warehousing, infrastructure management and business intelligence. In the R&D space, MindTree offers R&D outsourcing services and also does its own in-house research through which it has developed intellectual propriety (IP) in the short-range wireless communication segment. The company customises and licenses these IPs to clients. The company derived 76.5% of its revenues from IT services and 23.5% from R&D services. MindTree’s major customers include Fortune 10 companies like American International Group and Fortune 100 companies like United Technologies Corporation in addition to Uniliver, Volvo, Avis Budget Group, LSI Logic and Symantec.

Objectives of the issue

1. To fund new development center in Chennai.

2. Pre-pay certain loans

Key Investment Rationale

Strong management team
MindTree benefits from a strong management team led by Ashok Soota. The team has an average experience of 20 years in the industry with different areas of specialisation.

End-to-end mid-size IT services player
MindTree has positioned itself as a global mid-size IT services company providing services spanning IT strategic consulting, application maintenance, package implementation, product engineering, testing, data warehousing, infrastructure management and business intelligence. The mid-size positioning gives it a unique advantage, as it is able to provide a higher degree of attention to its customers as compared to larger players.

R&D services – a key source of strength
The company derived 23.5% of its annual revenues from its R&D division in FY06. The R&D business has two divisions – engineering and research. The engineering division provides R&D outsourcing services like product architecture & design, product re-engineering and product assurance, while the research division conceives and develops MindTree’s own intellectual properties primarily in the short-range wireless communication segment. The company has a Bluetooth wireless technology IP portfolio that it has licensed to a large handset OEM. The company is now developing IPs in the Ultra Wide Band Technology space, which has immense scope considering that it is a high speed Bluetooth technology. We believe that this business will lay the pillars for a back-ended revenue model.

Consultancy – moving up the value chain
The company has positioned itself as an IT solutions provider rather than a mere IT services provider. Larger companies in the IT space are now gradually foraying into consultancy. MindTree positioned itself as a consultant right from day one with business transformation initiatives. We believe that this would augur well for the company as it pursues a high growth path.

To acquire a semiconductor design firm
The company plans to acquire a domestic semi-conductor design company for which it has already signed a non-binding term agreement. The acquisition would help strengthen its R&D services business.

Human resource management looks top notch

The company’s ability to retain and nurture talent looks top notch with attrition rates at 12% comparable to larger peers. The company employed 3,128 people as on March 31, 2006.

Key Concerns

* The company develops IP in the short-range wireless technology space. The company could be subject to third-part claims asserting infringement.


Revenue grew at a CAGR of 50% during FY04-FY06 to Rs 455.37 crore in FY06. EBIDTA margins have also grown from 7.8% in FY04 to 19.3% in FY06. The company recorded a net profit margin of 12% to record profits of Rs 53.8 crore in FY06. Net profits grew by 219% in FY06 over FY05. On an annualised basis for the reported nine months ended FY07 the company is likely to record a 62% net profit growth to Rs 87.3 crore. The company is likely to post a RoNW of 22% at the lower band and 20% at the upper band based on the annualised earnings of the nine months ended FY07E earnings.


At the issue price of Rs 365 to Rs 425, the stock discounts its FY07E annualised earnings of Rs 23.4 earnings on post-issue diluted basis by 15.6x at the lower band and 18.1x at the upper band. We believe the valuations are reasonable for a company that is likely to post a 62% earnings growth based on nine-month FY07E annualised earnings. Investors can subscribe to this issue for listing gains and for the long-term.

Forecast - Lackluster trading may continue tomorrow

Today’s correction was on account of profit-booking and it followed a gain of 425 odd points in the Sensex during the previous three trading sessions. Compared to the surge, the correction was very marginal. This apart, the market also received direction from flat trading across global markets. We are experiencing a dearth of triggers to ascend further. Budget-related triggers are yet to impact trading in a full-fledged manner.

The total volumes of around Rs 45,000 crore in cash and F&O were quite decent.

A lot of investors are seen squaring off their positions, both long and short. That is because the lackluster condition is likely to continue for a couple of more trading days.

Fund-managers and investors world-wide are alarmed on the news that hedge fund, Red Kite, which had substantial investments in copper and zinc, showed a 20% fall in the net asset value of its investment portfolio on account of a fall in metal prices. It is feared that a couple of other hedge funds may be in a similar position as Red Kite and the sentiment itself could ignite a redemption pressure on funds. If funds start liquidating investments to service redemption demand, then a serious correction may be on the cards.

The next support levels for the Nifty are at 4,172 followed by 4,124. On the upper-side, the resistances are at 4,266 and then at 4,310.

- Arun Mewawala, Technical Analyst, K R Choksey Securities

Karvy - Union Bank of India

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BRICS PCG - Balaji Telefilms

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Indian Bank IPO

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Close: Choppy market as investors consolidate gains !

Indian Indices were highly ranged for the day but closed in red. Profit booking would best describe this action. The indices traded mixed all day undecided on the direction to take. Selling was seen in the index heavy weights and selective Mid and Small Caps and also the sectors like Auto Ancillary, Energy, FMCG, Chemicals and Finance. Cement and Sugar stocks saw some buying. Asian Markets ended in positive with Europe also in green. But that did not help Indian markets much.

Sensex closed down by 38 points at 14478.19. Weighing on the Sensex were losses in RCVL (489.15,-5 percent), Hindalco (174.3,-2 percent), Hero Honda (719,-2 percent), Bharti Tele (770.5,-1 percent) and HDFC Bk (1088.15,-1 percent). Losses were restricted by gains in Rel Energy (560.25,+2 percent), Ranbaxy (420.05,+1 percent), ICICI Bk (957.35,+1 percent), Cipla (250.1,+1 percent) and HLL (209,+1 percent).

NRC closed up circuit. There was a block deal of 7 lac at circuit. As per unconfirmed reports, Reliance MF was a buyer. The company has 346 acres near Mumbai and indications are that this property has been revalued in a deal which could mean windfall gains for the stock. We have an insight on the stock. Do read for clearer information.

Raymond Apparel Ltd has entered the popular price segment with its new brand called Notting Hill targeted at young professionals between the age-group of 22-30 years. The products would first be distributed through 25 exclusive Notting Hill stores in the state and after taking stock of the response would be expanded to the rest of India in around six to eight months through 400 distribution points. We will be able to comment on it mostly when we see the positioning price levels. The popular segment would be interesting proposition as that is a big market and there gaping holes and provide opportunities. Whether Raymond succeeds here is a question waiting to be answered. We like Raymonds though its struggling with the garments business. The cash is now invested and the strategy seems to be falling in place. With 75% domestic revenues it is a bigger textile domestic play. The company is among the top brands in Fabrics and also has a strong brand for garments in the domestic market. There is a real estate element here as well with 140 acres of land on the outskirts of Mumbai. This could be valued at half the market cap currently and plans are afoot to get value out of that land. Expect benefits from this land over the next couple of years. The Textile stocks traded mixed for the day where as Raymond closed marginally up.

India's largest petroleum marketing company IOC has taken up the merger of its subsidiary and the stand-alone petroleum marketing entity - IBP with itself. The former has already initiated the synchronisation of operations between the two through sharing of infrastructure logistics. IOC has decided to retain the IBP brand even after completion of the merger process. IOC and IBP together have nearly 16,000 retail outlets, out of which IBP operates 3,500 retail pumps. IBP has a 10% market share in diesel and a little over 8% share in petrol sales in the total sales in the country. On the other hand, IOC has 36.9% and 33.8% share in diesel and petrol sales respectively. This merger helps the IOC to strengthen its market share. However the policy of this sector is dependent on the whims of the Politicians. A sector we tend to avoid. IOC closed down by 2% unenthused by the development and more concerned with high crude prices which have lowered realisations of late.

Technically Speaking: It was a seesaw session for the whole day before closing. Sensex touched intraday high of 14564 and low of 14452. Market turnover stood good at Rs 6084 cr. Overall breadth was in favor of Advancers where they stood at 1399 and Decliners stood at 1271. Sensex has managed to maintain the break out and certainly thats positive. 14020 and 14210 should be the stoploss for long positions in this market.

Market ends choppy

After surging for the last three sessions the market took a pause today. The market remained volatile throughout the day amid alternate bouts of buying and selling in front-line stocks. The Sensex began the trading session with a positive gap of 25 points at 14541. The index exhibited some strength in the afternoon and touched the day's high at 14565, but slipped on selling in consumer durables, metal, technology and oil stocks. After witnessing range-bound moves the market saw a strong bout of selling towards the close and the Sensex shed 112 points from the day's high. The Sensex finally ended the session at 14478, down 38 points, while the Nifty was down 19 points at 4196.

The broader market was positive. Of the 2,727 stocks traded on the BSE, 1,402 stocks advanced, 1,274 stocks declined and 51 stocks ended unchanged. A few sectoral indices ended in the green. The BSE CG index gained 0.38% at 9959 followed by the BSE IT index (up 0.35% at 5406) and the BSE Auto index (up 0.21% at 5725). However, the BSE CD index shed 2.09% at 3945 followed by the BSE Metal index (down 0.66% at 9284) and the BSE Teck index (down 0.56% at 3893).

Among the laggards Reliance Communications slipped 5.04% at Rs489, Hindalco declined 2.08% at Rs174, Hero Honda shed 1.52% at Rs719, Bharti Airtel dropped 1.38% at Rs771, HDFC Bank lost 1.20% at Rs1,088 and ITC fell 1.18% at Rs175. However, select heavyweights attracted some buying support. Reliance Energy gained 2.14% at Rs560, Ranbaxy rose 1.36% at Rs420, Cipla jumped 1.11% at Rs250 and ICICI Bank added 1.11% at Rs957.

Select consumer durables stocks witnessed considerable selling pressure. Videocon Industries dropped 2.55% at Rs443, Rajesh exports lost 2.48% at Rs468, Lloyd Electric declined 2.47% at Rs166, Blue Star slipped 2.29% at Rs234 and Titan Industries was down 1.70% at Rs1,007.

Over 70.67 lakh TCS shares changed hands on the BSE followed by IDBI (40.02 lakh shares), IDFC (34.64 lakh shares), Reliance Communications (29.27 lakh shares) and SAIL (21.39 lakh shares).

TCS topped the value list with a turnover of Rs908 crore on the BSE followed by Reliance Communication (Rs144 crore), Reliance Industries (Rs83 crore), Reliance Capital (Rs61 crore) and Zee Telefilms (Rs50 crore).

Sensex corrects for a change

The Sensex was confined to a narrow range of 112 points today. However, the turnover on BSE was in excess of Rs 6,000 crore, a striking Rs 6,084 crore by the end. This is approximately 29% higher compared to Monday’s turnover (Rs 4719 crore).

The turnover surged on the back of three huge block deals of 23.14 lakh shares each in TCS, at an average Rs 1299.26 per share, in opening trade. The counter was the top-traded on BSE with a turnover of Rs 918.28 crore. The TCS stock was down 0.77% to Rs 1295.05, on an aggregate volume of 70.67 lakh shares. Block deals were also struck in many other counters, leading to the high turnover.

The Sensex remained highly volatile throughout the day, moving in and out of positive ground, on account of a mixed trend in pivotals. The fall became more pronounced in the last 30 minutes of trade, as selling intensified.

The 30-shares BSE Sensex settled 37.71 points (0.26%) lower, at 14,515.90. The benchmark Sensex had opened in the red, at 14,479.58. It struck a fresh all-time high of 14,564.80, as buying began in index pivotals. The benchmark index also struck a low of 14,452.78.

The S&P CNX Nifty declined 19.45 points (0.46%), to 4,195.90. It had surged to an all-time high of 4,228.15, in intra-day trade.

The market-breadth was positive. For 1,399 shares advancing on BSE, 1,271 declined. Just 48 scrips remained unchanged. The BSE Small-Cap Index closed at 7,662.75, up 0.09%, while the BSE Mid-Cap Index gained 0.44% to settle at 6,182.35.

Among the 30-Sensex pack, 18 declined while the rest advanced.

Reliance Communications (RCL) was the top loser, down 5.13% to Rs 488.65, on a volume of 29.21 lakh shares. Misgivings about possibility of rapid equity dilution due to the large FCCB issue impacted the scrip.

The conversion premium for the issue is 30% over a reference share price of Rs 508.64. The relatively lower-than-expected premium raised concerns that there can be early dilution of equity within just one or two years.

Reliance Communications (RCL) on Monday (5 February 2007) raised a huge $1 billion through a convertible bond issue. As per reports, the company is battling Britain's Vodafone Group and other domestic firms in its bid to buy rival Hutchison Essar. RCL raised $1 billion through a convertible bond issue.

RCL is a front-runner, along with Vodafone, for 67% stake in the number-four operator, Hutchison Essar, owned by Hong Kong's Hutchison Telecommunications International.

Hindalco (down 2% to Rs 174.50), HDFC Bank (down 1.58% to Rs 1084), and Maruti Udyog (down 1.39% to Rs 950), were the other big losers.

REL was the top gainer, up 2.10% to Rs 560, on a volume of 3.87 lakh shares. The stock had surged to a high of Rs 566.80 in intra-day trade. Interest in the power sector assets of Globeleq, and a contract to build a large power project in Haryana have triggered a solid rebound in Reliance Energy over the past few days.

Ranbaxy gained 1.35% to Rs 420, after entering into a research and development pact with GlaxoSimthKline that modifies and expands their strategic alliance since 2003, to provide the company expanded drug-development responsibilities and further financial opportunities.

ICICI Bank advanced 1.39% to Rs 960, on a volume of 2.11 lakh shares. The stock had recovered from a low of Rs 946.

Index heavyweight Reliance Industries (RIL) was highly volatile. Finally, it settled unchanged at Rs 1388, on a volume of 6.02 lakh shares. RIL recovered from a low of Rs 1382 and surged to an intra-day high of Rs 1408.

Pidilite Industries was down 0.64% to Rs 115.90, on high volumes of 11.12 lakh shares, after a block deal of 10 lakh shares was struck in the counter at Rs 119 per share by 10:36 IST.

Recently-listed auto component maker Autoline Industries surged 20% to Rs 391.35, extending its surge post listing. The stock clocked 62.37 lakh shares on BSE. The company made only a modest debut at Rs 261.15 on BSE on 31 January 2007, compared to the IPO price of Rs 225. It had settled at 257.95 on the day of debut. The very next day, Autoline had slipped to Rs 250.20, from where it has gained 56.4% in just three trading sessions.

Optical storage device maker Moser Baer India jumped 6.65% to Rs 388 after agreeing to acquire OM&T B.V., an optical research and development firm. OM&T is a subsidiary of Philips Electronics.

Cinema operator Pyramid Saimira Theatre climbed 5%, the maximum daily limit, to Rs 442.40, on plans to set up an equal joint venture for a chain of cinema halls in Malaysia. The company has decided to invest Rs 240 crore in the joint venture with Asian Integrated Industries.

BSEL Infrastructure Realty climbed 2.10% to Rs 95.80, after its subsidiary entered into an agreement to buy four plots in Emirates City to build houses.

Gammon India dropped 5.40% to Rs 390, after the company said on Tuesday the stock market regulator was against the listing of a subsidiary in the next one year.

Sebi, according to Gammon India, advised investment bankers that a proposed initial public offer (IPO) of Gammon's subsidiary could not be allowed for a year. As per Gammon India, Sebi made the remark in a letter to bankers, who were to handle the IPO of Gammon Infrastructure Projects (GIPL).

JSW Steel rose 2% to Rs 464, after the company got a go-head to utilise the waste gases to generate power for internal consumption. The proposal was approved by an executive body of the Clean Development Mechanism, United Nations Framework Convention of Climate Change.

With this clearance, the company will utilise the waste gases emitted by JSW Steel’s Karnataka plant (7,500 tonne per day) for generating power, which will be consumed for running its own operations. The project thus contemplates reduction of emission from both the steel and power plants.

Punjab Tractors gained 1.40% to Rs 283, amid reports that several auto companies were interested in bidding for private equity firm Actis’ 29% stake in the firm. According to the report, Tatas may bid for the private equity firm's holding in the north-India based tractor unit. Actis had given financial services firm, Citi, the mandate to call bids from potential buyers for its stake in Punjab Tractors (PTL). Other players who have evinced interest for Actis' stake include Mahindra & Mahindra, TAFE and Sonalika Tractors, reports suggest.

Sintex Industries rose 0.57% to Rs 221.10 on NSE, after the company said on Monday it expects annual savings of Rs 14.40 crore from a new 18.9-Megawatt captive power plant. The power plant set up at a cost of Rs 45 crore will serve its plastics as well as textiles division, the company said in a statement on Monday.

Bharat Electronics gained 6.97% to Rs 1,507.50, boosted by reports that it will sign a memorandum of understanding with Northrop Grumman Corp., the third biggest US defence contractor.

Syngenta India gained 5.79% to Rs 412.35, on expectations of its annual results. The company unveils its results for the year ended 31 December 2006 on 12 February 2007.

Ashok Leyland advanced 2.35% at Rs 50, after the company reported 67% rise in its January vehicle sales, to 9,650 units, over the year ago period. Ashok Leyland’s domestic sales rose 62% to 9,096 units from 5,618 units, while exports jumped to 554 units from 169.

FM Radio operator Entertainment Network India surged 4.61% to Rs 328, after its subsidiary bagged the rights for maintenance of advertisements at Indira Gandhi International Airport, New Delhi. The subsidiary, Times Innovative Media, has been selected for designing, developing and maintaining advertisements on specified locations at the Indira Gandhi International Airport, New Delhi. TIMPL is a wholly-owned subsidiary of ENIL, and operates its Out of Home Media business under the brand name "Times OOH Media".

BSEL Infrastructure Realty climbed 2.10% to Rs 95.80, after its subsidiary agreed to buy four plots in Emirates City to build residences.

The Nikkei average finished up 0.36% on Tuesday, recouping some losses from the previous day's decline as Olympus Corp and Nikon Corp gained after both camera makers posted big rises in quarterly earnings, while raising forecasts. The Nikkei finished up 62.06 points at 17,406.86. It fell nearly 1.2% on Monday, booking its biggest one-day loss in a month.

The market had surged in the earlier three trading sessions, in what is largely seen as a pre-budget rally. The BSE Sensex added 424.98 points (3%) from 14,090.92 on 31 January 2007.

With the US Federal Reserve opting to keep interest rates steady at its 31 January 2007 meeting, the sentiment has received a big boost. The market also drew inspiration from the fact that RBI had raised the GDP growth forecast to 8.5 - 9% from an earlier 8%, on the same day as the Fed meeeting. The barometer index is up 5.2% in calendar 2007 thus far.

FIIs were net buyers to the tune of Rs 608 crore in index-based futures on 5 February 200. They were net sellers to the tune of Rs 167 crore in individual stock futures that day.

As per reports in a section of the media, the government may raise short-term capital gains tax on shares to 15% from 10%. The proposal being market sensitive, opinion is divided within the finance ministry in this regard, the report indicates.

US stocks ended mixed on Monday, with losses in shares of Microsoft Corporation weighing on technology shares. The Dow Jones industrial average gained 8.25 points, or 0.07%, to end at 12,661.74, while the Standard & Poor's 500 Index dipped 1.40 points, or 0.10%, to finish at 1,446.99. The Nasdaq Composite Index fell 5.28 points, or 0.21%, to close at 2,470.60.

Crude oil rose in New York on speculation that colder-than-normal temperatures in the US will increase demand for heating fuels. Crude oil for March delivery rose as much as 41 cents, or 0.7%, to $59.15 a barrel on the New York Mercantile Exchange. Brent crude oil for March settlement rose as much as 40 cents, or 0.7%, to $58.50 a barrel on London's ICE Futures exchange.

ENAM - ACC, Nagarjuna Construction, NTPC

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Sharekhan Commodities Buzz dated February 06, 2007

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WOW India - Broker RAP - AIA

Mining Industry to drive Demand for high Chrome..
In its report dated 31st January, 2007 Kotak Institutional Equities (Kotak) initiates an outperformer rating on AIA Engineering (AIA) at the CMP of Rs. 1,385.

Kotak highlights that the demand for high chrome products from the global mining industry will be driven by substitution of conventional products. Global demand for mill internals is around 3 mtpa, of which high chrome products account for only 15% at present. The mining sector consumes 2.5 mtpa of mill internals, of which only 5-10% is high chrome. Higher replacement and project demand from cement industry will also contribute to demand.

Kotak mentions that AIA is the dominant player in the domestic high chrome mill internals space with 90% share in cement industry and 70% share in the mining and utility industries. Kotak believes that AIA is on the verge of becoming the premier global supplier of high chrome mill internals with its (1) technical expertise, (2) relationships and (3) impending capacity addition of more than 3X. AIA has 20% (ex China) share in replacement demand from the global cement industry.

Kotak states that capacity additions will increase AIA''s volumes by nearly 2X over FY2006-09E. Based on Kotak''s projected volumes and marginal decrease in realisations, Kotak expects net earnings to grow at a CAGR of and 50% over FY2006-09E, respectively. Post capex, Kotak expects AIA to generate large free cash flows, which can be utilized for captive power set-up or capacity scale-up organically/inorganically.

According to Kotak slowdown in cement and mining and delay in shift to high chrome mill internals by the mining industry are the key risks to growth estimates. Also, any large capacity build-up by the leader - Magotteaux, could affect margins and therefore earnings for AIA.

Kotak points out that valuations may not appear compelling on FY2008 P/E basis, strong earnings growth and robust cash flows will keep valuations at a premium. Kotak estimates AIA''s consolidated EPS to grow at a CAGR of 20% for Sensex''s net earnings over the same period. Kotak anticipates revenues to grow at a CAGR of 38% over FY2006-09 and EBIDTA to grow at a CAGR of 47% over the same period

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Upmove may continue

Sensex closed on record high of 14516 on sustained buying in auto stocks yesterday, shrugging off the worries of the inflation hike. However, the market is moving in the tune with international markets may witness caution on mixed global cues and dwindling fund inflows. Among the domestic indices, the Nifty on the upside it could test 4250 and on the down side it may touch 4180. The Sensex has a likely support at 14372 and may face resistance at 14600.

US indices ended mixed on Monday on upbeat report from Wal-Mart and slew of merger news. While the Dow Jones moved up by 8 points to close at 12662, the Nasdaq ended five points lower at 2471.

Indian ADR losers pipped gainers on the US bourses. Wipro, Tata Motors, HDFC Bank ,Dr Reddy's lab ICICI Bank and Patni Computers declined around 1% each. Infosys and MTNL gained marginally while VSNL, Satyam and Rediff remained unchanged.

The Nymex light crude oil for March delivery fell by 28 cents to close at $58.74. In the commodity space, the Comex gold for April series gained $4.60 to settle at $656.10 a troy ounce.

Market may remain firm

The market is in uncharted territory following a solid surge in the past three trading sessions in what is largely seen as a pre budget rally. The Sensex has gained 424.98 points (3%) in the past three trading sessions from 14,090.92 on 31 January 2007. The market sentiment is firm due to US Federal Reserve keeping interest rates steady at its 31 Jan 2007 meeting. Sentiment was also boosted by the RBI, on the same day, raising fiscal 2006-07 GDP growth forecast upwards to 8.5% to 9% from earlier 8%. The barometer index is up 5.2% in calendar 2007 thus far.

FIIs steeped up buying on Friday 2 February, the day when Sensex had risen 137 points. They were net buyers to the tune of Rs 664.60 crore on that day. As per provisional data, FIIs were net buyers to the tune of Rs 463 crore on Monday 5 February, the day when Sensex had risen 112 points.

FIIs were net buyers to the tune of Rs 608 crore in index-based futures on 5 February. They were net sellers to the tune of Rs 167 crore in individual stock futures on that day.

Meanwhile, as per reports in a section of the media, the government may raise short-term capital gains tax on shares to 15% from 10%. However, since the proposal is market sensitive, opinion is dividend with the finance ministry in this regard, the report suggests.

Healthy company results and outlooks lifted Japanese shares on Tuesday and stocks elsewhere in Asia hit a record. MSCI's index of non-Japan Asian shares rose 0.2% to hit a fresh record and to stand a third higher than the middle of 2006. Australia's S&P ASX 200 reached a record too and was 0.5% higher.

US stocks ended mixed on Monday, with losses in shares of Microsoft Corporation weighing on technology shares. The Dow Jones industrial average gained 8.25 points, or 0.07 percent, to end at 12,661.74, while the Standard & Poor's 500 Index dipped 1.40 points, or 0.10 percent, to finish at 1,446.99. The Nasdaq Composite Index fell 5.28 points, or 0.21 percent, to close at 2,470.60.

Crude oil sat near Monday's one month peak just short of $60 a barrel, supported by a blast of cold weather in the United States.

Intra-day Stock Ideas

NIFTY (4215) SUP 4194 RES 4236

BUY Matrix Labs (231)
SL 227 T 239, 242

BUY Maruti (963)
SL 957 T 973, 977

BUY Tata Steel (470)
SL 465 T 480, 482

SELL Cipla (248)
SL 252 T 240, 238

SELL Canara Bank (240)
SL 244 T 232, 229


Short-term could be taxing for bulls

Nothing travels faster than the speed of light with the possible exception of bad news, which obeys its own special laws.

The bulls will hope to extend their winning streak today, though some softening in key indexes cannot be ruled out at higher levels. Foreign investors appear to be back with a bang. In the last few sessions they have stepped up their investments into Indian equities. As long as this continues, there is hope that the Sensex could flirt with the 15k milestone maybe before the budget.

The momentum may get disturbed by reports that the Finance Minister may hike the short-term capital gains tax from 10% currently to 15%. Also, Congress President Sonia Gandhi's request to the Prime Minister that the Government should go slow on opening up the retail sector could also weigh on the sentiment.

The pre-budget rally may already be underway, but one should not get carried away and build up huge positions. A sharp correction is possible just about anytime. Long-term investors, with enough money need not be told to buy on dips.

The third quarter earnings growth has been quite strong barring a few surprises like Satyam and SBI. The trend is likely to continue in the fourth quarter as well though cost pressures are beginning to tell on a few companies already. Rising inflation and hardening interest rates could spoil the party for India Inc. and consequently for the bulls going ahead. Another cause for worry is the higher crude oil prices.

FIIs were net buyers of Rs4.63bn (provisional) in the cash segment yesterday. In the F&O segment, they pumped in Rs7.1bn. On Friday, they poured in Rs6.64bn in the cash segment. Mutual Funds were net sellers to the tune of Rs776.3mn on the same day.

Steel stocks should open up after domestic producers hiked prices of Hot-Rolled Coils by an average of Rs500 per ton. Public sector banks could come under pressure after the Finance Minister's diktat that they should refrain from raising home loan rates.

Maruti is expected to be in the limelight as it inaugurates its Manesar plant today. Our recent recommendation Pyramid Saimira could advance further amid news that it is foraying into Malaysia with a 150-theatre plan.

Lanco, Tata Power and Reliance Energy will be in focus as the three are likely to bid for the global power assets of Globeleq. Hindalco is another stock to keep an eye for as it is reportedly eyeing Canadian aluminium major Novelis.

Pfizer could rise as it has reportedly sold its Chandigarh plant. Reliance Communications has raised $1bn from a mega FCCB issue. Punjab Tractors could hog some limelight as well amid reports that the Tata Group has joined M&M in the race for acquiring the tractor major.

Cement shares may also rise amid expectations of another increase in prices in Mumbai and Ahmedabad. Generic pharma makers like Dr. Reddy's and Ranbaxy are likely to gain amid reports that three US Senators have introduced a bill to prevent Big Pharma companies from launching authorised generics.

Shares of Textile and Footwear-making companies might attract some buying amid news that the Finance Minister may bring down the import duty on machinery used by the two industries to 5%.

Entertainment Network India might gain as it has won the contract from Delhi International Airport Pvt Ltd (DIAL) to design, set up, develop and maintain advertisements at the Indira Gandhi International Airport.

US stocks were mixed on Monday. The S&P 500 fell for the first time in five days and the Nasdaq had its first drop in a week as faster-than-forecast growth in service industries revived concern that an expanding economy will stoke inflation. The Dow Jones rose as Wal-Mart reported sales that topped its forecast.

The S&P 500 lost 1.40, or 0.1%, to 1446.99. The Nasdaq fell 5.28, or 0.2%, to 2470.60. The Dow added 8.25, or 0.1%, to 12,661.74.

US light crude oil for March delivery fell 31 cents to $58.71 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 24 cents higher at $58.98 a barrel in extended trading in Asia.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 4.8% from 4.82% late on Friday. In currency trading, the dollar gained versus the euro and fell versus the yen. COMEX gold rose $4.60 to $656.10 an ounce.

European markets also finished mixed. London-based FTSE 100 inched up 0.1% , or 7 points, to 6,317.90. The German DAX Xetra 30 declined 0.1% to 6,876.98 and the French CAC-40 edged higher by 0.1% to 5,684.66. The pan-European Dow Jones Stoxx 600 index ended 0.1% higher at 379.42.

Key Asian markets are trading higher this morning. The Nikkei in Tokyo was up 70 points at 17,415 while the Hang Seng in Hong Kong gained 133 points at 20,589. The Morgan Stanley Capital International Asia Pacific Index gained 0.6% to 142.92 at 11:09 a.m. in Tokyo.

Australian stocks were set to close at a record as investors anticipated that the central bank will today refrain from raising interest rates. All markets open for trading advanced except South Korea, Singapore and China, whose Shanghai and Shenzhen 300 Index lost 2.7%.

Major Bulk Deals:
Sundaram Finance picks up Alok Industries but HSBC Financial sells it; Bear Stearns and JP Morgan have bought Bhagyanagar India; Fidelity has sold Bharat Forge; BNP Paribas has purchased Global Vectra while HDFC MF has sold it; Citigroup has bought Graphite India; T. Rowe Price has sold Network Fincap; HSBC financial has sold Shree Ashtavinayak; Morgan Stanley has picked up Sujana Metal while HSBC Financial has sold it; HSBC Financial has also sold Zee News.

Insider Trades:
Igarashi Motors India Limited: Goldman Sachs Investments (Mauritius) I Limited ("GSIMI") has purchased from open market 586180 equity shares on 31st January, 2007.

Bajaj Auto Finance Ltd: Dipak Poddar (Managing Director) has sold in open market 100000 equity shares of Bajaj Auto Finance Ltd on 29th January, 2007.

Market Volumes:
The turnover on NSE was down by 10% to Rs91.86bn. BSE Auto index was the major gainer and gained 2.05%. BSE Consumer Durable in (up 1.53%), BSE Small cap index (up 1.26%) and BSE Capital Good index (up 0.99%) were among the other major gainers. However, BSE Metal index lost 1.18%.

Volume Toppers:
IFCI, Himachal Futuristic, RNRL, TTML, IDBI, R Comm, Shree Ashtavinyak, XL Telecom, Indiabulls, IDFC, Aftek, Tata Steel, Hanung Toys, UCO, Praj industries and Bharat Forge

Upper Circuit Filters:
Ansal Infrastructure, GMR Industries, Nelco Ltd, Jyoti Structure, Heritage Foods, Shree Ram, Anant Raj Industries, Aurionpro Solutions, Flex Industries, Ganesh Housing, Gemini Communication, HOV Services and Taneja Aerospace.

Delivery Delight:
ABG Shipyard, APIL, Aptech, BEL, Bharat Forge, Bharati Shipyard, Hero Honda, IFCI, India Infoline, Indiabulls, IDBI, Maharashtra Seamless, M&M, Maruti, Praj Industries and Reliance Communications.

Brokers Recommendations:
Jindal Drilling & Industries - Buy from Emkay with target of Rs786
Crompton Greaves - Buy from Sharekhan with target of Rs230.

Long Term Investment:

Major News Headlines:
Chidambaram says there is ample liquidity in the banking system
L&T starts concrete plant in Dubai
Govt may let foreign airlines buy stake in cargo airlines
Shringar Cinemas gets Entertainment Tax Exemption in Aurangabad
RMCL to consider fund raising option for expansion on Feb 6
Tata Motors ties up with MDI of France for developing environmentally-friendly engine technologies
BOC India signs agreement with Adhunik Metaliks
Infotech Enterprise sets up development center in Kakinada
TCS signs agreement with Mumbai International Airport
Manugraph India board declares interim dividend of 100%
BPCL gets 20% interest in Timor exploration area
Federal Bank Board to consider plan to sell shares on Feb 12

From Research Desk - Usha Martin

Usha Martin Ltd. Result Update

Usha Martin posted strong results for Q3 FY07 with stand-alone earnings rising 19.8% qoq and 72.2% yoy. On consolidated basis, net profit growth was higher at 29.3% on sequential basis. This robust bottomline performance was led by significant operating margin expansion; 170 bps qoq on stand-alone basis and 390 bps qoq on consolidated basis. During the quarter company reaped the benefits of higher iron ore integration, better realizations and improved product mix. We maintain 'BUY' and raise our EPS estimates to Rs27.2 (earlier Rs26) for FY07 and Rs34.1 (earlier Rs32.6) for FY08. Our one-year target price is Rs251 based on 5.2x FY08 EV/EBITDA and implying a multiple of 7.4x on FY08 EPS.

Since our last recommendation at Rs170 in our Q2 FY07 Investment Update in November 2006, the stock has run-up by 24%. Despite this, we still maintain 'BUY' as Q3 FY07 performance was above our expectations and has forced us to raise earnings estimates. At CMP of Rs210, company trades at 7.7x FY07E EPS and 6.2x FY08E EPS. We believe these valuations does not reflect sufficient premium to commodity steel makers with company's character of an alloy/special steel manufacturer producing high value added products like Wires and Wire Ropes in majority. Also company's products are subjected to far less cyclical price fluctuations than that of commodity steel players. With operating margin on improvement path from backward integration (iron ore - started & coal - to start) and stress on value added products, we expect material upgrades to valuations.

How Market Fared

Global cues to guide market

The markets recorded third consecutive day of gains, as bulls settled on a new peak. Sharp fall in metal prices on LME and rise in crude oil prices dragged the key indices lower at open. However, the bulls emerged victorious as Auto, Power, Telecom, Capital Gods and Oil & Gas stocks lifted the benchmark BSE Sensex to hit an intra-day high of1456.51. Finally, the BSE benchmark Sensex surged 112 points to close at 14515. NSE Nifty advanced by 31 points to close at 4215. HDFC, REL and M&M were among the major gainers. However, Hindalco, SAIL and Colgate were among the major losers.

L&T rose by 0.8% to Rs1692 after the company announced that they have set up a Dh48 million ready mix concrete plant with a capacity of 240cubic metres per hour in Jebel Ali, Dubai. The scrip has touched an intra-day high of Rs1703 and a low of Rs1658 and has recorded volumes of over 4,00,000 shares on NSE.

SBI advanced 1.4% to Rs1197 after the company announced that share sale could be public or Rights issue. The scrip touched an intra-day high of Rs1206 and a low of Rs1170 and recorded volumes of over 12,00,000 shares on NSE.

Radha Madhav was locked at 5% upper circuit to Rs73.35 after the company announced plans to consider the fund raising option for the expansion project on 6th February. The scrip touched an intra-day high of Rs73.35 and a low of Rs66.80 and recorded volumes of over 20,00,000 shares on BSE.

Power stocks were in limelight. Reliance Energy, Suzlon and Tata Power were among the major gainers.

Telecom stocks also were among the major gainers. Frontline stocks Bharti Airtel advanced 1.2% to Rs780, Reliance Communication surged over 5% to Rs517 and VSNL added 0.4% to Rs506

Capital Good stocks ended with smart gains. Heavy weight BHEL gained 0.7% to Rs2518, ABB was up by 1.5% to Rs3808, Siemens has gained by 0.6% to Rs1187 as the German parent is keen on hiking its stake in the Indian arm, Crompton Greaves rose 2.2% to Rs211 and BEML added 0.8% to Rs1091.

Banking stocks also recorded smart gains. The heavy weight SBI and ICICI Bank were among the major gainers. Among the Mid-Cap stocks PNB gained 0.9% to Rs521, Corp Bank rose 0.7% to Rs305 and OBC added 0.6% to Rs220.

Metal stock were the major lowers as according to a Wall Street Journal report, metal trading hedge fund Red Kite's $1-billion fund lost 20% in the year to January 24. Following this report, zinc, copper and aluminum plunged. Sterlite industries lost over 6% to Rs487, Hindalco slipped by over 3% to Rs178, SAIL was down 2% to Rs111 and Nalco lost 1.2% to Rs234.

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Sharekhan Investor's Eye dated February 05, 2007

WS Industries India
Cluster: Vulture’s Pick
Recommendation: Buy
Price target: Rs87
Current market price: Rs54

Price target revised to Rs87

Result highlights

  • The Q3FY2007 results of WS industries (WSI) are in line with our expectations.
  • The revenues for the quarter grew by 8.5% to Rs40.1 crore while the net profit grew by 125% to Rs2.2 crore on the back of the company's high operating leverage and lower interest expense.
  • The operating profit for the quarter grew by 30% year on year (yoy) to Rs4.9 crore as the operating profit margin (OPM) expanded by 200 basis points to 12.2%. The OPM expanded because of lower raw material and power & fuel costs. The raw material cost increased by just 2% and the power and fuel cost rose by 5%. The company has benefited from the falling crude oil prices. Going forward we expect the company to maintain its OPM in the range of 12-12.5%.
  • The interest cost declined by 12% while the depreciation increased by 17.4% on account of a 20% expansion in its hollow core insulator manufacturing capacity.
  • Consequently the net profit grew by 125% to Rs2.2 crore.
  • The order book at the end of December 2006 stood at Rs190 crore.

Allahabad Bank
Cluster: Cannonball
Recommendation: Buy
Price target: Rs106
Current market price: Rs90

Prior-period income inflates numbers

Result highlights

  • In Q3FY2007 Allahabad Bank's net profit grew by 27.6% year on year (yoy), much above our expectation of Rs207.5 crore. The growth was higher than expected mainly due to a one-time interest income of Rs62 crore during the quarter.
  • During the quarter the bank's net interest income (NII) grew by 23.8% yoy and 24.3% quarter on quarter (qoq) to Rs484.7 crore mainly due to a one-time interest income of Rs62 crore related to prior period. However, adjusting for the same the NII grew by 8% yoy and 8.4% qoq. The net interest margin (NIM) adjusted for the one-time item increased by five basis points on a sequential basis.
  • The non-interest income decreased by 16.3% yoy to Rs125.5 crore despite a 49% year-on-year (y-o-y) growth in the treasury income. That was mainly because a sundry amount of Rs28.1 crore that was included in Q3FY2006 was absent in the Q3FY2007 numbers. Adjusted for the same the non-interest income remained flat on a y-o-y basis. On a sequential basis the non-interest income grew by 2.7%.
  • The operating expenses declined 6.7% on a y-o-y basis but showed a 6.3% sequential increase. The operating profit was up 9.7% yoy and 7.7% qoq while the core operating profit (excluding the treasury & others) increased by 28.4% on a y-o-y basis but showed a marginal decline of 0.7% on a sequential basis.
  • Provision and contingencies including the amortisation expenses (Allahabad Bank reports its amortisation on held-to-maturity securities under "Other operating expenses", we have adjusted the operating expenses and provisions accordingly) decreased by 70.2% on a y-o-y basis mainly due to higher minimum alternative tax (MAT) credit.
  • The Q3FY2007 numbers are much above expectations mainly due to the one-time interest income of Rs62 crore related to the prior years. Hence, we have revised our FY2007 profit after tax (PAT) numbers upwards by 9.7% to Rs770 crore to factor in the one-time income.
  • At the current market price of Rs90, the stock is quoting at 4.8x its FY2008E earnings per share (EPS), 2.9x pre-provision profits (PPP) and 1x book value (BV). The bank is available at attractive valuations given its low price-to-book multiple compared with its peers. We maintain our Buy call on the stock with a price target of Rs106.

Bharti Airtel
Cluster: Apple Green
Recommendation: Buy
Price target: Rs820
Current market price: Rs780

A mixed bag of policy changes
In the past couple of weeks, the Telecom Regulatory Authority of India (TRAI) has announced a number of policy changes and also released consultation papers that would eventually lead to amendments in the prevailing policies for the domestic telecommunication service industry.

Some of the policy initiatives like the reduction in the cap for roaming charges would adversely affect the industry. But the resulting loss would be more than made up by the reduction in the port charges (beneficial for private sector operators) and the proposal to reduce access deficit charge (ADC) going forward. What's more, the big boost would come from the expected reduction in the revenue sharing licence fee in the forthcoming Union Budget. Thus, the net impact of the changes already announced and of those that are expected to materialise in future is likely to be positive for the private sector operators in general and Bharti Airtel in particular.

ICI India
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs550
Current market price: Rs434

Colours shine bright

Result highlights

  • ICI India’s Q3FY2007 net profit (adjusted for extraordinary items) at Rs23.5 crore is ahead of our expectations. The net profit grew by 24.3% year on year (yoy).
  • The net revenues have shown degrowth of 13% yoy to Rs224 crore due to the discontinuation of the rubber chemical and surfactant businesses (Uniqema).
  • The paint business grew by 11.6% yoy to Rs192 crore. The continuing chemical business grew by 14.6% yoy to Rs32 crore.
  • The profit before interest and tax (PBIT) in the paint business grew by 41% yoy with a 310-basis-point expansion in the margin. The PBIT in the residual chemical business grew 16% yoy with a 20-basis-point expansion in the margin.
  • The overall operating profit (including all businesses) grew by 6% yoy with a 122 basis-point expansion in the operating profit margin (OPM).
  • With a higher other income and stable depreciation, the net profit grew by 24.3% yoy to Rs23.5 crore.
  • We have revised our earnings per share (EPS) estimates for the stock for FY2008, from Rs24.2 to Rs29 taking into account the selling off of Quest International as well as the higher non-operating income. Taking the cash per share of Rs232 and 17.5X FY2008 core EPS of Rs18 we have revised our price target upward to Rs550.
  • At the current market price of Rs434, the stock trades at 15x its FY2008E EPS of Rs29. We maintain our Buy recommendation on the stock with a price target of Rs550.

Bank of Baroda
Cluster: Apple Green
Recommendation: Buy
Price target: Rs327
Current market price: Rs246

Comparatively a better quarter

Result highlights

  • Bank of Baroda's Q3FY2007 results are much above expectations with the profit after tax (PAT) reporting a growth of 62.8% to Rs329 crore compared to our estimates of Rs258.9 crore. The higher than expected non-interest income growth driven by higher fee income and other income coupled with the lower than expected provisions resulted in the actual PAT exceeding expectations.
  • The net interest income (NII) was up 18.1% to Rs960.8 crore compared to our estimates of Rs921.3 crore. The margins have declined on a year-on-year (y-o-y) basis by 17 basis points but have improved by 3 basis points sequentially to 2.98%.
  • The non-interest income increased by 21.6% to Rs333.7 crore with the trading income down 22.7% year on year (yoy) and the core fee  income up 47.4% yoy.
  • The operating profit was up by 29% yoy and by 6.7% quarter on quarter (qoq) to Rs656.9 crore. However the core operating profit was up 34.2% yoy and 14.4% qoq.
  • The provisions declined by 37% to Rs141.7 crore primarily due to the nil NPAs provisions made during the quarter as compared to Rs42.6 crore in Q3FY2006.
  • The operating profit growth and a decline in the provisions helped in the PAT reporting a sharp rise of 62.8% to Rs329.1 crore despite the tax provisions rising by 126.9% yoy to Rs186.1 crore.
  • The asset quality has improved as the gross NPAs have come down on a y-o-y and q-o-q basis with the net NPAs in percentage terms also down to 0.67% from 1.1% yoy and from 0.77% qoq. The capital adequacy stood at 12.24% as on December 2006 compared to 12.93% on a sequential basis with Tier I at 9.13%.
  • The operating numbers are comparatively better for Q3FY2007 on a y-o-y and q-o-q basis than what we had witnessed in Q2FY2007 and based on the higher than expected PAT numbers we have revised our FY2007 PAT upwards by 3.6% to Rs1,015.6 crore. At the current market price of Rs246, the stock is quoting at 7x its FY2008E earnings per share (EPS), 3.4x pre-provision profits (PPP) and 0.9x book value. The bank is available at attractive valuations given its low price-to-book multiple compared to its peers and earnings upside possibilities. We maintain our Buy call on the stock with a price target of Rs327.
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