Inflation in other FMCG items now

The next time you head out to the corner store after reading the morning papers about spiralling inflation, you could take some solace or cold comfort, if you will, from the fact that prices of tea, coffee, soft drinks and certain food items such as confectionery have remained pretty much stable.

But for everything else, be prepared to fork out a lot more than what you did last year. .

It isn’t just fruits and vegetables or pulses and rice which you’re paying more for as sharp increases in input costs across several categories of items of daily consumption (fast moving consumer goods/FMCGs) have seen manufacturers hike prices sharply over the past year.

You could be shelling out far more for that jar of Horlicks or Bournvita, or your detergents, toilet soaps and biscuits, not to mention the oil for your pans and the atta for the phulkas.

With petroleum prices going through the roof, it was inevitable that prices of products such as detergents that use petro-derivatives as inputs would go up.

The prices of palm oil (used in toilet soaps), wheat and milk — key inputs for malted beverages and biscuits — have risen.

And, what’s more, packaging costs have gone up too as prices for LDPE and HDPE plastic, again petro-derivatives, have also shot up, fuelling the price hikes.
Sharp rise

After holding prices for over three years between 2005 and 2007, FMCG makers have, over the past year, pegged up prices sharply.

Ask Mr D. Sundaram, Vice-Chairman and CFO, Hindustan Unilever, the country’s largest FMCG maker, whether higher prices of consumer goods are merely keeping pace with the higher inflation, and he says that prices for HUL brands need not necessarily match the underlying inflation in the relevant commodities. “For instance, vegetable oil prices have gone up by over 50 per cent in recent times while the increase in soap prices has been significantly lower; this is true across many categories,” explains Mr Sundaram.

Nor has the reduction in peak import duties over the past two years helped offset the steep increases in input costs of palm oil and petroleum-related raw material.

As Mr Sundaram points out, prices of industrial vegetable oil (which go into soaps) have gone up by over 50 per cent while the duty reduction has been about 5 per cent.

For three years till 2007, a combination of several factors, such as fierce competition among existing players, entry of new players and depressed demand, ensured prices of most consumer goods largely stayed static.

But, a cursory glance of current MRPs of a sampling of FMCGs spread across various categories ranging from beverages to biscuits and detergents to soaps shows that prices have risen in a band of Rs 2-Rs 10.

A 500-gram jar of Horlicks now retails for Rs 128 against Rs 118 last year and Bournvita for Rs 123 against Rs 116 last year.

Or, take detergents. A 1.5-kg pack of Surf Excel Blue retails for Rs 135 today while it sold for Rs 120 in February 2007 (See table on Page 3).

While most brands have seen an outright increase in prices (malted beverages by at least Rs 10), in some categories such as biscuits, manufacturers have chosen to reduce the weight of the packet, tantamount to a price increase.
Less grammage

According to Mr Praveen Kulkarni, Marketing Manager, Parle Ltd, “We reduced our grammage by almost 10 per cent across the brands this January and will continue to do so till the time every other biscuit player does the same thing. There have been input cost increases by 30 per cent for ingredients such as wheat, flour, sugar and vegetable fats. The category is price-sensitive and under these circumstances, we would rather not increase prices for our biscuits.”

So, in the context of higher prices across a swathe of consumer goods, what is happening to the consumer’s shopping basket? Are they downtrading to cheaper products, postponing purchases, refraining…?

Mr R. Subramanian, Managing Director of discount retail chain Subhiksha, who closely observes that “moment of truth” when a customer makes a brand purchase, does see an impact at some levels.

“But the core basket still survives, mostly the impulse discretionary items are clearly suffering at the margin. This month (May) is key — this is the first month of salaries under lower taxes — and hence more cash in consumer hands.”
Shift in preference

Mr Subramanian emphasises that impulse goes down — and substitution happens.

“Gingelly oil at Rs 150 per kg is clearly substituted in large part by groundnut oil while palm oil consumption has also grown at the cost of sunflower oil. There are clear shifts, even in items like rice, but prices of agri-produce have been the biggest pain area in the basket,” he adds.

Weekly Watch - May 17 2008

Weekly Watch - May 17 2008

Company Background - Cipla

Cipla Ltd was incorporated in the year 1935. Today Cipla is one of the largest manufacturer and marketer in bulk drugs and formulations. It has been ranked as first in India by ORG IMS ratings 2005 in terms of retail pharmaceutical sales. All the bulk drug facilities have been approved by the US FDA and the formulation facilities have been approved by the Medicine Control Agency, UK; the Medicine Control Council, South Africa; the Therapeutic Goods Administration, Australia and other international agencies. It has manfacturing facilities at Kurkumbh, Bangalore, Patalganda and Vikroli in Mumbai. The company's products are currently registered in over 150 countries.

Cipla has a very wide product range which includes antibiotics, anti-bacterials, anti-asthmatics, anti-inflammatory anthelminites, anti-cancer and cardiovasculars. In domestic formulation market, antibiotics are the mainstay, which contributes around 50% of the company's revenue. Some of the leading brands are Ciplox (Ciprofloxacin), Novamox (Amoxycilin) and Norflox (Norfloxacin). Cipla also has in its product portfolio Zidovir (zidovudine, anti-AIDS drug). Cipla was one of the first among the Indian pharmaceutical companies to introduce ampicillin and norfloxacin.

The company is constantly maintained its lead in introducing new drug formulation. The company has very strong research and developement facilities which has been bearing fruits. Its ability to quickly duplicate a new drug introduced elsewhere and introduce it in the Indian market has played a significant role in building a basket of formulation brands. Being one of the earliest entrants into the market with a new drug, generally, enables a company achieve higher realisations. In addition to being among the early entrants, one aspect which has given an edge to Cipla's strategy is the ability to market products at a significantly lower price.

Cipla has developed the world's first budesonide-based, chlorofluorocarbons (CFC) - free anti-asthma inhaler, 'Budecort CFC-free'. Budesonide, which falls in the preventive class of anti-asthmatic drugs, is essentially a steroid and preferred due to its safety profile. The company has invested over Rs 20 cr in developing CFC-free asthma products over a period of 12 month. The product is largely being targeted at the international markets, which are CFC-sensitive and is awaiting for registration in the European markets. The fruits of the new product will be obtained in the coming years, since the company expects to increase its exports through this product.

In Dec 2000, the company cut the price of its anti-AIDS drug Nevimune (scientific name : nevirapine) by 34% to Rs 650 for a strip of ten tablets. The price was earlier Rs 985. Cipla has slashed the price of the drug thrice reducing it from the launch price of Rs 1,350 for a strip of ten to the current price. The company attributes this to improvements in technology that has enabled it to cut costs and pass on the savings to consumers.

Cipla is the only manufacturer of nevirapine from the basic stage in India. This is the fourth price cut of anti-AIDS drugs effected by Cipla in the last three years. The last reduction was in Sep 2000 when prices of its Lamivir, Duovir, Stavir and Nevimune brands were cut between 13 - 45% across six dosage forms.

Among the large pharma companies, Cipla was considered as the fastest growing company with a pre-eminent position in anti-asthma and its foray into high-growth areas like anti-cancer and anti-AIDS. However, current performance is not in line with this perception.

Cipla became the first player outside the US and Europe to launch non-CFC (chlorofluorocarbons) metered dose inhalers. After growing smartly in the domestic market, the company is now focussing on export markets. Cipla has tied up with US major Andrx to supply Omeprazole, an anti-ulcer bulk drug slated to go off patent in October. Andrx is expected to gain the 180 days exclusivity for marketing the generic Omeprazole in the US market, post-patent expiry in October 2001.

Cipla has also tied up with the US-based Zenith Goldline and United Research Labs for marketing Flutamide (an oncology drug) and Felodipine (a cardiovascular drug) in the US and European markets. Flutamide will go off patent in May, while the patent for Felodipine will expire in late 2001.

Cipla has one of the best R&D facilities for reverse engineering in the country. As in the past, its R&D division continues with its focus on finding new processes for existing products.

Cipla is now focussing on high-margin areas like anti-AIDS, cardiovascular and anti-cancer, in order to reduce its exposure to the highly competitive anti-infectives segment. In July 2001, the company has effected another round of price cuts of its anti-AIDS drug segment. This is the fourth price cut in AIDS segment during the last nine months (last one was in May 2001). The company has cut prices of its triple drug regimen by as much as 39%. The three-drug combination of lamivudine, stavudine and nevirapine, which has the potential to reduce the HIV virus in the body to very low levels, will now cost the patient Rs 2,130 per month down from Rs 3,495 per month.

The company is one of the three Indian pharma companies who will jointly market the anti-anthrax drug, Ciprofloxacin, in India. The company is also to benefit in case if USA allows the Indian companies to sell their anti-anthrax dose over there . Anthrax has gripped the world, mainly the USA recently and is suspected to be a form of biological terrorist attack. During 2001-02 a number of Active Pharmaceutical Ingredients which was made in house was introduced, This will definitely scale up the overall sales growth in the near future.

During 2004-05 the company launched many new products and APIs in the country. Some of them are Duova, Duovir E Kit, Duonase, Levolin, Mucinac, Seroflo Multi-Haler and Voltanec. The first phase of the new formulation plant at Baddi, Himachal Pradesh for the manufacture of tablets and capsules was completed and the unit commenced commercial production in April 2005.

In 2005-06 the company has enhanced its installed capacity of Bulk Drugs (including Malts), Tablets & Capsules, Creams, Aerosols/Inhalation Devices and Injections/Sterile Solutions by 79 Tonnes, 2828 Millions Nos, 400 Tonnes, 7800 Thousand Nos and 461 Kilolitre respectively. With this expansion the total installed capacity of Bulk Drugs (including Malts), Tablets & Capsules, Creams, Aerosols/Inhalation Devices and Injections/Sterile Solutions by 1598 Tonnes, 12296 Millions Nos, 616 Tonnes, 53580 Thousand Nos and 1071 Kilolitre respectively.

The company's new export-oriented manufacturing unit for APIs and drug formulations is nearing completion at Patalganga. It is expected to commence production in the second quarter of 2006-07. The company expanded its facilities at Baddi in Himachal Pradesh. The company is planning to set up a large drug formulation manufacturing facility for various dosage forms as a Special Economic Zone (SEZ) in Goa and also planned major additions to its manufacturing facilities at Kurkumbh and Bangalore.

Company Background - Suzlon Energy

Suzlon Energy, a leading WTG manufacturers in India is Asia's strongest growing fully integrated wind power company and ranks amongst the top ten in the world. Suzlon integrates consultancy, design, manufacturing, operation and maintenance services to provide customers with total wind power solutions

Suzlon is one of the fastest growing Wind Energy companies in the world. The key to companies meteoric growth has been companies vision of creating world-class products by adopting the best of everything from around the globe. Suzlon has a subsidiary in Germany for technology development, an R&D facility in the Netherlands for rotor blade molding and tooling, and Wind Turbine and rotor blade manufacturing facilities in India. All this is backed up by stringent international quality control and assurance systems like ISO 9001:2000 and Type certification.

The Company was incorporated in 1995 by Tulsi Tanti. Tulsi Tanti was primarily in the textile business and was introduced to wind energy through a wind power project that he had commissioned for his textile factory. The first subscribers to the Memorandum were the family members and friends of Tulsi Tanti.

The Company entered into a technical collaboration agreement in 1995 with a German company, Sudwind GmbH Windkrafttanlagen to source the latest technology for the production of WTGs in India. Sudwind GmbH Windkrafttanlagen was subsequently taken over by Sudwind Energiesysteme GmbH ('Sudwind'). The parties entered into a fresh agreement dated September 30, 1996, under which Sudwind proposed to share technical knowhow relating to 0.27 MW, 0.30 MW, 0.35 MW, 0.60 MW and 0.75 MW WTGs in consideration for royalty to be paid on the basis of each WTG sold over the course of five years from the date of this agreement. The Company obtained the official non-exclusive, non-transferable license for the manufacturing, marketing, dealing and servicing of APX-60 type blades from the trustee of Aerpac B.V. upon its liquidation, for consideration of Euro 200,000 vide an agreement that was entered into between the trustee of Aerpac B.V. and the Company dated June 4, 2001. This license is valid for an indefinite period. The Company entered into an agreement dated April 10, 2001 with Enron Wind Rotor Production B.V. for the acquisition of the moulds and the production line and technical support and assistance for the production of the rotor blade type APX 60-P in India for total consideration of Euro 500,000. Enron has granted these rights for the manufacturing, marketing and dealing with the products for an indefinite period.

The Company introduced the concept of total solutions wherein, in addition to the supplies of equipments, the client is offered project execution work comprising land acquisition, site development, erection and commissioning, foundation and other civil work and O&M services. These services are offered in conjunction with the Associate Companies. SWSL, a subsidiary of the Company, was incorporated in 1998 with the objective of providing O&M for wind power projects set up by the Company. The Company has also set up technological development centres in Germany and The Netherlands through wholly-owned subsidiaries. SEG, incorporated in 2001 and earlier known as AX 215 Verwaltungsgesellschaft mbH became a wholly-owned subsidiary of the Company in 2002. AERT, a wholly owned subsidiary of AERH, which in turn is a wholly owned subsidiary of the Company, was incorporated in 2001 to engage in the development of technology for rotor blades, a key component of WTGs. Further, Suzlon Energy A/S, a wholly-owned subsidiary of the Company was incorporated in August, 2004 to supervise the international marketing activities of the Company. It is proposed that the entire non-India marketing activities of the Company shall be coordinated through Suzlon Energy A/S. SWECO, now a wholly-owned subsidiary of the Suzlon Energy A/S, was incorporated in 2001 to market, the WTGs manufactured by the Company in U.S.A. Further, Suzlon Energy A/S has another wholly-owned subsidiary, Suzlon Energy Australia Pty Limited, which was incorporated in 2004 to access the wind energy market in Australia. Suzlon Energy B.V. earlier known as AE-Rotor B.V., The Netherlands, a wholly-owned subsidiary of AERH, which is a wholly-owned subsidiary of the Company, was incorporated in 2001 to market the rotor blades manufactured by the Company. Cannon Ball Wind Energy Park-I, LLC ('Cannon Ball') was incorporated as a limited liability company in July, 2002 for the purpose of setting up a wind power project in North Dakota, USA. Cannon Ball is a wholly-owned subsidiary of SWECO which is a subsidiary of Suzlon Energy A/S. Further, a representative office of the Company was also set up in China in 2003 to explore the Chinese market.Suzlon's

Suzlon Energy Limited has taken a step further for establishing its presence in China by commencing the establishment of a wind turbine generator manufacturing facility in China through its wholly owned subsidiary Suzlon Energy (Tianjin Limited, The said manufacturing facility which is scheduled to commence its commercial operations by about Second quarter of financial year 2006-2007 would cater to the energy needs of China.

The companies product range includes 0.35 MW, 0.60 MW, 0.95 MW, 1.00 MW, 1.25 MW and 2.00 MW WTGs

Suzlon Energy also has the distinction of introducing the concept of large wind parks in Asia and has gone on to build some of the largest wind parks in Asia including the world's largest wind park of its kind.

Further, Suzlon's status as a force to reckon with in the wind energy industry came with the World Wind Energy Association's award for the year 2003, recognizing its contribution in disseminating wind energy worldwide.

ACC: Hold

Investors in the stock of ACC can hold on to their investments. The company’s aggressive expansion plans are expected to push up its total cement capacity to 30.4 million tonne per annum (mtpa) by 2010, from the current 22.4 mtpa.

Also on the anvil are the company’s 30 MW captive power plant at Bargarh, Orrisa (to be commissioned by mid-2009) and 25 MW power plant at Chanda, Maharashtra (2010).

With cement prices unlikely to witness any strong increase in the near term and ACC’s expansion plans likely to contribute only after two years, the company may post moderate earnings growth in the near term.

At the current market price of Rs 680, the stock trades at nine times its 2007-08 earnings.
Overview

ACC is a leading player in the Northern and Eastern cement markets and the largest cement player in the country with a capacity of 22.4 mtpa. Swiss cement major Holcim holds a 41 per cent stake in the company’s stake. After its acquisition by Holcim in 2005, the company saw a substantial improvement in performance, with the operating profit margins expanding from 28.7 per cent in 2005 to 33.6 per cent by 2007.

Holcim’s operational efficiencies and edge in technology has lent strong support to ACC over the years, with benefits expected in future as well.

ACC has also gradually exited its non-core businesses, with the sale of its refractory business in 2005, subsidiary ACC Nihon Castings Ltd in July 2007 and ACC Machinery Company in March 2008. The company’s ready mix concrete business was also hived off as a separate entity with effect from January 2008.

On the acquisition front, ACC has purchased 100 per cent equity stake in Lucky Minmat Private Ltd, Rajasthan, to augment the company’s limestone reserves. Further, the company has also taken up 14.3 equity stake in Shiva Cement to strengthen its market presence in Orissa.
Expansion Plans

ACC’s proposed addition of 8 million tonne per annum (mtpa) to its existing 22.4 mtpa by end-2010 is planned by way of augmenting grinding capacities at Madukkarai and New Wadi by 0.8 mtpa (total) and additions of 1.18 mtpa, 3 mtpa and 3 mtpa at three locations at Bargarh (Orissa) New Wadi (Karnataka) and Chanda (Maharashtra) respectively.

While the smaller additions to grinding capacity will contribute in 2008, the larger additions are expected to be commissioned by 2009 and 2010. The expected outlay for the Chanda green-field expansion is around Rs 1,450 crore.

The addition of significant capacities in the Western and Southern markets may help the company achieve a better regional balance in its sales mix. This may make it relatively less vulnerable to regional demand-supply disparities. For 2007-08, the northern markets reported a cement demand growth of 8.6 per cent and the Eastern markets 3 per cent.

Demand growth in the West at 14.6 per cent — was supported by an over 13 per cent growth in Maharashtra while growth in the South remained strong at 12 per cent.

The Northern and Western regions are expected to sustain strong growth with huge infrastructure and construction projects. ACC’s expansion in the relatively high demand pockets (West and South) may also strengthen its average realisations.
Soaring Operating expenses

Although ACC is a long standing player in the cement industry, input cost escalations have muted financial performance in recent times. For the quarter ending March 2008, ACC’s total expenses rose 15 per cent, led by power and fuel expenses rising by 25 per cent compared to the same period previous year.

ACC’s raw material cost, as a proportion of sales, also rose to13.4 per cent from 10.8 per cent over the above period . Further, the company has announced a price hold for two-three months after the Government’s request targeted at curtailing inflation.

Sales for quarter-ended March 2008 was up 12.6 per cent excluding the RMC business which was demerged this quarter.

The cumulative despatches between January-March 2008 rose 7.1 per cent to 5.29 million tonnes from 4.94 million tonnes in the corresponding previous period. However, strong volume growth did not translate into profit growth due to cost escalations.

Net profit after tax showed a marginal decline, after excluding profit from the disposal of ACC Machinery Company Ltd. Cost-pressures, flat realisation and sedate volume growth may contribute to moderate earnings growth from ACC over the next few quarters

PVR Cinemas: Buy

Investors with a long-term perspective can consider accumulating the stock of PVR Cinemas in small lots. A lacklustre season at the box office and the migration of movie audiences to cricket with the onset of the Indian Premier League tournament have resulted in the stock languishing in the bourses in recent weeks.

However, the current market price offers a good entry point for investors willing to hold on to the stock for a two-three year period.

The stock trades at 21 times its trailing four quarters’ per share earnings. While the near-term outlook for earnings is likely to be dimmer than the past, amidst a sluggish period for the film industry, the long-term prospects for the company remain bright.
Earnings outlook

PVR has reported a strong performance in recent quarters on the back of ramp up in screen presence and expanding margins. A key positive for the company has been the strong performance of its existing properties, which have been clocking robust double-digit growth in footfalls. This means that earnings growth will be less dependent on the timely opening of theatres.

The fourth quarter is typically a relatively subdued one for multiplex operators. With the exception of Jodhaa Akbar and Race and some spillover collections from Taare Zameen Par, the box office did not have much to report. The dry spell appears to have continued into the summer, which may dampen box office collections in the first quarter of FY-09 as well.

New theatre openings may be the main revenue driver in the near term, if content remains sluggish. PVR continues to add screens, although there have been delays in screen openings across the industry.

The company has tied up with mall developers such as the Prestige group to broaden its presence in the South. It has a target of opening an additional 250 screens by 2011 from the current 95.

From a long-term perspective, however, PVR’s ability to maximise spends on tickets, food and advertisements augurs well for its overall profitability. PVR derives about 20 per cent of its revenues from food and beverages and, thanks to its large screen presence in metros, another 10 per cent from advertisements. Maximising revenue streams beyond the box office is key to maintaining profitability at a time when film hire costs (the cost to exhibit a film in a multiplex) are on the rise. PVR appears to have fared better than its peers on this score.
Focus on metros

This may be partly due to PVR’s focus on metros even as its peers scout for properties in Tier-2 and Tier-3 cities. The company believes that metros remain the most profitable centers for multiplex operators, as spending habits are yet to mature in smaller towns and cities.

This view appears to be validated by its ability to command higher ticket prices in cities such as Delhi and Mumbai. Its existing properties clock superior occupancy levels of over 40 per cent, charge an average ticket price of Rs 130 and there has been an increasing trend in spends per head.

The company’s operating margins are likely to remain higher than its peers, who are now foraying into smaller towns and cities.

PVR recently launched PVR Premiere for the urban elite, with ticket prices ranging from Rs 150-750. The company also operates a low-cost multiplex model PVR Talkies in towns such as Aurangabad and Latur, where tickets are priced at Rs 40. The use of multiple formats that straddle across income segments enables the company to capitalise on both increasing footfalls and the increasing willingness to spend on entertainment.
Building on distribution

With increasing screen presence, PVR is well-placed to build on its distribution business, operated by subsidiary PVR Pictures. Although it is early days still, we expect PVR Pictures to make an increasing contribution to revenues and profits over the next couple of years.

The company’s first co-production Taare Zameen Par with Aamir Khan Productions was a runaway hit. More such projects have been lined up, including one from Aamir Khan Productions expected to release in July 2008.

PVR Pictures, which already has a track record of distributing strong English movie titles, has distributed fairly successful Hindi movies such as Bheja Fry, Omkara and Honeymoon Travels over the past year.

The distribution business appears to be closely tied with the exhibition business, considering that these films clicked particularly well with multiplex audiences. PVR’s multiplexes are present in six of the nine territories for film distribution, which makes it easier for PVR Pictures to drive distribution through its own multiplexes.

A presence in distribution will also keep a check on film hire costs for the multiplex chain.

Cadila Healthcare: Buy

Investments with a two-year perspective can be considered in mid-sized pharma company, Cadila Healthcare. Good momentum in generics business outside India, diversified product portfolio in the domestic market and bright prospects of cornering a chunk of the contract manufacturing pie, form the basis of our recommendation.

The company’s sales and net profits have grown by 13 per cent annually in the last five years. On a like-to-like basis (excluding acquisitions), Cadila’s revenues have grown by around 20 per cent in FY-08.

Over the long term, positive surprises, once validated through out-licensing deals, could also spring from the elaborate drug discovery set-up, which is currently working on five molecules in areas of obesity, diabetes, metabolic disorders etc. At the current market price of Rs 315, the stock discounts its likely consolidated FY 2009 earnings per share by 13 times. The valuation appears attractive when compared to formulation-based players of similar size and scale.

With a business skewed towards high-margin formulations — finished dosages (contribution from bulk drugs is less than 15 per cent), Cadila Healthcare is among the top five in the domestic market. Formulation exports have grown annually at 60 per cent over the last three years, helped by acquisitions and presence in key markets.

Going forward in the next two years, Cadila could emerge as an important contract manufacturing player (sales contribute less than 5 per cent now) through joint-ventures, which are in place, even as it consolidates its position in the Indian market and builds on a viable generics business in countries such as US, France, Brazil and Japan.
Indian business

On the domestic front, Cadila is likely to build on the 13-15 per cent growth in branded formulations space through new launches (own pipeline as well as in-licensing) and through entry as well as consolidation in profitable therapeutic areas such as nutraceuticals, orthopaedics, dermatology and cosmetology.

Cadila also has major interests in the consumer products business (8-9 per cent of consolidated sales) through brands such as low-calorie sweetener ‘Sugar Free’, skin-care product ‘EverYuth’ and butter alternative ‘Nutralite’.

While the steep growth witnessed in this segment is partly on account of an acquisition, the division holds strong potential given the market share enjoyed by the brands.
Growing overseas

Exports account for around one-third of Cadila’s revenues. While its limited exposure to the highly competitive US generics market could be seen as a negative, its relatively late entry has enabled it to avoid the massive price-corrections in generic landscape in the US.

Though the outlook in the US still remains cautious, the worst is perhaps over now and players such as Cadila with distribution tie-ups and a portfolio of 18-20 products could grow from here on.

The company also has more than 40 unapproved drug filings in the US which are likely to materialise over the next 18-24 months, lending greater mass to its business. In France (presently 7 per cent of sales) Cadila’s business broke-even and turned profitable in 2007-08.

The company has sealed certain local tie-ups, which can be expected to scale up revenues, as it sells more number of products than the 20-25 it already has. It has also obtained 25 site transfers for products currently made in France to India, which will see an improvement in profitability. Cadila’s Brazilian operations hinge around an acquired entity called Nikkho which gives it both front-ended presence (marketing force and channels) as well as local manufacturing facilities (helps to get approvals quicker). A major portion of Nikkho’s portfolio is yet to be tapped, which may provide upsides for Cadila.
Contract manufacturing

Cadila’s relationship with innovators and conspicuous absence in patent-infringing generic products in its own US business indicates that it harbours larger contract manufacturing ambitions.

Cadila currently has three large long-term supply contracts for drugs. It also has over 20 smaller contracts, which together offer a peak revenue potential of $35-40 million annually. Cadila’s JV with Nycomed for a certain bulk drug product is starting to face early genericisation with generic alternatives launched in the US. Though a small proportion of sales, it has very high profit margins and forms a chunk of Cadila’s profits.

However, revenues from this JV have declined by 20 per cent in 2007-08 with increasing competition. Nycomed has now planned to shift all its bulk drugs manufacturing to India (to cut costs) for 17 products, expected to be operational by 2010; Until such time, Cadila may see some dent in contribution from the JV. Meanwhile, Cadila’s JV with U.S-based Hospira for oncology injectables, expected to commence in October-November 2009, may partially offset the decline in revenues from Nycomed.
Risks

Cadila’s balance-sheet carries a net debt of Rs 860 crore (80-85 per cent is denominated in foreign currency). Interest costs could put pressure on operating margins in the medium-term. Organic growth in 2008-09 may be hampered due to integration issues, product delays, regulatory interferences etc.

Container Corporation: Buy

Investors with at least a two-year perspective can buy the stock of Container Corporation, a leading player in the multi-modal logistics space.

A massive infrastructure network, huge wagon inventory and strategic tie-ups with potential competitors in the logistics space inspire confidence in the company’s ability to scale future growth. At the current market price of Rs 901, the stock trades at about 14 times its likely FY09 per share earnings.

Concor had suffered significant de-rating in the recent past on the back of concerns over growing competition given the entry of 14 new private players in the container rail logistics space. The company nevertheless retained its leadership position; it contributed to over 94 per cent of the container rail traffic as against the 6 per cent carried by the new entrants last year.

This dominance may remain given Concor’s pan-India infrastructure network of over 57 inland container depots and 8,500 wagons. Plans to further add to these capacities (capex of Rs 700 crore) would help sustain its leadership. Concor also boasts of a highly depreciated asset base. Backed by a low per unit cost, Concor is also likely to enjoy the best returns on incremental investments while its competitors may continue to grapple with high investment costs.

In a bid to further strengthen its service offering and address competition from road transport businesses, Concor has formed joint ventures with companies such as Reliance Logistics and Transport Corporation of India. Through these ventures, Concor would provide end-to-end inter-modal logistics solutions to its customers.

Further, Concor also proposes to enter new businesses such as container shipping and air cargo. Entry into these segments would be a logical extension of its current business offerings and will help Concor establish presence in the entire length of the logistics chain. In an attempt to overcome any hiccup arising from lack of prior experience in these initiatives, the company plans to carry the new businesses through joint ventures. Concor reported a compounded earnings growth of over 23 per cent on the back of 18 per cent growth in revenues over the last five years.

Notwithstanding this, operating margins declined last year by 2 percentage points to about 27 per cent. Margins came under pressure due to the running of empty rakes as there was a drop in export volumes last year. While Concor has since then taken necessary steps to address this problem, the recent depreciation in the rupee may provide some respite.

Long Term Picks - May 17 2008

Buy Chambal Fertilizers

Buy Suzlon

Buy HDFC

Buy Tata Power

Buy Aban

India Weekly Snippets - May 17 2008

India's external fundamentals are strong: Moody's

Moody's Investors Service said that the Indian economy's external fundamentals are strong enough to withstand a wide range of potential shocks, including sudden reversals in short-term capital flows, a sharp slowdown in global growth, and weak government finances, or a slowing in structural reforms on account of a fractious political landscape. The Moody's report said that the strong fundamentals, combined with a private-sector induced upturn in savings and investment and a rising rate of potential growth, support the Government's foreign currency sovereign bond rating of Baa3 and local currency bond rating of Ba2. "The government's local currency bond rating of Ba2 balances a high level of indebtedness with a favorable debt structure," said Aninda Mitra, a Moody's VP/Senior Analyst and author of the report. "At the same time, concerns about the size and servicing burden of the government debt is somewhat mitigated by the latter's high local currency content, long tenor, growing domestic savings and a stable creditor base dominated by domestic institutions," added Mitra.

April indirect tax receipts up 11% yoy

Indirect tax collections grew 11% in the first month of the current fiscal year despite a decline in excise collection, the Government said. Excise duty collection fell by 3.9% to Rs64.1bn in April from Rs66.73bn a year ago. Customs duty collection grew by 24.9% to Rs90.18bn in April against Rs72.21bn in the same month last year, thanks to high growth in imports. Total indirect tax collection (excluding service tax) rose by 11% to Rs154.28bn as against Rs138.94bn during the period. Excise duty collection has been falling short of target for quite some time. Revised estimates for collections under this head had to be cut to Rs1.28 trillion for 2007-08 from Rs1.3 trillion in the budget estimates. Even this truncated target could not be met and the Centre could collect only Rs1.25 trillion from excise duty during the year.

No wheat imports this year: Pawar

The Government won't import wheat this year as procurement from the domestic market reached a record, Agriculture Minister Sharad Pawar said. "There's no question of importing this year," Pawar told reporters in New Delhi. The Government imported 1.8mn tons of wheat in 2007. Procurement of wheat is all set to reach 20mn tons as against the target of 15mn tons in the current marketing season. "Though we have a target of 15mn tons, we will reach at 20mn tons. If we reach 20mn tons, wheat imports will not be required," the Agriculture Minister Pawar said on the sidelines of a function organised by industry chamber CII. Pawar said he had discussed wheat procurement with all state governments and the Food Corporation of India (FCI) and the assessment is based on their feedback. Separately, Pawar said the Government does not plan to ban futures trading in more agricultural commodities. The Government last week banned trading in soybean oil, potatoes, chick peas and natural rubber to cool down inflation. "The decision to ban four commodities was taken by the FMC. I think the situation will not be there to extend it beyond four months. I don't think any new commodities will be included in the list," Pawar said.

SEBI clears alternative payment for public/rights issue

The SEBI Board approved the concept of marking lien on bank account as an alternative mode of payment in public / rights issues. The concept will enable the application money to remain in the bank account of the applicant till such time the allotment is finalized and thus eliminate the refund process. The Board also decided to enhance the minimum net worth requirement for registration as a portfolio manager from the existing Rs5mn to Rs20mn and to give effect to the requirement of maintaining continuous networth separately for portfolio management activities. It was also decided that Portfolio Managers should not float a scheme or pool the resources of the client in a way which is akin to mutual fund activity. They would be required to keep assets of each client separately and not in a pooled manner. A time frame of six-months from the date of notification has been given to convert their operations managed on pooled basis to individual basis.

Reliance Infratel, MCX get SEBI nod for IPOs: reports

Market regulator SEBI reportedly cleared the Initial Public Offering (IPO) of Reliance Infratel and Multi Commodity Exchange (MCX). While Reliance Infratel is likely to raise between Rs50-60bn from the IPO, MCX may mobilise up to Rs7bn. Reliance Infratel, a Anil Dhirubhai Ambani Group (ADAG) company is reportedly looking to offload a 10% stake to the public. The company, which is 95% owned by Reliance Communications (RCOM), is planning to offer about 89.16mn shares. It may be recalled that Reliance Infratel had earlier sold a 5% stake to a clutch of investors, including HSBC and George Soros' Quantum Fund. Meanwhile, the MCX issue is aimed at part funding its proposed infrastructure and technological investments. The commodity exchange will raise money partly through issuing fresh equity and partly through offer for sale by Financial Technologies (FT), one of the chief promoters of MCX, and Corporation Bank. Post IPO, FT's stake in MCX will fall to 26% from the current 32%. In February, FT had sold a 5% stake in MCX to NYSE Euronext.

Haven't made any bid for MTN: Bharti Airtel

Bharti Airtel reiterated that its talks with South Africa's MTN Group are exploratory in nature and that it has not made any bid for acquiring Africa's biggest wireless telecom operator. "The company has not made any bid nor is there any requirement to make a bid, as has been incorrectly speculated and reported," Bharti Airtel said. The company also reiterated that the discussions with MTN may or may not lead to any transactions. "Bharti Airtel and MTN are holding talks to combine the strengths of the two leading emerging markets players and accordingly veering towards possible structures to achieve this objective," the New Delhi-based company said. Bharti Airtel submitted an indicative bid for a controlling share in MTN at about 165 South African rand per share, the Financial Times reported on May 5. On May 9, the Dow Jones Newswires reported that Bharti Airtel was considering a bid of 175 rand a share. But, this week, Dow Jones said Bharti Airtel may not pay more than US $45bn for all of MTN, though the South African operator is seeking US $50bn. Meanwhile, some industry observers and merchant banking experts believe that the deal could happen through a merger. A financial daily reports that Bharti Airtel is exploring the possibility of buying 100% of MTN through a scheme of arrangement. It will offer MTN shareholders cash as well as stock. Reports also said that Bharti Airtel had offered the post of Chairman to Matamela Cyril Ramaphosa, the non-executive chairman of MTN. Sunil Mittal, the chairman of Bharti Group, is likely to be group CEO and deputy chairman of the new entity.



SC seeks explanation on Singur land acquisition

The Supreme Court (SC) asked for replies from Tata Motors, the West Bengal government and others as to why fertile multi-crop agricultural land was acquired for the company's small-car project at Singur. A bench headed by the Chief Justice, K.G. Balakrishnan, while issuing notice to Tata Motors, the state government and the West Bengal State Industrial Development Corporation (WBSIDC) posted the matter for further hearing in July. According to reports, Kedar Nath Yadav, a practicing lawyer, had filed a petition, seeking immediate halt to the Nano car project. Yadav had challenged the Calcutta High Court's decision that upheld as legal the acquisition of land at Singur by the West Bengal government. The acquisition of fertile multi-crop agricultural land by the state government in various parts of the state for a number of industrial projects violated farmers' rights guaranteed by the constitution, Yadav argued in his petition. The land acquisition by state also goes against the provisions of Land Acquisition Act, 1894, he said.

Upaid wins case against Satyam Computer

Online and mobile payments service leader, Upaid Systems, announced that the Court of Appeal in London affirmed a January High Court Judgment in Upaid's favour against Satyam Computer Services, soundly rejecting the Indian software leader's effort to block Upaid's fraud and forgery claims in a Texas court. The decision confirms an earlier High Court judgment in favour of Upaid on all points. This ruling allows Upaid's lawsuit against Satyam alleging forgery, fraud, misrepresentation, and breach of contract, and what Satyam admits are "extremely large sums of money", to proceed to a US trial by jury in a Texas federal court. Satyam said it is confident that it has merits in the case involving Upaid Systems, and would contest the case. It is premature to make any judgment on the quantification of any potential damages, Satyam said, adding that the matter is sub-judice. The Hyderabad-based IT major said it is considering all its legal options as regards the dismissed appeal in a London court.

Bajaj, Renault and Nissan form JV company

Rajiv Bajaj, MD of Bajaj and Carlos Ghosn, President & CEO of Renault and Nissan, announced they will form a joint-venture company to develop, produce and market the car code-named "ULC" with wholesale price range starting from US$2500. The new JV will be 50% owned by Bajaj Auto, 25% by Renault and 25% by Nissan. Targeting the growing Indian new vehicle market, ULC will be made at an all-new plant to be constructed in Chakan in Maharashtra. Initial planned capacity will be 400,000 units per year. Sales will start in early 2011 in India, as a primary market, with growth potential in other emerging markets around the world. The feasibility has already extended into Joint Product Development and the project is on line to meet targeted performance and cost, the companies said.

Ranbaxy forms research alliance with Merck

Ranbaxy Laboratories said it had signed a Product Development Agreement with Merck & Co., providing for a drug discovery and clinical development collaboration for new products in the anti-infective field. Ranbaxy and Merck will work together to develop clinically validated anti-bacterial and anti-fungal drug candidates. Ranbaxy will carry out drug discovery and clinical development through Phase IIa clinical trials, with Merck conducting development and commercialization of drug candidates thereafter. The collaboration will begin this year with an initial term of five years and can be extended mutually thereafter by the parties. Under the terms of the agreement, Ranbaxy will be paid an undisclosed upfront sum with the potential to receive payments totaling more than US$100mn associated with achievement of various R&D and regulatory approval milestone for each target included in the collaboration.

RCOM forms JV with Alcatel - Lucent

Reliance Communications (RCOM) and Alcatel - Lucent announced forming a global joint venture. Combining the unique strengths of Alcatel - Lucent and RCOM, the JV would foray in the fast growing US$16bn (Rs640bn) Managed Network Services industry and will cater to telecom operators, both CDMA and GSM, across the globe. The first assignment of this JV will be to provide Managed Services for RCOM's nationwide CDMA and GSM networks in India. The JV will support the expansion and growth of RCOM, within and outside India. A new legal entity is being farmed as part of the JV. Alcatel-Lucent will have the operational control of the new entity. RCOM is represented in the JV through its wholly own subsidiary. The JV would thereafter expand its operations in the global arena.

NTPC eyes coal mines in Indonesia

NTPC plans to buy majority stakes in one or two coal mines in Indonesia, Chairman R.S. Sharma said. The public-sector company may decide on buying the stakes by March, Sharma told reporters in New Delhi. NTPC has selected three banks to advise it on the acquisition, Sharma said, without giving names. The company seeks to buy assets with reserves of 200mn tons to 300mn tons, he added. "We have already appointed three merchant bankers for this and our endeavour is to finalise the stake purchase by the end of this financial year," Sharma said. Separately, NTPC decided to allocate 0.5% of distributable profit annually for its "Research and Development Fund for Sustainable Energy". This fund will be used for sponsoring / undertaking research leading to development of green and clean technologies. The research may include development of

China rocked by major quake

A strong earthquake measuring 7.9 on Richter scale rattled southwest China, causing buildings to shake in Beijing. The quake hit Wenchuan County of China's Sichuan province, less than 100 km from the provincial capital of Chengdu, the US Geological Survey said. It struck 90 kms west-northwest of Chengdu at 2:28 p.m. local time on May 12 at a depth of 10 kilometers, the USGS said. The effect of the quake was felt as far away as Thailand. The cost of the devastating earthquake in China, which killed nearly 15,000 people, is likely to exceed US$20bn, according to leading disaster modelling firm AIR Worldwide. The earthquake was the worst to hit China in 32 years. AIR warned that the full extent of the damage could take weeks to discover. Rescue workers struggled to reach some of the worst affected areas and tens of thousands of people were still buried under collapsed buildings. The number of deaths announced so far rose to 19,500 in Sichuan province, the centre of the earthquake.

Markets still not completely stable: Bernanke

Though financial markets have stabilised in the past few weeks they still remain stressed, Federal Reserve chairman Ben S. Bernanke said. The Fed's liquidity measures appear to have contributed to some improvement in financing markets, Bernanke said. However, he added that conditions in financial markets are still far from normal. Bernanke noted some improvements in the markets for certain mortgage-backed securities, such as those backed by Fannie Mae and Freddie Mac, as well as some fixed-rate mortgages and corporate debt. Moreover, the Fed's extraordinary decision in March to let investment firms go to the Fed for emergency loans seems to have bolstered confidence, Bernanke said. The central bank has taken a number of steps to help ease the credit crunch. Still, there are strains involving a widely used interest rate called the London interbank offered rate, or Libor, Bernanke said. And funding pressures have also been evident in the strong participation of commercial banks in a Fed auction program that has made billions of dollars available in short-term cash loans, he said. The Fed policymakers stand ready to further increase the size of these loans in the future if warranted by financial developments, Bernanke added.

China hikes reserve requirement again

The Chinese central bank raised banks' reserve requirement for the fourth time this year to soften inflation which accelerated further last month due to rising food costs. The reserve requirement rose to a record 16.5% of deposits from 16%, the People's Bank of China said. The increase takes effect on May 20 and is aimed at curbing excess liquidity and soaring inflation. The hike came only a few hours after official data showed that China's consumer price index (CPI) accelerated at a faster-than-expected 8.5% pace in April from the year-ago period. The increase will freeze about 208bn yuan (US$30bn) in the banking system, and may help cool the world's fastest-growing economy. Having said that, a 7.5% increase in the reserve requirement since the start of last year has failed to stop lending growth. The central bank has kept the benchmark one-year lending rate unchanged at a nine-year high of 7.47% this year after six increases in 2007. The government has also slowed the pace of yuan gains since April.

Eurozone economy grows faster than expected

Germany and France, two of eurozone's biggest economies, paced economic growth in the EU during the first quarter, despite a global credit crisis and a slowdown in the United States. GDP in the euro area increased 0.7% from the previous three months, when it rose 0.4%, the European Union's Luxembourg-based statistics office said. The reading exceeded average forecast of a 0.5% gain. Germany's economy surged to the fastest pace in 12 years and growth in France surpassed expectations, even as Spain suffered its weakest expansion in almost eight years. While Italy doesn't report GDP data until May 23, economists said it may already have slipped into a recession. The ECB has resisted pressures to cut interest rates to boost growth in the wake of the US slowdown and turbulence in financial markets. It has indicated it is in no rush to cut rates and wants to contain inflation. Figures published showed euro-area inflation eased to 3.3% in April from a 16-year high of 3.6% in March, still well above the ECB's 2% ceiling. ECB President Jean-Claude Trichet said last week inflation will remain high for some time and moderate only gradually



Japanese GDP growth beats forecast

Japan's economy grew at a faster than expected pace in the first quarter of the year, marking its third consecutive expansion amid strong exports to Asia and other emerging markets. A rebound in private residential investment also helped the world's second-biggest economy to weather a slowdown in the US. Gross Domestic Product (GDP) in the January-March period rose 0.8% from the last quarter, or 3.3% annualised, the Cabinet Office said today. Economists had expected the Japanese economy to grow 0.7% for the quarter. Fourth-quarter growth was revised to 2.6% from 3.5%, the Cabinet Office said. Finance Minister Fukushiro Nukaga and Economy Minister Hiroko Ota said they're concerned about the outlook for business investment, which fell 0.9% last quarter. The risk of weaker growth prompted the Bank of Japan last month to shelve its policy of gradually raising interest rates. Governor Masaaki Shirakawa and his board are expected to hold the key rate at 0.5% at the end of their next meeting on May 20 and most economists say borrowing costs will stay unchanged this year.

Icahn mounts proxy war against Yahoo

Yahoo shares surged after activist shareholder Carl Icahn launched a campaign to overthrow the Internet giant's board as part of an effort to restart deal talk with Microsoft. Icahn said he owns the equivalent of 59mn Yahoo shares, and has permission to acquire up to US$2.5bn worth. He created a slate of 10 nominees for board seats, including Mark Cuban and Frank Biondi Jr. All 10 of Yahoo's directors are up for re-election at the annual meeting on July 3. In a letter to Yahoo's board, Icahn said that a combination with Microsoft is by far the most sensible path if the Internet company wants to take on Google. "The board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft,'' said Icahn, 72. "I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.'' Yahoo said it was right to reject Microsoft's US $47.5bn offer and that its directors are the most qualified to boost the company's value. Icahn has a significant misunderstanding of Microsoft's offer and the response of Yahoo's board, Yahoo chairman Roy Bostock said. He said Yahoo is willing to consider any proposals, including from Microsoft, that offer shareholders full value. Yahoo's board met more than 20 times to review Microsoft's offer and other options, keeping an open mind and an open ear," Bostock said.

Rupee hits 13 month low

The Indian rupee fell to a 13-month low as public sector oil companies continued to buy dollars to pay for crude oil, which surged to a new all-time high above US$127 per barrel. Also, data showing inflation touching a new three and a half year high heightened worries about slowing economic growth amid record oil prices and slowing foreign capital inflows.

The rupee lost 2.2% during the week to close at 42.5075 a dollar, adding to last week's 2.3% fall. It earlier dropped to 42.92, the lowest intraday level since April 12, 2007. But, it recovered some ground on speculation that the Government will ease curbs on overseas borrowings, allowing more capital inflows. At its low of the day, the rupee was down 8.2% in 2008. It had risen more than 12% against the dollar in 2007. The currency's near 8% decline this year is the third-worst performance among the 10 most-traded Asian currencies after the South Korean won and the Thai baht.

Government data showed annual inflation at 7.83% for the week ended May 3, while provisional inflation rate for the week ended March 8 was revised up to 7.78% from 5.92%. Earlier this week, data showed that the annual pace of growth in industrial production more than halved to 3% in March from 8.6% in the previous month. The gain was the smallest since February 2002.

Crude oil, India's biggest import, hit record highs near US$127 a barrel this week, raising the risk of the trade deficit widening. Moreover, FIIs have sold Indian equities worth US$2.9bn this year, a sharp turnaround from record net purchases of US$17.4bn last year.

On a trailing 12-month basis, the current account deficit - excluding remittances and trade deficit - remain high at around 4.5% and 7.2% of GDP, respectively, says Morgan Stanley. Higher oil prices will likely add further to the trade deficit, the US brokerage adds. The rupee may fall by 5-7% against the US dollar by the end of 2008, dragged down by a slew of factors such as a widening trade deficit, and soaring oil and commodity prices, Morgan Stanley said in a note.

Industrial output growth hits 6-year low

If inflation hitting a three-year high was not enough, the Indian economy received another jolt with the industrial output falling to a six-year low in March. High interest rates, coupled with spiraling costs and a US-led global slowdown hit industrial activity during the last month of FY08. However, some economists pointed out that the figures weren't quite as bad as the Index of Industrial Production (IIP) actually witnessing an increase of a few basis points over the previous month. The major culprit was the manufacturing sector, which has three-quarters weightage in the IIP while consumer durables segment too remained in the doldrums.

Industrial production grew by just 3% in March as against 8.6% in February. The figure was much lower than average expectations of 5.5-6%. In the corresponding month last year, industrial output grew by a whopping 14.8%. Growth in the manufacturing sector sank to 2.9% from an impressive 16% in the same month last year. The mining sector expanded by 3.8% in March as against 8% in the same month last year. Electricity grew at a 3.7% pace in the month versus 7.9% in March 2007.

As many as 12 out of the 17 industry groups, showed positive growth during March. ‘Jute & Other Vegetable Fibre Textile)’ showed the highest growth of 62.7%, followed by 24.9% in ‘Other Manufacturing Industries’ and 12.7% in ‘Leather and Leather & Fur Products’. On the other hand, ‘Metal Products & Parts’ showed a negative growth of 25.8% followed by 5.8% in ‘Wood & Wood Products; Furniture & Fixtures’ and 5.5% in ‘Textile Products’.

Basic Goods, Capital Goods and Intermediate Goods recorded a growth of 3.1%, 8.6% and 3.5%, respectively compared to 11.9%, 18.1% and 15.3% in the same month last year. Consumer Durables witnessed a negative growth of 2.1% versus 3.8% in March 2007. Consumer Non-durables registered a modest growth of 0.6% as against a strong expansion of 20.2% in the year-ago month. The overall growth in Consumer Goods was (-) 0.1% as against 15.8% in March 2007.

During the fiscal year ended March 2008, the industrial output growth stood at 8.1% versus 11.6% in the previous fiscal year. This is its slowest pace in four years. Industrial production growth would average 6-6.5% in Q1 FY09 as the high base effect of last year gradually wears off. Industrial output will then pick up to around 8% from Q2 FY09 onwards. However, with rising inflation and the risk of further monetary tightening, industrial production growth is most likely to fall. FY09 growth will decelerate to 7.5-8% from 8.1% in FY08.

Weekly Market Update - May 17 2008

Tracking its Asian peers, the Sensex opened 96 points down on Monday at 16,641 from the previous close of 16,737. The bears came out with renewed vigour taking cues from the weak IIP data and hammered the Sensex down further, to test its day low of 16,546.55 points.

The sharp rise in the US dollar against the rupee attracted investors fancy to technology stocks and the sensex salvaged some gains to finish the day at 16,737.07 with a modest rise of 123 points.

Gradually the bulls gained the upper-hand from Tuesday onwards, and made attractive gains, shrugging of the news of Jaipur blasts.

To wrap-up the week, the Sensex all through stayed firm and absorbed the negative news such as the relentless rise in oil prices, the 7.83 per cent inflation rate and gained nearly 700 points to finish at 17,434.96.

The BSE Mid-cap and smallcap indices fell Monday on concerns of surging inflation, and ever-increasing crude oil prices.

On Monday, the overall markets perceived the rise in oil prices as negative. Cairn Energy bucked the trend and breached its all time high to finish at Rs 305, with a phenomenal increase in volumes.

Shares of MphasiS Ltd, an EDS company, rose 9.88 per cent on Tuesday on reports that Hewlett-Packard is in talks to buy IT outsourcing company Electronic Data Systems Corp for about $13 billion. MphasiS shares gained Rs 21.80 to close at Rs 242.45.

Cement stocks on Wednesday continued their free fall, with the Government exerting pressure on companies to lower prices, thereby squeezing the profit margins.

Local aluminium stocks reacted to higher aluminium prices on the LME. Nalco, which claims to be the lowest cost producer in the world, moved up by over 6 per cent. Hindalco went up by 3 per cent on Wednesday.

Even as IT stocks were doing well, Satyam Computers came under a heavy selling pressure with large volumes on the negative fall-out of the court room battle. The stock was down nearly 5 per cent to finish at Rs 485 on Thursday.

Sugar stocks surged sharply on Thursday owing to the SC ruling allowing sugar mills in Uttar Pradesh to pay farmers Rs 110 per 100 kg for cane. All the major sugar stocks were on a roll.

As the rupee continues to fall against the dollar, textile stocks seemed to have shed the burden of the appreciating rupee and gained favour among investors. Arvind Mills has gone up by 20.19 per cent from a month ago, and other textile stocks have followed the trend.

Steel Authority of India on Friday reported its highest-ever net profit of Rs 7,536.78 in fiscal 2007-08, as sales and prices increased. The scrip was on fire helped by short-covering to gain 7.33 per cent and finish the day at 185.90.

NSE Bulk Deals to Watch - May 16 2008

Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
16-MAY-2008,APTECHT,Aptech Limited,FIDELITY MANAGEMENT AND RESEARCH COMPANY,BUY,269750,246.91,-
16-MAY-2008,HARRMALAYA,Harrisons Malayalam Ltd,PRASHANT JAYANTILAL PATEL,BUY,153646,104.19,-
16-MAY-2008,HYDRBADIND,Hyderabad Industries Ltd,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,BUY,52121,200.20,-
16-MAY-2008,OMNITECH,Omnitech Infosolutions Li,MBL & COMPANY LTD.,BUY,75392,199.31,-
16-MAY-2008,HARRMALAYA,Harrisons Malayalam Ltd,PRASHANT JAYANTILAL PATEL,SELL,153646,105.32,-
16-MAY-2008,HYDRBADIND,Hyderabad Industries Ltd,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,SELL,38875,199.23,-
16-MAY-2008,OMNITECH,Omnitech Infosolutions Li,MBL & COMPANY LTD.,SELL,75392,200.23,-
16-MAY-2008,SITASHREE,Sita Shree Food Products,SOPHIA GRWOTH - A SHARE CLASS OF SOMERSET INDIA FUND,SELL,393415,45.03,-

BSE Bulk Deals to Watch - May 16 2008

Deal Date Scrip Code Scrip Name Client Name Deal Type * Quantity Price **
16/5/2008 532975 AISHWARYA TE RICHA N SHAH B 80567 121.99
16/5/2008 532975 AISHWARYA TE CHIRAG D MEHTA B 104543 121.79
16/5/2008 532975 AISHWARYA TE BHASKAR SHANKARBHAI PATEL B 100000 121.84
16/5/2008 532975 AISHWARYA TE DIPAL DEVENDRA SHAH B 70000 122.30
16/5/2008 532975 AISHWARYA TE RAHUL DOSHI B 72458 121.89
16/5/2008 532975 AISHWARYA TE KORADIA CONSTRUCTION PVT B 100000 121.57
16/5/2008 532975 AISHWARYA TE PRABHUDAS LILLADHER PVT. LTD. B 447956 122.73
16/5/2008 532975 AISHWARYA TE N D NISSAR B 859049 122.01
16/5/2008 532975 AISHWARYA TE MANSI SAH B 138239 121.70
16/5/2008 532975 AISHWARYA TE SMITA VILAS MARATHE B 236091 153.21
16/5/2008 532975 AISHWARYA TE JAYSHREE R MEHTA B 108000 121.35
16/5/2008 532975 AISHWARYA TE BHUPENDRA SINGH CHOUHAN B 119507 121.96
16/5/2008 532975 AISHWARYA TE AMU SHARES AND SEC LTD B 77002 122.39
16/5/2008 532975 AISHWARYA TE MUKESH SHAH B 349358 122.04
16/5/2008 532975 AISHWARYA TE MANISH V SARVAIYA B 54562 121.25
16/5/2008 532975 AISHWARYA TE RICHA N SHAH S 80567 122.19
16/5/2008 532975 AISHWARYA TE CHIRAG D MEHTA S 104543 121.85
16/5/2008 532975 AISHWARYA TE BHASKAR SHANKARBHAI PATEL S 100000 121.58
16/5/2008 532975 AISHWARYA TE ANIL.SHRIMAL S 93679 124.10
16/5/2008 532975 AISHWARYA TE SANJAY KUMAR YADAV S 54077 121.88
16/5/2008 532975 AISHWARYA TE DIPAL DEVENDRA SHAH S 70000 122.88
16/5/2008 532975 AISHWARYA TE RAHUL DOSHI S 72458 122.52
16/5/2008 532975 AISHWARYA TE KORADIA CONSTRUCTION PVT S 125000 122.29
16/5/2008 532975 AISHWARYA TE PRABHUDAS LILLADHER PVT. LTD. S 447956 122.84
16/5/2008 532975 AISHWARYA TE N D NISSAR S 859049 122.16
16/5/2008 532975 AISHWARYA TE MANSI SAH S 138239 121.28
16/5/2008 532975 AISHWARYA TE SMITA VILAS MARATHE S 236091 153.76
16/5/2008 532975 AISHWARYA TE JAYSHREE R MEHTA S 108000 122.00
16/5/2008 532975 AISHWARYA TE BHUPENDRA SINGH CHOUHAN S 119507 121.80
16/5/2008 532975 AISHWARYA TE AMU SHARES AND SEC LTD S 77002 122.49
16/5/2008 532975 AISHWARYA TE MUKESH SHAH S 349358 122.29
16/5/2008 532975 AISHWARYA TE MANISH V SARVAIYA S 54562 121.30
16/5/2008 531223 ANJANI SYNTH NILESH RASIKLAL PANDYA B 70453 43.45
16/5/2008 531223 ANJANI SYNTH NILESH RASIKLAL PANDYA S 70453 42.58
16/5/2008 519485 ASIA IND NET ATUL NAGINBHAI CHAUHAN B 22524 13.18
16/5/2008 507944 BAJAJ STEEL SHEETAL RAJESH JAIN S 32274 174.88
16/5/2008 532397 CONTECH SOFT DEEPAK GOBINDRAM PUNJABI B 50000 24.51
16/5/2008 532271 CYBERMAT INF EDELWEISS ESTATES PRIVATE LIMITED S 654333 5.63
16/5/2008 517973 DMC INTER HITECH COMPUTECH PRIVATE LTD S 35000 13.22
16/5/2008 532022 FILAT FASH KISHOR B GIRI S 30000 33.26
16/5/2008 532318 GEMINI COMMU MAHESH CHOTALAL SHAH S 104214 264.38
16/5/2008 516078 JUMBO BAG LT SANJAYKUMAR C JAIN B 50000 30.40
16/5/2008 516078 JUMBO BAG LT RINA ASHISHBHAI SHAH S 57069 30.45
16/5/2008 531602 KOFF BR PICT PRAVIN D GALA B 33100 21.99
16/5/2008 531261 KUSHAGRA SO ROMY REALTY PRIVATE LTD. B 157025 7.87
16/5/2008 522298 MICRO FORGE GEOMETRIC SEC AND ADV PVT LTD B 48600 16.52
16/5/2008 522199 MONOZYM INDI VINAY SHARMA B 60000 4.19
16/5/2008 517522 RAJ GLO WIR SUNIL CHORDIA B 100000 60.70
16/5/2008 517522 RAJ GLO WIR RAJRATAN RESOURCES PVT. LIMITED B 150000 60.70
16/5/2008 517522 RAJ GLO WIR CHANDANMAL CHORDIA S 250000 60.70
16/5/2008 530253 RAJAS TUBE M APL INFRASTRUCTURE PRIVATE LIM S 90000 14.30
16/5/2008 532972 SANKHYA INFO SMITA VILAS MARATHE B 50726 121.91
16/5/2008 532972 SANKHYA INFO SMITA VILAS MARATHE S 50726 121.96
16/5/2008 532498 SHRIRAM CITY INDIA ADVANTAGE FUND VI B 1428571 385.00
16/5/2008 532498 SHRIRAM CITY VINAMRA UNIVERSAL TRADERS PVT LTD B 771483 385.00
16/5/2008 532498 SHRIRAM CITY CPIM STRUCTURED CREDIT FUND A 1000 LTD S 733333 385.00
16/5/2008 532498 SHRIRAM CITY CPIM STRUCTURED CREDIT FUND A 1500 LTD S 266667 385.00
16/5/2008 532498 SHRIRAM CITY CPIM STRUCTURED CREDIT FUND A 20 LTD S 1200000 385.00
16/5/2008 523606 SIKA INTERP NEERJA CHAWLA S 9387 68.04
16/5/2008 532961 SITA SHREE SOPHIA GROWTH A CLASS OF SOMERSET INDIA FUND S 393410 45.03
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