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Market likely to open flat

Indian equities are likely to open flat on Friday, Mar. 12, 2010. SGX Nifty is trading at 5,144.50 (8.04 a.m.), 15.50 points lower than Thursday`s closing of 5,129.

Asian stocks rose, as the yen weakened on speculation Japan`s central bank will loosen monetary policies. Japanese benchmark index Nikkei 225 rose 41.78 points, or 0.39%, to trade at 10,706.73.

US stocks Thursday helped the market extend its grind higher to a third day. The Dow Jones industrial average rose 44.51 points, or 0.42%, to 10,611.84. It is down 1.1% from its recent high in Jan. 19.

Among Indian ADRs, Sterlite Industries (1.64%), Patni Computer Systems (1.28%), I C I C I Bank (1.17%), Infosys Technologies (0.28%) were major gainers. On the other hand, Wipro (0.04%), H D F C Bank (0.15%), Dr Reddy`S Laboratories (0.23%), Satyam Computer Services (0.55%) were major losers.

European stocks declined from a seven-week high as U.S. jobless claims fell less than forecast and basic-resource producers retreated on speculation rising inflation will prompt China to pare back stimulus measures. UK`s benchmark index FTSE 100 declined 23.31 points, or 0.41%, to end at 5,617.26.

Oil prices stayed put, just above USD 82 on Thursday, as investors mulled demand uncertainties and a government report that showed the country`s huge natural gas reserves shrank a little last week. Benchmark crude for April delivery rose 2 cents to settle at USD 82.11 a barrel on the New York Mercantile Exchange.

In the spot market, the Dollar Index dropped 0.016% to 80.31. It touched a high of 80.33 and a low of 80.25 after opening at 80.28. (21:27 ET)

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Daily News Roundup - March 12 2010

Bharti Airtel made its debut into media and entertainment services with the launch of the Airtel Digital Media Business. (BL)

Fortis Healthcare Ltd acquired 23.9% strategic stake in Singapore-based healthcare service provider, Parkway Holdings Ltd for about US$685.3mn. (BL)

Bank of India has increased interest rates on big-ticket (wholesale and bulk) deposits by 75-150 basis points across various maturities (BL)

Maruti Suzuki would export at least 35,000 units of the A-Star compact car to Nissan in Europe in FY11. (BL)

Ashok Leyland plans to import radial CV tyres and has sought a licence from the Government. (BL)

Hero Honda would finalise the location to set up its fourth manufacturing facility by September 2010. (BL)

TVS plans engine making unit in Karnataka. (BS)

CESC intends on adding 5,000 MW of thermal generation capacity over the next few years, with investments in the range of Rs 200bn, by establishing five new facilities. (BS)

Bosch is expected to declare a lockout at its flagship plant in Bangalore on March 15. (BL)

Mahindra Satyam has won a US$48mn contract from KMD, an IT major from Denmark that specialises in the public sector projects. (BL)

ICSA India has received work orders worth Rs1.3bn from Powergrid Corporation of India, taking the total order book size to Rs21.3bn. (BL)

Areva T&D India has bagged a contract worth Rs4bn from Uttar Pradesh Power Transmission Corporation Ltd for building a substation. (BL)

Anglo-Swedish major AstraZeneca has tied up with Torrent Pharmaceuticals to brand and supply a basket of Torrent's non-patent medicine in emerging markets. (BL)

IVR Prime Urban Developers raised Rs1.5bn through issue of secured redeemable Non-Convertible Debentures (NCDs) on private placement. (BL)


The rate of food inflation showed some signs of moderation, sliding to 17.81% for the week ended February 27, 2010. (BS)

Cement industry registers 6.34% growth in dispatches during February. (BS)

According to UN Industrial Development Organisation (UNIDO), India has entered into the league of top-10 industrial producers for 2009. (BL)

Public and private sector banks have raised Rs330bn through issue of capital bonds so far this fiscal year. (BL)

Time to stand and stare!

Enjoyment is not a goal, it is a feeling that accompanies important ongoing activity.

There is no great feeling in the market as we stare at another soft opening. The global markets appear inconclusive. US stock benchmarks posted moderate gains while Europe was subdued. Asian markets are trading mixed. Looks like investors are on a ‘wait-n-watch’ mode and appear to be reluctant in taking major bets immediately. The Nifty is expected to remain stuck in the 5100-5150 range and the next hurdle is near the 5200. Fresh selling could take it as low as 5030-5050. Inflation numbers showed a spike in fuel price. A possible trigger later in the day would be the IIP numbers.

Meanwhile, India Inc’s global conquest continues unabated – yet another sign of revived confidence following the financial turbulence. The economy is in good shape, if not great. The Government is aiming for the top slot in a few years. This may sound a little ambitious but not unachievable. Much will depend on how the policy landscape unfolds besides of course the state of the world economy. Among the other major headwinds include inflation and its implication on monetary policy. But, fund flows should remain healthy given the strong medium-to long-term growth prospects for India.

FIIs were net buyers in the cash segment on Thursday at Rs3.05bn on a provisional basis. Local funds were net sellers of Rs2.02bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers of Rs9.70bn. On Tuesday, FIIs were net buyers of Rs17.7bn in the cash segment. On Wednesday, FIIs were net buyers of Rs4.18bn in the cash segment, as per SEBI figures.

US stocks gained traction late on Thursday, ending higher for a third straight session, after Citigroup said that it is on its way to sustainable profitability. An apparent lack of progress on the financial regulatory front prompted investors to get more optimistic on financials.

The Nasdaq and S&P 500 ended at 18-month highs as investors eyed the day's jobs and trade news and the direction of the US dollar.

The Dow Jones industrial average added 44 points, or 0.2%, ending at a six-week high. The S&P 500 index added 5 points, or 0.5%. The Nasdaq gained 3 points, or 0.1%.

The dollar fell versus the euro and gained against the yen.

US light crude oil for April delivery rose 2 cents to settle at $82.11 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery rose $0.10 to settle at $1,108.20 per ounce.

Treasury prices slipped, raising the yield on the 10-year note to 3.74% from 3.72% late on Wednesday.

Market breadth was positive.

Stocks seesawed through most of the session as investors turned cautious after the recent advance and showed concerns about a spike in China's inflation last month. But the weakness gave out by the close and markets ended with slim gains.

Stock index futures and commodities were down after China reported its inflation rate rose to 2.7% in February from 1.5% the prior month.

US stocks have been on an upswing lately, posting gains over the last month. As of Thursday's close, the Dow has risen in eight of the last 10 sessions and the S&P 500 and Nasdaq have risen in nine of the last 10 sessions.

Further stock gains will be determined by earnings and revenue growth and the transition between a government stimulus-driven economy and one driven by fundamentals.

On Capitol Hill, Senate Banking Committee Chairman Christopher Dodd, D-Conn., said he would offer his own overhaul of financial regulation after failing to get bipartisan agreement.

Today's jobs report was a little disappointing. The Labor Department reported that the number of Americans filing new claims for unemployment fell to 462,000 from a revised 468,000 the previous week. Economists thought it would fall to 460,000.

Continuing claims, a measure of Americans who have been receiving unemployment checks for a week or more, rose to 4,558,000, up 37,000 from the previous week's reading of 4,521,000. Economists expected 4,500,000 claims.

The January trade gap narrowed to $37.3 billion from a revised reading of $39.9 billion. The deficit was expected to widen to $41 billion, according to forecasts.

Another report showed that foreclosure rates rose 6% in February from a year earlier, but fell 2% from the previous month.

In corporate news, BP said it will pay Devon Energy $7 billion for exploration rights in Brazil, the Gulf of Mexico and the Caspian sea.

Regional banks extended gains after reports that Britain's Barclays was on the prowl for a U.S. retail bank acquisition.

In European markets, German automakers Volkswagen and BMW closed higher while miners lost ground in a broadly weak session. The Stoxx Europe 600 index lost 0.3% at 257.55. On Wednesday, the index advanced to a level not seen since Jan. 19, after gaining for seven out of nine sessions.

Greek shares were also underperforming, with the ASE Composite Index down 0.7% at 2,124.58 as workers staged their third general strike in protest at government austerity measures.

Germany's DAX index lost 0.1% to 5,928.63, the U.K. FTSE 100 index declined 0.4% to 5,617.26 and the French CAC-40 shed 0.4% to 3,928.95.

Buying towards the fag end lifted the otherwise lackluster benchmark indices to shut with modest gains. The index heavyweights like ICICI Bank, Reliance Industries and Infosys led from the front.

However, the breadth on the BSE Sensex was negative for second day, out of the total 2918 stocks, 1774 declined as against 1065 advances and 79 remained unchanged. Among the 30-components of Sensex, 15 stocks ended in the negative and 15 ended in the green.

The BSE Sensex advanced 70 points to end at 17,168 after touching a high of 17,215 and a low of 17,054. The NSE Nifty gained 17 points to end at 5,133.

Investors seem to be upbeat on the Initial public offerings rather than the FPOs as scintillating debut for IPOs continue. The most recent ones namely Texmo pipes, Jubilant Foodworks, Infinite Solutions and Cox & Kings were among the major outperformers.

Man Infraconstruction, which turned out to be the most successful IPO so far this year, debuted with dazzling gains on the Indian bourses today. The stock shot up to Rs348 as against its issue price of Rs252 per share translating in to premium of 38%. The IPO was subscribed 62.33 times. The issue received total bids for over 290mn shares against 465.3mn shares on offer at the end of the IPO. It generated a demand for ~Rs73.08bn worth of shares instead of the Rs1.42bn.

Among the 30-components of Sensex, 15 stocks ended in the negative and 15 ended in the green.

In Asia, the Nikkei in Japan ended in the green, adding 1%, while Australia's S&P/ASX ended flat. Shanghai SE Composite ended flat and Hang Seng index in Hong Kong edged higher by 0.2%.

In Europe, stocks were in negative terrain. The DAX in Germany, the CAC 40 index in France and the FTSE in the UK all were flat.

Coming back to India, among the BSE sectoral indices, the IT index was the top gainer, adding 1%, followed by the Teck index that was up 1% and the BSE Bank index was up 0.7%.

Among the losers were BSE Auto index down 1% and BSE FMCG index down 0.8%. Even, the BSE Mid-Cap index was down 0.2% and BSE Small-Cap index was down 0.2%.

Outside the frontline indices, the big gainers in the broader market were Shriram Transport, Sintex Ind, Exide Ind and Jain Irrigation. On the other hand, losers included NMDC, Hindustan Copper, India Cements and Gujarat NRE Coke.

Shares of Thermax have further advanced by 1.5% to end at Rs683 after the company yesterday announced that it has formed a strategic joint venture with Babcock & Wilcox Power Generation Group, Inc. (B&W PGG), to engineer, manufacture and supply supercritical boilers for the Indian power sector. The Joint venture will also manufacture subcritical boilers over 300 megawatts (MW) in size. The agreement was signed by M S Unnikrishnan, Managing Director and CEO, Thermax, and Richard L. Killion, President and Chief Operating Officer, B&W PGG.

Crompton Greaves won order worth Rs3.02bn to construct a substation in the northern Indian state of Uttar Pradesh. The contract was signed on March 5, the company said. The stock ended lower by 1% to Rs242. The scrip opened at Rs244 it touched an intra-day high of Rs246 and a low of Rs240 and recorded volumes of over 0.23mn shares on BSE.

AstraZeneca plc announced a license and supply agreement with Torrent Pharmaceuticals Ltd. As per the deal, AstraZeneca would initially buy from Torrent the licenses and market authorizations for 18 products in 9 countries and the agreement allows the flexibility to add further products and new countries where AstraZeneca sees opportunities for growth.

Shares of Torrent Pharma gained by 3% to end at Rs490. The scrip opened at Rs476 it touched an intra-day high of Rs501 and a low of Rs476 and recorded volumes of over 81,000 shares on BSE.

Areva T&D won Rs4bn contract in India by state utility Uttar Pradesh Power Transmission Corpo- AREVA ration Ltd (UPPTCL). AREVA will build a 765 kV Extra High-Voltage (EHV) substation at the Anpara "D" thermal power plant1 in the state of Uttar Pradesh.

The stock gained 2% to Rs279. It opened at Rs275 it touched an intra-day high of Rs281 and a low of Rs273 and has recorded volumes of over 0.21mn shares on BSE.

Fortis Healthcare hit news 52-week high to end at 178 advancing 5% after the company announced that through one of its wholly owned subsidiaries has entered into a definitive agreement to acquire 23.9% strategic stake in one of the Asia's largest healthcare service provider, Parkway Holdings Ltd. from TPG Capital (formerly Texas Pacific Group) in an off market deal.

McNally Bharat received an order worth Rs243.8mn for Design, Engineering, Supply of Equipment, Civil Work, Structural Work, Erection & Commissioning of flood lighting along Indo- Bangladesh Border in the State of Tripura (Package Nos. Panifl- IV, Gokulfl- I, Gokulfl- II & Gokulfl IV) for national projects construction corporation ltd. The contractual period of completion is within 11 months.

The stock ended higher by 1.5% to end at Rs280. The scrip opened at Rs270 it touched an intra-day high of Rs284 and a low of Rs270 and recorded volumes of over 0.14mn shares on BSE.

Bullion metals add little shine

Prices register marginal rise after Chile is hit with aftershock of last quake

Precious metal prices ended little higher on Thursday, 11 March, 2010. Prices rose after Chile was rocked by an aftershock, which followed the major earthquake that hit the country a fortnight back. Prices also increased following China's economic data.

Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.

On Thursday, gold for April delivery ended at $1,108.2 an ounce, higher by $0.1 (0.01%) an ounce on the New York Mercantile Exchange. Last week, gold gained 1.4%. In FY 2010, gold touched a high of $1,154 in January.

On Thursday, May Comex silver futures ended higher by 14.2 cents (0.8%) at $17.15 an ounce. Last week, silver ended higher by almost 8%.

Gains were limited today, after Chile's mining-giant Codelco, the largest producer of copper in the world, said it found no damage to its Andina and El Teniente operations. Both locations were temporarily shut down after the February quake.

Gold and other metals also advanced after a report from China showed sharper-than-expected increases in consumer and producer prices. That rekindled concern about tighter monetary policy in the country, which many have looked to as a leader in the global economic rebound. China reported that its inflation rate rose to 2.7% in February from 1.5% the prior month.

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, fell by more than 0.2%.

Gold had ended FY 2009 higher by 24%. Silver futures had ended 2009 up 50%. The dollar index had lost 4.2% against its counterparts last year.

SGX Nifty Live Update - March 12 2010

5,155.00 -5.00

Market awaits IIP, Sensex holds 17000

Today's major news

Manappuram hits 52-week high on bonus and stock split plan; the stock rises 6.44%

GVK Power bags 690MW hydel project in Jammu and Kashmir; the stock ends 0.11% lower

India Cements to raise Rs295.6 crore via qualified institutional placement; the stock closes 0.46% higher

Reliance Industries leases ultra-deepwater drillship for exploration; the stock finishes 0.84% up

Tata Consultancy Services and government of Maharashtra form a joint venture; the stock surges 1.31%

Post-market summary

Global signals

European shares were trading either in red or green in early trades on Thursday, March 11, 2010 as gains in utilities and automobiles overshadowed the fall in banks and commodity stocks. At the time of writing this report, FTSE 100 was trading 0.15% lower.

All the major Asian indices closed in green except Kospi Index that closed 0.34% lower. SGX Nifty closed 25 points higher.

US stock futures opened lower indicating a weak start for the Wall Street.

Indian indices

The markets had a dull outing bar some bouts of active trading especially towards the fag end. On sanguine global leads the Sensex opened 20 points firmer at 17087. But investors stayed away from the market ahead of the index of industrial production (IIP) readings tomorrow (Friday, March 12, 2010). The index traded within a tight band of around 128 points. Some buying in information technology (IT), TECk, consumer durables and banking counters lifted the market to touch the day’s high of 17215, mere 117 points higher than its yesterday’s close. The day’s low was measly 11 points lower than its previous closing. At finishing line, the Sensex shut shop at 17167, 69 points higher, while the Nifty closed 17 points higher at 5133.

Market sentiment

Declining scrips outnumbered advancing scrips with the advance/decline ratio at 0.90. Of the total 2,918 stocks traded on the BSE, 1,065 stocks advanced, whereas 1,774 stocks declined. Seventy nine stocks remained unchanged.

Sectoral & stock screening

IIP numbers due tomorrow kept investors at sidelines. The 13 sectoral indices on the BSE had a perfect split—six sectors advanced, six declined, where as one remained unchanged. BSE IT and BSE TECk gained the most—1.00% and 0.93% up. Auto and fast moving consumer goods (FMCG) were down the most—0.95% and 0.79% respectively.

Talking of Sensex scrips, Sun Pharmaceuticals surged the most by 2.97%, followed by Sterlite Industries that rose by 2.12% and Bharti Airtel that was up by 1.98%. Among losers, the most hit was Hundustan Unilever that was down 4.21%, followed by Hindalco Industries that was 1.72% lower and Reliance Communications that was down 1.17%.

Viewing volumes

Suzlon Energy India, the wind turbine maker, was the most actively traded share with over 60 lakh shares changing hands on the BSE, followed by the India’s second largest realty company Unitech (57 lakh shares), industrial finance company IFCI (37 lakh shares), sugar manufacturer Balrampur Chini Mills (34 lakh shares) and Shree Renuka Sugars (31 lakh shares).

Pradip Overseas IPO Review

Pradip Overseas IPO Review

Pradip Overseas IPO Analysis

Pradip Overseas IPO Analysis

Purvankara Projects

Purvankara Projects

Bharti Airtel Ltd

Bharti Airtel Ltd

Nifty March 2010 futures at premium

Turnover rises

Nifty March 2010 futures were at 5,159.80, at a premium of 26.40 points over spot closing of 5,133.40. Turnover in NSE's futures & options (F&O) segment increased to Rs 66,223.11 crore from Rs 65,513.54 crore on Wednesday, 10 March 2010.

Reliance Industries March 2010 futures were at premium at 1023.50 compared to the spot closing of 1019.

Shree Renuka Sugars March 2010 futures were at a slight premium at 164.25 compared to the spot closing of 163.75.

Tata Steel March 2010 futures were at discount at 610.50 compared to the spot closing of 611.50.

In the cash market, the S&P CNX Nifty rose 17.15 points or 0.34% at 5,133.40.

Asian stocks extend listless week

Chinese inflation figures keep the overall sentiments subdued

Asian stocks were mostly mixed today, extending a listless sort of week as traders continue to ask questions on monetary policy in China and Greece Sovereign scenario. China's consumer price index rose a faster-than-expected 2.7% in February from the year earlier period, intensifying from January's 1.5% rise. The rise in CPI and a sharp 20.7% jump in January-February industrial output triggered worry about further credit tightening in the world's fastest growing economy.

Chinese markets pared their initial advances after these data pointers and the Shanghai Composite closed up 0.1%, while the Shenzhen Composite index slid 0.1%. The stock market in Japan ended in positive territory on Thursday, lifted by weaker yen and optimism that the Bank of Japan, in its meeting next week, will announce additional measures to ease monetary policy and fight deflation. The benchmark Nikkei 225 Index gained 0.96% while the broader Topix index was up 0.86%.

In Japan, the final report on Q4 GDP released by the Cabinet Office revealed that the country's gross domestic product rose 0.9% in the fourth quarter, slightly less than the 1% growth expected by economists and 1.1% growth reported in the preliminary report released last month. The report further noted that annualized GDP came in at 3.8%, missing economists' mean expectation of 4% growth and also sharply lower than the annualized 4.6% growth reported in the preliminary report.

The Indian stocks ended slightly higher on Thursday after an early setback as late buying following a gain in the U.S index futures helped. IT stocks outperformed on improving business outlook. Bellwether Infosys rose 0.92%, rival TCS advanced 1.31% and Wipro gained 1.73%. After trading in a lackluster manner for most of the day, the 30-share Sensex added over 100 points in late trading before paring some gains and finishing at 17,168, up 70 points or 0.41%, while the 50-share Nifty ended up 17 points or 0.34% at 5,133.

In other markets, Hong Kong's Hang Seng Index inched up 0.1%, Taiwan's Taiex lost 0.4%, South Korea's Kospi shed 0.3% and Australia's S&P/ASX 200 slipped 0.1%.

In the U.S., stocks moved higher on Wednesday. The major averages all closed in positive territory, with the tech-heavy Nasdaq posting a sizable gain. The Dow gained 2.95 points or less than a tenth of a percent to close at 10,567, while the Nasdaq advanced by 18.27 points or 0.8% to 2,349 and the S&P 500 rose by 5.17 points or 0.5% to 1,146.

However, the US index futures have not been able to hold in green for a longer period today and currently languish in red. The DOW Jones is expected to open lower by 6 points as per the latest futures data. Light sweet crude oil futures for April delivery trade at $82.28 a barrel in electronic trading, up 19 cents per barrel from previous close.

ILFS Transportation Networks IPO Analysis

IL&FS Transportation Networks (ITNL), promoted by IL&FS (Infrastructure Leasing & Financial Services), is an established surface transportation infrastructure developer providing end-to-end solutions for BOT (build, operate and transfer) road projects.

The company, incorporated in 2000 to consolidate the existing road infrastructure projects of IL&FS and pursue various new project initiatives in the area of surface transportation infrastructure, currently has a total road portfolio of 9,397-lane km of BOT roads under development and management. Of which, about 35% is annuity projects and balance 65% are toll projects. Of the total road project portfolio, operational projects were eight with an aggregate distance of 4,081 lane km, and the projects under development number about 11 (including one overseas project in Spain), with an aggregate length of 5,316 lane km. In addition to the road sector projects, it is also developing the Gurgaon Metro Link Rail Project. Similarly, it operates the Nagpur City Bus Transportation Service on BOO basis. Moreover, the company is believed to be the preferred bidder for two projects, with an aggregate distance of 2,100-lane km.
All the BOT projects are implemented through special purpose vehicles (SUVs), and the company has controlling interest in a number of SPVs. Noida Toll bridge is the first BOT project of the company. It holds a 25.35% stake.

The company acquired a 100% stake in Spain-based Elsamex SA, which provides maintenance services primarily for highways and roads in Spain and other countries, in March 2008. Apart from o
operations and maintenance (O&M) of roads, Elsamex also offers O&M service for petrol stations and buildings. Elsamex has over 21,000-lane km of roads and over 3,100 petrol stations under maintenance worldwide. ITNL plans to diversify its operations into urban infrastructure, railways, and airports.

ITNL's major source of revenue are fees received on account of rendering 1) project development services; 2) advisory and project management services; 3) construction supervision services; 4) operation and maintenance service; 5) tolling; and 6) dividend and interest income on investments. O&M income, construction contract revenue, toll revenue and finance income accounted for about 63.2%, 13.3%, 6.9% and 6.2%, respectively, of the FY 2009 consolidated income of the company, excluding other income. However, the share of construction contract revenue has increased to 42.9% for the half-year ended September 2009, with that of O&M declining to 39.8%. Toll revenue and finance income stood at 7.2% and 4% for the same period.

The O&M revenue largely consists of income from 1) Elsamex's maintenance activities [beginning FY 2009]; and 2) operation and maintenance startup fees the company generate in India as well as recurring O&M fees to upkeep the road assets in India. The finance income consists of revenue from financial assets (roads or bridges for which ITNL entered into an annuity contract). The majority of the annuity received for these roads or bridges is not recognized as revenue but instead used to offset the cost of the original assets, which was capitalized.

Further, the company has also entered into a memorandum of understanding with Belbadi and Ascon Road Construction L.L.C (Ascon) to bid for new projects in the Gulf Cooperation Council Region and for setting up a contracting and project development strategic partnership to undertake major infrastructure, real estate development, and construction and maintenance projects. IL&FS has also entered into a memorandum of understanding with the AAI pursuant to which IL&FS has agreed to cooperate, identify, develop, implement, operate and maintain airports and associated projects outside India, and it intends to leverage IL&FS's arrangement with the AAI (Airport Authority of India) for identifying, securing and developing airport projects outside India. The company also entered into a memorandum of understanding with Middle East Coal Pte, Singapore, for financing, developing and implementing coal evacuation infrastructure facilities in Muara Wahau, Indonesia. The company intends to utilize Elsamex to bid for OMT (operate, maintain and transfer) projects outside India in the countries in which Elsamex operates.

Though the company is not get anything from the offer for sale (by Trinity Capital), at the offer price band of Rs 242-258, the fresh issue will result in proceeds of Rs 589.61 crore to Rs 596.45 crore. These funds will be used primarily for funding pre-payment and repayment of portion of the Rs 500-crore debt and balance for general corporate purposes.

Strengths

Parent IL&FS has reputation in infrastructure development, with advisory relationship with various agencies/arms of governments, both Central and state, implementing infrastructure projects. This differentiates ITNL from other infra developers who transformed themselves from being construction companies to project developers. On strong parent, the company is well positioned to generate value in the pre-construction phase, with its advisory role. IL&FS also brings in strong management team with vast experience in infrastructure development and financing of infra projects.

Has strong execution capability, with a track record of operational projects.

The government of India is strongly committed to road sector development, with construction of 20 km of road a day, expressways etc. This is all set to bring enormous opportunities for road sector developers.

Weakness

Though the GoI is committed to highway construction of 20 km a day, the last couple of years, especially 2008 and 2009, has not seen major finalization of orders from NHAI (National Highways Authority of India), the nodal agency for highway development in the country at the national level.

Though the company, off late, took up design, engineering and project management for SPVs, it still outsources civil works unlike its competitors, who are integrated players. Thus, it is unable to capture the complete value chain.

IL&FS and certain other group companies have equity interests or other investments in other companies that offer services that are similar to the business of ITNL, such as Maytas Infrastructure, Chhattisgarh Highway Development Company, Jharkhand Accelerated Road Development Company, MP Toll Roads, Road Infrastructure Development Company of Rajasthan and IL&FS Nepal Infrastructure Development Company Private. This may result in conflict of interest in addressing business opportunities and strategies in circumstances where ITNL's interests differ from other companies in which IL&FS or group companies have an interest. Additionally, as per the model concession agreement, an applicant will be considered to have conflict of interest and will be disqualified if such applicant and any other applicant have common shareholders or other ownership interest direct or indirect of more than 25% of the paid-up and subscribed capital. As neither IL&FS nor any group company has undertaken to refrain from competing with ITNL's business, future bidding of the company may be affected in such conflict of interest cases.

As on September 30, 2009, approximately about 40% of the loans were repayable with a period of the next 12 months. The total indebtedness of the company as on September 30, 2009, was Rs 2417.13 crore. Moreover, about 21.40% of the total debt availed by ITNL as on January 21, 2010, is repayable on demand, with the unsecured debt from promoter/ group companies such as IL&FS, IL&FS Securities Services and IL&FS Financial Services aggregating to Rs 340 crore.

The company's plans of integration of Elsamex with the company might (i) take longer than expected; or (ii) cost more than expected. Any failure to effectively implement the Elsamex integration strategy would have an adverse bearing on the financials of the ITNL.

Promoter of the company, i.e. IL&FS, has been involved in SEBI proceedings. SEBI had restrained IL&FS depositary participant from opening fresh demat accounts in relation to the investigations relating to IPO scam. However, the show cause notice of the enquiry officer was disposed of, accepting the response of IL&FS.

Though GOI is committed and removed some irritants relating to concession agreement and RFQ/RFP (Request for Qualification/ Request for Proposal), land acquisition remains a roadblock, affecting the timely completion of projects. Moreover, some external factors not in the control of the developers such as insufficient/quality traffic assessment could affect the successful implementation and viability of the project.

Valuation

The financials of FY 2008 and FY 2009 are not comparable on acquisition of Elsamex SA in March 2008. The revenue for FY 2009 was up by 246% to Rs 1252.59 crore. However, the net profit (after minority interest) was lower by 70% to Rs 27.88 crore, with OPM crashing to 17.6% in FY 2009 compared to 50.6% in FY 2008 on account of thin margin business of Elsamex. But the revenue for the half-year ended September 2009 was at Rs 958.34 crore. With OPM improving to 35.2% on the back of change in revenue mix in favour of construction services business, net profit stood at Rs 118.23 crore. On post-issue equity (based on price band of Rs 242-258), the annualized EPS works out to Rs 12.2 -12.3. This is discounted 19.8 times at the lower price band and 21 times at the upper price band. In comparison, IRB Infrastructure quotes at a PE of 26.3 times its nine months ended December 2009 annualized consolidated EPS.