>GITANJALI GEMS: Penetration in real estate sector

Gitanjali Gems Ltd. (GGL) is one of the largest integrated diamond and jewellery manufacturers and retailers in India. The company is engaged in sourcing of rough diamonds from primary and secondary source suppliers in the international market, cutting and polishing the rough diamonds, manufacturing and selling of diamonds and other branded and unbranded jewellery.


• Substantial share in the gems and jewellery segment GGL has secured substantial market share in the customized gems and jewellary market in India with more than 35% share. With the robust distribution network across retail and wholesale markets, we expect the firm to maintain its market share.


• Indian gems and jewellery segment is expected to grow by at a 15% CAGR by FY16 During the last 4 years, the sector has grown at a CAGR of 12% till FY12. However, going forward with the rising domestic consumption, India is likely to remain as the major gold consumer in the world. Further the government initiatives like setting up of SEZ, relaxing import duties on some components is likely to help the sector.


• Strong distribution network The firm has an established network in the domestic market with around 3,000 distributors and 200 own stores. Further, acquisition of Crown Aim Limited is likely to enhance distribution network in the overseas market. Besides, the company has invested Rs 4.14bn for expansion in the UAE.


• Domestic gold consumption will remain the major revenue driver Despite the recent hike in import duties on gold and more than 25% depreciation in INR; the gold imports have remained robust during the last one year. It suggests that the domestic gold consumption will continue to grow. Therefore, we believe that GGL which has an established network is likely to benefit from stable increase in domestic gold consumption.


• Penetration in real estate sector As a strategy to diversify, the company has invested into real estate market across Mumbai and the sub urban areas. Besides this, Gitanjali Infratech has large land bank which will help the company to secure more revenue out of the real estate business.


To read report in detail: GITANJALI GEMS


RISH TRADER

>YES BANK: Operates in four segments: treasury, corporate / wholesale banking, retail banking and other banking operations

Yes Bank Ltd. is engaged in providing a range of banking and financial services. The bank operates in four segments: treasury, corporate / wholesale banking, retail banking and other banking operations. Following the success of its version 1.0 strategy, the bank has embarked on a version 2.0 strategy.


• Total business continues to grow at more than industry growth rate Despite having major exposure to the corporate loans which largely includes infrastructure credit, the advances continues to beat the industry credit growth. The growth in the industry’s corporate credit moderated during the last few quarters to around 14% Y-o-Y. However, bank’s advances have grown at a CAGR of 22% as on March 31st 2012 since FY09. However, during FY12, the advance growth of the bank too moderated form its historical trends, following the rate hike pressure during the year.


• Asset quality remains strong As on March 31st 2012, total gross NPA of the industry stood at around Rs 1.2tn, which has grown by around 40% Y-o-Y. Notwithstanding, the asset quality of the bank has remained firm as GNPA of the bank has grown by only 4% Y-o-Y in FY12.


• Stable NIM due to increase in CASA Yes Bank is one of the few banks which increased the saving a/c rates following its deregulation. As a result, the CASA share, which remained the lowest in the industry at 10% has jumped to 15% in FY12. The bank has stated that it plans to take it to 20% in the upcoming periods. Going forward, we therefore believe that higher CASA share will protect its margin.


• Diversification in retail business Historically, the bank has majorly positioned itself in the big ticket corporate loan with almost nil exposure to the retail segment. However, during the last 2 years the bank has started diversifying into the retail segment. Increase in the retail exposure is likely to help maintain its margins.


To read report in detail: YES BANK
RISH TRADER

>PAGE INDUSTRIES: Tie-up with Speedo

Page Industries Ltd (Page), promoted by the Genomal Brothers in 1995, is the exclusive
licensee of Jockey International Inc (US) for manufacture and distribution of the Jockey brand
innerwear/leisure wear for men and women in India, Sri Lanka, Bangladesh, Nepal and UAE. The
agreement is in place till 2030. The company paid a royalty of 4.9% of sales. Page has also been
appointed the India franchisee for Speedo, a swimwear brand.


• Leading Global branded Innerwear Company: - Jockey is an established & well know inner
ware brand. Page is the sole licensee of the Jockey brand in India and is the leader in the
India innerwear (undergarments) market. We expect the branded innerwear market to
continue to grow at CAGR of 15-20% over the medium term, driven by increasing consumer
aspirations and the shift from the unorganized segment to branded goods.


• Shift from unorganized to organized segment to aid overall growth: - Indian apparel
market has been witnessing a shift to organized segment over the past couple of years. The
share of the organized segment in the overall pie has increased from 13% in 2005 to 16% in
2010 and the same is expected to go up to 40% in 2020E. It is expected to grow more rapidly
at a CAGR of ~22% during 2010-2020E as compared to the apparel industry which is
expected to grow as 10.6%. This is an advantage for organized players.


• Tie-up with Speedo to boost up the top line going ahead: - Page has tied up with
swimwear brand Speedo International to manufacture market and distribute the brand in
India. Under the exclusive licensing agreement, effective from July 2011, the company will
make swimwear, water shorts, apparel, equipment and footwear in India. Page will be able to
leverage the strong distribution network created for the innerwear products to market this
range of swimwear products also.


To read report in detail: PAGE INDUSTRIES
RISH TRADER

>SUZLON ENERGY- World’s 3rd largest wind turbine manufacturer : Indian Operations (Suzlon Wind) & REpower (Europe Operations)

Suzlon Energy Ltd (SEL), with manufacturing capacity of 6GW in India, China, Germany and USA is the world’s 3rd largest wind turbine manufacturer. The company enjoys10% market share globally and more than 50% market share in India.


• SEL is the one of the low cost producer of wind turbine in the world, with cost of production of per MW of 1.32mn euro as compared to world average of 1.8mn euro in FY11.


• Due to the ongoing volatile growth in developed economics, the company has diverted its focus on emerging markets like BRICS countries. As on Q2FY12, the Suzlon Wind order book comprised of 96% of domestic order as compared to 80% in the same quarter last year. SEL through its fully owned subsidiary REpower, supplies wind turbine to Euro zone. As on Q2FY12, the subsidiary has an order book of USD 4.1bn, giving an earning visibility for the next two years.


• The management is confident of turning around the operating performance of the group by taking initiatives like focusing on high revenue and margin markets, reduction in COGS and lower CAPEX. For FY12, the management has given top line guidance of Rs. 240 – 260bn with EBIT margin of 7-8%.


• In Q2FY12, the company has fully acquired its German subsidiary REpower, which has cash and cash equivalent balance of Rs. 11bn as on FY11. This huge cash reserve will help in reducing the group leverage position in future.


• The concern for the company could be the highly leveraged balance sheet, lower order book from USA & Euro Zone, depreciating rupee against USD/ Euro and competition threat from Chinese manufactures.


RISK & CONCERN

• Leveraged balance sheet: The company is planning to deleverage its balance sheet by using cash from the 26% stake sale in Hansen Transmissions and also by using the cash from its wholly owned subsidiary REpower. As of H1FY12, the company had total debt of Rs. 134bn as compared to debt of Rs. 121bn in H1FY11. Due to high leverage, the company may find difficulties in raising funds.


• Lower new order: Due to ongoing volatile economic position of developed world especially USA and Euro Zone, the company may find difficulties in getting new order. In Q2FY12, Suzlon Wind, the international orders fell by 65% Y-o-Y to 25MW. Thus the sustained economic downturn in developed countries can adversely affect the company’s performance.


• Increase in international competition: China has added wind energy capacity aggressively for the last three years. Because of better outlook of wind energy, various international players have ventured resulting into competition. SEL may be affected both in domestic and in international markets by losing its market share.


• Lower wind turbine realization: Due to increase in number of players in wind turbine manufacturing, the  capital cost for per MW of wind energy has declined drastically from 1.2mn euro to less than 1mn euro in FY11. This may affect SEL in getting international orders as in most countries the orders are placed through competitive bidding process. SEL’s domestic market is not expected to be much affected because of various import duties.


• Foreign exchange risk: A significant part of SEL’s revenue, costs, assets and liabilities are denominated in foreign currency. Unhedged trade and financial exposure can adversely impact the company’s overall profitability. SEL’s presence across geographies helps in providing natural hedging by offsetting purchase and sales transactions amongst various currencies. Also the company is expected to repay FCCB worth USD 389mn by FY13 as the stock is trading at 70% discount to the conversion price.


To read the full report: SUZLON ENERGY
RISH TRADER

>BANK OF INDIA (FULLERTON)

Bank of India [BOI] operates in three business segments: Treasury Operations, Wholesale
Banking and Retail Banking. The bank has presence in 4 continents and 15 countries covering
financial centers, such as London, New York, Paris, Tokyo, Singapore and Hong Kong.

· Bank of India’s strong pricing power coupled with the benefit of recent CRR cuts has helped the bank to improve its NIMs. Yield on global advances has also improved by 40bps at 8.9%.

· Bank of India’s international loan book grew 23% in FY09 to 302bn [16% of loan book]. Operating revenue from international operations grew marginally by 1% to Rs 21bn on the back of slowdown of the global economy.

· The management is targeting a 22% loan growth and 20% deposit growth for FY10 while expecting the short term NIMs at 3% as there is pressure on spreads due to high cost of funds.

· The bank’s capital adequacy ratio currently is 13.01% where as NIM has been consistent over the years at 2.4%. It has a very strong asset base of 2,255bn. The management expects global business mix of around 4000bn for FY 2009-10.

BUSINESS PROFILE
Bank of India was found in 1906 and had got nationalized in 1969. With a very minimal start, the bank today has extensive branch network spread across the country to cater the needs of the people and occupies a premier position among the nationalized banks in terms of asset size & business volume. The bank has premiered in opening branches abroad and has a notable presence in various countries. The Bank has 3,021 branches in India spread over all states/ union territories including 136 specialized branches. International business now contributes ~17.82% to overall business of the bank. The bank provides a host of commercial banking products including housing loans, loans to SMEs, personal loans etc.

To see full report: BOI