>ELECON ENGINEERING COMPANY LIMITED (INDIA CAPITAL MARKETS)

Elecon Engineering Company Limited is a leading manufacturer of mission critical Material Handling Equipment and Power Transmission Solutions for Defence, Mining, Power, Steel, Plastic, Sugar and Cement amongst other sectors. We believe, with an established set-up, Elecon
Engineering would be among the key beneficiaries of the increased investment in sectors such as power, cement, mining and steel, which contribute significantly to its bottom line. Further, the changes in the product mix, entry into the wind energy segment, coupled with a healthy order-book, lend greater confidence to its earnings visibility. We expect revenues to grow at a CAGR of ~20% over FY09-11 and expect net earnings to grow at a CAGR of ~24% over the same period. Leading player in MHE and Industrial Gears segment Elecon Engineering is a leader in industrial gears with a market share of 26% and also has a dominant presence in the Material Handling Equipment.

De-Risked Business Model
Elecon Engineering offers a range of products and solutions for various industries which helps the company to distribute the risk across a wide spectrum of industries.

Strong Order Book
The Company has a strong order book of Rs 15490 mn, of which Rs 13040 mn (84.18%) is from the Material Handling Equipment segment and the rest Rs 2450 mn (15.82%) is from the Industrial Gears segment.

Valuations
We possess a positive outlook on the MHE and the Power Transmission business of the company. However we don’t see any significant business traction from the wind mill and wind mill gear box segments in the near term. At the current market price of Rs.96, the stock trades at 15.5x its FY09 earnings of Rs 6.19, 14x its FY 10E earnings of Rs 6.87 and 10x its FY 11E earnings of Rs 9.50. We recommend Accumulate with a target price of Rs 114 based on 12x its FY11E earnings i.e. a potential upside of 19% from its current levels.

To see full report: ELECON ENGINEERING

>VOLTAMP TRANSFORMERS LIMITED (INDIA CAPITAL MARKETS)

Voltamp Transformers Limited is among the top 3 players in building application transformers in the organised market and commands 20% market share in the industrial application transformers, with large installation base of more than 37000 transformers. We expect volumes to grow at a CAGR of ~14.5% over FY09-11 and expect revenues to grow at a CAGR of ~8.5% over the same period. Despite likely moderation in its FY10 earnings, any revival in order inflow in the current financial year on account of amplified focus on infrastructure development from the newly formed government will provide earnings upside in FY11.

Investment Rationale Highlights

De-Risked Business Model
The Company has a unique business model where unlike others, it generates 92% of its revenue from the industrial clients and only about 8% from the SEB’s. Market Leader in Dry Type of Transformers The Company is a market leader in the Dry type distribution segment with 40% market share.

Strong Order Book
The Company has a strong order backlog of Rs 4.75 bn (representing 8806 mva) as on June 2009 which VTL expects to execute in current financial year.

Ramp up in capacity to meet additional demand
The Company plans to increase the installed capacity by 4000 MVA to 13000 MVA. The new facility is expected to commission by August 2009.

Valuation
At the current market price, the stock trades at 8.05x its FY 10E earnings of Rs 94.60 and 6.75x its FY 11E earnings of Rs 112.84. We recommend BUY with a target price of Rs 1015 based on the P/E Multiple method (9x its FY11E earnings), i.e. a potential upside of 33% from its current levels. We believe the company offers decent opportunity to play on the India T&D sector story.

To see full report: VOLTAMP TRANSFORMERS LTD

>INFLATION (INDIA CAPITAL MARKETS)

WPI continues to be negative - increases on a weekly basis

• The WPI continues to be negative at -1.17% for the week ended July 11, 2009 as compared to -1.21% for the week ended July 04, 2009 (consensus was at -1.17%).

• Though this is the sixth successive week of negative inflation (yearly), it continues to increase on weekly basis. This week it has increased by 13 bps.

• The rise in inflation largely owes to increase in price index of Primary Group by 70 bps on a weekly basis. The rise was led by increase in Food Articles (by 91 bps) followed by Non-food Articles (by 29 bps). The Mineral Group again remains unchanged for the week.

• The Fuel Group price index was up by 6 bps led by increase in price index of Mineral Group by 10 bps.

• The Manufacturing Group price index was infact down by 10 bps. This was attributed to decrease in price indices of Food Products (by 43 bps) and Chemical Products (by 4 bps). The group price indices that rose on a weekly basis include - Rubber & Plastic Products (by 18 bps), Textiles (by 7 bps), Machinery & Tools (by 6 bps) and Basic Metal, Alloys & Products (by 4 bps).

• The prices of Food Articles are expected to be at elevated level till the problem of short supply persists. However, revival of monsoon should be an encouraging factor with Kharif Crop sowing started to peak up.

• The WPI figures for the week ended May 16, 2009 has been revised upwards by 104 bps to 1.65% from 0.61% (twelevth consecutive upward revision and fourth upward revision of 100 bps or more). This was led by upward revisions in price indices of Manufacturing Group (by 129 bps), Primary Group (by 75 bps) and Fuel Group (by 65 bps).

To see full report: INFLATION 230709

>INFLATION METER (INDIA CAPITAL MARKETS)

WPI down to 0.48% - but keeps rising on weekly basis …
• The WPI falls to 0.48% for the week ended May 02, 2009 against 0.70% for the week ended April 25, 2009 (consensus was at 0.26%).

Reading between the lines…

• Though the WPI has fallen on a yearly basis, it has continued to rise on weekly basis - fifth successive week of increase in WPI. This week it was up by 0.39%.

• The yearly fall was solely owed to high base of last year.

• The rise in WPI was led by increase in price indices of all the groups - Primary Articles Group (by 39 bps), Fuel Group (by 22 bps) and Manufacturing Group (by 40 bps).

• In the Primary Articles Group, the price index of Food Articles was up by 28 bps. This is attributed to the higher prices of food grains, vegetables, condiments & spices etc. The non-food
Articles segment price index too was up by 78 bps led by increased prices of fibers and oil seeds. The mineral group price index remained unchanged.

• In the Fuel Group, the mineral group price index (up by 37 bps) led the spike owing to increased prices of naphtha, furnace oil and light diesel oil. However, prices of ATF and bitumen were down.

• Coming to the Manufacturing group, the price index Food Products group continued to go up (this week by 70 bps) owing to increased prices of sugar and oil cakes. The prices of edible
oils was down slightly this week. The other groups that contributed to rise were Chemical Group (up by 126 bps - owing to organic chemicals and fertilisers & pesticides) and Basic metals alloys & metals products (up by 12 bps - owing to iron and steel). The Transport equipment group was infact down by 17 bps.

To see full report: INFLATION METER

>Arshiya International Ltd (INDIA CAPITAL MARKET)

Revenues declined to Rs 940 mn (28% yoy, 18% qoq) in Q4FY09 impacted by decreasing freight rates in logistics segment. Arshiya’s end to end logistics declined by 20% yoy due to global economic slowdown. In FY09, Arshiya net added 62 new clients in India & Middle East for its logistics division. In Q4FY09, EBIDTA margins improved by 260 bps to 15.8% due to improvement in supply chain services and more demand of Cyberlog IT solutions.

Arshiya International has commenced rail operations with two rakes for Vedanta Aluminium Ltd & Mitsubishi. Arshiya will provide customized solution to its clients through its dedicated rakes on a long term contract basis. The 3rdrake is expected to commence by Q1FY2010.

Management has guided that the company will deploy 30 rakes of Phase I project by Q1FY2011 in domestic segment with the capex of Rs 6.26 bn. The D/E of this project will be 1.8 : 1. For FY09 Arshiya’s revenues increased by 25% to Rs 5 bn, while EBDITA grew by 47% to Rs 762 mn. EBIDTA margins expanded to 15.2% (+230 bps) due to change in revenue mix. In FY09,

Arshiya’s volume handling increased by 35% to Rs 42000 TEUs. Arshiya has entered into long term contracts for its rail container business. The 3rd rake is expected to start in current quarter for domestic segment.

FTWZs – delayed by three months
Arshiya has received formal approval from Board of Approval (BoA) of SEZs for JNPT FTWZ, while it is still waiting for the final approval. We expect the delay in BoA approval will defer the development work at FTWZ which is now expected to start its commercial operations by Q4FY2010. The company has earmarked the capex of Rs 5.3 bn for this project. Arshiya has tied up its capex with lead bankers for JNPT FTWZ project. Arshiya has received formal approval for FTWZ in Khurja, Delhi. The company will incur the capex of Rs 4.4 bn and are in the process for debt arranging with bankers.

Arshiya has acquired the land for Central FTWZ (Nagpur) which is anticipated to be at an investment of Rs 2 bn. Management has indicated that FTWZ at Sohar in Oman is dropped due to regulatory issues on leasing of land.

Outlook & Valuations
We expect business outlook for all logistic companies to remain weak through H1FY2010, due to global economic slowdown. Though we are positive on the delivery expertise of the company and its expansion plan, external environment presents significant scope for downward revision of its expected numbers. Moreover the delay in FTWZ approval will further shift the revenue to a future date. Though the business environment is bleak, we are positive on the company’s future plan and expertise. We recommend a ‘HOLD’ till our next update.

To see full report: ARSHIYA INTERNATIONAL

>Inflation Meter (INDIA CAPITAL MARKET)

WPI rises to 0.31% - but downside will continue

• The WPI fell to 0.26% for the week ended March 28, 2009 against 0.31% for the week ended March 21, 2009.(consensus was at 0.35%). Full Year FY 08-09 WPI at 8.32%..highest since 94-95• For the full year FY08-09 (FY07-08), the provisional WPI stood at 8.32% vis-à-vis 4.67% in FY07-08. The previous highest inflation for full year was in FY 94-95 at 12.50%.(first year ofnew series of WPI)

• The full year FY08-09(FY07-08), the price indices of Primary Articles, Fuel Group and Manufacturing group came at 9.98%(7.61%), 7.36%(0.97%), and 8.00%(4.97%) respectively.

To see full report: INFLATION METER

>Inflation Meter (INDIA CAPITAL MARKETS)

Negative inflation could be delayed

WPI rises to 0.31% - but downside will continue.......

• The WPI rose to 0.31% for the week ended March 21, 2009 - the first weekly increase in yearly figure in last eleven weeks. (consensus was at 0.18%).

• On a weekly basis the WPI has increased by 0.13%. It was led by increase in price indices of Manufacturing group (increased by 20 bps) followed by Primary group (increased by 4 bps). The Fuel Group price index was marginally down by 3 bps.

• This is the second consecutive increase on a weekly basis (the first instance since week ending of Aug 30 and Sep 06 - ’08 when the WPI rose by 8 and 12 bps respectively on a weekly basis).

• The weekly increase in WPI largely owes to the increase in the price indices of Manufactured Products group by 20 bps (for the second consecutive week). The increase in Food Articles’ price index was led by increase in prices of oil cakes, tea and coffee whereas the prices of sugar,
salt and edibles oil were decreased. However, this rise was cushioned by decline price indices of Textile Group, Chemical Products, and Basic metals alloys & metals products.

• It was a mixed bag for the Primary Articles Group (rose by 4 bps). The price index of Food Articles was down whereas the price index of Non-food Articles went up.

• The Fuel Group price index was down marginally by 3 bps (prices of ATF rose and that of Furnace oil declined).

To see full report: INFLATION METER 040409

>Index of Six Infrastructure Industries (INDIA CAPITAL MARKETS)

India’s ISII Growth - Sectoral - Sequential Period

• Overall Index of six Key Infrastructure Production (Electricity, Finished Steel, Crude Oil, Coal, Cement & Petroleum Refinery Products) - for India grew at 2.2% against 7.0% in Feb’08 and 1.5% in Jan’08.

• On a monthly basis, it has grown negatively at -3.5% in Feb’09. One of the major reason for this negative growth could be less number of working days in the month of February.

• The cement segment continues to post decent growth figures. The coal segment too has posted decent yearly growth on high base suggesting the continuing momentum in the sector. The steel production too has hold out this month. The crude oil and petrochemical segments are still under pressure. The electricity segment has once again grown negatively, however on a yearly basis it has posted 2.2% growth.

• The index is the barometer of the infrastructure activities and investment in the country as it includes all the key industries falling under the infrastructure.

• The IISL has a combined weight of 26.7% in the total IIP. Now a low growth in the infrastructure sector shows the possible signs of worse performance in overall IIP growth in Feb’09.

• The IISL growth for Jan ’09 was revised upwards to 1.5% compared to 1.4% provisional, owing to upward revision in Petroleum Refinery Products. The final revision for Nov ’08 IISL growth remains unchanged.

To see full report: ISII METER

>Inflation Meter (INDIA CAPITAL MARKETS)

● On a weekly basis too, the WPI has decreased by 0.44%.

● This weekly decrease coupled with high base impact of last year has resulted into a below 1.0% figure for WPI as mentioned in our earlier report.

● The weekly decrease in WPI is attributed to the fall in the price indices of Primary Articles Group (decreased by 105 bps) led by fall in price indices of Food Articles (vegetables, fruits, food grains etc) and Non-food Articles (fibers, oil seeds).

● The Fuel Group price index too declined by 77 bps led by fall in price index of Electricity (by 264 bps). In mineral oils group, the prices of HSD oil, naphtha and furnace went up whereas the decline was seen in prices of ATF, bitumen and light diesel oil.

● Though overall price index of Manufactured Products group remained unchanged on a weekly basis, the high base resulted in “y-o-y” fall. On a weekly basis, the Textile (Jute hemp & mesta) and Machinery & Tools (Electrical mach) price indices increased marginally; which was offset by decrease in price indices of Paper Products (Paper & pulp) and Chemical Group (Basic heavy inorganic chem).

To see full report: INFLATION METER