>CRISIL (EMKAY)

Credit Rating Information Services of India
Result Update
Target - 3,650

Results inline with expectations

CRISIL’s CY08 numbers were in line with our expectations. The operating revenues have grown by 31%yoy to Rs5.3bn. The reported net profit at Rs1.4bn has grown by 67.7% yoy. However Q4CY08 performance was moderate on account of slower growth in advisory business, Forex losses and one-time expenditure. The reported operating margins contracted by 266bps yoy and
1,630bps sequentially to 27.4% during the quarter on account of higher employee expenses, goodwill write off and Forex loss during the quarter.

The stock is currently quoting at 9.3x CY09E EPS, The company has declared a total dividend of Rs70 per share (including Rs35 per share interim) reflecting a dividend yield of 3.3%. We maintain our BUY recommendation with price target of Rs3,650.

Forex losses and advisory impact revenue growth
The CRISIL net operating revenue for Q4CY08 grew by a moderate 15.1%yoy to Rs1.4bn. The moderate performance was on account of following reasons:

# CRISIL has sold of its one of the international subsidiaries Gas Strategy Group (for ~Rs210mn) with effect from December 10, 2008. Hence, the revenues from the business were not there for 21 days. Along with the same we were expecting slow down in the advisory business.

# The research business has also grown by just 16.1% yoy during the quarter. However, during the quarter there was no loss of clients. We expect the business to grow by 20% in CY09 albeit with back ended growth. However, the rating business has continued its robust performance, as the revenues have grown by 37.7% yoy and 16.5% qoq to Rs526mn during the quarter. The growth was driven by continued demand for bank loan rating and SME rating.

However, the rating business has continued its robust performance, as the revenues have grown by 37.7% yoy and 16.5% qoq to Rs526mn during the quarter. The growth was driven by continued demand for bank loan rating and SME rating.

To see full report: CRISIL

>TCS (RELIANCE MONEY)

TATA COSULTANCY SERVICES
Company Update
Action - SELL

The worst is still not behind us…

* Project cancellations intensified, Q4FY09 is likely to be dismal …
There have been project cancellations in the last two months across the board, more severely in BFS, Manufacturing and Telecom with some amount of resilience witnessed in Retail, Pharma and Utility verticals. Nevertheless, management indicated at newer deal flow albeit at a slower pace. On the other hand, as clients are trimming their overall IT budgets, there could pressure on volume growth in the coming quarters, however some respite can be expected by Q2FY10E, with bottoming out of project cancellation and revival in organic volume growth.

* Pricing cuts worries intensify; margins to come under pressure..
TCS’s management indicated that pricing pressure from clients increased in the recent months and renegotiation requests are coming in to the extent of ~5%-15% cut in the contracts. However, management expects to negate the pricing pressure to the extent of single digit pricing cut by exercising the internal levers like higher offshoring, cut in variable pays (~8%of salary), increase in working hours (~45 hrs per week from ~40hrs earlier) coupled with bringing down the bench strength (already substantially reduced outside of India bench strength).

To see full report: TCS

>ONGC (GOLDMAN SACHS)

OIL & NATURAL GAS CORPORATION
Action - SELL

Five structural issues that concern us about ONGC; reiterate Sell

Source of opportunity
We re-visit the fundamental premise for our outlook on ONGC and highlight our five top concerns, which, in our view, will likely keep ONGC stock unattractive over the medium term. Our key concerns are:
(i) Overseas growth strategy has not been very effective
(ii) Unexciting execution track record in domestic business,
(iii) Limited focus on cost control,
(iv) Corporate governance issues with cash withdrawals by promoter, and
(v) ONGC being structurally unattractive with downside from lower oil price but limited upside from price rebound.
Also the key positive stock catalysts are in government hands – hence unpredictable.

Catalyst
1) Downgrades to FY10E-11E consensus estimates, which remain high,
2) lack of meaningful domestic exploration successes,
3) production decline in overseas assets;
4) price cuts in retail fuel, and
5) announcement of any expensive overseas acquisition.

Valuation
We reiterate Sell on ONGC, with P/B-based 12-month target price of Rs574, implying potential downside of 14%. Our target multiple of 1.4x FY09E P/BV, based on 2003 trough multiple, is actually generous (mainly due to ONGC’s net cash position), since ONGC’s FY10E ROE is likely to be much lower than FY03-04 levels. We have cut FY09E-11E EPS by 6%-15% primarily driven by lower volume and higher costs. Though some investors like ONGC for its large government holding and for not being widely owned by institutional investors, we find it hard to own the stock, given that it has hardly any catalysts to surprise on the upside but has downside risk from adverse government action.

To see full report: ONGC

>Satyam (ANAGRAM)

SATYAM COMPUTER SERVICES
Event Update

SATYAM UNDER THE BIDDING HAMMER

Government and SEBI working in tandem has chalked out a definitive plan to offer a 51 percent equity equity to the prospective investor in Satyam.

The company would come out with the specific plan for the bidding process in the next few days.

Earlier Company Law Board (CLB) authorised the Satyam Board to make a preferential allotment of equity shares to a strategic investor and raised the company's authorised capital to Rs 280 crore from Rs 160 crore.

The plan has two riders among other conditions :

1. The bidder should have net assets of over $150 million.

2. Whoever wins the bid cannot sell equity shares for a period of three years from the date of the acquisition.

The process

The selected investor should subscribe to the newly issued equity shares, comprising 31 percent of the authorised share capital.

The investor should go for a mandatory minimum public open offer (at the same share price the investor paid for the subscription of new shares) for the remaining 20 per cent.

In case the investor falls short of 51 per cent stake after the two-step process, the option to subscribe to additional newly issued equity shares to reach the figure that gives controlling stake would also be available.

Is worst over for Satyam?

It seem so. The company has taken drastic steps to curtail expenses and survive on wake of unimaginable conditions.

The company is using the available bank funding in a controlled and phased manner to meet immediate and near-term operating requirements, including payments to vendors.

There were media reports of company receiving unsolicited offers from banks for funding.

Though, It is loosing some customers, there are few new orders as well. The company has bagged $250-million worth of deals over the past two months. According to the management, current orders are across industry verticals, technologies and geographies.

To see full report: Satyam