Saturday, November 15, 2008


What's new? — Press reports (ET, Mint) indicate Jet is negotiating to sell a 10%
equity stake to Temasek Holdings for consideration of Rs2.5bn. The company
is also reportedly raising debt funds of Rs10bn from Abu Dhabi-based
Mubadala Development Corporation to help fund working capital requirements.

Management denies this development — Management has indicated these talks
are speculative, and that the company has no plans to infuse equity or debt
(from Mubadala). However, management has said that Jet plans to raise fresh
debt funds to meet its working capital requirements.

What are Jet's funding requirements? — We forecast Jet's cash losses at
Rs31.3bn (over FY09E-10E) (after interest payments, but before principal
repayments of c.US$280m). The company is trying to curb operational losses
through various initiatives – cutting loss-making flights, reducing ticket
commissions, etc. The biggest positive is the sharp fall in crude oil prices
(<$60 vs. our FY10/11 estimates of $75/bbl). If crude prices continue to
decline, there could be a substantial positive upside to our current numbers.

Read full report here JET(CITI)

>Hindlever(Merrill Lynch)

Rising concern on demand but relative safe haven; Buy
Our mgmt meeting revalidated our view that margin outlook is improving but we
were surprised by mgmt's rather sombre outlook for demand. Our 2009 forecast
of margin expansion of 150bp remains intact. However our sales forecast of 11%
could be at risk should macro environment continue to deteriorate. Nonetheless
overall, we believe HUVR is well placed to grow earnings in mid teens, way ahead
of average Sensex growth. Hence we reiterate our Buy rating.
Margin outlook is improving
We estimate lower input cost benefits will begin to flow in partly from March Q and
fully from June Q. The benefits will differ category to category - Soaps will witness
benefits being passed on, detergents will see benefits being retained.
Key issue #1: Is there risk to volumes?
HUVR’s volume growth has been slowing down from 10% in March Q to 7% in
Sept Q in response to rising prices. Despite stabilizing retail prices, the macro
environment is not favourable enough to suggest that volume acceleration is likely
near term. Key concern is falling employment in 2nd tier cities and uncertain
economic outlook. Yes, HUVR’s products are non discretionary but down-trading
is likely as was the case during the drought years of 2002/2003.
Key issue #2: Will low price competition be rekindled?
Lower commodity prices invariably come in with the negative of reenergizing low
price competitors. This is most likely the case in soaps as margins here will
expand the maximum. We expect HUVR to withstand higher competitive activity
through its diversified portfolio which gives it the flexibility to cut prices and retain
margins more effectively versus competitors.

Read full report here Hindlever(Merrill Lynch)