Monday, November 17, 2008


With the introduction of VAT, an increase in excise duty for
non-filtered cigarettes and a recent smoking ban in public
places (2 October), the tobacco sector is getting hit hard and
fast. These measures are part of an overall global plan to
reduce tobacco consumption, spearheaded by the WHO.
While it is true that, in India, the vigour of implementation
may change depending on political or other factors, we
believe the tobacco sector is in for a tough time in the long
term. The halcyon days of FY05-07 averaging 7.5% volume
growth pa may be over.

To read full report ITC(HSBC)

>Dr Reddy (JP Morgan)

We recently hosted the management of Dr Reddy’s as part of our India
Conference 2008. Key takeaways from the various investor meetings are
as follows:
• Generics pipeline remains strong; CIS business robust: Dr Reddy’s
reiterated a strong growth pipeline in the US as demonstrated by the
ANDA pipeline. The company had 66 ANDAs waiting approval from
the US FDA as of October 2008. The company maintained that the CIS
business remains robust with receivables under control from that
particular region.
• AOK tender results expected some time in November end; market
to become more competitive: The company expects the AOK tender
results to come out some time in November end. The AOK tender
addresses around 60 molecules and approximately 40% of the German
market. While management remains hopeful of some wins in the AOK
tender, the company expects price competition to remain severe in
Germany. The company did not give any guidance for Betapharm
profitability for next year.

Read the full report here Dr Reddy (JP Morgan)


Our brief inquiries with key Indian retailers about sales during the
Diwali festive season indicate that consumer spending was satisfactory.
Categories that saw some weakness include Furniture and Watches,
whereas sales in Apparel and Jewelry were encouraging.
• Although it is difficult to gauge consumer sentiment accurately we
believe sales for Dec’08 quarter should be satisfactory if interest rates
and inflation trends continue to show improvement from current levels.
• We maintain our Overweight rating on key retailers Titan Industries,
Pantaloon Retail, and Gitanjali Gems, and believe that the current credit
crisis should accelerate the shift towards organized retail.
Here are some direct quotes on Diwali sales made by various retailers:

Read full report here INDIA RETAIL(JP Morgan)

>Reliance Infra(EDELWEISS)

Reliance Infrastructure’s (Rel Infra) return on average equity (ROAE) was 9.0% and
return on net operating assets (RNOA) was 9.2% in FY08 (ROE analyser analyses the

Investment in associate companies stands at INR 61.1 bn as at end-FY08 (INR 1.2 bn
as at end-FY07), generating a meager return of 1.3%. This is primarily on account of
investment made in Reliance Power (RPL; INR 60.8 bn), which is currently under
gestation and not fully operational.

Investments made by the company increased 124.0% from INR 52.2 bn in FY07 to INR
117.0 bn in FY08. The additional investment of INR 59.8 bn was primarily due to
investment in RPL’s initial public offer (IPO). Return on investment, other than
investment in RPL, comes to 6.5% for FY08.

Read full report here Reliance Infra(EDELWEISS)