Sunday, December 25, 2011



Syndicate Bank Limited 
Investment Profile: Aggressive                                                                    Horizon: 1-1.5 Yrs

Business Summary
Syndicate Bank Limited (SBL) is a Karnataka based public sector bank that has a strong presence in the rural and semi urban locations of the country. SBL seeks to position itself as “A Small Man‟s Big Bank”.

Yes Bank Limited 
Investment Profile: Aggressive                                                                     Horizon: 1-1.5 Yrs

Business Summary
Yes Bank Limited (YBL) is a new generation private bank that is based on the „One bank‟ model that seeks to provide a slew of value added services (rather than plain vanilla transactions) over the lifecycle of its clients. Its business model is based on three key pillars namely: - Product, Knowledge and Relationship. Currently it mainly services institutional clients but is looking to become a more granular bank by 2015.

Axis Bank Limited 
Investment Profile: Moderate                                                                         Horizon: 1-1.5 Yrs

Business Summary
Axis Bank Limited (ABL) is considered to be India‟s third largest private sector bank in the country with strengths in both retail banking as well as corporate banking. It has a widespread pan-India network of 1390 branches and 6270 ATMs.


Shriram Transport Finance Company 
Investment Profile: Aggressive                                                                  Horizon: 1-1.5 Yrs

Business Summary
Shriram Transport Finance Company (STFC) is a deposit taking NBFC primarily involved in the financing of 2nd hand and new Commercial Vehicles. It enjoys the distinction of being India‟s largest Asset Financing NBFC with a market share of 25% in the pre-owned CV (Commercial Vehicle) financing segment and a market share of 8% in the new CV financing segment.

Investment Profile: Aggressive                                                                      Horizon: 1-1.5 Yrs

Business summary
IDFC was incorporated on January 30, 1997 in Chennai; it was set up on the recommendations of the 'Expert Group on Commercialization of Infrastructure Projects' under the Chairmanship of Rakesh Mohan. The company focuses on developing and leveraging its knowledge base in the infrastructure space to devise and provide appropriate financing solutions to their customers. The company's strong capitalization reflects the crucial role that it plays in infrastructure development. It provides financial assistance to various segments such as power, roads, and ports, telecommunications, Information Technology, Urban Infrastructure, Health care, education Infrastructure, food and agri business infrastructure, health care and tourism. IDFC provides financing through various routes such as Senior Debt-Financing through Debentures, Mezzanine products-Subscribing to preference capital or debts, proprietary equity, private equity, Debt Capital, are amongst its product offerings.


Maruti Suzuki India Limited 

Investment Profile: Moderate                                                                   Horizon: 1-1.5 Yrs

Business Summary
Maruti Suzuki India Limited (MSIL) is India‟s largest passenger vehicle maker with a market share of 45%. Primarily known for its expertise in the manufacture of low cost and fuel-efficient cars, it has gradually expanded its portfolio across the 4-wheel automobile value chain with 14 brands and 150 variants.

Exide Industries Limited 
Investment Profile: Aggressive                                                                 Horizon: 1-1.5 Yrs

Business Summary
Exide Industries Limited (EIL) is the biggest lead acid battery manufacturer in the country. The company manufactures a wide range of storage batteries for industries such as automobiles, railways, telecom, power plants, solar cells and submarines (incidentally EIL is just one amongst 5 companies in the world that can manufacture submarine batteries).


Investment Profile: Moderate to Aggressive                                               Horizon: 1-1.5 Yrs

Business Summary
BHEL is the largest engineering and manufacturing enterprise in India in the energy related/infrastructure sector today. BHEL was established in 1964, ushering in the indigenous Heavy Electrical Equipment industry in India. BHEL is amongst world‟s rarest few who have the capability to manufacture entire range of power plant equipment. BHEL is maintaining a consistent track record of growth, performance and profitability since 1976-77.

Larsen & Toubro Limited 
Investment Profile: Moderate                                                                         Horizon: 1-1.5 Yrs

Business Summary 
Larsen & Toubro Limited is an Indian multinational conglomerate; The Company has business interests in engineering, construction, manufacturing, information technology and financial services. L&T is India's largest engineering and Construction Company with a dominant presence in India's infrastructure, power, hydrocarbon, machinery and railway related projects. In recent years, L&T has expanded its global presence and international projects contributed 9% of its overall order book for the 2010-11 period. Considered to be the "bellwether of India's engineering sector", L&T was recognized as the Company of the Year in 2010. L&T has featured four times in Forbes Fab 50 list of the best public companies in the Asia-Pacific region. L&T works under operating divisions of Engineering & Construction Projects, L&T Power, Heavy Engineering, Construction, Electrical & Electronics, Information Technology and machinery & Industrial products.


Gujarat State Petronet Ltd 
Investment Profile: Moderate                                                                    Horizon: 1-1.5 Yrs

Business Summary
Gujarat State Petronet Ltd (GSPL), a GSPC group company, is a pioneer in developing energy transportation infrastructure and connecting natural gas supply basins and LNG terminals to growing markets. It is the only company in India to transmit natural gas for its clients without trading in it.

To read the full report: STOCKS FOR 2012


Proposal to Purchase Shares of subsidiary Redington International Holdings (RIHL) from a private equity investor Investcorp (IVC) by a wholly owned subsidiary of the Company Redington International Mauritius Ltd (RIML) for a consideration of $ 113 mn. This would be funded by raising foreign debt of Rs. 450 crores and the remaining through internal accruals.

  • In Nov 2008, IVC had bought 25.97% stake in RIHL for $ 65 mn valuing it at $ 239 mn. This was at valuations of 2.94 x P/BV and 15.8 x P/E. The current buyback of this stake by RIML at $113mn was valued at 1.78x P/BV and 15.8x P/E.
  • As per the agreement, in the 4th year after stake sale to IVC, Redington International Holding Ltd (RIHL) was supposed to be listed but due to the uncertain environment, the IPO plan got cancelled and now the stake purchase by Redington International Mauritius Ltd (RIML) will take place.
  • After this, RIML will have 95.96% stake in RIHL and the balance would be with employees which the management may later buy from them and swap it with Redington (India) which is expected to take place in mid next year.
  • Debt at the end of Sept 2011 is Rs 1350 (~Rs 700 India debt and Rs.650 overseas) and at the end of March 2012 it is expected to be Rs 1800 crs net of cash. Cash at the end of Sept 2011 is ~Rs 530 crs.
  • The company is planning to raise a debt of Rs.450 crores overseas and the rest would be funded internally through cash.
  • Management also plans to increase its stake in Arena, however due to the prevailing market conditions, they are timing out the buy-out.

Valuation & Recommendations

Rupee has depreciated almost by 7% during the current quarter and this would impact Redington India’s India business which accounts for almost 48% to the revenues. However, we believe the company would pass this raise in import costs to the consumers mitigating the impact. However, some pressure in margins could be expected in the Q3FY12 and thus have reduced the earnings estimates for FY12E by 3% to Rs.7.2.

We believe increase in stake in the holding company would be EPS accretive in 2013E for the company and profits would be higher by 9% from our earlier estimates at Rs.360 crores in FY13E. We continue to have a positive outlook on the company and recommend a BUY for the stock. At CMP, the stock is trading at 9.7x its FY12E earnings and looks attractive.

To read the full report: REDINGTON

>INDIA STRATEGY: The Year That Was: All About “Cs” i.e. Crisis, Corruption, Currency slides, Cut in earnings and growth, Cost of living rises...

Our customary year-end note highlights how challenging 2011 was – a year equity investors will want to forget quickly. It is ending as the second-worst in India’s history (after 2008). Investors faced the following 11 “Cs”, or Challenges, of 2011.

C - Central bank tightening – Rates at multi-year highs
C - Crisis in Europe
C - Corruption scandals occupy headlines
C - Costs rise faster than revenues – Corporate earnings hurt as margins drop to lows
C - Compression in multiples causes equities to deliver negative returns
C - Cold Storage for policy action
C - Cost of living rises – inflation proves too stubborn
C - Consumer stocks outperform
C - Currency slides to all-time lows
C - Capex tumbles along with corporate confidence
C - Cut in earnings and growth is sharp and consistent

The Year That Was

• India is likely to end the year as the second-worst-performing emerging market (out of 21). This is the second-worst yearly performance after 2008.

• Consumer Staples and Telecoms were the best- and worst-performing sectors for the year. Interestingly, the top four performing sectors (Consumer Staples, Consumer Discretionary, Technology and Healthcare) of 2010 interchangeably retained their top four positions in 2011.

• FIIs were marginal sellers of Indian equities, while domestic institutions were strong buyers during the year.

• Trading activity was marked by strong volumes in derivates markets (at record levels), even though the cash turnover fell to a seven-year low, and, compared with % of market cap, it was at its lowest level in history. The share of options trading to total derivatives trading climbed to 75% vs. 68% in 2010 and 52% in 2009.

• Market breadth and depth were weak during the year, while hedging activity ascended to a decade high. Implied volatility picked up in the second half of the year.

• Through the year, less than 20% of the stocks were trading close to their 52-week highs, and the number fell to less than 5% by the end of the year. The share of Sensex turnover to total turnover rose for the first time since 2008 to a three-year high.

• After a tough 2010, domestic fund managers received inflows in their equity as well as fixed income funds.

• India’s absolute P/E multiple fell to 2009 levels, although on relative valuations India is trading above 2009 levels.

• Consensus has revised down F12 Sensex earnings growth by 7.5 ppts since the start of 2011. Similarly, earnings revision breadth remained negative throughout the year.

• The yield curve narrowed during the year, with the 91-day and 10-year yields rising to multi-year highs, influenced by steady rate hikes by the central bank and growth scare. Also, the rupee depreciated to all-time low levels.

• India’s macro looked worse than that in 2010, with elevated levels of inflation and slowing growth (IIP).

To read the full report: INDIA STRATEGY