>RANBAXY (CITI)

■ Lower Risk & Lower Value — We believe the impact of Astra’s settlement with Teva (for Nexium) on Ranbaxy should be viewed from the risk & valuation perspectives. While it could entail a modest impact (cRs11/sh) on fair value, it also significantly lowers the risk of Ranbaxy’s exclusivity being triggered earlier. This protects the more valuable leg (4.5 yr supply contract) of Ranbaxy’s deal with Astra. We believe the lower risk more than makes up for the lower value. Maintain Buy.

■ Teva settles patent litigation with Astra — Teva & AstraZeneca have settled all patent disputes for generic versions of Astra's Nexium. Astra has granted Teva with a license to launch generic version of Nexium delayed release capsules, subject to regulatory approval, on or before May 27, ‘14.

Buy: Teva’s Nexium Sett. – Lower Risk Offsets Valuation Impact

■ How does it affect Ranbaxy? — Ranbaxy’s settlement with Astra allows it to launch
generic Nexium on or before May 27, ‘14, with 180 days exclusivity. The settlement with Teva essentially means that there will be two players (Ranbaxy & Teva) in the market during the exclusivity period. We had assigned Rs22/sh in our valuation towards the 6m exclusivity. This would have to be shared with Teva.

■ Risk overhang lifted — While the exclusivity upside could be lower, we believe this also lowers one key risk w.r.t. the Nexium settlement. Ranbaxy’s deal with Astra includes a supply contract (upto May ’14, valued at Rs35/sh) and a launch with 180 days exclusivity (in May ’14, valued at Rs22/sh). If Teva had won its litigation with Astra, it would have triggered Ranbaxy’s exclusivity earlier – thus impairing the supply part of the deal. It also ensures that Ranbaxy has time on its side to get approval for Nexium (relevant, given its issues with the FDA).

■ Potential impact on valuation is modest — Our target price includes Rs22/sh towards exclusivity sales of Nexium. If one assumes that this is shared with Teva, it could entail an impact of Rs11/sh (assuming Teva takes away half of the upside) or c2% on our fair value for the stock.

To read the full report: RANBAXY

>Gremach Infrastructure Equipments & Projects Ltd (FIRST CALL)

As the industry leader, the company provides a voice for the construction equipment industry.

• Gremach provides innovative solutions to the growing challenges of the construction equipment industry and strives to be the best.

• The company is planning to dilute its 10% stake in Osho Gremach Mining.

• Got approval to set up a SEZ near Kolhapur.

• The Company has planned to enter into commodity trading (Coal, Iron ore, Urea etc.) business in a big way.

• Company has signed the MOU for 40 on-shore rigs with China's biggest oil & gas rig manufacturer “BOMBO”.

To read the full report: GREMACH

>GAS AUTHORITY OF INDIA (MOTILAL OSWAL)

■ Re-rating imminent: GAIL is on its way to becoming a true utilities company - gas transmission will account for over 65% by FY14 from 53% in FY09 of its EBIT. Its transmission business has all the characteristics of a utilities company: (1) Large asset base with annuitylike returns, (2) Secular demand growth with strong long-term earnings visibility, and (3) Direct customer interface with CGD business. We believe that GAIL should trade at par with other utilities companies.

■ Geared to capture huge gas transmission opportunity: India is witnessing a big thrust in gas production from domestic finds in the Krishna-Godavari basin. We expect gas availability in India to grow at 23% CAGR to 312mmscmd by FY14, buoyed by trebling of domestic production to 254mmscmd and doubling of RLNG imports to 58mmscmd. To capture the huge transmission opportunity presented by this gas surge, GAIL is investing to double its capacity by FY12/13. We expect its transmission volumes to grow at 20% CAGR through FY14 to 208mmscmd.

■ HVJ-DVPL tariffs to stay intact, 10% upside likely: As against consensus expectations of tariff decline for its HVJ-DVPL network (which accounts for >65% of its total volumes), our calculations indicate that tariffs should stay intact or even increase by 10%.We expect GAIL's profits (EBIT) from the transmission business to increase 2.8x by FY14.

■ CGD and E&P to add substantial value, petchem capacity to double by FY12: GAIL is expanding its CGD presence from the current 9 cities to 45-50 cities in the next 4-5 years, with a gas volume potential of 25mmscmd. We believe CGD would lead to long-term value creation for GAIL and just 25mmscmd volumes would add Rs27/ share. Further value accretion would come from its E&P blocks entering production phase and doubling of petchem capacity by FY12.

■ Increasing FY11E EPS, upgrading target price; Buy: We remain positive on GAIL primarily due to: (1) long-term revenue visibility, (2) value creation through the CGD business, (3) potential upside from its E&P business, and (4) likely favorable policy decision on subsidy. We value GAIL on SOTP basis at Rs485 (core business at 14x FY12E EPS), investment value of Rs54/share and E&P value of Rs23/share). We believe there is further upside potential of at least Rs27/share from its CGD foray. Adjusted for investments, the stock trades at 11.7x FY12E EPS of Rs29.1. We maintain Buy.

To read the full report: GAIL

>Birla Shloka Edutech Ltd (HDFC SECURITIES)

Highlights of the issue:
Birla Shloka Edutech Ltd. is one of the education companies in India, which is engaged in sales and services of varied products to education institutions. It is also engaged in providing IT infrastructure and imparting IT and IT enabled education in schools of various boards. It sets up computer labs, Digital classroom solutions and Audio Visual solutions in schools along with its software product “XL@School” which is a curriculum based interactive multimedia software for mathematics and science subjects.

It has entered into a joint venture agreement with Vision India Software Exports Pvt Ltd., on 30th April 2009, to bid and execute various tender projects (“the Projects”) of Central Government of India and various State Governments in the field of Computer Education, Education through computers, and facilitate the supply of various hardware and equipments and provide hardware solutions, teacher training and various allied services of similar nature on BOO/BOOT basis.

It has following Strategic Business Units:
• IT / Multimedia based education and ICT Solution in private schools.
• ICT Solution in government schools through Public Private Partnership.
• Sales of Educational and Software products.

Objects of Issue:
The objects of the Issue are:
• Capital expenditure for Turnkey Projects executed by the company under the BOOT model
• Capital expenditure on upgradation of infrastructure and content development for XL@School
• Funding the proposed M&A activities
• To meet the Working Capital requirements
• Meeting the Public Issue Expenses

To read the full report: BSEL