>India cable & satellite TV (Macquarie Research)

● Colors considered joint No.1 in Hindi GECs; one ad break a big help: Viacom 18’s (unlisted) Hindi GEC Colors has garnered 304 GRPs for the latest week, just one short of the 305 for genre leader, Star Plus. We highlight the fact that the surge in GRPs was driven by Colors’ strategy for all programmes, except for its most popular family soap, Balika Vadhu, to run with only one commercial break per half-hour show. In addition, the channel has adopted the strategy of telecasting blockbuster Hindi movies over the weekend. As a result, the channel has had a remarkable and sustained increase in weekly GRPs over the last 12 weeks.

● Colors’ addition to One Alliance to strengthen its reach: From 1 April, Colors will be distributed as part of the One Alliance bouquet (Viacom 18’s MTV, Nickelodeon and Vh1 are already part of it, as are the Sony channels). This is a positive driver for Colors, as it means wider distribution and reach.

● Competitive intensity in Hindi GECs increasing: In a bid to protect its No.1 position in the genre, Star Plus has run no advertisements between 8am and 9pm over the past few Saturdays and lined up back-to-back Hindi movies, following Colors’ successful strategy. This trend of Star Plus and Colors of cutting commercial air time to increase stickiness and thereby channelling GRPs is likely to hurt shares in TV ad revenue, as it reduces ad inventory.

● Zee TV’s ad revenue share to feel pressure: We expect Colors’ strong position in the genre to work a continuing shift in advertising revenue away from No.3 player Zee TV towards joint No.1 player Colors. We note that ad revenue growth for Zee Entertainment slumped to 1.7% YoY in 3Q FY3/09. Zee Entertainment’s management asserted in the 3Q earnings call that the slump in ad revenue was entirely due to the economic slowdown. Given the tough macroeconomic outlook and with Colors now considered joint No.1, we do not see upside risk to our FY3/10E ad revenue growth forecast of 5% YoY.

● General Election to benefit news channels: The upcoming elections to the Indian Parliament, slated for 16 April to 13 May 2009, will be a big driver of ad revenues on news channels and on Zee News in the June 2009 quarter.

● Weekly GRP trends for Regional channels have not shown any change. We believe regional channels are better placed vs Hindi GECs to ride the slowdown. Zee News Limited (ZEEN IN) continues to have a solid leadership in its key regional GEC markets of Maharashtra and Bengal, with a solid lead over the competition (see Figures 6 and 7 on Page 3).

To see full report: INDIA CABLE

>Mphasis Limited (EMKAY)

Our recent interactions with Mphasis management continue to reinforce our strong belief in the company being the best demand story in the sector with a softening currency environment adding more fuel to our argument (Mphasis has higher sensitivity to a depreciating currency as offshore proportion at ~72% of revenues is the highest in the sector). Our +ive view on the company continues to get vindicated with quarterly results beating expectations by a wide gap for more than 3 quarters now. (please refer to the section: Mphasis: Best performing IT services stock across all time frames)

Though more clarity on HP’s offshoring plans would clearly help we believe that investor concerns around any unfavorable treatment to Mphasis (given that HP already has a 100% subsidiary in India) remains a wild card. Investors cite Digisoft as a precedent, however we note that even in case of Digisoft , delisting happened at significant premium to June’03 price levels. (please refer relevant section below). We are comfortable upping our FY09E and FY10E earnings further by ~15% post our interactions with the company and now expect Mphasis to report earnings of Rs 34.6 and Rs 32.2 for FY09/FY10 (as compared with Rs 29.9 and Rs 28 earlier). Maintain BUY with a price target of Rs 240. (For our comments on Q1FY09 results, please refer to our result update ‘Mphasis: Rock on performance speaks for itself’ dated
March 2’09).

To see full report: MPHASIS LIMITED

>Power Finance Corporation (RELIGARE SECURITIES)

● Strong traction in loan sanctions: In light of India’s rising energy deficit and inadequate T&D infrastructure, we expect large investments in the power sector during the 11th and 12th Five Year Plans. With more than 20 years of experience in lending to the power sector, Power Finance Corporation (PFC) is wellpositioned to leverage the growing financing opportunities. The company has witnessed strong traction in loan sanctions over the last few years and currently has outstanding sanctions of Rs 1.1tn. A large proportion of these will be disbursed over FY10-FY12 which provides strong growth visibility. We expect PFC to clock a 19% CAGR in loan disbursals over FY08-FY10 and consequently a 22% CAGR in its loan book to Rs 772bn by FY10.

● Margins to remain largely intact: In a rising interest rate scenario, PFC has benefited from re-pricing benefits on its loan assets (80% of which have a reset clause of three, five or ten years) and the fixed nature of its liabilities (90% fixed). With the recent decline in interest rate, PFC’s incremental spreads now stand at 3–4% which will help in maintaining spreads of ~2.3–2.4% for FY10. However, interest margins may come under pressure from FY11 onwards when loans disbursed in FY08 and FY09 will be due for re-pricing. Access to tax-free bonds, if allowed by the government, will help PFC to maintain its interest spreads. We are not factoring in this possibility at present.

● Robust asset quality: PFC’s asset quality has remained robust with net NPAs hovering at near-zero levels. Loans to state and central sector utilities comprise ~88% of the total loan book. Moreover, loan to utilities have an escrow mechanism in place which provides further comfort on the asset quality front. Significant T&D losses and lower realisations have weakened the financial
position of state utilities; however, losses have remained under control in the past few years and the subsidy burden as a percentage of state government revenues has declined significantly.

● Favourable tax ruling to act as catalyst: PFC is eligible for tax exemption up to 20% of the profit derived from the financing business. However, it is providing for tax on this deduction by creating a deferred tax liability due to objections from the auditors in FY05. This issue is under consideration with the ICAI; if the outcome proves favourable for PFC, the company’s tax rates for future years will be lower and its net worth will increase by ~Rs 13bn–14bn.

To see full report: PFC

>Indraprastha Gas (KARVY)

Since our last update on Indraprastha Gas (IGL) dated 4th February 2009, the stock has corrected by almost 9% to Rs 101. We believe that there has not been any adverse news for IGL and the fall in stock price is largely in line with that in the broad market. In our opinion, IGL's business model is relatively immune from any economic downturn and it is likely to benefit from compressed natural gas (CNG) sales growth during Commonwealth Games to be held in New Delhi and national capital territory (NCT) in 2010.

Petroleum and Natural Gas Regulatory Board (PNGRB) has approved IGL as the authorized entity in NCT, giving it three years marketing exclusivity and 25 years network exclusivity for city gas distribution (CGD) network within NCT.

IGL's Q3FY2009 results were depressed due to the provision of Rs 175 mn made for a disputed demand from the gas supplier, which might have adversely affected the stock price performance. However, the future growth prospects for IGL appear bright driven by increased conversion of private four-wheelers to CNG, acceleration in the conversion of light commercial vehicles (LCVs) to CNG and a sustained growth in piped natural gas (PNG) customers.

At current levels of Rs 101, the stock quotes at a P/E of 6.7x FY2010E EPS of Rs 15.1 and 2.8x EV/EBIDTA of FY2010E. We continue to value the stock based on one year forward EV/EBIDTA multiple of 5x with target price of Rs 155. We believe that the 5x multiple captures the concerns over the sustainability of margins.

To see full report: INDRAPRASTHA GAS