Textile Sector - Back from the brink:

Happier Times may just be around the corner for textile stocks. The sector, which for long had been written off by the market punters, is buzzing on the bourses these days. This is largely on account of the interest that that is being shown in the sector by a few private equity (PE) firms, led by big daddy Blackstone. Given the heightened interest, IG decided this is a good time to revisit the long- forgotten sector.

From laggard to performer:

The textile sector has been underperforming the broad market for quite sometime now. The recent activity in textile scrips, however, serves as an indicator of the revival of interest in this sector. Over the past month or so, four or five most actively traded textile stocks have appreciated significantly. Moreover, half these scrips gained 10% or more during this period. In fact, two months ago, the number of textile companies earning such returns was only 15% vis-à-vis almost 50% now. From laggard

Interest shown by large PE firms:

Much of the action in textile stocks has been triggered by Blackstone's decision to acquire Gokaldas Exports. According to one line of thinking, if Blackstone sees, value then there is a good chance that it sees something that others are missing out. The gains, though, are not immediate, as many believe that the additional capacity for some of the leading textile players will kick off only over the next 2-3 years. But they also point out the very fact that so much capacity addition is taking place means that the demand scenario for the industry is firm.

Increasing demand from global as well as domestic market:

The sector is also buoyant on account of a demand pull, both from global as well as from domestic markets. Textile manufacturing in developed countries is on the decline following the emergence of low-cost manufacturing base in countries including India. China, India, Bangladesh and Indonesia have also seen a two to three-fold rise in textile exports to the US, the biggest textile market in the world.

On the domestic front, the retail boom offers great opportunity for textile companies in both garments and home textile segments. The heavy import duties on fabric and apparels ranging from 20-60% provide a fair degree of protection to domestic textile manufacturers. With domestic consumption also on the rise, Indian textile companies are adding capacities across various segments including yarn, fabric, garment and processing.

Challenges ahead:

However, the journey may not be completely smooth. The biggest challenge for the domestic textile sector will be trying to cope with the increasing competition from other low cost countries. Furthermore, the appreciation rupee may caste a shadow on margins.

The risk is mitigated to a certain extent as textile companies can claim a 3% drawback on free on board (FoB) value of exports under a special government scheme.

Bright future prospects:

Given the future prospects and the fact that big foreign institutions are so bullish on the sector, investors with a long term view can consider textile companies, which can take advantage of economies of scale and are fully integrated.

ankit.jain

We are initiating our coverage on MindTree, with an Under performer rating as we expect the earnings growth for the next two years to be muted and the valuations are yet to correct. Besides, return ratios are showing no strength and are likely to decline from the current levels, as the incremental growth are likely to slow down. Since its business model is more skewed towards project based - the forecasting the quarterly profitability is difficult and in the current environment the stock is likely to under perform.

Our rationale for under performance is based on 1. Competition is likely to hot up, which would necessitate many tier- 2 companies to not to seek billing rate increase. 2. Derives 75% of revenues from undertaking new development services', which do not have the traditional annuity component. 3. Smaller size, higher client concentration, and necessity to pay higher wages could create abrupt changes and volatility in growth and margins on a quarterly basis. Competition would emerge to dwarf growth: MindTree has been growing its revenues in USD terms at a CAGR of 65% (between FY04 - 08E).

However, it would find it difficult to sustain the same, as the situation in US, could be turning unfavorable and the stiff competition particularly from the larger vendors could pull the growth down. Though it has a de-risked revenue model by geography, its ability to report strong growth both in USD terms is little suspect and in INR terms, the growth would be dwarfed as the rupee is likely to be in an appreciating mode. In Rs terms we expect its revenues to grow by 18.8% for FY08 and for FY09 and FY10; we at this point of time expect the growth to be at 16.9% and 24.7%. Skewed in favor of development services: We expect Rs to appreciate from an average of Rs40.5 in FY08 Rs34 by FY11, which is a risk that we cannot underplay.

Apart from the rupee factor, what we fear is, it derives little above 3/4th of revenues from undertaking new development services', which more often than not, do not have the traditional annuity component. We do not expect the revenue model to significantly change from the current project centricity, which would lead to volatility in its utilization rates. This, along with its smaller size, relatively higher client concentration, and necessity to pay higher wages to attract and retain talent could create sudden changes and volatility in growth and margins on a sequential quarter basis.

Valuations are extremely stretched:

Given MindTree's high exposure to new application development work, slow down in the global IT spending could result the company reporting serious negative growth in earnings. At present, we expect the earnings to decline by 11.4% for FY08 and for FY09 expect a further decline of 1.4%, which is more a result of rupee appreciation. However if the slow down percolates further, then the company can report can serious earnings decline, which at this point of time - the market is not factoring. The stock is currently at a valuation of -- -%FY08 and ---%FY09, which we believe are expensive. Consequently we recommend the stock as an under performer of Rs475.

Balmer Lawrie is a Government of India company that operates as a diversified conglomerate with interests in logistics, industrial packaging, greases & lubricants, travel & tourism, leather chemicals, tea exports and turnkey projects. It enjoys market leadership in most of its core business segments capturing a high share of government and PSU businesses.

In the recent years, the company’s focus on the logistics division has led to a strong growth in its profitability. Though logistics contributes approx. 24% to the company’s total revenues, it delivers approx. 61% of its total EBIT. The company plans to focus on its core business and expand via organic and inorganic routes. Based on the organic route, the management is targeting Rs. 2000 cr. & Rs. 200 cr. in Revenues & Net Profits respectively by FY10E, implying a CAGR of 41.7% in earnings during FY07-10.

To attain market leadership in its core businesses, Balmer Lawrie plans to exit some of its non-core businesses such as tea blending and specialty containers. The company also plans to expand its offerings in key businesses to tap potential clients. Further, Balmer Lawrie’s nearly debt free status, comparatively cheap valuations and the possibility of divestment of Government’s stake make it an attractive value play.

Key Investment Arguments

Balmer Lawrie has a market cap of Rs. 754.4cr, average daily volume of 7433 shares for the last six months and net sales of Rs. 1338cr for the trailing twelve months ended 30th June 2007.

Its Operating profit and Net profit margins are at 9.5% and 5.5% resp. in FY07. The company has achieved a 5-year CAGR of 14.1% in net sales, 21.6% in EBITDA and 54.4% in net profits. Balmer Lawrie presently trades at a PE multiple of 10.4, Price to Book ratio of 2.8 and Price to Sales ratio of 0.6. Debt-equity ratio is virtually NIL at 0.4 for FY07.

Conclusion

On the basis of our research, we feel that this is a good stock to buy at the current market price of Rs. 463.10. If everything goes well, the price is likely to appreciate to Rs. 630.0, within a year or so, translating into a gain of about 36%.

Key Takeaways

Existing projects of Ashok Towers (Parel), Ashok Gardens (Sewree), Peninsula Technopak (Kurla) and Peninsula Business Park (Dawn Mills, Lower Parel) are on schedule.

Future projects include its 3 SEZ projects in Goa, 2 projects in Pune and 2 in Nashik, all expected to break ground by June 2008. Peninsula also plans to enter cities like Chennai, Coimbatore, Bangalore, Mysore, Hyderabad and Ahmedabad.

Peninsula shall continue to focus on an asset light business model, as is evident from its real estate fund plans. Peninsula shall co-invest (25%) along with the fund in all future projects, once the fund is closed (expected by March 2008).

Possible Dilution:

As per our calculations, Peninsula will need to raise approx Rs 5-7billion to co-invest with the fund, as well as for executing its larger SEZ and township projects.

Outlook

We believe the company is a high quality real estate player in Mumbai with a strong focus on the commercial segment. At CMP of Rs 587, the stock trades at a discount of approx 8% to our NAV of Rs 637*. We maintain a sector Outperformer rating and our sum-of-parts price target at Rs 719.

Real estate fund Fund size:

Domestic: Rs 3.5-4.0billion; Offshore: USD 325-350million

Investment strategy:

West & South India–projects with an IRR >25%

Alignment of interests with Peninsula:

Peninsula Land will not buy land independent of the fund. It will coinvest with the fund up to 25% Co-investment at the same time and at same terms and conditions No existing project of Peninsula to be transferred to the fund

Revenue streams for Peninsula

Fund to have a 2-20% (fee-carry) structure, with Peninsula having a 76% stake in the investment management company. Peninsula to provide project and facility management @approx 5-7% of revenue

Valuations Sum of parts approach:

We believe a sum-of-parts approach is most appropriate to valuing real estate in India currently. This approach gives due weightage to the execution ability of a company, a key factor in gauging the performance of developers. The key components of our methodology are:

1) Land bank value: Current market value on a post tax basis, after conversion to commercial use

2) Conversion margin: Margin enjoyed from undertaking the core activity of construction, development and selling (does not include land gains),

3) Leased income: Valued on a 9% rent capitalization basis.

MIC Electronics Ltd. ( MIC) is a Hyderabad, Andhra Pradesh based manufacturer of LED displays, electronic & telecom (ICT) equipment and also offers software services for the telecom segment.

The ICT segment accounted for approx 67% of its FY07 revenues. However, MIC aims to leverage its expertise in design, development and manufacturing of LED display systems and boost its share in revenues in the coming years.

To capitalise on the changing demand dynamics of the Media industry , MIC is scaling its display LED display module manufacturing capacity from 6,000 p.a. to 15,000 p.a. by end - CY08.

In Oct’06, it acquired an InfoSTEP Inc., a US based software services outfit catering to the ICT sector. This gives it access to the lucrative North American market. 􀂄 MIC raised Rs 765 million via its IPO in Apr’07. The proceeds are proposed to be utilised for manufacturing capacity enhancement and beefing up its R&D and marketing initiatives .

It’s order book in the media segment is approx Rs 1.5 billion executable over 12 to 18 months. In telecom segment, the same is approx Rs 650 million to be executed by H1FY08. Backed by strong growth in both its business segments, MIC reported a 130% increase in net sales to Rs 2.4 billion for FY07, with a 108% growth in net profits to Rs 322 million.

At the CMP of Rs 436, the stock trades at a P/E and EV/EBIDTA of 13.1x and 10.1x FY09E earnings. Considering its product range, technical competence and operational scale up, we initiate coverage with a ‘BUY’ recommendation, with a price target of Rs 525, on an investment perspective of 12-months.

Financial Performance Quarter ended June 07

Karur Vysya Bank (KVB) has reported a net profit growth of 24.93% to Rs 48 cr in the Q1 FY08 compared with Rs 38 cr in the corresponding period of the previous year. Total income rose by 34% to Rs 292 cr (Rs 218cr). Net Interest income increased by 20%, whereas, other income registered a jump of 40%. Interest on advances touched Rs 194 cr (Rs 131 cr), up 47.25 %. Net NPA stood low at 0.25% and Capital adequacy ratio (CAR) at 15.8%.

Year ended Mar 07

For the year ended Mar'07, bank recorded 23% increase in Net interest income to Rs 347 cr and mere 2% increase in other income. Bank reported 18% increase in PAT to Rs.160 cr. NIM's too improved by 8 bps to 3.6%. Advances registered growth of 27% at Rs.7040 cr and deposits grew by 23% to reach Rs.9340 cr; Creditdeposit ratio improved to 75% from 73% during previous year. Despite robust credit growth asset quality improved with Net NPA's lowering down to 0.23% of advances as compared to 0.81% last year. The bank has set a business target of Rs 21,000 cr during F.Y 08 up from Rs.16380 cr during F.Y 07. CAR declined slightly to 14.5% from 14.8% as on March 31, 06.

Company Outlook

Bank has reported decent financials during F.Y 07 and during Q1 FY 08 with robust business growth, good asset quality and satisfactory profitability. Bank is operating on 100% CBS platform. Furthermore bank has shown aggression to grow. We believe that bank has potential to continue registering robust financial performance in line with its peers and could be potential acquisition target post 2009. At CMP of Rs.337, bank's stock is trading at P/E of 11.1x and P/Adj BV of 1.7x on FY 07 EPS and Adj BV respectively.

Bank has outperformed Nifty as well as Bankex. Bank has robust dividend history in the range of 100%-120% since past 4 years and has generated stock return of 56%. Further bank has declared issued bonus during 1995, 2002 and 2006, which indicates banks intention to reward their shareholders. Considering bank's robust financial performance, investor friendly approach and potential acquisition target, we recommend, "Hold" for existing shareholders and accumulate at lower levels.

Stock up 118% in the past 5 months

RELE shares have rallied up 118% over the past 5 months on expectations of blue-sky scenarios through capacity additions, EPC order wins and the value of CBM blocks.

The deepest shade of blue

Even our extreme blue-sky scenario of (1) additional 25,000MW capacity in 7 years, (2) execution of EPC orders of Rs800 billion to be executed over 7 years with EBITDA margins of 15%, (3) no fuel supply risks, (4) no execution risks, (5) generous multiples for valuations, (6) and 20% premium to our existing value of RELE (ex-cash) yields only Rs1,183/share. We reiterate our Sell/Low Risk rating.

Execution risks are real

RELE has re-rated every time a project has been announced. It was expected that RELE would capitalize on the opportunities thrown up by the passing of the Electricity Act 2003 (EA03). Projects were announced from time to time, but 4 years have passed and RELE continues to have only 941MW of generation capacity and distribution licenses in Mumbai and Delhi.

Some progress but....

RELE has made strides in terms of the (1) implementation of the Rosa project, (2) winning the Sasan UMPP, (3) clearance for the 3 transmission projects, and (4) winning a real estate project in Hyderabad. But the current stock price does not appear to factor in any execution risk and at Rs1,106.50 the implicit value of net cash/share is 3.5x book value.

Reiterate Sell/Low Risk

RELE has been re-rating every time a project has been announced. It was expected that RELE would capitalize on opportunities that the passing of the Electricity Act 2003 (EA03) would throw up. Numerous projects have been announced from time to time but 4 years have passed and RELE continues to have only 941MW of generation capacity and distribution licenses in Mumbai and Delhi. The only major difference has been the substantial build-up of cash and cash equivalents and the decent ramp-up of the EPC business.

Historical execution risks of course cannot be extrapolated to the future. The company has made strides in terms of the (1) implementation of the Rosa projects, (2) winning the Sasan project, (3) getting clearance for the 3 transmission projects, and (4) winning a real estate project in Hyderabad. However, even our extreme blue-sky scenario yields a value of Rs1,183 and the stock is at Rs1,106.50 (up 118% from May 16, 2007). Further, at Rs1,106.50 the implicit value of net cash/share is 3.5x book value, which in our view completely ignores execution risks. Reiterate our Sell/Low Risk rating on the company.

Investment strategy

We rate Reliance Energy Sell/ Low Risk (3L) with a target price of Rs510. Despite huge expectations about the company’s ability to capitalize on opportunities post the passing of the Electricity Act 2003 the company continues to have only 941MW of generation capacity and distribution licenses in Mumbai and Delhi. Most of Reliance Energy’s projects have hit regulatory, land clearance or fuel supply snags. The only major difference in the past 4 years has been the substantial buildup of cash and cash equivalents and the ramp-up of the EPC business.

Even our extreme blue-sky scenario yields a value of only Rs1,183 and the stock is at Rs1106.50 (up 118% from May 16, 2007). Further, at Rs1106.50 the implicit value of net cash/share is 3.5x book value, which in our view completely ignores execution risks. We reiterate our Sell/Low Risk rating on the company. Long-term steady state earnings growth in the 13-15% range and low RoCE of 2-4% (which is the lowest in our Indian Electric Utilities Universe as a result of 74% of the assets being cash) indicate inefficient capital deployment, in our view.

Valuation

Our 12-month target price for Reliance Energy of Rs510 is based on RELE (ex net cash) value of Rs229 and net cash value of Rs281 (1.1x FY07E Net Cash/FD Share). RELE (ex net cash) would comprise Mumbai business value of Rs117, other power assets value of Rs27, EPC Business value of Rs65 and Delhi distribution value of Rs20. At our target price of Rs510, RELE (ex Delhi) would trade at a P/E multiple of 10.1x FY09E.

Risks

We rate Reliance Energy Low Risk which is different from the High Risk rating that our quantitative risk-rating system accords. Our Low Risk rating is in-line with that of other rated Electric Utility stocks NTPC, Tata Power and CESC given: Stable and regulated earnings and cash flows from operations, with fuel costs being a pass-through.

Secular growth prospects for the power sector in India, given current shortages and low usage and penetration levels. The upside risks to our target price include: (1) Announcement of new projects, which leads to short term re-rating of the stock; (2) The company finishing any of its announced projects way before scheduled commissioning; and (3) Better than expected order wins and order execution in the EPC Business.

Merrill Lynch recently came out with a report wherein thee have updated their most and least preferred stock list .

According to the report, "In this note we update our most- and least-preferred stock list, consistent with our fundamental 12-month opinions but intended to appeal to investors with a shorter-term time horizon, with potential short-term price catalysts."

This month’s stock list:

With the monsoon season at an end, we expect cement producers to hike prices, especially since no new major supply is expected till 4QFY08. Earnings of cement companies are highly sensitive to cement prices. We add Grasim, our top cement pick, to our most preferred list. We are correspondingly removing TCS where valuations are looking attractive but strong rupee poses earnings risk.

Most preferred:

BHEL: 1) We expect 30% growth in order book in FY08E led by key customers NTPC, APGenco etc 2) Potential success at super-critical tenders & gas-based projects 3) BHEL’s capacity expansion plans are running on time to meet backlog.

Bharti Airtel: 1) Continued strong subscriber growth. 2) Solid revenue growth and strong margins in FY08E despite continued competitive pressures. 3) Visibility on tower portfolio in terms of build-out & tenancy.

Grasim Industries: (1) Strong cement prices in the upcoming construction season (Oct ’07 onwards) (2) No major new supplies till 4Q FY08E (3) strong quarterly earnings

Least preferred:

Hindalco: 1) September quarter results likely to disappoint owing to lower Aluminum prices and rupee appreciation. 2) Copper smelting business sharply affected by falling TCRCs.

Tata Motors: 1) Expect volumes to decline (YoY) over the next 2 quarters. 2) Earnings will disappoint led by slowing volumes and margin contraction.

Pantaloon: 1) Same store sales growth data has been choppy in the last few months and has been slowing down; 2) Margin pressure is likely to intensify with rising salary costs and 3) likely inventory write-off in the full year results due late Sept may have implications for gross margin going forward.

Big order from BSNL to boost the telecom business:

Bhagyanagar India received an order to the tune of Rs 350 million from the telecom behemoth Bharat Sanchar Nigam Limited (BSNL), New Delhi for supply of telecom cables to various circles. As per the fresh order, the company has to supply 3.12 LCKM of jelly-filled telecom cables with an execution period of four months. Apart from this major order, we expect Rs 150 million orders from various circles in FY 2008, taking the topline of the telecom division to Rs 500 million which is approximately 3x FY2007 sales of this division. This will tremendously boost the telecom division of the company which was ailing due to the decline in demand for jelly-filled telecom cables. The telecom cables division recorded a YoY decline of 73% in its topline in FY 2007 (from Rs 698 million in FY2006 to Rs 187 million in FY2007).

De-merger on track:

Bhagyanagar India is considering a proposal for restructuring of the company. The restructuring will mainly involve demerging the different business activities namely real estate and infrastructure, manufacturing of copper & telecom products and non-conventional energy. The real estate and energy business will remain under "Bhagyanagar India Ltd." and rest will de-merge into "Bhagyanagar Metals Ltd". The company is well on course to complete the merger, which is expected to be completed in the next 5-6 months.

Preferential allotment of warrants:

The company recently allotted 7.2 million warrants at a price of Rs 44/- to Delhi based M/s Foster Capital Ventures, implying a 7.3% stake in the company upon conversion (on fully diluted equity). Another 4 million warrants were allotted to M/s Bhagyanagar Ventures Ltd and .3 million warrants to Trimurthi Advisory Services Pvt Ltd. The fully diluted equity of the company (after outstanding FCCBs and warrants conversion) stands at 97.5 million shares.

Stock in for re-rating:

We currently value the real estate assets at a 10% discount to the present sale value of the raw land bank, due to the conglomerate nature of the company. This is an upward revision from our previous valuation involving a 20% discount, due to the recent across the board upsurge in the realty stocks. In the event of a de-merger, the company will start getting valued on the Net Present Value of its developed land like other listed real estate companies. Therefore, we believe that this move will be value accretive for the company making Bhagyanagar India a pure real estate play.

At current levels it quotes at a price earnings multiple of 6.8x FY08 and 5x FY09 earnings. Hence there is a huge potential for value unlocking, considering the price earnings multiple real estate companies enjoy. We believe a substantial value unlocking can take place in the stock and intend to revise the target upwards as and when the management gives more clarification on the de-merger details. We reiterate a BUY at current levels with a price target of Rs 65 per share. This includes Rs 55 per share for Real Estate business and Rs 10 per share for other businesses.

Investment Highlights

The emerging Rs.80 billion seismic services market in India is driven by a complement of rising oil demand, under penetrated geography and a bullish oil market, leading to substantial growth in not only new exploration projects but also encouraging the revival of abandoned fields. About 50% of this business opportunity will be addressed by merchant third party crews like AIL, given that large companies like ONGC & OIL also have in-house crews to handle their seismic service requirements. AIL introduced the fast growing 3D seismic services to its service portfolio during FY05.

The potential for 3D services is growing rapidly, although there is a limited scope for growth in 2D services. So the company has put conscious efforts towards development of expertise in the 3D services arena. In fact, within two years of launching its 3D services, the company achieved unprecedented success. During FY07, nearly 77% of the total revenues of the company were derived from the 3D services as compared to 43.7% in the corresponding period last year. AIL has not only demonstrated its ability to absorb the new technology (with capacity to scale up at a great pace), but has also reinforced its reputation as a leading 3D player in the country.

The company is now standing on a strong foundation and is very well positioned to reap rich benefits from the boom in the E&P activities (in India and abroad). The company has an outstanding order book position which stood at around Rs.1171 million (more than 2x its FY07 revenues), to be executed in the near term. Out of this order book, 85% of the orders are from the 3D service segment and rest is for the 2D services. With the strong order backlog and the ensuing demand growth, we believe the company would be able to maintain its low cost regime and thus would be able to maintain high operating margins over the next 2-3 years.

Outlook & Valuation

The company is expected to deliver a robust growth in the top line (55% CAGR) as well the bottom line (65% CAGR) during FY07-FY09 period. At the current market price of Rs.411, the stock is available at 16.7x & 11.0x its FY08E & FY09E earnings of Rs.24.5 & Rs.37.4 respectively. Considering that the company can show robust growth in the next 2-3 years, we are initiating a Desk Research call on the stock & believe it can deliver strong returns over the next 2 years.

Investment highlights ! Building global competency

TCS is India’s largest IT company, with global ambitions to be among the top 10 global IT players by 2010. The company has a three-pronged strategy to achieve the same – strong delivery capability through Global Network Delivery Model (GNDM), changing business mix (full services play) and inorganic growth through strategic acquisitions.

Ability to win and address large engagements

The strong business model has helped the company win and address large complex global engagements. The company won 12 USD 50 million plus deals in FY07 alone, which supports the large volume player strategy of TCS. Some of the large ongoing projects include Bank of China (USD 100 million, 5-years) and Bank of Pichincha (USD 140million, 7-years). Recently, TCS won a USD 140 million deal (2 year development, 7-8 years maintenance) from BSNL, India’s largest state owned telecom service provider and a USD 35 million multi year outsourcing contract from healthcare major Roche.

Increasing focus on products division

Product services division – TCS Financial Solutions has shown considerable growth (>50% YoY) in the last 2-years driven by strong customer addition across geographies. Management expects a revenue contribution in high single digits within next 3-years driven by growing business traction enhanced by inorganic growth momentum.

Strong demand environment with growth across geographies

TCS has witnessed robust growth across geographies especially established markets (US and Europe – 46% YoY FY07) and emerging markets Middle East Asia (MEA), Latin America and Asia Pacific – 79% YoY FY07). This continued growth has been propelled by leveraging global support capability, changing business mix and acquisition leading to significant customer additions and deal wins

Balance sheet analysis

" Cash and cash equivalents stood at healthy Rs.8,021m which we believe could be further used for acquisitions. " TCS has consistently maintained a strong Return on Net Worth (RoNW) of greater than 50% in the last 3-years. The RoNW stood at 51% as on 30 June, 2007.

Valuation

TCS currently trades at 18.6x and 15.3x FY08E and FY09E earnings which is lower than its closest competitor Infosys. We expect TCS to trade at a premium to its close peers bolstered by strong revenue growth, GNDM, full services play and continued acquisitions. Furthermore, there is strong IT demand environment with IT exports expected to cross US$ 60bn by 2010 and TCS’s global ambitions, we believe a revenue growth of 25%+ is achievable on a long term basis.

This is further supported by healthy pipeline, strong employee metrics, recent large deal wins and a strong domestic presence, which adds value to our recommendation. We assume 26% revenue and 21% EPS CAGR through FY10. Moreover possible inorganic growth and continued large deal wins, add to protracted revenue growth over a long period with sustainable margins. We argue that the stock should trade 20-25% higher than the current level at Rs.1,248/share within 12-months.

How will the appreciating RS bear down on earnings?

We believe that hedging has protected EPS for FY08E but FY09E is still vulnerable to the appreciating RS. Our FY09E EPS assumes a base-case RS-USD equation of 40.5. We have laid out the scenario table outlining our estimated impact on FY09 EPS for various RS-USD exchange rates. We can see that if the RS were to strengthen to 39.0 vis-àvis the USD, the downside to our FY09E EPS estimates from the base case is the range of 8%. This does not include hedging income which we cannot forecast and therefore an upside risk is inherently present. In such an appreciating RS environment there will likely be an accompanying de-rating of our FY09E target P-E by at about 3-4%. So taken together, there could be a downside of about 11-12% to our appraised return of near-30% over a 12-month horizon on account of the appreciating RS. In other words, a 12 month price target of RS 350-355 stands reduced to about RS 315-320. We must be cognizant of the risk to earnings and our target price of an appreciable strengthening of the RS. This should a constant watch point for the investor.

HCLT has strengthen its execution capability by aggressively recruiting quality middle-tosenior management talent

One of the company’s success factors in the recent past has been its improved execution and a good reason for that has been its ability to aggressively hire senior managers from firms such as TCS, Satyam and Infosys (Indian peers) and IBM among the global names. This has helped HCLT close the gap between peers with respect to the enterprise application portfolio.

HCLT unveils its progress on its innovation initiatives but it is premature to predict success yet.

HCLT has focused its mindshare in the last couple of years to move towards a business model driven by IP. It has commercial offerings to address areas such as SOA, MDM, WIMAX etc. These emerging services have not yet turned mainstream but the company is betting on their taking off in the near future. We believe that while such initiatives serve to differentiate HCLT from the Indian IT pack, it is far too early to declare success here. To impact a company of HCLT’s size positively in a meaningful manner, we believe that we will have to wait till FY10E.

What’s noteworthy is that clients have already been signed up for HCLT’s proprietary offering in SOA (called Penstock) and this quickens the pace with which HCLT signs up transformation deals. HCLT is striving to bring differentiation to its pricing model to delink revenues and manpower As part of its efforts to drive an increasing proportion of incremental revenues from outputbased measures as opposed to input-based measures, the company has begun to deploy several pricing models such as risk-reward, outcome-based pricing, gain sharing mechanisms etc. We believe that these still largely remain in the paradigm phase and HCLT’s largest peers such as Infosys and TCS are also articulating such possibilities equally seriously. HCLT is winning its fair share of large deals on the back of its three-pronged business model The company is increasingly on the final stage shortlist in deals that other Indian vendors do not make it to. In those instances it faces Indian vendor competition at the final stage; the most common player it runs into is TCS.

We believe that this is due to the fact that apart from HCLT, the only other Indian vendor with comparable maturity on the Infrastructure Management Space (specifically, remote infrastructure management) and bundling it with application management/optimization is TCS. This strength enables HCLT to win a good proportion of multi-service client deals and the frequency of such client wins is on the rise. Is HCLT diversifying its growth sufficiently and quickly enough? Yes, we believe so. Growth is deriving from investments already made in emerging sub-verticals such as media & entertainment, Consumer Products Group, life sciences and healthcare and telecoms. The company has been following a micro-vertical strategy identifying pockets where it should dominate versus those pockets where it should differentiate. Many of these sub-verticals will grow at least 50% in FY08 over FY07 in USD (admittedly over a smaller base).

In addition, there is low-hanging fruit to be profitably captured in these less penetrated verticals being in the initial stages of the adoption curve. In our view, HCLT’s broad-based multi-service existing model with its top 30 clients (most of them USD 10 mn plus clients) gives the company further flexibility in managing its order books and ensuring that its q-o-q revenue momentum can absorb the impact of incremental investments. Our outlook on valuations From the chart below, we see that excluding that quick aberration in May 2006, HCLT’s valuations are reaching near 2 year-lows. HCLT has lost much of the P-E gains that it has accomplished over the past 20-24 months.

We believe that stock prices will continue to be volatile in the short-term. Observers are trying to assess the multiplier impacts of developments in the US. We believe that HCLT’s valuations have become fairly reasonable for investors at this point in time within the Re contained within 39.5 to the USD. It currently trades at 14.5x FY08E and 11.3x FY09E, and we maintain our ‘BUY’ rating on the stock.

Investment Rationale

* Indoco has reorganized its business in order to add strength by bringing all the manufacturing units of the group under its fold.
* During the first nine months ending March 2007, Indoco’s net sales were up 38% and the net profits increased by 28%.
* Indoco’s top 10 products are ranked within the first five in the segment.
* Indoco’s research team is working on 9 molecules mainly in the ophthalmic segment.
* Indoco’s facility for manufacturing sterile eye drops is US FDA approved and is in a segment that has 5-6 players in the world. • The company has its manufacturing facilities approved by USFDA, UKMHRA, GMP, etc...
* Indoco has received the ANDA approval for Ciprofloxacin, used in sterile eye drops.
* The company has growth plans in the semi regulated markets and has filed dossiers in CIS, South Africa, Australia and New Zealand.
* IMS ORG ranks Indoco 21st in the Prescription Audit and 33rd in the Retail Audit for July 2007.

Financials and Valuation

Indoco is currently trading at 7.1x FY07E and 5.6x FY08E EPS of Rs. 35.4 and Rs. 45.1 respectively. Given the reorganization of business, the growth in both domestic business and exports, the rankings of the company’s products and the business strategy for growth, we estimate the revenues to grow at 33% CAGR from FY06-08E. We initiate our coverage with a ‘BUY’ rating with a 12 month target of Rs. 350.

HDFC Securities has come up with a report on Tata Tele Services. The research firm has maintained buy rating on the stock with target price of Rs 44. HDFC report on Tata Tele Services:

Key investment arguments:

High growth rates with spectrum availability:

The subscriber acquisition rate for TTML at 37.7% CAGR for FY07-10E will be higher than the industry CAGR of 27%. It will gain market share from 12.3% to 15.7%, due to extensive micro coverage expansion and increased focus on data products.

Turnaround story, cruising ahead:
TTML has shown a remarkable turnaround in financial and operational parameters, which we believe will reflect in future performance, backed by expert top management. The company has reported positive EBITDA of Rs 3026 million (FY07), compared to negative EBITDA of Rs 661 million (FY05). We expect this to go up to Rs 8843 million (FY10E) at 43% CAGR (FY07- 10E) compared to Bharti and RCOM’s CAGR of 34% for the same period. We expect TTML to report a profit of Rs 3,777 million (FY10E) from a loss of Rs 3,106 million (FY07), with further upside potential due to margin expansion.

Integrated product offering – voice and data:
Compared to Idea, Hutch and BPL Mobile of pure voice plays, TTML has integrated its product offerings for voice and data for both retail and enterprise customers. TTML is the leader in the enterprise segment, with 54% market share (FY07) in Mumbai, with assets already in place for leased lines, ADSL, wireless
etc and accessibility to the group’s expertise in technology, software and finance.

Key Developments:
The launch of wireless data card in July 2007 has elicited tremendous response with average additions at 6000-8000 subscribers per month, which would be ramped up to 20,000 per month by Dec 2007. Data cards being high ARPU products and better margins should affect the performance positively. Subscriber additions per month are on track with a market share gain as per our expectations (as on Aug 2007 end – 186000 net adds, 3.56 mn subs, 13.2% market share compared to Mar, 2007 – 2.77 mn subs with 12.3% market share )

Valuation and Outlook:
TTML has shown a remarkable turnaround in financial and operational parameters, which we believe will reflect in its future performance, backed by expert top management. Subscriber acquisition rate for TTML at 38% CAGR for FY07-10E will be higher than the industry CAGR of 27%, with a gain in market share from 12.26% to 15.65%, due to extensive micro coverage expansion and increased focus on data products. The stock is currently trading at 19.3 and 12.6 times EV/ EBIDTA on FY08E and FY09E basis. We maintain BUY rating with a price target of Rs 44 that values the stock at 19.1 and 13.3 times EV/EBIDTA on FY08E and FY09E basis.

Narayan Ramchandran of Morgan Stanley said that 50 bps Fed rate cut in early 2008 is very likely. Although, he is surprised by 50 bps cut by the Fed. Fed believes that housing situation is still very serious and they might cut the rates again. He don't think that global slowdown would be too serious. Real bail out was from UK Central Bank.

He further said that valuations are no where next to peak and are not too stretched currently but sees some economic slowdown. There are no problems on earnings or GDP growth in India. He believes that India is one of the best assets in the context of global slowdown. But growth could slow to 7 -7.5% in India. He said that there may see 'Garden Variety' slowdown instead of serious one. He would remain invested in the Indian markets as fundamentals are still strong.

He believes that the US Subprime Issue has been eased and that he will remain invested in the markets. Money will flow from developed markets to emerging markets.

He further said that RBI is expected to pause rather than cut the rates and Asian Central Banks may also turn neutral from hawkish. He believes that rupee effects on stock markets and IT stocks is overdone. The rupee impact may not be as bad as market makes it to be. About Yen, he said that Yen carry trade may not be as 'Alive' as it was 4 months ago.

He is bullish on Telecom and IT sectors and believes that technology companies will continue to show very good RoEs. Most of the long-only investors will gain in the near-term. There is more probability of upside in 1 year and may not see 20% fall in the market. There are higher probability of markets going upside than downside.

Commodity guru Jim Rogers say that the recent cut by the Fed was a serious mistake and it will lead to higher US inflation. Higher commodity prices and weak dollar may trigger this US recession. He says that the dollar is likely to continue depreciating.

"Fed rate cut in my view is a serious mistake, it is going to lead to more inflation in the US and higher long term interest rates. The bonds have already started going down in the US, commodities have been sky rocketing since and it is going to lead to weakening dollar which of course means more inflation and higher interest rates. Also this means a worse recession in the US rather than a better economic view," Rogers said.

"US dollar is going to go down for years to come, whether you should buy it or sell it. This is world’s worst market time and I am the world’s worst short-term trader. The US dollar has even been going down against the rupee, so nearly everything is going up against the US dollar," he says.

Rogers continues to remian bullish on gold. "I own gold, I continue to own gold, I expect to buy more gold. Gold will double during the course of the bull market, which has years to go. You are going to make more money in agriculture as far as I am concerned but gold is certainly a commodity worth owning and I do own it and plan to buy more," he said. "I am not smart enough to know where the gold or base metals prices will be by the end of the year. I just know I own it, and when it will react I will buy more and I do not plan to sell gold for many many years," he adds..

On emerging markets he says that he has sold all his emerging market holdings except China, where he still holds a large position.

He is also bullish on the prospects of sugar. "Sugar, I expect, will be one of the most interesting commodities going forward, it had a huge run then it settled down by 50%. I suspect it is time for it to go up again. This week I re-examined sugar to see if I should add to my positions in sugar though cotton and coffee will probably do well. Agriculture is the best place to be as far as I am concerned, agriculture commodities is one of the very best asset classes in the world in September 2007 and going forward," Rogers says.

Chakri Lokapriya, Fund Manager, BRIC and Indian Equities, BNP Paribas Asset Mgmt said that Indian valuations are more attractive than those of China. Indian companies are also having higher ROE than China. US is a big trade partner for India and some coupling is expected during weakness.

He further said that BRIC fund has India overweight versus the index. The overweight position has been increased recenlty. He is positve on Banking and Industrials in India. About the markets, he said that markets are looking strong on liquidity flows and valuations and is likly to see the momentum continue going forward. Though the valuations for IT companies have come down, they are beginning to look attractive. Need more clarity in dollar before seeing more interest in IT, he finally said.

Frederic Neumann, Economist, Asia Pacific, HSBC said that 50 bps cut by the Fed was a huge surprise and is pricing in further cuts and because of the rate cut by the Fed, there is sense of relief in the Asian markets. But he don't expect aggressive rate cuts by the Asian Central Banks but the hikes may stop as inflationary pressure in Asia is high. India is relatively less coupled with US economy, he said. Liquiditity has improved since the fed cut rates, which has fueled flows in Asia and these liquidity flows to Asia will continue and will benefit asset classes, he believes. Higher interest rates in Asia also fuels the inflow of funds into Asian markets.

Asian econmies are less senistive to US slow down now than they were earlier, he believes. Asian markets echo US sentiments despite decoupling. Asia looks quite robust and within the assets class also expects equities and commodities to show strength going forward.

HSBC has set target for Sensex of 16,000 by 2007 end and 19,000 by 2008 end.

He also said that he expects India and Asia to decouple from US economy and to steer clear of US credit markets' woes. He believes that volatility in Indian markets might remain elevated for some time.

HDFC has cut floating new home loan rates by 50 bps. IDBI & BoB last week slashed rates by 50 bps. ICICI Bank has introduced floating rates on auto loans at 50 bps lower than fixed rate products.

Why the cut?
Home loans have grown at CAGR of 30% since 2001. Last 2 quaters growth has slowed down to 20%. Higher interest rates & rising property prices questioned affordability. (Volumes took a hit)

Banks have also seen their cost of deposits coming down which have softened their cost of funds. For some banks( like SBI), it may be a mode to garner lost market share

Impact
With interest rates having peaked out, bank margins may still be under pressure. Floating rate loans get re-priced immediately, but reduction in cost of deposits will take time to get re-priced (Pvt banks can re-price faster than PSU banks- favor those with higher CASA like SBI, PNB, Dena, Axis). Hence, in short term, one can expect margins to remain under pressure, to be offset later by larger volumes.

Outlook
If interest rates remain soft, one can expect home loans may witness a come back

Mangalore Refinery & Petrochemicals (MRPL) soared 12.02% to Rs 65.25 and it topped gainers in BSE's A group shares. On 5 September 2007, MRPL and a subsidiary of ONGC signed a 4-year product supply agreement with Shell India Marketing.

Indian Oil Corporation moved up 7.89% to Rs 436.20 and it stood second among top gainers in A group. Shares of oil refining-cum-marketing firms edged up today on reports the government will issue oil bonds worth Rs 12,000 crore in the first tranche to them to compensate for the losses these oil firms are incurring on sale of petrol and diesel.

Bharat Petroleum Corporation gained 7.31% to Rs 348.50. It was the third biggest gainer in A group. Earlier on 19 September 2007, the company approved the proposal of joint venture with Matrix Marine Fuels (USA) in Singapore for expanding bunkering business.

Fertilizers & Chemicals Travancore was up 4.81% to Rs 27.25. It came fourth among top gainers in A group.

Ispat Industries rose 4.66% to Rs 28.05 and came fifth among top gainers in A group. Earlier, reports suggested that the company is planning to invest about Rs 10,000 crore within five years to ramp up domestic production, and is also planning to expand overseas through capacity expansion and backward integration.

The market ended in the green today, 25 September 2007. However, market breadth was weak. The market recovered from lower level in late afternoon trade. Earlier, the market had slipped into the red in afternoon trade in contrast to a firm trend in mid-morning trade. European markets, which opened after Indian markets, were weak. Reliance Industries (RIL) hit an all-time high in late trade.

Sensex gained 53.71 points or 0.32% at 16899.54, a record closing high. Sensex came off from a low of 16,676.98, which it had struck in mid-afternoon trade. At day's low of 16,676.98, Sensex had lost 168.85 points for the day.

The S&P CNX Nifty up 6.65 points or 0.13% to 4,938.85, a record closing high. It hit an all-time high of 4,953.90 earlier during the day.

BSE clocked a turnover of Rs 7468 crore compared to Rs 7,783.09 crore on Monday, 24 September 2007.

The market had moved between positive and negative zone in early trade after a firm opening. The Sensex struck all-time high of 16,928.02 in late trade.

BSE Oil & Gas index (up 1.31% to 9,777.51), BSE Metal index (up 0.39% to 13,080.83) and BSE Healthcare index (up 0.67% to 3,687.60) outperformed the Sensex .

However, BSE Realty (down 3.03% to 9,085.47), BSE Auto index (down 0.89% to 5,250.27), Bankex (down 0.18% to 8,944.98), BSE Capital Goods index (down 0.5% to 14,763.61), BSE IT index (down 0.03% to 4,348.62) underperformed the Sensex today.

BSE Mid Cap rose marginally by 3.19 points or 0.04% to 7,313.33 whereas BSE Small Cap rose 4.08 points or 0.05% to 8,967.51. Both these indices underperformed the Sensex.

The market breadth was weak. 1,648 shares declined on BSE as compared to 1,079 that rose. 326 were unchanged.

Out of Sensex pack, 16 stocks declined and rest advanced.

L&T (down 1.12 % to Rs 2864.55), M&M (down 2.64% to Rs 763.05), SBI (down 1.6% to Rs 1803.85), Bajaj Auto (down 2.16% to Rs 2,518.50) were the major losers from Sensex pack.

Bharti Airtel (up 2.11% to Rs 964.80),Hindalco industries (up 2.86% to Rs 167.50) , HDFC Bank (up 3.82% to Rs 1397.70), Reliance Industries ( up1,82% to Rs 2399.60), Ranbaxy Labs (up 1.73% to Rs 424.10) were the top gainers from Sensex pack.

Banking majors declined. SBI (down 1.6% to Rs 1803.85), ICICI Bank (down 0.58% to Rs 990.05) edged lower.

Frontline IT stocks recovered from initial fall. Infosys gained 0.45% to Rs 1771.20 and Satyam Computer rose 0.2% to Rs 410.15. TCS was down 0.38% at 1002.15, off day's low of Rs 991. IT firms derive a lion’s share of revenue from exports and a rise in rupee against the dollar hits their revenue. Rupee has risen sharply in this calendar year.

Index heavyweight Reliance Industries (RIL), rose 1.82% to Rs 2399.60. It hit an all time high of Rs 2426 in the late trade. The stock had witnessed a solid surge over the past few days.

Ranbaxy, India’s biggest drug maker in terms of sales rose 1.73% to Rs 424.10. Ranbaxy said on Monday 24 September 2007, it had signed a licencing agreement with Australia's Sirtex Medical to market the Australian firm's liver cancer product SIR-Spheres. The product, approved by the US Food and Drug Administration, is used to treat patients with inoperable tumours from primary colorectal cancer that have spread to the liver.

India’s biggest oil exploration firm by revenue ONGC declined 0.3% to Rs 930.55. ONGC said after trading hours on Monday, 24 September 2007, it will invest at least $150 million over the next seven years to explore three new deepwater blocks in Myanmar. Myanmar's government has awarded 100% participating interest in blocks AD-2, AD-3 and AD-9 to ONGC Videsh, the overseas investment arm of ONGC.

BPCL rose 7.31% to Rs 348.50 on reports a consortium of BPCL and UK's Premier Oil had found reserves estimated at 8-18 trillion cubic feet in the remote Cachar region in northeastern India. The company had denied the reports.

Gayatri Projects rose 1.34% to Rs 310.65 after it secured new order valued Rs 154.01 crore. The work has to be executed with in a period of 2 years.

Jai Corp rose 5% to Rs 11,424.55 after it said that it has approved the proposal for acquiring two manufacturing units Pet Fibres and Prime Wovens.

South Indian Bank declined 1.28% to Rs 158.60, after it announced its board had allotted 2 crore equity shares to qualified institutional buyers at Rs 163 per share

Sadbhav Engineering was flat at Rs 727.10 after it announced today, 25 September 2007, that it has received a coalfield drilling and excavation order worth Rs 245.24 crore.

Vikash Metal & Power rose 4.08% to Rs 20.40 on BSE, after it announced today, 25 September 2007, that it has received approval from a United Nations body for a carbon-credit project.

Gremach Infrastructure Equipments & Projects hit 5% upper circuit to Rs 266.60 the company said it has taken 75% controlling stake in 11 coal mine licenses in Mozambique having an aggregate 13,520 hectares (about 13,52,00,000 square metres) in prime region of Moatize.

IFCI rose 3.4% to Rs 101.75.The company is set to announce the shortlisted bidders for 26% strategic stake today

BAG Films & Media hit 5% upper circuit of Rs 65.15 on reports that Fidelity International has picked up a 10% stake in the company. The company's board is due to meet on Tuesday afternoon to consider a preferential share and warrant issue.

Turnover toppers on BSE in that order were IFCI (Rs 449 crore), Reliance Natural Resources (Rs 442.34 crore), Jaiprakash Hydro-Power (Rs 275.35 crore), and Reliance Petroleum (Rs 266.60 crore)

The revised trading timing on the bourses due to sun outage becomes effective from today. The stock exchanges have extended trading timing by 45 minutes from 25 September 2007 to 9 October 2007 due to loss of satellite connectivity during this period. Trading will stop on NSE at 11:25 IST and re-open at 12:10 IST. The final closing will be at 16:15 IST, instead of 15:30 IST.

European markets, which opened after Indian market, fell on Tuesday, 25 September 2007, as worries about the financial system and earnings weighed on investors. France’s CAC (down 63 points or 1.12% to 5,628),Germany’s DAX (down 54 points or 0.7% to 7,733) and UK’s FTSE 100 (down 75 points or 1.16% to 6,390), edged lower.

Media reports Monday, 24 September 2007, suggested Germany's largest bank Deutsche Bank may take a big hit from subprime mortgage investments.

Asian markets were mixed today. Hong Kong's Hang Seng closed down 100 points or 0.38% to 26,451. Japan’s Nikkei 225 closed 89 points or 0.54% higher at 16,401. Stock markets in South Korea and Taiwan were closed for public holidays.

US stocks fell on Monday as financial shares weakened on news that Germany's largest bank Deutsche Bank may take a big hit from subprime mortgage investments, while a landmark strike at General Motors raised concern about the economic outlook. The Dow Jones industrial average finished the day down 61.13 points, or 0.44%, at 13,759.06. The Standard & Poor's 500 Index ended down 8.02 points, or 0.53%, at 1,517.73. The Nasdaq Composite Index was down 3.27 points, or 0.12%, at 2,667.95.

November crude oil fell 67 cents to settle at $80.95 per barrel on the New York Mercantile Exchange on Monday, 24 September 2007, as energy companies in the Gulf of Mexico began restoring output shut by a storm.

Rajat K Bose
Buy Core projects & Technologies with stoploss below Rs 179 for targets of Rs 191 & Rs 199. Intraday Call
Buy Development Credit Bank with stoploss below Rs 113.25 for target of Rs 123. Intraday Call

Mathew Easow
Buy Reliance Communication with a stop loss of Rs 569 for a short-term target of Rs 650
Buy Intense Technologies with a stop loss of Rs 63 for a short-term target of Rs 88

Ashwani Gujral
Buy Bongaigaon Refinery with stoploss of Rs 56 for target of Rs 88
Buy Oswal Chemical with stoploss of Rs 40 for target of Rs 62

IFCI
SBI buys 36.3 lakh shares @ Rs 90.75/sh (0.6% stake)

Adlabs Films
Birla MF buys 2 lakh shares @ Rs 555.6/sh

Gujarat N R E Coke
ABN Amro buys 25 lakh shares @ Rs 91.1/sh
Recent Fund Action:
T. Rowe Price Int bought 24.93 lakh shares @ Rs 87/sh (1% stake) on 21st Sept
Macquarie Bank sold 21.13 lakh shares @ Rs 87.6/sh on 21st Sept

Mastek
Lehman Brothers Asia buys 3 lakh shares @ Rs 300/sh (1.1% stake)
HSBC Global sells 3 lakh shares @ Rs 300/sh (1.1% stake)

Ipca Labs
Smallcap World Fund buys 1.89 lakh shares @ Rs 685/sh

KEC Int
Reliance Capital buys 5.46 lakh shares @ Rs 559/sh (NSE/BSE) (1.45% stake)

Aurionpro Solutions
Morgan Stanley Dean Witter buys 3.5 lakh shares @ Rs 460/sh (NSE/BSE) (2.9% stake)

DCB
Merrill Lynch Investment buys 10 49 lakh shares @ Rs 108.5/sh (0.7% stake)
Morgan Stanley sells 10 49 lakh shares @ Rs 108.5 (0.7% stake)
Recent Fund Action
Goldman Sachs buys 15 lakh shares @ Rs 108.5/sh (1.02% stake) on 20th Aug
Citi Group Global Mkt sells 30 lakh shares @ Rs 108.5/sh (NSE/BSE) (2.03% stake) on 20th Aug

Ruchi Soya Inds
Emerging Market buys 10.55 lakh shares @ Rs 378.5/sh
The Emm Umbrella Funds buys 2.63 lakh shares @ Rs 378.5/sh
Carlson Fund-Asian Small Cap sells 5 lakh shares @ Rs 378.5/sh
Goldman Sachs sells 7.22 lakh shares @ Rs 378.5/sh

Selan Exploration
Motilal Oswal buys 1.19 lakh shares @ Rs 165.7/sh

Monsanto India
Monsanto Holdings buys 3 lakh shares @ Rs 1373/sh (3.5% stake)
Bretco Holdings sells 3 lakh shares @ Rs 1373/sh (3.5% stake)

Tide Water Oil
Madanlal buys 16 thousand shares @ Rs 4525/sh (1.84% stake)
Micro Management sells 16 thousand shares @ Rs 4525/sh (1.84% stake)

Bhagyanagar India
Deutsche Securities Mauritius buys 4 lakh shares @ Rs 49.2/sh

Madhucon Projects
Reliance Capital MF buys 8.45 lakh shares @ Rs 245/sh
Deutsche Asset Management sells 9 lakh shares @ Rs 245/sh
Recent Fund Action
Pricipal PNB Long Term buys 5.5 lakh shares @ Rs 240/sh (1.49% stake) on 7th Sept
Pricipal MF Pricipal Tax Savings buys 1.76 lakh shares @ Rs 240/sh (0.48% stake) on 7th Sept
Principal MF Principal Resurgent India buys 2.5 lakh shares @ Rs 240/sh (0.68% stake) on 7th Sept
Bear Sterns sells 9.77 lakh shares @ Rs 240/sh (2.65% stake) (Reduces stake from from 7.74% to 5.09% stake) on 7th Sept

SKF India
Reliance Capital buys 8.05 lakh shares @ Rs 363/sh (1.5% stake)
HSBC Financial sells 8.09 lakh shares @ Rs 363/sh (1.5% stake)

Subhash Proj & Mkt
Reliance Diversified-Power Sector Fund buys 7.67 lakh shares @ Rs 255/sh (NSE/BSE) (2.5% stake)
Deutsche Securities Mauritius sells 8 lakh shares @ Rs 255/sh (NSE/BSE) (2.5% stake)

Tourism Finance Corp
Riteline Mercantile buys 4 lakh shares @ Rs 36.76/sh

Jayaswals Neco
IDBI sells 4.3 lakh shares @ Rs 24.15/sh

Noida Toll Bridge
Alliance Trust sells 10 lakh shares @ Rs 33.3/sh
Recent Fund Action
Citigroup Global buys 31 lakh shares @Rs 30.5/sh (1.66% stake) on 10th Sept
CLSA sells 31.47 lakh shares @ Rs 30.5/sh (1.69 % stake) on 10th Sept

Gayatri Projects
Goldman Sachs buys 70 thousand shares @ Rs 301.9/sh on 21st Sept (Reported Late)

PSL
ABN Amro sells 3 lakh shares @ Rs 375/sh

Visa Steel
Goldman Sachs sells 6.95 lakh shares @ Rs 34.6/sh
Recent Fund Action:
Goldman Sachs Inv sells 19.36 lakh shares @ Rs 34.4/sh (NSE/BSE) (1.76% stake) on 21st Sept

Action Const
Birla Sunlife Long Term buys 1.75 lakh shares @ Rs 340/sh
Birla Long Term Advantage buys 2.65 lakh shares @ Rs 340/sh
Birla Infrastructure buys 1.75 lakh shares @ Rs 340/sh
Birla-Midcap Fund 1.35 lakh shares @ Rs 340/sh
(Total of 7.5 lakh shares bought buy Birla Sunlife Trustee)
The Western India Trust sells 7.5 lakh shares @ Rs 340/sh
Recent Fund Action:
Standard Chartered Classic Equity bought 1.65 lakh shares @ Rs 340/sh on 21st Sept
Western India Trustee sold 1.65 lakh shares @ Rs 340/sh on 21st Sept

Dhampure Sugar
The Dhampur Sugar Mills sells 38 thousand shares @ Rs 136.6/sh
Recent Fund Action:
The Dhampur Sugar Mills Sells 1.03 Lakh Shares @ Rs 144.9/Sh on 19th Sept

Numeric Power Systems
Principal Trustee buys 60 thousand shares @ Rs 447.5/sh on 21st Sept
Reliance Capital Trustee sells 60 thousand shares @ Rs 447.5/sh on 21st Sept

The short listed bidders for IFCI stake will be announced today. Blackstone Group, manager of the world’s biggest buyout fund, General Electric Capital Corp and a group led by billionaire Wilbur Ross were among the 10 that have expressed initial interest in buying the stake. The winning bidder would gain access to a market where lending grew 28% last year and where the central bank limits foreign banks’ ownership of local private rivals to 5%.

IFCI, bailed out by the government in 2003 because of bad debts, in July announced plans to sell a stake to a local or overseas investor to bolster its capital. Ross’s group, including Goldman Sachs Group, Standard Chartered and Housing Development Finance Corp, is vying with Cargill Financial Services Corp, Natixis and Newbridge Asia, IFCI said in a statement to the Bombay Stock Exchange.

“What’s different about our consortium is we view this as being of strategic importance,’’ Ross said in an interview on September 17. “This is not just a trade, we really intend to be in India for the long term.’’
Other potential bidders include a group comprising Sterlite Industries (India) and Morgan Stanley, and a team consisting of Japan’s Shinsei Bank, Punjab National Bank and JC Flowers & Co, IFCI said. Kotak Mahindra Bank and Infrastructure Development Finance Co may also submit offers, it said.

IFCI posted net income of Rs 247 crore for the quarter ended June 2007, compared with a loss of Rs 15.61 crore a year earlier, according to its website. The company’s ratio of bad loans written off or provided for out of total lending fell to zero as of March 31 from a high of about 32% in 2004. IFCI was founded in 1948 to fund industrial and infrastructure projects when investment banks were non-existent in India and commercial banks lacked the funds to provide longer- term financing.

It was among the lenders that got caught up by rising bad loans in the 1990s, when interest rates climbed to about 15% and industries including textiles, chemicals and steel suffered excess supply. IFCI has shored up its finances by trimming bad loans and selling shares in companies such as the National Stock Exchange of India and rating company ICRA, which yielded a profit of Rs 793 crore in the year to March 2007, according to the company’s annual report.

India's largest commercial enterprise Indian Oil Corporation will invest over Rs 43,500 crore over the next five years, for capacity expansion, de-bottlenecking and quality upgradation, reports the Business Standard. Of that amount Rs 30,000 crore will go into downstream integration as the company forays into the petrochemicals business it is also looking to acquire oil producing blocks, Chairman Sarthak Bahuria told journalists on the sidelines of the company’s 48th annual general meeting in Mumbai today.

“We are planning an annual capex of Rs 7000-8000 crore in the next five years. A majority of the investment will be funded through internal accruals and borrowings as our financial health is quite good. If required, we may think of raising funds from the capital market, not in the next one or two years, but after that,” Bahuria said.

The government-owned company controls 10 of India’s 19 refineries and accounts for 40.4 per cent share of national refining capacity. It has 60.2 million metric tonnes per annum (mmtpa) refining capacity. Apart from its current Panipat and Koyali petrochemicals projects, IOC plans to develop world class petrochemicals production centres at Paradip, Haldia and Chennai. Open to partners.

The 15 million metric tonnes per annum (MMTPA) grassroots refinery coming up at Paradip will be integrated with petrochemicals units for paraxylene, propylene and styrene with an investment of over Rs 26,000 crore.
“IOC is actively pursuing upstream integration through exploration and production activities both within and outside the country,” the chairman said.

Behuria said that the Rs 14,500 crore naptha cracker project in Panipat, Haryana, is scheduled to be commissioned in 2009. IOC would like to have partners in this project but has not been able to rope in any so far. "We are open to have a partner in the project, but we are not wasting time in finding out partners,” he said, when asked whether the company was looking at a partnership with Mittals.

The company has already commissioned a 5,53,000-tonne Paraxylene/Purified Theraptic Acid plant at Panipat.
Other major projects are the residue upgradation plan at the Gujarat refinery (Rs 2,000 crore), a hydrocracker unit at Haldia (Rs 3,000 crore), modernisation and capacity addition of refineries at Haldia, Panipat, Mathura, Barauni, Guwahati and Digboi to comply with Euro III and IV norms (at a cost of Rs 4,500 crore).

The expansion of refineries will help IOC augment its refining capacity to 80 MMTPA from the current 60.2 MMTPA by 2011-12. IOC is gearing up its pipeline capacity, Bahuria said, with new projects worth Rs 2,300 crore (including LPG and R-LNG pipelines) under implementation to reach 10,000 km and 75 million tonnes per annum capacity in the next two years.

Bahuria said IOC is in the process of sourcing more LNG, building additional LNG infrastructure and expanding the customer base further. “An LNG import terminal is planned at Ennore, near Chennai,” he said. Bahuria said that the company would also look at acquiring producing oil blocks in India and overseas.

“Prices are too high for acquisition now, but we are actively pursuing targets. I don’t know when will it happen and where,” the chairman said. IOC has participating interest in eight oil and gas exploration blocks and two coal bed methane blocks. It is also associated with two successful discoveries in Iran and India.

IOC spends about Rs 500 crore on exploration and production activities every year. The company and its consortium partners OIL India Ltd and Kuwait Energy have exploration oil blocks in Nigeria, Indonesia and Yemen. IOC has received the government’s approval to acquire five per cent equity in Oil India Ltd, Bahuria said.

IOC is also planning to enter into the entire value chain of bio-fuels, mainly bio-diesel, starting from the plantation of Jatropha to sale of the end product. The company, which invested over Rs 1,000 crore for developing research and development infrastructure, is also planning to invest another Rs 500 crore in the next five years to maintain its leadership in downstream R&D activities in the hydrocarbon sector.

To promote hydrogen as an alternative fuel, IOC is in the process of setting up the country’s first hydrogen CNG dispensing station in Delhi.

US stocks fell on Monday, save for pockets of strength among technology shares, as investors consolidated strong gains seen last week after the Federal Reserve's hefty rate cut. Financial stocks fell amid fresh concerns about tightness in the credit markets. With little fresh data to go on Monday, investor enthusiasm weakened by midsession. Sectors from banks to homebuilders showed declines, while technology stocks fared better.

Stocks began to give up their gains after the International Monetary Fund warned the credit upheaval hurting international financial markets would likely be "protracted" and dampen growth of the global economy. The financial sector also weakened after Reuters reported that Deutsche Bank might have to write down a portion of its loan portfolio.

While its stock didn't fall sharply, General Motors Corp. shares lost ground after the United Auto Workers began its first nationwide strike during auto contract negotiations since 1976. At the New York Stock Exchange, more than 1.3 billion shares were traded, with declining stocks ahead of decliners by roughly 5 to 3.
Volume at the Nasdaq came to nearly 1.9 billion shares, with decliners edging ahead of advancers 9 to 5.

he Dow Jones industrials fell 61.13, or 0.44%, to 13,759.06. Broader indicators fell, with the Standard & Poor's 500 index declining 8.02, or 0.53%, to 1,517.73, while the Nasdaq composite index lost 3.27, or 0.12%, to 2,667.95.

Bonds edged higher, with the yield on the benchmark 10-year Treasury note falling to 4.62% from 4.63% late Friday. Treasury prices have fallen since last week's rate cut as investors moved back into stocks. The dollar fell against major currencies, hitting a fresh low against the euro, and gold prices rose. Oil prices fell as a tropical depression in the Gulf of Mexico dissipated without causing damage to key oil and gas infrastructure. A barrel of light, sweet crude settled down 67 cents at $ 80.95 on the New York Mercantile Exchange.


Indian ADRs end mixed; Techs suffer

Indian ADRs had a mixed session yesterday. Technology stocks bore the brunt and were the major losers as a rising rupee put pressure. In the technology pack, Infosys Technologies was down 1.39% at 45.97, Patni Computers was down 0.69% at 23.08, Satyam Computers was down 4.61% at 23.60, while Wipro ended the day 0.58% lower at 13.82.

In the non-technology pack, HDFC Bank was up 1.93% at 102.94, VSNL was up 3.29% at 22, ICICI Bank was up 2.42% at 51.21, MTNL was up 1.4% at 7.96, Tata Motors was up 1.48% at 18.50, Dr Reddy's Lab was up 0.62% at 16.15 and Sterlite was up 1.35% at 18.

The Hinduja group firm Hinduja TMT (HTMT) on Monday said it has formed a JV with Limitless, the real estate subsidiary of Dubai World, to foray into medicare-related realty business. Hindujas will hold 51% stake in the JV, with Limitless holding the remaining, reports ET. “We have identified healthcare as one growth area for the group. We have plans to set up medicity projects in various parts of India, which will offer a complete range of healthcare services including hospital services. Limitless will be handling the developmental aspects of the medicity project,” said Ashok Mansukhani, president, HTMT.

On Monday, HTMT underwent a name-change and will be known as Hinduja Ventures. The company has got approval for the name-change from shareholders at its AGM held in Mumbai. Ashok Hinduja, executive chairman of the group, told shareholders that the group would be investing Rs 100 crore in its medicare projects. Mr Mansukhani said the company is also developing its 47-acre land near international airport in Bangalore as a residential and commercial property. It has also decided to hive off its media division, IndusInd Media and Communication (IMCL) as a subsidiary company.

“Currently, IndusInd Media and Communication is a part of HTMT. We have decided to hive off it as a subsidiary and it will be listed in the stock exchanges sometime next year,” said Mr Mansukhani. IMCL is the major subsidiary of HTMT and is also one of the largest multi-system operators in the country. With approximately more than 6 million subscribers across 14 major cities, the company offers 170 channels in the digital mode.

It also offers about 90 channels in the analog mode. The company has a backbone of over 6,000-km of fibre optic network through which it offers broadband services with national ISP licence. The company is also into content creation, acquisition and aggregation. IMCL has completed the first stage of conditional access system (CAS) by installing more than 1 lakh set-top boxes in the CAS-notified areas. The company is fully-geared to meet the subsequent phases of the CAS rollout as per the government regulations.

Mr Mansukhani said the media distribution and content services firm of the Hinduja group is also planning to bring more foreign channels to India and an application on the same has been filed with the authorities for the approval.

HTMT has also entered into an agreement with ESPN Star Sports for the distribution of its new cricket channel, Star Cricket, in Mumbai, Thane and Navi Mumbai.