Swiss cement major Holcim, in a bid to further consolidates its holding in Ambuja Cement (ACL), has bought an additional 60 million shares (or 3.94% of the currently equity capital) from erstwhile promoters Sekhsaria and Neotia. The deal has been concluded at Rs 154 per share of ACL. Subsequently Holcim Mauritius ismaking and open offer for further acquiring 20% at the price Rs 154 per share. Thedeal values ACL at whopping USD 268 for its CY2007 capacity, 17.2X its CY2007earnings and 10.1X its CY2007 EBIDTA. We believe the price offered is very attractive and at significant premium to its fair value. We believe such a huge premium is being paid by Holcim, primarily because of strategic value and notmuch because of future profitability. If we assume that because of sheer future profitability of ACL Holcim is paying such a huge premium, it implies that cement prices in next 1-2 years should be more than Rs 320. Considering that cement industry is about to add significant 70 million tonne in next 2 years, such expectation looks unreasonable.

Holcim consolidates its holding in Ambuja cements – makes open offer @Rs154

Swiss cement major Holcim, in a bid to further consolidate its holding in Ambuja CementLtd (ACL), has bought an additional 60 million shares (or 3.94% of the currently equitycapital) from erstwhile promoters Sekhsaria and Neotia. The deal has been concludedat Rs 154 per share of ACL. Subsequent to the deal and taking into consideration SEBI takeover code, Holcim Mauritius is making an open offer for further acquiring 306.5million equity share of ACL (representing 20% of the equity capital) at the price Rs 154per share. Assuming 100% success of the open offer, Holcim stake in ACL would go upto 56%.

Is there an arbitrage opportunity?

At CMP of Rs 133 and acceptance ratio of 30%, the arbitrage opportunity (considering 0.7% impact cost and no opportunity cost) presents a return of 4%. However if LIC and GIC do not offer their cumulative stake of 12% in ACL the acceptance ratio jumps to 39%, which means an arbitrage return of more than 6%.

Deal values ACL at a whopping EV/ton of USD 268 for CY2007 capacity

The deal between Holcim and the erstwhile promoters values ACL at whopping USD 268 for its CY2007 capacity, 17.2X its CY2007 earnings and 10.1X its CY2007 EBIDTA. We believe the price offered is very attractive and at significant premium to its fair value. We believe such a huge premium is being paid by Holcim, primarily because of strategic value and not much because of future profitability. If we assume that because of sheer future profitability of ACL Holcim is paying such a huge premium, it implies that cement prices in next 1-2 years should be more than Rs 320. Considering that cement industry is about to add significant 70 million tonne in next 2 years, such expectation looks unreasonable.

What signal is this open offer sending?

We believe Holcim taking erstwhile promoters stake and the subsequent open offer for 0further 20% stake in ACL @ Rs154 per share is most probably culmination of the long drawn process of consolidation of Holcim stake in the company. We do not think this act of Holcim’s sends its aggressive or bullish view of the Indian Cement industry. Hence we do not believe that this open offers necessarily an event, which is likely to result in re rating of valuation of cement stocks.

What does it mean for ACC?

Holcim interest in Indian cement industry is driven by the stake it has in two Industry giants i.e. Ambuja Cement (36% stake) and ACC (43% stake – assuming Holcim 100%stake in ACIL). Holcim has already accelerated the process of consolidating its stake in ACL through buying stakes of erstwhile promoters, creeping acquisition as well as there cent open offer. While if we look at ACC, it already holds 43% and hence we believe, Holcim will continue to increase its stake in ACC through creeping acquisition from market rather than make an open offer. Also at CMP of Rs 975, ACC trades at EV/tonUSD 179 and EV/EBIDTA of 9.2X, which is lower valuation as compared to what Holcimis ready to pay for ACC.

We believe current valuation for ACL are expensive keeping in mind significant capacity additions of 70 million tonnes lined up by the industry over next two year. The capacity addition we believe would disturb the demand supply equation and would weaken pricing power of cement producers. However because of an buoyant cement demand in FY2008and high cement prices, cement stocks like Ambuja cement are likely to do well in the short term.

Deccan Chronicle has been among our top midcap picks since the time we commenced the coverage on the company in July 2005. The stock has appreciated from Rs 204 levels (before split) at the time of our initiation to Rs 220 currently (post 1:5 split) delivering a 5x return over July05-07. To further strengthen our belief in the management initiatives and the growth prospects of, we visited the Chennai facility of the company. Deccan Chronicle has its only printing facility in Tamilnadu situated in Chennai from where it circulates the newspaper upto a distance of 260 kms. The entire Chennai edition operates with just 150 employees including the editorial staff, marketing team and labor. The company has over the years, built-in significant amount of automation in its processes, which is clearly reflected in its robust profitability. In just 2 years from the launch of Chennai edition, Deccan chronicle has beaten its competitor THE HINDU in terms of circulation (over 300,000). While the company plans to unlock value from its wholly owned retail subsidiary ODYSSEY, it further plans to unlock value from its another wholly owned subsidiary Sieger Solutions Ltd engaged in the business of selling advertisement space in Deccan Chronicle and internet advertising. In our estimates we have not factored the value of any of the subsidiaries, which leave headroom for further upside from our mentioned target price. We maintain our estimates and reiterate BUY recommendation on the stock with a price target of Rs 330 based on 20x expected EPS of Rs 16.5 for FY09E.

The key highlights of our visit and management meet were

The value unlocking potential from its subsidiaries, Odyssey and Sieger Solutions and the Internet initiatives of Sieger Solutions

The printing facilities of Deccan Chonicle are highly automated and operate with very less manpower, which has resulted in significant operating efficiencies

More value unlocking from subsidiaries

Deccan Chronicle books majority of the advertising revenues through its wholly owned subsidiary Sieger Solutions Ltd. Sieger is engaged into the business of marketing and selling ad space in Deccan Chronicle for a commission of 10%. Apart from the ad space selling, Sieger plans to enter the Internet advertising, specialty magazine and event management businesses. The significant growth in the revenues of Deccan Chronicle also ensures clear visibility of revenues for the subsidiary Sieger.

Sieger has already launched a website called www.papyrusclubs.com which provides a medium for schools, colleges and educational institutes to publish news and articles on the happenings in the student community. The company has already tied up with several institutes to publish and share the campus news and happenings over the Internet. This initiative not only helps the student community get an access to their information online but also would provide the same till eternity. The company plans to enroll more than 1000 institutes over the next year. With a large chunk of student base accessing the website, the portal would provide a huge database of students and the youth community which would help the company monetize from the advertisements and e-commerce. The company also plans to extend the services on its website www.deccanchronicle.com to offer various domain specific services such as user communities, e-mails, travel, matrimony, cookery, online news, etc. The company intends to position the portal as a gateway to south, which would provide host of content ranging from news to cookery. It also plans to provide online shopping, ring tone & music downloads, and a host of e-commerce facilities to monetize from the vast user base. The retailing subsidiary, Odyssey, is also on aggressive expansion and an IPO of the same (likely in FY09) would provide another trigger and value unlocking for the shareholders.

Valuation

Our estimates and valuation of Deccan Chronicle is based on the core newspaper business and does not include anything from the subsidiaries Odyssey and Sieger Solutions. While management has guided for a net sales of Rs 2500 million and PBT of Rs 252 million for Odyssey, The subsidiary Sieger Solutions could generate revenues of Rs 765 million (at10% of ad revenues of Deccan Chronicle) from advertisement space selling in FY08E. Sieger’s new Internet initiative, www.papyrusclubs.com, is aimed at creating a niche community of school and college students, which could build a user base of over 2 million students and an additional access from the students family members. Such a high user base could lead to a huge potential for monetization the opportunity by way of advertisements on the portal and e-commerce. Currently not much information is available on the Internet initiative, however the management intends to spend around Rs 400-500 million on the same over the next 12-18 months. We believe that the Internet initiative and the value of subsidiary is a little too early to predict, but we strongly believe that Deccan is now looking at convergence by leveraging its leadership and the strong brand in the print media. Overall we believe that the Deccan Cronicle has highly automated, state of the art operating processes, which has resulted in significant amount of savings in operating expenses. The majority of the operating expenses are fixed, which provide significant operating leverage and the so-called “Delta effect” which is reflective in the financial performance of the company. We maintain our EPS estimates of Rs 12.3 and Rs 16.5 for FY08E and FY09E respectively. We reiterate our BUY recommendation on the stock with a price target of Rs 330.

Deccan Chronicle has been among our top midcap picks since the time we commenced the coverage on the company in July 2005. The stock has appreciated from Rs204 levels (before split) at the time of our initiation to Rs220 currently (post 1:5 split) delivering a 5x return over July05-07. To further strengthen our belief in the management initiatives and the growth prospects of, we visited the Chennai facility of the company. Deccan Chronicle has its only printing facility in Tamilnadu situated in Chennai from where it circulates the newspaper upto a distance of 260kms. The entire Chennai edition operates with just 150 employees including the editorial staff, marketing team and labor.

The company has over the years, built-in significant amount of automation in its processes, which is clearly reflected in its robust profitability. In just 2 years from the launch of Chennai edition, Deccan chronicle has beaten its competitor THE HINDU in terms of circulation (over 300,000). While the company plans to unlock value from its wholly owned retail subsidiary ODYSSEY, it further plans to unlock value from its another wholly owned subsidiary Sieger Solutions Ltd engaged in the business of selling advertisement space in Deccan Chronicle and internet advertising.

In our estimates we have not factored the value of any of the subsidiaries, which leave headroom for further upside from our mentioned target price. We maintain our estimates and reiterate BUY recommendation on the stock with a price target of Rs330 based on 20x expected EPS of Rs16.5 for FY09E.

Valuation

Our estimates and valuation of Deccan Chronicle is based on the core newspaper business and does not include anything from the subsidiaries Odyssey and Sieger Solutions. While management has guided for a net sales of Rs2500mn and PBT of Rs252mn for Odyssey, The subsidiary Sieger Solutions could generate revenues of Rs765mn (@ 10% of ad revenues of Deccan Chronicle) from advertisement space selling in FY08E. Sieger’s new Internet initiative, www.papyrusclubs.com, is aimed at creating a niche community of school and college students, which could build a user base of over 2mn students and an additional access from the students family members. Such a high user base could lead to a huge potential for monetization the opportunity by way of advertisements on the portal and e-commerce. Currently not much information is available on the Internet initiative, however the management intends to spend around Rs400-500mn on the same over the next 12-18 months.

We believe that the Internet initiative and the value of subsidiary is a little too early to predict, but we strongly believe that Deccan is now looking at convergence by leveraging its leadership and the strong brand in the print media. Overall we believe that the Deccan Cronicle has highly automated, state of the art operating processes, which has resulted in significant amount of savings in operating expenses.

The majority of the operating expenses are fixed, which provide significant operating leverage and the so-called “Delta effect” which is reflective in the financial performance of the company. We maintain our EPS estimates of Rs12.3 and Rs16.5 for FY08E and FY09E respectively. We reiterate our BUY recommendation on the stock with a price target of Rs330.

Execution of BOT projects resulted in higher EBITDA margins

Net sales increased by 26.8% YoY to Rs 1433.7 million. EBIDTA margins increased by 270 bps to 14.5% on account of execution of BOT projects, which yield higher margins. · Depreciation for the quarter increased by 20.1% to Rs 88.6 million on account of increased capex (Rs 100 million in the quarter). · PBT during the quarter increased by 18.2% to Rs 121.5 million however increased taxation (24% as a percentage of PBT as compared to 11% in the corresponding previous quarter) on account of removal of benefit u/sec 80 IA resulted in flat growth in PAT. · Though the company would not be claiming benefits u/sec 80IA from this fiscal, its taxation levels would remain low at 24% of PBT due to investment made in equipments.

Order book at approx Rs 42 billion

The current order book of the company is Rs 42 billion, which translates into 8.2x FY07 revenues. The completion period of the projects ranges from 2-3 years.Of the total order book, roads constitute 64% while water related projects constitute 33%.

The company has vast experience & expertise in road construction projects, which has enabled it to bag 4 road projects on BOT basis.

Establishing presence in real estate

Madhucon has procured a real estate project for AP Housing Board for developing a housing-cum-commercial project along with a 400-room hotel at Kukatpally, Andhra Pradesh. The company has already invested Rs 480 million for a 9-acre plot from the Andhra Pradesh Government. Excavation work on the project has already started and the approval for the building plan is expected within 3 months. The real estate business is expected to contribute about Rs 100-120 million in FY09. We value the real estate project of the company at Rs 10 per share.

Foray into thermal power project

The company is foraying into production of thermal power in collaboration with Mahalaxmi Group of Andhra Pradesh. Following are the details.

Investment into Indonesian coal mining company

MPL has entered into coal mining in Indonesia through a wholly owned subsidiary PT Madhucon Indonesia. It has the right to explore & export coal. The company has tied up with ICICI Bank for provision of machinery cost for excavation. The management expects a return of 19% -20% on its investment. Revenues from the coal mining business are expected to accrue in FY09.

Business Prospects

Madhucon Projects has a proven track record in the roads segment. Its Low gearing & higher EBITDA margins (despite having greater exposure to road projects) on account of owned equipments are a key feature of the company. With the growing infrastructure demand, the company’s strong order book position & diversification into newer verticals like power generation & coal mining we are positive about the company.

Financial Estimates

We expect net sales to increase by 46% CAGR between FY07-09 from Rs 5100.5 million in FY07 to Rs 10828.2 in FY09E. Revenue from the coal & real estate businesses are expected to accrue from FY09, which we have not taken into account. · With margins in the roads segment dwindling we estimate we estimate MPL’s EBITDA margins to fall by 100 bps to 13% for FY08 & FY09. · Company’s debt free status would help to raise further funds for executing its projects & we do not contemplate any equity dilution going forward. Moreover, company’s investment in own equipments would help gain tax benefits in addition to higher depreciation charges. · We expect an EPS of Rs 14.4 & Rs 22.6 for FY08E & FY09E respectively.

Valuation

At the current price of Rs 242, present EV/EBIDTA valuations of 11.8x FY09 & PE valuations of 10.7x FY09 look attractive. · We value MPL on Sum of the Parts method. We value the BOT projects (4 roads & 1 real estate) at Rs 47 per share. · We value the core construction business of the company at 12x PE FY09E & 13xFY09E EV/EBITDA resulting in a value of Rs 265 per share. We have not taken into account valuations for coal mining & power generation business. · Looking at the growth in the construction business and the growing order book of the company we maintain a Buy on the stock with a target price of Rs 312. At the target price of Rs 312, the stock trades at 15.5x FY09 EV/ EBITDA & 13.8x FY09 PE.

US subprime asset woes not to impact

ICICI Bank has significantly underperformed over last week at absolute level as well relative to Sensex driven by worries on its exposure to the Collateralised Debt Obligations (CDO). Our conversation with the management reveals that the bank has total CDO exposure of Rs60bn of which 30% is to investments outside India. We do not see much impact on ICICI Bank’s earnings as it comprises only ~0.5% of its total assets or 3.8% of FY08E book value.

Rs 18 billion exposure to international CDO

ICICI Bank’s total exposure to the CDO investments is approximately Rs60bn, of which nearly Rs42bn (70%) is domestic exposure. The balance 30% or Rs18bn which is international CDO, the exposure is primarily to the corporate papers and not to retail or subprime mortgage market.

Only loss could be MTM provision if yields move up

If the yields on the CDO obligation start moving up because of the subprime mortgages going bad, the CICI Bank may have to provide MTM losses on the international CDO obligations. However, these obligations are very insignificant by their size and 100bps increase in the yield on the international CDO portfolio could hit the earnings by 600mn or 1.4%. If ICICI Bank were to write off the whole portfolio, it would hit the earnings for FY08 by 40%. However, the impact on FY08E book value would only be 3.8%.

Stock may underperform in short term but for other reasons

We believe that ICICI Bank’s stock may underperform the broader market but for two other reasons:

The bank has seen significant rise in its NPA as gross and net level over past few quarters

FIPB has rejected the stake placement (5.9% for USD650mn) in the bank’s subsidiary ICICI Financial Services for the reasons that it may indirectly increase foreign stake in the insurance company above 24%. While ICICI Bank has given necessary clarifications to the board, nod is yet to come.

Valuations still look attractive

At the current market price of Rs880, the stock is quoting at 2.0x FY09E ABV with likely RoE of 12.0% in FY09E. On PER basis, the stock trades at 17.0x FY09E EPS, with earnings (diluted) CAGR of 23% over FY07-09E. We maintain our BUY recommendation on the stock with price target of Rs 1180.

BPH is likely to be valued at double the BILT’s existing valuations.BILT is likely to place about 23-25% stake in BILT Paper Holding (BPH) and is likely to attract valuations of 11-13x EV / EBITDA while at present BILT commands EV/ EBITDA of 5.6x in domestic market on FY08 estimates.

Valuations comparable with global peers

The valuations looks aggressive if compared with domestic valuations, but they are in line with global valuations. Global pulp and paper companies generally command EV/ EBITDA multiple of 9-14x and P/E multiple of 15-20x.

Why BILT should command global valuations

We believe that BILT is no more a domestic player after the acquisition of Sabah Forest (SFI) in Malaysia. BILT also have valuable forest inventory, which will take care of its fiber (raw material) requirement in long term. On business front BILT is now a fully integrated player starting from wood (forest resources) to captive pulp including captive power plant to paper and to high end retail stationery products including tissue paper. BILT has strong product portfolio, which includes coated paper, copier paper, maplitho, creamwove while it has strong presence in branded retail segment through ‘BILT’ brand.

BILT offers better growth opportunities compared to global players

Consumption growth in India is expected to be 10-12% in line with economic growth, which is second highest growing market after the China. As on one side, we believe that the BILT should command premium valuations over to global players because of strong growth opportunities, better profitability and returns while on the flip side it is trading at significant discount of approx 50% to global peers.

BILT is poised for strong case of re-rating

We believe that there is strong case of re-rating and planned reorganization exercise by the company will give better comparable valuations. On the basis of BPH valuations, we believe that BILT has a potential upside of 56%-122% based on potential target price in range of Rs 204-291. For the potential target price, we have worked on two scenarios and guidance given by the management.

We reiterate our ‘BUY’ recommendation on the stock; however we maintain our current price target of Rs 161 for the company and may revise the same after more clarity on this development.

Risks and concerns

However weather the company will be able to attract the private equity players at the price and valuations which the management has guided remain our key concern. The deal is subject to high court approval and is expected to be completed by Dec’07. Our potential target price is based on this particular event.

Integrating operational businesses with in-house engineering capabilities to drive growth:

Presently, Lanco derives its consolidated revenues from two main streams, one being the construction and EPC business of the holding company and the other is operating companies’ revenues. The holding company is using its expertise in EPC and execution of projects for the benefits of its own operating companies. Lanco power sector operating companies already contribute to its consolidated revenues and profits. Its property initiatives would begin contributing from FY08E. We expect the toll-based road projects to contribute to the revenue flow in the next three years. We expect Lanco’s consolidated revenues to increase 126% CAGR over FY07-09E to Rs81.7 bn with construction revenues contributing 47% and operating entities contributing the balance 53%.

Lanco to own 9,553MW of power projects:

Lanco’s power business has high visibility of revenue growth with 518MW of power plants in operation, 2,205MW under implementation and 1,670MW to achieve financial closure in the near future. The company has signed MoU’s for additional 5,160MW power projects. We expect these operating power companies to generate revenues of Rs16.4 bn in FY09E from 1,208MW of operational capacity. We have valued these operating companies, which are either in operation or have achieved financial closure, at Rs133 per share based on our DCF methodology.

Construction order book to reach Rs130 bn:

This is the core business of the company, and contributed 47% to its consolidated revenues in FY07. While Lanco historically derived 70% of its construction revenues from external contracts, internal contracts now constitute 94% of its Rs75 bn order book. We have valued the construction business at Rs174 (10x FY09E EPS of Rs17.4).

Ambitious property development projects over 170 acres:

The company’s flagship project, Lanco Hills in Hyderabad has 19.5 mn sq feet of saleable area. This project includes a SEZ, hotels, malls, residential towers and a Signature tower which would be the tallest residential building in the world. The company is also developing an integrated 4mn sq feet township in Chennai. We value these ventures at Rs93 per share based on the equity cash flows for the first ten years of the projects.

Valuation and recommendation:

We have valued Lanco on a sum-of-the-parts (SOTP) basis, with its power portfolio being valued at Rs133, road projects at Rs9 and the real estate business at Rs93 per share. We have valued the construction business at Rs174. At the current price, the stock trades at 10.7x its estimated consolidated FY09E EPS of Rs24.2. We initiate a BUY recommendation with a price target of Rs369, an upside of 42%.

IVRCL Infrastructure & Projects (IVRCL) announced its Q1FY08 numbers which were marginally better than our estimates. The company reported revenue of Rs6.8 billion (up 58.8% Y-o-Y). The EBITDA grew 67.9% y-o-y to Rs600.3 million and the PAT grew 74.6% Y-o-Y to Rs379.6 million. We also attended the conference call by the company and the key takeaways were:

Key highlights

The order accretion continues to be very strong. The company received order worth over Rs21 billion during the quarter. The addition was mainly in the water related projects segment where the company added over Rs15 billion and which now constitutes 61% of the order book. The transportation (17%), Power T&D (9%) and Buildings Structure (13%) segments constitutes the remaining order book.

The quarter saw an improvement of 50 bps in the EBITDA margins over the last year corresponding quarter at 8.9%. This is however below the last fiscal margins of 10%. The company expects the margins to improve by at least 25-50 bps for the full year.

The interest cost for the quarter was down by over 45% resulting in a faster growth in the PAT. The net margin was at 5.6% for the quarter and the management is confident of managing at least 6% net margins for the year.

In order to strengthen its position for pre-qualification for the projects in Power T&D segment, the company has set up a transmission tower manufacturing plant with a capex of Rs150 million. This is purely for captive purposes and is meant to support execution in the Power segment.

On the BOT projects front, the company has started construction activities on all its BOT projects. The Chennai Water Desalination project is expect to be commissioned by the first quarter of FY09, whereas the three BOT projects should start operations by the end of FY09. The company has already invested Rs2.5 billion in its BOT operations and will invest another Rs1 billion in the next year.

The company’s subsidiary IVR Prime has recently concluded its IPO and the issue price have been set at Rs550. The stock is expected to be listed shortly. IVR prime has a total of 75.5 m sft of saleable area in the cities of Hyderabad, Vizag, Chennai, Bangalore, Pune and Noida.

The company’s debt level should come down in the current fiscal from the current Rs7.9 billion as the company would repay debt to the extent of Rs2.5 billion. This will be possible as the company’s real estate subsidiary should repay the company the loans

The management also denied any plans for foray into the oil & gas explorations space as was reported earlier in various financial dailies.

The company has continued to take benefit of Section 80-IA and for the quarter the benefit taken was to the extent of Rs50 million.

The company has guided a turnover growth of 50% and a bottom-line growth of 60- 65% for its subsidiary Hindustan-Dorr Oliver (HDO). HDO currently has an order book of Rs4.5 billion.

Outlook and Recommendation:

IVRCL continued its splendid performance in Q1FY08 with a growth of over 55% to its topline as well as bottomline. The company als o added over Rs21 billion to its order backlog which currently stands at Rs 95 bn. The company had raised over Rs5.5 bn through the QIP route during FY07 which would help the company meet its funding requirement for various BOT projects and meet the working capital requirement. The Company has also recently successfully launched the IPO of its real estate subsidiary IVR-PUDL and has raised over Rs 7.8 bn from the same. We believe that the company's growth trajectory will continue in future and the pace of order accretion provides added visibility. We have arrived at a valuation of Rs 485 per share for the company based on a SOTP based valuation wherein we have valued the core construction business at Rs278 (15x FY09E), BOT projects at Rs55, holdings in subsidiaries at Rs143 for IVR-PUDL and Rs9 for Hindustan Dorr-Oliver. We reiterate our BUY recommendation.

Emkay Research has maintained accumulate rating on Grasim Industries with target price of Rs 3270. On EV/ ton basis the stock is trading at USD 174 for FY2008 and USD 108 for FY2009.

Grasim Industries’ (Grasim) Q1FY2008 standalone net profit at Rs 5.11 billion is ahead of our expectation primarily because of better then expected cement and VSF realizations. Also the other income was higher than expected and interest and tax charge was lower than expected. This coupled with better than expected performance by its 51% subsidiary Ultratech Cement meant that the consolidated net profit at Rs 6.69 billion was also ahead of expectation. The standalone revenue for the quarter stood at Rs 24.45 billion up 30.3%, driven by a stellar 25% growth in cement revenues and a stupendous 58% growth in VSF revenues. EBIDTA for the quarter grew by a very healthy 54% to Rs 7.92 billion driven by 30% growth in EBIDTA of cement division and 124% growth in EBIDTA of VSF division. The consolidated net profit for the quarter grew 54% yoy to Rs 6.69 billion. We are upgrading our consolidated earnings estimates for Grasim by 11% for FY2008 and 7% for FY2009. The company has also enhanced the capex program by 10% for cement capacities at its Shambupura and Kotpotli. On account of our earnings upgrade for Grasim Standalone and price target upgrade for Ultratech Cement we are upgrading our price target for Grasim to Rs 3270. At current levels the stock is trading at 10.2X its FY2009 earnings and 4.5X its FY2009 EBIDTA. On EV/ ton basis the stock is trading at USD 174 for FY2008 and USD 108 for FY2009. We maintain our accumulate rating on the stock.

Results highlights

Grasim Industries’ (Grasim) Q1FY2008 standalone net profit at Rs 5.11 billion is ahead of our expectation primarily because of better then expected cement and VSF realizations. Also the other income was higher than expected and interest and tax charge was lower than expected. This coupled with better than expected performance by its 51% subsidiary Ultratech Cement meant that the cons olidated net profit at Rs 6.69 billion was also ahead of expectation.

The standalone revenue for the quarter stood at Rs 24.45 billion up 30.3%, driven by a stellar 25% growth in cement revenues and a stupendous 58% growth in VSF revenues.

The growth in VSF division looks very steep as VSF operations in Q1FY2007 were impacted by water shortage, which meant that the division utilized the capacities sub-optimally. VSF volumes yoy grew by a very smart 33.6%, where as on the back of strong demand the VSF realizations improved a very healthy 20% yoy to Rs 94.5 per kg. The VSF to further build up on this stellar performance as the company has further hiked VSF prices by 6-7% at the start of Q2FY2008.

With peak capacity utlisation of 118%, cement volumes (inclusive of white cement) improved by a decent 11.3% and cement realisation improved by 12.5%. RMC business also did well with a strong 19% growth in volumes.

EBIDTA for the quarter grew by a very healthy 54% to Rs 7.92 billion driven by 30% growth in EBIDTA of cement division and 124% growth in EBIDTA of VSF division.

While the VSF division did benefit from higher volumes and better realisations, higher proportion of captive pulp (Nagda operation impacted in Q1FY2007) and appreciation of the Indian currency agains t the dollar also helped improving EBIDTA margins for the division. Consequently EBDITA margins for the VSF division stood at a very healthy 36.7% as compared to 25.9% in Q1FY2007.

With decent volume growth and healthy cement realization, the EBDITA margins for the cement division improved by 140 bps to 35.3%. The improvement in EBIDTA margins could have been higher but for a 28% rise in fuel cost and 8% rise in freight cost.

With decent volume growth and healthy cement realization, the EBDITA margins for the cement division improved by 140 bps to 35.3%. The improvement in EBIDTA margins could have been higher but for a 28% rise in fuel cost and 8% rise in freight cost.

Grasim’s Chemical division reported decent growth of 57% in EBIDTA as the operations of the division stabilized with maintenance works for the captive power plant getting over and the base effect kicking in (production in Q1FY2007 impacted due to water shortages). Even though then realization for the quarter were down 10% yoy, 40% growth in sales volumes and conversion to membrane cell technology (which helped in reducing power cost) helped the report a decent margin expansion of 750 bps. However sequentially the chemical division did report a 430 bps margin erosion.

The Sponge iron division also did better than expectations as the division reported a 148% growth in its EBIDTA as the sponge iron realisation improved making it viable to use even high cost Naphtha to boost the production and sales volume. With higher scrap prices sponge iron realization improved by 22% yoy.

With higher treasury income the other income for the quarter grew by 80%. Interest charge for the quarter grew by 21% depreciation charge grew by 14.7%. Consequently net profit for the quarter grew by a very healthy 64% yoy to Rs 5.11 billion.

Consolidated revenue for the quarter grew by 26.5% driven by 21% growth consolidated cement revenues and 55% growth consolidated VSF revenues. Consolidated EBIDTA grew by 37.3% as margins expanded by 250bps to 31.2%. The consolidated net profit for the quarter grew 54% yoy to Rs 6.69 billion.

Outlook

Going forward Grasim cement business is expected to report stable performance as the earnings would largely be driven by better volumes and cost rationalization exercise. The cement prices though could firm in Q3FY2008, they are unlikely show significant improvement as witnessed in FY2007. Also in a longer cement prices are expected to soften as FY2009 and FY2009 cumulatively is expected to witness huge capacity addition of 70 million tonne, which in turn could disrupt demand supply equation and thereby taking its toll on cement prices. The VSF business is expected to better its performance as in Q2FY2008 as apart from the 20% yoy increase in VSF realisation witnessed during this quarter, the company has further increased prices by 6-7% at the start of Q2FY2008. Also the volumes are expected to be healthy on account of capacity expansion and robust demand for cellulosic yarns. Overall the outlook for the division remains positive. On the back better realisation and the availability of gas by December 2007 the sponge iron division is expected to further improve its performance driven by better volumes. Chemical division however is expected to register muted performance as surplus capacities would continue to put pressure on realisation.

Upgrading earnings

We are upgrading our consolidated earnings estimates for Grasim by 11% for FY2008 and 7% for FY2009 on account following reason-

* Significant better performance of the VSF business and a further price hike of 6-7%
* Hike in cement capacity expansion at Shambupura and Kotputli
* Higher other income and lower interest charge
* Upgrade in earnings of Ultratech cement- ( upgrade of 11% for FY2008 and FY2009)

Upgrading price target to Rs 3270

On account of our earnings upgrade for Grasim Standalone and price target upgrade for Ultratech Cement we are upgrading our price target for Grasim to Rs 3270. The key changes in our target price are –

* Revision of cement capex plans for Standalone and cons olidated cement business
* Peak cycle EV/EBITA multiple of 7X FY2009 for VSF business.

Ultratech Cement Ltd (UTCL) Q1FY08 net profit at Rs 2.59 billion is above our expectations primarily because better than expected cement realizations and lower sales of traded cement. The net revenue growth of 15.7% to Rs 13.65 billion was entirely driven by improvement in cement realisations as cement volumes were flay on a yoy basis. Operating profit at Rs 4.33 billion grew in line with the topline and hence OPMs for the quarter were flat at 31.8%. Other income doubled to Rs 268.9 million. Interest costs declined by 10.8% on account of repayment of debt. The net profit at Rs 2.59 billion was above our expectation and showed a yoy growth of 23%. On account of better than expected numbers and also on account of additional 0.9 million tonne expansion at its Tadipatri plant Andhra pradesh, we are upgrading our earnings estimates for UTCL by 11% for FY2008 and by 11% for FY2009. The stock is currently trading at 11.4x its FY2009 earnings and USD 130.1 for its FY2009 cement capacity . The valuations though not significantly expensive do not provide much head room on account of significant capacity additions of 70 million tonnes lined up by the industry over next two year. This we believe would disturb the demand supply equation and would weaken pricing power of cement producers. Moreover with UTCL amongst the most leveraged company to cement prices the company’s earnings in a downturn scenario would suffer the most. We maintain our REDUCE rating on the stock with a revised price target of Rs 900.

Result Highlights

Ultratech Cement Ltd (UTCL) Q1FY08 net profit at Rs 2.59 billion is above our expectations primarily because better than expected cement realizations and lower sales of traded cement. Net revenue growth of 15.7% to Rs 13.65 billion was entirely driven by improvement in cement realisations as cement volumes were flay on a yoy basis. Cement realisation at Rs 3054 per tonne grew by 15% yoy. UTCL’s operating profit for the quarter increased by 15.7% to 4.34 billion in line with the growth in topline, as operating profit margin remained flat at 31.8%. On the cost front the total cost at Rs 2084 moved up by 15.1% yoy primarily because of 28.6% increase in raw material cost, 11% increase in freight cost and 26% increase in other expenditure per tonne. Other income for the quarter doubled to Rs 268.9 million as surplus cash was utilised for investment purpose. Interest costs declined by 10.8% to Rs 202 million on account of repayment of debt, which was aided by higher operational cash flows. UTCL’s net profit for the quarter at Rs 2.59 showed a yoy growth of 23%.

UTCL enhances its capex plans

UTCL had planned a capacity expansion of 4mt at its Tadipatri unit in Andhra Pradesh. But now the company has hiked its expansion plan by 0.9mt to cater to the growing demand in the southern markets and to benefit from the availability of slag. This plant is all set to start commercial operation from March 2008. We had expected a delay of 3-4 months, but the company is confident of commercial operation by March 2008. UTCL has increased its capex plans from Rs 27 billion to Rs 33 billion over the next three years. The incremental capex is for the following projects

* Setting up a new 33 MW TPP in Awarpur, Maharashtra.
* Increasing grinding capacity by 2 Million tonne at Gujarat
* Setting ready mix plants across the country.

Upgrading earnings

On account of better than expected numbers, higher cement prices in the southern region (where UTCL close to 20% of its produce) and also on account of additional 0.9 million tonne expansion at its Tadipatri plant Andhra pradesh, we are upgrading our earnings estimates for UTCL by 11% for FY2008 and by 11% for FY2009. Our EPS estimates for UTCL now stand at Rs 77.2 for FY2008 and Rs 86.7 for FY2009.

Valuations

The stock is currently trading at 11.4x its FY2009 earnings and USD 130.1 for its FY2009 cement capacity. The valuations though not significantly expensive do not provide much head room on account of significant capacity additions of 70 million tonnes lined up by the industry over next two year. This we believe would disturb the demand supply equation and would weaken pricing power of cement producers. Moreover with UTCL amongst the most leveraged company to cement prices the company’s earnings in a downturn scenario would suffer the most. We maintain our REDUCE rating on the stock with a revised price target of Rs 900.

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Tata Motors to raise USD 450 million through Foreign Currency Convertible Alternative Reference Securities Offering

Tata Motors Ltd (TAMO) will raise USD 450 million (approximately Rs 18 billion) through Foreign Currency Convertible Alternative Reference Securities (FACARS). The price of the issue is fixed at Rs 960.9 per share, which is 40% premium to the closing price of Rs 686.4 on 20th June 2007. The issue is opened on 21st June 2007 and expected to get close within a week’s time. The CARS will be convertible, at the option of the Company, into either Qualifying Securities, or ordinary shares or American Depositary Shares and expected to get listed on Singapore Stock Exchange. We believe TAMO to use the proceeds of FACARS mainly to fund product development and expansion program. TAMO is implementing its aggressive expansion by investing Rs100bn over next 3-4 years. We expect a equity dilution to the extent of 4.7%, with the completion of the issue and conversion of securities into equity shares.

Business Outlook and Valuation

TAMO is India’s largest commercial vehicle manufacture and commands 16% market share in passenger car segment. We expect TAMO would continue to perform well in medium to long-term period. Considering the robust demand growth, TAMO has aggressive capex plans of around Rs 100 billion over next 3-4 years, and issue of convertible securities in the foreign market is a step in this regard. We have a positive outlook on CV and passenger car segment and expect these segments to report growth of 10-12% for next 2-3 years. But the rising interest rates have created confusions among the CV buyers and we expect it to impact the demand for CVs in the short-medium term.

We assume dilution to come in FY09E and it will impact our EPS estimates of FY09E by 4.7%. At current market price of Rs 687, the TAMO stock trades at 13x on FY08E and 12x on FY09E on standalone earnings. On consolidated earnings TAMO stock trades at 11x on FY08E and 10x on FY09E earnings and it looks more attractive. We continue to remain positive on the stock and maintain BUY on the stock with a target price of Rs 932.

Visa Steel (VSL) is engaged in the production of Pig Iron, Lam Coke and Chrome Concentrates. VSL has manufacturing facilities in Kalinganagar and Golagaon. It currently operating a mini blast furnace with production capacity of 225,000 tpa of Iron; a chrome ore benefication plant and a chrome ore grinding plant with capacity 100,000 tpa each. For 4QFY07, the company reported net sales of Rs 1,415 million (qoq 11%, yoy up 27%), PAT of Rs 7 million (qoq down 89%, yoy down 70%). For FY07, company reported net sales of Rs 5,312 million (yoy up 37%), EBITDA of Rs 437 million (yoy up 21%) EBITDA margins were 6.4% (yoy down 165bps). PAT was Rs 205 million (yoy up 65%), margins were 3.9% (yoy up 64bps). The company has plans to set up an integrated 0.5mtpa special and stainless steel complex in a phased manner in Kalinganagar. It also has plans to set up wire and bar mill and captive power plants.

4QFY07 net margins under pressure due to high depreciation and DTL

For 4QFY07, the net margins stood at 0.5% (qoq down 435bps, yoy down 150bps). The reduction in margins was mainly on account of higher depreciation, which stood at Rs.33mn (qoq up 31%, yoy up 134%); and also on account of increased deferred tax liability, which was at Rs.53mn (qoq up 279%, yoy up 28%). The company incurred losses in trading activities for FY07 of Rs71mn, which has also contributed to the reduction in margins.

Expansion Plans

Special steel and Stainless steel plant – backward integrated

The company is setting up an integrated 0.5mtpa special and stainless steel complex Kalinganagar, Orissa. It is expected to commence by Dec.08. The product mix for the 0.5mtpa steel complex will be 80% speciality steel and 20% stainless steel. This will be backward integrated to ferro chrome, coke and sponge iron.

Ferro Chrome Plant

VSL is setting up a Ferro Chrome plant of 50,000 tpa capacity, which is expected to commenced shortly. Its commencement was delayed by 3-4 months. This will meet the ferro chrome requirement of steel complex.

Coke Oven Battery

The company had plans of setting up a coke oven battery of 400,000 tpa; out of which 300,000 tpa is already commissioned and the balance 100,000 tpa is expected to commence in 2QFY08. Currently VSL has pig iron manufacturing capacity of 225,000 tpa; assuming 90% capacity utilisation the coke requirement will be 141,750 tpa which will be met by the coke oven battery. The surplus coke will be sold in the market, which will add to the bottomline of the company. The company is making coke through stamp charging technology, which enables usage of soft coking coal blended with prime hard coking coal; thereby reducing the cost of production.

Sponge Iron Plant

VSL is seting up a 300,000 tpa sponge iron plant; of which first DRI kiln is expected to be commissioned by 3QFY08 and second DRI kiln by 4QFY08. The project is progressing as per the schedule. This will meet the sponge iron requirement of the steel complex.

Bar and wire rod mill – leading to value addition

VSl is planning to set up a 0.5mtpa bar and wire rod mill. This will enable the company to forward integrate and enter into value added segment. This is expected to commence by 4QFY09.

Captive Power Plants

The company will be setting a 50MW captive power plant, which is expected to be commissioned by 4QFY08. This will meet the power requirements of the steel plant. VSL is also setting an additional captive power plant of 25MW to meet the power requirements of 0.5mtpa bar and wire rod mill. Currently, company is sourcing its power from grid at an average cost of Rs.3/unit.

Capex Plans

VSL expects a total capex of Rs 18 billion. The capex will be funded in a debt-equity ratio of 65:35. Rs 6.3 billion will be funded through internal accruals and balance debt of Rs 11.7 billion through rupee term loan. Out of the total debt requirement, the cost of Rs 1.65 billion is 8% fixed, cost of Rs 7.45 billion is 9% fixed and cost of Rs 1.04 billion is 11% floating. Balance Rs 1.6 billion debt is yet to be tied up. Average cost of debt tied up currently is 9%.

Risks and concerns

VSL was previously engaged in trading of iron ore fines, which resulted in a loss of Rs 71 million at EBITDA levels. The company still has an iron ore inventory of 20,000 tonnes, which the compnay expects to sell at a marginal profit. Any delay in the project implementation and project cost over-run may have an impact on the company’s topline and bottomline. Coke prices are historically benchmarked against Chinese prices. Currently the coke prices in China are USD 230-240/t FOB. Due to high volatility in the coke prices, the margins of this segment is likely remain volatile. Currently VSL imports coking coal from Australia. Frieght cost in the current year have increased from USD 23-27/t to USD 30 – 37/t. With the freight market expected to remain firm, any future hike in freight rates will likely impact the margins of the company.

Valuations

At the current market price of Rs 34 the stock is trading at 18.2x its FY07 EPS of Rs 1.87. We do not have any rating on the stock, however given the current expansion programe including benefits from coke and ferro chrome operations that are likely to flow in FY08, we are positive on the stock.

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AAL is a leading Indian supplier of automotive components and is an integrated automotive component manufacturer with facilities for forgings, machining and subassemblies in locations in India, the United States and Europe. AAL is a Tier I supplier of auto components to major automobile majors like Maruti, Hyundai, M&M, Ford, Tata Motors, General Motors, Hero Honda, Bajaj Auto, HMSI (Honda Motorcycles and Scooters India) and many others. We expect AAL's focus on integration of its subsidiaries with itself would improve its EBITDA margins to 20.6% in FY09E from 19.3% in FY06A. We also expect AAL's export revenue to grow at a CAGR of 43% for the period of FY06-FY09E mainly because of its strong product line and strong relationships with the global OEMs.

AAL is sitting on a cash chest of Rs13.5bn (Rs97 per share), we expect AAL to utilize it for further inorganic growth and expansion opportunities, which would give a further boost to the revenue and profitability of the AAL in the near future.

We remain positive on the long-term prospects of AAL. At current market price of Rs.415 the stock is trading at a PE multiple of 15x, 14x and 11x on FY07E, FY08E & FY09E consolidated earnings respectively. We maintain a BUY with a target price of Rs. 510.

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Emkay- Bhushan Steel

Company brief

Bhushan Steel Ltd. (BSL) is primarily a converter of HR coils to value added products, which find application in the auto and white goods industries. The company is shifting its business profile from a converter to an integrated steel producer by setting up an integrated steel plant in Orissa. The plant, once fully commissioned, will produce 1.9mtpa of auto grade HR coils, which will be internally consumed for further value added products at its existing facilities. We believe the company will save Rs2.5 bn in FY10 due to captive production of HR coils. We believe the major cost benefits will accrue in FY10 once the HR mill is commissioned.

Growth drivers

Currently, BSL procures Hot Rolled Coils (HRC) from the domestic market as well as through imports. After commissioning of Hot Strip Mill (HSM) at its Orissa plant, BSL will source entire its requirement of HRC from there. We believe the Orissa plant will be the growth engine for Bhushan over the next 3-4 years. We estimate, at 60% capacity utilization, BSL will save around Rs2,966/t (13.5% on HR prices assumed at Rs22,000/t), leading to total savings of Rs2.5 bn (31% of the total profits in FY10E). The project will be commissioned in modular fashion so that accruals from initial stages will partly fund capex for later stages. We believe the major thrust in margins will likely accrue in FY10 when HR coil production from its captive plant at Orissa replaces market purchases. We estimate EBITDA margin will grow from 19.3% in FY08E to 24.7% in FY09E but will jump to 38.1% in FY10E.

We believe the growth over the next 3 years will be fuelled by the current greenfield project at Orissa. BSL has already commissioned 2 kilns commissioned during the latter part of the second quarter of FY07. the third kiln has recently been commissioned taking the overall capacity to 0.51mtpa. We expect the partial benefit of these kilns to flow in FY08E and the full benefit in FY09. During FY08, the company will commission additional 5 kilns of 170,000tpa each taking the total sponge iron production to 1.36mtpa. We expect the benefit of the additional 5 kilns to flow in the latter part of FY08E and fully in FY09E as the capacities ramp up. During the 9 months ended Dec 31 2007, the new sponge iron plant has produced 20,141t of sponge iron and 5,868t of billets.

Risks and concerns

Since BSL is currently a converter, its margins are limited to the difference between its cost of procurement of HR coils/sheets & zinc and its realization on sale of CR and GPGC.

Any change in steel prices which is not passed on to the customers will have a material impact on the earnings of the company. BSL has embarked upon a large project at Orissa that will involve a capex of Rs51.5bn. Material delay in project execution or cost over run is likely to impact our earnings forecasts. Our earnings estimate for FY10E is based on the fact that the HSM will operate at 60% utilization rate during FY10E. In case the actual capacity utilization is different from our assumptions, our earnings estimate will be materially impacted.

Financials and valuations

At 6x our FY09E FDEPS estimate of Rs118, BSL is currently trading at a discount of 34.5% to SAIL on a PEG basis, which is trading at a PEG of 0.29 with 3 yr EPS CAGR of 19.9% and consensus FDEPS of Rs24.5 for FY10E. Although we rate the stock on FY09E FDEPS, we believe the value unlocking will largely happen during FY10 after commissioning of the HSM at Orissa complex. We maintain a BUY on the stock with a target price of Rs709.

Recent developments and announcements

Bhushan Steel also has plans to increase the capacity of its HR mill at the Orissa integrated steel complex from the current proposed capacity of 1.9mtpa to 3.1mtpa with an additional capex of Rs8.5 bn. The increased capacity will have an additional EAF that will have a capacity of 0.69mtpa and 4 additional kilns of sponge iron of 170,000tpa each. This will take the total sponge iron production capacity to 2.04mtpa from the current proposed capacity of 1.36mtpa.

Recently, Bhushan Steel signed an MoU with the government of West Bengal to setup a 2mtpa integrated steel plant with captive power plant in Burdwan district of West Bengal.

The steel plant will require 2,500 acres of land. The company will also setup a 0.5mtpa cold rolling and galvanizing plant that will cater to the automotive and white goods industry.

The cold roll and galvanizing plant will need additional area of 90 acres. Bhushan Steel has planned a total outlay of Rs88 bn for the West Bengal project which is likely to have captive coal mines.

Everest Kanto Cylinders

Company brief

Everest Kanto Cylinder Limited (EKC) is the largest domestic manufacturer of high pressure gas cylinders used for storage of industrial gases and CNG. While the first manufacturing facility (at Aurangabad) was set up in collaboration with Kanto Koatsu

Yoki of Japan in 1978, the subsequent facilities have been built using in-house technology. The company currently has four manufacturing plants located in Aurangabad, Tarapur, Gandhidham, and Dubai with a total capacity to produce 806,000 Cylinders p.a. An aggressive expansion plan including doubling of the Dubai capacity as well as a greenfield plant in China would see EKC’s production capacity increase to 2.3mn cylinders over the next 4-5 years.

Growth drivers

EKC direct beneficiary of exponential growth in demand for CNG cylinders: Under the

aegis of the Supreme court ruling, to convert all the city transport buses to CNG fuel; there has been a remarkable growth in demand from the CNG Cylinders and EKC has been the direct beneficiary of this. Going forward, as the Supreme Court ruling is implemented in other cities; we expect the demand for EKCs products to increase exponentially. The demand from the industrial segment is strong and is expected to grow further on the back of huge increase in industrial investment lined up over next few years.

Improving refueling infrastructure and availability of gas to further fuel demand: Cost

economics in favor of CNG fuel and rising awareness amongst rapidly changing pollution norms are direct drivers of demand for CNG cylinders. This coupled with rapidly improving refueling infrastructure for CNG and visibility of gas supplies would mean that CNG penetration in India would grow at an accelerating pace, which in turn would further fuel demand for CNG cylinders.

Export another major growth driver: The CNG story in the export market is no different and replicating its success in the domestic market, EKC has already tapped the export market for CNG cylinders by setting up a plant in Dubai.

Massive capacity underway to capitalise on growth: In order to capitalise on the huge growth opportunity EKC has chalked out an aggressive capacity expansion plan. After expanding its capacity almost 3xin last 4 years (from 270,000 cylinders in FY03 to 806,000 cylinder in FY07), the company is all set to repeat the feat with a total installed capacity going upto a massive 2.3 mn cylinders by FY12E. The total capex for this huge capacity ramp up exercise is estimated at USD 75 mn. The company has recently raised USD 20mn for part financing this expansion.

Exponential growth in earnings: Strong demand arising from industrial gases and from nearly Insatiable demand from CNG vehicles in India, would be key demand drivers over the next 3-4 years.

Risks and concerns

EKC sources almost all of seamless tubes from Tenaris. Though it sources from Tenaris’s plants located in different regions of the world and it has been maintain excellent relationship with Tenaris, it still runs business risks in sourcing from a single supplier.

Increasing competition from domestic and foreign manufacturer does post a threat to

EKC numero uno with major competitors setting significant capacities.

Financials and valuations

At current levels the stock is discounting its FY2007 annualized earnings of Rs31 by 37x

Recent developments and announcements

In April 2007, EKC bagged export orders worth Rs22bn for supply of specialized cylinders.

EKC has started construction work in China. The Company plans to invest US$50 mn in the first phase of its China operation. Commercial production is expected in the last quarter of the current calendar year with an initial capacity of 200,000 cylinders. EKC plans to rampup the capacity to 1.5mn cylinders in the next 3-4 years.

In Jan 2007, EKC secured Rs400mn orders from defence authorities for supply of specialized gas cylinders.

EKC via its EOGM dated December 23, 2006 transferred all the fixed assets of its Dubai unit engaged in the business of manufacture and marketing of cylinders, to EKC International FZE, its wholly owned subsidiary by way of sale for a consideration amounting to US$6.2mn (~Rs285mn)