INVESTORS PLEASE LISTEN !: February 2009

Saturday, February 28, 2009

Indian Economy 26Feb2009

The Indian economy 27 Feb 2009 - Free Legal Forms

Friday, February 27, 2009

[Investors Please Listen] Roti, Kapda aur Makaan Indicators (RKMI) February, 2009

Roti, Kapda aur Makaan Indicators (RKMI) : tell us how Indians' material needs (Roti, Kapda aur Makaan) are growing (demand) and being satisfied (supply) and therefore, what India's future economic (GDP) growth will look like.

The data comprising the "Roti" indicator guides us on food prices and inflation.
The data comprising the "Kapda" indicator guides us on consumption trends (not just clothes but all consumer goods).
We have not restricted our interpretation of Makaan to real estate. The data comprising the "Makaan" indicator guides us on overall investment trends. It includes investment, infrastructure, credit as well as trade.

Note that there are several other indicators that we use in forming our economic views. This is just a snapshot of the regular, reliable, readily available data that we thought would interest our readers.

What do the latest RKMI tell us:

WPI inflation sharply declined to 5.3% in Jan compared to 12.6% in Aug due to high base, falling global commodity prices, domestic fuel price cut and various duty cuts.
Consumer durables saw the largest contraction of 12.8% in December, resulting in a dismal -6.7% growth in Q4 significantly lower than 10.8% growth in Q3 2008. Growth in auto sector sales for Q42008 is disappointing (-9.8% for two-wheelers and -47% for CVs).
Merchandise export growth contracted for third month. Imports also declined with non-oil imports surprisingly high. But non-oil imports are volatile and this might be an aberration.
Credit growth reached its peak in Oct as external credit had dried up. But since Nov, it is declining and reached 19% in Jan due to both banks' risk aversion and slowing credit demand. Mortgage rate is finally showing signs of softening on aggressive monetary easing.

What to Watch For:

Will the recent duty cuts together with pre-poll expected diesel price cut bring forward the deflationary period to Apr- May instead of the previously envisaged June-July?
Will the 20-40% salary rise along with 6% DA hike for Govt employees (constituting 60% of workforce in organized sector, 11% of households) and unaffected rural economy support consumption?
Will the recent duty cut in cement and steel together with lower house prices (as announced by DLF already) and lower mortgage rate help the struggling construction industry?

Will RBI cut rate as GDP growth numbers disappoint and WPI falls sharply

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Reliance Ind plans to absorb refinery unit

India's Reliance Industries Ltd said it plans to absorb its Reliance Petroleum unit, giving it direct control of the world's largest refinery complex and potentially signaling the exit of U.S. oil company Chevron from the subsidiary.

Reliance Industries (RELI.BO), India's largest listed firm with a market value of $40.7 billion, said in a statement its board would meet on March 2 "to consider and recommend the amalgamation of Reliance Petroleum Ltd with the company."

Reliance Petroleum (RPET.BO), in which Chevron (CVX.N) has a 5 percent holding and an option to increase it to 29 percent by mid-2009 or completely exit, said its board would also meet on Monday to consider and recommend the amalgamation.

Both companies' statements were similarly brief and contained no further detail.

Analysts say an amalgamation may signal the exit of Chevron, which would otherwise be left with a small holding in Reliance Industries after its stake was converted.

"Chevron has gone slow with its investment in various refinery projects. The market was concerned that this (raising stake) would not come through given the global meltdown and price of crude and their overall strategy," said Sharmila Joshi, vice-president sales at brokerage firm Systematix.

Another market analyst said, "Chevron will try to exit, though they have the option to raise stake, because their view is that refining cycle is softening."

Reliance Petroleum commissioned its 580,000 barrel per day refinery in December, located next to Reliance Industries' 660,000 bpd refinery in Jamanagar on India's west coast.

The combined firm would have refining capacity of 1.24 million barrels per day, the largest in the world.

"It is vintage Reliance. Most likely the parent's holding will be transferred to treasury stock and sold as and when required at a premium," said Arun Kejriwal, strategist at research firm KRIS.

"They did it the last time too," he said referring to the absorption of an earlier company also named Reliance Petroleum into Reliance Industries in 2002.

Reliance Petroleum was listed in May 2006 and has a market value of $7 billion. Stock exchange data showed Reliance Industries held 70.38 percent of Reliance Petroleum at the end of 2008. Billionaire Mukesh Ambani is the chairman of both the Reliance companies.

Before the announcement, shares in Reliance Petroleum fell 1.2 percent to 76.20 rupees. The shares have fallen 12.7 percent so far in 2009 after falling 60.9 percent in 2008.

Shares in Reliance Industries fell 2 percent to 1,265.05 rupees on Friday. The stock has risen 2.8 percent so far in 2009 after falling 57.3 percent in 2008.

Analysts said the move would create an entity with more muscle to raise funds. Reliance could also cancel its stake in the unit after an amalgamation, a move analysts said would boost the combined firm's earnings per share and other key metrics.

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[Investors Please Listen] View from Research Desk on February 27, 2009

Mphasis reports Q1FY10 results today. Our expectations

Mphasis will declare its Q1FY10 results during market hours today. We expect Mphasis to report revenues of Rs 8840 mn and operating profits of Rs 1832 mn (EBITDA margins of 20.7%). Net profits are estimated at Rs 1261 mn. We do not have comparable nos on a quarterly basis or a yearly basis on account of change in accounting year for the company (Co has changed its financial accounting period to Nov-Oct cycle from April-March earlier in inline with HP's policy). We highlight that Mphasis had reported 1 month numbers for Oct'08 in late November'08 where it had reported operating profit margins of 26.5%. Though our current estimates for the coming results build in margins at 20.7%, we believe that results could be far ahead of our estimates driven by favorable impact of US$/INR exchange rates as well as lower impact from cross currency movements (contribution from Europe at ~20% of revenues only)

Key things to watch out:

Employee hiring during the quarter: Hiring for Mphasis over the past 3 quarters has remained lower than initial indications with the company deriving the benefits from improving utilization levels over the period. Co has indicated of employee additions of ~3,500 during Nov'08 for the next 2 quarters while we build in a net hiring of 2,600 into our estimates. Progress of flow of work from HP-EDS channel. Comments on vendor consolidation exercises at client sides.

We estimate Mphasis to report earnings of Rs 24 and Rs 26.2 in FY10 and FY11 respectively. At CMP of Rs 160, Mphasis is trading at 6.6x FY10E earnings. We have a BUY rating on Mphasis with a price target of Rs 240.

Tata Steel (Consolidated) 3QFY09 estimates

We expect Tata Steel (consolidated) to report net sales of Rs209.4bn (yoy down 34.4%, qoq down 52.6%), loss at EBITDA level of Rs2.1bn and net loss of Rs16.1bn. We expect Tata Steel to report forex loss of Rs1.3bn. Key things to watch out for – company's outlook on volume growth, performance improvement program and cost reduction

Cement Sector Dealers Update; Prices firm across markets

We spoke to cement dealer across four regions in India i.e. Southern, Western, Eastern & North Eastern region. The discussions points out to decent demand growth and firm prices scenario across most of the regions. This has encouraged cement companies to cut discount/rebates given by them to dealers. This phenomenon was particularly evident in Eastern & Western regions. Looking at the events like removal of price equalization mechanism in Western India, freezing of discounts in Eastern India and a price hike in Southern India points to a strong demand and firm cement prices scenario in the country.

SEAMEC Ltd. Q4CY2008 Result Update; Results sharply above estimates; BUY; Target: Rs73

Seamec has reported net profit Rs547 mn in Q4CY2008 which is sharply above our expectation on account of higher than expected utilisation of fleet during the quarter. Revenues for the quarter stood at Rs1044 million registering a growth of 369% yoy as Seamec had all of its four vessels full operational during the quarter as compared to just two vessels operating partially in Q4CY2007. Driven by full utilisation of fleet, higher day rate for Seamec Princess and currency appreciation, EBITDA for the quarter stood at Rs612 mn as compared to loss in Q4CY2007. As per management guidance all of its vessels will be fully available for operation in CY2009. Consequently on expected full utilisation of fleet and currency appreciation we are upgrading our earnings estimates for CY2009 by 20% to Rs24.3 per share. At current levels the stock is trading at undemanding valuations of 2X its CY2009 earnings and P/B of 0.4X. The company has a market cap of USD 34 million and it is already sitting on committed contracts worth 40 million dollars. We maintain our BUY recommendation with a revised price target of Rs73.

Inflation update; February 14, 2009; Eases to 3.36%

Inflation for the week ended February 14, 2009 eased to a 14- month low at 3.36%, as compared to 3.92% reported in the last week. The prices of primary articles declined to 7.31% for week ended February 14, 2009 as compared to 7.97% for the preceding week, primarily driven by lower prices of food articles like maize, barley, fruits and vegetables. The prices of fuel items decline by 3.98% or the week, as against a fall of 3.03% in the preceding week. The inflation for manufactured products decline to 4.67% for the week, as compare to 4.94% for the preceding week, driven by lower prices of food products, Chemical and chemical products, Basic metals alloys & metals products and Machinery & machine tools. Amongst the manufactured articles, the prices of textile products, Beverages tobacco & tobacco products, and wood & wood products rose the most by 10.18% yoy, 10.08% yoy and 10.05% respectively.

Global Cues

Yesterday the US mkts started on a strong note up by about 3.5% on the back of positive cues from Europe. Earlier in the day UK govt announced more than $ 700 bn insurance cover for its banks. As a result, in spite of unprecedented losses by RBS almost all the banks were trading with wide gains. However the US mkts gave up all the initial gains after the budget presented by the US president. The US govt decision to increase marginal tax rate from 35% to 39%, taxes on PE & Venture capitalists & bridging the loopholes that allow rich Americans to pay less in taxes did not go down well with the mkts. It appeared the US was going the socialist way. Also the US budget deficit was at the highest at 12.5% of US GDP pulled down the mkts. Consequently the Dow ended the day with a loss of 90 points.

Asian mkts are trading mixed with some commodity shares advancing. SGX is trading flat with a loss of 10 points.

Our Markets:

Yesterday our mkts opened on a weak note but as expected later in the day the end of Feb series considerations resulted in some movement in the mkts. In the first half the mkts were flat with low volumes. However in the last hour of trade the mkts witnessed strong up move & finally helped the mkts close near the day's high.

However today we will be starting the new F&O series. In terms of open interest positions mkts will be starting the series on a flat note. We expect the mkts to start the day on a flat note with subdued global cues.

Today mkts will be watching the consolidated numbers from Tisco for Q3 as well as Mphasis will be announcing its Q3 results. Indian GDP numbers for Dec ended quarter will also be announced today. Consensus estimates are expectations of growth of 6.1% after Q1 & Q2 growth of 7.9% & 7.6% respectively.

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Safe Harbor:
The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.

Indian equity markets look past the latest stimulus

Fidelity Flash_26 February 2009_CI01140 - Free Legal Forms

The Sensex responded positively to the latest round of the economic stimulus package announced by the government. On Tuesday, 24th
February, the government of India announced a new round of tax cuts to stimulate demand in the economy by reducing excise duty and service
tax by 2% each.
However, the Sensex and other global equity markets struggled to stay in positive territory as many key equity indices, in Asia and the rest of the
world, touched multi year lows this week before staging a tentative recovery on Wednesday, 25th February.

[Investors Please Listen] Inflation - hitting new lows

"Inflation Report"

Inflation falls further, hits a 14-month low

Wholesale Price Index (WPI)-based inflation for the week-ended February 14, came in at 3.36% Y-o-Y, in line with expectations (Edelweiss: 3.31%; Consensus: 3.40%). The overall trend for prices continues to remain downward with weakening demand.

On a W-o-W basis, while food prices (including manufactured food products) fell marginally, softening in prices came from a decline in prices of manufactured products. Chemicals and chemical products declined significantly (1.4%, W-o-W). Fuel group inflation remained unchanged.

With rapid correction in commodity prices, inflation expectations have come down significantly. Base effects for WPI inflation will also continue to remain markedly favourable in the coming weeks. Even if overall prices stay constant at the current levels, Y-o-Y WPI inflation could drop close to zero by March 2009. The fast correction in commodity prices reiterates our view of a spell of negative Y-o-Y inflation in CY09.

CPI yet to show any commensurate decline

Consumer price indices (CPI)-based inflation is yet to show any significant decline. CPI-IW is still at 9.70% Y-o-Y in December 2008. This is because CPI-based inflation is dominated by prices of food articles (which have not corrected significantly). Weights of fuel group and metals (two major contributors to softening of WPI inflation) are relatively less across all CPI variants.

More RBI action imminent

The rapid fall in inflation is providing Reserve Bank of India (RBI) additional headroom for further monetary accommodation. Weakening real economy (December Industrial Production, IP, declined 2.0% Y-o-Y) and bulging government borrowing (additional borrowing of ~INR 460 bn scheduled during February 20 to March 20) are making the case for further cuts in policy interest rates stronger. We expect reduction of 50bps each in repo and reverse repo rates (to 5% and 3.5% respectively) soon. Moreover, RBI has also announced additional quantitative measures like purchase of government securities through open market operations (OMO) to infuse liquidity.

Significant softening in inflation globally

Globally, inflation is falling fast owing to the sharp dip in commodity prices and sluggish demand. China's CPI during January was 1% Y-o-Y, slowing for the ninth consecutive month. CPI for Eurozone and Japan stood at 1.6% and 0.4% Y-o-Y, respectively, in December. Inflation across other emerging markets also showed a downward trend.
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Safe Harbor:
The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.

[Investors Please Listen] Telecom - monthly subscriber tracker; monthly update

"Telecom Report"

Record wireless additions led by RCOM; Vodafone, Idea adds continue to rise

Industry wireless subscriber additions jumped 42% Q-o-Q to 15.4 mn, led primarily by RCOM, which contributed a substantial 32% of industry adds in January 2009. Reliance Communications (RCOM) added 4.95 mn subscribers, followed by Bharti Airtel (BHARTI) at 2.7 mn (flat M-o-M), and Vodafone Essar (VE) at 2.4 mn (up 11% M-o-M). BSNL's net adds also jumped sharply ~50% M-o-M to 1.4 mn. RCOM's market share improved 61bps M-o-M to 18.3%, while BHARTI's subscriber market share slipped by 30bps to 24.4%. Excluding Idea, which maintained its subscriber market share M-o-M, all other operators lost subscriber market share to RCOM in January 2009.

Key highlights

§ RCOM: Positive surprise on additions, improves subscriber market share

RCOM added 4.95 mn subscribers in January, comprising 4.5 mn subscribers from CDMA and newly launched GSM circles. Net adds from existing eight GSM circles at 391k were relatively flat M-o-M. On a proforma basis, assuming flat CDMA adds M-o-M at ~1.7 mn, RCOM has approximately added ~2.9 mn subscribers in its newly launched GSM circles. Its market share improved by 61bps M-o-M to 18.3%, while all other operators, excluding Idea, lost market share.

§ VE and Idea additions continue to rise on back of new circle launches

Over the past six months, Idea and VE have shown the maximum M-o-M growth in net additions, primarily led by new circle launches—subscriber adds have jumped 80% for Idea (ex-Spice) and 33% for VE. Idea continues to grow at a robust pace in Mumbai capturing ~59% of the circle's GSM adds; in Bihar it acquired ~12% of the GSM net adds. VE adds in category C circles (launched in the past five months) jumped 35% M-o-M and comprise ~22% of the GSM net adds in those circles.

§ C circles apart, sharp M-o-M jump in subscriber adds in all circles

Category A and B circles cornered the lion's share of subscriber adds, adding ~11.4 mn subscribers (up 46.7% Q-o-Q). Metro circle adds jumped 67.6% M-o-M to 2.2 mn (primarily led by the Mumbai circle) while category C circle adds were up only 6% M-o-M to 1.7 mn.

§ Wireline attrition continues

While incumbents MTNL and BSNL continued to witness sharp attrition of their wireline subscriber base, private players BHARTI, RCOM, and TTSL continued to grow at a steady pace M-o-M. Industry wireline subscriber base dipped ~0.15 mn to ~37.7 mn.

[Investors Please Listen] Edel Daily Debt - Sovereign yields upbeat as market smells rate cut; old benchmark down 13bps

"Daily Debt Report"

Sovereign yields upbeat as market smells rate cut; old benchmark down 13bps

n The government bond prices pleasantly rose today as rate cut sentiments of the market heightened after a probable action by the apex bank with the close of the 14^th and the final Lok Sabha session. The old benchmark bond travelled south by a whopping 16bps from days' high to low of 6.49%, closing only 2bps higher.

n The new 10-year paper (6.25% GoI 2019) on the other hand has been markedly sticky, softening only 5bps to close at 6.13%. The spread between the old and the new benchmark has subsequently eased ~10bps, to 38bps, as participants huddle their bids for the most liquid 8.24% 2018 counter.

n Cash availability seemed to have enhanced in the system, reflected both in the money market and reverse repo volumes; the latter standing at INR 693 bn. Average overnight rate was 20bps less than the 4% reverse repo rate, while the cheapest interbank borrowing was done at 2-2.5%.

n Annual inflation for week ended February 14 eased 56bps from the previous week, holding at 3.36%. The price index for food products and chemical and chemical products (within the major manufacturing products group) led the decline, easing 0.3% and 1.4%, respectively.

n Yields on the 5 and 10-year corporate papers trailed softer in repose to the easing sovereign yields, both declining by 10-15bps to close at 8.65% and 9.17% respectively.

Highlights of the day

Dearness allowance of 6% has been approved by the Lok Sabha for central government employees. This would cost the government, revenues worth INR 35 bn which if considered a part of the 3^rd stimulus package would pull the deficit by nearly INR 340 bn.

Thursday, February 26, 2009

WPI at 3.36% yoy due to high base

WPI inflation for the week ending Feb 14^th declines to 3.36% yoy - lowest in over a year. Lower than consensus (Consensus: 3.38%, Previous week: 3.92%, last year corresponding week: 5.66%).
Inflation declined only marginally by 0.1% week over week. So the yoy decline was primarily due to high base.
Decline in prices of food articles like vegetable and fruits (-1.68 w/w) drove the food index in Primary article down.
A comparison of WPI and CPI Industrial Workers (as shown in chart 2) indicates that CPI for industrial workers has remained high and declined only in Dec to 9.7% from 10.45% in Nov. However, CPI- agricultural laborers and CPI- rural laborers increased from 11.14% each during Dec'08 to 11.62% and 11.35% respectively in Jan'09 as food prices continue to remain high and CPI indices have higher weightage of food. Even in WPI, food index (Primary Articles) has remained high as seen in chart 1.

Chart1: WPI and its component (% yoy) Chart 2: WPI and CPI-IW (% yoy)

Bottomline:
- Higher base will drive WPI inflation to very low single digit by March'09.
- Recent excise duty and service tax cuts will further lower inflation as these reductions are passed on to consumers over next few months.
- There is also report of a further pre-poll diesel price cut. A 5% price cut reduces inflation by 20-25bps directly.
- A good winter (rabi) crop should bring down double-digit rural CPI inflation.
- The duty cuts, fuel price reduction and good rabi crop will move forward the deflationary period to May instead of July.

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[Investors Please Listen] Cement Sector Dealers Update ; Prices firm across markets

Cement Sector Dealers Update

Prices firm across markets

SEAMEC Ltd. Q4CY2008 Result Update ; Results sharply above estimates ; BUY ; Target : Rs73

SEAMEC Ltd.

Results sharply above estimates

BUY

CMP: Rs48 Target Price: Rs73

[Investors Please Listen] The impact of third fiscal stimulus

The third fiscal stimulus: Key points

Excise tax

General rate of Central Excise duty reduced from 10% to 8%.
Retain the rate of central excise duty on goods currently attracting ad valorem rates of 8% and 4% respectively.
Reduce the rate of central excise duty on bulk cement from 10% or Rs. 290 PMT, whichever is higher to 8% or Rs.230 PMT, whichever is higher.

Service Tax

Service tax on taxable services has been reduced from 12% to 10%.
Naptha imported for generation of electric energy has been fully exempted from basic Customs Duty.
Changes are being made to Section 10 AA to extend the benefit of Income Tax exemption for export profits for units located outside SEZ.

The government has also allowed states to exceed the 3% fiscal deficit target in the next fiscal to 3.5% of GDP.

These measures to Boost Consumption….

These measures are expected to boost consumption with more than 2% cut in retail prices if the tax cuts are passed on to consumers. Consumers will benefit significantly since over 90% of excise duty collections come from the 10% slab rate that is levied on durable goods, metals, commercial vehicles, iron and steel and cement.
Tyre makers have already responded by announcing a 2% cut in prices.
Colour television sets, washing machines, refrigerators, soap, detergents, cola, hybrid cars and commercial vehicles etc to get cheaper.
Service tax cuts will result in lower phone bills, airline tickets, credit card charges, insurance premia, tour packages.

….further lower Inflation….

Softening prices of manufactured products across industries as well as recent fuel cut and higher base will bring down WPI inflation to record low by Mar'09 and a deflationary scenario sooner than expected.

.…and drive Fiscal Deficit high in FY10

These measures will translate into an additional Rs 300 bn of revenue losses (Rs 140 bn on service taxes, Rs 66 bn on account of customs and countervailing duty and Rs 85 bn on excise duties) over and above the revenue losses estimated earlier. (Govt has already foregone about Rs 400 bn of revenues on account of previous two fiscal stimuli).
As the new Govt will provide additional fiscal stimulus amid dwindling revenue collection, fiscal deficit will move up further from the estimated 5.5% of GDP for FY10. State fiscal moving to more than 3% of GDP for FY10, the combined fiscal deficit can be higher than 10% of GDP for FY10. This will translate into even higher Govt borrowings for FY10 from the already announced gross borrowings of Rs 3,617 bn.
This certainly means that the major rally of G-sec is certainly behind us. Yields can marginally dip as inflation declines and RBI cuts policy rates.

Impact on Various Sectors

Sectors	Impact
Auto	This will lead to reduction in prices of commercial vehicles (CVs) as they used to attract 10% excise earlier. Buses, small cars, two wheelers and three wheelers will continue to attract 8% excise duty. Further, the reduction in Service Tax would likely benefit fleet operators. It is a positive for CV sector along with previous measures. But sustainable recovery for the CV sector would come only with a revival in economic activity.
Cement	We expect cement companies to pass on the benefit of the reduced excise duty (approx Rs3-4/bag) on bulk cement to their customers. It will boost infra projects and construction activities But as bulk cement sales constitute about ~8-10% of volumes for most cement companies, there may not be any material impact on earnings.
Engineering	The 2% reduction in service tax will be passed on to the clients. The provision of additional Rs 14 bn towards the Textile Upgradation Fund (TUF) may boost some demand for textile machinery. Exemption of customs duty on imported Naptha for electric energy generation is positive for power sector.
Logistics	This results in cheaper logistics services. Not much impact on the demand led by the reduction of the service tax
Steel	Steel companies have indicated that they will pass on the benefit. HRC prices to reduce by Rs500-600 per tonne. As benefits are passed on, no significant impact on company financial. Lower Steel and cement prices are positive for infra, real estate companies. Prices of cars and other consumer durables, that use steel extensible, expected to come down.
Telecom	Telecom companies will benefit from two ways The service tax reduction will increase affordability, Cost of procurement of equipment will fall through a reduction in excise duty / CVD Major part of cost reduction will be passed on with rest likely be kept by the telcos, marginally improving profitability.
IT	The ambiguity over computation of export profits at SEZ has been removed. It has been now clarified that 100% of SEZ profits are tax free. The impact can be minimal as with around 0% revenue growth over the next year, contribution from SEZs is very low for Indian IT services vendors.

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Safe Harbor:
The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.

Wednesday, February 25, 2009

Tata Capital Ltd NCD issue oversubscribed 6 times

Tata Group firm Tata Capital said today that its public issue was oversubscribed six times, receiving bids worth more than Rs 3,000 crore on robust response from all categories of investors.

The company would retain subscriptions worth Rs 1,500 crore from the issue of secured non-convertible debentures (NCDs). The instrument would be listed on the National Stock Exchange (NSE), Tata Capital said in a statement.

"The issue has gained significant acceptance and this re-instates investor confidence in Tata Capital. Based on the good response we feel such bonds will become an instrument of choice for investors and other corporates leading to the development of a strong corporate bond market, " Tata Capital managing director Praveen P Kadle said.

The issue proceeds would be used for various activities such as lending and investments, capital expenditure and repayment existing loans, Kadle added.

The Rs 500 crore issue, which had a greenshoe option of Rs 1,000 crore, was open for subscription between February 2 and 24.

ICICI Securities, Citigroup Global Markets India and DSP Merrill Lynch Ltd were lead managers to the issue, while Tata Capital Markets were advisors

[Investors Please Listen] Cement Sector Monthly Update ; Jan dispatches up 8.8% continue to surprise

Cement Sector Monthly Update

Jan dispatches up 8.8% continue to surprise

Key Points

n January 2009 cement dispatches continued the momentum picked up over last two months and grew at a pace of 8.8% yoy to 16.13mn tonnes. The growth was on account of strong pick up in rural housing and also pick up in infrastructure projects. The low base for January 2008 also helped the growth. Month on month cement dispatches grew by 0.7%.

n Dispatches growth of cement majors (ACC, Ambuja, Grasim & Ultratech) at 7.4% yoy was lower than that of industry average for the month of January 09. ACC with 12.5% yoy growth in dispatches topped the growth chart while Ultratech at 4.3% was at the bottom of the chart.

n All India cement prices for the month of January declined by 0.33% yoy and 0.42% m-o-m to Rs231 per bag. However according to cement dealers during the month of February most of the cement have increased cement prices by Rs3-5/bag.

n International coal prices witnessed a substantial decline of 13.7% on a yoy basis to USD96.2 per ton. However on a m-o-m basis, coal prices witnessed an increase of 4.6%.

n Cement stocks on an aggregate basis over last three months have outperformed Sensex by 37%. We acknowledge that the outlook on macros for cement sector has not improved as compared to previous months. However we opine that business fundamentals, driven by sharp drop in coal, pet coke and HDPE prices have improved considerably. We believe the impending oversupply of cement on back of capacity addition and the resultant weakening of pricing power of cement producers is already factored in valuation of cement stocks. But what is not factored in is the possible upgrade in FY2010 earnings given sharp moderations in cost. We maintain positive view on ACC, Ambuja, India Cement & Ultratech.

[Investors Please Listen] "EXIM Bank Ltd":-Term Deposit Scheme

	FINANCIAL HIGHLIGHTS

	Export-Import Bank of India is the premier export finance institution of the country, set up in 1982 under the Export-Import Bank of India Act 1981. Government of India launched the institution It has a high-powered Board of Directors comprising : A Deputy Governor of Reserve Bank of India , Chairmen of IDBI, ECGC, Representatives of the Ministries of Finance, Commerce, Industry, External Affairs and Planning, Chairmen of scheduled banks and professionals from trade and industry.

TERM DEPOSIT SCHEME

Table I: Cumulative Interest Option

Period (Mths.)	Interest Rate (%) p.a.	Amount on Maturity (Rs.)	Yield (%) p.a.
12-23	10.00%	11,038	10.38%
24-35	10.00%	12,184	10.92%
36-47	10.00%	13,449	11.50%
48-59	10.00%	14,845	12.11%
60	10.00%	16,386	12.77%

Table II : Non-Cumulative Interest Option- Interest Payable Half Yearly

Period (Mths.)	Interest Rate (%) p.a.	Amount Payable Half Yearly for Deposit of Rs. 10,000	Yield (%) p.a.
12-23	10.00%	506	10.13%
24-35	10.00%	506	10.13%
36-47	10.00%	506	10.13%
48-59	10.00%	506	10.13%
60	10.00%	506	10.13%

FINANCIAL HIGHLIGHTS

Rs. Crores.	2000-01	2001-02	2002-03	2003-04	2004-05	2005-06
Paid up Capital	549.99	649.99	649.99	649.99	849.99	949.99
Reserves	1,066.38	1,202.64	1,317.09	1,493.30	1,662.50	1,770.31
Net Profit	154.14	171.16	206.6	229.23	257.91	270.74
Dividend	38	42	45	47	65.44	86.75

NOTE

• Interest compounded on quarterly basis.
• Minimum Deposit of Rs.10,000/- and in multiples of Rs.1,000/- thereafter.
• Interest is subject to deduction of tax at source, wherever applicable.
• The above rates are applicable to Resident Individuals, NRIs, HUFs and Superannuation Funds.
• Senior citizens will be eligible for additional interest at 0.25% p.a. on deposits placed for 12-35 months and 0.50% p.a. on deposits placed for 36 months and above.

• Cheques/Demand Drafts to be drawn favouring 'Exim Bank Term Deposit Account'.

Tuesday, February 24, 2009

[Investors Please Listen] EMKAY Research Desk on February 25, 2009

Stimulus III

Benefits likely to be passed through

The FM announced further cut in rates in excise duty and service tax to provide further stimulus to the economy. Central excise rates were reduced from 10% to 8% while excise duty on bulk cement has been reduced to 8% or Rs230 per ton, whichever is higher. Excise duty on goods attracting rates of 8% and 4% remain unchanged. Service tax has been reduced by 2% to 10%

Impact on economy

Back of the envelope calculations suggest that a 2% cut in excise and service tax is likely hit the revenue estimates by 4.8%. The incremental fiscal deficit could be to the

tune of Rs300bn (or 0.5%). Thus, the revised fiscal deficit for FY10 will be 6.0%. Caveat: We have presumed that the budget numbers were based on assumption of continuance of the 4% excise duty cut which was announced earlier. If not the impact could be 13% on revenues and 1.2% on the fiscal deficit. The fiscal deficit could be revised to 6.7%.

Although, many of the industries had responded to earlier excise duty cut by cutting prices, the consumption failed to pick up as reflected in January sales numbers for commercial vehicles and passenger vehicles. The cement dispatches have been aberration to the same. We believe that today's 2% cut in excise duty is unlikely to boost

the consumption soon as people anticipate more price cuts with falling commodity prices and more importantly due to lack of availability of the retail credit in many consumption segments.

Sectorwise impact

We believe that these further rate cuts will not have any incremental effect on the profitability of companies as these benefits are likely to be passed on the consumers. However companies could gain on account of higher demand fuelled by lower prices.

Cement

Excise duty on Bulk cement reduced to 8% (earlier 10%) or Rs230/ton (earlier Rs290/ton) whichever is higher. This measure is unlikely to have significant impact as bulk cement sales form only 6-8% of total cement volumes. Excise duty on bagged cement unchanged at 8%.

Metals

We believe that 2% cut in excise duty will not have any significant impact on Metals sector as such. Current ex-factory steel prices are at Rs25,000/t. So the price to consumer comes to Rs27,500/t (inclusive of 10% excise duty). Post reduction of excise duty, the price to consumer will be Rs27,000/t (inclusive of 8% excise duty). So net reduction of Rs500/t in the price to consumer, which we believe will be passed on entirely to the end-user. However, we believe that this reduction of Rs500/t may not have a significant impact in boosting the steel demand and as such this excise duty cut is expected to be neutral for the entire sector.

Auto

Excise duty on CVs reduced to 8% (earlier 10%) while on small cars excise duty remained at 8%. We do not see any major impact of this step on auto volume growth. We believe that availability of consumer finance and growth in consumer spending are the critical factors for the revival of auto industry.

FMCG

Most of the companies in the FMCG sector operate in the tax free zone. Hence the duty reduction would hardly provide any benefit for the companies in the business.

Telecom

Service tax has been reduced from 12% earlier to 10%. The change would have little direct implication to the operators as the service tax is entirely pass through. The 2%

saving from service tax, even if re-spent on telecom services would lead to minimal impact to the sector.

Paints

Paint industry is expected to benefit for the reduction in duty from 10% to 8%. However, most of the companies are likely to pass on the benefit on customers.

Paper

Excise duty on paper is likely to remain unchanged which is 4% at present. Hence there is not likely to be any impact on companies.

Fertiliser and Chemicals

Excise duty on chemicals is reduced to 8% (earlier 10%) in line with reduction in general excise duty by 2%. However this measure is unlikely to have any significant impact on companies since we expect benefit is likely to be passed on to end consumers. Few companies which can be positively impacted (if they do not reduce the

prices) are like Tata chemicals, Deepak Fertiliser, GSFC and GNFC.

Global Cues

After a 15% fall in the past few days the Dow recovered a bit yesterday on the back of Fed Chairman's assurance that US govt is not thinking of nationalization of banks. On this news the banks stocks witnessed a sharp recovery & provided the much needed impetus to the mkts. However the concerns on AIG's multi billion losses & the bank's stress test scheduled for Wednesday remain & are likely to play heavy on mkts.

Asian mkts are trading in green taking cues from the western counterparts. Most of the Asian mkts are trading up between 1-1.5% while SGX is trading up by 38 points.

Our Markets:

Yesterday the govt came out with a surprise third stimulus package by providing relief in excise duty & service tax. As mentioned in this communication elsewhere we believe most of the benefits from this package will be passed on to the consumers. However we believe this kind of packages are temporary sentiment boosters. No major financial impact can be expected from this in near term as was the case with previous excise cut in Jan 09. Nevertheless our mkts may react some more to this package today after a bit of reaction yesterday. We are also on the penultimate day of expiry of Feb F&O series. Therefore mkts will take cue from positions built in the system.

For today we may expect to start the day on a firm note providing a small bounce back to our mkts. However we would like to remind important news that S&P has downgraded India's rating on the back of high fiscal deficit. This news will be negative for the mkts in the longer term & will have larger fundamental negative impact on our mkts as international investors become suspicious.