INVESTORS PLEASE LISTEN !

Tuesday, August 4, 2009

[Investors Please Listen] Bond Market Update: 10-year benchmark sustains at 7%; bonds trade weak for INR 37 bn

n The government bond segment witnessed weak participation today, with total NDS-OM volumes closing at a dismal INR 36.75 bn. Yields were firm for most of the day as participants exhibited scepticism for the upcoming bond auction. Despite the scheduled re-issuance of the 10-year bond for INR 60 bn, participants offloaded INR 9.05 bn today, pushing its yield above 7% (at 7.01%).

n The finance minister attempted, in vain, to reassure markets of subdued yields despite increased bond supplies, as offshore players maintained sentiments of higher interest rates going ahead reflected in OIS trades—the 5-year OIS touched a high of 6.43% (up 7bps from its previous close).

n Overnight liquidity remained plush at INR 2.18 tn (sum of RBI's net LAF volumes and overnight money market volumes) earning participants an average return of 3.16%. CBLO volume shot up to a month's high of INR 610 bn as participants sought a higher return of 3% (up 16bps from yesterday).

n The INR 74.74 bn SDL auction for 6 state governments concluded with cut-off yields in the range of 7.95-8.03% (up 20-25bps from previous fortnight's INR 20 bn auction). The spread between central and state government securities surged 15bps to touch 95-100bps today, validating aggressive investor participation to induce bid-to-cover of 2.13.

n Shorter maturing corporate papers (2-3 year maturity) witnessed continued selling by fund houses with only select mutual funds posing as buyers. Yield on PFC's 11.15% 2011 bond closed 10bps higher at 6.75% than Friday's close. The 10-year corporate bond yield too firmed 5bps to close at 8.72%.

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[Investors Please Listen] NTPC Q1FY10 Result Update ; CERC regulations are neutral, maintain reduce ; Target : Rs187

CERC regulations are neutral, maintain reduce

REDUCE

CMP: Rs216 Target Price: Rs187

NTPC reported net profit of Rs21.9bn, up 27% yoy and significantly above our estimate of Rs19.2bn. As per our assessment the higher than expected net profit was driven by (1) higher other income, (2) higher UI charges - attributed to huge power shortage during the quarter and consequently lower frequency of the grid and (3) higher plant availability of 93% - attributed to lower planned maintenance and higher availability of gas. Though NTPC has reported strong performance during Q1FY10 but we believe it is mainly driven by unsustainable factors (other income, UI and PAF). Therefore we view this as an aberration. We reiterate that new CERC regulations are neutral to NTPC's earnings (confirmed by the management in the analyst meet). We maintain our earnings estimates of Rs10.4, Rs11.4 and Rs12.5 for FY10E, FY11E and FY12E respectively. We believe that NTPC's valuations are directly linked with 10-yr Treasury bond yields currently at 7%. The current valuations are factoring in 310 bps improvement in its reported ROE. With reported ROE not expected to improve during next 3-4 years at least we do not see any re-rating triggers. At CMP of Rs216, stock is trading at 2.8x FY10E Book Value and 20.6x FY10E earnings. We maintain 'REDUCE' rating on the stock and SoTP based target price of Rs187/Share.

Monday, August 3, 2009

[Investors Please Listen] IPO Update: NHPC Ltd.

NHPC LIMITED
Symbol - Series	NHPC EQ
Issue Period	August 07, 2009 to August 12, 2009
Issue Size	1,67,73,74,015 EQUITY SHARES
Issue Type	100% Book Building
Face Value	Rs. 10/-
Price Range	Rs. 30 To Rs. 36.
Tick Size	Re. 1/-
Market Lot	175 Equity Shares
Minimum Order Quantity	175 Equity Shares
Maximum Subscription Amount for Retail Investor	Rs.100000
IPO Market Timings	10.00 a.m. to 5.00 p.m.
IPO Grading	IPO Grade 3
Rating Agency	ICRA Limited
Book Running Lead Manager	Enam Securities Private Limited, Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited
Syndicate Member	Kotak Securities Limited and SBICAP Securities Limited
Categories	FI, IC, VC, MF, FII, FVCI, SIDC, PF, PEF, MLA, BDFI, NIF, CO, IND, HUF, NRI , OTH ,EMP and DIR
No. of Cities with Bidding Centers	62
Name of the registrar	Karvy Computershare Private Limited
Address of the registrar	Karvy House, 46, Avenue 4 Street No. 1, Banjara Hills, Hyderabad 500 034.
Contact person name number and Email id	Contact Person: M. Murali Krishna Toll free no: 1-800-345-4001 Tel: (91 40) 2342 0815-28 Fax: (91 40) 2342 0814 Email: nhpcipo@karvy.com
Prospectus	Click Here
Application Form	Click Here
Trading Member List	Click Here
IPO Grading	Click Here

[Investors Please Listen] Yield bearishness induces vicious sell-off spiral; 7.94% 2021 up 6bps

Yield bearishness induces vicious sell-off spiral; 7.94% 2021 up 6bps

n The domestic debt market continued its ongoing bearishness as it failed to react to softening yield of US 10-year treasuries; the second most active bond and recently re-issued (on July 31) 7.94% 2021 rose 10bps intraday to close at 7.42%.

n Pessimism was also evident in dismissal volumes traded on NDS-OM. Bonds worth INR 59 bn changed hands, significantly below 5 DMA of INR 73 bn. Bidding interest was skewed in to be re-issued 10-year benchmark mopping up 27% of the total trade.

n On first trading day of the non-reporting week, volumes in the overnight money market were buoyant; cumulative volumes over previous trading day rose by INR 120 bn to INR 897 bn at an average rate of INR 2.91 bn. Surplus funds parked with RBI, which on previous trading day had plunged to INR 977 bn (1 month low), surged back to trillion mark; INR 1.16 tn were parked with the apex bank.

n The short-term (less than 1-year) primary segment failed to attract any biding interest as volumes in the same plunged to zero. Activity in the secondary market was also dismissal; INR 1.75 bn volumes in expected to be account of some profit booking. Corporate bonds followed the direction of sovereign debt; however, the intensity was much higher—2-5 year segment witnessed selling pressure. 5 and 10-year quasi sovereign debt closed at 8.20 and 8.68%, respectively.

n Trade data released continued to paint a grim external trade picture. While exports plunged by 27.7% Y-o-Y, imports contracted 29.3%, resulting in trade deficit of USD 6.16 bn in June compared to USD 5.2 bn in May.

Saturday, August 1, 2009

[Investors Please Listen] NFO Update: Canara Robeco FORCE

India Growth Story – The Sweet Spot:

Rising GDP & Slowing Population growth leading to better Per Capita Income – More Money in the hands of Consumer
Economy possesses the unique traits of both Emerging & Developed Countries – Resilient Economy

Indian Consumption Story:

· Rising Domestic Savings: Rising Savings of the Indian Households (which accounts for almost 37% of Indian GDP) would fuel the Indian Consumption Story. The Savings are expected to double in the next 5 years.

· Changing Face & Needs of the Indian Consumer: The Indian Consumer is adopting a new shape - 'YUM – Young Urban Middle Class'.

· Almost 2/3 of India's Population is below 35 years of age – Young

· Urban population is estimated to grow to 42% of total population by the year 2030 – Urban

· Middle Class Population slated to be around 60% of India's income profile – Middle Class

Direct Beneficiaries:
Financial Services, Retail Consumption and Media & Entertainment Industry are the direct beneficiaries from the increasing wallet of the Indian Consumer. With the rising share of YUM Population in India, the demand stimulus is thus expected to ensure continued economic growth in India

· Financial Services – Low penetration of Bank Accounts, MF Investments, Equity Broking Accounts, Insurance Policies, Consumer Loans vis-à-vis developed nations presents a large opportunity.

· Retail – Organised Retail is approx 5% of the overall Retail Market in India which is extremely low vis-à-vis other developed nations. Organised Retail will grow at more than 2 times the rate of growth of the overall market.

· Media & Entertainment – The industry is all set to gain from the improved Revenue levels due to the introduction of Digital Cable\ DTH which will help the industry & let them grow faster than the industry. Introduction of multiplex would boost revenues for producers.

NFO Closes On 18^th Aug 09

For Canara Robeco FORCE

Call @ 0-9818-26-9396