We have capped a 3rd consecutive negative closing week and have dropped 12% from the calendar high.

WEEK IN A NUTSHELL

WIN-dow to the week that was

Week In a Nutshell (WIN)

Week

ended

11 May

2012

Key WIN-dicators

We have capped a 3rd consecutive negative closing week and have dropped

12% from the calendar high. The week saw the Finance Bill for FY13 being

cleared by the parliament with implementation of GAAR being postponed by a

year to FY14 and some comments suggesting its scope and teeth will be diluted

from the original stand. But the cheer in the market mood on this account was

very short lived.

Another surprise on the clearance of the finance bill was the change from ad-

valorem excise duty to a higher (20%) specific duty on Cigarettes…..ITC needs

only an additional 2-3% through the year to neutralize the impact of excise hike

Cognizant

– rounded off the most eventful quarter for the IT sector with rev

growth guidance being cut from 23% to 20% ( 2 cut in 6 years). Mgmt cited not

just concentration risk of BFSI but also geography concern across NA and Europe.

Pharma discretionary spend slowing down was the other reason

Banking

– While we saw profit beats, the quality of asset performance left the

markets gasping. Across banks of varying sizes from PNB, BOB to Allahabad,

Corporation and Indian impairment of loan book took the spot light. Read inside

detailed updates.

Pharma –

Domestic big boys in pharma reported no’s this week. While there

were no operating disappointments in the reported no’s, muted guidance by

CIPLA for FY13 and tax related disappointments on Lupin were the key negatives.

Also Lupin and Cadilla remain upbeat on the revenue outlook going forward.

While Glenmark no’s were also encouraging, our upgrade in the

recommendation has a lot to do with the positive surprise on the working

capital cycle and the resultant expectation of debt reduction in the stock going

forward. We expect the D/E to come down from 1x to 0.4x over next 2 years.

HDFC:

The reported nos were a positive surprise led by better than expected

margin performance and steady growth nos.

Importantly we have upgraded the

stock to a buy primarily led by expected ROE improvements going forward on

re-pricing of fixed rate loans & softening of interest rates.

Also it will not need to

raise any further capital over the next 2/3 years to fund the growth of its

subsidiaries – this has been a large capital guzzler over the last 5 years.

Some of the highlights of this edition:



GLENMARK:

Strong growth, lower working capital to improve balance sheet,

return ratios



Reliance Inds:

FY12 CY11 Annual Report Analysis



Consumer Results Round Up

Cummins India margins strongly

correlated to pig iron prices

Impact of re-farming as per COAI

Asian Paints: Strong Volume

Growth

WoW - Nifty Change (-3%)

WWW – WIN Weekend Wisdom

Though difficult to practice, think ahead of the crowd

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

[W]INside this week’s edition

WIN-teresting data points ................................................................................................................................... 4

WIN-ning charts & chats ..................................................................................................................................... 5

EMERGING GLOBAL TRENDS ..................................................................................................................................... 5

Results and Earnings Concall Next Week ............................................................................................................. 7

Results expected this week ....................................................................................................................................... 7

Concall Details ........................................................................................................................................................... 7

WIN-sights from management interaction ........................................................................................................... 8

Bajaj Auto - Kevin Dsa ............................................................................................................................................... 8

Bank of Baroda (BoB) - MD Mallya, CMD.................................................................................................................. 8

Bosch - VK Viswanathan, Managing Director............................................................................................................ 8

Canara Bank - S Raman, CMD ................................................................................................................................... 8

Cognizant - Francisco D'Souza, Chief Executive ........................................................................................................ 8

Glenmark Pharmaceuticals - Glenn Saldanha, MD & CEO ........................................................................................ 9

HDFC – Keki Mistry, Vice-chairman and chief executive officer ............................................................................... 9

IRB Infra - V D Mhaiskar, CMD .................................................................................................................................. 9

Petronet LNG - Dr A Balyan CEO & MD ..................................................................................................................10

Shriram Transport Finance Company - Parag Sharma, chief finance officer ..........................................................10

Titan Industries - S Subramanian, CFO ....................................................................................................................10

Union Bank of India - Debabrata Sarkar, CMD........................................................................................................10

WIN Sector Updates.......................................................................................................................................... 11

FINANCIALS: RBI releases Final Guidelines; In line with draft guidelines; Lower MHP a positive ..........................11

TELECOM: COAI - TRAI recos imply 30p/min increase in tariffs v/s TRAI’s calculation of 3.6p/min ......................11

INDIA UTILITIES: FY12 ST volume up 16%, direct trades by SEB’s/Exchange up 50%.............................................11

METALS: Steel prices weaken across geographies; thermal coal prices touch 18-month low at USD99/ton ........12

THE POLICYMAKER: NHAI | NHDP - 8,800km target award in FY13; INR700b opportunity ...................................12

WIN Corporate Corner ...................................................................................................................................... 13

ABB INDIA 1QCY12: Revenues below estimate, margins improve; PAT broadly in-line; Cutting est .....................13

ALLAHABAD BANK 4QFY12: Margins down sharply 50bp QoQ; Trades at 0.7x FY13, Div. yield of 3.5% ...............13

ANDHRA BANK 4QFY12: Above-est.; NIM down ~45bp QoQ; Negative net slippages a positive surprise ............14

ASIAN PAINTS: Overall demand remains strong; Input costs a concern; Upgrading estimates 6-8% ....................14

BOB 4QFY12: Margins stable QoQ; Tax write-back boosts bottom-line; Asset quality surprises negatively .........15

CADILA 4QFY12: Above est; Topline led by acquisition and JVs; Upgrading EPS est 6-10%; Upgrade to Buy .......15

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

CANARA BANK 4QFY12: In-line; Balance sheet consolidation continues; Trades at 0.8x FY13 PBV; Buy ..............15

CESC 4QFY12: Above estimates; Other income boosts PAT; Spencer improvement continues; Buy ....................16

CIPLA 4QFY12: Core performance in line; Muted FY13 guidance; Neutral ...........................................................16

COGNIZANT 1QCY12: Revenue in line; Full year Guidance cut on slower acceleration BFSI, Pharma ...................16

CORP BANK 4QFY12: Margin decline 25bp QoQ; Slippages declines sharply QoQ ................................................17

CUMMINS INDIA: Premium valuations amidst emerging headwinds- Downgrade to Neutral ..............................17

DEWAN HOUSING: Stake sale boosts PAT; Margin pressures persist; Trades at 0.9x FY13E BV; Buy ....................18

GLENMARK: Strong growth, lower working capital to improve balance sheet, return ratios ................................18

GRASIM 4QFY12: Below est impacted by sharp decline in VSF realn; One of lowest PBITDA margins..................19

GSK PHARMA: 1QCY12 below est; Impacted by inventory correction & one-time VRS charge .............................19

GVK POWER & INFRA: 4Q/FY12 performance hit by interest cost on acquisition; Fund raising critical ................20

HDFC 4QFY12: Above est; Strong operating performance; Valuation attractive at 12x P/E FY14 .........................20

HINDALCO 4QFY12: Above est; strong operating performance driven by value added products .........................20

IDFC 4QFY12: Strong loan growth; Higher provisions led to lower PAT; Stable asset quality................................21

IOB 4QFY12: Margins up 13bp QoQ; Asset quality remains volatile ......................................................................21

ITC: Excise duty increased by 4% as specific excise duty replaces ad valorem duty ..............................................22

JUBILANT FOODWORKS: Officially launches “Dunkin Donuts & More”;includes sandwiches, smoothies ............22

JUBILANT FOODWORKS 4QFY12: SSS up 26%; Price hikes, operating leverage expand margins; Neutral ............22

KOTAK MAHINDRA 4QFY12: SA deposits up 14% QoQ; NIM up 10bp QoQ; Valuations rich; Neutral ...................23

L&T: Guidance expectations - understanding likely surprises & disappointments ................................................23

LUPIN 4QFY12: Core EBITDA in-line; Strong launch pipeline for US; India growth momentum to sustain ...........24

NMDC: New blocks to drive 15% volumes CAGR; upgrading EPS 6% for FY13; expect 50% upgrade in R&R ........24

PNB 4QFY12: Restructured book swells 50% QoQ; NIMs down 40bp QoQ ...........................................................25

Reliance Inds: FY12 CY11 Annual Report Analysis ..................................................................................................25

SHRIRAM TRANSPORT: Below est; Margins decline 15bp QoQ; Higher provisions impact earnings .....................26

SOBHA DEVELOPERS: PAT up 2.2x QoQ; FY12 sales ahead of guidance; Targets ~INR20b sales in FY13 ..............26

UNINOR 1QCY12: EBITDA loss at INR5.4b; KPIs in line; lowest quarterly capex; ~INR34b write-off .....................27

UNION BANK 4QFY12: Above est; Asset quality no surprises; Trades at 0.9x FY12 BV ..........................................27

WIN Collage ...................................................................................................................................................... 28

The new French president changes the tune of Europe’s debate, but huge challenges remain ...........................28

Nifty Valuations at a glance............................................................................................................................... 30

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

WIN-teresting data points

Global

Indices

Sensex

Nikkei

Last

week

16831

9380

Current

week

16293

8953

WoW

change (%)

-3.20

-4.55

P/E

Valuations

15.70

26.21

Inflows

FII (Rs B)

DII (Rs B)

MTD

-4.72

-2.82

Last

week

113.16

1642

8254

1992

2028

40118

53.48

1.31

YTD

(Calendar)

429.98

-215.96

WoW

change

(%)

-1.18

-3.64

-5.51

-0.56

-1.33

-1.15

0.00

0.18

-1.02

Hang Seng

Dow Jones

FTSE 100

Sectoral

Indices

Bank Nifty

CNX IT

BSE Oil

Bond yields-

India

1 Year

10 Year

21086

13038

5655

19965

12855

5525

-5.32

-1.41

-2.29

9.74

13.43

11.03

Commodities

Oil(US$/Bbl)

Precious Metals

Gold ($/OZ)

Silver ($/OZ)

Metals

Copper(US$/MT)

Zinc(US$/MT)

Aluminum(US$/MT)

Steel HRC(Rs/T)

Currency

Rs Vs Dollar

Euro Vs Dollar

This week

111.82

1582

8207

1966

2005

40118

53.57

1.30

9802

6100

7738

Last

Friday

8.11

8.62

9398

5831

7548

This

week

8.10

8.57

-4.12

-4.42

-2

WoW

change (%)

-0.14

-0.61

13.70

19.29

10.68

Spread Vs US

10 yrs

7.93

6.71

BSE 500 – Key Movers

Top Gainers

Company Name

MUTH

RALLIS

BERGER

A2Z

BPCL

NIIT TECH

KPIT

S MOBILITY

CRISIL

% Change

11%

10%

Top Losers

Company Name

IRB

GMR INFRA

JINDAL SOUTHWEST

TTK

UNITED SPIRITS

NCC

UNITECH

CENTRAL BANK

ROLTA

% Change

18%

17%

16%

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

WIN-ning charts & chats

EMERGING GLOBAL TRENDS



VIX Index over the last few months has been trading at lower levels (around 15~20 levels) and has formed an

Inverted Head & Shoulders pattern.

The Index tested its neckline in the last session and reverted back, though breakout of its neckline levels (~ 20)

should see a sharp rise in volatility.

Replicating the VIX Index, the US indices have been trading near their highs (Since VIX is inversely related to its

underlying index).

We here look at S&P 500, which has already given a negative crossover of its short term trendline levels, and

has formed a Head & Shoulders pattern, trading at its neckline.

We also look at the MSCI World Index and Index has already given a negative crossover of its short-term trend

line support levels, as well as the neckline levels of its Head & Shoulders pattern.

The coming sessions could be key in determining the trend emerging out of global markets and any failure of

support here could see a sharp correction in the offering.

VIX Index

SPX Index

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

MSCI World Index

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

Results and Earnings Concall Next Week

Results expected this week

Company

BHUSANSTL

Chamblfert

J&K Bank

Unichemlab

DIVISLAB

CHENNPETRO

Eicher motor

Havells

Heidelberg

IGL

IVRCLINFRA

Lovable

ORCHIDCHEM

SREINFRA

ADANIPORTS

ADANIPOWER

ASHOKLEY

JSWSTEEL

L&T

Abirlanuvo

Date

12-May-12

14-May-12

15-May-12

Company

Cox & Kings

Dishman Pharma

Gammon india

CUMMINSIND

UNITECH

INDIAINFO

PANTALOONR

PATELENG

Shree Cement

TULIP

Video Ind

Bajajfinsv

Blue star co

DISHTV

BAJAJ-AUTO

COALINDIA

TATASTEEL

HT Media

KTKBANK

TORNTPHARMA

Date

15-May-12

16-May-12

17-May-12

18-May-12

Concall Details

Date

14-May-12

15-May-12

16-May-12

17-May-12

18-May-12

Company Name

ALLAHABAD BANK

JSW STEEL

United Bank of India

McNally Bharat Engineering

Company Ltd.

IVRCL Group

SREI Infrastructure Finance Ltd.

Aditya Birla Nuvo Ltd

Firstsource Solutions Ltd.

Dish TV India Limited

Cummins

Hindusthan National Glass &

Industries Ltd

Edelweiss Financial Services Ltd

SBI

eClerx Services Ltd

Shriram City Union Finance

AM/Conc

alls

Analyst

Meet

Analyst

Meet

Analyst

Meet

Concall

Analyst

Meet

Concall

Analyst

Meet

Concall

Venue / Dial In No : Mumbai

Hotel Trident, Nariman Point,

Mumbai-Roof Top

ITC Grand Central, Parel, Mumbai

Gulmohar, The Trident

+91 22 6629 0532 / 3065 0378

+91 22 6629 0311 / 3065 0111

+91 22 6629 0349 / 3065 0129

+91 22 3065 0139 / 6629 0359

+91 22 6629 0335 / 3065 0124

+91 22 6629 4444 / 3065 0480

Y B Chavan, Nariman Point

+91 22 6629 0301 / 3065 0122

+91 22 6629 0375 / 3065 0375

State Bank Auditorium, Nariman

Point, Mumbai 400 021

+91 22 3065 0151 / 6629 037

+91 22 6629 0365 / 3065 0143

Time IST

4.30 pm

5.00 pm

11.00 am

12.00 noon

3.30 pm

10.00 am

2.00 pm

4.00 pm

4.30 pm

4.00 pm

4.30 pm

5.00 pm

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL

WIN-sights from management interaction

Bajaj Auto - Kevin Dsa



With the EEFC balance coming off 50%, they are to some extent exposed to the risk of volatility of the exchange

rate on the date of the contract.

It could have impact but I don't think it is significant at all. It all depends on the spot rate of the rupee at the end

of the month.

Impact not more than Rs 2-3 crore per month - this on the presumption that the rupee keeps depreciating at

this point.

Bank of Baroda (BoB) - MD Mallya, CMD



Made incremental provision of Rs 325 crore over above RBI norms.

FY11 restructured accounts worth Rs 8,515 crore in the last fiscal, out of which, Rs 5,281 crore in Q4FY11

Talking in terms of this tax write-back, you should also appreciate the fact that the bank has made incremental

provisions of almost Rs 325 crore over above what is the quarter we made as per Reserve Bank of India norms

Lumpy accounts have contributed to the incremental NPAs in Q3 and Q4

Large account in the aviation segment has contributed largely to the incremental restructured portfolio

Guidance for slippages would not be more 1.25%

Bosch - VK Viswanathan, Managing Director



The automotive market excluding two-wheelers, which means the commercial vehicles such as passenger cars,

tractors and three-wheelers put together helped the market increase production results by about 7% in

January-March 2012 over January-March 2011. As compared to this, Bosch Limited's turnover has grown by

about 10% and within that, overall domestic sales have grown by 11%-12%. Exports have only grown by about

3% and therefore the company's overall turnover growth is ahead of the industry

But we expect our performance to be better in the second half of the year than in the first half



Canara Bank - S Raman, CMD



This year I would characterize it as a year of consolidation and de-risking in Canara Bank. We did not grow to the

expected levels this time. Some of it was a conscious decision.

This year we have reduced our short-term corporate loans by over Rs 10,000 crore.

Another major achievement in this Q is we would see from our figures that our NPAs have hardly increased.

Our total exposure to the electricity boards, which need restructuring, is Rs 5,000 crore and whatever we have

done thus far has no NPV loss

The prospective accounts for restructuring are hardly anything, at the most Rs 1,000 crore.

Savings bank account increase was about 10-11%. It is the current account where we got hurt and we are

determined to fix the problem.

Cognizant - Francisco D'Souza, Chief Executive



The second quarter showed some acceleration but it was not as strong as expected and this led us to adopt a

more conservative approach and take our full year guidance down to atleast to 20% for this calendar year from

the prior guidance of around 23%.

The weakness was in two areas of our business- the pharmaceutical arm of our healthcare segment and the

banking segment of our financial services business- both of which largely depend on the North American

market.

It is a volatile environment out there. I think that in Europe and increasingly North America our clients are

examining spending carefully and are becoming prudent given the volatility, which I expect we will continue

through the course of this year.

For the full year, we expect financial services rather than banking will underperform. We expect the insurance

business will grow better than the company average in the coming quarters.

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL



We expect that in Q2 our operating margin would come back into the range of 19-20% which would allow us to

deliver within the 19-20% range for the full year

Pricing in Q1 was flat and we expect that for the full year

Pharma will continue to be under pressure for the remainder of the year. Our pharma arm unusually declined in

the Q1 by about 4%.

Solid hedge position for the rest of this year and continue to increase our hedge positions as we look out two-

to-four years because we think that this will help in terms of managing volatility.

Our BPO, IT infrastructure services and management consulting businesses have been leading the company’s

growth

Our share re-purchasing programme is a solid opportunity to return cash to shareholders. Approved an increase

in the share repurchase programme from USD 600 million to USD 1 billion

Glenmark Pharmaceuticals - Glenn Saldanha, MD & CEO



US business has seen a recovery in Q4 which was expected on the back of Malarone continuing to show very

strong growth and the launch of Cutivate. We just had one week sales of Cutivate in Q4

Inventory rationalization was completed in Q3. In Q4, we continue to see very strong growth coming out of the

Indian business. In fact, IMS in the month of March set about 37-38% growth.

Growth will continue into next year for the India business where we will outperform the Indian industry, given

all the products we are launching and the penetration we have been able to achieve

Margins in the quarter were at about 17.5% if you net out the forex gain impact. On a full year basis, our EBIDTA

margins stood at about 19.5%. We don’t guide towards margins but, we feel comfortable with where our full

year margins stand at as of now.

Licensing income is extremely unpredictable. We have got a USD 50 million payment in FY11-12 make sure that

we continue to out-license some of our pipelines.

Guidance number - we expect top line revenues to grow anywhere from 22-25%

HDFC – Keki Mistry,

Vice-chairman and chief executive officer



We don't expect any change in spreads. Last ten years, you will see that the spreads in the range of a low of

2.15 to a high of 2.35. four-five years spreads, it has been between 2.25 and 2.35%. We don’t expect that to

change

Total stock of loans that have been sold by us aggregates Rs 14,556 crore. On this Rs 14,556 crore, we will

continue to earn income of 1.53%. We are earning income on loans which are not there in the balance sheet

and that then tends to increase the NIMs.

60% of the Indian population is below 30 years of age. So all these young people, over the next 5-10-15 years,

will need housing and therefore, housing loans.

We are reasonable confident that unless we get to a situation where people start losing jobs, we should

continue to expect a growth in-line with what we expected last year, which was around 18%.

City-wise breakdown for lending this year, the Delhi-NCR region would be the largest, Chennai second and

Mumbai would be the third largest. Then we would have Bangalore and Pune.

Liquidity continues to remain tight and because of that interest rates have remained high. As far as we are

concerned, whenever our cost of funding reduces, we will definitely pass on the benefit to our borrower.

IRB Infra - V D Mhaiskar, CMD



Current quarter we have done a topline of Rs 881 crore and construction is Rs 624 crore and toll revenue is Rs

257 crore and the PAT is Rs 120 crore. Fairly successful in retaining the margins

We are not paying Rs 69 crore. That is the number of shares we are acquiring for 100% stake and it is a project

around Salem, starting from Omalur to Namakkal. This is a 68 km, four-lane stretch which is operational. We

expect excellent IRRs out of this project in the range of 20-21%.

CBI case and has the polygraph test - We have categorically denied any involvement in that particular matter.

Net debt now stands at Rs 5,300 crore and the net debt to equity ratio is at a comfortable 1.86:1. The average

interest cost for the company is in the range of around 11.25%.

Ahmedabad-Baroda project - End of first quarter is when we will be starting the execution.

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL

Petronet LNG - Dr A Balyan CEO & MD



As far as Petronet LNG is concerned, we have again maintained that regasified liquefied natural gas (LNG) would

not fall under the domain of the regulator. The only empowerment as far as LNG terminals are concerned is that

the regulator can register the new LNG terminal not even the earlier ones.

We give most of the quantity of LNG back to back to our three major offtakers so we don’t do any retailing

They may come up with some kind of recommendation that the fresh LNG terminals maybe registered with the

regulator.

We have hardly any exposure on the marketing margins. Our earnings are from regasification, which is back to

back almost 100% of our volume

Registration is just one process, one time activity. I don’t think there is anything more than that in this.

Shriram Transport Finance Company - Parag Sharma, chief finance officer



The year has been tough for the company and mining losses accounted for Rs 80 crore. profit was up around 2%

at Rs 1,257 crore. The net interest margin (NIM) is still looking strong at 7.5% vis-à-vis 7.8% for the previous

year.

We did Rs 8,000 crore of securitisation assignment in last year and we have to see the market appetite under

the revised guidelines scenario. There will be some capital requirements if we do pass through certificates via

securitisation route.

Every quarter we disburse around Rs 5000 crore and we are confident of maintaining this pace. We expect

growth in the range of 10-15% till September

There has been some deterioration in the asset quality but we would like to catch it up in next few quarters.

Gross NPL is around 3.06 and we have provided 85%, net NPL will be around 0.4%. Peaked off in terms of asset

quality at 3.06

Portfolio of around Rs 18,000 crore of the total assets under management (AUM) of Rs 40,200 crore, roughly

around 42-43%.

Demand for securitisation normally comes only during the September and the March quarter. That is the reason

for higher volumes in March.

We have taken the entire hit in term of mining. Asset quality has slightly deteriorated but we are likely to catch

it up.

Titan Industries - S Subramanian, CFO



We have come up with affordable diamonds where you have diamond jewellery available from Rs 10,000 to Rs

25,000

We do expect volumes to be depressed. We had a 7% decline on year on year basis for the last quarter.

We should be looking at a 25-30% top line and bottom-line growth in FY13 as well. That's our intent and the

growth in the jewellery business should be more than the one in the watches business, basically because of the

sheer volume of the jewellery business

Union Bank of India - Debabrata Sarkar, CMD



We are trying to maintain our net interest margin above 3%.

We can concentrate more on retail, SME and agriculture businesses where basically I feel that average rate of

return will be helping us.

Also, I would like to increase my current account, savings account (CASA) deposit

Restructured asset is over Rs 11,000 crore- two-three sectors, telecom, SEB and steel sector. I don’t feel there is

a lot of pressure

Presently, my tier I capital is 8.37%. We are comfortable with it

Deposits, we are planning for around 17% growth. Loans, we are planning for 19% minimum

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

WIN Sector Updates

FINANCIALS: RBI releases Final Guidelines; In line with draft guidelines; Lower MHP a positive

Key highlights:



MHP for loans with different maturities and repayment schedules has been lowered v/s that proposed in the

earlier draft guidelines. For loans with monthly repayment schedule (which largely impacts NBFC-AFCs), the

MHP has been halved across various loan tenors.



The guidelines remain status quo on some of the other important parameters such as 1) Minimum Retention

Ratio (MRR) 2) upfront profit booking on securitization 3) disallowing credit enhancements through direct

assignment route and 4) disqualifying of loans with bullet repayment of principal and interest from the ambit of

securitization.

Our View:



For NBFC-AFCs, reduction in MHP augurs well for players like SHTF and MMFS, and would allow them to

continue with their securitization activity. However, maintaining status quo on withdrawal of credit

enhancement on direct assignment transactions would negatively affect MMFS as it curbs MMFS’ ability to do

loan assignments.



We believe the same has already been priced in and should not have any material impact on MMFS’ earnings. In

case the company decides to forego this route for its funding requirements, there could be a margin impact of

20-25bp, which we believe could be recovered either through loan re-pricing or adopting securitization route as

against assignment route currently.



There is no respite for gold loan companies as final guidelines maintain status quo on disallowing loans with

bullet repayment of principal and interest from ambit of securitization and assignment.

TELECOM: COAI - TRAI recos imply 30p/min increase in tariffs v/s TRAI’s calculation of 3.6p/min



COAI presentation made to Mr Kapil Sibal. As per COAI, TRAI’s recent recommendations on spectrum auction

will lead to an increase in outgoing tariffs by 30p/min - almost 8x TRAI’s calculation of INR3.6p/min; Implies

~40% increase in per min charge for customer

Fallacies in the TRAI calculations 1) TRAI’s MOU assumptions include incoming minutes which are non-

chargeable at the customer-end, 2) lower spectrum assumed by TRAI v/s assigned quantity, 3) No provision for

further spectrum requirement to support assumed MOU growth, 4) Spectrum requirement for future data

traffic not considered, 5) Ignoring the impact of revenue sharing licence fee and service tax, and 6) No impact

price elasticity built-into the TRAI calculations.

Re-farming would result in ~INR1,250b incremental capex and ~INR250b asset write-off for the industry (mainly

Bharti, Idea, BSNL/MTNL, Vodafone, and Aircel).

We do not rule-out a prolonged legal battle given significant divergence in the stance of industry and

government/regulator

Our target price for Bharti/Idea already incorporate regulatory risk outlay of INR142b (INR37/sh) for Bharti and

INR67b (INR18/sh) for Idea.



INDIA UTILITIES: FY12 ST volume up 16%, direct trades by SEB’s/Exchange up 50%



As per CERC’s Market Monitoring Cell Report (March 2012), power trading volumes for the month stands at

~7.6BUs (up 3% YoY and 18% MoM). For FY12 Power Trading Volume stood at 94.5BUs (up 16% YoY) v/s All

India generation growth of 8% YoY.

Growth in the volume is led by Bilateral and UI category, which was up 2% and 13% YoY, respectively. However,

it is important to note that bi-lateral trades through traders have seen 17% decline for March 2012, while direct

trade is up 67% YoY.

For FY12 too, the volume growth is driven by exchange/direct trades, which are up 50%, while power sale

through traders is up 23% only. Also, the tightening norms on UI and disciplined buying by DISCOMs have led to

decline in UI volumes, which is down 1% YoY.

Trading as a percentage to sales for the month stood stagnant YoY at 9.8%, and for FY12 it stood higher at

11.8% (v/s 11% YoY). PTC India market share during the month improved to 39% (up 9ppt YoY) and stood at

near same levels for at 33% (v/s 35% YoY).

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL



Weighted average short term tariffs in FY12 stands at INR4/unit in-line with our estimate. We continue to

believe that improved availability of LT power in the system and disciplined buying by SEBs will keep ST prices

under check. It remains to be noted that despite several large state elections (UP, TN, etc), we have not seen

any major uptick in ST prices in FY12.

For FY13, we model ST prices at INR3.5/unit.

In the recently approved tariff order, TNERC notes very minimal requirement of ST power buying for TN in FY13,

as large capacity is commissioned.



METALS: Steel prices weaken across geographies; thermal coal prices touch 18-month low at USD99/ton



Both global and Indian steel prices were weak. Indian long and flat steel prices declined 1.1% and 0.2% WoW,

respectively. HRC tube grade prices were flat WoW at INR40,118/ton while pencil ingot prices decreased 2.2%

WoW to INR35,500/ton. Prices of steel intermediaries also declined, with pig iron and scrap prices decreasing

0.4% and 1.9% WoW, respectively.

Steel prices decreased 0.2%, 1.5% and 1.6% WoW in Europe, China and Turkey, respectively. Prices were flat in

Russia, North America and the Middle East.

63.5% Fe iron ore prices were flat WoW at USD148/ton while Richards Bay steam coal prices decreased 1%

WoW to the lowest level since October 2010 to USD99/ton.

Base metal prices decreased 1-2%, with spot LME prices of aluminum, copper, lead and Zinc decreasing 1%, 2%,

2% and 2% WoW, respectively.

Indonesia has implemented mineral ore export ban and 20% export tax from 6 May 2012. However, exports will

be allowed for companies having a clear processing plan along with signed integrity agreements stating that

processing plants will be ready by 2014.



THE POLICYMAKER: NHAI | NHDP - 8,800km target award in FY13; INR700b opportunity



NHAI is targeting to award road projects totalling 8,800km in FY13 (v/s 6,491km in FY12), which is pegged to be

an opportunity pie of ~INR700b for developers (almost same size as in FY12).



This will be the 2

year of sizable improvement in project award compared to 5,083km in FY11



NHAI is favourably placed on funding as it raised INR100b in FY12 through bonds (INR100b in FY13 approved).



In addition, given revenue from cess (~INR92b), toll collection (~INR30b) and premium income (INR30b), it is

well placed to meet its recurring obligation on EPC/annuity projects.



NHAI land acquisition has increased 4x over the last five years to 12,000 hectares from 3,684 hectares in FY08,

on the back of strong regulatory support like setting up of land acquisition cell and financial manoeuvrability.

However in certain states like Goa and Kerala land acquisition is a constraint



Our interactions with authorities however suggested that developers may find it difficult to close large projects.

Players with rational bidding, lower reliance on outside equity funding, and healthy B/S could be winners.



For Maharashtra-Karnataka border project, the difference was INR80m, while for Rohtak-Jind project it was

~INR700m. This compares with L1 / L2 difference of 30-40% in past.

Our View



Aggressive bidding, lower than expected traffic, rising funding cost, and project execution delays have sizably

lowered returns on projects awarded in past



We think this facilitates M&A opportunity for large, focused players.

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

WIN Corporate Corner

ABB INDIA 1QCY12: Revenues below estimate, margins improve; PAT broadly in-line; Cutting est



ABB India reported mixed 1QCY12 performance with flat YoY revenues, impacted by deferment of project

bookings and focus on tight working capital management. EBIDTA margins were impacted by forex losses of

INR327m (largely MTM losses on derivative contracts), adjusted for which net profit was up 35% YoY, broadly in

line with our estimates. EBITDA margin, adjusting for forex losses, was up 150bp YoY and the improvement was

driven by Power Systems business which showed turnaround (EBIT margins at 5%) after reporting losses since

last eight quarters. 1QCY12 saw moderation in order intake momentum, down 4% YoY, impacted by slowdown

in industrial sector (largely process automation) while power segment posted strong double digit growth. The

unexecuted orders pertaining to rural electrification business stood at INR250m which has remained unchanged

from 4QFY11. The company is yet to decide whether it will execute the remaining portion of the orders.

ABB has nearly trebled its gross fixed assets to INR15b (Dec 2011) over the past 5 years, and the management

reiterated plans to invest in capacities - recently the company announced plans to invest INR2.5b for setting up

power products facility. The quarter saw significant traction in exports (~10% of sales) driven by Middle East and

Africa, particularly in Power segment. Services business (~10% of sales) has also shown strong performance and

this continues to be an important focus area.

Valuation and view:

We believe 1QCY12 is the first sign of profitability improvement as (1) ABB has largely

exited RE works, and (2) the benefits of cost reduction measures have started to flow in. We have cut our

earnings estimate by 4%/11% for CY12/13 driven by slower execution. Valuations are rich, and we remain

Neutral

on the stock.



ALLAHABAD BANK 4QFY12: Margins down sharply 50bp QoQ; Trades at 0.7x FY13, Div. yield of 3.5%



NII down by 7% QoQ to INR12.9b led by 50bp QoQ decline in NIM’s to 3.23% despite loan growth of 19% YoY

and 11% QoQ.

NIM’s down led by 54bp QoQ increase in CoD & 19bp QoQ decline in YoA led by interest income reversal (not

quantified by the mgmt.)

Slippages up to INR9.6b v/s INR6b – led by agri (INR2.76b) and micro and small enterprises (INR4b)

up-gradations & recoveries at INR2.9b v/s INR5.3b in 9MFY12

Restructured loans worth INR26.4b - INR10b - SEBs, INR5b - Air India, ~INR2.5b in textiles; Restructured

portfolio swells to 5.7% of gross loans (v/s 3.8% in 3QFY12)

Total exposure to SEB stood at INR40b, of which INR10b (towards Uttar Haryana and Rajasthan SEB) has been

restructured during the quarter. Besides the bank has exposure towards UP Discom (INR21b) and Punjab SEB

(INR1.2b), which would likely get restructured during 1QFY12

Tax rate at 10.4% due to INR3b worth I.T. refund, which boosted the bottom-line

PAT down 4% YoY to INR4b led by NIM’s down 50bp QoQ to 3.23%, weak fee income & higher provisions led by

slippages while lower tax outgo provided some respite

Guidance for FY13: Loans growth of 23% YoY, deposits growth of 20% YoY, CD ratio of 72% vs 70% in FY12

NIMs decline sharply by 50bp QoQ (%)

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

ANDHRA BANK 4QFY12: Above-est.; NIM down ~45bp QoQ; Negative net slippages a positive surprise



Andhra Bank (ANDB IN, Mkt. Cap USD1.3b, CMP INR118, Buy) 4QFY12 PAT grew ~9% YoY and 12% QoQ to

INR3.4b (26% above our estimate of INR2.7b). While operating profit was 6% below est. lower provision

(INR2.4b vs. est. of INR3b) and tax rate (19% vs. est. of 33%) boosted profitability. Key highlights:

Reported margins declined ~45bp QoQ (down 35bp YoY) to 3.3% led by 1) higher interest income reversals of

~INR1b (margin impact of 35bp+) on restructured loan and agricultural loans and 2) 8bp QoQ increase in cost of

funds. Adjusted for one-off interest income reversal, margin decline would have been lower at just 10bp QoQ.

In 4QFY12, net slippages were negative INR791m (vs negative net slippages of INR1b in 3QFY12 and +INR11.5b

in 1HFY12) – a key positive. Strong recoveries from system based NPA leading to impressive performance.

Despite strong performance on asset quality front ANDB aggressively provided for NPA (INR1b vs INR395m in

3QFY12; utilized benefit of lower tax rate) leading to sharp decline in NNPA (down 20% QoQ). Consequently PCR

(cal) improved to 58% (~50% in 3QFY12), and PCR including technical stood at 71.1% (65.4% in 3QFY12).

Restructured loans increased sharply to INR74.5b (+43% QoQ) and now form 8.8% of the outstanding loans.

During the quarter ANDB restructured loan of INR23b (~2.7% of overall loans) of which INR6.3b was towards Air

India exposure and INR12b towards Rajasthan SEB exposure; excluding these two large accounts, restructured

loans stands at 6.6% of the loan book (stable QoQ). Net o/s restructured loans stood at INR59.5b (7% of overall

loans). Based on the current pipeline management does not expect restructuring to increase significantly in

1QFY13.

Business growth was healthy with loans and deposits each growing by 7% QoQ. On a YoY basis loan growth

stood at 17% whereas deposit growth was at 15%. CD ratio remained elevated at 80% as bank continues to tap

re-financing and foreign currency borrowing opportunities.

Other highlights: (1) CASA ratio remained largely stable QoQ at 26.4% led by strong QoQ growth in CA deposits

(+15% QoQ, though declined 11% YoY). SA deposits grew just 4% QoQ and 10% YoY. (2) Overall CAR stood at

13.2% with tier-1 at 9%, however core Tier I stood at 8.8% and (3) ANDB declared a dividend of INR5.5/share;

dividend yield of 4.6%.



ASIAN PAINTS: Overall demand remains strong; Input costs a concern; Upgrading estimates 6-8%



Demand remains robust; domestic volume growth estimated at ~18-19% :

Demand scenario in the domestic

market for paints remains robust as the consumers are now becoming more involved towards painting than in

the past. Robust demand resulted in standalone sales growth of 29% to INR 20.6b; we estimate volume growth

at ~18-19%. Also, management attributed high disposable income with consumers as a key demand driver for

paints.

Input cost environment still volatile and remains the major cause of concern:

APNT’s RM index increased by

1.5% during 4QFY12; for FY12 the increase was 19% to 135. The company expects that raw material prices will

remain volatile due 1) global supply demand mismatch, 2) INR depreciation and 3) high crude prices.

APNT gearing for high growth phase with huge capacity expansion:

APNT in April 2012 completed capacity

addition of 50,000in its Rohtak plant. The Rohtak plant currently has a capacity of 2, 00,00KL, which can be

doubled. However the doubling of capacity is currently not on the agenda for FY13. Current paints capacity for

APNT stands at 6, 44,000KL. The company invested INR4b for capex during FY12 and plans to invest another

INR5b in FY13 for its Khandala plant in Maharashtra. Phase 1 which will have a capacity of 3,00,000 KL is set to

be commissioned by Q4FY13.

International business still under pressure; slow and delayed recovery likely :

APNT witnessed pressure in its

international business and believes the pressure to continue due to uncertainties in few geographies. South

Asian region witnessed healthy growth, while Middle East, Caribbean and Singapore remained under pressure.

Political unrest in Middle East affected the business, while in Singapore weak economic situation kept the

demand for paints low. Margins too were low due to high input cost inflation and lack of pricing power in these

regions.

Demand conditions strong; operating leverage to boost margins; increasing estimates by 6-8%:

We believe

concerns of severe slowdown in domestic volumes is unwarranted; expect double digit volume growth to

sustain. We are increasing FY13 and FY14 estimates by 6-8%; believe APNT will continue to enjoy premium

valuations due to strong growth visibility, high entry barriers and pricing power. The stock trades at 28.9x FY13E

and 22.8x FY4E EPS.

Buy

with a target price of INR4,057 (25x FY14E).

May

2012



WIN – Week In a Nutshell

WEEK IN A NUTSHELL

BOB 4QFY12: Margins stable QoQ; Tax write-back boosts bottom-line; Asset quality surprises negatively



PAT up 18% YoY to INR15.2b (17% above est) - reversal of income tax provisions (INR 4.25b)

Opex up 37% QoQ - bank made INR3.0b worth excess provisions towards increased pension liability.

Asset quality deteriorated as Slippages up to INR13b v/s INR9.5b in 3QFY12; media (INR3.5b) and aviation

(INR1.5b) sectors leading to a 15% QoQ increase in gross NPAs; made INR3.4b worth ad hoc provisions towards

specific NPA accounts

Restructured loans worth INR53b v/s INR21b in 3QFY12; INR24b – Air India and INR20b – SEBs; o/s Restructured

portfolio at INR151b (7.5% of domestic loans)

Domestic CASA ratio fell 85bp QoQ to 33.2%

Global NIM’s at ~3%; Domestic NIM’s down 7bp QoQ led by INR1.25b worth interest income reversal on Air

India; overseas NIM;s up 4bp QoQ; Interest on income tax refund of ~INR1.0b helped to maintain margins

LIC infused INR16.5b @ INR840/share leading to fall in GOI holding to ~54% vs ~57% earlier

Guidance for FY13: (a) ROA of 1.2%+ and ROE of 20%+ (b) NIM of +/- 10bp of FY12 (Global 2.97% in FY12) (c)

Slippage ratio of 1.25% vs 1.44% in FY12 (d) PCR of ~80% (stable YoY) and (e) 3-4% higher than industry business

growth

Valuation & View:

Trades at 0.9x FY13E BV and 0.8x FY14E BV.

CADILA 4QFY12: Above est; Topline led by acquisition and JVs; Upgrading EPS est 6-10%; Upgrade to Buy



Cadila's 4QFY12 performance was above estimates. Core revenues grew 26.4% YoY to INR13.98b (v/s est of

INR13.46b), core EBITDA grew 54.7% YoY to INR2.83b (v/s est of INR2.29b) while Adj PAT grew 24% YoY to

INR1.71b (v/s est of INR1.36b). Reported revenue grew 15.3% YoY on a high base (of exclusivity product generic

Taxotere) while reported EBITDA grew 24.1% YoY.



Core revenue growth was led by US business and revenue contribution from various JVs. The growth in US was

partially led by acquisition of Nesher Pharma. However, the growth was pulled down by single digit growth in

formulation exports to Europe, Japan, Brazil and Emerging Markets.



Based on better than estimated 4QFY12 result and guidance given by management, we have upgraded earnings

estimates by 6.2% for FY13 and 9.9% for FY14. Our revised EPS estimates for FY13 and FY14 stand at INR40 and

INR49.4.

Valuation and View



We estimate strong 34% EPS CAGR for FY12-14 for the core operations excluding one-offs and RoE of ~27% over

the next two years.



The stock trades at 19x FY13E and 15.4x FY14E consolidated EPS. Upgrade to Buy with a target price of INR889

(18x FY14E EPS) an upside of 17%.

CANARA BANK 4QFY12: In-line; Balance sheet consolidation continues; Trades at 0.8x FY13 PBV; Buy



Net interest income up just 3% YoY; NIM’s stable QoQ at 2.5%; calculated NIm;s down 10bp QoQ; management

expects margin to improve by 20-25bp in FY13.

non-interest income (18% below est.) was off-set by lower than expected provisions (24% below est.) leading to

in-line PBT

Gross slippages at INR11.2b vs. INR8.6b in 3QFY12- INR7.9 was from large corporate (9 accounts) and INR1.2b

from MSME segment up-gradation and recoveries (INR6.1b vs. INR5.4b in 3QFY12) coupled with aggressive

write-off (INR5.2b) contained GNPA in absolute terms (stable QoQ).

Restructured INR27.5b - Air India at ~INR14.8b; Change in accounting led to sharp decline in restructured book:

Not yet restructured any SEB loans and expects INR54b of SEB loans to be added to restructured loans in

1QFY13 and further INR10b of loans under CDR in 1HFY13; Overall exposure of SEB stands at INR120b

loans and deposits growing 9.5% YoY (+6% QoQ) and 11.3% (+4% QoQ); CASA ratio improved marginally to

24.3% (+40bp QoQ). Management intends to focus on retail deposits and CASA and bring down its bulk deposits

in FY13.

CBK’s strategy of consolidating balance sheet in an uncertain environment is a welcome move considering weak

liability structure and higher share of power sector loans in the balance sheet

Valuation & View:

Trades at 5.4x FY13E EPS and 0.8x FY13E BV

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL

CESC 4QFY12: Above estimates; Other income boosts PAT; Spencer improvement continues; Buy



CESC reported higher than our estimates of INR2.1b partially boosted by higher other income and arrears

recovery

Our estimates had factored in ~INR400m of positive contribution from change in RoE to 15.5% from 14% earlier,

which is accounted in 4Q including arrears for past 9MFY12.

4QFY12 fuel cost rose 33% YoY and 4% QoQ and stood at INR2.1/unit (procures ~40% of its requirement from

Coal India.)

FY12 reported PAT stood at INR5.7b (up 21% YoY), led by increase in core regulated profit owing to approval of

tariff order. We understand that benefit owing to change in RoE by 150bp for both its generation and

distribution was INR400m

Average PLF stood at 77% v/s 68% YoY. For FY12 PLF for Budge Budge stands at 90% (v/s 83% YoY), Titagarh at

81% (v/s 89% YoY), and Southern project at 87% (v/s 92% YoY).

Spencer continued improvement in operating performance

in FY12 with focus on higher sales, consolidation

and cost control/efficiencies. It closed 35 Small Express Stores and opened 5 Hyper and 2 Super Stores in FY12.

Average revenue grew 11% YoY to INR1,060/sft/month, while same store sales grew 14% to

INR1,147/sft/month.

As at 4QFY12, Spencer’s total stores under operation stood 182

v/s 195 QoQ

Focus on cost control and efficiencies

have improved operating performance – FY12 store level EBITDA stood at

INR32/sft/month v/s INR31 for 1HFY12.



CIPLA 4QFY12: Core performance in line; Muted FY13 guidance; Neutral



Cipla's4QFY12 core performance was in line with estimates. Core revenues grew 6.4% YoY to INR17.72b, core

EBITDA grew 19.3% YoY to INR3.43b And Adj PAT grew 17% to INR2.5b .



Topline growth was primarily led by 14% YoY growth in domestic formulation business. Formulation exports

grew 15%YoY led by formulation supplies to Teva for exclusivity product generic Lexapro. Excluding the same

formulation exports grew by 2.3%



Management has given muted topline growth guidance of 10% for FY13 while PAT growth guidance stands at

10-15%.



Cipla’s quarterly performance has not been encouraging for the past many quarters (except 2QFY12). The

company continues to face short-term headwinds in ramping up its formulation exports business despite a

favorable currency.



Cipla’s formulation exports performed below expectations with growth of ~7% in FY12. This was particularly

disappointing given favourable currency in FY12 (Cipla does not have very high hedges).



Its muted growth guidance for overall business raises uncertainty on the timelines of ramp-up at Indore SEZ. We

believe it is imperative for the company to improve asset utilization at Indore to drive future growth and derive

benefits of operating leverage (overhead expenses continue to adversely impact performance).

Valuation and View:

20.4x FY13E: NEUTRAL



We have cut our FY13 EPS by 3% and FY14 EPS by 4% to account for muted growth guidance. In the beginning of

FY12, management had guided for 9% topline growth and 22-23% EBITDA against which the company delivered

10% core revenue growth and 22% core EBITDA margins for FY12. Based on our revised estimates, the stock

trades at 20.4x FY13E and 18x FY14E earnings.



We are reducing our target P/E for the stock to 20x from 22x to account for the muted growth guidance, cut in

earnings and continuous large capex resulting in pressure on return rations. We rate the stock Neutral with

target price of 358 (20x FY14 EPS).

COGNIZANT 1QCY12: Revenue in line; Full year Guidance cut on slower acceleration BFSI, Pharma



Cognizant’s 1QCY12 revenue marginally beat guidance, but the cut in CY12 revenue growth guidance to 20%

from 23% (only the second cut in six years), and ensuing disconcerting commentary around its key segments –

be it Banking, Pharma, North America, Europe – give the thesis of slowdown a more industry-wide connotation

rather than just a company-specific issue.

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL



Higher penetration within BFSI has made the vendors more vulnerable to business cycles of their large clients,

while constricting the former’s room for further expansion within these accounts.

Revenue at USD1,711m bettered the guidance of USD1,700m and was in line with consensus estimate of

USD1,710m (and our estimate of USD1,717m).

2QCY12 guidance of “at least” 4.6% QoQ growth implies 4.8% CQGR in the second half of the calendar year (to

meet 20% growth). Implied CQGR was 6.85% as per the previous guidance.

The acceleration in March and April fell short of expectations built into management’s 23% growth guidance,

causing Cognizant to lower the growth outlook. This was a function of lower spends by large clients within the

Banking segment in North America (similar to the case with Infosys’) and slower discretionary spending in

Pharma segment.

While 20% is by no means a weak number, what compounds to lowering of growth expectation is the missing

conviction that this year too, Cognizant will continue its significantly-beat-and-raise mode of the past, that had

almost become a de-facto expectation for the investors.

The guidance and management commentary bode negatively for the industry in general, and particularly TCS,

given its highest exposure to BFSI.

OPM was slightly higher than the company’s targeted band



Revenue at USD1,711m marginally ahead of guidance of USD1,700m

CORP BANK 4QFY12: Margin decline 25bp QoQ; Slippages declines sharply QoQ



NII down 3% QoQ to INR8.4b led by 25bp QoQ to 2.41%

FY12, NIM’s down by 35bp+ to 2.5% led by significantly higher stress on asset quality, leading to a higher

interest income reversal and increased pressure on cost of deposits(+190bp YoY).

Net slippages were negligible at INR270m vs INR2.4b in 3Q and INR3b in 2QFY12

absolute terms, GNPA up 2% QoQ (+61% YoY) to INR12.7b; NNPA down 2% QoQ to INR8.7b

restructured loans of ~INR29.2b, of which INR13b is from Air India and INR13b from Rajasthan SEB. NPV hit on

the restructured book during the quarter stood at ~INR700m.

Loans grew 9% QoQ and 16% YoY; Sequentially growth was driven by retail segment (+14% QoQ and 29% YoY)

Bulk deposits 40%+ of overall deposits; Going forward management intends to de-bulk its liabilities and increase

focus on CASA especially SA deposits

Valuation & View:

Dividend yield of 5.4%; Trades at 0.6x FY13 BV

CUMMINS INDIA: Premium valuations amidst emerging headwinds- Downgrade to Neutral



Environment becoming challenging and the company has been contionously downgrading guidance.

Our interactions with competitors suggest that the power generation (YTD revenue down 9% YoY) and industrial

businesses (flat YoY) are yet to demonstrate sustained growth pick-up.

Prices of pig iron, the key raw material for DG sets, continue to be near peak levels at INR36k/ton. This remains

an overhang on margins, notwithstanding KKC's efficiency improvement initiatives.

In 9MFY12, even as domestic power generation revenues declined 9% YoY, the low horsepower 9( low

margin)(LHP, sub-160kVa) segment revenues were up 30% YoY.

MNCs like Perkins, MTU, and Volvo are making definite inroads while local players like KOEL have plans to

launch new products into rated engine market segment in the Indian market

Coordinated efforts are underway to put the power sector back on track which may further soften the demand

momentum for DG sets.

KKC currently trades at 9% premium to its LPA P/E whereas the capital goods sector is at a 33% discount to its

LPA P/E.

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL

Valuation and View:



We believe KKC's premium valuation reflects its dominant market positioning, strong free cash generation, and

robust 30-35% RoE. Such rich valuations leave little room for disappointments.



We have cut our EPS estimate by 7/12% for FY13/14, implying FY12-14E EPS CAGR of 15%.



At 18x FY14E (20% premium to Capital Goods universe), our target price of INR474 leaves little upside.

Downgrade to Neutral.

DEWAN HOUSING: Stake sale boosts PAT; Margin pressures persist; Trades at 0.9x FY13E BV; Buy



Dewan Housing Finance’s (DEWH IN, Mkt Cap USD0.5b, CMP INR207, Buy) 4QFY12 reported PAT grew 60% YoY

and 25% QoQ to INR938m (12% above est. of INR840m) led by one off gains on partial stake sale in DHFL Vysya

Housing Finance Ltd. (DVHFL) and provisions write-back. Assignment of INR16b of loans led to release of

INR60m of provisions during the quarter leading to lower than expected operating expenses. Loan growth

continued to remain strong and asset quality remained healthy with zero net NPAs during the quarter. Key

highlights:

During the quarter, DEWH sold ~49% stake in DVHFL to comply with clause 32 of the NHB Directions 2010.

Moreover, with a view to focus on its core business DEWH also completely divested its holding in DHFL Property

Services Ltd (DPSL) and Wadhawan Retail. As a result, the company has booked net income of INR285m on

divestment of its stake in these companies, which led to the beat in earnings. Capital gains on DVHFL stake sale

led to additional tax liability of INR60m

NII grew by 35% YoY and 4% QoQ to INR1.29b (6% below est.) as 1) margin pressures during the quarter

persisted driven by high competitive intensity 2) cost of funds at elevated levels and 3) full benefit of loans

worth INR16b securitized towards the end of quarter to accrue in the coming quarters. Pressure on margins

should also be seen in the context of sharp increase in high yielding LAP and project loan book from 6.5% a year

ago to 17.7%. In FY13, margins will improve driven by reversal in interest rates and expected benefit of INR3b

raised during the quarter gone by.

Loan growth remained strong with loans growing by 37% YoY and 4% QoQ to INR194b. During the quarter,

DEWH securitized loans worth INR16b, adjusting for which AUMs grew strongly by 49% YoY and 13% QoQ to

INR210b. Sanctions and disbursements during the quarter grew by 63% YoY and 52% YoY respectively.

Borrowings grew by 59% YoY and 5% QoQ to INR191b.

Despite a strong 49% QoQ increase in employee expenses (due to year end phenomenon), the overall operating

expenses declined 12% QoQ on account of 1) provision writeback to the tune of INR62m and 2) sequentially

lower ad expenditure.

Asset quality improved as GNPAs declined 20% QoQ to INR1.3b. Notably, provision cover improved significantly

to 118% compared with 81% in 3QFY12.

FBHFL performance: First Blue Home Finance’s loans grew 17% YoY and 3% QoQ to INR61.1b. Sanctions and

disbursements grew ~53% YoY to INR10.6b and 30% YoY to INR6.5b for the quarter. Reported cumulative

spreads improved to 2.31% from 2.23% in 3QFY12. Asset quality improved with %GNPA declining to 0.84% from

0.96% in 3QFY12.



GLENMARK: Strong growth, lower working capital to improve balance sheet, return ratios



Glenmark’s 4QFY12 performance was in line with estimates. Core topline grew by 30% to INR10.3b (v/s est of

15.2% YoY growth to INR9.13b). Core EBITDA stood at INR1.63b (v/s est of INR1.57b) while core EBITDA margins

at 15.8% were lower than our estimate of 17.1% due to adverse product mix. Adjusted PAT stood at INR1.33b

(v/s est of INR1.36b)

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL



FY13 Guidance – Mgmt has guided for 22-25% topline growth (including Para-IV upsides), EBITDA of INR9-9.25b,

capex of INR2.5b and tax rate of 14-15%.



Despite the strong sales growth recorded in FY12 (36% topline growth), GNP has shown significant

improvement in working capital for FY12, which we view as a positive.



Net working capital has come down to ~128 days compared to ~200 days for FY11. High working capital was one

of the main reasons leading to low return ratios in the past. This is likely to gradually correct in the FY13-14

period.



We believe that improved WC and moderate capex will impart flexibility to the management to target debt

reduction. High debt was one of the main risk factors in the past. We expect GNP to gradually reduce its net

debt over FY13-14 period resulting in improvement in D/E from the current 1x to about 0.4-05x by FY14.



Return ratios are expected to gradually improve over the next two years with RoCE estimated to improve from

12.1% to 19.5% and RoE expected to improve from 13.5% to 19.8%.

Valuation and View



Post the 4QFY12 results, our FY13 and FY14 EPS estimates remain largely unchanged at INR19.8/sh and

INR25.6/sh. The stock currently trades at 17.3x FY13E and 13.4x FY14E EPS. We now attach a slightly higher

target P/E of 16x (given the improvement in working capital and expected reduction in debt) leading to TP of

INR420 (16x FY14 EPS + INR12 DCF value for Crofelemer & Para-IV upsides).

GRASIM 4QFY12: Below est impacted by sharp decline in VSF realn; One of lowest PBITDA margins



VSF Volumes at 94,904 tons (est 83,555 tons) driven by higher exports; realizations at INR121/Kg down ~6%

QoQ and cost push impact S/A numbers

S/A - Sales down 3% YoY to INR13.9b (est INR13.2b), EBITDA margin at 15.6% (est 26.4%), EBITDA is at INR2.17b

(INR2.9b), PAT down 38% YoY to INR2.44b –

Consol sales up 13% to INR72.1b, with EBITDA margin decline of 340bp YoY to 21.2%, PAT de-growth of 8% YoY

to INR8.1b.

Preliminary estimates indicate downgrade of ~2% (despite upgrade in UltraTech estimates) for FY13 & FY14

Valuation & View:

Trades at 7.3x FY13E Consol EPS, 4.2x EV/EBTIDA and cement business’s implied valuation of

US$71/ton

GSK PHARMA: 1QCY12 below est; Impacted by inventory correction & one-time VRS charge



GSK Pharma’s 1QCY12 performance was below estimates mainly due to inventory correction in the pharma

business and de-growth in the remaining businesses. Lower topline growth at INR6.22b (up 3%) impacted the

profitability with EBITDA at INR1.96b (vs est of INR2.4b).

EBITDA margins were at 31.4% compared to our est of 34.9%. Adj PAT at INR1.86b was also lower than our est

of INR2.0b and was adversely impacted by lower operational performance but was boosted by higher other

income at INR804m (vs est of INR612m).

Reported PAT at INR1.23b was lower than our est of INR2.0b, impacted mainly by lower operational

performance and a INR628m one-time charge related to VRS and other related costs for the company’s Thane

facility.

We believe GSK is one of the best plays on IPR regime in India with aggressive plans to launch new products in

the high-growth life-style segments. We believe GSK is likely to sustain double-digit topline growth over the

next few years.

Given the high profitability of operations, we expect this growth to lead to sustainable double-digit earnings

growth and RoE of ~30%. This growth is likely to be funded through miniscule capex and negative net working

capital.

GSK deserves premium valuations due to strong parentage (giving access to large product pipeline), brand-

building ability and likely positioning in post patent era. It is one of the very few companies with ability to drive

reasonable growth without any major capital requirement leading to high RoCE.

Post the adverse 1QCY12 performance, we have cut our EPS estimates for CY12 and CY13 by 6% each. Based on

our revised estimates, we expect GSK to record CY12E EPS of INR80.6 (up 8.2%) and CY13E EPS of INR94.2 (up

16.8%).

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL



Our estimates exclude the potential adverse impact of the proposed new pharma policy pending its

implementation. The stock is currently valued at 26.4x CY12E and 22.6x CY13E earnings. Maintain Buy with a

target price of INR2,355 (25x CY13E).

GVK POWER & INFRA: 4Q/FY12 performance hit by interest cost on acquisition; Fund raising critical



GVK Power & Infrastructure (GVKP IN, Mkt Cap USD0.4b, CMP INR13, Under Review) reported 4QFY12 net loss

of INR209m v/s PAT of INR368m YoY and loss of INR145m in 3Q. 4QFY12 loss was attributable to i) lower gas

supply impacting availability/PLF for power projects (loss of INR260m v/s PAT of INR66m in 4QFY11), ii) interest

cost on acquisition of stake in airport projects (4Q interest cost at INR1.7b v/s INR547m YoY and INR1.4b QoQ),

and iii) impact of higher overheads (INR250m) and interest/depreciation at Mumbai airport.

Road business performance was strong with EBIT growth of 63% YoY at INR382m (depreciation policy change

had positive impact of INR69m).

FY12 PAT stood at INR615m (v/s INR1.5b in FY11), impacted by lower operational performance in power

business and interest cost on acquisition debt.



HDFC 4QFY12: Above est; Strong operating performance; Valuation attractive at 12x P/E FY14



NII grew by 27% YoY to INR17.4b (14% above est of INR15.2b) as interest expenses declined 2% QoQ. However,

adjusting for INR1.03b worth MTM provisions made in 3QFY12 (through interest expenses line item), interest

expenses remained largely flattish. In FY12, HDFC debited reserves to the extent of INR4.85b (pre-tax of

INR7.05b) for accounting of interest on Zero coupon bonds (in FY11, they charged INR5.23b pre-tax to reserves).

Spreads improved 4bps QoQ to 2.27%, while NIMs up to 4.7% from 4.3% in 3QFY12. HDFC has utilized funds

kept in liquid MF (INR16.2b in 3Q, NIL in 4QFY12) to report strong NII performance.

Loans grew 20% YoY and 7% QoQ to INR1.41t. AUM including loan sell-downs grew by 20% YoY and 7% QoQ to

INR1.56t. HDFC sold loans worth INR49.8b during TTM v/s INR42.2b in 3QFY12 and INR43.8b in 4QFY11.

Importantly, momentum in individual home loans remained healthy as it grew 20% YoY and 6% QoQ to INR1.03t

(including sell-down). In the overall AUM, share of retail loans stood at 66.5% (stable QoQ and YOY).

Disbursement growth remained healthy at 15% in 4QFY12 and 18% YoY in FY12. Approvals also grew 22% YoY in

4QFY12 and 20% in FY12.

Asset quality remained impeccable with GNPAs at 0.74% (on a 90-day overdue basis) v/s 0.82% in 3QFY12 and

at 0.44% (on a 180-day overdue basis) v/s 0.53% in 3QFY12.

Provisions increased marginally to INR250m v/s INR200m in 3QFY12. During the quarter, HDFC routed

provisions worth INR648m through reserves pertaining to the one-off provisions to be made due to change in

NHB’s provisioning guidelines.



HINDALCO 4QFY12: Above est; strong operating performance driven by value added products



Hindalco standalone adj. PAT increased 42% QoQ to INR6.4b led by higher proportion and better realization of

value added products. Small aluminum inventory destocking and dividend from subsidiary further contributed

to earnings growth.

EBITDA increased 21% QoQ to INR8.6b due to 29% increase in copper EBITDA to INR3.4b (best ever), while

aluminum EBITDA increased 16% to INR5.3b. Copper and aluminum sales volumes increased 11% and 1% to

94kt and 149kt respectively.

Copper EBIT margins too increased 24% QoQ to USc28.4/lb. EBIT increased 36% QoQ to INR2.9b due to

improved recoveries, greater value from selenium and ‘waste to wealth’ initiatives. Copper smelters reported

best ever quarterly production of 95kt.

According to our calculations, the cost of production (CoP) was flat at USD1817/t for Aluminum. Costs at

Renukoot smelter were higher, but lower at Hirakud smelter. Segmental EBITDA increased 16% QoQ to INR5.3b

due to higher share of value added products and better premium

150m warrants have been allotted to Promoters at INR144.35/share. INR5.4b towards 25% of consideration has

been received.

Hindalco has received INR700m as return of capital from AV Minerals (Netherlands).

Novelis will report results later in month. We expect 4QFY12 EBITDA at USD234m. Consolidated Annual results

too are expected in May end.

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL

Valuation and View



After couple of quarters of subdued performance, 4Q stronger operating performance is encouraging. However,

weak aluminum prices will suppress margins in subsequent quarters. Uncertainties over coal supply to Mahan

smelter have put a question mark on the viability of this project because the CoP is likely to be higher than

current metal prices without captive coal/linkage at reasonable prices. We believe Utkal Alumina is a profitable

and viable project due to captive bauxite mines. Timely execution of this project will trigger re-rating



Stock is trading at FY13 EV/EBITDA of 5.4x PE of 6x and P/BV of 1x. These valuations are ignoring value of

INR210b of CapEx spent so far. We re-iterate BUY.

IDFC 4QFY12: Strong loan growth; Higher provisions led to lower PAT; Stable asset quality

IDFC 4QFY12 PAT grew 17% YoY to INR3.3b (10% below estimates) due to higher than expected provisions (made

over and above the prudential guidelines) of INR838m (v/s est. of INR497m). Strong asset growth,

improvement in spreads (4bp QoQ) and stable asset quality were the major positives during the quarter.



Business growth remained strong:

outstanding loans grew 10% QoQ and 28% YoY to INR482b. IDFC’s exposure

in transportation segment increased by 15% both on YoY as well as on a QoQ basis. Sanctions grew 64% YoY to

INR102b and disbursements grew 42% YoY to INR59.8b. The growth in outstanding disbursements was strong

and well diversified as disbursements in the telecom, energy and transportation segments grew by 35% YoY,

31% YoY and 20% YoY respectively. Spreads (on a 12-month rolling basis) improved to 2.4% v/s 2.37% in 3QFY12

implying a 4bp QoQ improvement in quarterly spreads in 4QFY12.

Asset quality remains stable QoQ; Provision coverage improves to ~52% v/s 35% a quarter ago : The

GNPAs

remaining steady on a QoQ basis, while the PCR improved to ~52% v/s 35% a quarter ago. Provisioning

expenses at INR838m were 69% higher than est. due to 1) INR250m worth excess provisions made (over and

above the regulatory requirements) to shore up the loan loss coverage and 2) some investment depreciation

provisions made apart from the regular standard asset provisions made during the quarter. Adjusting for which,

the bottomline was largely in line with our estimates. The loan loss ratio stood at 1.5% of standard loans. IDFC

has not booked any NPV loss on account of rescheduling / restructuring.

Liabilities grow in tandem with assets; mix tilts towards short term:

Borrowings growth for the quarter grew

largely tracked the loan growth as it grew by 6% QoQ and 28% YoY to INR464b. The borrowing mix tilted toward

short term borrowings as its proportion in the overall liability profile increased to 16% as on March 2012 v/s

12% a quarter ago and 5% in FY11. Foreign currency loans declined by 17% QoQ resulting into decline in share

of foreign currency loans to 9% from 11% in 3QFY12.

Valuation and view:

IDFC has delivered a strong performance on the growth and margin front. Loan growth

momentum has picked up led by refinancing opportunities

We expect IDFC to report an EPS of INR11 and INR13 and ABV (for investment in other ventures) of INR82 and

INR92 for FY13E and FY14E respectively. The stock trades AP/ABV of at 1.1x FY13E BV and 1x FY14E BV.



IOB 4QFY12: Margins up 13bp QoQ; Asset quality remains volatile



Indian Overseas Bank’s 4QFY12 Net profits grew 12% YoY and improved 4.5x QoQ to INR4.9b. Strong growth in

other income(+31% YoY and 23% QoQ) and lower provisions (13% YoY and 42% QoQ) led to strong performance

in profit growth. Key Highlights:

NII grew 10% both on a YoY and on a QoQ basis to INR13.4b. However adjusted for interest on IT refund

adjusted (INR433m) and interest income reversals amounting to INR540m, NII grew 11% YoY and QoQ.

Reported Margins were up 13bp QoQ. 12bp QoQ increase in cost of funds was compensated by 18bp QoQ

improvement in yield on loans.

Absolute GNPA declined 1% QoQ, but was up 27% YoY. Slippages remained elevated INR10.2b v/s INR6.9b in

3QFY12. However, GNPA remained largely flat QoQ led by higher write offs

Out of the total slippages ~35% came from services (other than CRE), 13% from metals, 12% from textiles and

19% from engineering companies. Net slippages during the quarter stood at INR5.7b vs INR4b in 3QFY12.

Loans restructured during the quarter stood INR31.7b as compared with INR32.2b in 3QFY12. Out of the total

restructuring INR12.4b from Aviation, INR8b from Infrastructure, INR4b came from power, INR2.5b from metals

and INR1.5b from textiles. Outstanding restructured loans stood at INR126.4b (8.8% of the loan book)

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL



Tax rate for the quarter stood at 14% as IOB has availed benefit of (a) INR2.3b for write off and long term infra

lending (b) Reversal of some excess provisions of the earlier years

Valuation and view



IOB is yet to provide INR2b for achieving counter cyclical provisions (deadline extended for it till FY13)

requirement. Higher amount of restructured loans at 8.8% of the loan book coupled with expected increase of

INR18-20b in 1HFY13 likely to take restructured loans as a %age to overall loans to 10%.



The stock trades at P/BV of 0.6x of FY13 BV of INR147. Maintain Neutral.

ITC: Excise duty increased by 4% as specific excise duty replaces ad valorem duty

Government of India has withdrawn 10% ad-valorem excise duty imposed on cigarettes at 50% of MRP, which

implied an effective increase in specific excise duty of ~16%. This has been replaced with ~20% increase in specific

excise duty

Our View:



ITC needs to take price increase of 10% just to neutralize the impact of 20% increase in excise duty and 1.4%

increase in VAT. Further, ITC needs to take a price increase of 14% to achieve a 15% EBIT growth with 2%

volume growth.



ITC has already undertaken price increase of 12% post budget and needs a further price increase of 2-3% during

the mid-year to cover increase in taxes and duties and grow its EBIT by 15% in FY13.



Reversion to specific excise duty is positive as it reduces the cascading impact of taxes. Ad-valorem excise duty

would have resulted in increased excise outgo every time the company changes prices of cigarettes, thus

making the margin management difficult.



Additionaly operational difficulties exist in implementation of ad-valorem rates due to differential VAT rates and

other local taxes across various states.

Although positive, current rollback does not rule out the possibility of

imposition of ad-valorem excise or a hybrid structure in future.



Our earnings estimate largely remains unchanged with ~18% PAT CAGR over FY12-14.



We remain positive on the long term prospects of ITC and model ~17.8% PAT CAGR in FY12-FY14. The stock

trades at 24.2x FY13 EPS and 20.5x FY14 EPS post 10% correction from recent highs.



Our target price of INR251 (12% upside) is based on 23x FY14 earnings. Maintain Buy.

JUBILANT FOODWORKS: Officially launches “Dunkin Donuts & More”;includes sandwiches, smoothies



Jubilant Foodworks has officially launched Dunkin Donuts in its flagship store at Connaught Place in New Delhi

branded “Dunkin Donuts & More”. It has added “& More” to signify wide product range and unique experience

that the restaurant will offer.

“Dunkin Donuts & More” will offer the best of its international menu as well as products developed specially for

India. The menu will feature a wide range of donuts, Dunkin’ original blend drip coffee, and espresso-based

beverages.

The format is designed to appeal to a “sit down, leisure” crowd rather than the traditional take away segment in

the US.

Pricing is competitive with the hot beverages priced between Coffee Day and Coffee Bean while almost all the

cold beverages and the food is priced at par with Coffee Day

JUBL plans to open 10 stores in FY13 and 80-100 stores in the coming five years.

We believe that the launch enables JUBL to enter high growth segment of coffee retailing, on a differentiated

platform.

However, we note that unlike in pizza where Dominos was a category creator, Dunkins will compete with

established players like Café Coffee Day, Costa Coffee, Barista Lavazza, and soon to be launched Starbucks. We

like the business model and positioning of JUBL in the QSR space. However, valuations at 45x FY13 and 31x FY14

leave little scope for disappointments. We maintain our Neutral rating on the stock.

JUBILANT FOODWORKS 4QFY12: SSS up 26%; Price hikes, operating leverage expand margins; Neutral



Jubilant Foodworks’ (JUBI IN, Mkt Cap USD1.2b, CMP INR1,050, Neutral) 4QFY12 Adj PAT grew 51.8% to

INR293m (v/s est INR279m).

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL



Same store sales (SSS) growth at 26.2% is healthy. Same store orders grew 24-25% (23-24% in 3Q) which

indicates deterioration in mix as the prices have been going up; FY12 prices were up 12%.

Gross margin was up 10bp YoY at 74.6% and flat QoQ as price increases neutralized the increased cost. EBITDA

margin expanded 140bp YoY. Cost towards commissioning Dunkin Donuts stores was INR16m in 4Q.

FY13 store rollout is guided at 90 stores. The relocation of commissaries in the west and east and new

commissary in Chandigarh will all be operational in 1QFY13. The 2 stores opened in Sri Lanka are performing

well; it plans to add five more stores in FY13.

Dunkin Donuts: The first flagship store in Delhi and the CML (central manufacturing location) was opened in

May 2012; management plans to open 10 stores in FY13 and to further scale up to 80-100 over five years. We

expect losses to increase in the initial phase of rollout; investments in brand building will be higher for Dunkin in

an environment of stiff competition from incumbents and likely competition from new players like Starbucks.

We remain positive on the QSR growth opportunity and strength of Dominos brand and USP in delivery based

own store model. Stock seems fairly valued at 43.8x FY13 and 29.9x FY14 EPS. Neutral.



KOTAK MAHINDRA 4QFY12: SA deposits up 14% QoQ; NIM up 10bp QoQ; Valuations rich; Neutral



Kotak Mahindra Bank’s 4QFY12 consolidated PAT grew 6% YoY (+ 13% QoQ) to INR5.2b. PAT excluding profits

from life insurance business grew 9% YoY and 13% QoQ to INR4.7b.



During the quarter, profitability of non-lending business viz. capital market and asset management business

improved, as a consequence share of lending business in overall profitability declined to 76% vs. 83% a quarter

ago.



The last three quarters of sluggish performance, profitability of capital market related business saw a significant

improvement (+96% QoQ, however it declined 17% on a YoY basis) to INR550m. This was partially helped by

some one-off opportunity (quantum not disclosed) to earn fees from tax free bond issuance by IFCs during the

quarter.



The CASA ratio improved 450bp QoQ and 650bp since 1HFY12 to 32.2%. The Reported consolidated margins

improved 10bp QoQ to 4.8%.



Lending business profitability remained healthy (+4% QoQ and +17%YoY) at INR4b led by 1) strong loan growth

(+29% YoY, though flat QoQ) (2) 10bp QoQ improvement in margin and 3) superior asset quality performance

(NPA provisions virtually NIL during the quarter).



Consolidated loans were largely flat QoQ (+29% YoY) due to 15% QoQ decline in corporate loans. Management

stated that running down of short term corporate loans is in-line with the strategy of reducing the outstanding

balance at the end of the year so that PSL targets will be lower next year.

Valuation and view :

On a Consolidated basis, KMB is expected to report ROE of 15%+ over FY12-14. Stock trades at

2.7x and 2.4x FY13E and FY14E consolidated BV and 19.4x FY13E and 16.7x FY14E consolidated EPS. We to maintain

Neutral

with SOTP based target price of INR500.

L&T: Guidance expectations - understanding likely surprises & disappointments

#1 Order intake: Continues trickling in, but mix adverse



L&T began FY12 with an order intake guidance of 15-20%, which was curtailed to 15% in August 2011, and

further brought down to 5% in October 2011;



Meeting 5% guidance difficult: During 9mFY12, order intake at INR494b and residual to achieve 5% growth

guidance in FY12 stands at INR343b.



FY13… drawing line between comforting / surprising - Focus more FY13 visbility, rather than a possible 5%

miss. Intake run-rate of ~INR650-750b in FY13 will be comforting; while guidance of INR800b+ of intake will

be a positive surprise.



FY12 order intake: reading between the lines;

Excluding BTG / in-house projects, order intake to be still up

10-14% YoY:



Mix change adverse for margins…but

demonstrates the adaptability: Mmix is adverse for margins, as the

share of heavy engineering / fabrication component (process / hydrocarbons / BTG) etc has declined from

46% in FY11 to 9% in FY12. During 9mFY12, L&T reported that share of infrastructure in order intake stands

at 45% vs 38% in FY11 and 27% in FY10.

FY12 Management guidance: order intake and margin expectations had been downgraded

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

May-11

+25%

Aug-11

+25%

Oct-11

+25%

Feb-12

+25%

MOSLFY12E MOSL FY13E

22.1

8.0

-5%

+5%

+15-20%

+15%

+5%

down

down 75-

-100bp

stable

Margins

50bp

125bp

#2 Revenue growth continues to be robust; expect 10% guidance for FY13



BTB ratio of 2.9x reported and 2.6x excluding power BTG projects (ttm, Dec 2011) suggests that revenue

growth in a normalized environment would have been robust at 15-20%.



FY13 guidance for ~10% revenue growth will be comforting, while 15-20% growth guidance will act as a

positive surprise

#3 Margins: Emerging headwinds, further pressures possible



Guided for a 50bp drop in margins and later revised the same to a 75-125bp correction. During 9mFY12,

E&C business EBIDTA margins are down 74bp to 11.6%. We factor in EBIDTA margins of 11.8% in FY12

(down 100bp) and stable in FY13. Ee expect possibilities of further 50bp YoY decline in E&C EBIDTA margin

guidance in FY13.

Valuation & View:

Stock quotes at PER of 15x FY12 and 14x FY13E

Revenues

Order

Intake

LUPIN 4QFY12: Core EBITDA in-line; Strong launch pipeline for US; India growth momentum to sustain



Lupin's 4QFY12 topline grew 24% YoY to INR18.8b. Excluding one-offs, core topline is estimated to have grown

by 19.6% to INR18.2b. Reported EBITDA grew 26.4% to INR3.32b. Excluding one-offs, core EBITDA is estimated

to have grown by 14.5% to INR3b.



Reported PAT de-grew 37% YoY to INR1.55b. PAT was impacted due to tax of INR132.8m on unrealized gains on

inventories sold to foreign subsidiaries. For the full year FY12, this number was INR563.4m.



Adj 4Q PAT at INR1.69b was lower than estimates. This is mainly due to significantly higher tax outgo as export

benefits of some of the manufacturing units in EOUs



Key growth drivers for future will be: (1) Increased traction in India formulations and emerging markets, (2)

Strong launch pipeline for US, and (3) contribution from oral contraceptives in US.



Inorganic initiatives: Management will focus on getting access to certain high-end technologies, brand buyout

and access to front-ends in certain key emerging markets (especially Latam).

Valuation and View

at 21.4x FY13; BUY

We expect Lupin's core operations (excluding one-off upsides) to record 18% revenue CAGR and 23% EPS CAGR over

FY12-14.

NMDC: New blocks to drive 15% volumes CAGR; upgrading EPS 6% for FY13; expect 50% upgrade in R&R

We met Mr S Thiagrajan, Director (Finance) of NMDC. Key highlights:



There is very strong demand for NMDC’s iron ore products in India. Demand is likely to grow further as steel

production will continue to grow in the country. Iron ore pricing is likely to remain firm.



NMDC is now pricing ore based on market data rather than export parity. This is leading to better realization as

compared to export parity. Iron ore prices for fines have increased by an average of 10% QoQ in 1QFY13.



NMDC shipments are constraints by limitation in evacuation facilities from Bailadila region. Slurry pipe line to

Essar’s pellet plant in Vizag was blown up by naxals in Oct 2011. The repair work is still hampered. NMDC has

accumulated inventories of 5m tons.



NMDC is working with Indian railways to improve the carrying capacity.



The iron ore shipments are expected to increase at CAGR of 15% to 42m tons over FY12-FY15 driven by 7mtpa

capacity of 11B block in Chhattisgarh and another 7mtpa capacity of Kumarswamy mines in Karnataka.

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL



According to the internal re-assessment, the total R&R are expected to increase by ~50% to 2.2b tons.

FY13 EPS upgraded 6%; valuations at EV/ton of USD4 (EBITDA per ton of USD75) and EV/EBITDA of 4.1x is

compelling

PNB 4QFY12: Restructured book swells 50% QoQ; NIMs down 40bp QoQ



NII up 9% YoY to INR33b (8% below est)

NIm’s down sharply by 38bp QoQ to 3.5%; YoL down 57bp QoQ, COD up 6bp QoQ leading to margin

contraction; NIM’s down on back of interest income reversal of INR1.3b.



Management has reiterated its margin guidance of 3.5%+. We model in NIM decline of ~15bp for FY12 and NII

CAGR is expected to be ~15% over FY12/14.



Non-interest income up 11% YoY and 34% QoQ driven by a steep 83% QoQ increase in profit on sale of

investments; Recoveries from written off accounts were strong at INR2.4b v/s INR920m a quarter ago



Gross slippages at INR28.2b v/s INR16.8b in 3QFY12; Recoveries & upgradations at INR4.75b v/s INR3.6b

3QFY12; NPA provisions up 62% QoQ to INR9.4b



Restructured INR86b (290bp of o/s loans) - INR47b -SEB & INR22b – aviation; Provided INR1.55b towards NPV

losses in 4Q



as global loans grew 22% YoY and 12% QoQ; Domestic loans grew 19% YoY and 12% QoQ; Overseas loans too

grew strongly by 69% YoY and 10% QoQ



Deposit up 21% YoY and 6% QOQ; CASA ratio remained stable QoQ at ~36%

Valuation & View:

Trades at 1x FY13E BV and 0.8x FY14E BV.

COF up 6bp QoQ; YOL decline 57bp

Slippages increased sharply QoQ – a negative surprise

Reliance Inds: FY12 CY11 Annual Report Analysis

Reliance FY12 annual report does not have any surprises. Key highlights include



To invest cautiously in E&P Business: RIL is committed to investing in this business, but simultaneously remain

conscious of its responsibility of deploying capital prudently.



Expect earnings contribution from shale gas: RIL’s shale gas JVs in Marcellus and Eagle ford blocks in US are

likely to contribute to RIL’s medium term earnings growth.

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL



Expects refining margins to remain range bound: Refining business performance will be primarily governed by

the global economic environment and crude oil price movement. While, economic outlook continues to remain

uncertain, refining margins are expected to remain range bound in near term.

Downgrades 1P reserves by 7% and 1P+developed reserves by 36% production data v/s original production

geological model, validated by experts

Arbitration notice issued to govt.; RIL believes that cost recovery can’t be denied

RIL has reiterated its earlier announced investment plans for a) Coke gasification facilities with capex of USD4b

over the next 3-4 years; b) USD8b across polyester and polymers chain over the next 3-4 years and USD450m

towards rubber business (RIL-SIBUR JV).

RIL has invested ~USD8b in new businesses ranging from Retail, SEZs, Shale Gas, Airlines, Hotels to BWA. Of

these, it is actively focusing on Retail, Shale Gas and BWA.

SHRIRAM TRANSPORT: Below est; Margins decline 15bp QoQ; Higher provisions impact earnings



Shriram Transport’s 4QFY12 PAT came in 9% below estimate at INR3.08b (up 2% QoQ) led by higher than

expected provisioning expenses. Margin contraction of 15bp QoQ to 7.24% and higher than expected

provisioning expenses (indicating pressure on asset quality) were key negatives.

Business growth remain low; outlook clouded:

AUMs during the quarter grew 11% YoY and 2% QoQ to

INR402b. On book AUMs grew by 11% YoY but declined 7% QoQ to INR220b, mainly due to higher asset

securitization done during the quarter. Disbursements declined sharply by 20% YoY and remained largely

flattish QoQ at INR49.8b. On a sequential basis, disbursements in the new CV segment grew strongly by 31.7%,

while the disbursements in the old CV segment declined by 4.5%.

Share of off books AUMs increases considerably; RBI guidelines on PSL would set the tone going forward:

Growth in off books AUMs remained strong at 17% QoQ and 12% YoY. Consequently, the share of off balance

sheet AUMs increased to 45% (of overall AUMs) as compared with 40% in previous quarter. Unaccounted

(deferred) securitization income stood at ~INR28b.

Reported NIMs (on AUM) continued to contract:

NII (including securitization income) grew 5% YoY but

remained flat QoQ at INR8.0b as NIMs on AUMs contracted by 15bp QoQ to 7.24%. Over the past two quarters,

the NIMs have contracted sharply by ~95bp. The management is confident of maintaining margins above 7%

levels and expects margins to improve in coming quarters.

Asset quality pressures persist; provisions remain elevated marring bottomline :

Asset quality remained under

pressure as GNPAs increased 3% QoQ resulting into %GNPAs reaching 3.06% (highest level in past 24 quarters).

Although the sequential increase in GNPAs has been limited, provisioning expenses remained higher than

expected at INR1.9b, up 66% YoY and stable QoQ, which led to lower than expected bottomline. As a result,

the provision coverage has remained stable QoQ at ~86%.

Valuation and view :

Over the past few quarters, SHTF’s performance has been impacted by various factors

such as 1) moderating asset growth, contrary to trends observed among its peers and certain PSU and private

banks in the CV financing space, 2) steep contraction in margins led by pressure on yields and cost front and 3)

asset quality pressures leading to higher credit costs.

We model in AUM CAGR of ~11% over FY12-14E. However, superior return ratios with ROA of ~3% and ROE of

21% are attractive.

Current valuations at 1.6x FY13 and 1.3x FY14 BV discount concerns in our view.



SOBHA DEVELOPERS: PAT up 2.2x QoQ; FY12 sales ahead of guidance; Targets ~INR20b sales in FY13



Sobha Developers reported 4QFY12 numbers with sequential margin improvement. Standalone revenues were

up 49% YoY to INR4.7b. Consolidated revenue stood at INR5.2b (up 64% YoY).

EBITDA margin improved sharply to 38% (v/s 31% in 3QFY12) on the back of land sales (~40% EBITDA margin)

and better margin from Sobha City projects.

Sales volume improved QoQ to 0.9msf (INR4.6b) v/s 0.8msf (INR4.5b) in 3QFY12. Total sales in FY12 stood at

3.3msf (~INR17b) v/s 2.8msf (INR11b) in FY11 and management guidance of 3msf (INR15b). The management

has guided FY13 sales of 3.75msf (~INR20b).

On the back of improved operating cash flow, consolidated net debt declined ~INR1.9b QoQ, INR11.4b, implying

net DER of 0.57x. Additionally, in April-12, it already repaid INR1.3b out of INR3.5b of repayment due in FY13.

May

2012

WIN – Week In a Nutshell

WEEK IN A NUTSHELL



The mgmtt commentary suggests strong expectation of recovery in sector over FY13 with measures like interest

rate cut. Besides de-leveraging, Sobha would also continue to pursue value-accretive, land acquisition strategy.

The stock trades at P/E of 11.3x FY12 EPS of INR28.2 and 1.6x FY12 BV. Not Rated.

UNINOR 1QCY12: EBITDA loss at INR5.4b; KPIs in line; lowest quarterly capex; ~INR34b write-off



Telenor’s Indian subsidiary Uninor reported 1QCY12 revenue of INR8.8b, up 13% QoQ. EBITDA loss increased

12% QoQ to INR5.4b.

KPI’s were in line with mobile traffic growing 15% QoQ and RPM at 28p – 35% discount vs 42-44p for

Bharti/Idea.

Environment remains challenging for Uninor as indicated by 1) Increase in net debt (up by INR11b QoQ to

INR71b), 2) 45% QoQ reduction in capex to INR1.2b (lowest quarterly capex since launch), and 3) Recognition of

fresh impairment loss to the tune of ~INR 33.5b (~INR34.6b in 4QCY11 taking total impairment to INR68b; no

further accounting exposure to India).

Management statement from Telenor mentions that TRAI recommendations on auction format are

unacceptable and it would be almost impossible for it to participate in such an auction.

Potential exit of Uninor can lead to improvement in the operating environment given its discounted pricing

strategy and relatively large scale (~25m VLR subs; 4% of industry base).



UNION BANK 4QFY12: Above est; Asset quality no surprises; Trades at 0.9x FY12 BV



Union Bank of India reported 4QFY12 PAT of ~INR7.7b (v/s est INR4.4b). Better-than-expected loans and fee

income growth, higher recoveries from written off accounts and lower than est (11%) opex led to 26% higher

than est operating profit growth. Unlike peers, there was no negative surprise on asset quality. Lower credit

cost coupled with MTM depreciation reversal led to 16% lower than expected provisions. During the quarter,

UNBK restructured INR34.2b; ex large accounts, net outstanding standard restructured loans stands at 5% of

the loan book.

Slippages at INR6.1b v/s INR5.7b a quarter ago:

In 4QFY12, gross slippages stood at INR6.1b (annualized

slippage ratio of 1.6%; v/s INR31.5b in 9MFY12) and recoveries and upgradations remained stable at INR2b.

GNPA and NNPA in absolute terms was up 5% QoQ each at INR54.5b and INR30.2b, respectively. In % terms,

GNPA declined to 3% v/s .3% in 3QFY12. PCR including technical write-offs remained largely stable at 62.2%. For

FY12, slippages stood at INR37.6b v/s INR29.2b in FY11. Slippages seems to have normalized over past two

quarters and management expects to contain GNPA at similar levels in FY13 led by improvement in recoveries

and up-gradation.

Restructured INR32.4b in 4QFY12:

UNBK added INR32.4b restructured loans (180bp of overall), of which

INR18b was on account of SEBs. Net outstanding restructured loan book (facility-wise) stood at INR74.6b (4.1%

of overall loans) whereas borrower-wise it stood at INR111b (6.1% of overall loans). Ex-SEB net o/s restructured

loan book (borrower-wise) stood at INR91b (5% of overall loans), in line with peers. UNBK’s total exposure to

SEB stood at INR110b of which INR70b is towards Gujarat and Karnataka SEB where management does not see

any concern. Further, of other SEB exposure of INR40b, INR20b is already restructured and INR11b is expected

to be restructured in 1QFY13. Thereby, large part of SEB restructuring is likely to be over in next quarter. Ex SEB,

management does not expect any significant restructuring in 1QFY13.

Margins down 5bp QoQ:

NII grew 5% QoQ and 9% YoY to INR18.8b (v/s est INR18.2b). Reported NIM declined

5bp QoQ to 3.26%. While cost of funds increased 11bp QoQ, yield on loans were up 9bp QoQ leading to

contraction in margin. For FY12, margins stood at 3.2% v/s 3.3% in FY11. Management expects margins to

remain under pressure in 1HFY13 and has guided 3%+ for FY13.

Strong balance sheet growth; CASA ratio down QoQ:

Loans grew 18% YoY (+ 16% QoQ) to INR1.8t, whereas

deposits grew 10% YoY (+8.5% QoQ) to INR2.2t. As a result, CD ratio improved sharply to 81.2% v/s 76.1% in

3QFY12 and 75.6% in 4QFY11. Management has guided for FY13 loan and deposit growth of 19% and 17%

respectively.

Valuation and view :

Healthy income growth coupled higher base of provisions will lead to strong earnings

CAGR of 24.5%+ over FY13/14. We expect RoA of 0.8%+ and RoE of 17%+ over FY13/14; EPS of INR43/50, and

BV INR269/307. Stock trades at P/BV of 0.8x FY13E, 0.7x FY14E and dividend yield of 3.9%.

Buy.

May

2012



WIN – Week In a Nutshell

WEEK IN A NUTSHELL

WIN Collage

The new French president changes the tune of Europe’s debate, but huge challenges remain

AS CANDIDATE, François Hollande found the doors of Europe’s chancelleries shut in his face. He visited London, but

David Cameron refused to meet him. Angela Merkel would not see him in Berlin, and openly supported his

opponent. Italy’s Mario Monti did not find time in his diary. How foolish they all seem. And how pleasing for

President-elect Hollande that so many now sing to his tune on the need for economic growth.

The German chancellor has invited the new French president to Berlin as soon as possible. Herman Van Rompuy,

president of the European Council, has summoned European Union leaders to dinner in Brussels on May 23rd to

discuss how the Germanic fiscal compact might be complemented by a French-inspired growth compact. José

Manuel Barroso, president of the European Commission, can scarcely contain his excitement. Mr Hollande wants

more investment? Here are plans to recapitalise the European Investment Bank and to issue “project bonds”

sweetened by the EU for big infrastructure projects. And by the way, let’s also have a bigger EU budget. Too much

austerity? The commission wants to relax deficit-reduction targets, especially for Spain.

For all the buzz, Mr Hollande will not get much of a honeymoon. Mr Normal comes to power at an abnormal time,

with the debt crisis taking another lurch for the worse. He faces three challenges in Europe: to manage the

partnership with Germany; to demonstrate economic competence in balancing growth with fiscal discipline; and to

handle the crisis in Greece that could yet push the country out of the euro.

The relationship with Mrs Merkel is perhaps the most straightforward. Mr Hollande does not seem to bear a grudge

over her snub. His unpretentious calm may suit the chancellor better than the erratic grandstanding of Mr Sarkozy.

But in policy terms Berlin and Paris are far apart. She may be ready to temper her views on austerity, but bringing

down deficits and debts remains her priority. Mrs Merkel is ready to talk about growth, but not if it means

reopening the fiscal compact and not if it will cost Germany many more billions. Volker Kauder, a political ally, sums

it up like this: Germany is not here to finance French election promises. This means that any growth compact will be

modest, consisting mainly of the commission’s existing proposals. It is sensible stuff, but will not itself lift Europe

out of recession.

Mr Hollande’s standing will rest especially on his economic credibility. He faces an early test, since the commission’s

new forecasts are expected to confirm that France will miss its deficit target for next year. Having campaigned

against austerity, Mr Hollande may yet have to do some belt-tightening. At the end of the month, moreover, the

commission will issue recommendations for reforms to redress France’s declining competitiveness that are unlikely

to be much to Mr Hollande’s liking.

At present, the financial markets seem untroubled by the election of a man who once described them as his true

enemy. But they are increasingly nervous about Greece. On the same day that French voters elected Mr Hollande,

Greek voters granted victory to nobody. The conservative New Democracy party and the socialist Pasok movement

were both crushed. Between them, they usually take about 80% of the vote; this time they barely mustered 30%. In

a fifth year of recession, the election amounts to a rejection of the EU-IMF austerity programme that the two

parties had accepted. More broadly, it was a denunciation of decades of incompetence and corruption.

But having made clear their revulsion with the political elite, Greek voters were less clear about what should replace

it. Their support was scattered among anti-austerity factions ranging from far left to neo-Nazi right, from which it

seems impossible to create a government. They will probably be called back to the polling booths in June. The hope

in Brussels is that the mess will somehow resemble a two-round French election: citizens vote in the first with their

hearts, and in the second with their heads.

Even if this happens, the mainstream parties will try to renegotiate the programme. But there is little patience for

more haggling. It was only a few months ago that Greece was granted a second bail-out that wrote off half its debt.

For the past two years Greece and its donors have held each other in a balance of financial terror, each fearing the

WIN – Week In a Nutshell

May

2012

WEEK IN A NUTSHELL

meltdown that would follow a Greek default and departure from the euro. The risk of contagion is ever-present:

Spain is in worse shape than before, Italy is on a knife-edge. Europe’s rescue funds, though strengthened, could not

credibly cover these two. The boost provided by liquidity from the European Central Bank is wearing off. Most

officials in Brussels just want to keep muddling through. After all, the Greek economy is small. If the bail-out had to

be extended, it would be mostly to repay money owed to donors. Yet this game can be played only if Greece makes

a reasonable show of complying with reforms, which Greek voters are making almost impossible.

What to tell Angela

The danger is that Greece and its creditors may talk themselves into a chaotic rupture that nobody is prepared for

and that has consequences nobody can predict. When he meets Mrs Merkel next week, Mr Hollande should quickly

do a deal on the growth compact and get on to the more pressing questions of what to do about Greece and how to

stabilise the euro in the longer term. Mrs Merkel may say it is too early to talk of Eurobonds or of a more

accommodating policy from the ECB. She may add that Greece shows the moral hazard inherent in any schemes for

greater risk-sharing. But Mr Hollande could present the issue the other way round. It is only when the euro zone

becomes more closely bound together that it can credibly threaten to cut off Greece without fearing for its own

survival.

Source: Economist

WIN – Week In a Nutshell

May

2012