WEEK IN A NUTSHELL
WIN-dow to the week that was
Week In a Nutshell (WIN).
Week
ended
9 Sep
Key WIN-dicators
THERMAX – Margins seeing structural
change?
Markets for the week were flat with all the hard work through the
week (gain of 2%) lost on the last trading day. While one of the calmest
week in terms of news flow for some time, the highlight being the
outlining of the 447 USD Bn JOBS PLAN by President Barack Obama. If
one has to play contrarian, this is the first of the last 3 packages which
has not been received with a bug HURRAH – So can it work??
TELECOM –
The sector just does not go out of news. This time there was
an exchange of volleys - Mr. Sunil Mittal leading with an announcement
of a definite increase in tariffs in the future to make up for lower
revenues. TRAI responded with indication of intervention if tariffs keep
going up. Mr. Himanshu of Idea reiterated that publicity around tariff
hikes is overdone and long term growth will depend on data.
LABOUR TROUBLE –
Maruti continues to have problems at Manesar and
it does not seem to be a short term one. It couldn’t have been more ill-
timed considering success of their New Swift. The company is having to
juggle around employees from one factory to another and also in cases
move some lines to Gurgaon. One or a combination of the following are
at play – Political motive, Maruti losing the upper hand in bargaining
with prosperity of the auto belt, and lastly, loose labour laws in India.
We were lucky to have a services boom and skip industrial progression. If
we now need a manufacturing boom, we need stronger labour laws.
Maharashtra increased daily wages
from INR 127/day to INR 200/day
resulting in increased outlay of INR 50 Bn. This compares with spending
of less than INR 3.5 Bn over the last 3 years. Wonder why!!!
PRIMARY INFLATION – Not letting up
Delhi – Policy Drive, Must Read
Some of the highlights of this edition
Policymaker Series – Meeting Notes with various ministries
Union Bank of India management meet takeaways
Indonesia and India Power plants
WoW - Nifty Change (+0.4%)
Happy Reading and Have a GREAT WEEKEND!!
WWW – WIN Weekend Wisdom
Investing probably is not played best as a group sport
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2011

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[W]INside this week’s edition
WIN-teresting data points .................................................................................................................. 4
WIN-ning charts & chats ..................................................................................................................... 5
NIFTY: Is it time to turn bullish?? .............................................................................................................................. 5
Mr. Obama’s tenure – A quick reportcard ................................................................................................................ 5
WIN-conomics .................................................................................................................................... 6
WEEKLY INFLATION: Weekly primary inflation accelerates on non-food and minerals inflation ............................ 6
THE POLICYMAKER: Delhi Drive - Core sectors in action mode; Government committed to 9%+ GDP ................... 6
Interaction with Mr Sriprakash Jaiswal, Union Minister of Coal; Mr N C Jha, Chairman, Coal India .................... 6
Interaction with Mr Rakesh Jain, Jt Secretary and Financial Advisor, Ministry of Power ..................................... 6
Interaction with Mr G Srinivas, Joint Secretary, Ministry of Mines ...................................................................... 7
Interaction with Mr B K Chaturvedi, Member, Planning Commission .................................................................. 7
WIN-sights from management interaction .......................................................................................... 8
EDUCOMP- Shantanu Prakash, MD & CEO ............................................................................................................... 8
IDFC: Dr Rajiv Lall, CEO & MD ................................................................................................................................... 9
INFOSYS: SD Shibulal, CEO ......................................................................................................................................10
Kirit Parikh, Expert on oil and gas ...........................................................................................................................12
LARSEN & TOUBRO: R Shankar Raman, CFO...........................................................................................................12
MARUTI SUZUKI : RC Bhargava, Chairman ..............................................................................................................13
REC: HD Khunteta, CMD ..........................................................................................................................................15
SIAM + M&M - Pawan Goenka, President – Automotive & Farm Equipment Sectors ...........................................17
UNION BANK Of INDIA: Mr. S S Mundra, ED ...........................................................................................................18
WIN Sector Updates ......................................................................................................................... 19
INDIAN BANKING: Incremental loan to infra down marginally MoM; Ex- Infra loan growth at 18% .....................19
INDIAN FINANCIALS: Loan growth improves to 20.6%; Deposit growth at 17.9%; Lower CD ratio at 35% ...........19
INDIAN TELECOM: 3T-Tele Talk Time: Indian telecom monthly (September 2011) ...............................................19
INDIAN UTILITIES: August all-India generation up 9%, PLF up 212bp YoY..............................................................20
MEDIA: Sony gets stronger at No.2; Star Plus stable; Colors & Zee TV grow [News Article] .................................20
METALS WEEKLY: North American steel prices continue to recover; Copper quarterly production up ................21
Oil AND GAS: CAG Report on KG-D6 .......................................................................................................................21
STEEL: Real consumption flat YoY; production up 17%; India net exporter (JPC prov. data for Aug) ....................21
TELECOM: Mobile tariffs to go up further, says Sunil Mittal .................................................................................21
TELECOM: TRAI warns telcos on call rates, may intervene [News Article] .............................................................22
WIN Corporate Corner ...................................................................................................................... 23
ASHOK LEYLAND: August volumes down 3.5% YoY (8% MoM) to 7,218 units. NOT RATED ..................................23
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INDIAN UTILITIES (Delhi discoms): Interactions with NTPC / RELI ..........................................................................23
JSW STEEL: Supreme Court allows e-auction of iron ore stock pile in Karnataka; Concall Takeaways ..................23
JPA: May rope in cement biz partner - Talks with Votorantim, Cemex for stake sale [News Article] ....................24
MARUTI SUZUKI: Downgrading estimates by 7.5% for FY12 & FY13 ......................................................................24
TATA MOTORS: Jaguar disappoints in Aug 2011 ....................................................................................................25
THERMAX: Interaction with the MD; Order momentum slows down further .......................................................25
TCS: Media Reports Company leading race to acquire Lufthansa Systems; No Impact on EPS. ............................26
MARUTI: Maruti Suzuki to make Swift at Gurgaon, Manesar [News Article] ........................................................26
WIN Collage...................................................................................................................................... 27
Labourers under NREGS get Maharashtra bonanza ...............................................................................................27
Indonesia ‘Life-or-Death’ Coal Law to Cut Sales: Energy Markets ..........................................................................27
SEBI triggers move for domestic hedge funds ........................................................................................................28
Nifty Valuations at a glance .............................................................................................................. 29
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2011

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WIN-teresting data points
Global Indices
Sensex
Nikkei
Hang Seng
Dow Jones
FTSE 100
Sectoral Indices
Bank Nifty
CNX IT
BSE Oil
Bond yields-
India
1 Year
10 Year
Last
week
16821
9061
20585
11494
5419
Current
week
17166
8793
19913
11296
5340
WoW
change (%)
2.05
-2.95
-3.27
-1.72
-1.44
P/E Valuations
15.31
16.41
9.20
12.12
10.47
Inflows
FII (Rs B)
DII (Rs B)
Commodities
Oil(US$/Bbl)
Precious Metals
Gold ($/OZ)
Silver ($/OZ)
Metals
Copper(US$/MT)
Zinc(US$/MT)
Aluminum(US$/MT)
Last
Friday
8.26
8.34
This week
8.25
8.29
WoW
change (%)
-0.08
-0.50
Spread Vs US
10 yrs
8.15
6.32
Steel HRC(Rs/T)
Currency
Rs Vs Dollar
Euro Vs Dollar
MTD
23.33
-6.95
Last
week
114.67
1826
42
9127
2213
2419
35811
45.79
1.43
YTD
(Calender)
22.61
210.23
This week
114.3
1870
42
9096
2231
2386
36038
46.20
1.39
WoW
change (%)
-0.32
2.41
1.80
-0.33
0.82
-1.34
0.63
0.89
-2.64
9581
5384
8534
9920
5456
8821
3.53
1.34
3.00
13.72
17.02
11.68
BSE 500 – Key Movers
Top Gainers
Company Name
IVRCL
SKS Microfinance
BF Utilities
NCC
VIP
Delta
IRB
Top Losers
% Change
30.8%
27.5%
23.1%
21.7%
21.2%
17.3%
15.9%
Company Name
Bajaj Electricals
Magma
CMC
Dish TV
Jagran Prakashan
Exide
Power Grid
% Change
6.9%
5.4%
5.1%
4.8%
4.5%
4.3%
4.0%
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WIN-ning charts & chats
NIFTY: Is it time to turn bullish??
Nifty corrected sharply in the last month making a low of 4720 and has since been consolidating.
Over the last few sessions, Nifty has formed an Inverted Head and Shoulder pattern and given a positive
crossover of its neckline at 5100 today.
Sustainance above 5100 levels could see Nifty aim for 5500 levels (according to the pattern target as well as
50% retracement of the fall from 6336 to 4720)
Mr. Obama’s tenure – A quick reportcard
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WIN-conomics
WEEKLY INFLATION: Weekly primary inflation accelerates on non-food and minerals inflation
The weekly primary inflation jumped again while food inflation decelerated on high base during the week
ending August 27, 2011. Fuel inflation remained static as international prices remained rangebound.
Primary articles inflation accelerated sharply to 13.3% (from 12.9% previous week). This is the third
consecutive week of acceleration and was the highest in 23 weeks since December 3, 2010.
The largest component - food inflation however, moderated to 9.5% (from 10.0% of previous week).
Thus the two other major components of primary inflation, viz. non-food (increased to 19.9% from 17.2%)
and mineral group (27.5% from 24.4%) were responsible for acceleration in primary group inflation.
Going forward however, the base effect would work in favour and both primary and food inflation is likely to
decline during the course of September 2011.
Going forward the fuel inflation would have an upward bias for September purely on base effect even if pass
through of international oil prices is deferred.
Primary articles inflation increases despite food decelerating, fuel static
THE POLICYMAKER: Delhi Drive - Core sectors in action mode; Government committed to 9%+ GDP
Key highlights of our Interaction with several key policy makers – Based on these interactions, we believe the
authorities are committed to:
Set right the development framework for core sectors like coal, mines, power and infrastructure, which are
integral to India's socio-economic development
Achieve the targeted 9%+ GDP growth in the 12th Plan.
Interaction with Mr Sriprakash Jaiswal, Union Minister of Coal; Mr N C Jha, Chairman, Coal India
Domestic coal availability is an important issue and Ministry of Coal (MoC) is focused on addressing
bottlenecks in domestic production ramp-up and evacuation.
Production issues would require compromise/alignment with locals, addressing law and order situation in
coal-bearing areas, and resolution of environment/forest issues.
Evacuation issues are being addressed through close consultation with Ministry of Railways; results are
forthcoming with rake availability improving by 12-15 rakes/day in FY12.
Wage negotiation has begun
MoC has proposed mining tax based on profit (rather than revenue) as impact is nearly half.
Interaction with Mr Rakesh Jain, Jt Secretary and Financial Advisor, Ministry of Power
Key challenges facing the sector are: a) Fuel availability b) Financial health of SEBs.
On SEBs front, Shunglu committee report is likely to be out by September, which will be reviewed along with
state power ministries to chalk out a turnaround plan.
Central government would work on "carrot and stick" and bailout possibilities do not exist.
Tariff hike and long-term power availability would help bring down SEB losses. Central government is
tightening short-term funding for SEBs; it would also not intervene if CPSUs cut power supply to states if dues
are not paid as per "commercial terms".
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Onus is thus on States to charter recovery path. However, PFC/REC would not face any issues given escrow
mechanism.
Interaction with Mr G Srinivas, Joint Secretary, Ministry of Mines
Mining in India is still at a very nascent stage with only 3% of surface area surveyed-hence large scale
development could drive GDP growth for states like Orissa, Jharkhand and Chhattisgarh.
The MMDR Act is important, as it could act as a catalyst to bring large areas under mining, through
participation by locals.
Given this, the set-off of CSR activities already spent by mining companies like Coal India could dilute the very
purpose of the Act
Auction of mining blocks is in advanced stage and the process will likely commence in FY12.
Interaction with Mr B K Chaturvedi, Member, Planning Commission
Mr Chaturvedi gave some early indications of priorities that would guide the 12th Plan (FY13-17):
The Planning Commission seeks to raise the growth bar to 9% from ~8% of 11th Plan.
Agriculture and infrastructure are high-focus areas; the targets seem feasible.
The envisaged pick-up in industry may be the biggest challenge.
Interestingly, the Commission seeks to resolve the inflation-interest rate spiral through long-term supply-side
measures in contrast with RBI's demand-side management.
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WIN-sights from management interaction
EDUCOMP- Shantanu Prakash, MD & CEO
http://www.moneycontrol.com/news/business/will-divest-stakesubsidiary-cos-soon-educomp_583510.html
Q: So you have got a clean chit from the IT department officially?
A: Well it takes some time to wrap up all the proceedings but no discrepancy has been observed either in
Educomp or in any of our group companies.
Q: The bigger concern after the collapse of the stock price is how will you fix your balance sheet? You have high
debt, you had an equity raising plan which you seem to have shelved and you have a large FCCB program
coming up for redemption at a very high conversion price. How do you go about fixing these problems?
A: It is a fact that many of Educomp’s businesses such as building schools or higher education in vocational have
been capex intensive in the past. Because of the nature of the business itself, they do tend to produce positive
cash flows and return on capital invested over a period of time. What you see in terms of Educomp’s results today
are the result of only deployment of one quarter of our capital.
The results of the deployment of the other three-fourth of the capital haven’t really shown up in our P&L and our
financial results so far. For that part of the business, we have to be a little patient and wait for the returns to flow.
The businesses itself are robust, are very solid, they play into the education consumption story in India and we are
seeing unprecedented demand for all our products. On our strategy forward, the company is going to slowdown if
not completely stop discretionary capex. Not only in response to the fact that we have a bond coming up but also
in response to the fact that the capex that we needed to have done, to build the showcase schools, colleges and
vocational training centers has already been done. You might have noticed that most of the announcements
about these core businesses in Educomp have all been in a model which is capex light. We have been doing joint
ventures for schools; we have been doing other kinds of deals where Educomp needs to leverage its intellectual
capital and not necessarily its financial capital. The company is going to also focus on divesting some of the
investments that we have made and the investments are very well known. For instance, we own Vidya Mandir
Classes - the premier IIT Test prep brand in India. We own EuroKids - the number one pre-school brand in India.
We own Learning.com in the US which is the recipient of several awards. We own Gateforum – the number one
GATE test prep company in India. Many of these investments that we made over the past five years have now
reached a situation where we can extract two to three times the value that we have invested in these. In a recent
clarification to the stock exchanges, we did mention that going forward, our strategy is do not raise equity capital
at this time because it’s just a bad time to raise equity capital. We don’t want to dilute EPS for our investors who
have been very patient with Educomp. We will generate the cash flow needed to pay off the bond quite
comfortably. The word used was ‘quite comfortably’ by focusing on additional debt and by divesting some of our
high value assets that we already own.
Q: In Q4 you said you hoped to raise between Rs 65-70 crore. How soon do you expect through that strategic
sale and how much do you expect to gain from it? Does it make sense to raise more debt?
A: We have always treated the FCCB as a debt instrument. It falls during July 2012. If you look at our financial
statements, Educomp is actually still under levered as a company. So our debt equity ratio right now is only 0.66
of debt to 1 of equity. I don’t think compared to our networth that we are actually overleveraged as a company at
all. Market convention on debt-equity ratio could be as high as 2:1 or 1.5:1. We are only 0.66:1 right now. The
strategy going forward is really to focus on internal cash flow. Our flagship business is called Smart Class. This
business itself which is the biggest part of Educomp is a cash flow positive business. Ever since we started
securitizing the future receivables, the cash flow characteristics of this business are so appealing that a lot of the
positive cash flow in the absence of incremental capex can be used to pay off our upcoming FCCB. That is the
reason we went out there and told investors - don’t worry about the upcoming FCCB, we will be able to meet our
obligations just from internal accruals.
Q: If you are going to take on more debt, the sheer interest cost burden that you might have to incur, would it
not be very earnings dilutive going forward? What happens to interest costs?
A: The fact is interest rates have gone up and that is something that the entire country has to deal with. In our
strategy going forward, debt is a much more subordinate option. The company has positive internal cash flow in
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our flagship business which contributes to 70% of our revenues. It has a number of investments that can be very
quickly converted into cash as and when needed.
Q: There are some concerns that Smart Class is not moving with as much momentum as it has nor generating
the kind of volumes it has over the past few quarters. Your debtor days as well are increasing. What is it that
you hope to see in terms of core growth?
A: Last year we did 27,000 classrooms in the Smart Class business. For this year our guidance was we will do
between 40,000-45,000 classrooms. That itself is a very strong statement to make in today's markets. We are
estimating a growth rate of close to 70% in our core business.
If you look at the pricing at which we are selling, the pricing has remained rock solid despite the entry of marginal
competition. This is not something that I am saying myself but a number of competitors and analysts also
acknowledge the fact that Smart Class is the market leader and the dominant brand in that product category.
In a recent analyst report it was also mentioned that our market share is close to 90%. So I do not agree with the
statement that Smart Class is not showing momentum. Smart Class is absolutely showing momentum. We might
come back with a surprise for the investors based on how we see the momentum at which consumers are buying
the Smart Class product.
Q: By when can you liquidate some of your assets whichever they are and pair down debt somewhat or
because you are quite guarded about which assets are going to be sold? Will things be fixed by the end FY12?
A: I would say by the end of FY12 would be a fair timeline.
IDFC: Dr Rajiv Lall, CEO & MD
http://economictimes.indiatimes.com/opinion/interviews/transparency-needed-in-land-titles-for-private-sector-
ceo/articleshow/9895913.cms
Q: First off essentially we understand that the Finance Ministry has asked private investors in Delhi-Mumbai
Corridor Corporation to exit their investments given the conflict of interest, how much stake does IDFC own in
the corporation at this point?
Just to clarify, DMIC was set up as an advisory company basically to do project management for the Delhi-Mumbai
Industrial corridor. So, the intention was never for the DMIC company to become a balance sheet heavy company
and own a lot of assets and take a lot of financing, it was just supposed to be a project management company. So,
when it was being set up government invited IL&FS and IDFC to participate in the ownership of this company to
get access to skills and resources for project management. IL&FS, if I remember correctly, own 40% of this
company, IDFC own some 10% or IL&FS may be own 41% and government owned 49%. Now, government have
decided that it would be a more constructive engagement with entities like IL&FS and IDFC if instead of being
involved at the project management level, we were actually involved at the project level and provide financing for
the projects that DMIC will be managing. And therefore, they think it is better for IL&FS primarily which is a 41%
owner and IDFC to exit from this company where the capital is very small, I do not remember exactly how much
the capital is, but IDFC is 10% contribution is a very small amount of money which we will liquidate and exit the
company.
Q: How will the new land acquisition bill change life for IDFC?
Actually, see what really drives up the cost, doing infrastructure projects is uncertainty that causes delay. If the
law can be made clear and it is relatively simple to implement everybody knows what they have to do and
compared to what the situation is today I think it will vastly improve the efficacy with which projects gets done
and therefore in that sense it will reduce cost, it will not increase cost. One more point that I neglected to
mention, I think in parallel to a enacting legislation such as this government has more work to do in terms of
making a land titling much more transparent across the board. That will make it easier for the private sector to
actually aggregate land on their own in direct negotiations with sellers and they will feel much more confident
about doing it, than they are currently experiencing. And that would further reduce the cost of actually acquiring
and aggregating land for the purpose of infrastructure projects.
Q: There is of course a lot of concern about the government's impasse on reform process your sense form here
on what can improve market sentiment?
I think that if two or three things happen over the next six months that perception could change. One is the land
acquisition bill and the second, at least from my perspective, being in the financial services industry is revision of
the banking regulations act. If it could past muster with the houses of parliament, that would be a major step
forward. It will clarify regulatory arrangements that apply to financial services companies and it will accelerate the
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pace of reform in the sector, so that is the second one that I look for. The third one that I look for, but on which I
do not have visibility at this time is the GST. To my mind, the GST from an efficiency enhancing perspective is a
very important reform measure. It is really important that we build the necessary consensus to get that introduce
as the soon as possible.
Q: Given the way how cost of capital has gone up how do you see margins for IDFC moving in coming quarters?
We have been little more focused, shall we say than during a high growth phase about what kind of particularly
loans we are booking on our books and that has helped stabilise and improve our spreads. I think competition will
also has not been as fierce as it was some quarters ago. Third, our competitors have themselves become more
disciplined about pricing and so all these things taken together has meant that even though the cost of our
borrowings has gone up our spreads have not shrunk.
Q: Let us talk about the key concern and the infrastructure space today the power sector are things really that
bad on the ground as it is being made out to be?
We have already begun to see movements in certain states where the tariffs after a unnecessarily long period
have finally begun to track upwards so Delhi has raised tariffs. I think Tamil Nadu is raising tariffs, I suspect that
other states will follow suit. So, the SEB problem will overtime resolve itself. The other concern on the power
sector asset quality has to do with projects that are stuck because they have come under the no go zone of the
Ministry to Environment. They have made some investments, interest during construction is accruing but they are
not able to complete projects because of this restriction imposed over them by the ministry of environment. Third
concern on power sector asset quality arises from availability of fuel.
Q: So for IDFC do you see a large scale restructuring given that 30% of your total book is currently exposed to a
private sector players?
If you are asking specifically about IDFC, first is that our underwriting standards are very very strong and I have
tried to elaborate on that without getting into too much detail on an interview like this. Second is that we have
provisioned our general provisioning is way above industry standards. We have 650 crore-700 crore just stashed
away in general provisioning. So, even if you ascribe to us the absolute worst case in terms of restructuring, we
have ample cushion within our balance sheet to absorb the cost of that restructuring without affecting our
incremental P&L. The cost is sounding unnecessarily repetitive but since you keep pressing me on this issue I will
have to insist that we are very confident that it is a different environment. But that there is no cause for or we are
not worried about managing our asset quality through this difficult times. Yes, we are concerned about growth.
Q: So 15% of your total loan book do you expect your loan book to grow at that rate?
Our guidance to the market for balance sheet growth this year is about 15%. And 15% is not that bad a growth
given everything that is happening around us. It is just that it seems disappointing because last year we did 50%
but that is what it is.
Q: So how does life change for IDFC post the new NBFC norms because that of course the big talking point as
well, from RBI its point of view on provisioning norms etc. how does it really change the dynamics of your
business?
Well for IDFC it means that we will have to be even more disciplined than we have been about following up on
delayed payments, making sure that people are not falling behind on their payments. Because now it has a
regulatory implication after 90 days we will have to recorded it as an NPA as opposed to 180 days.
INFOSYS: SD Shibulal, CEO
http://economictimes.indiatimes.com/opinion/interviews/a-buyout-between-600-million--1-billion-is-desirable-infosys-ceo-s-
d-shibulal/articleshow/9877212.cms?curpg=3
What are the challenges facing Infosys and the IT industry?
First, it is the current economic situation. There is uncertainty in the economic situation in the US and Europe US
due to the slowdown in GDP growth, downgrading, unemployment, lack of confidence, lack of consensus on how
to address issues and Europe there are issues as physical promises, that leads to customers being indecisive, leads
to delays in investment and revisiting of investments. Even though everyone is hopeful there will not be a double
dip, no one is confident that there will not be a double dip. Second, regulatory issues also come up, you can face
some new regulations in any part of the world. Currency is another uncertainty.
Could you specify the challenges at a more strategic level?
Some part of the business is getting commoditised. Clients are looking for better value for the money they spend.
In the long term, recruiting brilliant talent at a large scale could be a challenge. Competition may take the low-
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hanging fruit and accelerate commoditisation.
If you look at rivals, they are also adapting in their own ways. In this situation do you think some more radical
measures are needed by Infosys?
What you said is very right, in their own ways (they are adapting). That is the very important part and this is our
way. We are seeing extremely good traction with the clients. The building tomorrow's framework gives us an
opportunity to discuss transformational work with our clients. Most of those conversations are at CXO levels,
that's where we want to have those conversations. Our consulting and systems integration gives us 27% of
revenue, if you look at the industry; I don't think the industry has seen that kind of growth in that space. Most of
the competition we have is with global system integrators. We do not compete with Indian system integrators in
the consulting and system integration space. Our comfort level of winning deals between $80 million to $120
million is very good today and we are winning every quarter.
So, how long can you sustain this margin game that is being played?
It is not a game, it is an aspiration. This is a company that always believed that we should have superior financial
performance. That means above industry average growth and industry leading margins and I believe it can be
sustained.
Are we near a stage where we will see Infosys making a big, bold acquisition?
We are always near. We are constantly looking at acquisitions. We just did McCamish, that was a good acquisition
because it was a platform acquisition. We have to find the right company, the company that wants to be acquired
and it has to make strategic sense. Just because you have cash in the bank doesn't mean you have to spend it. If
we find the right company, it is like falling in love.
How far or near are you from that stage? You refused to enter a bidding war when Axon happened?
It's not about a bidding war. It is about value for money. When we say we de-risk it means we take thought out
risks. It does not mean we do not take risks, we think about it and then take it.
Is it something to do with appetite, or is there a threshold. Like sometime back all of you used to say 10% of
revenues?
Even today I would say 10-15% of revenue because you know acquisition is something you have to integrate. So,
today if we are at about $6 billion, an acquisition between $600 million and $1 billion, I would not say is easy, but
it is desirable. When we did McCamish it was $35 million. Even if it is $35 million or $350 million, you still have to
spend energy. You have to do the due diligence, the risk management, you have to make sure that the leadership
is staying, you have to see the synergies. It has to be done. The 10% is a ballpark number, $600 million to $1
billion is a good range to operate in.
So, how soon, or how far, is an acquisition? Have you seen a person you have fallen in love with?
We have seen multiple people and we fell in love with McCamish. It is not because of this or that that we have to
do an acquisition. We have a dedicated person, a dedicated department that does the evaluation constantly. For
us to move our strategic direction forward we need to do it. For instance, if I can do an acquisition in Spain that
gives me three per cent or 10% market share it would be wonderful. It would move my European revenue
forward which is very much my aspiration. If I can get another McCamish done, it will make me meet my one-
third goal.
Non-linearity has been a holy grail for IT industry. If you look at a new company that does not have the legacy
Infosys has, will it be a big threat to Infosys?
In any industry you have to reinvent yourself. In 1999 we were getting 90% of our revenues from ADM. When we
went into enterprise solutions there was a big argument that if you do enterprise solutions you will be
cannibalising your ADM revenues and it is true. Because clients will take a decision on buy versus build, we were
mostly building. If you start recommending a buy, what does that mean, it means your revenue from the build
side will come down. Now today we have multiple platforms, we are cannibalising the enterprise solutions
revenue. It's a part of life. When the world changes, you have to reinvent your models. It does not mean you will
entirely cannibalise your revenues. As an organisation we will go with our strategic direction, we have to be
relevant to our clients.
So that goes back to the same thing, didn't MNCs have the same argument?
If you are asking about IBM versus Infosys in 1992, we had a disruptive model that they didn't have. If you are
asking a small corporation providing a platform versus us providing the same platform, it's a completely different
thing. Your argument is relevant if Infosys didn't have platforms. Let's assume that in our strategic map we have
systems integration, consulting and business IT but we don't have the other part, then I agree.
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When you look at the non co-founders can you identify the 4/5 people who have the potential to be CEO?
We have people on the board, three people have joined the board, Bala, Ashok and BG. Then you have multiple
people who are executive council members. Then there are people outside that. I can easily think of at least 25
people and it is too early to identify. These things have to be done at the right time at the right place. Over the
past few months there has been uncertainty over Infosys' direction and margins being under pressure. We have
just put a new direction in place, a new management has come into place all of those things, one needs to wait
and watch.
Kirit Parikh, Expert on oil and gas
http://www.moneycontrol.com/news/business/parikh-blames-systeminability-to-catch-cost-anomaly_584088.html
Q: What have you made of the statements made by the CAG so far?
A: I have not looked at the report, but what I can tell is that the production-sharing contract does indeed require
an appropriate monitoring system. There will be some incentive for the contract to overstate cost, and one really
needs to be little bit more careful in terms of saying what the process is by which such cost are approved.
One needs to tighten the regulatory mechanism by which we can do this. But the general idea of the production-
sharing contract that depending on how much you get, an increasing share belongs to the government, is a
reasonably good idea. The only loophole there is really, what is the cost that you incur? There, perhaps, a more
transparent process of accessing this is required.
Q: The CAG has said that Reliance violated the PSC, but the DGH and the Petro Min are unequipped for
overseeing the production-sharing contract. Does this mean that companies, such as Reliance in this case, can
get some relief from the fact that it is the system that is not capable?
A: No, but I agree with that because it’s a complex process of projects and complex types of investments are
required. There is bound to be an overstatement. We need an overseer which has the right kind of understanding
and the capacity to do the necessary monitoring of it. I have come to agree with the CAG that given the present
structure of it, it is not perhaps equipped to oversee and assess the complex processes and projects involved such
large projects.
Q: Generally speaking, in your opinion, is the operator to blame here or is the system to be blamed? Could the
operator get some relief because the system is not very equipped?
A: No, I would expect any operator to try to sort of overstate its cost. So it is quite reasonable that all people do
that, and that’s why that the process and the system that we need should be such that it can capture these
things.
LARSEN & TOUBRO: R Shankar Raman, CFO
http://www.moneycontrol.com/news/business/lt-to-evaluate-stake-saleee-unit-cfo_583996.html
Q: Some reports have indicated that L&T may be looking to off load its stake in its electrical and electronics
(E&E) business. Would you like to comment on that and is that a strategy L&T may be looking to employ?
A: Our restructuring exercises have been covering various parts of our business and electrical business is one of
them. As you know we have taken approval from our share holders for creating a subsidiary, in which the
electrical business can be housed. The intent of this restructuring is to enable the business to grow and maximise
the opportunities, which are available to it. If there was a requirement to have access to better products, better
markets and if that is going to be achieved through a joint venture, then L&T would have indicated that it is open
at evaluating these opportunities. We have not yet finalised any of these specifics. Meanwhile, we continue to
look to grow the business in the best possible manner that we can.
Q: Would you sell only a minority share in the E&E business and would it be through an auction process? Have
you reached out to large global players to sense what their interest levels could be because the market has
started speculating about names like Schneider Electric who have some interest in picking up a stake?
A: All our large competitors are present in India and are eager to move forward. So, it’s very natural that when a
restructuring of a market leader happens, the competitors would like to explore similar opportunities. In fact,
many have been speaking to us to see what their plans could be if such a venture was to involve them. However,
we have not got into the mechanics of the process in terms of whether it will be an auction or any other format.
At the moment, we are engaged in chalking out the best possible course for this business. If that means accessing
technology, then it always comes in with certain strategic holding. We’ll have to work out the number and
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percentages accordingly. Once we decide who the partner is and how the partnership is going to roll out going
forward, we are very flexible and open in our approach because it is an evaluation process.
Q: Give us a timeline by which you would like to execute this transaction and bring it to closure. Given revenues
of the E&E division this year, what kind of ballpark valuation could you be looking at?
A: Since last two years, this business has been hit by a slowdown. So, when the conditions improve, we will see
some bounce back in this business. However, it all depends on when the recovery takes place. We have not
committed any timeline because that restricts the opportunities and the flexibilities available to us. Since the plan
to deal with this business is from a growth plank and not from the plank of cutting losses, there is no emergency
in terms of time line. We need to plan our business in a manner, which maximises the value for our share holders.
So we don’t want to rush into anything in a premature manner.
Q: The company is currently undergoing a restructuring exercise. Is this option also being exercised or looked at
for any other arms of L&T? Would you look at the option of getting a strategic investor in or divesting some
stake if it helps L&T?
A: We have recently done divestment in financial services business, which is part of our restructuring process. We
have another capital intensive business in our portfolio, which is the concession business. The infrastructure
developmental projects business is also held through a subsidiary. At an appropriate time, we need to see as to
whether it serves the business interest better by having it put out in the listed space as an independent company.
So that access to capital is not constrained by what L&T could allocate from time to time.
We also have a fair bit of businesses surrounding the engineering products. Most of them are small but quite
profitable. They hold premium position in their respective market spaces. If the restructuring would involve L&T
to focus around its core, which is engineering and construction products, then those could also be part of the
restructuring exercise. Since last five-six years, we have been consistently trying to get out of some of these small
businesses which are profitable but are subscale. In most of the occasions, we have landed up selling them to a
joint venture partner with whom we have been engaged in the business for many years.
So to that extent, the handling over of the business has been gone to the partner without any hassles. Hence, we
need to see what all of these could add up to depending on the individual businesses. Today 85% of our revenues
come from engineering and construction. It’s 15%, which is representing assortment of business portfolios
gathered over the last 70 years and these include electrical, machinery, industrial products and a few others.
MARUTI SUZUKI : RC Bhargava, Chairman
http://economictimes.indiatimes.com/opinion/interviews/marutis-manesar-plant-strike-to-be-resolved-soon-rc-bhargava-
maruti-suzuki/articleshow/9884065.cms?curpg=4
Let me start with something which is of immense market curiosity. For the month of August dispatch numbers
for Maruti were rather poor because of the Manesar strike problem. Do you see them improving going
forward?
Yes, I see that there should be some solution emerging out of this whole thing pretty soon. I do not think this is a
kind of strike which should carry on for very long.
Maruti was hit with a similar strike in 2000 and 2001 as well and you emerged clean out of it. How do you plan
to emerge clean out of the strike?
You see I am not directly dealing with the strike, but all I can say is that the issues then were much more affecting
the workers' livelihood and their incomes and things what they were raising. Plus, there was a question of the
then union trying to retain its strong position in the management of the company itself. Now that all was being
challenged and was being put down and that is why that strike took such a long time. But in this present strike,
actually it is in a sense really not much of a strike because there are no real issues involved except a somewhat
political issue of a political party wanting its trade union to get established in a company and not having an
independent union in the company as has been the practice so far in Maruti.
What about the impact of that on demand and the bookings of cars, especially Swift? Do you think there would
be a significant one on the back of this imbroglio between the management and the workers?
Well, obviously the delay in stepping up production to a level which we had planned is going to affect the delivery
of the cars and as you know the bookings for the new Swift are very high and we have a long waiting list of
customers. So, at this point the customers are certainly, I am sure, feeling that they are being a little bit let down,
and all we can say is appeal to them that in the longer term interest of their own ability to buy good quality cars
and maintain supplies, we will appeal to them to bear up with us.
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Are you a bit surprised with the car demand given the way how interest rates have moved and how
discretionary spend has come under pressure? The industry is still growing at 14% to 15%?
No, actually I am not surprised because the economy has not slowed down all that much against a possible 9%
growth we are going to get something like 7.5% to 8% growth. So that is not such a big difference. The demand in
the last few months has been very slow for various reasons, but over time and as the festival seasons approaches,
we were all expecting the situation to start reversing and that is beginning to happen now.
Three things which impact your margins. Number one, volume growth, number two commodity prices and
number three discounts. Update on all three.
The demand growth as you know is clearly going to be there, but the discount factor in the festival season, usually
the discounts come down and there is not that much of discounting in the festival seasons. It all depends on how
strongly the market grows in this period and if that demand grows strongly, then I think the discount factor will
automatically come down because discounts are means which the marketing divisions of all companies adopt to
maintain a minimum level of sales in the market. So, I do not think that we can actually accurately predict what is
going to happen. It all depends on how in the next two months the whole situation behaves in the market.
Talk a bit specifically about your models. The diesel cars of Maruti have been doing well, the demand being
strong there, Ritz, Swift, Dzire, how much in your opinion is the compensation expected to change in the favour
of perhaps more diesel cars being sold off these models? Are the diesel variants over 75% of the three models?
Yes, at the moment I think the market is very much skewed in favour of diesel cars. In some models, the demand
actually is over 80% diesel and I suspect the situation is going to continue until and unless there is again a
readjustment of the relative prices of petrol and diesel. We have been requesting the government to relook at
this whole policy framework of fuel prices for automobiles and this sector.
But so far they have been so many other perhaps more pressing problems before the government that this issue
has really not received attention. The problem with us is that we do not know when this matter will receive
attention. And if and when this readjustment of prices takes place, then the demand will come back to near of
what it was before the diesel spike took place.
What about in terms of margins and profitability? Are diesel cars more lucrative? Is there a comparison
perhaps that you could draw and the kind of bottom line growth that you see on account of in the two
segments separately?
No, I do not think that the diesel car market or the diesel cars are any more profitable than the petrol cars and we
have to live with this situation.
We were talking about the diesel car segment as well as the petrol fuel cars basically the contribution to
profitability from either of the segments?
The diesel car market has shown a tremendous spurt because of the relative prices of petrol versus diesel,
occasioned by the fact that petrol prices were increased substantially more than once while diesel prices went up
but only by a little bit and much later. As long as this somewhat abnormal situation of the relative pricing of petrol
and diesel continues, I do not see that the demand for diesel cars will fall or will change very much from about
almost 80% for some models and 70%-75% for the rest till something else happens.
As far as the ramp up of capacities are concerned, our second line has been started in Manesar and as we go
along and assuming this labour situation get sorted out in the next two or three days, I suspect that the diesel
demand will predominate in the production which we have to take place there. But the total production will of
course go up sharply in Manesar.
The launch of Alto was a big game changer for Maruti, the launch of Swift was a big game changer for Maruti.
What could be the big game changer for Maruti now?
At the moment, we have no other launches plans till we get the new Dzire out sometimes next year. But till that
happens, we have to try and meet the demand for the Swift which is just enormous at the moment.
Sources close to the company have indicated to me that Maruti is planning to enter the multi-utility vehicles
market. Is that true?
We have exhibited our 7-seater vehicle last time at the auto show and we are now proceeding to develop that
into a commercial model. I am not sure exactly what is the time schedule for its launches, but in the next few
months, we would have that model in the market also.
What about the export market? The last quarter sales of the export market fell by 20%. Is it a change in
strategy to ramp up sales there?
No, the export market actually depends on the demand in the countries where we export. Europe has been very-
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very slow. It has not picked up at all whereas in some of the other non-European countries, the demand has been
growing.So, the net-net result is that while the sales in Europe have fallen down, the sales in the other countries
have gone up and in the last month of August, there was quite a big increase in exports. It was about 40% or
something. The exports went up. So there is no policy of deliberately slowing down exports, but we have to go
according to the demand from the countries where we are exporting.
Now that commodity prices have corrected, are you planning to renegotiate your new contracts at a much
lower price?
We never have very long term contract for most commodities except steel which goes for 6 months at a time and
steel prices have to be negotiated. Some of the domestic steel manufacturers are in fact still asking for a price
increase, but those negotiations have yet to be held. But on other commodities, certainly we are getting little bit
of a relief in terms of lower commodity prices.
Is it too early to make an assumption that operating profit margins for Maruti will expand because of the
recent drop in commodity prices?
It is too early for me to say anything on margins because against the commodity price benefit which we will get to
an extent, we have still to see what will happen on the steel prices which we have to negotiate with domestic
suppliers and the impact of the strike and the loss of some production also will have to reassessed. So, it is not a
simple calculation to determine what the margins would be.
Let's look at your Q4 and Q1 margins, they have stabilised. Is it safe for me to assume that now for Maruti in
coming quarters, margins will not slip and they will only expand?
I cannot make any commitment on margins frankly. All I can say is that we will do our best to maintain and
improve margins, if that is possible. But what will actually happen depends on so many factors, many of which are
outside our control. It would really not be appropriate for me to try and guess what the margins would be.
How about commitment from you on volume growth essentially because the expectation on the street is that
with another rate hike if that is to happen, we will see contraction in demand, perhaps that can bring down
sales to single digits for the year versus about 14-15% expected. Is that fair to go by with?
I do not know at the moment on the volumes. We have to see how the market behaves in the next couple of
months, especially months of September and October because these are the festival months. Now and if the
volumes go up, I do not think anybody is contemplating price increases at this point of time, but assuming that
the prices do not go up, the volumes will essentially be market driven rather than manufacturers driving up
volumes or not driving up volumes.
REC: HD Khunteta, CMD
http://www.moneycontrol.com/news/business/no-issuesloan-repaymentssebs-says-rec_583180.html
Q: What is the extent of your exposure to SEBs? What is your extent of your exposure to private power
companies?
A: Exposure to SEBs is 84% and exposure to the private generation companies is 10%.
Q: What are the chances of SEBs not paying back loans on time?
A: 90.9% of them are making the payment on the due date. The north eastern states like Meghalaya or Manipur
delay payments for a couple of quarters. But once they issue their money from the Central Government, then
they make the payment.
Q: So do these states, Meghalaya and Manipur, contribute a significant portion to your assets?
A: They contribute hardly Rs 250 crore and Rs 150 crore of the total loan book of Rs 87,000 crore.
Q: Is there a likelihood of that getting restructured or even a part of that slipping into non-performing loans
(NPLs)?
A: We have sanctioned loans to the capacity of around 67,000 megawatt, out of which around 7,000 megawatt
capacity had been commissioned and all are doing well. SEBs are capable of making the payment of interest and
repayment of loan but their return on equity maybe much lower than what they have expected.
So as far as the repayment of loan is concerned, they can make the 70% or 72% payment. For the capacity of
7,000 megawatt, which has been commissioned to them, we have not faced any such problem of nonpayment of
interest or repayment of loan.
Q: There are problems related to coal availability, coal price. We already know that some of the ultra mega
power project companies are trying to negotiate with the respective state governments to allow an increase in
the power tariff, which they had agreed to 4-5 years ago. So the danger signs are still on the horizon. Are you,
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therefore expecting that in a year, you would be looking at a different NPL situation with respect to your
private power borrowers?
A: No. The problem is being faced where Tata Power or other companies have got the projects through
competitive bidding or through ultra mega power projects. But we are not the part of the financing to the Tata
Power's Mundra project. We are not a part of Reliance , which is based on imported coal and the work on that
project has already been stopped. As far as the Sasan project is concerned, we are providing funds on their mines,
so there is no problem.
We have also put a condition that either coal price will be decided in consultation with the lender or those
projects will be merged with the Sasan project. So the financial viability of those projects should improve. For
most of the projects, we have sanctioned the loan either on case I bidding or case II bidding. Normally, the
increase in the coal price is fully or partially passed on since we have entered into the generation sector a couple
of years back. So, most of the projects are likely to commission in 2014-2015 or 2015-2016.
Q: Let me read out to you from the Macquarie report itself. There is a fear that the SEBs in some of the states,
where the private power companies are located, are unlikely to be able to buy more power. So, merchant
power rates may fall or the power itself may remain unsold. They have an issue with Adani Power, where they
expect that the SEBs in question may not be able to buy. So, on both Mundra as well as Tiroda projects, their
worry would be at high risk of restructuring. They have similar fears also with JSW Energy’s Ratnagiri project,
which is not finding buyers at a high risk of restructuring, would you agree?
A: I agree where the developers have quoted on case I bidding and the fuel cost is not passed through, they are
definitely facing the problem. But as far as REC is concerned, we have not provided funding in JSW. In case of
Adani power with a phase I, they have already paid the money before the due date.
As far as the repayment of loan or interest payment is concerned, there is no default and I do not feel in coming
years also they are likely to default. But it is true that a number of power generation companies are not buying
power because of the higher cost, the cost of the generation is coming at around Rs 3.50 per unit or Rs 3.75 per
unit, whereas the export rates are around Rs 3-Rs 3.25. So they are not buying the power because they feel that
in case they buy the power, then their losses will increase. Moreover, their financial health is not good. At the
same time, you have to see that the states are also taking the necessary step to increase the tariff. Punjab has
increased its tariff by 28% and Rajasthan is also likely to increase the tariff. Tamil Nadu, which is the more crucial
state, where losses are more than Rs 10,000 crore, they have made the payment to REC on due date. We have got
Rs 300 crore and they are coming out with guaranteed bonds from the government, which will be issued by this
Tamil Nadu Power Finance Corporation.
Tamil Nadu has actually bought for Rs 9000 crore and they will increase the tariff by December. So, all the states
have no option except to increase their tariff. Hence, whatever the increase in the coal price is, it has to be passed
through. We feel the prices will increase post one year. Moreover, merchant power rates are likely to increase to
around Rs 4 in upcoming years.
Q: Give your fair assessment on what is the standard asset provisioning that REC would require to do because
many of the brokerages believe that this number could be Rs 400 crore. In your view, what is the realistic
number that one should expect?
A: As far as the RBI norms are concerned about the NBFC, it is not applicable to government-owned NBFCs. So as
per RBI norms, there is no need for any provisioning for the standard assets. But what we feel that on commercial
prudency, we should make that provision of around 3% of profit, but it is subject to approval of the board. So, we
can consider that proposal.
Q: The other point raised by the report is that your provisioning may go up to 2.5% of your total assets from
FY12 to FY14. Is there a likelihood that your provisioning will have to go up to such an extent that 2.5% of your
assets could be restructured?
A: This recent committee has recommended 40.40% provisioning of the loan and we have asked the RBI that if it
is to be implemented, then it should be done in phases.
Q: Are your total NPLs likely to rise to that extent that it would be 2.5% of your total loans?
A: No, at this time, it is only 0.20% and it will remain close to that level. NPLs are unlikely to go above 2.5% of the
total assets.
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SIAM + M&M - Pawan Goenka, President – Automotive & Farm Equipment Sectors
http://economictimes.indiatimes.com/opinion/interviews/auto-cos-may-hike-prices-in-near-future-pawan-goenka-
siam/articleshow/9897052.cms?curpg=2
Q: First up I want a big industry view from you because many believe the industry is staring at another round of
slowdown, just yesterday you indicated that you might have to revise growth target sometime in October,
what is your sense?
We will look at performance for 3 months and in October come out with a new forecast. When we had done it in
July, we had to reduce it by a couple of percentage points from the original forecast. Right now, the 2 wheeler
industry is doing well and which does contribute quite significantly to overall average and therefore we may not
have to reduce the overall average of 11% to 13% that we have said. But, clearly the passenger vehicle industry is
having bit of a difficult time. The 2 months of July and August both have been de-growth months and therefore
our original forecast that we had made of about 10% growth in passenger vehicles may have to be revised. It will
be premature for me to say that right now because we have to look at overall all the indicators and decide in first
week of October what the forecast will be.
Q: What is your own sense of a price hike because you have seen some automakers increase prices? For M&M
specifically, do you think the time has come for you to re-look at prices?
We constantly revisit prices depending upon the input cost and change it when we need to. We have done a
recent price increase in the month of August for some of the models and I cannot say specifically when the next
price increase will happen on which model. But, certainly with commodity prices going up though, not as much as
we had anticipated, there will be some price increases in the future, but timing I cannot tell you right now.
Q: But likely in the next couple of months?
Very difficult to say that. We have to time it based on many factors and therefore we frankly do not even decide
just a few days in advance when the price hike might happen and in what magnitude.
Q: With respect to your tractor segment growth, you have recorded the second highest growth in the segment.
If you could just run us through whether that will be sustaining and you also have reports talking about the
plans to generate $18 billion in revenue in 8 to 10 years from the defence segment.
I cannot talk about the defence segment. I am not intimately familiar with that. As far as tractor is concerned,
industry is having a good year this year. In fact, the growth is somewhat better than what we had anticipated at
the beginning of the year. The monsoons have been very good, the overall sentiment is very positive in the rural
economy and every economy specifically and therefore tractors are showing us a growth of 15% plus for the year.
This is on top of 2 very good years of high growth for tractor industry. Mahindra & Mahindra also is in fact
performing slightly better than the market. We have picked up slightly on the market share about 1 percentage
point and we are quite happy with the way the tractor industry is going, not just in terms of volumes but also the
type of tractors that are selling more. The industry is moving more and more towards the higher end tractors,
which means that the Indian farmer is graduating to higher mechanisation which again is good news for the
industry.
Q: What is your sense of revenues coming in from exports in the near term, do you think that the revenue mix
could change and a significant amount of revenues could come from exports going forward?
You mean tractor or automotive?
Q: Automotive?
In automotive, for Mahindra & Mahindra we have a good growth. In fact the growth in export segment for the
first 5 months of the year has been more than 70%. So we are seeing a good potential in export. The export
revenue per vehicle tends to be higher because we sell more of SUVs and pick up and not much of our 3 wheeler
products and therefore it is a good offset for slowing down, that we are seeing somewhat in the domestic
industry. But I must also add that for Mahindra & Mahindra we have done very well in overall growth for these 5
months. Even in the last 2 months, industry had seen a slowdown. We have grown 30% and 40% in these 2
months. So, we are fortunate in not experiencing the affect of slowdown primarily because of the expanding
segments that we have gotten into, but having said that, still export growth is higher than domestic growth.
Q: You also have demand for the diesel cars which has been fairly robust for most auto companies, is the trend
in demand for diesel cars and SUV building up vis-a-vis the petrol cars?
We do not have data right now to show whether there is a significant increase in diesel penetration compared to
petrol. This is still based on perception and the fact that many of the automakers are getting off diesel vehicles.
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We will soon be compiling data what is the movement in diesel versus petrol over the years but I should say that
over the last 3-4-5 years, they has been slight increase in diesel percentage but not as much as people like to talk
about. Similarly, in SUV in the last 2 or 3 months, SUV sales have been somewhat bigger or somewhat higher
percentage wise than passenger cars. But, over the last 5 years if you look at the trend in SUV versus passenger
car, there has not been a significant shift that you have seen in SUV. There is no increase in SUV segment
compared to passenger car. Part of that also is because of taxation that we have in India where SUVs tend to
attract higher taxation than smaller passenger cars too.
Q: What is your outlook on the MCV and HCV vehicles, the volume growth there has not quite been strong as
the LCVs, would you worry about that?
I would not say I would worry about that. The growth is there better than passenger car right now, about 8-9%
growth. this year, I would expect to see the growth to be continuing about that level, 8% or 10% level and that is
SIAM forecast is also. As per LCV is concerned, that segment is growing very well and that is growing well because
of growth in the sub-one-tonne segment, that has been very strong. New products have been launched by
different manufacturers including Mahindra Maxximo which is driving the growth in that segment. The BOP
segment also is doing very well. So, the commercial vehicle segment in the lower category is driving growth. The
higher category is growing but sort of at a steady pace of 8% to 10% that will continue for the year.
UNION BANK Of INDIA: Mr. S S Mundra, ED
Sector Comments
Credit growth revised downward to 18% may also be difficult if GDP slows down to 7-7.5%
Education loan is gaining prominence with focus on premier B Schools, the stress in the portfolio comes from
lower grade institutions. RBI to come up with a framework on the same
Housing loan Market getting competitive again with HDFC and ICICI introducing fixed rate loans. Though they
are different from teaser loans as the fix rate is not lower than prevailing rates
Port in infra space is the only segment seeing viable new project proposals
SME stress is still unit specific and not sector specific. Units operating on thin margins are seeing stress.
In textile, most of the majors did not buy cotton inventory at high prices resulting in lower stress
Expects 1-2 more Rate hikes
Commencement date getting pushed is likely for power plants, this will lead to temporary lower interest
income but no loss of interest income
The moving of PSU banks to system based recognition of NPAs will lead to NPAs in the medium term but it
will lead to better recovery as more and more accounts will be put on the recovery path
Union Bank specific
SEB exposure is 7700 cr (Rajasthan 2500, Gujarat 2400 while TN is only 70). The book is very healthy and they
have stopped lending to loss making units as well. Believe that fiscal tightening is the only control that centre
has over states to discipline them
Year-end target - GNPA 2.2% and NNPA of 1-1.1%
Flow down from restructured assets to NPA to remain at 13% levels
CASA drive very strong. Various initiatives: focusing on govt. Accounts, central schools, defense. Started
initiative of "branch of the future" where they would have 65% of the staff of a branch with customer facing
responsibility from currently only 35%
Q2 slippage to be close to Q1 numbers as the smaller agri loans get system recognized
NIMs for full year to be around 3.2%
WIN – Week In a Nutshell
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2011

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WEEK IN A NUTSHELL
WIN Sector Updates
INDIAN BANKING: Incremental loan to infra down marginally MoM; Ex- Infra loan growth at 18%
Non-food credit moderates to ~19% as compared to 19.6% in June-11. YTD credit growth stood at 1.7% v/s
3% in the corresponding year ago period.
Non-food credit growth moderates for all major sectors except Services. Agriculture loan growth continues to
lag overall loan growth and stood at ~12% YoY as against ~20% in Jul-10.
Services segment grew 21.3% YoY largely driven by NBFC and real estate, excluding which growth was ~15%.
Housing loan growth moderated to 15.4% (17% month ago) dragging overall personal loan growth to 15.4%.
Petroleum loans declined 15% YoY and 18% MoM led by subsidy compensation received from government.
While loans growth to industry remained healthy, incremental credit to infrastructure segment declined
(though marginally) MoM for the first time since April 2009. As a result, infrastructure loan growth moderated
to 23% YoY as compared to 30% in Jun-11 and 49% in Jul-10.
Excluding Infrastructure, non food credit growth stood at 18.2% and manufacturing growth stood at 20.2%.
Outlook and View:
Loan growth of 17-18% is achievable for FY12-13 notwithstanding tough macro economic factors.
Services growth driven by real estate and NBFC segment (%) Incremental Credit to Infrastructure declines MoM
INDIAN FINANCIALS: Loan growth improves to 20.6%; Deposit growth at 17.9%; Lower CD ratio at 35%
RBI released banking sector business data for the fortnight ended 26
th
August 2011. Key takeaways:
Loan growth improved to 20.6% YoY (20.2% fortnight earlier). In absolute terms, loans decreased INR36b v/s
increase of INR431b fortnight ago. Since 25
th
March, absolute loans are up INR1.1t
Deposit growth moderated to 17.9% YoY v/s 18.4% a fortnight earlier. In absolute terms, deposits increased
INR177b v/s increase of INR103b in previous fortnight. Since 25
th
March, absolute deposits are up INR3.04t.
CD ratio moderated to 73.4% v/s 73.7% a fortnight ago and was lower than 75.7% as of FY11. On a yearly
basis incremental CD ratio improved to 82.7% v/s 79.9% a fortnight earlier.
INDIAN TELECOM: 3T-Tele Talk Time: Indian telecom monthly (September 2011)
GSM subscriber net adds (ex RCOM and Tata DOCOMO) is 7.6m in Jul-11 v/s 8.6m in Jun-11,
down 11% MoM
and 34% YoY.
All major operators except BSNL & Uninor reported lower net additions on MoM basis with
decline of 26-29% recorded by Bharti, Idea and Vodafone.
Reliance Communications reported 1QFY12 PAT of INR1.57b, lower than our estimate
of INR2.09b due to
lower EBITDA and higher minority interest. Adjusted revenue declined 3.3% YoY and 7.3% QoQ to INR49.4b
(10% below est) mainly due to lower revenue in non-wireless business. Maintain
Neutral
with revised target
price of INR83 (INR106 earlier).
Recently announced transaction involving 5.5% stake sale in Vodafone Essar for a consideration of INR28.6b
(USD640m) implies an EV of ~USD18b and equity valuation of ~USD11.5b for Vodafone Essar. The deal values
Vodafone Essar at FY11 EV/EBITDA of ~12x, EV/sales of ~3x, and EV/sub of ~USD130.
We expect EBITDA CAGR of 25% for Bharti and 42% for Idea over FY11-13E. Improving competitive
environment in the wireless sector should drive better revenue growth as well as expansion in margins for
Indian wireless companies.
19
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2011

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INDIAN UTILITIES: August all-India generation up 9%, PLF up 212bp YoY
Sector observations
In August 2011 all-India generation grew 9% YoY to 72BUs, led by an increase in installed capacity by 14GW
over the past 12 months and higher PLF of nuclear and hydro plants.
PLF for coal and gas plants were down 184bp and 231bp YoY respectively but they were up 11ppt and 19ppt
YoY for hydro and nuclear plants.
Most important, the average generation growth in the system was 9.1% since January 2011, much better than
generation in previous months. Generation growth was aided by higher hydro-power generation. During the
FY12 monsoon period (June-August) hydro power generation grew by over 25% YoY.
Performance of key companies
Adani Power
synchronised its second unit of the Mundra Ph-III, from 1.9GW capacity it generated 1.3BUs and
reported PLF of 85% (against 62% in July 2011).
JSW Energy
generated 874MUs, down 8% MoM. The Rajwest plant, awaiting approval of a tariff hike (existing
tariff ceiling INR2.4/unit) from the RERC, was closed for the third consecutive month.
Jindal Power
generated ~662MUs down 8% YoY and PLF dipped 750bp YoY to 89%. Lower generation was led
by plant maintenance shut-down of two units.
Lanco Infratech
Udupi PLF improved MoM to 64% but Kondapali PLF dipped to 44% (against 77% in July 2011,
73% in August 2010).
NTPC's
August generation was 17BUs (down 3% YoY) of which coal and gas plant generation was lower by 2%
and 13% YoY respectively. The PLF of the coal plant was down 351bp YoY at 79%
ST prices range bound
The IEX average ST price for the week to September 05 was INR2.7/unit against INR3.1/unit a month earlier.
Since the start of FY12 IEX prices moved in a INR2-4/unit range.
MEDIA: Sony gets stronger at No.2; Star Plus stable; Colors & Zee TV grow [News Article]
Hindi GECs have made a good comeback post the Anna Hazare movement with the top 4 channels registering
growth in Week 36 of TAM 2011.
While GEC leader Star Plus remained stable this week, the dream run of ‘KBC’ continued to strengthen Sony
Entertainment Television (SET) channel at the No.2 position.
Surprisingly, Sony has got a huge push from its crime show ‘CID’ this week which has made it to the top 5 list.
The top 5 programmes for Week 35 (August 28 – September 3) are ‘Sathiya’ (5.9 TVR), ‘KBC’ (4.8 TVR), ‘Balika
Vadhu’ (4.4 TVR), ‘CID’ (4.0 TVR) and ‘Pavitra Rishta’ (3.6 TVR).
Riding on its successfully running shows ‘KBC’ and ‘Bade Achche Lagte Hain’, Sony has strengthened its
position at No.2. The channel acquired the second spot in Week 34. Sony has added 16 GRPs this week,
recording 258 GRPs (last week 242).
At No.3, Colors has bounced back by adding maximum GRPs this week. The channel recorded 249 GRPs (last
week 228 GRPs).
After losing heavily in the last couple of weeks, Zee TV has finally seen some growth this week and taken its
GRPs to 198 points (last week 180).
HINDI GEC: GRP trend over past ten weeks
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9 Sep
2011

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METALS WEEKLY: North American steel prices continue to recover; Copper quarterly production up
Indian long steel prices were down 0-0.5% WoW and flat product prices were flat.
Steel intermediates prices declined with sponge iron down 0.9% WoW at INR21,300/t and HMS 80:20 prices
were down 0.7% at INR24,932/t.
North American domestic HRC prices increased 1.9% WoW to USD660/t and North European prices declined
1.1% WoW to Euro538/t. Prices were flat/mixed in southern Europe, Russia, the Middle East and Turkey.
Chinese spot iron ore CIF prices increased 1% WoW to USD189/t.
Aluminum spot prices increased 3% WoW and copper and zinc declined 0.4% and 1% WoW respectively.
Japan's biggest copper producer, Pan Pacific Copper Co, expects copper to be in short supply for a third
successive year in 2012 as China-led demand boosts prices. It expects a deficit of 495,000 tons in 2011
followed by a decline to 31,000 tons in 2012.
CESCO, a Chilean copper and mining study group, said the world's 14 largest miners produced 2.43mt of
copper fines in 1QCY11, up 4.3% YoY.
Oil AND GAS: CAG Report on KG-D6
The final report largely reiterates the CAG comments in the draft report and the large part of deficiency is on
DGH. CAG has said that DGH is ill-equipped to oversee production sharing contracts.
Though, CAG seems to have also said that there is enough ground to revisit profit sharing (PSC) mechanism
for KG basin. This might be unlikely to happen and CAG suggestion would be considered in the future PSC’s.
Key takeaways from the final CAG report (as per media reports)
Reliance violated production sharing contract (PSC) in D6 block
Hoarded D6 exploration acreage despite lack of rigs (did not relinquish 25 per cent of total contract area of D6
block as required.)
DGH should have stopped RIL from proceeding on D6 phase two works.
DGH is ill-equipped to oversee production sharing contracts.
CAG has said there is enough ground to revisit profit sharing mechanism for KG basin.
Government suffered substantial royalty losses from the Panna Mukta and Tapti (PMT) fields.
STEEL: Real consumption flat YoY; production up 17%; India net exporter (JPC prov. data for Aug)
According to provisional JPC data, the real finished steel consumption has remained flat YoY for August 2011
at 5.9m tons. For the corresponding month last year i.e. August 2010, the consumption data was revised
upwards by 2.6m tons to 5.89m tons.
Production of finished steel however increased 17% YoY to 6.4m tons due to higher contribution from major
steel producers (mainly Essar, JSW, JSW Ispat and JSPL).
Imports declined 11% YoY to 341k tons, while exports increased 119% YoY to 386k tons leading India to
become net exporter for the month of August.
TELECOM: Mobile tariffs to go up further, says Sunil Mittal
Mobile tariffs will rise significantly in the coming months, according to Mr Sunil Mittal, Chairman, Bharti Airtel.
This will happen because operators will try to offset the lower revenue from rural markets, where users typically
make fewer phone calls than in cities and towns. So far, operators in the country boasted the lowest tariffs in the
world. But increasing pressure on margins and rising costs have forced operators to increase tariffs.
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Over the past few months, Airtel, Tata DoCoMo and Reliance Communications have increased tariffs. Mr Mittal's
comments indicate that there could be more hikes in the near future. Mr Mittal added that the Government
should be liberal and judicious in allocating spectrum.
Speaking on the sidelines of an industry event, he said operators have paid far too much to obtain spectrum for
offering third-generation mobile phone services. Operators including Airtel, Vodafone and Idea together paid
more than Rs 1 lakh crore to the Government for bandwidth to offer 3G mobile services and wireless broadband
in India. In addition, the Government is looking to price 2G spectrum also which will put further pressure on
operators to increase tariffs.
TELECOM: TRAI warns telcos on call rates, may intervene [News Article]
In a stern warning to telecom operators, Telecom Regulatory Authority of India (Trai) chairman J S Sarma on
Wednesday said mobile operators could not increase rates at will and the regulator would have to “intervene” to
protect the interest of consumers. “We will not allow operators to increase their tariffs at will. We are
investigating the matter and if necessary will intervene on the issue,” Sarma told Business Standard.
This means the regulator can bring rates under regulation once again. Currently, the rates are determined by
market forces. Sarma’s warning came a day after Sunil Mittal, chairman of the country’s largest telecom company,
Bharti Airtel, said a further increase in rates was inevitable as costs were rising. “The pressure on the industry will
be acute, as operators will have to serve rural markets, as well as low-end customers, who use only voice calls and
SMSes.” Mittal had said in an industry conference in Delhi. The correction in rates was required to compensate
the company’s rural operations, as the cost of operations had gone up exponentially, Mittal had said.
Bharti Airtel has raised rates by over 20 per cent since July across most key circles. Other telecom operators like
Tata Teleservices, Vodafone, Idea Cellular and Reliance Communications have followed suit. Trai has asked
operators to give details justifying the increase in rates. Currently, operators have to notify Trai for any change in
the rate plan, introduction of new plans and changes in prices within 30 days. This is not the first time that the
regulator is closely scrutinising rates. It had sought details from operators in August 2010, when rates hit a rock
bottom low to 1 paise per second, amid allegations that new telecom operators were resorting to predatory
rates.
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2011

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WIN Corporate Corner
ASHOK LEYLAND: August volumes down 3.5% YoY (8% MoM) to 7,218 units. NOT RATED
Ashok Leyland volumes de-grew by 3.5% YoY (8% MoM) to 7,218 units led by weakness in HCV volumes
HCV volumes declined by 4%YoY (8% MoM) to 7,136 vehicles, impacted by mining related issues in South
India (its stronghold).
LCV volumes grew by 52% YoY, 21% MoM (from a low base) to 82 vehicles.
The stock trades at 10x FY12E consensus EPS of INR2.6 and 8.3x FY13 consensus EPS of INR3.1.
INDIAN UTILITIES (Delhi discoms): Interactions with NTPC / RELI
We interacted with the management of NTPC and Reliance Infrastructure to gain further understanding on non-
recovery of dues by NTPC from Delhi DISCOMs, viz. BSES Rajdhani Power (BRPL) and BSES Yamuna Power (BYPL),
where RELI has 51% stake.
Key takeaways are as follows:
NTPC:
Outstanding dues from Delhi DISCOMs of INR9b+ comprise of INR4.3b of arrears (based on the revised CERC
tariff order approval for 2009-2014) and INR4.7b for the billing towards August 2011.
The arrears of INR4.3b have not yet been billed, NTPC recognizes revenues based on the revised CERC orders,
the billing will be done post approval of the Tariff Orders by CERC.
INR4.7b of outstanding dues for August 2011, the payment due date for claiming rebate is September 6 and
the dues are to be paid within 60 days from the billing
The key trigger level has been that the Letter of Credit (NTPC) in favour of NTPC for 105% of the last 12
months monthly average billing was valid till 3
1st
August, 2011; and has not been extended further. This has
led to NTPC threatening power cuts wef September 7, 2011.
NTPC’s management stated
that LCs could be restored in 24 hours time.
Reliance Infrastructure:
~22% Tariff hike in Delhi ensures that cashflows are now matched
DERC has also allowed quarterly adjustment of Fuel charges to the tariff by DISCOM.
RELI had indicated that total arrears on the books are INR60b, funded through unsecured loans. DERC has
approved the same and has indicated to look into the recovery over next 3-4 years (along with cost of carry),
and thus, there is now improved visibility.
No payment issues with other SEBs, Tripartite agreement framework provides a robust mechanism.
Expect NTPC to report net profit of INR88b (up 11% YoY) in FY12E and INR104b in FY13E (up 19% YoY). NTPC
quotes at a PER of 16x FY12E and 14x FY13E. P/BV is 2.0x FY12E and 1.8x FY13E. Maintain Buy.
JSW STEEL: Supreme Court allows e-auction of iron ore stock pile in Karnataka; Concall Takeaways
We attended the JSW Steel conference call to discuss the Supreme Court order for E-auction of iron ore inventory
in Karnataka. Key takeaways:
JSW Steel to cut steel production on rising iron ore cost and shortage for period of minimum 7-10 days.
JSW Steel is currently operating its furnaces at capacity utilization (CU) of 80%.
Since the mining and dispatches of iron ore was banned in Tumkur and Chitradurga last week, JSTL has not
been able to source the shortfall from other states.
As a result, inventories of iron ore at plant have depleted further and cost of iron ore has increased more than
the guidance of INR 500/ton. JSTL will be cutting steel production over the next 7-10 days due to shortage of
iron ore.
Supply of iron ore will be just sufficient
JSTL needs nearly 1.5m tons of iron ore every month to reach 100% CU. The monthly supply through E-
auction and NMDC mines in Bellary is currently estimated to be ~2m tons per month.
The requirement of iron ore from other Karnataka dependent steel producers is estimated to be about 500k
tpm. Thus, the total availability of iron ore is estimated to be just sufficient. If the E-auction is successful as
anticipated, JSTL is likely to get sufficient supply of iron ore.
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2011

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JSTL has adequate iron ore beneficiation and pelletization capacity to process all grades of iron ore.
What is likely to be costing of ore to JSW Steel?
Since other steel producers in the state have mini blast furnaces without sintering facilities, they are likely to
bid for lumps only. JSTL will have to focus on bidding for iron ore fines and lower grade ore
The supply of iron ore and demand is likely to be in equilibrium. Hence, there is a likelihood of everybody
bidding at reserve prices i.e. NMDC prices adjusted for quality and grade.
If the supply of iron ore falls short of demand, the cost increases are likely to be higher.
JSW STEEL may be able to restore steel production but the cost structure has changed permanently
We believe SC’s order to ensure iron ore supply to steel producers is a positive development for JSTL. For an
interim period of minimum 7-10 days, the margins and production are likely to be hit.
We continue to believe that iron ore supply and demand equation in the state has changed permanently. Iron
ore production will never return to the levels of 45-50m tpa because some of mines will be closed
permanently. JSTL trades at a PE of 14.1x FY13 and EV/EBITDA of 6.8x FY13. Maintain Sell.
JPA: May rope in cement biz partner - Talks with Votorantim, Cemex for stake sale [News Article]
Jaiprakash Associates (JPA), the Jaypee Group flagship, is exploring the option of roping in a strategic partner for
its cement business, the third largest in the country. According to three independent sources, JPA is open to
diluting up to 26 per cent in the business. Jaypee, added these sources, has roped in a clutch of investment
bankers to advise on any strategic stake sale. Preliminary talks have already begun with large South America
conglomerates such as Cemex and Votorantim Group, who have a global presence but are also looking at a bigger
India play. A deal, if any, may still take some time to fructify.
However, when contacted, Manoj Gaur, executive chairman, Jaiprakash Associates, denied a potential stake sale.
“There is no plan to rope in anybody or any partner for the cement business,” he told Business Standard. While
Cemex spokesperson Jorge Luis Perez said the company would not comment on market speculation, Votorantim’s
spokesperson said the company evaluated business development opportunities in key markets across the globe,
including India. “To date, however, no concrete step to enter this market has been taken, other than the 2010
acquisition of a 21 per cent stake in Cimpor, which owns and operates a facility in western India,” she added.
But a deal may not be that easy to conclude, said people following the development closely. But the $21 billion
Votorantim Group — one of the largest family-controlled industrial conglomerates of South America with
interests ranging from cement to mining and aluminum and even chemicals — has taken similar minority
positions in the past. Votorantim Cementos, the group’s cement arm, for example has a a similar minority stake in
Portugese cement maker Cimpor. Headquartered in Brazil, Votorantim Cementos is among the top 10 cement
manufacturers in the world with operations spread across 20 countries in four continents. The NYSE-listed Cemex
of Mexico is also a global leader in building materials, with an annual cement capacity of 96 million tonnes and
sales of $14.7 billion. Its geographical spread includes the Americas, Europe, Middle East and even pockets of
South East Asia. However, it has undergone a debt restructuring exercise recently, which may make it difficult to
pursue large-scale M&A opportunities just yet.
MARUTI SUZUKI: Downgrading estimates by 7.5% for FY12 & FY13
Long term outlook positive with 15% volume CAGR over FY11-16;Despite
short-term headwinds.
Capacity addition
at Manesar, a second line of 0.25m units has started operations in September 2011 and a
third line of 0.25m units will start by September 2012, taking total capacity to 1.9m units. MSIL plans to set up
a 1m-unit capacity plant in Gujarat.
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2011

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Focus on alternative fuels
to counter rising petrol prices, enhance sales & service network. The proportion of
diesel (volumes) increased from 60% to 80% among available models (~20% of total volumes). MSIL will
increase its diesel-engine capacity (in the SPV Suzuki Powertrain) from 0.25m to 0.29m units by September
2011. It is focusing on promoting CNG cars based on its superior i-GPI CNG technology.
Targets vendor localizations
to cut forex exposure and save costs. In FY11 it added 191 sales outlets, totaling
993 outlets in 668 cities. It increased service outlets by 206 to 2,946 outlets in 1,395 cities. Last four years
rural sales contributed ~20% to domestic sales. About 40% of MSIL's sales outlets are in the rural format.
Aims at localization of imported parts to cut forex exposure, costs:
MSIL has a three-year roadmap
beginning FY13 to cut vendor imports 600-700bp from 14-15% of revenue.
Downgrading estimates by 7.5%
for FY12 and FY13 to INR79.1 and INR93.8;Maintain
Buy
with a target price
of INR1,418 (~10x FY13E consolidated EPS)
TATA MOTORS: Jaguar disappoints in Aug 2011
Driven by weakness in Jaguar volumes, JLR’s US volumes de-grew 9% YoY (-5% MoM), underperforming the
luxury car market growth of 11% YoY (5% MoM).
Land Rover volumes grew 10% YoY (flat MoM); Jaguar volumes disappointed with de-growth of 43% YoY
The weakness in Jaguar volumes appears to be driven by discontinuation of MY11XF, prior launch of MY12XF
US retail volumes for August-2011
THERMAX: Interaction with the MD; Order momentum slows down further
We interacted with the Managing Director, Mr. M S Unnikrishnan. Key Takeaways
Lack of decision-making at various levels of government along with macro factors. Given the environment,
Thermax sees tough business environment going ahead, which will impact order flows.
Power sector has been badly impacted due to rising cost of imported coal (IPP) coupled with lack of initiatives
by several states towards distribution reforms and low tariffs, has significantly lowered return expectations
from new projects. Given high cost of capital, few IPPs are willing to start projects at this time.
Thermax’s JV company with Babcock & Wilcox is technically qualified for the boiler package of NTPC’s bulk
tender-2 (9 x 800MW). Price bids are expected to be submitted during the current month.
Slowdown in orders remains the biggest concern for Thermax. Order book at the end of 1QFY12 was Rs58.8b,
down 7% YoY while order intake during 1QFY12 declined 7% to Rs16.2b.
Valuation and view:
15x FY12E and 13x FY13E, NEUTRAL
BTB falling due to stagnating order book
Rising share of power EPC in revenues impacts EBITDA margin
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9 Sep
2011

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TCS: Media Reports Company leading race to acquire Lufthansa Systems; No Impact on EPS.
TCS has reportedly put in a bid valued at USD500m to acquire 80% stake in Lufthansa systems, the captive
information technology unit of the airline.
Our View: Risk Reward Favorable, NEUTRAL
We don’t see any meaningful impact on EPS.
The acquisition would treble TCS’s revenues in the travel & transportation vertical to USD980m
Give access to Lufthansa’s platforms for the airline industry like: -1) Integrated Operations Control Center
(IOCC) Platform: To manage flight operations2) Integrated Commercial Platform (ICP): Dynamic scheduling
platform 2) Lido / Flight: Flight planning solution.
The acquisition could help TCS use Lufthansa’s existing platforms in railroads, shipping, logistics etc.
Lufthansa has guided for revenues decline in 2011 and 2012 but has initiated a restructuring program
Lufthansa Systems: Key highlights
MARUTI: Maruti Suzuki to make Swift at Gurgaon, Manesar [News Article]
Maruti Suzuki India Ltd (MSIL) said on Wednesday it had decided to initiate processes to partially shift production
of its best-selling car, the new Swift, to the Gurgaon plant to meet rising demand. “The company has taken this
decision to deliver Swift cars as soon as possible to customers, who have booked it and are waiting for the
delivery. As the company is working with less manpower at the Manesar plant these days, the decision to make
Swift both at Manesar and Gurgaon will help to raise the overall volume of Swift models,” MSIL said
MSIL is considering transporting components from the weld shop at Manesar to assemble the Swift partly in
Gurgaon. It has received 90,000 bookings for the new car that was launched on August 17. The new Swift was
originally planned to be produced at the Manesar unit. MSIL, in fact, stalled production for a month in July to
increase the capacity to manufacture 17,000-18,000 units of the new Swift, from the earlier monthly average of
12,000 units.
However, production has come to a near standstill since the fresh face-off with workers on August 29. MSIL
produced 435 cars last week. This week, production has increased to 675 units, which includes the 250 units
rolled out from the Manesar unit on Wednesday. MSIL hired another 20 technicians, taking the total workforce
available at the facility to 870. This includes the 90 engineers deputed from the Gurgaon plant and 290
supervisors.
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WIN Collage
Labourers under NREGS get Maharashtra bonanza
The state government has decided to raise the minimum wage under the National Rural Employment Guarantee
Scheme (NREGS) to Rs200 from the present Rs127 per day. The decision comes in the wake of criticism from
various quarters about the government’s poor performance in the scheme. This change in payment policy, the
government says, will help it in spending Rs5,000 crore per year under the scheme as higher incentives will attract
greater number of labourers.
On average, the state government has been spending Rs350 crore per year for the last five years under the
NREGS, which is fully funded by the Centre. Highly successful across the country, the scheme has played an
important role in eradicating poverty. While states like Rajasthan, Andhra Pradesh and Madhya Pradesh have
been on top in utilising NREGS funds of up to Rs6,000 crore per year, Maharashtra spent only a meagre amount,
leading to criticism not only from the Opposition, but also from Union ministers belonging to the ruling Congress
and the Nationalist Congress Party (NCP).
“With concerted efforts, we raised the number of labourers working on the projects under the NREGS to 6.5 lakh
in April-May from just 30,000 in February-March, 2011. Apart from farm pond, plantation and road construction,
well digging is the major work undertaken under the scheme. We have 28,000 village panchayats, and even with
five wells/village, nearly Rs2,800 crore will be utilised from the scheme,” said Ratnakar Gaikwad, Chief Secretary.
An official from the Mantralaya said that lower-than-market wage was one of the reasons for fewer number of
labourers taking up jobs under the scheme. “This had resulted in poor spending. We have decided to raise the
rate to Rs200, for which the Centre has also given its nod,” he said.
Indonesia ‘Life-or-Death’ Coal Law to Cut Sales: Energy Markets
Thermal coal supplies from Indonesia may shrink by as much as 38 percent within three years as the world’s
biggest seller of the power-station fuel introduces legislation that will boost prices for India and China. A draft of
an Energy and Mineral Resources Ministry decree banning the sale of lower-quality coal from 2014 may remove
about 120 million metric tons a year from the market, equivalent to about 20 percent of global trade, according
to Supriatna Suhala, the Jakarta-based executive director of the Indonesian Coal Mining Association. Prices may
“shoot up” as a result, said Vinay Prakash Goel, head of the coal unit at Adani Group, owner of Adani Enterprises,
India’s biggest coal importer. Increased coal prices for Asia’s biggest power users may complicate efforts by policy
makers in India and China to sustain economic growth while curbing inflation. The region’s demand for thermal
coal, used to generate electricity, may rise by 9 percent to 505 million tons in the two years through 2012, Societe
Generale SA said in a June report. Indonesia is the biggest supplier of thermal coal to China and India.“It’s a life-
or-death situation for importers from India as it’s hard for power producers there to suddenly change suppliers,”
Suhala said. “In fact it could stop power plant operations in India.”
Local Processing:
The regulation bans the sale of coal with a heating value of less than 5,700 kilocalories a
kilogram to overseas markets and aims “to generate economic, social and cultural benefits” by mandating local
processing of all raw minerals by 2014, according to the draft. For coal, that means upgrading the heating value or
blending it with higher-grade fuel. The ministry is likely to approve the decree this month, according to Suhala.
Bambang Gatot Ariyono, director of coal management at the Energy and Mineral Resources Ministry in Jakarta,
didn’t answer two calls to his mobile phone seeking comment. “The prospect of this regulation is very frustrating
for Indonesian coal companies because further processing of coal is rarely done by anyone in any country,” said
Thomas Warren Shreve, a Jakarta-based director at PT Berau Coal Energy, whose sales to China have increased
fourfold in the past two years. “The market doesn’t require it and there is a market for low-rank coal which will be
underserved if the coal is upgraded.”
Indexed Prices:
As part of the 2009 law, Indonesia stopped exporters from selling coal for less than a domestic
index since September last year. The country increased the reference price of the fuel by 24 percent over the past
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year to $117.21 a ton on a free-on-board basis for sale in August, according to calculations based on data
published by the Directorate General of Coal and Minerals at the energy ministry.“Indonesia will lose half their
exports” because of the law change, said Goel. “China and India will have to go for higher-quality coal and
international prices will not merely go up, they’ll shoot up.” China shipped in 23.9 million tons of coal from
Indonesia in the first half of this year, equivalent to a third of total coal imports, according to national customs
data. The countrypaid $92 a ton on average from $79 a ton on average in 2010.“Lower imports from Indonesia
will mean that demand fordomestic supplies will increase as a lot of power plants in the south made changes to
their boilers to take low-grade coal of around 4,500 or 5,000 kilocalories,” said David Fang, director of the Beijing-
based China Coal Transport Association.“Supplies at Qinhuangdao will get tighter and domestic coal prices in
China will rise in general.”
Chinese Prices:
Coal with an energy value of 6,000 kilocalories per kilogram at Qinhuangdao port, which ships
more than half of the country’s domestic coal, has climbed 6 percent this year to$148.10 a ton for the week
ended Aug. 26, according to HIS McCloskey data. Stockpiles at the port were at 7.4 million tons as of Sept. 4,
according to the China Coal Transport and Distribution Association. India’s purchases from Indonesia surged 41
percent in the first half of 2011 compared with a year earlier, with the south Asian country surpassing China as
the largest importer, DeutscheBank AG said in a report on Aug. 12. India may import 102 million tons from all
countries in 2011, according to the bank’s estimates. Tata Power Ltd., the developer of India’s first 4,000-
megawatt plant, asked the government to help recover potential project losses caused by the rising price of
Indonesian coal, two people familiar with the matter said last month. The nation’s plan to regulate exports of the
fuel may double the cost of generating power, the people said, asking not to be identified because the matter
isn’t public.
SEBI triggers move for domestic hedge funds
Draft paper allows pooling of capital by HNIs
Domestic companies may be allowed to float hedge funds for the first time in India, under new rules proposed to
be introduced by the securities regulator shortly. The move will allow wealthy local investors to tap these high-
risk, high-return funds that trade in sophisticated instruments such as equity derivatives, structured products and
volatility plays. The Securities and Exchange Board of India, which put out a draft paper on alternative investment
funds (AIF) in August, said it would allow pooling of capital from institutional or high net worth investors where
more diverse risks or complex underlying products are involved.
Kalpesh Kinariwala, founder & CEO of CapVeda Capital (India) Advisory, which provides research support to
Mauritius-domiciled hedge funds, said there was huge appetite among local investors for hedge funds.
Brokerages, mostly foreign, now provide such products through offshore funds to their overseas clients while
domestic investors are deprived of such products, he said. Still, Kinariwala said, several local brokerages play
hedge fund strategies but it is done through their proprietary books. Leading local brokerages including Kotak and
Edelweiss, in addition to big proprietary desks, have their own alternative investment sections, which may look at
floating hedge funds as and when allowed, experts said. Kinariwala said Indian capital markets would receive at
least $2 billion in funds once the hedge fund route is opened up for wealthy investors, who can take bigger risks.
Siddharth Shah of Nishith Desai Associates, a law firm, said Sebi’s proposal would be welcomed by investors.
The hedge funds may invest in derivatives and complex structural products subject to suitability and disclosure to
investors. Avinash Gupta, leader, financial advisory at Deloitte in India, however, said globally hedge funds were
allowed to leverage 20 times or more, which may not be possible in the Indian context. Further, he said, wealthy
investors were already buying in India structured products that have hedge fund-like strategies. It is likely that,
through AIF regulations, Sebi wants to bring these products under its direct control with proper regulatory
framework. Sebi, in its paper on AIF, for which comments were invited till August 30, pointed out that IOSCO
(International Organisation of Securities Commissions) had suggested 28 rules for effective oversight of hedge
funds, including mandatory registration of funds and managers. It also said prime brokers and banks that provide
finance to hedge funds should be subjected to mandatory registration/regulation and supervision.
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Nifty Valuations at a glance
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