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Keynote capitals   industry monitor Keynote capitals industry monitor Document Transcript

  •       K E Y N O T E Keynote Capitals Institutional Research - Industry Monitor September 21, 2011Industries covered • Banks • Cement • Infrastructure • IT • Media & EntertainmentExecutive SummaryGovernment approves amendment to Export-Import Bank ActThe GoI has approved amendments to the Export-Import Bank Act to improve its ability to increasecredit to exporters and importers.The Export-Import Bank of India (Amendment) Bill, 2011 seeks toincrease the authorised capital of the bank from `2,000Cr to `10,000Cr, said an official statementafter the cabinet committee on economic affairs (CCEA) headed by Prime Minister Manmohan Singhapproved the amendments to the act.Key highlights in Cement IndustryAmbuja Cements and Ultratech Cement coal from South Africa for the months of December andJanuary. 9 cement companies bid for Himachal mega cement plant in Chopal area of Shimla District.The companies include Reliance Cementation, which proposes cement plant of 5mn tones whileothers include, JK Cements, Ambuja, ACC, Dalmia with proposal of 2mn tones cement plant. Coalstockpiles at Indias ports fell slightly since mid-September to 11mn tonnes from 12mn, importers said,but weak cement sector demand and rail bottlenecks are likely to keep stock levels high, according tosome of Indias biggest importers. JK Cement has announced an investment of `750Cr to set up awhite cement plant in the UAE, through a subsidiary, with capacity to produce 0.6mn tpa. And finally,Jaypee Group acquired majority stake in Andhra Cements. The company’s 2 cement units were non-operational since June 2010 with accumulated losses of `200Cr for last 2 years.Infra sector the most underperformers, although market factored the slumpinessIn the last fortnight, many companies declared their half yearly and Q2FY12 results. As expectedalmost all companies has revenues grew significantly but there were decline in profits and theirmargins mainly due to the higher cost of funds and higher raw material price which are now startedcooling off. Given sluggishness in the sector, IRB Infra and IL&FS Transportation Networks remainsour top picks and we maintain buy on the same however revising the target price to `197 in IRB infraand maintaining same target price for IL&FS Transport Networks of `248 per share.IT stocks fell on euro zone debt worriesBSE IT index closed at 5614.13, down 2.26% during the last week vis-à-vis its previous week. Thelosers on the BSE IT index were Infosys, HCL Tech, TCS and Mphasis down 1.30%, 5.51%, 3.78%and 9.08%, respectively. Tech Mahindra and Patni computers were gainers on the BSE IT index. ITstocks fell on euro zone debt worries. Europe is the second largest outsourcing market for Indian ITcompanies. The rupee fell past 51 per dollar for the first time in nearly 32 months, but did not have apositive impact on software services exporters such as TCS and Infosys, which get more than halftheir revenue from the US.Cable operators challenge ordinance for digitalizing cable TVA cable operators body moved the Delhi High Court challenging an ordinance promulgated lastmonth for achieving complete digitalization of cable television networks in the country by 2015. CableOperators United Front (COUF), in its petition sought the courts direction, restraining the governmentfrom enforcing the Cable TV Networks (Reg) Amendment Ordinance 2011.
  •       K E Y N O T E Weightages in major indices Sectors Sensex Nifty BSE 500 CNX 500 Banks 22.55% 23.48% 22.08% 22.20% Cement 0.51% 2.80% 2.70% 2.70% Infrastructure 8.19% 8.44% 7.33% 7.28% Information & Technology 15.00% 13.00% 10.16% 10.19% Media & Entertainment - - 0.78% 0.78%Banking Industry MonitorBanking Industry and its contribution to Indian equitiesBanking and other Finance firms together have the highest weightage in the Sensex and BSE 500with 22.55% and 22.08% respectively. The major players in BANKEX Index are the private banksnamely ICICI Bank (26.30%), which is the second largest bank in India with HDFC Bank LT (25.36%).Other banks include SBI (14.61%), Axis Bank (7.66%) and Kotak Bank (5.72%). The sector’sweightage in CNX Nifty is 23.48% and in CNX 500 is 22.02%.Government approves amendment to Export-Import Bank ActThe GoI has approved amendments to the Export-Import Bank Act to improve its ability to increasecredit to exporters and importers.The Export-Import Bank of India (Amendment) Bill, 2011 seeks toincrease the authorised capital of the bank from `2,000Cr to `10,000Cr, said an official statementafter the cabinet committee on economic affairs (CCEA) headed by Prime Minister Manmohan Singhapproved the amendments to the act. "Increase in the authorised capital would enable the bank totake higher export credit exposures, enable it to borrow funds to disburse under export line of credits,"the statement added.The Exim Bank, which plays a vital role in financing of export and import deals, is governed under theExport-Import Bank Act, 1981. The Export-Import Bank provides financial assistance to exporters andimporters and is the principal financial institution for coordinating the working of institutions engagedin financing overseas trade. The amendments also provide for appointment of two-whole timedirectors, other than the chairman and managing director in the bank by the central government.SBI ties up with MoneyGram International for inbound money serviceSBI has joined hands with money transfer services company MoneyGram International and itsprincipal agent Thomas Cook (India) Ltd. to provide in-bound money services across SBIs keybranches. Initially, the services will be made available to SBIs 100 branches. "Adding SBI to ouragent network immensely increases consumers access to the companys services across India. TheBanks locations throughout India will make it be more convenient than ever to receive moneywherever you are in the country.", MoneyGram Internationals executive vice president for theAmericas and Emerging Markets, Dan OMalley, said.IDBI Bank becomes first lender to tap China fundsIDBI Bank became the first lender to raise funds in offshore yuan in Hong Kong, signalling a new setof borrowers to enter the growing bond market, with an order book of 900 million yuan ($141 million),nearly double what it set out to raise, and borrowing costs of 4.5% for three-year "dim sum" debt.While the steady increase in rupee interest rates has driven local companies to raise funds overseas,the yuans attractiveness has received a boost after New Delhi added the Chinese currency as aexternal financing vehicle to the US dollar, Japanese yen, euro and the pound sterling in September.India has set a $1 billion limit for borrowing in yuan within the $30 billion overseas borrowing limit forcompanies."IDBI Bank decided to access this market as an attractive funding cum diversification play as also tocultivate a new and fast developing investor class," Melwyn Rego, executive director at the bank told
  •       K E Y N O T E a media briefing. IDBI has a "Baa3" rating from Moodys and "BBB-" from S&P, both with stableoutlooks, and similar ratings are expected for the new bonds. The bank has already lined up assets,which will be funded from the proceeds of the bond, he added. While the bank did not have anyimmediate plans to tap the market again, despite the good demand from investors, Rego said thebank has applied to Chinese banking authorities to open a representative office in Shanghai.Cement Industry Monitor9 cement companies in run for Himachal mega cement plantReliance Cement has proposed a 5mn tonne capacity mega cement plant the biggest so far inHimachal Pradesh. Besides Reliance eight other firms have bid for this project proposed to be set upin Chopal area of Shimla district. While the others have proposed a 2mn tonne capacity plant,Reliance Cementation Pvt Ltd (RCPL) has proposed a 5mn tonne plant. The other firms who have bidfor the grant of prospective license are Lafarge, JK Cements, Ambuja, ACC, Dalmia, Abhijit Group,Laxmi Cements and Atha Mines. The plant is proposed to be set up at the Sanrothi limestonedeposits which is close to the Gummah limestone deposits where India cements is already setting upa 2mn tonnes capacity plant. The state already has four cement plants in operation run by ACC,Ambuja, CCI and Jaypee which have a total capacity of 12.6mn tonnes. Four others with a capacity of7.27mn are in the process of being set up.Coal sourcing for cement companiesAmbuja Cements may secure four Panamax cargoes of South African thermal coal. Ultratech CementLtd (UTCEM), has requested offers for 100,000 tons of South African coal for delivery next month.India coal stocks fall slightly to 11mn tonnesCoal stockpiles at Indias ports fell slightly since mid-September to 11mn tonnes from 12mn, importerssaid, but weak cement sector demand and rail bottlenecks are likely to keep stock levels high,according to some of Indias biggest importers. Until the unsold tonnage shrinks, which could takemonths, Indian buyers are unlikely to return to the spot market for large fresh purchases despite thegrowing coal supply crisis which is causing power shortages across the country. Indias need forimported coal for power generation is structural and rapidly increasing but a lack of rail capacity tomove it from ports to end-users is holding up both domestic supply and imports.JK Cement plans UAE plantJK Cement has announced an investment of `750Cr to set up a white cement plant in the UAE,through a subsidiary, with capacity to produce 0.6mn tpa. This is in sharp contrast to the earlierannounced plans for a 2.2mn tpa, $400mn project. The UAE cement plant by Kanpur-based cementmaker JK Cement was scheduled to go on stream by the middle of 2010, but was hit by deterioratingeconomic conditions amid global slump and meltdown. The new plant will be set up at the FujairahFree Trade Zone and the plant will have provision to change over to produce grey cement.Jaypee Group acquired Andhra CementsThe G P Goenka Group sold its controlling stake in ailing Andhra Cements to Jaypee Group in an allcash deal of `235Cr. Goenka group will sell its 32.95% promoters stake, out of 45% it held. JaypeeDevelopment Corp will also subscribe to additional fresh issue of 14.75Cr shares through preferentialallotment. These will take Jaypees stake in Andhra Cements to 66.64%, Andhra Cements. Thepreferential allotment will be at `12 a share of `10 each. At this price, Jaypee Development Corp willhave to fork out `234.74Cr to acquire 66.64%. Jaypee will launch an open offer for 7.63Cr shares ofAndhra Cements at `12 per share. Andhra Cements incurred a loss of `35.50Cr on net sale of `65.48Cr last year while two of its units have been non-operational since June 2010. Andhra Cementshad accumulated losses of over `200Cr in the past two years.
  •       K E Y N O T E Infrastructure Industry MonitorThe Sector has underperformed 7.22%, 6.18%, 6.81% and 6.07% over Sensex, BSE500, Nifty andCNX500 respectively. However, Noida toll bridge was the top performer by 5.51%, 6.56%, 5.89% and6.63% whereas KSK Energy was the worst performer by 36.10%, 35.01%, 35.71% and 34.99% overSensex, BSE500, Nifty and CNX500 respectively.Government clears three stalled infra projects worth `25000CrThe government has given in-principal approval for three infrastructure projects involving aninvestment of `25000Cr, these infra projects are cleared by inter ministerial committee led by thefinance ministry. The three projects, which have been cleared, are L&T Metro Hyderabad, HindujaPower, Vishakhaptanam and Seembari Expressway, Andhra Pradesh. The L&T Metro Hyderabad isthe biggest projects which involves investment of `16000Cr. The idea is to put these projects on thefast track and bank loans, which have been sanctioned, should be disbursed for implementation. Tillnow, the government has discussed around 24 projects worth around `209000Cr. However, as ofnow, panel has only discussed projects where bank loans are above `1500Cr, and in next stage,panel will discuss loan above `1000Cr. The government’s move to fast track these infra projects willalso clear way for banks to start lending and boost slowing credit growth and pushing banks toaccelerate lending at a time when credit growth is slowing because of the ongoing economic crisisand high interest rates. However, banks are concerned over increasing NPAs, as any of these infraprojects turns into NPA, it may have chain reaction. The ministry of finance is also concerned over thedowngrading of the Indian banking sector by the credit rating agency Moody’s.Government will stick to its disinvestment target of `40000Cr for FY12In the first seven months of the current financial year, the government has been only able to raisearound `1145Cr through a stake sale in Power Finance Corporation (PFC) and there areapprehensions that the government may miss the disinvestment target of `40000Cr. The governmenthas delayed its proposed stake sales in the Public Sector Units because of the volatile stock marketconditions. During 2010-11, the government had raised around `22763Cr via the sale of equity inpublic sector enterprises. The government has delayed its proposed stake sales in the Public SectorUnits because of the volatile stock market conditions. he international equity markets have been on adownslide on worries over the ongoing debt crisis in the euro zone and credit crunch in the UnitedStates. All these aspects have to be taken into account and the government will take a decision at theappropriate time
  •       K E Y N O T E IT Industry MonitorIT Industry and its contribution to Indian equitiesIT sector has weightage of 10.16% and 10.19% in BSE 500 and CNX 500 with major stocks areInfosys, TCS and Wipro. The sector is also represented through BSE IT and CNX IT indices. IT sectorcompanies also constitute major portion of Sensex and Nifty with weightages of 15.00% and 13.00%.Tech Mahindra reported a mixed second quarter resultsFor 2QFY12, Tech Mahindra reported revenue growth of 2.4% Q-o-Q to `1333Cr due to flat Q-o-Qvolume growth. Operating profit margin (OPM) slipped to 15.3%, down 337bp Q-o-Q, due to negativeimpacts of wage hikes given during the quarter and volume decline from BT. PAT, excluding sharefrom Satyam, came in at `139Cr, negatively impacted by higher interest cost of `72.1Cr becauseit includes MTM loss of `52Cr derived from foreign currency loans.i-GATE to delist Patni ComputerNasdaq-listed iGATE Corporation announced its intention to commence the process of delisting itsIndian subsidiary, Patni Computer Systems. The de-listing process, to be done through a reversebook building process, is expected to be completed by mid-2012. iGATE has indicated a floor price of`356.74 per share. The delisting is subject to the approval of Patni shareholders and regulatoryapprovals.Infosys launched XBRL filing solution to help companies file financial statementsInfosys launched XBRL filing solution to help companies file their financial statements in the formatmandated by the Ministry of Corporate Affairs. XBRL filing solution is a ready to use tool, in whichusers can convert their excel-based financial information into XBRL.Wipro implemented material management system for All Nippon Airways (ANA)Wipro Technologies has implemented aircraft parts and material management system for All NipponAirways (ANA) to strengthen regulatory compliance and optimize its inventory stock.Wipro expands footprint in South Africa, to hire 1,000Wipro Technologies is planning to set up a delivery centre in South Africa. The proposed move by theIT services business wing of Wipro would create job opportunities for 1,000 professionals in the nextthree years. The company mentioned that over 500 employees who are either located in South Africaor in various offshore centers are servicing clients in that country, belonging to industries such astelecommunications, financial services and oil & gas.Satyam Expects North America Sales to Grow: Mr. Lakshmanan ChidambaramAccording to Mr. Lakshmanan Chidambaram, head of the Americas business at Satyam, SatyamComputer expects sales from North America this fiscal year to increase faster than last years 16%growth, but fears that the outlook could be hurt if economic conditions in the industrys biggest marketworsen. The economic worries of the U.S. havent hurt the Indian software services exportersbusiness so far and that reflects in the size of the deals the company is chasing, The company ispursuing nearly 10 deals worth more than $100mn in the banking and financial services,manufacturing and hi-tech sectors, with the largest deal worth more than $200mn. Its largest deal sofar in North America was worth about $55mn.
  •       K E Y N O T E Media Industry MonitorMajor listed Media & Entertainment companies included in BSE 500 and CNX 500 indices are ZeeEntertainment Enterprises, Dish TV India, Sun TV Network, Jagran Prakashan and UTV SoftwareCommunications, while the sectors weight age is 0.78% in both the indices.Cable operators challenge ordinance for digitalizing cable TVA cable operators body moved the Delhi High Court challenging an ordinance promulgated lastmonth for achieving complete digitalization of cable television networks in the country by 2015. CableOperators United Front (COUF), in its petition sought the courts direction, restraining the governmentfrom enforcing the Cable TV Networks (Reg) Amendment Ordinance 2011.COUF challenged the ordinance, promulgated on October 25 on the basis of a recommendation byTelecom Regulatory Authority of India (TRAI), terming it as "unconstitutional" and contending itviolated the cable operators fundamental right to carry on their business and profession.COUF pointed out to the court that a huge investment to the tune of `10,000Cr is required forcomplete digitalization of the cable TV network, which the cable operators are not capable of doing.Reliance MediaWorks to restructure businessReliance Mediaworks, part of ADAG group, said that its board will explore options for restructuring itsbusiness, including creating subsidiaries for exhibition and film and media services divisions. Thecompany also said that the restructuring will help position the film and entertainment servicescompany to pursue strategic growth and enable it to boost revenues and profitability as well asexpand products and service offerings.Dish TV plans to raise $200mn from overseas investorsDish TV plans to raise $200mn from overseas investors and is in the second step to get statutoryapprovals and made an application to Foreign Investment Promotion Board (FIPB).The CEO of Dish TV, RC Venkatesh said that the company has to deploy additional capital fordigitization and the high definition technology and the company should be in a position to do it in shortnotice since this entire procedural thing is a long winded exercise.Den Networks eyes 2.5mn new digital subscribers in FY13In FY13, Den Network is looking to add about 2.5mn new digital subscriber as its a completely newparadigm where the entire under declaration or non-addressability goes out of the market and 100%of the subscribers are going to be addressable.Zee Group announces $250mn fund for Veria LivingZEE Group has announced the creation of a $250mn content development, production, co-productionand acquisition fund that will benefit Veria Living, a network devoted to showcasing wellnessprogramming and related content across multiple media platforms. Veria Living, headquartered atNew York, offers the world’s largest line-up of first-run, original programming – connecting viewers ina contemporary and accessible manner to the benefits and joys of living a healthy lifestyle.
  •       K E Y N O T E  KEYNOTE CAPITALS LTD. Member Stock Exchange, Mumbai (INB 010930556) National Stock Exchange of India Ltd. (INB 230930539) Over the Counter Exchange of India Ltd. (INB 200930535) Central Depository Services Ltd. (IN-DP-CDSL-152-2001) 4th Floor, Balmer Lawrie Building, 5, J. N. Heredia Marg, Ballard Estate, Mumbai 400 001. INDIA Tel. : 9122-2269 4322 / 24 / 25 • www.keynoteindia.netDISCLAIMER• This report has been prepared and issued by Keynote Capitals Limited, based solely on public information and sources believed to be reliable.• Neither the information nor any opinion expressed herein, constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities and also for the purpose of trading activities.• Keynote Capitals Limited makes no guarantee, representation or warranty, express or implied and accepts no responsibility or liability as to the accuracy or completeness or correctness of the information in this report.• Keynote Capitals and its affiliates and their respective officers, directors and employees may hold positions in any securities mentioned in this Report (or in any related investment) and may from time to time add to or dispose of any securities or investments.• Keynote Capitals may also have proprietary trading positions in securities covered in this report or in related instruments.• An affiliate of Keynote Capitals Limited may also perform or seek to perform broking, investment banking and other banking services for the company under coverage.• If ‘Buy’, ‘Sell’, or ‘Hold’ recommendation is made in this Report, such recommendation or view or opinion expressed on investments in this Report is not intended to constitute investment advice and should not be intended or treated as a substitute for necessary review or validation or any professional advice. The views expressed in this Report are those of the analyst which are subject to change and do not represent to be an authority on the subject. Keynote Capitals may or may not subscribe to any and/ or all the views expressed herein.• The opinions presented herein are liable to change without any notice.• Though due care has been taken in the preparation of this report, Keynote Capitals limited or any of its directors, officers or employees shall be in any way be responsible for any loss arising from the use thereof.• Investors are advised to apply their judgment before acting on the contents of this report.• This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Keynote Capitals Limited.