1. Market Outlook
India Research
March 25, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices provisionally ended a choppy trading session with
BSE Sensex 0.2% 40.5 17,451
small gains. Equities rebounded from a near 1% fall on Monday, triggered by
worries that higher interest rates may hamper the ongoing strong economic Nifty 0.4% 20.1 5,225
rebound. The market was volatile as traders rolled over positions in derivatives MID CAP 0.2% 13.8 6,707
segment from the March 2010 series to the April 2010 series ahead of the SMALL CAP 0.3% 25.5 8,448
expiry. The Sensex and Nifty gained 0.2% and 0.4% respectively while the BSE BSE HC 1.5% 80.4 5,292
Mid-cap and Small-cap indices grew by 0.2% and 0.3% respectively Among the BSE PSU -0.3% (24.9) 9,004
front-liners, HDFC Bank, Tata Power, RIL, Tata Steel and NTPC were up by 1- BANKEX 0.3% 33.4 10,377
3%, while Bharti Airtel, Tata Motors, DLF, Grasim and ACC were down by 1- AUTO -0.5% (38.7) 7,459
3%. In the Mid-cap segment, Cadila Healthcare, Asian Star, Kirloskar Oil, METAL 0.8% 146.1 17,697
Alstom Projects and Havells India were up by 4-5%, while Andrew Yule, Shree OIL & GAS 1.1% 114.1 10,172
Renuka Sugar, Core Projects, Polaris Software and UB Holdings were down by BSE IT 0.3% 17.2 5,512
3-4%.
Global Indices Chg (%) (Pts) (Close)
Markets Today
Dow Jones -0.5% (52.7) 10,836
The trend deciding level for the day is 17446 / 5221 levels. NIFTY trades above NASDAQ -0.7% (16.5) 2,399
this level during the first half-an-hour of trade then we may witness a further FTSE 0.1% 4.3 5,678
rally up to 17536 – 17620 / 5248 – 5271 levels. However, if NIFTY trades Nikkei 0.4% 41.0 10,815
below 17446 / 5221 levels for the first half-an-hour of trade then it may correct
Hang Seng 0.1% 20.8 21,009
up to 17362 – 17272 / 5198 – 5171 levels.
Straits Times -0.7% (19.3) 2,886
Indices S2 S1 R1 R2 Shanghai Com 0.1% 3.7 3,057
SENSEX 17,272 17,362 17,536 17,620
NIFTY 5,171 5,198 5,248 5,271 Indian ADRs Chg (%) (Pts) (Close)
Infosys -1.4% -0.9 $61.4
News Analysis Wipro -2.4% -0.6 $23.1
Satyam 1.1% 0.1 $5.4
HDIL, Mphasis Ltd – Initiating Coverage
ICICI Bank 0.1% 0.0 $41.2
Zain okays Bharti Airtel’s bid
HDFC Bank -1.4% -1.8 $130.7
Cairn India – upgrades Reserves and Production estimates
AT&T exercise option to acquire 8.07% stake in Tech Mahindra
Advances / Declines BSE NSE
Piramal Healthcare acquires the “ i-pill” Brand from Cipla
IVR Prime achieves financial closure for its Road DBFOT Project Advances 1,277 625
Declines 1,558 668
Refer detailed news analysis on the following page.
Unchanged 108 49
Net Inflows (Mar 22, 2010)
Rs cr Purch Sales Net MTD YTD Volumes (Rs cr)
FII 1,993 1,722 271 14,302 15,279 BSE 4,208
MFs 508 868 (360) (2,754) (4,764) NSE 12,425
FII Derivatives (Mar 23, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 6,870 6,291 579 16,143
Stock Futures 8,290 8,392 (102) 29,008
Gainers / Losers
Gainers Losers
Company Price (Rs) Chg (%) Company Price (Rs) Chg (%)
Areva T&D 307 10.3 NMDC 327 -5.5
Lanco Infra 55 6.8 Idea Cellular 66 -3.7
Alstom Proj 605 3.9 Shree Renuka 72 -3.5
Cairn India 293 3.8 Bharti Airtel 307 -3.0
Petronet LNG 79 3.5 UB Holdings 273 -3.0
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
HDIL – Initiating Coverage with a BUY recommendation
HDIL is the largest listed Slum Rehabilitation developer in the most resilient Mumbai
market, which contributes a substantial 71% of our GNAV. Execution of the Rs200bn MIAL
project is progressing well, sustainable TDR prices and successful new launches via the
conventional method provides strong visibility for HDIL. Further, HDIL seeks to de-leverage
its Balance Sheet on the back of expected high Revenue inflow from the MIAL project and
the recent low-cost Rs11.5bn fresh NCD issue, which will reduce its gearing to 0.3x in
FY2012E from current level of 0.5x. At Rs284, the stock is trading at 28% discount to our
1-year forward NAV, 8.1x FY2012E EPS and 1.2x FY2012E P/BV. Hence, we Initiate
Coverage on the stock, with a Buy recommendation and Target Price of Rs356, which is at
10% discount to our 1-year forward NAV.
TDR prices in Mumbai have recovered from their bottom of Rs900/sq. ft in February 2009
to Rs2,700/sq. ft currently. HDIL, being a market leader and controlling around 70% of the
TDR supply in Mumbai, is a key beneficiary of revival in the TDR market. We have assumed
Rs2,000/sq. ft (ie. 25% discount from current levels) for its MIAL project. First phase of
HDIL’s MIAL project to rehabilitate 20,000 families is on track and likely to get completed
by September, 2010 and generate around 11mn sq. ft of TDR. Further, the company will
also get 2mn sq. ft of FSI for commercial development in the airport vicinity once the
20,000 families get rehabilitated. We expect HDIL to sell 5-6mn sq. ft of TDR annually
over the next five years on the back of strong ongoing execution of its MAIL project which
will generate further 37mn sq ft of TDR over next 5-6 years. The MAIL project contributes
around 30% to our 1-year forward NAV.
Mphasis Ltd – Initiating Coverage with a Buy recommendation
Mphasis has been the best performing IT Services company in the recent past due to the
strong pipeline from HP-EDS. Going ahead, we believe the ongoing recovery in the IT
demand environment and sustained deal flows from parent HP (accounts for 71% of
Mphasis’ Total Revenues) would induce the next leg of growth for Mphasis, marking its
entry into the big league of the Indian IT Services Industry. At Rs668, the stock is trading at
attractive valuations of 12.2x FY2011E EPS. Hence, we Initiate Coverage on the stock, with
a Buy recommendation and Target Price of Rs872, implying a Target multiple of 16x (25%
discount to Tier-I companies’ Target range 20-22x), 10x EV/EBIDTA (v/s 15x EV/EBIDTA of
Tier-I players) on FY2011E estimates.
Zain okays Bharti Airtel’s bid
Kuwait-based Zain Telecom’s board cleared Bharti Airtel’s proposal to buy its African
assets for US$10.7 bn (around Rs 48,600cr). Thus Bharti Airtel would now gain 42 mn
subscribers from Zain. The combined entity, with a subscriber base of 171 mn in 19
countries (15 in Africa), will become the world’s seventh-largest telecom company. The key
countries to be added to Bharti’s network will be Tanzania (Zain has 39 % share), Zambia
(70%), Nigeria (25%), Congo (45%) and Chad (70%) amongst others. Zain buyout at
enterprise value of $10.7 bn would result in a payout of $9 bn (Rs 40,887cr), which
includes any loan payable by the operating companies to Zain Group based on estimated
net debt of about $1.7 billion (Rs 7,723 crore) as on December 31, 2009. A further US
$700 mn (Rs 3,180 cr) is to be paid a year after the deal closes. Bharti Airtel, has already
arranged a US$ 8.3bn (Rs 37,750 cr) loan to finance the Zain buy. Its debt issue had
been oversubscribed and major international banks had committed to underwrite the total
amount. Of the loan, US$7.5 bn (Rs 34,072 cr) is US dollar denominated and US$ 1bn
(Rs 4,550 cr) is in rupees. With Zains South African operations, we believe Bharti to get a
strong business opportunity along with a strong customer share in South African market,
which is in sync with Bharti Airtel’s global expansion plans particularly through M&A in
emerging economies. Apart from India, Bharti also has operations in Bangladesh, Sri
Lanka, and Seychelles. We maintain Buy on the stock.
March 25, 2010 2

3. Market Outlook | India Research
Cairn India – upgrades Reserves and Production estimates
Cairn India recently carried out a comprehensive review of Rajasthan block’s resource
potential, post which the in-place reserves, discovered reserves and the production target
has been increased. CIL has raised its potential Rajasthan In-place Resource base to 6.5bn
boe largely on account of increase in gross unrisked reserves estimates to 2.5 bn boe. CIL
has also increased its discovered resource base in Rajasthan basin to 4.0bn boe from the
earlier levels of 3.7 bn boe. While the 2.1bn boe core MBA formation estimates have not
been changed, estimates at the Rajasthan small fields and other Rajasthan fields
represented by 22 fields (prominent being Barmer Hill formation) has been increased from
the level of 1.7bn boe to 1.9-2.0 bn boe. According to management the resource base
provides a basis for vision to up the plateau production rate of 240,000bpd (175,000bpd
currently) from the block subjected to the government approval and additional investments.
The increase in the plateau would be driven by higher production from the core MBA fields
coupled with production from EOR, Barmer Hill and newer discoveries. The estimated
production rate from the Mangala fields has been increased to 150,000bpd from
125,000bpd earlier. The increase is largely on account better than expected well
deliverability and the better reservoir quality. The production rate at the horizontal wells
has been at 12,000bpd. Company did not divulge into details of the ramp-up of the
capacity, however the management believe that the production capacity is not likely to be
a constraint for production ramp-up. After factoring in Rajasthan exploratory portfolio
upsides, preponement of the production from the MBA block our target price of the stock
stands revised upward at Rs315/share from Rs269/share earlier. At the current market
price, the target price provides an upside of 7.6%. We maintain our Neutral view on the
stock.
AT&T exercise option to acquire 8.07% stake in Tech Mahindra
AT&T has exercised its option to acquire 9.87 million amounting to 8.07% stake in Tech
Mahindra from MBTM, Mauritius based subsidiary of Tech Mahindra. The stake transfer
was part of the equity option offered in May’2005 (pre IPO of Tech Mahindra ) to AT&T as
part of the sweetener to the $350mn deal it signed at that time. AT&T (second largest
client) has exercised the option as Tech Mahindra has achieved the desired revenue
milestone and emphasizes the strong client confidence, which further enforces our positive
view on the stock. We maintain Buy on Tech Mahindra, with a Target price of Rs. 1,168.
Piramal Healthcare acquires the “i-pill” Brand from Cipla
Piramal Healthcare announced signing of a definitive agreement for purchase of all
Intellectual property rights in India related to "i-pill" brand of Cipla for an aggregate
consideration of Rs 95cr. “i-pill” features in the top-300 pharmaceutical products and had
sales of Rs. 31cr as per ORG IMS for the last twelve months, putting the valuation for the
brand at around 3xSales, which is slightly on the higher side. “i-pill” is an emergency
contraceptive pill (ECP) used to prevent unplanned pregnancy and addressing a market of
Rs100cr.The ECP market in India has grown by 250% in the last two years. The acquisition
of “i-pill” is positive for Piramal as it strengthens its over the counter (OTC) portfolio which
has strong consumer brands such as Lacto Calamine skin care range, Supractiv Complete,
Saridon and Polycrol antacid. We maintain our Accumulate rating on Cipla and Piramal
Healthcare.
March 25, 2010 3

4. Market Outlook | India Research
IVR Prime achieves financial closure for its Road DBFOT Project
IVR Prime Urban Developers Limited (IVRPUDL) has achieved financial closure for the
recently awarded Road DBFOT Project for upgrading the existing road from 2lane to 4
lane on NH-59 from Indore to Jhabua. The Project was awarded to IVRCL and is co-
sponsored by IVR Prime. The Project is proposed to be implemented through IVRCL Indore
Gujarat Tollways Limited. The estimated cost of the project is Rs1,524cr, with a 75:25
Debt: Equity ratio. This development needs to be seen in the backdrop of the NHAI’s latest
amendment to Road project bidding norms, wherein a developer will not be allowed to bid
for road BOT projects if it has three or more projects which have not achieved financial
closure. We believe that this development takes IVR Prime closer to the meeting with the
new bidding clause setup by NHAI, thereby enabling it to bid for newer projects going
ahead. IVR Prime has one more project for which financial closure is to be achieved. We
have valued IVRCL Infra on an SOTP basis. We have valued the company’s core
construction business at a target P/E of 14x (Rs180/share), whereas IVRCL’s stake in
IVRPUDL and Hindustan Dorr-Oliver is valued on a Mcap basis after assigning a 25%
holding company discount and contribute Rs49/share and Rs11/share to our Target Price
respectively. We maintain Buy on IVRCL Infrastructure with a Target Price of Rs240.
Economic and Political News
RBI hints at further rate rise
More goods than services likely to come under GST
Food inflation may transmit to non-food items: FM
Corporate News
Jaypee group may foray into fertiliser industry
Bosch settles wage talks at Bangalore plant
Auto exports up 16% in Apr-Feb; value at Rs1.62 lakh cr
Cars to cost 1-3% more from April 1
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
March 25, 2010 4

5. Market Outlook | India Research
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