1. Market Outlook
India Research
September 22, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices logged smart gains for the third straight session on BSE Sensex 0.5% 95.5 20,002
foreign institutional investors' buying spree and robust 2Q advance tax Nifty 0.5% 28.6 6,000
payments from frontline companies. Nevertheless, volatility was intense as MID CAP -1.0% (79.6) 8,078
the Sensex and Nifty gyrated near their psychological levels of 20,000 and SMALL CAP -1.3% (138.1) 10,176
6,000, respectively, along with achieving their highest levels in 32 months. BSE HC 1.1% 61.8 5,939
Despite the rise, the market breadth was weak, as small and mid-cap stocks BSE PSU -0.3% (26.9) 10,272
underwent correction. While, FMCG shares declined on profit booking, software BANKEX -0.1% (8.3) 13,888
pivotals gained on improving sentiment in the US economy. The Sensex and AUTO 0.1% 10.1 9,407
Nifty closed with gains of 0.5% each. However, BSE mid and small-cap indices
METAL -0.6% (95.4) 16,605
were down by 1% each. Among the front liners, TCS, Wipro, Tata Power, Tata
OIL & GAS -0.5% (50.9) 10,806
Motors and HDFC gained 2–5%, while ITC, JP Associates, DLF, Reliance
BSE IT 2.4% 142.8 6,021
Infrastructure and Jindal Steel lost 1–2%. Among mid caps, Kwality Dairy, CMC,
Global Indices Chg (%) (Pts) (Close)
IBN 18, Marico and JM Financials gained 4%, while Redington India, TVS
Motor, Sigrun Holdings, IL&FS Transportation Network and Indraprastha Gas Dow Jones 0.1% 7.4 10,761
lost 4–6%. NASDAQ -0.3% (6.5) 2,349
FTSE -0.5% (26.4) 5,576
Markets Today Nikkei -0.3% (24.0) 9,602
The trend deciding level for the day is 19984/6001 levels. If NIFTY trades Hang Seng 0.1% 25.3 22,003
above this level during the first half-an-hour of trade then we may witness a Straits Times 0.5% 14.4 3,095
further rally up to 20107–20212/6041–6072 levels. However, if NIFTY trades Shanghai Com 0.1% 2.8 2,592
below 19984/6001 levels for the first half-an-hour of trade then it may correct
up to 19879–19756/5970–5930 levels. Indian ADRs Chg (%) (Pts) (Close)
Infosys -0.4% (0.3) $65.9
Indices S2 S1 R1 R2 Wipro 1.1% 0.2 $14.1
SENSEX 19,756 19,879 20,107 20,212 Satyam 6.1% 0.3 $5.5
NIFTY 5,930 5,970 6,041 6,072 ICICI Bank -0.9% (0.5) $48.5
HDFC Bank -1.6% (3.0) $182.1
News Analysis
Amara Raja Batteries – Initiating Coverage Advances / Declines BSE NSE
Orient Green Power IPO – Recommend Neutral
Advances 857 286
Blue Star bags orders worth Rs130cr
Refer detailed news analysis on the following page.
Declines 2,185 1086
Unchanged 71 31
Net Inflows (September 20, 2010)
Rs cr Purch Sales Net MTD YTD
Volumes (Rs cr)
FII 4,548 2,669 1,879 15,499 74,625
BSE 5,432
MFs 549 758 (209) (2,649) (18,442)
NSE 17,933
FII Derivatives (September 20, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 3,448 3,965 (517) 25,569
Stock Futures 2,898 3,516 (618) 40,780
Gainers / Losers
Gainers Losers
Price chg Price chg
Company Company
(Rs) (%) (Rs) (%)
Ranbaxy Lab 562 5.6 Gujarat Mnrl 135 (4.2)
TCS 953 4.6 Essar Ship Ports 114 (4.2)
Bombay Dyeing 665 3.7 REC 343 (4.1)
Rolta India 174 3.5 GCPL 419 (4.0) 1
IVRCL Infra 165 3.5 Ispat Inds 23 (3.9)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
Amara Raja Batteries – Initiating Coverage
Amara Raja Batteries Limited (ARBL) is India’s second largest manufacturer of lead
batteries with a market share of ~27%. US-based Johnson Controls (JCI) is a joint venture
partner of ARBL and holds a 26% equity stake in the company. Automotive and industrial
batteries contribute 50% each to the total revenue of ARBL.
JV with JCI – Well placed to chase long-term growth opportunities: Growing concerns
about the environmental impact of CO2 emissions and significant investments by global
auto majors to develop alternative fuel base vehicles offer a huge opportunity to industry
players. We believe ARBL, through its existing relationship with JCI, is well placed to tap the
demand for new generation automotive batteries (lithium ion and hybrid).
OEM and replacement segment to drive demand: We expect the automotive battery
market to post a 16.1% CAGR in sales over FY2010–13E, led by a robust 12% CAGR in
new vehicle sales and growing vehicle population. Thus, during FY2010–13E, we expect
ARBL to post a 17.8% volume CAGR in the automotive battery segment, leading to a
26.6% automotive revenue CAGR. Also, with a strong focus on strengthening its
distribution network, we expect ARBL to increase its market share to ~29% in FY2013E.
UPS/inverter batteries to drive industrial battery demand: ARBL pioneered the use of
maintenance‐free batteries with presence in the railway signaling, telecom power and
supply solutions segments. Going forward, we expect the power back-up (UPS) and
inverter segment to drive demand for industrial batteries, leading to a 13.8% CAGR in
industrial revenue over FY2010–13E.
Capacity expansion to provide scale: Supported by strong demand for automotive
batteries, ARBL plans to increase its two-wheeler and four-wheeler battery capacity by
100% and 21%, respectively, by FY2011, incurring a capex of Rs85cr (Rs150cr overall
capex). We expect ARBL to post a 19.8% CAGR in revenue, driven by a strong 17.9%
volume CAGR over FY2010–13E.
At the CMP, ARBL is trading at 12x FY2011E and 9.4x FY2012E earnings. We feel the
stock is available at attractive valuations. We Initiate Coverage on ARBL with a BUY rating
and a Target Price of Rs261 (21% potential upside). At our target price, the stock will trade
at 11.6x FY2012E EPS of Rs22.5 (30% discount to Exide's multiple of 16.6x).
September 22, 2010 2

3. Market Outlook | India Research
Orient Green Power IPO – Recommend Neutral
Orient Green Power (OGPL) has set a price band of Rs47-55/share for its Rs900cr IPO,
which will be open for subscription during September 21-23, 2010. At the lower and
higher end of the price band, the issue would involve dilution of 40.9% and 37.2% of the
fully-diluted post-issue paid-up capital of the company.
OGPL is India’s leading renewable energy-based power generation with an installed
capacity of 213.0MW, and another 836.5MW of prospective capacity expected to get
operational by FY2013. The company plans to increase capacity by more than four-folds
to 1,049MW by FY2013 and is well poised to capitalise on the untapped potential in the
renewable energy space. OGPL currently has 405MW of wind power committed projects,
and the infrastructure is in place for majority of the projects. Financial closure has also
been achieved for most of the projects. It may be noted here that the execution risks and
project commissioning time are lower for renewable energy projects due to the lower land
requirement and lesser regulatory hassles. Hence, we believe that OGPL has good revenue
visibility going ahead. However, OGPL’s wind energy plants currently have a PLF of 20-
21% (varies according to wind density), which is lower than the normative PLF of 25% set
by the CERC. This would result in the company reporting lower IRRs than the achievable
IRRs if CERC’s prescribed norms are achieved. Moreover, the company also does not have
fuel supply contracts in place along with lower availability of fuel for the biomass plants,
which would result in lower PLF than the normative standard set by CERC.
At the lower and upper price bands OGPL is available at implied P/BV of
1.7x – 1.9x on FY2012E financials, which we believe is fair considering higher RoE’s of its
business and the risks associated with lower PLFs. The IPO is available at a premium to its
private sector peer Indowind Energy (1.3x FY2012E P/BV), which has lesser operational
assets at 44MW. For OGPL, the EV/MW works out to Rs6cr and Rs6.3cr on FY2012E
capacity at lower and upper price bands, which are at 7% and 10% premium to its
replacement cost, which limits further upside considering the return ratios. Hence, we
recommend a Neutral view on the IPO.
Blue Star bags orders worth Rs130cr
Central air-conditioning and commercial refrigeration major, Blue Star Limited has won
orders worth Rs130cr for air-conditioning and plumbing at the Chhatrapati Shivaji
International Airport (CSIA), Mumbai. This is a positive development for the company,
which is poised for strong growth over the next few years. At the end of 1QFY2011, the
order book for the company’s EMPPACS segment stood at nearly 1.1x FY2010 sales. We
expect strong sales growth, at a 22.3% CAGR, over FY2010–12E, on the back of improved
demand from the retail and commercial segments. Blue Star is currently trading at 16.2x
FY2012E earnings. We recommend Buy on the stock with a Target Price of Rs589.
September 22, 2010 3

4. Market Outlook | India Research
Economic and Political News
India's GDP likely to grow by 9.2% in FY2011, says CMIE
Kotak Mahindra ups interest rates on term deposits
Rupee at 4-month peak; up 15 paise against dollar
Corporate News
Bajaj to increase Discover production from next month
Ranbaxy gets USFDA’s approval to sell Alzheimer's disease drug
US firm, Prakash Steelage ink MoU for specialised forging unit
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
September 22, 2010 4

5. Market Outlook | India Research
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