K E Y N O T E Keynote Capitals Institutional Research - Industry Monitor October 17, 2011Industries covered • Banks • Cement • Infrastructure • IT • Media & EntertainmentExecutive SummaryGoI to infuse `4,500Cr in SBI by the end of current fiscal yearThe Government of India (GoI) will infuse `3,000-4,500Cr in the SBI by the March end to help thelender achieve 8% capital adequacy norm. The government, which holds 59% stake in the bank, willhave to pump in more capital to enable it to expand its business and maintain Tier-I capital at 8%.Recently, Moodys had downgraded the rating of SBIs financial strength by one notch to D+ onaccount of the lenders low Tier-I capital ratio and deteriorating asset quality. The SBI has alreadysubmitted a response to the government on the rating downgrade, and started implementingmeasures to improve the banks efficiency.Cement prices in south India rose `25 per bagCement has become expensive by almost `25per bag for the buyers in south India due to the presentagitation in the state a separate state of Telangana. Moreover, cement is sold at `280-`310 per bagas against `265-`285 per month ago. The surge in price has been mainly led by the severe coalshortage for the cement firms in Andhra Pradesh, which has been fulfilling demand in the importantsouthern markets besides Andhra Pradesh.Slowdown in economy already factored in Infra sectorOver past 12 months there has been slowdown in infrastructure spending further added by economicslowdown. However, number of initiative like benefits in infra bonds has been taken which thespending in infra has started picking up over a month ago. PFC will be raising `16500Cr bonds, NHAIhas fasten the process of awarding road projects and has already awarded 1900kms till August,2011,Mining activities also has been under radar. So, looking as the current scenario infra stocks seems tobe attractive at current valuation tough there some concerns of corporate governance. It isrecommended to be selective in picking up stocks. Stocks like IRB infra, IL&FS Transport, Tatapower, GMR Infra, Mundra port, etc to perform well going ahead.The Q2 results season has started on a positive noteBSE IT index closed at 5698.90, up 8.73% during the last week vis-à-vis its previous week. Thegainers on the BSE IT index were TCS, Infosys, Wipro and HCL TECH, up 8.18%, 9.48%, 8.81% and8.91%, respectively. Financial Technology was the only loser on the BSE IT index. Infosys hasdeclared its second quarter results on Oct 12, 2011. The company has shown improved performancein terms of revenues and margins. The company posted revenue at `8099cr up 16.6% and 8.2% on aYoY and QoQ basis, respectively. EBITDA for the quarter stood at `2514cr, up 9% from the samequarter in the previous year. Infosys added 45 new clients in Q2FY12 which is a significant increasefrom the past quarters. The company has projected 19.7% to 21.6% growth in EPS at `143.02 to`145.26 in FY12 over FY11. The company has also revised FY12 revenue guidance upwards. Infosyshas projected 21.8% to 24% growth in revenue at `33501cr to `34088cr in FY12 over FY11.Cabinet Committee of Economic Affairs (CCEA) approved an ordinance to digitalized cableand satellite television industryThe major development in the media and entertainment industry is that the government has clearedan ordinance to digitalized cable and satellite television industry in India. The government gave amajor boost to the television industry by clearing an ordinance to completely digitize the `20,000Crcable and satellite television industry in the country by 2014.
K E Y N O T E Weightages in major indices Sectors Sensex Nifty BSE 500 CNX 500 Banks 24.04% 24.30% 23.77% 22.62% Cement 0.64% 1.83% 1.97% 1.97% Infrastructure 8.66% 8.75% 7.58% 7.63% Information & Technology 14.52% 12.89% 9.77% 9.79% Media & Entertainment 0.79% 0.79%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 24.07% and 23.77% respectively. The major players in BANKEX Indices are the private banksnamely ICICI Bank (27.89%), which is the second largest bank in India with HDFC Bank (24.07%).Other banks include SBI (14.62%), Axis Bank (8.04%) and Kotak Bank (5.24%). The sector’sweightage in CNX Nifty is 24.30% and in CNX 500 is 22.62%.Govt to infuse `4,500Cr in SBI by the end of current fiscal yearThe Government (GoI) will infuse `3,000-4,500Cr in the SBI by the March end to help the lenderachieve 8% capital adequacy norm. The government, which holds 59% stake in the bank, will have topump in more capital to enable it to expand its business and maintain Tier-I (equity) capital at 8%."SBI will need something like `12,000Cr (to achieve 8% capital adequacy). Internal accrual will bearound `7,500 to `9,000Cr so the gap will certainly have to be funded by us," Financial ServicesSecretary D K Mittal said. "The government is looking at various options to capitalise SBI, which willbe slightly innovative, public sector banks would fully capitalised". The process of capital infusion inSBI, he added, would be completed by December or maximum by March-end.Recently, Moodys had downgraded the credit rating of SBI citing inadequate capital and poor assetquality as reasons. The SBI has already submitted a response to the government on the ratingdowngrade, and started implementing measures to improve the banks efficiency. Responding toquestions on SBIs downgrade, Mr.Mittal said, "We are really concerned and pained at the way SBIhas been downgraded. The SBI has been unnecessarily downgraded." Tier I capital of the bankdeclined to 7.6% at the end of first quarter, against the minimum norm of 8%.Canara Bank cuts rates for housing loans by 50 bpsCanara Bank has announced a retail loan festival from October 10, 2011 till January 15, 2012 duringwhich interest rates on housing and home improvement loans will be reduced by 50 basis pointsacross all slabs and tenures.The bank has also completely waived processing charges during thisfestival period. It has also waived the 25 bps additional interest being levied on borrowers acquiring asecond residential unit.SBI launches NRI Services in UAESBI is set to launch a range of services for non-resident Indians in the UAE to strengthen its presencein the Gulf regions. "These services include opening of NRI accounts. The bank would retain its focuson corporate products, trade finance and consolidate its operations from the Dubai InternationalFinance Centre" said SBIs DIFC branch CEO Debajyoti Ray Chaudhuri.SBIs Dubai office was set up in 2007 in the DIFC under licence from the Dubai Financial ServicesAuthority. The licence was upgraded in 2009, allowing the bank to expand its operations. According to
K E Y N O T E Mr.Chaudhuri, the bank will be able to provide all the facilities that a representative office can extendin the UAE. "SBI has a presence in Bahrain and Oman with full banking licences. Its operations inSaudi Arabia have already commenced, with a branch in Jeddah. Its office in the Qatar FinancialCentre is likely to start operations very shortly," he added.Dhanlaxmi Bank to raise fresh capital by DecemberPrivate sector bank Dhanlaxmi plans to raise fresh capital by December. The banks managingdirector and chief executive officer Amitabh Chaturvedi said that the lender would need fresh capitalto support the banks growth in the next three months declining to comment on the size of capital-raising and the route through which funds will be raised as the bank. The bank is adequatelycapitalised with a capital adequacy ratio of 11.40% at the end of June 2011. The bank can raise up to`500Cr in the form of Tier-II debt.
K E Y N O T E Cement Industry MonitorCement prices in south India rose `25 per bagCement has become expensive by almost `25per bag for the buyers in south India due to the presentagitation in the state a separate state of Telangana. Moreover, cement is sold at `280-`310 per bagas against `265-`285 per month ago.The surge in price has been mainly led by the severe coal shortage for the cement firms in AndhraPradesh, which has been fulfilling demand in the important southern markets besides AndhraPradesh.Reports suggest that the cement industry is forced to import coal, which is almost 30% expensive, forclinker manufacturing. The situation may deteriorate further and the prices may go up further.Century Textiles cement business may merge with UltraTech CementAccording to news reports, BK Birla groups Century Textiles may merge its cement business withUltraTech cement. B K Birla group has its cement business under Century, Kesoram and MangalamCement with a collective cement capacity of around 17mn tonnes. Of that, Century Textiles alonecontrols 7.8mn tonnes of capacity. The process had started and the deal was likely to be inked in afew months, according to a leading financial daily.Cement capacity utilisation falls in H1Cement industry’s average capacity utilisation across the country declined in the first six months ofthe current financial year, amid a sharp rise in prices. In other words, price rise was due to a fall in theproduction.Capacity utilisation has fallen when the industry has been adding new capacities. In the first half (H1),however, cement production has grown in absolute terms. According to the Cement ManufacturersAssociation (CMA), the country produced 83.24mn tonnes during April-September this year, ascompared to 81.69mn tonnes last year in the corresponding period.From April to September, the cement industry has witnessed a fall in capacity utilisation across thecountry compared to the same period last year. Last year, in the first quarter (April-June), capacityutilisation was 78%, which has fallen to 75% this year. To add to it, the average capacity utilisation inboth the quarters is 70% as compared to 74% during the corresponding period last year.
K E Y N O T E Infrastructure Industry MonitorThe Sector has underperformed 3.34%, 1.45%, 1.97% and 1.49% over Sensex, BSE500, Nifty andCNX500 respectively. However, Reliance Infra was the top performer by 3.48%, 4.18%, 3.68% and4.16% whereas Engineers India was the worst performer by 6.75%, 6.05%, 6.67% and 6.19% overSensex, BSE500, Nifty and CNX500 respectively.PFC plans to mop up `16800Cr through issue of securitiesThe company is planning to mop up about `16800Cr in the coming months. The company has alreadystarted the process of issue of long-term infrastructure bonds, through which it can raise up to`6900Cr. It began on September 29 and the first tranche is for `200Cr. There would be both 10-yearterm bonds carrying an interest rate of 8.50% as well as 15-year term bonds having an interest rate of8.75%. Earlier in August, the company had received RBI’s nod to raise $1 billion around `4600Cr viaoffshore medium-term note borrowings which would mark its debut in the international bond market.BHEL bags order worth `4071Cr from SCCLThe company has bagged major contract worth `4071Cr from Singareni Collieries Company (SCCL)for setting up 1200MW thermal power plant in Andhra Pradesh. The order comprises supply andinstallation of the main plant package for a power project in Andhra Pradesh, involving two thermalpower generating units of 600MW each. Significantly, only two orders for coal-based Boiler TurbineGenerator (BTG) packages have been finalized in the country in the current financial year, since April,2011, and both have been secured by BHEL.Suzlon Energy receives 21MW order from SenokThe company won a repeat order from Senok to supply 10 units of Suzlon’s S88 - 2.1MW windturbine generators, aggregating to 21MW of wind power capacity. The project will be commissioned intwo phases and be completed by May 2012.Tata Power sets up 300MW wind energy capacityThe Company has installed more than 300MW wind power capacity and widens crossways fourstates, including Gujarat and Karnataka. It aims to add sizable capacity every year to maintain asignificant wind portfolio. The company aims to commission 64.5MW wind energy capacity in TamilNadu and Maharashtra by the third quarter of FY11.The Company is in the process of acquiring20.95MW operating wind assets in Maharashtra from Niskalp Energy. Soon Tata Power likely to placean order for 150MW wind capacity to be set up in Maharashtra and Rajasthan, and to becommissioned during the course of FY12 and FY13.Ashoka Buildcon to dilute stake in arm to raise $150mnThe company is in advanced stage to rope in a strategic investor in its newly formed roaddevelopment projects subsidiary to raise up to $150 million (around `737Cr). To raise funds for itsupcoming projects, the company has formed a holding company for eight of its road projects, whichare together worth around `6000Cr. Ashoka Buildcon would continue to own majority stake in the armpost dilution. Ernst & Young is advising Ashoka Buildcon on this deal.Madhucon Projects bags two EPC contracts worth `202CrThe company has bagged two work orders worth `202Cr from Sardar Sarovar Narmada Nigam,Gujarat for constructing distributaries and minors for the command area under Dharangadhra BranchCanal chainage from kilometer 0.00 to km.98.26. With this new project the total order book position ofthe company is at present `6100Cr. The project is to be completed in 18 months from the date ofacceptance.
K E Y N O T E IT Industry MonitorIT Industry and its contribution to Indian equitiesIT sector has weightage of 9.77% and 9.79% in BSE 500 and CNX 500 with major stocks are Infosys,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 14.52% and 12.89%.Infosys launched updated version of Finacle e-Banking solutionInfosys launched Finacle e-Banking Version 11 at the 2011 BAI Retail Delivery Show in Chicago. Thesolution is a comprehensive offering that empowers banks to achieve quick global rollouts of onlinebanking services. The new version of Finacle e-banking provides unique personalisation capabilities,industry leading security features and intelligent customer insights to drive adoption of online bankingchannel and enhance customer loyaltyInfosys is not in talks to buy Thomson Reuters unitDenying earlier media reports, Infosys clarified that it is not in discussions for the acquisition ofThomson Reuters Healthcare business at present."TCS ranks 3rd in the FinTech 100Tata Consultancy Services ranked 3rd in the FinTech 100, an annual international listing of the topvertical technology vendors that derive more than one-third of their revenue from financial servicesindustry as named by American Banker, Bank Technology News and IDC Financial Insights. For thefourth consecutive year, TCS has been ranked among the top 10 in the FinTech100.Wipro is planning to launch low cost productsWipro has identified education and health care as the next big business opportunities as it prepares tolaunch a host of low-cost products such as an electro-cardiogram necklace, tablet computer andcameras for use in hospitals and in mining and retail.Wipro helps UGI Utilities to create IT Systems based on new Oracle platformWipro has announced that it is implementing the Oracle Financial suite (12.1.3) of products for UGIUtilities Inc, a natural gas and electric utility, and a subsidiary of UGI Corporation. The solution isintended to help UGI Utilities streamline financial processes, update latest compliance mandates andcreate agile IT systems, to support their new business processes.Result Calendar Company Result Date TCS Second quarter 17 Oct,2011 Persistent Systems Second quarter 17 Oct,2011 NIIT Second quarter 18 Oct,2011 HCL Tech First quarter 18 Oct,2011
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 0.79% in both the indices.Government clears an ordinance to digitalized cable and satellite television industry in thecountry by 2014The Cabinet Committee of Economic Affairs (CCEA) approved an ordinance to amend Section 4A ofthe Cable TV Networks (Regulation) Act. The government gave a major boost to the televisionindustry by clearing an ordinance to completely digitize the `20,000Cr cable and satellite televisionindustry in the country by 2014. The proposed digitization will be carried out in four phases, as per theordinance to amend Section 4A of the Cable TV Networks (Regulation) Act. The move to fulldigitization with addressability will benefit all stakeholders in the value chain — from consumer toservice providers to broadcasters and the government. The proposal had its genesis in August lastyear when the Telecom Regulatory Authority of India (TRAI) suggested the digitization of televisiontransmission in the four metros of Mumbai, New Delhi, Kolkata and Chennai by March 31, 2012.Cities with a population of one million will be covered by March 31, 2013. All urban areas would becovered by September 30, 2014 while the entire country will be covered by the end of that year. Thegovernment accepted the recommendations with minor revisions. Ninety million homes in the countrythat receive television programs via analogue cable networks will have to switch to digital set-topboxes in a phased manner over a period of two years, beginning March 2012. All satellite channelswill be beamed to houses through set-top boxes.Currently, analog cable does not offer consumers any choice of what channels they can select. Inmost cases, a single rate is charged to all customers and a single package of 80-90 channels isoffered at the most. The digital technology will offer improved quality of transmission and greaterchoice of content, albeit at a higher cost to consumers. This will bring a paradigm shift in televisionviewing experienceThe move is expected to improve subscription revenue for broadcasters beaming to 116 millionhomes. Broadcasters will also benefit because digitization will remove the need to pay carriage fee tocable operators, bringing down the cost of operations of running channels. Currently, carriage andplacement fee contribute to nearly 20% of the total cost of running a channel.Zee Entertainment to launch 3-4 HD channels in FY13TV channel operator Zee Entertainment Enterprises plans to launch 3-4 high definition (HD) channelsin FY13, adding to its total of regular 29 channels. The company, which also has sport channelsexpects the business to break even between 2013 and 2014.Sun TV to launch Kids Channel in MalayalamSun Television Network plans to launch first 24-hour childrens Malayalam channel Kochu TV. KochuTV will be the first and only 24 hour kids channel in Malayalam, targeting children in the age group offour to 14 years with regional and international flavour.Eros International & Red Chillies announce brand tie-upsEros International Media has said that Eros International & Red Chillies announced brand tie-upsworth `52Cr for its forthcoming movie, ‘Ra.One’.
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