Jaypee Infratech is constructing the 165km Yamuna Expressway between Noida and Agra and plans to develop over 500 million square feet of real estate alongside the expressway over the next few years. The company will benefit from the expressway increasing tourism and commercial traffic between Delhi and Agra. Jaypee Infratech is raising funds through an IPO to partially finance the expressway project and for general corporate expenses. The IPO is priced between Rs. 102-117 per share and will dilute the promoter holding to 84.5% post issue.
HDIL has successfully raised 250 million USD through a share issuance to part finance the second phase of an airport project and acquire new land. The equity dilution could pressure stock prices in the near term. However, faster execution of the airport project and winning new land redevelopment projects could boost share prices. While a planned increase in development limits could impact land prices, analysts believe HDIL is well positioned to execute successful new projects and see long term demand for real estate in Mumbai remaining strong. The analyst maintains an "Accumulate" rating on HDIL stock.
Atlanta ended the fiscal year 2012 with an order book exceeding Rs. 24 billion, over 4 times expected revenues for fiscal year 2013. This positions the company for strong growth going forward. Three new road projects worth Rs. 27 billion were won in fiscal year 2012 and are key drivers of anticipated growth. Two operational build-operate-transfer road projects are also expected to contribute improved cash flows in fiscal years 2013 and 2014. The company remains attractively valued given its portfolio of road projects and other infrastructure and real estate developments.
Oberoi Realty has a proven track record developing real estate projects in Mumbai since 1983. It differentiates itself by creating "destination developments" that integrate residential, commercial, retail, and community spaces. The company has a strong brand, timely project execution, and a well-capitalized balance sheet. Proceeds from the IPO will fund construction of ongoing projects and land acquisition, allowing Oberoi Realty to continue expanding its high-quality real estate development portfolio in Mumbai.
J Kumar Infraprojects is one of the leading construction companies in India with nearly three decades of experience. It has a current order backlog of Rs. 13 billion diversified across various segments like transportation, civil works, irrigation and piling. The company is well positioned to benefit from the large infrastructure projects underway in India. Kotak Securities initiates coverage on J Kumar with a "Buy" rating and a target price of Rs. 260 per share given its strong growth outlook and attractive valuations.
Eros International Media plans to raise Rs. 350 crores through an IPO to fund acquiring and co-producing new films. EIML is well positioned to benefit from expected growth in the Indian film industry as it has an impressive pipeline of films over the next two years. It reduces risk through a de-risked business model of co-productions and acquisitions that provide revenue visibility. EIML further decreases dependence on any one film or genre through a diversified portfolio and regional films. Non-theatrical revenues from its library of over 1,000 films also provide a stable revenue stream.
ITNL is an established surface transportation player and market leader in the road BOT sector with a portfolio of over 7,500 lane km of projects spread across India. The company is expected to benefit from the growing opportunities in the road sector in India, with the NHAI targeting to award around 33,500 km of projects over the next 5 years. However, increasing revenue from low-margin EPC contracts is expected to impact ITNL's margins. The analyst values ITNL on an SOTP basis and initiates coverage with an "Accumulate" recommendation and target price of Rs358 per share.
Engineers India Ltd (EIL) is offering 33.7 million shares, or 10% of its total shares, through an initial public offering. EIL provides engineering services to the oil and gas industries and has experience with 49 refinery projects, 7 petrochemical complexes, and various other infrastructure projects. The IPO price band is Rs. 270-290 per share and is expected to raise Rs. 909.7-977.1 crore. EIL has a strong order backlog of Rs. 6,236.8 crore and has experienced high revenue and profit growth in recent years. Proceeds will go to the selling shareholder, not the company.
HDIL is initiating coverage with a buy recommendation and target price of Rs356 per share. HDIL's Mumbai International Airport redevelopment project is on track to generate significant revenue. The company is also set to benefit from strong land development rights (TDR) prices in Mumbai, which have recovered in recent years. At the current price of Rs284 per share, HDIL is trading at a 28% discount to the analyst's 1-year forward estimate of net asset value (NAV) of Rs395 per share. The target price of Rs356 represents a 10% discount to the estimated 1-year forward NAV.
HDIL has successfully raised 250 million USD through a share issuance to part finance the second phase of an airport project and acquire new land. The equity dilution could pressure stock prices in the near term. However, faster execution of the airport project and winning new land redevelopment projects could boost share prices. While a planned increase in development limits could impact land prices, analysts believe HDIL is well positioned to execute successful new projects and see long term demand for real estate in Mumbai remaining strong. The analyst maintains an "Accumulate" rating on HDIL stock.
Atlanta ended the fiscal year 2012 with an order book exceeding Rs. 24 billion, over 4 times expected revenues for fiscal year 2013. This positions the company for strong growth going forward. Three new road projects worth Rs. 27 billion were won in fiscal year 2012 and are key drivers of anticipated growth. Two operational build-operate-transfer road projects are also expected to contribute improved cash flows in fiscal years 2013 and 2014. The company remains attractively valued given its portfolio of road projects and other infrastructure and real estate developments.
Oberoi Realty has a proven track record developing real estate projects in Mumbai since 1983. It differentiates itself by creating "destination developments" that integrate residential, commercial, retail, and community spaces. The company has a strong brand, timely project execution, and a well-capitalized balance sheet. Proceeds from the IPO will fund construction of ongoing projects and land acquisition, allowing Oberoi Realty to continue expanding its high-quality real estate development portfolio in Mumbai.
J Kumar Infraprojects is one of the leading construction companies in India with nearly three decades of experience. It has a current order backlog of Rs. 13 billion diversified across various segments like transportation, civil works, irrigation and piling. The company is well positioned to benefit from the large infrastructure projects underway in India. Kotak Securities initiates coverage on J Kumar with a "Buy" rating and a target price of Rs. 260 per share given its strong growth outlook and attractive valuations.
Eros International Media plans to raise Rs. 350 crores through an IPO to fund acquiring and co-producing new films. EIML is well positioned to benefit from expected growth in the Indian film industry as it has an impressive pipeline of films over the next two years. It reduces risk through a de-risked business model of co-productions and acquisitions that provide revenue visibility. EIML further decreases dependence on any one film or genre through a diversified portfolio and regional films. Non-theatrical revenues from its library of over 1,000 films also provide a stable revenue stream.
ITNL is an established surface transportation player and market leader in the road BOT sector with a portfolio of over 7,500 lane km of projects spread across India. The company is expected to benefit from the growing opportunities in the road sector in India, with the NHAI targeting to award around 33,500 km of projects over the next 5 years. However, increasing revenue from low-margin EPC contracts is expected to impact ITNL's margins. The analyst values ITNL on an SOTP basis and initiates coverage with an "Accumulate" recommendation and target price of Rs358 per share.
Engineers India Ltd (EIL) is offering 33.7 million shares, or 10% of its total shares, through an initial public offering. EIL provides engineering services to the oil and gas industries and has experience with 49 refinery projects, 7 petrochemical complexes, and various other infrastructure projects. The IPO price band is Rs. 270-290 per share and is expected to raise Rs. 909.7-977.1 crore. EIL has a strong order backlog of Rs. 6,236.8 crore and has experienced high revenue and profit growth in recent years. Proceeds will go to the selling shareholder, not the company.
HDIL is initiating coverage with a buy recommendation and target price of Rs356 per share. HDIL's Mumbai International Airport redevelopment project is on track to generate significant revenue. The company is also set to benefit from strong land development rights (TDR) prices in Mumbai, which have recovered in recent years. At the current price of Rs284 per share, HDIL is trading at a 28% discount to the analyst's 1-year forward estimate of net asset value (NAV) of Rs395 per share. The target price of Rs356 represents a 10% discount to the estimated 1-year forward NAV.
HDIL reported strong results for the first quarter of FY2011, with revenue up 52.7% year-over-year and profit up 118%. This was driven by high-margin sales of floor space index and transferable development rights, with TDR prices and volumes sustained at high levels. The company's execution of its large airport redevelopment project remains on track. HDIL is well positioned in the large market for slum redevelopment in Mumbai. Recent residential project launches have also been well received, providing revenue visibility. The analyst maintains a 'Buy' rating on the stock.
Godrej Properties is a real estate developer in India with a national footprint. It has grown revenues, earnings, and profits consistently over the past 6 years. The report recommends buying GPL now given its leadership position, asset-light business model, and attractive valuations. GPL is projected to continue growing sales and profits over the next two years as real estate demand increases and the economy recovers. However, risks include sector cycles, funding challenges, and regulatory changes. Overall, GPL is seen as a quality real estate stock to buy for long term growth.
Suzlon Energy Ltd. is a wind turbine supplier that has faced difficulties due to large FCCB repayments coming due. However, the document argues the company is well positioned to handle the remaining $208M repayment in October. Key points are that Suzlon has already redeemed $360M of FCCBs, has a large order backlog and strong revenue guidance, and is realigning its business in China to generate funds. The document recommends Suzlon as a "Buy" based on its attractive valuation multiples and future growth prospects.
Uppal Group and Luxor Group signed an MoU with Trinity Capital to develop a 10 million square foot SEZ in Gurgaon over 67 acres of land. As part of the agreement, Uppal Group and Luxor Group will divest partial ownership of the special purpose vehicle to Trinity Capital for Rs. 300 crore. The SEZ will include 6.5 million square feet of IT space and 3.5 million square feet of supporting infrastructure and is scheduled to be completed by 2011.
The document summarizes the telecom sector in India. It states that India has the second largest telecom market in the world. As of April 2016, there were over 1 billion mobile subscribers in India, with urban areas having higher teledensity than rural areas. The sector contributes significantly to India's GDP. The market has grown due to liberal government policies and the sector is expected to generate millions of jobs. The entry of Reliance Jio in 2016 with cheap 4G plans disrupted the market and forced other operators to lower prices. However, Jio also faced issues like call drops due to actions of other operators, which led to regulatory interventions. A large spectrum auction was held in 2016.
The document summarizes the telecom sector in India. It states that India has the second largest telecom market in the world. As of April 2016, there were over 1 billion mobile subscribers in India, with urban areas having higher teledensity than rural areas. The sector contributes significantly to India's GDP. The market has grown due to liberal government policies and the sector is expected to generate millions of jobs. The entry of Reliance Jio in 2016 with cheap 4G plans disrupted the market, gaining over 35 million subscribers quickly and forcing other operators to lower prices. However, Jio also faced issues like call drops due to actions of other operators, which led to regulatory interventions. A large spectrum auction was held in 2016.
Anant Raj Industries' (ARIL) 4QFY2010 results were below expectations due to a delay in launching a premium residential project. Rental income grew 10.6% but profit fell 53.9% quarter-over-quarter. The analyst downgraded earnings estimates for FY2011-FY2012 to account for the delayed project launch. However, ARIL has a strong development pipeline and the analyst maintains a Buy rating due to ARIL's low-cost land bank and strong balance sheet.
PTCL is a well-diversified telecom provider in Pakistan with operations in fixed line, wireless, cellular, and broadband services. While PTCL's traditional fixed line business is declining, its cellular and broadband segments are growing and contributing more to revenues. PTCL's broadband revenues have increased significantly, up 219% in 1QFY10, and broadband is expected to be a major driver of growth going forward. PTCL's cellular division PTML continues to be profitable and its revenues are projected to increase substantially through FY14E. At its current price, PTCL offers upside potential of 52% based on the analyst's fair value estimate, and is recommended as a buy.
The key Indian indices opened higher supported by strong Asian markets and quarterly results. Gains were trimmed in the afternoon but markets recovered on buying in metal, realty and auto stocks. The Sensex and Nifty ended up 0.7%.
IVRCL won its first international contracts worth $440 million in Saudi Arabia and Nepal, diversifying geographically. BGR Energy won a $490 million contract in India. Allcargo Global acquired controlling stakes in Hong Kong logistics firms, expecting to boost earnings. Market sentiment was positive supported by company results and deals.
- Infosys reported disappointing quarterly results with revenues and margins declining year-over-year
- The company lowered its revenue guidance for FY2013 to 8-10% growth due to budget cuts in developed markets and challenges in Europe
- Operating margins declined due to currency losses, pricing pressures, and lower utilization rates
- The analyst recommends selling the stock and expects further downside due to macroeconomic headwinds facing the IT industry
SEBI imposed penalties on two AMCs - Kotak AMC and PGIM India AMC. Kotak AMC was fined Rs. 1.6 crores for failing to disclose plans around extending maturities of debt schemes invested in Essel Group companies. PGIM India AMC's CEO and fund managers were fined for inter-scheme transfers of stressed and high-quality securities between open and closed-ended schemes during a credit crisis. Nippon India MF suspended inflows into five international fund schemes due to depleted headroom following high FPI sales in 2022, which have reached a record Rs. 2.1 lakh crore for the first half of the year.
Vodafone acquired a 67% stake in Hutch-Essar (now Vodafone Essar) for $11.1 billion in 2007 to gain access to the fast-growing Indian mobile market. Hutchison wanted to exit due to market saturation in urban areas, while future growth would be in lower revenue rural markets. Vodafone saw the acquisition as an opportunity to expand its market share in India, the world's fourth largest mobile operator at the time with over 24 million subscribers. The deal financing came from Vodafone's sale of other assets and cash reserves, allowing it to capitalize on India's expected growth to 500 million subscribers by 2010 and the potential for 3G services.
International Business (IB) consists of all commercial transactions between two or more countries and involves the exchange of goods, capital, services, and other economic resources across national borders. Studying IB is important because most companies either operate internationally or compete with international companies. The modes of operations and best practices for conducting business may differ between countries. Understanding IB helps with career decisions and determining what governmental policies to support.
Engro Fertilizers is a leading fertilizer company in Pakistan. It has a wide portfolio of fertilizer products and is the largest importer and seller of phosphatic products. The document analyzes Engro's financial ratios, profitability, liquidity, efficiency, and cash flows. It finds that Engro has reasonable liquidity and profitability ratios compared to its competitor Fauji Fertilizers. However, Fauji has higher cash flows and better efficiency. The intrinsic value of Engro is estimated to be Rs. 75.2 per share, higher than the market price, indicating the shares are undervalued. Overall the document recommends buying Engro Fertilizers shares.
Elecon Engineering is a leading provider of material handling equipment and gear solutions in India. It has a 26% market share in the domestic gear market, making it the leader. The company is well positioned to benefit from an estimated Rs32,500 crore of opportunities in the material handling equipment industry over the next few years, driven by growth in core sectors like power, steel, and coal. Elecon's order book and revenues are expected to grow at a CAGR of 40% and 13.5%, respectively, during FY2010-12, supported by a recovery in industrial activity and capital expenditures. The company's strong position in the stable gear market also helps support its profitability.
Elecon Engineering is a leading provider of material handling equipment and gear solutions in India. The company is well positioned to benefit from increasing industrial capital expenditures in sectors like power and steel. The analyst estimates Elecon will grow sales at a CAGR of 13.5% and adjusted profits at 37% over fiscal years 2010-2012 due to improving financials and recovery in the material handling equipment industry. The report initiates coverage on Elecon with a buy recommendation and target price of Rs102 based on attractive valuations and growth opportunities.
Madhucon Projects reported a 43% increase in net sales and a 22.2% increase in operating profit for the first quarter of FY2011, beating analyst estimates. While margins and earnings also exceeded forecasts, regulatory changes have delayed the company's plans to raise equity financing. As a result, the analyst downgrades the stock to "Accumulate" and changes the valuation methodology to no longer factor in potential equity dilution. The analyst sets a target price of Rs174 per share based on assigning a PE ratio to FY2012 earnings estimates and valuing subsidiaries.
ZF Hero Chassis Systems is in talks with Suzuki and Honda to supply auto components in India. It currently supplies axles to GM India and will invest Rs. 100 crore to expand capacity by 70%.
The RBI divested its remaining 1% stake in NABARD worth Rs. 1,430 crore, transferring ownership to the Government of India which now holds 99% of NABARD.
Mobile operators added 12.4 million new GSM subscribers in September. BSNL added the most at 2.3 million and Uninor added the second highest to reach over 11.2 million subscribers.
South Korean company E-land is acquiring Mumbai-based Mudra
Jagran Prakashan has approved the acquisition of Mid-Day Multimedia's print media business via a share swap. The deal values the print business at approximately Rs. 175 crores. Jagran will issue 1.51 crore new shares, expanding its equity base to 31.63 crore shares and diluting its shares by around 5%. Mid-Day's publications will fill gaps in Jagran's portfolio and boost revenues through bundling advertisements across publications. The analyst maintains a "Buy" rating for Jagran with a target price of Rs. 160.
The Indian markets are expected to open higher, tracking gains in most Asian markets. Spain has asked for a bailout of up to €100 billion for its banking system. Chinese exports grew more than expected in May. In India, shares extended gains for a fifth session despite weak global cues as major central banks held off on additional stimulus. The key support and resistance levels for the Nifty are 5,023 and 5,114 respectively. L&T has bagged orders worth Rs. 483 crore to build commercial vessels in Qatar. Vedanta Resources has acquired a 24.5% stake in Raykal Aluminium for Rs. 201 crore.
Axis Bank reported a 27.0% year-over-year increase in net profit to Rs. 942 crore for the first quarter of fiscal year 2012, in line with analyst estimates. Business growth momentum slowed as advances declined 7.4% quarter-over-quarter and deposits fell 3.0% quarter-over-quarter, moderating the bank's cash-deposit ratio to 40.5% from 41.1% last quarter. However, asset quality remained healthy with slippage ratio declining to 0.8% and gross and net NPA ratios stable.
HDIL reported strong results for the first quarter of FY2011, with revenue up 52.7% year-over-year and profit up 118%. This was driven by high-margin sales of floor space index and transferable development rights, with TDR prices and volumes sustained at high levels. The company's execution of its large airport redevelopment project remains on track. HDIL is well positioned in the large market for slum redevelopment in Mumbai. Recent residential project launches have also been well received, providing revenue visibility. The analyst maintains a 'Buy' rating on the stock.
Godrej Properties is a real estate developer in India with a national footprint. It has grown revenues, earnings, and profits consistently over the past 6 years. The report recommends buying GPL now given its leadership position, asset-light business model, and attractive valuations. GPL is projected to continue growing sales and profits over the next two years as real estate demand increases and the economy recovers. However, risks include sector cycles, funding challenges, and regulatory changes. Overall, GPL is seen as a quality real estate stock to buy for long term growth.
Suzlon Energy Ltd. is a wind turbine supplier that has faced difficulties due to large FCCB repayments coming due. However, the document argues the company is well positioned to handle the remaining $208M repayment in October. Key points are that Suzlon has already redeemed $360M of FCCBs, has a large order backlog and strong revenue guidance, and is realigning its business in China to generate funds. The document recommends Suzlon as a "Buy" based on its attractive valuation multiples and future growth prospects.
Uppal Group and Luxor Group signed an MoU with Trinity Capital to develop a 10 million square foot SEZ in Gurgaon over 67 acres of land. As part of the agreement, Uppal Group and Luxor Group will divest partial ownership of the special purpose vehicle to Trinity Capital for Rs. 300 crore. The SEZ will include 6.5 million square feet of IT space and 3.5 million square feet of supporting infrastructure and is scheduled to be completed by 2011.
The document summarizes the telecom sector in India. It states that India has the second largest telecom market in the world. As of April 2016, there were over 1 billion mobile subscribers in India, with urban areas having higher teledensity than rural areas. The sector contributes significantly to India's GDP. The market has grown due to liberal government policies and the sector is expected to generate millions of jobs. The entry of Reliance Jio in 2016 with cheap 4G plans disrupted the market and forced other operators to lower prices. However, Jio also faced issues like call drops due to actions of other operators, which led to regulatory interventions. A large spectrum auction was held in 2016.
The document summarizes the telecom sector in India. It states that India has the second largest telecom market in the world. As of April 2016, there were over 1 billion mobile subscribers in India, with urban areas having higher teledensity than rural areas. The sector contributes significantly to India's GDP. The market has grown due to liberal government policies and the sector is expected to generate millions of jobs. The entry of Reliance Jio in 2016 with cheap 4G plans disrupted the market, gaining over 35 million subscribers quickly and forcing other operators to lower prices. However, Jio also faced issues like call drops due to actions of other operators, which led to regulatory interventions. A large spectrum auction was held in 2016.
Anant Raj Industries' (ARIL) 4QFY2010 results were below expectations due to a delay in launching a premium residential project. Rental income grew 10.6% but profit fell 53.9% quarter-over-quarter. The analyst downgraded earnings estimates for FY2011-FY2012 to account for the delayed project launch. However, ARIL has a strong development pipeline and the analyst maintains a Buy rating due to ARIL's low-cost land bank and strong balance sheet.
PTCL is a well-diversified telecom provider in Pakistan with operations in fixed line, wireless, cellular, and broadband services. While PTCL's traditional fixed line business is declining, its cellular and broadband segments are growing and contributing more to revenues. PTCL's broadband revenues have increased significantly, up 219% in 1QFY10, and broadband is expected to be a major driver of growth going forward. PTCL's cellular division PTML continues to be profitable and its revenues are projected to increase substantially through FY14E. At its current price, PTCL offers upside potential of 52% based on the analyst's fair value estimate, and is recommended as a buy.
The key Indian indices opened higher supported by strong Asian markets and quarterly results. Gains were trimmed in the afternoon but markets recovered on buying in metal, realty and auto stocks. The Sensex and Nifty ended up 0.7%.
IVRCL won its first international contracts worth $440 million in Saudi Arabia and Nepal, diversifying geographically. BGR Energy won a $490 million contract in India. Allcargo Global acquired controlling stakes in Hong Kong logistics firms, expecting to boost earnings. Market sentiment was positive supported by company results and deals.
- Infosys reported disappointing quarterly results with revenues and margins declining year-over-year
- The company lowered its revenue guidance for FY2013 to 8-10% growth due to budget cuts in developed markets and challenges in Europe
- Operating margins declined due to currency losses, pricing pressures, and lower utilization rates
- The analyst recommends selling the stock and expects further downside due to macroeconomic headwinds facing the IT industry
SEBI imposed penalties on two AMCs - Kotak AMC and PGIM India AMC. Kotak AMC was fined Rs. 1.6 crores for failing to disclose plans around extending maturities of debt schemes invested in Essel Group companies. PGIM India AMC's CEO and fund managers were fined for inter-scheme transfers of stressed and high-quality securities between open and closed-ended schemes during a credit crisis. Nippon India MF suspended inflows into five international fund schemes due to depleted headroom following high FPI sales in 2022, which have reached a record Rs. 2.1 lakh crore for the first half of the year.
Vodafone acquired a 67% stake in Hutch-Essar (now Vodafone Essar) for $11.1 billion in 2007 to gain access to the fast-growing Indian mobile market. Hutchison wanted to exit due to market saturation in urban areas, while future growth would be in lower revenue rural markets. Vodafone saw the acquisition as an opportunity to expand its market share in India, the world's fourth largest mobile operator at the time with over 24 million subscribers. The deal financing came from Vodafone's sale of other assets and cash reserves, allowing it to capitalize on India's expected growth to 500 million subscribers by 2010 and the potential for 3G services.
International Business (IB) consists of all commercial transactions between two or more countries and involves the exchange of goods, capital, services, and other economic resources across national borders. Studying IB is important because most companies either operate internationally or compete with international companies. The modes of operations and best practices for conducting business may differ between countries. Understanding IB helps with career decisions and determining what governmental policies to support.
Engro Fertilizers is a leading fertilizer company in Pakistan. It has a wide portfolio of fertilizer products and is the largest importer and seller of phosphatic products. The document analyzes Engro's financial ratios, profitability, liquidity, efficiency, and cash flows. It finds that Engro has reasonable liquidity and profitability ratios compared to its competitor Fauji Fertilizers. However, Fauji has higher cash flows and better efficiency. The intrinsic value of Engro is estimated to be Rs. 75.2 per share, higher than the market price, indicating the shares are undervalued. Overall the document recommends buying Engro Fertilizers shares.
Elecon Engineering is a leading provider of material handling equipment and gear solutions in India. It has a 26% market share in the domestic gear market, making it the leader. The company is well positioned to benefit from an estimated Rs32,500 crore of opportunities in the material handling equipment industry over the next few years, driven by growth in core sectors like power, steel, and coal. Elecon's order book and revenues are expected to grow at a CAGR of 40% and 13.5%, respectively, during FY2010-12, supported by a recovery in industrial activity and capital expenditures. The company's strong position in the stable gear market also helps support its profitability.
Elecon Engineering is a leading provider of material handling equipment and gear solutions in India. The company is well positioned to benefit from increasing industrial capital expenditures in sectors like power and steel. The analyst estimates Elecon will grow sales at a CAGR of 13.5% and adjusted profits at 37% over fiscal years 2010-2012 due to improving financials and recovery in the material handling equipment industry. The report initiates coverage on Elecon with a buy recommendation and target price of Rs102 based on attractive valuations and growth opportunities.
Madhucon Projects reported a 43% increase in net sales and a 22.2% increase in operating profit for the first quarter of FY2011, beating analyst estimates. While margins and earnings also exceeded forecasts, regulatory changes have delayed the company's plans to raise equity financing. As a result, the analyst downgrades the stock to "Accumulate" and changes the valuation methodology to no longer factor in potential equity dilution. The analyst sets a target price of Rs174 per share based on assigning a PE ratio to FY2012 earnings estimates and valuing subsidiaries.
ZF Hero Chassis Systems is in talks with Suzuki and Honda to supply auto components in India. It currently supplies axles to GM India and will invest Rs. 100 crore to expand capacity by 70%.
The RBI divested its remaining 1% stake in NABARD worth Rs. 1,430 crore, transferring ownership to the Government of India which now holds 99% of NABARD.
Mobile operators added 12.4 million new GSM subscribers in September. BSNL added the most at 2.3 million and Uninor added the second highest to reach over 11.2 million subscribers.
South Korean company E-land is acquiring Mumbai-based Mudra
Jagran Prakashan has approved the acquisition of Mid-Day Multimedia's print media business via a share swap. The deal values the print business at approximately Rs. 175 crores. Jagran will issue 1.51 crore new shares, expanding its equity base to 31.63 crore shares and diluting its shares by around 5%. Mid-Day's publications will fill gaps in Jagran's portfolio and boost revenues through bundling advertisements across publications. The analyst maintains a "Buy" rating for Jagran with a target price of Rs. 160.
The Indian markets are expected to open higher, tracking gains in most Asian markets. Spain has asked for a bailout of up to €100 billion for its banking system. Chinese exports grew more than expected in May. In India, shares extended gains for a fifth session despite weak global cues as major central banks held off on additional stimulus. The key support and resistance levels for the Nifty are 5,023 and 5,114 respectively. L&T has bagged orders worth Rs. 483 crore to build commercial vessels in Qatar. Vedanta Resources has acquired a 24.5% stake in Raykal Aluminium for Rs. 201 crore.
Axis Bank reported a 27.0% year-over-year increase in net profit to Rs. 942 crore for the first quarter of fiscal year 2012, in line with analyst estimates. Business growth momentum slowed as advances declined 7.4% quarter-over-quarter and deposits fell 3.0% quarter-over-quarter, moderating the bank's cash-deposit ratio to 40.5% from 41.1% last quarter. However, asset quality remained healthy with slippage ratio declining to 0.8% and gross and net NPA ratios stable.
1) For 1QFY2012, Electrosteel Castings reported 16.4% sales growth but margins declined due to higher raw material costs. EBITDA fell 18.2% and net profit declined 7.2%.
2) While sales volumes grew, costs increased more due to a rise in raw material costs as a percentage of sales.
3) The company maintains a buy recommendation due to initiatives in steelmaking and backward integration that should lower costs starting in FY2013 and valuation remains attractive.
1) For 1QFY2012, Persistent Systems reported revenues of ₹224 crore, up 5.2% over the previous quarter and 23.6% over the same period last year.
2) EBITDA was ₹40 crore, up 5.3% over the previous quarter but margins declined.
3) PAT was ₹28 crore, down 16.8% over the previous quarter due to higher taxes.
4) Management maintained revenue guidance of 29% growth for FY2012 and expects PAT to remain flat despite higher tax rates.
HT Media reported a 22.7% year-over-year increase in revenue to ₹494 crore for the first quarter of FY2012. Revenue was also up 5.8% quarter-over-quarter. Advertising revenue grew 17% year-over-year, with 18% growth in English and 15% growth in Hindi. Operating profit rose 11.8% year-over-year to ₹87.8 crore due to higher other income and lower tax rates, although operating margins contracted by 174 basis points. The company maintained its Accumulate rating based on expectations of continued revenue growth and margin expansion.
The summary is:
1) The derivative report analyzes the performance of the Nifty futures, options, and key stocks from the previous trading session on July 18, 2011.
2) It provides details on changes in open interest, premium levels, volatility, and turnover for various derivatives contracts.
3) Trading strategies and technical analysis is also given for some stocks along with risk-reward profiles of sample spreads trades for the Nifty.
The market ended lower, with the Sensex and Nifty closing down 0.3%. Mid- and small-cap indices closed higher. Select heavyweights like Hindalco Industries and BHEL gained 1-3%, while TCS and Tata Motors lost 1-2%. In corporate news, Motherson Sumi Systems agreed to acquire an 80% stake in Peguform for €141.5 million. HDFC Bank, Cadila Healthcare, Crompton Greaves, and Ashok Leyland are scheduled to announce their quarterly results. The trend for the day will be decided by whether Nifty trades above or below the levels of 18,533/5,572 in early trade.
- GSM subscriber additions in India continued their declining trend in June 2011, with net additions of 9.6 million, down 10% from the previous month.
- All major operators except BSNL reported a drop in subscriber additions. Bharti and Vodafone each added 2.1 million subscribers.
- The total GSM subscriber base reached 598.8 million in June 2011, with Bharti, Vodafone, Idea and BSNL maintaining their major market shares.
The document provides a technical analysis of the Indian stock market indices Sensex and Nifty for the week of July 16, 2011. It summarizes that the indices declined over 1.5% for the week and are currently trading in a range between 18,326/5496 on the downside and 19,132/5740 on the upside. It notes that a break above or below this range would dictate the direction of the upcoming trend. The analysis also lists pivot levels for 50 Nifty stocks to watch in the coming week.
The document provides a summary of derivative market activity in India for July 18, 2011. Key points include:
- Nifty futures open interest increased 0.67% while Mini Nifty increased 3.48% as the market closed at 5581.10
- Nifty July futures closed at a premium of 5.85 points and August futures at a premium of 22.60 points
- Implied volatility of at-the-money options decreased from 18% to 17.3%
- Total open interest in the market was Rs. 135,158 crore with stock futures open interest at Rs. 34,675 crore.
The indices opened flat but traded choppily throughout the day. Metal, auto and realty stocks declined while IT stocks gained. The indices are currently trading in a range between 18,326-18,810/5496-5653 on the downside and 19,132-19,094/5740-5700 on the upside. A break above these resistance levels could lead to further gains while a break below support could result in losses extending to 17,805-17,950/5350-5400. Pivot levels for 50 Nifty stocks are provided.
- The key Indian stock indices declined slightly, with the Sensex and Nifty closing down 0.3%.
- GSM subscriber additions in India continued their declining trend in June across most major operators such as Idea, Bharti Airtel, and Vodafone. Total GSM subscriber addition was 9.6 million, down 10% from the previous month.
- Tata Motors reported flat annual global sales growth in June 2011 compared to the previous year.
- South Indian Bank reported a 41.2% year-over-year increase in net profit to Rs. 82 crores for the first quarter of fiscal year 2012, slightly below analyst estimates.
- Business growth remained strong, with advances growth of 31.2% and deposits growth of 35.5% year-over-year. However, net interest margins compressed by 29 basis points sequentially to 2.8% due to a sharp rise in the bank's cost of deposits.
- Non-interest income was boosted by treasury gains, but fee income growth was modest. Asset quality was stable with gross and net NPAs rising marginally, and provision coverage at a comfortable 73.1%.
Bajaj Auto reported marginally lower-than-expected results for the first quarter of fiscal year 2012, with net sales growth of 22.8% year-over-year driven by a 17.7% increase in volumes. However, operating margins contracted by 145 basis points quarter-over-quarter to 19.1% due to a 150 basis point increase in raw material costs. As a result, net profit grew by 20.5% year-over-year to ₹711 crore, which was slightly below analyst estimates. Going forward, the analyst expects further margin pressure and has revised downward its earnings estimates for fiscal years 2012 and 2013 to factor in higher raw material costs and changes to export incentives.
1) Tata Consultancy Services (TCS) reported strong results for the first quarter of fiscal year 2012, outperforming expectations with revenue growth of 6.3% over the previous quarter and 31.4% over the same quarter of the previous fiscal year.
2) A key highlight was 7.4% quarter-over-quarter growth in business volumes. While profit margins declined due to wage hikes, net profit remained flat due to foreign exchange gains.
3) Management maintained a positive outlook, highlighting strong demand environment and deal pipeline, and expects pricing increases later in the fiscal year.
The document summarizes the Indian stock market outlook and performance on July 15, 2011. It reports that domestic indices closed with modest gains of 0.1-0.4%, while global indices declined. Wholesale price inflation in India rose to 9.44% in June 2011, above estimates and persisting above 9% for seven months, driven by increases in primary articles and fuel costs. Key benchmark levels are identified for determining if the market may continue rallying or correct in the near term.
The summary is:
1) The derivative report analyzes the movement in Nifty futures, options, and individual stocks between July 14-15, 2011.
2) Nifty futures open interest decreased while mini Nifty open interest increased as the market closed at 5599.80.
3) Implied volatility of at-the-money options increased from 17.6% to 18%.
The Sensex and Nifty indices opened lower and traded with volatility, closing marginally lower. On the sectoral front, Realty, Banks and Healthcare gained while IT and FMCG fell. The advance-decline ratio favored advancing stocks. On the daily chart, prices tested but did not close above the downward gap area of 18,679-18,589/5,601-5,580 levels. Immediate resistance is seen at 18,735/5,633, while 18,449/5,541 is crucial support.
1) Infosys reported modest revenue growth of 3.2% qoq for 1QFY2012. EBITDA and margins declined due to wage hikes.
2) Guidance for 2QFY2012 revenue growth was lower than expected at 3.5-5% qoq. Annual revenue growth guidance was unchanged.
3) The analyst revised EPS estimates down and cut the target price to INR 3,200 due to macro concerns and muted guidance.
This document summarizes a derivative report from India Research dated July 13, 2011. Some key points:
- The Nifty futures open interest increased 0.51% while Minifty futures open interest rose 8.2% as the market closed at 5526.15.
- Implied volatility of at-the-money options increased from 18% to 19.75%. PCR-OI decreased from 1.20 to 1.15.
- Total open interest of the market is Rs. 125,816 crore and stock futures open interest is Rs. 33,500 crore.
- FII were net sellers of Rs. 969 crore in the cash market segment. Put-call
1. IPO Note | Infrastructure
April 29, 2010
Jaypee Infratech NEUTRAL
Issue Open: April 29, 2010
Building on Periphery Issue Close: May 4, 2010
Jaypee Infratech (JIL) is constructing the 165km stretch (Yamuna Expressway Project Issue Details
- 69% completed) and planning real estate development at five locations (approx
Face Value: Rs10
530mn sq ft from land reserves of around 254mn sq ft) alongside the Expressway
over the next few years. This is one of its kind business models among the listed Present Equity Capital (No. of Shares): 122.6
players, wherein shortfall in the toll revenue would be compensated from the
Post Equity Capital (No. of Shares): 136.7#
realisations from the Real Estate space. We have assumed a ten-year development
period for the company's existing land bank (530mn sq ft) and have assumed Issue size (amount): Rs2,352cr#
average realisation of Rs4,000/sq ft and Rs8,000/sq ft on JIL's saleable interest in Issue Price Band: Rs102-117
Residential (50%) and Commercial (33%) property, translating into a Fair Value of
Promoters holding pre-issue: 99.1%
Rs95/share. Thus, the IPO is available at a premium to our NAV. Hence, we are
IPO.
Neutral on the IPO. Promoters holding post-issue: 84.5%#
#
at Upper end of the price band
Funding in place + Strong Parentage Execution
Note: 5% discount for retail investors
JIL stands to benefit from JAL's strong technical capabilities as well as capitalise on
its strong parentage. Moreover, the total project cost of Rs9,739cr for the 165km
stretch is fully funded, which instills confidence on the execution front. On the Real Book Building
Estate front too, the company has met with good response for all its projects and QIBs At least 60%
sold 21.3mn sq.ft till March 31, 2010, which further aids its capex plans. Non-Institutional At least 10%
Geographically concentrated bet Retail At most 30%
JIL's entire land reserves are located in UP between Noida and Agra unlike
established players like DLF and Unitech, who have a diversified presence. We like Post Issue Shareholding Pattern
players with diversified presence owing to the cyclical nature of the Real Estate
Promoters Group 84.5%#
industry. Thus, JIL's future prospects are closely dependent on the general economic
MF/Banks/Indian
conditions and activities in this region, besides the government policies relating to FIs/FIIs/Public & Others 15.5%
infrastructure development.
Fairly valued
The land required for Yamuna Expressway has been acquired to the extent of 96%,
whereas that required for Real estate development to the extent of around 61%.
The Toll policy relating to the Yamuna Expressway is yet to be finalized and toll
operations would be the prime Revenue driver in the foreseeable future. We have
assumed a ten-year development period for the company's existing land bank
(530mn sq ft) and average realisation of Rs4,000/sq ft and Rs8,000/sq ft on JIL's
saleable interest in Residential (50%) and Commercial (33%) property based on its
geographical presence. However, our Earnings estimate for the expressway over Kanani
Shailesh Kanani
+91 22 4040 3800 Ext: 321
the Concession period yields a negative NPV of Rs2,200cr on FCFE basis.
Email: shailesh.kanani@angeltrade.com
Accordingly, we have arrived at a Fair Value of Rs95/share. Thus, the IPO is available
at a premium to our NAV along with being fairly valued on P/BV basis of 3.8x and Aniruddha Mate
4.2x on FY2010E estimates at the lower and upper price band. Hence, we are +91 22 4040 3800 Ext: 335
Neutral on the IPO. Email: aniruddha.mate@angeltrade.com
Please refer to important disclosures at the end of this report
2. Jaypee Infratech | IPO Note
Company Background
Jaypee Infratech (JIL) part of the Jaypee Group and incorporated on April 5, 2007 as
a special purpose company is engaged in the development of the Yamuna Expressway
and related real estate projects. The Yamuna Expressway located entirely in Uttar
Pradesh will connect Noida to Agra. The Expressway is a 165-kilometre access-
controlled six-lane concrete pavement expressway along the Yamuna river, with the
potential to be widened to an eight-lane expressway. in The expressway is expected to
commence at the existing Noida-Greater Noida Expressway, pass through various
proposed SDZs, the proposed Taj International Hub Airport and end at District Agra.
Land required to construct the expressway is 4,042 acres, of which 3,897 acres (96%)
has been acquired by the Yamuna Expressway Authority (YEA) and leased to JIL. The
company holds the Concession (36 years) from the YEA to develop, operate and
maintain the Yamuna Expressway. At the end of the Concession period, the expressway
will be transferred to YEA. Thus, the Concession follows a build-operate-transfer (BOT)
model pursuant to which JIL has the right to earn toll revenue for a period of 36 years
following the award of a certificate of completion of the expressway.
The Concession also provides JIL the right to develop 25 million square metres
(approximately 6,175 acres to be acquired by the YEA and leased to JIL for a 90-year
term) of land along the Yamuna Expressway at five locations (constituting 1,235 acre
parcels) for residential, commercial, amusement, industrial and institutional purposes
which is expected to compensate JIL for losses arising from the expressway. Noida is
one location. Two locations are District Gautam Budh Nagar (part of the NCR) and
one location each in the Districts of Aligarh and Agra. Of the total 6,175 acres provided
for real estate development, JIL has signed lease deeds and taken possession of
approximately 3,745 acres as of March 31, 2010, all of which is located in Noida
and in District Gautam Budh Nagar.
Across the five land parcels for real estate development, JIL expects approximately
half of the land that JIL develops to be sold for residential use, approximately one
third will be for commercial purposes and the balance will be for institutional use and
open space.
April 29, 2010 2
3. Jaypee Infratech | IPO Note
Exhibit 1: Land details
Land Land in Land yet to be
Required Possession transferred
(Acres) (Acres) (Acres)
I(A) Land for the expressway
(i) Gautam Budh Nagar 4,042 3,897 40
(ii) Aligarh 9
(iii) Mathura 73
(iv) Mahamaya Nagar 6
(v) Agra 17
Total
Sub Total (A) 4,042 3,897 145
Yamuna
(B) Structures for the Yamuna Expressway
(i) Gautam Budh Nagar 1,018 183 461
(ii) Aligarh 129
(iii) Mathura 119
(iv) Mahamaya Nagar -
(v) Agra 125
Total
Sub Total (B) 1,018 183 835
Total
Sub Total (A+B) 5,060 4,080 980
II Land for real estate development
Noida 1,235 1,211 24
Gautambudh Nagar 1,235 1,195 40
Gautambudh Nagar 1,235 1,031 204
Aligarh 1,235 - 1,235
Agra 1,235 309 926
Total
Sub Total (II) 6,175 3,745 2,431
Total (I+II) 11,235 7,825 3,411
Source: RHP Angel Research
,
Exhibit 2: Good response for all launches
Project Launch
Launch Total Total area Total no of Pre
re-
% Pre-sold Gross sales
date no. of unit planned Units sold on a sq ft Avg.
Avg. up to Expected
planned (msf) as of basis as of realised price 31 Mar 2010 completion
31 Mar 2010 31 Mar 2010 (Rs/ sq ft) (Rs cr) date (CY)
Klassic Nov-08 2,886 4.1 2,506 84.1 3,436 1,196 2012
Aman May-09 3,276 3.5 3,276 100.0 2,383 846 2012
Kosmos Jul-09 6,282 7.2 5,892 93.2 3,274 2,190 2012
Commercial plots Dec-09 13 3.1 13 100.0 2,623 821 2011
Residential plots Jan-10 1,508 4.0 1,352 81.8 2,748 890 2011
Kensington Park Feb-10 1,534 2.4 866 50.8 3,089 374 2013
Total 15,499 24.3 13,905 87.5 2,966 6,317
Source: RHP Angel Research
,
April 29, 2010 3
4. Jaypee Infratech | IPO Note
IPO Details
JIL plans to raise up to Rs1,650cr via its Initial Public offer (IPO) priced in Rs102-117
band implying fresh equity issuance of 14.1cr/16.2cr at the upper and lower price
band, respectively. The issue offers a discount of 5% for the retail investors. Besides the
fresh issue, promoter Jaiprakash Associates (JAL) would offload six crore shares to
raise around Rs700cr. Part of the IPO proceeds would be utilized for financing the
Yamuna Expressway Project.
Exhibit 3: Break up of the Total Project Cost
Financing
Means of Financing Amount Amount deployed
to be deployed Feb,2010
as of 28th Feb,2010
(Rs cr) (Rs cr)
Proceeds
A . Net IPO Proceeds 1,500 -
B. Other means of financing
i) Debt 6,000 4,044
ii) Equity Contribution by Promoter 1,250 1,250
iii) Contribution from Real Estate Dev. 989 956
Total
Sub Total (B) 8,239 6,250
Total Project Cost
Project 9,739 6,250
Source: RHP
Exhibit 4: Objects of the Issue
Particulars Amount (Rs cr)
A) Partially finance the Yamuna Expressway Project [•]
B) General Corporate Expenses [•]
Total 1,650
Source: RHP
Exhibit 5: Shareholding Pattern
Pre-Issue Post Issue
No. of Shares (Cr) (%) No. of Shares(Cr) (%)
A.
A. Promoter 121.5 99.1 115.5 84.5
JAL 121.5 115.5
B.
B. Investor 0.1 0.1 0.1 0.1
BCCL 0.1 0.1
C. Others 0.6 0.4 0.6 0.4
0.6 0.6
D.
D. Public 0.4 0.4 20.6 15.0
Trustee of Jaypee Group Emp. 0.4 0.4 0.3
Fresh Issue to Public# - 14.1 10.3
Sale of Share by JAL - 6.0 4.4
Total (A+B+C+D) 122.6 100.0 136.7 100.0
Source: RHP Angel Research; Note: #At the upper end of the price band
,
April 29, 2010 4
5. Jaypee Infratech | IPO Note
Investment Arguments
Large development planned across the Expressway
The Government of UP (GoUP) has planned the Yamuna Expressway to aid development
of the entire stretch besides significantly reducing travel time between Delhi and Agra.
Agra is a popular tourist destination located on the banks of river Yamuna and has
heritage monuments like the Taj Mahal, Agra Fort and Fatehpur Sikri. Agra is also
part of the famous 'Golden Triangle' tourist circle that includes New Delhi, Jaipur and
Agra. GoUP has also constituted the Yamuna Expressway Industrial Development
Authority (YEA) as the nodal development agency for integrated industrial and urban
development along the Yamuna Expressway. We highlight below the key factors that
would drive the toll collections.
Proposed Taj International airport hub
GoUP has proposed an international airport at Jewar pending the approvals. The
international airport could prove to be a catalyst for growth in tourism, hospitality,
entertainment, SEZ exports, agri exports, handicrafts, etc. and other related sectors
resulting in demand for commercial and residential space.
Higher Tourist traffic
Faster access is also likely to increase the tourist thoroughfare for both Mathura and
Agra. Travel time to Agra from Delhi is expected to reduce by more than 50% from the
existing 4+hours post completion of the road project.
Industrial and Residential development
YEA intends to undertake larges scale residential as well as industrial development
along the entire Yamuna Expressway corridor. It has already launched two large scale
projects. First is the development of a Logistics Corridor and YEA has sought Expressions
of Interest (EoI) from interested parties for developing the first Logistics Hub in 500
acres. YEA has also invited applications from companies intending to set up projects
for allotment of plots of any size between 25 to 250 acres. Activities targeted for
allotment of the plots include industrial, IT, bio-technology, sports and re-creational.
The plot site is adjacent to the area of Greater Noida Authority and two minutes from
the Gautam Buddha University. The Yamuna Expressway is intended to develop various
residential locations along the route in the districts of Gautam Budh Nagar, Aligarh,
Mathura and Agra.
Attract commercial traffic
The Expressway is located entirely in UP along the Yamuna river between Noida and
Agra, while the existing road comprises portions in the states of Delhi, Haryana and
UP enroute Noida to Agra. We believe that the need to pass through the state borders
could be expensive and time-consuming for the users, particularly for commercial
traffic.
April 29, 2010 5
6. Jaypee Infratech | IPO Note
Real Estate: Growth to be driven by Faster Access
Development of five land parcels along the Expressway
JIL has the right to develop 6,175 acres of land with a 90-year lease, which will consist
of 1,235-acre parcels, at five different locations along the Expressway in lieu of
development of the Expressway. Noida is one such location, which is very valuable on
account of its accessibility to Delhi, and initial launches in this land parcel have met
with tremendous success. The other four land parcels are situated along the expressway
and their development will depend on the economic growth in the respective regions.
Two locations are in District Gautam Budh Nagar (part of NCR) and one location each
in District Aligarh and Agra. Of the total 6,175acres for real estate development, JIL
has already taken possession of 3,745acres as of March 31, 2010 all of which is
located in Noida and District Gautam Budh Nagar. Across the five land parcels for
real estate development, approximately half the land to be developed will be sold for
residential use, approximately one-third will be for commercial use and the balance
will be for institutional use and open space.
Land parcel in Noida is valuable
We believe JIL will be able to command premium pricing for this project on account of
the following: 1. Location - the project is close to up market South Delhi; 2. Accessibility
- this project lies on the Noida-Greater Noida Expressway; and 3. Size - the project
will be one the largest planned layouts in India.
Investment Risks
Current revenues derived from related party transactions
JIL has sold approximately 342 acres as undeveloped land and 3.13mn. sq.ft of
potential developable area (based on a 1.5 FAR) as developed commercial plots.
Approximately, 79.4% and 100% of the proceeds was derived from sales to related
parties. Approximately 75.7% (by acreage) and 100% (by acreage) of land that JIL
sold as undeveloped land and developed commercial plots respectively, were sold to
related parties. The company has totally garnered Rs1,376cr, of which Rs555cr was
recognised in FY2009 and Rs501cr in 9MFY2010.
Land acquisition for expressway and real estate development is not
complete
Pursuant to the Concession agreement, YEA will lease the entire land required for the
development of the Yamuna Expressway and approximately 6,175 acres of the
additional land for real estate development along the Expressway to JIL. There is no
assurance that YEA will lease and transfer unencumbered possession of the land
required for the development of the Yamuna Expressway Project. Based on the milestone
payments made by JIL to YEA and pursuant to notifications issued by GoUP under the
LA Act, YEA has commenced proceedings to acquire the balance land pursuant to the
LA Act. However, in many cases, the process of dispossessing the previous landowner
has not yet been completed. The delay or inability in acquiring the remaining land by
the YEA, if any, may consequently delay implementation of the Yamuna Expressway
Project.
April 29, 2010 6
7. Jaypee Infratech | IPO Note
Toll policy applicable to the Expressway has still not been notified
JIL is entitled to determine the fee structure for the different type of vehicles provided
that such fee shall not exceed such amounts as may have been notified by the GoUP .
However, as of October 31, 2009, GoUP has not notified a toll policy applicable to
the Expressway. The impact of toll rates on the collection from Expressway will prima-
rily be a function of price-elasticity of demand for the planned Expressway. If the
government sets low rates, JIL's Revenues may be adversely hit if traffic volumes do not
increase to offset lower toll.
Diversion of traffic from the parallel NH-2
NH-2, which connects Delhi with Agra runs through industrialised cities like Faridabad,
Ballabhgarh, etc. and is congested due to heavy traffic. The Expressway will facilitate
lower travel time via the highway. We believe the Expressway toll rates will likely be
higher than the national highway and its success would depend on its ability to divert
traffic from the highway.
Large capital outlay and long gestation period
The Expressway required substantial capital and entails long gestation period prior to
completion. Pertinently, the Yamuna Expressway under development will not generate
any revenue until it is awarded the certificate of completion under the concession
agreement, which is not expected to take place prior to CY2011. The time and costs
required in completing a project may be subject to substantial spill over due to factors
including shortages, increased competition, rise in market price of materials,
equipment, skilled personnel and labour, adverse weather conditions, natural disas-
ters, labour disputes with contractors, accidents, changes in government priorities
and policies, changes in market conditions, delay in obtaining the requisite licenses,
permits and approvals from the relevant authorities and other unforeseeable
problems and circumstances.
Property prices - cyclical business
A decline in property prices either due to increase in supply or demand slowdown
could impact our Revenue and Earnings estimates. Over the past two years property
prices have fallen and are currently stabilising. Although we do not doubt the secular
growth in property prices over a period of time given growing demand, we highlight
that the real estate business is cyclical in nature and property prices are volatile.
Interest rate risk
A sharp increase in interest rates may dampen demand for housing finance. This
would in turn impact Revenues and Earnings of JIL's Housing Segment.
April 29, 2010 7
8. Jaypee Infratech | IPO Note
Outlook and Valuation
The land required for Yamuna Expressway has been acquired to the extent of 96%,
whereas that required for Real estate development to the extent of around 61%. The
Toll policy relating to the Yamuna Expressway is yet to be finalized and toll operations
would be the prime Revenue driver in the foreseeable future.
We have assumed a ten-year development period for the company's existing land
bank (530mn sq ft) and average realisation of Rs4,000/sq ft and Rs8,000/sq ft on
JIL's saleable interest in Residential (50%) and Commercial (33%) property based on
its geographical presence. However, our Earnings estimate for the expressway over
the Concession period yields a negative NPV of Rs2,200cr on FCFE basis. Accordingly,
we have arrived at a Fair Value of Rs95/share. Thus, the IPO is available at a premium
to our NAV along with being fairly valued on P/BV basis of 3.8x and 4.2x on FY2010E
estimates at the lower and upper price band. Hence, we are Neutral on the IPO.
April 29, 2010 8
9. Jaypee Infratech | IPO Note
Annexure - The Concession Agreement
Duration of Concession: The Concession follows a build-operate-transfer (BOT) model,
and JIL will have the right to earn toll revenue for 36 years commencing on award of
the certificate of completion of the expressway. At the end of the concession period,
the expressway would be transferred to the YEA without any payment to JIL.
Terms of land lease: The YEA will lease out the land required for the Yamuna Expressway
to JIL land free of all encumbrances. JIL will pay YEA an amount equal to the cost of
acquiring the land for the project along with a minimal lease rental of Rs100 per
hectare per annum during the Concession period.
Selection of location: The specific tracts of land to be leased are to be selected at JIL's
request, subject to the ability to achieve a minimum floor area ratio (FAR) of 1.5. To
the extent local regulations do not permit for an FAR of at least 1.5, the YEA has
agreed to make suitable adjustment to the land to be transferred under the Concession
Agreement. Lease period for various land parcels is 90 years.
Construction period: JIL commenced construction of the expressway in January 2008.
While the Concession has set the deadline for completion by April 2013, JIL expects to
complete construction by 2011.
Expressway surface: The expressway will have a concrete, rather than blacktop, surface,
which is expected to make it relatively more durable, require less maintenance and
provide better traction in wet conditions though the initial construction will be more
expensive.
April 29, 2010 9
10. Jaypee Infratech | IPO Note
Profit and Loss Account (Consolidated) (Rs cr)
Particulars (Rs cr) FY2008 FY2009 1HFY2010 9MFY2010
Income 0.8 556.3 27.6 533.0
Sale and Income from operations 0.0 554.5 24.6 525.5
Other Income 0.8 1.7 3.1 7.5
Total Income 0.8 556.3 27.6 533.0
Total Expenditure 1.6 238.7 7.5 41.0
Cost of Sales 0.0 172.2 1.9 30.2
Personnel Expenses 0.2 3.9 2.8 5.3
Other Expenses 1.4 62.6 2.8 5.5
EBITDA
EBITDA (0.8) 317.6 20.1 492.0
Depreciation 8.5 14.0 7.7 11.5
EBIT (9.3) 303.6 12.4 480.5
Interest & Finance Charges
Preliminary w/off 2.0 0.0 0.0 0.0
rofit/(Loss)
Profit/(L
Net Profit/(Loss) before tax (11.3) 303.6 12.4 480.5
Provision Taxation
Less: Provision for Taxation 0.1 36.9 2.1 81.7
Current tax 0.0 36.6 2.1 81.7
Deferred tax 0.0 0.0 0.0 0.0
Fringe Benefit Tax 0.1 0.3 0.0 0.0
Profit Tax
Net Profit after Tax (11.4) 266.7 10.3 398.9
Less: Minority Interest 0.0 0.0 0.0 0.0
Add: Share of Profit/(loss) in Associates 0.0 0.0 0.0 0.0
Profit
Reported Profit (11.4) 266.7 10.3 398.9
Adj. made on account of Restatement 0.0 0.0 0.0 0.0
Profit
Adj. Profit (11.4) 266.7 10.3 398.9
Balance b/f from previous year 0.0 (11.4) 255.4 255.4
Balance carried to Balance sheet (11.4) 255.4 265.7 654.2
Source: RHP
April 29, 2010 10
11. Jaypee Infratech | IPO Note
Balance sheet (Consolidated) (Rs cr)
Particulars (Rs cr) FY2008 FY2009 1HFY2010 9MFY2010
I Fixed Assets
Gross Block 30 59 54 55
Less: Accumulated Depreciation 10 24 31 35
Net Block 21 35 23 20
Capital Work in Progress
(including capital advances) 899 2,291 2,881 3,682
Expenditure during construction period
(pending capitalization) 102 246 434 506
1,022 2,572 3,338 4,209
II Investments - - - -
III Deferred Tax Assets, (Net)
Tax - - - -
Loans
IV Current Assets, Loans and Advances
Inventories 2 2 2 2
Project Under Development 301 548 1,331 1,650
Sundry Debtors - - - 90
Cash and Bank Balances 8 191 1,252 773
Other Current Assets 0 2 3 5
Loans and Advances 346 298 331 537
Total Current Assets 657 1,040 2,918 3,057
A=(I+II+III+IV) 1,679 3,612 6,256 7,266
V Provisions
Liabilities and Provisions
Secured Loans 200 1,868 4,000 4,200
Current Liabilities 525 462 701 1,042
Provisions 0 37 40 119
B = (V) 725 2,366 4,741 5,362
NET WORTH (A – B) 954 1,245 1,516 1,904
Net Worth Represented by
Share Capital
- Equity Shares 965 966 1,226 1,226
Reserves and Surplus
- Security Premium 24 24 24
- Surplus /(Deficit)and Loss Account (11) 255 266 654
NET WORTH 954 1,245 1,516 1,904
Source: RHP
April 29, 2010 11
12. Jaypee Infratech
Disclaimer
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Angel Securities Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment
decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are
those of the analyst, and the company may or may not subscribe to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading
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Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
13. Jaypee Infratech
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel : (022) 3952 4568 / 4040 3800
Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angeltrade.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angeltrade.com
Vaishali Jajoo Automobile vaishali.jajoo@angeltrade.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angeltrade.com
Anand Shah FMCG , Media anand.shah@angeltrade.com
Deepak Pareek Oil & Gas deepak.pareek@angeltrade.com
Puneet Bambha Capital Goods, Engineering puneet.bambha@angeltrade.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angeltrade.com
Rupesh Sankhe Cement, Power rupeshd.sankhe@angeltrade.com
Param Desai Real Estate, Logistics, Shipping paramv.desai@angeltrade.com
Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angeltrade.com
Viraj Nadkarni Retail, Hotels, Mid-cap virajm.nadkarni@angeltrade.com
Paresh Jain Metals & Mining pareshn.jain@angeltrade.com
Amit Rane Banking amitn.rane@angeltrade.com
Rahul Jain IT, Telecom rahul.j@angeltrade.com
Jai Sharda Mid-cap jai.sharda@angeltrade.com
Sharan Lillaney Mid-cap sharanb.lillaney@angeltrade.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angeltrade.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angeltrade.com
Aniruddha Mate Research Associate (Infra, Real Estate) aniruddha.mate@angeltrade.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angeltrade.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angeltrade.com
Vibha Salvi Research Associate (IT, Telecom) vibhas.salvi@angeltrade.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angeltrade.com
Technicals:
Shardul Kulkarni Sr. Technical Analyst shardul.kulkarni@angeltrade.com
Mileen Vasudeo Technical Analyst vasudeo.kamalakant@angeltrade.com
Derivatives:
Siddarth Bhamre Head - Derivatives siddarth.bhamre@angeltrade.com
Jaya Agarwal Derivative Analyst jaya.agarwal@angeltrade.com
Sandeep Patil Jr. Derivative Analyst patil.sandeep@angeltrade.com
Institutional Sales Team:
Mayuresh Joshi VP - Institutional Sales mayuresh.joshi@angeltrade.com
Abhimanyu Sofat AVP - Institutional Sales abhimanyu.sofat@angeltrade.com
Nitesh Jalan Sr. Manager niteshk.jalan@angeltrade.com
Pranav Modi Sr. Manager pranavs.modi@angeltrade.com
Sandeep Jangir Sr. Manager sandeepp.jangir@angeltrade.com
Ganesh Iyer Sr. Manager ganeshb.Iyer@angeltrade.com
Jay Harsora Sr. Dealer jayr.harsora@angeltrade.com
Meenakshi Chavan Dealer meenakshis.chavan@angeltrade.com
Gaurang Tisani Dealer gaurangp.tisani@angeltrade.com
Production Team:
Bharathi Shetty Research Editor bharathi.shetty@angeltrade.com
Dharmil Adhyaru Assistant Research Editor dharmil.adhyaru@angeltrade.com
Bharat Patil Production bharat.patil@angeltrade.com
Dilip Patel Production dilipm.patel@angeltrade.com
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