The document provides a market outlook and summary of key events from India on May 6, 2010. It includes the following: 1) Domestic indices closed lower as metal stocks fell with slumping metal prices, while banking stocks declined on fears of further monetary tightening. 2) Preliminary discussions were held between Bank of Rajasthan promoters and banks like ICICI and HDFC about a potential merger. 3) Jagran Prakashan acquired the print media business of Mid-Day Multimedia via a share swap deal valued at around Rs. 175 crore. 4) The government agreed to provide additional Rs. 14,000 crore to oil marketing companies to compensate most of their losses

1. Market Outlook
India Research
May 6, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
Recovery in European stocks helped the domestic bourses wipe out almost the
entire losses suffered earlier in the day, in what was a highly volatile trading BSE Sensex -0.3% (49.2) 17,088
session. Metal stocks fell as metal prices slumped on the LMEX. Banking stocks Nifty -0.5% (23.6) 5,125
declined on fears that the RBI may resort to further monetary tightening to MID CAP 0.3% 20.8 7,048
counter soaring inflation. High beta infrastructure stocks dropped. Telecom SMALL CAP -0.2% (21.3) 8,986
stocks saw a divergent trend. The Sensex and Nifty closed down 0.3% and BSE HC 0.6% 33.0 5,352
0.5%, respectively. The BSE Mid-cap was up by 0.3%, while the Small-cap index BSE PSU -0.2% (18.2) 8,982
closed lower by 0.2%. Among the front-liners, Bharti Airtel, Wipro, Maruti BANKEX -0.4% (38.3) 10,872
Suzuki, M&M and NTPC were up by 1-3%, while JP Associates, Sterlite, Reliance AUTO 0.1% 3.9 7,692
Infrastructure, Hero Honda and HUL were down by 1-5%. In the mid-cap METAL -1.1% (177.3) 16,464
segment, Bajaj Fin Serv, Godrej Consumers, Patni Computers, UCO Bank and OIL & GAS -0.4% (38.5) 9,783
Indian Bank were up by 6-18%, while REI Agro, Prakash Industries, Gujarat NRE BSE IT 0.9% 48.2 5,305
Coke, Aban Offshore and Videocon Industries were down by 3-7%.
Markets Today Global Indices Chg (%) (Pts) (Close)
Dow Jones -0.5% (58.7) 10,868
The trend deciding level for the day is 17023 / 5110 levels. If NIFTY trades
above this level during the first half-an-hour of trade then we may witness a NASDAQ -0.9% (22.0) 2,402
further rally up to 17187– 17286 / 5163 – 5202 levels. However, if NIFTY FTSE -1.3% (69.2) 5,342
trades below 17023 / 5110 levels for the first half-an-hour of trade then it may Nikkei 0.0% 0.0 11,057
correct up to 16924 – 16759 / 5071 – 5018 levels. Hang Seng -2.1% (435.5) 20,328
Straits Times -1.4% (40.9) 2,860
Indices S2 S1 R1 R2 Shanghai Com 0.8% 21.9 2,857
SENSEX 16,759 16,924 17,187 17,286
NIFTY 5,018 5,071 5,163 5,202 Indian ADRs Chg (%) (Pts) (Close)
Infosys 0.6% 0.3 $58.9
News Analysis Wipro -1.9% (0.4) $21.3
Satyam 0.0% (0.0) $5.2
ICICI, others in talks to buy out Promoter’s stake in BoR ICICI Bank 2.9% 1.1 $40.5
Jagran Prakashan acquires Mid-Day’s Print Media Business HDFC Bank 0.0% 0.1 $141.8
Govt. to give Rs14,000cr more to OMCs
Advances / Declines BSE NSE
Results Review: Alembic, Allcargo, Lupin
Advances 1,073 461
Result Previews: Dr. Reddys Labs, PNB, Union Bank
Declines 1,800 850
Refer detailed news analysis on the following page.
Unchanged 77 41
Net Inflows (May 5, 2010)
Rs cr Purch Sales Net MTD YTD Volumes (Rs cr)
FII 2,827 2,722 105 (132) 29,579 BSE 4,760
MFs 1,307 732 305 (1,410) (7,229) NSE 15,284
FII Derivatives (May 4, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 1,212 1,951 (738) 13,916
Stock Futures 1,268 1,403 (134) 29,292
Gainers / Losers
Gainers Losers
Company Price (Rs) Chg (%) Company Price (Rs) Chg (%)
Bajaj Finserv. 399 17.6 Jaiprakash Asso. 134 -4.7
Godrej Cons. 308 9.1 Guj.NRE Coke 80 -4.2
Patni Computer 609 7.3 Jindal Steel 690 -3.9
UCO Bank 75 6.1 Aban Offshore 1,100 -3.5
Indian Bank 233 6.1 Aditya Birla Nuvo 773 -3.5
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
ICICI, others in talks to buy out Promoter’s stake in BoR
As per newspaper reports, the promoters of Bank of Rajasthan (BoR) have had preliminary
discussions with ICICI Bank, HDFC Bank and a few other banks to explore the possibility of
a merger. Given ICICI’s market capitalisation of Rs1,00,717cr, and BoR’s Rs1,450cr, a
merger would mean a small dilution for ICICI. ICICI Bank has close to 2,000 branches.
ICICI Bank had stepped up its presence in the south and west with the two earlier
acquisitions—Bank of Madura in FY2001 and Sangli Bank in FY2007. Taking over a bank
like BoR would strengthen its network in the north. BOR has a network of 460 branches,
60% of which are in Rajasthan. We believe that the talks are at a preliminary stage and
will take some time to fructify. Further, at this stage, there is no clarity about the valuations
sought by the promoters of BoR, and the bank which may be interested at those valuations.
We maintain a positive view on ICICI Bank and HDFC Bank.
Jagran Prakashan acquires Mid-Day’s Print Media Business
Jagran Prakashan (JPL) in its board meeting held on 5th May, 2010, has approved the
acquisition of Print Media business of Mid-day Multimedia (MML) via a share swap of 7:2
(for each 7 shares of MML, its shareholders will get 2 shares of JPL). The scheme of
arrangement, subject to necessary approvals, will result into de-merger of the Print
business from MML which will get transferred to a wholly owned subsidiary of JPL with
effect from 1st April, 2010. JPL has indicated that the current management of Mid-Day
including Tarique Ansari and Manajit Ghoshal would continue to run the publication
business.
Based on the share swap of 7:2, at the CMP of Rs115 for JPL, the deal values the acquired
Print business of MML at ~Rs175cr and would lead to dilution of ~5% in JPL. Hence, JPL
will issue 1.51cr equity shares under the share swap to MML shareholders and its equity
base will expand from 30.12cr shares to 31.63cr shares.
For FY2010, MML’s Print business reported a revenue of Rs95cr (Rs102cr), EBIT of
Rs16.9cr (Loss of Rs13.1cr) and EBIT Margin of 17.8%. Hence, we believe JPL has paid a
reasonable valuation of 2.1x EV/Sales and 12x EV/EBIT (modeling in an Rs25cr debt for
Print Business) based on FY2010 financials, a ~30-40% discount to its peers JPL and HT
Media. Moreover, while the acquisition is likely to dilute JPL’s Margins to an extent (as
MML’s Print business operates at 18% EBIT Margins vis-à-vis JPL’s 24%), we believe the
deal is likely to be Earnings accretive to the tune of ~2% on FY2011E financials. While we
have not factored the deal in JPL’s numbers (await complete clarity), we believe, with
Blackstone’s recent investment of Rs225cr (not utilised for the current deal) and a wider
portfolio (including Mid-Days publications), JPL is well poised to benefit from steady growth
in Print Media. We maintain JPL as our Top Pick in Print, owing to its dominant position in
the Hindi Belt, increasing colour ad inventory and its ability to attract a high amount of
local advertising. The underperformance of the stock, in our opinion, provides a good
entry point; hence, we maintain a Buy, with a Target Price of Rs160, based on a P/E
multiple of 20x FY2012E EPS of Rs8 (in-line with historical valuations).
May 6, 2010 2

3. Market Outlook | India Research
Govt to give Rs14,000cr more to Oil Marketing Companies (OMCs)
The government has agreed to give an additional Rs14,000cr to OMCs (IOC, BPCL and
HPCL), to make up for most of the losses they incurred on selling cooking fuel below cost
in FY2010. The three retailers lost Rs31,621cr on selling domestic LPG and kerosene
below cost in FY2010. Of this, the finance ministry had previously released Rs12,000cr in
cash and has agreed to give an additional Rs14,000cr. Oil Ministry had sought
Rs19,620cr to fully compensate OMCs revenue loss on PDS kerosene and domestic LPG in
FY2010, but finance ministry has agreed to give only Rs14,000cr, leaving the balance
Rs5,620cr as unmet subsidy burden. OMCs have lost Rs46,051cr on selling petrol, diesel,
domestic LPG and PDS kerosene below imported cost in FY2010, of which upstream firms
like ONGC and Oil India Ltd are meeting the entire Rs14,430cr loss on petrol and diesel.
With this development, OMCs are likely to report robust performance in 4QFY2010. We
believe that ONGC is unlikely to bear any subsidy burden on cooking fuels, which is a
positive development. However, given the ad hoc subsidy-sharing mechanism and flat
production outlook, we maintain a Neutral on ONGC.
Result Reviews
Alembic
Alembic announced its 4QFY2010 results, which were below our estimates. Net Sales
came in at Rs263.4cr (Rs255.9cr) up 2.9% and was below our expectation of Rs283.0cr on
back of de-growth on the Regulated market front. Sales of Formulation and API to the
Regulated market de-grew by 16.1% to Rs22.4cr (26.7cr) and by 48.1% to Rs31.7cr
(Rs60.9cr), respectively. However, the Domestic formulation grew by healthy 14.9% to
Rs131.4cr (Rs114.4cr). The company reported OPM of 6.7% (5.5%) up 116bp but was
below our expectation on back of lower sales growth. Alembic reported Net profit of
Rs0.4cr (loss of Rs1.5cr). The stock is under review.
Allcargo Global Logistics (1QCY2010)
Allcargo Global Logistics’ (AGL) consolidated 1QCY2010 results were above our
expectations. AGL reported 21.9% yoy jump in revenues on account of strong performance
across segments. The Indian MTO and CFS business grew by 27.8% yoy to Rs104cr and
Rs45cr, respectively, on account of strong volumes with improving Exim visibility. ECU line
reported 12.3% yoy jump in revenues to Rs406cr. However, consolidated operating profit
grew by mere 2.7% yoy to Rs57cr on account of inability to pass on entire hike in freight
rates. Consequently, OPM fell by 182bp yoy to 9.8%. The interest cost fell by 32.6% yoy to
Rs3.5cr, owing to reduction of debt. Further AGL continued to claim MAT entitlement,
which resulted in lower tax rate of 17.4% for 1QCY2010 as against 26.2% in 1QCY2009.
Consequently, PAT surged 23.2% yoy to Rs34cr in 1QCY2010. We remain Neutral on the
stock.
Lupin
Lupin announced its 4QFY2010 results, which were ahead of our estimates. Net Sales
grew by 23.1% to Rs1,285cr (Rs1,043cr), against our expectation of Rs1,223cr, driven by
the advanced market which recorded a stellar growth of 33% yoy to Rs713.4cr. Lupin
launched Lotrel in 4QFY2010 with limited competition with a market share of 26% in US.
On the Operating front, OPM came in at 19.4% up 130bp driven by better product mix
and launch of Lotrel in US. The company reported Net profit of Rs220.6cr (Rs157.7cr) up
39.9% driven by Top-line growth, OPM expansion and higher Other Income. For FY2010,
the company reported Net Sales of Rs4,740cr (Rs 3,776cr) up 25.5% with OPM of 18.0%
(17.2%) and Net Profit of Rs681.4cr (Rs502.2cr) up 35.7%. The stock is under review.
May 6, 2010 3

4. Market Outlook | India Research
Result Previews
Dr Reddy’s Labs
Dr Reddy’s Lab (DRL) is slated to announce its 4QFY2010 results today. The company is
expected to post a de-growth on the Sales front by 8.2% to Rs1,769cr, as 4QFY2009 was
boosted by launch of the generic version of Imitrex. Excluding the one-off, DRL's Recurring
Sales are expected to grow by a healthy 13%. On the OPM front, Margins are expected to
come at 17.5% down by 668bp, with Net Profit of Rs235.5cr. We recommend an
Accumulate on the stock, with a Target Price of Rs1,313.
PNB
PNB is expected to post a 4QFY2010 net profit of Rs962cr, a growth of 11.2% yoy.
Operating Income of the bank is expected to increase by 10.1% yoy to Rs3,041cr. NIMs of
the bank are expected to remain stable sequentially as per our estimates, as majority of the
deposits have already been re-priced during 9MFY2010 for the bank. The stock is trading
at 7.5x FY2012E EPS of Rs139.1 and 1.5x FY2012E Adjusted Book Value of Rs718. In our
view, PNB is capable of delivering a sustainable ROE of 17-18%, by leveraging its strong
network (4,707 branches and 2,910 ATMs) and a CASA of 40% (due to a major presence
in North India). However, at the CMP, we believe the stock is trading above its intrinsic
valuation. Moreover, the bank’s high growth in advances in earlier quarters at relatively
high yields could contribute to relatively higher asset quality deterioration for the bank
going forward. Hence, we maintain a Reduce on the stock, with a Target Price of Rs874.
Union Bank
Union Bank of India is expected to post 4QFY2010 net profit of Rs525cr, a growth of
13.0% yoy. Operating Income of the bank is expected to grow by 4.3% yoy to Rs1,550cr.
NIMs of the bank are expected to improve by 15-20bp sequentially as per our estimates.
The bank is structurally among the more profitable and competitive PSU Banks. We have a
positive outlook on the bank, due to its dynamic leadership, robust traction in CASA
deposits, consistency in core fee income growth and its fast expanding branch network. At
the CMP, the stock is trading at 6.8x FY2012E EPS of Rs44.7 and 1.3x FY2012E Adjusted
Book Value of Rs237. We maintain a Neutral rating on the stock.
Economic and Political News
Bank loans up 17% on yr as on Apr 23: RBI
Govt to take up fresh SEZ proposals on June 8
Petroleum Ministry seeks Rs19,620cr compensation for oil PSUs
Corporate News
SAIL to set up power plant & greenfield steel mill by 2020
Hewlett Packard India gets Rs1,450cr tax notice
L&T on aggressive expansion abroad
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
May 6, 2010 4

5. Market Outlook | India Research
Events for the day
Ajanta Pharma Results
Bharat Bijlee Results
Dr Reddy Results
PNB Results
Rashtriya Chemcials Results
Swaraj Engines Results
Torrent Pharma Results
Union Bank Results
May 6, 2010 5

6. Market Outlook | India Research
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