1. .
Market Outlook
India Research
August 11, 2010
Dealer’s Diary Domestic Indices Chg (%) (Pts) (Close)
The key benchmark indices opened on a tentative note and had an indecisive BSE Sensex -0.4% (67.5) 18,220
morning session due to the softness on the Chinese bourses and other Asian Nifty -0.5% (25.4) 5,461
peers. Indices hit fresh intraday lows in early afternoon trade, as Asian stocks MID CAP -0.5% (38.7) 7,583
fell led by a steep slide in Chinese equities. Selling pressure intensified in SMALL CAP -0.4% (33.8) 9,687
afternoon trade as European stocks dropped in early trade as well. To close BSE HC -0.8% (43.9) 5,548
with, benchmark indices ended in the negative terrain due to lack of buying BSE PSU -0.8% (72.8) 9,574
activity at higher levels, with the Sensex and Nifty closing down by 0.4% and BANKEX 0.0% (1.6) 11,943
0.5%, respectively. BSE mid-cap and small-cap indices closed down by 0.5% AUTO 0.1% 9.0 8,640
and 0.4%, respectively. Among the front liners, Tata Motors, JP Associates, HUL,
METAL -0.7% (112.3) 15,594
L&T and ICICI gained 1–4%, while Sterlite Industries, Wipro, Hindalco, TCS and
OIL & GAS -0.2% (19.9) 10,056
Mahindra & Mahindra declined by 1–2%. Among mid caps, Prism Cement,
BSE IT -1.4% (80.8) 5,592
Zydus Wellness, Indiabulls Real Estate, Educomp and Berger Paints grew 5–7%,
Global Indices Chg (%) (Pts) (Close)
while Jai Corp, Motherson Sumi, Sigrun Holdings, HT Media and Britannia
Industries lost 4–6%. Dow Jones -0.5% (54.5) 10,644
NASDAQ -1.2% (28.5) 2,277
Markets Today FTSE -0.6% (34.1) 5,376
Nikkei -0.2% (21.4) 9,551
The trend deciding level for the day is 18228/5466 levels. If NIFTY trades
above this level during the first half-an-hour of trade then we may witness a Hang Seng -1.5% (328.0) 21,474
further rally up to 18285–18351/5486–5512 levels. However, if NIFTY trades Straits Times -0.4% (10.8) 2,984
below 18228/5466 levels for the first half-an-hour of trade then it may correct Shanghai Com -2.9% (77.3) 2,595
up to 18163–18105/5440–5420 levels.
Indian ADRs Chg (%) (Pts) (Close)
Indices S2 S1 R1 R2
Infosys -0.6% (0.4) $62.1
SENSEX 18,105 18,163 18,285 18,351 Wipro -0.9% (0.1) $13.8
NIFTY 5,420 5,440 5,486 5,512 Satyam -0.6% (0.0) $4.9
ICICI Bank -0.1% (0.1) $42.3
News Analysis HDFC Bank 0.0% 0.0 $161.8
Infotech Enterprises acquires US-based Wellsco, Inc.
Result Reviews: Hindalco – Novelis, IVRCL, Motherson Sumi, Nagarjuna Advances / Declines BSE NSE
Const, Piramal Healthcare, Tata Motors Advances 1,258 494
Result Previews: Bharti Airtel, Bosch Declines 1,751 868
Refer detailed news analysis on the following page. Unchanged 80 33
Net Inflows (August 09, 2010)
Rs cr Purch Sales Net MTD YTD Volumes (Rs cr)
FII 2,361 2,420 (59) 3,221 51,162 BSE 5,485
MFs 516 839 (323) (630) (13,253)
NSE 15,190
FII Derivatives (August 10, 2010)
Open
Rs cr Purch Sales Net
Interest
Index Futures 1,211 1,541 (330) 16,945
Stock Futures 1,175 1,128 47 35,465
Gainers / Losers
Gainers Losers
Price Price
Company chg (%) Company chg (%)
(Rs) (Rs)
IB Real 186 5.8 Jai Corp 270 (5.9)
Educomp 690 5.3 Essar Ship 123 (3.5)
Bombay Dye. 598 4.8 Amtek Auto 183 (3.5)
Tata Motors 957 4.2 MMTC 1,550 (3.4) 1
KSK Energy 169 4.1 Aban Offshore 880 (3.4)
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Market Outlook | India Research
Infotech Enterprises acquires US-based Wellsco, Inc. in an all-cash deal
Infotech Enterprises (Infotech) has acquired Arkansas-based Wellsco, Inc. (Wellsco) in an
all-cash deal. Wellsco provides network engineering and management services to the
telecommunications (Telco) industry. Wellsco has 180 professionals working across five
offices in the US.
Infotech has not disclosed the consideration amount but has guided that the consideration
value paid is lower than 1x of Wellsco’s annual revenue. Out of the total consideration
amount, 85% is already paid in cash, while the remaining would be paid-off by Infotech in
the form of earn-outs, depending on the financial performance of Wellsco in the next six
months. The current annual revenue run rate of Wellsco is US $12mn, which would result
in annual revenue contribution of US $8mn for Infotech in FY2011, while the current
EBITDA margin of Wellsco is in the 7–10% range. The acquisition is expected to be
earnings accretive. Currently, the addressable market size of the Telco engineering services
sector in the US stands at US $20bn, of which the market size of the designing and
planning work, where Wellsco has a strong presence stands at US $2.5bn. Thus, through
this acquisition, Infotech plans to explore and scale up on this huge opportunity.
This acquisition would also result in improved volume-led growth in the company’s UTG
vertical, which has been witnessing subdued growth in the past couple of quarters. After
the acquisition, Infotech would execute work from offshore compared to the complete
onshore delivery currently being done by Wellsco. Going forward, this is expected to result
in an improvement in Wellsco’s EBITDA margin.
The acquisition is in line with Infotech’s inorganic growth strategy. Going forward, we
expect the company to continue to scout for such acquisitions, which are of a strategic fit,
as it would help it gain further domain expertise for seizing any upcoming opportunities.
Through this strategy, the company also aims to add and grow its marquee client accounts
across geographies and verticals, thereby expanding its operations. At the current level,
we recommend Buy on the stock with a Target Price of Rs192.
Result Reviews – 1QFY2011
Hindalco – Novelis
Novelis, Hindalco’s subsidiary, reported strong set of numbers for 1QFY2011. The top line
grew 29.2% yoy and 4.7% qoq to US $2,533mn as shipments of rolled products increased
by 14.8% yoy and 4.2% qoq to 746kt. Adjusted EBITDA grew by 112.1% yoy and 13.9%
qoq to US $263mn. Net income decreased by 65% yoy to US $50mn. Following the expiry
of Novelis’s metal price ceiling contracts and the expected benefit from price increases and
cost savings measures, we maintain our Buy recommendation on the stock with a Target
Price of Rs204.
IVRCL Infrastructure
For 1QFY2011, IVRCL Infrastructure (IVRCL) posted a flat top line at Rs1,106cr, which was
19.1% below our expectations. The company lost revenue of around Rs250cr for the
quarter on account of its projects in MP and AP along with its IOC tankage project. On the
operating front, the company posted margin of 9.1% against our estimate of 8.6%. Below-
estimate top-line performance cascaded at the bottom-line level, which came in at mere
Rs28.1cr. The order inflow for the quarter stood at Rs3,174cr, whereas the outstanding
order book stood tall at Rs23,275cr (4.3x FY2010 revenue). The management continues to
maintain its FY2011 top-line guidance in the Rs6,700cr–Rs7,100cr range. However, we
have marginally pruned our numbers, which are below the management’s guidance. We
believe the current valuations provide a good entry point for long-term investors. Hence,
we maintain a Buy rating on IVRCL with a Target Price of Rs216.
August 11, 2010 2

3. Market Outlook | India Research
Motherson Sumi Systems
For 1QFY2011, Motherson Sumi Systems (MSSL) registered 32% yoy growth in net sales to
Rs1,905cr (Rs1,442cr), which was below our expectations. Sales growth was largely aided
by the 53% yoy jump in domestic market revenue at Rs630cr and a 24% yoy increase in
revenue from outside India at Rs1,229cr. However, the sequential decline in Samvardhana
Motherson Reflectec’s (SMR) revenue arrested revenue growth during the quarter.
On the operating front, the company reported a 370bp yoy increase in EBITDA margin to
9.8%, lower than our expectation of 11.6%. Operating margin also came in below our
expectation, largely due to the sequential increase in overall input costs and lower-than-
expected margin of SMR at 7.2% (8.7% in 4QFY2010). On a sequential basis, margin fell
by 508bp qoq. The adverse currency movement also impacted operating performance
during the quarter. Thus, net profit for the quarter came in below our expectation at
Rs60cr, largely on account of lower-than-expected top-line growth and operating margin.
Further, higher tax rate for 1QFY2011 restricted net profit growth for the quarter.
We will be revising our estimates and rating post the management’s conference call.
However, we maintain our positive stand on the company, considering its fundamental
track record and business portfolio. The stock rating is under review.
Nagarjuna Construction
Nagarjuna Construction (NCC) posted disappointing numbers for 1QFY2011. The major
disappointment came in from the top-line front, which grew by mere 8.5% against our
expectations of 27.4%. However, the management has maintained its guidance of
Rs5,800cr for the year. Operating margin for the quarter came in at 9.7% (10.4%), in line
with our estimates. NCC managed to save on the interest cost front due to low short-term
borrowings rate and as interest costs witnessed a sequential decline in spite of increasing
debt. NCC is well placed to leverage the opportunity in the infrastructure space with one of
the most diversified order books and exposure to most of the growth sectors—
transportation, water and power. We maintain a Buy rating on the stock with a Target Price
of Rs201.
Piramal Healthcare
Piramal Healthcare (PHL) reported its 1QFY2011 results, which were below our estimates
on the back of subdued domestic formulation business. The company reported net sales of
Rs842cr (Rs821cr), up by mere 2.6% yoy. Domestic formulation sales grew by 4.9% to
Rs461cr (Rs440cr), mainly affected by the sale of the business to Abbott. Further, the
CRAMS segment remained lackluster at Rs175cr (Rs190cr), down 8.0% yoy; however, the
critical care segment grew by 48.6% yoy to Rs108cr (Rs72.8cr) on the back of higher
contribution from Minrad. The company also disappointed on the operating front, with
OPM at 15.3% (18.9%), a contraction of 360bp yoy on the back of higher employee
expenses and cost pertaining to the Abbott deal. PHL reported net profit of Rs80.7cr
(Rs85.0cr), down 5.3% yoy, impacted by subdued growth on the top-line front. On the
Abbott deal, the company expects the proceeds (US $2.1bn) to come by September end.
We recommend a Neutral rating on the stock at the current level, given the uncertainty
over the usage of funds.
August 11, 2010 3

4. Market Outlook | India Research
Tata Motors
Tata Motors posted an outstanding performance for 1QFY2011, on the back of improved
operational performance at JLR and other key subsidiaries of the company. On a
standalone basis, the company reported 63% yoy growth in the top line, aided by 48% yoy
growth in volumes and 10.5% growth in realisations. Operating margin stood at 11.1%,
driven by better operating leverage and a yoy decline in input costs. However, net profit
declined 23% yoy to Rs396cr due to lower other income of Rs69cr (Rs319cr).
On a consolidated basis, net revenue grew 65% yoy to Rs27,056cr, aided by higher
growth in domestic and JLR volumes and a substantial 27% yoy jump in JLR realisations.
Volumes at JLR increased by 59% yoy. On the operating front, margin increased by
1,118bp yoy and 343bp qoq to 14.2% for 1QFY2011. Favorable currency movement and
restructuring efforts at JLR helped to improve the margin at consolidated levels. Net profit
for the quarter stood at Rs1,979cr, as against net loss of Rs334cr in 1QFY2010.
We maintain our positive stance on the company, considering its impressive 1QFY2011
performance. We will be revising our estimates upwards (largely on the JLR front) and
would shortly release a detailed update on the company. The stock rating is under review.
Result Previews – 1QFY2011
Bharti Airtel
For 1QFY2011, we expect Bharti Airtel to report a 5.1% yoy (3.9% qoq) increase in net
revenue to Rs10,450cr. Growth is expected to be driven by the mobile services business, as
net subscribers are expected to grow by 6.6% qoq and 33% yoy to 136mn. However,
higher network expansion costs and a decline in tariffs are expected to impact margins by
480bp yoy (100bp qoq). However, the bottom line is expected to decline by 22% yoy (4.5%
qoq) to Rs1,962cr. At the current level, we maintain an Accumulate rating on the stock with
a Target Price of Rs360.
Bosch – 2QCY2010
Bosch is slated to announce its 2QCY2010 results. The company is expected to deliver
33% yoy growth in revenue to Rs1,628cr for the quarter. On the operating front, Bosch is
expected to post a 119bp yoy improvement in operating profit margin to 18.7%. Net profit
is expected to increase by 9.6% yoy to Rs209.3cr. The stock rating is under review.
August 11, 2010 4

5. Market Outlook | India Research
Economic and Political News
High Court asks SEBI to decide on MCX-SX plea by September 30
Rajasthan government to take a 26% stake in ONGC’s Barmer refinery
18 foreign banks apply for branches, representative offices: Jr. Fin. Min. NN Meena
Corporate News
M&M, Ruia submit bids for Ssangyong
Uttam Galva increases prices by Rs500 a tonne
GMR Infra gets US $1bn offer for InterGen stake
Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
Events for the day
Bajaj Hindustan Results
Bajaj Hindustan Sugar Results
Bharti Airtel Results
Bosch Results
Everonn Results
Financial Tech Results
Jindal Poly Results
Parsvnath Developers Results
Sundaram Fasteners Results
Tamilnadu Petroproducts Results
Tips Inds Results
Videocon Inds Results
West Coast Paper Results
August 11, 2010 5

6. Market Outlook | India Research
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August 11, 2010 6