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HPCL's Rs 576 crore order to L&T

Monday, March 31, 2008

Larsen & Toubro has been awarded a Rs 576 crore order by Hindustan Petroleum Corporation (HPCL).

The scope of work for this prestigious LSTK order, valued at Rs 576 crore, includes residual process design, detailed engineering, procurement, supply, transportation, storage, fabrication, inspection, construction, installation, testing, mechanical completion, pre-commissioning, commissioning and performance guarantee test runs for the said project.

The order was bagged by L&T's E&C division's refinery projects business unit against keen competition on the strength of its track record of having executed several high operating pressure refinery projects, meeting exacting refinery quality requirements and conforming to stringent delivery schedules.

Published by DalalStreet Business @ 11:07 AM


Spanco Tele to computerize Maharashtra Ration System

Spanco Telesystems & Solutions has been awarded a letter of intent by food, civil supplies and consumer protection department, Government of Maharashtra, appointing the company as sole & total solutions provider for computerization of the entire rationing system in the State and issue ration cards on build, own, operate and transfer and the project duration will be for a period of 3 years.

This contract shall give impetus to Spanco's growth plans and strengthen Spanco's future business opportunities and potential and also put Spanco in a leading position in all important government space, particularly considering the government spending and expansions programmes and budget allocations in the area of telecom & IT / ITES segment of which Spanco will be a direct beneficiary. The future business growth and outlook continues to be robust. The total value of the project would be approximately Rs 125 crore.

Published by DalalStreet Business @ 10:21 AM


Pay Commission - Threat to India's Fiscal Consolidation

Monday, March 24, 2008

Breaking NewsThe government-appointed Sixth Pay Commission is due to announce its recommendations on the magnitude of wage and pension hikes for central government employees. Assuming that the Sixth Pay Commission announces a hike in salaries and pension slightly lower than that announced under fifth pay commission, we believe that that the total central government salaries and pension payments could increase by about 0.4% of GDP (Rs300 bn) to 2.5% in F2009.

The combined wage and pension costs of the state governments to rise by about Rs900 to Rs1000 billion spread over the next 2-3 years. Adding to the woes is the recent farm loan relief spending and the pay hike impact will decidedly reverse the six-year trend of reduction in government deficit.

Be prepared to face a Indian Donwgrade on the Macro Economic Front.

Published by DalalStreet Business @ 2:47 PM


Dun & Bradstreet award for GAIL India

Gail India has been selected as the top Indian company in the gas-processing, transmission and marketing sector for the Dun & Bradstreet Corporate Awards 2007. U D Choubey, chairman and managing director, GAIL received the award on behalf of GAIL from Manoj Vaish, president & CEO, Dun & Bradstreet, India. This is the second time that GAIL has received this award.

The corporate awards have been launched to recognize the twin virtues of size and growth in the top organizations of corporate India. The awards recognized the best organizations spread across various sectors such as oil and gas exploration, power generation, banks, software and IT, fertilizers, cement, FMCG and others.

Published by DalalStreet Business @ 11:19 AM


Citi's GDP Estimates down to 7.7%

Breaking NewsCiti has revised FY09 GDP Estimates – from 8.3% to 7.7%. out: Earlier this year, when Citi cut our FY09 GDP estimate from 9% to 8.3%, they said that the two key risks to the growth outlook were
Continued rise in volatility and risk premium in the financial markets is likely to result in a deceleration in capital flows and financing becoming more costly as spreads are widening. This in turn will have spillover effects to the real sector.

The India story has been largely investment-led rising 15% on a YoY basis with the Investment GDP ratio increasing to 36% of GDP from 25% in FY03. With the increase in risk aversion, low appetite for public offerings coupled with high domestic rates could dampen/delay investment demand.

Published by DalalStreet Business @ 11:12 AM


H1B Visa + Salary Hikes to dent Infosys Margins

Thursday, March 20, 2008

Indiainfoline in a research note has said additional costs due to H-1B Visa applications and salary hikes will take ~200bps off Infosys's EBITDA margin in 1QFY09, resulting in a 4% QoQ decline in PAT. Infosys is to release its FY09 guidance on 15 April. Expect FY09 guidance would be revenue growth of 20% and PAT growth of 15% as against consensus estimate of 19%, which means an EPS upgrade cycle is unlikely. Given management's none-too-encouraging comments in the recent past and clients' weak business outlook, Infosys could even guide conservatively for a 10% PAT growth. This is really shocking and if that is the case then expect a MASSIVE SELL off in IT stocks.

Now are you shocked that how come H-1B Visa's can take a toll on its margins ? In 2007, Infosys Technologies processed 1,734 Visa applications excluding BPO, Consluting etc The Visa processing charges + Attorney Fees + Employee Relocation cost will all add up.

Published by DalalStreet Business @ 9:32 PM


ICICI Life Insurance Clarifications

Tuesday, March 18, 2008

ICICI Prudential Life Insurance hosted a conference call to clarify the new business margin calculations on its life insurance business – This was prompted by Prudential plc's disclosure that its Indian life insurance business (which is a JV with ICICI Bank) had a new business margin of 12%, compared to ICICI Bank's disclosure that the margin is 19%. We depend on the insurance company to disclose margins - it's impossible to calculate it ourselves - and if Prudential was correct, this would have reduced life insurance values by 35%.

However, the difference is due to accounting; the underlying margin is closer to 19%. The key reason for the difference in margins is expense ratio assumptions. New business margins reflect the present value of all profits on a particular policy; its calculation requires various assumptions like discount rate, return, expense ratio. For the expense ratio, the correct assumption is to take expenses over the life of the policy - which will imply a meaningfully lower expense ratio compared to the current ratio.

Published by DalalStreet Business @ 3:25 PM


India to supply world's largest coal gasifier to China

The World's Largest Coal Gasifier will be Manufactured by an Indian company - L&T and will be supplied to China. Contract valued at Euro 28 million (Rs 170 crore) for supply of the coal gasifier and syngas cooler assembly to Hebi Coal and Electricity, subsidiary of Zhongyuan Coal Chemical Industry Group, People's Republic of China.

The complete gasifier assembly & the structure, which is expected to weigh 1740 MT, is the world's largest and heaviest gasifier assembly, with a capacity to handle 3400 tpd of coal. The assembly will be the heart of a methanol plant with a capacity of 600,000 tpa. The order was won through an international competitive bidding process.

Published by DalalStreet Business @ 12:45 PM


Final Advance Tax Numbers

We have received Advance Tax Collection Numbers from Various Companies [Thank you] and we are compiling the list of the same. The table below lists the name of the company, followed by Advance Tax paid for the last quarter of previous financial year and Advance Tax paid for the last quarter in current financial year.

Company Previous No Current No. [All figures in Rs crore]
SBI 690 1418
RIL 118 443
TISCO 350 300
HDFC 165 250
BOI 150 191
BOB 50 220
L&T 80 170
UNION BANK 100 130
TATA CHEM 65 90
TCS 20 116
CBI 0 221
ICICI 125 250
M&M 83 116
TATA MOTOR 190 75
IND HOTEL 2 44
DENA BANK 10 50
MRPL 20 100
TATA POWER 0 43
TECH MAHINDRA 5.5 0
INDUSIND BANK 12 19
GUJ AMBUJA 100 175
CASTROL 24 46
ULTRATECH 110 155
BPCL 275 240

Tatat Steel, Tata Motors and BPCL are the only ones reporting a fall in Advance Tax for the last quarter. Since Tech Mahindra is a EoU, we can exclude the same.

Published by DalalStreet Business @ 12:32 PM


JSW Steel inaugurates cold rolling mill complex

Monday, March 17, 2008

The cold rolling mill complex of JSW Steel, Vijayanagar works was inaugurated minutes ago by J J Irani, director Tata Sons and former managing director, Tata Steel. The 1 million tonne CRM complex will cater to the booming automobile and auto component industry and act as a catalyst for attracting further investments in this sector in southern India.

Built in a record time of 22 months, the CRM facility is a forward integration of the existing facilities where hot rolled coils are cold rolled to produce high end cold rolled sheets which cater to the upper segment of the steel market.

Published by DalalStreet Business @ 3:55 PM


Sun FM Rocks in Allahabad + Jabalpur

Sun TV Network has informed us that the company has launched its FM radio stations at Allahabad and Jabalpur under the brand 'S FM' from 18 March 2008 and 19 March 2008 respectively through its subsidiary South Asia. These stations can be heard at 93.5 MHz frequency in Allahabad and Jabalpur and will cater to the audience of all age groups.

With the launch of these FM stations, the total operational FM stations of Sun TV goes up to 27 as it already operates at Chennai, Coimbatore, Tirunelveli, Visakhapatnam, Bangalore, Hyderabad, Jaipur, Bhubaneswar, Tirupati, Madurai, Tuticorin, Lucknow, Bhopal, Pondicherry, Kozhilkode, Indore, Vijayawada, Varanasi, Tiruchy, Rajahmundry, Kanpur, Thiruvananthapuram, Thrissur, Mangalore and Kannur.

Published by DalalStreet Business @ 1:57 PM


Sun Pharmaceutical receives USFDA approval

Sun Pharmaceutical Industries has informed us that USFDA has granted approval for ANDA to market a generic version of medimmune's ethyol, amifostine for injection 500mg.

This generic amifostine for injection is therapeutically equivalent to medimmune's ethyol amifostine for injection 500mg. Ethyol has annual sales of approximately US$ 80 million in the US.

Sun Pharma, being the first-to-file an ANDA for generic ethyol with a para IV certification, has a 180-day marketing exclusivity.

Amifostine is used as an adjuvant in cancer treatment. Sun Pharma's amifostine for Injection will be indicated for the reduction of kidney damage in patients who have advanced ovarian cancer and are being given repeat doses of cisplatin.

Published by DalalStreet Business @ 11:48 AM


Merrill Lynch sells Reliance Energy + Jai Corp

Sunday, March 16, 2008

Caught in the sub-prime web, FIIs are unwinding their positions in Shangri-La companies like Reliance Energy, Jai Corp etc. Here is what they have sold.

Merrill Lynch Cap-Espana
Reliance Energy 3.40 mn shares
Jai Corp 2.65 mn shares

Citigroup Global-Mauritius sold
Ruchi Soya 2.50 mn shares
Jet Airways 0.50 mn shares

Goldman Sachs sold
Indian Overseas Bk 18.96 mn shares
Punjab National Bk 15.26 mn shares

BSMA has sold
Sonata Software 2.10 mn shares
Dabur Pharma 1.31 mn shares

Details here.

Published by DalalStreet Business @ 3:47 AM


Sub-Prime Hall of Shame

Saturday, March 15, 2008

Here is the Sub-prime hall of shame. Bank followed by write-offs till date.
More expected at the end of March quarter, 2008.

Published by DalalStreet Business @ 1:35 PM


Life Insurers Market Share

Friday, March 14, 2008

We had an exclusive market research on the market share of private life insurance companies in India. Data indicated in the research is as of Feb-2008. The top 5 private life insurance companies in India are,
Market share of other insurance companies is as shown above in the pie-chart.

Published by DalalStreet Business @ 4:11 PM


Industrial output skids to 5.3%

Wednesday, March 12, 2008

Industrial output growth fell to 5.3% y-o-y in January from 7.7% in December, below expectations, because of a sharp slowdown in the manufacturing sector.

Capital goods output, a lead indicator of investment activity, slowed to 2.1% y-o-y in January from 16.6% in December. A single month does not make a trend, but this is worrying nevertheless since investment has been the main driver of India's strong economic growth in recent years.

Consumer durables continued to underperform, with the growth rate falling to -3.1% y-o-y in January from 1.2% in December.

Mining and electricity sector output growth remained sluggish at 1.8% y-o-y and 3.3%, respectively, in January, likely reflecting capacity constraints.

Wood products, one of the best-performing sectors, saw output growth plunge to -4.6% y-o-y in January from 31.3% in December

Published by DalalStreet Business @ 5:45 PM


Gayatri Projects secures 242 crore order

Tuesday, March 11, 2008

Gayatri Projects has secured new order valued Rs 242.55 crore. The entire work has to be executed with in a period of 2 years form the executive engineer, Narmada Development Canal Division, Khargone, Madhya Pradesh.

The company, as ISO 9001-2000 certified company, is among India's fastest growing construction companies known for its in-securing model driven by professional teams and unique equipment bank.

Published by DalalStreet Business @ 12:31 PM


Gitanjali Gems acquires Trinity Watch Company

Monday, March 10, 2008

Gitanjali Gems has informed us that in continuance of company's policy towards strategic acquisition, company has acquired Trinity Watch Company through its wholly owned subsidiary Gitanjali Lifestyle.

Further the company has informed that, the Trinity Watch Company is engaged in the business of sale of watches under its registered premium brand 'Iris'. The company also distributes various international watch brands under license from various principals.

The demand for premium watches is on the rise as we saw launch of Hamilton and Leon Hatot watches in India in October 2007.

Published by DalalStreet Business @ 12:57 PM


Hedging Loss Haunts L&T

L&T could incur loss of Rs 150 crore to Rs 200 crore from commodity hedging in the year ending March 2008 (FY 2008). The company expects overall margin expansion to offset the losses from commodity hedging.

Brokerage Motilal Oswal Securities had, in a client note, said Larsen & Toubro (L&T) International FZE, a wholly owned subsidiary of Larsen & Toubro, was expected to incur marked-to-market losses on commodity hedging transactions during FY 2008.

Motilal Oswal, which maintained its neutral rating on L&T stock, said it had downgraded its earnings forecast for L&T FZE and expected it to now report a net loss of Rs 92.4 crore in FY 2008, compared to a profit of Rs 85.10 crore a year earlier. It said it had also revised downward its consolidated net profit estimates for L&T to Rs 2400 crore in FY 2008 from a previous estimate of Rs 2590 crore.

Published by DalalStreet Business @ 12:44 PM


Sabah Sarawak Project to Punj Lloyd

Friday, March 07, 2008

Punj Lloyd just a while ago informed us that a consortium led by Punj Lloyd has been awarded the Sabah Sarawak gas pipeline project for an approximate value of US$ 500 million by Petronas Carigali Sdn Bhd, a subsidiary of Petronas, the State Oil and Gas Major in Malaysia.

The scope of the work involves engineering, procurement, construction and commissioning of a 512 km, 36" diameter onshore natural gas pipeline from the proposed Sabah Oil and Gas Teminal in Kimanis, Sabah to Petronas Liquefied Natural Gas complex in Bintulu, Sarawak State and associated facilities.

Published by DalalStreet Business @ 3:28 PM


Ambani's Reliance Energy Hammered on the Bourse

Reliance Energy [down 10.5%] virtually a shell [empty] company after promoter Mr. Anil Ambani looted the projects to his private venture Reliance Power Ltd. We raised our voice against Reliance Energy transferring business and assets to Reliance Power where Mr. Anil Ambani gained a back door entry at Rs 17 / share in Reliance Power Ltd and you public bought it at Rs 430.

Anil Ambani more of a speculator and a Trader [currently] without any project execution track record announced yet another speculative move - Buy Back of Reliance Energy shares. Reliance Energy is starving for CASH for CAPEX and why is Ambani going for a Buy Back ? Reasons is obvious - Boost the stock price. [God Damm Ambani must know that no where in the world Utlility companies trade at a forward P/E more than 15 while his REL is traded close to 30 and RPL more than 200 on FY2010 earnings estimate]

Published by DalalStreet Business @ 2:22 PM


30% of BSE stocks hit lower circuit

The BSE Sensex is down 645 points to 15,896.63 at 2:05 IST. Weak global cues are pulling the market down very badly.

Out of 758 stocks that were locked in lower circuit filter, 93.13% or 706 are from BSE 'B' and BSE 'S' group.

Lower circuit is the day's minimum possible level to which stock can fall with no buyers available at that point.

Published by DalalStreet Business @ 2:19 PM


ICICI Bank Concealed Sub-Prime Facts ?

Wednesday, March 05, 2008

The US sub-prime crisis has hit ICICI Bank. The bank did provide US$75m in 4QFY08 for marked-to-market (MTM) losses on its CDO exposure and the UK subsidiary's investment portfolio. However, the bank concealed further losses it is facing until Minister of State for Finance Pawan Kumar Bansal said in the parliament that ICICI Bank's cumulative MTM losses on its international business are $264m (Rs10.5b), as at Jan end.

CLSA has cut earnings estimate of ICICI by 5-7% for FY08. The bank is still not very clear on its stand about USD 2.2 bn exposure to CDO/CDS. Further MTM losses can be expected.

Published by DalalStreet Business @ 12:35 PM


SEBI Cracksdown on Insider Trading

The Securities and Exchange Board of India, the highest regulating authority of the Indian capital market under its new Chairman, C.B.Bhave has started a crackdown operation Insider Trading to expose dirty CEOs and Chairmans in corporate India.

The first Axe has fallen on MCX's Jignesh Shah reports LiveMint. Jignesh Shah appears to be under investigation by the market regulator for alleged violation of insider trading regulations, according to a draft offer document filed by MCX with the stock market regulator.

Jignesh Shah owns 45% in Financial Technologies, which was the darling of speculators on exchanges. SEBI is investigating the case since Nov-07 but under C.B.Bhave, it is very unlikely that Jignesh Shah will go unpunished. Incidentally, their are rumors that Jignesh Shah is backed by Mukesh Ambani who also held close to 1% stake in the company in 2004.

Published by DalalStreet Business @ 10:52 AM


BSE Realty Index Worst Hit

Tuesday, March 04, 2008

With the slowdown in Real Estate sector a reality, BSE Realty Index is the worst hit in the recent stock market meltdown. Today speculative stocks without any significant Landbank nor projects such as Akruti, IndiaBulls Real Estate, Peninsula, IVR Prime, etc have taken a severe beating.

Leading Realty companies are also down. DLF and Unitech are down by 3.5% while HDIL is down by 7%. Some companies like Omaxe, Ansal Infra / API, IVR Prime have already fallen by 50% since Jan-08.

Published by DalalStreet Business @ 3:03 PM


GDP for 3QFY08 Declines

Monday, March 03, 2008

GDP grew by 8.4%, a decline from 8.9% in the previous quarter (2QFY08) and 9.2% same quarter last year (3QFY07). Non-agricultural GDP growth decelerated to 9.8% from 9.9% last quarter and six consecutive quarters of double digit growth before that. As compared to 2QFY08, growth deceleration is most marked for mining, electricity and construction.

Coinciding with the growth deceleration, there has been significant spurt in WPI inflation which has increased by ~200 bps since October 2007. This would make it difficult for RBI to go for an early cut in policy rate.

Published by DalalStreet Business @ 9:37 AM


Reliance Communcations BIG TV DTH Rollout

Sunday, March 02, 2008

RCom will be rolling out nationwide direct to home (DTH) TV services before 1QFY09. India's TV-broadcasting industry is in an exciting growth phase. Advertising expenditure, driven by growing consumerism and spending power, is estimated to result in a 15%+ Cagr in FY08-11CL, while the subscription revenues face structural changes with expansion of DTH services and upgradation of cable services on the back of conditional access system (CAS).

Three DTH players Tata Sky, Dish TV and SUN have already launched DTH services with an aggregate of 4.2m subscribers, while RCom and Bharti are expected to start within the next six months. We believe in the event that CAS is rolled over even in phases, in the remaining metro areas and 55 cities across India it would be a tremendous boost to the prospects of the DTH industry proving an upside to our forecasts.

Published by DalalStreet Business @ 8:52 PM


Budget 2009 - First Look

Saturday, March 01, 2008

Short Term Capital Gains:The increase in Short Term Capital Gains tax (STCG) and the indirect increase in Securities Transaction Tax (STT) will disappoint the markets, in our view. On the positive side, the Finance Minister has succeeded in more than meeting his fiscal deficit targets and has forecast a fiscal deficit of only 2.5% of GDP for next year.

Waiver of farm loans - Indian Sub-prime:
The Finance Minister has announced a waiver and a one-time settlement of agricultural loans that will lead to a write-off of loans upto Rs600 bn. While details are still not clear, the Government has said that they will compensate the banks fully for these write-offs.

Autos - gain with excise duty cuts and personal Income tax cuts Autos will gain in the budget with a decrease in excise duty by 4% on small cars, 2-wheelers, buses and CVs. Also, helping autos would be lowering of personal taxes and the impact of the likely announcement of the Pay Commission impact.

Holding companies gain - Double Dividend Taxation set-off
Holding companies can now claim set-off of dividend taxes paid on dividend received by their subsidiaries. This should help companies like Jaiprakash which have presently many SPVs (and in future helps companies like Gammon, L&T etc) as well as finance companies like ICICI, HDFC.

Published by DalalStreet Business @ 1:10 AM


Nothing major for IT sector in India budget

Our Analysts have worked really hard to Digest the outcome of Budget and we are summarizing in a series of posts. To begin with, no major developments for the Indian IT sector out of the proposed India budget. Specifically, the most material element that had been debated was the possibility of an extension on the Software Technology Park (STP) tax holiday, which is set to expire in fiscal 2010. From a longer-tem perspective, we view the increased allocations on education spending and proposed college campus build-outs as a positive for the industry as it helps support the continued growth of India's labor capacity.

With India's fiscal 2009 budget behind us, we do not expect much in the way of near-term catalysts. At this point we are left exposed to broader macro trends and sentiment, and await the FY2009 guidance period in April from all the Major IT companies.

Published by DalalStreet Business @ 12:46 AM