IIP Data for October

India's industrial output grew by a robust 10.3% in October against a paltry 0.1% a year ago, powered by manufacturing, particularly consumer durables, which was driven by the stimulus packages.

The strong industrial production data came days after better-than-expected economic growth of 7.9% in the 2nd quarter of this fiscal, reflecting that the economy would sustain the recovery provided agriculture does not slide too much. For the first seven months of this fiscal, industry expanded by 7.1% against 4.3% a year ago.

Manufacturing, which has almost 80% weight in the Index of Industrial Production, grew by 11.1% against -0.6% a year ago, when the industry faced the full impact of the world financial and economic crisis after the collapse of US financial services icon Lehman Brothers.

Within manufacturing, consumer durables production expanded by 21% in October against -1.6 per cent a year ago.

Mining production grew by 8.2% in the month against 3.2% and electricity generation expanded by 4.7% compared to 4.4%.

Industrial growth for September was revised to 9.6% from provisional estimate of 9.1%.

Reliance Infrastructure bags Rs.1,000-crore road project

Anil Dhirubhai Ambani Group flagship company Reliance Infrastructure Ltd (R-Infra) has won a Rs.1,000-crore (Rs.10-billion) road project from the Gujarat government, within a week after winning the Rs.1,725-crore (Rs.17.25 billion) Pune-Satara Road project from the National Highway Authority of India.

R-Infra quoted Rs.42-crore (Rs.420-million) premium over the bids of rival companies such as GVK Power and Infrastructure Limited, GMR Infrastructure, B Sennaih and C&C, JMC Srei and Sadhbhav,

The project is to execute a 71 KM four-six lane corridor connecting the ports of Mundra and Kandla in Gujarat. The project has to be completed by December 2012 on a design, build, finance, operate and transfer (toll) basis with a concession period of 25 years.

R-Infra is now executing nine road projects with a total outlay of Rs 7,500 crore (Rs 75 billion) totaling more than 700 kilometers. Two months ago, the company had operationalised its two toll road projects worth Rs.760 Cr (Rs.7.6 billion) in Tamil Nadu.

The rest of the road projects are at various stages of development. All road projects of the company are executed by Reliance Infraventures, a 100 per cent subsidiary of R-Infra. The company plans to increase its investments in road projects to over Rs 20,000 crore (Rs 200 billion) by 2012. R-Infra is also looking for opportunities in ultra mega road projects across India,

Oil Bonds to be issued

Petroleum ministry has sought oil bonds worth Rs.20,872 crore (Rs 208.72 billion) to compensate state-owned fuel retailers for the losses incurred on selling domestic LPG and kerosene below cost this fiscal.

Minister of state for petroleum and natural gas Jitin Prasada in a written reply to a question in the Lok Sabha said the finance ministry is yet to approve the oil bonds. Indian Oil, Bharat Petroleum and Hindustan Petroleum lost Rs 11,853 crore (Rs 118.53 billion) in revenues on not being allowed to raise LPG and kerosene prices in line with the cost during April- September.

An additional Rs 9,019 crore (Rs 90.19 billion) revenue loss is estimated for third quarter ending December 31, 2009.

The government, which had last fiscal issued oil bonds worth Rs 71,292 crore (Rs 712.92 billion), has not issued any bonds to the three PSUs for revenue losses during the current fiscal.

BUY - Mahindra Satyam

It’s very good news for Mahindra Satyam. The stock, which closed at Rs 103 on Wednesday, up 1%, has gained almost 12% in a week. Analysts say that the settlement for $70 million will eliminate the uncertainty surrounding its liabilities. Also it will save it from disgrace & might get be able to retain the client.

 

Upaid had filed the lawsuit in a Texas court seeking damages exceeding $1 billion, alleging forgery of documents necessary for transfer of proper title to its under an assignment agreement entered into in 1998.

 

Mahindra Satyam has agreed to pay $70 million to UK-based mobile payment services firm Upaid in an out-of-court settlement, ending uncertainty over one of its long-drawn legal liabilities.
In return, Upaid will drop all charges against Mahindra Satyam and also provide a royalty-free license on its patents on a worldwide and perpetual basis. The amount is a tenth of what Upaid was seeking in damages from the erstwhile Satyam.

BUY Mahindra Satyam with the target of Rs.150 in near term.

Sahyadri Industries - Potential Multibagger

Equity Share Capital – 9.56 Cr

No. of equity shares – 95,61,500

Promoter holding – 85.10%

Institutions – 3.89%

General Public – 11.01%

Market Cap – Rs.90 Cr

Book Value – Rs.61

Reserves – Rs.48 Cr

EPS – Rs.20.70

52 week high/low – Rs.105 / Rs.21.05

CMP – Rs.94

Sahyadri Industries Limited is 60+ years old company based out of Pune, engages in the production of cement roofing products in India. The company primarily offers fiber cement sheets, which are used for roofing of industrial sheds, warehouses, and residential houses. Its products also include corrugated cement sheets and roofing accessories, main doors, and spectra tiles. The company offers its products under the ‘Swastik’ brand name.

Sahyadri Industries, (SIL) has further planned to invest in additional 6 wind mill, 2 in the state of TamilNadu and 4 in Rajasthan. The wind power generation in TN will be consumed by SIL’s sheet manufacturing plant at Perundurai and power generation in Rajasthan will be sold to State Utility. In the process of wind power generation, SIL also generates carbon emission reduction which may be negotiated for price in international market under Clean Development Mechanism, subject to completing formalities and obtaining certificate of carbon emission reduction as per Kyoto Protocol.

SIL has posted very good numbers for H1FY10. Its total income was Rs.153 Cr (Rs.139 Cr) & Net profit of Rs.17.5 Cr (Rs.12.11 Cr). Thus it posted an EPS of Rs.18.30 Vs Rs.20.69 for the full year FY09. Hence SIL is most likely to post an EPS of Rs.33 in FY10, which would further go up to Rs.38 in FY11. So, at CMP of Rs.94, the share is trading at a P/E of 2.8x on FY10E and 2.4x on FY11E. Apart from this, its Net profit margin has improved to 11% as compared to that of 9% last year for the first half of financial year.

SIL has been forming higher highs and higher lows. The resistance on the upside is at Rs.105. A breach of this level should take the stock price to Rs.130. One should BUY this stock with a target of Rs.125 which is around its life time high. For longer term it may offer wonderful returns. However, its slow & steady kind of a stock & will require lots of patience to hold it.

Last 4 years’ performance:

Mar '06; Mar '07; Mar '08; Mar '09

(Rs. In Cr)

Total Income - 113.49; 160.75; 228.90; 253.38

Operating Profit - 25.35; 22.66; 30.47; 40.92

PBDT - 21.96; 15.02; 20.31; 33.75

PBT - 17.22; 6.72; 9.90; 25.77

Net Profit - 10.44; 3.84; 6.71; 19.79

Reserves - 22.98; 25.69; 33.09; 48.77

EPS (Rs) - 10.91; 4.01; 7.02; 20.70

Dividend/Share (Rs) - 2.00; 1.00; 1.00; 2.00

Operating Profit/ Share (Rs) - 27.75; 24.97; 32.31; 43.03

Book Value (Rs) - 34.03; 36.87; 42.65; 61.00

Godrej Properties' IPO fully subscribed

I have already written about Godrej Properties IPO. Just summarizing it here –(Please refer old postings for more details)

It is in the business of real estate development in India. It currently has real estate development projects in 10 cities in India, which are at various stages of development.

The proceeds of the issue will be used for acquisition of land development rights for forthcoming projects; construction of forthcoming project and repayment of loans. In an IPO press conference, the company said would use 30% of IPO funds to repay debt.

The company has land reserves of 391.04 acres, developable area of 82.74 million sqft and saleable area of 50.21 million sqft (including 27 million sqft in Ahmedabad).

The equity shares are proposed to be listed on the BSE and NSE. For the year ended March 31, 2009, the company reported profit after tax of Rs 74.74 crore on total income of Rs 188.13 crore. As on June 30, 2009, it has debt of Rs 745.78 crore on its books.

Investment Advisor S. P. Tulsian is not impressed with IPO pricing. His view is that Market-cap of GPL will be around Rs.3700 Cr but lots of mid-size companies with M-cap of Rs.1000-22000 Cr are available, in this space he likes Peninsula Land, Brigade Enterprise, Mahindra Lifespace, Marathon Nextgen realty. Further, GPL has posted Profit after tax of Rs.48 Cr on topline of Rs.125 Cr, even that has come from the sale of long term investments of about 58 Cr & so they haven’t got much from their core business.

Amit Dalal says that the investment in GPL will fetch good returns over a period of 2-3 years. He like the business model of GPL, but says that it is aggressively priced.

So overall, the IPO is looks a bit expensive as it is available at a P/E of around 37-39 whereas industry P/E is around 30. I would say that the investment for 2-3 years should be done. Also Godrej Ind holds around 80% stake in GPL, investment in it also may give you good returns. Last but not least, Godrej group is one of the oldest business groups of India and they have very good track record also.

Godrej Properties - Issue opens on 9th Dec

Mumbai based Godrej Properties Ltd. has fixed the price band for its initial public offering (IPO) of 94,29,750 equity shares of Rs 10 each, at Rs.490-530 per share. The issue will open for subscription on December 9 and will close on December 11, 2009.

GPL will raise around Rs.462 Cr – Rs.500 Cr through this issue, of which 30% would be used to repay debt i.e. around Rs.140-160 Cr. The issue will constitute 13.5% of the post issue paid-up capital of the company. Parent company, Godrej Industries currently holds 80.26% of equity share capital in the company.

It is in the business of real estate development in India. It currently has real estate development projects in 10 cities in India, which are at various stages of development. The proceeds of the issue will be used for acquisition of land development rights for forthcoming projects; construction of forthcoming project and repayment of loans.

The equity shares are proposed to be listed on the BSE and NSE. For the year ended March 31, 2009, the company reported profit after tax of Rs.74.74 Cr on total income of Rs.188.13 Cr. As on June 30, 2009, it has debt of Rs.745.78 Cr on its books. Later the debt would come down to around Rs.600 Cr.

Global Coordinators and book running lead managers to the issue are ICICI Securities Limited, Kotak Mahindra Capital Company Limited, IDFC – SSKI Limited and Nomura Financial Advisory & Securities (India) Private Limited. Karvy Computershare Private Limited is the registrar.

The IPO of GPL will re-rate Godrej Industries & we might see some positive movements happening in stock price of Godrej Ind.

Nearterm Outlook

After witnessing about 7% correction in the month of October 2009, the bulls attempted a comeback in the month of November 2009 with the markets re-gaining the 17,000 peak, only to witness profit-booking, once again, at these higher levels.

Nonetheless, it was the bull camp that had the upper hand as the Sensex managed to close the month with about 3% gains, which were cut sharply on the last couple of days as the Dubai debt crisis sent equities the world over on a downward spiral. While positive global cues supported the Indian stock markets for most part of the month aided by the Federal Reserve’s promise to keep interest rates low for an extended period of time; accelerated action on the divestment front in the country and better-than-expected IIP numbers helped investor sentiments.

The weakness in the Dollar Index has also been helping the flows away from dollar-denominated assets and into emerging markets. For the month of November, FII inflows were at about Rs5,000Cr even as domestic MFs continued to remain net sellers for the third consecutive month to the tune of Rs.500Cr.

Going forward, while near-term consolidation in the market cannot be ruled out considering that December is generally a lackluster month on account of the festive season the world over (Christmas and New Year), the medium-to-long-term arguments for investing in Indian equities continue to remain strong.

The government draws up 25 state firms for stake sales

The government has drawn up 25 state firms for stake sales, the Financial Express newspaper reported on Wednesday.

These include Nuclear Power Corporation of India, National Bank for Agriculture and Rural Development (NABARD), Exim Bank of India, Punjab & Sind Bank, Indian Railways Finance Corporation and National Housing Bank, the paper said, quoting unnamed sources.

Other companies planning initial public offers include SBI Caps and SBI Fund Management, both subsidiaries of government-controlled SBI, it said.
Many of these IPOs could hit the market after the follow-on public offers of 5% each in NTPC and Rural Electrification Corporation, and a 10% stake sale in unlisted Satluj Jal Vidyut Nigam Ltd are completed in the current financial year, the paper said.

UTI Asset Management Co, Cotton Corporation of India, NTPC Electric Supply Co Ltd and HMT (International) Ltd, it said. On Tuesday, Finance Minister Pranab Mukherjee told parliament the government would sell up to 10% of its stake in the profit making state-run firms.

Institutions' Activities in November

FIIs’ activity in November:
On November 30, 2009, foreign institutional investors (FIIs) were net buyers to the tune of Rs.707.70 Cr in equities. They made gross purchase of Rs.2,983.90 Cr and gross sales of Rs.2,276.20 Cr.

In the month of November, FIIs were net buyers of Rs.5,317.80 Cr.

Between January 01, 2009 and October 31, 2009, FIIs remained net sellers to the tune of Rs.69,682.60 Cr.

MF’s activity in November:
Mutual funds (MFs) were net buyers to the tune of Rs.374.90 Cr in equities. They made gross purchase of Rs.917.00 Cr and gross sales of Rs.542.10 Cr.

In the month of November, MFs were net sellers of Rs.695.30 Cr.

Between January 01, 2009 and October 31, 2009, FIIs remained net sellers to the tune of Rs.2,846.90 Cr.

Disinvestment in three power PSUs

Disinvestment in three power PSUs -- NTPC, Rural Electrification Corporation and Satluj Jal Vidyut Nigam -- would be completed during the current financial year (FY10) while the process of selling stake in other profit-making PSUs is already underway. Finance Minister Pranab Mukherjee said in a statement in Rajya Sabha.

While in NTPC and REC, 5% stake each was being off-loaded, it’s 10% in SJVN through the capital market, he said.

This apart, the Department of Disinvestment has started dialogue with the administrative ministries and the central public sector undertakings (CPSUs) to assess their capital expenditure requirements to be raised through issue of fresh equity in case of other public sector undertakings.

Mukherjee said all CPSUs having positive net worth, no accumulated losses and having earned net profit for three preceding consecutive years, are to be listed through public offerings out of government shareholding or issue of fresh equity by the company or a combination of both. Also PSUs will comply with the new law of making atleast 10% floating equity, he added.

He said the proceeds from disinvestment would be channelised into National Investment Fund till March 2012 in select social sector programmes decided by the Planning Commission and Finance Ministry, he added.

SAIL FPO on the card

As part of its aggressive divestment agenda, the government is planning to raise about Rs.16,000 Cr via a follow-on public offer (FPO) in state-owned steel major SAIL. The FPO is expected to take place in the fourth quarter of the fiscal year.

The government will divest 10% in SAIL — from the current holding of 68% — and at the same time also issue fresh equity of up to 10%, sale proceeds of which would be used by SAIL for capital expenditure and acquisitions. The FPO is expected to get Cabinet approval by December 2009.

Among other FPOs, last month, the Ministry of Power approved Rural Electrification Corporation's FPO, which will divest 20% including 15% fresh equity and 5% government stake dilution.

SAIL may show good momentum in near term. So one can pick it up for the near term & also look out for trading opportunities.

Bourses Continued their upmove

The Nifty rallied further and was trading above the 5,100 mark as global cues were positive. Banking, metal, pharma, realty, telecom, power, cement and auto stocks along with Reliance Industries were witnessing buying interest.

Heavyweights like Reliance Industries, SAIL, SBI, Sterlite Industries, ICICI Bank and Bharti gained 1.7-4%.

The Sensex was trading at 17,192, up 266 points and the Nifty was at 5,119, up 88 points.
Among the broader indices, the BSE Mid-cap Index was up 1.6% and the Small-cap Index was up 2.15%. About 2,057 shares advanced while 827 shares declined on the BSE. Nearly 549 shares were unchanged.

In the large-caps, Unitech shot up 10.40%. Sun Pharma, Tata Motors, DLF, M&M and Reliance Infrastructure gained 4-6%. However, select stocks like HUL, BHEL, ITC, TCS and GAIL were the losers.

In the mid-cap space, REI Six Ten, Jet Airways, Havells India, Kingfisher Airlines and National Fertiliser were up 6-13.5% while AIA Engineering, Jain Irrigation, Allcargo Global, Simplex Infra and Shriram City lost 1.6-4.5%.

In the small-cap space, Zydus Wellness locked at 20% upper circuit. OCL Iron and Kiri Dyes Chemical rallied over 19%. KPR Mill was up 18% and Noida Toll was up 12.54%. However, Jindal Worldwide, Nirlon, PVP Ventures, MSP Steel and Rollatainers declined 3-5%.