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Colgate-Palmolive (India) - Consumer Products. Competitive position can potentially deteriorate. Colgate’s cost competitiveness is likely under threat starting FY2011E as the company will see a reversal of trends in the past four years (FY2005-09) in lower excise rates—down 650 bps to 3.6% and lower income tax rates. 50% of Colgate’s output is in excise-exempt zones, this is 80% for HUL, providing HUL an option to channelize the benefits to gain market share. Headwinds facing Colgate are (1) renewed aggression from HUL, (2) limited pricing power and (4) higher tax rates. Favorable factors are (1) strong momentum in market share gains, (2) penetration-led growth in Cibaca and (3) opportunity to moderately cut adspends in the near term. Investors can reduce the stock on rallies due to : (1) premium valuations for sub-par earnings growth in FY2011E, (2) HUL is now a threat as it has become more aggressive compared to its previous position of being satisfied with improving sales , (3) lim

Result Update: Infotech Enterprises • Infotech’s results for 2QFY10 were inline with expectations on the revenue line and operational front. Revenues grew 2.1% QoQ; EBITDA de-grew marginally QoQ as margins expectedly moderated 80bps QoQ. Business volumes were flattish QoQ; cross currency benefits impacted revenues positively by 2.1%, and contributed to all of the growth seen in the quarter. • Reported PAT at Rs.353.3mn was above the estimated Rs.325mn, only on account of higher other income. Net other income for the Q (Rs.44.6mn) included Rs.72.5mn towards reversal of provision for MTM losses on forward contracts and Rs.84mn towards loss on forward contracts. • Modify earnings to factor in Q2FY10 numbers; expect an FY10E EPS of Rs.26.1 (Rs.24 earlier). In FY11E, we expect revenues to grow 13% YoY; margins are likely to taper from FY10E levels given our assumptions on the INR, likely peak utilizations, wage inflation and increasing S&M investments, given an improving demand environm

Simplex Infra -stock update. Strong growth in FY09: Simplex Infra witnessed a strong 68.6% YoY rise in its revenues to Rs47.4bn in FY09. Operating expenses increased by 69.1% YoY to Rs43bn driven mainly by consumption of materials (45.4% of net sales) & employee cost (31.6% of net sales). While operating profits surged 64.2% YoY led by the buoyant topline growth, OPM declined marginally by ~25bps to 9.3%. Net profits for the year were at Rs1.2bn (+37% YoY) translating into an EPS of Rs24.9. Strong Order book at ~Rs101bn: Fresh order inflows for the quarter stood at Rs1.1bn, taking the full year inflows to Rs56.6bn (+15.5% YoY). Around 30% of the backlog consists of overseas projects; 36% accrue from the Government sector & 34% from various private sector parties. ~95% of the present backlog remains completely hedged against commodity price fluctuations, barring piling jobs. Valuations. At the CMP of Rs392, SIL trades at a P/E of 12x & EV/EBIDTA of 6.2x its FY10E earnings.

EKC Everest Canto Cylinders -Q4 results . EKC has come out with good set of Q4 results.The demand for CNG cylinders in India is picking up due to increasing focus on reducing the environmental pollution and also due to the fact that even after reduction in global oil prices, CNG is still ~55% cheaper then petrol. The Supreme Court has also mandated the public transport system of the 28 cities to be converted to CNG to reduce emissions over next few years. Also with the recent gas finds of Reliance and GSPC we expect good amount of gas to be available for the automobiles. Revenues of Q4FY09 were impacted due to lower domestic sales on account of slowdown in off take of CNG cylinders by OEMs. However the drop in CNG sales in India was partly compensated by robust growth in sale of industrial cylinders. In Q4FY09 the company recorded lower EBIDTA margin on account of higher sale of industrial cylinders which typically have lower operating margins then CNG cylinders. in India, Dubai

NIIT Ltd - Results Update. NIIT Revenues rise by about 10% YoY . Revenues rose by 10% YoY and came in marginally below street stimates. The individual learning business (ILS) and corporate learning business (CLS) led the overall growth with 15% and 11% gains, respectively. However, on a QoQ basis, CLS revenues remained almost flat, despite the rupee depreciation. Schools business also grew by 17% YoY. New businesses like IFB, Imperia, Uniqua, etc disappointed. Future prospects The individual learning business is expected to witness a slowdown in growth rates in FY10 to about 16%. New initiatives are expected to gather steam over the quarters with higher acceptance of the courses. However, incremental growth is expected to be muted. Corporate learning businessis expected to grow at 8%. This may prove to be optimistic in the back drop of further deterioration in the US economy and scale up issues faced by the company. Margins to improve (YoY basis) on the back of better capacity utiliz

IVRCL Infrastructure - Result highlights. Revenues of IVRCL Infrastructure for Q4FY09 and full year FY09 grew by 23% and 33% respectively as compared to same period last year. Operating margins for the current quarter and full year stood at 8.7% and 8.6%, lower than street estimates. Net profit growth for Q4FY09 and full year FY09 stood at 9% and 7%. Performance of subsidiaries. IVRCL's progress on its BOT projects is impacted by delays with two road BOT projects witnessing a delay of almost 6 months as against estimated completion by March, 2009. Kumarapalyam tollways is likely to get operational from June, 2009 while Jalandhar Amritsar Tollway is expected to get completed by Sep, 2009, Salem tollways by October, 2009 and Chennai Water Desalination project is expected to take another 2-3 months. Valuation. At current price of Rs 332, stock is trading at 16.5x and 14.8x its P/E multiples on FY10 and FY11 estimates respectively. IVRCL Infrastructures is set to benefit from economic

Economy Update: India's GDP grew 5.8% during Q4FY09. The GDP growth estimated by the CSO at 5.8% during Q4FY09 as against 8.6% in Q4FY08 and 5.8% in Q3FY09 came above street expectations. The 'agriculture, forestry & fishing' segment picked up to 2.7% in Q4FY09 from 0.8% decline in Q3FY09 on back of good winter crops. However, manufacturing sector declined 1.4% in Q4FY09 on expected line as reflected by the falling IIP numbers in recent times. The GDP growth was 6.7% for FY09 despite the world economy facing one of deepest economic crisis on back of 13.1% expansion in community services, 9.0% in transport and communications sectors and 7.8% in financial and other services sector. Our savings as well as Investments as a percentage of GDP are one of the highest in the world, which is likely to insulate us (albeit partly) from deteriorating world economic environment. We expect economic activities to pick up in the H2FY10. The recent indicators like PMI data, cement dispat

Sector Update: Print Media Newsprint prices have seen a meaningful decline, an appreciating INR is an added positive for publishing companies- JPL, HT Media and DCHL. As per most of the publishers, NP prices have corrected by 20-25% and international prices are expected to stabilize around US$650-700/MT, over the medium term. Immediate financial benefits though may be limited given higher cost inventory being carried; expect full impact H2FY10E onwards. Cautious optimism in industry regarding a revival in advertising revenue trends on the back of anticipated policy action leading to a recovery in economic growth and corporate earnings. Macro-environment is nevertheless materially better than 2Q ago. The traditional media (print, TV broadcasting) will be the early beneficiaries of a pick-up.

Power Finance Corporation Power Finance Corporation's advance book recorded a strong growth of 25% for FY09 to Rs. 644bn as compared to Rs. 515bn in FY08. Improved disbursement growth of 30% during FY09 to Rs 210bn, fostered the enhance business growth.During Q4FY09 disbursements growth remained healthy at 7.2% to Rs.69bn as compared to Rs. 65bn in the previous year. Sanctions, on the other hand reported a deceleration in growth trend following the higher base in Q4FY08. PFC's major source of funding has been bulk borrowings, which are available at relatively softer interest rate, and hence helped contain cost of funds, which stood at 8.78% during Q4FY09. For FY09, its NIM improved to 3.84%, which lead to a FY09 NII growth of 22% yoy to Rs. 23bn as compared to Rs 18bn. Further, close to Rs.70-80bn worth of loans would come up for repricing, (due under the 3 year re-set clause) during FY10. These loans were disbursed during FY07 when the interest rates were hovering around the

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Areva T&D Q4 Results Update. Revenues for the quarter has grown 68% yoy in Q1 CY09 driven by robust demand from the power T&D utilities (60% of the orders) as well as the industrial sector. Margins declined 280 bps to 12.9%. Areva's product portfolio is mainly oriented towards the higher end of T&D equipment, thus earnings higher margins. However, during the quarter, EBITDA margins declined 280bps to 12.9%. We believe decline in operating margins is mainly due to higher share of subcontracting expenses in the revenues. Margins can fluctuate in a quarter depending upon the share of projects revenue (lower margins). Areva inaugurated eight manufacturing facilities in April. The actual capex incurred was Rs 9.5 bn higher than Rs 7.0 bn envisaged. This capex has been financed through a mix of internal accruals and debt. Outstanding debt at the end of the year has increased to Rs 4.7 bn as compared to Rs 1.0 bn in CY07. Capacity addition in April 2009 The company has setti

Infotech Enterprises. Infotech's results for 4QFY09 were a mixed bag; while revenue growth (1% QoQ) was modestly below estimate, EBITDA surprised positively with a 230bps gain QoQ. PBT was however below estimates given higher losses in the other income line. PAT (up 28% QoQ) came in at lower than estimate, aided by a deferred tax write back. Within verticals EMI was flattish QoQ; this vertical contributes c66% of company revenues. UTG vertical on the other hand grew by 2% QoQ. Volumes de-grew for the quarter by 0.5%; revenues were helped by the favourable INR (+0.3%) and price variation (+1.2%). Management in its commentary has outlined that the global economic slowdown is having a visible impact on client spends with additions/ ramp ups taking a hit. IEL, thus far had not seen sizeable client issues in its lines of business given its differentiated focus and also given the fact that engineering design (ED) spends have been relatively resilient, especially in the GIS business. Gi

Q4 Results Update: LIC Housing Finance. LIC Housing Finance has reported good results for the Q4 FY09 quarter. Mortgaged loans and disbursements for FY09 grew by 26% yoy and 22% yoy respectively, disbursement for Q4FY09 grew by 21% yoy. NII for Q4FY09 stands higher by 34% yoy, the better than expected growth is attributable to improved margins and enhanced mortgage loan growth. Net profit grew by 33% yoy during Q4FY09 in light of higher processing fee contribution and lower than expected NPL provisions. Higher growth in net profit during FY09 is mainly on the back of improved margins coupled with healthy mortgage loan growth. Improved recoveries and non-fund based income (from short term fund management activity) also supported the net profit growth. The stock has historically traded at around 1x its adjusted book value, following concern over its asset quality. Management's cautious effort to check slippages has resulted into healthy asset quality. The superior return ratios Ro

Result Update: Zee News. Zee News Ltd has reported a decent set of numbers - revenue growth of 26% YoY, aided by 24% advertising revenue growth and 30% subscription revenue growth. Profitability declined 40% YoY, impacted by new launches. Revenue growth and cost containment likely to help in an adverse macro environment- FY10E. The prospects of medium term advertising spend trends is not that optimistic, ZNL is likely better off given positioning of strong franchises in regional markets, which are likely to enjoy higher growth rates. Subscription revenues are also now getting meaningful; sustained accelerated growth in this stream will provide a counter cyclical growth opportunity. Ahead of industry growth rates, healthy financial results and stock outperformance that are in contrast to larger broadcasting peers validate ZNL having been our only preferred pick in the segment, for the last 2Q. At valuations of 16x FY10E EPS and 10x EBITDA,most of ZeeNews' strong prospects (28% re

Tata Consultancy Services TCS - Results Update TCS' Volumes de-grow by 2.7% on an organic basis; average realizations down 2% QoQ. In USD terms, the revenues de-grew by 3.4% QoQ. This was despite a contribution of about 4.49% from the CGSL consolidation. Thus, organically, revenues were lower by more than 7% QoQ. Existing clients holding back projects, new wins along expected lines Volumes degrew as existing clients held back projects. TCS has exposure to several clients, which are facing revenue and profit falls on a yearly basis. These clients have held back most of the discretionary projects and this has increased the uncertainties for the company. Pricing pressures continue The management has indicated that, pricing pressures continued in 4QFY09. While clients have been demanding lower prices at the time of re-negotiation of contracts, the company has also faced several out-of-the-turn pricing negotiations. The budgets of several clients have been cut and they are looking at

Gateway Distriparks GDL - Stock Update. Gateway Distriparks Ltd is one of the leading CFS players in the country with CFS at JNPT, Chennai, Vizag and Kochi. It also has two rail linked ICD at Garhi Hasaru near Delhi and at Ludhiana. GDL has category I rail license to run both EXIM and domestic private container trains and has 13 rakes as on date. It also runs cold chain business through Snowman Frozen Foods. Allcargo Global logistics has Acquired 5.97% equity stake in GDL. Allcargo has acquired 6,095,223 equity shares of GDL constituting 5.97% of the total paid up capital from the open market through M/s. Sealand Terminals Pvt.Ltd., which is the wholly owned subsidiary of Allcargo. It paid Rs.300 mn for this stake. As of now the management of Allcargo has that it is purely a treasury investment and has clearly declined any synergy with GDL. As of December 2008, the promoters of GDL hold 45.6% in GDL. Valuation: At Rs.74, GDL trades at fair valuations of 1.2x book value, 8.6x earnin

Indian Economy Update: February IIP fell by 1.2% YoY. The index of industrial production (IIP) for February 2009 declined 1.2%, as compared to 9.5% growth in February 2008 on back of 1.4% and 1.6% de-growth in manufacturing and mining segments, respectively. During the same month, electricity grew by only 0.7%. The capital goods and consumer durables witnessed growth of 10.4% and 5.7%, espectively during February 2009. However, intermediate goods, basic goods and consumer non-durables declined by 5.4%, 0.4% and 5.5%, respectively. The cumulative growth for April-February 2008-09 stands at 2.8% over the corresponding period of the previous year. At the same time, IIP growth for January 2009 has been revised upward to 0.4% from the previously reported negative growth of 0.5%. The recent fall in inflation would provide greater leeway to Reserve Bank of India for taking softer monetary stance, going forward.

Punj Lloyd - Key highlights. Progress on adjudication proceedings against SABIC. Post termination of the contract by SABIC Petrochemicals , Simon Carves had commenced adjudication proceedings against SABIC. Earlier SABIC Petrochemicals had argued that adjudication doesn't have the jurisdiction to decide the case. But the court has overruled this and final hearing is expected by third week of April, with likely decision expected to be announced within 2-3 days after the final hearing. Since client has also revoked the performance and advance bank guarantee to the tune of Rs 2.14bn, we have written off this amount as an exceptional item in the current fiscal financials on the basis of conservative accounting policy. Certain orders of Punj Lloyd have been facing delays since Q3FY09 due to the credit crunch. Project worth Rs 18bn related to Integrated Condensate Splitter Aromatics Complex at Jurong Island, Singapore has still not achieved financial closure and is likely to be canc

Zee News - well diversified, reasonable financial discipline, news genre to see healthy advertiser interest in an otherwise cautious environment. ZNL has three driver channels - Zee Marathi , Zee Bangla and Zee News - making up close to 70% of its total advertising revenues. This reduces the risk of overdependence on one property and ensures a well diversified revenue stream, unlike other competitors in broadcasting. Subscription revenues- 26% CAGR over FY08-10E. Pay revenues- a counter cyclical growth opportunity, expect domestic subscriptions to grow led by increasing DTH penetration . Going forward over FY08-10E the subscription revenues are expected to grow at a 26% CAGR. The pay revenues will likely be a strong growth driver for ZNL financials along with ad revenue contributions from existing channels. Margins to largely hold over FY08-10E despite new investments and slowing growth. Stable ratings and breakeven of new properties may support. Earnings growth for ZNL, is likely

Allcargo Global Logistics - key points. The global recession has led to slowdown in the global trade . There has been significant slowdown in major export markets like US and Europe. Due to this the import and export activity in India has been significantly impacted. India's total exports have registered de-growth. India's exports have registered negative growth rate for four consecutive months. This has led to lower number of container handling at the Container Freight Station (CFS) facilities. However due to liquidity crunch the importers are keeping the containers for longer durations with the CFS thereby increasing the ground rent income for the CFS players like Allcargo. This is compensating for the fall in volumes handled at the CFS. JV with Hind terminals to ease the pressure on capex - however major benefits unlikely before H2CY10E.Allcargo is looking to set up 4 CFS / ICD facilities over next three years and it has already purchased land at Nagpur, Hyderabad, Bangal

Voltas Limited offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, electromechanical projects, textile machinery, machine tools, mining and construction equipment, materials handling, water management, building management systems, indoor air quality and chemicals. The Company's strengths lie principally in the design and manufacture of industrial equipment, management and execution of air conditioning and public works projects, sourcing. Key Points. Engineering services and consumer durables segments have slowed down but visibility remains strong in the major revenue segment of Central Airconditioning projects. Inventory liquidation in consumer durables in progress likely to reduce capital employed. Order book growth has remained fairly stable on a sequential basis. Order backlog is up 53% yoy to Rs 53 bn providing 27 months of revenue visibility for the projects segment. Debt free and cash on h

Tata Tea - Forays non-carbonated drinks - launches TiON . With tea volumes growing moderately in the domestic and international markets, Tata Tea (a strong player in the branded tea markets, both domestic and international) is seeking opportunities to expand its domestic as well as international beverage portfolio beyond tea and coffee, which could be a future revenue driver for the company. In line with its strategy, Tata Tea has launched TiON , a tea and fruit based cold beverage in three variants— Mango Rush, Peach Punch and Apple Buzz —in a 400 ml pet bottle. The launch is an attempt to capitalise on the emerging health and convenience food and beverages trend in India. The demand for carbonated drinks in India is softening, as more and more consumers (especially the youth) are opting for healthier beverages such as fruit juices and fruit-based drinks. Consequently, non-carbonated beverages are gaining good acceptance and the segment is growing at a healthy rate of 35-40% per ye

NTPC -National Thermal Power Corporation. NTPC likely to commission 250 MW project at Bhilai and complete the COD of unit I of 250 MW before FY09. One unit of 500 MW at Kahalgaon also likely to be commissioned in the fourth quarter. NTPC may commission 750 MW of fresh capacity in the current quarter. This includes 250 MW under JV with SAIL and one unit of 500 MW at Kahalgaon Stage II. The company is also working on commercialization of the first unit of Bhilai Expansion project of 250 MW by the end of this quarter. Strong likelihood of significant slippage in meeting targeted capacity given delay in upcoming projects. Equipment orders for XIth plan projects worth 1760 MW are yet to be placed. Impact of CERC norms likely to be neutral to positive. CERC has raised regulated return on Equity from 14% to 15.5% for the FY09-14 period. We believe new tariff regulations to be neutral to positive for NTPC. Loss of revenues on account of lower tax reimbursement and tightening of operating nor

HCL Technologies - Reader’s Digest’s deal part of Q3 deal win. HCL Technologies (HCL Tech) has announced that it has signed an information technology (IT) outsourcing engagement worth over US$350 million with Reader’s Digest Association spread over seven years. Though HCL Tech won record deals of US$1 billion in Q3FY2009, the company is likely to incur an upfront transaction cost of US$25 million for clients. Hence, there is a risk to the company’s earnings, as the upfront transition cost on some of the new deals may not be supported by increased volume from the clients in the current difficult environment. Further, the rupee has depreciated significantly, close to 5.2%, in the last one month and is expected to remain weak in coming days. The depreciation in the rupee is likely to again expand HCL Tech’s unrecognised foreign exchange (forex) losses. In Q3FY2009, the company’s unrecognised forex losses expanded to US$207 million from US$156 million due to the depreciation in the rupe

PVR Ltd - Stock Update. The outlook on exhibition stocks is cautious which is underpinned by likely delays on property handover front given delays from real estate developers and a weak macro for consumption that is expected to adversely impact property footfalls and occupancies. For PVR new investments towards retail entertainment formats and other allied ventures will likely drag earnings over FY09-10 and come in the backdrop of an adverse macro that will delay business break-evens. The consolidated margins will struggle over the medium term, with limited available levers, as operators counter a rising cost base (new properties), slowing revenues (lower occupancies) and investments towards business lines. Also likely peaked ATP's and SPH's will be another pressure point. Ther is no immediate catalysts as focus will remain on macro for consumption and timely handovers from real estate developers. The DCF based methodology for valuing the stock works out to a price target o

Marico - Company Update: While the prices of sunflower , corn and rice bran oils have declined in the past few months, the matter that is of prime importance to Marico is the hardening of the price of its key raw materials, copra and kardi oil (safflower oil). These two commodities showed a significant decline in February 2009. Copra prices (the key raw material for the flagship brand, Parachute) have declined by 4.9% month on month (down 12.4% compared with the average prices in July 2008) whereas the price of kardi oil has fallen by 16.3%. The company’s Saffola volumes suffered in Q3FY2009 and grew by a meagre 3% yoy. This was on account of a hefty increase in the premium (currently about 50%) enjoyed by the Saffola products over the other edible oils due to a reduction in the prices of the latter as a result of the softening of the raw material prices. However, the management indicates that the volume growth has recovered slightly to mid single digits in Q4FY2009 till date. The

KSB Pumps - Pump division drives growth. Result highlights: KSB Pumps has reported a strong 31.4% improvement in its top line to Rs175.4 crore. The top line growth was primarily driven by a 46.9% rise in the pump revenues. However, the revenues of the valve division declined by 7.9% during the quarter but remained almost flat on a sequential comparison. The operating profit margin (OPM) of the company has remained volatile over the last couple of years. On a segmental basis, the profit before interest and tax (PBIT) margin of the pump division declined by 270 basis points to 12.8% on account of a different mix of orders while that of the valve division declined by 410 basis points to 21% due to a slower top line growth. Consequently, the overall OPM of the company declined by 440 basis points year on year (yoy) to 15.8%. As a result, the operating profit for the quarter grew marginally by 2.7% to Rs27.7 crore. Slightly higher interest and depreciation costs led the company to report

The macro business environment has worsened further since the last commentary by Infosys Technologies’ (Infosys) management. In the recent interaction, the management has indicated higher than expected pricing pressure, project cancellations and considerable decline in the IT budgets of its clients. The worsening situation has been further aggravated by the banking and financial services clients, with large global players like the Bank of America , Citibank , American International Group (AIG) and the Royal Bank of Scotland (RBS) looking for further bailout packages. In addition, the possible nationalisation of banks and the anti-outsourcing rhetoric getting shriller put a question mark on the volume growth in the next fiscal. On the positive side , the continued depreciation in the rupee has emerged as a significant tail wind for tech companies including Infosys. The rupee has depreciated by around 6.5% in the past one month alone and is likely to remain weak. Infosys, with a relat

RIL - RPL Merger - EPS accretive for RIL. Reliance Industries Ltd’s (RIL) and Reliance Petroleum Ltd’s (RPL) board of directors have approved RPL’s merger with RIL in an all share deal in the ratio of 1:16 (one RIL share for every 16 shares of RPL). RIL will extinguish the treasury shares created from the merger and issue 6.92 crore shares (4.4% dilution) to the minority shareholders of RPL. The merger will provide RIL access to RPL’s strong free cash flows of around $1.2-1.5billion each year (expected from the next fiscal year) in the difficult macro environment. This is expected to help RIL to tide over the downturn in the petrochemical cycle and fund its capital expenditure (capex) in the exploration business. At the operational front, RIL will benefit from crude oil sourcing and placement of the final products in the export market. Moreover, the meger will help RIL balance its overall product slate and better adjustment of capacity ultilisation in the times of downturn. The merge

Indraprastha Gas - Key highlights: IGL granted three year exclusivity period by PNGRB. The Petroleum and Natural Gas Regulatory Board (PNGRB) has authorizedIndraprastha Gas to do city gas distribution operations in the National Capital Territory (NCT). IGL is now authorized to retail CNG (compressed natural gas) to automobiles and piped gas to households in NCT. IGL has also got a three-year exclusivity period do business in the NCT, and no other company would be allowed to operate in the city in the duration. This is positive for IGL as finally PNGRB has softened its stance against IGL. Awaiting authorization for Noida & Greater Noida. Growing CNG and PNG markets. Some of the triggers for the growing CNG markets are large scale conversion of petrol driven private vehicles, introduction of Radio Taxis and high capacity buses on CNG. Also there is increase of CNG variant models by car manufactures and introduction of 2-3 wheelers on CNG. Piped Natural Gas (PNG) has become a preferr

Mphasis BFL Results Update: 1QFY09 (November - October fiscal) results were better, on higher revenues and margins. Volume growth of about 6% QoQ in IT services is encouraging in this macro scenario. Third consecutive quarter of 6 - 7% volume growth; HP support is a differentiator. According to the management, the overall volume growth was 4% with IT services reporting a 6 - 7% rise, and ITO reporting a 10 - 12%. BPO business continued with a volume de-growth. This is the third consecutive quarter of 6 - 7% volume growth for IT services which is impressive. Mphasis saw a faster growth in European geography, which contributed about 22% to overall revenues.On-site revenues continued to help overall growth rates. On-site revenues contributed to 28% of overall revenues as against 26% in the preceding quarter.The initiation of several projects in recent quarters has led to more on-site jobs before they are transitioned off-shore. BPO business - muted growth continues. BPO revenues de-grew

Market Strategy : The benchmark indices remained range bound during the past month. Weak global markets and absence of fiscal stimulus measures weighed on the markets. The Vote-on-account, which was presented during the month,failed to cheer the markets as the Finance Minister did not offer any specific measures to further stimulate the economy. At the same time, the vote-on-account highlighted the elevated level of fiscal deficit. On the US front, investors treated the new Financial Stability Plan with skepticism over lack of details. Markets in the US tumbled to multi-year lows. Economic activity shrunk appreciably across major regions. Fresh concerns on deteriorating prospects of emerging European economies resulted in weak eurozone markets. The quarterly results have not provided any additional visibility on prospects in FY10. The excise duty cut has largely failed to have any meaningful impact on the respective sectors stocks. With no more macro triggers expected in the current qu

Indian Economy Update March 2009. India’s GDP grew 5.3% during Q3FY09. • GDP growth estimated by the CSO at 5.3% during Q3FY09 as against 8.9% in Q3FY08 came below street expectations. • The 'agriculture, forestry & fishing' and 'manufacturing' segments witnessed decline of 2.2% and 0.2%, respectively. However, the economic activities in mining, construction and services provided some vibrancy to Q3FY09 numbers. • With 9MFY09 GDP growth coming at 6.9%, our 4QFY09 growth would need to come at 7.6% to achieve the 7.1% advance estimate by the CSO for FY09. This is less likely in current uncertain macro-economic environment. • However, our savings as well as Investments as a percentage of GDP are one of the highest in the world. This is likely to insulate us (albeit partly) from deteriorating world economic environment.

Sanghvi Movers Ltd -Result highlights. Sanghvi Movers Ltd (SML) has reported strong performance during Q3FY2009,both on revenue and profitability front. SML’s income from operation grew by 37.8% to Rs88.8 crore led by better-than-expected utilisation and higher yields. The operating performance of the company surprised positively with a 290-basis-point year-on-year (y-o-y) improvement in the operating profit margin (OPM) to 75.7%. on account of a decline in the operating cost. The net profit increased by 34.8% to Rs23.9 crore as against our estimate of Rs18.6 crore. The profits were higher mainly due to a better top line growth coupled with better operating performance and high other income component. The other income was high due to sale of an old crane, which realised Rs1.9 crore. The company has added Rs55 crore worth of cranes during the period under review. The total fleet size of SML now stands at 323 cranes, accordingly the gross block of the company now stands at Rs950 crore.

Thermax - Result highlights. Thermax’ Q3FY2009 results were below expectations on revenue front, however owing to better-than-expected operating performance and lower tax the adjusted net profit came in line with estimate. The stand-alone total income from operations reported a decline of 6% to Rs795.1 crore. Revenue from energy division continued to be disappointing as it declined by 9% to Rs628.3 crore, while the revenue from environment division grew by a decent 14.1% year on year (yoy) to Rs185.3 crore. During the quarter the company provided for marked-to-market (MTM) losses of Rs10.6 crore as against a net gain of Rs2.4 crore in Q3FY2008. Adjusting for the same the operating profit of the company rose by 2.35% to Rs107.4 crore. The operating profit margin (OPM) improved by 110 basis points yoy to 13.5% on account of decline in raw material cost as percentage of sales by 510 basis points yoy to 65.6%. The adjusted net profit of the company was up 8% to Rs79.3 crore.Accounting for

Opto Circuits India -Result highlights. Strong performance continues; concerns overdone. Opto Circuits (Opto) has reported a top line growth of 65.7% to Rs211.0 crore for Q3FY2009. The revenues were driven by a 20% growth in the non-invasive segment (excluding Criticare Systems [Criticare]) and an 81.9% growth in the invasive segment. Criticare contributed revenues of Rs40.4 crore. On excluding the contribution from Criticare, the organic growth was ~34%. Opto’s operating profit margin (OPM) expanded by 60 basis points year on year (yoy) to 28.9% in Q3FY2009. The margins are impressive considering the consolidation of Criticare, which has relatively lower margins.Consequently, the operating profit grew by 69.3% to Rs60.9 crore in Q3FY2009. Driven by a strong operating performance, Opto has reported a net profit of Rs52.6 crore, up by 47.2% yoy. The net profit reported by the company is marginally ahead of our estimate of Rs49.0 crore. The net profit was aided by a foreign exchange (fo

Indian Hotels Company - Results Highlights. The revenues and margins are strictly not comparable on a year-on-year basis, as the operating revenues include Rs26.36 crore of insurance claims for loss of profit on Taj Mahal Palace & Tower, which was non-operational due to damages sustained during 26/11 terrorist attacks. The operating revenues declined by 12.3% year on year (yoy) to Rs456.6 crore due to substantial drop in occupancies and subdued average room rates (ARRs) yoy. The management clarified that despite the economic slowdown their ARRs and occupancy rates were holding good, however post 26/11 there have been significant cancellations and the month of December played a spoilsport for Q3FY2009 results. The occupancy rate in December 2008 dropped to 50% against 74% in December 2007 and 67% in April-November 2008. ARRs for the month were lower by 15.4% yoy. Consequent to subdued top line performance the operating margin declined from 47% in Q3FY2008 to 36.3% in Q3FY2009, whic

Andhra Bank - Results Update. Andhra Bank has reported a profit after tax (PAT) of Rs212.7 crore in Q3FY2009 indicating an increase of 33.7% year on year (yoy). The net interest income (NII) for Q3FY2009 registered a healthy growth of 29.3% yoy and stood at Rs451.9 crore on account of a strong 34.2% year-on-year (y-o-y) growth in the advances coupled with an 8-basis-point y-o-y increase in the calculated net interest margin (NIM), which stood at 2.88%. The operating expenses increased by 28.9% yoy during the quarter as employee expenses increased at a much faster pace of 40.9% yoy, while other operating expenses grew by 16.5% yoy. During the quarter the bank made an ad-hoc provision of Rs40 crore towards pending settlement for wage revision. However, despite this increase the cost to income ratio was contained at 44.3% in Q3FY2009 vs 51.1% in Q2FY2009. Notably the provisions declined by 10.5% yoy to Rs24.9 crore as compared with Rs27.8 crore in Q3FY2008, which boosted the bottom line.

Vote-on-account: • The vote-on-account, with impending general elections, stuck to convention and did not contain any major announcements / initiatives. • Revised FY09 revenue and fiscal deficits are estimated at 4.4% and 6%, respectively - significantly above the budgeted levels, but in line with consensus estimates • Fiscal deficit for FY10 is budgeted at 5.5% and revenue deficit at 4% of GDP; Budget assumes a 10% rise in corporation tax and a similar rise in income tax in FY10, which may be challenging to achieve in the backdrop of a weak economic environment. • No sector specific incentives announced except extension of interest rate subsidy for labour intensive export operations. Major initiatives to be taken up only in the full budget to be unveiled by the new Government, post elections • With no major triggers in the near term, markets will now look at the elections and international factors over the next two months. Monetary measures, if any, will have an impact in the intermed

Maruti Suzuki India - Result highlights. Maruti Suzuki’s Q3FY2009 results are ahead of estimates after some adjustments. The net sales for the quarter declined by 1.9% to Rs4,567.6 crore (adjusting for Rs55crore of compensation paid to dealers due to a reduction in the excise duty). The sales volume for the quarter dropped by 14% and the average realisation improved by 14% due to a change in the product mix towards the B and C segment cars. The operating profit margin (OPM) is lower than expectation. The OPM declined by 649 basis points year on year (yoy) to 6.6% during the quarter. The margin contracted due to a higher cost of raw materials. The depreciation in the rupee against the yen further increased the cost of imported raw materials for the company. This coupled with the higher fuel cost, royalty charges, A-Star launch expenses and an increase in distribution expenses led the operating profit for the quarter to decline by 50.4% to Rs304.3 crore (excluding a foreign exchange [fo

Interim Railway budget. Growth targets maintained despite slowdown, sixth pay commission impacts operating ratio, passengers get some relief Interim budget was largely in line with expectations with no major strategic initiatives announced for the next fiscal While freight rates maintained at FY09 levels, marginal relief has been given on passenger fares The growth targets for freight volumes and total earnings have been maintained at the budgeted levels despite the economic slowdown. Significantly high expenditure for the sixth pay commission as compared to the budgeted levels has dented operating ratio at 88.3%. Ratio for FY10 expected to remain at those levels.The total plan outlay target has been marginally revised to Rs.367.73bn for FY09. Mr. yadav has set a target to invest Rs.2.3trn over the 11th five year plan. Key points. FY09 growth targets maintained despite slowdown. The budget has maintained the targets for growth in FY09 at near the budgeted levels. Gross earnings are exp

Zensar Technologies. As was the case last year, Zensar has introduced an offering for its customers, which assures a 10% savings in cost over a 10-month time frame by improving the processes of the customer company. Zensar is merging its wholly - owned subsidiaries Zensar ThoughtDigital LLC and Zensar OBT Technologies Inc with Zensar Technologies Inc. Challenges have emerged in the enterprise applications business with both, SAP and Oracle related implementations facing a slowdown. Future prospects. We expect Zensar to achieve revenues of Rs.9.49bn in FY09 and Rs.9.5bn in FY10. While volumes are expected to rise by about 6%, expected billing rate pressures and rupee appreciation are expected to impact revenue growth. EBIDTA margins are expected to be almost flat as gains from higher off-shore content and better resource utilization should set off the impact due to salary increases and expected rupee appreciation. Higher revenues from value added services are also expected to restrict t

Results Update:Cummins reported stellar earnings growth for Q3 FY09 mainly aided by strong export volumes and margin expansion as a result of rupee depreciation and softer metal prices. However, during the third quarter, the company witnessed a degrowth of 12% in the domestic sales. Given the lackluster scenario in the domestic market coupled with lower export demand, the management has indicated that order book for the current quarter indicates likely degrowth of 20 - 30% on a sequential basis. Management guidance of 15-20% decline in FY10 revenues. In 9M FY09, revenues grew 35% yoy mainly led by strong export volumes. During the period, export revenues likely grew 91% yoy to approximately Rs 10.1 bn. Sharp hike in export volumes was a result of new low HP engine facility at Pirangute and the High HP KVA facility in Kothrud. Share of exports in revenue mix increased to 47% from 31% in FY08. On the other hand, domestic market growth has been modest during the nine-month period. The out

Economy Update: Inflation falls to 5.07%. India's wholesale price index (WPI) came down to 5.07% for the week ended January 24, 2009 from 5.64% for the week ended January 17, 2009, lowest in almost last one year. The index number of 'primary articles' and 'manufactured goods' declined week-on-week for the week ended January 24, 2009.However, 'Fuel segment' saw some moderate up move during the same period. 'Fuel segment' continues to witness deflation for last seven consecutive weeks. Recent cut in fuel prices would start showing its impact from the next week's reported numbers. Manufacturing segment is largely on the downward trajectory for last two months, consequently, reducing the inflation risk emanating from it.One can expect headline Inflation (read WPI) to continue to fall at an accelerated pace before coming down to sub-2.0% levels by the end of FY09.

Balaji Telefilms : Lower volumes due to discontinuation of Star programs and FWICE strike lead to crash in revenues. Higher costs of production and deteriorating pricing power for content players crunch profitability. Balaji Telefilms has been underpinned by discontinuation of high margin programs (on Star), foray into new high budget programming, lack of scale in business, waning popularity of its content and an expected erosion of pricing power as recent GEC entrants face tough times. Adjust earnings and price target to account for dismal Q3FY09 results and deteriorating business outlook for content players that are unable to drive scale. While the stock has corrected 36% over the last 3m, it makes us no less negative on BTL’s medium term prospects. Multiple headwinds persist and will lead to sharp declines in profitability over FY09-10E.

Sesa Goa · Highest ever iron ore sales volumes in tough Q3 is commendable. · Chinese Steel/Iron Ore Industry Macro is improving. · Q4 traditionally the best quarter but can't ignore global macro stress – 5MT volume assumed for Q4 against 5.44MT in Q3. · Amalgamated estimates from now on – No material change as pig iron operations small. · Attractively valued - BUY with a price target of Rs.123 based on 2.5x EV/EBITDA for FY09E.

Subex Results are in-line with estimates. No major impact of the macro scene as yet on Subex, as reflected by steady order inflows. Stock price has declined significantly over past few quarters. While we are upgrading the stock because of the sharp decline in price, we still recommend ACCUMULATE as the macro scene remains challenging. Uncertainty over FCCB conversion remains. Our FY09 EPS earnings estimate of Rs.13 does not include MTM losses on FCCBs. The price target stands reduced to Rs.55 from Rs.65 earlier.

Voltamp Transformers Voltamp's revenues reflect signs of moderation in growth and lower realistions as a result of decline in copper prices. EBITDA margins came at an all-time high of 30% up 740 bps possibly as a result of efficient sourcing of raw material and lower base of revenues. High other income of Rs 75 mn and lower tax rate boosts profit growth. Raise earnings estimates by 20% for FY09. Accumulate in view of impending slowdown in revenue growth in view of lackluster industrial growth, with a target price to Rs 450.Stock trading at 3.3x FY09 earnings.

Result Update: Shree Cements Revenues for the current quarter Q3FY09 grew by 27% YoY, which was better than our estimates led by better dispatch growth as well as sale of captive power. Operating margins were impacted by high power and fuel and transportation expenses. Healthy revenue growth as well as decline in depreciation charges resulted in 254% growth in the net profits in the current quarter as compared to Q3FY08. At current price of Rs 500, stock is trading at 2.5x and 3.0x on P/CEPS multiples on FY09 and FY10 estimates respectively. ACCUMULATE the stock with a price target of Rs 627 based on average of 4x P/CEPS and 3.5x EV/EBITDA on FY10 estimates.

ICICI Bank : The ICICI Bank's Q3FY09 performance on core operating front was in-line with our estimates. In Q3FY09, net interest income (NII) and net profit showed flat growth of 1.6% and 3.4%, respectively. With the strategy of lightening the Balance sheet and prioritizing capital conservation, the bank was able to achieve this on back of robust growth in treasury profit (Rs.9.76 bn in Q3FY09 vs. Rs.2.82 bn in Q3FY08) and 18.5% decline in total operating expenses (YoY). Improving NIMs: NIM of the bank rose to 2.4% at the end of Q3FY09 from 2.3% at the end of Q3FY08. Capital adequacy: The bank's capital adequacy at the end of Q3FY09 was 15.6% (including Tier-I capital adequacy of 12.1%) as against the regulatory requirement of 9.0%. Asset quality: At the end of Q3FY09, the bank's net NPA (net of technical write-offs) stands at 2.07% of net customer assets, deteriorating from 1.50% in Q3FY08. Gross NPA (net of technical write-offs) increased from Rs.64.75 bn at the end o

Crompton Greaves : Crompton Greaves' (CGL) third quarter numbers are largely in line with expectations. The company has been guiding towards a 20% plus growth on domestic as well as international front. The power segment revenues rose 20% yoy to Rs 5.7 bn. The main client segment for this division is the utilities sector including PGCIL. PGCIL has plans to spend Rs80 bn in FY09 up from Rs 65 bn in FY08. We expect healthy growth to sustain in Power division. Consolidated profits up 49% yoy but flat sequentially.EBITDA margins stable for CGL as well as its overseas subsidiaries.Maintain earnings in view of in-line results. Industrial growth has slackened further since the third quarter raising downside risk to FY10 earnings. Maintain Accumulate given slowdown in domestic industrial production.Overseas subsidiaries also face pressure as the Euro Zone has been slowing down. ACCUMULATE with a price target of Rs 187 based on DCF.

Everest Kanto Cylinders : EKC reported excellent set of Q3FY09 results which are above estimates both on the revenues and profitability front. However we factor in slowdown in economy and sharp decline in CV sales. On a consolidated basis EKC sold 1.5 lakh cylinders in Q3FY09, which is down 3.2% YoY and down 14.5% on sequential basis. This is primarily due to lower sales of cylinders to the OEM players like TATA motors and Ashok Leyland. However the average realizations per cylinder have improved by 106.6% YoY and up 33.0% on sequential basis as the company is concentrating more on value added cylinders like jumbo cylinders. The sale of jumbo cylinders has gone up by 49% on YoY basis to 719 cylinders with average realizations of Rs.7.9 lakh per jumbo cylinder. FY10 EPS is estimated at Rs.18.0.Long term investors can buy with a price target of Rs.200.

Sun–Taro acquisition: The stalemate continues In line with the directive issued by the Israeli Supreme Court, Sun Pharmaceuticals (Sun Pharma) had sent a revised proposal to the promoters of Taro Pharmaceuticals (Taro) for the completion of its long-standing acquisition of Taro. In its proposal Sun Pharma had raised its offer price for Taro shares and outlined two options to buy out the remaining stake in Taro. For the first option, Sun Pharma had offered to amend the original merger agreement to buy the Taro shares at $9.50 each instead of the earlier $7.75 per share, which would raise its acquisition cost by 23%. In addition, Sun Pharma would also end the tender offer. For the second option, Sun Pharma had offered $9 per share for all shareholders other than Taro Chairman Barrie Levitt and $8.5 per share for the five million odd shares held by the promoter group, subject to Israeli Supreme Court’s withdrawal of the injunction on Sun Pharma’s open offer. The tender offer will close te

Key points Ashok Leyland's total vehicle sales for December 2008 were below our expectations. The sales of the company plunged during the month amidst weaker demand and financing constraints. The total sales (including exports) declined by 63% to 2,321 units from 6,340 units in the same month a year ago. On a month-on-month basis, the total sales grew by a meagre 1%, taking the year-till-date (YTD) sales volume down by 22%. Sales in the medium duty vehicle (MDV) passenger segment slumped by 38% on a yearly basis to 1,211 vehicles, with the sales of domestic passenger vehicles declining by 42% and exports dropping by 28%. However, on a monthly basis, the total MDV passenger sales surged by 18% during the month. The MDV goods segment’s sales dropped by 76% year on year (yoy) to 1,061 vehicles. The domestic sales declined by a whopping 85% yoy to 637 vehicles. On the other hand, the exports showed an impressive growth of 119% to 424 vehicles. On a YTD basis (April-December 2008), the

Result highlights: Tata Consultancy Services (TCS) Q3FY2009 results were below our as well as street expectations. The resuls came below our expectations largely on account of lower-than-expected revenues primarily due to sharp cross currency movement and a lower-than-expected volume growth. The consolidated revenues in rupee terms grew by 4.7% quarter on quarter (qoq) to Rs7,277 crore driven by favourable exchange rate (contributing 3.4% to the top line growth). In constant currency terms, the revenues grew by 1.23% sequentially driven by a 2.4% volume growth. This was partially offset by higher proportion of offshore revenues (-1.6%) and pricing (-0.1%). In dollar terms, the revenues declined by 5.8% qoq to US$1,483 million below our expectations on account of sharp cross currency movement and a lower-than-expected volume growth. The earnings before interest and tax (EBIT) margin improved by 53 basis points to 24.8% in Q3FY2009 on account of favourable exchange rate (136 basis point

Lowest in almost last 10 months; Downward movement to continue India's wholesale price index (WPI) dropped to 5.91% for the week ended December 27, 2008 from 6.38% for the week ended December 20, 2008,lowest in almost last 10 months. The index number of Primary articles and manufactured products declined week-on-week for the week ended December 20, 2008, whereas it was flat for fuel groups.We expect headline Inflation (read WPI) to continue to fall at an accelerated pace before touching 2.0-2.5% levels by the end of FY09. We also expect continuation of monetary and fiscal policies. Although not much scope is left for any more fiscal stimulus on Keynesian philosophy,our planners are likely to apply more of monetary instruments.

Economy Update: November IIP – Bounced back into positive zone. The index of industrial production (IIP) for November 2008 increased 2.4%, as compared to 4.9% growth in November 2007. Mining, manufacturing and electricity grew at 0.5%, 2.4% and 3.1%, respectively during November, 2008.The capital goods declined 2.3%, whereas intermediate good and consumer goods rebounded into positive zone by growing at 2.6% and 4.4%, respectively. The cumulative growth for April-November 2008-09 stands at 3.9% over the corresponding period of the previous year. At the same time, IIP growth for October 2008 has been revised upwards to 0.3% decline from the previously reported decline of 0.4%. The recent fall in inflation would provide greater leeway to RBI for taking softer monetary stance, going forward. In our view, further fiscal stimulus by the government is less likely, given their fiscal position.

Banking sector under our coverage universe is expected to register NII growth of 22.4% (YoY), Pre-provisioning profit growth of 11.7% (YoY) and Net income growth of 7.2% (YoY). Credit off take (as on December 05, 2008) has been robust at 26.3% (YoY) and 12.5% (YTD). During the same period (as on December 05,2008), deposits grew 21.4% (YoY) and 11.4% (YTD). Margins to be stable; PLR cut would be compensated by recent cut in CRR, SLR, Repo and Reverse repo rates. Write-back of MTM provisions as 10-year government bond has fallen by around 320 bps during Q3FY09. NPAs to rise; Write-back of MTM provision to provide cushion in overall provionings. Top Picks: Axis Bank , HDFC Bank , Union Bank, BOB , Indian Bank , PNB In the challenging global and domestic environment, policy makers (both Govern- ment and RBI) are busy prescribing booster doses to minimize the spill-over effect of global financial crisis. India's growth trajectory has been impacted by both finan cial crisis and the fol