Month: August 2007

Citigroup Research in a detailed research report released just a while ago has initiated coverage on India’s premier and best Infrastructure Financial institution – Infrastructure Development and Finance Corporation – IDFC. Citi has recommended a BUY with a Target Price of Rs 140 from current levels of Rs 110.

IDFC is the most levered and broad-based infrastructure play in the Indian financial sector. IDFC brings to the table,

• Integrated offering as a lender, advisor and investor,
• Management – track record, defined strategy and pedigree
• A broadening business model – trending towards more annuity and risk-linked fees,
• Risk management systems – proven asset quality record, and
• Capital – to leverage and invest.

Citi expects IDFC’s profits to grow at a strong 26% CAGR over FY07E-10E, backed by asset expansion and stronger asset management-driven fee income growth. ROEs, is likely to remain moderate at 14-15%, with leverage and fee incomes the driver beyond.

Citi recommends a BUY on IDFC with Rs140 target price implying a 27% expected total return from current price levels. Target price is based on a sum-of-parts methodology with the core lending business valued at 2.5x FY09E PBV or Rs113 per share. The asset management business is valued at Rs17 per share based on DCF analysis. Finally, the unrealized investment gains at Rs10 including NSE and SSKI stakes.

DalalStreet Analyst Views:
Yes, you can take exposure to this stock at Rs 110 level and blindly add more when it falls. IDFC is backed by Deepak Parekh who indirectly had told Citigroup executives to sell their stake in HDFC if they were not happy with HDFC’s performance. [The issue was just Citi wanted HDFC to be little bit more aggressive but then Deepak Parkeh may have misunderstood and reacted sharply].

Comments, Suggestions & Requests for entire Research report maybe sent to feedback @ DalalStreet.Biz

Citigroup research in a report released just a while ago advises investors to accept Holcim’s open offer at Rs154/share for Ambuja Cements Ltd [ACL].

Citi rates ACL Sell/Medium Risk (3M) with a target price of Rs103. Although ACL is likely to trade at a premium to domestic peers, due to higher EBITDA margins, the stock is expensive given: (1) limited visibility on cement pricing moving up as a result of uncertainties arising from unfavorable government measures in CY07; (2) a 20% yoy expected decline in CY08E earnings as large capacities are expected domestically, particularly in North India; and (3) the risk to exports, as substantial new cement capacity is coming up in the Middle East, which would convert the current deficit in that region into a surplus.

Dalal Street Analyst Note:
Kindly note that shares tendered in Open Offer are liable for Long Term Capital Gains Income Tax because you are not paying the STT [Security Transaction Tax] when submitting through open offer. So decide if you want to SELL in the market or accept the open offer.