Month: September 2007

UBS Equity research is underweight on the prospects of Indian market compared to others globally. It has rated India at position 15 amongst 16 countries.
Rank of India across various parameters in the UBS Report are as follows, [1=Highest Score, 16=Lowest Score]

• Country Risk Rank – 15
• Economic Rank – 16
• Political Rank – 9
• Budget Deficit – 15
• Current Account – 13
• Tariffs – 16
• Currency – 13
• Inflation – 14
• Sovereign Credit Rating – 14
• Economic Rank – 16
• Contract enforcement – 16
• Investor protection – 4
• Liquidity – 5
• Size of Government – 3
• Corruption – 11
• Reforms – 9

The sectors UBS is globally looking for are Banking, Telecom and Consumer Services and Goods.

Merill Lynch has raised the stock target price of Reliance Capital [R-Cap] to Rs 1850. R-Cap is expanding its distribution at a very rapid pace which could result in growth, ahead of Merill’s estimates, remaining very strong through FY10 and possibly beyond. Based on FY10E sum of parts valuation, a value of Rs 2033/share, the target price for Mar’09 (18 months from now), a 36% upside. Hence, 12 month PO is Rs 1850.

By Dec’08, it is likely to have 10,000 touch points in retail in 1 year (v/s 4,000 now), 5,000 locations (v/s 700), 300,000 agents in life insurance (and 400 cities) and +1500 dealers.

• Consumer loan book [Housing, Auto, Personal etc] to expand 10-fold to US$4.1bn by FY10, delivering ROE of +20%.
• General insurance too is likely to show +100% growth through FY09 and 75% in FY10.
• R-Money is likely to be the other strong growth driver as it expands distribution and customers hit 1 million mark.
• Overall, life insurance should, however, remain the biggest contributor at 37% of target value with premia income forecast to rise 7-fold from FY07 levels.

Reliance Capital is likely to emerge amongst the top 3-4 players in the financial services segment. R-Cap is expected to report an EPS of Rs 41.16 for FY 08 and Rs 59.27 for FY09.

In a separate report, Merill Lynch’s most preferred stocks are – BHEL, Bharti Airtel and Grasim Industries. While the least preferred are Hindalco, Tata Motors and Pantaloon Retail India Ltd.

Power Grid Corporation of India (PGCIL) selected Reliance Energy (REL) as a joint venture partner through international competitive bidding for setting up the transmission lines for the Parbati and Koldam hydro-electric projects in Himachal Pradesh and two projects under the Western Region System Strengthening Scheme-II (WRSS-II) in Maharashtra and Gujarat on a build, own, operate (BOO) basis.

These projects would entail an investment of about Rs 3,500 crore. The two companies would sign a letter of intent for the WRSS-II project and a shareholder agreement for a joint venture for the Parbati and Koldam projects soon, the reports added.

In a separate development, there was a wide spread rumor that Reliance Energy will file for a DRHP to raise $2 Billion for Reliance Power Ltd. REL may also bid for another Ultra mega Power Project.

REL also wants to hive off its EPC construction business, which fueled the rally ignoring Citigroups recommendation.