September, 2007 | Dalal Street

US Recision Fear hits Infosys and other IT Stocks

September 10, 20071 min read

IT pivotals edged lower today after data released on Friday, 7 September 2007, showed US payrolls shrank in August 2007 for the first time in four years, raising fears that the world’s largest economy was headed into a recession. IT stocks derive a large part of their revenue from the US. In the first quarter of current financial year, IT Slave Trading Companies such as Infosys and TCS who are purely dependent on currency arbitrage were hit badly due to the strengthening of Indian rupee.

The BSE IT index had underperformed the market over the last one month to 7 September 2007, declining 1.57% compared to the Sensex’s return of 3.25%. It had also underperformed the market over the past quarter, falling 6.56% compared to the Sensex’s gain of 10.85%.

India IPO Reviews and Updates

Subscribe to Powergrid Corporation IPO

September 10, 20071 min read

Investors can blindly subscribe to the IPO of Powergrid Corporation India Ltd [PGCIL] at Cut Off price. Powergrid is into the Power Transmission business and controls over 45% of the Indian market. It has transmission lines of 61,875 Kms.

Proceeds of this IPO will be utilized in the forthcoming 15 power line transmission projects. With tremendous thrust for the Power sector in India, PGCIL is all set to cash in on this boom.

The IPO is roughly of Rs 1,000 crore to the Retail Indian investor. Even if the IPO is subscribed 15 times, you still stand to get 125 shares. We recommend investors to subscribe to the issue. Grey market premium is just Rs 10. But PGCIL is more of a long term story so invest and HOLD tight for the next few years.

Here are PGCIL Recommendations – One and Two.

Economy, Markets and Macro Views

Citi initiates BUY on DLF

September 10, 20071 min read

DLF remains committed to an aggressive execution schedule – seeks to deliver 16m and 23m sq ft of completed assets over the current and next year, with ~50m sq ft under construction. DLF management dismissed perceptions that it has low cost land bank. It clarified that about 40m sq ft (7% of land bank) is historic with an average cost of Rs275psf – the rest, about 575m sq ft, has been acquired in the last 3-4 years; effective cost slightly higher at Rs350psf.

DLF sees itself well leveraged to the strong commercial/retail asset environment; 50-55% of its assets are in this space, it has over 12m sq ft in preleased commitments on its books, with 42m sq ft of space under execution. DLF has an aggressive launch schedule in the mid-income housing space, spread across various cities in the country.

Target price of Rs.725 is based on a 25% premium to an estimated core NAV of Rs530, and Rs62 for other asset holdings and new JV businesses (Rs45/share for the existing 4.6m sq.ft leased assets and 7.2m sq.ft plot, and Rs17/share for DLF’s share in construction and hotel JVs. DLF is a medium Risk BUY.

Equity Research

Accumulate Prism Cement – HDFC Sec

September 10, 20072 min read

Prism Cement Limited [PCL] is an ISO 9001:2000 certified company promoted by Rajan Raheja Group. PCL manufactures and markets Portland Pozzollana Cement (PPC) with the brand name ‘Champion’ and full range of Ordinary Portland cement (OPC) of 33, 43 and 53 Grades.

PCL has planned to undertake a massive expansion plan, wherein PCL has envisioned a Brownfield expansion at Satna of 2 mtpa Clinker expected to come on stream by 2010. This would offer locational advantage, as the demand is very strong in North and growing at a good rate. For the last quarter ended June 07, PCL witnessed another high in its operating margins recording 50.6%, best in the industry. PCL’s Satna plant is at a prime location, near to well-known thermal plants like NTPC, MPSEB, IFFCO, Hindalco, etc. which provides a rich source of fly ash used in manufacturing of PPC.

Key demand drivers include big surge in real estate build-out for housing & commercial purposes by developers such as DLF, Unitech, Parsvanath, Omaxe etc., Commonwealth Games 2010 related Capex, Major scale-up in Hydro power and Infra Capex across North & Central India.

PCL will hold a 74% stake and the Australian group will hold the rest in proposed Insurance joint venture. One could look at accumulating Prism Cement in the Rs 53-61 band for 30-40% gain in a year’s time.

Breaking Corporate India Earnings News

Lloyd Metals Stock Split + RTS Power – Order

September 10, 20071 min read

The board of Lloyds Metals & Engineers approved the sub – division of existing equity capital of the company of nominal value of Rs 10 each fully paid up forming part of the subscribed and paid-up capital of the company into nominal value of Rs 2 each credited as fully paid up.

The board has approved the issue of 10,00,000 warrants convertible into equity shares of Rs 10 each to, individual non promoters on preferential basis.

The board has approved the issue of 10,00,000 warrants at a price of Rs 90 per warrant entitling the holders of warrants to apply for and obtain allotment of equity share against each warrant within a period of 18 months.

RTS Power Corporation announced before market hours today, 10 September 2007, it has got Rs 35.11-crore orders for supply of transformers, conductors and cables to power utilities.

Breaking Corporate India Earnings News

ICRA to Rate SBI Loans

September 7, 20071 min read

ICRA and State Bank of India (SBI) have signed a MoU under which the company will assign ratings to the bank’s loans and its other exposures under the standardized approach of RBI’s new capital adequacy framework for Basel-II.
To assist potential and existing borrowers of SBI in obtaining ratings, ICRA is offering special terms to the clients of SBI covered by the MoU.

The MoU between ICRA and SBI seeks to deliver a number of benefits to the SBI as well its clients. For SBI, ICRA’s line of credit ratings would assist in implementing RBI’s new capital adequacy framework under Basel-II.

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