2007 | Dalal Street

Unitech Enters Morgan Stanley Capital Index

May 4, 20071 min read

Unitech, along with Videocon and Aditya Birla Nuvo will be included in popular index complier MSCI’s Standard Index series following an annual review. This changes in MSCI’s Standard Index will take effect from the close of 31 May 2007.

MSCI Barra, is a leading provider of benchmark indices and risk management analytics products, and announced changes today for the MSCI Standard Index Series. These changes result from the May 2007 Annual Full Country Index Review.

MSCI Barra’s risk models and analytics products help the world’s largest investors analyze, measure and manage portfolio and firm-wide investment risk.

Arvind Mills, Biocon, Bank of Baroda and Matrix Labs were eliminated from the MSCI Index.

Economy, Markets and Macro Views

IFCI jumps to 52-week high. Mega Block Deals

May 4, 20072 min read

The IFCI stock surged to Rs 50 in intra-day trade, a 52-week high for the counter.

On the back of recoveries and sale of investments, the Industrial Finance Corporation of India (IFCI) reported a net profit of Rs 644.12 crore for the fourth quarter ended March 2007, against a loss of Rs 105.11 crore, in the corresponding period a year ago.

For the fiscal ended March 2007, IFCI’s net profit stood at Rs 898 crore compared to a loss of Rs 74 crore, a year ago.

While operational income for the quarter ended March 2007 rose by 40% to Rs 1052.62 crore (Rs 748.68 crore), other income for the quarter increased by 40% to Rs 41.47 crore (Rs 29.61 crore). The financial institution (FI) saw a huge dip in total expenditure from Rs 883.32 crore to Rs 86.82 crore on the back of reversal of provisioning.

The FI earned around Rs 730 crore through the sale of its stake in the National Stock Exchange and another Rs 60 crore through the sale of stake in ICRA. IFCI still has a 5.5% stake in NSE, which is valued at Rs 550 crore. The book value of its investments is at around Rs 1000 crore while the market value of these investments are more than Rs 2000 crore.

IFCI chief executive officer RM Malla said, “We have focused our attention on recoveries, reducing the cost of our borrowings and unlocking the value of our investments. The net NPAs have now been reduced to zero, while gross NPAs are now at Rs 6500 crore. All future recoveries will go straight to the bottomline. The accumulated losses eased from Rs 4800 crore to Rs 800 crore. This financial year, there was NPA resolution of over Rs 1000 crore. The state-run financial instituion also paid back liabilities of Rs 900 crore in the year, reducing them to Rs 13,000 crore.”

In three separate block deals on the NSE, about 3.88 crore IFCI shares were purchased by Clean Finance & Investment, Jaypee Capital Services and Latin Manharlal Securities, respectively. About 10.76 crore shares changed hands on NSE’s counter on that day.

Equity Research

Subros Outperformer – ICICI Research

May 4, 20071 min read

Subros, a leading automobile air-conditioner manufacturer, reported a 8.7% growth in net sales for Q4FY07, while net profit declined 16.6%. For the full year, the company reported 14.6% revenue growth on buoyant volume growth, despite pressure on realizations. EBITDA margins improved marginally (50 basis points) to 11.4%, mainly due to increasing localization of raw materials that eased realization pressures. Net profit increased 14.2% to Rs 28.4 crore in line with ICICI’s expectations.

On the back of strong demand outlook, backed by surging volume growth from its key customers – Maruti Udyog and Tata Motors – ICICI maintains earning estimates for FY08. Post ICICI’s recommendation (Sept 21, 2006) at price of Rs 230, the stock surged to a high of Rs 299. It has corrected and is currently trading at Rs 235. At this price, it is available at attractive valuations of 7x its FY08E EPS of Rs 33.7. ICICI reiterates OUTPERFORMER rating on the stock.

India IPO Reviews and Updates

MIC Electronics Ltd – Review

May 4, 20072 min read

ICICI Direct advises you to apply for this IPO. I have personally not looked into it and have no opinion. Here are ICICI Research’s thoughts.

LED display market is around US$3.55 billion and is expected to reach US$3.9 billion by 2007. This market has grown at a CAGR of 15.98% between FY04 to FY07. Also the Live entertainment industry is growing at 18% and needs more LED displays for live events. MIC could be a big beneficiary from the boom in the media space.

MIC is the only player in India to have manufacture to design capabilities for LED video display in India . The company does customised solutions for customers for LED display used in sports and live events, advertising applications, indoor applications such as shopping mall, airports etc and mobile vans. The company also has international presence and offices in many countries.

Financials:
The company posted a top line of Rs 104.4 crore for FY06 compared to Rs 21.19 crore for FY05, while its bottom line jumped to Rs 15.4 crore from Rs 2.14 crore. For the 6 months ending FY07, the company clocked an income of Rs 65.46 crore and posted a profit of Rs 10.89 crore. More than 30% of the income comes from the media business while the rest from telecommunications and info-tech businesses. We expect the company to post a top line of Rs 206 crore in FY07 and Rs 230 crore in FY08 with a bottom line of Rs 32.56 crore and Rs 40.5 crore in FY07 and FY08 respectively. We expect the revenues from the media segment to contribute more than 50% of the top line in FY08, which has EBIDTA margins around 30%.

Valuations of IPO:
The issue is being priced at a price band of Rs 129-150. At the top end of the price band, the stock commands a P/E of 7.44x FY08 EPS of Rs 20.15. Global companies in the media business such as BARCO NV and Daktronics are trading at a P/E multiple of 25 inline with Indian media companies. Based on this MIC Electronics very reasonably priced and one may consider investing in the stock.

Issue closes on May-8th.

Equity Research

Bharti Airtel Outperformer – Macquaire

May 4, 20071 min read

In a research note released to high net worth clients, Macquaire has rated Bharti Airtel as an Outperformer with a 12 month Price Target of Rs 1050, 25% potential upside from current levels. Bharti Airtel is expected to report an EPS of Rs 37 for FY08 and Rs 50 for FY09.

Bharti Airtel reported a fantastic Q4 and highest ever EBITDA margin of 41.6%, an
expansion of 80bp QoQ and 410bp YoY. Bharti’s performance in 4Q and FY3/07 was impressive despite subscriber deactivation of 300k in 4Q and the hit from the phase out of roaming rentals and sharp cuts in roaming tariffs that took effect from 15 February 2007. Bharti’s ROE was 37.4% in FY3/07 and free cashflow break-even was achieved in 4Q FY3/07, well before the consensus estimate.

On DCF Methodology, Macquaire sets a price target of Rs 1050 and Bharti Airtel is their top telecom pick in Asia.

Breaking Corporate India Earnings News

ING Vysya Bank upbeat on strong Q4 outcome

May 4, 20071 min read

ING Vysya Bank reported a net profit of Rs 18.39 crore for Q4 March 2007 against a net loss of Rs 24.65 crore in Q4 March 2006. Total income rose 34.1% to Rs 463 crore (Rs 345.17 crore).

For FY 2007 (year ended 31 March 2007), ING Vysya Bank reported a net profit of Rs 88.90 crore compared to a net profit of Rs 9.06 crore in FY 2006 (year ended 31 March 2006). Total income rose 17.2% to Rs 1595.70 crore (Rs 1361.61 crore).

Recently, the board of ING Vysya Bank had approved the raising of upper tier II capital through unlisted yen denominated bonds from the parent ING N V. The amount would be equivalent to Rs 100 crore and the bond would have a tenure of 15 years with a call option at the end of 10 years.

ING Vysya Bank has 136 ATMs in the country. The bank also has over six lakh debit card users.

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