Indian Equity Research and Investment Strategy
Private equity funds General Atlantic, Blackstone and Warburg Pincus have shown interest in ICICI Venture’s 63% stake in Infomedia India. Infomedia India is Google’s authorized Adwords resellers in India.
Reportedly, the firm buying the stake will have to make an open offer and also pay a controlling premium. The buyer will have to put in more than Rs 400 crore for the acquisition.
Infomedia’s market capitalisation is Rs 505.98 crore, based on its current price of Rs 256.45 at the BSE.
KS Oils has entered into joint venture in Malaysia with a stake of 49% for the purpose of investments / acquisitions of palm plantations / manufacture of crude palm oil.
This joint venture would enable the company’s long term objective of backward integration and to secure raw materials sourcing for its crude palm oil requirement from South East Asia. The joint venture company is also in the process of acquiring its first plantation in Malaysia for a negotiated consideration up to 11.50 Malaysian ringitt.
Punjab Chemicals and Crop Protection is in the final round of negotiations to acquire a 30% stake in PSD Chemicals, a privately-held firm in the US. Reportedly, the total deal size could be around Rs 100 crore.
The acquisition will give the company an access into the North America’s $7 billion agrochemicals market, which is largest in the world.
ADAG group company, Reliance Energy is planning to spin off EPC division into a separate company.
The engineering, procurement and construction (EPC) division’s revenue was Rs 2094.56 crore in the the year ended March 2007 (FY 2007), almost a third of REL’s total revenue of Rs 5836.62 crore in the same phase. The EPC division contributed about 27% of the profit before interest & tax (PBIT) of Rs 446.12 crore in FY 2007.
When elder brother Mukesh wants a centralized holding company [RIL] , Anil Ambani is doing the opposite – creating more and more companies to get listed on the exchanges and have a bigger daily Satta 🙂
Mangalore Refinery & Petrochemicals (MRPL) and a subsidiary of ONGC, has signed a 4-year product supply agreement, extendable by another two years, with Shell India Marketing. The products include all grades of MS and HSD. The company started offering products to Shell in 2004 and since then, their off-take has been steadily rising, which reiterate the confidence reposed by Shell on the company’s products, in terms of quality and service. Shell India is presently uplifting almost all of their fuel requirements from the company since 2004 under a product supply pact valid till October 2007.
The new agreement which will become operational from October 2007 covers not only fuel supply but also infrastructure sharing & hospitality and collaboration on health, security, safety and environmental management procedures & practices.
UBS Securities has upgraded the stock of ITC to Buy from Neutral with a price target of Rs 200.
ITC’s cigarette volumes is expected to be down by 4.4% in FY08, previous forecast a 6.5% fall. With strength in consumer spending, cigarette volumes held up well in Q1, despite imposition of a 12.5% VAT rate and a 33.5% trade tax in UP. Expect volumes to stabilise in Q2 and to recover in Q3. ITC’s multiple price points in its cigarette portfolio has allowed the business to move the consumer across segments rather than lose volumes. Filter cigarettes have held volumes better than the non-filter variety. This has improved the revenue mix.
ITC’s FMCG business is driving strong growth in the non-tobacco segments. Losses have stabilised and look set to decline. The hotel and paperboard businesses are recording strong growth and are expanding capacity.
Raised FY08 EPS forecast to Rs8.4 (+9%), and FY09E EPS to Rs9.9 (+13%). The increase reflects a rebound in cigarette volumes. New price target is benchmarked at 20x FY09E earnings, the mid-point of ITC’s valuation band.
Deutsche Bank has initiated coverage on IDFC, India’s only listed infrastructure financing company with a Price Target of Rs 150.
IDFC’s fee incomes will grow aggressively at an estimated CAGR of 66% during FY07-FY10E, and from 17% of total income in FY07 to 33% in FY10E. Fees are expected to rise from 17% of total income in FY07 to 33% in FY10E. Ramp-up of the principal investment business provides added equity upside potential.
Since it is not realistically possible to improve the RoE of the lending business to beyond 18-19% because of the expected spread compression, IDFC has been deliberately allocating more capital and management time to the other forms of serving the same infrastructure finance objective. These are principal investments, private equity, project equity and investment banking. Globally, infrastructure lending has progressed in this direction.
IDFC currently has $670mn FUM under private equity. One fund of $220mn is already fully deployed. Of the next proposed fund of $450mn, 35% is already committed, and should be 65-70% committed by June 2008. IDFC holds investments through PE in Bharti Airtel, NTPC, Indraprastha Gas, ONGC, etc
Sum of Parts Valuation of IDFC:
Value from Infrastructure Financing Rs120
Value form SSKI Rs 7.2
Value from NSE and ARCIL stake RS 7.0
Value from IDFC Private Equity Rs 8.3
Value from IDFC Project Equity Rs 5.1
Value from gains on listed investments Rs 3.0
Here is Citigroup’s Research Report on IDFC.