February, 2008 | Dalal Street

Reliance Infratel files for DRHP

February 4, 20081 min read

Reliance Communications has announced that Reliance Infratel, subsidiary of the company proposes an initial public offering – IPO of 8,91,64,100 equity shares of Rs 5 each for cash at a premium to be decided through the 100% book building process. The issue will constitute 10.05% of the post-issue paid-up equity capital of the company.

The company has filed its draft red herring prospectus with the Securities and Exchange Board of India (SEBI), on 04 February 2008.

The company is part of the Reliance Anil Dhirubhai Ambani group and its business is to build, own and operate telecommunication towers and related assets at designated sites and to provide these passive telecommunication infrastructure assets on a shared basis to wireless service providers and other communications service providers under long-term contracts. These customers use the space on the company’s telecommunication towers to install their active communication-related equipment to operate their wireless communications networks.

goBroadband reports that the company is on a aggressive expansion mode for FY2009 as it extends its GSM footprint on PAN-India basis.

Economy, Markets and Macro Views

Buy Punj Lloyd – Kotak

February 4, 20081 min read

Punj Lloyd took a hit on its bottom line last quarter due to project delay and cost overrun. However, the markets have reacted more than necessary considering the strong order-book the company enjoys.

Punj Lloyd’s management expects to settle these losses once the projects get over by March-April 2008. In that case, losses may get reversed. Kotak expects blended operating margins to be around 9% in FY08 and expect it to improve to 10.3% in FY09 and 11% by FY10. (more…)

Mutual Funds Review

HDFC Funds Underperform over 1 Year Period

February 4, 20082 min read

The markets maybe buoyant but our SIP investments have underperformed the markets in the past 6 months and 12 months period in the hands of HDFC Fund Managers [Prashant Jain, Chirag Setalvad and Vinay Kulkarni] .

HDFC Equity Fund:
Mainly focused on Large Cap stocks. This fund has delivered returns of 53.25% Vs 62.08% [S&P CNX 500]. However the fund continues to beat the benchmark for period longer than 3 years.

HDFC Top 200 Fund:
Has some exposure to Midcaps but a strict no to smallcap.This fund has delivered returns of 54.10% against benchmark [BSE 200] 60.03%. The fund continues to beat the benchmark for period longer than 3 years. Both the funds are managed by Sr. Fund Manager Mr. Prashant Jain, almost since inception. The fund manager believes in sticking to highly liquid stocks. In the past we have seen him pick-up turnaround companies or pick new winners and stick to them to reap the bounty. However, in the past 12 months their has been no aggression from the fund managers side but we continue to believe his performance will beat the benchmark over a 3+ year period.

HDFC Long Term Advantage Fund:
This fund was launched in the bear phase in Indian market. This fund has also failed to beat the benchmark SENSEX over a 12 month period. It generated returns of 40.36% Vs 46.84. [One cannot compare this fund for just 12 months period because investor funds are locked-in by default for 3 years] However, over a 3 year period the fund has beaten its benchmark index. The fund qualifies for ELSS investment tax benefit under section 80 of the IT act.

HDFC Tax Saver Fund Growth:
This fund saw change of guard with Tushar Pradhan moving to AIG and Vinay Kulkarni taking the drivers seat. This fund has again failed to beat its benchmark S&P 500 over 12 month period. However, it continues to beat benchmark and create wealth over longer term.

Since we advise Investors to have a long term view, we need to take atleast a 3 year period under review before one can pull the plug.

India IPO Reviews and Updates

IRB Infrastructure Developers – Review

February 3, 20082 min read

IRB is an infrastructure development and construction company in India with extensive experience in the roads and highways sector. The Company has established business in the roads sector and has a large portfolio of completed and operational BOT projects in road infrastructure sector.

IRB also has an advantage of support of experienced promoters and skilled engineering staff. It has recently diversified into the real estate development sector in order to complement its infrastructure development business. Due to its early entrance in the BOT toll road business, IRB operates a number of BOT projects which contributes to robust cash flow and a healthy bottom-line. (more…)

Equity Research

Motherson Sumi Systems – Accumulate

February 3, 20081 min read

Motherson Sumi’s EBITDA margin declined as it scaled up operation in line with its key customer Hyundai Motor India’s upcoming new factory. Delay in commissioning of Hyundai’s Motor’s new factory in India from Oct 07 to Feb 08 has contributed to increase in staff and other expenditures and hence impacted Q3 FY08 margin. (more…)

Breaking Corporate India Earnings News

Hotel Leela + Puravankara Projects Result Overview

February 3, 20082 min read

Hotel Leela reported 3QFY08 revenues of Rs1,430m and net profit of Rs550m. Results are not comparable on a YoY basis because of merger of Kovalam Hotels, a subsidiary, during the quarter. Net profit for the quarter was augmented by high other income which includes gains of Rs69m on forex debt.

The company recorded a healthy EBITDA margin of 51.7% for the quarter on the back of 8% YoY ARR growth, led by 27% growth in Mumbai ARR while Bangalore ARR declined 12%, and high occupancy of 76% which was boosted by higher business and tourist traffic.

Properties on the anvil include hotels at Gurgaon (management contract), Udaipur, Chennai, Delhi, Hyderabad and Pune to be operational over next 2-3 years.

Puravankara Projects:Revenues grew 78% yoy to Rs1,505m while net profit increased 122% yoy to Rs631m on account of a sharp increase in EBITDA margin by 830bps YoY to 39.4% and net interest income of Rs62m in 3Q FY08,
compared to interest expense of Rs3m in 3Q FY07.

~72.8 acres of land added – 30 acres in Hyderabad near Hitech City and 42.8 acres in Sriperumbudur near Chennai. These are still to be included in our NAV estimate. 2) Area under construction has increased to 18.8m sq ft with the launch of two large residential projects in Chennai and Kolkata (JV with Keppel Land) with a total area of ~6m sq ft.

Puravankara’s large exposure to Bangalore and Chennai is an advantage over North India-based developers, since we believe South India appears to have lower supply risks.

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