2008 | Dalal Street

Equity Research

Cipla to undeperform – Macquarie Research

December 24, 20082 min read

Cipla employs a partnership model where it undertakes product development and manufacturing for international partners, without investing in building frontend presence. This will limit profit expansion over the long run. Nine out of the top 15 global players in 2001 have been acquired by now and ongoing consolidation appears inevitable. Cipla faces the risk of its partners getting acquired and the acquirer not being willing to source products. Also, given the fierce competition, its partners have substantial bargaining power.

Cipla’s Margins are Sensitive to HIV (more…)

Breaking Corporate India Earnings News

On Wipro’s Citi Technology Acquisition – Analysis

December 24, 20081 min read

Wipro has acquired Citi Tech Services (CITOS), Citigroup’s India-based captive, for an all-cash deal of US$127m. CITOS has CY08 projected revenue of US$80m.

According to our estimates, Citi would, through CITOS, provide Wipro with revenue of at least US$500m over the next six-year period. The acquisition is expected to close in Mar-09. [The same way like TCS – Citi BPO Deal that happened in October-08]

Operations of CITOS:
CITOS provides Technology Infrastructure Services (TIS) and application services. It has about 2,050 people (1,650 employees and 400 on contract) and development facilities in four locations – two each in Mumbai and Chennai. CITOS gets business from Citi entities worldwide.

On a TTM basis, CITOS has an EBIDTA margin and NPM of ~38% and ~42%, respectively, assuming an annual run-rate of US$80m in revenue.

Economy, Markets and Macro Views

Satyam’s Raju Vs Anil Ambani – Corporate Governance

December 24, 20082 min read

The past few days have been terrible for Satyam Computers and B. Ramalinga Raju. The company has been in the news for all wrong reasons first a failed merger of Maytas Properties & Infrastructure into Satyam Computers and the ban by World Bank for Data Theft at Satyam’s Campus.

B. Raju – Scapegoat of Economic downturn & Activism of Corporate Governance: Yes, you read that right. We believe, B. Raju is the victim in the current scenario. If you have read the book, The Polyester Prince – Biography of Dhirubhai Ambani, you will know how to put dirty corporate governance into practice in India.

We feel, B. Raju and his son should have taken a lesson from Anil Ambani on how to merge or transfer successful projects into different companies. B. Raju got the timing wrong as well and is thus a victim today [Imagine would anybody have objected to this deal had it happened in Dec 2007 ?]. Reliance Power IPO Scam was a much bigger issue but everybody including the regulators were mere spectators. (more…)

Equity Research

Zee still has more shows in the Top100

December 23, 20082 min read

Zee is third behind Colors in ratings but still has more shows in the Top100. Star Plus has regained the number 1 slot with 24% share of the Hindi GEC audience. While Colors continues to be number 2 at 20% share, Zee is close behind at 17% and actually has more shows in the Top100 than Colors.

Sports business is a key part of Zee’s bouquet strength; helping the company drive higher subscription revenues. Sports revenues have averaged 12.5% of Zee’s total revenues in the past 8 quarters but EBITDA contribution has been marginally negative. With the sports business strategy revolving around cricket, securing exclusive telecasting rights remains key to its (more…)

Economy, Markets and Macro Views

Satyam Computers + Maytas Scam on Conference Call

December 23, 20083 min read

The Rajus of Satyam Computer who had painted a fantastic picture of their IT Services [we call it modern day slave trading] business appear to be skating on a thin layer of ice with global meltdown in BFSI segment. The company absolutely has no corporate governance.

The management came for a face saving exercise and decided to host an analyst call. We are presenting an excerpt from the same, (more…)

Breaking Corporate India Earnings News

JP Associates Mergers – Impact Analysis

December 23, 20081 min read

Jai Prakash Associates [JPA] proposes to merge the following companies with itself wef April 1, 2008.

Jaypee Hotels Ltd (existing 72% stake, owns Jaypee Palace Hotel (Agra), Jaypee Vasant Continental and Jaypee Siddharth Hotel (New Delhi))

Jaypee Cement Ltd (existing 100% stake)

Gujarat Anjan Cement Ltd (existing 100% stake, setting up ~ 2.4 mtpa cement capacity in Gujarat by FY10)

Jaiprakash Enterprises Ltd (owns 15% stake in Jaypee Power Ventures. Jaypee Power Ventures in turn owns power assets of Vishnuprayag hydro, Siddhie and Karcham Wangtoo (55%)). (Outstanding share capital and stake held by JPA is not known)

The impact of merging three subsidiaries Jaypee Hotels, Jaypee Cements and Gujarat Anjan Cement with JPA is negligible. Equity share capital is diluted by 1.3%, JPA’s standalone PAT increases by 0.8%. We await details of the outstanding share capital and stake held by JPA in Jaiprakash Enterprises to assess its impact on JPA.

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