Indian Equity Research and Investment Strategy
We first reported about HCL Tech’s bid for Axon on the 4th of Sept. However, subsequently the company denied but we knew from our sources that it was only negotiating with the bankers.
HCLT intends to fund the all-cash GBP441mn ($818mn) deal through a GBP400mn loan and rest from internal cash. If all goes well, the process should complete by 1Q CY09. (more…)
The benchmark Indian indices Sensex and Nifty have corrected ~37% from their peak. However, the BSE Realty Index has fallen by 70% and some stocks in the property index have fallen more than that. Property prices have started correcting every where, Residential was the first one to be hit followed by Commercial and Retail now. Worli and Bandra Kurla Complex have seen big fall in rental values. We present to you the performance of Realty Stocks in the past 9 months. (more…)
Suzlon Energy will hold a board meeting on Sep 27, 2008 to consider a rights issue of equity shares to the extent of Rs18bn.
The target ceiling amount of Rs18 bn from the proposed rights issue corresponds to the 270 mn pounds consideration payable to Martifer by Dec 15, 2008 for acquiring its ~22.5% stake in REpower. Suzlon’s management had then indicated that the company had secured an in-principle tie-up for euro-denominated funding for the transaction. Accordingly, we view the decision to raise funds via any form of equity offering as a negative surprise.
Further, Suzlon Green Power (100% owned by the Tanti family), has committed to set up 3,500MW requiring investments of US$5bn in green assets over five years, in India and China. One has to view these developments cautiously as it might not be very easy for Suzlon Green Power/Honiton Energy to raise funding for investments in wind farms under the backdrop of the global credit crisis.
Goldman Sachs [GS] in a report has released few stocks in the Asia-PAC region which have the potential to double within the next 2 years from current levels and Axis Bank from India has made it to the list.
According to GS strong consumer and corporate banking franchise, the latter to be driven by branch expansion, Axis is poised to emerge as a key competitor within Indian financial services. Corporate Banking will see strong capitalization, breadth of products, and cost competitiveness as key advantages. (more…)
India suffered its capitulation-like fall in June / July when the market fell 20% in a month. At that time, composite sentiment indicator dipped into fear zone. Since then, India has outperformed emerging markets and risen 11% in absolute rupee terms. Even though sentiment remains fragile, it is currently outside what we define as fear territory. (more…)
For the week ending 13 Sep ’08, headline (wholesale price index, WPI) inflation was 12.14%. The alarming part is the change to provisional inflation data for 19 Jul ’08 which has been raised 56bps to 12.54%. This revision is unexpectedly high and almost across-the-board.
The fall in the manufactured price index for two successive weeks is encouraging as such prices are generally more downwardly rigid than primary prices. If this trend continues, inflation could soften much faster than our current projection.
Vegetables, pulses, oil seeds and oil cake prices declined on a w-o-w basis. At the broader level, manufactured prices fell, primary prices rose and fuel remained unchanged.
Check out our Detailed Post on What Commodities and Materials make up the Indian Inflation Index.