Year: 2008

Ganesh Housing Corporation Ltd (GHCL) reported revenue growth of 180.4% for FY08 to Rs1.3b. Net profit grew 229.5% to Rs1.1b. EBITDA margins were 82.9% v/s 43.1% in FY07. For 4QFY08, revenue declined 53.9% YoY to Rs147m and net profit declined 61.8% YoY to Rs40m.

In 4QFY08, GHCL acquired 21.2msf land from promoter group companies for the Ognaj Township. This is part of the ~33msf land that was to be transferred from promoter group companies to GHCL.

The management is considering strategic tie-ups for development of key projects like – Million Minds IT SEZ (~13msf), and (b) Ognaj Township (~21msf). We believe this is a positive move, as these projects are vast and have an embedded execution challenge.

India’s current account deficit in FY08 rose to 1.5% of GDP, the highest since FY96. Despite a major rise in services exports and private transfers, the strong import growth widened the current account deficit.

• Due to higher oil prices, India’s CAD widened to US$17.4bn v/s US$ 9.7bn in FY07. This was slightly higher than our estimate of US$14.4bn.
• Remittances (classified under invisibles) touched a record high of US$40.8bn
• Capital flows led by strong portfolio flows (US$29.2bn) and loans (US$41.9bn were up by US$108bn.
• Including valuation changes, the overall accretion to reserves was US$110.5bn v/s US$47.6bn in FY07

Incorporating the latest BoP data, Analysts expect India’s CAD to widen to US$45 to $50bn or 3.6% to 3.9% of GDP which is a serious concern on the macro front.

India has introduced a plan to encourage investments in Wind power clean energy by giving generation-linked incentives of 50paise/kWh, in case investors can’t claim accelerated depreciation incentive. This scheme, is likely encourage those Independent Power Producers (IPPs) / foreign financial investors who have been either limited or absent from the market due to tax anomalies. This plan improves IPP project IRRs by 175-210bps. If successful, it could rejuvenate growth in the world’s 5th largest market with less than 20% potential tapped of the 45GW.

You should note that India has been an early adopter of renewable energy, with wind accounting for ~6% of installed capacity. More importantly, in 2007, 16% of new generation capacity add
was through wind turbines.

Panacea Biotec’s Q4 PAT (Rs249mn) was 3% lower than estimates. Revenues were 26% lower than estimates. While gross margin improved significantly by 450bps which reflects the price increase in polio vaccines, EBITDA margin (16.8% vs 18.7% last year) was lower on account of forex loss, and higher than expected personnel and R&D costs. Q4 PAT was saved largely by other income due to reversal of sales tax liability.

Expect Panacea to drive growth in FY09 through pentavalent combination and other vaccines launches. Likely progress on Anthrax vaccine tender award Dec’09, potential M&A activity, launches of IPV vaccine, Pharma NDDS dossier filings.

Laid back Modis who failed to turn around a company in 10 years have finally sold out of Spice Communications [Holds license in Karnataka and Punjab with Spectrum in 900MHz band] to Idea Cellular in a share swap ratio of 100:49. [49 Idea Shares for every 100 Spice]. Going forward what does the future look like for Idea Cellular ?

From the structure of Idea’s deal it appears that TMI [Telekom Malaysia] is keen to partner a larger player in the Indian Mobile growth story. TMI will acquire 14.99% equity (pre-Spice merger) in Idea at ~Rs157/share as a cash infusion implying post-merger valuation of Idea at ~13x FY10E-EV/EBITDA.

Additionally, TMI holds ~39.2% stake in Spice that will be swapped for a 4% stake in Idea post-merger. Eventually, TMI will hold one board seat in Idea & own between 18.5-20% stake in Idea depending on its participation in the open offer for Spice. The AV Birla group will hold ~46% stake post deal vs ~58% currently.