CP | Dalal Street

JP Morgan Upgrades India after a Year

January 8, 20092 min read

JP Morgan equity research upgraded India to neutral from underweight. They were underweight on 18 January 2008 due to expensive valuations, high earnings growth expectations, rising inflation, high borrowing costs, weak currency and widening twin deficits. Many of these factors have now reversed. Monetary and fiscal policies have turned significantly pro-growth.

Over the past few months, RBI and the Government has taken measures to control the inflation [though Food Prices are still high] and ensure credit flow to the productive sectors rather than fuel a bubble in Real Estate and restructure debt where needed. (more…)

Breaking Corporate India Earnings News

Sun Pharma gets USFDA approvals on controlled substance

January 8, 20091 min read

Drug major Sun Pharmaceutical Industries along with its subsidiaries has secured its first US Food and Drug Administration approval to sell the generic version of a controlled substance in tablet form and has also received final approval from USFDA for the various Abbreviated New Drug Applications (ANDA).

The company has received the approval for Hydrocodone with APAP, its first approvals for product based on controlled substances.

The company has also received approval for generic versions of cholesterol-fighting Lopid, Aredia, used to treat high blood calcium, and anti-allergent Phenargen in multiple strengths.

Mutual Funds Review

Fund Managers who Sold Satyam ?

January 7, 20092 min read

Sensing Trouble or whatever, some smart fund managers sold Satyam Computers. HDFC Tax Saver and HSBC Equity completely exited their positions in Satyam as on Dec-31st 2008. HDFc Long Term Advantage Fund reducedi ts esposure but didn’t completely exit Satyam in Dec-08. IDFC and Kotak fund managers also completely exitted Satyam in Dec-08.

However, HDFC Top 200 and HDFC Equity funds increased their exposure to Satyam [less than 2.5% of total assets] in the month of Dec-08. Both th funds are managed by Sr. fund Manager Prashant Jain. In the last 12 months his over aggressive investment bet on ICICI Bank has already led to the under performance of both of these funds compared to Reliance Growth Fund.

However, we need to take a macro view on the fund and the management before taking any extreme decision of switching like Dhirendra Kumar recommends. Here is Satyam’s complete holding picture by Domestic Mutual Funds.[PDF]

Update on Feb-5-2009:
HDFC Mutual Fund has sold 50 Lakh Shares of Satyam Computers on Jan-2nd. So the loss from Satyam is negligible in the funds we recommend. Economic Times of Feb-05 carries an article on who all sold Satyam before Jan-7th when the stock crashed.

Breaking Corporate India Earnings News

Price Waterhouse Auditor of Satyam

January 7, 20091 min read

PriceWaterhouse Coopers – PwC India is the Auditor of Satyam Computers which let the $1 bn scam happen under its nose.

Some of the companies mentioned below might come under pressure as they have Auditor as PwC.

Colgate Palmolive, Coromandel Fert
Cummins India, Gateway Distpark
GlaxoSmith C H L, GMR Infra.
Graphite India, HCL Infosystems
HCL Technologies, Hinduja Ventures
Info Edge (India) ,Infotech Enterprises
Ingersoll-Rand, Jagran Prakashan
Kesoram Inds, Lanco Infratech
Marico, Maruti Suzuki
Mastek, Max India
Moser Baer (I), Motherson Sumi
NDTV, NIIT, NIIT Tech.
Piramal Healthcar, Religare Enterprises
Satyam Computers, Simplex Infra
United Breweries, United Spirits
UTV Software & Co, Glenmark Pharma and Novartis India.

Breaking Corporate India Earnings News

Satyam’s Raju Confesses $1 bn Fraud in Accounts

January 7, 20091 min read

Satyam Computers Services Ltd Founder and Chairman confessed of accounting fraud to the extend of $1 bn. Excerpts from Raju’s letter follows,

The Balance Sheet carries as of Sept 30, 2008,

Non existent cash and bank balances of Rs 5,040 cr
An accrued interest of Rs 376 cr which is non-existent
An understated liability of Rs 1,230 cr on account of funds arranged by me
An overstated Debtor’s position of Rs 490 cr as against Rs 2,651 cr reflected in the books

For the September Quarter, a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore was reported as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore.

The gap in the Balance Sheet is on account of inflated profits over a period of last several years. What started as a margina gap between actual accounting profits and the one reflected in books of accounts continued to grow over the years… Read the full letter here [PDF]

So who is next in line ? Anil Ambani’s Reliance Communications is already probed for Evasions. Indian Real Estate Companies are also known for their Inflated Land Bank Values… Will the truth ever come to light ?

Economy, Markets and Macro Views

Expectations for Q3 – Merrill

January 6, 20092 min read

Indian Market is bracing for a poor set of results from corporate India for the quarter ended December 2008 – how bad ? Merrill bottom-up forecasts point to a slight drop in EBIDTA for the Sensex companies – we have not seen this in the past 10 years. Or there is likely a 2% increase in net profit largely due to – bond gains for banks and lower taxes, EPS would drop 1%. Nine out of the 30 Sensex companies are likely to report a decline in profits. (more…)

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