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Orchid - Merck drug discovery Insight

Tuesday, September 30, 2008

Orchid Research Laboratories (i.e. ORLL - the wholly-owned drug discovery subsidiary of Orchid) and Merck will work to identify and develop novel antibacterial and anti fungal compounds as clinically validated drug candidates. Orchid will undertake discovery and candidate development through Phase IIa human clinical trials. Merck will conduct late-stage clinical development and commercialization if regulatory approval is granted.

Orchid will get an undisclosed upfront sum, and is eligible to receive payments totaling more than US$100 million associated with the achievement of various research and development milestones.

The collaborative pact with Merck - a global innovator, is an landmark achievement for Orchid's research arm as it had been undertaking efforts to secure business alliances with pharmaceutical multinational corporations. So far as ORLL is concerned, its been developing its pipeline of new chemical entities (NCEs) in the fields of oncology, inflammation, diabetes and anti-infectives.

Published by Webmaster @ 9:14 AM IST.


DTH market to grow 5 times in 4 years

Monday, September 29, 2008

Dish TV expects the Indian DTH market to grow five times in the next 4 years. Dish TV CEO Vinay Agarwal said,
We believe that the DTH market will grow exponentially and is estimated to touch 30 million subscribers by 2012 from 6-7 million now. We aim to add five million subscribers by March 2009.
In a separate yet related development, the contentious issue of
payment of carriage fees by broadcasters to the cable industry for carrying their channels has brought forward divisions among the various stakeholders while the Telecom Regulatory Authority of India (TRAI) remains undecided on the subject. Some of the new broadcasters have suggested auctioning parts of cable spectrum as a possible solution towards fixing the ground rules for carriage fees that is charged by the large cable operators from broadcasters, Multi System Operators (MSOs) have called for terming carriage fees as placement fees. The direct-to-home (DTH) firms are not keen on fixing any sort of legal norms for carriage fees.

Published by Webmaster @ 10:55 AM IST.


Suzlon Energy Rights - Negative Surprise

Friday, September 26, 2008

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.

Published by Webmaster @ 2:25 PM IST.


Inflation Unchanged at 12.14%

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.

Published by Webmaster @ 6:30 AM IST.


Is the Worst Over ? Where are We headed ?

Wednesday, September 24, 2008

Two big shocks for the Indian Economy were - High Commodity prices and Inflation thereof combined with Global credit crisis. The former had the most negative consequences on the health of Indian economy while the latter will have a minor impact on it.

The interest rates have peaked, and in the current global environment, the central bank will remain in liquidity injection mode. Second, lower oil prices takes away a significant risk. Third, the monsoons, another critical concern for agriculture and overall growth, have been near normal and spread widely. the financial sector remains essentially sound, mortgages are a fraction of total credit, and exposure to inflated real estate is small.

However we are still into the downturn of the business cycle, with growth slowing and earnings downgrades yet to come, valuations are still not too cheap. Concerns remain on the fiscal deficit and political risks, corporate spreads have increased significantly, and the deterioration in the global environment with continued risk aversion suggests that the forecast is still far from sunny.

Published by Komal M @ 2:07 PM IST.


Cairn India hires two drilling rigs

Tuesday, September 23, 2008

Cairn India has hired two custom-made drilling rigs from Weatherford International, built by NOV, Houston, Texas, especially for Cairn to assist it in the process of extracting oil in Barmer in Rajasthan. The cost of hiring is estimated at $86 million.

The first rig has already reached the Haldia port and the second is expected to reach Mundra port today.

These rigs, which are highly automated, require very less human intervention and are designed to move rapidly from slot to slot on a pad location and also in between the pad locations. It is from these slots that the wells will be drilled.

The Barmer field is expected to produce 175,000 barrels per day of oil equivalent by 2010. The oil reserves discovered in 2004, is estimated to contain 3.7 billion barrels of oil equivalent, of which one billion is extractable.

Published by Webmaster @ 12:00 PM IST.


Punj Lloyd bags contract from Waha Oil

Monday, September 22, 2008

Punj Lloyd Upstream, a subsidiary of Punj Lloyd Ltd. hasi nformed us that the company has received a Letter of Intent for a contract worth USD 42 million in Libya for deploying two onshore rigs.

It said,
The contract requires drilling exploratory wells in the Gialo oilfield of the prolific Sirte Basin for Waha Oil Company, a Joint Venture between State-owned National Oil Company and Conoco Phillips, Amerada Hess, and Marathon Corporation of the United States. Waha Oil Company is the second largest crude oil producer in Libya. Punj Lloyd is already present in Libya through a pipeline project for Sirte Oil Company.

Published by Webmaster @ 6:15 PM IST.


Addressing the Market Liquidity

Last week apart from raising interest rates on Foreign Currency Deposits, the RBI also took a some more measures. Permitting back to access the Liquidity Adjustment Facility (LAF) to the extent of 1% of net demand and time liabilities which amounts to an indirect reduction in the SLR and conducting the LAF twice daily. Over the week, the RBI injected liquidity to the tune of Rs 655bn.

RBI has sufficient ammunition to minimize the impact of the financial turmoil on the real economy. Tools include - The un-wind of the market stabilization bonds where the o/s amount is currently Rs1.8trillion. Domestic savings, which are currently at 34.8% of GDP is an additional cushion of liquidity.

India is not insulated from the current turmoil. However, the direct impact is limited and would depend on timely policy response in areas such as easing capital account norms and reduction in SLR/CRR to ensure that adequate credit is available for the real economy.

Published by Webmaster @ 12:26 PM IST.


US Financial to Impact Indian IT

Friday, September 19, 2008

The IT spending in US Financial companies is likely to see a drop of 4% YoY [Dec-08] This contraction will continue for at least a year and the turnaround could happen only by 2010. Volumes for India IT companies are likely to be severely affected in F2010, although too uncertain to estimate as of now.

Even in the best case for Indian IT companies if the spending is unlikely to be cut down, due to collapse and M&A activities, BSFI segment will easily contract by 2-3%. The business environment has deteriorated considerably faster than what the street may have expected.

Ahead of th results, Analysts expect Infosys to lower its F2009 organic USD revenue guidance by ~2.5% to at least US$4,850mn in the worst case (vs. current guidance of US$4,970-5,050mn). Likewise, Satyam may also lower its F2009 USD revenue guidance to US$2,600mn (21.5% YoY revenue growth) from current guidance of 24-26% YoY revenue growth.

With 10% depreciation of the INR, IT companies are likely to stay on target for their earnings in Rupee terms.

Published by Komal M @ 6:39 PM IST.


India Textiles Footwear Exports - Lackluster

Thursday, September 18, 2008

India's overall textile exports to the US fell by 3.6% while overall US imports fell by 1.7% in July 2008. China's textile exports in July were up 0.7% yoy. In the apparel category, imports by the US fell by 0.5% while India's apparel exports fell by 4.9% and China apparel exports grew by 1.1%.

India's market share in textile export slipped 9bps yoy. China continued to regain market share in August, as its share rose to 37.0%, up about 89 bps yoy.

Despite 12% depreciation of the Indian Rupee versus RMB from Jan 2008 to July 2008. However, India does not seem to have benefited from this relative improvement in competitiveness yet.

Published by Webmaster @ 12:11 AM IST.


RBI Support INR - NRE Deposit Rates Raised

Wednesday, September 17, 2008

With the rupee weakening to a low of Rs46.8/US$1 and call money rates spiking to 16%, the RBI announced a host of measures late last evening to stem market volatility.
Given the volatile market situation, near term rupee weakness is likely to continue and could trade in the Rs45-47 range. Although portfolio flows will likely remain negative, FDI remains buoyant and hence by March 09 INR is likely to be around Rs 43 levels to the USD.

Published by Webmaster @ 9:26 AM IST.


Corporate Advance Tax for Q2-FY09

Tuesday, September 16, 2008

We have obtained information about Advance Tax numbers by various corporates in India paid for Q2 of FY09. Here is the list [All figures in Rs Crore],
Except Tata Steel and Tata Motors, rest have seen an increase in the numbers compared YoY basis.

Advance Tax Numbers for Q1- FY2009.

Update:
Macquarie analysis shows that advance taxes paid in a quarter by a company has no correlation. 75% of the time the advance tax paid in a particular quarter is different from the accounting tax by more than 25%. There is absolutely no pattern - not even a normal distribution, not even a systemic understatement.

Published by Webmaster @ 11:56 AM IST.


Massive Sell of in Indian IT triggerd by Lehman + Merill Woes

The filing of Chapter 11 by Lehman Bros and Bank of America's buyout of Merrill Lynch has increased concerns about the possible impact on Indian IT leading to a sharp sell-off. Prima facie, expect a 2-3%/4-5% negative impact on FY09E/FY10E US$ revenues if the US financial sector continues to show more problems.

Lehman is not a big customer for any of the large Indian IT companies. Merrill is a big customer for Satyam and TCS and Bank of America is a big customer for TCS and Infosys. There could be some impact on Satyam over the coming 2-3 quarters.

Goldman Sachs just minutes ago removed Satyam Computers from favorite growth list due to stop loss. Satyam is down 15.4% since its addition to the favorite growth list on July-31, 2008, exceeding stop loss limit, vs. the S&P 500 down 5.9%.

Published by Webmaster @ 11:48 AM IST.


Stocks held by AIG in India

Monday, September 15, 2008

American International Group (AIG) too has been facing liquidity crisis and has been working on plans to raise capital after its three straight quarterly losses totally $18.5 billion. It has also asked Federal Reserve for a $40 billion bridge loan. Below, we enlist the holdings of AIG in India, which could face pressure in case of liquidation.

Name of the Indian Company, Investment Arm of AIG and finally percentage shares held in the company.

AIA Engg AIG Global Investment Corporation 1.16
AIA Engg AIG Global Investment Corporation 1.26
AIA Engg AIG Global Investment Corporation 1.3

Bharati Shipyard AIG Trustee Company India Pvt Ltd 1.19
Bharati Shipyard Aig Trustee Company India Pvt Ltd 1.14
Bharati Shipyard AIG Trustee Company P Ltd - AIG India Equity Fund 1.32

Federal Bank AIG Global Investment Partners LP 1.0

Gayatri Projects AIG Trustee Company India Pvt Ltd 1.4
Gayatri Projects AIG Trustee Company India Pvt Ltd 2.07
Gokaldas Exports Aig Trustee Company India Pvt Ltd 1.05
Gokaldas Exports Aig Trustee Company India Pvt Ltd 1.12

Indo Tech AIG Global Investment Corpn Asia 2.12
Ipca Labs. AIG Trustee Company India Pvt Ltd 2.0
Ipca Labs. AIG Trustee Company India Pvt Ltd 1.4

Kolte Patil Developers AIG Trustee Company India Pvt Ltd 1.06

Mindtree Ltd AIG Offshore Systems Service Inc 3.27
Mindtree Ltd AIG Offshore Systems Service Inc 3.28
Mindtree Ltd AIG Offshore Systems Service Inc 3.33

NIIT Tech. AIG Global Investment Corp 1.7
NIIT Tech. AIG Global Investment Corp 2.29
NIIT Tech. AIG Global Investment Corporation 1.5

Nucleus Software AIG Global Investment Corporation 1.58

Sun Pharma Advan AIG Global Investment Corporation Asia Ltd 1.17
Sun Pharma Advan AIG Global Investment Corporation Asia Ltd 1.81
Sun Pharma Advan AIG Global Investment Corporation Asia Ltd 2.39

Unity Infra AIG Global Investment Corporation (ASIA) 1.05

Published by Webmaster @ 4:32 PM IST.


Merrill Holding in Indian Stocks

Sunday, September 14, 2008

Here is the tentative holding of Merill Lynch in various Indian companies. Name of the company followed by stake in percentage.

Resurgere Mines 10.51 Intellvisions Sf 10
Kewal Kiran Clot 9.74 Taneja Aerospace 9.47
Parekh Aluminex 8.31 Vakrangee Soft. 7.74
HOV Services 7.34 Pratibha Inds 7.19
Broadcast Init 6.73 Classic Diamonds 6.5
Northgate Techno 6.06 Pokarna 5.95
Educomp Solution 5.7 Orchid Chemicals 5.31
BSEL Infrastruc. 5.18 Shree Renuka Sug 5.11
Horizon Infrastr 4.97 Tulip Telecom 4.88
Prakash Inds. 4.66 Arihant Foundatn 4.63
United Spirits 4.6 Marg 4.39
Divi's Lab 4.33 Asahi Songwon 4.32
CHI Investments 4.21 Suprajit Engg. 4.2
Ansal Housing 4.18 Prajay Engg. 4.06
Panacea Biotec 3.95 Lancor Holdings 3.84
Matrix Labs. 3.74 Jupiter Bio. 3.72
Zodiac Cloth. Co 3.72 CEAT 3.69
HTMT Global 3.52 GRUH Finance 3.46
Unity Infra 3.33 Tanla Solutions 3.25
Bajaj Hindusthan 3.24 Nucleus Software 3.19
NIIT Tech. 3.12 Allsec Tech 3.11
Steel Str. Wheel 3.03 Ganesh Housing 2.95
MSK Projects 2.91 Cranes Software 2.9
Indiabulls Fin. 2.87 Stone India 2.86
Mahindra Lifespace 2.84 Wire & Wireless 2.77
Shasun Chemicals 2.73 Nitco 2.72
Asian Electronic 2.68 Action Construct 2.64
Indoco Remedies 2.62 Gremach Infra 2.6
Navin Fluorine 2.6 Bhagyanagar Indi 2.59
ICICI Bank 2.59 Ador Welding 2.57
Aptech 2.57 Infotech Enterpr 2.56
Bharati Shipyard 2.55 Rohit Ferro 2.44
Take Solutions 2.36 Deep Industries 2.34
Strides Arcolab 2.34 Modison Metals 2.28
J Kumar Infra 2.24 ICSA (India) 2.19
S Kumars Nation 2.18 Salora Intl. 2.17
IFSL 2.14 TTK Prestige 2.13
Patni Computer 2.11 Puravankara Proj 2.1
Bilpower 2.09 Royal Orchid Hot 2.06
Jyoti Structures 2.05 McNally Bharat 2.04
Redington India 2.04 Vimta Labs 2.04
Ansal Properties 2.02 Great Offshore 2
Prithvi Info 2 Sonata Software 2

Published by Webmaster @ 6:39 PM IST.


Capital Goods Sector Boost July IIP - Below Average Rainfall

Saturday, September 13, 2008

We all know that the July-08 India Industrial Production was at 7.1% from 5.4% the previous month. The key reason for the higher than expected rise in the July was the rebound in capital goods up 22% - nearly twice the growth seen earlier this fiscal. Capital goods have a weight age of 9.3% in the overall index of industrial production. There are 53 items that are classified under capital goods and as seen in the table below, 17 of these items recorded growth rates in excess of 25% in Jul08 over Jul07. These include ship building, offshore platforms, turbines, and electric generators.

Rainfall during June 1 to Sept 10 remained 3% below normal. Crop sowing data is also unsatisfactory with sowing down 3% YoY. Our GDP forecasts for FY09 factor in marginally lower agriculture growth of 2% with headline GDP at 7.5%.

Published by Webmaster @ 5:02 PM IST.


Suzlon Energy secures Martifer contract

Thursday, September 11, 2008

Suzlon Energy A/S, Denmark, the wholly-owned subsidiary of Suzlon Energy, has secured a major contract with Martifer for the delivery of 29 S88-2.l MW turbines, totaling a capacity of 60.9 MW, to projects in Romania.

This order is company's first wind turbine order in Romania. In addition, the company and Martifer have also signed a contract for wind power development in Portugal, supplying nine S88 turbines between the Baiao and Vila Franca de Xira wind farms for a total 18.9 MW of capacity.

Published by Webmaster @ 10:27 AM IST.


Core sector growth slows down to 4.3%

Growth of core sector industries has slowed down to 4.3% in July compared to 7.2% during same month of the last fiscal. For the four month period of April-July 2008, growth was registered at 3.7% compared to 6.6% during the same period last year. The following chart shows the comparison between July-07 and July-08.
India Core Sector GrowthHowever, the growth in July was better than the average growth during the first three months of current fiscal. The main contributor to the growth was coal that grew at 5.5% compared to 1.1% last year. The only other industry to show greater growth on a year-on-year basis was petro products, which grew at 11.8% in July compared to 4.7% last year.

All other core sector industries registered a slower growth compared to July last year, with crude putting the worst show by posting a negative growth of 3% compared to 0.9% last year. Steel was another industry that disappointed with merely 1.9% growth compared to 10.8% last year.

Published by Webmaster @ 10:18 AM IST.


Oil - Gas subsidy pain eases

Monday, September 08, 2008

International Crude oil prices have corrected 26% from their July 3 highs on fears of slowing global growth leading to demand destruction.

Subsidies on petrol and diesel are down to Rs2.9/ltr and Rs8.1/ltr, respectively, down from a high of Rs14/ltr and Rs25/ltr. LPG and SKO losses are down 22-25% to Rs262/cylinder and Rs27/ltr. Overall subsidy losses are down 52% from peak level in May-08 to ~Rs91B

If crude stays at US$105-110/bbl for the rest of FY09, annual under-recoveries will come down to Rs1.55-1.60 trillion from over Rs2.0 trillion estimated in early-Jun08, when price hikes and duty cuts were announced. This exactly takes care of Rs400bn unaccounted gap between the Finmin's bonds allocation vs. Petroleum Ministry's wish

Published by Webmaster @ 10:11 AM IST.


Inflation Standstill - Rate Cuts Far Off

Friday, September 05, 2008

The rising curve of Inflation for now is moving sideways. For the week ending 23 Aug '08, headline (wholesale price index, WPI) inflation was 12.34%, in line with market expectations.The decline in the inflation rate this week has been due to w-o-w softening of primary, in particular, vegetable prices. Egg, meat and cereal prices also declined. Within manufactured products, edible oil prices fell.

With inflation softening over the past two weeks and the change of guard at the RBI, expectations have been raised that a rate cut could come soon. However, we do not think so. In over view the RBI should maintain its policy stance until inflation corrects significantly and remains low for a while.

Published by Sunil K @ 12:06 PM IST.


Subbarao RBI Governor Appointment - Political Move

Thursday, September 04, 2008

The appointment of Dr. Subbarao as the new RBI Governor has seen as a Political move by Foreign Financial Institutions effectively designed to put a halt to the progressive monetary tightening that Governor Reddy has implemented since he took the job in September 2003.

On 28 July, Dr. Subbarao spoke to Bloomberg and quoted that raising rates is the "obvious" answer to surging prices. So we can expect interest rate calls unchanged, envisaging 50bps of repo rate hikes and 50-75bps on the CRR by end CY2008. The rate reductions will only begin in 2H CY2009 when growth may have slipped below 7%.

A period of below trend growth, which the monetary tightening may well engineer, is likely to be deemed as an inevitable consequence of controlling inflation expectations and easing the many bottlenecks in the economy.

Published by Sunil K @ 2:00 PM IST.


HCL Tech counter bid Infosys' Axon ?

We have reliably learnt that HCL technologies is preparing a counter bid to Infosys' bid for Axon. We had covered the implications of Axon takeover by Infosys on the 26th of August and had clarly stated at the end that a counter bid is not ruled out.

Our due dilligence indicates that HCL Technologies has $100 mn in cash and maybe upto $500 mn including short term investments. HCL has appointed Merill to help it counter bid and arrange for part financing the deal.

HCL Technologies is not present in the SAP domain and the acqusition will complement its existing vericals and strengthen is base in Europe. HCL already is one of the best local employers in the European union and may not face any hurdles while obtaing the clearance if it wins the bid.

Published by Webmaster @ 12:01 PM IST.


2 + 4 Wheeler Auto Sales for August

Tuesday, September 02, 2008

Breaking NewsAutomobile dealer dispatches were mixed this month with strong dispatches in two wheelers (especially Hero Honda), and relatively weaker trends visible in the passenger car segment.

Impressive growth was driven by Hero Honda dealer dispatches (+27% Y/Y). Bajaj Auto's domestic sales declined 7% Y/Y, whilst TVS' domestic sales rose a modest 6% Y/Y. Hero Honda continues to build inventory levels ahead of the festive season. Sequentially, both motorcycle and 2 wheeler sales were up ~6% and 5% respectively.

Maruti Suzuki's sales fell by 10% Y/Y due to a sharp decline in A2 (compact segment) sales. Retail offtake continues to be weak, given the adverse macro environment - higher interest rates and an erosion of wealth (in both property and financial markets)

Mahindra & Mahindra's August sales rose 8% YoY; driven by strong tractor sales (+16% YoY). UV sales were muted (+2% Y/Y) as strong growth in non Scorpio sales (+12% Y/Y) was offset by weak Scorpio sales (-21% YoY).

Published by Komal M @ 12:53 PM IST.


Indian Rupee New Low Vs Dollar

Monday, September 01, 2008

The Indian Rupee has breached the 44 level and is weakening against the USD. The RBI is not really active in the market which is a blessing in disguise to the Exporters. Now, why is the RBI piling up USD ? Well, as an insurance cover :-)

The March 08 international investment position tells that, US$297bn fx reserves not withstanding, India still owes US$100+bn. This is why, in Gov Reddy is so reluctant to use fx to appreciate against inflation - as some Delhi economists advise - or float a sovereign wealth fund - as another section proposes - to acquire strategic CIS gas fields. Recall he let the INR temporarily slip Rs46+/USD in mid-06 rather than run down fx reserves. This, of course, begs the question why we still expect the RBI to stem depreciation? Because this time's different because of imported inflation.

You may also want to read the 50 factors that influence the value of USD.

Published by Webmaster @ 12:30 PM IST.