Dalal Street :: India Equity Research, Investment Analysis

India’s Budget + Current Account Deficit Problems

March 2, 20092 min read

India’s Current Account Deficit
Based on data for the first half of 2008/09, India’s current account looks to be heading for a fiscal year deficit of more than 3% of GDP. This would match
the highest ever shortfall since the data began in 1950/51.

During India’s Balance of Payments crisis, the peak full year deficit was 3% of GDP in 1990/91. The recent deterioration reflects the previous period of above-trend growth as well as the earlier oil price surge. The good news is that the external deficit is now significantly better covered by foreign (more…)

Economy, Markets and Macro Views

Reliance – RPL Merger Deal Analysis

March 2, 20092 min read

FreePress broke the news this morning about 1:16 swap ratio for RPL merger into RIL. RIL will extinguish the treasury stock from the merger and issue additional 69 mn (4.4% of current RIL share base) for minorities in RPL.

Analysis of the Deal:
It gives RIL access to about US$1.5 bn-US$1.8 bn of RPL’s annual cash flows (on full ramp up) for its various planned projects. (more…)

Equity Research

L&T Historical Performance in March

March 2, 20091 min read

L&T has been in the news for wrong reasons – Hostile bid for Satyam Computers which has eroded its stock price as Satyam’s Scam unfolded.

Investors who have destroyed wealth in the past 12 months in L&T have been asking about the performance of the stock in the month of March. Credit Suisse analyzed the historical performance of the stock in the past 16 years (more…)

Equity Research

OnMobile Global – Performance disappointing

March 1, 20091 min read

OnMobile Global reported 3Q FY09 revenues of Rs1157MM, up 19% Q/Q (due to seasonality of revenue recognition) and 44% Y/Y but 5% below our estimate. The EBIT margin of 25% jumped Q/Q but was also lower than expected – this seasonal jump is due to a large proportion of international revenues being booked in 3Q without the associated costs.

YTD (9M FY09) revenue growth was a creditable 51%; however, margins have come off sharply, leading to absolute EBITDA being flat Y/Y. (more…)

Breaking Corporate India Earnings News

Rural Consumption Story at Risk ? FY 10 GDP Estimates at 5.5%

February 28, 20091 min read

Growth was below ours and consensus estimates (6.1%), with the surprise element being the 2.2% contraction in agriculture (partly due to a high base effect). While industry growth slowed to 2.4%, growth in services remained buoyant – up 9.9% largely due to a reflection of the pay commission outgo (community services, up 17.3%). With 9MFY09 GDP growth at 6.9%, growth in 4QFY09 would need to come in at 7.6% in order for the government to achieve its 7.1% advance estimate put out earlier this month. This appears optimistic given the weakening global environment and continued contraction in trade.

The deceleration in investment continued, with fixed capital formation slowing to 5.3% in 3Q vs. 12.6%yoy during 1HFY09. However, headline consumption growth remained buoyant at 7.8% (vs. 7.3% in 1HFY09) with the deceleration in the private sector +5.4% being offset by the pay revision which is accounted under public consumption – up 24.6% yoy.

Citi revised India’s FY 2010 GDP expectations to 5.5% with contraction in exports, a further deceleration in investment, and a moderation in consumption.

Equity Research

Bajaj Auto – XCD 135cc motorcycle gets Positive Response

February 27, 20091 min read

Following positive customer response to XCD 135cc motorcycle, Merrill has greater confidence for 4 upcoming launches by Sept. Merrill raises domestic two wheeler sales estimates to 1.36mn units in FY10 (5% growth, earlier 5% decline), and retain 5% growth on higher base in FY11.

In the export category, management maintains positive for exports next year, albeit with slower growth trajectory, Merrill estimate 10% decline in two wheelers (more…)

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