Category: Economy, Markets and Macro Views

With the Indian inflation at a record high, 6.58% and interest rates at a four year high, it maybe the right time to exit Indian Real Estate Stocks as the correction has already begun warned Analysts with several brokerage houses.

That’s good news for wealth and job creators who were complaining about unrealistic real estate prices. Late December-2006, Bangalore was the first city to witness correction in Real Estate prices.

Three Stocks, Mahindra Gesco Developers Ltd, Parsvnath Developers Ltd and Peninsula Land Ltd are among the 10 worst.

A six-bedroom duplex apartment in the Malabar Hill area in South Mumbai, where Bollywood actor Vinod Khanna and Citigroup Inc.’s India head Sanjay Nayar reside, sold for about Rs25 crore ($5.7 million), according to the buyer, Rakesh Jhunjhunwala.

Mahesh Nandurkar of CLSA Asia Pacific Markets said,

While a decline in housing affordability and potential oversupply could weaken prices in the near term, the long term outlook remains attractive on strong demand.

Parameswara Krishnan of DNB Nor Asset Management said,

Property-stock valuations are approaching bubble territory. We should see some correction. He said he is avoiding real-estate shares. As more supply of paper hits the market, valuations and returns will come down to more stable levels.

Purvankara Projects, Omaxe, DLF, Kolt Patil and others are waiting for an IPO.

Citigroup in its latest research report has maintained a BUY on all the front line IT stocks.

TCS is expected to report an EPS of Rs 54.26 and Rs 65.67 for Fy2008 and FY2009. Price target for TCS is Rs 1560.

Infosys is expected to report an EPS of Rs 84.74 and Rs 105.9 for FY08 and 09 respectively. Price target for Infosys is Rs 2660. 21% upside from current levels.

Slowdown in Telecom sector is unlikely and Wipro is all set to cash in. Wipro’s BPO is also doing extremely well. It is expected to report an EPS of Rs 25.05 and Rs 31.1 for FY08 and FY09 respectively. Price target for Wipro is Rs 730. I am wondering if Wipro will spin off its BPO as a separate business to unlock shareholder value ? Maybe not as the management is much more ethical and has long term road map and blueprint of the company rather than short term stock market profits.

Citi continues to be bullish on HCL Technologies. HCL Tech is expected to report an EPS of Rs 36.5 and Rs 44.05 for FY08 and FY 09 respectively. Conservative price target for HCL Tech is Rs 770 [Cum Bonus]

Detailed review of Satyam’s stock recommendation is available here.

Citi has recommended a SELL on iFlex solution with a price target of Rs 1850 as the company’s stock is currently overvalued compared to its peers.

I am not sure if Finance Minister P Chidambram is awake @ 1:00 AM on Feb-7th, but if he is, he would probably be celebrating the confidence FIIs have in his economic policies. I just received the final SMS which said the recently concluded IPO of Power Finance Corp is subscribed 77.24 times.

Foreign Institutional Investors have bid for a whopping 5.68 Billion shares of PFC against the total offering of 117 Million.

The final subscription figures are as below.

All retail application bids for over 800 shares will get firm allotment of 80 shares. Going by this subscription rate I am wondering if I should apply for the smaller IPOs or not as fate of every application will be decided by lottery.

The stock of Ansal Properties was locked in upward circuit today due to a rumor of Bonus issue.

Recently, IL&FS Investment Managers (IIML), the private equity arm of IL&FS, signed an agreement to invest in two special purpose vehicles (SPVs) being floated by Ansal Properties and Infrastructure (APIL). DalalStreet.Biz could not confirm the quantum of investment, sources close to the deal said that IL&FS will have 49% equity in the SPVs with an investment of about Rs 130 crore.

The two SPVs that APIL plans to float in partnership with IL&FS, will develop projects in Gurgaon. While the first SPV is being floated for an integrated township, the second SPV will develop an IT special economic zone (SEZ). IL&FS is the second private equity fund to commit investments in an APIL SPV in the last six months. Earlier, HDFC Realty Fund had taken a 33% equity in an APIL SPV for developing an SEZ in Greater Noida.

In recent times, APIL has also attracted private equity investment in the holding company by diluting promoters’ stake. The company had raised Rs 175.8 crore through a 5% private placement with Citigroup in October last. Later, in November, George Soros had bought close to 1% equity in the company for Rs 25 crore through the secondary market.

APIL has reported a profit of Rs 40.19 crore for the quarter to December 2006, up by 256% from a profit of Rs 11.3 crore in the corresponding previous period. The company’s revenues has also jumped 194% to Rs 197.28 crore against a revenue of Rs 67.1 crore in the quarter to December 2005.

In the December quarter, the company signed a Memorandum of Understanding (MoU) with the Uttar Pradesh government for developing a hi-tech city on 2,504 acre adjoining Noida. The company also completed the qualified institutional placement issue to raise Rs 681.75 crore.

To cash in on the booming medical tourism business in India, Ansal Properties and Infrastructure (APIL) is reportedly said to have signed up with Fortis Healthcare for developing a 50-acre medicity project in Greater Noida. Apart from a 200-bed hospital, the project will also have an adjoining service apartments.

Ansal Properties & Infrastructure is engaged in real estate promotion, construction and development activities and executes contracts for building residential complexes, commercial complexes etc. It undertakes projects in India and abroad. The company later diversified into development of shopping malls and retail business by establishing a chain of departmental stores.

Hindustan Zinc was down 5% to Rs 657.90, Sterlite Industries was down 5.5% to Rs 491 and Hindalco had shed 2.3% to Rs 178.80, in response to the fall in metal prices arising from fund-liquidation. Reports indicate that a hedge fund had suffered heavy losses.

Benchmark copper for delivery in three months closed at $5,330, down 4.8% from Thursday’s close of $5,600. In New York, copper futures closed at their cheapest levels in ten months. Rising LME copper stocks also dampened sentiment, with stocks up 127% over the last year. Copper is down more than 12% since the start of the year and around $3,000 below the peak hit in May 2006.

Zinc ended down at $3,085 versus $3,390 after falling 11.8% at one point, to $2,990 on Friday. Zinc prices have tumbled by more than 25% since the start of the year on worries about a looming surplus, China’s reporting net exports of zinc in 2006 and a slowing demand in Europe and the United States.

Aluminum fell a relatively modest 1.2%, to $2,720, on Friday.

Copper and zinc makers reported a strong financial performance in the December 2006 quarter on the back of firm prices of these metals on a year-on-year basis. Hindustan Zinc’s net profit rose 305.8% in the Dec-06 quarter to Rs 1335 crore, on 171.3% growth in net sales to Rs 2480 crore.

Hindalco’s net profit rose 91.5% in the Dec 2006 quarter to Rs 643.90 crore on 62.1% growth in net sales to Rs 4656.20 crore.

ACC posted 106.66% surge in net profit to Rs 358.46 crore for the quarter ended December 2006, whereas the same was Rs 173.45 crore for the quarter ended December 2005. Total income rose 52.46% to Rs 1677.94 crore (Rs 1100.51 crore).

For the year ended December 2006, ACC posted a net profit of Rs 1231.84 crore compared to Rs 709.70 crore for the year ended December 2005. Total income increased to Rs 5934.96 crore (Rs 4445.68 crore). The board of directors of the company recommended a dividend at the rate of Rs 15 per share for year 2006.

The results for the year ended December 2006 include figures of Tarmac (India), which was merged with ACC in January 2006. The current quarter’s and year ended December 2006 figures are not comparable with the corresponding quarter of the previous year and year 2005 figures. The operation of Tarmac (P) resulted in a profit of Rs 4 crore during the current year as compared to the Rs 1.23 crore loss during the corresponding period of the previous year (not included in these results).

On a consolidated basis, the group posted a profit of Rs 1239.60 crore for the year ended December 2006, whereas the same was at Rs 695.97 crore for the year to December 2005. Total income for the same period was Rs 5974.39 crore (Rs 4672.03 crore).

ACC is expanding capacity at its Wadi plant, Karnataka, by three million tonnes a year, at Rs 1,480 crore. Apart from the new Wadi plant, ACC is gearing up to capture the boom in the cement industry by increasing capacity by 2.9 million tonnes per annum in Gagal (Himachal Pradesh), Lakheri (Rajasthan) and Bargarh (Orissa). ACC also plans to expand by 2 million tonnes per annum every year through internal accruals, if the demand-supply gap widens.

Holcim, along with Gujarat Ambuja Cements (GACL), hold 35.15% stake in ACC as of December 2006.