Category: Economy, Markets and Macro Views

In what may be the single largest engineering, procurement and construction (EPC) contract, the Haryana Power Generation Corporation has asked Relience Energy to set up a 2×600 Mw coal-based power project on a turnkey basis for Rs 3763 crore. The project will be financed in a debt:equity ratio of 80:20, with 20% of the contribution coming from the state government.The project will be implemented in a schedule of 35 – 38 months.

REL has also bagged the ‘balance of plant package’ from Uttar Pradesh Rajya Vidyut Utpadan Nigam for the 2×250 Mw extension units 5 & 6 of the Parichha Thermal Power Station, Jhansi. The value of the order is Rs 395 crore. The order for the main plant, which consists of boiler turbo-generator and civil works, was earlier awarded to Bhel.

As many as 90,645 shares changed hands in the counter on BSE. The stock had advanced ahead of this announcement; from Rs 502.10 on 25 January to Rs 513.60 by 31 January.

In late-2006, Reliance Energy, along with its consortium, recently signed a contract with the Ministry of Petroleum and Natural Gas (MoPNG) for exploration and production of four coal-bed methane (CBM) blocks – two in Rajasthan, one in Andhra Pradesh and one in Madhya Pradesh.

REL will be responsible for utilising the coal from the four blocks for power-generation. REL has major expansion plans in the power-generation segment. The company is planning a 4,000 Mw gas-based plant in Maharashtra. The company may bid for two ultra-mega projects, which have been launched by the Government of India, at Mundra and Sasan.

REL posted 22.10% growth in net profit to Rs 201.03 crore for Q3 December 2006, against Rs 164.64 crore in the corresponding period of the previous fiscal. Total income in the quarter rose 60% to Rs 1,820.34 crore (Rs 1,137.63 crore).

During the quarter, REL purchased the balance equity shares of BSES Kerala Power (BKPL) making it a wholly-owned subsidiary of the company. The company also acquired 100% shareholding in Reliance Aworld, Reliance Infrastructure Projects and Reliance Infrastructure Services. REL also purchased 51% shareholding in Reliance Energy Transmission. Consequently, all these companies have also become REL’s subsidiaries.

The stock had bounced back from a lower level ahead of results. From Rs 162.65 on 9 January 2007, the scrip recovered to Rs 172.40 by 29 January 2007. The stock had earlier drifted lower in a weak market. From Rs 177.65 on 28 December 2006, ITC declined to Rs 162.65 on 9 January 2007.

The key trigger for the ITC scrip, in the near term, is developments pertaining to value added tax (VAT) on cigarettes. The Centre has agreed to allow states to levy VAT on tobacco and tobacco products. The Centre and states reached an agreement in early January 2007, to phase out central sales tax (CST) over the next four years.

A 12.5% VAT on cigarettes will lead to a steep hike in cigarette prices, which may impact volumes. The concern for the cigarette industry is higher taxes may result in a shift in tobacco consumption, to low-end products such as bidis and chewing tobacco.

ITC today reported a 33.6% growth in net profit in the December 2006 quarter to Rs 717.40 crore, from Rs 536.83 crore during the year ago period. The net profit was at the top end of analysts’ expectations. Net sales rose 23.8% to Rs 3165.57 crore (Rs 2556.04 crore), which was also in line with estimates.

ITC has initiated retail and wholesale vending of vegetables and fruits. The company has prepared a plan to expand its ‘Choupal Fresh’ stores across the country. The company will open 140 stores across 54 towns in the next three – four years. Currently, ITC runs a store each in Chandigarh, Pune and Hyderabad.

If you are planning for Real Estate Investment in 2007, then here is an in depth review of prevailing property prices across various cities in India.

• Ahmadabad Real Estate Update
• Bangalore Residential Real Estate Update
• Chennai Residential Real Estate Update
• Jamnagar Real Estate Update
• Mangalore Real Estate Update
• Mysore Real Estate Update

Delhi and NCR is also one of the hottest property market but the prices have risen way too sharp, so don’t expect much returns unless you are first time home buyer.

As many as 48,353 shares changed hands in the counter on BSE.Rumours of a bonus, stock-split boosted the stock ahead of the results announcement. From Rs 2315.80 on 23 January 2007, the stock rose 5.7% in just two trading sessions to Rs 2448.35 on 25 January. The announcement of a bonus hit the market after trading hours on 25 January.

At the time of declaring Q3 results, Bhel also unveiled a 1:1 bonus issue on Thursday (25 January). Bhel reported 58% growth in net profit in December 2006 quarter to Rs 667.70 crore, on 32% growth in sales to Rs 4339.70 crore.

The order backlog at end of Dec 2006 was Rs 46700 crore, a rise of 38% on year-on-year. The current price of Rs 2500 discounts its FY 2006 (year ended 31 March 2006) EPS of Rs 68.60, by a PE multiple of 36.4.

ASK Raymond James has maintained its BUY recommendation on Cadila Healthcare Ltd with a price target of Rs 450.

Cadila Healthcare posted 15% YoY growth in consolidated profits (adjusted) at Rs426 mn in 3Q FY07, lower than its expectation of Rs519 mn. Profits have been primarily impacted by 85% YoY increase in R&D cost at Rs294 mn, higher A&P spent on consumer healthcare business and lower sales in Altana JV. A 25% YoY growth in consolidated sales is primarily driven by US and French generics markets, which grew 147% at Rs928 mn (20% of sales).

The management indicated 20% growth over the next few years driven by generics markets and pick up in APIs. The stock trades at 20.0x FY07E earnings and 15.2x FY08E earnings and trades at 14.4x FY07E EV/EBITDA and 11.3x FY08E EV/EBITDA. ASKRJ, maintain Buy rating on the stock with a target price of Rs450 (14x FY08E EV/EBITDA).

Sales and EPS expectations for FY2008 are – Rs 2140 crore and Rs 23.6 respectively.

The stock also hit a life high of Rs 700.80. As many as 1.9 lakh shares changed hands in the counter on BSE.

The stock had firmed up in the run up to the results. From Rs 613.10 on 10 January 2007, it surged to lifetime closing high of Rs 682.05 on 19 January 2007, only to ease the next day to Rs 676.35.

Bharti Airtel’s consolidated net profit as per US GAAP, jumped 122.8% to Rs 1215.13 crore (Rs 545.30 crore), beating market expectations. Four brokerages had forecast 87.6% to 99.2% growth in Bharti’s net profit.

Consolidated revenue rose 62.3% to Rs 4913 crore (Rs 3025.60 crore). Topline growth was within analysts’ expectations.

The board of Bharti Airtel today approved transfer of its towers for mobile communications and related infrastructure, to a wholly-owned subsidiary, Bharti Infratel, for better operational efficiency.

The company also announced commencement of Direct-To-Home (DTH) services to address the fast-growing home entertainment segment through Bharti Telemedia, another wholly-owned subsidiary.

The board also approved acquisition of a submarine network cable system from Network i2i (jointly owned by Singtel and a Bharti group company) for an overall consideration of $ 110 million.