Category: Equity Research

Just after the Government went to De-Regulate Petrol Prices, Brokerages were busy BUYING Oil Marketing Companies and later upgrading the same.

Indian Oil Corporation -Outlook for deregulation has thus brightened. The upside to IOC’s FY11E EPS in this scenario would be 20% to Rs42/share. Even without full reforms government being more generous than assumed by us in compensating R&M companies cannot (more…)

RIL announced its second JV for shale gas assets in the US, with Pioneer Natural Resources and Newpeck LLC in the Eagle Ford shale formation. RIL will acquire ~118k acres from Pioneer and Newpek for a total consideration of US$1.3bn. RIL will pay a total of US$1.3bn, US$263mn in upfront cash and the remaining US$1.05bn in the form of a drilling carry. The deal implies price of US$11,144/ acre, however, considering the drilling carry is spread over four years, adjusting for time value the deal implies a price of US$9,438/acre using a discount rate of 10%, which is lower than the US$10,797/acre paid by RIL to Atlas in its first transaction.

We are positive on RIL’s recent investments in shale gas and its stated strategy of building a sizeable portfolio there. However, NPV (more…)

Shree Renuka Sugars (SHRS) will pay USD 250 mn (INR 11.5 bn) to acquire 50.34% stake in Equipav, 25% below INR 15.3 bn quoted in February 2010. Balance stake in the venture is to be held by the founding Equipav Group – the Toledo, Tarallo and Vetorazzo families. At the revised amount, SHRS says that the EV of Equipav comes to USD 1,147 mn, translating into an EV/tonne of USD 109.

The international raw sugar price bottomed out (more…)

ITC’s launch in personal cream under the barand name – Vivel Active Fair is positive for ITC as fairness cream segment is worth ~INR 16 bn and growing at ~15% per annum.

Fairness cream is the largest part of skin cream (worth ~INR 43 bn) and we expect ITC to eventually enter other parts of skin care category. Vivel brand is doing quite well and ITC has launched the fairness cream as a brand extension which means marketing costs are not going to be very high. The product formulation of this cream is a result of R&D efforts over 3 years and is priced (more…)

Shiv-Vani Oil & Gas, the pre-eminent domestic player in onshore oil & gas exploration, has made aggressive investment to capitalise on the ~US$4bn pa onshore opportunity in India. With ONGC and OIL accounting for 90% of its sales, the company is breaking new ground in technologydriven services like integrated well services and directional drilling.

With only 25% of pre-NELP (New Exploration Licensing Policy) onshore blocks with ONGC and OIL being explored, the probable size of (more…)

Punj Lloyd is one of the strongest companies for executing Infrastructure Projects in India and abroad. However, adjusted loss for 4Q was INR4.6bn was a surprise. Performance was impacted by 1) lower execution (revenue at INR17.8bn, -45% yoy) and 2) cost overruns at a) Ensus Bio Ethanol project in the UK (this is in addition to INR1.63bn, GBP23.1m liquidated damages claimed by customer in March 2010) and b) ONGC Heera project. (more…)