Banking Industry Framework | Reserve Bank Of India | Basel Ii

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OUTLOOK 2009: PREFERRED SECTORS AND COMPANIES

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Analyst:

ANKIT KHAITAN
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INDEX
INDIAN ECONOMY - 01

BANKING INDUSTRY
OVERVIEW RECENT NEWS PRODUCTS & SERVICES ARE INDIAN BANKS SAFE??? GRAPHICAL PRESETATION RBI STEPS TO FIGHT AGAINST LIQUIDITY CRUNCH ANALYSIS OF BANKING SECTOR A) CRAMELS STRATEGY B) PORTER'S FIVE FORCES MODEL C) PEST ANALYSIS D) SWOT ANALYSIS GROWTH PROSPECT & MARKET OPPORTUNITIES THINGS TO WATCH & KEY TAKEAWAYS - 02 - 03 - 04 - 05 - 06 - 07 - 08 - 09 - 10 -11 - 12 - 13 - 14 - 15 - 16 - 17 - 18 - 19 - 20 - 21 - 22 - 23 - 24 - 25 - 27 - 28 - 29 - 30 - 31 - 32 - 34 - 36 - 38 - 40 - 42 - 44 - 46 - 48 - 50 - 52 - 54

TELECOM INDUSTRY
OVERVIEW RECENT UPDATES ALL ABOUT TELECOM INDUSTRY SEGMENTS GOVERNMENT REGULATIONS ALL ABOUT ‘3RD GENERATION TECHNOLOGY (3G)’ FUTURE OF INDIAN TELECOM INDUSTRY ANALYSIS OF TELECOM SECTOR A) PORTER'S FIVE FORCES MODEL B) SWOT ANALYSIS & KEY TAKEAWAYS WHAT’S ROAD AHEAD

FMCG INDUSTRY
OVERVIEW INDUSTRY CATEGORY AND PRODUCTS GROWTH PROSPECT GOVERNMENT INITATIVE MARKET OPPORTUNITIES ANALYSIS OF FMCG SECTOR A) PORTER'S FIVE FORCES MODEL B) SWOT ANALYSIS & KEY TAKEAWAYS

COMPANIES
BHARTI AIRTEL LIMITED RELIANCE COMMUNICATION HDFC BANK STATE BANK OF INDIA UNION BANK OF INDIA AXIS BANK LIMITED PUNJAB NATIONAL BANK HINDUSTAN UNILEVER LIMITED GODREJ CONSUMER PRODUCTS LIMITED DABUR INDIA LIMITED EMAMI LIMITED ICSA INDIA LIMITED

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Indian Economy

20th February 2009

Indian Economy: An Overview
Indian Economy is among one of the fastest growing economy in the World. It has registered a robust growth rate in past few years. But weakening of U.S. Economy coupled with higher inflation rate, higher interest rate, higher crude prices and higher commodity prices have a reflection on Indian Economy too. The Index of Industrial Production (IIP) has registered a double digit growth of 11.5 per cent in the year 2006-07 but it slip down by 300bp to 8.5 per cent in the year 2007-08. According to Centre for Monitoring Indian Economy (CMIE) forecast, the IIP could be at 3.9 per cent for the year 2008-09. The IIP for the month ended December was quite disappointing at -2 per cent as compare to 8 per cent for last year ended December. Indian Economy has registered an over of 9 per cent of growth in Gross Domestic Product (GDP) for last 3 years. Economic Advisory Council expects GDP to be 7.1 per cent for the year 200809.

According to CMIE forecast, the IIP could be at 3.9 per cent for the year 2008-09.

Source: CMIE

To fight against the slowdown of the Economy, Government of India & Reserve Bank of India took many fiscal as well as monetary actions. Clubbed with fiscal & monetary actions, decreasing commodity prices, decreasing crude prices and lowering interest rate, we expect that Indian Economy could again register a robust growth rate in the th year 2009-10. Inflation stands at 3.92 per cent on 7 February 2009 against a high of th 12.63 per cent on 9 August 2008.

Inflation stands at 3.92 per cent against a high of 12.63 per cent.

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Banking Industry – Funding the Economy
Banking Industry is an essential part of any economy. In fact, banks are the single most important supplier of credit. The banking industry has the capital and commitment to support the financial needs of individuals, businesses and all levels of government. Banks make loans to consumers to finance purchases of homes, education, cars and major appliances. Bank credit helps small businesses get started, grow and prosper. Banks help state and local governments fund a variety of public improvements like schools, roads, water & sewer and public health facilities. In each of these roles, banks support the creation of jobs and the growth of our economy. India has 79 scheduled commercial banks with 28 public sector banks, 23 private banks and 28 foreign banks. They have a combined network of over 67,000 branches and 914,241 employees, according to a release by Reserve Bank of India published on Sep 24, 2008. According to a report by ICRA Limited, a rating agency, the public sector banks hold around 75.3 per cent of total assets of the banking industry and the private and foreign banks hold of 18.2 per cent and 6.5 per cent respectively. Banking Industry is the most dominant sector of the financial system in India, and with good valuations and increasing profits, the sector has been among the top performers in the markets. But currently worldwide the banking industry is facing a tough time due to the failure of financial system in the biggest economy i.e. United State of America. The problem arises due to default in sub prime mortgage lending clubbed with rising national debt, current account deficit, and fiscal policies of US. This has led to the failure of some big investment banking firm leading to file bankruptcy. Financial Institutions are the one to face challenge because of liquidity crunch. Indian Industries have been witnessing today is an indirect, knock-on effect of the global financial situation and is a reflection of the uncertainty and anxiety in the global financial markets. While no country in today’s globalizing world can remain completely insulated from the global financial crisis, Indian banking industry is better placed to cope with the adverse consequences of the financial turmoil. India is relatively better placed due to its robust policy framework, stricter prudential regulations with respect to capital and liquidity and strong growth performance (a growth of ~9 per cent) in recent years. An added obstacle to the sustained improvement of the banking system is the fact that banks are mandated to provide funding to government-defined priority sectors dominated by small-scale business and agriculture. Loans to these sectors are at high risk of becoming non-performing. Private-sector banks must ensure that 25 per cent of their loans are directed towards these priority sectors; for state-owned banks, the figure is 40 per cent. These thresholds restrict the level of credit available to more efficient companies in non-priority sectors. The level of bad loans has been falling in recent years as a result of the creation of asset-reconstruction companies and a rapid expansion in lending. Non-performing assets (NPA) fell to 1.0 per cent for the fiscal year 2007-08, according to the latest data from the Reserve Bank of India. In the near future, for a stint, we expect to see an increase in Non-performing Assets.

India has 79 scheduled commercial banks, 28 public sector banks, 23 private banks and 28 foreign banks.

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Recent News in Banking Industry
RBI turns down plea to relax NPA norms Companies, especially small and medium enterprises (SMEs) has plea to treat loan to be treated as Non Performing Assets (NPA) if it is overdue for 180 days rather than the current treatment which consider loan as NPA if it is overdue for 90 days. But Reserve Bank of India (RBI) has turned down plea. RBI feels such a move will affect banks’ financial health. SBI loans at 8 per cent could trigger a rate war State Bank of India’s has taken a decision to offer home loans at 8 per cent and allow loan borrowers to switch to SBI after foreclosing existing loans. This may compel the other government-owned banks to reduce rates. The primarily reason for the reduction in interest rate is to stimulate growth in the economy and not to attract customers of their competitor. Why aren’t banks lowering their Prime Lending Rate (PLR)? Under RBI norms, certain loans are benchmarked to Prime Lending Rate (PLR) and if it declines, banks’ earnings on such loans are compromised drastically. For instance, loans to exporters are given at 250 basis points lower than PLR. So if PLR for a bank is 12.25 per cent, they offer loans to exporters at 9.75 per cent. Similarly, all small-firm loans are priced cheaper than a bank’s PLR and same for home loans. 30 to 35 per cent of the total loan provided accounts for such concessional loans. India needs more bank branches for rural areas According to a joint study by ASSOCHAM and Ernst & Young, India needs to increase the number of bank branches in the country to cater to the large number of people especially those living in rural areas. “Population to Branch Ratio” of India stands at more than 16,000 individuals which are very high as compare to other developed countries stands at around 1,600 to 4,500 individuals. PSBs to see higher pressure on margins Public sector banks (PSBs) could see higher pressure on their net interest margins (NIMs) in the coming months as they have mopped up large amounts of deposits at higher rates and have also affected by steep cuts in lending rates. Bank credit shrinks by INR 25,000 Crores Reflecting moderation in economic growth, bank credit contracted by about INR 25,000 Crores from 27,42,947 Crores in December ended 2008 to 27,18,077 Crores in January 2009. Centre to infuse INR 3800 Crores in three state-run banks The Union Cabinet has approved a proposal to infuse INR 3800 Crores out of which UCO Bank will received INR 450 crore in fund infusion in the year ending March 2009 and additional INR 750 crore in next year. Central Bank of India will receive INR 700 crore each this fiscal and the next year whereas Vijaya Bank to receive INR 500 crore in year ending March 2009 and INR 700 crore in next year. Populations to Branch Ratio for different countries: UK stand at 4484 US stand at 2720 Singapore stand at 10101 & India stand at 16129

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Products & Services
Banking Industry has evolved a lot over past few decades. Now banking is not limited to traditional banking which just offers deposits and loans. Internet banking, mobile banking, ATMs and technology advancement has help banks to lower there cost and at the same time offer new and sophisticated products and services to there customers.

Deposits
Excepting deposits are prime functions of bank. Types of accounts offered are Current, Saving and Recurring account. The average CASA (Current account saving account) deposit accounts for Indian Bank are around 25-30 per cent of the total deposit. Today banking is not limited to traditional banking which just offers deposits and loans but Internet banking, mobile banking, ATMs and technology advancement.

Loans
Banks provide loans from the deposit. They manage long term loans with short terms deposit. They charge a spread between loan and deposit. Traditional banks were limited to deposit and loan. But in today world, the banks offer loans from consumer loan to corporate loan, education to marriage loan, personal to vehicle loan. Bank offers loan to SME (Small & Medium Enterprise) at lower interest rate. Loan sector has grown at ~30 per cent per year over the past 4-5 years.

Retail banking
Retail banking provides many services to retailer. It provides need of the hour services like around-the-clock accessibility through automated teller machines (ATMs), mobile and internet banking. It has also offered services like Demat, plastic money (credit and debit cards), and online transfers.

ATMs
Banks have increased their ATM network over the past three years. According to the RBI, by June 2008, the number of ATMs in the country had gone up to 36,314 against 27,088 and 20,267 at end-March 2007 and 2006, respectively.

Convenience, Complete Solution, Faster Services and Safety are the buzzing word of Banking Industry.

Plastic Money
With the use of credit cards increasing significantly over the last few years, it has played an important role in promoting retail banking. The number of credit cards (outstanding) in June 2008 stood at 27.02 million, against 24.39 million in June 2007, posting a 10.73 per cent growth.

Financial Services Wealth Management
Banks offer wealth management services to individual and HNI. The investment service offers all financial products not limited to Mutual funds, Gilt funds, ForEx, Insurance, derivatives.

One Stop Point for Every Financial Service - Indian Banking Industry

Insurance
Banks are offering insurance products also. They offers Life Insurance, Health Insurance, theft Insurance, Vehicle Insurance, House Insurance, Goods Insurance to name a few.

Demat Services
Bank offer demat account for Individual and to corporate. The services offered are in equities, commodity and currency.

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Are Indian Banks Safe???
India Banks are relatively placed better due to its robust policy framework, stricter prudential regulations with respect to capital and liquidity and strong growth performance (a growth of ~9 per cent) in recent years. The regulatory systems of Indian banks are rated above China and Russia; and at par with Japan and Singapore. Reserve Bank of India while restricting the overnight unsecured market for funds to banks and primary dealers has also imposed limits on their borrowing and lending operations in the overnight inter-bank call money market. In order to encourage greater reliance on stable sources of funding, the Reserve Bank of India has imposed prudential limits on banks’ purchased inter-bank liabilities and these limits are linked to their net worth. Even Reserve Bank of India continuously monitored the incremental credit-deposit ratio of the banking industry. The Asset-Liability Management guidelines in India take into account both on and off balance sheet items. In order to strengthen capital requirements, the credit conversions factors, risk weights and provisioning requirements for specific off-balance sheet items (including derivatives) have been reviewed in the last few years. As per RBI, Indian banks have little exposure to sub-prime mortgages which are mainly through the bank overseas branches. But this exposure is part of the normal course of their business and is quite small relative to the size of their overall business. The bulk of retail lending ~80 per cent consists of mortgages and vehicle loans, which are considered relatively safe. Indian banks are insulated from the mortgage-lending woes currently afflicting developed-country banks, as their lending criteria remained strict even throughout the boom years and their exposure to complex securitizations are minimal. While many big companies of financial markets are either going bust or getting bailed-out, Indian banks are performing well and have secured a place in the latest Top 500 Global Financial Brands 2009. 19 Indian banks have secured a place in Global 500 for the year 2008, up from 6 Indian Banks for the year 2007. For three months ending December 2008, 19 Indian banks/financial institution in the 500 Global 2009 reported an average 35 per cent growth in interest income and an average of 42 per cent jump in net profit. Basel II Norms The Indian banks with overseas presence and foreign banks operating in India have successfully migrated to Basel II Framework by March 2008 and all other scheduled commercial banks are encouraged to migrate to Basel II not later than March 2009. The Basel Committee on Banking Supervision (BCBS) is now deliberating on Basel II, which is complicated than Basel I. An important improvement in Basel II, compared with Basel I, is that banks will hold more capital against a wider range of risks - not just credit risk and market risk but also operational risk, interest rate risk and other risks. The financial health of Indian banking industry improved significantly in terms of capital adequacy ratio (CAR) during the third quarter of the fiscal 2007-08. The mandated limit for CAR posed by the Basel II is 8 per cent. Indian banking industries are quite healthy. The average deposits in government securities and cash are ~34 per cent, this give banking industry a safer picture.

Regulatory systems of Indian banks are rated above China and Russia; and at par with Japan and Singapore.

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Graphical Representation - Are Indian Banks Safe???

Among 9 banks considered, Kotak Mahindra Bank CAR stands at the highest with 17.00 per cent.

Non-Performing Assets (NPA) is lower for Union Bank which stands at 0.14 per cent

For both, State Bank of India and ICICI Bank the total net-worth stands at more than 50,000 Crores.

State Bank of India’s net worth is ~20 per cent more with its nearest revival ICICI Bank.

The above values are for December Quarter 2008

The numerical represent Capital Adequacy Ratio (CAR) and then Non-Performing Assets (NPA). The next figure represents the Net Worth of the Banks in INR Crores.

Lower NPA and Higher CAR - Best for Banks
In graphical representation, banks having Non-Performing Assets (NPA) less than 1.5 per cent are consider stable, whereas NPA higher than 1.5 per cent are not consider stable. Capital Adequacy Ratio (CAR) above 12 per cent gives a stable picture. CAR for above banks are calculated according to Basel II norms.

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Steps by RBI to fight against the Liquidity Crunch
Liquidity in the banking system has eased significantly with the Reserve Bank of India pumping over INR 3,20,000 Crores into the banking system since October 2008. RBI, the central bank, has reduces the Cash Reserve Ratio, or CRR, (portion of funds that the banks have to park with RBI) to 5 per cent. Reductions of 100 bps results in infuse of additional liquidity of INR 40,000 Crores into the system. RBI has reduced the statutory liquidity ratio, or SLR, (amount which banks have to park in government securities) to 24 per cent. Even reductions of 100 bps results in infuse of additional liquidity of INR 40,000 Crores into the system. RBI has also cut the Repurchase-agreement rate, or Repo rate, (agreement by one party to sell a security by another and agreed to purchase it on a specified date) to 5.50 per cent. The reduction in the repo rate will make short term (overnight) borrowing from the RBI cheaper for banks. Other step taken by RBI was reduction in Reverse Repurchase-agreement rate, or reverse repo rate, (agreement by one party to purchase a security by another and agreed to sell it on a specified date) to 4 per cent. An reduction in reverse repo rate discourage banks from parking surplus short term funds with the RBI and encourage them to lend those funds. Bank Rate (at which central banks lend funds to national banks) stands at 6 per cent. The Bank rate directly impacts the cost portion of the bank and hence the bank lending rates. Since 4 October 2008, when the CRR was at its peak of nine per cent, the RBI consistently pruned it to bring it down to 5 per cent by 17 January 2009. This amounts to a liquidity infusion to the tune of INR 1,60,000 Crores. A 100 bps reduction in SLR cut from 25 per cent to 24 per cent in November 2008 had yielded a liquidity infusion of INR 40,000 Crores. Liquidity has returned to comfortable levels following swift, prompt and extensive measures by the RBI such as CRR and SLR cuts and opening of refinance windows, lending rates of banks eased. The prime lending rates (PLR) for most of the banks have come st down by an average of 150 basis points from 1 October 2008. We further expect RBI to announce cut in Repo rate and in Reverse Repo rate. Even we expect Banks for further reduction in prime lending rate.

Monetary action by Reserve Bank of India has eased significantly Liquidity in the banking system by pumping over INR 3,20,000 Crores into the banking system since October 2008.

CRR from the peak of nine per cent has come down to 5 per cent.

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CRAMELS Strategy – Must for Banking Industry
The statutory mandated areas for banking industry are solvency, liquidity and operational health. For analyzing banking industry, the model we prefer is known as CRAMELS. The ‘CRAMELS’ model stand for: Capital Adequacy, Resource raising ability, Asset Quality, Management & System evaluation, Earning potential, Liquidity/Assets Liability Management and System & Control. (a) Capital Adequacy: Capital represents the level of cushion or protection available to the company creditor’s to absorb losses from credit and other risks. It is measured by the ratio of capital to risk-weighted assets (CRAR). Although CRAR is lower for bank as compare to finance companies, but bank are positioned better on account of big capital base and strong recapitalization prospect. A sound capital base strengthens confidence of depositors. According to release by Reserve Bank of India the average CRAR for all banks is 13 per cent and 12.3 per cent for the year ended 2007-08 and 2006-07 respectively. The CRAR for Indian Banking is higher as compare to the statutory requirement. (b) Resource raising ability: Since funds are finance company’s raw material, its ability to generate them is essential for its operating model. Banks has an advantage for raising resource as compare to others financing institution. This give banks a competitive advantage over other financial institutions. (c) Asset Quality: Asset quality is of primary consideration when assessing credit risk of a finance company. One of the indicators for asset quality is the ratio of non-performing loans to total loans (NPA). The non-performing loans to advances ratio is more indicative of the quality of credit decisions made by bankers. Lower NPA is indicative of good and robust credit decision-making. Low NPA of Indian Banks give the Industry a saver picture. (d) Management & System evaluation: The quality of a company’s management, its business strategies and its ability to track and respond according to changes in market condition. The ratio of non-interest expenditures to total assets can be one of the measures to assess the working of the management. This variable, which includes a variety of expenses, such as payroll, workers compensation and training investment, reflects the management policy stance. We need to analysis management’s risk appetite in terms of its growth, capitalization policy and diversification philosophy. (e) Earnings potential: Earnings are the key input for supporting growth. Earning potential directly attract debt and equity. Earning for finance company is driven by net interest margin and the difference between the yield generated by assets and cost of debts. The spread has come down to 3-4 per cent as compare to over 8 per cent a decade back. This has leads to increase in efficiencies to maintain overall profitability. (f) Liquidity/Assets Liability Management: Cash maintained by the banks and balances park with central bank is an indicator of bank's liquidity. Bank has access to call market or RBI refinance facilities in the event of liquidity crunch. The banks properly manage the time difference between short term deposits with long term loans. In general, banks with a larger volume of liquid assets are perceived safe, since these assets would allow banks to meet unexpected withdrawals. (g) Systems and Control: The Systems and control access plays an important part in today’s highly advance banking technology. Due to electronic technology advancement, the bank needs to have access as well as control over the systems. Safety and security plays a vital role in today world.

‘CRAMELS’ Strategy: Capital Adequacy Resource raising ability Asset Quality Management & System evaluation Earning potential Liquidity/Assets Liability Management System & Control

The CRAR for Indian Banks are higher as compare to the statutory requirement.

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Porter's Five Forces Model

Porter's Five Forces model outlines the primary forces about competitiveness within the industry.

Rivalry among Competing Firms
Rivalry among competitors is very fierce in Indian Banking Industry. The services banks offer is more of homogeneous which makes the company to offer the same service at a lower rate and eat their competitor market’s share. Market Players use all sorts of aggressive selling strategies and activities from intensive advertisement campaigns to promotional stuff. Even consumer switch from one bank to another, if there is a wide spread in the interest. Hence the intensity of rivalry is very high. . The intensity of rivalry among competitors is very high

Potential Entry of New Competitors
Reserve Bank of India has laid out a stagnant rules and regulation for new entrant in Banking Industry. We expect merger and acquisition in the banking industry in near future. Hence, the industry is less porn of new competitor. . Potential Entry of New Competitors is very less

Potential Development of Substitute Products
Every day there is one or the other new product in financial sector. Banks are not limited to tradition banking which just offers deposit and lending. In addition, today banks offers loans for all products, derivatives, ForEx, Insurance, Mutual Fund, Demat account to name a few. The wide range of choices and needs give a sufficient room for new product development and product enhancement.

. Wide range of choices and needs results in new product development and product enhancement

Bargaining Power of Suppliers
Banking industry is governed by Reserve Bank of India. Reserve Bank of India is the authority to take monetary action which leads to direct impact on circulation of money in the Economy. The rules and regulation lay down by RBI.

. Reserve Bank of India is lay down the rules and regulation for Banking Industry . Bargaining Power of Consumers is little high as “Customer is the King”

Bargaining Power of Consumers
In today world, Customer is the King. Banks offers different services according to clients need and requirement. They offer loans at Prime Lending Rate (PLR) to their trust worthy clients and higher rate to others clients.

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PEST Analysis
PEST analysis of any industry investigates the important factors that affect the industry and influence the companies operating in the sector. PEST stands for Political, Economic, Social and Technological analysis. The PEST Analysis is a tool to analyze the forces that drive the industry and how those factors can influence the industry.

Political Factors
Focus on Regulations Indian Banking is least affected as compare to other developed economy which is attributed to Reserve Bank of India for its robust policy framework, stricter prudential regulations with respect to capital and liquidity. This gives India an advantage in terms of credibility over other countries. High Capital Adequacy Ratio The Implementation of Basel II norm has stricter rules and regulations. India’s regulatory systems are places above China and Russia; and at par with Japan and Singapore. Every Industry has Governmental or Social influence on their workings.

Economic Factors
Growing Economy Indian economy has registered a growth of more that 9 per cent for last three year and is expected to maintain robust growth rate as compare to other developed and developing countries. Banking Industry is directly related to the growth of the economy. Low Interest Rates Reserve Bank of India controls the Interest rate, which is based on several monetary policies. Recently RBI has reduced the interest rate which stimulates the growth rate of banking industry. Inflation Rates Different fiscal and monetary policies have curbed the Inflation rate from the high of 12.63 per cent to 3.92 per cent. PEST Analysis gives insights on different influence. Pest Analysis stands for: Political Factor Economic Factor Social Factor Technological Factor

Social Factors
Loyalty Factor Banking industry services is lending and borrowing of funds. The banks need to have a good royalty factor as compare to counter part in other countries. The financial meltdown on Indian Banks is less impact as compare to other countries. Increased Penetration of Cards India has registered a robust growth in plastic money. There is a still lot of potential in the plastic market. India just spend 1 per cent of their total purchases through credit cards where as the world average is stands more that 9 per cent.

Technological Factors
IT Services & Mobile Banking Technology advancement has changed the face of traditional banking systems. Technology advancement has offer 24X7 banking even giving faster and secured service.

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SWOT Analysis
Strengths:
Wider presence of branches and ATM Micro Finance Low expenditure cost due to high usage of ATM & Internet Banking Electronic banking - Connected Globally Faster and safer banking Specialized services offering

Weaknesses:
Intensive competition has reduce the margins Cyber crime

Opportunities:
Large market – over a billion populations Foreign banks eyeing over India banks for Merger and Acquisition From traditional banking to a Hub of every financial products Increase in loans due to easy and faster loan approval Rising disposable income has resulted in demand of different financial products

Threats:
Non Banking Financial Institution (NBFC) offering financial services Reserve Bank of India persuade banks to lower the spread RBI control the Supply of money in the Economy, has an impact in loan offering To ensure minimum loans towards priority sectors 25 per cent for private banks and 40 per cent for state-owned banks has a limitation on growth

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Growth Prospect
Advantage India – FDI
The Reserve Bank of India (RBI), has allowed foreign players to set up branches in rural India and take over weak banks with an investment of up to 74 per cent, and further relaxations are on the anvil by 2010, with the second phase of opening expected to commence in April 2009. Some of the biggest names in global financial services and banks like Credit Suisse, Rabo Group and ANZ are seeking a banking license in India. The RBI has, in recent months, given fresh banking licenses to UBS - Switzerland's largest bank, Dresdner Bank and United Overseas Bank. ANZ and Rabobank Group, the Dutch Group, is now in the process acquiring a banking license. The Rabobank Group already holds 18.2 per cent stake in another local private bank YES Bank. Some of the existing players such as StanChart, Citi and HSBC, hold India as one of their top markets. Due to current Global crisis, we expect the deadline for second phase i.e. April 2009 to be extended further. However, banking authorities has not announced about the extension of the phase. Foreign players are allowed to set up branches in rural India and take over weak banks with an investment of up to 74 per cent.

Market Opportunities
Road Ahead
The Indian consumer holds the biggest opportunity for the Indian banking system and retail banking has immense opportunities in India. Though there are 334 million bank accounts in India, only 60 million Indian households are actively involved with regular banking activities. If 30 million additional households are targeted over the next three years, it would expand the revenue pool by around US$ 2.24 billion for banks. Around 91 million households, with incomes of varying between INR 45,000-2,00,000 per annum, are yet to be tapped by the banking sector. This year is likely to set a reform process in the banking sector with most banks are expected to comply Basel II guidelines. The Indian banking system can see an enormous transformation after the opening of the financial services sector under the World Trade Organisation (WTO). Under WTO, the Indian banking sector will be open to foreign banks. Bigger capital reserves, cutting edge technology, best practices in audit, accounting and transparency and skilled personnel of foreign banks will pose major challenges to Indian banks. According to a report by Boston Consultancy Group, the profit pool of the Indian banking industry is estimated to increase to US$ 20 billion in 2010 and further to US$ 40 billion by 2015 and credit market is estimated to grow to US$ 23 trillion by 2050. To sustain an average capital adequacy ratio of 12.0 per cent by March 2010, the public sector banks would require an additional capital of approximately US$ 67.50 billion. Under such favorable conditions, India is expected to become the third largest banking hub in the world by 2040.

According to BCG, the profit pool of the Indian banking industry is estimated to increase to US$ 20 billion in 2010 and further to US$ 40 billion by 2015. Where as the credit market is estimated to grow to US$ 23 trillion by 2050.

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Things to Watch Out For in 2009: Remittances, NPLs
Remittances
The global recession coupled with declining oil prices could result in a deceleration in remittance flows which have played an integral role in the Balance of Payment (BoP). To counter this, besides raising rates on NRI deposits, introducing another ‘diaspora’ bond and further reducing remittance costs would be steps in the right direction.

Rising NPLs
Higher rates, ForEx assumptions going wrong, slowing industrial output and corporate profits are likely to result in a rise in NPLs and weakness in asset quality. Though far from peak levels, the macro implication is cautious lending, with aggressive policy easing not being matched by banks lowering rates or increasing advances. This would escalate the negative feedback loop currently in play.

Key Takeaways
Key highlights of our analysis are: Accelerated growth rate - Indian Banking and Financial Services led to impressive value creation. Over 5 year period from April 2003 to March 2008 the total shareholder return for the sector was more than 53 per cent which was better than the overall return of 42 per cent by the complete stock market. Indian Banking performance - Even during the Global Meltdown, Indian Financial sector performs better than its peer in the developed and other BRIC countries. Wide distribution network - Public sector bank and even now private sector bank are entering into rural area too. Higher Disposable Income - Rise in household income has resulted in increase in disposable income and hence increase in savings and investment. Future growth rate - The financial sector is expected to maintain a decent growth rate in future.

In India, default on loans either on principal amount or interest amount for more than 90 days, are consider as NPL. Where as major other countries consider it NPL when it is due for more than 180 days. This gives India a safer picture.

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Telecom Industry – Connecting the World
Introduction- Low-cost, High-Quality networks & Innovative Marketing Indian Telecom sector, like any other sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to advanced technologies like GSM, CDMA, and WLL to the much awaited great 3G (Third Generation) Technology in mobile phones. Telecom Industry in India is the fastest growing markets in the World and become the second largest mobile market in the world just after China. India has added around 9.5 million new mobile subscribers to the network each month for the year 2008. Upcoming services such as 3G and WiMax (Worldwide Interoperability for Microwave Access) will help for further growth rate. The service providers are offering services at cheap call rates, low-cost handsets and network expansion is fuelling the boom for the industry. There exists enormous business potential for telecom companies on account of the country’s low teledensity, which stand at 33.23 for December 2008. Every day there is an addition in Value added Services (VAS), technology advancement and reduction in traffic charges. Increase in private and public players in the sector has enhanced the telecommunication technology to give the maximum benefits to their customers. Segment Analysis India's growth story in the telecom space shows no signs of slowdown. The country added 113.26 million new customers in 2008, the largest globally. To put this growth into perspective, the country’s cellular base witnessed around 48.50 per cent growth in 2008, with an average 9.5 million customers added every month. The country had 346.89 million mobile phone users as of December 2008 compared to 233.62 million in the corresponding period a year ago and the total number of telephone connections (wireless and wireline) is 384.79 million as of December-end, taking the telecom penetration to over 36 per cent. It implies that one out of every three Indian has a telephone connection. The Indian telecom industry has been growing rapidly at a CAGR of 40.63 per cent from 2003 to 2008. Telecom sector contributed 3.4 per cent to India’s gross domestic product in for the year 2008 and is expected to contribute 5.4 per cent by 2010. There is still a big room for further growth. The growth will primarily driven by the rise in communications demand from semi urban and rural India. The teledensity in rural areas being a little more than 10 per cent against the national average of 33.23 per cent, there is huge untapped potential for mobile phone penetration in rural India. The total Broadband subscriber base has reached 5.45 million by the end of December 2008 as compared to 5.28 million by the end of November 2008. Even there is a huge potential in broadband segment. The growth in 2008 was led by Bharti Airtel, the country’s largest communications provider. Bharti had 85.65 million customers as of December-end, Reliance Communications had 62.02 million and Vodafone of about 60.93 million. In fact, Bharti has more customers than the state-owned BSNL’s mobile and landline users combined.

India's telecom services industry revenues is projected to reach $54 billion in 2012, as compared with $31 billion in 2008 according to the CII Ernst & Young report titled 'India 2012: Telecom growth continues.'

According to Capitaline Database, total revenue for Telecom industry for current year is around 100,000 Crores.

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Recent updates in Telecom Industry
Around 11 million mobile subscribers added in the month December
According to telecom regulator TRAI, 10.81 million mobile subscribers were added in the month December, the highest monthly addition, against 10.35 mobile subscribers in the month November.

3G Auction
With the announcement of a 3G policy on 1 August 2008, India joined a select list of countries to have a policy on the much-hyped 3G revolution. Third generation mobile services would offer voice, video, data and downloading services on mobile phones. However, the journey towards 3G in India was not quite uneventful, with the auctions being postponed and the economic slowdown affecting the major players vying for 3G. According to Gartner Inc., India's mobile subscriber base is projected to exceed 737 million connections by 2012 growing at a CAGR of 21 per cent.

3G & WiMax
The launch of 3G and WiMax (Worldwide Interoperability for Microwave Access) services is expected to drive the data revolution. Mobile entertainment and mobile banking are likely to be the biggest drivers for data services. 3G and WiMax services are expected to gain popularity initially in the top 20 cities in India and then gradually penetrate to the rest of the country. By 2012, India could have around 25-30 million 3G subscribers and around $4-5 billion 3G revenues. WiMax, on the other hand, could attract about 8-10 million subscribers and could account for about $1-1.5 billion by 2012. The average revenue per user per month is likely to drop further since most of the growth in subscriber additions is coming due to expansion in non-metro regions.

The Government has plans to raise teledensity to 40-45 per cent by 2010, thereby offering greater growth opportunities for service providers.

Mobile number portability gets nod and bid invited for mobile number portability
Department of Telecommunications (DoT) has invited bids for mobile number portability. Mobile Number Portability (MNP) will provide the customer the facility to retain the same number while switching over from one operator (service provider) to another within the same service area. A recent study pointed out that having to give up their mobile numbers was the single most reason that subscribers did not want to change their operator despite poor quality of services. This will be an advantage for the customer.

99 per cent of new mobile connections in India are pre-paid
Call it the death of post-paid mobile user in the world’s fastest-growing mobile market. Out of new mobile user additions in the country, pre-paid connections accounts for around 99 per cent.

Telecom Industry on robust expansion plans
The total outstanding investment in the telecom industry at the end of December 2008 quarter stood at INR 2,09,007 crore spread over 140 projects. Of these, close to 70 projects entailing an investment of INR 1,53,821 crore are under implementation and seven projects encompassing an investment of INR 4,577 Crore are stalled. Most of the existing telecom companies have robust expansion plans out of which majority have not witnessed any delay in execution.

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All about Telecom Industry
Industry Fact Book
Total mobile phone subscribers: 346.89 million (December 2008) Teledensity: 33.23 per cent (December 2008) Addition of new mobile subscribers in month: 10.81 Million (December 2008) Average Addition of new mobile subscribers per month: 9.44 Million (Year 2008) Annual growth rate of telecom subscribers: 48.48 per cent (Year 2007-08) Fastest growing cellular telephony markets in the world Average Revenue per User (ARPU) for GSM: INR 261 per month (December 2008) Average Revenue per User (ARPU) for CDMA: INR 176 per month (December 2008) More Wireless subscribers than Wireline subscribers Minute of Usage (MoU) for GSM: 464 Minute per month (December 2008) Minute of Usage (MoU) for CDMA: 375 Minute per month (December 2008) According to Springboard Research, India will become the leading market for WiMAX in the Asia pacific region and is expected to have 15.8 million WiMAX subscribers by 2012, accounting for 46.7 per cent of total subscribers in Asia-Pacific and 35.7 per cent of revenues from the region.

The Telecom sector in India has witnessed unparalleled growth by global standards. In a little over a decade of wireless telephony, India has moved from a subscriber base of zero to becoming the second-largest market in the world after China. Rural telephony, 3G, WiMax and data services will drive sector growth in 2012. The industry will witness sustained growth in mobile services and data revenues. Network expansion will continue in order to support the rural growth. It is imperative for the government to revisit high levies on the telecom sector and lay down a clear roadmap for future spectrum allocation. Subscriber base to grow Further growth will be primarily driven by a rise in communications demand from semi urban and rural India. Over past few years, Circle B and Circle C have witnessed the highest growth rate as compare to Metros and Circle A. The availability of adequate spectrum could remain a hurdle for wireless growth. The telecom sector could witness another round of Mergers & Acquisitions. As new operators roll-out networks, there could be 10-12 operators in each circle. However, by end of 2012, industry consolidation will result in about five to seven large operators.

According to Gartner, the value-added services (VAS) market in India is expected to grow to about US$ 5.6 billion by 2011.

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Segment
Mobile Services India's telecom growth pattern continues with mobile operators adding 113.26 millions subscribers in the year 2008 to the world's second largest wireless market. GSM The GSM subscriber base has reached to 257.98 million in the year ending December 2008. The number of addition in GSM subscriber for month ended December 8.12 million which stand at 3.25 per cent. Bharti with 85.66 million subscriber base remains the largest GSM mobile operator followed by Vodafone, BSNL and Idea with subscriber’s base of 60.93 million, 41.36 million, and 38.01 million respectively. CDMA The CDMA subscriber base has reached 87.91 million in the year ending December 2008. The number of addition in CDMA subscriber for month ended December 2.29 million which stand at 2.67 per cent. Reliance remains the largest CDMA mobile operator followed by Tata Teleservices and BSNL with subscriber base of 52.07 millions, 31.18 millions and 2.62 millions respectively. Wireline Wireline services subscriber base stood at 37.90 million for the year ended December 2008 compared to 39.42 million last year. The Wireline has registered a decline of 3.63 per cent. The market leader in wireline is BSNL and market follower is MTNL. The fixed (Wireline) subscriber base registered a decline of 1.52 million in the year 2008. Reduction in the subscriber base of wireline is mainly due to switching to wire less which is more convenient and cheaper. Other Telephone Services Public Call Offices Number of Public Call Offices (PCOs) has reported a positive number over past few years. In Public Call Offices, BSNL is market leader with a share of little more than 30 per cent. MTNL market share is a little less than 4 per cent and the rest of market is capture by other private operators. Village Public Telephones Number of Village Public Telephones (VPT) has increased from 5.60 lakh in quarter ending March 2008 to 5.63 lakh in quarter ending June 2008. There are around 6 lakh villages in India. More than 85 per cent of the villages have VPTs. 100 per cent of Villages in Haryana and Panjab have access to Village Public Telephone. Wireline internet subscriber Broadband Growth: Total Broadband subscribers base has reached to 5.45 million by the end of December 2008 as compared to 3.13 million last year to registered a growth of 74.12 per cent. Non Voice Services Value added service has registered a robust growth rate. It contributes more than 10 per cent of the total revenue. According to Gartner, India's mobile subscriber base is projected to exceed 737 million connections by 2012 growing at a compound annual growth rate (CAGR) of 21 per cent and India is likely to remain the world's second largest wireless market after China in terms of mobile connections.

The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion.

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Telecom Industry Government
Government Policy Initiatives The Government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry. The Indian telecom industry has a 74 percent FDI limit in the telecom services segment. The Government of India (GOI) has permitted 100 percent FDI in manufacturing of telecom equipment in India through the automatic route. The Indian telecom industry has attracted foreign investors. The cumulative FDI inflow, during April 2000 to November 2008 period (latest data available), in the telecommunication sector amounted to INR 256,716.88 Million. It is the third largest sector to attract FDI in India which accounts for 7.86 per cent just after Service sector and Computer Software & Hardware sector. FDI calculation takes into account radio paging, cellular mobile and basic telephone services in the telecommunication sector. Opening of telecom industry for private sector participation. Establishment of an independent regulator - the Telecom Regulatory Authority of India (TRAI) - for the telecom sector. Allowing service providers to share active infrastructure. Total FDI inflow in Telecom Sector from April 2000 to November 2008 amounts to INR 25,671.68 Crores which is 7.86 per cent of total FDI inflow.

According to an IMRB paper for the Internet and Mobile Association of India, VAS, or the sale of ring tones, caller tunes, wallpapers, SMSes (for contests and communication), among other non-voice services, generated Rs 7,500 Crores in revenues in 2008

There is a huge growth in FDI Inflow in India for the month of Sep, 08.

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All about the ‘Much Awaited 3rd Generation Technology (3G)’
What is 3rd Generation Technology (3G)???? The 3rd generation technology (3G) represents a shift from voice centric services to multimedia oriented services like video, voice, data and fax services. 3G networks have potential transfer speeds of up to 3 Mbps (about 15 seconds to download a 3-minute MP3 song). For comparison, the fastest 2G phones can achieve up to 144Kbps (about 8 minutes to download a 3-minute song). The high speed of data transfer can accommodate broadband applications like video conferencing, receiving streaming video from the internet, sending and receiving faxes, instantly downloading e-mail messages with attachments and international roaming. What will be the impact on Revenue???? We have seen a decline in Average Revenue per User (ARPU) and the decline is due to continuous fall in the tariff charges as competition in the industry increases. There is substantial rise in subscriber base from Circle B and Circle C compare to Metros and Circle A. The usage is less in Circle B and Circle C as compare to other circle. Around 129.79 million GSM subscribers are from Metros or Circle A. It accounts for more that 50 per cent of the total GMS subscriber base. We expect atleast 5 per cent of the customer to opt for 3G within 2 years. This could result for 3G subscriber base of more than 10 million. This would leads to sharp rise in ARPU from this Circle. Recently Mahanagar Telephone Nigam Limited (MTNL) has become the first telecom operator in the country to launch 3G mobile services. Although the service is on the higher side as mobile users will have to pay a one-time fee of INR 500 as activation charges and a monthly rental of INR 599, but the company has receive good response from the customer. Apart from the rental charges, there will be an increase in revenue from usage of the service. Although we expect a decrease in the tariff charges, there would be an increase in Average Revenue per User. According to a report by industry body FICCI and telecom consulting firm BDA, "3G subscriber base will reach 90 million by 2013 and the revenue from 3G is expected to reach $ 15.8 billion by the same year." Even introduction of 3G would also increase the Average revenue per users (ARPU).

Value-added Services (VAS) brings in 9 per cent of telecom industry revenues. As average revenues per user (ARPU) fall, the pressure on making more money from VAS will keep going up.

Wireless Vs Wireline

There is a constant rise in subscriber base of wireless where as there has been a constant decrease in wireline subscriber.

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Future of Indian Telecom Industry
Industry on High Growth Track The telecom industry has been growing at a CAGR of 40 per cent during 2003-2008, with total subscriber growing at an average of 9.5 million subscribers per month over the last year. The subscriber base totaled to 346.89 million in December 2008, and is expected to be 500 million and 800 million by 2010 and 2012 respectively as per TRAI. The ARPU for the industry is INR 240, which is among the lowest in the world. Rural Expansion & Services Abroad The number of mobile users per 100 persons is described by teledensity. Currently, the teledensity of the Indian telecom sector is 33.23 per cent, whereas the TRAI expected it to reach around 45 per cent by 2010. Falling Handset Prices and Youth Population Falling handset prices along with added features, makes the market more attractive. Today, the handsets are available in just three-digit figures with all necessary facilities. Young generation and living standard is also one of the factors for the increase in subscriber base. Alarming Competition The rising competition from new entrants in the industry, both domestic and foreign players along with new technologies and their core competencies, will heat up the competition in the industry. Availability of Spectrum The Government has allowed and framed the policies for introduction of new technologies in the Indian telecom sector in the form of 3G and Wimax. The Department of Telecom and TRAI are about to auction the required 3G spectrum to various service providers. The scarcity of spectrum and the price to be charged at the auction will purely be a matter of time. Passive Infrastructure Sharing The infrastructure sharing will encourage more efficient operations, thereby resulting in significant cost savings. The company is also willing to explore and share active infrastructure, based on guideline issued by TRAI. Mobile Commerce to Become the Next Big Thing Mobile commerce is the upcoming and growing trend. The increased use of mobile phones for the purpose of banking, tele-booking, inquiries, and other commercial services will lead to further increase in the revenues of the companies. The increased use of such services is welcomed by the users as it offers high utility and value for money. Mobile Number Portability to Become a Reality Soon Indian mobile users will soon have the option to switch their service providers without changing their mobile numbers. Implementation of mobile number will motivate and stimulate the service providers to constantly endeavor to further improve their quality of service in order to retain existing customers and attain new subscribers. Falling ARPUs – Margins under Pressure The revenues are showing a fall because of declining call tariff. However, the profit margins are stable because of rising subscriber base in the industry. Every month, more than 9.5 million subscribers are added in the last year.

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Porter's Five Forces Model

Porter's Five Forces model outlines the primary forces about competitiveness within the industry.

Rivalry among Competing Firms
New entrant and commencement of WLL services has resulted in intense competition Due to higher setup cost the intensity of rivalry is very high

. The intensity of rivalry among competitors is very high

Potential Entry of New Competitors
High start up cost result as an obstacle for new competitor Nation wide player has an advantage for network, license fee, new technology and to maintain margin, hence threat of entry is low . Potential Entry of New Competitors is very low

Potential Development of Substitute Products
Little substitutes Wireless has already substituted the wireline which has registered a decline in wireline subscriber base Voice over Internet Protocol (VoIP), future threats, has already been incorporated by existing service provider Hence threat of substitutes is low for telecom industry . Product development and enhancement is serviced by the market player

Bargaining Power of Suppliers
Tower upliftment companies and silicon chip manufacturers - main suppliers has high competition among them has in low bargaining power but medium switching cost for telecom vendors has resulted in medium to low bargaining power of suppliers . Medium to low bargaining power of suppliers

Bargaining Power of Consumers
Many telecom providers in wireline as well as in wireless Mobile number portability after getting approval will result in high bargaining power for consumer, hence the over all bargaining power is high . Bargaining Power of Consumers is little high

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SWOT Analysis
Strengths:
Technology Advancement has offered enhanced services Widening of network coverage to rural areas also Low Operational Costs Demand of Mobile Commerce

Weaknesses:
High start-up cost Reducing ARPU Reducing MoU

Opportunities:
Large domestic market – over a billion populations Low Teledensity as compare to other developed countries Potential in rural market 3G and WiMax to be launched

Threats:
Higher bidding cost for 3G Government control companies get regulatory benefits over private player Net-phone

Key Take Away for Investors
Rapid CAGR of more than 40 per cent over last from few years Low Teledensity as compare to other developed countries leave place for future growth Upcoming 3G and WiMax Technology to result in high ARPU

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Telecom Industry – What’s Road Ahead
Growth Potential The Indian rural market is going to be the next big thing for wireless telecom providers. With the tele-density in rural areas being a little more than 10 per cent against the national average of 33.23 per cent, there seems to be huge untapped potential for mobile phone penetration in rural India. According to a report by industry body FICCI and telecom consulting firm BDA, "3G subscriber base will reach 90 million by 2013 and the revenue from 3G is expected to reach $ 15.8 billion by the same year." Even introduction of 3G would also increase the Average revenue per users (ARPU).
Note: Teledensity for certain Countries are for March 2008

The much awaited Third Generation (3G) Auction has been delayed. As per Department of Telecom (DoT), set a base price of INR 2,020 crore for a pan-India 3G spectrum where as the Union Finance Ministry stepped in with a recommendation to double this price to INR 4,040 Crore. The Cabinet Committee on Economic Affairs (CCEA) is likely to consider the proposal to set INR 3540 crore by the means of doubling the reserve price for Delhi, Mumbai and category A circles and increasing it by 1.5 times for Kolkata and category B circles and retaining the current base price for category C circles. This could again put off the muchawaited roll-out of advanced mobile services. WiMax, Broadband Wireless Access (BWA), which was been proposed at INR 1,010 Crore could be doubled to INR 2,020 Crores as recommend by ministry of finance. Mahanagar Telephone Nigam (MTNL) becomes the first telecom company to launch th third-generation (3G) mobile services in India on 5 February 2009. MTNL competes with private firms, including Bharti Airtel, Vodafone, Reliance Communications, Idea Cellular and Tata Teleservices, in India. State-owned telcos MTNL and BSNL were given 3G spectrum last year before the private players, giving them the first mover's advantage.

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FMCG Industry – Moving at fastest Pace
FMCG Sector is one of the most important sectors for each and every Economy. It plays a vital role being a necessity and inelastic product which touches every life in one or the other aspect. India's FMCG sector is the fourth largest sector in the economy and creates employment for more than three million people in downstream activities. Its principal constituents are Household Care, Personal Care and Food & Beverages. The total FMCG market is in excess of INR 85,000 Crores. It is currently growing at double digit growth rate and is expected to maintain a high growth rate. FMCG Industry is characterized by a well established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and unorganized segments. The FMCG Industry remained insulated from inflation led demand slowdown. Inflation as measured by the wholesale price index (WPI) shot up to 9.5 per cent in June 2008 quarter and further climbed up to 12.63 per cent in September quarter. In both these quarters, industry sales accelerated by more than 15 per cent backed by healthy growth in off take as well as price hikes affected. During this period, the industry was largely able to hold on to margins through a combination of strategies such as reduction in packaging cost and changes in product mix. Since October, inflation rate has been waning and fell th to 3.92 per cent for the week ended 7 February 2009. Thus demand for personal care products is likely to remain buoyant. According to CMIE Data, Aggregate sale of the industry is expected to increase by 19.2 per cent during the December 2008 quarter. Commodity prices after peaking are on the downswing. In September 2008 quarter, palm oil price fell by 13 per cent sequentially. In the subsequent months, palm oil price continued to weaken further and in November 2008 its price ruled 38 per cent lower than the year ago level. This would minimize input cost pressure for soap companies like HUL, Nirma and Godrej Consumer Products. Even fall in crude price is expected to make petroleum derivatives like LAB (key input for detergents) cheaper as well reduce packaging costs. Even during the slowdown of the economy, the FMCG sector has registered a growth rate of 14.5 per cent for the year 2007-08. There is a huge growth potential for all the FMCG companies as the per capita consumption of almost all products in the country is amongst the lowest in the world. Federation of Indian Chambers of Commerce and Industry (FICCI) predicted that the Indian FMCG industry sales could grow 16 per cent during 2008-09. According to CRISIL anticipation, FMCG sector total revenue could touch around INR 140,000 Crores by 2015. The key players in FMCG Industry are Hindustan Unilever Limited, Dabur India Limited, Procter & Gamble Hygiene & Health Care Limited, Nirma Limited, Emami Limited, Colgate Palmolive India Limited, Godrej Consumer Products Limited to name a few.

85,000 Crores Indian FMCG market is one of the important sector and has registered a robust growth rate.

According to CMIE Data, Aggregate sale FMCG industry is expected to increase by 19.2 per cent during the December 2008 quarter.

According to Federation of Indian Chambers of Commerce and Industry (FICCI), FMCG industry sales could grow at 16 per cent during 2008-09.

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Industry Category and Products
Household Care
Personal Wash The market size of personal wash is estimated to be around INR 8,300 Cr. The personal wash can be segregated into three segments: Premium, Economy and Popular. The penetration level of soaps is ~92 per cent. It is available in 5 million retail stores, out of which, 75 per cent are in the rural areas. HUL is the leader with market share of ~53 per cent; Godrej occupies second position with market share of ~10 per cent. With increase in disposable incomes, growth in rural demand is expected to increase because consumers are moving up towards premium products. However, in the recent past there has not been much change in the volume of premium soaps in proportion to economy soaps, because increase in prices has led some consumers to look for cheaper substitutes. Detergents The size of the detergent market is estimated to be INR 12,000 Cr. Household care segment is characterized by high degree of competition and high level of penetration. With rapid urbanization, emergence of small pack size and sachets, the demand for the household care products is flourishing. The demand for detergents has been growing but the regional and small unorganized players account for a major share of the total volume of the detergent market. In washing powder HUL is the leader with ~38 per cent of market share. Other major players are Nirma, Henkel and Proctor & Gamble. Hindustan Unilever Limited is the biggest producer of Personal wash and detergents. The segment is expected to grow by double digit.

Personal Care
Skin Care The total skin care market is estimated to be around INR 3,400 Cr. The skin care market is at a primary stage in India. The penetration level of this segment in India is around 20 per cent. With changing life styles, increase in disposable incomes, greater product choice and availability, people are becoming aware about personal grooming. The major players in this segment are Hindustan Unilever with a market share of ~54 per cent, followed by CavinKare with a market share of ~12 per cent and Godrej with a market share of ~3 per cent. The Skin Care segment is expected to register a growth rate of mare that 16 per cent.

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Industry Category and Products (Cont…)
Personal Care
Hair Care The hair care market in India is estimated at around INR 3,800 Cr. The hair care market can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels. Marico is the leader in Hair Oil segment with market share of ~ 33 per cent; Dabur occupies second position at ~17 per cent. Shampoos The Indian shampoo market is estimated to be around INR 2,700 Cr. It has the penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of the total shampoo sale. It has low penetration level even in metros. Again the market is dominated by HUL with around ~47 per cent market share; P&G occupies second position with market share of around ~23 per cent. Anti-dandruff segment constitutes around 15 per cent of the total shampoo market. The market is further expected to increase due to increased marketing by players and availability of shampoos in affordable sachets. Oral Care The oral care market can be segmented into toothpaste - 60 per cent; toothpowder - 23 per cent; toothbrushes - 17 per cent. The total toothpaste market is estimated to be around INR 3,500 Cr. The penetration level of toothpowder/toothpaste in urban areas is three times that of rural areas. This segment is dominated by Colgate-Palmolive with market share of ~49 per cent, while HUL occupies second position with market share of ~30 per cent. In toothpowders market, Colgate and Dabur are the major players. The oral care market, especially toothpastes, remains under penetrated in India with penetration level ~50 per cent.

Personal Wash is a highly penetrated category, with all India penetration levels exceeding 90 per cent. On the other hand, shampoo is not as penetrated which is expected to be around 40 per cent. Companies can bet on growth rate for the shampoo category.

Food & Beverages
Food Segment The foods category in FMCG is gaining popularity with a swing of launches by HUL, ITC, Godrej, and others. This category has 18 major brands aggregating INR 4,600 Cr. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, ready to eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury. Tea The major share of tea market is dominated by unorganized players. More than 50 per cent of the market share is capture by unorganized players. Leading branded tea players are HUL and Tata Tea. Coffee The Indian beverage industry faces over supply in segments like coffee and tea. However, more than 50 per cent of the market share is in unpacked or loose form. The major players in this segment are Nestlé, HUL and Tata Tea. According to Tea Board of India, the export of tea is expected to be more that 210 million kg for the year 2008 against about 179 million kg last year.

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Growth Prospect
Large Market
India has a population of more than 1.150 Billions which is just behind China. According to the estimates, by 2030 India population will be around 1.450 Billion and will surpass China to become the World largest in terms of population. FMCG Industry which is directly related to the population is expected to maintain a robust growth rate. India is second largest Country in terms of Population growth and increase in population has a direct relation to FMCG Products.

Source: UN Population Division: Medium variant

Spending Pattern
An increase is spending pattern has been witnessed in Indian FMCG market. There is an upward trend in urban as well as rural market and also an increase in spending in organized retail sector. An increase in disposable income, of household mainly because of increase in nuclear family where both the husband and wife are earning, has leads to growth rate in FMCG goods.

Increase in spending pattern because of higher disposable income.

Changing Profile and Mind Set of Consumer
People are becoming conscious about health and hygienic. There is a change in the mind set of the Consumer and now looking at “Money for Value” rather than “Value for Money”. We have seen willingness in consumers to move to evolved products/ brands, because of changing lifestyles, rising disposable income etc. Consumers are switching from economy to premium product even we have witnessed a sharp increase in the sales of packaged water and water purifier. Findings according to a recent survey by A. C. Nielsen shows about 71 per cent of Indian take notice of packaged goods' labels containing nutritional information compared to two years ago which was only 59 per cent.

Consumer mind set changed towards “Money for Value” from “Value for Money”

Survey by A. C. Nielsen shows about 71 per cent of Indian take notice of packaged goods' labels containing nutritional information compared to two years ago which was only 59 per cent.

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Advantage India
Governmental Policy
Indian Government has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions, reducing excise duties, automatic foreign investment and food laws resulting in an environment that fosters growth. 100 per cent export oriented units can be set up by government approval and use of foreign brand names is now freely permitted.

Central & State Initiatives
Recently Government has announced a cut of 4 per cent in excise duty to fight with the slowdown of the Economy. This announcement has a positive impact on the industry. But the benefit from the 4 per cent reduction in excise duty is not likely to be uniform across FMCG categories or players. The changes in excise duty do not impact cigarettes (ITC, Godfrey Phillips), biscuits (Britannia Industries, ITC) or ready-to-eat foods, as these products are either subject to specific duty or are exempt from excise. Even players with manufacturing facilities located mainly in tax-free zones will also not see material excise duty savings. Only large FMCG-makers may be the key ones to bet and gain on excise cut. 4 per cent reduction in excise duty

Foreign Direct Investment (FDI)
Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI). There is a continuous growth in net FDI Inflow. There is an increase of about 150 per cent in Net Inflow for Vegetable Oils & Vanaspati for the year 2008.

There is a continuous growth in FDI Inflow in India.

Source: DIPP

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Market Opportunities
Vast Rural Market
Rural India accounts for more than 700 Million consumers, or ~70 per cent of the Indian population and accounts for ~50 per cent of the total FMCG market. The working rural population is approximately 400 Millions. And an average citizen in rural India has less then half of the purchasing power as compare to his urban counterpart. Still there is an untapped market and most of the FMCG Companies are taking different steps to capture rural market share. The market for FMCG products in rural India is estimated ~ 52 per cent and is projected to touch ~ 60 per cent within a year. Hindustan Unilever Ltd is the largest player in the industry and has the widest market coverage.

Export - “Leveraging the Cost Advantage”
Cheap labor and quality product & services have helped India to represent as a cost advantage over other Countries. Even the Government has offered zero import duty on capital goods and raw material for 100 per cent export oriented units. Multi National Companies outsource its product requirements from its Indian company to have a cost advantage. India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew apart from being the second largest producer of rice, wheat, fruits & vegetables. It adds a cost advantage as well as easily available raw materials.

Export - Leveraging the Cost Advantage India offers cost advantage benefits by offering lower raw material & labor cost

Sectoral Opportunities
Major Key Sectoral opportunities for Indian FMCG Sector are mentioned below: Dairy Based Products India is the largest milk producer in the world, yet only around 15 per cent of the milk is processed. The organized liquid milk business is in its infancy and also has large longterm growth potential. Even investment opportunities exist in value-added products like desserts, puddings etc. Packaged Food Only about 10-12 per cent of output is processed and consumed in packaged form, thus highlighting the huge potential for expansion of this industry. Oral Care The oral care industry, especially toothpastes, remains under penetrated in India with penetration rates around 50 per cent. With rise in per capita incomes and awareness of oral hygiene, the growth potential is huge. Lower price and smaller packs are also likely to drive potential up trading. Beverages Indian tea market is dominated by unorganized players. More than 50 per cent of the market share is capture by unorganized players highlighting high potential for organized players. FMCG Industry has Sectoral Opportunities as rural market has growth potential.

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Porter's Five Forces Model

Porter's Five Forces model outlines the primary forces about competitiveness within the industry.

Rivalry among Competing Firms
In the Fast Moving Consumer Goods (FMCG) Industry, rivalry among competitors is very fierce. There are scarce customers because the industry is highly saturated and the competitors try to snatch their share of market. Market Players use all sorts of tactics and activities from intensive advertisement campaigns to promotional stuff and price wars etc. Hence the intensity of rivalry is very high. . The intensity of rivalry is very high among the competitor of FMCG Industry.

Potential Entry of New Competitors
FMCG Industry does not have any measures which can control the entry of new firms. The resistance is very low and the structure of the industry is so complex that new firms can easily enter and also offer tough competition due to cost effectiveness. Hence potential entry of new firms is highly viable.

Potential Development of Substitute Products
There are complex and never ending consumer needs and no firm can satisfy all sorts of needs alone. There are plenty of substitute goods available in the market that can be replaced if consumers are not satisfied with one. The wide range of choices and needs give a sufficient room for new product development that can replace existing goods. Every other day there is some short of new product, variants and design. This leads to higher consumer’s expectation.

. There is a threat for new entrants as well as for substitute.

Bargaining Power of Suppliers
The bargaining power of suppliers of raw materials and intermediate goods is not very high. There is ample number of substitute suppliers available and the raw materials are also readily available and most of the raw materials are homogeneous. There is no monopoly situation in the supplier side because the suppliers are also competing among themselves. . Even there is high bargaining power for Suppliers as well as for Buyers.

Bargaining Power of Consumers
Bargaining power of consumers is also very high. This is because in FMCG industry the switching costs of most of the goods is very low and there is no threat of buying one product over other. Customers are never reluctant to buy or try new things off the shelf.

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SWOT Analysis
Strengths:
Presence of established distribution networks in both urban and rural areas Low Operational Costs Presence of well-known brands in FMCG sector Availability of raw materials

Weaknesses:
"Me-too" products which illegally mimic the labels and brands of the established brands Lower scope of investing in technology and achieving economies of scale, especially in small sectors Low exports levels

Opportunities:
Large domestic market – over a billion populations Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers Export potential and tax & duty benefits for setting exports units

Threats:
Tax and regulatory structure Removal of import restrictions resulting in replacing of domestic brands Temporary Slowdown in Economy can have an impact on FMCG Industry

Key Take Away for Investors
Robust Growth rate in Future Wide distribution network and supply chain Customized Product range to suit local market requirements Superior processing technology Brand building and marketing Higher Disposable Income Awareness about Nutrition and Hygiene

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Bharti Airtel Limited
Company Outlook Positive

Company Description
Bharti Airtel Limited (Airtel) is India’s largest integrated and first private telecom services provider with a footprint in all the 23 telecom circles. The company is been structured into three individual strategic business units (SBU) - Mobile Services, Airtel Telemedia Services (ATS) & Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 95 cities. The Enterprise services provide end-to-end telecom solutions which has two sub units. National & International long distance services to carriers and services to corporates. The company’s subscriber base for the year ended December 2008 is 85.65 million by adding an additional of 2.73 million of new subscriber in the month of December 2008. The company has a market share of 33.22 per cent in the mobile GSM sector. Bharti is the only Indian company to have existence in all 23 telecom circles.

Major Recent News Bharti Airtel introduced a broad range of new mCommerce services and announce milestone of One Million users
Bharti Airtel announced that more than One Million users have registered for the mChek on Airtel service, since its commercial launch in June 2008. Further, Airtel also introduced a new range of capabilities and offers for users of mChek on Airtel.

Bharti Airtel plans USD 5 Billion CAPEX for 2009-10
Bharti Airtel has set aside around USD 5 billion as capital expenditure (CAPEX) for mobile services and infrastructure business for the next financial year. The allocation is USD 2.5 billion for CAPEX of mobile services and approximately USD 2.5-3 billion for passive infrastructure.

Fitch upgrades Bharti Airtel rating to BBBFitch Ratings has upgraded Bharti Airtel long-term foreign currency Issuer Default Rating (IDR) to BBB- from BB+. According to Fitch, the outlook for the company is Stable. The rating upgrade reflects the strengthening of the company consolidated financial.

Bharti Airtel wins top honours at the 7th Frost & Sullivan ICT Awards 2008
Bharti Airtel won top honours at the 7th edition of the Frost & Sullivan ICT awards 2008. The company also won three Market Leadership Awards in the Large Enterprise Telecom Services, Wholesale Data Services and Mobile Services categories under the Telecom Services category-one of the six major award categories.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company performance improved significantly in 2007-08. The company reported a net sales of INR 20,712.2 Crores registered a growth rate of ~47 per cent over the last year which was INR 18,420.2 Crores whereas the profit after taxes were INR 6,395.4 Crores to registered a growth rate of ~57 per cent over the last year which stood at INR 4,062.1 Crores. The Company consolidated revenue and EBITDA has grown at a CAGR of 54 per cent and 72 per cent respectively over the last five years.

Bharti Airtel Q3 (Dec’ 08) Results: Revenue Soars by ~8 per cent to INR 9633 Crores
The Company has registered revenue of INR 9,633.4 Crores as compare to INR 9,020.3 Crores on QOQ basis to register a growth rate of 6.79 per cent. The Average Revenue per user (ARPU) has decreased to 324 from 331 on QOQ basis. The reduction on ARPU is mainly due to continuous reduction in traffic charges and new scheme coming to market. The Minute of Usage (MoU) has also reduced to 505 minutes from 526 minutes. The Company plans $5 billion as CAPEX on mobile services and infrastructure in FY10. This CAPEX is in addition to the amount the company plans to spend on 3G and WiMax.

Bharti Airtel is India largest mobile company by user base, added a record 8.1 million-plus new customers during the OctoberDecember 2008 quarter, of which 99.6 per cent were pre-paid users.

Outlook
Company’s strong operational metrics coupled with its low cost structure and scale of operations will help the company to maintain strong growth rate. The company's strong cash position along with low gearing will support its expansion plans. The pan-India existence, along with brand equity, first-mover advantage and quality of services will help the company in maintaining its leadership position. Intense competition, regulatory changes and uncertain 3G bidding remains a concern.

Total wireless Subscriber base for the company stands at 85.65 million user on December 2008.

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Reliance Communications (RCom)
Company Outlook Positive

Company Description
Reliance Communications (RCom) is one of the largest private sector communications and Information Company, with over 62 million subscribers. The company offers a complete range of telecom services covering mobile and fixed line telephony. It includes broadband, national and international long distance services and data services along with an exhaustive range of value-added services and applications. The company is market leader in CDMA segment. It has a subscriber base of 52.07 million in CDMA and more than 10.00 million in GSM. The company has a lion share of around 60 per cent in CDMA segment. Recently the company has launched GSM services in many circles.

Major Recent News Reliance Communications launches GSM service in all over India
Reliance Communications launch a nationwide enhanced GSM service covering over 1 billion people in 24,000 towns and 600,000 villages. The company has existence in 8 circles out of 23, the company has already launched the services in many other circles and has planned to cover all 23 circles. The company has a market share of 3.86 per cent of the total GSM market.

RCom geared up with USD 1 Billion for 3G rollout
Reliance Communications (RCom) has kept aside USD 1 billion for its 3G (third generation) telecom services. About INR 47 billion investments in 3G, will be funded through the company’s internal cash treasury of INR 120 billion.

RCom venture into the GSM space sets off a price war
Reliance Communications (RCom) foray into the GSM space has set off a price war in pre-paid segment as Airtel, Vodafone and Idea have slashed tariffs on several entry-level schemes. The company is planning to launch more pre-paid and post-paid plans offering maximum value suited for various other customer segments of the GSM market. RCom has created a low-price environment.

Estimates CAPEX of INR 15000 Crores in FY10
By next year the company expects to incur a CAPEX of INR 15000 Crores including CAPEX for Reliance Infratel. The Investment to roll out 3G license is not included in 15000 Crores. The company expects CAPEX intensity to slow down going forward and expects to have 50,000 towers by the end of current financial year which currently stands at 40,000 with combined tenancy of 1.7 for CDMA and GSM.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company performance improved significantly in 2007-08. The company reported a net sales of INR 19,067.76 Crores registered a growth rate of 31.79 per cent over the last year which was INR 14,468.29 Crores whereas the profit after taxes were INR 5,401.14 Crores to registered a growth rate of 70.51 per cent over the last year which stood at INR 3,167.59 Crores. The Company revenue has registered a growth of ~50 per cent in the wireless and broadband segment. The revenue has registered a CAGR of ~33 per cent over the last two years where as the profit after taxes has registered a CARG ~350 per cent over the last two years.

About 99.9 per cent of RCom 5.5 million new additions in the quarter went in for a pre-paid connection.

RCom Q3 (Dec’ 08) Results: Revenue Soars by ~20 per cent and Net Profit by ~3 per cent
The Company has registered quarterly sales of INR 5,850.2 Crores as compare to INR 4,874.2 Crores for the last year to report a growth rate of more than 20 per cent where as the quarterly profit after taxes amount to INR 1,410.6 Crores as compare to INR 1,372.9 Crores for the last year. Profit after taxes has registered a growth rate of 2.7 per cent growth. The Average Revenue per user (ARPU) has decreased drastically to INR 251 from INR 339 compare to Q3FY07. Even Minute of Usage (MoU) has also reduced to 410 minutes from 449 minutes compare to Q3FY07. The net realizations per minute in wireless segment for RCom were low at INR 0.61 where at Bharti Airtel and Idea was at INR 0.64.

Total CDMA wireless Subscriber base for the company stands at 52.07 million user on December 2008.

Outlook
Rcom recently launch of GSM has receive good response from the market and shall result in gaining higher net additions and improvement in subscriber market share. The company expects to become a major player in GSM segment too. The company is expecting an increase in ARPU with the launch of 3G services.

Total GSM wireless Subscriber base for the company stands at 9.96 million user on November 2008.

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HDFC Bank
Company Outlook Positive

Company Description
HDFC Bank, a private sector bank, was incorporated in the year of 1994 by Housing Development Finance Corporation Limited (HDFC). HDFC Bank was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. The company deals with three key business segments - Wholesale Banking Services, Retail Banking Services and Treasury. It has entered the banking consortia of over 50 corporates for providing working capital finance, trade services, corporate finance and merchant banking. The bank also provides sophisticated product structures in areas of foreign exchange and derivatives, money markets, debt trading and equity research. In 2008, the bank merged with Centurion Bank of Punjab (CBoP). Currently Bank has distribution network comprised 1,412 branches and 3,177 ATMs across the country.

Major Recent News HDFC’s disbursement plan on track
HDFC expects to record a growth rate of around 20-25 per cent in home loan disbursements during the current fiscal. In the first nine months of the current fiscal, the bank has recorded a 22 per cent growth.

HDFC very near to the largest private sector bank in terms of branch count
HDFC Bank and ICICI Bank are very near to each others in terms of branch network. HDFC Bank after adding 658 branches last year have a network of 1,412 branches where as ICICI Bank has a network of 1,416 branches.

HDFC Bank raises INR 17.28 Billion via bonds
HDFC Bank has issued on a private placement basis unsecured non-convertible redeemable subordinated bonds in the nature of debentures as Upper Tier - II Bonds for an amount of INR 5.78 billion and Lower Tier - II Bonds for an amount of INR 11.50 billion.

HDFC Bank opened branch in Bahrain
HDFC Bank opened its overseas branch in Bahrain with a 25-member strong staff. The branch will offer cash management and trade finance solutions to corporate clients and wealth management services for NRIs.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company performance improved significantly in 2007-08. The company reported net revenue of INR 12,492.8 Crores registered a growth rate of more than 50 per cent over the last year which was INR 8,301.8 Crores whereas the net profit were INR 1,592 Crores to registered a growth rate of ~39 per cent over the last year which stood at INR 1,143 Crores. The Company revenue has registered a CAGR of ~50 per cent across the last three years where as the net profit has registered a CARG ~33 per cent over the last three years. The bank operates with 1,412 branches in India. It is second among the private players and very near to it competitor ICICI bank at 1,416.

HDFC Bank Q3 (Dec’ 08) Results: Revenue Soars by ~59 per cent to INR 5400 Crores
The Company has registered quarterly revenue of INR 5,407.89 Crores as compare to INR 3,405.79 Crores for the last year to report a growth rate of 58.85 cent where as net profit amount for the quarter was INR 621.74 Crores as compare to INR 429.36 Crores for the last year. Net Profit growth rate was 42.80 per cent. Note: The results for the quarter ended December 31, 2008 includes operations of Centurion Bank of Punjab Limited.

The bank has 3,177 numbers of ATMs across India.

Outlook
There is an increase in NPA from 0.40 per cent to current 0.60 per cent. NPA for the bank has increased due to merger with Central Bank of Punjab. Even at 0.60 NPA, it is among the lowest in the industry. The bank has lots of expansion plans in near future also.

Business India declare HDFC Bank as the 'Best Bank 2008'

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State Bank of India (SBI)
Company Outlook Positive

Company Description
State Bank of India (SBI) commenced its operations from the year 1955 is country’s largest commercial Bank in terms of profits, assets, deposits, branches and employees which was constituted through an act of Parliament in 1955. State Bank of India has 21 subsidiaries and more than 11,000 branches. The company offer banking services as well as non- banking services to their customers. It provides a whole range of financial services which includes Life Insurance, Merchant Banking, Mutual Funds, Credit Cards, Factoring, Security Trading & Primary dealership in the Money market. The Bank is actively involved in non-profit activity called community services banking apart from its normal banking activity.

Major Recent News
SBI loans at 8 per cent could trigger a rate war State Bank of India’s has taken a decision to offer home loans at 8 per cent and allow loan borrowers to switch to SBI after foreclosing existing loans. This may compel the other government-owned banks to reduce rates. The primarily reason for the reduction in interest rate is to stimulate growth in the economy and not to attract customers of their competitor. SBI wins IBA Award State Bank of India got two prestigious awards from Indian Banks Association namely 'Rural Banking Initiative' and 'Best IT Architecture' in the IBA & TFCIs 5th Annual Banking Technology Awards function 2009. Bank will open 2000 new branches in FY09 The bank has planned to open 2000 new branches in FY09 of which more than 300 has already opened. Plastic Money is ‘OUT’ and fingerprints are ‘IN’ Smart cards have been outsmarted as the country's largest lender, State Bank of India (SBI), has come up with a card-less transactions that requires only an account holder's fingerprints. The bank has decided to dispense with cards to lower the cost of transactions, particularly for the disbursement of social security pensions and wages under the National Rural Employment Guarantee Scheme. SBI to set up 383 I-banking kiosks State Bank of India is planning to set up 383 internet banking kiosks at ATM centers located on railway stations across the country over the next couple of months. The internet banking services at these kiosks have been specially designed to provide e-ticket facility for railway travelers through IRCTC gateway. In addition to the ticket reservation facility, other internet banking facilities would also be there in the kiosk. The bank is also planning to open add 300 ATMs over the next few weeks thereby taking the total number of ATMs to 10,000.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company performance improved significantly in 2007-08. The company reported a net revenue of INR 91,079.1 Crores to registered a growth rate of ~33 per cent over the last year which was INR 67,788.25 Crores whereas the net profit were INR 9,212.81 Crores to registered a growth rate of ~46 per cent over the last year which stood at INR 6,619.8 Crores. The Company revenue has registered a CAGR of ~18 per cent across the last three years where as the net profit has registered a CARG ~24 per cent over the last three years.

The bank has more than 9000 ATMs at present and has a plan to scale up its ATM network to 15,000 by FY09 and 25,000 by FY10.

State Bank of India Q3 (Dec’ 08) Results: Revenue Soars by ~34 per cent and Net Profit by ~47 per cent
The Company has registered quarterly revenue of INR 91,079.1 Crores as compare to INR 67,788.25 Crores for the last year to report a growth rate of ~34 per cent where as net profit for the quarterly amount to INR 9,213.83 Crores as compare to INR 6,619.80 Crores for the last year. Net Profit growth rate was ~47 per cent.

Outlook
State Bank of India has largest number of branches in world. State Bank of India presence in rural and sub-urban regions is a distinct advantage over its private peers. A large branch network and improving distribution network would sustain greater volumes from rural areas. Greater propensity to mobilise low-cost deposits and technology-driven connectivity would ensure profitability, besides volumes from these regions.

The bank has more than 11,111 branches in the World.

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Union Bank of India (Union)
Company Outlook Positive

Company Description
Union Bank of India is a leading nationalized bank of India which was incorporated in the year 1919. The company is committed to consolidating and maintaining its identity as a leading, innovative commercial Bank, with a proactive approach to the changing needs of the society. The bank’s business is mainly divided into three main areas; corporate financial services, retail financial services and agricultural financial services along with other allied services. The bank also provides fee-based services including distribution of third-party products and financial services to small and medium enterprises (SMEs) and small scale industries (SSIs). The Bank services include the broad categories of Government Business, Social Banking, Insurance, Mutual Fund and Non-Life Insurance.

Major Recent News Union Bank of India made it existence globally
Union Bank of India has made it global presence and has finalized plans to open representative offices or subsidiaries in a few more countries by 2009. The company has branch in Hong Kong and representative offices in Shanghai in China and Abu Dhabi in UAE.

Union Bank of India to set up an asset management joint venture company with KBC Asset Management
Union Bank of India, a leading nationalized bank in India, and KBC Asset Management, the globally active asset manager of the Belgian KBC group, formally signed the shareholders agreement to set up a joint venture asset management company in India, in which they will take a stake of 51 per cent and 49 per cent, respectively.

Union Bank to add more than 500 branches by March 2009
Union Bank of India is planning to add more than 500 new branches by March 2009 to the current 2500 branches in the country. Out of which more than 60 per cent is expected to be in rural areas. The bank is also expected to add 1000 ATMs by the end of next year.

Union Bank ties up with Edelweiss Securities
Union Bank of India had tied up with Edelweiss Securities, a part of Edelweiss Group to launch Wealth Management Services to cater its High Net worth Individuals (HNI) in Mumbai. Under the terms of the tie-up, Edelweiss will be offering a whole range of wealth management products and alternative investment options such as structures product, Real Estate Funds, Art and so on.

Union Bank focuses on MSMEs, opens 100 branches
Union Bank will open 100 specialized branches in order to increase the focus on the Micro, Small and Medium Enterprise (MSME) sector. The bank has planned to recruit specially trained staff including credit analysts and technical officers for these branches and would be located in the MSME-centric regions.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company performance improved significantly in 2007-08. The company reported a net revenue of INR 11,189.24 Crores to registered a growth rate of ~27 per cent over the last year which was INR 8,603.36 Crores whereas the net profit were INR 1,387.03 Crores to registered a growth rate of ~64 per cent over the last year which stood at INR 845.39 Crores. The Company revenue has registered a CAGR of ~25 per cent across the last three years where as the net profit has registered a CARG ~25 per cent over the last three years. Union bank added 427 outlets during 9M FY'09 increasing total ATMs to 1573 as on 31st December 2008.

Union Bank of India Q3 (Dec’ 08) Results: Net Profit Soars by ~84 to INR 672 Crores
The Company has registered quarterly revenue of INR 3,653.79 Crores as compare to INR 2,806.04 Crores for the last year to report a growth rate of ~30 per cent where as net profit for the quarterly amount to INR 671.74 Crores as compare to INR 365.02 Crores for the last year. Net profit growth rate was ~84 per cent.

The bank added 82 new outlets during 9M FY'09 increasing total outlets to 2596 as on 31st December 2008.

Outlook
Union Bank of India is among the top performer in public sector bank. We expect the bank to register a robust growth rate in the future also. The Bank NPA has decreased from 0.35 per cent to 0.14 per cent. It is among the lowest in banking industries.

Productivity (INR Lakhs) Business/ Employee - 672 Business/Branch - 7609 Net Profit/Employee - 4.47 Net Profit/Branch - 50.64 Gross Profit/Employee- 8.73 Gross Profit/Branch - 98.81

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Axis Bank Limited
Company Outlook Positive

Company Description
Axis Bank, formerly known as UTI Bank, was among the first to set up private banks. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTII), Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance companies. The bank has restructured its business into four strategic profit centres such as Corporate, Retail, Merchant & Treasury Banking and Further the bank also provide mobile banking services and mobile refill facilities. It has also diversified into investment banking, insurance, credit cards, mortgage financing, depository services and more. The bank has taken control of UTI collection centers in many cities. The bank is also acting as a clearing house for NSE and has also tied up with companies in e-commerce.

Major Recent News Axis Bank secured a place in Nifty Index, to replace Zee Entertainment
Axis Bank, a leading private sector bank will replace Zee Entertainment Enterprises in the National Stock Exchange's benchmark 50-share index Nifty, with effect from March 27, 2009.

Axis Bank planning to expand its network in Orissa
Axis Bank is planning to expand its networks in 30 districts of Orissa to consolidate its position in the state. The company has planed to open six branches at Jatni, Talcher, Nuapada, Jagatpur, Sundergarh and Baripada all in Orissa during the current year. The bank further plans to open 10 branches in next year.

Nayak to step down as Axis chairman
P J Nayak will step down as Axis Bank’s Chairman & CEO from August after a nine-anda-half year’s stint with the bank. Nayak’s term is due to end in July 2009.

Axis Bank to improve Credit Deposit (CD) Ratio
Axis Bank has focus on improving the credit-deposit (CD) ratio in Orissa. The bank had a CD ratio of 33 per cent on mid of January 2009 and aims to increase it to 40 per cent by March 2009. The bank has chalked out plans to lend more to sectors like agriculture, micro-finance and mid cap corporate.

Care assigns ‘AAA’ rating to Axis Bank
CARE has assigned ‘AAA’ rating to Lower Tier II Bonds of Axis Bank aggregating to INR 20 Billion. Axis Bank track record of growth and improving profitability, healthy capitalization levels, strong management and resource-raising ability marked with high proportion of low-cost deposits on the back of innovative product offerings, strong technology platform and expanding network leads to best rating quality.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company performance improved significantly in 2007-08. The company reported a net revenue of INR 8,801 Crores to registered a growth rate of more than 60 per cent over the last year which was INR 5,472 Crores whereas the net profit were INR 1,071 Crores to registered a growth rate of more than 62 per cent over the last year which stood at INR 659 Crores. The company has registered a decent decrease in NPA when the competitors NPA has actually shot up. The closing NPA for the year ended is among the lower in the sector. The Bank has a very wide network of 3171 ATM. This is one of the largest ATM networks in the country.

Axis Bank of India Q3 (Dec’ 08) Results: Revenue Soars by ~65 to INR 2985 Crores
The Company has registered quarterly revenue of INR 2984.77 Crores as compare to INR 1802.34 Crores for the last year to report a growth rate of ~65 per cent where as net profit for the quarterly amount to INR 500.86 Crores as compare to INR 306.83 Crores for the last year. Net profit growth rate was ~63 per cent. Savings Bank deposits registered a growth of 39 per cent on YOY basis to INR 21,888 Crore for the quarter end December 08 from INR 15,768 Crore last year. Even Current Account deposits grew at 20 per cent on YoY basis.

During the quarter the bank opened 20 branches, 89 ATMs and also recruited 1,415 employees. Axis Bank operates with 752 branches including extension counters and overseas branches and two representative offices overseas.

Outlook
Axis Bank is among the top performer in private sector bank. In this global financial crisis, the company is least affected in terms of NPA. The company has reported a reduction in NPA from 1.39 per cent to 0.42 per cent in a span of just three year. The company has reported lower NPA for the current quarter too. The Company has 19,719 employees as on December 2008.

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Punjab National Bank
Company Outlook Positive

Company Description
Punjab National Bank (PNB) is the second largest state owned bank with a strong presence in cash rich North and Central India. It has over 37 million satisfied customers and over 4589 offices and more than 1733 ATMs. It has continued to retain its leadership position among the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. It is one of the most technologically advanced public sector bank with the government owning around 57.8 per cent of the company equity. PNB aims to expand its base in the entire northern India region for providing banking facilities at the doorsteps of the people. PNB offers a wide variety of banking services which include corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. Among the clients of the Bank are Indian conglomerates, medium and small industrial units, exporters, non-resident Indians and multinational companies.

Major Recent News Punjab National Bank Upper Tier II bonds rated CRISIL AAA
CRISIL has assigned ‘AAA/Stable’ rating to the INR 10 billion Upper Tier II bonds of Punjab National Bank. The rating reflects PNB strong market position and healthy resource profile. It is also underpinned by the bank’s comfortable capitalization and earnings positions, and the support it is likely to receive from its majority owner, the government of India, in the event of distress.

Punjab National Bank International, fastest growing Indian bank in UK
In the first year of operation in the UK, the Punjab National Bank International Limited (PNBIL) has recorded the fastest growth among Indian banks in the country. The PNBIL set up in May 2007 with two branches in London and Southall has asset size of more than $500 million.

Punjab National Bank aims at workforce rationalization
Punjab National Bank is expected to rationalize its workforce and reduce its staff strength by 28,000 in the next six years from 58,000 now. The company long-term goal is to run the bank by 30,000 people. The company doesn’t have any exit policy and don’t want anybody to leave with an exit package. The reduction in the employee will happen by natural course of retirement.

Many in the race for Punjab National Bank’s housing finance subsidiary
GE Capital, Carlyle, New Silk Route and Tata Capital are in the race for a significant stake in Punjab National Bank’s housing finance company. The second-largest stateowned bank is planning to sell a 49 per cent stake in its subsidiary, PNB Housing Finance. Five bidders have been short-listed and the due diligence is likely to be completed soon.

Punjab National Bank to merge PNB Gilts with self
Punjab National Bank is planning to merge its primary dealership subsidiary PNB Gilts with self instead of selling the company. The Bank holds 74.07 per cent stake in PNB Gilts.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company performance improved significantly in the year 2007-08. The company has reported a net revenue of INR 16,653.72 Crores to registered a growth rate of ~26 per cent over the last year which was INR 13,187.4 Crores whereas the net profit were INR 2,119.50 Crores to registered a growth rate of ~36 per cent over the last year which stood at INR 1,552.68 Crores.

Punjab National Bank Q3 (Dec’ 08) Results: Net Profit Soars by ~85 to INR 1006 Crores
The Company has registered quarterly revenue of INR 6,239.91 Crores as compare to INR 4,119.57 Crores for the last year to report a growth rate of ~51 per cent where as net profit for the quarterly amount to INR 1,005.82 Crores as compare to INR 541.45 Crores for the last year. Net profit growth rate was ~85 per cent.

The bank operates with 4,589 branches in India. It has one of the largest numbers of branches.

Outlook
The Bank has registered a robust growth rate in the past and is expected to maintain the same in the future also. Bank margin are among the best in the industry. The NPA for the quarter has decreased from 1.33 per cent to 0.39 per cent.

The bank has 1.912 numbers of ATMs across India.

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Hindustan Unilever Limited (HUL)
Company Outlook Positive

Company Description
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods (FMCG) Company, touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal Care Products and Foods & Beverages. In FY ending 2007 the Company generated net sales of INR 13,913.40 Cr. and a profit of INR 1,914.88 Cr. HUL is also one of the country's largest exporters in FMCG product; it has been recognized as a Golden Super Star Trading House by the Government of India. The mission that inspires HUL's over 15,000 employees, including over 1,300 managers, is to "add vitality to life." HUL meets everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. HUL's brands - like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, Kwality Wall's are household names across the country and span many categories - soaps, detergents, personal products, tea, coffee, branded staples, ice cream and culinary products. They are manufactured over 40 factories across India. The operations involve over 2,000 suppliers and associates. HUL's distribution network comprises of about 4,000 redistribution stockists, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers.

Major Recent News Margins scenario likely to change
We expected to see an increase in margins. The primary reason for our upgrade is that we expect the margin scenario to turn around. Crude prices have dropped drastically over the last quarter, driving a sharp decrease in cost of key inputs for soaps, detergents and packing material. HUL increases the prices of soaps and detergents to partially pass on rising costs, when crude rose from US$70–80/bbl to US$140/bbl. Now, Crude prices are down to ~25 per cent from its peak.

Unilever, U.K. reduces packaging spend
Unilever is lowering its expenditure on packaging across its portfolio of food brands as part of a wider cost-cutting drive. HUL has pared down the colour palette used for printing across many products. The system has been used to reduce printed packaging costs for Unilever's products. It is also eco-friendly because it reduces waste in the printing process. HUL is taking different steps to reduce the cost and increase the margin.

Unilever's Pureit wins the UNESCO Water Digest Water Award 2008-2009
Hindustan Unilever’s product - Pureit (a water purifier) has received the UNESCO Water Digest Water Award 2008-2009 in the category of best domestic non-electric water purifier. Pureit received the award for outstanding contribution in the field of water in India. The product is available across 21 Indian states and has reached more than 1 million homes in India giving them access to microbiologically safe drinking water. Pureit’s performance has been tested by leading international & national medical, scientific & public health institutions and meets the germ-kill criteria of the Environmental Protection Agency, the drinking water regulatory agency in the USA.

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Key Financial Result for the Financial Year Ending Dec’ 07
The company has reported total income of INR 14,366.54 Crores as compare to last year of INR 12,803.90 Crores to report a growth rate of ~12 per cent. The company is among one of the fastest growing in FMCG Industry. Where as, Profit after taxes were at INR 1,767.66 Crores as compare to last year of INR 1523.16 Crores to register a growth rate of ~16 per cent. The Company sale has registered a CAGR of 9.67 per cent across the last three years where as the profit after taxes has registered a CARG 13.83 per cent over the last three years. HUL is a market leader in FMCG Industry.

The company is able to maintain its margin and even to capture bigger market by widest coverage.

HUL Q4 (Dec’ 08) Results: Revenue Soars by ~17 per cent to INR 4300 Crores
The Company continues to impress on sales growth with one more quarter of near ~17 per cent growth. Total Income reported by the company for the quarter was INR 4,307.71 Crores as compare to INR 3,687.40 Crores QOQ basis. The Net Profit registered for the quarter was INR 615.74 Crores as compare to INR 631.44 Crores. The reduction in profit margin is mainly due to increase in raw material prices which are expected to come down in next quarter. Note: The Company has change the accounting period from December to March. The company is innovative in launching new products. The new flavor in coffee has leads HUL to snatch big market share in Coffee Division.

Outlook
The Company is the largest FMCG player and market leader in most of the product category. The Company has registered a robust growth rate over last few years and has wide market coverage. HUL believe in product innovation and entrance into niche market. Recently company has launch Pureit, a water purifier, received a good response from the market. The company has a good growth rate.

The Company has launched Pureit, a water purifier, has received a good response and is expected to grab big market share.

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Godrej Consumer Products Limited (Godrej)
Company Outlook Positive

Company Description
Godrej Consumer Products Limited (GCPL) continues to be one of the leading FMCG companies in the country. One in three households in India uses a Godrej product every day. The company is a leader in hair colour category and Liquid Detergent category and is among the largest marketer of toilet soaps with leading brands such as Cinthol, Fairglow, Godrej No 1. The company has wide market coverage and by the means of acquisition the company is building a presence in different countries. The company is presently exporting there products to 30 different countries. The acquired arms of Godrej like Keyline, Rapidol and Kinky are expected to create synergy and larger market share. The company launches some new products that include Godrej Expert Powder and Liquid hair colors, Cinthol Musk and Godrej Ezee Bright and Soft. The mission that inspires Godrej's over 950 employees, spread over 3 state-of-the-art manufacturing facilities at different location, is to “Deliver Superior Stakeholder Value by providing solutions to existing and emerging consumer needs in the Household & Personal Care business”. The company has annual sales of INR 1102.57 Crores with a CAGR in double digits over past many years.

Major Recent News Godrej takes over Joint Venture
The Board of Directors of Godrej Consumer Products Limited (GCPL) has approved the acquisition of 50 per cent stake of its joint venture partner SCA Hygiene Products’ stake in Godrej SCA Hygiene Limited. After the transaction, the Joint Venture which owns the ‘Snuggy’ brand of baby diapers will become a 100 per cent subsidiary of GCPL.

Godrej buys back equities
The Company has bought back 23.83 Lakhs shares for INR 3.11 Crores under its buy back offer. The share represents 20.89 per cent of the INR 14.9 Crores offer.

Godrej acquired Kinky - One of South Africa’s leading hair brand
Godrej Consumer Products Limited has acquired 100 per cent stake in the Kinky Group Limited, South Africa. Kinky is among one of the largest brand into hair segment with product portfolio includes dry hair, hair braids, human hair extensions, hair pieces, wigs and wefted pieces. Kinky also offers hair accessories like styling gels, hair sprays, oil free shampoo, bonding glue and bonding glue removal.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company reported sales of INR 1,102.57 Crores to register a jump of ~16 per cent compare to INR 951.52 Crores last year. Where as the profit after taxes were at INR 159.23 Crores grew by ~11 per cent from INR 144.03 Crores last year The Company sale has registered a CAGR of 25.11 per cent across the last three years where as the profit after taxes has registered a CARG of 20.80 per cent over the last three years.

Godrej Q3 (Dec’ 08) Results: Revenue Soars by 25 per cent to 342 Crores
The Company continues to impress on sales growth with one more quarter of more than 26 per cent growth. Total Income reported by the company for the quarter was INR 342.14 Crores as compare to INR 272.75 Crores QOQ basis. The Net Profit registered for the quarter was INR 40.06 Crores as compare to INR 43.02 Crores QOQ basis. There is a decrease in Net profit in mainly on account of increase in raw material prices.

Godrej enjoys a market share of ~35 per cent in Hair Colour and ~80 per cent in Liquid Detergent. For both the segment the company is a market leader.

Outlook
The Company is one of the largest FMCG player and market leader in hair colour category and Liquid Detergent category. The company is come international acquisitions. The company has entered into several new categories during the year and expects to add significant value to the company. The company registered a decrease in profit, mainly on account of high raw material prices, now as the raw materials process are down, the company will be able to maintain the margins.

Although the company is market leader for Hair Colour and Liquid Detergent, the company always does some product innovative. The company launched some new products in Liquid hair colors and Godrej Ezee.

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Dabur India Limited (Dabur)
Company Outlook Positive

Company Description
Dabur India Limited is the fourth largest FMCG Company in India with interests in Health care, Personal care and Food products. Dabur has build on a legacy of quality and experience for over 120 years, today Dabur has powerful brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Dabur is a market leader for Dabur Chyawanprash and packaged juice - Real & Active. The Company never limits itself to power branded product but believes to strength in other business opportunities by growing in niche segments. The company has entered into Health and Beauty Retail segment which is an emerging retail category in India. The Company has opened 7 H&B stores and has plan to setup 160 stores by 2010. Hindustan Unilever Ltd (Ayush) and Marico (Kaya Skin) have presence in Health and Beauty Retail segment. The mission that inspires Dabur’s over 3500 employees is to “Dedicated to the Health and well being of every household”. Dabur posses Strong capabilities which are reflected by Strong R&D infrastructure, 14 manufacturing units and wide distribution network which covers 2.5 million retailers.

Major Recent News Dabur foray into health drink
Dabur has entered into the malted food drink market with the launch of a new health drink “Dabur Chyawan Junior”. According to the company, they expect to capture a market share of 10 per cent of the INR 1,900 Crores malted food drink market over the next two years.

Acquisition of Fem
Dabur has acquired 72.15 per cent of Fem Care Pharma Ltd (FCPL), a leading player in the women’s skin care products market, for Rs 203.7 Crores in an all-cash deal. The Company is expected to create synergy by this deal.

Dabur to set up new medicine manufacturing in Himachal Pradesh
Dabur got approval from Government of Himachal Pradesh to set up another medicine manufacturing unit. The project has an expected investment of INR 130 Crores.

Margins scenario to increase
We expected to see an increase in margins of FMCG Company. The recent fall in commodity prices are primary reason for the margin scenario to turn around. Crude prices have dropped drastically over the last quarter, driving a sharp decrease in cost of key inputs for soaps, detergents and packing material. The company also expects to see a significant correction in packaging costs. The company is taking different steps to reduce it packaging cost which currently consist ~17 per cent of the total cost for the company.

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Key Financial Result for the Financial Year Ending Mar’ 08
Dabur has achieved a turnover of INR 2,396.30 Crores compare to INR 2080.3 Crores last year to register a growth rate of ~15 per cent and Profit after Tax of INR 332.90 compare to INR 281.7 Crores last year to registered a growth rate of ~18 per cent. Over the last five years, the company has reported compound annual growth rates of 18 per cent in Net Revenues and 33 per cent in Profit after Tax. The Company sale has registered a CAGR of 19.15 per cent across the last three years where as the profit after taxes has registered a CARG 28.76 per cent over the last three years. Dabur is able to maintain is margin. The company has continuously registered a robust growth rate.

Dabur Q3 (Dec’ 08) Net Sales Soars by 20 per cent to INR 778 Crores
The Company continues to impress on sales growth with one more quarter of around 20 per cent growth. Total Income reported by the company for the quarter was INR 778.65 Crores as compare to INR 649.64 Crores QOQ basis. The Net Profit registered for the quarter was INR 108.45 Crores as compare to INR 94.52 Crores QOQ basis. Dabur took aggressive cost management initiatives coupled with a judicious pricing strategy and continued strong performance in key categories helped Dabur to mitigate the impact of steep cost inflation and the company announced an increase in profit margin.

Recently company foray into health drink and expect to capture 10 per cent market share in next two years.

Outlook
The company is well known for ayurvedic brand which have existence of over 120 years. The major product of the company is Dabur Chyawanprash and packaged juice. The acquisition with Fem will add synergy to the company and will help the company to capture market in women’s products too. Recently the company has entered into Health and Beauty Retail segment. The company has registered a continuous and high growth rate. There is growth in Profit margin also. We expect the company to continue the growth.

Dabur is not leaving any stone un-green. The Company has acquired 72.15 per cent stank in Fem. By this acquisition the company got an entrance into women’s skin care product.

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Emami Limited (Emami)
Company Outlook Positive

Company Description
Emami Limited (Emami) is one of the know brands whose principal activities are to develop and manufacture personal, beauty and health care products through an effective leverage of Ayurveda. The company’s portfolio consists of 20 products made from herbs, natural extracts and essential oils. The company started with a vision of making people healthy and beautiful naturally. The products are sold across India and in countries like Holland, Bangladesh, Nepal, Sri Lanka, Pakistan, Gulf countries, Europe, Russia, Africa and the Middle East. The company has a network which consist of 2,700 distributors which have a direct coverage of 4,00,000 retail outlets across the country. The company has plants located in Kolkata, Pondicherry and a new plant in Guwahati. The Company accounts for ~22 per cent share of personal care of the country’s FMCG market. Some of the company power brands like Boroplus Antiseptic Cream is the market leader with a ~70 per cent market share; Navratna Oil is also a market leader with more than 50 per cent market share. Company’s other power brands also plays an important part and hold a good market share. The company entered into Realty business in May 2007. Emami Realty with its joint venture partners undertook 31 projects. Recently the company called off its earlier decision to quit the realty business. The company is planning to transfer its stake in 100 per cent subsidiary Emami Realty to other group companies.

Major Recent News Emami may hive off Zandu Chemical
The company has recently bought Zandu Pharmaceuticals for ~INR 700 Crores is evaluating the possibility to hiving off Zandu Chemicals, a subsidiary of Zandu Pharmaceuticals, because there are limited growth prospects and chemicals in not the core business of Emami.

Emami plans to transfer holding of realty arm to group companies
The company has decided to stay rooted in the real estate business and transfer its stake in 100 per cent subsidiary Emami Realty to other group companies. The company share swap ratio would be worked out so that Emami Realty's stake is fairly distributed among other group companies. The company has reversed its earlier decision to quit the property business.

Emami plans to set up a manufacturing facility in Africa
The company is planning to set up a new manufacturing facility in Africa with an investment of INR 90 Crores. The facility is anticipated to commence operations by 2010.

Emami to install its 2nd plant in Assam
Emami has established its second production facility in Assam. The plant is installed at Abhoypur with an investment of INR 500 million which will manufacture creams, lotions and ointments. The plant has installed capacity to produce 5,400 tons of cream, 1,800 tons of lotion and 900 tons of ointment.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company performance improved significantly in 2007-08. The company reported a net sales of INR 583.71 Crores registered a growth rate of ~13 per cent over the last year which was INR 515.80 Crores whereas the profit after taxes were INR 92.75 Crores to registered a growth rate of ~41 per cent over the last year which stood at INR 65.92 Crores. The Company sale has registered a CAGR of 24.56 per cent across the last three years where as the profit after taxes has registered a CARG 45.81 per cent over the last three years. Emami is one of the best names for Ayurvedic products.

Emami Q3 (Dec’ 08) Results: Net Sales Soars by 43 per cent to INR 280 Crores
The Company has registered sales of INR 280.63 Crores as compare to INR 195.47 Crores for the last year to report a growth rate of ~43 per cent where as profit after taxes amount to INR 33.65 Crores as compare to INR 37.82 Crores for the last year. The company has registered a decline in profit margin.

The company has acquired stake in Zandu Pharmaceuticals. The company has plans to get into different industries.

Outlook
The company is one of the know brands whose principal activities are to develop and manufacture personal, beauty and health care products through an effective leverage of Ayurveda. Recently the company has entered into Realty business.

In 2007, the company has undertaken 31 projects with Emami Realty, 100 per cent subsidiary, with its joint venture partners.

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ICSA India Limited
Company Outlook Positive

Company Description
ICSA India Limited was incorporated in 1994 is into the business of embedded solutions, software services and infrastructure projects. ICSA India delivers comprehensive solutions in the areas like Customized Embedded System Applications and Integrated Telemetry Applications. This apart, the company is also into the business of construction of power transmission lines and substations. The company’s product line include: Intelligent Automatic Reading System, Multiplexer Unit, Distribution Transformer Monitoring System, Substation Controller, Micro Remote Terminal Unit, Theft Detection Devices, and Pole Top RTU.

Major Recent News Government of Singapore Investment Corporation increases stake in ICSA
The Government of Singapore Investment Corporation (GIC) has raised its stake in Hyderabad based ICSA India Limited. GIC bought 159,771 shares from open market and its shareholding after the acquisition stands at over 3.3 million shares, representing 7.14 per cent stake of ICSA. Even Goldman Sachs has recently acquired 1.75 million equity shares in ICSA by exercising its right of conversion for warrants.

Goldman Sachs buys additional stake at 28 per cent premium in ICSA
Goldman Sachs acquired an additional stake worth INR 35.75 Crore in ICSA India, at 28 per cent premium to the company's stock price by exercising an option to convert warrants into equity.

ICSA earns INR 236 Crores orders from Mahavitaran and MP Paschim Ksehtra Vidyut Vitaran
ICSA India Limited has bagged work orders of INR 236.14 Crore from two power utilities Mahavitaran (Maharashtra State Electricity Distribution Company Limited) and MP Paschim Kshetra Vidyut Vitaran Company Limited. The INR 204.22 Crore order from Mahavitran is for the construction and commissioning of sub transmission lines, power transformers, new substations, augmenting of existing substations, distribution transformers of varying capacities and allied works. The second order worth INR 31.92 crore from MP Paschim Ksehtra Vidyut Vitaran Co Ltd is for the supply of material, survey, erection and installation, and commissioning of 11 Kilo Volts (KV) line and bays with VCB and metering.

ICSA India Limited get approval to set up Wind Project
ICSA India Limited has been permitted by the Board of Non-Conventional Energy Development Corporation of Andhra Pradesh Limited (NEDCAP) to set up a 20 MW Capacity Wind power project in Andhra Pradesh.

ICRA assigns LA+, A1 to fund based, non-fund based limits of ICSA
ICRA assigns the ratings of LA+ and A1 for INR 2,300 million fund based and non fund based limits of ICSA (India) Limited. ICRA has also assigned rating of A1 to the short term non fund based limits indicating lowest credit risk in the short term.

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Key Financial Result for the Financial Year Ending Mar’ 08
The company performance improved significantly in 2007-08. The company reported a net sales of INR 678.55 Crores which registered double fold over the last year which was INR 333.25 Crores whereas the profit after taxes were INR 108.95 Crores to registered a growth rate of more than 82 per cent over the last year which stood at INR 59.86 Crores. The Company sale has registered a CAGR of more than 300 per cent over the last three years and even the profit after taxes registered a CARG of more than 300 per cent over the last three years.

CAGR for Revenue as well as for Net Profit was more than 300 per cent over the last three years.

ICSA India Q3 (Dec’ 08) Results: Net Sales Soars by 60 per cent to INR 304 Crores
The Company has registered quarterly sales of INR 304.22 Crores as compare to INR 189.13 Crores for the last year to report a growth rate of ~60 per cent where as quarterly profit after taxes amount to INR 45.22 Crores as compare to INR 36.24 Crores for the last year. Profit after taxes growth rate was ~25 per cent. EPS for the quarter was INR 9.66 compare to INR 8.93 for the last year quarter. Profit after taxes for the nine month has registered a growth of more than 50 per cent. Lots of potential is embedded system applications and also in integrated telemetry applications.

Outlook
The company has registered best growth rate in the industry. With a little more than a decade the company is expected to registered total revenue of more than INR 1,000 Crores. There is lot of potential is embedded system applications and also in integrated telemetry applications.

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Disclaimer: This document is prepared on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited and any of its employees shall not be responsible for the content. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned here in and the same have acted upon or used the information prior to, or immediately following the publication

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