Markets & Finance
While private sector companies are
known to take that extra risk, diver-
sify into newer areas even at the risk
of inviting investors’ wrath, state-
owned companies are happy in their
comfort zone, anchored in their tradi-
tional businesses despite holding the
biggest chunk of idle cash in the cor-
porate world.
It’s in this context that state owned
Bharat Petroleum’s gradual but suc-
cessful move into the exploration &
production (E&P) space needs to be
looked at. After all, E&P business is
vastly different from refining and
marketing, although they form the
same value chain.
In the next five years, the company
will start earning much higher profits
from its E&P business than the gov-
ernment-sponsored profits it can earn
from its traditional business.
In 2010 huge natural gas deposits
were discovered in a Mozambique
offshore block. BPCL’s 10% stake in it
is already worth over $2.2 billion, or
half of the company’s value today.
BPCL also holds be-
tween 10% and 20%
stake in 10 blocks in
Brazil , whi ch have
seen some exciting oil
discoveries over the
years. Although not
certified yet, they are likely to be sig-
nificant going by the technical details
By 2018, both these mega projects
begin production, BPCL is likely to
have a bigger source of profits than
its conventional businesses.
Experts are already valuing the E&P
portfolio steeply. In fact, most broker-
age houses prefer BPCL as an invest-
ment candidate for its E&P success.
“BPCL remains our top pick,” men-
tioned a Barclays report in May 2013
attributing the preference to its un-
dervalued E&P portfolio.
The oil reserves in Brazil will be
known in the first half of 2014, ac-
cording to a Motilal Oswal report.
“Assuming the recoverable reserves
at 500 mmboe, it is likely to add
around `50 to BPCL’s share value,” it
As more details trickle in, this chang-
ing face of BPCL will turn it into a win-
ner for investors.
of the day
Is it a Refining
Stock or an
Exploration Play?
Operations Listed Investment
Unlisted Investment Upstream
Source: Barclays Research estimates
FY14 P/B multiples (x)
DFC Bank continues to
be the most expensive
bank stock in the world
though its price-to-book value
(P/BV) has fallen from the peak
levels achieved in the stock mar-
ket boom of January 2008.
The Mumbai-based bank is
valued at a P/BV of 4.27 at the
current market price, down
from 7.75 of January 2008 and
from 5.31 in January this year.
But this level is not only higher
than all its peers in India, but al-
so higher than the P/BV of the
biggest banks in the world,
Bloomberg data shows. For in-
stance, Citigroup’s P/BV is 0.78,
JP Morgan is 1.03, while Bank of
America has a P/BV of 0.71.
India’s second-largest pri-
vate sector lender also main-
tains its premium over ICICI
Bank, the largest private bank,
despite announcing its slowest
quarterly profit growth in a
decade on Tuesday.
The difference between the P/
BV of HDFC Bank and ICICI
Bank changed to the former’s
advantage at the end of trading
on Thursday, the first day of full
trading after Tuesday’s results.
At 4.27, HDFC’s P/BV was high-
er than Tuesday’s 4.25, but low-
er than Monday’s 4.35. ICICI
Bank’s P/BV was 1.62, down
from Tuesday 1.64 compared
with 1.67 the previous day.
HDFC Bank’s second quarter
profit growth slowed to 27%
compared with 30% in the previ-
ous quarters as the economic
slowdown, high interest rates
forced customers to cut back on
borrowings and spending.
The difference between price-
to-book value is the premium
that investors pay when they
buy shares of HDFC Bank. The
values of both banks have fluc-
tuated in a narrow band in the
past one month though the gap
between them has been in-
creasing in the past three years.
In 2010, the average P/BV of
HDFC Bank was about 4.09
compared with ICICI’s 2.07.
Fund managers and analysts
believe that HDFC’s focus on as-
set quality, its expansive retail
franchise and focus on profit-
ability will help it weather the
current slowdown despite the
September quarter’s slippage in
growth. Some brokerages have
retained their price targets de-
spite Tuesday’s numbers.
“HDFC Bank is best placed
among defensives to weather the
storm. Hence, we maintain our
‘buy’ rating on the stock with a
price target of
. `725and have
relative prefer-
ence for HDFC
Bank against
other defen-
sives,” said
Adarsh Paras-
rampuria, ana-
lyst at Prabhu-
das Lilladher.
HDFC Bank’s
performance is
also better than that of the
Sensex, whose price-to-earnings
multiple and P/BV have fallen
from their 2008 highs but still re-
main below that of the bank.
The Sensex is trading at a price-
to-earnings multiple of 18.1
times and a P/BV of 2.64 times.
HDFC Bank’s PE is 22.4 times.
Experts say as the fall at the
shorter end of yield curve after
the 125-bps cut in the MSF, or
marginal standing facility, rate
by the Reserve Bank of India
will lower the marginal cost of
funds and increase the prospec-
ts of a recovery in the whole-
sale lending business. MSF is
the penal overnight rate at
which banks borrow from RBI.
“We continue to believe the
bank is well positioned to play
the India consumption story
with best in class underwriting
abilities and superior manage-
ment capabilities, its current
valuation premium is largely
reflective of these strengths,”
said Jignesh Shial, analysts at
IDBI Capital Research.
HDFC Bank shares ended
0.36% up at . `653.75 on Thursday,
while ICICI slipped 0.95% to
. `966.15. “We believe HDFC Bank
remains uniquely positioned
among Indian banks – its strong
asset quality and profitability
make it a safer stock,” said Man-
ish Chowdhary, analyst at IDFC
Securities who maintains an
‘outperformer’ rating.
Fund houses are bullish on
loan advances, which they ex-
pect to pick up with the festival
season coupled with good mon-
soon, as the bank has been ag-
gressive in adding branches in
semi-urban and rural areas,
which are likely to push
growth in the coming quarters.
HDFC Bank Maintains Its
Primacy Despite Sept Blip
Lender’s price-to-book value has come down, but it is still far ahead of global giants
P/BVs of
changed to
advantage on
Hours before he was arrested, Anjani
Sinha, former MD & CEO, NSEL, in a
statement to the Mumbai police, said the
board, comprising Jignesh Shah and Jo-
seph Massey, was aware of the goings on
at the exchange. Massey, former MD of
MCX-SX, Shah and other board members
will be questioned in light of this fresh
statement. In an earlier affidavit, Sinha
said the NSEL board was not aware of the
fraud being perpetrated on the bourse.
In the first high-profile arrest made in
connection with the . `5,600-crore NSEL
fraud, Sinha was arrested by Economic
Offences Wing (EOW), Mumbai police, on
Thursday evening. In another important
development, EOW received the consent
of the Mumbai city and suburban collec-
tors to invoke the Maharashtra Protec-
tion of Investors Deposit (MPID) Act,
1999, against the accused.
Commodity markets regulator FMC
will direct the MCX board to remove
Shreekant Javalgekar, MD and CEO,
MCX, and Dipak Shah, head of surveil-
lance, who are directors on the board.
Sinha’s arrest came a day after he was
grilled by ED, which is investigating the
case under the Prevention of Money Laun-
dering Act. He was grilled for seven hours
by EOW before being arrested at 6 pm on
Thursday evening. Sinha will be presented
before a metropolitan magistrate within 24
hours of the arrest.
“Sinha has been arrested at 6 pm,” said
Balsing Rajput, DCP, EOW. “Sinha has been
arrested as he was associated in one capaci-
ty or the other with NSEL. He was on the
board of NSEL as its MD & CEO. All things
related to the company are reported to the
board by the MD. He had all the powers and
it was with his knowledge and intention
that what has transpired on the exchange
has been carried out. The decision of the
management starts from Sinha. We have
also received permission to invoke MPID
against the accused .”
Sinha was issued summons by EOW ear-
lier this month but failed to appear before
the agency for almost a fortnight on
grounds that he was laid low by viral fe-
ver. This, EOW sources pointed out, could
be placed on record against him.
Significantly, EOW sources confirmed
that Chandrakant Kamdar, a director on
the board of FT, the promoter of NSEL, was
being interrogated by EOW. “Being a pro-
moter of NSEL, we are trying to ascertain
whether FT knew of the happenings on the
spot exchange,” they said.
On MPID, EOW sources said it would
have to prepare a list of all moveable and
immoveable properties belonging to the
accused and trace whether funds from the
NSEL fraud were used to acquire them. If
a link is indeed established, properties,
cash, investments in debentures, stocks,
etc, could be frozen, the sources added.
Asked earlier whether the provisions of
the MPID Act could be applied to an ex-
change, which is not in the business of tak-
ing deposits, Rajput said, “If an agent, bro-
ker or anybody takes money (from
investors) on the pretext of delivering a ser-
vice – in cash or kind, including a commodi-
ty – and fails or refuses to do so, it is sup-
posed that he has duped an investor and is
liable to face action under the MPID Act.”
EOW filed an FIR on September 30
against directors and key management
personnel of NSEL, its promoter FT, 25
borrowers/ trading members of NSEL,
some of the brokers of NSEL and others.
NSEL Ex-MD Anjani Sinha Arrested
Now claims that board,
including Jignesh Shah &
Joseph Massey, were aware
of exchange’s working
Saurabh Agrawal has pounded the
path leading up to Aditya Birla group’s
Mumbai headquarters plenty. The in-
vestment banker has helped the Birlas
cut many significant deals – restruc-
turing cement business, purchase of
UltraTech, acquisition of Spice Tele-
com by Idea Cellular and later an in-
vestment from Axiata in Idea.
It was on one such trip that Agrawal,
44, a graduate from IIM, Kolkata, posed
a simple, humble question to Kumar
Mangalam Birla: “Can I be helpful?”
Agrawal, MD and regional head of
corporate finance, South Asia, Stan-
dard Chartered Bank, was referring to
the stalled discussions by Birla’s ce-
ment company UltraTech to purchase
JP Associates’ cement plant in Gujarat.
The two sides had engaged in many
spurts of negotiations for almost two
years, but couldn’t agree on a deal.
Several rival investment banks had
already unsuccessfully tried ‘cooking
up a deal.’ “It wasn’t completely mari-
nated...some ingredients were mis-
sing,” recalls Agrawal who has more
than a passing interest in cooking.
“In any negotiations, deals get stuck
on a rigid stance,” says Agrawal. Be-
sides his proximity to Birla, Agrawal
had also developed a warm relation-
ship with Manoj Gaur, executive chair-
man and CEO, JP Associates. He had
advised JP on its fund-raising plans.
Armed with consent from both Birla
and Gaur, Agrawal set out to break the
deadlock. He did it in 13 weeks. On
September 11, Birla announced a
. `3,800-crore deal to buy out JP Asso-
ciates’ cement plant in Gujarat.
Agrawal had excellent persuasive
skills in college, his classmates say.
“Saurabh was comfortable with
numbers, had a sharp sense of com-
merce and excellent persuasive
skills,” recalls Venkat Viswanathan,
Saurabh’s classmate at IIM, and now
chief executive of Latent View Ana-
lytics, a data analyser for many mul-
tinational companies.
It’s not just the Birlas, Agrawal enjoys
a good rapport with the Tatas too. “He
never sells anything to you; he only
brings value propositions with the best
insights to the table,” says Natarajan
Chandrasekaran, chief executive and
managing director, Tata Consultancy
Services, India’s largest software ser-
vices exporter. “He is extremely de-
pendable, trusted and brings in high
quality advice.” Agrawal advised TCS
on its public offer in 2004 and also on a
string of acquisitions. “He helped me
with how and what to present to in-
vestors during our road shows for the
TCS IPO,” recalls Chandrasekaran.
Investment banking sources say
Agrawal was also part of the team that
blew the whistle on Satyam founder
Ramalinga Raju. In 2009, Raju had ap-
pointed DSP Merrill Lynch to find
buyers for Satyam. Sources say that
Agrawal, who was working with DSP
Merrill Lynch, found some gaps in the
accounts, and alerted Sebi along with
his mentor Hemendra Kothari, then
DSP Merrill Lynch’s chairman. Raju
later made his famous confession.
Early in his career, Agrawal ap-
peared for an interview for a summer
internship position at Citibank in Kol-
kata. How can a chemical engineer –
Agrawal was from IIT, Rourkee – deal
with finance, he was asked. “Ultimate-
ly, it is all about making money wheth-
er it is chemical engineering or run-
ning a business,” he had replied. He
got the internship and also persuaded
Citibank to let him work in Mumbai.
Managing businesses is not new to
Saurabh’s family. His father owned a
printing and publishing business in
Mathura which published epics –
Mahabharata and Ramayana – in tra-
ditional oil press. “I still have some of
the original copies,” he says.
His younger brother Parag Agrawal
co-founded Onmobile, a value-added
service provider for mobile companies.
Soon after passing out from IIT, Rour-
kee, Saurabh joined Engineers India, a
public sector unit, as a trainee engi-
neer. A year later, he got into IIM, Kol-
kata. His next stop was investment
banking. He started that journey with
DSP Merrill Lynch before finding his
way to StanChart 16 years later.
“He was able to pull together all the
corporate business, be in finance,
mergers and acquisitions, equity cap-
ital market under one roof in India,”
says Mark Dowie, his boss and the
group head, corporate finance, whole-
sale banking at StanChart. “We had
growth in market share and added
more clients under his leadership.”
After two decades at work, Agrawal
took a four month break before he
joined Standard Chartered Bank in
2011. “He has missed all the anniver-
saries and festivals after our marriage
as he had crazy travel schedules,” says
Shelly Agrawal, his wife. She is a for-
mer banker and now a part-time teach-
er. “But now, he teaches geography and
history to his two school kids.”
“I went for a 10-day vipasana medita-
tion in Mumbai and have turned much
more calm,” says Agrawal. “I am tak-
ing life a bit more easy now.” With
deals like JP cement, he can afford to.
Cooking Up a Deal
Comes Easy to This
Investment Banker
He was able to push
through the stalled deal
between Birlas and Gaurs
and has a good rapport
with the Tatas too
: N
No. COS/CRJ IPLTB/ e-Tender /13/0162 Dated: 15.10.2013
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[1]; 91140857; Complete Stator Assembly for 3-Phase Tra ction Motor Type 6FRA-6068.
Dig. No. OTWD.096.002 ALT-3 [Or Latest Alteration]. Speon. No. 4TMS.096.069 ALT-
5 (Or Latest Alteration]; 295 Nos.; 2,290.00; 10,00 000.00; 20.11.2013, 11:00 firs.
[21; 91140389; Set of Stator Chamber and Associated Components each set consisting
of 15 [Fifteen] Items. (1) Stator Chsmber/DE (CNC Machined) to Drg. No. 1TWD.096.0 17
ALT-6 & to Specn. No. 4TMS.096. 059/Latest Version & RDSO STR No. 21. (II) Inner
Lab nth/DE (CNC Machined) (Rotor) to Dig. No. 4TWD.096.043 ALT-5 & to Specn.
No. 4TMS.096.068 REV- t [Latest Version] & RDSO STR No. 21. (ifi) Outer Bearing
Cap/DE (CNC Machined) to Drg. No. 1TWD.096. 006 ALT-3 & to Specn. No.
4TMS.096.068 REV-i [Latest Version] & RDSO STR No. 21. (IV) Inner Labyrintb/DE
(CNC Machined) to Dig. No. 4TWD.096.028 ALT-4 & to Specit No. 4TMS.096.068
REV-i [Latest Version] & RDSO STR No. 21. (V) Outer Labyrinth/DE (CNC Machined)
to Dig. No. 4TWD.096.029 ALT-5 & to Speen. No. 4TMS. 096.068 REV- 1 (Lat est
Version] & RDSO STR No. 21. (VI) End Frame/DE Assembly (CNC Machined) to
Dig. No. ITWD. 096.005 AALLT-T-i i REF-4 with Air Out let Net to Dig. No. 2TWD. 096.078
ALT-l & to Specn. No. 4TMS. 096.068 REV-i [Latest Versi on] & RDSO STR No. 21.
(VII) Stator Chamber/NDE (CNC Machined) to Drg. No. 1TWD. 096.0l6 ALT-6 & to
Specn. No. 4TMS. 096.059/Latest Ver sion & RDSO STR No. 21. (VIII ) Inner
Labyrinth/NDE (CNC Machined) to Drg. No. 4TWD.096.042 ALT-5 & to Speen. No.
4TMS. 096.068 REV-i [Latest Version] & RDSO SIR No. 21. (IX) Inner Labyri nth/NDE
(CNC Machined) to Dig. No. 4TWD. 096.03 1 ALT-4 & to Specu. No. 4TMS.096.068
REV-l [Latest Version] & RDSO SIR No. 2211 . (X) Bear ing Cap/NDE (CNC Machined)
to Dig. No. 3TWD.096.032 ALT-5 & to Speen. No. 4TMS.096.068 REV-i [Latest
Version] & RDSO SIR No. 21. (XI) Clamp PlatefNDE (CNC Machined) to Dig. No.
2TWD. 096.033 ALT-6& to Specsi No. 4TMS.096.068 REV-I [Latest Ver sion] & RDSO
SIR No. 21. (XII) End FsamNDE Assembly (CNC Machined) to Dig. No. OTWD.096.003
ALT-9 REF-5 & to Speen. No. 4TMS. 096.068 REV- l [Latest Version] & RDSO SIR
No. 21. (XIII ) Speed Probe Housing (CNC Machined) to Drg. No. 1TWD.095.077
ALT-4 & to Specn. No. 4TMS.096.061 REV-i [Latest Version] & IWSO SIR No. 21.
(XIV) Machined Terminal Box Assembl y to Drg. No. 3TWD.096.059 ALT.3 & to
Specn. No. 4TMS.096. 055 ALT-4 [Latest Version]. (XV) Terminal Box Cover Assembly
to Dig. No. 4TWD.096.027 ALT-2 & to IS:10192’82.; 808 Set; 2,290.00; i0,00,000.0G,
25.11.2013, 11:00 fir s.
[3]; 91140949; End Ring Plate for Scheme-I Rotor. Dig. No. SKEL-4739 ALT- l,
Specn. No. 4TMS.096. 068 REV- I , ALT-4; 355 Nos.; 1,145.00; 77,000.00;
20.11.2013, 11:00 lIr e.
[4]; 81140126; Polyamide Sheet [NOMEX 1’pe-4l 0]. Size: 0.25 MM Thick x 914 MM
Wide in Roll Length of 30 Mtrs. Specn. No. A0255, ALT-2 ; 530 Mtr s.; 172.00;
8,500.00; 25.11.2013, 11:00 firs.
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