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OWERGRID'S YTD FY12 project awards at INR79b, up 41% YoY; expect momentum to continue for the rest of the year: Power Grid Corporation of India's (Powergrid) project awards in YTD FY12 (April - October) totaled INR79b, up 41% YoY. After a lull in the beginning of the year, ordering has picked up lately, with orders worth INR40b placed in October alone. In the last one month, Powergrid has further approved investments worth INR39b, which will ensure healthy ordering towards the year-end. We expect Powergrid to place orders of over INR150b in FY12, which will result in total awards

of ~INR550b during the 11th Five Year Plan. This represents an impressive growth of ~3x over the 10th Five Year Plan. Ambitious targets for 12th Five Year Plan: Powergrid plans to install ~65,000 circuit km (ckm) of transmission lines during the 12th Plan, nearly twice the likely installation in the 11th Plan (~30,000ckm, target of 37,000ckm) with a targeted capex INR1t+, ~2x the 11th Plan capex. While the target appears ambitious, it will be necessary to meet growing transmission needs in the country, especially after commissioning of 80-100GW of generation projects under construction. Competitive intensity remains high; but unlikely to deteriorate

further. Aggressive bidding by Chinese and Korean players, who together commanded ~60% of the EHV transformer/ reactor market during FY0811, beat down prices by 30-40% over the last 2-3 years. Recent trends suggest that pricing in the segment has bottomed out and should not deteriorate further because of non-sustainability of very low prices. Increasing thrust by Powergrid on local manufacturing and decreasing proportion of mandatory import content will benefit domestic players. We believe that low product prices coupled with rising input costs will keep margins under pressure in the near term. (NMS) ■

be greedy
■ By Shruti Kohli

UPIN'S 2QFY12 operational performance was in line with the estimates. Key highlights are: LPC's 2QFY12 performance was in-line with net sales growth of 17.1% to INR16.4b (v/s est of INR15.6b), core EBITDA at INR2.76b (v/s est of INR2.86b) and Adj PAT at INR2b, down 6.5% compared to estimate to INR2.1b. Core revenues (excluding USD20m licensing income from Medicis) grew by 17.1% led mainly by 55% growth in formulations exports to emerging markets and 22% growth for India formulations business. US generic sales grew by 14% impacted by high base (due to absence of generic Lotrel sales) while US branded sales has grown by 19%. We expect EPS of INR19.2 for FY12 (flat YoY) and INR25.6 for FY13 (up 33.6%). Based on our revised estimates, the stock is valued at 24.8x FY12E and 18.5x FY13E core EPS. Our estimates do not include one-time upsides from the company's Para-IV pipeline. Maintain Buy with TP of INR513 (20x FY13 EPS).


ed EPS (for higher depreciation) estimates in FY12 and FY13 by ~21% and 14% to INR188 and INR211 respectively. The stock trades at 9.5x FY13E EPS, 4.8x EV/EBITDA and USD89/ton (adjusting for merchant power assets of ~400MW). Upgrade to Buy with target price of INR2,468/share (SOTP based).

profit from the sale of longterm investments drove the outperformance. While valuations are attractive, the key trigger for the stock will be improvement in the macroeconomic scenario and pick-up in capital marketrelated business. Maintain Neutral.

Ranbaxy Laboratories

LF'S reported 2QFY12 results in line with our estimates. PAT declined by 11% YoY to INR3.7b v/s our est. of INR3.6b. The number includes ~INR548m loss from its Insurance and Hotel business. EBITDA grew 26% YoY to INR11.7b (v/s our est. of INR10.8b) while EBITDA margin remained steady at 46% (v/s our est. of 45.5% and 45.5% in 1QFY12). Revenues were up 7%YoY to INR25.3b (v/s our estimate of INR23.8b). Revenues includes contribution from land FSI sales of ~INR6.2b and annuity income of INR4.8b. On the backdrop of no major new launch, sales volume was subdued but in line with expectation at 1.3msf (v/s 2.2msf in 1QFY12). Leasing volume stood at 0.66msf as against 0.97msf in 1QFY12. Over 1HFY12, it achieved gross leasing of ~1.6msf v/s. guidance of 2.5-3msf in FY12. Due to high level of cancellation, net leasing stood at 0.94msf. DLF trades at a PER of 21.1x FY13E EPS of INR10.8 and 1.4x FY13E BV. Maintain Buy.


Tata Steel


ATA Steel's (TATA) consolidated adjusted PAT declined 75% QoQ to INR3.6b. Reported PAT of INR2.1b included a forex loss of INR1.5b. A high effective 87% tax rate dragged down PAT. Tata Steel Europe (TSE) reported EBITDA of USD103m, in line with estimate. EBITDA per ton declined sharply by USD46/ton to USD32/ton, squeezed by falling steel prices and higher coking coal costs. Tata Steel India's (TSI) EBITDA per ton was USD380/t, which was a tad lower than estimate due to higher-than-expected other expenditure. We are cutting our FY12 EPS by 46% to model weaker performance of subsidiaries in 2QFY12 and in 2HFY12. We cut FY13 EPS 15% to factor in lower volume guidance for Indian operations to 8.3mt against 9mt earlier. The stock trades at a PE of 6.4x and EV/EBIDA of 4.7x FY13E. Maintain Buy.

ORE revenue growth of 8.3% to INR20.9b (v/s est of INR20.8b), core EBITDA at INR1.74b (v/s est of INR1.44b). Core EBITDA margins at 8.3% were higher than our estimate of 6.9%. The company reported a Adj PAT growth of 59% YoY to INR1.62b (v/s est INR1.1b) mainly driven by better operational performance and higher other income. Core revenue growth was mainly led by 22% growth in EU, CIS & Africa region and a 52% increase in API revenues. This growth was tempered down by a slower 2.3% YoY degrowth in US and a muted 6.6% growth in India formulations Valuation and view: Given the potential recurrence of Para-IV upsides every year for the CY11-12 period, Para-IV upsides are attracting P/E based valuations. We believe that these are one-off upsides and hence continue to value them on DCF basis. Our current DCF value of all potential Para-IV upsides is INR80/sh. Since sustaining current valuations is dependent on upsides from Lipitor & Nexium, it is imperative for RBXY to resolve outstanding US FDA issues and salvage the upsides from these two opportunities which account for 80% of overall Para-IV upsides. RBXY is currently valued at 26.6x CY11E and 20.8x CY12E core EPS. Our estimates exclude MTM forex gains and one-off upsides from Para-IV opportunities. Our current DCF value of all potential Para-IV upsides is INR80/sh. We believe that current valuations are discounting the best-case scenario for both the core business as well as for the Para-IV upsides. We maintain Sell with target price of INR460 (20x CY12E EPS + FTF DCF value of INR80/sh). N F R A S T RU C T U R E Development Finance Company's (IDFC) 2QFY12 PAT increased by 55% YoY and 67% QoQ to INR5.24b (55% above our estimates), led by higher profit from sale of investments worth INR2.6b. On an adjusted basis, the bottom-line was ~INR3.3b, largely in line with our estimates. NII in 2QFY12 grew by 31% YoY and by a marginal 2% QoQ to INR5b (~4% lower than our estimates). Key highlights are: Business momentum gained pace with sanctions rising 40% QoQ to INR81b and disbursements rising 22% QoQ to INR36b. Outstanding loan book grew by 5% QoQ and 14% YoY to INR393b. Asset pipeline declined to INR184b from INR191b in 1QFY12 and INR237b in 2QFY11. Valuation and view: Though IDFC's 2QFY12 headline numbers appear to be strong, higher income from


Shriram Finance


Shree Cement
HREE Cement's (SRCM) 2QFY12 operating performance was above our estimates with EBITDA of INR2b (v/s our estimate of INR1.84b), due to a better product mix and lowerthan-estimated fall in realizations. However, tax write-back boosted reported PAT to INR385m. Key highlights: SRCM's 2QFY12 revenue grew by 19% YoY (-17% QoQ) to INR8.5b (against our estimate of INR8.2b) and recurring PAT was INR107m (against our estimate of INR28m). EBITDA de-grew by 40% YoY (~23% QoQ de-growth) to INR2b (against our estimate of INR1.85b), translating into EBITDA margins of 23.5% (against our estimate of 22.5%) - an improvement of 360bp YoY (-160bp QoQ). Tax writeback (including prior-period tax) boosted reported PAT to INR385m. We are upgrading our adjust-




HRIRAM Transport Finance (SHTF) posted a PAT of INR2.99b (flat YoY) for 2QFY12. This was 16% lower than our estimate of INR3.6b on account of higher write-offs (~INR600m) on its mining related portfolio in the states of AP, Karnataka and Goa. Operating profit grew 20% YoY and 3% QoQ to INR6.8b (in line with our estimate), led by healthy 19% YoY and 7% QoQ increase in net income (including securitization income). NII (ex securitization income) grew 33% QoQ on account of 9% QoQ increase in on-books AUM coupled with ~25bp QoQ increase in yields. Valuation and view: We downgrade our earnings estimates by 6%/11% for FY12/13 to factor lower asset growth. Besides slowdown in growth, pending clarity over certain regulatory issues could act as an overhang on the stock in the near term. The stock trades at 2.2x FY12E and 1.8x FY13E BV. Maintain Buy.


NCE upon a time not very long ago, an early adolescent asked his mother for money while going to school. His mother gave him an angry look and told him, “You are getting spoilt. I think you are in bad company. You want money every second day!” The kid was confused. He only wanted to buy that amazing burger to which he had taken a special liking. The mother’s explanation was that she is providing him with everything. Why should he need money to spend independently? There was no convincing her. Fast forward. The adolescent grows up, gets a job. During a coffee conversation on a lazy Sunday morning, he tells his parents the money he earns is not enough to take care of their needs. He is preparing to get a better-paid job. He went on to add that it would be so nice to have a lot of money and be rich. He may have expected his parents to support him admiringly for his high ambitions. But all that he got was a depressed look on their faces. Then they told him that being greedy was bad and that “Money was evil.” Love for money never did well to anyone. He ended up confused yet again because he had seen that look on his mother’s face when they could not replace their old refrigerator with a new one due to financial constraints. He thought if we feel so sad when we don’t have money, why should it be evil? MONEY OR GOODNESS This is something which has forever confused me too. And I’m sure you too. No matter how much people miss money in their lives, if you show open affection for money, you are more than likely to be scorned at. You’ll be looked down upon. Chances are that you’ll be an outcaste. They will call you “money-minded” and this will most definitely offend you like anybody else in your situation. I’m sure you will immediately come out in defence and the most common form of defence used in such cases is, “I’m not money-


minded!! I care for people’s feelings. I respect human beings.” Ah! Yes of course you do. But it is not law that you can’t do all this along with loving money although your elders, your family, your teachers, your books, and the programmes you watched on TV told you that money and goodness don’t go together. The hero in your favourite movie hates money and loves people, values human emotions and that makes him extremely popular. He gets the girl also in the end while the rich villain looks on. Applause! But I have a real life hero who is extremely rich, loves people, and values human emotions. At the same time, he is shrewd and selfish at times. He is still my hero because I know he can’t be perfect. I understand that if he does not carry an attitude, he will not be able to survive and make this kind of money to donate for good causes, to the needy. If he is not shrewd, he would not be able to build and keep a lucrative job or a business which fetches him money to provide for the needy rest. The other aspect is that all the money he has, helps him be happy and peaceful, the most –wanted emotions – which he then passes on to the people around him. He smiles at them and makes them feel good. He is able to smile because h e

can afford to. His comforts are taken care of and he stands at such a position that he can take care of the comforts of the people who most need them. CONNECTING THE DOTS He never sat and worried about the lack of money. He was constantly working towards earning more to provide for his needs. He was greedy for money. But he put his greed to positive use. He worked towards earning it rather than sitting on a bench in a park and looking up in the air and making castles without foundations. He rather chose to sweat it out and build solid castles with strong foundations on ground. Absolute discipline, a few productive hours in a day and a whole lot of research and home work made him capable of earning the kind of money he thought was needed to fulfil his requirements. My point is that a person, who nurtures negative emotions, will do so money or no money. Money is not the culprit if a rich person is stone-hearted. Ever since I got the maturity to understand, I have not been able to understand the missing link between money and positive attitude. This disconnect established with this short, sweet and seasoned phrase, “Money is a necessary evil” lingers on at the back of our minds and finds a comfortable position in our psyche by the time we are adults. Subsequently, we tend to falter in typical situations where money is involved. For instance, this mentality restrains us from effectively negotiating salaries f o r

the fear of being misunderstood as greedy. ROOT OF ALL EVIL We have been told time and over again that the love of money is the root of all evil. They have picked instances of war from history and said that the kings fought to win money. More contemporarily, siblings fight over property. Well, I say money is not the cause of these negative developments. It is the lack of money. It is when you don’t have money that you resort to unpleasant and unlawful means. Consider this. You want to buy a car which costs a few lakhs of rupees, and you can’t afford it. At that particular point if your brother is all set to get the ancestral wealth being willed by your father, chances are you will jump in to claim your bit in that wealth. You may have refused it earlier on grounds that you are earning well and are financially sound. But now the lack of money will lead you into a clash with your family. I mean that you will look for easier and faster ways of getting the money to buy the car. You could have waited till you earned those few lakhs or loaned it from the bank. But that was a long wait and loan would involve repayments and interests. Claiming from an existing pool seemed more convenient. This happens in most cases. So, it is the lack of money that’s the root cause of all evils. It happens when you feel that you don’t have enough money. It happens when you start stretching yourself beyond your means. It happens when you place luxury over comfort without having the means to afford it. And it happens when you plan to take the easy way out rather than sweating it out. GET IT RIGHT So if anything is evil, it is not money, it is your attitude. Like trust and like a good reputation, money too has to be earned through the longer route. There is no short cut. Wars of the yore and scams of the present day are the shortcuts they take to make more money and in the course of it money bears the brunt by being called evil. So, work hard and wait. Love money. It is an awesome thing if you get it right. And yes, greed is good. (The author is FounderEditor, & ■

Before taking a personal loan...


Cadila Healthcare


ADILA'S 2QFY12 operational performance was above our estimates. Key highlights : Revenues grew 11.5% YoY to INR12.45b (v/s est of INR13.04b), EBITDA grew 12.6% YoY to INR2.76b (v/s est of INR2.5b) while Adj PAT declined 40% YoY to INR1.03b (v/s est of INR1.59b). Net profits were impacted by INR900m in forex losses on hedges and foreign currency loans. Based on our revised estimates, CDH is valued at 26.6x FY12E and 17.8x FY13E consolidated EPS. Maintain Neutral rating with a target price of INR854. ■

ERSONAL loans are the one of the most widely chosen options, in case you are in a spot and need some urgent cash. However, personal loans are tricky and you need to know as much as possible about their basics before applying for one. Let’s start with some common questions. What is a personal loan? Personal loan is credit that is granted to the borrower for personal use. These loans are usually unsecured (no security or collateral required/asked) and is based solely on the borrower’s integrity and ability to pay. Who is eligible for a personal loan? The eligibility criteria and their specific details may differ from banks to bank based on their perception of the risks associated with given out personal loans. However, nearly all banks divide the potential borrowers into three categories: ● Salaried individuals ● Self employed individuals ● Self employed professionals Other factors which are taken into consideration are, age, residence, work experience, repayment capacity, past obligations and place of work. What kinds of interest rates are offered on personal loans? Personal loans are offered in: ● Fixed rate ● Floating rate ● Flat rate Of the three, flat rates turn out to be the most expensive since the other two are calculated on a reducing balance basis. What is the average interest rate for personal loans?

The interest rate for a personal loan is decided on the basis of your credit repayment capability and history. Depending on this, interest rates could be anywhere between 14% and 25%, depending on the financial institution. What documents are required for personal loans? Personal loans require the least number of documents, making it the fastest to be approved. Typically, financial institutions would require proof of identity, residence, income and also 3 to 6 months of your bank statements. Some banks also require guarantors and the same set of their documents. How is a personal loan repaid? Is prepayment of a loan possible? Normally, personal loans are offered between 1 to 5 years. The loan is repaid with Equal Monthly Instalments (EMIs). Prepayment is possible but will generally carry a significant prepayment charge. These are some basics that you should know when obtaining a personal loan. These days, securing a loan is easy. Repayment is the tough bit. When you don’t repay on time, the recovery agent may come knocking at your door. When getting a personal loan it is important to ask yourself ‘Will I be able to pay it off?’ Some things which can help you pay back your personal loans are: ● Pay off your credit cards: Try to pay off your credit cards as soon as possible, since credit card debts inadvertently hamper loan payments.

● Budget your spending: Once you have taken a loan, ensure that you budget your spending, so that if in any unforeseen circumstance you cannot make a monthly payment, your savings will help you out. Personal loans if not utilized and repaid properly, can become a curse in disguise. Make your decisions prudently to ensure a safe financial future. ■