MONDAY ◆ MARCH 5, 2012

Telecom sector


HE Supreme Court of India has ordered cancellation of ~120 licences issued to Unitech (22), Videocon (22), Idea (9), S Tel (6), Loop (21), Sistema Shyam (21), Spice (4), Etisalat DB (13) and Tata Teleservices (3). These licences, issued by the government on or after 10th January 2008, and subsequent spectrum allocation have been declared illegal and are quashed. The Court has directed TRAI, the telecom regulator, to make fresh recommendations for grant of licence and allocation of spectrum in 22 circles by an

auction similar to the 2010 3G spectrum auction. The government would consider TRAI recommendations and take appropriate decision within next one month and grant fresh licences by auction. We believe the Supreme court order has following positive structural consequences for the Indian telecom sector: 1) De-facto exit of non-serious operators and availability of spectrum allocated to them for use by serious efficient operators, 2) Industry consolidation, 3) Expected improvement in regulatory visibility over the next four months as 2G auction price would become the benchmark

to settle all spectrum related regulatory liabilities like excess spectrum/re-farming etc, and 4) Potential room for pricing improvement and traffic/revenue migration from marginal operators to incumbents. On the negative side, we expect renewed concerns on potential entry of Reliance Industries (RIL) through the upcoming 2G auction process as well as on pricing given the history of significantly fierce bidding during 3G/BWA spectrum auctions held during 2010. We expect bidding to be relatively benign given high spectrum availability and relatively low demand expected. We also expect tower business of various operators to be impacted to some extent by this development. (NMS) ■
■ By Shruti Kohli

family friends from Bangalore visited us for a week. They brought a new Titan watch for me and a cricket bat for my brother. I couldn’t wait to get back to school to flaunt my new possession. These family friends had a son who was an early adolescent at that time. My parents gifted him the new pair of Levi’s jeans which they had actually bought for my brother on our recent visit to Delhi. They had come unexpected and at that time, in the 1980’s that is, there

gifts were made to express emotions. Your gift shows how much you value a relationship or friendship. One of my cousins organised a family get together when he came over with his family from the UK at the end of last year. They gave kid blankets as return gifts to everybody regardless of whether there was a child in the receiver’s family or not. My nuclear family has no children. After three months, we are still figuring out what to do with that


Crompton Greaves
EVENUE growth picks up, but profitability continues to decline: Crompton Greaves (CG) reported 67% YoY decline in consolidated net profit for 3QFY12 to INR771m (v/s our estimate of INR1,385m), despite 26% YoY growth in revenue to INR30b (v/s our estimate of INR27b). Growth in revenue was boosted by the acquisition impact of Swedish company, Emotron and USbased QEI, and gain on account of variation in exchange rates. We believe that CG is a strong company, with an impressive product portfolio and stands to benefit from the capex cycle in India. However, the company is going through a lean phase, which could last through the next 3-4 quarters, limiting any meaningful re-rating possibilities. We maintain Neutral, with a target price of INR134.


ESULTS below expectations; revenue visibility poor: Revenue growth, which was healthy till 1HFY12, tumbled to a marginal 2% YoY in 3QFY12. Revenue for the quarter was INR12.6b v/s our estimate of INR14b. The company has been posting healthy growth in revenue due to rising share of Power EPC (30% of revenue in 2QFY12, up from 23% last year). However, with the projects reaching completion stage and slowing order intake, visibility for FY13 appears poor. Cutting earnings estimates, driven by expectation of lower order intake: We cut our earnings estimates by 5% for FY12 and 12% for FY13, driven by lower sales and order intake assumptions. We estimate revenue CAGR at 5% and PAT CAGR at 3% over FY11-13. The stock trades at ~15x FY13E EPS. We maintain Neutral, with a revised target price of INR414.

engines meet the requirement of M&M's "Swaraj" branded tractor. There are more than 4,50,000 tractors in India with SEL's engines. In FY11, SEL supplied 47,413 engines - 22% share of M&M's engine requirements. For the last three year's, SEL's share of M&M's engine requirement has been between 22% and 24%. Valuations & View: Swaraj Engines is available at a 20% discount to historical valuations on a trailing twelve month basis despite ROE being 20% higher than the historical average of 25%. We attribute this to weak market sentiments and lower growth in FY13E as compared to the 45% earnings CAGR over the last 3 years. We expect valuations to improve with the rise in dividends, given current yield of 3.0% for FY13. Given limited valuations, we recommend to ACCUMULATE for a target price of `625 based on average valuations.

kets was a key contributor to volume growth; share of rural sales has increased to 30% for 9MFY12 as against 27% in FY11. Upgrading estimates, stock recommendation: We are revising our earnings estimate for FY13 by 12% and are introducing our EPS estimate for FY14 at INR8.9. We are also upgrading our recommendation on the stock to Buy. This follows strong operating performance in 3QFY12 and improved visibility of higher medium-term growth. Our SOTP-based target price is INR185 (we have valued the domestic consumer business at 22x FY14E earnings, the international business at 12x FY14E earnings and Kaya at 0.7x sales).


GlaxoSmithKline Consumer



Prakash Industries


RAKASH Industries’ 3QFY12 Adj PAT grew 20% QoQ to INR668m (v/s est INR668m) due to stronger market for sponge iron and power. EBITDA at INR910m was also broadly in line with our estimate of INR956m. New Fe-Mn capacity of 24ktpa is being planned in FY13 at a capex of INR600m to leverage on enhanced power. Steel production is now being optimized to gain from improved market. Stock trades at very attractive FY13E P/E of 2.5x, EV/EBITDA of 2.7x, and P/BV of 0.3x. Maintain Buy.

Power Finance Corporation


Prestige Estate Projects


RESTIGE Estate Projects (PEPL) reported lower than expected standalone numbers for 3QFY12. Standalone EBITDA declined 46% YoY to INR501m; EBITDA margin was 30% (v/s 38.4% in 2QFY12 and 23.4% in FY11). Standalone revenue declined 54% YoY to INR1.7b, while PAT was INR281m (v/s INR544m in 3QFY11). Sales momentum remains strong at ~1msf (INR4.7b), though lower than ~2.1msf (INR7.8b) in 2QFY12. Sales for 9MFY12 were 3.6msf (INR14.6b) as against management guidance of INR15b-17b and our estimate of INR17b for FY12. We believe that with its wider product presence and client base, PEPL would be a key beneficiary of the outperforming Bangalore market. Key triggers for the stock: (a) improvement in customer collection and debtors, (b) on-time monetization and execution of flagship projects such as Golfshire, Kingfisher Tower, etc, and (c) acquisition of new turnkey projects. The stock trades at 8.8x FY13E EPS of INR8.8x FY13E BV Maintain Buy. RIVING M&M's tractor business: Swaraj Engines's

OWER Finance Corporation (POWF) reported a PAT of INR11b for 3QFY12, up 68% YoY on the back of higher forex gain to the tune of INR4.2b. Adjusted for forex gain, operating profit and PAT were in-line. Key highlights: NII grew 18.5% YoY and 1.6% QoQ to INR10.9b (v/s our estimate of INR11.3b). Spreads and margins contracted 6bp and 12bp QoQ, respectively, as the cost of funds increased by 5bp QoQ, while yields remained stable. Business growth remained strong, with loans growing 28% YoY and 7% QoQ to INR1.2t. Disbursements grew 36% YoY and 22% QoQ to INR106b. Sanctions continued to decline YoY (down 13% on a high base), but grew 21% QoQ to INR154b. Outstanding sanctions pipeline stood at INR1.82t. Valuation and view : We estimate adjusted EPS at INR24 for FY12 and INR29 for FY13, and BV at INR158 for FY12 and INR177 for FY13. During FY12/13, we expect the company to report average adjusted RoA of ~2.7% and average RoE of ~17%. The stock trades at 1.2x FY12E and 1.1x FY13E BV. Maintain Buy, with a price target of INR250.

QCY11 adjusted PAT in line; margins contract GlaxoSmithKline Consumer Healthcare (SKB) posted adjusted PAT of INR646m (v/s our estimate of INR655m) for 4QCY11, up 21%. Reported PAT grew 11%, impacted by INR55m tax adjustment of previous years. Net sales grew ~18.6%, led by 12% volume growth in MFD (v/s our estimate of 10%). EBITDA margin contracted 130bp due to input cost pressure (up 50bp) and higher ad spends (up 140bp) on Horlicks Oats launch and relaunch of Boost. We remain positive on the core MFD portfolio given SKB's brand equity, leadership position and distribution reach. However, significant growth acceleration seems unlikely in the current operating environment. Export growth is likely to remain volatile. We introduce our CY13 EPS estimate at INR119.7 (17% growth); we expect SKB to post 18.3% EPS CAGR over CY11-13. We value the stock at 20x CY13E EPS, which we believe is reasonable, given strong brand equity in the core business but lack of success in new verticals. The stock trades at fair valuations of 25.8x CY12E EPS of INR102.3 and 22x CY13E EPS of INR 119.7. Maintain Neutral with a target price of INR2,395. HOUGH growth in the overall FMCG market slowed to 10% during the quarter (from 15% in 2QFY12), Hindustan Unilever (HUVR) has not been impacted and performed well in both rural and urban markets. Volume growth in the soaps and detergents segment has been in mid-single digits with both the urban and rural markets contributing. Lower ad spends (in line with industry), continued premiumization and cost control contributed to strong margin expansion; the management is happy with current margin levels but did not comment on sustainability of the same. We believe current valuations leave little scope for further re-rating given rising competition and threat to personal product margins in the medium term. The stock trades at 31.3x FY12E EPS and 27.1x FY13E EPS. We maintain our Neutral rating. (NMS) ■

WONDER at times that if there were no gifts, my feelings will be wasted. I smiled at my friend. She smiled back. I opened a box which had a teddy bear with a note that said, “Keep Smiling!” My friend jumped and said, “O’ my God!! How sweet!!” She smiled more and for a longer while. That’s the magic of gifts. Make sure you get them right. Give Your Best My early adolescent nephew made a new friend recently. He dropped in one day in my presence. While his mother, my cousin, was talking to me, my nephew came and whispered to her that he wanted to give a gift to his new friend. My cousin asked him what the gift would be. He showed her two toy mobile phones. He pointed out to the one which was older and said he would give that one to his friend. My cousin told him that if he wants to give his friend a gift, he should give the new toy. He immediately hid the new one behind him. So, my cousin took out a box of chocolates from the refrigerator and told her son to gift that to his new friend. Since my nephew is not very fond of chocolates, he happily gave the box to his friend. Thankfully, the little friend liked chocolates very much. So it was a winwin for both. The child was later told that he should never give old and used things as gifts to his friends. This reminded me of an incident which happened when I was in school. When I reached high school, I was still developing a craving for gadgets. I was already hooked to video games which my parents had bought for me when I got promoted to class IX. Later, when I was in high school, one of our

were no exclusive brand showrooms in my hometown. So, surprise shopping was out of question. So, my parents gifted the pair of denims which was supposed to be for my brother. These incidents kept on piling up in some corner of my head as I grew up. I learnt that when you gift someone, you must gift them what you would ideally buy for yourself or let it be something better than that. That’s because by gifting, you are honouring the other person. It’s a token of regard you have in your heart for the other person. Besides, it also shows your status and your taste.

One of my uncles back in my hometown would land up every Diwali at our place with a box of sweets which were cheap and tasted bad. It was embarrassing for us if there were some other friends around at that time. They found it difficult to spend money on “these unnecessary things”. My uncle and his wife supported a self-made ideology that material gifts don’t make a difference. It’s the emotional connect that matters. Extension of Emotions The emotional connect does matter. But,

piece of foreign affection. It’s just lying folded in a Manchester United packet in some corner of a cupboard. If you are gifting, let it be something which the receiver can use. Your gifts must have utility else they fail the purpose. Let your friends or relatives be proud of what you gave them. Let them flaunt it among their friends. It will make you happy. Won’t it? But when they land up at a party wearing the dress you gave them, please don’t announce it to the crowd that you gifted that thing from which nobody can take their eyes off. It’s embarrassing. If you do it quite often, people will be wary of wearing or carrying your gifts to gatherings or parties where they know that you would also be present. Gifts are just an extension of your feelings and emotions. They are meant to add colour to your expressions. Consider this. When you are writing an email to your beloved, you try and make it more expressive by using stylish fonts or by attaching an e-card. Why do you do that? Of course for the reason I gave above. When you are meeting them, you will replace fonts and ecards with gifts. If you have to express your feelings, let them look like important. Your gifts must say without words that the receiver means a world to you. But yes, don’t use gifts to buy people’s emotions for yourself, to win people to your side. That is when gifts \become bribes. Keep them genuine. (The author is a Money Psychologist and Founder-Editor, & She can be reached at ■

Start on a savings plan!


Hindustan Unilever


N THIS era of recession, deflation, and job cuts, it is especially important for you to consider where your hardearned money is going; financial security is the key in today’s unpredictable world. And the first step towards gaining that security is to have a saving plan. Do you have money put away for a rainy day? How will you manage if there’s a family emergency? What about a down payment for a home, or a fund for higher education, or retirement? Do you have loans to repay? In this era of recession, deflation, and job cuts, it is especially important for you to consider where your hard-earned money is going; financial security is the key in today’s unpredictable world. And the first step towards gaining that security is to have a Saving Plan. Still not convinced? Then ask yourself why you need to save. The answer’s really very simple: so that your money can start earning money, and work towards reducing the effort you put in everyday. START SAVING NOW: HERE’S HOW! You might wonder how to begin saving if your income is already over-committed. Efficiency and discipline are the answers. ● You need to first find out where your income is going. Maintain a diary for the month, noting down everything you spend on, to the last paisa. You will be surprised at the amount of random purchases you make – from coffee breaks to grocery bills. These are the best places to start trimming. ● Then, make a budget. This isn’t as difficult as you think. All a budget does is create a plan for spending, by stating expenses and goals. Make sure to cover fixed and regular expenses such as mortgage or rent, utility payments, and car or loan/credit card payments. Then set limits on necessities like groceries and clothing, as well as nice-tohaves like entertainment and travel. It’s also important at this stage to factor in a savings amount. ● Now, your first priority is an emergency fund, if you don’t already have one in place. And the easiest way to do this is to have the amount deducted from your salary every month and put into a Fixed or

Recurring Deposit. Give yourself a pat on the back if you find yourself adding that little extra to your fund because you managed to save a little more this month. You might find it easier to stay within budget if you use cash or debit cards for the necessities and frills. ● As your emergency fund accumulates, your next task is to find more money for savings and even investment. Begin by paying off your credit cards. If you spend a little time examining your monthly statements, you will be amazed to see how much money you’re losing just by way of interest! SAVING Vs INVESTING At this point, we need to address the differences between saving and investing. Savings provide for emergencies and fund specific purchases in the near future (within two years). The

on nurturing these investments, how much you know about the funds, how much money you have to invest, whether you can tolerate risk, and handle loss. Remember that your ultimate goal is a financially secure future for you and your family. If you look back over all that we’ve discussed so far, you will realise that we’ve told you how to begin saving money, in small, manageable chunks. The final objective might be to set aside enough for you to retire so that you don’t have to work another day, but your immediate goal is to start the process and become habituated, so that saving becomes a way of life, and a chance to improve how you live. ■

OLUME growth momentum continues: Volume growth momentum continued for Marico (MRCO), led by 16% volume growth in the domestic business; consolidated organic volume growth was 13%. Increased focus on rural mar-


Swaraj Engines Ltd.


primary goal is to store funds and keep them safe. However, you invest to increase net worth and work toward long-term goals. Also realise that investing involves risk, where you could lose some of your original investment. Only consider an investment plan when you have in place an emergency fund, insurance, control over credit use, and a retirement plan. IN THE LONG RUN Now, consider making a long-range savings and investment plan. When beginning to plan for investments, consider your goals, the amount of time you will be able to spend

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