MONDAY ◆ MARCH 12, 2012

Real estate sector
ONETARY easing to address several headwinds RBI's recent CRR cuts starts the rate moderation cycle. This, we believe, is a key momentum driver for the real estate sector with (1) higher affordability augmenting sales, and (2) lower cost of debt improving developers' profitablity. Still, liquidity management remains a major challenge for developers in FY13 given (1) high scheduled debt repayment amidst tough refinancing, and (2) modest operating cash flow. However, we believe the dual effect of rate downcycle would


bolster sector momentum; it offers good play on improvement of both financial and operating leverage. Regulatory challenges subsiding Liquidity apart, the realty sector has underperformed on account of several other adverse regulatory/political developments, especially at company level. Of late, we find some of these concerns subsiding with efforts/ progress in right direction e.g. (1) Improved visibility in long-stalled HDIL's MIAL project; (2) MoEF approvals (IBREL Lower Parel projects, and (3) approval in Anantraj's Golf Course project etc. We believe meaningful

progress in some much awaited regulatory reforms e.g. Mumbai Development Control Regulation (DCR) amendments, draft regulator bill etc, would revive investor confidence. Sector Strategy We revisited our six factors scorecard to objectively reassess individual stocks. The weighted scores corroborate our preferred stocks – Oberoi, Phoenix and Prestige (steady operation, better asset utilization, cash flow visibility). DLF offers play on deleveraging theme (greater visibility of divestment plans). We believe the risk-reward equation of some long underperforming stocks is turning favorable – HDIL, Anantraj, IBREL could emerge as near-term dark horses. (NMS)

■ By Shruti Kohli

Dena Bank
ENA Bank (DBNK) reported a PAT of ~INR1.9b for 3QFY12, up 20% YoY. Reported NIM improved 11bp QoQ to 3.3%, led by ~300bp improvement in CD ratio and higher yield on loans (+22bp QoQ). Further, core fee income was strong at 13% QoQ and 27% YoY, driving PAT. Key highlights: Strong loan growth: Loans grew 11% QoQ and ~16% YoY to INR480b whereas deposits grew 6.4% QoQ and 13% YoY to INR683b. CD ratio improved 300bp QoQ to 70%. Management has guided loan growth of 20%+ for FY12. Slippages remain under check: Slippages during the quarter stood at ~INR1.7b (annualized slippage ratio of 1.7% - stable QoQ). Slippages were broadbased and the bank expects asset quality to remain healthy. Valuation and view: We expect DBNK to report an EPS of INR21.8 in FY12 and INR26 in FY13. BV would be INR122 in FY12 and INR144 in FY13. The stock trades at 3.7x FY12E and 3.1x FY13E EPS, and 0.7x FY12E and 0.6x FY13E BV. RoA and RoE are likely to be ~1% and 19%+, respectively over FY12/13. Maintain Buy.


NGC posted 6% YoY and 25% QoQ decline in EBITDA for 3QFY12 to INR106.6b, higher than our estimate of INR102b (adjusted for subsidy). Other expenditure was INR31.4b, lower than our estimate of INR35b; this aided EBITDA performance. Adjusted PAT declined 20% YoY and 46% QoQ to INR46.4b v/s our estimate of INR44b. We currently model Brent oil price of USD112 /100 /95 /90 /bbl for FY12 / FY13 / FY14 / long term, and upstream sharing at 40% in FY12 and 38.7% in FY13. We are positive on ONGC from a longer term perspective due to expected rationalization of subsidy sharing and potential reserve accretion from its large E&P acreage. ONGC trades at a ~45% discount to its global peers on EV/BOE (1P basis). Near-term profits will remain impacted due to high under-recoveries and lower production from OVL, led by geopolitical tensions. The stock trades at 9.4x FY12E EPS of INR30. Our SOTP-based target price is INR322. Maintain Buy.


by 11% QoQ (+20% YoY) to INR4,206/ton (v/s est INR4,032/ton). Net sales improved by 28% YoY (+16% QoQ) to INR25b (v/s est INR23.7b). Further, lower tax boosted adj PAT grew by 103% YoY (+130% QoQ) to INR2.8b (v/s est INR2.5b). We maintain our EPS for CY12 at INR76.5 and CY13 at INR93.6. We estimate 12% volume CAGR (CY11-13) and cement price increase of INR12/bag in CY12E and INR10/bag in CY13E. The stock trades at 18.3x CY12 EPS, 10.1x EV/ EBITDA and USD147/ton. Maintain Neutral with target price of INR1,379 (~10x CY12E EV/EBITDA).

Jubilant Foodworks
TRONG SSS growth has been a function of healthy demand across cities and stepup in marketing and promotion spends; the step-up in spends has compensated for the slight slowdown in demand. The management expects to end FY12 with over 25% SSS growth. Jubilant hiked prices by 5% in November (12% YTD); inflationary pressures are now softening, and it does not expect to raise prices again in 4Q. Valuation and view: Raising estimates by 4-8%; Neutral. We raise our estimates for FY12 and FY13 by 4-8% to factor in (1) higher store openings - from 80 to 85 in FY12 and 70 to 75 in FY13, and (2) higher operating leverage led improvement in EBITDA margin. Our revised EPS estimates are INR16 for FY12 (INR15.4 earlier) and INR24 for FY13 (INR22.2 earlier). We remain positive on the QSR growth opportunity, the strength of the Dominos brand, and the USP of delivery-based own store model. We remain uncomfortable with valuations of 64.5x FY12E and 43x FY13E EPS. Neutral.


Tech Mahindra

Cadila Healthcare
EVENUE increased 18.6% YoY to INR13.83b compared to our estimate of INR13.2b and EBITDA grew 3% YoY to INR2.64b, in line with our estimate of INR2.69b. But adjusted PAT declined 8% YoY to INR1.49b compared to our estimate of INR945m. PAT was impacted by INR342m in forex losses on hedges and forex loans. Revenue growth was led by export formulations which grew 42.8% YoY to INR7.1b. The growth was partially led by acquisition of Nesher Pharma in the US and Bremer Pharma in India. However, growth was pulled down by muted 8.4% YoY growth in domestic business to INR6.1b. Based on our revised estimates, CDH is valued at 25.8x FY12E consolidated EPS and 17.5x FY13E consolidated EPS. Maintain Neutral with a target price of INR684 (18x FY13E consolidated EPS).



ECH Mahindra's (TECHM) 3QFY12 revenue at USD289m (down 2.5% QoQ) was marginally below our estimate of USD294m, due to g r e a t e r- t h a n - a n t i c i p a t e d decline in revenues from BT (USD101m compared to our estimate of USD105m). EBITDA margin at 16.2% (up 90bp QoQ) was lower than our estimate of 18.3%, despite 11.2% QoQ depreciation of the INR. PAT (excluding share from Mahindra Satyam) was INR1.44b (v/s est. of INR1.6b). Stock trades at 9.6x FY12E and 10.1x FY13E EPS. Neutral, based on our TP of INR647 (10x FY13E earnings).

HENEVER they say ‘money’ and ‘woman’ together, it is actually supposed to mean ‘shopping’ and ‘women’. In the very first instance, women are never seen as connecting with money in any way other than shopping. More often than not, this connect is a butt of jokes. Husbands and prospective grooms suddenly get creative and develop the funny bone when it comes to making jokes about women’s inclination towards shopping. SHE SHOPS, HE DOES TOO This maybe very commonplace and most of us find it funny too. But I have always wondered when will women start making jokes about men’s shopping tendencies. Don’t you know men shop too? Their shopping is all about expensive gadgets and automobiles. Most of my male friends change phones as frequently as they switch to new pair of socks. Ah! Yes, I am referring to men whose socks wear out within a standard span of time due to regular washing. This is as against men who repeat a single pair of socks throughout a week without washing them and smell like dead rats in office or anywhere they go. So what should make women more notorious when it comes to shopping when even men are obsessed with it? It happens because women are required to indulge in the activity more often than men have to. Women’s shopping is more spread out. They have to shop for the household and also for themselves. They have to frequent the market more often than men. Men will go to the market once, spend Rs 1 crore and return with a car. Their next shopping trip may happen only after a few months. Also, their shopping does not involve carting back packets and bags full of stuff hence making it less conspicuous. SHE SHOPS FOR YOU I talk about this at my training sessions very often and I feel that if it weren’t for the shopping orientations of women, all the shops run by men would go bust. Even the hardware shops flourish because women want the look of their houses changed every now and then. They want the floor tiles changed. They want the sanitary ware changed. They want the walls to look different after a decent interval of time. Come to talk of it, they don’t just want to shop for themselves all the time. They want their husbands to don the trendiest outfits. They want their children to make a fashion statement. A very good friend in Delhi called me last week. She was excited to tell me that after exactly a year and a half, that weekend, she shopped for herself. During this preceding


period of a year and a half, she had only shopped for her six-year-old daughter. On other occasions, it was either the kitchen, interior decor or other household family shopping that took her to the market. So women’s inclinations towards shopping get noticed immediately because they are shopping for the world. Men shop big but they shop less. They do so mostly for themselves. I am not saying that men don’t care. They care to give the money to their wives so that they can shop. They care to stand behind their women to make sure they don’t drop as they shop. However, the latter is mostly an indirect precautionary trick to save some of their own money. So, I was wondering that taking cognisance of all the care they show, in disguise or otherwise, shall we give them the space to make jokes about our shopping inclinations? I think that should not be a problem only on the condition that they get creative and come up with new and funnier jokes. ON THE ADVERSE No wonder then, there is a revolution with adverse vibes. Married couples are unable to arrive at a consensus on who spends how much and on what. Hence, we come across more broken families and relationships these days. The number of single women and single mothers is on a rise. Daughters-in-law are finding it tough to adjust with their new families. Rather than getting back home and pointing out that the pasta was tasteless, the husband can do better by appreciating his wife for managing the family budget smartly so that they were saved from going broke when he lost his job. WOMEN TAKE CHARGE On the other hand, the wives, working or non-working, must take the initiative to learn basics of technical financial management which includes insurance and investments in mutual funds, stocks and debt products. I am not saying that you should fight and ask your husband to hand over the reins to you. All you have to do is learn about it. Just understand how money works outside the four walls of your house. You will find it’s not very different from how it works at home. Spend an hour every weekend, if not more, learning about various financial products. We live in an uncertain world. No one knows what comes next. Keep yourself prepared for any sort of adversity. I say this in my corporate training sessions. Women in our society are brought with a mindset that one day they have to get married and then their husband will take care of all their financial needs. They are raised as dependents. They are told in as many words that they may not slog too much

because their salary will remain secondary to their husband’s. This is a very dangerous and wrong mentality. It must change sooner. Conforming to such a mentality, women are left stranded in the face of an emergency or a tragedy. Besides, some women tend to take this too seriously and refuse to contribute money from their salaries towards family expenses leading to broken families. KEEP COMPOSED In my capacity of a Money Psychologist, quite a few couples and youngsters get in touch with me looking for advice on organising their financial lives. Recently, a woman connected with me. Her problem was that her husband had been forcing her to give some money towards common family expenses. She refused on the grounds that her salary (of Rs 3 lakhs a month) is pocket money and she cannot afford to give even a penny away. It’s the husband who should be responsible for family expenses. This is a clear case of wisdom gone awry. The age old mentalities are to be blamed for this along with the stubbornness of the adult who refuses to open up her mind to the changes that are happening around her. They must know that they have to move towards self-dependence without harming peace and cordiality in their families. (The author is a Money Psychologist and Founder-Editor, & She can be reached at

Make insurance claim experience hassle-free
claim rejection and disappointment. To ensure that your claim experience is hassle-free, rain check on the following: 1. Understand the plan you intend to buy and benefits thereof. 2. Make complete and correct disclosures of your age, health, medical problems / treatments taken at any point in time, family history, occupation, income, habits, so on. That is, truthfully and comprehensively answer all questions asked in the proposal form. 3. Read policy contract terms and conditions carefully and understand them well. When in doubt, seek clarifications. Every insurance company offers a free-look period of 15 days to cancel / alter the policy contract if you find the contract to be different from what you had understood it to be. Avail of this facility if you so desire. 4. Ensure that correct nominations are made in the policy. Also ensure that the nominee is aware of the policy contract and your details in full. Claim requirements are mentioned in every policy contract and it is important that the nominee is aware of the same. 5. Submit all claim documents in an orderly and timely manner to the insurance company with details in the claim intimation form filled accurately and truthfully. Non-disclosures, partial disclosures and / or wrongful disclosures of significant and material facts are important reasons for rejection of claims. Where such information comes to the knowledge of the insurer, the claim gets rejected as per the contractual terms and conditions. When a claim is rejected on sound grounds, there is often little room for appeal. The three most common reasons why claims are repudiated are: 1. Non-disclosures of major ailments by life insured at proposal stage - that is, heart, kidney, lung, liver or brain ailments, cancer, HIV, major surgeries, so on. 2. Non-disclosure of material medical facts such as high levels of diabetes, hypertension, respiratory issues, smoking and alcohol habits. 3. Non-disclosure or improper disclosure regarding existing insurance policies, income, nature of occupation and age at the proposal stage. This could lead to overinsurance of a person and his / her worth after death becomes higher than during his / her life time, which is a moral hazard. If insurers discover contradicting facts after the issuance of policy contracts, they normally communicate and re-engage with the customer. Besides, they re-underwrite the case and arrive at an appropriate decision in light of fresh facts. On rare occasions, if the non-disclosure is very significant and risk cannot be accepted, the policy contract could also get cancelled. In the ultimate analysis, these proactive steps help the insured’s family to avoid problems at the time of claims. Further, insurance companies also train their sales people with live case studies to sensitise them to the importance of swift and timely claim settlement. It must be understood that insurance is a contract based on the principle of uberimae fides or utmost good faith and underwriting decisions are based on the faith that the disclosures made by the customer are fully and completely true. Selective disclosures or non-disclosures affect underwriting decisions. It not only undermines the very basis of the insurance contract but also alters the risks the insurer assumes on its books. There are occasions when the nominees appeal that it is not their fault that facts were not shared or misstated, but unfortunately the insurer may not be able to help much at this stage. It is important that the proposer, who is responsible to provide correct facts in the first place, bear these important aspects in mind, to ensure that his kin have a swift claim experience. ■

Anant Raj Industries
NANT Raj (ARCP) reported better than expected results for 3QFY12. Revenue grew 26% YoY to INR922m (our estimate: INR835m), EBITDA declined 37% YoY to INR490m (our estimate: INR451m), EBITDA margin was 53% (v/s 56% in 2QFY12), and PAT declined 37% YoY to INR315m (our estimate: INR308m). Rental income from commercial / hotel projects was INR232m (v/s INR218m in 2QFY12). Incremental rent came from higher contribution from Kirti Nagar Mall (INR33m v/s INR20m in 2QFY12). We expect strong uptick in revenue booking in 4QFY12, with (a) meaningful contribution from the Golf Course Road plot project, (b) commencement of Tricolor Hotel, and (c) higher revenue contribution from Kirti Nagar Mall. The stock trades at 8.1x FY13E EPS of INR8.8, 0.5x FY13E BV. Buy.

Cummins India



Bharti Airtel


HARTI'S 3QFY12 PAT declined 22.4% YoY and 1.5% QoQ to INR10.1b, below our estimate of INR14.7b. While consolidated revenue of INR184.8b was broadly in-line, earnings were dragged by higher opex (sponsorship and other expenses of ~INR1.2b) and depreciation (one-time adjustment of ~INR0.75b in Africa segment). Revenue for India and South Asia (SA) grew 12.3% YoY and 3.8% QoQ to INR131.6b (1% below our estimate). EBITDA declined 1% QoQ, largely due to 15-16% QoQ EBITDA decline for Telemedia and Enterprise businesses. India and SA mobile revenue and EBITDA grew 45% QoQ. The stock trades at an EV of 8.4x FY12E and 6.7x FY13E EBITDA. Maintain Buy, with a revised target price of INR410 (EV of 7x FY14E EBITDA for India and SA business, and EV of 5x FY14E EBITDA for Africa business).

CC's standalone performance is above estimate with EBITDA of INR3.9b (v/s est INR3.7b) and adj. PAT of INR2.8b (v/s est INR2.5b) driven by lower tax. Key takeaways: Volumes grew by 6.1% YoY (4% QoQ) to 5.95MT (v/s est 5.87mt). Realization improved


QFY12 results above estimates: Cummins’ 3QFY12 net profit was above our estimate, led by strong QoQ improvement in EBITDA margin. During the quarter, revenue grew 1%, YoY, while PAT was up 2% YoY and 10% QoQ. Revenue was impacted by the slowdown in power generation market and some softness in the auto segment. The industrial segment recorded robust growth. Strong improvement in profitability by cost reduction measures and favorable product mix: EBITDA margin expanded strongly, up 181bp QoQ and down 20bp YoY, positively impacted by savings due to cost reduction programs, favorable sales mix towards high horse power engine sales and forex gains. We believe there can be meaningful upside to margins next year, with improvement in product mix, benefits from cost cutting initiatives and possible softening of commodity prices. Over the years, the stock has got re-rated due to significant improvement in revenue visibility in domestic market and parent’s increasing thrust on outsourcing from India which we believe will continue to drive Cummins India’s valuations in the long-term. Maintain Buy, with a revised target price of INR487. (NMS)

■ By Suresh Agarwal

ASSLE-FREE claim experience is central to the insurance promise. A claim, however, arises only in case the conditions for it, such as death or permanent disability, occur. Such conditions are outlined in the insurance contract. Either-way, the environment in which a claim is made is usually one of grief and sadness. While there is no way to compensate such loss, a claim at least cushions the financial fallout on the family arising from the death or disability of the life insured. This acquires greater importance in those cases where the life insured was the sole breadwinner. The importance of swift, easy and hassle-free claim settlement experience cannot be understated in such circumstances. The foundation for a hassle-free claim experience, however, is laid not at the time of claim, but at the time of policy purchase itself. It is advisable to look at claim settlement ratios of insurance companies whose products you are considering. A high claim settlement ratio usually indicates better process efficiencies and careful due diligence by the insurer; and, for the claimants, it means lesser possibility of


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