Namaste India - News Roundup:: Deutsche bank, 7 December 201

India Upstream: Incorporating Brent oil price forecast revisions [Harshad
Katkar]
Deutsche Bank has raised its oil price outlook for CY10-14 by 1.1-9.4% on a
stronger oil demand outlook but kept  the long-term forecast unchanged at
US$100/bbl. This leads to a 1-1.4% increase in the valuations of Indian upstream
oil companies ONGC, OIL and CAIL to  INR1540, INR1620 and INR365 per share,
respectively. We maintain Buy on ONGC and OIL and Hold on CAIL. ONGC
remains our top pick in the sector, as it looks well poised to benefit from diesel
deregulation and in our view, offers the best risk/ reward on reforms.



Sun Pharma: Finally proposes to delist US-listed Caraco [Abhay Shanbhag]
On Friday, Sun Pharma made a US filing proposing to take US listed Caraco private
by acquiring all its free float (~25.5%)  at a cash price of USD 4.75/share.
Consolidation phase commences: Post getting control of US listed Taro in end
Sept’10 with 69% of voting rights, Sun raised stake to threshold 76% of voting
rights in Nov’10. Sun now has 2 US-listed subsidiaries – Caraco (acquired in
1990’s) and Taro. We have always been surprised by Sun keeping Caraco listed,
despite its large underutilized war-chest.

India Economics Weekly: July-Sep GDP, fiscal update, PMI, core infra, WPI
[Taimur Baig, Kaushik Das]
India's real GDP rose by 8.9%yoy in the July-September quarter, similar to the
Apr-June outturn (revised up to 8.9% from 8.8% earlier). Data for the first two
quarters of the previous year were also revised up somewhat. The latest GDP data
indicate that the non-farm growth momentum (9.5% vs. 10.0% in the previous
quarter) is somewhat stronger than we had estimated. This is primarily due the
resilience of the services sector. Going forward, we expect non-farm growth
momentum to moderate in the second half of FY10/11, owing to negative base
effect led moderation in industrial sector activity, but agricultural sector growth
would remain supportive given a favorable monsoon outcome in 2010. This
assessment coupled with the strong 1HFY10/11 GDP growth outturn of 8.9%,
therefore leads us to revise up our annual growth forecast by ½ percentage point
to 8.5%.

Commodities Special Report: Thermal  Coal: Becoming Strategic [Daniel
Brebner]
On the back of our expectation of a market deficit in thermal coal of 28mt in 2011
and 30mt in 2012 we have upgraded our forecasts for these years to USD118/t
and USD140/t respectively (from USD110/t and USD120/t previously).

US Economics/Strategy Weekly: November employment clunker [Joseph
LaVorgna]
In October 2010 the Bureau of Labor Statistics announced that it planned to revise
down the level of March 2010 payrolls by 366k. This was based on more detailed
source data that showed less job creation through the first quarter of this year
than what was previously reported. However, new information since then
suggests that employment may in fact be understated. If so, this could partly
explain the grindingly slow pace of payroll gains thus far in the business cycle. The
November employment data were particularly weak. It will be interesting to see
how the disparity between what we learned in November and what we have seen
over the past few months in terms of improving tax receipts, jobless claims and
the various purchasing manager indices is ultimately resolved.


News Headlines
Sarkozy courts Indian business, clinches $20 billion deals (Reuters)
France's President Nicolas Sarkozy said  on Monday he had clinched deals worth
about $20 billion with India, becoming the latest among a string of world leaders
jostling for a share of Asia's third biggest economy
India should open up FDI in multi-brand retail – adviser (Reuters)
India should open its multi-brand retail sector to foreign investors and raise its
investment cap in the insurance sector to 49 percent from the current 26 percent,
Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, said.
GST meet likely to be delayed, states want more time (BS)
Introduction of a Goods and Services Tax  (GST) could be delayed further with the
Centre and the states failing to reach  common ground at the meeting of the
Empowered Committee of state finance ministers on Monday.
Bill to allow options trading in goods, commodity derivatives introduced (BL)
The Government on Monday introduced in Lok Sabha a new Bill that would allow
trading in options in goods and new generation of commodity derivatives so as to
provide wider opportunities for risk management.
RBI plans open market purchase of G-Secs worth Rs 12,000 cr (BL)
In a bid to ease the tight liquidity situation in the market, the Reserve Bank of India,
on Monday, announced an open market purchase of government securities worth Rs
12,000 crore. The auction will be conducted on December 9
RBI asks banks to open resource centres for financial inclusion (BS)
The Reserve Bank of India (RBI) has urged commercial banks to open financial
inclusion resource centres throughout the  country. These would work as a storehouse of all relevant information pertaining to financial inclusion
Govt may consider diesel price hike - oil secretary (Reuters)
The government could consider raising diesel prices before planned share sales of
state-run companies IOC and ONGC, Oil Secretary S. Sundareshan said.
DGCA tells airlines to post fare details on websites (BS)
Passengers will soon learn more about the various fares available on any route,
thanks to the Directorate General of Civil Aviation. It has asked all airlines to post
various fare categories route-wise and date-wise on their websites by December 8.
MNP leads to minimal churn, show data from Haryana (BS)
Judging by the initial reaction, most cellphone users have no pressing desire to shift.
Mobile number portability was launched 11 days ago in Haryana. Since then, 30,000 -
35,000 customers have requested a change. Haryana has 17 million customers.
SBI to raise deposit rates from Dec 7 (Reuters)
State Bank of India, the country's top lender, said it will raise deposit rates by
between 50 and 150 basis points for various maturities, with effect from Dec. 7.
ONGC Videsh's agreement firmed for 25% stake in Kazakh oilfield (BS)
ONGC Videsh Ltd (OVL) will sign a formal agreement for taking a 25 per cent stake in
Kazakhstan’s Satpayev oilfield by the end of February 2011. It is to invest about $400
million (Rs 1,800 crore) in the 1,582 sq km North Caspian Sea oilfield.
Suzlon to asborb 2 fully owned units (Reuters)
Suzlon Energy said on Monday it would acquire the tower business division of fully
owned unit, Suzlon Towers & Structures, and the operations and maintenance
division of wholly owned Suzlon Infrastructure Services.
EU Ministers Rule Out Immediate Aid Boost (Bloomberg Finance LP)
European finance ministers ruled out immediate aid for Portugal and Spain or an
increase in the 750 billion-euro ($1 trillion) crisis fund, counting on European Central
Bank bond purchases to calm debt-spooked markets.
Bernanke Says More Fed Easing Is Possible (Bloomberg Finance LP)
Federal Reserve Chairman Ben S. Bernanke said the economy is barely expanding at
a sustainable pace and that it’s possible the Fed may expand bond purchases beyond
the $600 billion announced last month to spur growth.
China Outstrips Fed in Liquidity Surge Threatening Inflation Spike in 2011
(Bloomberg Finance LP)
China’s reluctance to allow a stronger exchange rate has hamstrung its efforts to rein
in inflation and endangered a campaign to shift economy toward domestic demand

BofA Merrill Lynch:: IPCA Labs- Management meet update

IPCA Labs
Management meet update
�� Confident on solid growth foundation; Retain Buy
We recently hosted IPCA management for Investor meetings and came back
reassured of robust growth path driven by surge in formulations business. While
domestic formulation remains IPCA’s strong hold, export formulations to throw
positive surprises post facility approval by USFDA in near term.



Recent fieldforce additions to boost domestic business
IPCA has doubled its domestic formulations (38% of sales) fieldforce in the last
two years to 4000+ now. Much of the increment has been to strengthen
capabilities in Pain, CVS segment. We expect domestic formulation business to
sustain 20%+ growth rates over medium term as new fieldforce becomes
productive, also aiding margin expansion. Increasing penetration in tier 2/3 cities
& expanding coverage to 0.5mn doctors (of total 0.8mn in India) remains medium
term focus for the co. Company aims to have atleast 2-3 Rs1bn+ brands by 2012.
Indore SEZ USFDA approval remains key upside catalyst
IPCA’s US generic business faces capacity constraints currently and USFDA
approval for Indore SEZ remains key to support its growth plans. With no
revenues from the facility currently, the company is incurring unabsorbed fixed
overheads of Rs220mn p.a (inc. depreciation). IPCA can potentially grow its US
business multi-fold (to Rs3bn) from Rs750mn currently in next 3-4 years given
robust demand for approved products as well as new filings. Near-term facility
inspection and approval would pave way for improved profitability & visibility.
Stable business; Reasonable valuations
IPCA trades at 13.6x FY12E EPS, at 25-30% discount to the sector, which is
reasonable considering stable domestic business (45% of sales), growing export
formulations and strong financial health (D/E of 0.4x; RoE of 24-26%). We expect
valuation gap with peers to narrow on sustained growth (21% EPS CAGR).

News Round-up :: Kotak Securities: December 7, 2010

News Round-up
` The govt. has agreed in principle to ensure a minimum 10% return on investment to
ONGC (ONGC IN) in Cairn India's (CAIR IN) Rajasthan blocks, boosting the firm's
valuation ahead of its follow-on public offer & removing a big obstacle for the USD
9.6bn Cairn-Vedanta deal. (ECNT)
` ONGC (ONGC IN) will pick up 25% in Kazakhstan's Satpayev block after 6 year delay.
(ECNT)

` SBI (SBIN IN) has raised deposit rates by 50 to 150 basis points giving a clear
indication that lending rates are set to rise by the end of this month. (ECNT)
` Maruti Suzuki India (MSIL IN) said it would increase prices of its vehicles soon, to
offset rising input costs and impact of the strengthening yen. (BSTD)
` Mukesh Ambani is planning to provide USD 222 mn seed capital to begin a new
venture that would invest in innovative business ideas, including technology and
healthcare segments. (BSTD)
` Suzlon Energy (SUEL IN) said it would acquire the tower business division of fullyowned unit, Suzlon Towers & Structures, and the operations and maintenance
division of wholly-owned Suzlon Infrastructure Services. (BSTD)
` Glenmark (GNP IN) gets FDA nod for painkiller drug. (BSTD)
` Siemens (SIEM IN) bags USD 28 mn order from Jaypee. (BSTD)
` Mahindra Finance (MMFS IN) to raise up to USD 127 mn in January. (FNLE)
` M&M (MM IN) in pact with Italian firm for supply of tillers. (THBL)
` The shares of Tata Steel (TATA IN) surged 3.4% after news that global mining major
Rio Tinto had made a USD 3.5bn bid for Africa focused Riversdale Mining, in which
the Tata own a 24% equity stake. (ECNT)
` Religare Enterprises (RELG IN)  is close to buying 85% of the Ajay Piramal Group
promoted real estate fund Indiareit Fund Advisors, valuing the entire fund at around
USD 55.55mn. (ECNT)
` JSW Steel (JSTL IN) has got shareholder's nod to  issue 0.97mn shares equity shares
on a preferential basis to Japanese steelmaker JFE Steel. (ECNT) 
` Piramal Healthcare's (PIHC IN) shareholders have approved a proposal to buyback
20% of its total shares that will entail an outgo of USD 557.37mn. (ECNT)
` NRI businessman C Sivasankaran has acquired 2.99% stake through open market
purchases in the Bangalore based  Karuturi Global (KARG IN) in the past few weeks.
(TTOI)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line

Bank of Baroda:: concerns on capital constraints recede:: JP Morgan

Bank of Baroda Overweight
BOB.BO, BOB IN
Capital infusion: concerns on capital constraints
recede but infusion EPS and ROE dilutive


• Large capital infusion by the government: According to CNBC
reports, the Indian government has infused ~Rs100bn in PSU banks with
stakes of <57-58%. BOB has received Rs35bn and assuming current
market prices, the infusion would lead to ~10% dilution and would take
the government’s stake in BOB from 54% to 58% and lead to ~175bps
increase in BOB’s Tier 1.


• Positives - No constraints on capital now: The capital infusion
addresses concerns about capital constraints not only in the near term but
also longer term, as the increase in the government’s stake to 58% leaves
leeway for further capital issuance without government help in the
future.

• Negatives: EPS and ROE dilutive, capital marginally higher than
required: Assuming current prices, EPS dilution would be ~6% over
FY11-12E and ROEs would be brought down by ~250bps to ~20-20.5%
for FY12-13. Given strong internal capital generation, we estimate that it
would take more than three years for BOB to leverage up again, leading
to lower ROEs over that period.

• Prefer PNB now vs. BOB: Though we currently have no official
confirmation of the same, we assume the infusion to be 100% equity.
Given very low dilution for PNB, we would prefer PNB vs. BOB as the
capital infusion would widen ROE differentials for BOB vs. PNB from
200bps earlier to 500bps now and valuations would be on par on a post
diluted book basis.

• Maintain Overweight: Though the news is positive for PSU banks in
general as it addresses their capital issues, we believe for BOB the large
dilution is at best neutral, given the large EPS and ROE dilution. We
continue with our Overweight on BOB, given superior asset quality but
would prefer PNB for return ratio differentials post the capital infusion.

Economy & Corporate News:: Kotak Sec: 07/12/10

Economy News
4 Foreign direct investment (FDI) in multi-brand retail and insurance may
be opened up soon in India, Mr Montek Singh Ahluwalia, Deputy
Chairman, Planning Commission, indicated on the sidelines of  a
Federation of Indian Chambers of Commerce and Industry (FICCI) event.
(BL)

4 France on Monday signed deals with India worth euro 13.3 billion in the
nuclear power, civil aviation and defence sectors. India and France have
signed as many as five agreements in the civil nuclear power sector. They
included a framework agreement to construct two civil nuclear plants in
Jaitapur, Maharashtra, costing euro 7 billion (roughly $9.5 billion). The
sixth agreement was on film co-production and one MoU on cooperation
on earth system science and climate. Plans are also afoot to construct
another four nuclear power plants (a total of six), all by French nuclear
giant Areva, at a total cost of $25 billion. (BS)

Corporate News
4 State Bank of India, on Monday, hiked interest rates on fixed deposits
by 50-150 basis points. The sharp rise of 150 basis points is for short-term
deposits having maturity up to three months, while for longer term
deposits; the hike is between 50 and 100 basis points, which indicate tight
liquidity in the system. (BL)
4 Engineers India Limited said it is mulling to bid under the ninth round
of the New Exploration and Licencing Policy (NELP) of oil and gas blocks
and enter city gas distribution projects. The company is looking to enter
city gas distribution projects and provide consultancy for nuclear power
projects. (BS)
4 Piramal Healthcare on Monday said its shareholders have approved a
proposal to buyback 20 per cent of its total number of shares that will
entail an outgo of Rs 25.08bn. A resolution seeking shareholders nod for
contributing to charitable and other funds up to an amount of Rs 2bn, has
also been approved by the shareholders. (BS)
4 Shares of Tata Steel, surged 3.4% on Monday after news that global
mining major Rio Tinto had made a $3.5-billion bid for Africa-focused
Riversdale Mining, in which the Tatas own a 24% equity stake. While the
development sparked speculation that Tata Steel, one of the three major
shareholders in Riversdale Mining, could launch a counter bid, people
familiar with the group said the Mumbai-based conglomerate would not
go alone in putting in such a bid. (ET)
4 India and Kazakhstan will iron out some unspecified commercial issues by
February next year, paving way for state-run ONGC to pick up 25% stake
in Kazakhstan’s Satpayev block after six years of delay. The Cabinet
Committee on Economic Affairs (CCEA), India’s apex body on economic
matters, has already approved the deal last year. (ET)
4 Suzlon Energy Ltd has informed BSE that the board of directors of the
company has approved the acquisition of tower business division of
Suzlon Towers and Structures Ltd and operations and maintenance
division of Suzlon Infrastructure Services Ltd, both are wholly owned
subsidiaries of the company, under a composite scheme of arrangement,
subject to receipt of all statutory and regulatory approvals. (BL)