Reports » India

Indian stock market and companies daily report (September 12, 2012, Wednesday)

Contributed by Angel Broking

The Indian markets are expected to open in the green today tracking positive opening in most of the Asian markets as an upbeat session on Wall Street improved investor sentiment while looking ahead to key upcoming decisions from Europe and US.

The US markets ended higher yesterday as optimism among investors ahead of decisions by a German court and a possibility of further monetary stimulus from the Federal Reserve fueled a rise in the Dow industrials to their highest finish in nearly five years. German Federal constitutional court is expected to give decision today regarding ruling on a request for a temporary injunction against EuropeRs.s permanent bailout fund. Meanwhile, a report from the commerce department in the US showed that the trade deficit widened to US$42.0bn in July (expected -US$US$44.3bn) from a revised US$41.9bn in June.

Meanwhile the Indian markets reversed early losses to end modestly higher in yesterdayRs.s trading session after Oil Minister S Jaipal Reddy said that an increase in diesel, cooking gas and kerosene price was unavoidable. Investors today will watch out for the domestic IIP growth data for July 2012 (Bloomberg data - 0.5%), due to be released today.

Markets Today

The trend deciding level for the day is 17,799 / 5,372 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,921 - 17,990 / 5,412 - 5,433 levels. However, if NIFTY trades below 17,799 / 5,372 levels for the first half-an-hour of trade then it may correct up to 17,731 - 17,609 / 5,350 - 5,311 levels.

India's external debt rises by 13% to US$305.9 bn

IndiaRs.s external debt at end-March 2012 increased to US$345.8 billion from US$305.9 billion in end-March 201 1 mainly due to an increase in commercial borrowings, short-term debt, and non-resident Indian deposits. At end-March, external debt increased by 13% in US$ terms; however, it increased by 29.3% in INR terms reflecting the sharp depreciation of the rupee during the period.

The external-debt to GDP ratio during end-March 2012 increased to 20% from 17.8% at end-March 2011. The debt-service ratio, indicating debt sustainability, witnessed an increase to 6% from 4.3% during the corresponding period in the previous year.

External debt continued to comprise of predominantly long-term debt. In FY2012, the share of government debt in overall external debt declined to 23.7% while non-government debt increased to 76.3%.

The composition of IndiaRs.s external debt is undergoing a change with the share of commercial borrowings (30.2%) and NRI deposits (16.9%) increasing over the years as compared to the share of multilateral debt (14.6%) and bilateral debt (7.7%) indicating the increasing role of the corporate sector in the growth of the economy.

Tata Motors to launch products in Indonesian markets

Tata Motors (TTMT) announced its foray into Indonesian markets through a wholly owned subsidiary, PT Tata Motors Indonesia. The company intends to enter the passenger and commercial vehicle segments in Indonesia and plans to launch its products in 2013. According to the management, by the time of the launch of the products, PT Tata Motors Indonesia will have about 10 to 15 dealers nationwide, offering sales, service and spare parts. Further, over a period of three years, the company will set up a country wide network of about 60 full service dealers, about 100 other workshops and about 300 spare parts retailers. TTMT is also evaluating options for setting up a manufacturing base in Indonesia and significant investments are also planned for component localization. We believe that TTMTRs.s move to enter the Indonesian markets is a positive one as there is a large opportunity for Tata vehicles in Indonesia, with operating conditions and customer needs being very similar to those in India. At the current market price of Rs.250, the stock is trading at 5.7x and 3.1x FY2014E earnings and EV/EBITDA, respectively. We maintain our Buy rating on the stock with an SOTP based target price of Rs.292.

PNGRB cuts GSPL's pipeline tariff by 40%

The Petroleum and Natural Gas Regulatory Board (PNGRB) has cut Gujarat State PetronetRs.s (GSPL) tariff rate for its 2,239km Gujarat Gas Grid by 40% to Rs.23.99/mmbtu. Further, PNGRB has stated that the approved tariff will be effective November 2008 which implies that the company will have to adjust the rates in subsequent bills for its customers. This will have a material adverse impact on GSPLRs.s financials; However, it is currently challenging to quantity the impact of this order on the companyRs.s financials as GSPL has been charging differential tariffs for different customers. We maintain our Neutral rating on the stock.

South Indian Bank raises Rs.442cr via QIP

South Indian Bank (SIB) has raised capital of Rs.442.6cr through a Qualified Institutional Placement (QIP) by issuing 20cr new shares at a price of Rs.22.13 (premium of ~3% to yesterdayRs.s closing price of Rs.21.5). The main investors in the QIP include financial institutions like IFCI, SBI, Carlyle Ventures, Multiples Alternate Asset Management and Axis Bank. The capital raising should give the bankRs.s CAR a boost and also aid in maintaining its pace of credit expansion. The management post the capital raising indicated a credit growth of ~20-25% over FY2013-14. At the CMP, the stock is trading at 0.9x FY2014E ABV. We recommend a Buy rating on the stock with a target price of 725.

HCC bags order worth Rs.1,534cr

Hindustan Construction Co. (HCC) has bagged two major contracts worth Rs.1,534cr in various business segments. The first order is for the construction of a 10.2 km tunnel on the Udhampur-Srinagar-Baramulla railway line in Jammu and Kashmir. This contract is worth Rs.884cr and will be completed in 60 months. The second order, worth Rs.650cr, is a contract from HCC Concessions, a step down subsidiary of HCC. It is an EPC (engineering, procurement and construction) order for expansion of a section of the National Highways-8 between Vadodara and Surat, which also includes the construction of an extradosed bridge across river Narmada. Work has already commenced on this project and is scheduled for completion in 36 months. We maintain our Neutral view on the stock.

Economic and Political News

- 321mn subscribers opted for number portability in 2012

- Fuel price rise unavoidable in short term: Reddy

- Government approves Rs.2,410cr FDI proposals

- IndiaRs.s steel imports to rise in 2012-13 as local supplies stall

- RBI eases norms for ECB

Corporate News

- Dr ReddyRs.s launches high blood pressure tablets in US market

- Infosys BPO arm McCamish begins US operations

- NIIT Tech acquires Sabre Philippines Development Centre

- Zee to invest US$1 00mn in new Arabic channel