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Indian stock market and companies daily report (September 25, 2012, Tuesday)

Contributed by Angel Broking

Indian markets are expected to open flat tracking marginally positive opening trades in most of the Asian bourses and the SGX Nifty.

Globally, US markets ended the MondayRs.s trading session mostly lower, as traders continued to express concerns about the global economic outlook despite recent announcements of further monetary stimulus. However, selling pressure remained somewhat subdued, limiting the downside for the markets. Most of the European bourses too ended the trading session in negative territory. A number of issues contributed to the weakness today, but most stemmed from concerns over global growth.

Meanwhile, Indian markets fell modestly on Monday, as investors indulged into profit booking following recent steep gains. After a slew of big ticket reforms announced by the UPA government over the last few days, investors are now anticipating concrete measures to fast track projects and kick start the investment cycle.

Markets Today

The trend deciding level for the day is 18,712 / 5,681 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,773 - 18,872 / 5,699 - 5,728 levels. However, if NIFTY trades below 18,712 / 5,681 levels for the first half-an-hour of trade then it may correct up to 18,61 2 - 18,551 / 5,652 - 5,634 levels.

CCEA clears debt restructuring plan of SEBs

CCEA has cleared the debt restructuring of SEBs under which 50% of the short terms loans of these SEBs would be taken over by the state government. The bonds would first be issued by the discoms, backed by the state government and then would be taken over by the state government over the next 2-5 years depending on the fiscal position of the states. This conversion of short term debt to long term debt is expected to lead to reduction in yields on advances of banks by ~250bps. According to rough calculations and data available, some of the banks that would be impacted the most would be Andhra Bank (~8.0% of FY2014E PBT), Bank of Maharashtra (~6.3%) and Dena Bank (~4.3%).

The restructuring by lenders is subject to steps to be taken by the State discoms to bridge the gap between the cost incurred and revenue realized to restore the viability of the sector. While this is strongly positive for the power sector, the SEB restructuring plan by the government is also positive for the banking sector as it provides more confidence and clarity on the timeline of the SEB loan repayments. The investors were valuing banks by including the SEB restructuring into impaired assets while we had always factored/assumed that the government would step in and take control of the situation eventually. The impact on the banks is expected to be around 2 to 8% at their FY2014E PBT levels, however the overhang of SEB loans by banks is expected to wane off, which should be sentimentally positive for the banking sector.

No Roaming Charges from 2013

Telecom minister, Mr. Kapil Sibal announced yesterday that there will be no roaming charges from 2013. At present, mobile users pay ~ 60paise/minute in their home market while shelling out Rs.1.25-Rs.1.50/minute while roaming in another telecom circle. Although one can make calls at the same rate once roaming charges are dropped, telecom operators who would lose revenue may end up jacking up local call charges to recoup some of the losses. The move, however, might not go down well with service providers, who will face a hit of up to Rs.13,500cr in revenues. We maintain our Neutral view on overall telecom sector.

Maruti Suzuki to hike car prices within a week

Maruti Suzuki (MSIL) is planning to increase the prices of its vehicles within a week to offset the impact of adverse foreign exchange movement and rising input cost pressures. While the company has not disclosed the quantum of the price increase, we believe it could be in the range of 1-2%. Considering the current environment wherein the demand for passenger cars in the petrol segment remains weak in spite of higher discounts; the move to hike prices may impact the demand for petrol cars. However, it is less likely to impact the consumer demand in the diesel car segment. At the current market price of Rs.1,354 the stock is trading at 15.5x FY2014E earnings which is in-line with its historical average of 15x. We maintain our Neutral rating on the stock.

IVRCL bags orders worth Rs.959cr

IVRCL has bagged orders worth Rs.959cr in the in water, irrigation and power businesses. International orders include an order worth Rs.471.5cr for the construction of a rehabilitation project from the National Irrigation Board, Kenya and construction of water tanks, infrastructure and related buildings from Kuwait worth Rs.124.7cr. Domestically, IVRCLRs.s water division has been awarded orders worth Rs.314.7cr. One contract is from PHED, Bharatpur, for the construction of a transmission main pipeline for 97 villages, which includes operation and maintenance. Another order is for a cluster distribution system for 71 villages from PHED, Jodhpur. In the power division, IVRCL has got an order worth Rs.48.1cr for the construction of transmission lines in Bhopal Circle from the Madhya Pradesh Power Transmission Company. Owing to the recent surge in the stock price we recommend Accumulate with a SOTP target price of Rs.51.

Cravatex - FILA sub-license agreement extended for 30 years

Cravatex represents FILA in India and distributes its products under the license agreement which has been further extended for 30 years starting from January 2013. The license permits the distribution of FILA products and use of its trademark in India, Bangladesh, Pakistan, Sri Lanka, Nepal and Bhutan. Further, the agreement requires Cravatex to invest 4-5% of the revenue on marketing activities. Cravatex has been currently distributing the FILA products largely in wholesale, shop-in-shop and retail formats but now plans to focus on own-stores formats. FILA aims to more than double its stores to 100 in the next two years and thereby double its market share by 2015 from current 5%. We maintain our Buy recommendation on the stock with a target price of Rs.682 based on target PE of 12x.

Economic and Political News

- S&P lowers IndiaRs.s GDP growth forecast to 5.5%

- FM may clear sales tax compensation if statesRs. support GST

- New tax accounting standards to reduce litigation soon

Corporate News

- ONGC to start production in its KG basin block by 201 6-17

- Cairn Energy selling 8% stake in Cairn India

- Jindal Steel raises Rs.660cr bridge loan for CIC buy

- ONGC-IOC-OIL bid $5 billion for ConocoPhillipsRs. assets