Turnover drops ahead of long weekend

The market ended with small gains on a volatile day of trade. The market breadth turned weak later during the day in contrast to a strong breadth earlier during the day. IT pivotals rallied. Reliance Industries edged higher.
FMCG, capital goods, consumer durables, banking stocks declined. Satyam Computer Services and Infosys were major gainers whereas ACC and Cipla were major losers from the Sensex pack. European markets were positive. Asian markets were mixed today, 20 December 2007. The Dow industrials and the S&P 500 declined slightly on Wednesday, 19 December 2007.
Annual inflation, based on the wholesale price index (WPI), rose 3.65% in the week ended 8 December 2007, lower than previous week's 3.75% rise, data released by the government during trading hours today showed.
The 30-share BSE Sensex rose 70.61 points or 0.37% to 19,162.57. It hit a high of 19,291.14 in mid-morning trade. At its day’s high Sensex had gained 199.18 points.
The S&P CNX Nifty up 15.35 points or 0.27% to 5,766.50.
BSE clocked a turnover of Rs 6206 crore, lower than Wednesday (19 December 2007)'s Rs 8,347.15 crore.
The market remains closed on Friday, 21 December 2007 on account of Bakri Id.
Nifty December 2007 futures were at 5780.05, at a premium of 13.55 points as compared to the spot closing of 5766.50.
The NSE's futures & options (F&O) segment turnover was Rs 73,067.55 crore, which was lower than Rs 79,137.15 crore on Wednesday, 19 December 2007.
Market breadth was weak. On BSE, 1,139 stocks advanced, 1,748 stocks declined and 26 stocks remained unchanged. 16 out of 30 stocks from the Sensex pack advanced.
BSE Mid-Cap index declined 0.6% to 9,025.54. BSE Small-Cap index declined 0.86% to 11,813.32. Both these indices underperformed Sensex.
BSE Metal index (up 0.39% to 18,273) and BSE IT index (up 3.34% to 4,320.63) outperformed Sensex.
BSE Auto index (up 0.28% to 5,541.26), BSE Realty index (up 0.09% to 11,614.08), BSE Health Care index (down 0.11% to 4,242.53), BSE Bankex (down 0.24% to 10,738.59),BSE Power index (down 0.27% to 4,211.32), BSE Consumer Durables index (down 0.62% to 6,084.31), BSE Capital Goods index (down 0.91% to 18,725.69) and BSE FMCG index (down 1.16% to 2,198.45) underperformed Sensex.
IT stocks surged. Wipro (up 1.77% to Rs 491.75), Tata Consultancy Services (up 2.34% to Rs 1,045.25), Infosys (up 3.68% to Rs 1,698.35), Satyam Computer Services (up 5.65% to Rs 427.70) edged higher.
FMCG majors declined. ITC (down 1.83% to Rs 196.05), United Spirits (down 2.56% to Rs 1,846), Hindustan Unilever (down 0.28% to Rs 211.450 edged lower.
Capital goods stocks declined. Bharat Heavy Electricals (down 1.27% to Rs 2,370), Larsen & Toubro (down 0.48% to Rs 3,979) and Suzlon Energy (down 3.66% to Rs 1,830) edged lower.
Banking stocks declined. ICICI Bank (down 0.35% to Rs 1,157), HDFC Bank (down 0.18% to Rs 1,654) edged lower. State Bank of India rose 0.31% to Rs 2,265.20.
Consumer durables stocks edged lower. Videocon Industries (down 2.11% to Rs 625.25), Titan Industries (down 1.45% to Rs 1,480) and Rajesh Exports (down 1.92% to Rs 869.15) edged lower.
India’s largest private sector firm by market capitalization & oil refiner Reliance Industries was up 0.37% to Rs 2,714.70. The stock came off session's high of Rs 2,754. Reliance Industries (RIL) is reportedly in talks with Tata Chemicals (TCL) for sale of 2.2 million metric standard cubic metres per day (mmscmd) of gas from KG basin once the ongoing dispute with Reliance Natural Resources (RNRL) is resolved.
India's second largest power utility by revenue Reliance Energy rose 3.04% to Rs 1,939.85.
Cipla (down 2.04% to Rs 210.95), ACC (down 2.77% to Rs 1,002.05) and Ranbaxy Laboratories (down 1.65% to Rs 196.40) edged lower.
India's biggest power generation firm by revenue NTPC declined 0.04% to Rs 229.40. The company is reprotedly in active talks with more than one foreign power generation company for acquiring assets in excess of $1 billion (Rs 3,960 crore).
India's biggest commercial vehicle maker in terms of market share, Tata Motors, rose 2.86% to Rs 710.90. The company which is considered a front-runner to buy Ford Motor Co's luxury Jaguar and Land Rover brands, will unveil the world's cheapest car at an auto show in India next month. Tata Motors will showcase its $2,500 car at the Auto Expo in New Delhi on 10 January 2008, with a commercial launch planned for later in 2008.
Tata Steel, the world's sixth largest steel maker, rose 0.07% to Rs 824.80. Vale, the world’s largest producer of iron ore and pellets, is reportedly in talks with Tata Steel to set up a steel slab plant in Brazil. The $20 billion mining company, formerly known as CVRD, has three plants under construction in Brazil in partnership with ThyssenKrupp, Dongkuk and Baosteel. Vale has a minority stake in these projects.
IFCI clocked the highest volume of 6.11 crore shares on BSE. The scrip declined 23.29% to Rs 76.75 after the company, on Wednesday, 19 December 2007, called off the exercise to rope in a strategic partner through the private placement of 26% equity stake.
Ispat Industries clocked the second highest volume of 2.1 crore shares on BSE. The stock declined 3.91% to Rs 82.25. IKF Technologies clocked the third highest volume of 1.78 crore shares. The scrip declined 9.35% to Rs 12.89. Harig Crankshaft clocked the fourth highest volume of 1.28 crore shares. The scrip hit 55 upper circuit at Rs 4.50.G V Films clocked the fifth highest volume of 1.27 crore . The scrip declined 7.22% to Rs 10.66.
IFCI clocked the highest turnover of Rs 473.69 crore on BSE. Reliance Energy (Rs 292.34 crore), Reliance Industries (Rs 251.92 crore), Ispat Industries (Rs 175.3 crore) and Reliance Petroleum (Rs 86.96 core) were other turnover toppers in that order.
European markets edged higher in early trade. Germany’s DAX (up 0.51% to 7,877.18) and UK’s FTSE 100 (up 0.56% to 6,319.60) edged higher.
Asian markets were mixed today, 20 December 2007. Japan's Nikkei (up 0.01% to 15,031.60), Shanghai Composite (up 2.05% to 5,043.54) edged higher. Hong Kong's Hang Seng (down 0.05% at 27,017.09), Taiwan's Taiwan Weighted (down 1.96% at 7,857.08), South Korea's Seoul Composite (down 0.92% at 1,844.37) declined.
The Dow industrials and the S&P 500 declined slightly on Wednesday, 19 December 2007, in light trading on concerns about more fallout from the housing slump. The Dow Jones industrial average declined 25.20 points, or 0.19%, to end at 13,207.27. The Standard & Poor's 500 Index shed 1.98 points, or 0.14%, at 1,453.00. But the Nasdaq Composite Index edged up 4.98 points, or 0.19%, to close at 2,601.01.
Traders are likely to start building positions towards the end of the month based on expectations of Q3 December 2007 results due next month.

Sensex declines 181 pts in a choppy trade

The market declined sharply in the late trade before recovering from lower level in what was a choppy trading session today. Though the market breadth was still negative, it improved substantially compared to a weak breadth in mid-morning trade. FMCG, healthcare and consumer durable stocks gained. Banking, metal and capital goods stocks edged lower. Reliance Industries declined.
European markets which opened after Indian market were in green. Asian markets, which opened before Indian markets were mixed today, 18 December 2007. US stocks tumbled on Monday, 17 December 2007, on concerns about the US economy, amid signs of rising inflation and weakness in holiday shopping.
The 30-share BSE Sensex declined 181.71 points or 0.94% to 19,079.64. It had hit a low of 19,009.35 in late trade. At day’s low Sensex lost 252 points. It hit a high of 19,375.07 in early trade. At its day’s high Sensex had gained 113.72 points.
The S&P CNX Nifty declined 34.7 points or 0.6% to 5,742.30.
Market breadth was negative. On BSE, 1,193 stocks advanced, 1,672 stocks declined and 27 stocks remained unchanged. 18 out of 30 stocks from the Sensex pack declined.
BSE clocked a turnover of Rs 8007 crore, lower than Monday (17 December 2007)'s Rs 9641 crore.
Nifty December 2007 futures were at 5788, at a premium of 45.70 points as compared to the spot closing of 5742.30.
The NSE's futures & options (F&O) segment turnover was Rs 74,579.26 crore, which was higher than Rs 73,373.37 crore on Monday, 17 December 2007.
BSE Mid-Cap index declined 0.13% to 9,093.84. BSE Small-Cap index declined 0.18% to 11,818.12. Both these indices outperformed Sensex.
BSE Realty index (down 0.38% to 11,654.58), BSE Power index (down 0.17% to 4,215.30), BSE Auto index (down 0.08% to 5,564.87), BSE FMCG index (down 0.05% to 2,210.01), BSE Oil & Gas index (down 0.04% to 12,309.68), BSE Consumer Durables index (up 1.12% to 6,059.99), BSE Health Care index (up 1.5% to 4,261.32) outperformed Sensex.
BSE Capital Goods index (down 1.18% to 18,902.71), BSE Metal index (down 1.35% to 18,077.63) and BSE Bankex (down 1.42% to 10,764.22) underperformed Sensex.
India’s largest private sector firm by market capitalization & oil refiner Reliance Industries declined 1.75% to Rs 2,728.85. As per reports, Reliance Industries (RIL) has paid advance tax of Rs 1045 crore in the third quarter ended 15 December 2007 compared to Rs 440 crore in the corresponding quarter of the previous year.
Reliance Communications (RCom) was down 0.47% to Rs 714.40. As per reports it will invest Rs 800 crore to roll out a telecom network — fixed and mobile — in Uganda, a country in Eastern Africa. The company has bagged a licence to be the African nation’s sixth telecom operator. The company plans to launch services in Uganda by Q3 in 2008, the report added.
FMCG majors rose. ITC (up 2.22% to Rs 197.85) and Tata Tea (up 1.28% to Rs 880.60) edged higher. Hindustan Unilever (down 3.39% to 211.20) edged lower.
Consumer durables stocks rose. Videocon industries (up 0.53% to Rs 619.40), Lloyd Electric (up 1.19% to Rs 174) and Titan Industries (up 4.99% to Rs 1,459.65) edged higher.
Healthcare stocks rose. Sun Pharmaceuticals (up 4.03% to Rs 1,137.95), Cipla (up 3.78% to Rs 215.75), Dr. Reddy’s Laboratories (up 0.09% to Rs 717.45), Ranbaxy Laboratories (up 1.05% to Rs 410), edged higher.
Metal stocks declined. Tata Steel (down 0.91% to Rs 816.35),Sterlite Industries (down 1.76% to Rs 959), and Hindalco Industries (down 0.47% to Rs 199.70) edged lower. Steel Authority of India was flat at Rs 259.75.
Capital goods stocks declined. Bharat Heavy Electricals (down 1.24% to Rs 2,395.10) and Larsen & Toubro (down 2.8% to Rs 3,967.80) edged lower. Suzlon Energy (up 1.84% to Rs 1,861.80) edged higher.
Banking stocks declined. ICICI Bank (down 2.27% to Rs 1,140.65), and HDFC Bank (down 1.28% to Rs 1,685) edged lower.
State Bank of India declined 0.47% to Rs 2,303.70. State Bank of India (SBI) shelled out Rs 1090 crore, up 26.7% over the tax it paid in the corresponding period in the previous year.
Maruti Suzuki India (up 0.93% to Rs 1,019.65) and NTPC (up 1.66% to Rs 232.40) edged higher.
India’s largest dedicated housing financing firm by operating income HDFC declined 2.27% to Rs 2,812.30.
IKF Technologies clocked the highest volume of 3.77 crore shares on BSE. The stock rose 5.17% to Rs 13.03. IFCI clocked the second highest volume of 3.57 crore shares on BSE. The stock declined 6.73% to Rs 101.10. Ispat Industries clocked the third highest volume of 3.31 crore shares. The stock rose 4.43% to Rs 81.35. G V Films clocked the fourth highest volume of 2.65 crore. The scrip declined 3.24% to Rs 10.76. Himachal Futuristic Communications declined 0.12% to Rs 41 and it clocked the fifth highest volume of 2.29 crore shares.
ONGC clocked the highest turnover of Rs 387.94 crore on BSE. IFCI (Rs 364.74), Essar Oil (Rs 293.96 crore), Ispat Industries (Rs 259.98 crore) and Reliance Petroleum (Rs 227.16 crore) were other turnover toppers in that order.
European markets were trading higher today. Germany’s DAX (up 0.83% to 7,891.17) and UK’s FTSE 100 (up 0.77% to 6,326) edged higher.
Asian markets were mixed today, 18 December 2007. Hong Kong's Hang Seng (up 0.51% at 26,732.87), South Korea's Seoul Composite (up 1.18% at 1,861.45), Singapore's Straits Times (up 0.47% at 3,369.31) edged higher. Taiwan's Taiwan Weighted (down 0.3% at 7,807.39), Shanghai Composite (down 0.83% to 4,836.17) and Japan's Nikkei (down 0.27% to 15,207.86) declined.
The Dow Jones industrial average slid 172.65 points, or 1.29%, to end at 13,167.20, on Monday, 17 December 2007. The Standard & Poor's 500 Index dropped 22.05 points, or 1.50%, to 1,445.90. The Nasdaq Composite Index tumbled 61.28 points, or 2.32%, to 2,574.46.
US government reports last week showed rising price pressures in November 2007, while concerns about the housing slump intensified after news that sentiment among US home builders held at a record low for a third consecutive month in December 2007.
Volatility may remain high in the near term ahead of expiry of December 2007 derivatives contracts next Thursday, 27 December 2007. The market remains closed on Friday, 21 December 2007 on account of Bakri Id and also on Tuesday, 25 December 2007 on account of Christmas. Therefore, only six trading sessions are left for expiry of December 2007 derivatives contracts.
Meanwhile, the market regulator Securities and Exchange Board of India (Sebi) on Monday, 17 December 2007, put out a note on the proposed plan to introduce new products in the derivatives segment on its website to seek comments/suggestions from market participants on or before 21 December, 2007.

IPO Audit : Precision Pipes and Profiles (PPAP) -Avoid

Investors can avoid the initial public offering of Precision Pipes and Profiles (PPAP), which manufactures automotive sealing systems.
While the company appears to have grown impressively over the years, future growth prospects may not be as bright, given the ongoing slowdown in the automobile industry.
The volume-driven nature of its business and the negligible potential for after-market sales, also peg up uncertainty.
In the price band of Rs 140-150, the offer is priced at about 15-16 times its likely FY-09 per share earnings on a diluted equity base.This appears pricey given PPAP’s presence at the lower end of the value chain in the automobile industry.
At a time when established auto component manufacturers are finding the going tough despite their presence in niche and high-value products, PPAP’s business, restricted to lower end automotive sealing products appears not so attractive.
The company is highly reliant on domestic sales, with a marginal exposure to the overseas market. While the company intends to increase its exports share, it could take a couple of years for significant revenues to come by.
Investors can adopt a wait-and-watch approach to the IPO and consider investments after listing.
Business
PPAP makes automotive sealing systems and exterior products for the automobile industry.
Its products range from weather strips, windshield moulding to skirt air damper and body-side moulding.Catering to clients such as Maruti Udyog, Honda SIEL, General Motors and Toyota Kirloskar, the fortunes of PPAP have grown in tandem with its clients. It witnessed a compounded earnings growth of about 34 per cent annually, backed by a 28 per cent growth in sales during the last four years.
PPAP also caters to the white goods industry, manufacturing PVC-based customised profiles to companies such as Godrej, Voltas and Videocon; the segment contributed to about 5 per cent of revenues.PPAP does not enjoy a significant exposure to the export market (less than 4 per cent of its revenues).
However, the company proposes to increase its exports and has entered into a manufacturing agreement with the Australia-based Power Data Corporation for exporting the company’s ‘Electrical Outlet System’.
On the operational front, the company has expanded its margins by improving utilisations.For the year ended March 2007, the operating margins expanded by three-percentage points to about 25 per cent.
Expansion initiatives
The company proposes to use the proceeds from the issue towards setting up two new manufacturing plants for auto components and electrical outlet system products for Power and Data Corporation of Australia. It also plans to use the proceeds to expand capacity (to about 30 lakh kilos) in its existing plant from the current 12 lakh-levels.
Offer details
The offer is open from December 17-20. The company seeks to raise Rs 75 crore through this offer. UTI Securities and Nexgen Capitals are the lead managers to the issue and Intime Spectrum Registry is the registrar

IPO Audit : Aries Agro - Avoid

Investors can stay away from the initial public offer of Aries Agro, a manufacturer and marketer of plant micronutrients.
Though micronutrients have good demand prospects in the Indian context and are not subject to the regulatory constraints that fertilisers face, the business is characterised by high competition.
The offer price also appears high in relation to the multiples enjoyed by companies in the fertiliser and agricultural inputs business.At the price band of Rs 120-130, the offer price values the company at between 18 and 20 times its FY-07 earnings per share, on a fully diluted equity base.
Much larger players in the agri-inputs space such as Rallis India (11 times), which have a presence in this segment, trade at cheaper multiples.The offer proceeds are to fund working capital, towards the acquisition of an overseas material supplier, purchase of mobile vans for marketing products as well as capacity expansion.The substantial scaling up of capacities over the next year could provide justification for the offer price over the medium term.However, the intense competition in this business poses significant execution risks to the scaling up of operations.Micronutrients businessAries Agro derives the bulk of its turnover from the marketing of micronutrients under the names — Agromin and Chelamin, which are its leading brands.Aries also has a small presence in the crop protection and veterinary products business. Micronutrients, which are required in relatively smaller dosages to supplement macro-nutrients (nitrogen, phosphate and potassium — usually delivered through mainstream fertilisers), help improve the yield and output of agricultural and horticultural crops.The company focusses on chelated micronutrients (combinations of metallic nutrients such as zinc, iron and copper with certain chemicals) that have higher efficacy and allow better absorption by the plant.The micronutrients business has considerable potential in the Indian context. Factors such as low yields of major foodgrains and horticultural crops, high soil alkalinity and intensive cultivation are the key demand drivers for micronutrients.Wide networkAries has built an extensive distribution network which reaches 375 districts across 20 states, through a network of 4700 distributors. This is backed by a portfolio of 37 products consisting of micronutrients, chelated nutrients and insecticides.From being a small player, Aries has substantially ramped up its manufacturing capacities in FY-07, with capacities rising from 12,000 tonnes to 21,600 tonnes in FY-07.Net sales have climbed from Rs 26 crore to Rs 73 crore between FY-04 and FY-07 while net profits have risen from a minuscule Rs 0.09 crore to Rs 8.69 crore over the same period.Both numbers have been helped by a substantial trading component to sales.The company has now lined up an ambitious expansion, with 79,200 tonnes of additional micronutrients capacity proposed to be added to the existing facilities across locations.Limited pricing powerThe market for micronutrients such as zinc, iron and copper in India, is expected to double over the next two decades. This suggests sustained single-digit growth in demand over the next few years.Unlike fertilisers, micronutrients are not subject to any price controls by the government and, thus, allow greater operational freedom to producers.However, players such as Aries Agro would still be constrained by limited pricing power, due to competition from imports as well as the host of local/regional brands, as the product offers limited differentiation possibilities.The business has low entry barriers, involves small capital investments to put up capacities, limiting the company’s ability to withstand pricing pressures and scale up sales.The relatively high pricing of the offer also may not leave room for disappointments on this score.

Porwal Auto Components - Avoid

Investors can avoid subscribing to the initial public offering of Porwal Auto Components which is in the business of manufacturing castings. The fragmented nature of the foundry industry with a number of small players, competition from larger companies , unattractive margins and heavy dependence on one client, make the offer uninviting.
At the price band of Rs 68-75, the offer is priced at 15-17 times its likely FY-09 earnings on the post-issue equity. At the upper end of the price band, the company will raise around Rs 37.5 crore to fund its capacity expansion and set up a windmill for captive power consumption.
Business and plans
Porwal Auto manufactures ductile iron and grey iron castings and components primarily for the automobile industry. To cater to the growing demand, the company has expanded capacity up to 7400 tonnes in 2006-07.
The company plans to further increase installed capacity to 27,600 tonnes in FY 2008. 80 per cent of this installed capacity is to be utilized by 2009-10. With increase in capacity, the company expects to benefit from higher domestic demand for automobiles as well as the trend of overseas OEMs (Original Equipment Manufacturers) sourcing components from India.But in a fragmented industry such as this, small companies will find it tough to compete with bigger players.
The latter score over the smaller ones in terms of ability to execute larger orders, offer value added products such as machined castings and forgings and sub-assemblies and assemblies. These value additions also bring in better margins. Moreover, export growth for Indian component makers has come from high-end cast products and higher technology castings rather than from raw castings or forgings.
While the company too has plans to increase the supply of finished castings and scale-up its machined castings production, it will face stiff competition from established players. The company also needs to diversify its risks by supplying to other segments of the auto industry such as passenger cars and two-wheelers (to combat any slowdown in one particular segment ).
Currently, nearly 90 per cent of its revenues come from supplies to Eicher Motors for its commercial vehicles. L&T case equipment, Shakthi Pumps, Man Force trucks and a few others chip in with the rest. Eicher’s new joint venture with Volvo for the commercial vehicles business, may also create some uncertainty if the latter reviews the supply chain.FinancialsFor the year ended 31 March 2007, the company recorded sales of Rs 34 crore, which grew by about 32 per cent from the previous year. This was primarily due to capacity increase. Net profits decreased by about 8 per cent to Rs 75 lakhs. Margins may also be under pressure in the short-term due to finance charges

Understanding - Stock Splits

Stock splits refer to dividing the outstanding shares of a company into a larger number of shares, without affecting Stockholder's Equity or the total market value of the stock.

For example, if a company declares a 2-for-1 stock split of its stock, of which has a current market value of Rs 500/share and 200,000 shares outstanding, the following results occur:

Pre-split:

Outstanding shares: 200,000

Market Value: Rs 500

Market capitalization: Rs 100,000,000

Post-split:

Outstanding shares: 400,000

Market Value: Rs 250

Market capitalization: Rs 100,000,000

Essentially, in the 2-for-1 stock split, the company's outstanding shares are simply doubled and the stock price is divided in half. The market capitalization, or market value of the stock, remains the same at pre- and post-split conditions. This is because stock splits have no impact on the value of a company's stock. A stock split is merely an accounting transaction in which no equity is exchanged. Companies can split their stock in any number of ways. These splits may occur in different combinations.

When a company declares a stock split, the price of the stock may decrease, but the number of shares will increase proportionately. A stock split has no effect on the value of what shareholders own. If the company pays a dividend, your dividends paid per share will also fall proportionately.

Companies often split their stock when they believe the price of their stock exceeds the amount smaller individual investors would be willing to pay for the stock. By reducing the price of the stock, companies try to make their stock more affordable to these investors.Usually, stock splits have a positive affect on the stock price.

Over the long term, stock splits seem to have a considerable effect on the company's stock price. Although stock splits have no direct effect on a company's equity, the event of a split does forecast hints and signs of how the company is performing. Companies usually tend to split their shares when the company has an optimistic view of its future and operations. The announcement of a stock split can be a symbol that a stock has attained a certain level of success.

The fact that a company has a record of multiple stock splits usually indicates that the company is among one of the faster growing firms, since their stock has been split numerous times. Generally, a company is motivated to split their stock to attract more investors with a lower share price.

However, some people can only buy lower priced stock because they may not have the buying power to make a larger investment. Thus, they wait till a stock splits so they can afford some shares. Just because a company declares a stock split, it does not mean that the stock price will inevitably rise in reaction.

There are many other variables that influence investors' decisions in the result of a stock split including economic reports, market stability, earnings, interest rates, external conflicts, etc. Companies also split their shares if they need to broaden their shareholder base and make more shares available to investors.

A motivation for this could be a company's defence to a potential hostile takeover. Stock splits make the company more liquid, allowing more investors the opportunity to purchase an ownership in their company.

The timeline of a stock split consists of four main dates: Declaration or announcement date, Record date, Payment date, Ex-dividend date. The two key dates that are important to investors are the announcement date and the payment date. The announcement date is important because no one knows for sure if and when a company a will declare a split of their company's stock.

Thus, investors speculate on whether the company will announce and when they will announce. The payment date is crucial as well because this is the day before the company actually splits its share price, after which investor activity changes as the new share price targets a different audience. Moreover, there is another factor that engenders the announcement of a stock split.

Companies tend to try to keep their stock within a certain price range. Therefore, when a stock hits the company's price target, the company, upon approval of the Board of Directors and the shareholders, will announce a stock split.

A stock split simply involves a company altering the number of its shares outstanding and proportionally adjusting the share price to compensate.

This in no way affects the intrinsic value or past performance of your investment, if you happen to own shares that are splitting. With lower-priced shares, a stock's liquidity increases and making it easier to trade.

As a stock price rises, some people will be psychologically unwilling to pay that 'high price' so a stock split brings the shares down to a more 'attractive' level. Again, the intrinsic value has not changed, but the psychological effects may help the stock.

Sensex Crashes 769 points on weak global equities

The market witnessed major correction as Sensex tumbled more than 850 points at one point of time in late trade tracking weak global markets. Metal, realty and power stocks declined sharply in late trade. Capital goods and banking stocks also declined heavily. Reliance Industries declined sharply. The market breadth turned negative in late trade in contrast to a strong breadth earlier during the day. All the sectoral indices on BSE were in red.
European markets which opened after Indian market were weak. Asian markets which opened before Indian markets were trading lower today. US stocks slumped on Friday, 14 December 2007, on concerns surging inflation may prevent the Federal Reserve from lowering interest rates.
Crude oil prices rose, supported by a US winter storm and renewed tensions in the Middle East as Turkish planes bombed Kurdish rebels in northern Iraq. US light, sweet crude for January delivery which expires on Tuesday, 18 December 2007, rose 48 cents to $91.75 a barrel.
The 30-share BSE Sensex slumped 769.48 points or 3.84% to 19,261.35. Sensex hit a low of 19,177.19 in late trade. At day’s low Sensex lost 853.64 points.
The S&P CNX Nifty declined 270.7 points or 4.48% to 5,777.
Market breadth was weak. On BSE, 972 stocks advanced, 1,932 stocks declined and 23 stocks remained unchanged. 29 out of 30 stocks from the Sensex pack declined.
BSE clocked a turnover of Rs 9524 crore as compared to Friday (14 December 2007)'s Rs 9,480.42 crore.
Nifty December 2007 futures were at 5791, at a premium of 14 points as compared to the spot closing of 5777.
The NSE's futures & options (F&O) segment turnover was Rs 73,373.37 crore, which was higher than Rs 61,326.39 crore on Friday, 14 December 2007.
BSE Mid-Cap index declined 3.87% to 9,105.58. It underperformed Sensex. The index hit all-time high of 9,541.03 today. BSE Small-Cap index declined 2.91% to 11,840.02. The index outperformed Sensex. It hit a record high of 12,402.86 today.
BSE Power index (down 4.8% to 4,222.68), BSE Oil & Gas index (down 5.13% to 12,314.72), BSE PSU index (down 5.63% to 9,511.13), BSE Realty index (down 5.65% to 11,699.36) and BSE Metal index (down 7.28% to 18,324.50) underperformed Sensex.
BSE Capital Goods index (down 3.69% to 19.129.14), BSE Bankex (down 3.67% to 10,919.22), BSE Consumer Durables index (down 3.41% to 5,992.76), BSE HealthCare index (down 2.55% to 4,198.20), BSE FMCG index (down 2.33% to 2,211.07) and BSE IT index (down 2.16% to 4,167.90) outperformed Sensex.
India’s largest private sector firm by market capitalization & oil refiner Reliance Industries declined 3.86% to Rs 2,777.50.
Metal stocks slumped. Tata Steel (down 6.15% to Rs 823.85), Sterlite Industries (down 8.45% to Rs 976.15), National Aluminium Company (down 6.87% to Rs 418.50) and Hindalco industries (down 5.69% to Rs 200.65) edged lower.
Steel Authority of India fell 7.2% to Rs 259.75 on reports the company plans to enter the equipment manufacturing business to profit from the boom in the domestic steel sector.
Reliance Communications declined 5.55% to Rs 717.80 after the company today said it has completed the acquisition of US-based Yipes Holdings that would give the company access to a Rs 4,00,000 crore global enterprise data market.
Capital goods stocks declined. Bharat Heavy Electricals declined 5.32% to Rs 2,425.25. It announced during the market hours today that it has signed a joint venture agreement between with NTPC for establishment and operation of joint venture company for engineering, procurement and construction (EPC) business.
Larsen & Toubro (down 2.2% to Rs 4,082.10) and Suzlon Energy (down 6.67% to Rs 1,828.10) edged lower.
Tata Motors declined 5.8% to Rs 701.25 on reports that Ford Motor Company is poised to name the company as preferred bidder for its Jaguar and Land Rover brands.
Banking stocks declined. ICICI Bank (down 3.29% to Rs 1,167.10), HDFC Bank (down 2.91% to Rs 1,678.30) edged lower.
State Bank of India fell 3.98% to Rs 2,314.50 on reports the bank is planning to buy an Indonesian bank.
Power stocks declined. Reliance Energy (down 4.22% to Rs 1,828.95), NTPC (down 7.3% to Rs 228.60), Tata Power Company (down 0.39% to Rs 1,295.90) and Power Grid corporation (down 5.56% to Rs 137.55) edged lower.
Realty stocks declined. Peninsula Land (down 8.5% to Rs 135.05) , DLF (down 7.53% to Rs 944.25), Indiabulls Real Estate (down 8.26% to Rs 679.25) and Unitech (down 2.72% to Rs 465.35) edged lower.
Hindustan Unilever (up 0.76% to Rs 218.60) edged higher.
HDFC (down 5.93% to Rs 2,877.55), ONGC (down 5.84% to Rs 1,166.45) edged lower.
G V Films clocked the highest volume of 5.05 crore shares on BSE. It declined 7.41% to Rs 11.12. IFCI clocked the second highest volume of 3.97 crore shares on BSE. It declined 4.62% to Rs 108.40. Harig Crankshaft declined 3.43% to Rs 3.94 and clocked the third highest volume of 3.8 crore shares. Ispat Industries declined 1.45% to Rs 77.90 and clocked the fourth highest volume of 3.77 crore shares. Bellary Steels declined 0.13% to Rs 7.93 and clocked the fifth highest volume of 2.6 crore shares.
IFCI clocked the highest turnover of Rs 458.03 crore on BSE. Ispat Industries (Rs 309.58 crore), Kolte Patil Developers (Rs 287.71 crore), HDFC (Rs 204.55 crore) and Reliance Petroleum (Rs 196.28 crore) were the other turnover toppers on BSE in that order.
European markets were weak today. France’s CAC 40 (down 1.29% to 5,531.66), Germany’s DAX (down 1.32% to 7,843.41), FTSE 100 (down 1.17% to 6,321.90) edged lower.
Asian markets were trading lower today, 14 December 2007. Hong Kong's Hang Seng (down 3.51% at 26,580.38), Taiwan's Taiwan Weighted (down 3.54% at 7,830.85), Singapore's Straits Times (down 3.25% at 3,353.56), Shanghai Composite (down 2.53% to 4,881.40), Japan's Nikkei (down 1.71% to 15,249.79), South Korea's Seoul Composite (down 2.91% at 1,839.82) declined.
US stocks swooned on Friday, 14 December 2007, on concerns that surging inflation may prevent the Federal Reserve from lowering interest rates enough to pull the economy out of the grip of a housing and credit crisis. The three major indexes tumbled more than 1% each, and posted their worst week since 11 November 2007, after a report showing a jump in the consumer price index in November 2007.
Meanwhile, the advance tax figures, which will available this week, would trigger expectations regarding corporate performance of India Inc. in Q3 December 2007.
Bharatiya Janata Party (BJP) is poised to retain power in Gujarat but with a reduced majority losing some ground in Sunday (16 December 2007)'s second and final phase of polls in northern and central parts which was worst hit by 2002 communal riots, according to exit polls by four TV channels.

Sensex managed to hold 20000 level - Small Caps still rocks

The market ended slightly lower in what was a highly volatile trading session, seeing series of gyrations in either direction. Global cues were negative. The BSE Sensex cracked below the physcological 20,000 level at one point of in mid-afternoon trade, but managed to crawl back on buying support at lower levels.

Most of the European markets which opened after Indian market were subdued after strong opening while Asian markets which opened before Indian market also edged lower. US markets settled on a mixed note yesterday, 13 December 2007.

Despite the fall, there was plenty of action outside the index stocks, visible from the strong market breadth on BSE. BSE Mid-Cap and BSE Small-Cap indices struck fresh lifetime highs in afternoon trade.

Shares from FMCG, consumer durables, and Healthcare stocks rose while those of capital goods, IT, power and banking stocks declined. Annual inflation, based on the wholesale price index (WPI), climbed up 3.75% in the week ended 1 December 2007 from 3.01% in the week ended 24 November 2007.

The 30-share BSE Sensex declined 73.56 points or 0.37% to 20,030.83. It hit a high of 20,171.57 and a low of 19,936.49 during the day.

The S&P CNX Nifty declined 10.4 points or 0.17% to 6,047.70.

BSE clocked a turnover of Rs 9,122 crore in cash market today compared to yesterday’s 10,212 crore.

Nifty December 2007 futures settled at 6074.25, a premium of 26.55 points as compared to the spot closing of 6047.70.

The NSE futures & options (F&O) segment turnover declined to Rs 61,326.39 crore as compared to Rs 70,156.51 crore on Thursday, 13 December 2007.

Market breadth was strong on BSE. On BSE, 2,048 stocks advanced, 827 stocks declined and 27 stocks remained unchanged. 15 out of 30 stocks from the Sensex pack advanced.

BSE Mid-Cap index rose 1.02% to 9,471.94. It hit an all time high of 9,518.86. BSE Small-Cap index rose 1.57% to 12,195.50. It struck all time high of 12,262.12. Both these indices outperformed Sensex.

Sectoral indices displayed mixed trend. BSE PSU index (down 0.04% to 10,079.08), BSE Metal index (down 0.02% to 19,763),BSE Oil & Gas index (up 0.88% to 12,980.95), BSE FMCG index (up 1.44% to 2,263.93), BSE Consumer Durables index (up 2.51% to 6,204.25) and BSE Health Care index (up 2.52% to 4,308.27) outperformed Sensex.

BSE Auto index (down 0.38% to 5,743.80), BSE IT index (down 0.57% to 4,259.76), BSE Power index (down 0.76% to 4,435.53), BSE Capital Goods index (down 0.99% to 19,862.51) ,BSE Bankex (down 1.39% to 11,335.47) underperformed Sensex.

Banking stocks showed mixed trend. ICICI Bank (down 2.87% to Rs 1,206.85), HDFC Bank (down 1.65% to Rs 1,728.60). However State Bank of India rose 0.68% to Rs 2,410.55.

Power stocks paused after the recent rally. Reliance Energy (down 0.11% to Rs 1,909.45), Power Grid Corporation (down 1.09% to Rs 145.65), Neyveli Lignite (down 1.5% to Rs 248.85) and Tata Power Company (down 0.49% to Rs 1,301) edged lower.

IT stocks declined weighed by firm rupee against the US dollar. Infosys (down 0.72% to Rs 1,646.80), Satyam Computer Services (down 2.36% to Rs 411.10) and Wipro (down 1% to Rs 495.20) edged lower.However Tata Consultancy Services rose 1.43% to Rs 1,044.45.

Capital goods stocks declined. Bharat Heavy Electricals (down 1.16% to Rs 2,561.45), Larsen & Toubro (down 1.44% to Rs 4,174.10) and Bharat Earth Movers (down 2.75% to Rs 1,672.15) edged higher.

India’s largest private sector firm by market capitalization & oil refiner Reliance Industries rose 1.99% to Rs 2,889.05. Oil refining major is reportedly exploring ways to sell its petroleum products directly in the US and Europe. At present, the company sells its petroleum products through traders. Mulls setting up retail outlets in US.

Healthcare stocks rose. Fortis Healthcare (up 20% to Rs 104.30), Wockhardt (up 5.37% to Rs 429.65), Cadila Healthcare (up 5.01% to Rs 335.10), Cipla (up 2.65% to Rs 209.15), Dr. Reddy’s Laboratories (up 1.03% to Rs 717.90), Ranbaxy Laboratories (up 2.69% to Rs 422.20) edged higher.

FMCG majors rose. Marico Industries (up 2.66% to Rs 71.40),ITC (up 1.88% to Rs 200.60) and Hindustan Unilever (up 2.22% to 216.70) edged lower.

Consumer durable stocks rose. Videocon industries (up 6.75% to Rs 648.85), Blue Star (up 0.66% to Rs 488.25) and Gitanjali Gems (up 4.59% to Rs 416.75) edged higher.

Hindalco Industries rose 2.35% to Rs 213.80.

Tata Motors (down 2.03% to Rs 744.45),HDFC (down 0.26% to 3,058.80) and Bharti Airtel (down 3.57% to Rs 952.55) edged lower.

Sun TV Network clocked the highest turnover of Rs 482.36 crore on BSE. Kolte Patil Developers (Rs 246.7 crore), Jaiprakash Hydro Power (Rs 207.97 crore),IFCI (Rs 207.08 crore) and Lanco Infratech (Rs 179.01 crore) were the other major turnover grossers on BSE in that order.

Debutant Kaushalya Infrastructure Development Corporation settled with 37.08% premium at Rs 82.25 over issue price of Rs 60 per share on huge volumes of 3.21 crore shares on BSE.

Most of the European markets were weak. France’s CAC 40 (down 0.26% to 5,575.79) ,UK’s FTSE 100 (down 0.04% to 6,361.80) edged lower. Germany’s DAX (up 0.06% to 7,929) edged higher.

Asian markets were trading lower today, 14 December 2007. Hong Kong's Hang Seng (down 0.65% at 27,563.64), Taiwan's Taiwan Weighted (down 0.85% at 8,118.82), Singapore's Straits Times (down 0.37% at 3,466.38), South Korea's Seoul Composite (down 1.09% at 1,895.05), Japan’s Nikkei (down 0.14% to 15,514.51) edged lower. However Shanghai Composite rose 1.01% to 5,007.91.

US markets finished on a mixed note yesterday, 14 December 2007 as worries about a weakening economy and credit crunch continued. The Dow Jones Industrial Average gained 44.06 points, or 0.33%, to 13,517.96. The Standard & Poor's 500 index rose marginally by 1.82 points, or 0.12%, to 1,488.41, while the Nasdaq Composite index slipped 2.65 points, or 0.10%, to 2,668.49.

Meanwhile, the Government of India has reportedly allowed the Postal Life Insurance Fund (POLIF) and Rural Postal Life Insurance Fund (RPOLIF) to enter the stock markets through investments in public sector mutual funds. The Union Cabinet on Thursday, 13 December 2007 appointed UTI MF and SBI MF as managers for the over Rs 10,000-crore corpus of these two funds.

Markets Declines 271 Pts - Bluechips Tumbles

The market tumbled in the late trade following a sudden sell-off in blue-chip stocks, in sync with other markets across the globe. The day started on a firm note, with both the niche indices - BSE Sensex and S&P CNX Nifty striking record highs, but were not able to sustain at higher levels.

The market breadth, indicating overall health of the market was strong, despite the sharp fall, due to on strong buying momentum for small and mid-cap stocks.

FMCG, metal stocks rose. IT, power, Oil & Gas, capital goods & banking stocks declined. ITC & Tata Steel were top gainers while Bharti Airtel & ICICI Bank were top losers from Sensex pack. Reliance Industries declined sharply in late trade.

The 30-share BSE Sensex declined 271.48 points or 1.33% to 20,104.39. It opened with a upward gap to hit a all time high of 20,498.11 in early trade. At day’s high Sensex rose 122.24 points. It hit a low of 20,065.63 in late trade. At day’s low Sensex had lost 310.24 points.

The S&P CNX Nifty declined 101.2 points or 1.64% to 6,058.10.It hit a all time high of 6,185.40 in early trade.

Market breadth was strong on BSE. On BSE, 1,811 stocks advanced, 1,059 stocks declined and 28 stocks remained unchanged. 20 out of 30 stocks from the Sensex pack declined.

BSE clocked a turnover of Rs 9,873 crore in cash market today compared to yesterday’s Rs 9,614.65 crore.

Nifty December 2007 futures settled at 6,065, a slight premium of 6.90 points as compared to the spot closing of 6,058.10. The Nifty December 2007 futures hit a record high of 6181.90 in early trade.

BSE Mid Cap index rose 0.39% to 9,375.94. It hit a all time high of 9,460.50 today. BSE Small Cap index rose 1.03% to 12,007.33, It hit an all time high of 12,138.34 today. Both these indices outperformed Sensex.

BSE Consumer Durables index (down 1.27% to 6,052.12), BSE Capital Goods index (down 1.21% to 20,061.96), BSE Realty index (down 1.11% to 12,400.54), BSE Auto index (down 0.08% to 5,765.56), BSE Health Care index (up 0.68% to 4,202.18), BSE Metal index (up 0.71% to 19,767.72), BSE FMCG index (up 1.93% to 2,231.77) outperformed Sensex.

BSE IT index (down 1.59% to 4,284.37), BSE Bankex (down 1.85% to 11,495.40), BSE Oil & Gas index (down 2.17% to 12,867.24) underperformed Sensex.

India’s largest private sector firm by market capitalization & oil refiner Reliance Industries declined 1.88% to Rs 2,832.75.

Oil & Gas stocks declined sharply in late trade. Essar Oil (down 4.59% to Rs 295.30), Gail (India) (down 3.91% to Rs 520.65), ONGC (down 2.23% to Rs 1,227.80) & Reliance Petroleum (down 2.31% to Rs 223.75) edged lower.

Banking majors declined. ICICI Bank (down 3.7% to Rs 1,242.50) and HDFC Bank (down 1.48% to Rs 1,757.60), State Bank of India (down 1.89% to Rs 2,394.25) edged lower.

Capital goods stocks declined. Bharat Heavy Electricals (down 2.15% to Rs 2,591.50), Larsen & Toubro (down 1.14% to Rs 4,235.10) and Suzlon Energy (down 2.15% to Rs 1,966.85) edged lower.

Power stocks declined. NTPC (down 1.97% to Rs 246.05) and Tata Power Company (down 3.65% to Rs 1,307.40) Reliance Energy (down 1.05% to Rs 1,911.50) edged lower.

IT stocks declined. Infosys (down 1.55% to Rs 1,658.70), Satyam Computer Services (down 2.34% to Rs 421.05) and Wipro (down 1.06% to Rs 500.20 ) Tata Consultancy Services (down 1.84% to Rs 1,029.70) edged lower.

Cipla (up 2.1% to Rs 203.75) and Bajaj Auto (up 1.46% to Rs 2,818.65) edged higher.

Bharti Airtel (down 6.24% to Rs 987.80), Maruti Suzuki India (down 3.45% to Rs 1,038.35) edged lower.

FMCG stocks rose. ITC (up 4.12% to Rs 196.90) and Hindustan Unilever (up 0.76% to Rs 212), Tata Tea (up 4.31% to Rs 934.80) edged higher.

Metal stocks also inched up. JSW Steel (up 7.84% to Rs 1,334.65), Tata Steel (up 2.89% to Rs 889.40), Hindalco Industries (up 1.58% to Rs 208.95), edged higher.

Kolte Patil Developers settled at a premium of 26.95% to Rs 185.85 over the IPO price of 145 on its debut today. The stock will be placed in the B1 group on BSE. The company had fixed the IPO price at the top end of the Rs 125-145 IPO price band.

Mahindra & Mahindra rose 0.8% to Rs 794.10. As per reports Mahindra & Mahindra’s (M&M’s) all-Indian utility vehicle, Scorpio, will enter the quality-conscious US market, which is also the largest in the world with 15 million vehicles in annual sales. The company already has firm orders for 45,000 units of Scorpio for the first year, which is more than the 40,000 it sold in India in the last financial year. More importantly, 285 US dealers have signed up to sell the vehicle and are investing $178 million in setting up sales and service outlets.

European markets were trading weak today. France’s CAC 40 (down 1.86% to 5,636.33), Germany’s DAX (down 0.91% to 8,000.98) and UK’s FTSE 100 (down 1.85% to 6,438.30) edged lower.

Asian markets were trading lower today, 13 December 2007 on fears a quarter-point interest rate cut by the Federal Reserve announced on 11 December 2007 may not be enough to ward off a US recession. Japan's Nikkei (down 2.48% at 15,536.52), Hong Kong's Hang Seng (down 2.72% at 27,744.45), Taiwan's Taiwan Weighted (down 3.57% at 8,187.95), Straits Times (down 1.97% at 3,479.17), South Korea's Seoul Composite (down 0.6% to 1,915.90) edged lower.

US markets started the day sharply higher yesterday, 12 December 2007 fueled by news of Fed's plans to boost liquidity but eventually lost steam as negative developments out of the financial sector weighed on the broader market. The Dow Jones industrial average gained 41.13 points, or 0.31%, to 13,473.90. The Standard & Poor's 500 index rose 8.94 points, or 0.61%, to 1,486.59. The Nasdaq Composite index advanced 18.79 points, or 0.71%, to 2,671.14.

Back home, the Index of Industrial Production (IIP) jumped 11.8% in October 2007 from 4.5% in October 2006. IIP stood at 9.7% in April-October 2007 compared with 10.1% in April-October 2006. Industrial output data for September 2007 was revised upwards to 6.8% from 6.4%. The government released the IIP data early afternoon yesterday, 12 December 2007.

Edelweiss Capital soars on debut

Settles at Rs 1509.95 on BSE compared to IPO price of Rs 825

Edelweiss Capital settled at Rs 1509.95 on BSE, a premium of 83.02% compared to IPO price of Rs 825. The stock debuted at Rs 1443.75, a premium of 75% as compared to the issue price of Rs 825. The stock hit a high of Rs 1608.75 and low of Rs 1443.75

On BSE, 36.16 lakh shares changed hands in the counter on BSE.

The company had fixed the issue price at the top end of the Rs 725-825 price band. At the current market price of Rs 1509.95, the PE multiple works out to 103.42, based on the year ended March 2007 EPS of Rs 14.60.

The Edelweiss Capital IPO had ended on 20 November 2007 with 110.96 times subscription. The IPO received total bids for 93.05 crore shares, as against the issue size of 83.86 lakh shares.

The qualified institutional buyers (QIBs) category was subscribed 153.14 times. The non institutional investors category, made up of corporates and high networth individuals, was subscribed 164.30 times. The retail investors category was subscribed 17.21 times.

Edelweiss Capital provides investment banking, institutional equities, private client broking, asset management, wealth management, insurance broking and wholesale financing services to corporate, institutional and high net worth individual clients.

Edelweiss plans to utilise the IPO proceeds for enhancement of margin maintenance with stock exchanges, establishment of additional offices and acquisition of office infrastructure, enhancement existing technology capacity and prepayment of loans.

Edelweiss Capital’s total consolidated income in 2006-07 (April-March) was Rs 371.2 crore and net profit for the year stood at Rs 109 crore. For the five months ended August 2007, its consolidated total income stood at Rs 284.86 crore and net profit Rs 80.93 crore.

TV 18 - Buy with a 1Yr Horizon

Key Points on TV 18 from Leading Stock Broking Firm:

TV18 has acquired a 40% stake in Infomedia India (Infomedia) for Rs225 a share. The stake was acquired from ICICI Venture that held 62.74% stake in Infomedia.
The company has made an open offer to the shareholders of Infomedia for a further 20%stake in the company at Rs237 a share, as TV18 intends to increase its stake in Infomedia atleast to 53%.

Infomedia operates in three key business verticals- publishing, printing and publishing outsourcing. These verticals contribute 53%, 21% and 24% respectively to the company's revenues.

Infomedia is a leading publisher of special interest magazines and has a portfolio of eight business-to-consumer (B2C) and 12 business-to-business (B2B) titles. To further augment the magazine segment, the company has tied up with global majors such as Reed Elsevier, Ringier and Vogel Burda.

Infomedia is a dominant player in the Yellow Pages business in India with over 40% market share. While its Yellow Pages network currently covers 22 cities, the company targets to cover 48 cities by 2010 along with expanding the portfolio of product offerings.

To leverage on its strengths in content and search in print media, Infomedia targets offering them across emerging media platforms such as mobile, SMS, and Internet.
Infomedia has presence in global publishing outsourcing business with front-end offices in US and UK and back-end facilities in Noida and Bangalore. While the company would focus on acquisition-led strategy for growing the outsourcing business multifold, the business has a potential to grow by 30% annually.

We believe TV18's strength in electronic media provides a strategic fit with Infomedia's presence in directories and magazines. There is also a possibility for TV18 to exploit synergies with Infomedia especially in new media verticals.

We maintain our buy recommendation on TV18 based on our existing sum-of-the-parts price target of Rs571

Punj Lloyd - Buy with a 1 Yr Horizon

Story

Moving up the value chain: One of the significant achievements for Punj Llyod Ltd (PLL) over the years has been its increasing average order size. PLL started with an average order size of $30 million that has grown to $130-140 million, and the company intends to increase it to $250 million. We believe higher order size would improve the margins of the company and also make it a pre-qualified player for larger and more complex orders.
SEC turnaround—a key positive: PLL acquired Sembawang Engineers & Constructors (SEC) in June 2006. SEC's acquisition has added to the expertise of PLL in the field of oil & gas, airports, jetties, MRT/LRT, and tunneling. SEC has traditionally operated at lower margins, however the new orders are booked at healthy margins. Further, the company expects to execute all the legacy orders of SEC over the next 18-24 months. We expect, this will improve SEC's operating profit margin (OPM) from 3.5% in FY2008E to 7% in FY2010E.
Order book—more the merrier: PLL has had a spectacular flow of orders, with orders growing from Rs3,240 crore at FY2005 end to Rs15,944 crore (including Rs4,900 crore for SEC) by FY2007 end. In H1FY2008 the company bagged orders worth Rs2,070 crore. The company has a healthy order backlog of Rs14,852 crore, which is 2.9x its FY2007 revenues and this we believe imparts strong visibility to the earnings of the company.
Acquisitions—help plugging and bridging gaps: PLL is the second largest engineering, procurement and construction (EPC) company in the country. Acquisition of SEC and Simon Carves has helped PLL plug gaps in its offerings and increase its addressable markets. Post acquisition, PLL has considerably bridged the gap making it more competitive against Larsen and Toubro (L&T), the largest EPC player in the country.

Indian Markets buck weak global equities on strong IIP data

Weak global cues fail to dampen market spirit

The market surged to all-time high in late trade, in what was a choppy trading session today. The market had lost ground in afternoon trade after staging a rebound from lower level in early trade from an initial slump. IT, banking majors declined. Realty, healthcare and metal stocks gained. Reliance Industries was flat. HDFC and Reliance Communications were the major gainers while Infosys and Satyam Computer Services were major losers from the Sensex pack.

The market breadth was strong. BSE Mid-Cap and Small-Cap indices hit all-time highs today and both the indices outperformed Sensex. Edelweiss Capital surged on debut.

The Index of Industrial Production (IIP) jumped 11.8% in October 2007 from 4.5% in October 2006. IIP stood at 9.7% in April-October 2007 compared with 10.1% in April-October 2006. Industrial output data for September 2007 was revised upwards to 6.8% from 6.4%. The government released the IIP data early afternoon today, 12 December 2007.

European markets, which opened after Indian market, were weak in. Asian markets edged lower today, 12 December 2007, after the US Federal Reserve's small 25 basis points interest rate cut on Tuesday, 11 December 2007, raised worries about US economic growth.

Prime Minister Manmohan Singh brushed aside on Tuesday, 11 December 2007, a new threat from his communist allies to force early elections over a controversial nuclear deal with the United States. In the government's first reaction to a call by the leader of the largest left-wing party for talks on the deal to be stopped, Singh said he would stick to a plan conditionally approved by the communists earlier to push the landmark pact.

The 30-share BSE Sensex rose 84.98 points or 0.42% to 20,375.87. Sensex hit all-time high of 20,419.11 in late trade. At day's high, Sensex rose 128.22 points. Sensex had slipped to a low of 20,045.42 in early trade. At day’s low Sensex had lost 245.47 points.

The broader S&P CNX Nifty rose 62.05 points or 1.02% at 6,159.30. It hit all-time high of 6,175.65 today in late trade.

Market breadth was strong. On BSE, 2,108 stocks advanced, 749 stocks declined and 28 stocks remained unchanged. 18 out of 30 stocks from the Sensex pack were in green.

BSE clocked a turnover of Rs 8922 crore, compared to Tuesday, 11 December 2007's Rs 8,227.36 crore.

Nifty December 2007 futures were at 6177, at a premium of 17.70 points as compared to the spot closing of 6159.30.

The NSE's futures & options (F&O) segment turnover was Rs 71,385.36 crore, which was higher than Rs 59,421.97 crore on Tuesday, 11 December 2007.

The BSE Mid-Cap index rose 1.66% to 9,338.49. It hit a all time high of 9,345.16 today. BSE Small-Cap index rose 1.86% to 11,884.99. It hit a all-time high of 11,899.96 today. Both these indices outperformed Sensex.

BSE Auto index (up 0.15% to 5,770.02), BSE Power (up 0.36% to 4,539.86), BSE Capital Goods index (up 0.04% to 20,308.27), BSE Bankex (down 0.57% to 11,712.12) and BSE IT index (down 1.78% to 4,353.59) underperformed Sensex.

BSE FMCG index (up 0.92% to 2,189.52), BSE Oil & Gas index (up 1.44% to 13,152.02), BSE PSU index (up 1.58% to 10,245.58), BSE Health Care index (up 2.75% to 4,173.98), BSE Realty index (up 2.94% to 12,540.32) and BSE Metal index (up 3.01% to 19,629.07) outperformed Sensex.

India’s largest private sector firm by market capitalization & oil refiner Reliance Industries rose 0.28% to Rs 2,886.90. The company said on Tuesday, 11 December 2007, it has signed exploration and production contracts with Colombia's Agencia Nacional de Hydrocarburos for two offshore blocks, Borojo North and Borojo South.

Banking stocks declined. ICICI Bank (down 1.96% to Rs 1,290.30) and State Bank of India (down 0.22% to Rs 2,440.40) edged lower. Interest rates in India are unlikely to come down in the short to medium term, T.S. Bhattacharyya, managing director of State Bank of India said today. HDFC Bank rose 0.52% to Rs 1,784.

IT pivotals were mixed. Infosys (down 3.34% to Rs 1,684.80), Satyam Computer Services (down 2.39% to Rs 431.15) edged lower. Wipro (up 0.08% to Rs 505.55) and Tata Consultancy Services (up 0.94% to Rs 1,049) edged higher.

Healthcare stocks advanced in late trade. Cipla (up 2.36% to Rs 199.55), Ranbaxy Laboratories (up 0.63% to Rs 407.70) and Dr. Reddy’s Laboratories (up 1.75% to Rs 685.80) edged higher.

Realty stocks rose. Hosing Development & Infrastructure (up 14.01% to Rs 978.30), Ansal Properties & Infrastucture (up 22.38% to Rs 418.35), Indiabulls Real Estate (up 3.19% to Rs 746.55) Unitech (up 1.28% to Rs 485.95), and DLF (up 0.74% to Rs 1,021.10) edged higher.

Metal stocks surged in late trade. Tata Steel rose 3.42% to Rs 864.45. The company today said it has signed a joint venture agreement with state-run mineral development company SODEMI for the development of Mount Nimba iron ore deposits in Ivory Coast, West Africa.

Jindal Saw (up 12.35% to Rs 1,036.45), Shree Precoated Steel (up 3.67% to Rs 395.15), National aluminium Company (up 11.54% to Rs 451.45), Hindalco Industries (up 3.06% to Rs 205.65), Steel Authority of India (up 3.85% to Rs 287.55) edged higher.

HDFC (up 5.33% to Rs 3,103.95), Reliance Communications (up 3.51% to Rs 765.75), NTPC (up 3.21% to Rs 251) edged higher.

Bharat Heavy Electricals declined 0.82% to Rs 2,648.35.

Reliance Energy declined 0.72% to Rs 1,931.70. It has bagged an engineering, procurement and construction (EPC) contract from Damodar Valley Corporation (DVC) to set up a coal based power station at Raghunathpur in West Bengal. The contract is valued at over Rs 3,725 crore. The EPC Group of Reliance Energy currently has orders on hand for execution aggregating over Rs 10,000 crore.

IKF Technologies rose 20% to Rs 11.38. It clocked the highest volume of 3.97 crore shares on BSE. G V Films clocked the second highest volume of 3.86 crore shares. It rose 18.03% to Rs 9.10. Tata Teleservices (Maharashtra) rose 2.74% to Rs 60. It clocked the third highest volume of 2.53 crore shares. Ispat Industries rose 1.48% to Rs 71.80. It clocked the fourth highest volume of 1.54 crore shares. Gujarat State Petronet rose 14.13% to Rs 96.50. It clocked the fifth highest volume of 1.52 crore shares on BSE.

Essar Oil clocked the highest turnover of Rs 315.32 crore on BSE. Reliance Natural Resources (Rs 256.48 crore), Reliance Petroleum (Rs 178.07 crore), Jindal Steel (Rs 173.25 crore) and Lanco Infratech (Rs 156.73 crore) were other turnover toppers on BSE in that order.

Edelweiss Capital ended at Rs 1,509.95 on BSE, a premium of 83.02% compared to IPO price of Rs 825. On BSE, 36.16 lakh shares changed hands in the counter. The stock debuted at Rs 1443.75, a premium of 75% as compared to the issue price of Rs 825.

In an important event, after Indian market hours yesterday, 11 December 2007, the US Federal Reserve lowered its benchmark interest rate by a quarter point to 4.25%, while signaling that it is open to further cuts if the housing slump and credit squeeze worsens. The Fed also lowered its discount rate, the interest it charges on direct loans it makes to banks, by a quarter-point to 4.75%.

European markets slipped today. France’s CAC 40 (down 1.25% to 5,653.29), Germany’s DAX (down 0.6% to 7,961.18) and UK’s FTSE 100 (down 0.85% to 6,480.80) edged lower.

Asian markets were weak today, 12 December 2007. Hong Kong's Hang Seng (down 2.41% at 28,521.06), Japan's Nikkei (down 0.7% at 15,932.26), Taiwan's Taiwan Weighted (down 1.71% points at 8,490.84), Straits Times (down 1.11% at 3,549.25) and Shanghai Composite (down 1.54% to 5,096.59), all edged lower. South Korea's Seoul Composite (up 0.12% 1,927.45) edged higher.

US markets tumbled after the Fed cut rates by a quarter point disappointing traders expecting double that amount. The Fed's statement said that elevated energy and commodity prices may put upward pressure on inflation.

The Dow Jones Industrial Average slumped 294.26 points, or 2.14%, to 13,432.77. The Standard & Poor's 500 index plunged 38.31 points, or 2.53%, to 1,477.65, and the Nasdaq Composite index declined 66.60 points, or 2.45%, to 2,652.35.

Arbitrage Funds - Bulls Eye All the times

The markets are still on a dizzying ride—up one day, down the next. Yes, the ups are more pronounced, but investors are nervous about relying too much on this. That’s why most investors are delighted at the prospect of lowrisk returns. And no, we are not talking fixed deposits or savings accounts—a relatively new breed of mutual funds offers around 9% returns. Plus, in most cases, there is no tax on long-term capital gains.

Arbitrage funds have strangely not caught the fancy of many investors, possibly because the word arbitrage does not evoke confidence. Arbitrage involves simultaneous purchase and sale of identical or equivalent instruments from two or more markets in order to benefit from a discrepancy in prices. The transactions offset each other, making the fund immune to market movements.

The profit is the difference in the prices of the instrument in different markets. “Arbitrage funds are also known as market neutral funds, since they do not have direct exposure to the equity market,” says Rajiv Anand, CIO, Standard Chartered Mutual Fund.

Still not sure what this means? Take the case of, say, Reliance Industries. On 14 November, Reliance Industries (RIL) shares closed at Rs 2,888 in the cash market; the November future closed at Rs 2,905. To cash in on the price differential of Rs 17, a fund can sell a future contract of 150 shares of RIL and buy an equal number of shares in the cash market.



On settlement day, the price of RIL shares and its future will coincide, when one should sell shares in the cash market and buy back the future contract. If RIL closes at Rs 2,700, the fund would make a loss in the cash market of Rs 28,200 (Rs 188 x 150 shares) and a profit of Rs 31,800 (Rs 212 x 150 shares) in the future contract, making a net gain of Rs 2,550 (Rs 17 x 150). If RIL closes at Rs 3,100, it would still make a profit of Rs 17 per share.

The risks. With only about 200 stocks permitted to trade in the derivatives market, it could get difficult to find enough arbitrage opportunities. Also, the buystock sell-future strategy will not work if the future price of the stock is at a discount to its spot price, which is common in a bearish phase.

When it is difficult to spot arbitrage opportunities, we invest in low spreads,” says Vivek Pandey, fund manager, State Bank of India Mutual Fund. “The minimum and maximum returns by doing this is about 5% and 10%, respectively,” he adds. Another problem with regard to arbitrage funds is the lower liquidity in the spot/future segment. Future contracts are traded in lots; one lot of a future contract of a stock will have multiple shares.

For instance, company X may have a lot size of 50 shares, while company Y may have 10,000 shares. If an arbitrage opportunity arises in company Y, the fund manager will have to buy 10,000 shares from the stock market and sell one future contract. If the fund manager decides to sell, say, 30 lots, he has to buy 3,00,000 shares. The manager may not be able to buy the desired number of shares at the given price.

While some arbitrage funds can be liquidated on any day, others can be redeemed only on the settlement day. “Ideally, we advise investors to redeem on expiry day since one locks in to the return”, says Nilesh Shah, CIO, ICICI Prudential Mutual Fund.

Tax-efficient. These risks should not put you off arbitrage funds. Bank fixed deposits (FDs), fixed maturity plans or money market funds might provide higher returns, but are not tax-efficient. An FD that gives 9%, for instance, results in a post-tax yield of 6.3% (in the highest tax slab). In debt funds, long-term gains (over one year) are taxed at a flat rate of 10% or at 20% after indexation.

Arbitrage funds invest 65-80% of the corpus in equities and equity derivatives. So like equity funds, short term gains are taxed at 10% and long-term gains are tax free. Some funds also have debt options, where equity and derivatives investments are restricted to 45%. Their tax treatment is similar to that for debt funds.

Sensex Crosses 20k

Market registered smart gains, but was off its new intra-day high and ended near the 20,300 mark.

The market exhibited awesome display in anticipation of more foreign fund inflows if US Federal Reserve cuts the interest rate further as expected

and achieved a new peak on the back of all-round buying. The benchmark share index, Sensex, rose to its record high of 20,333 as realty and banking stocks registered heavy gains. The market opened with a positive gap of 118 points and kept its upward bias for the entire day. The realty major Ansal Properties and Infrastructure, Unitech, and Omexe registered the biggest gains in today's trades. Bharti Airtel and HDFC Bank were also the major contributors in today's rally. The index moved within a range in the afternoon. However, Sensex witnessed hectic buying towards the close and ended the session near its all-time high with a gain of 360 points at 20,291. The Nifty closed the session at 6,097, up 137 points.

Among sectoral indices, Realty index led the upsurge with a gain of 3.04% at 12,182 followed by the BSE Bankex index (up 2.54% at 11,779), the BSE Metal index (up 1.89% at 19,055) and the BSE PSU index (up 1.80% at 10,086). The market breadth was extremely positive. Of the 2,914 stocks traded on the Bombay Stock Exchange (BSE), 1,981 stocks advanced, 894 stocks declined and 39 stocks ended unchanged.


Out of the 30 Sensex stocks, 25 managed to end in the green while five stocks ended with losses. Bharti Airtel was the leading gainer and soared 6.21% at Rs1,031. HDFC Bank jumped 4.81% at Rs1,775, ONGC shot up by 3.68% at Rs1,238, Hindalco advanced 3.34% at Rs200, ICICI Bank moved up by 3.32% at Rs1,316, Maruti Suzuki added 3.17% at Rs1,079 and Bajaj Auto gained 3% at Rs2,794. Among the laggards DLF dropped 1.20% at Rs1,014. Infosys, BHEL, Ambuja Cement and Reliance Energy slipped marginally.

Over 3.23 crore Tata Teleservices shares changed hands on the BSE followed by IKF Technologies (2.73 crore shares), Himachal Futuristic (2.43 crore shares), GV Films (1.77 crore shares) and IFCI (1.72 crore shares).

Lanko Infrastructure registered a turnover of Rs210 crore on the BSE followed by Reliance Petroleum (Rs209 crore), Tata Teleservices (Rs192 crore), IFCI (Rs186 crore) and Reliance Energy (Rs128 crore).

Analyst Picks

Kotak Mahindra Bank
CMP: Rs 1,122.35
Target Price: Rs 1,363
Motilal Oswal Securities has initiated coverage on Kotak Mahindra Bank with a buy rating and a price target of Rs 1,363. “Kotak (Bank) is aggressively building up its banking franchise, with focus on affluent customers and retail services. Its asset management business should see exponential growth,” the Motilal Oswal note to clients said.

“Though its insurance business has been losing market share, we expect better utilisation of Kotak’s distribution strength to change this. We believe KMB deserves premium valuations, given the strong growth expected across its businesses, fast traction in earnings, and quality management,” the note added.

Titan Industries
CMP: Rs 1,531.70
Target Price: Rs 1,850

Merrill Lynch has initiated coverage on Titan Industries with a buy rating and a price target of
Rs 1,850, terming it a “high growth domestic consumption story.” “We expect Titan’s watch business to benefit from mix up-trading and distribution moving more towards high margin channel of ‘World of Titan’”.

“In jewellery, we expect volume growth to remain explosive at around 40% as Titan forays into second-tier cities with the new value format “Gold Plus”,” the Merrill note to clients said. “In the premium “Tanishq” format, larger stores and higher efficiencies should drive margins. Lastly, we expect the new venture of prescription eyewear to take off and account for 4% of EBITDA (earning before interest, taxes, depreciation and amortisation) FY10,” the note added.


Salora Intl
CMP: Rs 223
Target Price: Rs 312

Parag Parikh Financial Advisory Services has assigned a buy rating to Salora International with a price target of Rs 312. “The company derives 85% of its revenues from the telecom & infocom distribution business and more than 90% of the EBIT (earnings before interest and taxes) from the business of distribution, thus making it a clear contender for a re-rating from a CTV components manufacturer to a full-fledged distributor,” the PPFAS note to clients said.


“The company has active plans to get into retailing of products that it is already distributing; the modalities of the same will be out very shortly. The company is very well placed to show a topline growth of above 35% for some time in our expectations,” the note further said, adding that the recently initiated restructuring of the CTV components business will keep overall profitability intact.


3i Infotech
CMP: Rs 134.60
Target Price: Rs 175

ICICI Securities (I-Sec) has initiated coverage on 3i Infotech with a buy rating and a price target of Rs 175. “3i Infotech, with a balanced mix of software products and services (~1:1), has differentiated itself from peers by adopting a diversified business model with a strong foothold in high-growth areas.

With software services providing stability to revenue stream, products add non-linearity to the overall business model,” the I-Sec note to clients said. Additionally, the sharp rupee appreciation, which has baffled the whole software sector, is relatively a lesser concern for 3i Infotech as it derives around 31% revenues from the domestic market and the net dollar exposure is estimated to be less than 10%. Also, 3i Infotech remains comparatively aloof from other sectoral worries such as the subprime issue, impending economic slowdown in the US, wage inflation, attrition,” the note added.

Colgate Palmolive
CMP: Rs 410.35
Target Price: Rs 482

Citigroup Global Markets has assigned a buy rating to Colgate Palmolive with a price target of Rs 482. “Colgate’s business has demonstrated strong growth over the eight quarters, with sales growing in excess of 15%. It has gained share in rural areas through its ‘Cibaca’ brand and has also rolled out innovative toothpaste variants at the higher end, which have gained strong acceptance and helped accelerate growth,” the Citigroup note to clients said.

“With major capital expenditure behind it, and incremental tax and excise savings from its new plants, cash generation is likely to accelerate. We estimate about Rs 1,230 crore of free cash generation over the next three years, more than two times of what was generated over the previous three years and as such, dividend payout could increase,” the note added.

Disclaimer: The above stocks are picked up at random from research reports of brokerage houses. Investors are advised to use their own judgement before acting on these recommendations.

Brigade Enterprises - Invest with Caution

Originally set up as a partnership firm (Brigade Enterprises) between M R Jaishankar and Gita Shankar in 1990, Brigade Enterprises (BEL) was converted into a private company in 1995 and a public company in July 2007. It develops residential, commercial and retail properties primarily in Bangalore and Mysore, and has also developed and is managing around 115 serviced apartments under the brand, Brigade Homestead.

Since 1990 BEL has completed and delivered around 67 projects aggregating about 6.7 million square feet (sq ft) of space comprising residential (71% of the total developed area), commercial (IT parks/office buildings constituting 26% of the total developed area), and hospitality ventures (3%).

Land reserves stood at 403.45 acres with an estimated developable area of 44.16 million square feet on 23 November 2007. The reserves consist of land owned directly/indirectly: 112.13 acres (27.8% of the total land reserves)/14.2 million sq ft (32.2% of the developable area), land with sole development rights: 102.91 acres (25.5%)/4.83 million sq ft, land for which memoranda of understanding (MoU) for acquisition has been inked: 133.10 acres (33%)/ 16.38 million sq ft (37.1%), and land under joint development: 55.31 acre (13.7%)/8.75 million sq ft (19.8%). Of the total land reserves, about 56.5% is in Bangalore, 18.7% in Mangalore, 12.2% in Chickmagalur, and the balance in Mangalore, Chennai, Hyderabad and Kottayam.

On the land reserves, BEL is developing two integrated lifestyle enclaves (Brigade Gateway and Brigade Millennium), 12 residential properties, and two hospitality properties aggregating 13.84 million sq ft of developable area with a saleable area of 12.53 million sq ft on 23 November 2007. Brigade Gateway Hospital, the hospital project, is part of the integrated lifestyle enclave of Brigade Gateway and will become operational in another two-three months (interior, electrical and hospital equipment installation work is pending). The 200-bed hospital will be managed by Columbia Asia Hospitals and bring diversity to the revenue stream. Moreover, 18 projects are in the initial stage of development and necessary regulatory approvals are being obtained.

BEL engages external professionals for designing and construction of the projects in addition to its in-house competency developed over the years at every stage of the property lifecycle: land identification, project conceptualisation, and construction management, marketing and delivery. Leveraging the external expertise to specific tasks allows the company to focus on identifying appropriate land, project conceptualisation and marketing. Currently, majority of aggregate developable area is subcontracted to BE Billimoria & Company, Simplex Infrastructure, and Ahluwalia Contracts India.

Currently, BEL is constructing five hospitality properties in Bangalore including two service apartments and one hotel. In addition, the company is also about to start work on two hotels: one each at Mysore and Devanahalli (Bangalore), and two resorts: one each at Kottayam and Chickmagalur. The operation and management of these hospitality properties will be through arrangement with international hotel operators such as Starwood, Intercontinental, Banyan Tree and Accor. The company has signed agreement/ letter of intent (LoI) with these international hotel chains. Subsequent to the completion of these projects, BEL is expected to directly/ indirectly own or manage over 1,500 keys. The income from hospitality was just 2.2% of the income from operation in the financial year ending March 2007 (FY 2007) and 2.6% in the first half year ended September 2007. The rental income from commercial and retail properties was 3% and 3.2%, respectively.

Besides Bangalore, BEL has taken up a few projects in Mysore and recently initiated some development activities in other parts of south India including Mangalore, Hyderabad, Chennai.

BEL is tapping the capital markets to fund the Rs 47.97-crore acquisition of 41.85 acres of land in Bangalore and Kottayam, the Rs 512.04-crore construction and development cost of ongoing and forthcoming projects, and gemeral corporate expenses.

Strengths

An established player in the Bangalore realty market. Has successfully executed and delivered around 67 projects aggregating around 6.7 million sq ft of space comprising residential, commercial and hospitality properties.

Though revenue from management of serviced apartments is minimal currently, the development of five hospitality properties will significantly diversify the revenue base in the medium term.

The integrated lifestyle projects will fetch the company a 5%-10% premium over normal residential properties.

Weakness

The two integrated lifestyle projects, Brigade Gateway at Malleshwaram and Brigade Millennium at Whitefield in Bangalore, account for about 10.84 million sq ft of saleable area of the 12.53 million sq ft under construction and spread over 6 projects. Of late prices at Whitefield are stagnating due to glut in available properties. Also, just about 67% of the total space at the Whitefield property has been sold and hence vulnerable to fall in realty prices in these micro markets.

Interest cost has spiked from 6.9% in FY 2007 (on loans end March 2007) to 11.2% (annualised on loans end September 2007) in the six months ended September 2007. In the process, the interest cost has zoomed to Rs 17.25 crore in the six months ended September 2007. This is even higher than Rs 16.56 crore incurred in the entire FY 2007. The spike in interest cost can hurt, specially during a downtrend.

Current land reserves of 403 acres comprise acquisitions in the last one or two years, which was a period of hot realty prices. Thus, profitability is at risk if property prices cool down.

About 100.69 acres amounting to 24.96% of the total reserves is agriculture land. Realty development here is subject to conversion of that land.

Valuation

Consolidated revenue excluding other income recorded a growth of 103% to Rs 409.99 crore and net profit after accounting for share of profit from associates 70% to Rs 71.50 crore in FY 2007. EPS after adjusting for EO works out to Rs 6.3 on post-IPO equity. On the offer price band of Rs 351-Rs 390, the P/E is 56.7-61.9 times. Comparatively, Sobha Developers quotes at a P/E of 40.5 times and Puravankara Projects at 83.4 times.

Spike in interest cost, relatively low land bank compared with peers, relatively high cost of existing land bank, high concentration on a couple of projects, more of a regional play with focus on Bangalore seeing a glut of late are key concerns.

Transformers & Rectifiers India (TRIL) - Invest

Transformers & Rectifiers India (TRIL) manufactures electrical transformers for the power sector and industrial applications. Promoted by Jitendra U Mamtora and his family, the company was originally incorporated in 1994 as Triveni Electric Company. It subsequently changed its name to the present in 1995.

The two manufacturing units of TRIL are located at Changodar and Odhav near Ahmedabad in Gujarat. They had an aggregate installed capacity of 7,200 MVA end of the financial year ending March 2007 ( FY 2007). The company is in the midst of setting up a Rs 66.68-crore greenfield transformer manufacturing facility at Moraiya near Ahmedabad. The installed capacity of the new plant will be around 16,000 MVA per annum.

With an installed capacity of 6,000 MVA, the Changodar plant manufactures power transformers from 66 KV up to 220 KV. With an installed capacity of 1,200 MVA, the Odhav plant manufactured distribution and industrial transformers up to 33 KV class. The new plant at Moraiya will have the capacity to manufacture transformers up to 765 KV. But TRIL initially plans to manufacture 220-KV and 400-KV transformers at this facility. The Odhav plant came into the fold on the acquisition of the business of the sole proprietary concern of the promoters of the company, from August 20’06.

The average capacity utilisation over the last three years stood at 68%. Capacity utilisation peaked to 80% in FY 2007. Power transformers constituted 77% of the total sales in FY 2007, followed by furnace transformers, accounting for 13% of the sales, and distribution transformers 10%. Sales to state electricity utilities constituted about 51% of the total sales, and the remaining contributed by industrial and other sectors.

TRIL has two subsidiaries: Transweld Mechanical Engineering Works (TMEW) and Tanspares. While the wholly owned subsidiary TMEW manufactures tanks and core channels, Transpares (with 51% stake held by TRIL) produces pressed steel radiators. Aart from meeting captive requirement of its parent, TMEW also caters to a range of third-party public- and private-sector clients.

TRIL also proposes to undertake turnkey projects for setting up substations that form part of the power transmission and distribution (T&D) network, leveraging its established relationship with utilities, power T&D companies and in-house engineering capabilities. Once the new plant at Moraiya becomes operational (expected in FY 2009), the aggregate capacity of the company is expected to touch 23,200 MVA end March 2009.

To part fund the Rs 60.75-crore project and to meet incremental working capital requirement, TRIL is tapping the capital market with an initial public offering.

Strengths

Has wide product portfolio comprising power transformers, distribution transformers and industrial transformers such as furnace transformers and special transformers including mobile substation, rectifiers, and testing transformers. The wide product range is backed by strong longstanding relationship with customers, specially state electricity utilities. Is one of the largest manufacturers of furnace transformers in India.

The standalone order book was Rs 360 crore on 15 November 2007, with the order for power transformers amounting to Rs 325 crore and balance for distribution transformers.

The acquisition of 100% stake in TMEW and 51% in Transpares in FY 2007 has resulted in backward integration to critical components for manufacturing of transformers such as tanks, core channels, and pressed steel radiatiors.

Strong investment envisaged in the power sector, translating into strong demand growth for electrical equipment such as transformers.

Cushion of price-variation clause for supply to state and central power utilities to insulate margin from highly fluctuating inputs costs such as CRGO and copper. Derives around 50% of standalone sales from state utilities. But the share of sales to utilities has eased from 51% in FY 20’07, 51% to 47% in the six months ended September 2007.

Weaknesses
Still to pre-qualify for the supply of 400-KV and 765-KV transformers. Lacks strong technology in this class of transformers and will also face strong competition from MNC players with proven technology with domestic manufacturing facility in this category.

The Gujarat Pollution Control Board (GPCB) has rejected the application for no-objection-certificate for the Changodar unit, citing its operation without consent. The GPCB has stopped any expansion of the Changodar unit without prior permission and to obtain necessary approval for the existing production capacity. Application for Consolidated Consent and Authorisation (CC&A) for the unit is processing. However, if consent is not received in time, operations will be hampered.

Valuation

Consolidated revenue was Rs 221.20 crore and net profit after minority interest Rs 17.62 crore in FY 2007. On standalone basis, sales grew 67% to Rs 218 crore and net profit 118% to Rs 16.66 crore. The EPS on consolidated earning of FY 2007 on post-IPO equity is Rs 14.9 and the PE 28.5 times at the lower price band of Rs 425 and 31.2 times the upper price band of 465. Peers EMCO quotes at a PE of 37.1 times, Bharat Bijlee at a PE of 34.7 times and Indo Tech at a PE of 28.5 times.

Sensex ends slightly lower

The market ended slightly lower today in a choppy trading session. Concerns on the political front resurfaced after communist allies warned the government against going ahead with a civilian US nuclear deal.

European markets, which opened after Indian market, were mixed. Asian markets, which opened before Indian market, were subdued. Concerns arising from US sub-prime mortgage crisis resurfaced after Swiss bank UBS unveiled $10 billion in shock subprime writedowns on Monday, 10 December 2007, while simultaneously announcing that it had obtained an emergency capital injection from a Singapore government entity and an unnamed Middle East investor.

Hindalco Industries and ICICI Bank were top gainers from the Sensex pack. Tata Consultancy Services and Cipla were top losers from Sensex pack. Reliance Industries declined. Consumer goods and realty stocks gained. FMCG stocks declined. BSE Mid-Cap and Small-Cap indices outperformed Sensex.

Communist parties, a key ally of the ruling Congress party-led coalition, fired a fresh salvo on Sunday, 9 December 2007, asking the government to stop talks on a controversial nuclear deal with a UN nuclear watchdog.

The 30-share BSE Sensex provisionally ended down 38.22 points or 0.19% to 19,927.78.

The market was volatile. Sensex had hit a high of 20,095.69 in early trade. At day's high, Sensex had gained 129.96 points. Sensex hit a low of 19,834.01 in mid-afternoon trade. At day's low, Sensex had lost 131.99 points for the day.

The broader S&P CNX Nifty provisionally ended down 14.05 points or 0.24% at 5,960.25.

Market breadth was strong. On BSE, 2,025 stocks advanced, 788 stocks declined and 30 stocks remained unchanged. 19 out of 30 Sensex stocks ended in the red.

BSE clocked a turnover of Rs 7,359 crore, compared to Friday (7 December 2007)'s Rs 8,677.98 crore.

The BSE Mid-Cap index rose 1.08% to 9,119.14 and BSE Small-Cap index gained 1.66% to 11,530.16. Both these indices outperformed Sensex.

India’s largest private sector firm by market capitalization & oil refiner Reliance Industries declined 0.93% to Rs 2,815.10. As per reports, it has intensified restructuring of its retail venture Reliance Retail to create up to 30 independent business activities, each targeted to be a profit centre. Speculation is rife of a mega initial public offer in 2008 of Reliance Retail.

Consumer durables stocks rose. Videocon Industries (up 10% to Rs 609.70), Blue Star (up 1.98% to Rs 477) and Rajesh Exports (up 1.27% to Rs 918.30) edged higher.

Realty majors edged higher. India’s largest real estate developer in terms of market capitalisaion DLF rose 1.3% to Rs 1,023.05.

Unitech rose 3.29% to Rs 443.05. As per reports, India’s second-largest real estate developer, Unitech has major plans, which look beyond real estate. After announcing its plans of entering the telecom business, Unitech now wants to concentrate on positioning itself as a full fledged infrastructure development company with interests in power, roads, airports and also in other areas wherever it sees an opportunity. Besides, it also plans to enter the international market.

Indiabulls Real Estate rose 3.56% to Rs 711. The company said before trading hours today, 10 December 2007, its wholly owned subsidiary, Indiabulls Wholesale Services (IWSL), is proposing to make an open offer for Piramyd Retail, a retail company.

Banking stocks were mixed. ICICI Bank (up 1.8% to Rs 1,270 edged higher. HDFC Bank (down 1.43% to Rs 1,697), State Bank of India (down 0.44% to Rs 2,426) edged lower.

FMCG stocks lost ground. ITC (down 1.01% to Rs 187) and Hindustan Unilever (down 1.22% to Rs 205.80) edged lower.

Bharti Airtel rose 0.88% to Rs 968.10. Bharti Airtel announced before the market hours today 10 December 2007 that, Bharti Infratel, Idea Cellular and Vodafone Essar have agreed to form an independent tower company, Indus Towers to provide passive infrastructure services in India to all operators on a non-discriminatory basis. Idea Cellular rose 3.64% to Rs 137.90.

Hindalco Industries (up 2.71% to Rs 193.25), Infosys (up 1.74% to Rs 1,748), Reliance energy (up 0.98% to Rs 1,951) edged higher.

Tata Consultancy Services (down 2.44% to Rs 1,035.35) Satyam Computer Services (down 1.62% to Rs 436.55), Cipla (down 2.08% to Rs 192.0), and Bharat Heavy Electricals (down 1.92% to Rs 2,690.25) edged lower.

European markets were mixed today. France’s CAC 40 (up 0.15% to 5,728) and UK’s FTSE 100 (up 0.33% to 6,576.20) edged higher. Germany’s DAX (down 0.18% to 7,980.88) edged lower

Most of the Asian markets were trading in the red today, 10 December 2007. Taiwan Weighted index (down 1.43% to 8,598.03), Nikkei (down 0.2% to 15,924.39), Straits Times index (down 0.14% to 3,553.08), Hang Seng (down 1.18% to 28,511.07) and Seoul Composite index (down 1.44% to 1,906.42) edged lower. Shanghai Composite index (up 1.38% to 5,161.92) edged higher.

US stocks ended on a mixed note on Friday, 7 December 2007 in spite of better than expected employment data. November non-farm payrolls increased and unemployment rates remained steady. While the numbers helped to ease recession concerns, they also reduced probability of the US Federal Reserve cutting the Fed funds rate by a steep 50 basis points at its 11 December 2007 meeting.

The Dow Jones industrial average rose 5.69 points, or 0.04%, to 13,625.58. The Standard & Poor's 500 index declined 2.68 points, or 0.18%, to 1,504.66. The Nasdaq Composite index slipped 2.87 points, or 0.11%, to 2,706.16.

As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 253.84 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 339.64 crore on Friday,7 December 2007.

Crude oil fell for a second day today, 10 November 2007, in New York on speculation slowing US economic growth may limit demand as fuel stockpiles rise. Crude oil for January 2008 delivery declined as much as 53 cents to $87.75 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for January settlement declined 24 cents, or 0.3%, to $88.40 a barrel.