Market snaps five-day rally

The market remained weak throughout the day’s trade, as correction set in after five straight days of rally. Weakness in global markets and unwinding of positions in derivatives ahead the expiry of July 2007 derivatives contracts tomorrow, 26 July 2007, played spoilsport. Volatility was high, which is likely to intensify tomorrow.

Stocks from cement, real estate, auto, IT sector came under intense selling pressure. However buying was seen in FMCG, oil & gas and consumer durable stocks.

Though most Asian and European markets were subdued to weak, Chinese market outperformed and it was at striking distance of all time high

The BSE 30-share Sensex lost 95.59 points to 15,699.33. It had opened lower at 15,711.87 but advanced to hit a high of 15,771.26 at 10:41 IST, on value buying coupled with short covering. It slumped to a low of 15,572.98 at 13:25 IST as selling intensified. At the day's lowest point, the Sensex had lost 222 points for the day.

Sensex oscillated 198.28 points today between a low of 15,572.98 and a high of 15,771.26

Prior to today’s fall, the Sensex had jumped 505.10 points in five trading sessions to 15,794.92 on Tuesday, 24 July 2007 from a recent low of 15,289.82 on 17 July 2007.

The NSE Nifty slipped 32.05 points to 4,588.70. The Nifty July 2007 futures settled at 4597, a premium of 8.30 points as compared to spot closing. The Nifty August 2007 futures settled at 4581.90, a discount of 6.80 points as compared to spot closing.

The market breadth was weak on BSE, with 1,735 shares declining as compared to 901 that advanced, while 68 remained unchanged.

The BSE Mid-Cap Index lost 57 points or 0.84% to 6,755.20, while the BSE Small-Cap Index slipped 97 points or 1.2% to 8,056.36.

The BSE clocked a turnover of Rs 5,605 crore as against Rs 6,464.27 crore on Tuesday, 24 July 2007.

The NSE F&O turnover vaulted to record of Rs 72,365.46 crore as compared to Rs 64,281.92 crore on Tuesday, 24 July 2007.

Among the Sensex pack, 23 of the 30 constituents were in the red.

India’s largest cigarette manufacturer ITC surged 8.57% to Rs 165.30 on 57.99 lakh shares. It was the top gainer from the Sensex pack. The company announces Q1 June 2007 results on Friday, 27 July 2007. Foreign brokerage CLSA has raised its price target to Rs 184, and upgraded it to buy from underperformer.

Meanwhile, ITC is reportedly planning to sell home and personal-care products to sustain growth as new taxes and curbs on smoking threaten cigarette sales. The new products will be sold through the company's network of 6,400 web kiosks and 18 supermarkets.

India's largest FMCG firm in sales Hindustan Unilever rose 1.03% to Rs 201.50 on rumors the company is disposing off of its prime properties across India including its corporate office Lever House in Mumbai. The company is also selling some of its residential properties in Mumbai's suburbs. It may either develop its 30-acre property in Bangalore or sell it entirely. The company, however, denied these reports.

The BSE FMCG Index jumped 3.91% to 1,915.35, and was the top gainer from sectoral indices on BSE. Colgate Palmolive India (up 0.65% to Rs 371.50), and Dabur India (up 0.80% to Rs 101.35) were the other gainers from the FMCG pack.

NTPC, India’s largest power generation company, gained 2.35% Rs 167.45. The stock had risen 3.6% on Tuesday 24 July 2007 after it signed an MoU with Asian Development Bank for setting up a joint venture company to undertake renewable power generation. The company made this announcement after trading hours on Monday, 23 July 2007.

India’s largest oil explorer ONGC advanced 2.35% to Rs 937 after it today, 25 July 2007, reported an 11.9% growth in net profit to Rs 4610 crore in Q1 June 2007 over Q1 June 2006.

IT pivotals were subdued after the rupee gradually approached the crucial 40-mark today, touching new nine-year high of 40.22 against the US currency in early trade. Fourth largest software services exporter Satyam Computers plunged 6.18% to Rs 486.25, on 9.20 lakh shares. It was the top loser from the Sensex pack.

Other IT pivotals, TCS (down 1.93% to Rs 1148), and Wipro (down 1.31% to Rs 499.85), also edged lower The BSE IT Index lost 1% at 4,906.79.

However, India's second-largest software services exporter Infosys Technologies gained 0.69% to Rs 1,992. The company announced after market hours today, that it was awarded a $250 million global BPO contract by Royal Philips Electronics.

Cement stocks plunged after their recent rally following reports today, 25 July 2007, that on Tuesday, 24 July 2007, MRTCP had ordered a probe into the business practices of 14 leading cement manufacturers.

Ambuja Cements (down 5% to Rs 127.70), ACC (down 3.83% to Rs 1075), Grasim (down 1.08% to Rs 2,990) Birla Corporation (down 5.82% to Rs 266.30), JK Cement, (down 0.58% to Rs 170), India Cement (down 9.01% to Rs 204), UltraTech Cement (down 4.94% to Rs 920) slipped.

India’s largest private sector company Reliance Industries (RIL) was down 0.19% to Rs 1,908.10, on 5.61 lakh shares. As per reports, RIL is planning to set up 4,000 mega watt gas-based power generation capacity at multiple locations at an investment of Rs 10,000 crore, in addition to a mega fertiliser plant at Kakinada in Andhra Pradesh.

Second largest bike maker Bajaj Auto slumped 3.61% to Rs 2,360 after it scheduled a separate meeting of equity shareholders and unsecured creditors on 18 August 2007 for considering and, if thought fit, approving with or without modification(s) the scheme of arrangement between the company, Bajaj Holdings & Investment & Bajaj Finserv and their respective shareholders & creditors.

HDFC, country’s largest housing finance company slipped 0.54% to Rs 1964. It posted 25.60% rise in net profit in Q1 June 2007 to Rs 372.81 crore over Q1 June 2006. Total operating income rose 46.60% to Rs 1830.39 crore in Q1 June 2007 over Q1 June 2006.

Allied Digital Services settled at Rs 331.80 on BSE, a premium of 74.63% over the IPO price of Rs 190. The scrip debuted at Rs 332.50 on BSE, and touched a high of Rs 370.50 and a low of Rs 309.50 during the day. On BSE, 88.27 lakh shares changed hands on the counter. Allied Digital Services IPO ended on 5 July 2007, with 60.87 times subscription.

Real estate stocks, DLF (down 2.95% to Rs 637), Parsvnath Developers (down 3.75% to Rs 372), Sobha Developers (down 1.24% to Rs 917) and Unitech (down 3.62% to Rs 567.45), slipped on profit booking. The BSE Realty index lost 2.90% to 8,131.93, and was the top loser among the sectoral indices on BSE

The BSE Capital Goods Index declined 2.5% at 13,428.80, as capital goods stocks came under selling pressure after recent rally. The index has rallied 107.10% in the past one year from 6394.21 on 24 July 2006.

Suzlon Energy (down 6.74% to Rs 1400), Praj Industries (down 3.45% to Rs 212.40), L&T (down 3.21% to Rs 2582), and Bhel (down 2.26% to Rs 1794), declined from the Capital Goods index.

Godavari Fertilizers & Chemicals plunged 9% to Rs 121.40 whereas Coromandel Fertilisers rose 0.92% to Rs 86 after their boards approved the amalgamation scheme, with shareholders of GFCL entitled to receive 3 equity shares of Rs 2 each of the CFL for every 2 equity shares of Rs 10 each held in GFCL.

India's largest paper manufacturers Ballarpur Industries gained 3.71% to Rs 124 after announcing a major restructuring exercise involving the paper manufacturer buying back 40% of its equity capital after splitting each share with a face value of Rs 10 into five shares of Rs 2 each. Each shareholder would be allowed to sell 2 out of every 5 split shares back to the company at Rs 25 each. Small shareholders owning up to 1,000 pre-split shares would be allowed to surrender their entire holdings.

Ballarpur Industries also said the board approved hiving off its three units into separate entities and raise Rs 1,950 crore. Its units at Bhigwan, Ballarpur and Kamalapuram would be separated into a wholly-owned subsidiary BILT Graphic Paper Products (BGPPL).

The largest steel manufacturer in India, Steel Authority of India's (Sail) slipped 5.16% to Rs 152.55 after its net profit rose 10% to Rs 1,525.12 crore in Q1 June 2007 over Q1 June 2006. Total income inched up 8.2% to Rs 8,346.40 crore in Q1 June 2007 over Q1 June 2006.

Lanco Infratech plunged 10.62% to Rs 209.15 after the empowered group of ministers (E-GoM) headed by power minister Sushil Kumar Shinde, on Tuesday, 24 July 2007, decided to scrap the allotment of the 4,000- mega watt Sasan power project in Madhya Pradesh to the lowest bidder, the Lanco-Globeleq consortium. E-GoM declared Lanco’s bid as void ab-initio (invalid from the outset).

Mid-sized software firm Mindtree Consulting tumbled 8.54% to Rs 670.70 after it lowered its profit guidance for 2007-08 to $22.5-$22.6 million due to the appreciation of the rupee against the dollar.

Real-estate firm Mahindra Gesco Developers lost 3.4% to Rs 599 even as it reported a 260.9% surge in net profit to Rs 12.20 crore in Q1 June 2007 over Q1 June 2006.

Pidilite Industries, India's biggest maker of adhesives, rose 5% to Rs 146 after its net profit advanced 53.03% to Rs 58 crore in Q1 June 2007 over Q1 June 2006

Power generation equipment maker Thermax gained 4.91% to Rs 631.20 after it reported a 103% surge in net profit to Rs 56.01 crore in Q1 June 2007 over Q1 June 2006.

Blue Star, maker of refrigeration and cooling systems, vaulted 11.33% to Rs 281 after it reported a 205% surge in net profit to Rs 22.32 crore in Q1 June 2007 over Q1 June 2006.

Modern Steel rose 4.69% to Rs 89.30 after its board recommended 3 bonus shares for every 2 shares held. The mid-sized carbon and alloy steel maker had made the announcement after market hours yesterday, 24 July 2007.

Minda Industries advanced 2.54% to Rs 137.50 following reports that it is looking for acquisitions of Rs 200 crore in Europe to enhance its global presence and product portfolio.

Asahi India Glass slumped 8.18% to Rs 101 even as it posted 316% rise in net profit to Rs 20.72 crore in Q1 June 2007 over Q1 June 2006.

The market is likely to be extremely choppy tomorrow, 26 July 2007 as derivatives contracts expire. The total open interest in NSE’s futures and option (F&O) segment vaulted to an all-time record of Rs 1,02,247.50 crore on 25 July 2007, from Rs 94,285.34 crore on the previous day.

Asian indices edged lower today, 25 July 2007, after US blue-chips suffered their biggest single-day loss since March 2007. Japanese shares fell on declines in exporters such as Canon Inc. and Sony Corp., while in Australia, resources companies such as BHP Billiton led losses. Japan's Nikkei tumbled 0.80% at 17,858.75.

Hang Seng (down 0.47% at 23,362.18) and Singapore's Straits Times (down 0.86% at 3,633.54) declined.

However, Shanghai Composite jumped 2.70% to 4,323.96, almost kissing its all time high of 4,335.96

All the European markets were trading lower today, 26 July 2007, except FTSE 100, which was up 0.04%

Wall Street shares slumped sharply yesterday, 24 July 2007, on disappointing earnings reports and rising concerns about the mortgage market. The Dow Jones shed 226.47 points, or 1.62%, at 13,716.95. Twenty-nine of the 30 Dow components fell. Other major stock indicators also suffered steep declines. The Standard & Poor's 500 index shed 30.53 points, or 1.98%, to 1,511.04. The Nasdaq Composite index lost 50.72 points, or 1.89% at 2,639.86.

Crude oil fell for a fourth day in New York on speculation US gasoline production will be sufficient to meet late summer demand. Crude oil for September 2007 delivery declined as much as 46 cents, or 0.6%, to $73.10 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $73.22 in Singapore

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Broker's Recomendations

SAGAR CEMENTS

Recommendation: Buy
Current market price: Rs 161.90
Target price: Rs 192
Upside (%): 18.50
Broking firm: ULJK Securities

Sagar Cements, a small-cap cement company, manufactures clinker and ordinary Portland cement, which is marketed under the Sagar Priya brand. It has three plants in Andhra Pradesh. The company has planned a capex of Rs 300 crore, which would be part financed by a debt of $ 19 million sourced from the World Bank.

This expansion will help the company to increase its clinker capacity from 0.65 tonne to 2.5 tonne in order to serve growing demand for cement in the southern states. The new capacity is expected to go onstream by June 2008.

The company achieved a top line growth of 48 per cent in FY07 over the past fiscal, while its bottom line grew by more than seven fold for the same period. At the current market price of Rs 161.9, the stock trades at 6.7 times its FY07 earnings.

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ASHOK LEYLAND

Recommendation: Hold
Current market price: Rs 39.05
Target price: Rs 44
Upside (%): 12.8
Broking firm: Angel Broking

Although Ashok Leyland witnessed a decline in its volumes by 30.5 per cent to 20,121 vehicles in first quarter of FY08 due to higher interest rates. However, it strengthened its presence in the bus segment, where its sales volume grew by 6.6 per cent y-o-y.

Further, its realisations improved by 6.8 per cent y-o-y, which helped it grow its top line to Rs 1621 crore in Q1FY08 from 1424 crore for the same period last fiscal. Ashok Leyland’s operating margins improved by 250 basis points y-o-y on account of lower raw material cost to sales ratio.

Its net profit grew by 29 per cent to Rs 88.2 crore, and its net profit margin was higher at 5.4 per cent as against 4.7 per cent in Q1FY07. At Rs 39, the stock trades at a price earning multiple of 11.7 times and 10 times its estimated FY08 and FY09 earnings, respectively.

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NIIT

Recommendation: Buy
Current market price: Rs 1142
Target price: Rs 1431
Upside (%): 25.3
Broking firm: Emkay Research

During FY07, the enrolments for NIIT’s GNIIT programme recorded a growth of 112% y-o-y. Further, it hiked the fees for the GNIIT programme by 24 per cent in June 2006, and another 15 per cent in June 2007, a positive impact of which could be seen in its numbers by the second quarter of FY08.

Emkay expects the capacity utilisation for NIIT from its individual training business to increase from 54 per cent in FY07 to 65 per cent by FY09. Emkay expects NIIT’s revenues to post a compounded annual growth of 29 per cent over FY07-FY09. Its operating margins too are expected to expand by 570 basis points to 15.4 per cent by FY09.

This would translate into a 72 per cent CAGR in its earning per share over FY07-FY09. For its estimated FY08 and FY09 earning per share of Rs 48 and Rs 74.4 respectively, at the recommendation price of Rs 1135 the stock was available at a price-earning ratio of 23.7 times (FY08E) and 15.3 times (FY09E)

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Will Sensex cover 150 pts in 3 days to create HISTORY?

Sensex covered fastest 1000 mark in 16 days to reach 4K from 3K. The rally was majorliy bolstered by Harshad Mehta machinations and liberal export-import policies. Today is 12th day since Sensex hit 15000. So the question remains - will we cover remaining 150 points in next 3 days to create HISTORY?
2007-07-24 16:58

Sensex covered fastest 1000 mark in 16 days to reach 4K from 3K. The rally was majorliy bolstered by Harshad Mehta machinations and liberal export-import policies. Today is 12th day since Sensex hit 15000. So the question remains - will we cover remaining 150 points in next 3 days to create HISTORY?

During the rally of the Sensex from 15000 to 16000, the leaders in the market are:

Capital Goods: BHEL, up 17.5%, L&T, up 14%
Oil & Gas: RIL, up 11%, IPCL, up 10.5%
Metal: Hindalco, up 21%, SAIL, up 16.5%, Tata Steel, up 13.5%
Telecom: Bharti Airtel, up 7.5%, Reliance Communication, up 4.5%
Auto: Bajaj Auto, up 13%, Tata Motors, up 7%
Cement: Grasim, up 9.5%, ACC, up 7.5%

Other leaders are:
Rel Energy, up 19%, Zee Entertainment, up 10%

Laggerds of the market are:
Healthcare: Cipla, down 12.5%, Ranbaxy, down 4%
IT: Wipro, down 2.5%, Infosys, down 1%
Bank: SBI, down 9%, ICICI Bank, down 1.5%

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Markets @ lifetime closing highs

The market kept on surging as the day progressed, except for the odd hiccup in initial trade, which was due to weak global cues. Strong buying interest propelled the key indices to all time highs, with Sensex closing above the 15,700 mark and the Nifty above the 4,600 level.

Shares from the auto, real estate, capital goods sectors were at the forefront of today's rally. However, shares from the pharma pack saw some profit booking. Asian and European markets were trading on a mixed note.

The BSE 30-share Sensex surged 166.65 points or 1.07% to 15,732.20, an all time closing high. It opened lower at 15,560.57 and slipped to 15,477.91 in early trade, tracking weak global equities. But it started advancing from here to hit an all time high of 15,773.37 in late trade, as buying intensified breaching its previous all-time high of 15,683.03 hit on Friday, 20 July 2007.

The Sensex extended gained for the fourth straight session today, rising 442.38 points from a recent low of 15,289.82 on 17 July 2007.

The S&P CNX Nifty gained 53.30 points or 1.17% at 4,619.35, an all time closing high. It also struck an all time high of 4,628.45. The Nifty July 2007 futures settled at 4614, a slight discount of 5.35 points as compared to spot closing.

The market is expected to stay choppy in the near term ahead of the expiry of the July 2007 derivatives contracts on 26 July 2007. The total open interest in NSE’s F&O segment today increased to an all-time record of Rs 97,713.71 crore from Rs 90,641.76 crore on the previous day.

The BSE Mid-Cap Index ended at 6,849.12, up 13 points or 0.2% while the BSE Small-Cap Index ended at 8,234.45 up 46 points or 0.6%.

The market breadth was just about positive on BSE with 1,303 shares advancing as compared to 1278 shares declined, and 77 remained unchanged.

The total turnover on BSE amounted to Rs 4,825.29 crore as against Rs 5,791.29 crore on Friday, 20 July 2007. The NSE F&O turnover was at Rs 51,007.17 crore as ompared to Rs 48073.22 crore on Friday, 20 July 2007.

Among the Sensex pack, 21 advanced while the rest declined.

Shares from the capital goods pack surged, with the BSE Capital Goods index hitting an all-time high of 13,731.77. The BSE Capital Goods Index settled 4.03% higher at 13,596.20, and was the top gainer among sectoral indices on BSE.

State-run engineering major Bharat Heavy Electricals (Bhel) galloped to an all-time high of Rs 1,798 after it secured a Rs 1,829-crore order for manufacturing and setting up three 500-MW thermal power units in Haryana. The project is a joint venture between National Thermal Power Corporation, Harayana State Electricity Board and Indraprastha Power Generation Company. The stock settled 7.54% higher at Rs 1,772.30. It was the top gainer from the Sensex pack.

Engineering & construction major L&T galloped 7.42% to Rs 2,659, after striking an all-time high of Rs 2,675.

Areva T&D (up 7.20% to Rs 1646.55), Bharat Earth Movers (up 2.18% to Rs 1227.30), Alstom Projects (up 1.76% to Rs 843.15), and Punj Lloyd (up 2.50% to Rs 278.90) were the other gainers from the capital goods sector.

Hindustan Unilever (HUL) jumped 4.53% to Rs 203.10 after its parent announced after market hours on 20 July 2007 it is considering a plan to buy its own shares on 29 July 2007. HUL will also declare financial accounts for the second quarter and half year ended 30 June 2007 on that day.

State-run oil exploration major ONGC gained 2.49% to Rs 909 after the company said that it may have to shoulder lesser burden of fuel subsidies with the government agreeing to consider exchange rate losses while calculating the subsidy burden the upstream oil companies have to bear. Every one rupee appreciation against the dollar results in revenue loss of about Rs 900 crore to ONGC.

Domestic pharma major Cipla was the top loser from the Sensex pack. It shed 4.90% to Rs 191. The company posted a 30% drop in net profit to Rs 120 crore in Q1 June 2007 over Q1 June 2006. Net sales rose 5% to Rs 902 crore in Q1 June 2007 over Q1 June 2006 on the growth in active pharmaceutical ingredient (API) exports business. The results were announced on 21 July 2007.

Other pharma shares - Ranbaxy Laboratories (down 0.58% to Rs 350.50), and Dr Reddy’s Laboratories (down 0.15% to Rs 667.20), also edged lower. The BSE Healthcare Index was down 0.83% at 3,798.44, and was the top loser among the sectoral indices on BSE.

Infosys Technologies shed 1.83% to Rs 1,950.40 after both the companies, Infosys and Capgemini, denied rumors of Infosys mulling the acquisition of aquiring Capgemini.

ICICI Bank dipped 1.53% to Rs 970.05 despite posting a 25% rise in net profit in Q1 June 2007 to Rs 775.08 crore over Q1 June 2006, riding on increased fee-based income and retail lending. Total operating income rose 46.9% to Rs 9,281.42 crore in Q1 June 2007 over Q1 June 006. Fee income increased 35% to Rs 1,428 crore in Q1 June 2007 over Q1 June 2006.

ICICI Bank’s net interest margin (NIM) stood at 2.3% compared with 2.5% in Q1 June 2006. Net non-performing assets increased 112% to Rs 2,742 crore in Q1 June 2007 over Q1 June 2006 as high interest rates hit the bank’s retail borrowers. Net interest rose 16% to Rs 1,714 crore in Q1 June 2007 over Q1 June 2006. The results were announced on 21 July 2007.

Index heavyweight Reliance Industries (RIL) advanced 1.43% to Rs 1,914, on reports it may seek foreign partner for its deep water exploration blocks off the country's east coast. Reports indicate that global oil firms, including Chevron, have shown interest in partnering RIL for its Cauvery oil & gas assets.

Auto stocks gained on fresh buying on a view that interest rates have peaked for the time being. Auto major Bajaj Auto advanced 4.21% to Rs 2,425, while Tata Motors (up 0.65% to Rs 772) and Maruti Udyog (up 0.85% to Rs 835) also gained. The BSE Auto Index closed at 5,186.46 up 1.2%.

Debutante Suryachakra Power Corporation settled at Rs 22.82, a premium of 14.1% over the IPO price of Rs 20. The Suryachakra IPO had closed on 29 June 2007 with 2.18 times subscription. 6.10 crore shares were traded in Suryachakra Power Corporation counter on BSE today. The scrip topped volumes on BSE.

Shares from real estate pack advanced, with the BSE Real Estate index hitting an all time high of 8,398.36, on renewed buying momentum after KV Kamath, Managing Director and CEO of ICICI Bank, said on Tuesday, 17 July 2007, that interest rates seem to have peaked and should come down soon. The Reserve Bank of India (RBI’s) quarterly monetary policy review is due on 31 July 2007. BSE Real Estate settled 2.40% higher at 8,379.28.

DLF (up 4.07% to Rs 673.05), Unitech (up 2.22% to Rs 576.75), Mahindra Gesco Developers (up 6.40% to Rs 631.25) and Sobha Developers (up 1.63% to Rs 940.60) advanced from the real estate sector.

GMR Infrastructure spurted 8.94% to Rs 960. On 10 July 2007, GMR Infrastructure in consortium with Malaysia Airport Holdings and Turkey's Limak won the rights to build Istanbul's second airport with an 1.9 billion-euro bid. The consortium will build a new international terminal at the Sabiha Gokcen airport on Istanbul's Asian side and run the airport for 20 years. The winning bid does not include 18% value added tax.

Century Textiles & Industries jumped 7.52% to Rs 760.50 after its net profit surged 54.5% to Rs 107.91 crore in Q1 June 2007 over Q1 June 2006. Net sales rose 16% to Rs 836.84 crore over Q1 June 2006. The company declared the results during trading hours today, 23 July 2007.

ABB gained 6.04% to Rs 1136.10, the scrip gained on fresh positions build-up ahead of the company announcing its Q2 June 2007 results on 26 July 2007.

Fulford India rose 2.23% to Rs 537 after Reliance Capital Trustee Company on account of Reliance Pharma Fund acquired 63,100 shares of the company at Rs 525 per share on 20 July 2007 from Wipro chairman Azim Premji.

UTI Bank dipped 3.76% to Rs 624.80 after it priced its GDR issue at a discount to the ruling market price. It announced before market hours today, 23 July 2007 that it has successfully priced its offering of 14.13 million GDRs, aggregating $ 218.07 million. Each GDR, representing one underlying share, was priced at $15.43 and will be listed on the London Stock Exchange. This represents a discount of 1.7% to the closing price of the Bank's GDR on 20 July 2007.

In addition, the bank has determined the issue price of the equity shares to be offered in the proposed qualified institutional placement (QIP) to be Rs 620 per share. The size of the QIP will be Rs 1,752 crore.

Jindal Drilling & Industries jumped 4.77% to Rs 803 after scheduling a board meet on 30 July 2007 to consider stock-split. The board will also consider the unaudited financial results for Q1 June 2007 on that day.

SRF slipped 1.97% to Rs 156.90 after its net profit declined to Rs 56.02 crore in Q1 June 2007 over Q1 June 2006. Net sales slipped to Rs 404.65 crore from Rs 457.20 crore.

JK Lakshmi Cement gained 4% to Rs 157 after its net profit jumped 76% to Rs Rs 68.46 crore in Q1 June 2007 over Q1 June 2006. Net sales rose 41.2% to Rs 266.42 crore in Q1 June 2007 over Q1 June 2006.

Union Bank of India’s gained 4.67% to Rs 155.65 after its net profit rose 34.9% to Rs 225.10 crore in Q1 June 2007 over Q1 June 2006. Total income was up 25% to Rs 2,289.48 crore in Q1 June 2007 over Q1 June 2006.

Electrosteel Castings surged 6.93% to Rs 455.65 after its board approved splitting each share of face value Rs 10 into 10 shares of Re 1 each.

IVRCL Infrastructures & Projects rose 2.83% to Rs 415.90 on bagging orders of an aggregate value of Rs 641.39 crore for irrigation works by the government of Andhra Pradesh. The order is to be executed by IVRCL through a joint venture.

Asian indices were also trading mixed today, 23 July 2007, after a sharp fall on Wall Street on Friday, 20 July 2007. Japan's Nikkei tumbled 1.07% to 17,963.44.

Hang Seng gained 0.32% to 23,365.56, after initial weakness

China's Shanghai Composite jumped 3.81% to 4,213.36, even as the central bank raised borrowing costs, effective Saturday, 21 July 2007, in the latest of a series of moves aimed at capping inflation and preventing the world's fourth-largest economy from overheating.

European indices were trading on a mixed note.

Shares on Wall Street declined sharply on Friday, 20 July 2007, retreating from record levels following disappointing results from long-time favorites Caterpillar Inc. and Google Inc. The Dow fell 149.33 points, or 1.07%, to 13,851.08. Broader stock indicators also lost ground. The S&P 500 index fell 18.98 points, or 1.22%, to 1,534.10, and ended the week 1.19% lower. The Nasdaq Composite index fell 32.44 points, or 1.19%, to 2,687.60

Emerging markets-dedicated funds saw their second best inflows ever in the week ending 18 July 2007, after setting their all-time high just the previous week. Inflows to emerging markets equity funds exceeded outflows by $3.3 billion in the week ended 18 July 2007. More than half of this net inflow - a record high of $1.8 billion went to funds dedicated to Asia ex-Japan.

Meanwhile, due to pressure from Left- backed trade unions, the Employees Provident Fund (EPF) board today, 23 July 2007 agreed to continue paying 8.5% interest rate to its nearly four crore subscribers for fiscal 2006-07 as well. The EPF has a corpus of Rs 94,000 crore including pension fund.

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Investing in mutual funds? A checklist

I am a 42-year old government servant. I have an investment pool of Rs 650,000 in my provident fund and investments worth Rs 218,000 spread across 20 mutual funds. Unfortunately, about 40 per cent of this was invested just before market crash in May 2006. After that, I chose the SIP route for investments. I have opted for the dividend option to meet a portion of my annual expenditure. I would like to purchase a house in Hyderabad before retirement and wish to set aside money for my two children's education. I am willing to stay invested for the long-term.

Sometimes, lessons are best learnt the hard way. Luckily for you, in a short span of a year the equity market has zoomed past the 12000 mark to hover around 15000 levels.

Where you have done well
You have been wise in opting for an SIP. Sometimes, people burn their fingers and then exit from equities totally. You have made an astute move by not exiting but investing systematically. Also, you have smartly identified your short- and long-term financial goals, the very first step in financial planning.

Where you have gone wrong
While, you have been wise in choosing SIP as the medium to invest, your strategy is awry.Your current choice of funds is aimless because you attempted to de-risk your portfolio by going for numbers. Instead, inculcate a habit of investigating the fund's objective before investing. The absence of this exercise has landed you with a high-risk portfolio of predominantly mid- and small-cap firms.

Second, while you have identified your financial goals, your investments are not targeted to meet these goals. The investments made so far are haphazard. Learn to align your investments to your goals. For instance, your current strategy of meeting miscellaneous annual expenses through dividends is unwise.

It amounts to dipping into profits which have been set aside for a different purpose. Moreover, mutual funds are not under any obligation to declare dividends.

Switch to growth options
Asset management companies do not charge investors for switching between the growth and dividend option of the same fund. So our advice is to switch to the growth option, unless you find more lucrative options of reinvesting the dividends earned. Avoid using dividends to meet other expenses.

If you still insist on receiving money through dividends, then restrict this to the dividend proceeds from your tax planning and close-ended funds. Since you cannot redeem these funds, you can at least take away the dividends.

Alternative source for short term needs
Make a reasonable estimate of your miscellaneous annual expenses. On the basis of this, you can start an SIP in a liquid fund. Another option could be to institute a recurring bank deposit.

Restructuring the portfolio
The suggested portfolio will be achieved after one year. Instead of churning the current portfolio, we have redirected your SIPs to restructure your portfolio. This will minimise the cost of restructuring by reducing entry loads.

In our revamped portfolio, we have dropped sector funds in favour of large-cap oriented equity diversified funds. We have also done away with funds that have a marginal allocation. Instead of 11 monthly SIPs, your objective can be met by just four funds. Maintain it for a year after which you can review them and preferably choose a multi-cap fund.

You can look at funds from Fidelity and Franklin for this. We would have ideally recommended Magnum Contra and Magnum Global for future SIPs, but your exposure to SBIMF's funds is already very high.

We remain skeptical about your investment in SBI [Get Quote] One India Fund whose performance has been nothing to write home about.
The only reason for remaining invested here is the large exit load payable. Talking of exit load, sell only those funds that have been held for more than a year to avoid incurring short-term capital gains tax.

-Bussiness Standard

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IPO - "IVR Prime Urban Developers": Avoid

Investors can avoid the initial public offer of IVR Prime Urban Developers for now, given the steep asking price and the company’s limited track record as a developer.
Though the company’ proposed projects may translate into higher earnings over a period, most of them are at a nascent stage, making for low earnings visibility.
The price band of the IPO is Rs 510-600. The company’s earnings per share for 2006-07 stood at Rs 4.1 (on the pre-IPO equity base).

Also, certain transactions suggest a conflict of interest with the parent. However, the backing of the parent company — IVRCL Infrastructures & Projects — may help IVR Prime prove its execution capabilities over the next few years. Investors can wait for a significant ramp-up in earnings over the next few years for a better clarity on the investment decision.

We believe there are other real-estate companies with a proven track record and better earnings visibility, available at better valuations.

IVR Prime is an 80 per cent subsidiary of IVRCL Infrastructures, an integrated construction company. Post-IPO, the parent’s holding will reduce to about 62 per cent. IVR Prime has developed about two million sq ft, in a single project (predominantly residentials) at Gachibowli (games) village in Hyderabad. The company plans to raise Rs 720-850 crore through this offer.

The proceeds would be used to complete projects, repay loans and make payments for development rights — the last two to be made to the parent company. About Rs 362 crore, or over 40 per cent of the offer proceeds, would, therefore, go to the parent company.Land bank profile

Unlike some recent IPOs, the profile of IVR Prime’s land bank does not provide much comfort. The company has 2,478 acres, of which only 14 per cent is owned by the company or its subsidiaries; on a good 58 per cent the company has sole development rights. Of this, two-fifth of the acreage is rights from third-parties (other than parent company or subsidiaries).

Further, about 21 per cent of the land is still in the “agreement to acquire” stage. Only 5.5 per cent of the land is being developed jointly.

Although only a part of the land is directly owned by the company, it would be more confidence-inspiring if substantial payments had been made for the rest of the land. However, about 70 per cent of the payment on land is still outstanding, with a bulk of it pertaining to instalments to be paid for the Noida parcel.

The above land mix and the payment schedule show that most of the planned development is at a preliminary stage and face execution risks in terms of delays/stalling. The offer document states that the company expects the projects to be completed by 2012.

Concentration IVR Prime’s urban land reserves are skewed in favour of Chennai that accounts for about 70 per cent of the total developable area, consisting predominantly of residential projects.

While the Chennai market is witnessing a boom on the back of increased demand from IT companies, the prices, especially in the suburbs where the company holds land (Sriperumbudur and Minjur), have already witnessed a significant run-up. There is, therefore, a risk of a correction in property prices.

Further, the company has reported that, on average, it has realised about Rs 3,300 per sq ft from the sale of flats in 2006-07.This has largely come from the sale of its apartments in Gachibowli, which have the locational advantage of being near the IT corridor in Cyberabad. Further, the company is a new entrant (with hardly any joint ventures) in locations such as Bangalore, Pune or Noida, and may have to promote its brand mainly through competitive pricing.

IVR Prime now plans to develop about 75 million sq ft of area, consisting primarily of residential projects and a few commercial and retail projects. This is 37.5 times the two million sq ft project, executed so far over a four/five-year period.
Added to this, the company has not executed projects in any other locality save Hyderabad.

The lack of strong track record as a developer and entry into regions where the company does not have much brand recognition increases the risk profile.Strong parent but…

IVR Prime has a strong parent in IVRCL Infrastructures. A sound infrastructure player, the latter, is also likely to be the contractor for projects developed by IVR Prime Urban. This provides comfort to the project execution skills. However, while the resource pool of the parent is strong, it needs to be noted that IVRCL Infrastructures is itself sitting on a robust order-book that may absorb resources in terms of assets and skill-sets.

IVR Prime Urban has managed to contain its debt level as a result of support it received from its parent (unsecured loans of Rs 203 crore). Given that IVRCL Infrastructure is itself in a working capital-intensive industry, its subsidiary may not be able to receive continuous fund support for the massive scale of development that is being planned. This may necessitate borrowing and increase the debt levels.

Revenue scenario
IVR Prime’s revenue for 2006-07 was Rs 148 crore, with net profits at Rs 21 crore. While operating profit margins surged to 25 per cent compared to a mere 10 per cent, as a result of higher realisations, we do not expect significant margin expansion, given that much of the residential projects are aimed at the middle-income group, where the scope for improving margins comes only through lower land costs. However, this segment may help increase volumes, and, thus, maintain margins.
The parent company, which was allotted plots in Noida, has given the development rights to IVR Prime. Two of the four lease plots are, however under revenue-sharing agreements with the parent company.

This apart, some of the above Noida lands are subject to yearly lease rentals (that are enhanced by 50 per cent each year) that will be paid to the parent. These indicate that not all the revenue arising in Noida will accrue to the company.
The IPO is open from July 23 to 26. Enam Financial and Kotak Mahindra Capital are the book-running lead managers. At the offer price band, the company’s market cap would be Rs 3,300-3,850 crore.

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RECOMMENDATIONS FOR 23 July 2007

BSE SENSEX
Consider 15591 as trend decider. Down sup.15499-15433-15341 Up Res.15658-15749. Buy near to stop loss levels, because market looks to set for CORRECTION.

REDINGTON :Buy stop loss 272 Target 294-311.

TISCO :Buy stop loss 705 Target 729-742.

BONGAIGAON REFINERY:Buy stop loss 51 Target 56-57.

ASAHI INDIA:Buy stop loss 105 Target 111-113.

EXIDE:Buy stop loss 52 Target 58-62.

EICHER MOTOR:Buy stop loss 367 Target 396-421.

SHASUN CHEMICALS:Buy stop loss 130 Target 140-146.

BALAJI TELE:Buy stop loss 266 Target 279-286.

EASTERN SILK:Buy stop loss 301 Target 312-318.

GTL LTD:Buy stop loss 230 Target 237-241.

INFO EDGE:Buy stop loss 852 Target 892-915.

SUZLON ENERGY:Buy stop loss 1485 Target 1519-1536.

NIIT:Buy stop loss 1160 Target 1190-1205.


Disclaimer: This is neither an offer nor a solicitation to purchase or sell securities. The information and views contained in this article are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in, or have positions in the securities mentioned in their articles. Neither ShareGuruIndia.com nor any of the contributors accepts any liability arising out of use of the above information/article. Reproduction in whole or in part without written permission is prohibited.

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TCS vs INFOSYS

Over the last three years, I have often said that, to my mind, and sooner rather than later, it is TCS that will outrun Infy as the premier Indian IT company at the bourses, notwithstanding the media fixation with the former. The addition of the words ‘at the bourses’ in the opening paragraph is particularly significant as there is no dearth of IT professionals I know, who rate TCS ahead of Infosys.

Agreed, these are mere opinions, but with the latest results (Q1) that the two Indian IT majors announced, the seemingly wide gap is now surely closing in. The gap in the net sales figure of Infosys and TCS has widened in favour of the latter over the last four quarters.

The more interesting number set revolves around the growth in net sales percentage. Whereas Infy grew by 42.6 per cent as compared to TCS’ 32.6 per cent during Q4 of FY07, in this, the first quarter of FY08 the respective percentages have dipped to 23.9 and 24.4. Is this an early indication of which company carries more firepower, when the chips are down ?



TABULAR COMPARISON OF THE STANDALONE FINANCIALS OF INFOSYS AND TCS

Now, cast a glance at the operating profit , shorn of the other income boost. Here too, the gap widens in favour of TCS. For the record, Infy’s Operating Profit, net of other income stood at Rs.1010 crore whereas that of TCS stood at Rs.1105.9 crore.


Yet again, it is the growth in operating profit percentage that clearly displays how TCS is now coming into its own. Whereas Infy grew by 44.8 per cent as compared to TCS’ 41.9 per cent during Q4 of FY07, in this, the first quarter of FY08 the respective percentages have dipped to 16 and, note this carefully, 27.


On the operating margin front though, Infosys scores over TCS, but just about, and that too, it must be noted that the gap has widened from 3 per cent just three quarters ago, to less than 2 per cent now.


And so, the gap has narrowed. While Infy, undoubtedly remains the markets’ sentimental favourite, TCS now enjoys a marginally higher discounting at the bourses. So, will TCS outrun Infy ?


I think so, and my money is where my mouth is …….

-Ashok Kumar

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Is it time to sell your investments?

Now that the Sensex has scaled 15000, an absolutely new psychological barrier, the question running in everyone’s mind is whether to stay put or rush for the door. In one of my previous articles, we analyzed several reasons for selling stocks. This article attempts to address reasons for selling your mutual fund schemes.

Before you consider exiting your mutual fund investment/s, one of the important questions to ask yourself is the reason for buying this particular scheme. I am sure there might be several reasons but for most people it is “High (Highest) Returns”. This reason can easily fizzle out as it is very difficult if not impossible for schemes to consistently give High(est) returns. Some of the funds have performed consistently well in both up and down markets and have demonstrated their ability to be in the top quartile of funds, but there may be instances where these funds lag the market for various reasons.

Does that mean you should rock the boat at the smallest sign of trouble? The answer is ‘No’. Investing in Mutual Funds like investing in stocks is akin to getting into a relationship. The idea is to share the good and the bad times. Well you will have no problems sharing the great times (read investment rocking or bull markets) but going through a rough patch (read returns lower as compared to peers or bear markets) is testing time for most of us. However there will be times, which will necessitate you to take those tough calls.

Here are 6 such times when you should consider selling your mutual funds.

1. Poor Performance

The first and foremost reason for quitting any investment is that the fund has demonstrated poor performance. Infact this should be the last reason to consider quitting a scheme. First analyze the reasons for poor performance and the period over which the fund has demonstrated poor performance. Is it that the fund manager has taken some stock specific or sectoral calls that have gone wrong? Are some of the stocks out of favor currently? After all the reason that you have opted for a scheme is the track record of the fund manager in managing the scheme in good and bad times. So as long as there is no change in the fund manager you need to take stock whether underperformance for a few months warrants exit from the investment.

There are times when a star manager /fund management team will falter. You should not penalize the fund manager for sticking to the investment mandate of the fund. After all, this is what you would expect from him. However if he does not stick to the investment mandate of the fund but takes calls that he should not be taking, then one can look at moving out. For example someone who is mandated to be invested in equities at all times moves out when he takes the view that the markets are overvalued at 12,600. Since then the markets have delivered 20% and investors have lost on this opportunity. Well you can argue both ways that being in cash is a better strategy or not, a scheme that is mandated to be invested at all points should just do that.

For example Sundaram Select Mid Cap Fund has had consistently more than 22% in cash and this seems to have dented returns. One could attribute the high cash levels to a lack of conviction in the market or the belief that one can time the market. Both these reasons are detrimental to the future performance of a fund.

Keep an eye on the scheme whether it under performing continuously for a couple of quarters. If the fund doesn’t recover after several quarters of underperformance you can look at exiting the fund.

2. Follow the Manager

Fund houses often promote schemes that have done exceptionally well and the fund manager is accorded godly status. The scheme is then aggressively marketed and subsequently new schemes are launched using the star manager’s name. Then suddenly when the fund manager departs, the fund house is quick to do a volte-face and retort that we are a process oriented fund house. The fund house cannot have it both ways. So one needs to be careful of the statements a fund house makes. Take the example of SBI Mutual Fund and Sandeep Sabharwal. There was a lot of noise created around his midas touch during the launch of SBI Bluechip Fund. But as soon as the NFO was over, there was not even a murmur about his departure and exit. Such steps can prove to be harmful for investors. Luckily for SBI, the incoming Head of Equity proved to be as competent as his predecessor and was able to maintain the sheen of most of the SBI funds. Needless to say SBI Bluechip bombed. Similarly Lotus Mutual Fund was purely marketing their schemes on the basis of Sabharwal’s brand and track record. However when he quit the fund house just before the launch of their maiden equity offerings, Lotus seemed to have lost its trump card. There is no strong evidence that a fund’s performance will suffer for sure after a star fund manager’s departure but yes it’s a very important factor.

When a fund manager departs, check whether a competent fund manager with a consistent track record has stepped in. Also check if the fund manager sticks to the investment strategy of the fund or deviates from it. Reading and a finer analysis of the fact sheet will give you a sense whether there has been a churn in the portfolio in terms of stocks , sectors , asset allocation or strategy.

If a team of fund managers manages the scheme, one exit will not disrupt the fund and hence you should stay put and evaluate the investment for two quarters. However if there is an experienced fund manager who comes in the picture, you can look at opting for better options.

3. Size of the Fund

Size of the fund could have impact on a scheme’s returns. Funds such as Reliance Growth, HDFC Equity continue to shine even with a corpus of 3900 and 4400 crore respectively just as they did when they were much smaller in size. However funds such as SBI Magnum Global and Sundaram BNP Paribas Select Midcap seem to have tapered down under the pressure of too much money. This is particularly true for small and mid cap funds as it is difficult to move in and out of such stocks quickly. Reliance Growth had shut shop at 1700 crore but is open for subscription at almost 2.5 times of its previous closure. When closing the fund becomes a fashion nobody wants fresh subscriptions and hence launching a new scheme becomes a no brainer. After all, who wants to have Daal every day?

A look at Sundaram BNP Paribas Portfolio shows around 115 stocks. This shows that there are several marginal ideas besides some excellent ones. When the fund does not know what to do with the new money that comes in, it’s generally time to exit the investment and take it elsewhere. Whether it has 5 star rating or not is immaterial. A fund has got a 5 star rating because of its past performance and not because of its future performance. So 5 star or not, it’s time to look at the door.

4. Are your investments really diversified?

One of my readers had come across had around 40 funds with Rs 10,000 invested in each of them. Infosys was the common stock in 38 of his funds. This does not amount to diversification. Infact 20 stocks were common across 30 of his schemes. There was hardly any element of diversification. The point is having many funds does not mean you are diversified as funds often have similar kind of stocks in one’s portfolio. You can sell most of your funds if you find yourself in such a situation and keep only two funds with a good track record in each category diversified across fund managers, houses, type of stocks, sectors and style of investing. So take a hard look at whether a fund really complements your portfolio and exit where there is significant overlap between the funds.

5. Need Money for a Goal

This is one of the most important reasons to sell a fund. When you need money for a fund and you have achieved your targets, you can move partially 50% in debt or 100% depending on the market outlook. Since it is often difficult to time the markets, it is better to sell your fund and move into debt 6-12 months before you need money for a goal.


6. Rebalancing your portfolio / Moving into Cash or Debt

In today’s market, your equity allocation would have exceeded the figure that you like to have as a part of your portfolio. If this is the case, then you can either move some of your worst performing funds into debt / cash OR add additional funds to the debt part of your portfolio namely FMP’s. It’s best to undertake the asset allocation exercise as an annual ritual.

Finally before you press the Sell button, take stock of the tax implications and exit loads if any. If you can avoid tax by being invested for a few days or months, it makes sense to wait and then sell on completion of 1 year. However sometimes it’s good to exit (at the cost of paying short term capital gains tax and exit loads) if you have made substantial profits in a very short period of time or if the scheme is in deep trouble.

One of the biggest and most common reasons why people sell which I have not mentioned is the worry of market coming down and whether the markets can sustain at 15,000 levels. Well I don’t have the answer whether the markets will stay at this level in the next few days or will correct sharply as the Gloom Doom Guru repeatedly says on business channels. Market moves are random and one certainly cannot predict the next set of moves whether up and down with a consistent level of accuracy.

Corporate India’s report card will be out this week starting with bellwether Infosys and though corporate earnings will slow down from 30% plus levels to higher teen levels, a 15% earnings growth for the next 4 years remains a possibility. This can translate into a 12-15 % return by well-managed diversified equity schemes or for that matter even by balanced funds.

- Amar Pandit

The author is a practising Certified Financial Planner. He can be reached at amar.pandit@moneycontrol.com

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Tata Teleservices (maharashtra) - BUY

Tata Tele (TTML) is a listed subsidiary of unlisted Tata Teleservices Ltd which has pan-India operations. The company provides fixed line, CDMA-based mobile and fixed wireless services in Mumbai and Maharashtra. TTML has efficiently managed to reduce its earlier losses, with strong improvement in EBIDTA margins in past few quarters during FY07. The company posted a Cash Profit of Rs 131 crore for FY07 against Cash Loss of Rs 21 crore in FY06.

The ARPU during Q4 FY07 in mobile business stood at Rs 440, while the cost per subscriber was at Rs 340, which TTML plans to cut down to Rs 300 going forward. This would help it to improve the EBIDTA margins further and also result in reduction of net losses. TTML is likely to become net breakeven in FY09 when the current initiatives undertaken would start paying-off. Thus we expect TTML to show strong operational
performance going forward.

The subscriber base of TTML stood at over 30 lakhs as on 31st Mar’07 up from 10 lakhs as on 31st Mar’06. TTML plans to add around 1 lakh subscribers per month going forward and has planned a capex of Rs 500- Rs600 crore for FY08 to expand its coverage in the Maharashtra-Goa-Mumbai telecom circle. Also the company currently has a presence in 410 towns, which it plans to double this during FY08. This would certainly help the company to witness strong improvement in operational performance in next few years.

Financials
Net Sales up by 24% y-o-y with strong improvement in EBITDA in Q4 FY07 TTML has witnessed 24% y-o-y and 5% q-o-q growth in net sales to Rs 380.43 crore. This is backed by the strong growth in subscriber as witnessed during FY07. Also the company is witnessing strong improvement in EBIDTA margins on account of growing scale of operations, which has resulted in some fixed nature costs like Network operation, interconnect-access costs and Administration costs to decline q-o-q in past few quarters.

Thus for Q4 FY07 the company witnessed 135 bps of expansion in EBIDTA margins at 23%, while for FY07 the EBITDA margins witnessed robust expansion of 921 bps at 20.45%. Also going forward we believe the margins to improve further with the operating cost per subscriber declining further from Rs 340 as witnessed in Q4 FY07.

Net loss down by 22% q-o-q and 70% y-o-y during Q4 FY07 Though the company continued to witness net loss for the fourth quarter of FY07, the same has declined by 22% q-o-q and 70% y-o-y to Rs 45.90 crore in Q4 FY07 on account of strong improvement in operational efficiency. Since the company is in its growth phase and incurring huge capex, the depreciation cost is high due to which it has been making losses at its bottomline. During Q4 FY07 the depreciation cost was up by 3% q-o-q but declined by 20% y-o-y to Rs 104.48 crore. During FY07 the net losses reduced by 43% yo-y to Rs 310.61 crore.

Valuations
At current market price of Rs 29.40, TTML is quoting at EV/Sales and EV/ EBIDTA of about 4.95x and 22.62x respectively of its TTM earnings as on Mar’07.

Risks
- The future growth of TTML’s business is dependant on its ability to expand its network capacity, which is limited by the amount of the frequency spectrum available for its use. Thus the company’s network expansion plans might get materially affected if it is unable to obtain additional spectrum, which is an industry-wide phenomenon.

- Rapid changes in technology may render the company’s current technologies obsolete or require it to make substantial capital investments.

Growth
- Telecom Services Providers market grew at CAGR of 52% over last 2 years, while TTML grew at a CAGR of 89% in the same period.

- On the operational front the company’s current initiatives are helping it to cut down on costs, which have resulted in strong improvement in EBITDA margins, significant improvement in cash profits and productivity.

- TTML would focus on rural areas to drive its growth, where currently it is witnessing over 60% q-o-q increase in subscriber base, which stood at 2 lakhs in Q4 FY07 up from 1.09 lakhs in Q3 FY07.

- TTML is currently in its fourth year of wireless operations, a huge market yet to be explored, which going forward would yield strong revenues for TTML.

- TTML had incurred capex of Rs 738 crore in FY05, Rs 507 crore in FY06, Rs 564 crore in FY07 and plans to incur Rs 600 crore capex in FY08.

- The numbers of sites of TTML for providing services have also moved up from 694 in FY05 to 1234 in FY07.

Since the company is currently making losses, it could not be compared on PER basis with the peers in the Telecom Industry. However on EV/Sales and EV/ EBIDTA it is trading at cheaper valuations. Also in terms of EV Per Subscriber the company is cheap compared to peers. We believe TTML would witness strong growth from the current smaller base with its plans of adding 1 lakh subscribers every month. Also the current initiatives would further improve its operational efficiency thereby wiping-off all the losses and witnessing strong growth momentum going forward.

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