India Cements has raised $65 million via the qualified institutional placement (QIP) route, which we believe is primarily for the redemption of the $75 million of foreign currency convertible bond (FCCBs) due in May 2011.

The conversion price of the FCCBs is at Rs350, which is far above the company’s current market price. Thus the FCCBs are unlikely to be converted into equity. Further, a portion of the funds raised is also expected to be used for capital expenditure plans.

The company, which is currently setting up a 1.5 million tonne plant in Rajasthan through its subsidiary Indo-Zinc, is also in the process of setting up two 50-MW power projects. The QIP, as per media reports, has been made at a price of Rs120, and is expected to result in an equity dilution of close to 9%. We maintain an ACCUMULATE on the stock, with a target price of Rs136.

• Nagarjuna Constructions –Accumulate- Angel Securities
• Hindustan Construction (HCC) –Neutral- Angel Securities
• RIL –Buy- Angel Securities
• HDFC Bank –Buy- Angel Securities
• Sadbhav Engineering –Neutral- Angel Securities
• ABG Shipyard –Accumulate- Angel Securities

Mundra Port & SEZ stock up sharply (47%) since our last buy recommendation at Rs.501. Port volumes are up 13.8% y-o-y in 9MFY10 to 29.8 MMT.

Increased SEZ sales could bring further upsides to our earning estimates We remain positive on long term growth prospects However, the stock is fairly valued at 32.6x FY11E EPS of Rs22.0 Due to limited upside potential of 5% we downgrade the stock of MPSEZ to ACCUMULATE with unchanged price target of Rs750.

• Medium term view— MUNDRA PORT
• Bhushan Steel –Buy- Kotak Securities
• Mphasis – Accumulate- Kotak Securities
• Wipro Technologies –Buy- Kotak Securities
• Medium term view— Adani Enterprises
• Infotech Enterprises Ltd –Buy- Kotak

The stock hit a recent low of Rs950 in February 2010. Thereafter, it witnessed a rally to the current levels. The recent peak has proved to be major resistance for the stock as seen in the past.

Since February 2010 the stock has been trading along with the support of its short-term trendline. However, on Monday, it closed below the ascending trendline for the first time in last two weeks. Other momentum oscillators are in strong sell mode, suggesting build-up of momentum on the down side.

Keeping in mind the above-mentioned technical evidences, we recommend traders to sell the stock at current levels and on rallies to the levels of Rs1,030 with a stop loss of Rs1,045.

• Crompton Greaves –Buy- India Infoline
• Educomp -Sell –India Infoline
• HCL Tech –BUY- India Infoline
• India Infoline : BUY on Sterlite Industries
• India Cements –Accumulate- Angel Securities
• Mundra Port –Accumulate- Kotak Securities

The management of Orbit Corporation had earlier indicated that the company would launch at least one project every quarter. The company had successfully done so for the last two quarters. In the last conference call after the announcement of the company’s Q3FY2010 results, the management had indicated the launch of five new projects and the first phase of the Mandwa project over the next three to six months.

However, in the current quarter, Orbit Corporation has not launched any project so far and will not do so until the next quarter. One of the primary reasons for this was that people were waiting for the Budget 2010-11 and hence any new launch prior to its announcement might not have evoked a very positive response. This delay would percolate to the next quarter and subsequently delay the launch of the other projects of the company. However, we had built in two new launches in this quarter in our model.

We expected two of the company’s projects—Orbit Residency at Andheri and Orbit Grand at Lower Parel—to reach the revenue recognition stage in this quarter (ie Q4FY2010). However, both the projects will not be able to reach the threshold limit of 25% and hence revenue from these projects will be recognised in the next fiscal.

In the budget 2010-11, a service tax of 10.3% has been proposed on under-construction properties. It will be levied on 33% of the total project cost, thereby taking the net effect on the property price to 3.3%. This 3.3% increase in property prices will not affect the volumes of Orbit Corporation as it caters to the high-income group people.

We are changing our valuation methodology from the price/earnings (P/E) basis to the net asset value (NAV) basis as the latter is more appropriate for valuing a real estate company. Further, we are lowering our earnings estimates for FY2010, FY2011 and FY2012 taking into account the delay in the new launches as well as the delay in revenue recognition from two of the company’s projects.

However, we are positive on the company given the fact the company operates in the key property market—Mumbai—and caters to the luxury segment where marginal price hikes do not affect the volume. Secondly, though the company saw a delay in the project launch in the current quarter but it has a strong project pipeline which provides strong revenue visibility for the quarters ahead. At the current market price, the stock trades at 12.9x FY2011 earning estimates. We revise our price target for Orbit Corporation to Rs340 from Rs393 and our new price target is based on the NAV methodology. We maintain our BUY recommendation on the stock.

• Hindustan Construction (HCC) –Neutral- Angel Securities
• Allahabad Bank –Buy- Sharekhan
• Larsen & Toubro –Hold- Sharekhan
• HDIL inks pre-lease deal with Future Group
• Man Infraconstruction fixes IPO price-band at Rs 243-252
• Bajaj Auto –Buy- Sharekhan

Nagarjuna Construction (NCC) has secured orders aggregating to Rs1,221 crore. The work orders are spread across verticals of road construction, turnkey electrical works and building construction and are to be completed over a span of next 12-30months.

The order book of NCC stands at Rs16,600 crore or 3.5x its FY2010E revenues. At the CMP of Rs163, the stock trades at 16.4x FY2012E Earnings and 1.7x FY2012E P/BV. We recommend an ACCUMULATE on the stock with a target price of Rs186.

• India Cements –Accumulate- Angel Securities
• Hindustan Construction (HCC) –Neutral- Angel Securities
• RIL –Buy- Angel Securities
• HDFC Bank –Buy- Angel Securities
• Sadbhav Engineering –Neutral- Angel Securities
• ABG Shipyard –Accumulate- Angel Securities

The 332,243,200 equity shares follow-on public offer of NMDC, a navratna public sector undertaking, opened for subscriptions today. The price band for the issue, which will close on March 12, 2010, has been fixed at Rs 300-350 per share.

The government has offered a discount of 5% to the offer price to retail individual bidders and eligible employees.

Experts’ opinions were mixed on the issue but they have reached a consensus on the pricing—that it should have been at or below Rs 300 instead of this price band of Rs 300-350. Investment Advisor, SP Tulsian adviced retail investors to apply at Rs 300 per share. R Venkat Subramanian, CIO of Infina Finance Pvt Ltd says, at around Rs 300 maybe it is worth giving a shot. However, Paresh Jain of Angel Broking advised an avoid on the issue.

SP Tulsian said, “We feel that post this issue, share price will correct to its realistic levels, due to increase in float to over 11%, which in our view would be around Rs. 300 per share. So, it is advised to apply in the issue at the lower band of Rs 300 per share and advice is to refrain from applying at the cut off. In all probability, book is likely to get discovered at Rs 300 per share. Hence, it would have been prudent on part of the Govt. to announce the band with narrow range of Rs 25. This wide range of Rs. 50 in price band, indicates lack of confidence, even on part of the Govt. Even QIB category is likely to see offer coming in at around Rs 300 per share. If price gets discovered at Rs 300 per share, net cost of acquisition to them will be Rs 285 per share, which will leave some profit on the table for the prospective retail investors. If by chance, price gets discovered at Rs 350, due to  good response of QIB, it may not sustain on listing of new shares due to increase in float.”

Manish Bhatt of Prabhudas Lilladher says, one should subscribe to the issue at cut-off price with one-year horizon. He expects the pricing may be around Rs 300 per share, so that investors will get shares at Rs 285.

R Venkat Subramanian said, “NMDC price is still a bit of a tough range. I think Rs 250-275 range would have made it very attractive and at Rs 300 it is sort of neither here nor there. So I think at Rs 300 or above Rs 300, the investment bankers would have tough job on their hands. Otherwise the environment is extremely favourable for NMDC, the headlines for iron ore and any kind of resource is so strong that generally there should be investor appetite, there maybe a little bit of churning from even some of the global mining companies that investors are holding into something like NMDC. So it is okay but not great kind of pricing.” “I would think that something like a SAIL is cheaper than NMDC but around Rs 300 maybe it is worth giving a shot,” he has said.

Krishna Kumar Karwa, MD of Emkay Global Financial Services said, “From an investor perspective looking for listing gains probably this is not the issue to subscribe for but from a long-term perspective this is a good investment opportunity. So we are expecting institutional support for the issue and the retail investors’ response maybe slightly lukewarm.

Sandeep Madan, High Networth Individual says, “It is a skip for now, not because of NMDC itself, but because of the way the government has been pricing its issues, FPOs in the recent past. Rs 300 too in my mind is a price which is on the higher side based on all the parameters that one has there to analyse.

Paresh Jain of Angel Broking advised a avoid on the issue.

Amit Dalal, Executive Director of Tata Investment Corporation says, the discount to market price is something that could attract investors and perhaps hopefully there will be larger list of FIIs who will participate in this issue than what we saw in NTPC. “The whole space has become quite expensively priced though iron ore prospects are very good next year, prices of the iron ore have been revised upwards. So they do have an earnings growth potential next year which is perhaps even as good as what we saw last year but issue expensively valued undoubtedly,” he has said.

Source : Money Control

• Won’t subscribe to National Mineral Development Corporation (NMDC) FPO: Sandeep Madan
• NMDC FPO –Avoid- Angel Securities
• NMDC FPO price band at Rs 300-350 per share
• NMDC FPO price-band to be fixed on 8 March; issue opens 10 March

The follow-on public offer of NMDC opened for subscriptions today. The offer comprises a net offer to the public of 330,500,000 equity shares of face value Re 1 each and a reservation of 1,743,200 equity shares for purchase by eligible employees. The offer will close on March 12, 2010. The price band for the issue is fixed at Rs 300-350 per share.

In an exclusive interview with CNBC-TV18, Sandeep Madan, High Networth Individual, speaks about the issue and gives his outlook going forward.

Here is a verbatim transcript of the exclusive interview with Sandeep Madan on CNBC-TV18. Also watch the accompanying video.

Q: Is National Mineral Development Corporation (NMDC) a subscribe or a skip?

A: Basically, it is a skip for now, not because of NMDC itself, but because of the way the government has been pricing its issues, FPOs in the recent past. When promoters do this kind of stuff and have a high pricing on their side, it is understandable, these are group of individuals who want to get the best out of what they have created over a period of time. But government doing that, very clear examples for that is National Thermal Power Corporation, Rural Electrification Corporation (REC) trying to get the last dollar or last penny on the table for that matter, that is a bit surprising. In this case too my concern is the same that the pricing on this has been on the higher side, especially if it gets subscribed at the upper end to the band.

Q: Do you think there is any percentage in looking at it at Rs 300, the lower end of the band? Do you think that may work out for HNIs or you are not convinced even with Rs 300?

A: Rs 300 too in my mind is a price which is on the higher side based on all the parameters that one has there to analyse. But the fact of the matter remains that there has been no clear price determination on this stock for all this while because of the low liquidity with which it has been floating. So today the price that we are talking is the price that has been announced is times higher than the international peers and what one needs to see is that it is an international global market now. So if for any reason iron ore can be brought in from anywhere in the world at a cheaper price, I don’t understand why is something that is mined in India has to get a certain price for the valuation to justify itself.

The argument of growth being in this country is a very fair one. We see that this country is going to grow on a very different scale vis-à-vis the rest of the world. So in that given situation Japan, China, India, the growth story remains. The commodities would be required in plenty, steel would be required based on steel requirements iron ore prices should strengthen. If they do obviously the price going forward should improve from what it is today. Also the stock prices will benefit from that, but then saying that each international company would have the same advantage because now with the global world, this being a global place where trading can be done seamlessly, I don’t understand why something being produced in India, except for the freight part, would make any difference other than that.

Q: So let us talk about a couple of IPOs then, what about something like a DQ Entertainment, is that more interesting or lucrative for an HNI to invest in?

A: Basically the story with the IPOs as of the recent past, except for a couple of exceptions like Cox & King and a couple others, the complete story on IPOs and FPOs has been a disappointment for investors. Most of it, I would attribute to the merchant bankers, lead managers, the way they try to get the best without leaving anything for the investor on the table. Based on that without getting into the specifics or naming any of these particular ones, we have a stream of IPOs that are to come, a few of them open right now and a few of them opening in very near future, my basic concern on these has been the pricing. Everything is good for a price and the same thing could be bad for a higher price. So most of it has to do with the pricing except for a certain company could be bad fundamentals itself, but then those are very few and far. The major issue is the pricing.

Source : Money Control

• NMDC FPO – IPO Analysis, Updates, should you subscribe?
• NMDC FPO –Avoid- Angel Securities
• NMDC FPO price band at Rs 300-350 per share
• NMDC FPO price-band to be fixed on 8 March; issue opens 10 March

The promoter of the private bank says he will consult experts and clear SEBI and RBI ‘misunderstandings’

Pravin Kumar Tayal, the promoter of Bank of Rajasthan Ltd (BoR), has denied any wrongdoing after the capital market watchdog turned up the regulatory heat on him by banning 100 entities it said were related to the bank’s founders. The Securities and Exchange Board of India, or Sebi, also said late on Monday that Tayal and his associates actually own 55.01% of BoR and not 28.60% as has been claimed by the Tayal group.

The 100 entities that were banned by Sebi from dealing in the securities market allegedly violated a number of rules, including takeover norms, and engaged in fraudulent trade practices, the market regulator said.

Tayal denied the allegations. “We do not hold (a) 55% stake in the bank nor are these entities related to us. These are not our entities. We will reply to the order,” he said.

BoR has also been under the scanner of the Reserve Bank of India (RBI) for alleged violation of banking regulations including corporate governance.

The Indian central bank had imposed a penalty of Rs25 lakh on 25 February on BoR for a series of violations including “non-adherence to…money- laundering guidelines in the opening and conduct of certain accounts”, “irregularities in the conduct of accounts of a corporate group”, and “failure to provide certain documents sought” by the regulator. It has also ordered a special audit on the bank.

“We will take the views of experts and clear the misunderstandings of Sebi and RBI,” Tayal said. “Both are important to us.’’

In an order released late on Monday night, Sebi said that the 100 entities had connived with the promoters of BoR to mislead investors about the shareholding pattern of the bank.

While the bank, controlled by the Tayal group, had been declaring a reduction in promoter holding from 44.18% in June 2007 to 28.61% in December, Sebi has found the decline in promoter’s stake “clearly false”. Under RBI guidelines, promoters of banks are required to pare their stakes to 10%.

The holding of the promoters along with their “front entities” had actually increased from 44.71% in June 2007 to 60% in March 2008 and stood at 55.01% in December 2009, according to Sebi.

While such an increase triggers an open offer, the bank skipped Sebi norms and made no disclosures about it.

“…it is prima facie established that the entities had acted in concert with the promoters of BoR with the common objective of substantially acquiring shares/voting rights in BoR indirectly for the promoters for the purposes of camouflaging their acquisition,” Sebi said.

BoR shares fell 6.66% to close at Rs62.35 on Tuesday while the Bombay Stock Exchange’s benchmark Sensex index fell 0.29% to close at 17,052.54 points and its banking index dropped 0.15%.

G. Padmanabhan, the RBI-appointed managing director and chief executive officer of BoR, is confident that the Sebi action will not have any impact on the bank’s fund-raising plans.

BoR plans to raise Rs250 crore through a placement of shares with qualified institutional investors. The bank will take shareholders’ approval for the fund-raising exercise on 11 March.

This fresh capital infusion would dilute Tayal’s stated holding from 28.6% to around 20%. “Unlike retail investors, the institutional investors take a very different view. They look at the inherent strength of the bank,” said Padmanabhan.

In the December quarter, BoR posted a net loss of Rs44.7 crore. Its capital adequacy ratio, or the ratio of capital to risk-weighted assets, stood at 11.29% against the regulatory requirement of 9%. Its non-performing assets as a percentage of loans was 1.05%, in sync with the industry.

“The Sebi order will have no impact on the bank,” Padmanabhan said. “It only impacts a majority shareholder group and this group is in no way involved in the day-to-day running of the bank.”

According to him, the dominant shareholder group has to comply with the regulations. “Even if a group holds (a) majority stake in the bank and gets representation on the board, it cannot influence the working of the bank as banking norms are very stringent. This is a professionally run bank,” Padmanabhan added.

The banking regulator has appointed Deloitte Haskins and Sells to audit BoR’s lending policy while Deloitte Touche Tohmatsu has been hired to audit the information security system.

Source : Live Mint

• Australia and New Zealand Banking Group (ANZ) to re-enter India after a decade
• Banks hike home, auto loan costs
• Vijaya Bank expects Rs700 crore of recapitalization
• South Indian Bank –Buy- Edelweiss
• HDFC Bank –Buy- Angel Securities
• United Bank IPO to open on Feb 23, price band at Rs 60-66

The benchmark Nifty saw another lacklustre session of trade but consistently managed to hold the 5100 mark for third consecutive day. It was positive in first half of trade while turned extremely volatile in second half of trade. Heavyweight Reliance Industries (RIL) helped the index to remain positive throughout the session despite some small blips along with volatility; the stock gained nearly 2%.

The Sensex closed at 17092, up 39 points and the Nifty was at 5116, up 14 points, as per provisional data.

Today’s new listing - Texmo Pipes closed at Rs 139.05, up 54.50% over its issue price of Rs 90 per share.

Top gainers on the BSE Midcap: M&M Financial, BF Utilities, Asian Star, Cox and Kings and Blue Star were up 4-7%.

Top losers on the BSE Midcap: Balrampur Chini, Bajaj Hindusthan, Triveni Engineering, Shree Renuka and REI Six Ten were down 3-7%.

Top gainers on the BSE Smallcap: Force Motors, Nitin Fire Protection, Zylog Systems, Man Industries and Orbit Corporatin were up 7-20%.

Top losers on the BSE Smallcap: Dhampur Sugar, Aditya Birla, Gemini Communications and Ajmera Realty were down 5-6.5%.

• Nifty ends flat; broader indices outperform
• Sensex rallies further; RIL, SBI, NTPC, JSPL, BHEL lead
• Sensex cheers Union Budget 2010; auto, metals, banks lead
• Markets pare gains to end flat on cautious sentiments
• The Sensex closed down 120.01 points at 15,922.17; eight of its components ended in the green
• Markets end 0.4%; Satyam, telcos gain

British opposition says deal has been signed too close to the polls, pledges to review contract if it’s elected

With a general election due in June in the UK, a £600 million (Rs4,104 crore) contract the British government awarded last week to Tata Consultancy Services Ltd (TCS) has come in for political criticism in that country.

The main opposition in the UK, the Conservative party, has vowed to review the contract if it comes to power.

“The original procurement timetable called for contracts to be signed end-June. So we were very surprised when this timetable was suddenly accelerated,” the Conservative party’s shadow pensions minister Nigel Waterson wrote in an email to Mint. “Our view is that contracts of this sort should not be signed so close to the election.”

If the deal is cancelled after its first phase, which ends in October, TCS, India’s biggest information technology (IT) firm, may end up with a revenue of only £25 million from the contract—for setting up and maintaining the IT infrastructure of the UK’s state pensions scheme that’s expected to benefit millions of Britons.

TCS did not respond to Mint’s queries. Mint had reported on 16 December that TCS was the only company left in the fray for the UK’s National Employment Savings Trust, or NEST, project. TCS was selected through an international competitive bid by the Personal Accounts Delivery Authority, or PADA, under the UK government’s department for work and pensions.

Last week, the Conservative party voted against the auto enrolment legislation—critical for the implementation of the pension scheme—in the House of Commons to protest against the Gordon Brown government’s decision to sign the contract close to the elections.

Waterson said the Conservative party is “intent on holding an immediate review of NEST” if it wins the election. He said a review would not necessarily involve a fresh tendering process to select a new service provider, but the party would not be “constrained in any way by a contract signed in the dying days of this government”.

A shadow minister is a part of a grouping of senior leaders of the opposition who form an alternative cabinet to monitor the activities of the government.

Shadow ministers often become cabinet ministers if the opposition comes to power.

PADA defended its decision to award the contract to TCS. The contract is structured such that in October, at the end of its first phase, the new government can choose not to continue with TCS for the rest of the project, a PADA spokesperson said.

The seven-month, first phase of the contract will allow “TCS to commit actual resources and manpower”, the spokesperson said. “Signing the contract now provides value for money by securing the terms and conditions established during competitive dialogue.”

The spokesperson said the terms were consistent with the government’s commitment not to enter into long-term contracts at this point in the electoral cycle.

“The contract we are proposing is entirely consistent with that, whilst enabling PADA and TCS to get on with their work and derisk the implementation of the scheme,” the spokesperson said.

The contract is critical not just for TCS but also for other large Indian firms that are chasing opportunities in the £10 billion public sector technology outsourcing market in the UK, currently dominated by European IT firms.

Mint had reported on 3 December that an increasing amount of back-office and IT-related work was expected to be outsourced by the UK government as part of its efforts to trim expenditure.

Among large Indian IT firms, TCS has been more successful in winning deals from the UK public sector. In the last few months, it has won at least two other large contracts from UK public sector bodies.

But other firms such as Arbejdsmarkedet Tillaegspension Group, Great-West Retirement Services (Europe) Ltd and Logica Ltd had opted out of bidding for the pension scheme TCS has won, saying the project was not commercially viable.

Milan Sheth, partner, technology advisory services, at consultancy Ernst and Young, said TCS has in the past successfully demonstrated its ability to undertake large volume work at relatively lower margins.

“TCS has a large India practice, especially in the government space, and they know how to play that game,” Sheth said. “In any case, it will increase their visibility in UK’s public sector market and may help in opening up new opportunities in the future.”

TCS caught in political crossfire

• TCS successful bidder for project to set up IT framework for state pensions scheme

• The decision to award contract too close to general election in June, says opposition

• Opposition vows to review the contract if/when it comes to power

• Contract structured in two phases, with first phase running to October worth £25 million

• The new government can decide not to continue with TCS for the second phase

Source : Live Mint

• Mphasis announces Q1 results; net up 27.29%
• Budget 2010 : IT Cos seek tax sops beyond 2011
• Wipro Technologies –Buy- Kotak Securities
• Wipro eyes acquisitions in healthcare, telecom sectors
• NIIT Technologies soars on securing Rs 228 crore Government project
• Zensar Technologies Ltd – Buy- Kotak Securities