MARCH 10, 2010

Economy News Equity 4 Over 50% of Indian companies will have to make higher provisions in % Chg their balance sheets as gratuity expenses. This follows last week’s Union 9 Mar 10 1 Day 1 Mth 3 Mths Cabinet decision to raise the tax-free ceiling of gratuity payable to Indian Indices private sector employees from Rs 0.35mn to Rs.1 mn. (BS) SENSEX Index 17,053 (0.3) 6.3 (0.4) 4 India's top tyre firms are reluctantly holding prices, risking a hit on profit NIFTY Index 5,102 (0.4) 6.4 (0.2) margins, despite a recent surge in input costs as they wait for prices of BANKEX Index 10,295 (0.2) 9.8 1.4 natural rubber to stabilise from a current record high. The price of the BSET Index 5,310 0.8 6.8 8.0 BSETCG INDEX 13,891 (0.8) 6.2 2.4 most traded RSS-4 (ribbed smoked sheet) rubber hit a record high of BSEOIL INDEX 9,650 (1.3) (0.4) (7.1) Rs.14,425 per 100 kg on Saturday on demand from tyre-makers as well CNXMcap Index 7,564 (0.6) 4.5 3.1 as a poor crop this season. (ET) BSESMCAP INDEX 8,531 (0.7) 3.7 7.2 World Indices Corporate News Dow Jones 10,564 0.1 5.0 2.2 Nasdaq 2,341 0.4 8.8 7.2 4 Tata Motors’ largest promoter, Tata Sons, bought 4mn shares of the FTSE 5,602 (0.1) 9.6 7.7 former from Daimler for Rs.3 bn, thus raising its stake in the commercial Nikkei 10,568 (0.2) 6.0 7.1 and passenger vehicle giant by nearly one per cent. From the limited data Hangseng 21,208 0.1 6.4 (2.3) released by the (BSE), Daimler AG has completed the sale of its entire stake in Tata Motors, India’s biggest Value traded (Rs cr) automobile company, for Rs.19.24 bn. (BS) 9 Mar 10 % Chg - Day 4 Bosch Ltd has declared lock-out at its Naganathapura Plant near here Cash BSE 7,230 49.0 with effect from last night, after talks with workers over wage revision Cash NSE 13,109 (13.7) Derivatives 52,434 (12.1) failed. “The decision has been taken considering the safety of employees, machineries and installations, as a result of workmen associates of the Net inflows (Rs cr) plant resorting to physical intimidation of managers and officers of the 8 Mar 10 % Chg MTD YTD plant during their ‘Go Slow’ strike and the subsequent ‘Tool Down’ FII 2,259 20 5,119 6,097 strike,” the company said in a statement. (BS) Mutual Fund (201) (62) (448) (2,477) 4 UK-based media house Independent News & Media (INM) sold 7.5% or FII open interest (Rs cr) over half of its remaining holding in publishing group Jagran Prakashan 8 Mar 10 % Chg for Rs.2.55 bn to a bunch of domestic and foreign funds. Block deal data on exchanges show INM sold the shares at Rs.111 a share, a discount of FII Index Futures 10,697 0.2 9.3% to Jagran’s closing price of Rs.122.40 a share on the Bombay Stock FII Index Options 34,491 1.6 Exchange on Monday. The deal happened yesterday. (BS) FII Stock Futures 26,130 1.1 FII Stock Options 774 (1.4) 4 The government will provide Rs.95 bn for recapitalisation of public sector banks in the first quarter next year, while about Rs.70 bn will be infused Advances / Declines (BSE) during the rest of the financial year 2010-11. R Gopalan, secretary, 9 Mar 10 A B S Total % total Department of Financial Services, told that banks which did not have a Advances 50 634 176 860 34 CAR of 8% or above would get priority. , Declines 154 1,206 257 1,617 64 , Central , , Indian Unchanged 0 44 9 53 2 Overseas Bank, , UCO Bank, , Canara Commodity % Chg Bank and IDBI Bank are likely to benefit from the move. (BS) 9 Mar 10 1 Day 1 Mth 3 Mths

Crude (NYMEX) (US$/BBL) 81 (0.3) 9.0 15.2 Gold (US$/OZ) 1,122 (0.2) 4.7 (0.8) Silver (US$/OZ) 17 0.1 13.6 (0.7)

Debt / forex market 9 Mar 10 1 Day 1 Mth 3 Mths

10 yr G-Sec yield % 7.97 7.78 7.71 7.69 Re/US$ 45.64 45.53 46.67 46.55

Sensex

18,000

15,500

13,000

10,500

8,000 Source: ET = Economic Times, BS = Business Standard, FE = Financial Express, Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 BL = Business Line, ToI: Times of India, BSE = Bombay Stock Exchange MORNING INSIGHT March 10, 2010

EVENT UPDATE MUNDRA PORT & SEZ (MPSEZ) Apurva Doshi [email protected] +91 22 6621 6308 PRICE: RS.715 RECOMMENDATION: ACCUMULATE TARGET PRICE: RS.750 CONS. FY11E P/E: 32.6X

q Stock up sharply (47%) since our last BUY recommendation at Rs.501. q Port volumes up 13.8% YoY in 9MFY10 to 29.8 MMT q Increased SEZ sales could bring further upsides to our earning estimates q Remain positive on long term growth prospects q However, the stock is fairly valued at 32.6x FY11E EPS of Rs.22.0 q Due to limited upside potential of 5% we downgrade the stock of MPSEZ to ACCUMULATE with unchanged price target of Rs.750

We had recommended BUY on MPSEZ in November 2009 at Rs.501. Since then the Summary table - Consolidated stock has risen sharply by 47% to touch an intraday high of Rs.736 and finally closed (Rs mn) FY09 FY10E FY11E at Rs.716 yesterday. It has also outperformed the broader markets. Due to limited Sales 11,949 14,817 20,538 upside potential of 5% form the current levels we downgrade the stock of MPSEZ to Growth (%) 46.3 24.0 38.6 ACCUMULATE with unchanged price target of Rs.750 as we are positive on the EBITDA 7,340 10,256 14,308 long term growth prospects of MPSEZ. EBITDA margin (%) 61.4 69.2 69.7 Net profit 4,325 7,044 8,812 Net debt 16,006 15,384 25,043 Comparative price performance EPS (Rs) 10.8 17.6 22.0 Growth (%) 105.6 62.9 25.1 DPS (Rs) 2.0 2.5 3.5 150 MPSEZ SENSEX ROE (%) 15.6 21.9 22.7 ROCE (%) 13.9 16.9 18.5 140 EV/Sales (x) 25.3 20.4 15.2 130 EV/EBITDA (x) 41.3 29.5 21.8 P/E (x) 66.3 40.7 32.6 120 P/CEPS (x) 49.5 32.6 24.1 P/BV (x) 9.8 8.2 6.8 110

Source: Company, Kotak Securities - Private 100 Client Research 90 5-Jan 2-Feb 9-Feb 2-Mar 3-Nov 1-Dec 8-Dec 12-Jan 19-Jan 26-Jan 16-Feb 23-Feb 10-Nov 17-Nov 24-Nov 15-Dec 22-Dec 29-Dec

Source: Bloomberg

Long term positives for MPSEZ n It enjoys natural advantages like deep water draft of 17.5 meters and proximity to industrial areas n Long term contracts lends safety to the business n Setting up SEZ over 31900 acres - to help to ensure steady flow of cargo n In April - December 2009 while the traffic at Major ports of India grew by 5.1% the traffic at Mundra Port grew by impressive13.8% in 9MFY10 n Won the bid to operate coal terminal at Mormugao port and Non LNG berth at Hazira Port n Looking to be a pan India port operator in couple of years n Strategic investments in Dahej port, container train operations and inland container depots to ensure efficient and seamless movement of cargo n Future positives: ship building facility, LNG terminal, MRO for aircrafts

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Cons. Revenues (Rs. bn) Key Risks 25.0 n Slowdown in economy could impact the global trade thereby negatively impact the volume of cargo being handled at Mundra Port 20.0 n Slower then expected sale of land in SEZ would impact the Financials. Also the 15.0 company is at various stages of acquisition of 13000 acres. Inability to acquire 10.0 these would negatively impact the financials of MPSEZ.

5.0 MPSEZ one year forward rolling P/E band

- 1,500 Price 15x 25x 35x 45x 1,250 FY04 FY05 FY06 FY07 FY08 FY09 FY10E FY11E 1,000 Source: Company, Kotak Securities - Private Client Research 750 500

Cons. EPS (Rs.) 250 25.0 -

20.0 Jul-08 Jul-09 Jan-08 Jan-09 Jan-10 Mar-08 Mar-09 Nov-07 Sep-08 Nov-08 Sep-09 Nov-09 May-08 May-09 15.0

10.0 Source: Capitaline, Kotak Securities - Private Client Research

5.0 Trading above its average P/E band - We have also done one year forward rolling P/E band analysis for MPSEZ which revealed that it traditionally traded between 15x to 45x with average of 32x one FY05 FY06 FY07 FY08 FY09 FY10E FY11E year forward P/E band. Currently it is trading at 32.6x FY11E EPS of Rs.22.0 and thus it is trading above its average P/E. Thus it reinforces our view that it is fairly valued Source: Company, Kotak Securities - Private Client Research at current levels.

Valuation & Recommendation n We maintain our earning estimates and expect MPSEZ to report Cons. EPS of Rs.17.6. for FY10E moving upto Rs.22.0 for FY11E. We also maintain our SOTP based price target of Rs.750. n We have already built in strong port volume growth in our earning estimates and thus we feel it leaves little room for upward revision in port financials. However there could be further upsides to our earnings estimates for SEZ as couple of large SEZ deals could lead to significant increase in revenues and more importantly profitability as it enjoys ~95% operating margins in the SEZ business. n At Rs.715, the stock trades at fair valuations of 6.8x book value, 32.6x earnings and 24.1x cash earnings based on FY11E. We now recommend to n We continue to remain positive on the long term growth prospects of the ACCUMULATE on Mundra Port company primarily due to its integrated business model coupled with superior with unchanged price target of infrastructure consisting of multi cargo port, SEZ, Airport, Rail and Road Rs.750 connectivity. Also the industries in the surrounding SEZ would provide steady flow of cargo to the port. This would ensure steady growth in volume of cargo handled at the port. n However due to recent sharp increase in stock price, its outperformance to the broader indices, good long term potential and limited upside potential of 5% from the current levels we are downgrading the stock of MPSEZ to ACCUMULATE with unchanged price target of Rs.750.

Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 3 MORNING INSIGHT March 10, 2010

Bulk deals Trade details of bulk deals Date Scrip name Name of client Buy/ Quantity Avg. Sell of shares price (Rs)

9-Mar ACI Infocom Alok Gupta S 60,000 21.4 9-Mar ACIL Cot Inds Akash Kumar S 65,000 27.1 9-Mar Action Fin Sachin Dhiraj Gala HUF B 50,000 20.3 9-Mar Bafna Pharma Sasikala Bafna B 102,950 29.7 9-Mar Bihar Tubes Jaipur Engineering & Electricals Ltd B 265,786 94.7 9-Mar Bihar Tubes Umesh Purushottam Chamdia S 250,000 94.6 9-Mar Birla Shloka Sarswati Vincom Ltd S 131,764 63.2 9-Mar Camson Bio Sanatan Herbal and Naturals Limited S 175,000 125.6 9-Mar Cochin Mnrl Suryakant Dalmia B 50,000 71.5 9-Mar Cochin Mnrl Dalmia Securities Private Limited S 50,000 71.5 9-Mar Deep Inds Arcadia Share & Stock Brokers Pvt. Ltd S 131,961 114.6 9-Mar DMC Intl Bharat Gupta B 160,224 21.8 9-Mar Fiem Inds Param Commodities Pvt.Ltd. B 100,750 103.6 9-Mar Fiem Inds Manmohan Damani S 100,000 103.6 9-Mar Hind Inds Equity Intelligence India Private LTd B 100,000 29.2 9-Mar Hind Inds Litty Thomas S 84,637 29.3 9-Mar Imp Powers Percept Financial Ser. P. Ltd S 50,400 104.7 9-Mar Indsil Hydro Bakliwal Fincom Private Limited B 56,494 72.2 9-Mar Insutech India Absolute Leasing & Finance Pvt Ltd S 37,358 26.1 9-Mar Integra Ind Sharad Shah B 8,301 399.3 9-Mar Jaipan Inds Motilal Oswal Financial Services Ltd B 37,299 28.9 9-Mar Jaipan Inds Sonu Singh S 46,771 29.3 9-Mar Jaipan Inds Sanjay Agarwal S 71,952 29.1 9-Mar Jaipan Inds Ramesh Agarwal S 57,418 28.9 9-Mar Kadamb Constr Jayshree Somani S 250,000 41.6 9-Mar Kadamb Constr Samyak International Ltd S 89,400 42.0 9-Mar Kailash Ficom Goodness Trading Private Limited B 71,600 26.3 9-Mar Kailash Ficom Abhijai Investment B 71,500 26.3 9-Mar Kailash Ficom Bikash Sureka B 74,000 26.3 9-Mar Kailash Ficom Acme Pvt. Ltd. S 100,000 26.3 9-Mar Kailash Ficom Shree Bahubali International Ltd S 55,482 26.3 9-Mar Lyka Labs Haresh Shantichand Jhaveri B 109,000 28.2 9-Mar Lyka Labs Shantav Subramanian S 109,279 28.2 9-Mar Maestros Med Jugalkishore Mohanlal Maheshwari B 30,000 60.0 9-Mar Maestros Med Saroj Jugal Maheshwari B 63,341 60.0 9-Mar Maestros Med Pinnacle Trades and Investments S 60,000 60.0 9-Mar Mafatlal Inds Manisha Rao B 46,000 149.7 9-Mar Mah Poly Ankita Financial Services Pvt. Ltd B 100,000 155.6 9-Mar Mah Poly Fort Share Broking Pvt Ltd. S 200,151 155.6 9-Mar Mah Poly Hitesh Mulchand Pithadia S 93,000 155.1 9-Mar Mahindra Forg Limit S 1,029,230 121.9 9-Mar Mounteverest Mukund Motor Parts Pvt Ltd S 13,043 125.9 9-Mar Odyssey Corp Ranisati Dealer Private Limited B 42,100 71.1 9-Mar Omkar Overs Arvind Kashmirilal Punjabi B 70,000 60.8 9-Mar Omkar Overs Prakash Kumar Devshilal Sheth B 28,000 60.5 9-Mar Omkar Overs Bhutiya Hitesh Kanabhai B 25,000 60.5 9-Mar Omkar Overs Manish Suresh Joshi S 26,000 60.5 9-Mar Omkar Overs Falguniben Mahavirbhai Gohil S 30,278 60.8 9-Mar Omkar Overs Vishal M Ramnani S 25,000 60.5

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Trade details of bulk deals Date Scrip name Name of client Buy/ Quantity Avg. Sell of shares price (Rs)

9-Mar Omkar Overseas Vijaykumar Kashmirilal Punjabi S 35,000 60.8 9-Mar Omkar Overseas Gagan O Arora S 35,000 60.8 9-Mar Omkar Overseas Jhaveri Trading & Investment Pvt Ltd S 30,000 60.5 9-Mar Oregon Comm Shiva Investment B 7,000 204.0 9-Mar Oregon Comm Pradipbhai Rambhai Patel B 15,000 204.0 9-Mar Oregon Comm Patel Shailesh Jivanlal B 18,000 207.9 9-Mar Oregon Comm Ashlesh Gunvantbhai Shah S 5,300 204.6 9-Mar Oregon Comm Paresh Ramjibhai Chauhan S 5,000 205.3 9-Mar Oregon Comm Upendra Somchand Bhatt S 4,800 206.0 9-Mar Passari Cellu Daksha Bai S 30,000 68.3 9-Mar Pee Cee Cosma Sharad K Shah B 13,000 70.0 9-Mar Raj Television Kanchan Chhabra S 71,104 73.0 9-Mar Rama Pulp Amita Kaushik Shah S 40,194 37.6 9-Mar Rama Pulp Ashu Farms Pvt Ltd S 161,450 37.8 9-Mar Ranklin Sol Vijay Kumar Tummala B 34,797 55.1 9-Mar Ranklin Sol Satyanarayana Varaprasad Garikipaty S 36,300 55.1 9-Mar Ranklin Sol Ramesh Kumar Tummapala S 31,301 55.6 9-Mar Rich Capital Scope Vyapar Private Limited B 75,925 83.1 9-Mar Rotam Comm Pradipbhai Rambhai Patel B 20,000 114.7 9-Mar Rotam Comm Raju Kumar Mahipal HUF S 6,600 114.7 9-Mar Sanjivani Par Blossom Investments Pvt. Ltd. B 49,718 51.4 9-Mar Sanjivani Par Neelu and M A Merchant Trust S 49,718 51.4 9-Mar SE Investments Kuvera Capital Partners Llp A/C Kuvera Fund Limited B 407,440 400.0 9-Mar SE Investments Shri Radhe Govind Ice and Cold St S 265,500 400.0 9-Mar SE Investments Gaupal Products Private Limited S 145,000 400.0 9-Mar Shakti Metdor Suryanarayana Penubolusuryanarayana B 25,000 172.0 9-Mar Shakti Metdor Mamidipudi Venkata Ramamohan S 17,000 172.0 9-Mar Shalibhadra Fin Choice International Limited B 50,000 20.9 9-Mar Southern Ispat Arcadia Share & Stock Brokers Pvt. Ltd S 56,881 24.5 9-Mar Spice Islands Shri Parasramholding Pvt Ltd B 38,320 33.1 9-Mar Strides Arco Goldman Sachs Investments Mauritius B 310,000 328.2 9-Mar Strides Arco Zenith Pharamacevticals Limited S 350,000 328.2 9-Mar Sunderam Multi Tannavi Anil Bhayani S 527,102 43.2 9-Mar Tata Motors Tata Sons Limited B 4,000,000 750.0 9-Mar Tata Motors Global Markets Mauritius B 4,653,518 752.4 9-Mar Tata Motors Daimler Ag-Fdi A/C S 25,596,476 751.7 9-Mar TCFC Finance Greenstone Investment Pvt Ltd. B 100,845 30.3 9-Mar TCFC Finance RRB Securities Ltd S 100,000 30.3 9-Mar Tide Water Standard Greases And Specialities B 20,000 5,028.6 9-Mar Tide Water Victory Retail Marketing Pvt Ltd S 20,000 5,028.6 9-Mar Vakrangee Soft Abhirati Trading Private Ltd B 150,000 77.1 9-Mar Well Pack Pap Rameshbhai V Parmar B 25,090 475.0 9-Mar Well Pack Pap Dipika Dinesh Kankaria S 25,500 471.5 9-Mar Women Net Narendra Kumar Surana B 30,500 21.8 9-Mar Women Net Champion Tie Up Services Pvt Ltd S 30,000 21.8

Source: BSE

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Gainers & Losers Nifty Gainers & Losers Price (Rs) chg (%) Index points Volume (mn)

Gainers HDFC 2,659 1.8 4.2 0.9 Infosys Tech 2,684 0.9 4.0 1.0 HDFC Bank 1,811 1.5 3.2 1.2 Losers Reliance Ind 990 (1.4) (8.0) 4.0 Larsen & Toubro 1,589 (0.9) (3.0) 1.1 Tata Motors 776 (2.7) (2.0) 11.4

Source: Bloomberg

Research Team Dipen Shah Apurva Doshi Saday Sinha Shrikant Chouhan IT, Media Logistics, Textiles, Mid Cap Banking, Economy Technical analyst [email protected] [email protected] [email protected] [email protected] +91 22 6621 6301 +91 22 6621 6308 +91 22 6621 6312 +91 22 6621 6360 Sanjeev Zarbade Saurabh Gurnurkar Sarika Lohra K. Kathirvelu Capital Goods, Engineering Media, IT NBFCs Production [email protected] [email protected] [email protected] [email protected] +91 22 6621 6305 +91 22 6621 6310 +91 22 6621 6313 +91 22 6621 6311 Teena Virmani Saurabh Agrawal Arun Agarwal Construction, Cement, Mid Cap Metals, Mining Automobiles [email protected] [email protected] [email protected] +91 22 6621 6302 +91 22 6621 6309 +91 22 6621 6143

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