DOMESTIC:

BHEL bags Rs2,759cr order for 800 Mw unit in Tamil Nadu.

USFDA inspects two units of Aurobindo Pharma; makes observations.

Wipro picks stake in Pune startup Altizon Systems. GAIL seeks ethane import from US for USD5bn

petrochem plant. Grasim to spend over Rs4,000cr on capacity expansion

in 2016-17 fiscal. Birla Corporation to move court against Lafarge-

Holcim. Sun Pharma, Lupin launch generics in US. Camlin Fine in pact to acquire 65% stake in Mexican

firm Dresen Quimica. Bharat Biotech gets breakthrough in developing Zika

vaccine. GCPL arm acquires majority stake in Kenyan firm

Canon Chemicals.

ECONOMY:

Indian growth robust powered by domestic engine, says Nomura.

Over USD150bn investments required for smart cities. RBI keeps repo rate unchanged at 6.75%, CRR stays at

4%; EMIs unlikely to change.

INDUSTRY:

New private banks may get 74% FDI from the beginning .

RBI tells banks to conduct internal audit. Infosys, Wipro join Barack Obama’s USD4bn ’Computer

Science for All’ education plan. Government's gas pricing formula not viable to develop

KG gas: ONGC.

TM

THE WEEKLY WRAP-UP 5th February 2016

Price Performance (%)

Company 1M 3M 12M

Supreme Petrochem Limited 2% 8% 69%

Indian Hume Pipe Co. Limited -17% -4% 5%

Shanthi Gears Limited -16% -13% -33%

Hind Rectifiers Limited -21% -4% -14%

KCP Limited -16% -25% -2%

Navneet Education Limited -2% -7% -22%

Harita Seating System Limited -1% 6% 78%

Camlin Fine Sciences Limited -4% -10% 2%

GEE Limited -29% 23% 45%

Hester Biosciences Limited -23% -20% 33%

West Coast Paper Mills Ltd -25% -11% 2%

Rallis India Limited -8% -18% -29%

The Hitech Gears Limited -16% -3% -23%

Bharat Bijlee Limited 42% -1% 39%

Castrol India Limited -8% -9% -14%

Engineers India Limited -25% -5% -16%

One Year Sensex Performance

Coverage Universe Valuations

Company CMP Reco. Tgt price Upside Mcap EV/Sales (x) EV/EBITDA (x) PE(x)

(Rs) (Rs) (%) (Rs bn) FY16E FY17E FY16E FY17E FY16E FY17E

Supreme Petrochem Ltd** 113 BUY 150 32.9 10.9 15.2 10.3 0.3 0.2 6.5 4.3

Indian Hume Pipe Co.Ltd 352 BUY 475 35.1 8.5 16.3 11.4 9.1 8.1 8.4 6.8

Shanthi Gears Ltd 89 BUY 150 68.9 7.3 63.9 50.3 3.8 4.0 25.7 23.6

Hind Rectifiers Ltd 77 BUY 110 43.8 1.2 63.6 14.5 1.2 0.9 23.6 10.1

KCP Limited 69 BUY 105 53.1 8.8 22.3 15.8 1.7 1.5 10.1 8.5

Navneet Education Ltd 83 BUY 130 56.4 19.8 13.4 11.7 2.0 1.8 8.1 7.2

Harita Seating System Ltd 391 BUY 600 53.5 3.0 30.9 22.7 1.1 1.0 19.7 15.5

Camlin Fine Sciences 102 BUY 140 37.4 9.8 12.5 9.6 1.7 1.5 9.3 7.6

GEE Limited 39 BUY 70 77.7 0.9 17.1 12.3 0.7 0.6 6.6 5.8

Hester Biosciences Ltd 465 BUY 750 61.3 4.0 28.5 23.4 4.2 3.3 14.6 11.9

West Coast Paper Mills Ltd 59 BUY 110 87.7 3.9 11.1 3.0 0.6 0.5 3.6 2.9

Rallis India Limited 162 BUY 260 60.1 31.6 20.7 16.2 1.9 1.6 11.7 9.6

The Hitech Gears Limited 268 BUY 450 67.7 5.0 18.8 14.4 1.0 0.9 8.0 6.8

Bharat Bijlee Limited 837 BUY 1100 31.5 4.7 83.6 38.7 0.9 0.7 28.5 24.4

Castrol India Limited* 412 BUY 650 57.7 203.9 31.2 29.1 5.2 5.0 19.9 18.5

Engineers India Limited 180 BUY 325 80.7 60.6 17.2 16.4 2.0 3.0 13.1 19.7

*Castrol India– December Ending | ** Supreme Petrochem—June Ending

15000

20000

25000

30000

35000

40000

5-Feb-15 5-Apr-15 5-Jun-15 5-Aug-15 5-Oct-15 5-Dec-15 5-Feb-16

The week that went by: The indices were under pressure ahead of the Reserve Bank of India’s (RBI) monetary policy review scheduled during the week. The sentiments were further suppressed after Standard & Poor’s Ratings Services stated that India will face challenges in sticking to the fiscal consolidation roadmap as the expected revenues may not be fully realized and subsidy cuts may be delayed. The muted trend continued following the other Asian markets. The positive movement of the crude oil prices did give some respite to the markets.

KEY RESULTS Indian Hume Pipe Co ltd The company reported subdued results with a drop of 25.1% in the net sales at Rs1,988mn as compared to Rs2,656mn in the same quarter last year. Subsequently, the profits also dropped by 49.8% to Rs63mn from Rs125mn in the comparative quarter last year. The Ebidta margins came in at 11.2%. The balance value of orders in hand as on date is Rs3,038cr as against Rs2,050cr in the same quarter last year. Construction contracts of water supply schemes, pipe supply and laying projects segment of the company reported a drop of 25% as compared to the same quarter last year. The others’ segment also dropped by 56% during the quarter.

Our Comments: During initiation of report on the company, we had indicated that one cannot gauge the growth of the company through quarterly reporting analysis. This is evident through this quarter results. The subdued performance is mainly due to the pouring of the orders to the subsequent quarters. We had initiated BUY call on the stock with a target price of Rs475 and maintain the same.

Navneet Education Limited The net sales recorded of drop of 15.8% at Rs1,132mn as compared to Rs1,345mn in the same quarter last year. The Ebidta margins stood at 11.3% (17.8% in the comparative quarter). The net profit also dropped by 50% to Rs67.6mn from Rs118.4mn in the same quarter last year. The publishing content segment recorded a drop of 12% in the sales at Rs719mn. Also the stationary products segment showed a drop of 23% in the sales during the quarter.

Our Comments: Due to the seasonal nature of the business, one cannot gauge the company performance on the basis of quarterly results. Overall with the company venturing into new areas in the education space, incredible market share in the regions of Maharashtra and Gujarat and strong margins across the publication segment. We had recommended a BUY on the stock with target price of Rs130.

TTK Healthcare Ltd The company reported total income of Rs1,307mn for quarter ended December 31, 2015 in comparison to Rs1,208mn for same quarter last year, an increase of 7.8% on y-o-y basis. It remained flat on sequential basis from Rs1,298mn in Q2FY16. Net profits jumped 74% on y-o-y basis at Rs72.9mn as against Rs41.9mn in the period last year. It rose 54.5% on q-o-q from Rs47.2mn in quarter ended September 2015.

Our Comments: The company has come out with excellent set of numbers. The pharmaceutical segment of the business has seen a good jump in profits as a result of which the Ebidta margins have improved significantly.

TM

Subdued results as orders move to

next quarter

Results on expected lines

Good set of numbers backed

by pharma division

Indian growth robust powered by domestic engine, says Nomura As indicated by Nomura, rising disposable income, a normal monsoon, boost from the sixth pay commission and public infrastructure by the government will support India's growth next fiscal even as the rest of the world faces concerns. India's growth is holding up due to a robust local economic environment even as the rest of the world is jittery, the economists said comparing India's composite leading index to the seven richest countries of OECD.

Our Comments: Nomura expects India's economic growth to improve to 7.8% in fiscal year ending March 2017 up from 7.6% in March 2016.

Over USD150bn investments required for smart cities The Modi government’s vision of creating 100 smart cities will require an investment of about USD150bn in the next few years, with private sector being a significant contributor. The government has already initiated two programmes with an initial outlay of nearly USD7.5bn for the Smart Cities Mission and the Atal Mission for Rejuvenation of Urban Transformation (Amrut) for upgrading 500 existing cities.

Our Comments: Over the next 10-15 years, these cities will emerge as key technology, economic, and social hubs for the country.

RBI keeps repo rate unchanged at 6.75%, CRR stays at 4%; EMIs unlikely to change The Reserve Bank of India kept its policy rate on hold at 6.75%, as widely expected, opting to wait until after the government's annual budget statement at the end February to decide on whether to cut interest rates further.

Our Comments: Having cut the policy repo rate by 125bps in 2015, RBI Governor warned against straying from the path of fiscal consolidation or relaxing the fight against inflation.

India's exports may fall to USD265-270bn in FY16: FIEO The country's exports will range between USD265-270bn in 2015-16, sharply lower than the USD310.5bn achieved in the previous fiscal, as per the exporters' body FIEO. Exports contracted for 13th month in a row in Dec2015 as outward shipments shrank 14.75% to USD22.2bn amid a global demand slowdown.

Our Comments: As per the exporters body, the export development fund which currently has a corpus of Rs200cr is inadequate and should be enhanced to 0.5-1% of export value which is anywhere between Rs3,000 to Rs5,000cr. The Commerce Ministry has also supported this demand.

Government's gas pricing formula not viable to develop KG gas: ONGC ONGC has sent an urgent message to Petroleum Ministry, saying the natural gas prices according to a formula approved by the BJP-led government was not viable to develop its KG basin discoveries and has requested the government for a review.

Our Comments: The rate, according to this formula, comes to $4.24 per million British thermal unit currently. This price, as per ONGC is not enough to support multi-billion dollar investment for developing the gas finds, most of which are in deep sea and difficult areas.

TM

KEY NEWS ANALYSIS

Domestic factors to boost Indian Economy

growth

Investments for the smart cities plan

Policy rate on hold

Exports on a downturn as per FIEO

Non viability indicated by ONGC

New private banks may get 74% FDI from the beginning Those applying to set up private banks may be allowed to have overseas investment to the tune of 74% right at the beginning rather than five years later, a move that will help aspirants meet stringent capital norms. The government and the Reserve Bank of India (RBI) are giving final shape to the licensing guidelines. RBI granted approvals for new banks in the private sector in 2014, the first time it did so in a decade.

Our Comments: Bankers are of the view that, in the present circumstances, any entity looking to set up a private bank will need to raise capital from abroad. "It is a wise decision on the part of RBI, as new banks will have an avenue to raise resources to meet their capital requirements," said an executive director at a state-run bank.

RBI tells banks to conduct internal audit All public sector and private banks have been asked by the Reserve Bank of India to conduct a “thorough internal audit” and put the report before their respective audit committees, as part of the central bank's efforts to check fraudulent foreign exchange transactions. The move comes in the wake of irregularities that came to light last year in Rs6,100cr import remittances effected by Bank of Baroda’s Ashok Vihar branch in New Delhi.

Our Comments: The RBI was asked to provide details of action being taken by it to check fraudulent forex transactions by banks. The RBI has asked Bank of Baroda to conduct a bank-wide review of the outward remittances to rule out similar wrong doings at other domestic branches and submit a report thereof to it. The bank has since completed the internal audit and placed the report before its audit committee for directions. The Bank of Baroda has also selected a consultant to review its Know Your Customer (KYC), Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) policy and practises, to set up robust systems.

Infosys, Wipro join Barack Obama’s USD4bn ’Computer Science for All’ education plan Three major Indian information technology firms, Infosys Ltd, Tata Consultancy Services Ltd and Wipro Ltd have joined US President Barack Obama’s “computer science for all” initiative as part of a public-private collaboration, pledging thousands of dollars in grants. According to the White House, the TCS and Infosys pledge is part of the National Science Foundation’s (NSF) effort to collaborate with the private sector to support high school computer science (CS) teachers.

Our Comments: This collaboration will ultimately provide opportunities for as many as 2,000 middle-and high-school teachers to deepen their understanding of CS.

Solar, wind projects may attract USD20bn investment: IREDA As per IREDA Solar and wind projects in the country would attract USD20bn investment each year from next fiscal until 2018-19. Of the USD10bn of investments, the share of solar has been to the tune of USD5bn and that of wind USD4.3bn.

Our Comments: SECI would come out with floating tenders for solar capacities in next two weeks as the government has already asked it to commission solar energy projects with capacities of 3,000 mw by March 2017.

TM

KEY NEWS ANALYSIS

New banks to get 74% FDI from

beginning

All private and public banks to

have internal audit

IT Biggies to join the computer

science for all plan

Investments into renewable energy

resources

BHEL bags Rs2,759cr order for 800 Mw unit in Tamil Nadu BHEL has bagged an order of Rs2,759cr for setting up a unit of supercritical thermal power project in Tamil Nadu. Significantly, this will be the first ever 800 Mw supercritical set based power plant in the state. Valued at Rs2,759cr the main plant package contract for the 1x800Mw North Chennai Supercritical TPS Stage III, has been placed on BHEL by the Tamil Nadu Generation and Distribution Corporation (TANGEDCO).

Our Comments: The project is expected be commissioned by August 2019. BHEL's scope of work in the current contract involves design, engineering, manufacture, supply, erection, commissioning & civil works for the Main Plant Package.

USFDA inspects two units of Aurobindo; makes observations Aurobindo Pharma said two of its facilities have undergone inspection by US health regulator USFDA, which has issued observations for one unit. The said facilities underwent pre-approval inspection by the United States Food and Drug Administration (USFDA) and there was no Form 483 issued to unit III. With regard to unit VII, there were certain observations.

Our Comments: The company however did not provide any details about the observations made by FDA. The company is appropriately responding and said that there has been no perceived impact on operations and exports from the said facility. The company's unit III facility is a multi-product oral dosage form facility while unit VII formulations facility in Hyderabad manufactures oral non-antibiotic products.

Wipro picks stake in Pune startup Altizon Systems Wipro has picked up a 20% stake for Rs9.78cr in Pune-based Altizon Systems Pvt Ltd, a startup that is focused on the so called Internet of Things and Big Data technologies. Wipro will resell the Datonis platform for global customers under the Wipro brand as part of the agreement.

Our Comments: Altizon, founded in 2013, has built a platform called Datonis that allows organisations to build connected devices, process device data and gain insights from that data. The so called Internet of Things' focus aligns with Wipro's IoT platform technology stack.

GAIL seeks ethane import from US for USD5bn petrochem plant GAIL India plans to import ethane from countries like the US for a USD5bn petrochemical plant it is setting up in Andhra Pradesh jointly with Hindustan Petroleum Corp Ltd. GAIL will be the second company after Reliance Industries to plan import of ethane.

Our Comments: GAIL-HPCL plan to set up an ethane cracker plant. The plant will make

ethylene, which is the most commonly produced petrochemical.

GCPL arm acquires majority stake in Kenyan firm Canon Chemicals Godrej Consumer Products Ltd (GCPL) has acquired a majority stake in Kenya-based Canon Chemicals Ltd for an undisclosed sum. Canon Chemicals manufactures and distributes products in the personal and home categories. Its major brand is Valon, a petroleum jelly.

Our Comments: In the past few years, GCPL has been acquiring brands, specially in the Afri-can continent, mostly targeting local firms in emerging markets.

TM

STOCKS NEWS ANALYSIS

800mw supercritical power project for

BHEL

Aurobindo under the USFDA scanner

Wipro to invest in a start-up firm

GAIL to import ethane

GCPL acquires in its target countries

Grasim to spend over Rs4,000cr on capacity expansion in 2016-17 fiscal Grasim Industries will spend more than Rs4,000cr on capacity expansion of its various businesses namely cement, chemicals and VSF in the coming financial year. While the company will invest Rs3,800cr on its subsidiary, cement maker Ultratech, in 2016-17 fiscal, it will pour in Rs255cr in its VSF and chemicals business during the same period.

Our Comments: Going ahead in the VSF segment, the firm said it will continue to focus on expanding its domestic market through product development activities, working closely with brands, designers and retailers. In the case of cement, the demand is expected to pick up in the near term with the government’s focus on infrastructure development, housing sector, smart cities, roads, among others and the firm is well positioned across the country to cater to the growth in demand.

Birla Corporation to move court against Lafarge-Holcim Birla Corporation’s Rs5,000cr deal with Lafarge India to buy two cement units has gone sour, with the former planning to seek a legal solution. The company said that it is in the process of taking appropriate legal measures in consultation with lawyers. It also claimed Lafarge had stated its “inability to proceed with the agreement.”

Our Comments: Lafarge-Holcim, however, confirmed that it is no longer in discussion with Birla Corporation for the sale of Jojobera and Sonadih cement plants in eastern India.

Sun Pharma, Lupin launch generics in US Sun Pharmaceuticals and Lupin have launched the generic versions of top selling drugs with 180 days’ sale exclusivity in the US market. Sun Pharma has launched the generic version of Novartis’ anti-leukemia drug Gleevec after receiving USFDA approval in December last year. The product had total sales of USD4.5bn globally and USD2.5bn in the US, according to IMS data. On the other hand, Lupin has launched the generic version of Valeant Pharmaceuticals’ diabetes drug Glumetza. The company has 180-day exclusivity for the product, which had sales of USD450mn in the US.

Our Comments: The product launches will give a boost to the US business of the two companies, which have been hit by fewer approvals as well as regulatory compliance issues. Both the firms reported a drop in revenue from the US market in the second quarter of FY16. For the two companies, the US market accounts for 40-50% of the total revenue.

Bharat Biotech gets breakthrough in developing Zika vaccine Bharat Biotech claimed significant progress on two of its promising vaccines for Zika infection. The firm has been working on the virus for a year and one of the vaccines has now reached the stage of pre-clinical testing in animals. While one is a recombinant vaccine, the other is an inactivated one.

Our Comments: As indicated by the management, it could take at least two years to launch the Zika vaccine, provided the government takes an aggressive stand on expeditious regulatory approvals after declaring a national emergency. In the normal course, it takes 7-8 years for the vaccine to reach the market.

TM

STOCKS NEWS ANALYSIS

Birla corp and Lafarge in a tiff

Sun, Lupin launch generics

India cracks on the vaccine for Zika

Grasim chalks out the capex plan

Electrosteel sets up USD6.6mn warehouse in Bahrain Electrosteel Castings, the world's third largest producer of ductile iron (DI) pipes and ancillary products, inaugurated its USD6.6mn warehouse in Bahrain. The USD6.6mn warehouse in Bahrain will be "a one stop solution for water projects, for the Bahrain & Middle East markets" as indicated by the company.

Our Comments: The Bahrain facility will act as Electrosteel's regional hub for sales and

distribution activities to the Northern Middle Eastern markets.

COVERAGE STOCK NEWS

Camlin Fine in pact to acquire 65% stake in Mexican firm Dresen Quimica Camlin Fine Sciences Limited informed that the Company's subsidiary CFS ANTIOXIDANTES DE MEXICO S.A. DE C.V., Mexico (CFS Mexico) has entered into a share Purchase Agreements to acquire 65% stake in an entity in Mexico along with its proposed group companies, which shall be subject to certain conditions being fulfilled prior to the said acquisition. The company has acquired the stake for an aggregate of USD78,00,000 and it will be completed by May 02, 2016.

Our Comments: Through this deal, Camlin fine has further consolidated its position in the Mexican market by buying out one of its competitors there. This further boosts our conviction in the stock and we maintain our BUY call on the same with a target price of Rs140.

Engineers India OFS oversubscribed 2.54 times Engineers India Ltd informed its Offer for Sale has been oversubscribed 2.54 times indicating enthusiastic response from all category of investors. Under the OFS, the government is offering 33.6 million shares to the public thereby disinvesting 10% of its equity in the Public Sector Undertaking. The floor price for the share sale was fixed at Rs189 per share of face value of Rs5.

Our Comments: The EIL OFS received overwhelming response from retail investors which is borne out from the fact that the OFS registered participation of 3.9 times from this category of investors. As indicated by the company, the success of the offer raises hopes for the government's disinvestment programme in the remainder of the current fiscal.

TM

STOCKS NEWS ANALYSIS

Electrosteel sets its warehouse in place

Camlin to consolidate its Mexican hold

Bumper response to the EIL OFS

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TM