Sharekhan maintains `Hold` on Bharti Airtel

Sharekhan has recommended `Hold` on Bharti Airtel with a price target of Rs 383 as against the market price (CMP) of Rs 373 in its report dated Sept. 27, 2010. The brokerage house gave the following investment rationale:

Recently, there has been a strong run-up in the stock price of Bharti Airtel (Bharti; +42% in the past three month, +18% in the past one month). The strong performance was on account of a series of factors including improving domestic environment, positive industry news flow (consolidation talks and dilution of Telecom Regulatory Authority of India [TRAI]`s draconian 2G recommendation) and fund houses shoring up the under owned status of the stock in their portfolios on the back of higher liquidity flows.

We reckon the positive news flow and factor in the same by assigning a higher multiple to the stock (from the earlier 15x FY2012 earnings to 16.5x FY2012 earnings). Our revised price target for the company stands at Rs 383. Post the recent upsurge, the stock offers limited upside from the current levels, and hence we maintain our Hold recommendation. Going forward, improving profitability and actual execution of the stated targets of the African business would be the key monitorable for the stock. Any slippages on the same would lead to underperformance.

Domestic environment improving

In the last three quarters, there has been a considerable improvement in the domestic telecom environment which has witnessed reduced competitive intensity as is visible in the form of lower tariff reduction and strong volume growth. On the tariff side, the revenue per minute for Q1FY2011 showed a modest decline of 5.4% as against the sharp sequential decline of 7-8% witnessed in FY2010. Along with stabilising tariffs, there has been a strong upsurge in the volume growth witnessed by Bharti in the last three quarters. For Q1FY2011, the overall minutes of usage for the quarter stood at a phenomenal 190 billion minutes (a 10% quarter-on quarter [Q-o-Q] growth ie 2.1 billion minutes per day), which is the highest ever growth in the minutes reported by an operator.

Robust African business guidance and increasing scope for improvement

The management remains upbeat on the acquired African business and has time and again reiterated its stance that it would focus on Revenue Market Share (RMS) and improvement in the cost structure as the key profitability drivers for the business. It has set a target to achieve USD 5 billion in revenues and USD 2 billion in earnings before interest, tax, depreciation and amortisation (EBITDA) by FY2013 from the African operations, implying a 11% compounded annual growth rate (CAGR) in revenues and 25% CAGR growth in EBITDA, with EBITDA margins targeted to rise from the current 28% to approximately 40% by FY2013.

Valuation gap bridged, further upside limited

Though we reckon the positive news flow and factor in the same by assigning a higher multiple to the stock (from the earlier 15x FY2012 earnings to 16.5x FY2012 earnings),
our revised price target for the company stands at Rs383. Post the recent upsurge, the stock offers limited upside from the current levels, and hence we maintain our Hold recommendation on the stock. Going forward, improving profitability and actual achievement of the stated targets of the African business would be the key monitorables for the stock, and any slippages on the same would lead to underperformance.

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Aircel to spend $500 million for the 3G launch by 2011

New Delhi Sep 29 (IANS) Telecom service provider Aircel Wednesday said it would spend over $500 million to roll out its third generation (3G) service in India in the January-March quarter of 2011.

'We will launch the 3G services in the first quarter of the next year,' said Gurdeep Singh, chief operating officer.

The company, which has over 45 million subscribers, expects the number to shoot up to over 75 million customers with the rolling out of the 3G services.

The company has won spectrum for 13 new circles across the country, including Delhi (Metro) and Mumbai (Metro).

Initially, it will launch the 3G service in top 10 cities of each circle and then cover the rest of the territories.

Aircel is a joint venture between Maxis Communications of Malaysia and India's Apollo Hospital Enterprise, in which Maxis holds a majority 74 per cent stake.

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It's official, Mahindra Satyam FY10 loss at Rs 125 cr

Mahindra Satyam (formerly Satyam Computer) today reported a consolidated loss of Rs 124.60 crore for year ended March 2010, a far better show from the previous fiscal when it had plunged into a deep crisis after founder B Ramalinga Raju admitted to multi-crore rupee scam.

Helped by a sharp reduction in employee cost at Rs 3,981.10 crore in 2009-10 from Rs 6,073.7 crore in the previous year, the company reduced the net consolidated loss from Rs 8,176.8 crore in 2008-09.

In FY09, the company had to incur exceptional expenses related to the scam.

Cash and bank balances were to the tune of Rs 2,176.8 crore as on March 31, 2010. The loan balance as of March 31, 2010 was Rs 422 crore.

The results of Mahindra Satyam were keenly awaited across industry and markets as the real financials were shrouded in mystery after the scam --said to be India's biggest corporate fraud-- came to the light in 2009.

The audited numbers would now give a clear picture about the financial health of the company. The scam had thrown up many questions on corporate governance and accounting practices.

Mahindra Satayam audited financial results are coming after a gap of nearly two years. The company had obtained exemption from the Company Law Board from publishing audited results for the past two fiscals after its takeover by Tech Mahindra in April 2009.

Following the shocking revelation of an accounting fraud in Satyam Computer, a government-appointed board headed by Deepak Parekh, had taken over the administration of the company. Tech Mahindra later took the reins of the company after a transparent bidding.

"With this announcement today, we have fulfilled an important commitment and kept to our promise of transparency and agility. It also marks the beginning of a more significant journey of growth and the future," Mahindra Satyam Chairman Vineet Nayyar said.

Mahindra Satyam CEO C P Gurnani said the company will take two years to turn around.

The total income of the company stood at Rs 5,481 crore for the last financial year. In 2008-09, total income was Rs 8,812.6 crore.

Exceptional items stood at Rs 7,992 crore and Rs 416.9 crore for the fiscals 2008-09 and 2009-10, respectively.

"We will inculcate the highest values of Corporate Governance, for which the Mahindra group is renowned for, in shaping the future of this organisation," Nayyar said.

Tech Mahindra took over reins of the company in April 2009 and rebranded it as Mahindra Satyam.

Post the takeover by Tech Mahindra, the company had taken many cost-cutting measures like downsizing, relocation of office premises. The fruits of these measures can be reaped in 2012 only.

The company employs over 27,000 people.

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Expect rally to continue, use dips to buy: Experts

The equity benchmarks continued consolidation for the second consecutive day and closed on a flat note on Tuesday.

KR Bharat, MD, Advent Advisors says for India in particular and for equity markets in general, the liquidity situation is likely to prevail for some time going forward. “So, I think this party is going to continue.”

He thinks days like today present opportunities for people to get back in.

He further says the earning season is unlikely to throw up any unpleasant surprises. “As long as the strength of liquidity continues, I do not think October is going to be a problem.”

However, Bharat still expects that big correction to come although not in the near future. “I have changed my mind now about the big correction, I am still very sure it’s going to happen, I just think it’s been pushed away into, let’s not say distant future, but certainly not in the near future at all.

Rahul Mohindar, viratechindia.com advices investors to stay long. “I wouldn’t read too much into this fall because we have seen quite a good recovery. We have seen it on fairly decent volumes.”

Mohindar thinks stock specifically there are several ideas even now on the frontlines where one can look at 5% to 10% kind of an appreciation with short terms. “So, clearly maintain the longs on the Nifty; 6,120 odd, the target we have been talking about, is still very much intact. Key support for this market, 5,970 is an important support level for short-term traders. So, those looking at this market with a week or two perspective, that’s a support level to keep in mind, even ahead of that. I think all put together it certainly makes way to stay long.”

Below is a verbatim transcript of KR Bharat’s interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: I remember the last time we spoke in the first week of September, the markets have pretty much blown the lights out since then. How much more of an upswing you think?

A: Let me start by saying that I think in this battle between liquidity and fundamentals, liquidity is the winner. That’s the way it’s going to continue for a while going forward. I have been racking my brains to figure out why, if at all, this huge amount of excess liquidity that’s found it way into equity markets in general and India in particular could or should reverse.

Apart from coming up with reasons like should there be another crises in the Western world, I cannot think of anything except actually economic recovery on the ground in the US and in Europe, which might move some of this money back from financial assets into productive assets as any cause for this liquidity to reverse. I personally don’t see that happening in a hurry. Therefore, I think this party is likely to continue. As you were discussing some time back, there will be corrections along the way, there will be minor spooks. But for India in particular and for equity markets in general, I think this liquidity situation is likely to prevail for some time going forward. So, I think this party is going to continue.

Q: Are you taking profits now or it is more prudent to not preempt tops and just keep riding the party?

A: What I have done I think I might have alluded to this in one of your earlier shows is the core portfolio, which is in long-term holdings, is absolutely intact. I am not taking profit on any of that because those stocks are held for a certain period of time for achievement of certain milestones, which maybe one-two-three years down the road. I don’t see any problem at the micro level in India, so those stocks are where they are.

The remaining part of the portfolio where as I have confessed, I was in cash until sometime ago has been shifted to more of an opportunistic kind of portfolio. There you keep taking profits, you keep waiting for corrections, and you keep getting back in because like I said I have admitted defeat at the hands of this whole liquidity boom. So, there you keep taking profits and getting back in and so on, but the core portfolio, absolutely not.

Q: There has been some bit of anxiety across the global set up in last couple of trading sessions, not too much, but would that concern you at all?

A: That has concerned me for the last eighteen months. I have not felt shy of saying so that concerns me even today which is why I started this conversation by saying that liquidity has been fundamental. It is very difficult to justify why markets are where they are today, globally, maybe less so in India. But even in India you could make a case for this market being expensive, certainly not cheap. But markets elsewhere look much more expensive. I think, therefore, that financial markets in general are highly prone today to any kind of shock that comes into the system.

I think, yes, there are plenty of causes for concern. I have been highlighting issues like Greece and Ireland and so on for almost 15-18 months. Those concerns have not gone away, those problems cannot be wished away regardless of who does the accounting jugglery. I don’t think the basic problem with the balance sheets of American banks has gone away. Fed printed trillions of dollar and that money went into the banks, but the real estate prices in that part of the world hasn’t gone up. Therefore, the intrinsic problem has still not gone away.

So, it is a very difficult situation we find ourselves in where excess liquidity is driving prices higher and everybody including myself is having great fun at this party. But as we go along and as prices go up and as time goes along, there are more and more causes for concern. But as I keep saying unless there is a huge disaster waiting for us around the corner, which I cannot see, it is going to be a while before that big correction that I was talking about comes to pass.

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L&T Finance to file DRHP for Rs 1500 cr IPO

L&T Finance, the non-banking financial company of L&T is planning to file Draft Red Herring Prospectus (DRHP) for Rs 1500 crore initial public offering (IPO), reports CNBC-TV18 quoting NewsWire18.

L&T Finance had listed its non-convertible debentures (NCDs) on the NSE a year ago, closed today at Rs 1085 as against a face value of Rs 1,000 per debenture.

L&T Finance to file DRHP for Rs 1500 cr IPO

Earlier on August 30 this year, AM Naik chairman of the company had said in an exclusive interview to CNBC-TV18 , "Our IPO will be coming late this year. So, I think investor will know our run rate of profit. L&T brand, which everybody knows is a super brand, also people attach a lot of trust on the world L&T. So, therefore, when they have to come to invest, they feel little more comfortable. So, there is a brand value attached to it, there is a trust value associated with it, there is company’s results, which are far better than I would atleast have expected. By end of the year the picture will be clear, so people will begin to see value."

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PlayBook Tablet is BlackBerry's Revolution

BlackBerry makers Research in Motion just proved it can innovate with the PlayBook, a major new platform that vaults BlackBerry out of its doldrums and potentially back into the top rank of hot consumer technologies.

The 7-inch PlayBook is a radical break for a company that's been used to evolutionary steps, and some of its specs beat the competing iPad and Samsung's Galaxy Tab easily. The PlayBook's dual-core, 1-Ghz ARM Cortex-A9 processor, for instance, is faster than anything the competition has to offer.


The PlayBook runs a new operating system, which is based on QNX Neutrino, a product RIM bought earlier this year. Neutrino is a modern, UNIX-like operating system that currently runs in many embedded systems, including cars. According to RIM, developers will be able to build apps for the PlayBook based on a range of technologies, including Java, Flash, Adobe Air, OpenGL, and RIM's "WebWorks" HTML widget platform.

The PlayBook has two cameras, 1080p HD video playback, and—as expected, but still shockingly—apparently no modem, at least at the moment I'm writing this. Instead, it may rely on pairing with an existing BlackBerry handheld. It's unclear whether the PlayBook will work for folks who don't already own BlackBerrys.

This is a very dangerous trick. Smartphone "companions" tend not to sell well to consumers. People get confused by "one thing that requires another thing." Even Apple has trouble getting some iPhone owners to sync with their PCs. If the right enterprise apps are available, though, businesses may take to this easily managed, secure solution. And if it connects to Wi-Fi without a BlackBerry, the PlayBook could actually be the first RIM device someone owns - and they might then follow up with a phone.

Almost as importantly as the device itself, the PlayBook shows that RIM isn't boring. The mobile market seems to be dividing into two camps: fast innovators such as Apple and Google, who adapt quickly to market conditions with a dizzying array of new software, and lumbering behemoths such as Nokia and Microsoft who seem to always be a year behind.

When RIM launched the BlackBerry Torch earlier this year, analysts worried that it was too conservative, too worried about its enterprise base, and too comfortable with its number-one position in the U.S. to want to upset its apple cart. The BlackBerry Torch and BlackBerry 6 OS got good reviews (not least from myself), but they were seen as an evolutionary step.

The PlayBook is not evolutionary. It's big, it's exciting, and it's risky. It's an aggressive gamble that could set the agenda and actually cause Apple to chase behind—or it could be an expensive boondoggle that falls flat.

Which way the PlayBook goes depends, in large part, on sales, marketing, and app developers. Like with the Samsung Galaxy Tab, RIM is staying mum on the PlayBook's price. That's worrying. The device also has to have the right apps, and RIM needs to explain to users why they want it and how to use it. Will it be sold through business channels? Through carrier stories? At Best Buy?

RIM is taking a huge set of risks here, but only big bets win big. A successful PlayBook could keep RIM where they want to be, at number one.

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Anil Ambani mulls public issue, commercial bank for group firms

Mumbai: A public issue, entry in commercial banking and sale of strategic stake to an investor were among a slew of proposals unveiled by the Reliance Anil Dhirubhai Group for three companies during their respective shareholder meetings here Tuesday.

Ahead of CWG, it's about slumdogs v millionaires

Group Chairman Anil Ambani, who presided over the back-to-back meetings from 10 a.m. to 3 p.m., also set an ambitious target of 25,000 MW of energy capacity by 2015 and announced a new initiative on infrastructure lending with a target of $11 billion as asset base.

Anil Ambani group scrips end higher on plan announcements

'The Reliance Anil Dhirubhai Ambani Group is by far the youngest of all large business houses in India, yet we already rank among the top 5 on every important financial and operating parameter,' Ambani told the shareholders.

'In a short span of just four years, our group market capitalization has risen to over Rs.125,000 crore ($27.5 billion), ranking us amongst the top four business houses in India,' he told the shareholders of the three companies.

Reliance Power to raise capacity to 5,000 MW in 2 yrs

The companies were Reliance Power, Reliance capital and Reliance Communications and Amabni's near-to-medium-term plans outlined for them saw their scrips end higher on the Bombay Stock Exchange.

For Reliance Power, the Group chairman said the target was to raise the capacity manifold over the next 24 months to touch 5,000 MW, with an overall target of 25,000 MW by 2015, against the present capacity of 600 MW.

This company, he said, had concluded India's largest fundraising exercise worth $11.1 billion to finance 10,000 MW worth of projects, helping financial closure for two ultra-mega power projects of 4,000 MW each-at Sasan in Madhya Pradesh and Krishnapatnam in Andhra Pradesh.

He also announced an outlay of over $2 billion for the 2,400 MW power project at Samalkot in Andhra Pradesh. The construction for this unit, which had already started, will be completed by 2012, the shareholders were told.

'Split in Reliance empire has benefited India'

For Reliance Communications, India's second largest telecom firm, he said there was a proposal not just to induct a strategic investor with up to 26 percent stake, but also a public issue for its now independent towers arm.

'There is substantial interest in the market for such an offering given that we are now the only telecom operator in the country without a foreign partner,' he said, adding the idea was to become a debt-free company in three years.

On Reliance Infratel, the infrastructure arm now hived off into a separate entity, Ambani said discussions were on with strategic investors to unlock value and create a truly independent, operator-neutral tower company.

'We also have the possibility, if considered appropriate, of combining such a transaction with a possible initial public offering. For this we have necessary approval already from the Securities and Exchange Board of India,' he added.

Ambani said five years ago Reliance Communications had less than 10 million customers. But today, it had expanded to over 115 million, making it India's second largest and among the world's top four single-country operator.

'Reliance Communications will now lead the next wave of change-India's second telecom revolution,' he said, adding third generation (3G) telephony and high-speed data access were high on priority.

'My vision is to make India a 'wire-free' country where every Indian has access to high-speed data at the click of a mouse, the press of a key.'

India among 25 nations to undergo IMF check-ups

At the earlier meeting, the Group chairman said Reliance Capital was committed to playing role in India's infrastructure space and the nation-building endeavour, since over $1 trillion was to be spent in this area over the next few years.

'Reliance Capital will leverage this unmatched domain expertise of our group to offer customized financing solutions to vendors, suppliers and contractors, with targeted returns on equity of 18-20 percent,' he said.

'Our target is to create, in a phased manner, an asset base of over Rs.50,000 crore in the next three-five years.'

He said Reliance Capital was the first Indian insurance company to announce its plans for listing in 2009 and that the group awaited the guidelines in this regard from the industry regulator.

'Once this is done, we will explore the possibility of creating value for our investors by listing our life insurance business,' he said, adding entry into commercial banking space for which rules had just been framed was also top on the agenda.

'We have always regarded banking as a high priority and a huge potential opportunity, and are evaluating the different options contained in the guidelines.'

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