BSEIndia: All Stock Market News: 03/08/08

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A TIME COMMUNICATIONS PUBLICATION

VOL. XVII No. 17

Monday, March 10 - 16, 2008

Pages 22

Market on tenterhooks

as sentiment turns nervous and tentative

By Sanjay R. Bhatia

The markets continue to display weakness during the course of last week. Negative global cues along with lacklustre

budget announcements kept the markets on tenterhooks. Selling pressure was evident at higher levels as traders and

speculators built short positions. Volumes recorded remained amidst negative breadth of the market during this

truncated trading week. Incidentally, FIIs remained net sellers in

the cash segment, but were net buyers in the derivatives segment.

Mutual funds, however, remained net sellers during the course of

the week.

Global cues remained negative. The US economy continued to give

out negative economic signals, while crude oil prices touched a

new high of $105 per barrel. Inflation continued to remain a

concern for the Indian economy as it touched 5.02% for the week

ended 23

February 2008 and has crossed RBI's comfort level of 4-

4.5% for the medium term. The market sentiment remained

nervous and tentative. Participation remained lacklustre due to

lack of confidence.

With no domestic triggers in sight this month, the markets will

certainly take cues from the global markets. Any negative global cues will add to the selling pressure in our markets.

Occasional flare-ups may be witnessed due to short covering and some value based buying at lower levels due to the

attractive valuations. Budget related stock specific action will be witnessed amidst occasional bouts of volatility and

choppiness.

Technically, the Sensex has support at the 15,699 and 14,141 level. On the upside, the Sensex faces resistance at the 16,608

and 17,022 levels. The 4482 and 4074 are important support levels for the Nifty. On the upside, the Nifty faces resistance

at the 4899 and 5025 levels. Investors should avoid making fresh purchases.

Budget and subprime blues

BAZAR.COM

By Fakhri H. Sabuwala

Markets are down the world over but leading stock market investor Warren Buffet is the richest man in the world at $62

billion. What came as a pleasant surprise is that four Indians made it to the first ten ranks of the globally rich in the Forbes

list. Apart from L. N. Mittal and the Ambani brothers, it is DLF chief, K. P. Singh, who made it among the top ten. This

appears very pleasant in the backdrop of the harsh reality of a cool off on the bourses all around.

Budget blues or subprime blues, call it what you may, the gloom shall turn darker with every passing day. The firming up

of crude oil at $105 per barrel is sending shivers down the government's spine. If petrol and diesel is sold at realistic

levels, inflation may spin out of hand but if subsidised more, it may imbalance the country's arithmetic. It's a real tricky

situation for the FM at a time when his main concern is to win votes for his party and ensure its return to power.

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To add to the woes, the US subprime tremors have begun to be felt on Indian bourses as Indian banks have been hit by

the US subprime losses. ICICI Bank has taken a hit of US $263 mn. while some PSU banks are also feeling the jitters. Bank

of India with an exposure of Rs.1200 cr. in Credit-Linked Notes (CLNs) leads the sad pack.

All this developed after the Budget, but the market was nervous from the word go. The interference is simple for such an

outcome. FIIs are withdrawing funds, fears of a recession looms large, local players are bleeding profusely since 22

January 2008 massacre and people with money do not have the confidence to invest while those tempted to invest lack

liquidity. An ideal situation for bear operators to go on a selling spree and make a fast buck in the circumstances.

But even in such difficult times, the market offers some wonderful stories for medium to long-term investments. Going by

the Rs.16534 cr. allocation for health care, the cut in excise to 8% from 16% on all pharma goods augurs well for pharma

scrips in general. Exemption of excise on anti-Aids drug 'Atazavir' and cut from 10% to 5% on bulk drugs used to

manufacture these products is a positive trigger for Cipla, Glenmark, Ranbaxy and Cadilla.

Reduction in customs duty on life saving drugs and bulk drugs from 10% to 5% benefits the above four together with Sun

Pharma and Nicholas Piramal.

The introduction of new Sub Section (11C) in Section 80IB of the Income Tax Act to grant a 5-year tax holiday to new

hospitals built outside the urban agglomerations between 1

April 2008 to 31

March 2013 is a big positive for the private

hospitals and hospital companies and may be a boon for Apollo Hospitals and Fortis Healthcare.

Fortis is an upcoming hospital and healthcare company and has huge expansion plans, which include setting up branches

all around. It has tied-up with almost every realty player to be a part of the townships they build. At Rs.78, this scrip

appears to be a multibagger in coming years.

Somewhat similar, is the five year income tax holiday to new two, three and four star hotels set up in specified districts

having UNESCO-declared 'World Heritage Sites'. The hotel should be constructed and commence functions between 1

April 2008 to 31

March 2013. A boon indeed for Indian Hotels, Royal Orchid, Kamat Hotels, EIH etc.

Thus it is time to explore such tax holiday themes and invest in them for the medium-to-long-term. Today, times may be

difficult and trying and we may not be at the end of the tunnel. Even if we are, there is light here. So move on.

Lower range to be tested

TRADING ON TECHNICALS

By Hitendra Vasudeo

In last week's update, we had indicated a directional movement. The

directional movement was expected on the back of a triangle pattern

breakdown. The trend line was violated in the week ended on

Friday 29/02/08 and last week's movements were the effect of the

breakdown.

Last week, the Sensex last week opened at 17227.56 and maintained

the same as the high for the week. Further, the Sensex fell down to a

low of 15689.92 and closed the week at 15975.52. The Sensex thus

registered a week to week fall of 1602 points last week.

The Sensex violated the 200 day moving average (DMA) and

remained below it for the last 4 trading days. Last time, when the

Sensex moved below the 200 DMA was when the it corrected from

12671 to 8799 in 2006. At that time, the Sensex was below the moving average for 3 trading days and oscillated before it

for one day. After remaining below the 200 DMA for 3 trading days, it started moving up and then comprehensively

maintained above it to rally and make a new high. This time, we need to see how long it will remain below the 200 DMA.

Since the rise from 2904 (April'03) to 21206 (Jan'08), we give importance to two major corrective cycles with this rising

phase. The first was from the high of 6249 to 4227. This correction was 32% and lasted for 19 weeks. Further, it took 47

weeks to cross the top of 6249. The second major corrective cycle with the overall rise from 2904 to 21206 was the fall from

12674 to 8799. This fall was 30% in magnitude which lasted for 5 week and it took 23 weeks to cross the peak of 12674. The

current fall from 21206 to 15532 is 28% and happened in 2 weeks. The fall in 2 weeks was like a shock and caught

everyone unaware of what was happening without any warning or time to react to the situation. Later, a pull-back was

witnessed offering some opportunity to exit the frontline stocks whereas mid-caps and small-caps continued the falling

sequence. Finally, in the last 1 ½ week, we saw a normal market with sustained selling. It is a difficult choice for many to

come out and sell to take a loss. But those who attempt to sell irrespective of loss or profit ultimately benefit in the sense

that losses are reduced and the attempt is to restore capital. Those who were not able to execute the sell order are now at

the mercy of the market and live on hope!

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On the weekly chart, the

Sensex has violated an

important trend line taken

from the low of 4227 and

8799 on the log scale. The

trend line seems to have

been violated at the end of

last week. The panic low

of 15532 is yet to get

violated. A

fall and

weekly close below 15532

would confirm the trend

line breakdown.

WEEKLY UP TREND STOCKS

Weekly resistance will be

at 16297, 16905 and 17228.

Weekly support will be at

15300 and 13830.

Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy

with what ever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to

Level 3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value

then the trend will change from Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal

of the up Trend.

Last

Center

Relative

Weekly

Close

Point

Strength Reversal Trend

Scrips

Level 1 Level 2

Level 3 Level 4

Value

Date

Stop

Loss

Buy

Price

Buy

Price

Book

Profit

Book

Profit

REI AGRO

1399.00 1217.3

1339.3

1401.7

1461.3

1583.3

89.1

1366.8

28/12/07

GUJ. NRE COKE

153.30

123.1

144.5

157.0

165.9

187.3

68.5

149.4

15/02/08

PRAKASH INDS.

254.35

204.4

241.9

266.8

279.3

316.8

67.2

257.8

29/02/08

AIA ENGINEERING 1573.55 1282.7

1482.7

1591.9

1682.7

1882.7

66.6

1593.9

08/02/08

SAIL

232.55

194.4

220.8

235.4

247.2

273.6

65.2

236.8

22/02/08

WEEKLY DOWN TREND STOCKS

Let the price move above Center Point or Level 3 and when it move back below Center Point or Level 3 then sell

with what ever high registered above Center Point or Level 3 as the stop loss. After selling if the prices moves to

Level 2 or below then look to cover short positions as the opportunity arises. If the close is above Weekly Reversal

Value then the trend will change from Down Trend to Up Trend. Check on Friday after 3.pm to confirm weekly

reversal of the Down Trend.

Last

Center

Relative

Weekly Down

Close

Point

Strength Reversal Trend

Scrips

Level 1 Level 2

Level 3 Level 4

Value

Date

Cover

Short

Cover

Short

Sell

Price

Sell

Price

Stop

Loss

MAHA. SEAMLESS 308.95

261.8

296.2

317.9

330.6

365.0

23.56

341.19

11/01/08

I-FLEX SOLUTIONS 1002.00 864.7

962.7

1021.3

1060.7

1158.7

25.97

1039.50 07/03/08

MOSER-BAER IND 152.10

114.9

142.2

159.5

169.5

196.8

27.75

169.34

11/01/08

TECH MAHINDRA

642.50

550.1

615.0

652.5

679.9

744.8

28.99

674.29

28/12/07

SPICE COMMUN.

31.35

21.4

28.5

32.7

35.6

42.7

29.55

32.85

07/03/08

Sensex Wave Analysis

Wave I-2594 to 3758

Wave II-3758 to 2904

Wave III- Internals as

follows:

Wave 1- 2904 to 6249

Wave 2-6249 to 4227

Wave 3-4227 to 12671

Wave IV- 12671 to 8799

Wave V- Internals as

follows:

Wave 1-8799 to 14724

Wave 2-14724 to 12316

Wave 3-12316 to 21206.

Wave 4-21206 to Till date

movement

Internal of Wave 4

PUNTER'S PICKS

Note: Positional trade and exit at stop loss or target which ever is earlier. Not an intra-day trade. A delivery

based trade for a possible time frame of 1-7 trading days. Exit at first target or above.

Scrips

BSE

CODE

Last

Close

Buy Price

Buy On

Rise

Stop Loss Target 1 Target 2

Risk

Reward

FEM CARE PHARMA

524608 400.70

400.00

415.00

370.00

442.8

487.8

1.37

Wave A-21206 to 15532

Wave B- 15532 to 18137

Internal of Wave B went

into a triangle formation

Wave C- 18137 to Till

Date movement

The price implication of this Wave C can be 0.382, 0.500 and 0.618 times of Wave A projected down from Wave B. This

gives us the downside target figures of 15877-15183-14489 respectively

Ideally, it should not move down to 14489. The Sensex must start recovery from the range of 15877-15183. The low

registered last week was 15689.

If the Sensex moves down to 14489 and goes below 14724, then the fall will get extended to a much deeper level.

In that case, we will have to terminate the Wave V at 21206 and the alternate count from 8799 will be as follows

Wave V- Internals as follows:

Wave 1-8799 to 14724

Wave 2-14724 to 12316

Wave 3-12316 to 20238

Wave 4-20238 to 18182

Wave 5-18182 to 21206

If this wave count comes into shape and existence, then it will terminate the entire Wave from 2594 to 21206. If that count

comes into focus, then the correction will be of the rise from 2594 to 21206. The correction levels will be placed at 14102-

11907-9711.

Conclusion

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A fall down to test the

low of 15532 is likely and

if any recovery has to

come into the market for

a significant pull back

rally, then the bounce has

to come from either of

the range of 15877-15183-

14489. The low registered

last week was 15689.

Further, lower levels of

15532-15183-14489 will be

tested and we need to

monitor and check how

the market reacts from

these levels.

Strategy for the week

Sell at 16297-16905 with a

stop loss of 17228. Expect

the lower range of 15532-

15183 range to be tested.

A rise and close above 17228 could signal the temporary halt to the fall for a pull-back rise of the fall from 21206 to 15689

or whichever is lower at the time of the trigger of 17228.

EXIT LIST

Scrip

Last Close Sell Price Sell Price Sell Price Stop loss Target

Monthly Relative

Strength (RS)

RELIANCE INDUSTRIES

2249.00

2272.1

2304.5

2337.0

2442.00 1997.1

29.94

LARSEN & TOUBRO

2988.00

3147.7

3215.0

3282.3

3500.00 2577.7

30.70

INDIABULLS FIN. SERV

460.60

504.9

524.3

543.7

606.55

340.3

34.19

EXIDE INDUSTRIES

66.80

68.3

69.6

70.8

74.80

57.8

37.40

SINTEX INDUSTRIES

390.00

406.0

416.5

426.9

460.90

317.1

37.44

JINDAL STEEL & POWER

2006.00

2038.1

2080.5

2122.9

2260.00 1679.1

37.48

BANK OF INDIA

271.30

291.5

303.1

314.6

352.10

193.4

37.75

YES BANK

179.95

202.5

210.6

218.6

244.50

134.6

38.04

AXIS BANK

840.00

882.0

904.5

927.0

1000.00

691.0

38.12

SAIL (STEEL AUTHORIT

232.55

233.7

236.8

239.9

250.00

207.3

41.12

WELSPUN-GUJARAT STAH

374.00

381.8

392.5

403.2

438.00

290.8

41.39

EIH

154.20

155.6

159.5

163.3

175.90

122.7

41.69

WALCHANDNAGAR INDUST

672.00

732.0

750.5

769.0

829.00

575.0

42.73

TATA POWER CO.

1136.00

1203.0

1238.5

1274.0

1389.00

902.0

44.77

KARNATAKA BANK

237.85

246.1

249.5

252.9

264.00

217.1

44.88

ING VYSYA BANK

305.15

320.1

324.8

329.4

344.50

280.6

48.35

ESSAR OIL

220.75

232.0

238.4

244.9

265.85

177.1

49.19

EDUCOMP SOLUTIONS

3383.70

3685.4

3804.5

3923.6

4309.00 2676.4

50.35

* SEBI may ease the strictures governing P Notes to woo FIIs and attract funds to India.

TOWER TALK

* Anil Ambani has some more investor-friendly moves up his sleeve. One of them could be a warrant issue to Reliance

Power holders.

* If the US slowdown is for real then TCS, Infosys and Satyam will lose out both on the topline as well as the bottomline.

* Dish TV basks in sunshine thanks to the exemption of customs duty on set top boxes.

* Bank of India around Rs.275 is a safe bet and offers a 50% upside from t6he current level.

* Exemption from excise duty on wireless data card is a positive trigger for RCom, Bharti Airtel and Tata Telecom.

* The best option for investors is to shift to mutual funds now. Morgan Stanley ACE could be one such fund that can give

good returns for patient long-term investors.

* Look out for stocks in irrigation systems. Jain Irrigation is the leader but there is also a dark horse in Sturdy Industries,

which plans to merge its drip irrigation arm.

* Good dividend paying companies of over 15%-20% are a good defensive play in a bear market. Look out for Zenith

Fibres, South India Paper Mills and other consistent dividend paying, low-priced stocks.

* While the market is yet to recover from Rs.60,000 cr. loan waiver bonanza to farmers, there is another shock in store. In

the first week of April 2008, the Sixth pay commission for government employees will be announced and can lead to a

collapse of finances of several State Governments!

* Most mid-caps are available at one third and at the levels they use to trade in 2005. Will there be a sharp recovery or will

2008 be the worst year?

* Thanks to the open offer announcement at Rs.517, Flat Products is holding strong despite such sharp correction and

bearish mood. Add on declines.

* The revolutionary 'plastic to power' story of Asian Electronics doesn't have any takers as its share price has crashed to

one third from its January 2008 high of Rs.590.

* Thanks to the carnage, many scrips now dividend yield of more than 5%. Chemfab Alkalies, Varun Shipping, Royal

Orchid, ABC Bearings, Thirumalai Chemicals, Z F Steering, Sundaram Brakes, Cosmo Films, Andhra Bank, S I Paper

and Tera Software to name a few.

* Ajmer Realty & Infra Ltd. will be the new name of Shree Pre-coated Steels and the share may be upgraded to the 'A'

group as also split the face value to Rs.2 per share.

* DLF has entered into joint venture with the limitless group of Dubai to set up a 'Knowledge City' at Bidadi near

Bangalore.

* Tragedy struck at Bhuj in Gujarat as a trader commits suicide unable to cope up with big market losses.

* In keeping with the weak sentiment, the grey market premium on Rural Electricity Corporation crashed to Rs.9-11.

BEST BETS

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By Saarthi

Hind Rectifiers Ltd. (Code: 504036)

Rs.137.50

Established in 1958 in collaboration with Westinghouse, Brake & Signal, U.K. (which still holds 16% equity stake), Hind

Rectifiers Ltd. (Hirect) has a rich experience in developing, designing, manufacturing and marketing power

semiconductor, power electronic equipments and railway transportation equipments. Currently, the company derives

50% of its revenue from railways, 20% from the power sector and the balance 30% from various industries like

telecommunications, electronics, defence, aviation, R&D organizations, electro-chemical, steel, cement etc. Basically, its

business is segmented into the following four divisions:-

A. The Equipment Division manufactures power supply equipments for R&D, Defence & Aviation, DC power system for

electrochemical plants, rectifier for metal finishing, battery chargers and dischargers etc. It also offers specialised services

such as customisation, automation and optimisation of controls and safety. Notably, it has a technical tie-up with M/s.

Friem S.P.A., Italy for design and technology transfer of high current, water cooled rectifier system for Electro-chemical

applications.

B. The Semi Conductor Division manufactures power diodes, power modules, thyristors & assemblies apart from

supplying special devices and assemblies on request. To complement this, a full range of heatsink assemblies using IEC

circuit configuration as well as custom designed is also manufactured. These semi-conductors find use in industrial,

military and transportation applications. Recently, the company signed a technical collaboration agreement with M/s.

Infineon Technologies AG, Germany, for manufacturing of IGBT based primeSTACK, which will complement its other

products. These stacks will also be used for in-house consumption for manufacture of equipments.

C. The Railway Transportation Division manufactures transformer for rolling stock, auxiliary converter and inverter,

track side DC substation equipment, rectifier for rolling stock etc. Out of the 50% revenue from the railways, 10% comes

from locomotive transformers, 20% from rectifiers and the rest 20% from inverters. Hirect has a technical collaboration

with M/s. Transtechnik GmbH of Germany for design and development of inverter and auxiliary converters for traction

application. In collaboration with M/s. Nieke, Germany, the company has upgraded its technology and infrastructure for

manufacture of the main transformers for AC/DC Dual Voltage EMU and BG AC EMU. It also has a tie-up with M/s

Microelettrica Scientifica of Italy for supply of resistors for railway application.

D. The Trading Division imports and markets semi-conductor fuses from Bussmann-Denmark, capacitors from Icar-Italy

and resistors from Microelettrica Scientifica, Italy.

Hirect has two manufacturing plants spread across Mumbai and Nasik. Its Equipment Division has an ISO 9001

certification and the Semiconductor Division is ISO 9002 quality certified. Although Indian Railways is its major

customer, it still has a huge and reputed clientele including HLL, Indian Navy, Ordnance factories, ISRO, BARC, HAL,

Nuclear Power Corp, BSNL, BHEL, BEML, Grasim, L&T, Tata Steel, Hind Zinc, Siemes, ABB, Crompton Greaves etc. Its

products are also exported to Australia, Bangladesh, Canada, Colombia, Italy, Malaysia, Middle East, Pakistan, South

Africa, South Korea, Spain, Sri Lanka, Thailand, UK and USA.

Recently, Hirect modernised all its plants in Mumbai and has set up a greenfield plants in the tax free zone of

Uttarakhand for manufacturing of equipment, semiconductor and the railway transportation system. Although this new

plant is ready, Hirect is still completing the earlier orders from its old plant in Mumbai and Nagpur in order to get the

Cenvat paid on raw material. However, the new orders booked by the company will be manufactured at Uttrankhand

plant. Hence the excise and income tax benefits will be visible from FY09. Based on the first three quarter results, it may

end FY08 with sales of Rs.95 cr. with PAT of around Rs.11 cr. i.e. an EPS of Rs.15 on its very tiny equity of Rs.1.50 cr. with

a face value of Rs.2 per share. Importantly, the company is estimated to report an EPS of more than Rs.20 for FY09.

Investors are, therefore, strongly recommended to buy at the current level. At a fair discounting by 14 times, its share

price can double in 12-15 months. Moreover, the company is in its 50

year of operation and chances of declaring a liberal

bonus is high.

International Combustion (India) Ltd. (Code: 505737)

Rs.395.55

Established in 1936, International Combustion (India) Ltd. (ICIL) is recognised as a leading manufacturer of sophisticated

plant and machinery for core sector industries such as mining, steel, cement, petrochemicals, construction, sugar, power,

textile, paper, rubber, pharma, chemicals etc. From a modest beginning as a trading house, ICIL today boasts of

manufacturing specialised range of engineering products in technical collaboration and licence agreement from various

global leaders. According to its product profile, the company has broadly segmented its revenue model into the following

two divisions:-

I. Heavy Engineering Division: This is the main division as nearly 80% of its total revenue comes from it whereas it

contributes more than 95% of earnings. This division has been further sub-divided into the following three categories:-

a. Vibrating Equipments - ICIL manufactures and markets a wide range of mechanical and electro-magnetic vibrating

screens, feeders, sizers and conveyors that can handle all types of bulk solids, whether large lumps or very fine grains,

Page 6

wet or dry, whether abrasive such as scrap, flux and sinter. As accessories, it also makes exciters, DC brake units and

monitoring systems for vibrating machines.

b. Bulk Material Handling - Under this category, ICIL deals in spiralling belt elevators, scooping belt conveyers, girdle

pocket elevators, apron feeder, mining haulages etc. as intelligent solutions to suit even difficult-to-handle materials.

c. Grinding, Classfication and Drying system - ICIL offers complete grinding mill systems designed to pulverise and

classify various kinds of material including non-metallic minerals, fertilisers, chemicals and many other manufactured

products. Importantly, it markets 'Raymond" American brand roller mill, pulverisers, grinding mills, mechanical air

separators and flash drying system, which can reduce many products by 95-98% or refine them below 10 microns.

II. Gear Motors & Gear Box Division: Under licence from Danfoss Bauer, Germany, ICIL offers a comprehensive range

of geared motors, gear boxes and electric motors manufactured on specially designed inter-linked CNC production lines.

It also exports these products to neighboring markets including Iran and Sri Lanka. Besides, the company has been chosen

as the outsourcing partner by Danfoss Bauer itself and has even started exporting cast iron machine parts to them.

Currently, ICIL has three fully equipped manufacturing facilities spread across Calcutta, Nagpur and Aurangabad. For

cutting edge technology for manufacturing premium quality equipments, ICIL has several tie-ups with international

majors like Danfoss Bauer (Germany), Mogensen (Germany), IMS Engineering (South Africa), Alstom Power (USA),

Gummi Kuper (Germany) and Tredomen Eng (UK) for each product group. Of late, it has also entered into a licence

agreement with Ecutec (Spain) to manufacture microfine classifiers. Ironically, all the players in user industries are

ramping up capacities, which translates into a huge opportunity for the company's products. To meet the increasing

demand, an expansion programme has been initiated by the company for augmenting the manufacturing capacity of the

gear box/geared motor division. It is also upgrading the manufacturing capacity of its Heavy Engineering Division. On

the back of its wide product range and high engineering skills, ICIL is contemplating to enter the lucrative turnkey project

segment in the foreseeable future.

Fundamentally, ICIL is on a strong footing with expected reserves of around Rs.45 cr. i.e. book value of nearly Rs.200 by

end of this fiscal. Besides being a debt-free company, it has an impressive ROCE of 40% and ROE of 25%. Financially, ICIL

has recorded 20% growth in sales to Rs.66 cr. and 50% increase in PAT to 8.25 cr. for the first nine months ending 31

December 2007. Accordingly for this fiscal, it is expected to clock a turnover of Rs.95 cr. with profit of Rs.11.50 cr. i.e. EPS

of Rs.48 on its tiny equity of Rs.2.40 cr. Hence with an expected CEPS of more than Rs.60 and EV/EBIDTA of less than 5,

the company is available fairly cheap at the current market cap of merely Rs.95 cr. For FY09, the company has the

potential to register an EPS of around Rs.60. Investors, therefore, are strongly recommended to buy KIL at current levels.

At a reasonable discounting by 14 times against its FY09 earning, the scrip can double in 15-18 months. Moreover, the

scrip is a strong bonus candidate as well.

Zuari Industries Ltd.: For steady returns

ANALYSIS

By Devdas Mogili

Zuari Industries Ltd. (ZIL)., established in 1967 as Zuari Agro Chemicals, is a 41-year old Goa-based company belonging

to the K. K. Birla group. Its other group companies include Chambal Fertilisers Ltd. Further, ZIL has acquired the 74%

stake in public sector fertiliser company Paradeep Phosphates Ltd. through Zuari Moroc Phosphates Pvt. Ltd, a 51:49 JV

between Zuari Inds and Moroc Phosphore, SA, Morocco. K.K. Birla is the chairman while H.K. Bawa is the managing

director of the company.

ZIL manufactures chemical fertilisers like Urea, DAP and a unique complex fertiliser NPK 19:19:19. Its fertiliser complex

comprises a single stream ammonia plant, an urea plant, an NPK plant and a DAP plant along with related on-site and

off-site facilities for handling raw materials and end products together with generation of steam and captive power and

has an annual installed capacity of 9,46,200 MT.

ZIL became the largest producer of fertiliser in the private sector with the acquisition of Paradeep Phospates. The

company's products are sold under the brand names 'Jai Kisaan' and 'Jai Kisaan Sangam' and it markets them primarily in

Goa, Karnataka, Maharashtra and parts of Andhra Pradesh and Tamil Nadu. Its Fertiliser Division contributes around

95% of the topline for the company.

The company started operations by setting up a 3,40,000 TPA fertiliser plant in Goa with technical know-how from

Armour, a division of United Steel Corp, USA and set up an argon recovery plant that commenced commercial

production in May 1995. ZIL has also started marketing biophos, an environment-friendly product to enhance the

efficient use of phosphorus.

To market argon, a rare gas, the company has entered into an agreement with BOC (India). ZIL has also launched a range

of computer and entertainment furniture in 2000-01 under the brand name 'Zuari'. It has also forayed into office systems

and executed some prestigious orders for Chambal Fertilisers, UNICEF, Ernst & Young, Delhi etc.

Page 7

Subsidiaries: Its subsidiaries include Indian Furniture Products Ltd. (IFPL), which is engaged in manufacturing Ready-

To-Assemble (RTA) furniture of international quality through its state-of-the-art plant at Kakkalur near Chennai; Zuari

Seeds Ltd. (ZSL) is engaged in R&D, production & marketing of hybrid seeds; Simon India Ltd. (SIL) is engaged in

Engineering Procurement Construction (EPC), Zuari SEZ Ltd. was set up to develop Special Economic Zone for IT and

IT Enabled Services (ITES).

Joint Ventures: The company has joint ventures with Zuari Investments Ltd., Zuari Maroc Phosphates Ltd. (ZMPL),

Zuari Indian Oil Tanking Ltd. (ZIOL).

Performance: The company reported impressive results for FY07 as it clocked a net sales turnover of Rs.2396.96 cr. with a

net profit of Rs.393.55 cr. posting an EPS of Rs.13.48.

Financial Highlights:

(Rs. in cr.)

Particulars

QE 31/12/07

QE 31/12/06

9M 31/12/07

9M 31/12/06

FY07

(Audited)

Net Sales/Income from Operations

720.38

640.91

1955.02

1927.42

2396.96

Other Income

2.10

1.30

25.68

16.80

18.41

Total Income

722.48

642.21

1980.70

1944.22

2415.37

Total Expenditure

668.41

613.81

1849.43

1850.76

2317.78

Interest (Net)

4.27

9.03

21.37

31.56

41.15

Miscellaneous Expenditure Written off

0.60

1.79

2.38

PBT & exceptional items

49.80

18.77

109.90

60.11

54.06

Exceptional Items

357.34

353.87

Profit before Tax

49.80

18.77

109.90

417.45

407.93

Provision for Taxation

a) Current Tax

10.54

1.28

16.04

56.97

55.92

b) MAT Credit Entitlement

5.50

(1.97)

(45.34)

(44.30)

c) Deferred Tax

2.59

7.01

18.60

5.00

1.96

d) Fringe Benefit Tax

0.25

0.20

0.70

0.60

0.80

Net Profit for the period

30.92

12.25

74.56

400.22

393.55

Share Capital

29.44

Reserves excluding Revaluation

Reserves

751.93

a) Basic & Diluted EPS before

Exceptional Items (Rs.)

10.50*

4.16*

25.33*

14.57*

13.48

b) Basic & Diluted EPS after Exceptional

Items (Rs.)

10.50*

4.16*

25.33*

135.94*

133.67

* Not annualised

Latest Results: During Q3FY08, the company posted very encouraging results. It notched up net sales figure of Rs.720.38

cr. with a net profit of Rs.30.92 cr. as against sales of Rs.640.91 cr. with PAT of Rs.12.25 cr. in the Q3FY07 and registered a

basic/diluted EPS of Rs.10.50 in Q3FY08 against Rs.4.16 in Q3FY07. The annualised EPS works out to a hefty Rs.42.

Financials: The company has an equity base of Rs.29.44 cr. with a book value of Rs.265.41. It has a debt:equity ratio of

1.43 whereas ROCE is 8.08% and RONW of 15.27%.

Share Profile: The company's shares with a face value of Rs.10 are listed and traded on the BSE under the B1 segment. Its

share price touched a 52-week high of Rs.465 and a low of Rs.130. At its current market price of Rs.253.75, it has a market

capitalization of Rs.747.06 cr.

Dividends: The company has been paying dividends regularly as shown below:

March 2007 - 25%; March 2006 - 20%; March 2005 - 18%; March 2004 - 15%; March 2003 - 15%; March 2002 - 10%.

Shareholding Pattern: The promoter holding in the company is 34.11% while the balance 65.89% is held by non-corporate

promoters, institutions, mutual funds and the Indian public. Mutual Funds like Pru ICICI, DSP ML, Reliance Mutual

Fund, Franklin India, Canbank etc have added the ZIL share to their various schemes.

Prospects: The government policy on urea stipulates conversion of company's naphtha based urea plant to gas/RLNG by

FY10. With the increase in domestic gas production from the Krishna - Godavari (KG) basin, availability of gas for the

fertiliser industry is expected to increase substantially from 2008. The company is hopeful of switching over to gas in line

with the schedule stipulated by the government.

Conclusion: ZIL is a diversified company with a good track record. However, its fertiliser division is the core of its

operations and accounts for the major share of its business. In fact, ZIL is the first large industrial undertaking in Goa that

has diversified into furniture, hybrid seeds, EPC and IT.

At its current market price of Rs.253.75, the share is discounted less than 7.02 times against the industry average P/E

multiple of 12. Moreover, the share is available just above its book value of Rs.265. Considering the background of its

promoters, excellent performance and bright future prospects, the ZIL share may be added to ones portfolio on declines

for steady gains with a medium-to-long-term perspective.

MARKET

Page 8

Market witnesses major sell-off

By Ashok D. Singh

Stock prices were battered last week by a hike in short term capital gains tax and alternation of tax treatment of securities

transaction in the Union Budget 2008-09 announced on Friday, 29 February 2008. The sentiment was also hit tracking

weak global markets, which in turn were hit by US recession worries. The Sensex fell on 3 out of the 4 trading sessions of

the week. The market remained closed on Thursday, 6 March 2008, on account of Mahashivratri. The Sensex lost 1,603.20

points or 9.12% to 15,975.52 for the week ended Friday, 7 March 2008. The Nifty declined 451.9 points or 8.65% to 4,771.60

for the week.

The BSE Mid-Cap index fell 876 points or 11.4% to 6,804.39 in the week. The BSE Small-Cap index slumped 1,218.95

points or 12.66% to 8,409.18.

Foreign Institutional Investors (FIIs) were net buyers of shares worth Rs.1,733.30 cr. in the month of February 2008. They

were net sellers of shares worth Rs.12,702.90 cr. in calendar 2008 till 4 March 2008. Mutual funds bought shares worth

Rs.513.90 cr. in the month of February 2008.

The week started with unabated selling pressure across sectors mirroring weakness in global stock markets as the BSE

Sensex tumbled 900.84 points or 5.12% to 16,677.88 on Monday, 3 January 2008, registering its second biggest single day

point loss on a closing basis. It was also the Sensex's second biggest single day fall in percentage terms. 26 out of 30 stocks

from the Sensex pack were in the red. Even the mid-and small-cap stocks tumbled, as reflected in the poor market

breadth. Banking, power and realty stocks plummeted. A global sell-off was triggered after weak US data on Friday, 29

February 2008 and a record loss of US insurer American International Group (AIG) Inc. fuelled worries that there are

more write-downs to come.

The key indices drifted lower for a third consecutive session hit by Budget blues as the Sensex lost 337.99 points or 2.03%

at 16,339.89 on Tuesday, 4 March 2008. Banking and realty stocks were the worst hit. Auto stocks ducked the bearish

trend. 19 out of 30 stocks from the Sensex pack were in the red. The market breadth was extremely weak.

Snapping a four-day losing streak, the key benchmark indices surged in late trades as the BSE Sensex ended rising 202.19

points or 1.24% at 16,542.08 on Wednesday, 5 March 2008. Volatility was high. Index heavyweight, Reliance Industries,

witnessed an upward momentum at the fag end of the trade. Software stocks were the flavour of the day. Banking, realty

and power stocks dropped. The market breadth was weak. European markets, which opened after the Indian market,

were in the green. Asian markets, which open before the Indian markets, were mixed.

A surge in inflation, weak global cues and political concerns dampened the investor sentiment as share prices declined

sharply with the Sensex declining 566.56 points or 3.42% to 15,975.52 on Friday, 7 March 2008. All the sectoral indices on

the BSE were in the red. Reliance Energy was the biggest loser from the Sensex pack. Banking stocks tumbled. European

markets, which opened after Indian market, were weak. Mid-caps and small-caps were the worst affected as reflected in

the extremely weak market breadth.

Trading in long-term options on NSE's main 50-share index, the Nifty, began from Monday, 3 March 2008. The long-term

options contracts are now expected to deepen the market further, the NSE said in a statement issued late on Monday.

Before the introduction of these contracts, options had a maximum tenure of 3 months. The exchange said active trading

was observed in the three quarterly expiries of June 2008, September 2008 and December 2008. Total traded turnover for

Monday in the long term options was Rs.150

cr. at 5,223 contracts.

The FM expects the economy to grow 8.8%

plus in the 2008/09 fiscal year. He said an

investment boom was continuing but a

sluggish farm sector was hurting overall

growth. He added that FIIs were not behind

the recent volatility in stock markets. The ups

and downs in the stock markets depend on

the changing perceptions of investors -

domestic and overseas, retail and institutional

- about the economy, the sector and the

company, he said while replying to

supplementaries during Question Hour in the

Rajya Sabha.

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The basket of crude oil that Indian refiners

buy hit a fresh all-time high of $97.16 a barrel

on Friday, 29 February 2008. This was the

highest for the current fiscal. The Indian crude

Page 9

oil basket averaged $92.37 a barrel in February 2008 against $89.52 in January 2008. On Friday, the price of New York

crude touched a fresh high of $103.05 a barrel. The soaring global crude prices have an impact on the profitability of the

domestic oil marketing companies as they sell petroleum products below the cost price.

The RBI says the government's budget presented on 29 February 2008 as being in line with growth and price stability

objectives adding that it will help implement a farm debt relief scheme and that it will work closely with the government

and banks to ensure that the farm loan waiver scheme helps farmers, improves credit flow and serves the interests of the

banking system.

With rising inflation, RBI may not consider to provide liquidity to the market at this point of time by slashing rates

specially when markets are reeling under global pressure. India's wholesale price index rose 5.02% in the 12 months to 23

February 2008, higher than the previous week's rise of 4.89%, government data showed on Friday. The annual inflation

rate was 6.20% during the corresponding week of the previous year.

The Sensex lost 1,603.20 points to close at 15,975.52 last week. The market might be closely watching the cues from global

markets as fears of more credit-related losses in the global financial sector resurfaced. An expected cut in interest rate by

US Federal Reserve at its meeting on 18 March 2008 may provide some support to the markets.

Fed Chairman, Ben Bernanke, signalled a readiness to cut interest rates again to prevent further damage to the weak US

economy even as he took note of rising inflation risks. Delivering the Fed's semiannual report on the economy to

Congress, Bernanke made it clear that the central bank was worried at the deepening housing slump, softening jobs

market and tighter credit, which could dim an already bleak economic outlook.

FIIs rule and ruin the market

MARKET

By G. S. Roongta

The stock market continued to drift lower and lower last week, which was also the first week after the presentation of the

Union Budget 2008-09 on Friday, 29

February 2008, by Union Finance Minister, P. Chidambaram. The total loss for the

week was 1603.20 points on the Sensex and 451.9 points on the S&P CNX Nifty.

Weak global cues and the downturn in Asian markets is reported to be the main reason behind this sharp liquidation in

stocks on the Indian bourses. The Finance Minister (FM), too, is reported to have cited them as the reason for the fall

rather than his Budget. But I do not entirely agree with this prognosis as I clearly illustrated in my last article how Indian

indices fell in the week before last in sharp contrast to the rise in the Dow Jones index for three

consecutive days. I had, therefore, questioned why our markets did not move in tandem with the stocks

in USA, if we wish to accept the linkage for the downward movements.

It is indeed a great pity that none of the reporters or analysts do not have the courage to find out the deep

rooted cause about this sudden weakness in the market and merely refer to the global cues to justify the

market fall. Why did they not refer to the weak global cues when our markets were rising all through

2007 in sharp contrast to other markets? Now that our markets have been hit for the past six weeks, why

do they refer to global markets and not bother to look deep within? It is so convenient to fire the gun on

somebody's shoulders but calls for insight and courage to identify, understand and state the cause without fear or favour.

G.S. Roongta

To reiterate my point, if we look at the Dow Jones index, we will find that it has hardly fallen by 1000 points from its peak

despite the US economy slipping into a recession after the subprime fiasco that led to hundreds of billions of dollars being

written off by banks in USA! As against this, the Indian economy is said to be in fine fettle and our markets functioning

smoothly. Then, why did the Sensex fall by almost 6000 points from its peak of 21,200 on 10

January 2008. Thus our

market has fallen 6 times compared to the fall in US markets when our economy is less than half the size of the US

economy and when we are recording high growth rates for over six years now and investments are pouring in both into

manufacturing and services and into the stock markets. Also, there is no sudden crisis like the subprime mortgage crisis

of USA.

Actually, our markets have become the slaves of the FIIs and acts on their dictates quite blindly without reasoning out

what is right what is wrong and take steps accordingly. Isn't it funny that at the Sensex peak of 21,202 on 10

January

2008, the FIIs were busy buying Indian stocks as they found valuations most attractive and stock prices very reasonable

but why did it suddenly change in just 11 days when the Sensex crashed by 1408 points on 21

January 2008 and set in

motion the current bearish trend. Thereafter, Indian stocks suddenly began to look overpriced! The fact of the matter is

that all this was a game plan of the FIIs as they had built up heavy short positions in the F&O segment while they were

pushing up prices in the cash market. Thus at the end of the F&O settlement in January they reaped handsome profits by

squaring up their positions. Taking full advantage of the situation, the FIIs started selling heavily in the cash segment

right from Friday, 18

January 2008 so as to square up the F&O short selling at much lower prices as the BSE Sensex

tumbled by 1408 points on Monday, 21

January 2008 and another 875 points the next day. Thus they availed of a clear

eight trading sessions before the January 2008 F&O settlement on Thursday, 31

January 2008.

Page 10

This free fall on these two days was enough to unnerve any bull operator. The shock and awe that it delivered was

something that marketmen and investors have not been able to get over with even till now. This was because brokers and

funds compulsorily squared up their clients' positions without any reference to the clients and sold their shares in a panic.

As mentioned in earlier articles, the loss suffered by lakhs of investors and marginal traders in this meltdown is far

greater than what they suffered during the Harshad Mehta securities scam of 1992 or the Ketan Parekh led tech stocks

scam of 2002, which is why I have labelled it as the 'F&O scam' and which needs to be investigated.

This F&O fiasco should be fully investigated by SEBI and the grievances of millions of investors who have suffered as a

result of the arbitrary action by the brokerages need to be addressed. The government has addressed the woes of

marginal farmers and kept aside Rs.60,000 cr. of public money because of the strong farm lobby and an election year

ahead. But what about small investors who were massacred on 21

& 22

January 2008 on the bourses? The government

or SEBI have no time to look at this capital market scam where several lakh crores of market capitalization was rudely

drained out within two days by a handful of players!

Ever since the market has not been able to revive despite occasional pullbacks to the BSE Sensex level of 19,200 as

renewed selling pressures emerges on every rise because of pending unwinded position or settlement of clients' payment

positions.

If one looks at the current stock prices, one is shocked to find that hundreds of stocks have lost nearly 50% of value from

the recent peak on 10

January 2008, while hundreds of others are quoting near their 52-week low! Even then the

authorities appear unconcerned and have taken no remedial measures to boost investor confidence by bringing the

culprits to book. The given table lists out sample of stocks from different categories and gives true picture of the worst

ever prevailing sentiment in the stock market. Hopefully, it should awaken the watchdog body and other government

authorities to act and restore confidence among investors.

This is only a sample list but qualifies to represent

the market sentiment. MTNL, Banswara Synthetics,

Lime Chemicals, El Forge are at their 52-week lows

while the others have lost more than 50% from their

peak prices.

Stock

52-week

High (Rs.)

52-week

Low (Rs.)

CMP (Rs.)

(07/03/08)

ACC

1315

615

735

Power Grid Corporation

167

MTNL

219

113

Even some fancied stocks like Reliance Industries,

Reliance Capital, L&T, Grasim, ACC and several

others from the 'A' group, which are said to be the

market leaders, were not spared. Despite the fact

that the Reliance Group comprising both the

Ambani brothers is very conscious of its image and

concerned about the stock prices of group

companies, they could do precious little as Reliance

Industries lost nearly 1000 points from its high of

Rs.3252 in just about one month. Reliance Energy lost even more heavily in percentage terms i.e. a fall of 1125 points or

40% from a high of Rs.2632 to Rs.1505. Reliance Capital lost 1400 points in the fall from Rs.2925 to Rs.1525.

109

Banswara Syntex

Batliboi

140

Chowgule Steamships

105

El Forge

109

Eimco Elecon

729

222

343

Hindustan Motors

Indian Card Clothing

273

152

159

Jayant Agro

145

Jyoti Ltd.

192

100

Lime Chemicals

Modern Steel

Nahar Industrial

173

If this is the condition of the Reliance Group, which is most active and image conscious on the bourses, then what is there

to say about other promoters who are not even concerned about the share prices of their companies.

What does this kind of free fall in stock prices reveal? Does it indicate that the stock prices were rigged by the promoters

and operators? Or, does it reveal that the stock prices were not fair and that the market was zooming without any

fundamental justification? Or that it was enjoying some support and patronage of the government? Investors are entitled

to an answer to these questions either from government agencies, market authorities or the watchdog bodies of from the

TV channel experts who were advising investors day in and day out to buy this or that without the slightest hint of any

shock or trouble ahead.

Till the authorities do not provide satisfactory answers to the F&O imbroglio or do not apprehend some of the culprits,

the flock of investors/marginal traders may not return having incurred huge losses.

The Reliance Power IPO, which I had labelled as 'overpriced' has proved to be cent per cent true as the company is

offering a liberal 3:5 bonus without even having begun work! Although Anil Ambani is distributing the free gift from his

own stake, it has not helped. Like this there are several other high priced issues that drove the market to a hysteria but

ultimately led to its collapse.

The market will now take its own time to regain its health and the confidence of investors. Till then, investors should wait

and watch and nurse their wounds till they get well. According to me, several promoters should come forward to

announce buyback schemes of their shares if they feel that the price has fallen far below the intrinsic worth. This is most

important and will surely help the market to suck out extra liquidity of stocks.

OUTLOOK

Page 11

Budget calls for churning portfolios

By Suryadevara

Fears about the polls-eyed budget came true and the market decline gathered momentum due to the worsening impact of

the US financial crisis. People are simply dumping shares as if there will be no markets tomorrow. The 'Fear' factor has

almost taken over the territory, which was earlier occupied by the 'Greed' factor till January 2008. Is this the time to jump

out of the ship of equity investments altogether? If a cool mind is allowed to rest on our shoulders, things are not that

alarming. There is money that can be made even today from equity investments even by those who were not fortunate to

book profits/to cut losses before the recent sharp fall in the market.

Is the budget so bad? Is the best for Indian markets already over? Is the Indian economy in shambles and about to slip

into recession? Will global market movements be simply followed by the Indian markets forever? If the answer to all

these questions is 'Yes', then investors must dump equities and run for safecover. Hopefully, the situation is not that

alarming. It is true that in the globalised environment, India cannot escape the fallout of global events. It is also true that

funds/money gravitate to regions of higher growth from regions of falling growth rates. This was proved in the decade

long bull phase of Japan in the 1980s. A similar bull phase followed in the US markets after 1992 (when Indian markets

were falling very badly) as well as a similar bull phase in Chinese markets in the recent past. Then why cannot India think

of a similar, longer bull phase?

It may seem to be a mere wishful thought if the waiver of around US$15 billion (Rs.60,000 cr.) agricultural loans is seen

with a magnifying glasses. But if the USA with problems of around US$600 billion or more, subprime write-offs was

recording a growth below 2% is compared with the mere $15 billion write-offs in India, which recorded more than 8.75%

average growth in the last 4 years, then we will get the logical answer. The subject loans waiver and the fallout of the US

financial crisis on the Indian market may impact our growth rate by 75 or 100 bps. That still gives us a growth rate of

around 8% for the next few years. Such a growing economy cannot be simply dumped by global investors. If they are to

recoup their losses in USA, they have to stick on to economies which offer higher growth rates. Unless an unknown scam

surfaces on the Indian horizon, India can give them decent returns especially from the current low levels. As and when

such realisation dawns on them, FIIs will start coming back with higher allocations to emerging markets in general and

India in particular. Recent actions taken by SEBI raise hopes of welcoming FIIs back with liberalised moves.

Then, is the recent budget a simple non-event for FIIs as being made out? Global events did takeover and impact the

Indian markets. That does not mean that the recent budget will be ignored by global investors. If they are to record higher

profits to compensate for their US losses, they have to bet on new sectors in general and a new set of scrips in particular.

In that sense, they are likely to fancy sectors/companies which will benefit by the provisions of the recent budget. The

Farm sector, Pharma sector and Auto sectors will benefit the maximum benefit from the recent budget. Although the

corporate sector seems to be left to itself by the recent budget, increase in disposable incomes of individuals will

strengthen the corporate sector with increased purchasing power of millions of individuals. The consumption led growth

rate concept in India is turning really brighter. If the recession in the US market impacts the current high prices of crude

oil at a later date, then India can record even better growth rate in the next few years with its large domestic consumption.

In fact, in the face of the ongoing gloomy events, investors have overlooked the positives of the recent budget. Despite the

controversial loan waiver proposal, the finance minister has tried to improve our competitive advantage by encouraging

Research & Development (R&D) activities of corporate India. If corporate India makes the right moves in this direction,

India can become the global Research Hub and record miracles in the space of Pharma research and Pharma manufacture.

India has unassailable lead over China in this activity of R&D with its vast reserves of innovative manpower.

Coming to investments, new winners are more likely to emerge in the next round of market revival. Investors who can

churn their portfolios to replace the fading scrips with emerging winners will benefit in the emerging conditions.

Investors have to look at Pharma, Auto and Agro-related sectors and look at the emerging winners from these sectors.

The recent pick of 'Jupiter Biosciences Ltd' by the Ranbaxy group company 'Religare Enterprises' which gave a target

price of Rs.237 to this Peptide leader is a pointer of the ongoing thinking amongst serious investors. In fact, this is a classic

case of a scrip where domestic funds have little exposure while FIIs holds more than 32% stake. As and when the

domestic funds realise why FIIs have taken such an impressive stake in this scrip, it will develop its larger following.

Even Religare Enterprises may revise its forecast upwards. Investors may better churn their portfolios to add exposure to

such potential winners.

'FII liquidity pullback from Indian markets is what hit us'

FROM THE FUND MANAGER'S DESK

says Sandesh Kirkire, CEO, Kotak Asset Management Company in an exclusive interview with Money Times (MT)

MT: Given the sharp corrections witnessed over the past few weeks? What is your view on the markets?

Page 12

A: The abrupt correction in the Indian markets you are talking about is, in my opinion, a swift catching-up that the Indian

markets did with global markets. If you recollect, by September 2007 there was a disconnection between the directions of

the Indian market and the global markets - giving credence to the 'decoupling' theory. This has been proven wrong. And

not because our economy is getting affected majorly from the global slowdown but due to the FII liquidity pullback from

the Indian markets. Having said that, I believe that things should stabilise by the year-end and we may see the

continuation of the fabled bull-run.

MT: In this backdrop, what would be your advice to retail investors? Do you think asset allocation needs a revisit or is

equity still the most attractive asset class from hereon?

A: I agree that the intense volatility being witnessed in the near-term market may act as a

dampener to the investor sentiment. My advice is that investors should invest according to their

risk profile.

Now, assuming that investors do fit into the said risk criterion, I would recommend that

building positions through SIP would be a comparatively safer option provided that investors

have a valid investible horizon. Alternatively, people sitting on cash, may consider investing in

debt instruments through mutual funds and then using the SIP facility to slowly build position

in equities.

MT: Which two sectors do you think will be outperformers this year?

A: There are sound and valid reasons to believe that the interest-rate cycle has peaked and we

may see cut-down of interest rates in couple of months. With this viewpoint, I think that BFSI sector makes for a good

strategic stake notwithstanding the recent volatilities. Another sector, to remain buoyant in my opinion is infrastructure,

especially utilities.

MT: Kotak Opportunities is one of the better performing funds in the equity segment, what would be your strategy for the

same?

A: We adopt a thematic approach to Bottom Up stock picking by applying the Business, Management and Valuation

(BMV) Model and the same is true for Kotak Opportunities as well. This stems from our belief that it's the companies that

create the wealth and equities are just a representative of the possibilities that such companies portend.

MT: How do you rate the Union Budget 2008-09?

A: I think that the budget aims to oil the main levers of the Indian economy namely: domestic consumption, domestic

savings and infrastructure investment cycle. The Public-Private partnership in domestic infrastructure sector gets a

booster from the increased outlay in budgetary support. The announcement of raising the minimum Income Tax slab

levels is also very positive - redeeming significant resources in the hands of individual Tax Payers. The same is true for

loan waiver to the farmers. All in all, I think that the Union Budget was a commendable effort to balance the political and

competing demands.

Pharma Funds turns attractive post Budget 2008-09

MUTUAL FUNDS

By Devangi Bhuta

The pharma sector specific schemes have given extremely poor returns when compared to other diversified schemes or equity sector

specific funds have generated. The correct strategy here it appears is to back one or two stocks in the cash market which have better

visibility like those in the CRAMS space. Moreover investing in pharma space has significantly higher risk and investors must keep

this in mind before considering an exposure here.

This is what we wrote while reviewing the Pharma Sector funds in Money Times issue dated 24

December 2007.

But the Union Budget 2008-09 has been a booster for the pharma pack. Announcements like the cut in excise duty from

16% to 8% on all pharma formulations augurs well for pharma companies.

The weighted deduction of 125% for expenditure related to Research and Development (R&D) outsourcing will enhance

the cost competitiveness of Indian companies while increase in the outlay for HIV treatment will benefit key players in

the anti-retroviral segment. These announcements combined with increased investments in health insurance have further

enhanced the potential of the pharma segment.

By and large, the pharma segment has been a market underperformer barring the last few weeks. In view of the changed

market conditions, budget announcements and portfolio changes, certain schemes appear promising in the long-term.

JM Healthcare Sector Fund

After a disappointing performance, the scheme has given positive returns of 2.5% in the last three months. With a low

turnover ratio and decent stocks in its portfolio, investors with a long-term horizon and good risk appetite may look at

this fund.

Reliance Pharma Fund

Page 13

With a good mix of MNC companies and Indian CRAMS stories, this scheme has been one of the best performers in the

Pharma pack. The top three stocks include Divi's Laboratories, Ankur Drugs and Aventis Pharma, which are

fundamentally strong stories. Sun Pharmaceuticals and Dishman, too, hold strong potential.

Investing in a sector specific fund means entailing a risk that is higher than a equity diversified scheme. Further, in line

with the need for re-aligning its asset allocation strategy as reiterated in the previous article, investors need to be careful

and may consider only a small surplus exposure here. The key to rewards in the long-term would lie in staggering their

purchases as and when the markets decline over a period of time.

By Suresh Morakhia

STOCK PICK

Sathavahana Ispat Ltd. (SIL) (Code:526093) (Rs.50.40), a Hyderabad based company engaged in producing Pig Iron

(Foundry grade) and metallurgical coke which has the capacity of producing 2,10,000 MTPA and 3,00,000 MTPA

respectively. The company has planned to expand its capacity of met coke to 4,50,000 MTPA. The expansion would also

be formulated in power segment which will end to 40MW. The company has brought in private equity players to fund its

ambitious expansion projects. The first phase of funding was completed with UK based equity player, Stemcor

Corporation, buying 49 lakh shares at Rs.60 per share (FV of Rs.10 per share and premium of Rs.50). Even the promoter

group has contributed in this expansion project.

SIL has good market share which brings comparables numbers to net sales and net profit with its peer group. For the first

nine months ended 31

December 2007, the net profit stood at Rs.21.31 cr. and Rs.9.68 cr. for Q3FY08 resulting in an EPS

of Rs.3.68 for the quarterly period. The price of the products it produced is making new highs. For Q3FY08, SIL has huge

quantity in stock-in-trade, which when realised will fetch a good amount and contribute both to the top-line but more to

the bottom-line in coming quarters as its known to start its backward integration processes begin.

The hidden story for SIL's future growth and value lies in the commercialisation of 3,00,000 MTPA of met coke capacity.

The full benefit will start by 2009 (1

phase) and 2010 (full commercialisation) for the met coke plant. However, its 30 MW

cogeneration power plant mainly for captive use with surplus to be sold will contribute its business performances. This

plant has already begun contributing to its estimated EPS of approximately Rs.14. Applying a modest P/E of 8; the SIL

share can offer huge appreciation.

By Saarthi

STOCK WATCH

Krone Communications Ltd. (Code: 523411) (Rs.120) is a 62% subsidiary of the US based ADC Telecommunications,

which is a world leader in communications network infrastructure and has presence in over 150 countries worldwide.

Thus, Krone provides connections for wireline, wireless, cable, broadcast and enterprise networks in India. Its innovative

network infrastructure equipment and professional services enable high-speed Internet, data, video, and voice services to

residential, business and mobile subscribers. Besides structured cabling solution, it offers Wi-Fi and Wi-max solutions. In

addition, the company enables wireless carriers to get more from their networks with its Digivance™ radio frequency

transport solutions and ClearGain

tower-mounted amplifiers. Because of its hi-tech professional service, its clientele

includes corporate giants like Bharti Televentures, Reliance Infocom, Tata Teleservices, Siemens, HFCL Infotel, TCS,

Alcatel, Cognizant, Lucent, etc. to name a few. For FY07 ending 31

October 2007, it reported 15% growth in the topline as

well as bottomline to Rs.93 cr. and Rs.8 cr. respectively, which translates into an EPS of Rs.17 on its small equity of Rs.4.60

cr. Even for Q1FY08, it registered 20% growth in net profit despite 35% lower sales. Accordingly, it is expected to post an

EPS of Rs.20 for FY08. This means that this debt-free MNC is available at a very cheap discounting of 6 times.

*****

Belonging to the Duncan Goenka group, Stone India Ltd. (Code: 522085) (Rs.98) is the undisputed leader of locomotive

brake systems and has a large range of mechanical and electrical products for the railroad industry. It boasts of its own

patented beam mounted brake system for all types of freight wagons. Of late, it has ventured into the railway electronics

business with the introduction of a slew of high value power electronic products like inverters, converters and power

supply systems for coaches, locomotives, EMUs and metros. Currently, the company generates about 90% of its revenue

from the railways and has a market share of about 25-30%. It has appointed Telewira Tegas SDN BHD, Malaysia, as an

exclusive agent for turnkey project work relating to freight car, passenger coach and locomotive upgradation and

maintenance for Malaysian railways. Recently, it partnered with the Sumitomo Group of Japan to manufacture air

springs, which are technically far superior to the existing mechanical suspension system. Importantly, to diversify its

product portfolio, it has set up a greenfield facility at Nalagarh, Himachal Pradesh, which is likely to go on stream

shortly. Hence for FY08, it is expected to register sales of Rs.100 cr. with PAT of Rs.13.50 cr. i.e. EPS of Rs.18 on its equity

of Rs.7.60 cr. The scrip has the potential to double in 12-15 months.

*****

Tera Software Ltd. (Code: 590020) (Rs.48) is one of the leading e-governance solution providers undertaking data

entry/scanning works for digitization of information maintained under Right to Information (RTI) Act. It also undertakes

Page 14

short-term projects like issue of photo ID cards, ration cards and voter identity cards. In consortium with the Electronics

Corporation of India Ltd., the company has bagged a huge e-governance order taking its total order book position to

around Rs.250 cr. to be executed over the next five years. Recently, it was selected as an empanelled vendor for rollout of

IT services in the government sector through the National Informatics Centre Services Inc. for a period of one year which

can be extended for another one year. Considering its excellent nine month figures, the company is estimated to report

total revenue of Rs.75 cr. with PAT of Rs.16 cr. for FY08 i.e. EPS of Rs.13 on its equity of Rs.12.50 cr. For FY09, it has the

potential to report an EPS of Rs.16. Despite such strong fundamentals, investors are selling the scrip on fears of rupee

appreciation without knowing that the company derives 100% of its revenue from the domestic market. Hence, it is

totally unaffected by any sort of rupee appreciation against the US dollar. Moreover, the company has few acres of

surplus land in Hyderabad, which it plans to either sell or enter into JV with an infrastructure company. A total risk-free

bet at current levels.

*****

Promoted by the Delhi based Bali family, Mount Shivalik Industries Ltd. (Code: 507522) (Rs.65) specialises in production

and marketing of strong as well as mild beer under various brands across India. 'Thunderbolt', 'Torpedo', 'Punjab Extra

Strong'& 'Stroh super strong' are its popular brands in the strong beer category whereas 'Golden Peacock' & 'Stroh's

Premium Lager' are its mild beer brands. It also has the privilege to brew and market 'Cobra' beer, which is one of the

popular beer brands in the UK. With an installed capacity of 3,00,000 hecto litres per annum, it is the single largest

manufacturing unit of beer in Rajasthan. Looking at its first nine months performance, the company may close this fiscal

with sales of Rs.100 cr. and PAT of Rs.6 cr. This translates into an EPS of Rs.10 on its current equity of Rs.6.05 cr. Despite

such strong brand value and encouraging performance, the company is available at an enterprise value of less than Rs.50

cr. Moreover, several foreign and domestic majors are looking to acquire a majority stake in the Mount Shivalik Group.

Hence to get better valuation, the company is planning to restructure and consolidate its brewery business and may even

merge its unlisted entity with itself. Keep accumulating at declines.

By Kukku

FIFTY FIFTY

Investment Call

* Greaves Cotton (Rs.250.25) is Rs.1200 cr., multi-product, multi-locational company. It is a leading engineering company

with core competencies in infrastructure equipment and diesel/petrol engines. The company sustains its leadership

through nine manufacturing units, which produce world class products backed by a comprehensive marketing and

service/spare parts network throughout the country.

In addition to its recently commissioned plant for Transit Mixers, it is further augmenting capacity with another state-of-

the-art manufacturing plant, which is likely to go on stream soon. This would enable the company to double its capacity

in Compaction equipment as well as Concrete Pumps and Batching Plants. Once production stabilises, this division is

expected to contribute good profit for the company as demand for these products is said to be huge.

Greaves also makes air-cooled and water-cooled diesel industrial engines that find application in various quarters. The

company has managed a 15% market share in a market dominated by unorganised players.

Similarly in the agriculture engine segment (portable petrol/kerosene engines) the company has been successful in

combating low-cost imports from China. While it makes its own engines, it exports them to China for conversion into

power tillers before importing them.

The company continues to lay emphasis on

technology upgradation and introduction of

new products across all business segments.

With this strategy, coupled with the

government's continued thrust on higher

infrastructure

spending,

the

Greaves

management is confident of continuing the

growth momentum in coming years.

The company has reported H1FY08 EPS of

Rs.11 and it is expected to report EPS of

around Rs.22/23 for the full year FY08. The

stock reacted from Rs.466 to Rs.256 where it

looks attractive for long-term investment.

Investors should take benefit of the current

sharp fall in its stock price with a long-term

view, as it is a safe investment.

Daily Fresh Buy

(for the busy investor)

PROFITRAK is pleased to announce the launch of 'Daily Fresh Buy' for

investors/ traders who are keen to focus and gain from a single stock every

trading day.

With just one daily recommendation selected from stocks in an uptrend,

you can now book profit the same day or carry over the trade if the target

is not met.

Our review over the next four days will provide new exit levels while the

stock is still in an uptrend.

This low risk, high return product for the busy investor is available for

subscription at Rs.2000 per month. For details contact

moneytimes@vsnl.com or phone on 022-22616970/ 22654805.

Page 15

Market Guidance

* Tata Metaliks (Rs.143.80) - In view of the very firm prices of Pig Iron, the company is expected to report still better

results in future. For the first nine months, its EPS was Rs.17.5 and full year FY08 EPS is expected to be around Rs.24/25.

For the last three years, it has given dividend of 60%, which may be increased to 70/75%. Thus at the current market

price, the dividend yield too is good. Investors can safely add this stock for good long-term gains.

* Dividend yield stocks - Investors can add Sirpur Paper (Rs.89.50), Supreme Industries (Rs.236.25), Sterling Tools

(Rs.65), First Leasing (Rs.46) and Tata Metaliks (Rs.143.80) as good dividend yield stocks with better outlook in this

weak sentiment.

* Steel prices are very firm and the outlook for the sector is said to be encouraging. Investors can add TISCO (Rs.772.60),

SAIL (Rs.232.55), Mukand Ltd. (Rs.88.50) and Ramsarup Industries (Rs.165.35) on dips.

* International Combustion (Rs.396) is another fundamentally strong stock wherein the full year EPS is expected around

Rs.46/48 while its share price:book value ratio is an attractive around 2:3 since the stock reacted from its high of Rs.915 to

Rs.415. It is a safe investment bet.

* The Central Bank of India (Rs.81) stock looks attractive as it is available around book value of Rs.85 while FY08 EPS is

expected around Rs.13/15. Last dividend was 31%.

* View on the market - There is a general feeling in the market that the BSE index will come down to 14,000 and the Nifty

around 4400. Although the Sensex has fallen by 24% from high of 21,200, many of the active stocks like IFCI (Rs.52), JP

Associates (Rs.206.85), Punj Lloyd (Rs.304.15), Garware Wall Rope (Rs.134.60) and Ion Exchange (Rs.164.25) have fallen

by almost 50% while many other good stocks like Hindustan Dorr Oliver (Rs.112), HCC (Rs.148), JMC Projects

(Rs.318.60), Pratibha Industries (Rs.310), Ramsarup Inds. (Rs.165.35), Kirloskar Eletric (Rs.197) and many others have

come down by 40-45% from their peaks.

There seems to be good buying support at these levels in all such stocks from smart investors. In such uncertain and

fearful conditions, investors should accumulate these stocks where the further downside can be another 10%-15% but

there is every possibility that over the next one year these stocks may give return of 40%-60% or even higher over the next

one year.

Revival in buying interest by retail investors & traders may take some more time. But since there are several mutual funds

and portfolio management schemes (PMS), players along with corporate buying, the interest may revive in the next few

weeks.

There are rumours that real estate prices are likely to come down over the next few months and a correction may take

place in line with the sentiments of demand & supply. Investors must, however, note that crude oil has gone up five fold

in the last 6 years while steel prices have gone up almost three fold while gold prices witness with the same trend.

Real estate prices in Mumbai are 50-100% higher compared to the peak they had achieved in 1995 but have gone up by

150-200% from the recent low of 2002. It is likely that there will be more supply unless the demand goes up sharply.

Investors should remain cautious while investing in the same.

Many investors may have got trapped at higher levels in stocks with weak fundamentals or they might have bought

stocks on tips in good sentiment but may not be sure on the future outlook. Since the ratio of the fall is the same, it is

better to switch to some of the above mentioned stocks whose fundamentals are strong. This is the best time to improve

the quality of one's portfolio.

Research quality is always better in such sentiment and investors are advised to stay invested in good stocks.

* English Indian Clay (Rs.699) has clarified to shareholders that it had indicated Rs.179 per share as the fair value after

demerger based on NAV/book value as duly certified by the merchant bankers. Unfortunately, BSE replaced the market

price with NAV without informing the company. It has taken up the matter with SEBI but its growth story remains intact.

By V. H. Dave

EXPERT EYE

This share was earlier recommended in Early Bird Gains (EBG), our investment newsletter specializing in multi-baggers, at Rs.80.75

on 21

November 2007. Since then, it has touched a high of Rs.116 on 2

January 2008 fetching a gain of 49%. The current depressed

market provides a good opportunity to acquire this fundamentally strong share for decent appreciation in the medium-to-long-term

with a target price of Rs.100.

Lumax Auto Techologies Ltd. (LATL) (Code: 532796) (Rs.52.95) manufactures gear shifter assemblies for various four-

wheeler products of Maruti Udyog at its manufacturing facility at Manesar near Gurgaon. It also manufactures

corrugated boxes and supplies to Lumax Industries at a separate manufacturing facility located at Daultabad, Gurgaon.

Its main customers are Bajaj Auto, Maharashtra Scooters, Maruti Suzuki and Lumax Industries.

Lumax DK Automotive Systems, its 100% subsidiary, was incorporated as Lumax GHSP Industries Ltd. on 7

May 1997

as a joint venture between GHSP of USA and Lumax Industries to manufacture and supply gear shifter assembly to

automobile manufacturers in India.

Page 16

It tapped the capital market in December 2006 with an issue of 30.12 lakh shares at Rs.75 aggregating Rs.22.6 cr. to part

finance its project cost of Rs.50.2 cr. The issue proceeds are being utilised for setting up of a chassis assembly at Bhosari,

Pune, besides expansion and modernisation of its current manufacturing facilities at Chakan and Waluj and

modernisation of its development Centre at Chinchwad.

LATL's Uttarakhand plant for automotive lighting was recently commissioned at an investment of around Rs.23 cr. and

has started supplying its products to Bajaj Auto and others. The plant can cater to one million two-wheelers. The

company is also setting up a levelling motor unit and will enhance its infrastructure facilities at Manesar, near Gurgaon.

LATL has formed a 50:50 joint venture with the Italian Cornaglia group, which is a key supplier to Fiat, to make emission

systems. The JV will have an initial investment of Rs.50 cr. and already has orders for a similar amount from Tata Motors,

Fiat and Bajaj Auto.

For FY07, its consolidated sales were Rs.254 cr. with net profit of Rs.3.4 cr. and its EPS was Rs.2.9 on its enhanced equity

after the IPO.

During Q3FY08, consolidated sales advanced by 16% to Rs.71 cr. while net profit surged by 417% to Rs.3 cr. resulting in

an quarterly EPS of Rs.2.7. For the first three quarters of FY08, sales grew by 57% to Rs.226 cr. whereas net profit zoomed

by 231% to Rs.9.6 cr. The EPS for the first nine months works out to Rs.8.3.

Coming to its future prospects, the present size of the auto components industry in India is estimated at $ 8.7 billion,

which is 0.4% of the global auto components industry and it has grown by 23% p.a. in the domestic market and by 34%

p.a. in the export market over the last four years. It is expected to rise to 3% of the global market by 2015-16. The Indian

auto components industry has been growing at a CAGR 16% p.a. for past seven years. As per estimates provided by

Automobile Components Manufacturer Association of India (ACMA) and auto component exports are expected to reach

US $20-25 billion, growing at a CAGR of 33.4%.

LATL's major expansion projects are likely to be completed by March 2008 with production to stabilise from Q1FY09. The

improved outlook of the auto components industry owing to the expansion in the auto sector and the larger outsourcing

opportunity give strong visibility to LATL's revenue and profitability in coming years.

With the proposed reduction in excise duty in the Union Budget 2008-09 from 16% to 12% on 2 & 3 wheelers, buses and

small cars, the higher allocation to road development programmes and the increased agricultural credit outlay of Rs.2.8

lakh cr. will spur the demand for automobiles and for auto components.

For FY08, its consolidated sales are expected to go up to Rs.330 cr. with net profit moving up to Rs.14 cr., which would

give an EPS of Rs.12.

With the effects of expansion coming into play, LATL's consolidated sales could increase to Rs.460 cr. in FY09 with a net

profit of Rs.21 cr. resulting in an EPS of Rs.18.

At the CMP of Rs.52.95, the LATL share is trading at a P/E of 5.5 on FY08E EPS of Rs.12 and 3.5 times its FY09 earnings of

Rs.18. The share is strongly recommended with a target price of Rs.100 in the medium-term. The 52-week high/low of the

share has been Rs.116/53.

******

Simplex Castings Ltd. (SCL) (Code: 513472) (Rs.69.35) is on a solid growth trajectory. It is now eyeing the wind mill

power segment for its castings as there is a huge potential. Apart from this, the casting & forging industry has bright

prospects in view of the booming automobile and engineering sectors.

Registered as a partnership firm in 1971, SCL was incorporated in 1980 and went public in 1993. It was promoted by H B

Shah and Arvind K. Shah and manufactures heavy castings in grey cast iron, alloy cast iron, stainless steel and steel. Its

two casting plants are located at Bhilai and Urla with a capacity of 15,000 and 10,000 TPA respectively while the

MS/forging ingots capacity at Urla is 15,000 TPA.

SCL consists of two major units: a one heavy grey iron unit and a heavy steel-casting foundry. For the first time in India,

the company has developed a Truck Frame for Diesel Locomotive Works as per drawings and design of General Motors,

USA, with technical expertise from a leader in Rail and Road Castings, Atchison Casting Corp., USA.

SCL's products mainly go to steel plants, power plants, mining and cement plants, Defence and the Railways. Its main

products go to blast furnaces and coke oven batteries. During 1999-2000, the company developed bi-metallic rolls that are

used in thermal power plant. Its products are accepted by inspection agencies such as Lloyds, RITES, RDSO, SGS, Bureau

Veritas and other such global inspection agencies.

SCL has technical collaborations with several companies, which include Nippon Steel Corporation, Japan; Ikio Iron

Works, Japan; Dango & Dienenthal, Germany; China Metallurgical, China; Schalker, Germany etc. for manufacturing

various products.

SCL has doubled its exports with FY07 exports of Rs.15 cr. against FY06 exports of Rs.7.6 cr. to quality conscious,

technologically advanced markets of Japan, USA, CIS countries, Australia, Egypt etc. During FY07, SCL posted 106%

higher net profit of Rs.5.7 cr. on 23% higher sales of Rs.134 cr. recording an EPS of Rs.9.1. During Q3FY08, it posted 35%

increased net profit of Rs.1.9 cr. on 10% lower sales of Rs.35 cr. as against its performance in Q3FY07.

Page 17

Its equity capital is Rs.6 cr. and with reserves of Rs.22.8 cr., the book value of its share works out to Rs.48. During FY07,

SCL added Rs.5 cr. to its gross block taking its value to Rs.82 cr. and the debt-equity ratio is 1.3:1 as on 31

March 2007.

The promoters hold 56% in its equity capital, foreign holding is 3%, PCBs hold 10% leaving 31% with the investing public.

The Simplex Group is a leading Indian manufacturer of different engineering products, castings and equipments for core

industrial sectors for the last 50 years. With such an engineering expertise coupled with modern design, manufacturing

and non-destructive (NDT) facilities, SCL has become synonymous with high quality products. It is now entering new

areas like hydro & gas turbine castings, fabrication & equipment building, projects on turnkey basis for various steel

plants and automobile sectors.

It offers engineering castings in various grades for core industrial sectors like Steel, Power, Railroad equipment, Mining,

Cement, Defence, Sugar and other specialised areas in cast, machined or assembled condition. Its steel foundry is

equipped to manufacture engineering steel castings weighing upto 17 tonnes single piece cast weight. This foundry can

also produce cast steel castings like slag pot weighing upto 22 tonnes as a single piece.

SCL recently bagged a prestigious order worth Rs.14 cr. from the Ministry of Railway for supply of coco bogies (chasis for

electrical locomotive, WDG-4). Also orders worth more than Rs.120 cr. are in hand, which includes export orders worth

Rs.30 cr. from its clients like Indu Steel - France, Arcellor - Spain, Ingersoll Rand - Italy, Sandvik Asia - Pune, Al-Nasar

Company – Egypt for coke & chemicals and Hyundai Corporation - Korea. The company is in a position to meet the rising

demand of its customers who are fully satisfied with its quality.

Increased domestic demand of 20% p.a. of casting & forgings, the growth of over 15% p.a. in the automobile industry and

the increased exports of castings and forgings (target of US $5 billion by 2015) and the booming engineering & capital

goods sectors are the strong demand drivers for the casting & forging industry. Global recovery and the shifting of the

production/manufacturing base by the Western auto players to low-cost nations like China and India will help the

industry to explore many more opportunities.

With the Indian economy growing at 9% p.a. and the improved performance of the railways, automobiles and

engineering industries, the demand for

castings is expected to surge handsomely.

SCL expects to garner a good slice of the

upcoming wind power equipment business

that will increase its revenue and

profitability in coming years. The current

annual demand of wind power energy is

about 20,000 MW and 2,000 MW in India,

which would generate good business

opportunities

for

focused

casting

companies like SCL.

April – June 2007

EBG Quarterly Performance:

100% once again

During April – June 2007, which is the third quarter of the fourth year of

'Early Bird Gains' (EBG) – the investment newsletter that spots multi-

baggers, it has scored 100% success with all 15 recommendations

recording an appreciation.

Based on the above, SCL is likely to post a

net profit of Rs.9 cr. on sales of Rs.150 cr.,

which would yield an EPS of Rs.15 in FY08,

which could go up to over Rs.21 in FY09.

Traditionally, SCL posts better results in

the last quarter of the year.

EBG has, therefore, consistently, maintained quality while the bonus

issues in excess of 30% highlight the confidence of its recommendations.

Issue

Dated

Scrip

Buy

Price

Highest

price since

recom.

Growth

04/04/07

Panama Petrochem

129.00

270

109

11/04/07

The share of SCL is currently available at

Rs.69.35 discounting its FY08E Rs.15 by just

5 times. The industry average of the casting

& forging industry currently hovers at 15

making SCL's valuation highly attractive.

The SCL share can appreciate by more than

50% in about 6-9 months from the current

level. The 52-week high/low of the share

has been Rs.113/35.

******

A real estate analyst recommends the share

of Lok Housing & Construction Ltd.

(LHCL) (Code: 500256) (Rs.141.30) for

decent appreciation in the long-term. With

the merger of Lok Shelter, Lok Global &

National Construction (LGNC) and Lok

Rolta India

335.90

780

132

18/04/07

Metalman Industries

18.19

158

25/04/07

Indag Rubber

31.00

113

264

02/05/07

Paradyne Infotech

116.45

440

279

09/05/07

Pochiraju Inds. Ltd.

22.60

183

16/05/07

Asian Oilfield Services

73.95

446

503

23/05/07

Hanung Toys & Textiles

165.50

300

23/05/07

XL Telecom & Energy

119.30

595

400

30/05/07

Bharat Gears

73.00

06/06/07

Kanpur Plastipack

22.75

13/06/07

Deepak Fertilisers

89.30

178

13/06/07

MSP Steel & Power Ltd.

19.15

365

20/06/07

Bihar Tubes Ltd.

103.65

222

114

27/06/07

Astral Poly Technik Ltd.

105.00

235

123

EBG for sure profits

Page 18

Holdings certainly increases its valuation. It is bidding to redevelop its Mumbai properties in prime areas worth Rs.20,000

cr. Apart from this, LHCL has made a presentation to the State Government for remaking C3 & C4 wards of Kalbadevi

and Chira Bazar in South Mumbai. The project, if it succeeds, would cost Rs.60,000 cr. and would bring substantial

revenue to LHCL and the state government in the form of stamp duty and other taxes over a period of 7-10 years. The

LHCL share has come off its 52-week high of Rs.391 and provides good opportunity for long term growth.

Incorporated in 1986, LHCL, a flagship of Lok Group, LHCL was one of the first few companies to be corporatised in the

individual-driven Indian realty sector. LHCL was incorporated in 1987 and was promoted by Lalit Gandhi, its chairman

& managing director. The group has built several housing complexes in the suburbs of Mumbai like Khar, Andheri,

Vikhroli and Mulund and outside Mumbai in Thane, Kalyan and Ambernath.

Till date, the Lok Group has successfully executed and developed over 31 projects with 9 projects currently under

development, over 17,000 dwelling units and over 8.93 million sq. ft. of construction comprising townships, educational

institutes, health centres and commercial units.

During FY07, while sales advanced by 212% to Rs.269 cr. net profit jumped by 335% to Rs.95 cr. During Q3FY08, LHCL

posted 39% higher income of Rs.113 cr. and earned 153% higher net profit of Rs.59 cr. For the first three quarters of FY08,

it earned 34% higher net profit of Rs.101 cr. on 6% lower revenue of Rs.203 cr. in the previous corresponding period.

LHCL's equity capital has gone up to Rs.42.9 cr. after the issue of preferential shares to promoters and other investors at a

premium of Rs.187. The book value of its share is Rs.46.The promoters hold 51% in its equity capital, foreign holding is

3% and non-promoter corporates hold 31% leaving 15% with the investing public.

To build an even stronger brand image that is synonymous with size, scale and quality housing, LHCL is in the process of

merging 3 of its group companies – Lok Shelter, LGNC and Lok Holdings with itself. Lok Shelter is involved in urban

rehabilitation and reconstruction projects. Lok Holding & Constructions is a key vehicle to acquire land and Lok Global &

National Constructions is involved in diverse infrastructure projects.

This merger will help address infrastructure projects ( through LGNC) – a new opportunity at a time when economic

policies are directed towards modern infrastructural development and enhance its existing land bank by another 356

acres by bringing together land bank acquired under different companies for further development. It will also help

address rehabilitation projects – another huge opportunity through Lok Shelter and set the platform for taking on more

mega, ultra premium and landmark projects.

LHCL alone has a robust land bank of approximately 866 acres with development potential 49 mn. sq. ft. (including

properties where MoUs have been signed) in the most sought after realty destinations like Mumbai, Pune and Bangalore.

Post merger, the company will have a land bank of 1222 acres across the country with development potential of 62.5 mn.

sq. ft. LHCL has instituted six sigma quality systems for operational excellence, timely delivery and seamless execution of

large scale projects.

Having established a presence in Mumbai and procured land in Pune and Bangalore, LHCL is looking at establishing a

strong pan India presence by foraying into other metro cities and then in Tier II & III Tier cities. It would participate in

National Urban Renewal Projects comprising slum eradication, demolition and reconstruction of old and dilapidated

buildings.

LHCL is currently executing a Slum Eradication Project in Khar, Mumbai, where through group company, Lok Shelter, it

has completed the construction of 4 buildings. This initiative has resulted in the sanction of an FSI of 4 acres in one of the

most premium locations in Mumbai on which the company is developing ultra premium residential houses (on 50% of

the land) and plans to construct commercial units in the balance space.

LHCL was among the first to identify the huge potential for private-public partnership in the 're-making Mumbai'.

Backed by its proven track record in executing mass housing and rehabilitation projects, it has already submitted a

proposal to the State government for constructing 15,000 flats on 55 acres of its own land, rehabilitate tenants of about 300

unsafe cessed buildings in Mumbai and simultaneously develop 6 mn sq ft in the heart of the city in association with the

Government of Mumbai and MHADA. The government may cross subsidise this cost of redevelopment with the sanction

of Floor Space Index (FSI), which will more than compensate LHCL for its remaking efforts.

LHCL plans to embark on a grand project – The Lok International City – which will be a landmark mega township with

125-150 acres, resembling a small independent ultra modern city and possibly the first of its kind in the country. The

project will house a world-class mega IT Park for which it will involve the best-in-class architects and source world-class

technologies. The proposal has already been submitted to the government.

LHCL has recently approved the issue of 5 million convertible warrants to promoters on a preferential allotment basis at

the price of Rs.354 each aggregating Rs.177 cr. The convertible warrant is of Rs.10 face value and will be converted into 1

share within a period of 18 months. To enhance its long-term financial resources and thereby strengthen its financial

structure, the company has proposed qualified institutional placement (QIP) of Rs.800 cr., which will dilute the

promoters' stake below 50%.

Page 19

LHCL's proven expertise in executing mass housing and ultra premium projects, its efforts to increase the land bank on a

continuing basis and record of completing projects on time, diversify its geographic risk and strategic investment in

appropriate sites at competitive rates with international grade properties give strong visibility to its sales & profitability

the coming years.

Based on the ongoing projects, LHCL is expected to generate revenue of Rs.325 cr. and earn a net profit of Rs.150 cr. EPS

would work out to Rs.35. Going forward, FY09 revenue is expected to move up to Rs.400 cr. and report a net profit of

Rs.190 cr. giving an EPS of Rs.44. The LHCL share traded at Rs.141 at a P/E multiple of 5 on its FY08E earning and 4 times

on its FY09E earnings has all the potential to appreciate by over 50% in the medium-to-long-term. The 52-week high/low

of the share has been Rs.391/130.

By Nayan Patel

TECHNO FUNDA

Garware Offshore

BSE Code: 501848

Traded at NSE also

Last Close: Rs.206

On 8

January 2008, the BSE Small Cap Index kissed 14,239

and fell to 8301.97 last week as most small cap stocks lost more

than 50-60% in the last two months. But Garware Offshore lost only 15% over the last two months. Few months ago, we

had recommended this stock around Rs.185 level for investment and recommend it again strongly at Rs.206.

Garware Offshore will soon become a key player in the support services of oil exploration & drilling activities given the

increasing demand for offshore vessels & services by its timely fleet expansion.

The Mumbai based Garware group company has an equity of Rs.23.82 cr., India Star, Mauritius, an arm of the Citibank

Group, holds 20.42% stake in the company while the promoters hold 29.79% stake in the company.

The company has posted excellent results for the December 2007 quarter. While net sales jumped 90.34%, net profit

zoomed 153.21% to Rs.8.28 cr. and it is expected to post marvellous numbers for the March 2008 quarter also. As per its

expected earning, the stock is available at P/E ratio of just 8, which is the lowest in its segment. Buy at every decline this

18% dividend paying company's stock with a stop loss of Rs.186. On the upper side, the stock may go up to Rs.225 in the

short-term upto Rs.310 level in the next 6-8 months and Rs.375-400 level in the next 12-15 months. It is safe and strong

investment bet in this falling market.

ReIndia Expo

MONEY FOLIO

Review

Last week we recommended Twilight Litaka Pharma at

Rs.62.40 and in this bearish sentiment the stock zoomed

and kissed Rs.69 level.

The first ReIndia Expo will be held at the Bombay Exhibition Centre in Mumbai from March 6 to 8, 2008. Organised by

'recharger', the leading US-based information resource for the document printing industry aftermarket, ReIndia Expo

2008 opens new avenues for businessmen searching for ways to learn about the latest information and view the most up-

to-date products available in the office products recycling industry.

Like World Expo in Las Vegas, this new event could emerge as the most effective ways to purchase and preview state-of-

the-art equipment, products and services to increase productivity and reduce costs. It will allow industry members to

experience product launches, brand new service offerings and peer networking and information sharing classes.

Gammon Infrastructure Projects IPO opens on 10

March

Gammon Infrastructure Projects Ltd. (GIPL), an infrastructure project development company promoted by the 85-year

old Gammon Group, is entering the capital market with its IPO of 1,65,50,000 equity shares through the 100% book

building process the price band of Rs.167 and Rs.200 per equity share of Rs.10 each. The issue will open on Monday, 10

March and will close on Thursday, 13

March 2008. The issue has been graded by Credit Analysis & Research Ltd. as

'CARE IPO Grade 4' indicating above average fundamentals and will be listed on the BSE and NSE.

Resident investors can avail of two modes of payment. Under Payment Method-1, the amount payable on submission of

the bid-cum-application form (in case of retail individual bidders and non-institutional bidders) is Rs.50 per Equity Share

(such that it shall not be less than 25% of the Issue Price). And the balance payable shall be paid by the due date. Under

Payment Method-II, the amount payable on submission of the bid-cum-application form in the case of retail individual

bidders and non-institutional bidders shall be 100% of the bid amount and in the case of QIBs, it will be 10% of the bid

amount with the balance being payable on allocation.

GIPL was incorporated in 2001 and is modelled as an infrastructure development company undertaking projects on a

public-private partnership basis ("PPP"). Presently, GIPL undertakes and develops projects such as roads, bridges, ports,

hydroelectric power and biomass power projects on a PPP basis.

Page 20

It has fourteen projects of which four are already in the operations phase, seven are in the development phase and three

are in the pre-development phase. GIPL also provides operations & maintenance services (O&M) and project advisory

services for projects undertaken by project specific companies.

The issue proceeds will be utilised to fund its subsidiaries involved in building roads, bridges, power projects and

repayment of loans with general corporate purposes.

Sita Shree Food Products IPO opens on 11

March

Sita Shree Food Products Ltd., a wheat & pulses processor and supplier to major players like Pantaloon Retail and

Reliance Retail, proposes to enter the capital markets with an IPO aggregating Rs.31.5 cr. through the 100% book building

process in the price band of Rs.27 to Rs.30 per share. The issue opens on Tuesday, 11th March 2008 and closes on Friday,

14th March 2008. The equity shares are proposed to be listed on BSE and NSE. The issue has been graded by CARE as

'IPO grade 2' signifying below average fundamentals and is proposed to be listed on the BSE and NSE.

The company proposes invest the net proceeds of the issue to part finance its Rs.48.12 cr. expansion plan. The plan

include setting up of a 500 TPD Solvent Extraction Plant, a 100 TPD oil refinery for Solvent Extraction Plant, a 5 TPD

Lecithin plant for processing the by products of solvent extraction and a 275 TPD Flour Mill. The proposed project will be

set up at Badiakima, Indore, Madhya Pradesh just 8 km away from existing location. Union Bank of India has sanctioned

a term loan of Rs.10 cr. and the promoters have already brought in their contribution of Rs.6.24 cr.

Sita Shree's existing plant at Indore produces Wheat Flour, Maida, Rawa, Daliya, Suji, Chana Dal etc. which are marketed

under its brands like 'Sita Shree', 'Sita Shree Gold' or sold to other brands. But its turnover is dominated by the bulk

packed products segment. Since incorporation in 1996, the company is on the growth track and achieved a turnover of

Rs.80.74 cr. with PAT of Rs.92.92 lakh for FY07. For the first 7 months of FY08, the turnover was Rs.50.17 cr. with PAT of

Rs.59.17 lakh.

Max New York Life Insurance launches 'Lifeline'

Max New York Life Insurance, one of India's leading insurance companies, has launched 'Lifeline' health insurance plans,

which bring long-term insurance coverage for hospitalisation, surgeries and critical illness. It has also introduced some

significant firsts like fixed premiums for a five-year period, no-claim discount on revised premiums for leading a healthy

life, coverage for the largest range of ailments, free second opinion from the best hospitals in the country on diagnosis of

illness, free telephonic medical helpline.

Its lifeline series comprises 3 distinct groups of solutions:

Medicash Plans provide hospitalisation, benefit, Wellness Plans cover against 38 critical illnesses & disabilities and Safety

Net is a comprehensive term plus health protection against any losses arising from critical illness, accident, disability and

death.

Kotak Mahindra AMC signs MoU with Oriental Bank of Commerce

Kotak Mahindra AMC has entered into a distribution tie-up with Oriental Bank of Commerce (OBC), under which OBC

will offer the entire bouquet of Kotak Mutual Fund's products across its branches.

Offering advice on mutual fund investments is an extension of the value added services that will be offered by OBC

hereafter.

Reliance Infratel plans IPO

Reliance Infratel Ltd., a subsidiary of Reliance Communications Ltd. proposes an IPO of 8,91,64,100 equity shares of Rs.5

each through the 100% book building process. The issue will constitute 10.05% of the post-issue paid-up equity capital of

the company.

The company is part of the Reliance Anil Dhirubhai Ambani group and its business is to build, own and operate

telecommunication towers and related assets at designated sites and to provide these passive telecommunication

infrastructure assets on a shared basis to wireless service providers and other communications service providers under

long-term contracts.

The issue proceeds will be utilized to finance the development of passive infrastructure sites and for general corporate

purposes.

The equity shares of the company are proposed to be listed on the BSE & NSE.

Pipavav Shipyard plans IPO

Pipavav Shipyard Ltd., which is currently constructing a shipyard complex at Pipavav, located on the west coast of India

adjacent to the maritime sea lane between the Persian Gulf and Asia at an estimated investment of Rs.2,888 cr.

The company proposes to enter the capital markets with a public issue of 86,850,000 equity Ssares of Rs.10 each through

100% book building process.

Page 21

Tata AIG Life launches InvestAssure Future

Tata AIG Life Insurance Company Ltd. has launched 'InvestAssure Future', an unit-linked pension plan. It is designed to

help the customer meet his needs of capital accumulation to plan for a secure retired life. This is the first pure pension

plan from Tata AIG Life's portfolio. InvestAssure Future encourages people to provide for a steady and regular income

when they need it the most.

This easy to purchase plan comes in two options where a customer can find his future retirement needs by paying either a

single or regular premium. In this competitive product, the customer will also receive a guaranteed bonus at maturity that

will further augment his total retirement kitty.

The policy holder can choose from a spread of five fund options: Future Equity Pension Fund, Future Income Pension

Fund, Future Capital Guaranteed Pension Fund, Future Growth Pension Fund, and Future Balanced Pension Fund.

Customers can avail of this policy starting from the age of 18 years till the age of 65 years in case of regular premium and

70 years in case of single premium. The minimum annual premium amount in case of regular premium payment option is

Rs.10,000 and in case of single premium payment option it is Rs.25,000. Additionally, the premium paid under this policy

is eligible for tax deduction under Section 80CCC of the Income Tax Act, 1961.

Tata AIG Life launches Health Investor

Tata AIG Life Insurance Company Ltd. has launched 'Health Investor', its critical illness cover with return of premium.

Health Investor provides cover against 12 critical illnesses and surgeries and pays out a lump sum amount on the first

diagnosis of a critical illness or first performance of any surgeries for a critical Illness.

Importantly, Health Investor assures the customer return of premium if the insured is never diagnosed with any of the

covered illnesses and associated surgeries, till the end of the maturity period. This is the first return-of-premium Health

plan from Tata AIG Life.

The plan has four coverage periods to choose from where the customer can pay premiums for 5 years less than the chosen

term. The sum assured increases by 5% every year to a maximum of 50% of the original sum assured. This benefits the

customers by enabling him to address the rising health costs with each passing year. Customers can enter the plan

anywhere between 18-55 years of age and maturity is at 65 years.

Additionally, the premium paid under this policy is eligible for tax deduction under Section 80C of the Income Tax Act,

1961.

Health Investor will be available nationally through Tata AIG Life's advisors and other distribution partners.

Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources

that are deemed to be reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does

not accept any liability for the use of this column for the buying or selling of securities. Readers of this column who buy or sell

securities based on the information in this column are solely responsible for their actions. The author, his company or his

acquaintances may/may not have positions in the above mentioned scrip.

Page 22

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