Fw: Investor's Eye: Update - Banking (RBI caps LTV for gold loans - Negative for Mannapuram and Muthoot), Telecommunications (Bharti upping its ante; while Idea continues to shine)

 

 

Investor's Eye [March 22, 2012]  Sharekhan www.sharekhan.com

Summary of Contents SECTOR UPDATE Banking     RBI caps LTV for gold loans - Negative for Mannapuram and Muthoot   The Reserve Bank of India (RBI) has capped the amount of loan any non banking financial company (NBFC) can lend against gold at 60% of the value (loan to value). The tier I capital adequacy ratio (CAR) has also been raised from 10% to 12% with effect from April 2014. Further, the RBI has restricted NBFCs from lending against gold coins/primary gold or bullion. These regulations will reduce the leverage and lower the net interest margins (NIM) and return on equity (ROE). This is a big negative for listed players like Muthoot Finance, Mannapuram Finance, IIFL etc (not under our coverage).   Telecommunications      Bharti upping its ante; while Idea continues to shine   In February 2012 the GSM operators across India (excluding Reliance Communications [RCom] and Tata Telecommunications [Tata Tele]) added 8.8 million sim cards, taking the overall base to approximately 656.8 million. That is an increase of approximately 1.35% over the January 2012 base. On the net additions front, February's net additions (of about 8.8 million) were 4% higher than that reported in the previous month. Industry's monthly net additions improve from the recent lows On a reasonably higher base of 648.1 million subscribers, the GSM industry (excluding RCom and Tata Tele) added 8.8 million sims, This is positive, given that in the last couple of quarters, sim additions had drifted to fairly low levels. The additions were as low as 6.5 million sims during the August-September 2011 period.  Bharti upping its ante, adds 1.82 million subscribers Player wise, the highlight for the month is the strong 40% month-on-month increase in net additions for Bharti Airtel (Bharti), ie from 1.3 million subscribers in January to 1.82 million subscribers in the month under review (February 2012). This robust addition seen in the last two months (1.3 million in January [+36% MoM]; 1.82 million in February [+40% MoM]) is the result of aggressive market gain strategy adopted by the company. We believe that Bharti would continue to gain market share and take its monthly sim addition rate to an average of approximately 2 million in the next two- three months. Idea continues to shine; records highest net additions For the month under review Idea Cellular (Idea) continued its subscriber leadership trend by adding 2.58 million subscribers (+47.8% MoM). Idea is consistently outperforming its peers in terms of subscriber as well as revenue market share. Vodafone net additions remain muted; while Uninor still remains tall Vodafone has continued to go slow on its subscriber addition strategy. For the month it added 0.84 million subscribers (-2% on an M-o-M basis), while amongst the new entrants, Uninor still remains strong. For the month under review it added 2.3 million subscribers, which is marginally lower (-6%) than what it added in January 2012 (2.5 million subscribers). Supreme Court decision on quashing 122 new licenses to benefit incumbents  Uninor continued with its strong net addition momentum even in the month of February. It is one of the most serious players with it being operational in all the 22 circles. The Supreme Court recently gave a verdict whereby all of Uninor's 22 licenses would be quashed with they having been termed illegal. Apart from Uninor some of the other new players have also been impacted in terms of their licenses getting cancelled. The court ordered the Telecom Regulatory Authority of India to conduct an auction of the spectrum. We believe that some of the new players will leave the system, thereby posing way for natural consolidation which is likely to benefit the incumbents. Etisalat & STel have already decided to shut their operations. One will have to wait and watch Uninor's strategy and its India plans; its decision will be key for the incumbent players. Click here to read report: Investor's Eye Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Regards, The Sharekhan Research Team myaccount@sharekhan.com Manage your newsletter subscriptions