HINDALCO INDUSTRIES : An industry leader in Aluminium and Copper !!

Scrip Code: 500440 / HINDALCO

CMP:  Rs. 142.90; Buy at Rs.135- 138 levels. 6 month Target – Rs. 200; STOP LOSS – Rs. 124.50; Market Cap: Rs. 27,357.05 cr; 52 Week High/Low: Rs. 252.85 / Rs. 128.20; Total Shares: 191,44,19,297 shares; Promoters : 61,37,97,188 shares –32.06 %; Total Public holding : 130,06,22,109 shares – 67.93 %; Book Value: Rs. 155.12; Face Value: Rs. 1.00; EPS: Rs. 11.73; Div: 150 % ; P/E: 12.20 times; Ind. P/E: 14.89; EV/EBITDA: 10.50

Total Debt: Rs. 6359.70 cr; Enterprise Value: Rs. 33,770.35 cr.

HINDALCO INDUSTRIES: The Company was formed in 1958, and based in India. Hindalco Industries Limited engages in the production & sale of aluminium and copper in India and internationally. The company operates in two segments: Aluminium & Copper. The Aluminium segment engages in the production of alumina, aluminium metal, and aluminium metal products, such as aluminium ingots, billets, wire rods, flat rolled products, foils, and extrusions. The company's aluminium units across India encompass various operations, from bauxite mining, alumina refining, aluminium smelting to downstream rolling, extrusions, foils, alloy wheels, and recycling. The Copper segment engages in the smelting of copper and the production of continuous cast copper rods, copper cathodes, sulphuric acid, dap and complexes, gold, and silver. The integrated facility at Renukoot is for an alumina refinery and an aluminum smelter, along with facilities for the production of semi-fabricated products, such as rods, flat rolled products and extrusions. The others segment engages in the production of caustic soda and provides cellular services. The company has a joint venture agreement with Mahanadi Coalfields Limited (MCL, a subsidiary company of Coal India Limited) and Neyveli Lignite Corporation Limited (NLCL) and has formed MNH Shakti Limited for mining of coal. In addition, the company along with its partners, Dubai and Hydromine, is developing an alumina project through a joint venture company, Hydromine Global Minerals GMBH Limited. The Company's subsidiaries include Novelis Belgique SA, Novelis Benelux NV, Albrasilis-Aluminio do Brasil Industria e Comercia Ltda, Novelis do Brasil Ltda, Novelis Cast House Technology Ltd., Novelis Foil France SAS, Novelis PAE SAS, Novelis Deutschland GmbH, Novelis Aluminum Holding Company, Novelis Italia SpA and Novelis (India) Infotech Ltd.

Investment Rationale: In next 4 years company expects Aluminium capacity to increase by three folds.  A Part of the phase 1 at Hirakund has been completed in which the capacity will increase to 161 ktpa. Further, in phase 2 capacities will be increased to 213 ktpa. Capacities at Utkal Alumina & Aditya Aluminium are expected to come on line by 2 half of CY2012 & early by 2013 respectively. It is expected that production & sales volume will show significant growth over FY2011 – 2014. Most of these new capacities will be backed by captive bauxite & coal mines & hence, Hindalco will have a lower cost compared to non – integrated players. NOVELIS will also to expand its capacity by 20 % by FY2014. Novelis capacity at Pinda operations in Brazil is being increased by 220ktpa by 2012 and rest will be through debottlenecking (a 3-4 % increase in capacity every year), Novelis plans to invest up to US$400 million in expansion of its South Korean aluminum rolling & recycling plant by 1mtpa. Given its stable conversion business a steady EBITDA of US$1 billion/annum from Novelis is expected. The Pinda (Brazil) expansion is on process and is expected to complete by December 2012. This will increase the flat rolled product capacity to 600 KTPA. The expansion in South Korea and North America is expected to complete by mid 2013.  The Forest Advisory Committee has rejected the forest diversion proposal for the Mahan Coal block during the quarter. The issue has been recommended to the Group of Ministers (GoM) which has been constituted for giving forest clearance. The issue will be discussed in the next meeting of GoM. The first metal from the Mahan smelter is expected to come on by the end of DEC 2011.  The forest stage II clearance for the Aditya Aluminium has been received; hence the production is expected to start by early 2013. The majority land has been acquired for the Aditya Refinery & is expected to be operational by 2014. The land acquisition has started for the Jharkhand Aluminium.  The timely completion of the projects will be the key focus for Hindalco as the new capacities coming on stream will drive the additional growth in revenue and profitability from FY13E. However, the projects have infrastructure and administrative challenges which can lead to delay in commencement of the new projects.

Outlook and Valuation:

HINDALCO posted a 16.5 % net revenue of Rs. 6031 cr in Q1 FY12 vs. Rs. 5178 cr YoY and EBITDA was up 4.2 % to Rs. 867 cr vs. Rs. 832 cr. PAT was up by 20.5 % YoY to Rs.644 cr; other income at Rs. 178 cr. Novelis posted increase in net revenue to $3,113 million in Q1 FY12 vs. $2,533 million YoY and $2,960 million QoQ due to higher LME prices. Adjusted EBITDA was up 16.3% YoY to $306 million in Q1 FY12 from $263 million in Q1 FY11 (up 9.3% QoQ). Total shipments of the aluminium rolled products were up 3% YoY to 767 KT in Q1 FY12 vs 746 KT in Q1 FY11. Demand from the auto and beverage can segments have remained strong. The total beverage can volume increased 9% YoY (2% QoQ) and accounted for 60% of the total rolled product volumes. However the non-can segment declined 5% YoY and 4% QoQ. In the electronics segment the company is facing intense competition in the foil business from the unorganised players. The segment is not performing well due to weakness majorly in Asia in the flat panel TV segments. Novelis has a capex of $67 million against the full year guidance of $550-600 million. Hindalco is well placed to benefit from its aluminium expansion plans (capacity increasing by nearly 3 folds in the next 4 years); low production cost at its new capacities and steady capacity expansion at Novelis. Due to delay in its Utkal & Aditya projects there could be lows in production and sales volume estimates for FY12 and FY13. Higher other income was due to treasury operation, return of capital from Novelis and dividend from Aditya Birla Minerals.
HINDALCO to hold its AGM on 23rd September 2011; Book closure for dividend of Rs. 1.50/sh or 150 % from 16th September 2011 to 23rd September 2011. The valuation of HINDALCO stock on SOTP (sum‐of‐the‐parts) basis, with the standalone business comes at Rs. 196 / share for FY13E. In my view HINDALCO could report EPS in FY12E & FY13E of Rs. 12.90 / sh and Rs. 18.70 / sh, respectively. I would buy HINDALCO IND LTD for the long term with a price target of Rs. 200 with the strict stop loss of Rs. 124.50  

Business Subsidiary FY13E	Enterprise Value (in Rs.Cr)
HINDALCO (Standalone)	34,935
NOVELIS	23,946
TOTAL EV	58,882
Less : Net Debt (FY13)	23,523
Value of Investments@25% discount	2,224
Value per Share	196.00

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	60,708	72,078	75,368	83,023
NET PROFIT (Rs. Crs)	4,352	2,879	2,461	3,572
EPS (Rs.)	22.70	15.00	12.90	18.70
PE (x)	6.80	10.30	12.00	8.30
P/BV (x)	1.40	1.00	1.00	0.90
EV/EBITDA (x)	4.70	6.20	7.70	6.60
ROCE (%)	20.90	10.80	15.50	15.00
RONW (%)	14.00	9.90	10.00	10.00

I would buy HINDALCO INDUSTRIES with a price target of Rs. 200 for the 6 month. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 124.50 on your purchase.

MAHINDRA & MAHINDRA LTD : Showing Signs of strong growth !!

Scrip Code: 500520 / M&M

CMP:  Rs. 765.10; Buy  Rs. 730
Short term Target: Rs. 780, 6 month Target – Rs. 814; STOP LOSS – Rs. 670.00; Market Cap: Rs. 46,975.21 Cr; 52 Week High/Low: Rs. 826.70 / Rs. 585.00

Total Shares: 61,39,74,839 shares; Promoters : 15,26,37,105 shares –24.86 %; Total Public holding : 98,93,422 shares – 62.30 %; Book Value: Rs. 167.64; Face Value: Rs. 5.00; EPS: Rs. 44.05; Div: 230 % ; P/E: 17.39 times; Ind. P/E: 15.40; EV/EBITDA: 11.91.

Total Debt: Rs. 2552.90 cr; Enterprise Value: Rs. 50,619.76 cr.

MAHINDRA & MAHINDRA LTD: The Company was formed in 1945 as Mahindra & Mahindra and renamed as Mahindra & Mahindra Ltd in 1948, based in India. Mahindra & Mahindra Limited operates in the Motor vehicles and car bodies sector. The Company operates in nine segments: automotive segment comprises of sales of automobiles, spare parts and related services; farm equipment segment comprises of sales of tractors, spare parts and related services; information technology (IT) services comprises of services rendered for IT and telecom; financial services comprise of services relating to financing, leasing and hire purchase of automobiles and tractors; steel trading and processing comprises of trading and processing of steel; infrastructure comprise of operating of commercial complexes, project management and development; hospitality segment comprises of sale of timeshare; Systech segment comprises of automotive components and other related products and services, and its others segment comprise of logistics, after-market, two wheelers and investment. In November 2009, BAE Systems entered into a joint venture agreement with Mahindra & Mahindra Limited to create a land systems focused joint venture Defense Company, based in India. During the fiscal year ended March 31, 2011, the Company acquired a 70 % stake in Ssangyong Motor Company Limited - a manufacturer of sports utility vehicles in Korea. The company has a distribution network of over 130 dealers in Korea and exports to over 90 countries through 1,200 dealers. With the support of M&M, SMC is working on a revitalization plan with strong focus on cost reduction along with new product development and market expansion.

Investment Rationale: M&M gained market share by launching new models which drove volume & revenue growth in automotive sector, company’s market share in Utility Vehicles (UVs) rose by 4.50 % to 56.2 % and in tractors by 2.30 % to 43 %. Its domestic tractor numbers grew 14 % in Q1 to 1,33,103 units. New product launches in the pickup segment has helped M&M maintain its demand momentum. In the UV segment, the company expects to launch a new SUV by December 2011 end. SsangYong Motor Company a part of US$ 12.5 billion Mahindra Group unveiled the concept of crossover vehicle, which is targeted for the global market. The car will make its debut at the 64^th Frankfurt International Motor Show to be held in Germany this month. This SUV will be first launched in India & South Africa while several others countries around the world will be targeted later. M&M’s global SUV project codenamed W201 was christened as the XUV500. Consumer research for the Mahindra XUV500 was carried out in various western markets, South Africa & India, with testing of the product done across Europe, Australia & South Africa among others. The SUV will be manufactured at M&M’s plant in Chakan near Pune in Maharashtra. Mahindra is likely to price the SUV in Rs. 12 – Rs. 20 lakhs range. Demand for small commercial vehicles (SCV’s), the fastest growing commercial vehicles (CV) segment, remains strong and M&M has been successful in grabbing 20 % market share in the segment in less than 2 years of launch. M&M is working on turning around its recent acquisition of Ssangyong, Korea. In CY11, M&M targets revenue of US$3 billion from Ssangyong against US$ 2 billion in CY10. Two SUV’s from Ssangyong Motor’s portfolio (Rexton and Korando) would be assembled at M&M Chakan facility. Through its JV with Navistar, M&M continues to expand its sales network for commercial vehicles. M&M’s Tractors segment is expected to sustain its demand driven by higher rural penetration, good monsoons, onset of festival season & increasing usage in haulage applications. Current demand scenario is similar to what was witnessed in Punjab during the green revolution. The difference is it is visible in larger parts of the country & hence, a sharp jump in growth numbers. M&M’s low segment product (15HP) Yuvraj is gaining popularity among farmers. Company is selectively opening up in new markets with the latest addition being Maharashtra & Karnataka  

Outlook and Valuation:

Finance availability rather than interest rates, is the key parameter affecting demand. Not witnessing any constraints with finance availability M&M’s in-house financing arm - M&M Finance usually finances 35 % - 40 % of total vehicles sold. The company is prepared to handle any shift in demand for diesel/petrol vehicles with introduction of duty/price hike on diesel vehicles. MM expects share of Chakan in overall production to go up to 25 % in FY12. Currently, this plant produces Maximo, Genio and Navistar trucks. Management stated that all new products including W-201 and SMC products will come out from Chakan plant. Xylo and Scorpio are produced at Nashik plant, while Bolero is produced at both Nashik and Zaheerabad plants. The company is looking at new Auto plant in Chennai and new Tractor plant in Zaheerabad, as it operates at near full capacities at its existing units. Maharashtra government has withdrawn set-off of sales tax on sales outside the state from mid-March 2011. While it does not reduce the benefit, which is fixed as a % of total Capex, the benefit would now be realized over a much longer period. Impact of withdrawn of set-off of sales tax have contracted EBITDA margin by 0.6 % – 0.8 % in Q1 FY12. Management expects 25 % of auto sector volumes, as well as all new launches would be produced from Chakan plant. Due to higher volumes and revenues from Chakan plant, impact of withdrawn of set-off of sales tax would be higher in coming quarters. Capex could be some were about Rs 7,000 Cr over the next three years. M&M’s DEBT EQUITY RATIO AS ON JUNE 2011 stood at 0.22 X. In the automotive sector, M&M is expected to register a volume growth of around 17 % in FY12 and 13 % in FY13; in tractor sector at around 12 % in FY12 & 13 % in FY13 respectively. It is estimated that growth in M&M automotive sector would be lead by continued dominance of UV portfolio, launch of new SUVs and higher sales of Verito passenger car (earlier known Logan). Tractor sector to continue with its market share with expansion in capacity for Yuvraj tractor from 1,000 to 1,500 per month and normal monsoon this year. Any additional increase in excise duty on diesel vehicles would impact M&M as its UV portfolio is entirely diesel based (at around 97-98%). The valuation of M&M stock on SOTP (sum‐of‐the‐parts) basis, with the standalone business comes at Rs. 602 / share and subsidiary investments at Rs. 212 / share FY13E.  In my view M&M could report EPS in FY11 & FY12E of Rs. 43.70 / sh and Rs. 51.40 / sh, respectively. I would buy M & M LTD for the long term with a price target of Rs. 95o and for the SHORT TERM PLAYERS it would be Rs.814.00 

Business Subsidiary FY13E	Value Per Share (in Rs.)
M&M Financial Services	65.00
Mahindra Forgings	10.00
Mahindra Holidays & Resorts Ltd	34.00
Mahindra Lifespace Developers	13.00
Mahindra Ugine Steel Co	1.00
Tech Mahindra	65.00
Ssangyong Motor Company	24.00
Other Investment (at BV)	1.00
Total Subsidiaries	212.00
TOTAL	814.00

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	18,529.60	23,295.00	29,349.10	34,210.80
NET PROFIT (Rs. Crs)	2,018.10	2,519.80	3,019.70	3,492.40
EPS (Rs.)	36.30	43.70	51.40	59.50
PE (x)	18.40	15.30	13.00	11.20
P/BV (x)	4.70	3.70	3.20	2.60
EV/EBITDA (x)	13.60	12.50	10.20	8.70
ROCE (%)	30.90	27.80	26.50	25.50
RONW (%)	24.30	23.10	24.30	24.40

I would buy MAHINDRA & MAHINDRA LTD with a price target of Rs. 780 for the short term and Rs. 814 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 670.00 on your purchase.

VISAKA INDUSTRIES LTD: A strong rural play with strong fundamentals !!!!

Scrip Code: 509055 / VISAKAIND

CMP:  Rs. 87.15; Buy at current levels.
Short term Target: Rs. 100, 6 month Target – Rs. 150; STOP LOSS – Rs. 78.00; Market Cap: Rs. 138.40 cr; 52 Week High/Low: Rs. 173.70 / Rs. 82.55

Total Shares: 1,58,80,952 shares; Promoters : 59,87,530 shares –37.70 %; Total Public holding : 98,93,422 shares – 62.30 %; Book Value: Rs. 164.54; Face Value: Rs. 10.00; EPS: Rs. 25.24; Div: 50 % ; P/E: 3.45 times; Ind. P/E: 5.73; EV/EBITDA: 3.37.

Total Debt: Rs. 188.85 cr; Enterprise Value: Rs. 323.74 cr.

VISAKA INDUSTRIES LTD: was incorporated in 1981 in Secunderabad, India. Visaka Industries Limited manufactures and sells corrugated cement fiber sheets in India and internationally. It operates in two segments, Building Products and Textile Synthetic Yarn. The Building Products segment produces asbestos sheets, accessories, and non asbestos flat sheets that are used as roofing materials and interiors. Its accessories include close fitting adjustable ridges, apron piece, north light ridges, barge boards, north light curve, serrated adjustable ridges, roof lights, and ridge finials. This segment also offers V Boards and V Panels, which are used for false ceiling, wall partitions, wall paneling, door panels, mezzanine flooring, back liners, structural glazing back lining, prefabricated buildings, and roofing, as well as for fixed furniture, such as computer tables, black boards, dressing tables, shoe racks, A.C. duct covers, photo frames, and office tables. The Textile Synthetic Yarn segment manufactures yarns out of the blends of polyester, viscose, and other materials to produce various fabrics, including shirting, suiting, fashion fabrics, upholstery, and embroidery laces. This segment also exports its products to Italy, Belgium, the United Kingdom, the United States, Spain, Germany, Australia, Mexico, and Turkey. Visaka Industries markets its products through dealers for the retail market, and directly for projects and government departments.

Investment Rationale:

Visaka industries limited is the second largest manufacturer of fiber cement sheets in India with an estimated market share of more than 15 % by sales. VIL’s high-tech Fiber Cement plant is fully automated factory with the latest sophisticated technology.  The Cement Asbestos segment produces asbestos sheets and accessories used primarily for as roofing material. Visaka industries is a rural sector player which holds tremendous potential for its asbestos division as whenever economic conditions of the rural populations improves, their spending in durable products like asbestos cement sheets is likely to be increased. VIL is growing at a CAGR of 29% for past five years, highest in the industry. Company is making continuous efforts to increase production capacity through new and existing plants. Company’s new product in Reinforced Building Product is accepted in the market as it is preferred over wood/gypsum based products. Company has commenced the commercial production of V-Panel unit from January 01, 2010. V-Panel is a revolutionary building product, which is being manufactured with technical collaboration from M/s Dantotech of Australia. Company has its asbestos cement sheets unit at pune. Visaka industries commenced the commercial production in Reinforced Building Boards division on 1st May 2008. This unit is situated in Miryalguda Taluq, Nalgonda District, in the state of Andhra Pradesh. The product from this unit is branded as “V-Board”. The company exports its products to the countries likes of Srilanka, Bangladesh, and Middle East. VIL has through a special purpose vehicle Visaka Thermal Power Ltd ventured into Coal- based power of 1050 MW at an estimated cost of Rs. 5000 crores in Orissa. The project implementation is spread over a period of 9 years in 3 stages of 350 MW each. Also VIL has Synthetic yarn business, engaged in the manufacturing of yarn using state-of-the-art Twin Air Jet Spinning technology from Murata, Japan, with 28 MTS machines equivalent to 60,000 spindles Visaka has earned recognition as the largest Unit in the world with MTS installation. As of now company produces 10000 MT of yarn per year and exports around 4000 tons across the world.

Outlook and Valuation:

Real estate and construction and infrastructure dominate the growth for Cement product industry. With the initiatives made by the government in various infrastructure projects, road networks and housing facilities the cement product industry especially the asbestos cement manufacturers cheer on the importance given to rural infrastructure in the union budget especially on the thrust given on rural housing by the government through Indira Awaas Yojana and increased allocation to rural housing is a positive sign. Fiber cement sheets are gaining popularity because of their strong physical properties as compared other roofing materials. Asbestos cement industry is growing at 10- 12%, at this growth VIL can significantly be able to service its debts. In my view VIL could report EPS in FY11 FY12E of Rs. 28.30/sh and Rs. 22.70/sh, respectively. I would buy VISAKA INDUSTRIES LTD which is currently available at a discount to its Book Value of Rs. 164.54; I would buy VIL for the long term with a price target of Rs. 15o and for the SHORT TERM PLAYERS it would be Rs.100.00 

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	600.90	653.40	712.90	823.60
NET PROFIT (Rs. Crs)	60.00	45.10	36.10	46.90
EPS (Rs.)	37.70	28.30	22.70	29.50
PE (x)	3.50	3.70	4.60	3.50
P/BV (x)	0.90	0.60	0.60	0.50
EV/EBITDA (x)	2.60	3.50	3.00	2.40
ROCE (%)	28.30	18.10	13.10	15.30
RONW (%)	26.50	16.90	15.50	18.00

I would buy VISAKA INDUSTRIES LTD with a price target of Rs. 100 for the short term and Rs. 150 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 78.00 on your purchase.

RELIANCE CAPITAL : Long Term Bet !!!

Scrip Code: 500111 / RELCAPITAL

CMP:  Rs. 437.40; Buy at Rs. 400 - 415 levels.
Short term Target: Rs. 475, 6 month Target – Rs. 550; STOP LOSS – Rs. 370.00; Market Cap: Rs. 10,751.04  cr; 52 Week High/Low: Rs. 882.30 / Rs. 388.40 ; Total Shares: 24,56,32,800 shares; Promoters : 13,29,82,274 shares –54.14 %; Total Public holding : 11,26,50,526 shares – 45.86 %; Book Value: Rs. 282.70; Face Value: Rs. 10.00; EPS: Rs. 9.31; Div: 65 % ; P/E: 46.91 times; EV/EBITDA: 13.46.

Total Debt: Rs. 11,958.14 cr; Enterprise Value: Rs. 23,213.03 cr.

RELIANCE CAPITAL LIMITED: RCAP was incorporated in 1986, in India. The company engages in lending, investing, asset management, insurance and broking activities. It operates as a Non Banking Financial Company. Reliance Capital Asset Management (RCAM) manages money under the New Pension Scheme (NPS), it has been selected to manage funds for both EPFO & NPS. Reliance Consumer Finance offers products like personal loans, auto loans, housing loans & SME loans. Reliance Money is one of the top leading brokerage houses in India serving 3o lakhs customers approximately. Reliance General Insurance is considered one of the top player in general insurance businesses in India. In the year 2008, Reliance Equities International its institutional broking arm and Reliance Asset Reconstruction business commenced its operation. Company has an initiative named Reliance Capital Services which cross sell its products to the other customers of Reliance ADAG which also got operational from 2008 onwards. RCAP subsidiaries include Reliance Capital Trustees Co.ltd., Reliance Gilts Ltd, and Reliance Capital Research Pvt. Ltd. among others.

Investment Rationale:

The Reliance Capital has an AUM size of Rs. 1,01,600 Cr with an income of around Rs. 250 -290 Cr. Income continues to be strong as the retail proportion in debt AUM is rising. Commercial finance to be a game changer which contributes around Rs. 269 Cr, its loan book grew 34 % YOY to Rs. 1,230 Cr with 97 % book fully secured. Loan books are expected to grow by 25 % - 30 % for next two years. The General Insurance has been slower which reported a loss of Rs. 309 Cr, this includes Reliance Capitals share of Rs. 183 Cr in the total motor pool provision of Rs. 7000 Cr which the entire General Insurance industry had to provide. It’s AMC, Commercial finance and broking & distribution business generated approximately Rs. 620 Cr of profit. The company could be a contender for the banking license as RBI is in the process of finalizing guidelines for issue of new banking license; it is believed that ADAG group through RCAP could bid for banking license. RBI is believed to give banking license to those corporate houses which have market capitalization of more than Rs. 10,000 Cr. RCAP is among others who has the eligibility to win the license as it has a market cap of over Rs. 10,000 Cr & also has strong professional management to its side. Debts will be a concern, but I believe that with good professionals on board it is taken care off. IRDA recently said that a 10 year lock in guidelines does not apply for Reliance life insurance’s 26 % stake sale to Japan based Nippon Insurance, RCAP is likely to peg $680 million or Rs. 3,062 Cr once the deal is complete it would be biggest offshore investments in an Indian insurance company. Under the insurance law promoters of life insurance companies looking to offload 26 % stake the maximum permissible limit of their holding can do it only after completing 10 years of operation. It’s heard that RCAP is in talks with Axis Bank and Syndicate Bank to sell 23 % in its life insurance business to boost distribution network. This will be the second deal after Nippon deal if approved by the regulators.

Outlook and Valuation:

As told RCAP deal with Nippon Insurance is awaiting approval and if capital gains from the deal are factored then ROE to be around 10 % - 11 % , but since the deal is not approved yet it is expected that ROE to be around 8 % - 9 %. It is believed that the core profit to grow at 25 % CAGR over FY11 – FY13E. Also post profit of the life insurance may also get consolidated with the parent RCAP like other subsidiaries. General Insurance has been a slower in overall profits for many quarters which is expected to have a turn around. Broking and Distribution combined generated about Rs. 223 Cr due dip in average daily volumes to Rs. 1,400 Cr leading to market share decline to 0.9 % with a profit before tax of Rs.34.5 Cr. In my view RCAP could report EPS in the FY11 FY12E of Rs. 11.60/sh and Rs. 26.30/sh, respectively. RCAP TO DECLARE ITS RESULT ON 13 AUG 2011. RCAP’s stock price has corrected from its recent high on the back of the bad news on US economy, but I maintain a positive view on the stock & believe that any further correction would be a good buying opportunity for long term holders, as for short term, stock could be bought with a price target of Rs. 475

KEY FINANCIALS	FY10	FY11E	FY12E	FY13E
SALES (Rs. Crs)	6,140.60	5,498.10	6,433.20	7,592.60
NET PROFIT (Rs. Crs)	434.60	291.50	646.20	739.70
EPS (Rs.)	17.70	11.60	26.30	30.10
PE (x)	34.90	53.10	23.50	20.50
P/BV (x)	2.0	1.9	1.7	1.6
ROCE (%)	5.70	3.70	7.70	8.20
RONW (%)	2.00	1.20	2.50	2.60

I would buy RELIANCE CAPITAL with a price target of Rs. 475 for the short term and Rs. 550 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 370.00 on purchase.

COAL INDIA : Enjoying the whole Cake, best Investment !!!

Scrip Code: 533278 / COALINDIA

CMP:  Rs. 397.30; Buy at Rs. 370 for long term & at Current levels for short term
Short term Target: Rs. 415, 6 month Target – Rs. 435; STOP LOSS – Rs. 340; Market Cap: Rs. 2,50,949.15 cr; 52 Week High/Low: Rs. 422.35 / Rs. 289.00.

Total Shares: 631,63,64,400 shares; Promoters : 568,47,27,960 shares –90.00 %; Total Public holding : 63,16,36,440 shares – 10.00 %; Book Value: Rs. 52.7; Face Value: Rs. 10.00; EPS: Rs. 17.20; Div: 35 % ; P/E: 23.09 times; Ind P/E: 24.18; EV/EBITDA: 13.50.

Total Debt: Rs. 3,663.49 cr; Enterprise Value: Rs. 2,54,612.64 cr.

COAL INDIA LIMITED: CIL was incorporated in 1973 in Kolkata, India. It was formerly known as Coal Mines Authority Limited. CIL is a leading public sector undertaking engaged in coal mining & selling coal fines in India and is working on establishing its footprint globally through acquisitions. Company operates 471 mines in 21 coalfields across 8 states in India, which includes 163 open cast mines, 273 underground mines & 35 mixed mines – open & underground mines. CIL operates through its 9 wholly owned subsidiaries, of which 1 subsidiary is engaged in exploration and feasibility study analysis. Its subsidiaries include Eastern Coalfields Ltd (ECL), Bharat Coking Coal India Ltd (BCCL), Central Coalfields Ltd (CCL), Northern Coalfields Ltd (NCL), Western Coalfields Ltd (WCL) and South Eastern Coalfields Ltd (SECL). CIL has total reserves of 64.3 billion tons and proved reserves of 52.4 billion tons, of which extractable reserves stands at 21.7 billion tons. The company also provides middlings used by fuel plants, brick manufacturing units, cement plants, industrial plants, as well as for power generation. CIL coal fines/coke fines are used in industrial furnaces, as well as for domestic purposes. It serves primarily power, steel, cement, and fertilizer industries.

Investment Rationale:

The Group of Ministers (GoM) has approved the Draft Mines and Minerals Development Regulation (MMDR) bill which states that coal mining companies will have to share 26 % of their profits after tax of the previous year with the local public where the mining takes place. The current draft states that profits which is to be distributed should be calculated on Net Profit of each of the mining company including their subsidiaries, more clarifications on the matter is awaited and is believed that there could be significant impact of the bill on the EPS of the mining stocks (See the Table below). There are good chances of CIL to able to adjust prices over a period of time. It is believed that CIL will be able to acquire land & mines easily after the law in enacted. Coal India’s 26 % net profit will be 5 % – 5.5 % of its net sales and an impact of 10 % in FY12 EPS. Complete pass through of the wage hike and mining tax is a challenge and could act as an overhang on the stock performance in the medium term. CIL has access to 64.3 billion tons of reserves, the largest in the world. From this, 52.4 billion tons are based on Indian Standard Procedure (ISP) guidelines, representing 6 % share of the global proven reserves. CIL's profitability and earnings growth are strong, demand from power and other industries ensure favorable return, with upside from e-auction and washed coal. CIL is ramping up its washed coal capacity from 39.4 million to over 111 million tons, with the addition of 20 new facilities. Washed coal earns superior returns for CIL and volume is expected to grow from 16 million tons in FY11 (4 % of total) to 65 million tons by FY 16 (12.5 % of total).

IMPACTED COMPANY	IMPACT ON EPS (%)
COAL INDIA	10.00
HINDALCO	1.00
JSPL	3.00
JSW STEEL	2.00
NALCO	1.00
SAIL	11.00
SESA GOA	9.00
STERLITE IND	6.00
TATA STEEL	6.00

Outlook and Valuation:

India's coal demand for FY 10 stood at 600 million tonnes as against the domestic availability of 535 million tonnes; this gap was filled up by the import of 65 million tonnes. CIL is well positioned to capitalize the widening gap of demand & supply as it controls 80 % of the coal supply in India. CIL has been facing problems for its planned expansion, due to delays in requisite environment and forest clearances and land acquisition issues. In FY11 Coal dispatches to be at 425 million tonnes & 455 million tonnes for FY12E; Realisation to be of Rs. 1,183/tonne in FY11 & Rs. 1,321/tonne for FY12E; EBITDA to be Rs. 318/tonne in FY11 & Rs. 392/tonne in FY12E. Company to hold board meeting on 12th August 2011 for quarterly results; To hold AGM on 20th September 2011; Final dividend of 4 % (Rs. 0.40) on 8th September 2011; Book Closure for dividend from 12th September to 16th September 2011 

In my view CIL could report EPS of Rs. 22.10/sh and Rs. 26.50/sh, respectively. CIL’s stock price has corrected from high of Rs. 422/sh, on the back of the development on profit sharing. I maintain a positive view on the stock & believe that any further correction would be a good buying opportunity for long term holders, as for short term, stock could be bought with a price target of Rs. 415.

KEY FINANCIALS	FY11	FY12E	FY13E
SALES (Rs. Crs)	50,233.60	60,578.60	65,494.70
NET PROFIT (Rs. Crs)	10,867.40	13,905.95	16,742.73
EPS (Rs.)	17.30	22.01	26.50
PE (x)	22.70	17.97	14.90
P/BV (x)	6.80	5.69	4.50
EV/EBITDA (x)	13.50	11.40	9.70
ROCE (%)	26.40	37.80	33.90
RONW (%)	54.20	53.40	50.90

MAJOR EVENTS OF COAL INDIA

DATE	KEY EVENTS	MKT.CAP (Rs. Cr)	PRICE (Rs.)
4thNOV 2010	Listed on NSE/BSE	2,16,240.58	342.55
15thMAR 2011	Positioned no.3 in market cap	2,13,335.06	338.45
23rdMAY 2011	Positioned no.2 in market cap	2,31,020.87	365.40
8thJULY 2011	Fell down to 4th positon in market cap	2,28,652.23	362.65
12thJULY 2011	Regained 3rd position in market cap	2,30,673.47	365.30
27thJULY 2011	Regained 2nd position in market cap	2,52,117.51	398.95
8thAUG 2011	Will be included in SENSEX	------	-----

I would buy COAL INDIA LTD with a price target of Rs. 415 for the short term and Rs. 435 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 340.00 on your purchase.

L & T Finance Holdings : Subscribe for LONG TERM !!!

Price Band - Rs. 51- Rs. 59, Face Value- Rs.10.

Discount - 2% to L&T Employees & Shareholders.

Minimum Lot Size –  100 Shares.

Issue opens on - 27th July 2011, Wednesday.

Issue closes on – 29th July 2011, Friday.

Listing on – 12th August 2011.

Total No. of Shares offered – 21.1 Cr shares if priced at Rs.59

Total No. of Shares offered – 24.4 Cr shares if priced at Rs.51

Total Size of the Issue - Rs. 1,245.00 Crs.

IPO GRADING – 5/5 - CRISIL, 5/5 - ICRA – Strong Fundamentals

FAIR VALUE - Rs. 65 - Rs. 70.

KEY FINANCIALS (Consolidated)	FY 2010	FY 2011
Net Interest Income (Rs. in Cr)	726.00	1,039
Net Profit (Rs. in Cr)	242.00	398.00
Net Interest Margin %	7.80	7.10
EPS (Rs.)	1.80	2.80
Price to Book Value (x)	3.60	2.60
Return on Asset %	2.50	2.50
Return on Equity %	21.10	16.30

L&T Finance Holdings Limited was incorporated in 2008 and is a holding company for many of the L&T group companies. It has mainly 2 fully owned non-banking finance companies (NBFCs) – L&T Infrastructure Finance ( which contributes 33 % of its revenues) and L&T Finance (which contributes 66 % of its revenues).  Apart, from these L&TFH owns close to a 5 % stake in Federal Bank and City Union Bank. It also owns L&T Mutual Fund which has an asset base of Rs. 5,200 Cr as of June 2011. The company has a presence in 23 states, with 837 points-of-presence across India. The company’s operations are primarily into 4 business groups namely the Infrastructure Finance Group, the Retail Finance Group, the Corporate Finance Group and the Investment Management Group.  Company intends to use the IPO proceeds for the repayment of intercorporate deposit issued by the parent company L&T about Rs. 345 Crs; infusion of capital in L&T Finance for about Rs. 515 Cr and L&T Infrastructure Finance Company for about Rs. 485 Cr. There is a reservation for employees for Rs. 50 Cr and an additional reservation of Rs. 120 Cr for L&T shareholders, both of would get an Rs. 2.00 discount to the issue price. Out of the total of Rs. 537.5 Cr has been reserved for qualified institutional buyers (QIBs), Rs. 161.25 Cr for non-institutional investors (HNIs) and Rs 376.25 Cr for retail investors. The company had done a pre – IPO placement at Rs. 55/sh and anchor book to have a subscription of Rs. 56/sh, a nearly Rs. 153 cr are committed by anchor investor.

The company got the Infrastructure Financing Status in July 2010 it will benefit to raise more funds, of longer tenors and at lower costs, and in turn to lend more to infrastructure companies. The company's current net worth is around Rs 2,900 crore & post issue net worth including a 30% growth for FY12 would come be around Rs 4,700 crore. The company could be a contender for the banking license with RBI in the process of finalizing guidelines for issue of new banking license; it is believed that L&T group through L&TFH could bid for receiving license. RBI is believed to give banking license to those corporate houses which have market capitalization of more than Rs. 10,000 Cr. L&T comes winner as its promoter stake is less than 25 % and is driven by strong professional management.

Comparisons with Industry as on 31st March 2011

KEY FINANCIALS	FV (Rs.)	EPS (Rs.)	P/E (x)	RoNW %	BV/ Sh (Rs.)
L & T Finance HLDG	10.00	2.87	---	13.58	20.40
Shriram Transport Fin.	10.00	53.92	12.10	24.84	216.37
M&M Financial Ser	10.00	50.92	12.30	19.36	244.70
IDFC	10.00	8.77	15.40	11.39	76.97
REC	10.00	26.18	7.60	20.15	129.90
Pow.Fin.Corp	10.00	23.06	8.30	17.37	132.79
Sundaram Finance	10.00	70.01	7.70	21.53	325.22

According to me the fair value of L&T Finance Holdings Ltd comes to Rs. 65.00 - Rs. 70.00. Off - course it will trade into discount but for long term investors that will be a good opportunity, buy at if it trades below Rs. 55.00.   

SUBSCRIBE FOR LONG TERM & IF FOR TRADING PROSPECTIVE GO FOR IT ON LISTING GAINS......