UNION BUDGET 2014-15 : HIGHLIGHTS OF INTERIM BUDGET !!!

India's Interim Budget or VOTE ON ACCOUNT....(Full Year Budget on JUNE -JULY 2014.)

GROSS DOMESTIC PRODUCT ESTIMATED TO GROW AT 4.9 %, +/- 0.5 % IN FY14 - 15. 

AT CURRENT PRICES THE ADVANCE GDP ESTIMATE OF 2013 - 14 IS ₹ Rs. 105,39,605 LAKHS CR AND AT 2004-05 PRICES ITS AT Rs. 57,48,564 LAKHS CR.

FY15 TOTAL SUBSIDES AT Rs. 2,46,397 CR.

FY15 FERTILIZER SUBSIDIES AT  Rs. 67,971 CR.

FY15 FOOD SUBSIDIES AT  Rs. 1,15,000 CR.

FY15 OIL & PETROL SUBSIDIES AT  Rs. 63,427 CR.

FY15 FISCAL DEFICIT AT Rs. 5,28,631 CR.

THE CENTER'S EXPENDITURE 2014 - 15 PROJECTED AT Rs. 17,63,214 Cr.

BUDGET AT GLANCE (₹. in Cr) - 2014-15
1) REVENUE RECEIPTS	11,67,131
2) Tax Revenue (net to Centre)	9,86,417
3) Non- Tax Revenue (net to Centre)	1,80,714
4) CAPITAL RECEIPTS (5+6+7)	5,96,083
5) Recoviers of Loans	10,527
6) Other Receipts	56,925
7) Borrowings & other liabilities	5,28,631
8) TOTAL RECEIPTS (1+4)	17,63,214
9) NON PLAN RECEIPTS	12,07,892
10) On Revenue account  of which	11,07,781
11) Interest Payments	4,27,011
12) On Capital Account	1,00,111
13) PLAN EXPENDITURE	5,55,322
14) On Revenue account	4,42,273
15) On Capital Account	1,13,049
16) PLAN EXPENDITURE (9+13)	17,63,214
17) Revenue Expenditure (10+14)	15,50,054
18) Of which Grants for creation of Capital Assets	1,46,581
19) Capital Expenditure (12+15)	2,13,160
20) REVENUE DEFICIT (17-1)	3,82,923
21) EFFECTIVE REVENUE DEFICIT (20-18)	2,36,342

22) FISCAL DEFICIT (16- (1+5+6))

5,28,631

23) PRIMARY DEFICIT (22-11)

1,01,620

SOME MORE POINTS FROM BUDGET:-

• No change in Income tax rates and slabs.
• Growth in Q3 and Q4 FY14 will be at least 5.2 %
• Fiscal Deficit to be contained at 4.6 %.
• Current Account Deficit will be contained at $45 million and can only be addressed by Foreign Investments.
• Core Inflation to be at 3 % but Food Inflation remains a Key worry.
• Agriculture GDP growth is expected at 4.6 % in current year.
• Exports have recovered sharply and is estimated at $ 326 billion in current fiscal.
• Gov to start 4 Ultra Mega Power Projects in FY15 and over 29,000 MW of power capacity to be added during the fiscal, there is a construction underway for 50,000 MW of conventional (thermal) Power.
• Two projects sanctioned under Nirbhaya Fund; orignal Rs. 1,000 Cr made non- lapsable; another Rs. 1000 Cr granted.
• There were 296 projects worth Rs. 6,60,000 Cr cleared by Cabinet Committee on investment by end of January 2014.
• Agriculture credit will cross $45 billion as against $41 billion in 2012-13.
• Food grain production estimated at $ 263 million tons in 2013-14.
• Foreign Exchange Reserves up by $ 15 billion.
• Over rs. 45,000 Cr allocated for scheduled caste sub-plan.
• Budgetary support to railway at Rs. 29,000 Cr in 2014-15.
• Plan Expenditure to be at Rs. 5,55,322 Cr in 2014-15.
• Non- Plan Expenditure in 2014-15 is estimated to be over Rs. 10 lakh Cr.
• Defence sector allocated Rs. 2.24 lakh Cr an increase of 10 % in the allocation inFY15.
• Govt approves 1 rank 1 pay for retired jawans.
• Proposes Rs. 11,200 Cr for Capital Infusion in Public Sector Banks.
• Budgetary support to railways raised to Rs. 29,000 Cr.
• All taxes on Eports to be waived for manufacturing sector.
• Community Radio to be promoted with Rs. 100 Cr.
• Excise duty on capital goods reduced from 12 % to 10 %.
• Cars to be cheaper as FM proposes to reduce excise duty on Automoblies. Excise duty on small cars.motorcycles reduced fom 12 % to 8 %.
• Excise duty onSUV's reduced to 24 % on large cars to 20 %.
• Excise duty for all mobiles phones to be 6 %.
• Saops, TV, Fridges to be cheaper now.
• Growth for next year should be 5 %.

India's Interim Budget or VOTE ON ACCOUNT..what it means ?

A national interim Budget refers to the budget of a government that is going through a transition period. These budgets are common in democracies where one political party or a coalition is voted out and another political party or a coalition is voted into office. The two governments often have different fiscal plans, so the old government budget is cut short and a new budget is created. The interim Budget helps span the transition time between the two governments so that the government can continue to function. Countries like India use the term interim Budget specifically to describe this period. A national interim Budget is created out of necessity. National governments require interim budgets to function in the months it takes for a new government to create its own budget plan.

A vote-on-account presents an estimate of expenditures to be sanctioned by the exchequer till the Budget is passed. The Budget announces new programmes and estimates the public expenditure for the fiscal year. A vote-on-account cannot alter direct taxes since they need to be passed through a finance bill. In the Budget, fresh taxes may be imposed, old ones may go. Direct taxes like income tax and indirect taxes are both open to change. The common feature is that both include the previous year's financial performance of the government.

The significance:

The government cannot present a full budget because in such a short session, there's no time to debate proposals in Parliament. Expenditure for new schemes will have to form part of the new budget, which can be approved only after April 1. Also, it is ideally the new government's prerogative to decide how it'll raise and spend money. The newly formed government cannot be burdened by the previous government's budgetary allocations. While these are the technicalities, many look upon the vote on account as election rhetoric. Many look at it as a window where the government highlights its achievements ahead of elections. Experts say voters reward you for what you did in the first four years rather than what you did in the last six months. Whether or not the government succeeds in wooing the voter, the fact is that India is battling an economic meltdown like 2009. The government will have to take steps to reboot the economy. What remains to be seen though is whether these steps will be a part of the vote-on-account.

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Best Regards,

BHAVIKK SHAH

ULTRATECH CEMENTS LTD : ACCUMULATE AT EVERY LEVELS !!!

Scrip Code: 532538 / ULTRACEMCO

CMP:  Rs. 1705.70; Accumulate at every levels.
Short Term Target : Rs. 1790; Medium to Long term Target: Rs. 1875; STOP LOSS – Rs. 1569.24; Market Cap: Rs. 46,775.40 Cr; 52 Week High/Low: Rs. 2069.05 / Rs. 1402.35

Total Shares: 27,42,29,957 shares; Promoters : 16,98,87,299 shares –61.95 %; Total Public holding : 10,43,42,658 shares – 38.05 %; Book Value: Rs. 545.54; Face Value: Rs. 10.00; EPS: Rs. 74.12; Dividend: 90.00 % ; P/E: 23.01 times; Ind. P/E: 14.82; EV/EBITDA: 12.12.

Total Debt: 4,462.68 Cr; Enterprise Value: Rs. 52,981.91 Cr.

ULTRATECH CEMENT LIMITED: ULTRACEMCO was incorporated in 2000 and is based in Mumbai, India. It was formerly known as Ultra Tech Cemco Limited and changed its name to ULTRATECH CEMENT Ltd on October 2004. It’s a subsidiary of Grasim Industries Ltd from Aditya Birla Group. The Company is engaged in the business of cement and cement related products. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement. UltraTech Cement Limited, together with its subsidiaries, primarily engages in the manufacture and sale of cement in India and internationally. Its products include ready mix concrete; building products, including waterproofing solutions, polymer modified mortar, lightweight autoclaved aerated concrete blocks, thin layer jointing mortar, and ready mix plaster; and white cement. The Company also manufactures ready mix concrete (RMC). UltraTech Cement is an exporter of cement clinker. The Company has an annual capacity of 23.1 million tons. The Company has 11 integrated plants, one white cement plant, one clinkerisation plant in the United Arab Emirates, 15 grinding units - 11 in India, two in the United Arab Emirates, one in Bahrain and Bangladesh each and five terminals - four in India and one in Sri Lanka. In the 2011, its wholly owned subsidiary, UltraTech Cement Middle East Investments Limited (UCMEIL) acquired ETA Star Cement together with its operations in the United Arab Emirates, Bahrain and Bangladesh and acquired management control. On July 1, 2010, Samruddhi Cement Limited (Samruddhi) amalgamated with the Company.  The Company's subsidiaries include Dakshin Cement Limited, UltraTech Cement Lanka (Pvt.) Ltd. and UltraTech Cement Middle East Investments Limited. In India the company has 11 Integrated Plants, 11 Grinding Units, 5 Bulk Terminals, 4 Jetties. It has only 1 bulk terminal at Sri Lanka. In UAE, company has 2 Grinding Units, 1 Clinker production, 1 star cement head office. UltraTech has 1 Grinding unit each at Bahrain and Bangladesh. The company is compared to Ambuja Cements Ltd, ACC Limited, Shree Cement Ltd, Grasim Ind Ltd and Rain Commodities Limited domestically and Globally compared with Holcim of Germany, Ashaka Cement Plc of UAE, Bamburi Cement of UAE, Oman Cement Company of UAE, Kuwait Cement Company of UAE, Qatar National Cement Company of UAE, Asia Cement Corp of China, Chia Hsin Cement Corp of China, Krosaki Harima Corp of Tokyo, Ssangyong Cement Co of Japan, Taiwan Cement Corp of Taiwan, West China Cement of Hong Kong, Lafarge Cement of Germany, Vulcan materials Co of USA, US Concrete Inc of USA, United States lime & Minerals of USA, Grupo Argos S.A of USA, Cemex Latam Holdings S.A of USA .

Investment Rationale:

UltraTech’s inception can be traced back to the mid-1980s with the establishment of Grasim’s first cement plant at Jawad in Madhya Pradesh. In 2001, with the objective of increasing its reach, Grasim acquired a stake in L&T Cement Ltd. The stake was further increased to a majority stake in 2003 thereby giving Grasim a pan-India presence and an increased market share. In 2004, the demerger of L&T’s cement business was completed and Grasim acquired a controlling stake in L&T Cement Ltd and the name was subsequently changed to UltraTech cement. The cement business of Grasim was demerged and vested in Samruddhi Cement Limited in May 2010, with Samruddhi Cement Limited consequently being amalgamated with UltraTech Cement Limited in July 2010. UltraTech Cement now is a subsidiary of Grasim, a part of the Aditya Birla Group. Post-merger of Grasim’s cement business, it is the largest cement company in India with a total cement capacity of 61.5mt (by 1QFY16) with a pan-India presence. It is the largest exporters of cement and clinker from India. Post-merger, it would be the largest cement company in India and 10th largest in the world. UltraTech has a potential to increase without incurring major capex by increasing utilization and blending, along with locational advantage, gives it the flexibility to either export or sell in the domestic market. Company’s allied businesses of white cement and RMC has lender stability to company’s overall performance. UltraTech’s management expects long-term cement demand to grow around 8 % while in the near term it could be challenging. In Jul’13 it commissioned a 3.3m-ton clinker plant in Karnataka, adding to its earlier commissioning in Mar’13 of similar capacity in Chhattisgarh. In Oct’13 it commissioned a 1.6m-ton grinding unit in Jharsuguda, Orissa, adding to its earlier commissioning of similar capacity in Hotgi, Maharashtra. The balance five associated grinding units will be set up in 4QFY14 and FY15. During 2Q, Ultratech acquired JaiPrakash Associates’ 4.8m-ton unit in Gujarat, lifting its capacity to 59m tons, while ongoing expansions would further that to 70m tons by Mar’15. The transaction was at an Enterprise Value of Rs. 3,800 Cr (US$125 a ton) and is expected to be completed only by 1QFY15 given multiple approvals required. Looking at the current quarterly results which showed high operating leverage, especially post commissioning of new capacities in 1QFY14, could result in volatile earnings. Post weak pricing environment during monsoon, cement prices and demand are expected to pick-up post monsoon. Structural increase in cost base (both capex and opex) would necessitate into higher cement prices. Revival in cement demand would be key catalyst for the stock performance.

Outlook and Valuation:

UltraTech is the 10th largest cement manufacturer in the world making it a significant global player. It has grinding units, jetties, bulk terminals and integrated plants all across the world. UltraTech Cement is the country’s largest cement and clinker exporter, catering to export markets in countries across the Indian Ocean, Africa, Europe and the Middle East. Such diverse presence across the countries has helped UltraTech to leverage economies of scale and enable it to become a name to reckon within the international market. UltraTech reported its Q3, and reported an average realization of Rs. 4,650 a ton down by 2 % yoy. At 10.3m tons, volumes of grey and white cement, clinker, wall putty rose by 1 % yoy and 8 % on qoq. The Grey cement sales were up 0.6 % yoy and 8 % qoq, those of white cement including wall putty were up 10 % yoy. RMC revenue was at Rs. 450 Cr and that of white cement and wall putty it was Rs. 420 CR. UltraTech reported its EBITDA/ton, at Rs. 745, despite its lower-than-expected realisations. The benefit of lower coal prices (net of rupee devaluation) and optimisation of the fuel mix led to an 8 % yoy dip in power & fuel costs a ton. Freight inched up 4 % yoy chiefly due to a hike in diesel prices and a rise in freight charges. Higher other income, lower interest, depreciation and tax rate of 27 % led to better PAT. The outlook on UltraTech continuous to remain challenging, with demand growth in FY14 is likely to be around 5 %, though over the long run it is likely to be over 8 %. The key value drivers could be housing demand and infrastructure spending. UltraTech has commissioned 25 MW thermal power plants in Andra Pradesh. Overall, the company is investing around Rs. 13,700 Cr in 12.7mt capacities, CPP, marketing and logistic infrastructure, modernization/ up-gradation and in RMC business. The clinkerization plant of 3.3MT in Karnataka has been commissioned in 2QFY14, followed up with 1.6mt grinding unit at Orissa. Further, the company’s planned capacity of 2.9mt at Rajasthan plant including 2 split grinding units with capex of Rs. 2,100 Cr would commission by Mar-15, and this would take total capacity in India to 68mt. On Consolidation of Jaypee's Gujarat plant, UltraTech’s current valuations largely factors in for potential recovery in FY15, benefit of which would be diluted due to initial impact of Jaypee's Gujarat plant acquisition by 1HFY15. At the current price of Rs. 1705.70, the stock is trading at a P/E of 24.05 x on FY14E and 18 x on FY15 estimates. UltraTech could report and EPS of Rs. 70.90 for FY14E and Rs. 94.80 for FY15E. Ultratech Cements has good potential for upside and can touch price of Rs. 2092, One can continue to ACCUMULATE the stock and would advise investors to use declines in the stock to buy with a long term view. One can buy ULTRATECH with a target price of Rs. 1875.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 1790.00.

KEY FINANCIALS	FY13	FY14E	FY15E	FY16E
SALES (₹ Crs)	20,017.90	20,070.00	23,030.00	26,390.00
NET PROFIT (₹ Cr)	2,655.40	1,940.00	2,600.00	3,130.00
EPS (₹)	96.80	70.90	94.80	114.10
PE (x)	17.80	24.30	18.10	15.10
P/BV (x)	3.10	2.80	2.50	2.20
EV/EBITDA (x)	9.70	12.70	10.10	8.30
ROE (%)	18.90	12.10	14.50	15.30
ROCE (%)	21.40	14.20	16.80	18.70

I would buy ULTRATECH CEMENT LTD for the short term would be Rs. 1790 and for the Medium to Long term for target of Rs. 1875. 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 ₹ 1569.24 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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GATI INDIA LTD : PICKING UP SPEED !!!

Scrip Code: 532345 / GATI

CMP:  Rs. 62.30; Accumulate between Rs. 55.00 to Rs. 59.00 levels and at every dipps.

Medium to Long term Target Rs. 74; Short term Target: Rs. 65; STOP LOSS – Rs. 56.22; Market Cap: Rs. 539.40 Cr; 52 Week High/Low: Rs. 68.40 / Rs. 22.65.

Total Shares: 8,65,82,287 shares; Promoters : 3,28,88,430 shares – 37.99 %; Total Public holding : 5,36,93,857 shares – 62.01 %; Book Value: Rs. 97.19; Face Value: Rs. 2.00; EPS: Rs. 3.01; Div: 00.00 % ; P/E: 20.69 times; Ind. P/E: 40.76; EV/EBITDA: 8.10.

Total Debt: 375.94 Cr; Enterprise Value: Rs. 868.87 Cr.

GATI INDIA LIMITED: GATI INDIA LTD was incorporated in 1989, and is based in Secunderabad, India. Gati Limited provides express distribution and supply chain solutions to business customers in various industry verticals in India and internationally. GATI offers air, road, ocean and rail transportation services, surface cargo movement services for shipments, parcel train services, air movement services for non-commercial shipment, secure box and desk to desk services, art pieces packaging and transporting services and Student Express service for transporting luggage. It also provides managed, temperature sensitive, re-engineering, and upstream supply chain management services, cold chain transportation solutions by air, road, and ocean freight forwarding services, road and air movement to SAARC nations, warehousing solutions, customs clearance and in bound and out bound courier services. In addition, the company offers shipping services, such as break-bulk cargo, container, non-vessel operator container carrier and route services as well as project cargo services to oil and gas, pulp and paper, automotive, construction, power and energy and other shipments. Further, its e-commerce business provides services through e-hubs or e-fulfilment centres as well as owns online shopping portal for vendors to register and sell their products. Additionally, the company operates four fuel stations that deals in petrol, diesel, lubricants, etc. It operates a fleet of approximately 4,000 on road vehicles and 2 marine vessels. Gati has offices in China, Singapore, Bhutan, Dubai, Hong Kong, Thailand, Nepal and Sri Lanka and has plans to foray into other markets. Its Subsidiaries includes – Gati Holdings Ltd, Gati Asia Pacific Pte. Ltd, Gati Hong Kong Ltd, Gati China Holdings Ltd, Gati Cargo Express (Shanghai) Co. Ltd, Gati Japan Ltd, Gati Middle East Fze. Ltd, Newatia Commercial & Trading Pvt. Ltd, Trymbak Commercial & Trading Pvt. Ltd, Ocimum Commercial & Trading Pvt. Ltd, Sumeru Commercial & Trading Pvt. Ltd, Kausar India Ltd, Zen Cargo Movers Pvt. Ltd, Gati Import Export trading Ltd, Gati Skyways Ltd. GATI INDIA Limited is locally compared with Container Corporation of India Ltd, Gateway Distriparks Ltd, Transport Corporation of India Ltd, Ruchi Infrastructure Ltd, Kesar Terminals & Infrastructure Ltd, Shreyas Shipping & Logistics Ltd, Blue Dart Express Ltd, Patel Integrated Logistics Ltd, Global Vectra Helicorp Ltd, SICAL Logistics Ltd and Globally compared with Royal Mail Plc of London, Postal Services mail Plc of London, Deutsche Post AG of Germany, PostNL N.V. of Netherlands, Hanjin Transportation Co., Ltd of South Korea, Pos Malaysia Berhad of Malaysia, Singapore Post Ltd of Singapore, Yusen Logistics Co Ltd, Hyundai Glovis Co Ltd of Korea, Atlas Air Worldwide Holdings of USA, Bpost NV-SA Brussels, Belgium, Kintetsu World Express Inc of Japan, UPS – United parcel Service Inc of USA, Fedex Corp of USA, Air transport Services Group of Ohio, Hub Group Inc of Illinois, Xpo Logistics Inc of USA, Echo Global Logistics Inc of Illinois, Uti Worldwide Inc of British Virgin Islands,  Chichibu Railway Co., Ltd of Japan, Kobe Electric Railway Co., Ltd of Japan, Keifuku Electric Railroad Co. Ltd.

Investment Rationale:

Gati Limited is a pioneer and leader in the Express Distribution and Supply Chain Solutions in India. It was the revolutionary approach adopted by Gati that helped launch many path-breaking initiatives in the logistics segment and many were the firsts for the Indian market. Having started as a cargo management company in 1989, Gati has grown into an organization with more than 3,500 employees and covering 603 out of 611 districts in India. The logistics sector presents an incredible arena of opportunity because nearly 90 % of the market is still controlled by the unorganized sector. The size of the logistics market is just $230 billion and it is expected to grow at about 15 % CAGR for next several years, So there is no dearth of opportunity for companies seeking to bring some cost and time saving innovation to this field. Gati has joined with Kintetsu world Express, Japan's leading logistics service provider and formed GATI-KWE which is an unmatched leader in express distribution & Supply chain Solutions in this sector. GATI's Express Distribution & Supply chain (EDSC) business has been transfered to the joint venture company through a business transfer agreement between Gati and KWE wherein KWE has invested around Rs. 267.70 Cr in the JV for its 30 % stake. Gati’s announced a dedicated Shipping route service between Chennai -Yangon - Chennai which will help businesses to maximize trade potential between the two countries. Gati Kausar is expected to expand its Reefer fleet (Refrigerator fleet) size to 350 by the year 2015. GATI Kausar business strategy is to focus on primarily organize retail logistics including food chains, pharmaceuticals, dairy products, agro products and FMCG. The Company is setting up its own cold storage units and plans to develop customized cold storage units to cater to temperature sensitive products. Company’s GATI E commerce business focuses on B2C and C2C segments and is expanding its the capacity size to cater to 30,000 home delivery per day in FY 13. GATI E commerce caters to some of the top notch large online retailers, home shopping channels and provides franchisee solution to multinational brands. Gati has over 4,000 vehicles on road, fleet of refrigerated trucks, container vessels and world class mechantronic warehousing facilities across India. Gati plans to capture logistic demand by strengthening its Road network by way of greater automation and better material handling facilities by introducing the market with Multimodal plus products that have better transit times, Gati's Premium plus is a product offered between air, road and rail, such connectivity to the network and independently focusing on the growing market for the demand of Cold Chain Solutions, e Commerce and International Freight forwarding will surely benefite Gati as an first mover advantage. We may also see that E Shopping is going through an revolutionary changes with an offering of Same Day Shipping and Free Returns to their customers, many retailers are competing to offer the fastest delivery on time or adding an enhanced services such as improved courier services. Recently, an online shopping major announced that it will deliver its orders on same day in US which gives consumers a faster and improved shopping experience. With such intense competetions among online retailers to offer better and faster services, delivery becomes an key and is increasingly becoming a way for retailers to stand out from their competitors and there's were the companies like Gati play an pivotal role, Gati being market leader in logistics will sooner or later would be beneficiary from the online shopping platform.

Outlook and Valuation:

Gati Limited is a pioneer and leader in the Express Distribution and Supply Chain Solutions in India. Gati has a strong vertical integration and have been gaining market share because unorganised players find it difficult to operate due to high wage cost and other procedural hurdles. Expectation of FDI in E-Commerce makes logistics sector very much attractive. FDI will allow big-ticket MNC's to set up JV's so as to tackle supply chain constraints and logistics. The news that the top brass in the government is keen to allow foreign direct investment in retail E-Commerce before the end of FY2014 and as Gati being a stronger player in the logistics sector will be the main beneficiary. GATI’s Core business continues to perform well in subdued market even though it suffered a loss due to its shipping division; however Gati’s management is confident enough that its core business is expected to grow by 20 % which contributes around 75 % to the total revenues and expects its shipping business to turn positive in FY2014 and expects FY14 would be a good year with expected revenue growth of 15 % and EBITDA growth of 30 %. In addition, Gati in association with IBM has initiated Business Transformation process in May 2013 wherein the management expects to save around Rs. 20 Cr of management and admin cost by FY14. Currently, Gati has 2 vessels out of which 1 were dry docked, Gati has divested 40 % in its Shipping business for Rs. 8 Cr to HNI group in Hyderabad, this has now seen an turnaround in the shipping business and making some profit. Consequently, Gati has signed MoU with International Shipping Logistics FZE (ISL) which is a subsidiary of Tata Steel and has launched a new coastal service line across Kandla-Mundra-Cochin Ports,and Gati managements expects this segment to turn profitable in coming quarter. GATI is independently focusing on the growing market demand for Cold Chain Solutions, e Commerce and International Freight forwarding. Gati has over 4,000 vehicles on road, fleet of refrigerated trucks, container vessels and world class mechantronic warehousing facilities across India. Gati was also the first to run the millenium parcel express train in October 2001 between Mumbai and Kolkata with 10 VPUs. The initiative to run a parcel express train between KYN (Mumbai) and NGC (Guwahati) was again taken by Gati - this is a classic example of PPP (Public Private Partnership). The Gati advantage of seamless connectivity across air, road, ocean and rail has resulted in large amount of offerings to the customers which is unmatched in the industry. Besides having a strong network in India, Gati has a strong market presence in the Asia Pacific region and SAARC countries. Gati's shipping division, Gati Coast to Coast based at Chennai, with two decades of experience in the industry has many firsts to its credit: first in operating direct service to Yangon; first in operating a direct container service from Ranong Port, Thailand; and the first in operating direct container service from Penang, Malaysia. Gati Coast to Coast has a tonnage of 43,581 DWT and a fleet strength of six vessels. At the current market price of Rs. 62.30, the stock is bit expensive but it trades at a PE of 17.30x FY14E. The company can post Earnings per share (EPS) of Rs. 3.60 in FY14E and One can buy GATI INDIA LTD with a target price of Rs. 74.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 65.00.

KEY FINANCIALS	FY11	FY12	FY13	FY14E
SALES (₹ Crs)	1,203.00	1,189.00	1,273.40	1,462.30
NET PROFIT (₹ Cr)	14.10	41.50	9.60	31.10
EPS (₹)	1.60	4.80	1.10	3.60
PE (x)	16.50	5.60	20.50	6.40
P/BV (x)	0.70	0.50	0.30	0.20
EV/EBITDA (x)	6.80	8.70	6.50	6.10
ROE (%)	4.80	11.70	1.60	3.90
ROCE (%)	7.50	11.70	4.30	6.00

I would buy GATI INDIA LTD for Medium to Long term for target of Rs. 74 and for the shorter term the target would br Rs. 65.00. 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 ₹ 56.22 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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MULTI COMMODITY EXCHANGE OF INDIA LTD : RISING FROM ASHES !!!

Scrip Code: 534091 / MCX

CMP:  Rs. 529.50; Strongly Accumulate at every dips.

Medium to Long term Target – Rs. 800.00; STOP LOSS – Rs. 487.14; Market Cap: Rs. 2,700.36 Cr; 52 Week High/Low: Rs. 1536.05 / Rs. 238.15

Total Shares: 5,09,98,369 shares; Promoters : 1,32,59,575 shares –26.00 %; Total Public holding : 3,77,38,794 shares – 74.00 %; Book Value: Rs. 226.82; Face Value: Rs. 10.00; EPS: Rs. 47.00; Div: 240.00 % ; P/E: 11.26 times; Ind P/E: 33.35; EV/EBITDA: 7.46.

Total Debt: ZERO; Enterprise Value: Rs. 2,625.23 Cr.

Multi Commodity Exchange Of India Ltd: MCX was incorporated as a private limited company on April 19, 2002 in Mumbai, India. Multi Commodity Exchange of India Ltd (MCX) is a state-of-the-art electronic commodity futures exchange. The demutualised Exchange has permanent recognition from the Government of India to facilitate online trading, and clearing and settlement operation for commodity futures across the country. MCX came with an IPO with a sale of 64,27,378 shares by its then shareholders with an objective to achieve the benefits of listings on the Stock Exchange. The IPO was priced at Rs. 1,032.00 per share raising Rs. 663 Cr and got listed on March 09, 2012. MCX holds a market share of over 86 % as on March 31, 2012 of the Indian commodity futures market. The Exchange has more than 2,710 registered members operating through over 3,46,000 including CTCL trading terminals spread over 1,577 cities and towns across India. MCX was the third largest commodity futures exchange in the world, in terms of the number of contracts traded in 2011. The exchange is the world's largest exchange in Silver and Gold, second largest in Natural Gas and the third largest in Crude Oil with respect to the number of futures contract traded. MCX was the first exchange in India to initiate evening sessions to synchronise with the trading hours of global exchanges in London, New York and other major international markets. It was the first exchange in India to offer futures trading in steel, crude oil, and almond. Among international alliances, MCX have formed strategic alliances with a number of exchanges such as the London Metal Exchange, the New York Mercantile Exchange, the LIFFE Administration and Management (under renewal), the Baltic Exchange Limited, Shanghai Futures Exchange and Taiwan Futures Exchange. MCX holds 5 % in Dubai Gold and Commodity Exchange and the book value of this investment was Rs. 2.185 Cr as of December 31, 2011; 100 % in MCX Clearing Corporation Ltd; 5 % in MCX SX; 26 % in MCX-SX Clearing Corporation Ltd; 51 % in SME Exchange of India Ltd with initial investment of Rs. 5,10,000. MCXIL is compared with Bombay Stock Exchange of India Ltd, National Stock Exchange of India Ltd, United Stock Exchange of India Ltd, Calcutta Stock Exchange , National Commodity and Derivatives Exchange, National Multi-Commodity Exchange of India Ltd, Financial Technologies (India) Ltd in India and Globally compared with Ichiyoshi Securities Co Ltd of Japan, Osaka Securities Exchange also from Japan, CME group, Intercontinental Exchange Inc, Nasdaq OMX Group/THE, CBOE Holdings Inc, London Stock Exchange Group, TMX Group Inc, Deutsche Boerse AG, Bolsas Y Mercados Espanoles, ASX Ltd, Singapore Exchange Ltd, Hong Kong Exchange & Clearing House Ltd, Bursa Malaysia BHD.
                                                

Investment Rationale:

Multi Commodity Exchange of India (MCX) is a state-of-the-art electronic commodity futures exchange, with nearly monopolistic market share of around 90.50 % in commodity market in India. MCX enjoys a competitive edge, and has its own Economic Moat (A competitive advantage is, that one company has over the other companies in the same industry – by Warren Buffett) and is expanding its moats which is a very strong sign of as a future Multi-bagger given that its has an strong technology support for its trading platform supplied by its then promoter, Financial Technologies India (FTECH), which is a leading developer of exchange related software and technology in India. Technology for the exchange industry is difficult to replicate, and this provides the MCX as a company with a competitive advantage. Exchanges require constant technology upgrades and support, necessitated by regulatory regime and market forces. MCX is able to obtain speedy and efficient technology solutions from FTECH. MCX’s current technology infrastructure is sufficient to handle daily trading volumes of up to 10,000,000 in a day. Indian commodities exchanges are highly regulated, and the current regulatory environment, foreign institutional investors (FIIs), banks and mutual funds cannot trade on commodity exchanges. Growth potential in the economy like India's remains huge over the next decade, which is expected to drive the demand for commodities. The increase in physical market volumes consequently increases the hedging requirements for industry players, influencing derivative trading volumes. Penetration remains low - Globally, futures Gold volumes are 70-80x that of physical trade as against 17-18x in India, 20x in Crude as against 7x in India, 100x in Aluminum as against 8-9x in India. MCX has agreements with financial information service agencies to provide real time data-feed on trading prices, trading volume and other information on the Exchange and on the spot market. The company currently has such arrangements with the following entities: Bloomberg Finance L.P.; NewsWire 18 Private Limited; IQN Data Solutions Private Limited; Reuters India Private Limited; Interactive Data (Europe) Limited and TickerPlant Limited. 

 "In order to raise from its own Ashes 
                                                           A Phoenix First Must Burn "


                                                                                        - Octavia E Butler.

Just as the Phoenix bird raises from its ashes, MCX will also raise from the ashes. Recently, MCX stock prices faced extreme pressure in its prices on brouses and its prices went down from Rs. 1300 to Rs. 238 levels in months, due to Rs. 5,500 Cr National Spot Exchange Limited trade settlement scam. NSEL is a subsidiary of MCX’s parent company Financial Technology India Ltd, and as a promoter of MCX, after this scam, FTIL is forced to reduce their stake in MCX from 26 % to merely 2 % of paid up equity capital of MCX within the end of January 2014. The commodity regulator Forward Market Commission recently declared that Financial Technology, Jignesh Shah along with Joseph Messy, unfit as a promoter to run any exchanges in India due to NSEL Scam. From the reports of FMC Jignesh shah resigned from MCX as a Vice Chairman and also resigned as a shareholder director from the MCX. Last month of November 2013, the parent company sold its entire stake in Singapore Mercantile exchange to Intercontinental Exchange Group Inc for $ 150 million. The stake sale of 24 % would mean a additional pressure for a short time bring prices of MCX coming down, but since the change of guard of the company is huge positive and this will further strengthen the fundamentals of the company. MCX is a good business and it looks like its internal problems are getting sorted out, it is already being punished quite a lot. Also the fact remains that the impact of the securities transaction tax (STT) will probably going to impact MCX’s earnings, but still it’s a good long term opportunity. On 13 January 2014, MCX received approval of Institutional shareholders to raise funds through issue of shares in a form of rights issue to its existing 22 institutional shareholders of MCX-SX on basis of 1:1 at Rs. 10 per share on a proportionate basis. These domestic financial Institutional Investor includes IFCI, Union Bank of India and Punjab National Bank together holding 88.53 % of the undiluted shares. The process is expected to be completed by Mid-March. The exchange is expected to garner between Rs. 500 - Rs. 600 Cr through this issue. This rights issue will also result in the Financial Technologies group's effective stake in the exchange coming down from 70.9 % to 56.4 %, this is because most of its stake is held as a convertible warrants, for which no additional securities will be issued through the rights issue. MCX- SX's Net worth (Share capital + Reserves and Surplus) has come down from Rs. 274.6 Cr to Rs. 185.8 cr between March 2013 and September 2013. At this rate, the company's net worth could breach the stipulation of a minimum Net Worth of Rs. 100 Cr by SEBI. Apart from a successful rights issue, the exchange's net worth can also get boost if the FTIL group find takers for its warrants which are then converted into equity shares. Also MCX-SX have commenced trading in Interest Rate Futures (IRF) contracts in the currency derivatives segment from 20 january 2014.

Outlook and Valuation:

Multi Commodity exchange of India (MCX), India’s biggest commodity bourse, has an average daily turnover of about Rs. 240 billion or 77 % of the country’s exchange commodities volumes. MCX has its market leadership and has early mover advantage, edge in innovation with technology support from FTIL and is sticky liquidity. The exchange, with eight years of operating history and is in a growth phase with structural levers in place for an upward trajectory in volume over the long term. Until a new player poses a stiff competition or institutions are permitted to participate on CommEx, it is expected that MCX’s commission yields to stabilise. Comparing this company with its global peers, MCX valuations are at highly discounts with matured exchanges in developed nations and at 35 % ‐ 50 % discount to valuations of listed CommExes in developing markets. Currently CME Group Inc trades at a PE of 27.71x; Intercontinentale Exchange Group Inc trades at a PE of 29.48x; NASDAQ OMX Group Inc trades at a PE of 20.75x; CBOE Holdings Inc trades at a PE of 27.49x; MarketAxess Holdings trades at a PE of 34.27x; NYSE Euronext trades at a PE of 21.91x and MCX trades at 9 times.. Hence this discount is temporary in nature due to problems faced by its parent company and requlatory issues, and once these issues are solved these discounts will get narrowed down. Adding that there are possibilities of opening of option trading or participation by FIIs, MFs, Banks etc and possibilities of revision invariable fee structure for technology cost sharing with FTIL and also cannot rule out the possibilities of scale up in valuation of MCX-SX upside. It is expected that, MCX will sustain its market leadership which is steamed up from its technological edge and future readiness. MCX's volumes have grown at a CAGR of 47 % over FY07-FY12. Future potential remains exciting given the likelihood of new products and participants with the FCRA Bill, with its 20 lakhs client accounts as compared with 1.9 Cr – 2 CR Demat accounts, the industry has only scratched the surface with respect to potential volumes. MCX, with its technology as a backbone and readiness to latch on to new opportunities and also with the policy to maintain 50 % payout ratio is a key valuation positive. The valuation of MCX’s standalone business at 20x FY15E EPS of Rs. 37.60 gives us the standalone valuation of MCX at Rs. 752 per share; the valuation of the stake in MCX-SX (incl. warrants) contributes additional Rs. 110 per share to MCX. It is expected that MCX to have volumes growth of 15 % CAGR over FY12-15 and a PAT CAGR of 13 % over this period. Also, the ROE should sustain its level in the high 20's.  In my view MCX could report FY14E EPS of Rs. 66.50/share and for FY 15E of Rs. 76.50/share. The stock should go to the price of Rs. 862.00, and conservatively keeping the target of Rs. 800 and recommend to Accumulate on the stock at every dips.

KEY FINANCIALS	FY12	FY13	FY14E	FY15E
SALES (₹ Crs)	526.20	493.50	339.10	361.00
NET PROFIT (₹ Cr)	286.20	280.00	168.80	191.80
EPS (₹)	56.10	54.90	33.10	37.60
PE (x)	24.90	12.60	21.00	18.40
P/BV (x)	7.20	3.10	2.90	2.70
EV/EBITDA (x)	17.70	8.20	14.20	12.80
ROE (%)	31.00	26.00	14.20	15.10
ROCE (%)	24.80	24.80	13.60	14.60

I would buy MCX for Medium to Long term for target of Rs. 800. 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 ₹ 487.14 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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