Fundamentals February 1, 2013

Nik's Diary

The Indian market opened flat today, mirroring flat opening in the SGX Nifty and marginally positive opening trades in most of the Asian bourses. Investors would keenly watch out for the outcome of the RBI’s monetary policy meet scheduled today. The US stocks, after trending higher over the past few weeks, showed a lack of direction throughout the trading on Monday. The lackluster performance came as traders seemed reluctant to make any  significant moves following the recent strength. The European markets ended the trading session on Monday with mixed results. Investors were pleased with some positive economic data from China, as well as the surge in US durable goods orders. However, the larger than expected decrease in US pending home sales provided a note of caution. Meanwhile, the Indian markets ended a lackluster session largely unchanged as investors adopted a cautious stance ahead of the monetary policy meet of the RBI scheduled today and the January series F&O expiry slated for Thursday.

Axis Bank to raise `5,546cr via QIP and preferential allotment 
Axis Bank today said it successfully closed the largest equity QIP programme in the country worth over Rs 4,726 crore, which saw participation from pension funds, insurers and domestic mutual funds. The lender raised Rs 4,726 crore through the QIP route and Rs 811.47 crore from preferential allotment to five entities—LIC, General Insurance, The New India Assurance, National Insurance and United India Insurance, according to a regulatory filing. “The QIP (qualified institutional placement) programme was hugely successful having received significant interest from institutional investors from across the globe. “The entire offering was placed with high quality investors that included large long only funds, pension funds, insurers and domestic MFs,” the third largest private bank said in a statement. The bank further said this offering led to a redistribution of the bank’s shares with the weight of long-term institutions rising significantly, thereby bringing down the promoters’ holding to 33.5 percent, other resident shareholders to 19.3 percent and global institutions, including GDRs, to 47.2 percent. On successful fund-raising, bank’s Managing Director and Chief Executive Shikha Sharma said, “We are happy with the huge response from global institutional investors. We are delighted that large global houses and long-term institutions like pension funds, insurers and MFs have reposed their faith in us”. “We believe that the success of this fund-raising signals the belief in the India promise and the renewed interest global investors have in high quality companies and issuers from the country,” she said. The QIP programme was managed by Axis Capital, Citi and JP Morgan. Earlier this month, the bank reported a 22 percent rise in net profit at Rs 1,347 crore in the December quarter driven by higher retail loans which rose 45 percent and other income. The bank’s net interest income, grew 17 percent to Rs 2,495 crore, while the fee income jumped 15 percent to Rs 1,405 crore driven by a 35 percent spike in fee income from the retail business, and income from trading activities chipped in with Rs 159 crore during the reporting quarter. Total income of the bank increased to Rs 8,580.30 crore during the December quarter, from Rs 7,206.77 crore in the year-ago period.Source: First Post

Dabur India - RU3QFY2013

For 3QFY2013, Dabur India (Dabur) posted a 12.3% yoy growth in its consolidated top-line, which was in-line with our estimates. The company’s net profit rose by 22.2% yoy to `211cr aided by strong perational performance. The domestic consumer business posted a 14.3% yoy growth with volume growth coming in at 9.5%. While the Management maintained that rural markets and modern trade performed well, lower procurement by CSD impacted sales. In terms of category, Foods grew by 22.1% yoy while Home & Personal care grew by 15.7% yoy. The Hair care portfolio grew by 13.9%, while Shampoos grew by 29.6% yoy. The company’s international business posted a growth of 9%, with the organic international business posting a growth of 22.4% yoy. The OPM stood at 16.5%, up 126bp yoy, led by a healthy expansion in gross margins in the international business due to reduction in commodity costs.  The company’s advertising and promotion expenditure as a percentage of sales rose by 77bp yoy to 14.4%. Finance costs fell by 57.5% yoy to `7.8cr, due to favorable forex impact on a yoy basis. We expect Dabur’s top-line to post an ~16.1% CAGR over FY2012–14E. The bottom-line is expected to post a 21.6% CAGR, aided by top-line growth and margin expansion.Source: Angel Broking

Idea Cellular - RU3QFY2013

For 3QFY2013, Idea Cellular (Idea) reported mixed results with revenue coming in in-line with expectations while operating margin surprised negatively. The company’s total network minutes grew by 5.2% qoq, leading to a growth in network traffic to 132bn min. The average revenue per minute (ARPM) declined by 0.5% qoq to `0.41 due to decline in non-voice revenues’ share to 14.6% from 15.6% in 2QFY2013. The Management indicated that the company has not hiked headline tariff (as of now), but has only reduced promotional offers, that too in specific circles.During 3QFY2013, Idea won back 1,800MHz spectrum in all its seven circles in the 2G auction conducted by the government in November 2012, for which licenses had been quashed by the Supreme Court. Post the 2G auction, only four operators have pan-India presence. Idea’s Management indicated that the company has not hiked headline tariff (as of now) and has only reduced promotional offers, that too in specific circles. However, it reiterated its stance that tariff hikes are becoming imminent. Going forward, we expect ARPMs to improve as Idea has hiked tariffs via reduction of promotional offers. This should offset the rising input and regulatory costs. With increase in tariff rates expected going ahead, we have factored in a revenue CAGR of 10.7% over FY2012-14E. Idea still remains surrounded by regulatory uncertainties in the sector such as one-time spectrum fee  and spectrum refarming. With the 2G auctions coming up in March 2013, we expect partial resolution of these uncertainties, and the same would be a positive for the sector as a whole.Source: Angel Broking

Ipca Labs - RU3QFY2013

For 3QFY2013, Ipca Laboratories (Ipca) reported a good set of numbers, although they are a lad lower than our expectations. The top-line grew by 15.1% yoy to `692cr, lower than our expectation of `740cr. The OPM came in line with our expectation at 21.6% vs 16.4% in 3QFY2012. However, the same was not 

reflected in the net profit growth on account of a high rise in interest expenses. The net profit rose 36.3% yoy to `88cr vs our expectation of `107cr. We expect net sales to post a 21.4% CAGR to `3,474cr and EPS to register a 30.6% CAGR to `37.3 over FY2012–14E, driven by the US and domestic markets and the API segment. At current levels, the stock is trading at 16.3x and 13.1x FY2013E and FY2014E earnings, respectively. Source: Angel Broking