India Market Reflections (2008-12)

India Market Reflection 2008 – 2012

© Saurabh, 2013

Economic Indicators- Snapshot
Annual Real GDP Growth v/s Inflation CAD
14.0% 4.5% 4.2%
13.0% 13.0% 4.0%
12.0% 3.5%
11.0% 3.0% 2.8% 2.7%
10.0% 9.3% 2.5% 2.3%
9.5%
9.0% 9.1% 8.4% 2.0%
8.4% 8.4%
8.0% 1.5% 1.3%
6.7% 6.5%
7.0% 1.0%
6.0% 6.2%
0.5%
5.0% 0.0%
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
GDP Growth Annual Inflation

Fiscal Deficit FII Activity
7.0% 200,000.0
6.0% 150,000.0
5.0%
100,000.0
4.0%
50,000.0
3.0%
0.0
2.0%
1.0% (50,000.0)

0.0% (100,000.0)
2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012

Fiscal Deficit Net Investment (in Cr)
© Saurabh, 2013

12,000
14,000
16,000
18,000
20,000
22,000

10,000

6,000
8,000
Jan/2008

Apr/2008
20686.89
Jul/2008

Oct/2008
Equity Market

Jan/2009

Apr/2009

8427.29
Jul/2009

Oct/2009

Jan/2010

Apr/2010

Jul/2010
SENSEX

© Saurabh, 2013
Oct/2010

Jan/2011
20893.57

Apr/2011

Jul/2011

Oct/2011

Jan/2012

Apr/2012

Jul/2012

Oct/2012
19476

Comparison with Global Peers
Indices Performance
30

25.70
25

20

15.15
15
13.18 13.41

10 8.57

4.63
5 3.62
2.17

0
-0.86 -0.58

-3.37 -3.26
(5)
1 Year 3 Years 5 Years

Sensex MSCI World MSCI Emerging Markets S&P 500

© Saurabh, 2013

Value Creation over the Years (2008-12)
Stock/Index Sector 5 Years CAGR (in %)
BSE Sensex Index -0.88
ITC IN Equity FMCG 21.38
RIL IN Equity Oil & Gas -10.02
HDFC IN Equity Mortgage Finance 7.23
INFO IN Equity IT 5.82
ICICIBC IN Equity Bank -1.52
HDFCB IN Equity Bank 14.42
LT IN Equity Capital Goods -4.96
ONGC IN Equity Oil & Gas -3.02
TCS IN Equity IT 18.94
SBIN IN Equity Bank 1.19
HUVR IN Equity FMCG 19.15
TTMT IN Equity Auto 16.18
BHARTI IN Equity Telecom -8.10
MM IN Equity Auto 16.58
BJAUT IN Equity Auto 52.85
TATA IN Equity Metals & Mining -14.39
SUNP IN Equity Pharma 25.16
COAL IN Equity Metals & Mining 18.69
MSIL IN Equity Auto 8.48
NTPC IN Equity Power -0.03
GAIL IN Equity Oil & Gas -0.29
CIPLA IN Equity Pharma 14.43
WPRO IN Equity IT 4.96
DRRD IN Equity Pharma 20.32
BHEL IN Equity Capital Goods -15.07
HMCL IN Equity Auto 22.15
TPWR IN Equity Power -6.49
JSP IN Equity Metals & Mining -2.52
HNDL IN Equity Metals & Mining -7.76
STLT IN Equity Metals & Mining -14.68

© Saurabh, 2013

Now, the Building blocks…

© Saurabh, 2013

ITC is a holding co. which has a diversified presence in Cigarettes, Hotels, Paperboards and Specialty
papers, Agri-business, Packaged foods and Confectionery, Branded apparel, Greeting cards and other
FMCG products.

•Outperformed the broader market by huge margins on
sustained basis.
•Probably the only domestic FMCG powerhouse who
has managed to fight and sometimes beat its MNC
rivals in their own brand games.
The Plus factor: •Battery of brands like Vivel, Bingo and Yippee have
already started gaining traction in the market.
• With its diverse product lines and each catering to the
domestic markets; its one of the few stocks which has a
license to give investors a perfect ride on India’s
consumption wave.

•Valuations look stretched at current levels; limited upside
potential in near term.
• Cigarettes volumes have remained flattish in the last
quarter and an excise hike is further anticipated on Tobacco
Concerns: products.
•Inflation is also taking a toll on its margins; though to a very
limited extent.

© Saurabh, 2013

ITC
Versus Broader Market Price Earnings v/s Operating Margin
300 35 31.50 32.67
265.63 29.97
30 27.99 27.40
250 28 28
25 25 24
200
20 21
150
15
100 91.22
10
50 5
0 0
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

BSE Sensex ITC IN Equity Operating Margin Price Earnings

Top-line v/s Bottom-line Growth Debt to Total Assets
30 0.9
25.37 0.79
24.72 0.8
25
20.39 0.7
20 17.51 0.6 0.52
16.43 0.47
14.61 15.58 0.5
15 12.94 0.39
13.87 0.4
10 0.3
5.28
0.2 0.13
5
0.1
0 0.0
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
Revenue Growth Net Income Growth

© Saurabh, 2013

RIL’s activities span exploration and production of oil and gas, petroleum refining and marketing,
petrochemicals (polyester, fiber intermediates, plastics and chemicals), textiles, retail, infotel and special
economic zones. The company also owns a petroleum refinery cum Petrochemical complex in Jamnagar
(Gujarat) that produces a wide range of products like gasoline, superior kerosene oil & LPG.

•Improvement in Gross refining margins is a healthy sign for
this scrip; it’s been evident after quite a long interval.
•Huge capex lined up for its upcoming 4G venture; should
give it a significant edge over the incumbents as all major
The Plus factor: players are already struggling with rising costs and cut
throat competition.
•The recent spurt in Shale gas price in the US market is a big
positive development for this stocks

•KG basin has become an albatross around RIL’s neck.
•An aggressive play in the Forex market pose exchange
rate risk.
• GOI’s constant policy flip-flop on Natural gas pricing has
Concerns: created uncertainty on future profit potential for it s E&P
business.
•Its retail business is yet to become EBITDA positive even
after five years of launch.

© Saurabh, 2013

RIL
18
120 17
16 16
14
100 94.43 14
13
12
80 12.59 12.28 11
10
60 56.06 8 9.52 9.01
6
40 6.33
4
20 2
0
0
2008 2009 2010 2011 2012
2008 2009 2010 2011 2012
Operating Margin Price Earnings
BSE Sensex RIL IN Equity

Top-line v/s Bottom-line Growth 35 Debt to Total Assets
30.99
80 28.98 27.35 28.25
30
62.05 63.7 24.90
60 25

20
40 34.73 34.87
30.47 15
20 20.55
10.26 2.23 10
0
5
2008 2009 2010 2011 2012
-20 0
-21.26
-23.5 2008 2009 2010 2011 2012
-40 Net Income Growth Revenue Growth

© Saurabh, 2013

HDFC provides long-term housing loans to low and middle income individuals, as well as to
corporations. It also provides construction finance to real estate developers, besides providing lease
financing facilities to companies and development authorities for infrastructure and other assets.

•Industry leading margins along with solid growth in NII;
24% YoY and 11% QoQ is an excellent performance
indicator.
•Strong asset quality despite difficult macro environment.
The Plus factor: •The current valuation looks quite attractive and thus
triggered strong buy calls from many analysts.
•Going forward, it could be a big benefactor of real estate
recovery.

•Decline in loan processing fees as a result of change in
delivery mix. Loan processing fee declined by 46% YoY and
25% QoQ due to bigger business from third party route.
•Recent regulator intervention in lending rate decisions is a

Concerns: cause of concern for future profitability. Valuations look
stretched at current levels; limited upside potential in near
term.

© Saurabh, 2013

HDFC
Versus Broader Market
160 144.31
140
120
100
80 92.81
60
40
20
0
2008 2009 2010 2011 2012

BSE Sensex HDFC IN Equity

Top-line v/s Bottom-line Growth
120
100 108.87
80
55.74
60
40.27 39.72
40 37.39 32.46 20.63
20 16.15
5.71
0
2008 2009 2010 2011 2012
-20
-14.84
© Saurabh, 2013

Infosys Ltd provides IT consulting and software services, including e-business, program management
and supply chain solutions. The Group’s service include application development, product co-
development, system implementation and system engineering. It targets business specializing in the
insurance, banking, telecommunication and manufacturing sectors.

•Account mining for its existing top 50 clients hold
tremendous potential for impressive top-line growth.
•Its Indian IT bellweather tag would return if Infy is able
to deliver several quarters of consistent revenue and
earnings performance.
The Plus factor: •Strong pile of cash (over 4 billion USD), gives it a leading
edge over peers while chasing inorganic growth
opportunities.

•Macro environment looks turbulent especially in their
biggest market i.e. US where many prominent clients
have frozen their IT budget on discretionary spending.
•Operating margins have narrowed in FY12 and further
drop is anticipated in the coming quarters as a result of
Concerns: increased competition in IT services, higher costs
associated with hiring and training employees and rising
levels of attrition in the middle band employees.

© Saurabh, 2013

Infosys
250

200

150 139.63

100
91.31
50

0
2008 2009 2010 2011 2012
BSE Sensex INFO IN Equity

© Saurabh, 2013

ICICI Bank Ltd. operates a network of banks located throughout India. The Group specializes in retail
and corporate banking, in addition to forex and treasury operations. ICICI Bank also provides a wide
variety of financial services like Investment banking, Broking, Depository, Insurance and Asset
management.

• NIM has expanded to more than 3%; it more than offsets
higher credit costs.
• Its Tier 1 ratio of (13.4% as of Dec 2012) is the best
amongst all large sized banks in India.
The Plus factor: •Now it has become more global than its peer group with
35% revenue contribution from overseas business. It could
be of help while facing headwinds in the domestic market.

•Negative growth in CASA deposits reflects slower expansion
in branch network and rising competition for saving
deposits.
•Finance ministry’s thrust on new bank licenses could pose

Concerns: further threat on margins.
•Rise in NPS in forthcoming quarters on account of tighter
provisioning could also derail its business performance in
the short run.

© Saurabh, 2013

ICICI Bank
140
120
100 93.11
80 88.04
60
40
20
0
2008 2009 2010 2011 2012

BSE Sensex ICICIBC IN Equity

50
45.16
40
30.57 30.47
30 25.43
23.10
20

10 6.93
8.28
5.26
0 3.44
2008 2009 2010 2011 2012
-10 -7.22
Net Income Growth Revenue Growth

© Saurabh, 2013

HDFC Bank Ltd. is a banking company engaged in providing a range of banking and financial services, including
commercial banking and treasury operations. The Bank operates in four segments: treasury, which primarily
consists of net interest earnings from the Bank’s investment portfolio, money market borrowing and lending,
gains or losses on investment operations and on account of trading in foreign exchange and derivative contracts;
retail banking, which serves retail customers through a branch network and other delivery channels; wholesale
banking, which provides loans, non-fund facilities and transaction services to corporate, public sector units,
government bodies, financial institutions and medium scale enterprises, and other banking business, segment
includes income from para banking activities, such as credit cards, debit cards, third party product distribution,
primary dealership business and the associated costs.

•Top-line grew at an impressive 23.11% YOY in the last
quarter. NII grew by 26.7% which is again applaudable in
the industry. On both these fronts HDFC bank has been
producing Industry leading growth numbers since last
The Plus factor: year.
• Asset quality continues to remain stable.
•Its AMC and Insurance ventures are also growing well in
their respective segments.

•Net Interest margin remained flattish at sub 4% level.
Margins declined due to lower share of CASA to total
deposits.
•New banking licenses could squeeze margins further. But
this would certainly not have any near term impact.
Concerns:

© Saurabh, 2013

HDFC Bank
250

200 199.12

150

100
95.10
50

0
2008 2009 2010 2011 2012

BSE Sensex HDFCB IN Equity

© Saurabh, 2013

Larsen & Toubro Limited is a technology, engineering, construction and manufacturing company. It
operates in various segments including Engineering & Construction, Electrical & Electronics segment,
Machinery & Industrial Products, Financial services and others. Engineering & construction Segment
comprises execution of engineering and construction projects in India.

• Order inflows have so far beaten market expectations and
deal pipeline also looks quite promising, It s already sitting
on an order backlog of INR 1.62 lakh crore.
• De-leveraging efforts have started paying off; the firm will
The Plus factor: be saving big money on interest expenses.
• Should definitely be a big benefactor of GOI’s strong push
for infrastructure growth in the long run.
•Its EPC business also looks fairly attractive.

• Revenues and margin expansion has declined in the past couple
of quarters.
• Valuations look stretched at current levels considering shrink in
Concerns: margins and the tight interest rate environment.

© Saurabh, 2013

L&T
120

100 94.43

80
80.21
60

40

20

0
2008 2009 2010 2011 2012

BSE Sensex LT IN Equity

60 55.37
50 43.84
43.50
40 37.63
30
23.58
20
8.87 19.60
10 5.33
8.28
0
-10 2008 2009 2010 2011 2012

-20
-18.25
-30
© Saurabh, 2013

ONGC Ltd, a GOI company, is primarily engaged in the exploration and production (E and P) of Oil and
Gas reserves. It has two segments namely, E and P, refining. Its subsidiaries include ONGC Videsh
Limited (OVL), Mangalore Refinery & Petrochemicals Ltd., ONGC Nile Ganga BV (ONGBV), ONGC Nile
Ganga (Cyprus) Ltd., Jarpeno Limited, Imperial Energy Corporation Plc, Imperial Energy Limited and
Imperial Energy Kostanai Limited.

• Revenue growth has been consistently impressive. It
has been achieved on the back of higher crude oil sales
volumes.
• Gas price revision as recommended by Rangarajan
committee could be a big performance booster for its
The Plus factor: financials.
•Diesel price hike could be yet another good news for
the company though it may not happen immediately as
election year is approaching shortly.
•Valuation is fairly attractive at current level.

• Higher than expected subsidy burden could erode its margins.

Concerns: • Lower production volumes form overseas field is also a big cause
for concern.

© Saurabh, 2013

ONGC
140
120
100 95.27

80 84.79
60
40
20
0
2008 2009 2010 2011 2012

BSE Sensex ONGC IN Equity

© Saurabh, 2013

TCS, a Tata group company, is the largest IT service company in India by revenue and market
capitalization. It is engaged in providing information technology (IT) services, business solutions and
outsourcing. The Company’s services portfolio consists of application development and maintenance,
business intelligence, enterprise solutions, assurance, engineering and industrial services, IT
infrastructure services, business process outsourcing, consulting and asset leveraged solutions. TCS also
services several other industries, such as life sciences and healthcare, hi-tech, energy, resources and
utilities, media and entertainment and travel, transportation and hospitality.

• Robust top-line, bottom-line and margin expansion
reported in the last several quarters has made it the new
bellwether stock of Indian IT pack.
• Increase in business from Nielsen & Citigroup is an early
The Plus factor: indicator of strong deal flows and repeat business from its
bigger clients.
• Its full scale IT services model has started yielding results
as more and more clients are looking for order
consolidation to bigger players of the industry.

• Difficult macro environment could result in sharp decline
in discretionary IT services spending by its US & European
clients.
• Non-linear growth is yet to produce traction in its
Financials.
Concerns:

© Saurabh, 2013

TCS
300
246.44
250

200

150

100 95.10

50

0
2008 2009 2010 2011 2012
BSE Sensex TCS IN Equity

35 33.18
31.00
30 29.53
24.30
25 22.96

20 19.31
21.06

15 14.56
10 7.97

5 4.58
0
2008 2009 2010 2011 2012
Revenue Growth Net Income Growth
© Saurabh, 2013

State Bank of India is India’s largest bank by both asset size and revenue . As of March 31, 2012, the Bank
had a network of 20,193 branches, including 5,096 branches of its five associate banks. In addition to
banking, the Company, through its various subsidiaries, provides a range of financial services, which include
life insurance, merchant banking, mutual funds, credit card, factoring, security trading, pension fund
management, custodial services, general insurance (non-life insurance) and primary dealership in the
money market.

• Improvement in operating efficiency has been evident at
the group level.
• Could be a big benefactor of Interest rate cut and
economic growth turnaround.
The Plus factor:

• NIM looks to be under pressure.
•Wage hike is anticipated in the near term.
• Core Tier 1 ratio 9.2% is one of the weakest in the
industry. If the situation declines further it will require re-
Concerns: capitalization by GOI.
• Multiples under pressure as revenue growth dips and
asset quality concern rise.

© Saurabh, 2013

SBI
180
160
140
120 102.59
100
80 94.80
60
40
20
0
2008 2009 2010 2011 2012
BSE Sensex SBIN IN Equity

© Saurabh, 2013

Hindustan Unilever Ltd (HUL), a part of the €40 billion Unilever group, is one of India's largest Fast Moving
Consumer Goods company. It operates in seven business segments. Soaps and detergents include soaps,
detergent bars, detergent powders and scourers. Personal products include products in the categories of oral
care, skin care (excluding soaps), hair care, talcum powder and color cosmetics. Beverages include tea and
coffee. Packaged foods include staples (atta, salt and bread) and culinary products (tomato-based products,
fruit-based products and soups), Ice creams and frozen desserts.

• Top line growth looks healthy
• Home and Personal care (HPC) and food business has been
doing well since last couple of years.
The Plus factor: • Some of its recently launched rural India initiative should
start producing tangible results from FY14.
• Commands higher brand recall for most of its products than
its arch rivals.

• Volume growth has disappointed the street.
• Operating margins have been under pressure.
• Increase in royalty payment to Unilever on sale of certain
products will also have a negative impact on the EPS.
Concerns: • Valuation of FMCG pack looks quite expensive at current
levels.

© Saurabh, 2013

HUL
300 18
242.50 16
250 16
14
200 12
9.96 10.07
10 9.04 11
150
8 8
95.99
100 6 6
3.98
50 4
2
0 0
0
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
BSE Sensex HUVR IN Equity Operating Margin Price Earnings

© Saurabh, 2013

Tata Motors Ltd. is India’s largest automobile company. It is the leader in commercial vehicles in almost
each segment, and amongst the top three in passenger vehicles with winning products in the compact,
mid-size car and utility vehicle segments. The company is the world’s fourth largest truck manufacturer
and the world’s third largest bus manufacturer. Tata Motors Ltd. has around 62% market share of Indian
Commercial Vehicles and 13% of Indian Passenger Cars segment. In 2008, it acquired two British iconic
brands, Jaguar & Land Rover.

• JLR sales has been gaining ground since last several
quarters.
• Due to JLR’s global reach Tata Motors is more insulated
from domestic markets concerns than its peer group.
• Nano’s new positioning strategy has started gaining
The Plus factor: traction in the market.
• Under the new leadership of Karl Slym the company
has already started working on it’s next generation
product lines to be built on new platforms.

• Domestics passenger vehicle division has lost grip in the
market ; they lost the no. 2 title to M&M last year. Already
RNT has expressed his disappointment over falling market
share to the board.
Concerns: • CV sale growth has been disappointing due to the high
interest rate environment. The development of organized
pre-used CV market is also adding woes to the concern.

© Saurabh, 2013

Tata Motors
250
199.14
200

150

100
91.31
50

0
2008 2009 2010 2011 2012

BSE Sensex TTMT IN Equity

© Saurabh, 2013

Bharti Airtel Ltd, a part of Bharti Enterprises, is India’s biggest integrated communication company by
market cap, revenue and subscriber base. The company provides GSM mobile services, broadband,
fixed line telephone services, long distance services (international and national) and enterprise services.

• Subscriber base has grown much better than the
competition even though ARPU has been falling consistently.
• Bharti Infratel’s listing has unlocked values for the parent
The Plus factor: firm and provided some support in its deleveraging efforts.
• Has gained the early mover advantage in 4G with its service
launch in Kolkata, Pune & Bangalore market.

• Intense competition and tariff war has squeezed
margins and bottom-lines have been severely hit.
• Bleeding African business is adding woes to investor’s
worries.
• 3G has not taken off as per market expectation.
Remember it paid the highest ~ INR 13K Crore to
Concerns: acquire 3G licenses in 13 circles.
• RIL’s re-entry into communications business via 4G
route could trigger another phase of blood bath in the
data segment.

© Saurabh, 2013

Bharti Airtel
120

100 95.31

80
68.72
60

40

20

0
2008 2009 2010 2011 2012
BSE Sensex BHARTI IN Equity

80

57.44
60
46.64
40 38.28
42.28
14.22
20 22.88 20.01
12.03
0
2008 2009 2010 2011 2012
-20

-32.64 -29.56
-40
© Saurabh, 2013

Mahindra & Mahindra Ltd. manufactures automobiles, farm equipment and automotive components.
The Company's automobile products include light, medium and heavy commercial vehicles, jeep type
vehicles and passenger cars. Mahindra & Mahindra also manufactures agricultural tractors, agricultural
implements, internal combustion engines, industrial petrol engines, spare parts and machine tools..

• Last quarter revenue growth of 29% YOY looked solid on
the back of strong UV sales.
• Its margins are much better than Tata Motors in the
domestic market.
The Plus factor: • XUV 500 volumes have exceeded market expectations.
Even its UV line-up and pick-up segment have done
reasonably well in the market .

• Its Farm equipment division has been posting mute numbers
as a result of both weaker agriculture data and high interest
rate environment.

Concerns: • Ssangyong forthcoming product launches might spur brand
cannibalization for some of its existing products.

© Saurabh, 2013

M&M
250
216.97
200

150

100 90.34

50

0
2008 2009 2010 2011 2012
BSE Sensex MM IN Equity

100
76.36
80

60 61.18
58.90
40
36.43
24.25
20 22.19
4.94 7.76 1.52
0
-10.55
2008 2009 2010 2011 2012
© Saurabh, 2013

Bajaj Auto Limited is the flagship company of the Bajaj group. It manufactures and distributes
motorized two-wheeled and three-wheeled scooters, motorcycles and mopeds. It is the largest 3-
wheeler manufacturer and the second largest 2-wheeler manufacturer in India. In last several years, the
company has successfully transformed itself from a scooter manufacturer to 2-wheeler manufacturer.

• While domestic sales have stagnated marginally its
export growth numbers look quite impressive.
• Three wheelers sales have been clocking healthy growth
numbers.

The Plus factor: • Its margins have always been better than its bigger rival
Hero MotoCorp.
•KTM’s performance has improved significantly post
Bajaj’s acquisition. Its 2012 volume growth stood 32% on
Year on Year basis.

• Its biggest weakness is the entry level bike segment where it
trails behind the market leader by huge margin.
• Steep rise in commodity prices could make things worse for the
Concerns: company.

© Saurabh, 2013

Bajaj Auto
800
700 689.08
600
500
400
300
200
100 118.39
0
2008 2009 2010 2011 2012

BSE Sensex BJAUT IN Equity

250
197.62
200

150
116.66
100

50
36.67
-2.54 37.98 18.95
0
-6.67 -28.52
2008 2009 2010 2011 2012
-11.76
-50
-39.95
© Saurabh, 2013

Tata Steel Ltd. is an integrated steel producer which manufactures a variety of steel products. The
Company's products include steel ball bearing rings, alloy steel bearing rings, annular forgings, flanges,
bearings, welded steel tubes, cold rolled strips and seamless tubes. Tata Steel also manufactures
metallurgical machinery.

• Lower production by steel majors could decrease the Industry’s

The Plus factor: inventory levels and help in price escalation.
• Mean reversion seems quite possible on this counter.

•Decline in revenue growth .
• Europe continues to pose threat from demand side.
Concerns:

© Saurabh, 2013

Tata Steel
120

100 94.43

80

60
44.44
40

20

0
2008 2009 2010 2011 2012
BSE Sensex TATA IN Equity

600 Top-line v/s Bottom-line Growth

400 421.68

195.65
200

12.01
0 -59.91 11.91
-30.50 15.98
2008 2009 2010 2011 2012
-40.00
-200
-140.58

-400

-547.07
© Saurabh, 2013

Sun Pharmaceutical Industries Limited manufactures and markets pharmaceuticals for domestic and
international distribution. The Company's pharmaceutical portfolio includes drugs in the areas of
diabetes, cardiology, neurology, psychiatry and gastroenterology.

• Revenue grew by 33% in the last quarter.
• EBITDA margins have been better than peer group.
The Plus factor: • Taro’s performance has been exceeding market’s expectation
sine last year.

• Competition is heating up in its bread and butter generic drug
business.
•Litigation issues could also derail margin expansion in the
Concerns: forthcoming quarters.

© Saurabh, 2013

Sun Pharma
350
298.69
300
250
200
150
90.93
100
50
0
2008 2009 2010 2011 2012
BSE Sensex SUNP IN Equity

100 89.59

80

60 50.39
57.43
42.47
40 40.01
27.28 34.42
20 21.86
0
2008 2009 2010 -10.85 2011 2012
-20

-40 Net Income Growth -25.43 Revenue Growth
© Saurabh, 2013

Coal India Ltd, a Maharatna PSU, is the largest coal producer in the country with a market share of 81%
in domestic coal production. Around 90% of coal is produced from open cast mines and the balance
from underground mines. It produces and markets coal and coal products, as well as provides related
consulting services.

• Near monopoly on coal supply to domestic power sector.
The Plus factor: • Coal price hike will be a big performance booster for this counter.

• Margins under pressure; costs exceeded street’s expectations.
• Coal gate scam has affected its operations in Jharkhand and
Concerns: Orissa.

© Saurabh, 2013

CIL
180
160 143.59
140
120
100
80 94.03
60
40
20
0
Nov-2010 May-2011 Nov-2011 May-2012 Nov-2012
BSE Sensex COAL IN Equity

160
136.84
140
120
100
80
60
36.08
40
20 18.86 15.02 12.58 24.26
10.24
1.90 -5.19 12.94
0
2008 2009 2010 2011 2012
-20
© Saurabh, 2013

Maruti Suzuki India Ltd, a subsidiary of Suzuki Motor Corporation of Japan, is India’s largest passenger
car company, with 44.9% domestic car market share. Maruti Suzuki offers 14 models with over 200
variants across segments like, Passenger Cars, Utility vehicles, and Vans. Its portfolio has full range of
cars- from Maruti 800 & Alto to stylish hatchback Ritz, Wagon R, Swift, A-star, Estillo and sedans DZire,
SX4, Kizashi; Utility vehicle like Grand Vitara, Gypsy, Ertiga; Vans include Omni & Eeco.

• Volume growth has recovered; it still commands a lion share of
domestic Passenger vehicles business.
The Plus factor: • Battery of some of the best selling hatchback brands put it in an
enviable position in the PV market.

• Competition intensity is heating up day by day. If competitors
wage price war in the entry level hatchback segment then it
could severely impact its margins.
Concerns: • Frequent labor disputes have dented its brand equity
especially from employer’s perspective.

Maruti Suzuki
200

149.52
150

100
95.27

50

0
2008 2009 2010 2011 2012
BSE Sensex MSIL IN Equity

140
113.84
120
100
80
60
43.22
40
22.98 22.78
20 14.13
12.69
0 -9.23 -3.13
2008 2009 2010 2011 2012
-20 -31.43
-40 Net Income Growth Revenue Growth -29.44

© Saurabh, 2013

NTPC Ltd, a Maharatna status Company, is India’s largest state-owned power generation company.
NTPC is primarily in the business of generation and sale of bulk power and is engaged in the
engineering, construction and operation of power generation plants. The company is emerging as a
diversified power major with presence in the entire value chain of the power generation business.
Apart from power generation, NTPC has already ventured into consultancy, power trading, ash
utilisation and coal mining.

• This power sector giant is India’s leading and most
dependable energy supplier. With UMPPs limited success
in the past, India’s reliance on NTPC’s operations has
increased again.

The Plus factor: •Despite being a PSU, its efficiency (PLF) in Power
generation business is one of the best in the country.
• Now NTPC has secured fuel supply to most of its plants
through FSA with CIL . This would ensure that almost all
its plants should run at optimum level in future as well.

• The industry has gone through a crisis phase recently due
to various reasons like Coal gate scam, fuel shortage or
environmental concerns.
•The solvency of State Electricity boards also adds woes to
the worry of many power producers. So far GoI has
Concerns: insulated it from those perils but it often leads to under
recoveries of tariff.

© Saurabh, 2013

NTPC
120

100 94.43

80

60 62.32

40

20

0
2008 2009 2010 2011 2012

BSE Sensex NTPC IN Equity

© Saurabh, 2013

GAIL (India) Ltd. is India's flagship natural gas company. It integrates all aspects of the natural gas value
chain including exploration & production, processing, transmission, distribution & marketing and its
related services. Today, GAIL's Business Portfolio includes 6,700 km of natural gas high pressure trunk
pipeline, 7 LPG gas processing units, 1,922 km of LPG transmission pipeline network, 27 oil and gas
exploration blocks and 3 coal bed methane blocks. Currently, it sells over 70% of total natural gas in India.
Of this, 41% is to the power sector and 30% to the fertilizer sector. It also has a market share of 78% of
the gas transmission business in India.

• Partial withdrawal of oil and gas subsidies holds tremendous
potential for GAIL.. This looks more real than fiction because
The Plus factor: GOI is desperately seeking full measures to arrest rise in fiscal
deficit.

• Increase in natural gas prices by RIL as per Rangarajan
committee recommendation by more than 50% would badly
impact its margins in the near term as it will have to absorb
the impact of hike to the tune of at least 50%.
Concerns: • Decline in KGD6 output is impacting GAIL’s gas distribution
business to a great extent.

© Saurabh, 2013

Cipla is one of India’s largest pharma companies by domestic market share, with a strong presence in
the anti-asthma, anti-infective, anti-AIDS and cardiovascular segments and a moderate presence in the
anti-inflammatory and anti-ulcerants segments. The Company engages in the manufacture, sale, and
export of pharmaceutical and personal care products in India and across the globe (in 180 countries).
The major revenues come from the domestic market followed by Africa, the Americas and Europe

•Top-line growth has been healthy especially in the export
markets.
The Plus factor: •Product line-up in the US looks fairly impressive; it has more
than 50 approvals (thru’ partners). It has filed 5 ANDAs this
year on its own.

• Rise in overheads due to increasing headcounts that too in in
front-end roles have impacted margins.
• Domestic sales growth has dipped due to market slowdown.
Concerns: •Tax rate guidance has been increase d to 24% tom from 20%
earlier.

© Saurabh, 2013

Cipla
250

200 195.90

150

100 95.10

50

0
2008 2009 2010 2011 2012
BSE Sensex CIPLA IN Equity

50
40.41
40

30
23.69
20 16.80 15.63

10 8.04 11.57
9.98
0.00
0 0.00
2008 2009 2010 2011
-8.59 2012
-10
-20
© Saurabh, 2013

Wipro Ltd. operates in 3 business segments including IT Services, IT Products and Consumer Care and
Lighting. Wipro Technologies, the global IT business of Wipro Technologies, the global IT services
business of Wipro Limited is an information technology, consulting and outsourcing company that
delivers solutions to enable its clients to do business better. It provides a wide range of software
solutions, IT consulting, BPO services and outsourced research and development services to corporations
globally.

• Revenue growth broadly in line with NASSCOM
industry numbers.
• Hiving off non-IT business could unlock significant
values for its Consumer care, Infra engineering and
medical diagnostics divisions.
The Plus factor: • Revenue diversification across the IT spectrum will
bring a major relief in Investors camp. Although
tangible impact of this move would start bearing
tangible results only after 2013 fiscal.
•Stability in management should boost its business
recovery process.

• Weak macroeconomic fundamentals in Europe & the US checks
discretionary spending practice of on-shore clients.

Concerns: • Rise in competition, wage hikes coupled with falling utilization
price could impact operating margins in a major way.

© Saurabh, 2013

Wipro
180
160
140
124.73
120
100
80 95.10
60
40
20
0
2008 2009 2010 2011 2012

BSE Sensex WPRO IN Equity

© Saurabh, 2013

Dr Reddy’s Labs is India’s second largest Pharmaceutical Company by sales. It operates through five
business segments namely Formulations Segment, Active Pharmaceutical Ingredients and Intermediates
Segment, Generics Segment, Drug Discovery Segment and Custom Pharmaceutical Services Segment. It
also carries out R&D in diabetes, cancer, cardiovascular diseases, and inflammation and bacterial
infections and also has a significant presence in the biotech sector. The company market’s its products in
over 100 countries but its prime focus is on India, Europe, US and Russia. It is India’s first and the only
pharma company to be listed on the NYSE.

•Its low cost operating structure gives it an edge in the Generic
drug space.
•Probably one of the few Indian drug manufacturers to have
The Plus factor: cracked the US Over the counter market so far.
•Product pipe-line looks solid.

•Increasing competition could squeeze margins in generic
market. Already bigger players have gained access into this
business via inorganic route.
•Patent suits in the US market could prove expensive for the

Concerns: firm.
•Betapharm’s acquisition continues to haunt its financials
even today.

© Saurabh, 2013

Dr. Reddys Lab
300

250 259.77

200

150

100 95.31
50

0
2008 2009 2010 2011 2012

BSE Sensex DRRD IN Equity

300

200
184.18
100
38.18 30.23
3.34 5.61 30.44
0 -23.63
2008
-54.64 2009 2010 2011 2012
-100

-200 -138.32

-300 -309.36


© Saurabh, 2013

BHEL , a navratna PSU, is an integrated power plant equipment manufacturer and operates as an engineering
and manufacturing company. BHEL operates in two segments: power and industry . It is engaged in the design,
engineering, manufacture, construction, testing, commissioning and servicing of a wide range of products and
services for the core sectors of the economy, viz. power, transmission, industry, transportation, renewable
energy, oil & gas and defence. The Company supplies steam turbines, generators, boilers and matching
auxiliaries up to 800 megawatts ratings, including sets of 660/700/800 megawatts based on supercritical
technology. In Power generation segment, it supplies range of products and systems for thermal, nuclear, gas
and hydro-based utility and captive power plants.

•Still commands near monopoly in the Capital goods space.
The Plus factor: • Strong financials, lower capex and strong cash-flows still remains
its core advantages over peer group.

•Weak incremental order inflow is putting brakes on
revenue growth and margin expansion. Its already
evident in the last couple of quarters.
•Problems in Power sector like shortage of fuel,
controversies in land acquisition, delay in environmental
Concerns: clearances is also spelling doom for BHEL
•Increasing threat from L&T, Siemens, ABB apart from
Chinese rivals could further derail its top-line growth in
the long run.

© Saurabh, 2013

Hero MotoCorp, Ltd., formerly Hero Honda Motors Ltd., is the world’s largest two wheeler
manufacturing company. The Company offers two wheeler products that include motorcycles and
scooters. Motorcycles contribute around 95% of its total sales. It commands a mammoth 59% market
share in the motorcycle segment in India with leadership position in the entry-level segment (75-125
CC).

• Volume growth has been largely in line with market
expectations.
•Neemrana plan would further boost its production capacity.
Post Honda split, HMCL has got access to Foreign markets.
The Plus factor: Exports could add completely new revenue lines for this
stock.
•Product pipe-line looks impressive in view with the
competition.

• Margins are under pressure due to rising competition in its
bread & butter 100 C segment.
•Labor unrest in Gurgaon & Union expectations could increase
Concerns: wage costs in the long run.

© Saurabh, 2013

Hero MotoCorp
350
300 268.95
250
200
150
100 95.68

50
0
2008 2009 2010 2011 2012
BSE Sensex HMCL IN Equity

80
74.12

60

40
32.43 27.92
23.35
22.13
20 19.23 21.42
12.82
4.36
0
2008 2009 2010 2011 2012
-13.62

© Saurabh, 2013

TATA Power Ltd. is India’s largest integrated private sector power company. The company has an
installed generation capacity of 3127 MW and a presence across the entire value chain in generation
(thermal, hydro, solar and wind), transmission, distribution and trading. It is also involved in coal
business.

•Rise in tariffs is a significant trigger for its upside potential.
The Plus factor: • Improve d coal realizations and low cost of coal production could
be another big catalyst for this counter.

• Bleeding bottom-line is an early warning for company specific
problems.
• Fuel supply problems with both domestic and off-shore vendors
Concerns: could pose big risk to its existing operation.

© Saurabh, 2013

Tata Power
120

100 95.68

80

60 68.53

40

20

0
2008 2009 2010 2011 2012
BSE Sensex TPWR IN Equity

100 74.12
61.38
50 38.90
32.43 23.35
12.82 15.51 4.72
0 -13.62
2008 2009 2010 2011 2012
-50

-100

-150 -152.81

© Saurabh, 2013

JSPL is a Jindal Group company which operates in a promising mix of two business segments- Power &
Steel. It is a leading player in the Steel Industry. The company produces economical and efficient steel
and power through backward integration from its own captive coal and iron-ore mines. JSPL is the one of
the lowest cost producer of sponge iron in India. JSPL sells power on merchant basis, which commands
higher realizations than other power generation companies that are subject to regulated tariffs.

• Steel business is doing well especially its outperformance over
The Plus factor: domestic peers is really commendable..
•Its PLF is one of the best in the Power sector.

• Power venture has disappointed the market analysts off late.
•Delay in environmental clearances is derailing power production
Concerns: from new plants .

© Saurabh, 2013

Hindalco is the flagship company of Aditya Birla group. The Company operates in two segments: aluminium and
copper. is the largest aluminium producer in India and one of the world’s largest aluminium rolling companies. It
is also one of the biggest producers of primary aluminium in Asia. The company has captive bauxite mines, that
source around 70% of its requirements for its 1.5 mtpa (million tonne per annum) alumina refinery, and its 0.54
mtpa smelting capacity. The company also produces copper and its copper smelting capacity is the largest in
Asia. Hindalco’s products include standard and speciality grade aluminas and hydrates, aluminium ingots, billets,
wire rods, flat rolled products, extrusions, foil, alloy wheels copper cathodes, continuous cast copper rods along
with other by-products, including gold, silver and DAP (Di Ammonium Phosphate) fertilisers.

• EBITDA and Net Income growth has been in-line with
market expectations. Net Profit was USD 3 mn against a
loss of USD 12 mn in Q3GFY12.
•Management guide for EBITDA/Ton to improve from USD
The Plus factor: 250/t to 400/t in the next 2-3 years.
• Financials look strong even in weaker periods, this puts
Hindalco in a different league altogether.

• Overall macroeconomic indicators doesn’t look good especially
in the Us and European region.

Concerns: •Top-line growth has declined during last couple of quarters.

© Saurabh, 2013

Hindalco
140
120
100 95.61
80
63.34
60
40
20
0
2008 2009 2010 2011 2012
BSE Sensex HNDL IN Equity

800 744.21

600

400

213.22
200
38.29
10.14 -7.67 18.93
0 -39.87 11.94
-15.38
2008 2009 2010 2011 2012
-77.99
© Saurabh, 2013

Sterlite Industries is a subsidiary of London based Vedanta Resources. It is India’s largest non-ferrous
metals and mining company. Its primary business include Aluminum, Copper, Zinc, Lead and
Commercial Energy.

• With its huge market share in metals space especially
Aluminium, Zinc & Copper, Sterlite is well poised to capitalize on
The Plus factor: rising demand for those metals.
• There is big potential upside if regulatory issues turns favorable.

• Integration with Sesa Goa has rather turned out to be an
expensive proposition.
Concerns:

© Saurabh, 2013

Sterlite Industries
120

100 95.27
80

60
43.75
40

20

0
2008 2009 2010 2011 2012

BSE Sensex STLT IN Equity

Top-line v/s Bottom-line Growth 18 Debt to Total Assets 16.93
40 15.57 15.14 14.71
34.69 16
35.33
30 14 12.88
24.19
12
20 15.87
10
10 5.76 8
1.31
0.48 6
0
4
2008 2009 2010 2011 2012
-10 -4.26 2
-14.41
0
-20 2008 2009 2010 2011 2012
-21.44
© Saurabh, 2013

Constituents Correlation Matrix
BSE ITC IN RIL IN HDFC IN INFO IN ICICIBC IN HDFCB IN LT IN ONGC IN TCS IN SBIN IN HUVR IN TTMT IN BHARTI MM IN BJAUT IN TATA IN SUNP IN COAL IN MSIL IN NTPC IN GAIL IN CIPLA IN WPRO IN DRRD IN BHEL IN HMCL IN TPWR IN JSP IN HNDL IN STLT IN
Sensex Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity IN Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity

BSE Sensex 1.00

ITC IN Equity 0.59 1.00

RIL IN Equity 0.44 -0.38 1.00

HDFC IN Equity 0.89 0.87 0.04 1.00

INFO IN Equity 0.80 0.60 0.07 0.78 1.00

ICICIBC IN Equity 0.96 0.53 0.46 0.84 0.70 1.00

HDFCB IN Equity 0.74 0.97 -0.21 0.94 0.70 0.69 1.00

LT IN Equity 0.89 0.27 0.62 0.66 0.64 0.89 0.47 1.00

ONGC IN Equity 0.86 0.37 0.46 0.69 0.74 0.78 0.54 0.87 1.00

TCS IN Equity 0.73 0.93 -0.25 0.91 0.82 0.66 0.95 0.42 0.53 1.00

SBIN IN Equity 0.88 0.46 0.30 0.76 0.82 0.87 0.63 0.85 0.85 0.64 1.00

HUVR IN Equity 0.36 0.93 -0.49 0.70 0.34 0.31 0.85 0.05 0.17 0.77 0.20 1.00

TTMT IN Equity 0.81 0.87 -0.07 0.93 0.79 0.76 0.92 0.52 0.59 0.94 0.73 0.70 1.00

BHARTI IN Equity -0.02 -0.39 0.44 -0.16 -0.29 0.03 -0.35 0.10 -0.02 -0.36 -0.16 -0.41 -0.32 1.00

MM IN Equity 0.80 0.89 -0.13 0.94 0.84 0.73 0.95 0.57 0.64 0.95 0.72 0.72 0.90 -0.32 1.00

BJAUT IN Equity 0.79 0.92 -0.13 0.94 0.78 0.78 0.96 0.53 0.58 0.96 0.68 0.75 0.93 -0.28 0.97 1.00

TATA IN Equity 0.65 -0.10 0.84 0.31 0.32 0.65 0.05 0.69 0.50 0.09 0.47 -0.29 0.25 0.38 0.13 0.20 1.00

SUNP IN Equity 0.55 0.98 -0.40 0.84 0.58 0.49 0.94 0.22 0.32 0.92 0.41 0.92 0.86 -0.39 0.87 0.90 -0.10 1.00

COAL IN Equity 0.13 0.26 -0.04 0.24 -0.34 0.28 0.30 0.25 -0.07 0.05 -0.02 0.09 -0.15 0.20 0.13 0.00 0.02 0.16 1.00

MSIL IN Equity 0.74 0.51 0.16 0.67 0.76 0.66 0.64 0.69 0.77 0.62 0.76 0.35 0.64 -0.34 0.72 0.62 0.22 0.44 0.09 1.00

NTPC IN Equity 0.25 -0.44 0.71 -0.12 0.06 0.28 -0.27 0.50 0.46 -0.32 0.30 -0.51 -0.21 0.23 -0.17 -0.23 0.44 -0.51 0.01 0.33 1.00

GAIL IN Equity 0.81 0.48 0.20 0.73 0.93 0.74 0.62 0.76 0.82 0.70 0.87 0.19 0.67 -0.22 0.78 0.69 0.37 0.44 0.02 0.78 0.25 1.00

CIPLA IN Equity 0.73 0.78 -0.09 0.82 0.83 0.63 0.85 0.54 0.65 0.85 0.68 0.65 0.81 -0.51 0.89 0.85 0.08 0.76 0.00 0.82 -0.04 0.78 1.00

WPRO IN Equity 0.87 0.62 0.16 0.82 0.96 0.77 0.74 0.69 0.77 0.83 0.83 0.37 0.84 -0.26 0.84 0.78 0.44 0.60 -0.26 0.80 0.09 0.89 0.84 1.00

DRRD IN Equity 0.75 0.89 -0.21 0.91 0.88 0.66 0.93 0.49 0.60 0.97 0.71 0.70 0.92 -0.41 0.97 0.97 0.09 0.87 -0.14 0.70 -0.24 0.79 0.90 0.87 1.00

BHEL IN Equity 0.38 -0.41 0.70 -0.02 0.32 0.38 -0.21 0.66 0.57 -0.19 0.52 -0.61 -0.10 0.17 -0.03 -0.12 0.55 -0.47 -0.01 0.43 0.83 0.52 0.09 0.31 -0.06 1.00

HMCL IN Equity 0.61 0.75 -0.24 0.74 0.82 0.49 0.80 0.42 0.60 0.82 0.61 0.58 0.72 -0.43 0.86 0.87 -0.07 0.70 0.04 0.78 -0.07 0.77 0.86 0.79 0.88 0.08 1.00

TPWR IN Equity 0.74 -0.04 0.80 0.38 0.51 0.73 0.16 0.86 0.74 0.16 0.68 -0.26 0.29 0.20 0.28 0.24 0.83 -0.09 0.13 0.60 0.69 0.62 0.34 0.59 0.23 0.80 0.22 1.00

JSP IN Equity 0.80 0.30 0.38 0.60 0.87 0.72 0.47 0.77 0.82 0.55 0.84 0.03 0.57 -0.14 0.63 0.54 0.52 0.25 -0.12 0.82 0.44 0.91 0.69 0.89 0.64 0.66 0.69 0.78 1.00

HNDL IN Equity 0.83 0.22 0.55 0.60 0.74 0.81 0.38 0.80 0.70 0.49 0.81 -0.07 0.59 0.10 0.53 0.51 0.81 0.22 -0.09 0.50 0.30 0.77 0.46 0.77 0.52 0.56 0.34 0.79 0.79 1.00

STLT IN Equity 0.55 -0.28 0.90 0.14 0.29 0.55 -0.10 0.71 0.55 -0.08 0.46 -0.46 0.05 0.31 0.03 -0.01 0.88 -0.32 0.11 0.39 0.72 0.41 0.10 0.39 -0.03 0.80 -0.02 0.93 0.63 0.69 1.00

© Saurabh, 2013

Disclaimer - Due diligence has been exercised in checking the authenticity of all figures mentioned in this publication. But that does not
guarantee its accuracy or completeness. Also bear in mind that some analysis mentioned in the above is solely intended for illustration
purpose. This does not constitute a recommendation of the suitability of any investment strategy for a particular investor.
Further any review, retransmission, dissemination, or taking of any action in reliance upon this information by persons or entities other than
the intended recipient(s) is prohibited.

28-Feb-2013, © Saurabh 2013 (Saurabh Kumar| kaashyap.saurabh@gmail.com|+91-8374109195)

© Saurabh, 2013

India Market Reflections (2008-12)

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