business

Punjab National + Union Bank Asset Quality Concerns Surface

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PNB’s profits were up 0.5% yoy (+9% qoq, in-line with estimates) and were supported by its high NIMs (expands further), robust loan growth (well above industry), strong deposit franchise and some trading gains in 3Q. However, delinquencies increased substantially (mainly in the agricultural segment) and coverage levels dropped meaningfully – suggests caution given its large (16% of book) agri portfolio.

PNB’s margins expanded more than estimated to 384bps, driven by liability repricing. NPL uptick, lower coverage raises concerns on sustainability of earnings. Expect an EPS of Rs 108 and Rs 124.5 for FY10 and FY11 respectively.

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Sterlite Industries – Zinc + Power boost Q3 bottomline

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Sterlite Industries consolidated PAT (adj) at Rs9.2bn in 3QFY10 rose 73% YoY (~7% below our estimates) gaining from an 83-87% jump in zinc-lead LME prices, better copper TC/RC margins and higher sales of power. Operating margin was 25% in 3QFY10 vs. 11% in 3QFY09 and 22% in 2QFY10.

Standalone (copper) PAT was Rs2.3bn. Operating profit rose 36% to Rs1.4bn and the operating margin was 3.8%. OPM was 61% vs. 26% last year due to 1) jump in zinc-lead prices; 2) 30% surge in lead volumes; 3) sale of 41,000t of zinc concentrate; 4) silver production up 44% YoY.

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Pantaloon Retail – Strong Operational Performance

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Pantaloon Retail reported 25%, 29% and 51% yoy growth in revenues, operating profit and adjusted net profit, respectively, in Q2F2010. PRIL
continues to report parent only numbers with no disclosures on subsidiary performance. Lack of transparency for consolidated results remains our key concern.

Although the revenue growth reported by the company in the value and lifestyle segments is 14% and 25%, respectively, overall revenue growth reported by the company is 25%. We believe that a

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Idea Cellular – Pricing Pressure means early consolidation

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The management of Idea Cellular in its conference call has indicated that any further pricing pressure in near-term would lead to faster than expected consolidation.

Idea stated that revenue growth from recharge fee (due to migration of existing subs to lower price points) is lower than average revenue growth and hence was not significant contributor to 3Q revenue.

Idea mgmt expects to benefit from economies of scale/lower access

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JSW Energy Trading just 2.5% above IPO Price – Powerless Listing

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JSW Energy which raised money in the capital market last month listed on the bourses today and is trading at Rs 102.50, just 2% above the IPO issue price of Rs 100. Experts on Dalal Street had AVOIDED the issue since the price range during the IPO was Rs 100 to Rs 115 and had the management issued it at the upper band like all others did, then it would have been trading at 10% discount.

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Potential for a reintroduction of Re1 cigarette – ITC

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According to ITC, the vacuum created by the exit of the popular low priced micros and plain nonfilter cigarettes (in the wake of the heavy imposition of excise duties last year) has been occupied by duty-evaded illegal regular size filter cigarettes which are sold at Re1 per stick.

Mr. Kurush Grant Divisional Chief Executive, ITC said,

these low priced tax-evaded illegal cigarettes account for about 12-13% of cigarette industry today (~5% in 1HCY08).

Industry has represented to government to consider the introduction of

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