SECTOR UPDATES 16th November – 22nd November Finnacle Investments 11/23/2014

November 23, 2014

1

Banking and Financial Services Sector Update

(Sector Analysts: Jyoti Gupta, Ankita Kumar, Akshat Kulshrestha)

Market Performance:

The banking sector performed well last week. All the major private and PSU banks closed on a

positive note. Bank Nifty closed at 18056 after increasing 2.33% on Friday.

STOCK PRICE % CHANGE

Axis Bank 476.95 2.21

Bank of Baroda 1,038.65 1.28

Bank of India 276.20 1.40

Canara Bank 396.15 0.83

SBI 305.50 2.83

HDFC Bank 932.85 1.60

ICICI Bank 1,730.70 2.53

PNB 977.30 2.60

MAJOR NEWS:

Strict RBI norms create tough situations for NBFCs

On Monday, RBI announced new norms regarding the regulatory arbitrage. The advantage that

NBFCs had will be over by 2018. Now, NBFCs will have to provision for bad loans in line with what

banks were doing. Banks declared an account as non-performing if the party failed to pay the interest

or principle for 90 days. Whereas, NBFCs declared such parties as NPA after the payment was due

for 6-12 months. Also, RBI has directed NBFCs not to take any public deposit recently.

ING Vysya and Kotak Mahindra merger

Kotak Mahindra is all set to buy ING Vysya bank under an all stock $2,4 billion deal. However, the

management of Kotak is facing a challenge in trying to integrate the cultures of the two banks, which

are quite different. This step may provide Kotak with an opportunity to lend to small and medium

enterprises, but that has some issues as Kotak will now have to deal with less sophisticated clientele,

which is quite contrary to what Kotak did till now. Even after all this, Uday Kotak, VC and MD of Kotak

Mahindra Bank is confident that the merger will go smooth and without any issues.

Nabard sets aside Rs 2000 crore for UP for the current fiscal

NABARD has committed a sum of Rs 2000 crore for the development of UP. A sum of around 605

crores has been allocated for the irrigation project in Gorakhpur. In addition to this a sum of Rs 260

crores has been allocated for developing cold and dry storage facilities in the state.

November 23, 2014

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CCD owner buys stake in Lakshmi Vilas Bank

The owner of the CCD chain, VG Siddhartha had recently bought 4% stake in Lakshmi Vilas Bank for

Rs 65 crores

References:

http://www.business-standard.com/article/opinion/rbi-norms-puts-nbfcs-survival-in-question-

114111200109_1.html

http://www.moneycontrol.com/terminal/?index=23

http://economictimes.indiatimes.com/industry/banking/finance/finance/cafe-coffee-day-

owner-vg-siddhartha-buys-4-per-cent-stake-in-lakshmi-vilas-bank-for-rs-65-

crore/articleshow/45236507.cms

November 23, 2014

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FMCG Services Sector Update

(Sector Analysts: Amrit Pal Singh and Kirti Chablani)

Weekly Stock price performance of key companies:

STOCK PRICE(in INR) CHANGE

ITC 376.15 +2.12%

Dabur 230.65 -0.62%

Marico 323.05 -1.88%

Colgate 1893.20 -4.75%

Nestle 6336.40 +0.06%

Britannia to e-launch its premium cookie , Good Day Chunkies

Britannia is going to test the e-commerce route for the first time with its exclusive tie up with

Amazon for the launch of its super premium Chocolate chip cookie range Good Day

Chunkies. Good Day Chunkies, the company's most expensive product at Rs 50 for six

cookies, will be sold for the first few weeks (beginning next week) exclusively on Amazon.in.

The product won't carry a delivery charge and will be part of Amazon's gourmet & specialty

foods store.

Urban market sees a revival in demand of white goods and FMCG

FMCG value consumption in urban markets was up 7 per cent in the July-September

2014 period, against 2 per cent in the corresponding year-ago period, according to IMRB

data, although rural demand didn't register any growth. Latest data from the white goods

industry tracker GfK reveals that Indian appliances like microwave ovens and

refrigerators are logging double digit volume growth this fiscal after flat sales in the past

two years. Companies are also optimistic that this sentiment will eventually trickle down to the

rural segment as well, which continues to be a lag because of erratic and inadequate

monsoon this year.

References

http://economictimes.indiatimes.com/articleshow/45227000.cms

http://articles.economictimes.indiatimes.com/2014-11-21/news/56340082_1_refrigerators-urban-

markets-godrej-appliances

November 23, 2014

4

Pharma Sector Update

(Sector Analysis: Kanika Singh, Neha Kumar, Ravi Karanam)

New bulk drug policy by government set to stimulate growth in pharma sector

Government is all set to bring out a new pharma policy for bulk drugs in 10-15 days that would help

the sector grow multiple times over the next 5 years. The new industry friendly bulk drug pharma

policy will will have various concessions for all stakeholders of the pharma sector so that it is put on

the growth trajectory. Through this policy, the pharmaceutical sector which is Rs 1.8 lakh crore in size

currently is likely to grow by 4-5 times in next 5-7 years through phenomenal increase in its domestic

production and exports.

Ranbaxy Lab files a suit on US FDA for revoking drug approvals, court turns down its

request to block the launch of rival generic drugs

Ranbaxy Laboratories Ltd sued US Food and Drug Administration (FDA) for revoking approvals

granted to the firm to launch copies of two drugs which include AstraZeneca Plc's heartburn pill

Nexium, saying it had overstepped its jurisdiction by doing so. The US court, however turned down

Ranbaxy's request to block the launch of generic version of Valcyte by Dr. Reddy's Laboratories and

Endo International, who were given the right to exclusively sell the generic versions for the first six-

months after revoking the rights from Ranbaxy.

Global expenditure on medicines to touch $1.3 trillion by 2018

IMS Institute for Healthcare Information (Mumbai) has estimated that international spending on drugs

is likely to touch US$ 1.3 trillion by 2018 with a growth of 30 per cent over the 2013 level owing to

introduction of novel specialty medicines and improved accessibility for patients with minor impacts

from patent expiries in developed markets. The growth will be driven by rising population, an aging

population and improved access in pharma emerging markets.

Sun Pharma recalls bottles of anti-depressant drug in US on account of failure to

meet the dissolution specification

Sun Pharma initiated a recall of 68194 bottles of its Venlafaxine Hydrochloride Extended-Release

37.5 mg tablets manufactured at its Halol plant for failing to meet dissolution specification. The drug is

used to treat major depressive disorder and has been recalled. The recall has been classified as a

Class- II recall defined by the FDA as a situation in which use of or exposure to a violative product

may cause temporary or medically reversible adverse health consequences or where the probability

of serious adverse health consequence is remote.

Pfizer signs a $850 million cancer drug deal with Germany's Merck KGaA

In a major cancer drug deal, Merck will get an upfront payment of $850 million from the US drugmaker

for sharing rights to develop its experimental immunotherapy drug with the Pfizer. In addition, the

company is also eligible for up to $2 billion in payments based on the medicine's future success.

Merck's immunotherapy drug is a part of class of drugs known as anti-PD-L1 therapies which work by

November 23, 2014

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blocking a tumor's ability to evade the immune system's defences. Such immune-boosting medicines

are the hottest area of cancer research.

Rise in chronic illness offers huge growth opportunities for pharma market

The Indian pharma industry has witnessed the highest volume growth in anti-diabetic medicines in the

last five-years followed by medicines for treating semi-chronic ailments in urology and dermatology.

According to AIOCD (All India Organization of Chemists and Druggists), the Indian pharma market

grew at a CAGR of 3.3% in terms of volume in the past five-years while the medicines for combating

diabetes, urology and dermatology ailments grew at double the industry growth rate. The trend is

expected to sustain, owing to the increased chronic lifestyle disorders.

Stock Recommendations

The below stock recommendations are based on the comparison of the Bloomberg estimated Median Target Price and current price of the stocks.

Stock

Target Price(INR) - 12 month period

Current Price(INR) Recommendation

SUN PHARMACEUTICAL INDUS 980 841 BUY

DR. REDDY'S LABORATORIES 3453 3530 SELL/HOLD

RANBAXY LABORATORIES LTD 698 617 BUY

CIPLA LTD 631 627 BUY

LUPIN LTD 1526 1463 BUY

GLENMARK PHARMACEUTICALS LTD 790 819 SELL/HOLD

CADILA HEALTHCARE LTD 1519 1563 SELL/HOLD

BIOCON LTD 512 457 BUY

TORRENT PHARMACEUTICALS LTD 1023.5 1004 BUY

References

http://www.pharmabiz.com/NewsDetails.aspx?aid=85235&sid=2

http://www.ft.com/intl/cms/s/0/b126fbfa-6fc2-11e4-a0c4-00144feabdc0.html#axzz3JnGKZe5O

http://profit.ndtv.com/news/industries/article-government-to-rollout-bulk-drug-pharma-policy-within-15-days-700580

http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/sun-pharma-recalls-68194-bottles-of-anti-depression-drug-in-us/articleshow/45177996.cms

November 23, 2014

6

Power Sector Update

(Sector Analysis: Anshu Mishra and Ankit Bacchuka)

Major News:

India Plans solar army, to train 50000 people – They will be trained in areas related to solar

power by organizations like industrial training institutes (ITIs). The solar army will help the government

to achieve the revised target of 100000 MW from 20000 MW by 2022. For this estimated investment

is of around Rs.6.5 trillion over five years.

Private producers are seeking 10 per cent additional debt exposure by banks to the

power sector to fund projects stranded by lack of fuel. The Association of power producers suggested

if a project was stranded because of fuel, banks be allowed to classify these assets as standard, defer

interest and capitalize these, reduce the interest rate to the State Bank of India’s base rate till the

plants were operational and extend the loan tenure suitably.

Sesa Sterlite (2400 MW) and GMR Kamalanga (3*350 MW) has commissioned their

power projects in Odhisa, other Independent power producers like Jindal India Thermal Power Ltd

(JITPL), Ind-Barath Energy Utkal Ltd and Monnet Power have also made substantial investments and

are in advanced stage of commissioning their projects.

Bharat Heavy Electricals Ltd has commissioned the second module of ONGC gas-

based power plant in Tripura. The plant has 2 modules of 363.3 mw each. Across the country, it

has build 9 modules steam power turbine to produce electricity in combined cycle mode.

The sixth 660 Mw unit of Sasan ultra mega power project with total capacity of 3,960 Mw

will be fully operational before January 2015. For now 3300 MW capacity of the project is operational

NTPC has decided to invest in solar energy power projects in Odhisa, it has signed an

MoUs with the Andhra Pradesh government for generation of 1,000 Mw solar energy and with the

Madhya Pradesh government for another 750 Mw. Nationwide, NTPC has been mandated to

generate 3,000 Mw solar power.

The Union Cabinet today gave its approval for signing of "SAARC Framework

Agreement for Energy Cooperation (Electricity)" among the SAARC Member States during

the forthcoming 18th SAARC Summit scheduled to be held at Kathmandu, Nepal on 26-27 November,

2014. The Agreement is expected to improve the power availability in the entire SAARC region.

The prices in spot market continue to decline to as low as Rs. 2.17 per unit but still big

cities are facing power shortage issues in the range of 3,000 Mw to 4,500 Mw. The cost of power is

usually in the range of Rs 3.8-5 per unit. The difference is demand and supply is caused because of

lack of proper transmission system and planning of power purchase.

November 23, 2014

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References-

http://www.kseboa.org/news/india-plans-solar-army-to-train-50000-people-19113531.html

http://www.business-standard.com/article/companies/private-power-producers-ask-rbi-for-bailout-114112100888_1.html

http://www.business-standard.com/article/companies/ipps-invest-rs-33-000-cr-on-their-projects-in-odisha-114112200531_1.html

November 23, 2014

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Oil and Gas Sector Update

(Sector Analysis: Ashwin Jain, Mili Handa and Piyush Sethi)

Major News:

DBTL compliance in Gujarat:

IOC has set a target of 90% cash transfer compliance among its consumers by mid- January 2015. This modified Direct Benefit Transfer (DBTL) scheme is set to launch on 1st January, 2015. Last time this scheme was launched in 2013 but at that it mandatorily required consumers to have Aadhar card for availing LPG subsidy. Later it was modified under which consumers can receive cash directly into their bank account without producing Aadhar card. Around 6.5 million LPG domestic consumers are there in Gujarat between three PSUs – IOC, HPCL and BPCL.

Brent crude oil fell beyond 78$ a barrel:

This dip has been because of weak economic data of China and Europe and US crude inventories

high, resulting in more supply but not much demand.

Gas supply from Turkmenistan:

As part of TAPI gasline project, a 1800 km pipeline is being set up which will be exporting 33 million

bcm of natural gas from Turkmenistan via Pakistan and Afghanistan to India for over 30 years. They

are in a plan of expanding their activities in upstream and downstream facilities as well. Recently India

has set up a company jointly with Turkmenistan, Afghanistan and Pakistan which will commission the

TAPI project.

Reduction in Import Bill by Rs 10000 Cr:

Government is in a plan to import fuel from middle-east countries at better rates which will further lead

to reduction in import bill by at least Rs 10000 Cr. At this moment OPEC is battling up for market

share and is competing with the new energy suppliers. As per oil industry officials country will save Rs

9000 Cr a year for every 1$ reduction in price.

References-

http://www.business-standard.com/article/companies/ioc-aims-at-90-dbtl-compliance-in-gujarat-

by-mid-jan-114112100859_1.html

http://www.business-standard.com/article/markets/crude-oil-slips-below-78-a-barrel-

114112001432_1.html

http://www.business-standard.com/article/economy-policy/oil-ministry-seeks-gas-assurance-from-

turkmenistan-114111900773_1.html

November 23, 2014

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http://articles.economictimes.indiatimes.com/2014-11-18/news/56221832_1_oil-minister-

dharmendra-pradhan-tapi-pipeline-project-india-and-pakistan

http://www.etintelligence.com/etig_root/sections/Sectors/OilGas/news/2014/NOV/SEc-Oil-Gas-181114.pdf

November 23, 2014

10

Telecom and IT Sector Update

(Sector Analysis: Bharat Dasaka, Melvin Matthew, Arpita Verma)

Major News:

Acquisitions

Tech Mahindra in plans to buy Light Bridge Communications

Tech Mahindra, Part of Mahindra Group Conglomerate, Is planning to buy US based Light Bridge

Communications. Light Bridge Communications is a network services operator which will be adding

around 30 clients to the Tech Mahindra’s clientele. 45 % of Tech Mahindra’s revenue comes from

telecommunication business accounts. Acquiring Light Bridge communications would set the total

Tech Mahindra’s employee count to over 1,00,000. The Deal is estimated at $240 Million Dollars.

Tech Mahindra has been aggressively acquiring companies in the past as well with acquisitions such

as Hutchison Global Services, vCustomer BPO, Type Approval Lab. Tech Mahindra is trying to

establish firm ground and global foot print in telecommunication business.

Partnership

Infosys enters into partnership with Dream Works

Infosys has entered into an engineering pact with dream works to help DreamWorks develop its

technologies. Dream Works is an American film production company which is into films, animation

and video games. Infosys is set to funnel its talent pool across various technologies such as Cloud,

big data and java. These will in turn provide technological solutions to DreamWorks. The financial

details of this partnership is yet to be disclosed.

TCS faces setback in its new software system for emigration

Tata consultancy services has faced a setback when the recruitment agents asked MOAI(Ministry of

Overseas Indian Affairs) to roll back the new emigration software system developed by TCS to the old

system . Apparently, the new system was delaying the emigration clearance system leading to huge

blockage of applications. To quote an example, More than one lakh job seekers to the Gulf are

stranded in Mumbai and different parts of the country due to the implementation of the TCS eMigrate

system.

November 23, 2014

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What’s Trending in IT?

A new software has been developed by scientists which can analyse the life cycle, carbon

footprint and water foot print for grape, wine and sugar beet production

A Computer model is in place which shows how CO2 traverses across the globe. The model

helps identify the concentration of CO2 with respect to growth cycle of plants and trees and

climatic changes

References-

http://businesstoday.intoday.in/story/infosys-dreamworks-animation-sign-engineering-

pact/1/212072.html

http://www.thehindubusinessline.com/features/smartbuy/recruitment-agents-want-tcs-

emigration-software-withdrawn/article6618733.ece

http://www.sciencedaily.com/releases/2014/11/141118072648.htm

http://www.sciencedaily.com/releases/2014/11/141117174526.htm

November 23, 2014

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Metals & Mining and Real Estate Sector Update

(Sector Analysis: Arihanth Jain, Manish Rathore and Priyanka Mohanty)

Metals and Mining:

Stock price performance of key companies

Name Change % Related news

Tata steel -2.9% TATA steel receives $750m in commitments in an aim to borrow $5.6 billion.

Sesa Sterlite -0.39% Sesa Sterlite is going to take up Rs 2,500 cr TN facility expansion

Coal India limited -2.47% S Bhattacharya set to take on as CMD of CIL.

NMDC -5.5% NMDC and Odisha mining steel plant in keonjhar.

New legal/regulatory environment

Inter ministerial meet :An inter-ministerial meet is scheduled for next week to discuss the issues

related to linkages of coal sector to other sectors such as power.The power ministry also sought

suggestions from various ministeries.

Coal and CBM environment: Indian government is ready to align coal mining and gas exploration

legislation to facilitate the exploration of coal and coal bed methane(CBD) by both domestic and

foreign investors.

Estimates for the sector

Mining index: The index of mineral production of mining and quarrying sector for September grew

0.7 per cent while the total value of the mineral output was estimated at Rs 17,221 crore.

Other news

Global steel price: Coupled with increased exports from China led to CIS export prices witnessing

a bigger fall compared to domestic prices.It will also likely make Indian prices to follow the same

route.

Foreign firms to mine: India will likely allow locally registered foreign firms to mine and sell

coal.This will end the chronic shortage that cripples power plants.