SECTOR UPDATES 1st November – 8th November Finnacle Investments 11/8/2014

November 8, 2014

1

Banking and Financial Services Sector Update

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

Market Performance:

BSE sensex touched 28000 on Wednesday. The quantitative easing by Japan was a big driver

for this rally. Bank stocks were the top contributors to the surge. Yes bank, HDFC bank, SBI,

Kotak Mahindra bank, ICICI bank and Axis bank were among the most gainers.

Banking and financing sector has seen an increased investment by MFs. ICICI bank is the hot

favourite for the equity funds along with HDFC and SBI.

STOCK PRICE % CHANGE

ICICI Bank 1625.45 3.7

HDFC Bank 912.2 -1.45

Axis Bank 468.85 6.86

Yes Bank 684.15 -1.15

SBI Bank 2742.35 3.77

MAJOR NEWS:

Bank of India reports 26% increase in net profit

BOI has reported a 26% increase in net profit at Rs 786 crores for the quarter ending

September. The increase was due to reversal of provisions, up gradation of accounts and

expansion in interest income. The net interest income rose by 20% from Rs 2527 crores to Rs

3031 crores and non interest income fell to Rs 1006 crores from Rs 1100 crores.

Axis bank and South Korean Nonghyup bank sign a MOU

Private sector lender Axis Bank has signed a pact with NongHyup Bank (NH Bank) to enhance

cooperation in treasury, trade and other business between India and South Korea.

Chinese Payment Company China UnionPay to start operating in India

China UnionPay (CUP), the payments company which was created to rival Visa and

MasterCard in the Middle Kingdom, is setting up shop in India. The Reserve Bank

of India is also considering a bilateral arrangement whereby CUP cards are accepted in the

country and India's RuPay cards accepted in China.

November 8, 2014

2

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 355.65 +1.51%

Dabur 227.70 +6.70%

Marico 307.15 +3.78%

Colgate 1775.60 +4.76%

Nestle 6411.95 +7.41%

ITC gets clearance to setup its second five start hotel in Hyderabad, also likely to

set-up food processing park in Telangana

ITC has received all the required government clearances to set up ITC Kohinoor, a five star hotel

with an investment of INR 700 Crores in Hyderbad. The company is in talks with Telanghana

government to decide the potential location for setting up a food processing plant. Earlier, ITC

had already announced the expansion of its paper manufacturing plant in the state with an

investment of INR 3000 Crores.

FMCG companies eye close to 3k crore buyouts

M&A action has been picking up in Indian FMCG sector with several new deals being planned

out. Emami and Marico are in talks to acquire ayurvedic hair oil brand Kesh King. Kesh King has

one of the largest profit margins in the industry. The deal has been currently valued at over INR

2000 Crores . Deloitte has been the advisory for the deal. Wipro and a few private equity firms

are in talks to aquire Indulekha, another ayurvedic hair oil and soap brand, which belongs to

Kerala-based Mosons Extractions. The company has mandated investment bank Anand Rathi to

advise on a sale with an asking valuation of more than Rs 600 crore.

Dabur India launches premium offering of its brand Chyawanprash – Ratnaprash

Dabur India has launched premium offering Ratnaprash which has been targeted at adults. Ajay

Parihar , Category head – Health supplements at Dabur India said it has been designed “to give

the power of youth to those who feel that the stress of day-to-day living leaves them drained of

energy.” . Ratnaprash is available in two sizes: 450g (for Rs. 285) and 900g (forRs. 550).

November 8, 2014

3

References-

http://www.thehindubusinessline.com/companies/dabur-india-launches-premium-offering-

ratnaprash/article6563768.ece

http://www.business-standard.com/article/companies/itc-to-set-up-second-5-star-hotel-in-hyd-to-

invest-rs-700-cr-114110601522_1.html

http://timesofindia.indiatimes.com/business/india-business/FMCG-companies-eye-close-to-Rs-3k-cr-

buyouts/articleshow/45041488.cms

November 8, 2014

4

Pharma Sector Update

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

USFDA revokes Ranbaxy's 180-day exclusivity on sale of two generic drugs in US,

grants approval to Dr. Reddy for one of them

The USFDA has reverted its tentative approvals granting Ranbaxy six-months sales exclusivity of

the generic versions of Roche's anti-viral drug Valcyte and AstraZeneca's heartburn pill Nexium.

Ranbaxy had first-to-file status on both these drugs and it was expected to earn USD 60 million

and USD 180 million from the generic versions of Valcyte and Nexium respectively in the

exclusive sale period. The USFDA said that its original decision of granting tentative approvals

were erroneous because of the compliance status of the facilities mentioned in the ANDAs

(Abbreviated New Drug Application) filed by Ranbaxy, as a result of which in FDA's view,

Ranbaxy had forfeited its eligibility for 180-day exclusivity for its ANDA for Valcyte. The news

could hit the shares of Ranbaxy and Sun Pharma, already under CCI's scanner for the $4 billion

M&A deal, the decision for which is expected this month. Earlier in the week,Ranbaxy had

received approval from the USFDA to manufacture and market Fenofibrate capsules, used for

lowering high cholesterol and triglyceride levels in the blood.

The revocation of Ranbaxy's 180-day exclusivity on sale has turned out to be a positive news for

Dr. Reddy's Laboratories which has been granted the final approval by USFDA to make cheaper

versions of Valcyte. The company is expected to launch the drug shortly in the US market.

ROC questions Plethico Pharmaceuticals over complaints from investors on the

fixed deposit schemes

The Registrar of Companies (ROC),Gwalior is inspecting the books of accounts of the Indore-

based Plethico Pharmaceuticals, following hundreds of complaints received by the investor

grievance cell of the corporate affairs ministry for almost a year. The investors claimed that the

company had not returned their money despite the maturity of the fixed deposit scheme. The

number of investors and the amount of money raised will be clear after the initial probe is

complete. A statement from the company said the company is currently facing temporary liquidity

issues which are in the process of being corrected and normalized shortly and that the fixed

deposit holders have been explained the position and the course of action by the company.

IPCA Labs reported 15% intra-day loss following reports of stock downgrade by

Credit Suisse

On Wednesday, shares of IPCA Labs closed with a sharp loss of 10.5% on the BSE dipping its

market value by Rs 994.88 crores to Rs.8432.12 crores. The shares took a hit after reports of

downgrading of the stock from 'neutral' to 'under-perform' citing negative observations from the

USFDA in its Form-483 for its Indore SEZ. Out of the six observations made in the Form-483,

two are being considered critical pertaining to the practice of conducting trial/unofficial samples

and overwriting/deleting raw data files, as similar observations resulted in adverse FDA action at

Sun's Karkhadi unit and Wockhardt's Waluj unit.

November 8, 2014

5

Glenmark Generics and Lupin get USFDA approval for ulcer and arthritis treatment drug respectively

Glenmark received the US health regulator's final Abbreviated New Drug Approval to market Omeprazole Delayed Release Capsules, their generic version of AstraZeneca's Prilosec used for treatment of ulcer. In similar news, Lupin said it had received final approval from the USFDA to market Celecoxib capsules, their generic version of GD Searle LLC's Celebrex capsules, used for treatment of arthritis in the US.

Government panel recommends waiving off clinical trials for two cancer drugs

The Drug Technical Advisory Committee, headed by Mr. Jagdish Prasad, Director General of

Health Services has recommended waiving off of clinical trials of two medicines Aflibercept and

Trastuzumab emtansine used in the treatment of cancer considering that the drugs have been

tested in various other countries and have been found to be effective. The law allows waiver of

clinical trial in Indian population, only for drugs approved outside India, if there is national

emergency, extreme urgency, epidemic, orphan drug or a disease for which there is no therapy.

Many health experts feel the proposed clinical trial waiver to the two cancer drugs is in violation

of rules and can have serious implications for patients since it does not even qualify for

exemption as there are other alternative therapies available. According to Mr. Amit Sengupta, co-

convenor of Jan Swasthya Abhiyan, a public health advocacy movement, generally clinical trials

in India do not come up with any new data. On the contrary, trials costs a lot of money which the

consumers have to pay later and also cause a delay in the entry of crucial medicines.

November 8, 2014

6

Power Sector Update

(Sector Analysis: Anshu Mishra and Ankit Bacchuka)

Major News:

Speaking at the India Economic Summit, Power Minister Piyush Goyal said that India's

total power consumption would double to 2 trillion units by 2019 and the government

hopes to attract USD 250 billion investments within 4-5 years to give a boost to

the energy sector and provide electricity to all. Coal India is expected to double its

production to around one billion tones by 2019.

India has 21,211 Mw of gas-based power capacity commissioned and 5,900 Mw is likely

to be commissioned soon. Out of this 16,107 Mw is stranded including 6,997 Mw based

on KG-D6 allocation and 3,761 Mw commissioned without gas allocation. To help in

starting the operations of these stranded gas-based power plants the power ministry is

planning to pool the existing limited supply of domestic gas with imported

regasified liquefied petroleum gas. This plan will help in generating additional 39,000

million units of power.

The government will begin acquiring 18 mines, spread over 13,560 hectares, and

are part of the 214 captive blocks cancelled by the Supreme Court. The auction of these

mines will start in the first phase, which is likely to take place by March 2015. Total 52

mines were indentified for auction in the first phase.

Suzlon Energy, put into operation the world's tallest hybrid wind generator turbine

(120-metre) in Kutch. The turbine will generate 12- 15% more energy than a regular

hybrid turbine (about 80m)

Coal India's unions are planning to go on strike on November 24 to protest the

government's decision to privatise the sector to enact the Coal Mines Ordinance 2014.

The Russian engineering, procurement and construction company TPE demands more

$248 million from NTPC delaying the 1,980 mw Barh power project in Bihar.

November 8, 2014

7

Upcoming projects

India (Satluj Jal Vidyut Nigam Ltd, India) and Nepal (Investment Board Nepal) are

holding negotiation for the 900 MW Arun-III project, a second Project Development

Agreement (PDA) to generate hydroelectric power in the Himalayan nation. The

format of the PDA will be same as the agreement between GMR Consortium of India

and Nepalese authorities in September for the900 MW Upper Karnali project.

L&T secured orders valued at Rs 1,164 crore from Madhyanchal Vidyut Vitaran

Nigam under the R-APDRP scheme (Restructured Accelerated Power Development

and Reforms Program) and the west Bengal State Electricity Distribution Company

(WBSEDC).

NHPC is planning to build India’s biggest hydro power plant (3000 MW) in Arunachal

Pradesh. The Dibang hydel power project will be executed in partnership with one of

the PSUs and the state government at an investment of Rs. 15000 crore.

References-

http://www.kseboa.org/news/goyal-eyes-rs-15-lakhs-crore-investment-in-power-sector-07113509.html

http://www.kseboa.org/news/gas-pooling-proposal-on-petroleum-ministry-table-07113511.html

http://economictimes.indiatimes.com/industry/energy/power/russias-tpe-raises-fresh-demand-of-248-

million-from-ntpc/articleshow/45044070.cms

http://www.kseboa.org/news/suzlon-commissions-worlds-tallest-hybrid-wind-tower-in-kutch-

07113508.html

http://www.kseboa.org/news/denationalisation-coal-strike-on-nov-24-05113502.html

http://www.kseboa.org/news/india-nepal-hold-negotiations-for-900-mw-hydro-project-06113505.html

http://www.business-standard.com/article/pti-stories/larsen-toubro-bagged-orders-worth-rs-1-576-

crore-in-october-114110501014_1.html

http://www.kseboa.org/news/14000-hectares-of-land-bank-with-coal-blocks-to-be-auctioned-

07113507.html

http://economictimes.indiatimes.com/industry/energy/power/nhpc-to-build-indias-largest-hydel-power-

plant-in-arunachal-pradesh/articleshow/45017103.cms

November 8, 2014

8

Oil and Gas Sector Update

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

Major News:

Government to sell stake in ONGC

As part of its disinvestment plans to raise $9.5 billion, the government, which has decided to sell

a 5% stake in ONGC worth $2.8 billion, would be doing so by first week of December. The offer

is open to foreign players as well.

Pradhan seeks a uniform taxation on petroleum products

Petroleum Minister, Dharmendra Pradhan, plans to write to CMs of all states to bring about a

uniformity in VAT on oil products. This will ensure, the benefits of rate cuts, which have been a

little over Rs 5 on both petrol and diesel, trickles down to the masses.

Oil prices touch 4 year low

Brent crude dipped to $82.63, its lowest since October,2010. The market is shaken by reports

that Saudi Arabia has cut prices to be competitive in US

References-

https://in.finance.yahoo.com/news/india-plans-2-8-billion-110722393.html

http://www.dnaindia.com/money/report-subsidy-on-lpg-to-stay-petroleum-minister-dharmendra-

pradhan-2031827

http://timesofindia.indiatimes.com/business/international-business/Oil-prices-hit-four-year-low-after-

Saudi-discount/articleshow/45036120.cms?

November 8, 2014

9

Telecom and IT Sector Update

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

Major News:

Recent developments in Telecom & IT industry

TRAI reported: Telephone user base rises to 94.29 crore in April-June quarter

The telephone subscriber base in the country rose 1.07 % in April-June quarter to reach

94.29 crore at the end of June 2014. The subscriber base in the preceding quarter (Jan-

March) stood at 93.30 crore.

Total number of Internet subscribers has increased from 251.59 million at the end of Mar-

14 to 259.14 million at the end of Jun-14, there has been a quarterly growth of 3.00 %.

Monthly average revenue per user (ARPU) for GSM-based services increased to Rs 119

for the reported quarter as compared to Rs 113 in the preceding period, whereas ARPU of

CDMA-based services increased to Rs 112 from Rs 105.

The license fee increased from Rs 3,286 crore for the quarter ending March 2014 to Rs

3,503 crore for the quarter ending June 2014.

Airtel aims data users via Tutorials, with free Net

Bharti Airtel, the country's largest mobile-service provider, is going all out to expand its

data user base, targeting housewives and the elderly for lessons on the basics of Internet

usage, which is fuelling growth for telecom operators amid surging Smartphone sales.

It will offer free online tutorial classes through its 'one-touch Internet' plan. The classes

come with free, 10-day Internet access.

The company's revenue from data services increased 74% on year during the second

quarter ended September 30. It got 14.5% of its revenue from data services in the three-

month period, compared with 9.4% a year earlier.

Bharti plans to create several activation programmes to spread awareness around mobile

Internet usage, including sending vans into rural India to help inculcate digital education.

The initiative comes when the Union government plans to digitally connect the entire

country through a national optic fibre network and design several programmes to spread

digital literacy.

O-zone signs pact with Ericsson for 30K Wi-Fi spots in India

Wi-Fi services company O-zone and Swedish telecom gear maker Ericsson signed a

service agreement for setting up 30,000 Wi-Fi hotspots in the country.

Ericsson will provide Wi-Fi technology based solutions, according to a service level

agreement for a period of five years. The partnership will also ensure that O-zone is able

to establish the neutral Wi-Fi model in India, which will help the Indian government make

November 8, 2014

10

the right to internet access a reality for every Indian

These include opportunities for offering telecom operators the chance to reduce the data

burden on their network by utilizing the neutral Wi-Fi network of O-zone to offload some of

the traffic.

Government asks telcos to implement full MNP by May

Government has asked telecom firms to implement full Mobile Number Portability by May

3, a move that will enable subscribers to retain their numbers when they shift to other

states or licensed service areas.

Currently, MNP norms allow users to retain their numbers while changing their operators

within the same service area. India has 22 telecom circles, or service areas.

As per the data released by the Telecom Regulatory Authority of India, about 13 crore

people had requested for MNP facility as on August 31.

Infosys pulls out of Devanahalli IT Park

Infy has decided to pull out of its proposed campus at the IT park, near the Bengaluru

International Airport citing lack of basic infrastructure such as road connectivity and water,

but its plan to set up a large campus along the Sarjapur Road is still on.

The plan to have a second campus in Bangalore on Sarjapur Road started 7 years ago,

even before it decided to apply to the Karnataka Industrial Areas Development Board for

land at the Devanahalli IT Park near the international airport. The company had plans to

establish it as an IT special economic zone (SEZ), which would have functioned as its

second and the largest campus in Bangalore.

Spectrum Conundrum: DoT seeks TRAI's view again

The Department of Telecom (DoT) has sought clarifications from TRAI on the quantum of

spectrum auction. This comes close on the heels of the DoT rejecting TRAI’s

recommendations on spectrum base price.

For the upcoming auctions, scheduled to begin February next year, the availability of

spectrum is the most contentious issue. Most of the spectrum that are proposed to be put

up for sale are at present being used by Airtel , Vodafone, Idea Cellular and Reliance

Communications across various parts of the country. These companies will need to buy

back airwaves to continue their operations in areas where their licences are expiring in

2015-16.

The next round of spectrum auction is proposed to be held in February 2015 from which

government is estimated to garner at least Rs 9,355 crore.

November 8, 2014

11

References-

http://www.moneycontrol.com/news/

http://economictimes.indiatimes.com/

http://www.business-standard.com/article/companies/

November 8, 2014

12

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 -3.99% TATA steel proposes to revise compensation package for

Gopalpur project.

HINDALCO -4.2% Hindalco plans to raise Rs. 3000 crore through QIP (Qualified Institutional

Placement)

Coal India limited +7.3% Coal India (CIL) is looking to double its production to a billion

tonnes in the next five years.

NMDC -7.9% Naxals raided 14 deposits of NMDC in Chattisgarh

Hindustan Zinc -2.8% CEO Hindustan Zinc Akhilesh Joshi has been appointed as

the Vice Chairman of the Brussels-based International

Zinc Association (IZA).

M and A’s happening in the sector

Scorpio mining and US silver merge:In world news,Mexican silver producer Scorpio mining

and US silver and Gold merged together to counter low metal prices prevailing in the market.

New legal/regulatory environment

Effect of change in policy:-Changes to environment, land acquisition laws jeopardize human

rights – Amnesty International

Kenya pledges transparency: Kenya has pledged transparency and accountability in mineral

exploitation to avert a situation of mistrust among investors.

Estimates for the sector

Coal Block auctions: For the auction of 74 coal blocks,In an estimate the highest bidder needs

to pay almost 10% of total NPV upfront to government.

November 8, 2014

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Other news

Gemfield to enter India: London-headquartered Gemfields, a multi-national firm specialising

in colour gemstones mining and marketing, is planning to acquire colour gemstone mines

in Odisha and Jharkhand, and will also participate in the exploration of the Kashmir sapphire

mines in Jammu & Kashmir.

Metal stocks decline: Metal stocks declined after weak Chinese economic data.The

Chineese demand for the period has declined on commodities front.

Metals and Mining:

Stock price performance of key companies

Name Change % Related news

GMRINFRA -4.67% GMR Infra Ready to monetise 25-30 acres near Delhi airport

DLF +6.31% DLF surges over 6% as SAT allows to redeem MFs

New legal/regulatory environment

Government relaxes FDI norms for construction, real estate sector

In a boost to cash-starved real estate industry, the Narendra Modi government today relaxed

rules for FDI in the construction sector by reducing minimum built-up area as well as capital

requirement and easing the exit norms. The proposal to amend the FDI policy in construction

development sector was approved by the Union Cabinet.

China’s Real Estate Sector Drags on Growth

China’s real estate sector continues to lag following a decline in housing sales and construction

starts over the first three quarters of 2014. The real estate malaise has brought slower GDP

growth, from 7.5 percent in Q2 2014 to 7.3 percent in Q3 2014. Real estate prices began to fall in

May of this year, and it is uncertain when the drag on growth will end.

November 8, 2014

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Other news

Real Estate Developers Should Ensure Transparency: CRISIL

Developers in the real estate sector need to self-regulate and enhance their transparency

towards the customers, suggested Anirudh Agarwal, Regional Head, CRISIL Real Estate Star

Ratings, here on Friday.“The good news is that the real-estate developers are coming forward

and embracing the concept of third-party evaluation of their projects which is a positive sign,” he

said.

DLF surges over 6% as SAT allows to redeem MFs

Shares of DLF today rose by over 6 per cent, adding Rs 1,407 crore to its market valuation, after

the Securities Appellate Tribunal allowed the realty giant to redeem mutual funds worth Rs 1,806

crore to meet working capital needs and service debt payments.