DOMESTIC:

Suzlon commissions 4.2 MW wind project in Gujarat Asian Paints to invest Rs4,000cr in new units at

Karnataka, AP Siemens bags Rs570cr order from Power Grid

Corporation of India MBL Infra bags Rs779cr road project from NHAI L&T bags construction jobs worth Rs2,416cr in June Tata Comm sells Neotel for USD428mn Panacea Biotec launches diabetes drug 'Tenepan' RPG Life Sciences announces foray into cosmetology JSW Steel plans to raise up to USD2bn from foreign

investors Religare Finvest acquires 24.49% stake in ABG Shipyard Suven Life Sciences gets patent for neuro-degenerative drug Torrent Pharma to buy Glochem manufacturing unit Gayatri Projects bags Rs306cr road project Hester Biosciences Ltd to raise upto Rs75cr Alembic Pharma plants successfully inspected by

USFDA

ECONOMY:

Govt plans to take up strategic sale of at least one PSU this fiscal

PE investments drop 16% in June quarter to USD3.6bn

INDUSTRY:

Tepid response to auction for solar projects in Gujarat USFDA nods to Indian drugs up 84% in 1 year Government asks LIC to fund road expansion projects Telcos may seek withdrawal of Trai’s paper on free

data

TM

One Year Sensex Performance

Coverage Universe Valuations

Company CMP Reco. Tgt price Upside Mcap EV/Sales (x) EV/EBITDA (x) PE(x)

(Rs) (Rs) (%) (Rs bn) FY16E FY17E FY16E FY17E FY16E FY17E

Supreme Petrochem Ltd 178 BUY 200 12.4 17.2 24.0 16.3 0.5 0.4 11.4 7.9

Indian Hume Pipe Co.Ltd 347 BUY 475 37.1 8.4 16.0 11.2 9.0 8.0 8.3 6.7

Shanthi Gears Ltd 122 BUY 150 23.5 9.9 87.5 68.8 5.4 5.4 36.4 32.3

Hind Rectifiers Ltd 68 BUY 110 62.8 1.0 56.2 12.8 1.1 0.9 21.5 9.2

KCP Limited 95 BUY 105 11.0 12.2 30.7 21.9 2.2 2.0 12.9 10.9

Navneet Education Ltd 98 BUY 130 32.7 23.3 15.8 13.7 2.3 2.1 9.5 8.4

Harita Seating System Ltd 561 BUY 750 33.8 4.4 44.3 32.6 1.5 1.4 27.7 21.6

Camlin Fine Sciences 94 BUY 140 48.9 9.0 11.5 8.8 1.6 1.4 8.7 7.1

GEE Limited 39 BUY 70 78.6 0.9 17.0 12.2 0.7 0.6 6.6 5.8

Hester Biosciences Ltd 731 BUY 750 2.6 6.2 44.9 36.9 6.3 5.0 21.9 17.7

West Coast Paper Mills Ltd 81 BUY 110 35.6 5.4 15.3 4.2 0.7 0.6 4.1 3.3

Rallis India Ltd 221 BUY 260 17.8 42.9 28.1 22.1 2.5 2.2 15.7 12.9

The Hitech Gears Ltd 267 BUY 450 68.7 5.0 18.7 14.3 1.0 0.9 8.0 6.7

Bharat Bijlee Ltd 939 BUY 1500 59.8 5.3 93.8 43.4 0.9 0.8 31.3 26.9

Castrol India Ltd 394 BUY 650 65.2 194.6 29.8 27.8 4.9 4.8 19.0 17.7

Engineers India Ltd 209 BUY 325 55.2 70.6 20.0 19.1 2.5 3.4 16.7 22.9

TNPL 276 BUY 350 26.8 19.1 8.8 7.6 1.6 1.6 6.3 5.5

Triveni Turbines Ltd 124 BUY 135 9.3 40.8 40.0 33.6 0.5 0.5 2.6 2.2

Rajoo Engineers Ltd 17 BUY 24 41.2 1.0 13.4 9.7 0.8 0.7 7.1 5.4

Siemens Ltd 1300 BUY 1500 15.4 462.8 49.6 42.7 3.9 3.5 29.0 24.7

Hikal Ltd 175 BUY 200 14.3 14.4 41.1 29.0 2.2 2.1 10.9 9.6

TRIL 352 BUY 450 27.7 4.7 -16.0 26.1 10.0 7.2 443.8 79.9

KEC International Ltd 144 BUY 200 38.7 37.1 18.2 12.7 0.7 0.6 8.7 6.9

Aksh Optifibre Ltd 17 BUY 24 37.9 2.8 8.4 5.1 0.6 0.6 3.7 2.7

Price Performance (%)

Company 1M 3M 12M

Supreme Petrochem Ltd 1% 61% 101%

Indian Hume Pipe Co. Ltd 5% 8% 8%

Shanthi Gears Ltd 18.7% 40% 24%

Hind Rectifiers Ltd 0% 9% -13%

KCP Limited 20% 12% 53%

Navneet Education Ltd 13% 16% -5%

Harita Seating System Ltd 2% 25% 221%

Camlin Fine Sciences -1% 4% -10%

GEE Limited 5% 2% 67%

Hester Biosciences Ltd 12% 45% 14%

West Coast Paper Mills Ltd 3% 15% 47%

Rallis India Ltd 4% 31% -8%

The Hitech Gears Ltd 5% 7% 1%

Bharat Bijlee Ltd 7% 1% 67%

Castrol India Ltd 5% 4% -9%

Engineers India Ltd 15% 22% -12%

TNPL -2% 25% 74%

Triveni Turbines Ltd 15% 29% 7%

Rajoo Engineers Ltd 9.0% 8% 20%

Siemens Ltd 7% 16% -6%

Hikal Ltd 16.7% 45% 41%

TRIL -4% 47% 40%

KEC International Ltd 5.2% 16% 11%

Aksh Optifibre Ltd 20.4% 31% 13%

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30000

35000

40000

The week that went by: After the action packed end to the week, the markets opened on a soft note to settle down from the bloodbath and beating that stocks had taken across the board. The Europe rally lifted the sentiments and approached the positive zone in midweek trade. With the global rally, the Indian bourses also ended in the green owing to the buying built up by the participants. Domestic sentiment was also buoyed as the Union Cabinet has approved a proposal to revise upwards salaries and pensions for government employees. Furthermore, with the June derivatives expiry firming global cues added to the positivity.

COVERAGE NEWS

Siemens bags Rs570cr order from Power Grid Corporation of India Siemens has bagged an order worth Rs570cr from Power Grid Corporation of India for supply of the world's largest STATCOM (Synchronous Compensator) projects, the Indian arm of the German capital goods. "Power consumers across three states will be benefitted in the form of constant grid voltage and frequency leading to availability of uninterrupted quality power.

Our Comments: We expect the order intake to increase further in future.

Rallis India Limited: AGM update

There is no doubt; agricultural growth in the last two years has slowed down. Despite drought like conditions in India, the company managed to report good set of numbers for the quarter ending March 2016. The company has been reducing its debt burden and is virtually debt free. Management was contemplating at a long term sustainability plan which involved nearly 50% power generation using renewable source of energy. In view of the same, the company has set up a 4.4 MWp Solar Power plant at Dahej on Gujarat. The same established connectivity with the National Grid on 24th December, 2015. The set up should be used for captive consumption at Ankleshwar and Dahej. The per-hectare usage of agrochemicals is barely 0.6 kg in India which can be a trigger for growth as compared to other developed nations. Metahelix is now a wholly owned subsidiary of your Company. Business in Brazil was under stress during the year; however Management is seeing things to change here. During the year, the company had its focus on Fruits & Vegetables (F&V), where the resources were utilized to scale up the business. The R&D department is associated with Rallis Innovation Chemistry Hub which is also known as RICH. This segment is related to new product launches as well as contract manufacturing. Any development in CRAMs will be a great booster in time to come, however the development in this segment will take time. Some of the new products introduced during the year included a new variety of insecticide. The company is also focusing on the herbicides segment. The company had introduced two new Herbicides during the year. The company is continuously striving to establish its own seed brands in various segments including cotton, rice, maize, millet, wheat, mustard etc.; some of these were displayed at the AGM as well. Moreover, the company has been increasing its focus on plant growth nutrients. The company is also contemplating to launch a new product in the multi micro nutrient liquid segment.

Our comments: The expectation of better rainfall this year will be a major trigger for the company’ business in the agrochemical space. Rallis is aptly placed to benefit from the growth expected going forward. We had initiated a BUY call on the stock with a target price of Rs260 and we maintain the same.

TM

Siemens bags order from PGCIL

Positives for the company

ECONOMY:

Govt plans to take up strategic sale of at least one PSU this fiscal The government is preparing the ground for at least one strategic stake sale in a public sector unit this fiscal. The Department of Investment and Public Asset Management (DIPAM) is finalising a model of strategic disinvestment. DIPAM is working out procedures and timelines for strategic sale of government equity. There has not been any strategic disinvestment in over a decade and all policies have to be laid down afresh.

Our Comments: For loss making PSUs such as BSNL, it has suggested the government could consider selling it off. But, it could face challenges, especially labour issues. For strategic sale it has suggested Cement Corporation, Tyre Corporation of India Ltd, and Central Electronics Ltd.

INDUSTRY:

Tepid response to auction for solar projects in Gujarat Winning bids for solar projects in Gujarat remained stuck at Rs4.43 per unit, the reserve price set for most of the recent auctions in India, suggesting that prices may have bottomed out. The contracts were awarded on the basis of the least subsidy sought. With all bids quoting the same tariff, the winners were decided on the basis of the least subsidy or viability gap funding. The Ministry of New and Renewable Energy provides VGF up to Rs1cr per MW to solar developers.

Our Comments: No other offers this year have gone below Rs4.43 per kwH, probably indicating that that solar tariffs, after a steep fall in 2015, have temporarily bottomed out.

USFDA nods to Indian drugs up 84% in 1 year Drug approvals given by the USFDA to Indian companies nearly doubled year-on-year, with little known firms including MSN Lab, Shasun Pharma, Granules India, Ajanta Pharma and Gland Pharma making a foray into the world's biggest and most lucrative market. Over the last couple of years, companies have faced intense regulatory glare from the US, with nearly all the top pharma players having been issued warning letters over manufacturing violations at their plants. This led some to believe that they were being singled out for action -most of this was triggered after the erstwhile Ranbaxy (now part of Sun Pharma) faced regulatory woes.

Our Comments: The increase in number of approvals is partly due to GDUFA (Generic Drug User Fee Act) under which the FDA had agreed to expedite the processing of ANDAs, and partly due to the importance of drugs and inadequate competition.

Government asks LIC to fund road expansion projects The Indian government will be leaning on the state owned Life Insurance Corporation of India (LIC), India's largest insurer, to fund its ambitious road expansion plans and the insurer is set to open its purse strings for highways development, boosting the government's aim to step up road construction to 40kms a day. The road transport and highways ministry hopes to sign an agreement with LIC for the purchase of annual bonds issued by the National Highways Authority of India (NHAI). The road transport and highways ministry hopes to sign an agreement with LIC for the purchase of annual bonds issued by the National Highways Authority of India (NHAI).

Our Comments: In the current financial year, LIC is likely to subscribe NHAI bonds worth at least Rs10,000cr and an agreement to the effect is expected to be signed soon. The ministry will use the money raised through LIC for four-laning of highway projects.

TM

USFDA approvals on uptrend

One PSU sale this fiscal by Govt

Solar projects get tepid response

LIC to fund road expansions

Telcos may seek withdrawal of Trai’s paper on free data Phone companies may seek the withdrawal of a consultation paper issued by the telecom regulator on free data on the grounds that it is too vague and ad hoc in the absence of net neutrality rules that should first be laid down to give clarity to the industry. The Cellular Operators Association of India (COAI) will also seek "an extremely light-touch approach" from the Telecom Regulatory Authority of India (Trai) while "formulating the guidelines of net neutrality," amid rapid developments in internet technology. Trai issued a consultation paper on May 19 exploring ways of providing mobile internet access to consumers for free, without violating a ban on discriminatory pricing of data services.

Our Comments: Paper(s) of discriminatory pricing and free data are so vague that it (free data) can only receive clarification as a result of the responses.

COMPANY:

Suzlon commissions 4.2 MW wind project in Gujarat Suzlon Group announced the completion and commissioning of its 4.20 MW maiden wind project for Ahmedabad Municipal Corporation. The project, located at Nakhatrana, Kutch, comprises of two units of Suzlon's latest product variant, S97-120-meter hybrid tower wind turbine. The project will help in offsetting 9,000 tonnes CO2 emissions annually. S97-120 meter is the world's tallest all-steel hybrid tower which ensures 12-15% higher energy yield and further enables viability of sub-optimal wind sites.

Our Comments: As of March 2016, Gujarat's total wind installations stood at 4,038 MW, out of which 1,842 MW has been contributed by Suzlon.

Asian Paints to invest Rs4,000cr in new units at Karnataka, AP Asian Paints Ltd is investing around Rs4,000cr on setting up two manufacturing plants in Karnataka and Andhra Pradesh, although it has cautioned that demand conditions in the current fiscal "still remain uncertain" on account of the global economic situation. the company would be investing in phases at both these facilities to enable it to service the future demand adequately. The company has completed the land procurement process in both the states during the last fiscal and has taken possession of the identified land.

Our Comments: Over the longer term, the growth potential for the company's various businesses is immense especially given the large impetus being put on infrastructure development and urbanisation through creation of smart cities.

L&T bags construction jobs worth Rs2,416cr in June Larsen & Toubro has bagged construction orders worth Rs2,416cr in June, the USD16bn engineering and construction major. These orders include jobs for construction of buildings and factories worth Rs1,165cr. The company said it has bagged the contract from a "leading developer" for construction of two residential buildings in Mumbai. It has also bagged another order for a mixed used property in Kolkata. L&T said it has bagged orders worth Rs1,120cr in the domestic and Middle East markets from the power transmission and distribution sector. The company also won orders worth Rs131cr from RajCOMP Info Services, a government of Rajasthan undertaking, for establishing and commissioning command and control centres at Bikaner, Bharatpur and Jodhpur cities under the surveillance and incident response project.

Our Comments: The company is depicting strong order flow for the month under reference.

TM

Telcos against free data

Suzlon commissions wind project

Asian paints to invest in new units

L&T gains strong orders in June

MBL Infra bags Rs779cr road project from NHAI MBL Infrastructures said it has bagged a Rs779cr road project from NHAI. Under the contract, the company will have go for six-laning of the greenfield proposed Udaipur bypass on Hybrid Annuity mode, package IV under NHDP phase V in Rajasthan. During the construction, 40% of the bid project (Rs311.60cr) will be funded by NHAI and the balance 60% (Rs467.40cr) will be arranged by concessionaire.

Our Comments: During the operation period, NHAI will pay concessionaire this 60% in semi-annual payments alongwith interest thereon at Bank Rate and also semi-annual payments for operation and maintenance totalling Rs63.75cr for the project.

Panacea Biotec launches diabetes drug 'Tenepan' Panacea Biotec has launched diabetes drug 'Tenepan', used for treating Type 2 Diabetes Mellitus. Tenapan aims to improve accessibility of diabetes treatment at an affordable cost as part of the company's commitment to the 'Make in India' campaign.

Our Comments: With the launch of Tenepan the company intends to reach out to the patients with the latest therapeutic treatment.

JSW Steel plans to raise up to USD2bn from foreign investors JSW Steel will approach shareholders to raise up to USD2bn from global capital markets to meet its long-term capex requirement and loan refinancing, among others. The steelmaker will place the enabling resolution before its shareholders next month. It is in the interest of the company to raise long-term resources with convertible option so as to optimise capital structure for future growth. The proceeds of the issue will be used for long-term funding to meet the planned capital expenditure and for other corporate purposes, including refinancing of expensive debt to reduce interest costs and to meet any unlikely shortfall in unforeseen circumstances.

Our Comments: The firm said it intends to raise additional long-term funding through issuance of non-convertible foreign currency denominated bonds not exceeding USD2bn in aggregate in the international capital market.

Tata Comm sells Neotel for USD428mn Tata Communications has sold its South African telecom arm Neotel to Liquid Telecom and Royal Bafokeng Holdings for an enterprise value of 6.55 billion rand (USD428mn or Rs2,904cr). Tata Communications holds a 68% stake in the company, while Nexus Connexion and Communitel are the other investors. After the deal, Bafokeng Holdings will hold a 30% stake in Neotel, while Liquid Telecom, a subsidiary of South Africa’s Econet Wireless Global, has agreed to buy the remainder of the Tata company’s holding.

Our Comments: The move is part of Tata Communications’ game plan to reduce its debt of nearly USD1.5bn and fits in with Tata Sons Chairman Cyrus Mistry’s strategy to exit non-core businesses.

Torrent Pharma to buy Glochem manufacturing unit Torrent Pharmaceuticals Ltd has entered a binding agreement to acquire a manufacturing unit of Hyderabad-based Glochem Industries Ltd. Torrent did not disclose the value of the acquisition. The Visakhapatnam unit, approved by the USFDA and European regulatory authorities, is a multi-product facility which can manufacture advance intermediates and APIs.

Our Comments: With the latest acquisition, Torrent Pharma, which currently has five formulation manufacturing units, will have three API units for the regulated markets. The acquisition will help the firm in vertically integrating its abbreviated new drug application (ANDA) filings in the future.

TM

KEY NEWS ANALYSIS

MBL bags order from NHAI

Panacea launches diabetes drug

JSW Steel in the raising mode

Tata comm sells Neotel

Torrent pharma to buy manufacturing

unit

Religare Finvest acquires 24.49% stake in ABG Shipyard Religare Finvest Ltd, a subsidiary of Religare Enterprises Ltd, has acquired 1.32 million pledged shares of India’s largest private shipbuilder ABG Shipyard Ltd to take a 24.49% stake in the debt-laden company. This acquisition will, under the rules, not trigger an open offer to ABG Shipyard’s public shareholders. The firm was hurt by a slump in the industry as freight rates fell in step with a decline in global trade, combined with a domestic economic downturn.

Our Comments: Since 2014, the company has been under CDR exercise and the above would atleast ease the company to some extent.

Suven Life Sciences gets patent for neuro-degenerative drug Suven Life Sciences has been granted a patent from Europe and two product patents from Eurasia for a drug used in the treatment of neuro-degenerative diseases. Suven Life said it has been granted "one product patent from Europe and two product patents from Eurasia corresponding to New Chemical Entities (NCEs) for treatment of disorders associated with neuro-degenerative diseases. The patents are valid through 2029, 2030 and 2031.

Our Comments: With these clearances, Suven has a total of 21 granted patents from Europe and 19 from Eurasia. These granted patents are exclusive intellectual property of Suven and are achieved through internal discovery research efforts. Products out of these inventions may be out-licensed at various phases of clinical development like phase-I or phase-II.

RPG Life Sciences announces foray into cosmetology RPG Life Sciences has entered a technical collaboration with Italian cosmetic leader Labo Cosprophar. The company is in-licensing two research-based products to be launched in the Indian cosmetic market this July. A separate division has been created to market these unique products titled Crescina and Fillerina, specializing in hair-fall control and anti-aging, respectively.

Our Comments: As indicated by the company both these products will be ideal to fill the need gap in respective therapies.

Gayatri Projects bags Rs306cr road project Gayatri Projects said it has bagged a Rs306cr order from the Centre for four-laning of a highway on the Andhra Pradesh-Tamil Nadu border. Giving details of the projects, the company said the projects is for rehabilitation and up gradation of NH-4 from km 133.36 to km 179.59 (Andhra Pradesh-Tamil Nadu border to Nalagampalli Village) to four-lane with paved shoulder in the state of Andhra Pradesh on engineering, procurement and construction (EPC) basis.

Our Comments: The project would be a booster to the order book of the company.

TM

KEY NEWS ANALYSIS

Suven gets patent approval

Gayatri projects bags order

Religare acquires stake in ABG

RPG lifesciences to enter into cosmetology

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TM