DOMESTIC:

Biocon number six in top 10 Global Biotech Employers ranking for 2019

RIL recast may help Jio rein in AGR-linked payments to government

Wipro launches next generation engineering and innovation center in Virginia

InterGlobe Aviation signs for 300 A320neo Family aircraft

RIL draws government ire by monopolising sale of its own CBM

Coal India Ltd plans binding bids for coking coal assets

GSK's tuberculosis vaccine shows promising results

HDFC acquires 9.89% stake in Bandhan Bank

Adani Transmission receives LoI from REC Transmission Projects

Saudi Aramco to keep 4.6mn barrels of oil in Indian storage

ICICI Lombard, Karur Vysya Bank tie up for sale of insurance products

Siemens to double manpower at Chennai centre

YES Bank receives a binding offer of USD1.2bn

Lupin in talks to sell Japan Unit Kyowa for USD600mn

Ahluwalia Contracts gets new project worth of Rs521.71cr

Cochin Shipyard signs the Phase-III contract worth Rs3,000cr with Indian Navy

Lemon Tree entered into Udaipur, with the launch of our 139 rooms new upscale hotel - 'Aurika, Udaipur'

Cadila Healthcare received an EIR from USFDA

MTNL to become BSNL arm, merged entity to raise Rs15,000cr via bonds

GSK Consumer Healthcare re-launches Crocin Pain Relief

TCS plans to remove digital classification from its business

ECONOMY:

Fiscal deficit hits 93% of budget estimate at Rs6.52tn till Sept-end

India’s tax collection growth in H1FY20 lowest in a decade

Government fixes sugar sale quota of 20.5 lakh tonne for November

SEBI asks banks to disclose bad loan divergences within a day of RBI report

INDUSTRY:

Prices of cancer, cardiac drugs may be slashed

Advanced lithium-ion technologies on track for record annual investment

Govt. likely to reject telcos' demand for 2-year spectrum fee moratorium

Housing finance companies’ gross NPAs up 2.2%: As per ICRA

Demand for mining equipment falls 15-17% y-o-y: As per ICRA

Indian Steel makers face debt challenges after ill-timed bets

India to invest USD100bn in refining, pipeline, gas terminals by 2024: PM

Core sector output down by 5.2 % in the month of September

The week that went by:

Tracking global markets after a positive outcome on US-China trade talks, gap-up opening was witnessed in the Indian markets. Another gap up opening with the continued rally was seen despite the global market trading weaker. Backed by the Fed rate cut, the Indian markets opened on a positive note, with strength being witnessed in PSU banks. On the last day of trade, the markets opened flat and ended the first session of November series with +35 points.

Price Performance

Company 1M 3M 12M

Supreme Petrochem Ltd 0.7% 1.9% -22.1%

Shanthi Gears Ltd 7.7% 4.0% -15.5%

Hind Rectifiers Ltd 18.2% 56.1% 51.1%

KCP Ltd -0.9% -8.4% -31.7%

Hester Biosciences Ltd -5.5% 6.6% 43.0%

The Hi-Tech Gears Ltd 8.9% -5.1% -52.1%

Bharat Bijlee Ltd -8.5% -2.7% -28.4%

Triveni Turbines Ltd 1.8% 5.6% 2.7%

Siemens Ltd 8.4% 49.3% 75.9%

GMM Pfaudler Ltd -8.9% 15.2% 28.4%

Alicon Castalloy Ltd 17.2% 2.8% -35.5%

Gufic Biosciences Ltd 1.1% 24.2% -25.6%

Excel Industries Ltd 5.8% 19.3% -39.8%

Vesuvius India Ltd -2.5% -1.8% -9.2%

Munjal Showa Ltd 8.6% 14.8% -24.5%

Bharat Rasayan Ltd 1.5% 50.9% 5.7%

Alkyl Amines Chemicals Ltd 0.3% 25.1% 39.7%

Grauer and Weil (India) Ltd -5.1% -8.6% -13.7%

Texmaco Rail & Engineering Ltd -3.2% -9.0% -32.2%

Nagarjuna Agrichem Ltd 0.7% 4.3% 6.0%

ITD Cementation India Ltd 26.8% -19.3% -47.6%

Westlife Development Ltd 21.2% 24.7% 9.1%

Federal Mogul Goetze (India) Ltd 5.2% 8.7% 36.4%

Dynamatic Technologies Ltd -7.5% -7.2% -20.1%

Hitech Corporation Ltd -46.5% 20.9% -2.3%

NRB Bearings Ltd 7.8% 15.9% -34.2%

Kokuyo Camlin Ltd 20.0% 21.7% -26.5%

Timken India Ltd 11.1% 34.8% 68.8%

Morganite Crucible (India) Ltd -1.4% 14.5% -9.8%

Vardhman Special Steels Ltd 2.7% -4.5% -37.5%

Zen Technologies Ltd 9.7% 29.6% -5.6%

KSB Ltd 0.4% 14.2% -12.8%

Thermax Ltd 1.4% 5.5% 13.5%

Transpek Industry Ltd 3.3% 2.6% -13.3%

BASF India Ltd 3.0% -3.4% -39.3%

Artson Engineering Ltd 0.6% -9.6% -39.4%

Remsons Industries Ltd 0.6% 7.2% -20.5%

Snowman Logistics Ltd 2.3% 36.0% 3.9%

Alembic Pharmaceuticals Ltd 10.7% 10.4% -5.09%

SKF India Ltd 1.8% 19.2% 22.8%

HFCL Ltd 1.1% -7.1% -14.9%

Sudarshan Chemical Industries Ltd 8.1% 23.2% 6.3%

Huhtamaki PPL Ltd 10.5% 13.5% 16.9%

Mishra Dhatu Nigam Ltd 30.0% 40.7% 32.0%

Anuh Pharma Ltd 6.9% 41.8% 2.7%

Indian Hume Pipe Co. Ltd -3.0% -0.3% 91.7%

Engineers India Ltd 6.4% 24.2% 106.3%

Gulshan Polyols Ltd -13.0% 22.7% -23.6%

Nesco Ltd -2.3% 4.0% 29.5%

Castrol India Ltd 14.4% 30.9% 114.1%

Hikal Ltd -18.5% -18.6% 17.7%

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01 Nov 2019

Page No: 1

Recommendations adjusted as per Corporate Actions

Company Reco Target Corp Action Adj Price Adj Tgt Price Appreciation

IHP Ltd 341 600 Bonus 1 : 1 171 500 55%

Engineers India Ltd 211 200 Bonus 1 : 1 105 200 15%

Gulshan Polyols Ltd 390 500 Stock Split from Rs.FV 5 to Rs.FV 1 110 78 -46%

Nesco Ltd 2397 3200 Stock Split from Rs.FV 10 to Rs.FV 2 479 640 18%

Castrol India Ltd 447 550 Bonus 1 : 1 223 200 -30%

Hikal Ltd 143 325 Bonus 1 : 2 95 216 27%

Coverage Universe Valuations

Company Reco Adj Reco CMP Tgt price Upside Mcap EPS(x) PE(x) EV/EBITDA (x)

(Rs) (Rs) (Rs) (%) (Rs bn) FY18 FY19 FY18 FY19 FY18 FY19

IHP Ltd 341 171 266 500 88.3 12.9 13.6 20.1 19.5 13.2 10.7 8.2

Engineers India Ltd 211 105 121 200 64.9 40.9 6.0 7.0 20.3 17.3 18.5 14.7

Gulshan Polyols Ltd 390 78 43 78 83.5 2.0 3.9 5.1 10.9 8.4 5.0 4.0

Nesco Ltd 2397 479 565 640 13.3 8.0 25.1 23.7 22.5 23.8 18.4 19.2

Castrol India Ltd 447 223 155 200 29.0 76.7 7.1 15.6 21.9 10.0 14.4 13.0

Hikal Ltd 143 95 121 175 45.1 9.9 9.4 10.1 12.8 12.0 8.4 7.6

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01 Nov 2019

Page No: 2

Coverage Universe Valuations

Company Reco Reco at CMP Tgt price Upside Mcap EPS(x) PE(x) EV/EBITDA (x)

(Rs) (Rs) (Rs) (%) (Rs bn) FY18 FY19 FY18 FY19 FY18 FY19

Supreme Petrochem Ltd BUY 77 175 275 56.9 16.9 6.6 6.4 26.5 27.4 8.0 9.8

Shanthi Gears Ltd BUY 107 101 150 47.9 8.3 3.5 3.9 29.0 26.0 22.5 19.0

Hind Rectifiers Ltd BUY 69 182 175 -4.0 2.7 0.8 5.3 231.1 34.4 35.7 17.5

KCP Limited BUY 71 68 125 84.4 8.7 7.0 7.0 9.7 9.7 7.9 7.0

Hester Biosciences Ltd BUY 566 1635 2250 37.6 13.9 35.9 39.8 45.5 41.1 13.4 12.0

The Hitech Gears Ltd BUY 298 182 450 147.1 3.4 17.0 21.2 10.7 8.6 7.3 6.4

Bharat Bijlee Ltd BUY 787 854 1500 75.6 4.8 25.1 37.4 34.0 22.8 20.8 17.4

Triveni Turbines Ltd BUY 92 106 150 41.8 0.3 3.0 3.1 35.5 34.0 22.2 21.3

Siemens Ltd BUY 1128 1671 1750 4.7 595.0 53.0 53.6 31.5 31.2 43.3 42.6

GMM Pfaudler Ltd BUY 332 1371 1600 16.7 20.0 19.4 26.7 70.6 51.4 43.2 31.6

Alicon Castalloy Ltd BUY 288 395 650 64.7 4.9 29.0 46.6 13.6 8.5 7.0 5.2

Gufic Biosciences Ltd BUY 50 70 120 71.9 5.4 1.9 3.1 37.4 22.4 16.1 12.5

Excel Industries Ltd BUY 380 969 1200 23.8 12.5 58.1 112.2 16.7 8.6 9.9 5.3

Vesuvius India Ltd BUY 1165 997 1500 50.4 19.9 52.3 56.3 19.1 17.7 9.4 9.0

Munjal Showa Ltd BUY 191 139 191 37.4 5.6 19.4 21.5 7.2 6.5 4.8 4.2

Bharat Rasayan Ltd BUY 2747 5945 7500 26.2 25.0 227.3 257.5 26.2 23.1 16.8 14.6

Alkyl Amines Chemicals Ltd BUY 391 868 1000 15.2 17.7 31.5 38.9 27.5 22.3 16.5 12.6

Grauer and Weil (India) Ltd BUY 45 46 65 42.2 10.4 2.7 3.0 17.1 15.4 10.8 10.1

Texmaco Rail & Engineering Ltd BUY 91 44 91 107.3 20.2 0.5 1.8 95.8 24.2 46.4 13.8

Nagarjuna Agrichem Ltd BUY 29 28 45 59.6 4.4 0.7 0.8 41.1 35.7 13.4 12.6

ITD Cementation India Ltd BUY 158 61 130 114.3 9.4 8.3 9.8 7.3 6.2 4.7 4.1

Westlife Development Ltd BUY 266 349 450 28.9 54.3 0.8 1.6 420.7 219.9 72.4 50.8

Federal Mogul Goetze (India) Ltd BUY 540 562 750 33.5 31.3 14.9 18.0 37.7 31.1 16.7 15.2

Dynamatic Technologies Ltd BUY 2160 1152 2160 87.5 7.3 1.1 51.1 1014.7 22.6 10.1 7.7

Hitech Corporation Ltd BUY 175 84 125 48.8 1.4 4.5 6.4 18.6 13.2 7.9 6.0

NRB Bearings Ltd BUY 138 109 138 27.0 10.5 8.5 10.4 12.9 10.5 8.0 6.7

Kokuyo Camlin Ltd BUY 132 80 132 66.0 8.0 1.0 1.5 81.2 54.0 24.3 19.4

Timken India Ltd BUY 883 878 1000 13.9 59.7 13.5 19.0 64.8 46.3 36.5 23.3

Morganite Crucible (India) Ltd BUY 1047 1578 2000 26.7 4.4 49.6 63.9 31.8 24.7 3.3 3.0

Vardhman Special Steels Ltd BUY 151 70 110 58.0 2.5 7.0 8.7 9.9 8.0 7.4 6.2

Zen Technologies Ltd BUY 115 68 125 83.8 5.2 -0.1 0.8 -1348.8 84.5 -277.9 50.4

KSB Ltd BUY 820 682 1100 61.3 23.7 18.8 21.2 37.0 32.8 15.5 13.8

Thermax Ltd BUY 1019 1158 1230 6 137.9 22.1 26.8 52.4 43.2 37.1 31.8

Transpek Industry Ltd BUY 1547 1270 2000 57.5 7.1 47.3 76.0 26.9 16.7 16.9 12.7

BASF India Ltd BUY 1954 999 1700 70.2 43.2 20.3 43.5 49.2 22.9 15.4 12.2

Artson Engineering Ltd BUY 64 33 75 124.9 1.2 0.4 2.3 89.0 14.5 54.9 16.8

Remsons Industries Ltd BUY 104 86 130 52.0 0.5 6.0 7.9 14.2 10.8 9.5 7.4

Snowman Logistics Ltd BUY 33 39 55 42.9 6.4 -0.2 0.1 -180.7 267.5 17.4 14.3

Alembic Pharmaceuticals Ltd BUY 605 571 751 31.5 107.6 22.3 26.7 25.6 21.4 17.7 15.0

SKF India Ltd BUY 1942 2197 2620 19.3 112.8 57.6 60.7 38.1 36.2 25.9 24.1

HFCL Ltd BUY 25 18 35 97.2 22.1 1.3 1.7 14.0 10.5 9.4 6.8

Sudarshan Chemical Industries Ltd BUY 372 401 500 24.5 25.8 12.4 13.8 32.4 29.2 15.6 13.9

Huhtamaki PPL Ltd BUY 254 252 320 27.0 19.0 4.6 11.2 54.5 22.5 10.2 8.1

Mishra Dhatu Nigam Ltd BUY 123 163 190 16.9 23.0 6.7 7.0 24.4 23.3 16.0 16.4

Anuh Pharma Ltd BUY 142 154 175 13.6 3.9 6.6 9.3 23.4 16.5 21.5 13.0

*Castrol, Vesuvius – Dec Ending | Siemens—Sept ending|

Recommendations adjusted as per Corporate Actions

Company Reco Target Corp Action Adj Price Adj Tgt Price Appreciation

IHP Ltd 341 600 Bonus 1 : 1 171 500 55%

Engineers India Ltd 211 325 Bonus 1 : 1 105 200 15%

Gulshan Polyols Ltd 390 500 Stock Split from Rs.FV 5 to Rs.FV 1 110 78 -46%

Nesco Ltd 2397 3200 Stock Split from Rs.FV 10 to Rs.FV 2 479 640 18%

Castrol India Ltd 447 550 Bonus 1 : 1 223 200 -30%

Hikal Ltd 143 325 Bonus 1 : 2 95 216 27%

*Castrol, Vesuvius – Dec Ending | Siemens—Sept ending| * T= Target

Coverage Performance Sheet

Company Reco at CLS Target Price (Rs) Appreciation

(Rs) (Rs) T1 T2 T3 T4 T5 T6 T7 T8 T9

IHP Ltd 341 266 500 600 500 - - - - 55% - -

Engineers India Ltd 211 121 200 250 200 - - - - 15% - -

Gulshan Polyols Ltd 390 43 110 78 - - - - - -46% - -

Nesco Ltd 2397 565 640 - - - - - - 18%

Castrol India Ltd 223 155 275 250 200 - - - - -30% - -

Hikal Ltd 143 121 200 250 325 216 175 - - 27% - -

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01 Nov 2019

Page No: 3

Coverage Performance Sheet

Company Reco at CLS Target Price (Rs) Appreciation

(Rs) (Rs) T1 T2 T3 T4 T5 T6 T7 T8 T9

Supreme Petrochem Ltd 77 175 120 150 200 275 350 500 275 - - 128%

Shanthi Gears Ltd 107 101 150 200 150 - - - - - - -5%

Hind Rectifiers Ltd 69 182 110 140 175 - - - - - - 164%

KCP Limited 71 68 105 150 200 150 125 - - - - -5%

Hester Biosciences Ltd 566 1635 750 875 1150 1500 2200 1750 2250 - - 189%

The Hitech Gears Ltd 298 182 450 600 500 450 - - - - - -39%

Bharat Bijlee Ltd 787 854 1100 1500 2000 1500 - - - - - 9%

Triveni Turbines Ltd 92 106 135 150 - - - - - - - 15%

Siemens Ltd 1128 1671 1500 1350 1500 1750 - - - - - 48%

GMM Pfaudler Ltd 332 1371 500 700 800 1000 1300 1600 - - - 313%

Alicon Castalloy Ltd 288 395 450 600 750 1000 850 650 - - - 37%

Gufic Biosciences Ltd 50 70 75 100 140 175 150 120 - - - 40%

Excel Industries Ltd 380 969 550 650 800 1100 1400 1800 2200 1800 1200 155%

Vesuvius India Ltd 1165 997 1500 - - - - - - - - -14%

Munjal Showa Ltd 191 139 250 300 350 300 250 191 - - - -27%

Bharat Rasayan Ltd 2747 5945 3500 4250 5000 6500 9000 5000 6500 7500 - 116%

Alkyl Amines Chemicals Ltd 391 868 550 700 850 1000 - - - - - 122%

Grauer and Weil (India) Ltd 45 46 65 80 100 65 - - - - - 2%

Texmaco Rail & Engineering Ltd 91 44 125 150 91 - - - - - - -52%

Nagarjuna Agrichem Ltd 29 28 45 60 75 60 45 - - - - -3%

ITD Cementation India Ltd 158 61 225 180 130 - - - - - - -62%

Westlife Development Ltd 266 349 350 425 525 450 - - - - - 31%

Federal Mogul Goetze (India) Ltd 540 562 750 - - - - - - - - 4%

Dynamatic Technologies Ltd 2160 1152 3000 2750 2160 - - - - - - -47%

Hitech Corporation Ltd 175 84 230 180 150 125 - - - - - -52%

NRB Bearings Ltd 138 109 200 240 138 - - - - - - -21%

Kokuyo Camlin Ltd 132 80 175 132 - - - - - - - -40%

Timken India Ltd 883 878 1200 1000 - - - - - - - -1%

Morganite Crucible (India) Ltd 1047 1578 1500 1750 2300 2000 - - - - - 51%

Vardhman Special Steels Ltd 151 70 225 140 110 - - - - - - -54%

Zen Technologies Ltd 115 68 170 125 - - - - - - - -41%

KSB Ltd 820 682 1100 - - - - - - - - -17%

Thermax Ltd 1019 1158 1230 - - - - - - - - 14%

Transpek Industry Ltd 1547 1270 2000 - - - - - - - - -18%

BASF India Ltd 1954 999 2500 2000 1700 - - - - - - -49%

Artson Engineering Ltd 64 33 95 75 - - - - - - - -48%

Remsons Industries Ltd 104 86 155 130 - - - - - - - -18%

Snowman Logistics Ltd 33 39 55 - - - - - - - - 17%

Alembic Pharmaceuticals Ltd 605 571 751 - - - - - - - - -6%

SKF India Ltd 1942 2197 2620 - - - - - - - - 13%

HFCL Ltd 25 18 35 - - - - - - - -29%

Sudarshan Chemical Industries Ltd 372 401 500 - - - - - - - - 8%

Huhtamaki PPL Ltd 254 252 320 - - - - - - - -1%

Mishra Dhatu Nigam Ltd 123 163 160 190 - - - - - - - 32%

Anuh Pharma Ltd 142 154 175 - - - - - - - 8%

TERM OF THE WEEK: Equity-linked debentures (ELD): An equity-linked debenture is a hybrid structured product i.e. they combine the benefits of capital protection along with participation in returns from the equity markets. It is a zero-coupon bond and the returns are linked to an index. The coupons earned by the ELDs depend on the performance of the stock markets during its tenor.

COVERAGE NEWS: Hikal Limited: Hikal has informed the exchanges that MIDC has restored 100% water supply to the Taloja MIDC zone on 25th October, 2019 (Taloja plant was earlier receiving 50% water supply; affecting Q2FY20 operations). The plant is now fully operational. Company has also informed that its Mahad Facility, which was affected by flooding, is now fully operational as well. Our comments: This was the much needed positive for the company after the jolts the stock received post the results declared. Engineers India Limited: Numaligarh Refinery Ltd has awarded Engineering, Procurement and Construction Management Services to EIL for Cross Country Crude and Product Pipelines and Crude Oil Terminal. It is one of the largest pipeline networks to be set up in North Eastern region, about 2000kms. EIL's order value for the project is approximately ~Rs185cr. Our comments: This is an addition to the order book of the company. Excel Industries Limited: Excel Industries Ltd has informed the regulators that the acquisition of the chemical manufacturing unit of NetMatrix Crop Care Limited located at Plot no. 15 & 15A, APSEZ, Atchutapuram, Visakhapatnam, Andhra Pradesh has been successfully completed on 25th October, 2019. Result Update: SKF India Ltd: The total revenue for the quarter de-grew by 2.5% to Rs7,472mn as compared to Rs7,660mn in the same quarter last year. The EBITDA margin for the quarter under review stood at 12.72% as against 16.02% in the corresponding quarter of last year. The net profit is flat at Rs846mn as against Rs843mn in the comparative quarter, on exercise of option of lower tax rate. The EPS stands at Rs17.10. Outlook and Recommendations: Slowdown in the Auto sector has impacted the contribution of the Auto segment to the company’s overall revenues. Although the focus of the company lies towards the shift to the industrial segment, it was not that visible in the quarter of reference. Cost-control measures, increase in exports, foreign exchange benefits and lower tax rate collectively helped the company improve its NPM. This survival strategy of the management in terms of margins backed by support of the parent will help SKF face challenges in current scenario. Thus, we maintain our target price of Rs2,620 on the stock with a 12-month horizon.

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Weekly Sectoral Gainers & Losers in (%)

01 Nov 2019

Page No: 4

Corporate Announcement

Corporate Announcement

Orders For EIL

Impacts Of Auto Slowdown

Result Update: Mishra Dhatu Nigam Ltd: The management has reported about stabilisation of 1500T forge press while at the same time the recent capital investments coupled with healthy order booking (particularly from space sector) has helped company register higher turnover. The net sales for the quarter under review grew by 47.8% to Rs1,702mn as compared to Rs1,152mn in the same quarter last year. The EBITDA margins for the quarter under review stood at 31.1% as compared to 30.2% in the same quarter last year. The net profit grew by 74.5% to Rs358mn as against Rs205mn in the comparative quarter. The EPS for the quarter under review stood at Rs1.91 as compared to Rs1.23 Outlook and Recommendations: The company has registered good growth in terms of top line as well as bottom line for the quarter under review. The order book position of the company as on 1st October 2019 stood at Rs17.76bn. The company has been spreading its wings in a number of niche defence related projects wherein they intend to be a part of Advanced Multi-role Combat Aircraft project to be built jointly by the Aeronautical Development Establishment (ADE) and the Gas Turbine Research Establishment (GTRE) - both Defence Research and Development Organisation (DRDO) bodies based in Bengaluru. The company has also been spotted in number of defence expo (DefExpo) displaying joint efforts of bulletproof jacket they developed together, named Bhabha Kavach in recognition of BARC’s contribution. With a strong order book in hand which is providing a visibility of nearly 6-8 quarters, new product developments and better margins shown by the company, our conviction in the stock idea has further strengthened. The stock has already breached our initial target price of Rs160 and we take the leeway to revise the target price to Rs190 with a horizon of 12 months.

ECONOMY: Fiscal deficit hits 93% of budget estimate at Rs6.52tn till Sept-end As per the government data, the country’s fiscal deficit reached nearly 93% of the Budget Estimate (lower than 95.3% in the corresponding month a year ago) at Rs6.52tn at the end of September in the current financial year. With muted tax revenues, the government will have to undertake spending cuts to achieve FY20 fiscal target of 3.3% of GDP. Additional RBI transfer provided some cushion to the government that saw net tax revenues grow by a muted 4%, aiding overall revenue receipts that stood at Rs8.16lk-cr in H1FY20. Considering the economic slowdown, the government however, did not cut expenditure too much. The government spending has picked up significantly in the months after the release of Union Budget in July 2019, which would support the economic growth in Q2FY20. Our comments: The government will still stick to budgeted levels of market borrowing for the fiscal; indicating to be keen to be within the budgeted levels of 3.3% of the GDP. However, tax revenues may take a hit post-October due to cuts in the corporate tax rates announced recently.

INDUSTRY: Govt. likely to reject telcos' demand for 2-year spectrum fee moratorium The Finance Ministry is likely to reject a demand from the telecom industry for a two-year ban on payment for spectrum bought in previous auctions. Recently, the Supreme Court ruled in favour of the government on recovering AGR of about Rs92,000cr from telecom service providers including Bharti Airtel, Vodafone, Reliance Communications and state-owned MTNL and BSNL. The setback to the telecoms came as the apex court upheld the AGR definition formulated by the Department of Telecom (DoT) and termed as frivolous the nature of objections raised by them. Our comments: Given the challenging fiscal situation this year, the government is banking on non-tax revenue items to make up for some of the anticipated tax revenue shortfalls. So any relaxation or waiver cannot be given on spectrum fee.

On Growth Track

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01 Nov 2019

Page No: 5

Fiscal Deficit In-line

Telco’s Plea Gets Rejected

INDUSTRY: India Core Sectors contracts 5.2% in Sept, most in 14 years India’s core sectors, ranging from cement to steel and energy, contracted the most in fourteen years in September, adding to a list of indicators suggesting that economic growth remained weak in the July-September quarter. The Indian economy grew at a six-year low pace of 5% in the April-June 2019 quarter. High frequency indicators suggest that growth since then may have weakened even further due to weak demand and constrained financial conditions. Such a low growth in core sector industries has not been witnessed so far in either 2011-12 base or 2004-05 base year series. This clearly indicates the severity of the ongoing industrial slowdown. Barring fertilizers, where the output improved by 5.4% in September, the other seven infrastructure industries witnessed a contraction. Coal was the worst performer on account of an extended monsoon, a surge in renewable energy supply and labour issues at state-run Coal India Ltd. Our comments: Experts agree that this is a worrying signal, but the trend can be reversed in a few months.

Demand for mining equipment falls 15-17% y-o-y: ICRA The demand for mining and construction equipment has seen a sharp fall by 16-17% on a y-o-y basis on account of tight liquidity conditions in the market delayed payment to contractors and an overall slowdown in government spending on infrastructure activity. Further, lack of liquidity on account of delayed payment by contractors coupled with a slowdown in project execution is a cause of concern. Equipment utilisation in a few markets is down almost 50%. Consequently, delinquencies which were holding largely steady for the construction equipment asset class until Q1FY20 too are expected to have increased in the past two months. Our comments: Considering this sharp fall in demand, ICRA has scaled down its CY19 outlook sharply to a decline of 15-17% after factoring in some post-monsoon recovery during Q4CY19.

COMPANY:

Siemens to double manpower at Chennai centre Siemens' Chennai-based Graphics and Engineering Center of Competence is planning to double its manpower to 200 engineers over the next two years and develop applications for global market. As per the Executive Vice President of Siemens Pte Ltd; GECC Chennai will add talented people as business expands, growing from the current manpower of 85 people to over 100 by end of this year and 200 in the next one to two years. The Chennai facility was started as a second support to the main centre in Sofia, Bulgaria, about 10 years ago but became an independent entity within the group in 2011 catering to the Asia Pacific and Middle East. Growth has been rapid over the past three years with Siemens US centres off-loading work to Chennai. The Chennai team is now providing graphics and engineering services for building automation systems for the Middle East, Asia Pacific and the US regions. Our comments: This shows that Siemens is bullish on India and is willing to invest here. RIL recast may help Jio rein in AGR-linked payments to government Reliance Industries Ltd.’s decision to separate the digital business from the telco may help its telecom arm save on future payments to the government that are based on its Adjusted Gross Revenue (AGR) and prompt rivals to consider adopting a similar arrangement. The Supreme Court upheld the definition of AGR for telcos to include their non-core income streams. This increases the amount payable as licence fees and spectrum usage charges, which are calculated as a percentage of AGR. Some markets experts are of the view that moving Jio’s noncore digital businesses to a new unit would contain the telco’s AGR-linked licence fee/SUC payouts in future and in turn insulate the company from potential financial shocks, ahead of a potential listing in about a year. Our comments: This move will be beneficial to Jio.

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01 Nov 2019

Page No: 6

Reduction In Core Sector Output

Sharp Fall In Mining Demand

Plans To Double Workforce

Recast Of Business Division

COMPANY:

RIL draws government ire by monopolising sale of its own CBM The government is weighing options of terminating the Production-Sharing Contract (PSC) or invoking arbitration to penalise RIL for selling to itself all the Coal Bed Methane (CBM) it produces, allegedly in violation of policy. RIL conducted open and transparent bidding process through a reputed independent third party, in compliance with provisions of the CBM contract and policy. RIL emerged as the highest bidder. Supply of CBM gas to RIL, pursuant to the bidding process, maximises benefit to the government. Government official is of the view that a producer can sell CBM to an affiliate if it fails to find a buyer in an open and transparent auction. Our comments: There are two options viz; terminate the PSC or invoke arbitration. The government is yet to make up its mind on which course to take and this decision can set a precedent. Saudi Aramco to keep 4.6mn barrels of oil in Indian storage According to a government official, India will lease a quarter of its strategic petroleum reserve in Padur to Saudi Aramco to store about 4.6 million barrels of oil. Global oil producers are eager to gain a foothold in India, where fuel demand is expected to keep rising as the country's economy grows. Indian Strategic Petroleum Reserves Ltd, a government company charged with building oil storage, signed a MOU with the Saudi state firm for its participation in the 2.5-million-tonne facility in Karnataka state. Aramco has signed an MoU for only one compartment out of the four available at the Padur storage facility. India, which relies on imports for about 80% of its oil needs, has underground emergency storage in three locations to protect against any supply disruption. The reserves can hold 36.87 million barrels. Our comments: This is part of government’s strategy to seek global investment in its pursue to expand energy infrastructure. YES Bank receives a binding offer of USD1.2bn The bank has received a binding offer from a global investor for an investment of USD1.2bn in the bank through fresh issuance of equity shares; subject to regulatory approvals/conditions as well as bank's board and shareholders approvals. The bank however did not disclose the name of the investor. This offer would enable the bank to maintain the minimum capital requirement and the amount is sizeable enough which can take care of future growth as well. Our comments: Raising more capital will be crucial for Yes Bank to achieve regulatory balance between capital adequacy rules and business growth.

01 Nov 2019

Page No: 7

Govt. Mulls Action Against RIL

Strategic Oil Reserves

Binding Offer For Yes Bank

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