SECTOR UPDATES 9th November – 15th November Finnacle Investments 11/15/2014

November 15, 2014

1

Banking and Financial Services Sector Update

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

Market Performance:

The banking sector performed quite well during the last week. Almost all the major banks closed

on a positive note by the end of the week. Bank Nifty closed at 17576.80 after gaining 0.71%. All

the PSU banks gained except Canara bank, which dropped by a mere 0.14%.

STOCK PRICE % CHANGE

ICICI Bank 1692.30 -0.01

HDFC Bank 930.10 1.54

Axis Bank 476.90 0.70

PNB 938.60 0.44

SBI Bank 2787.85 2.52

MAJOR NEWS:

Kerala & Goa have achieved their targets under Jan-Dhan yojana

Kerala and Goa have become the first states in India to achieve their goal of providing

every household with one bank account. This was made possible in just two and a half

months after the launch of the Pradhan Mantri Jan-Dhan Joyana.

HDFC bank gets approval to raise foreign investment to 74%

HDFC bank’s proposal to increase foreign investment to 74% was approved by The Foreign

Investment Promotion Board (FIPB), on Friday. However, the bank has to pay a penalty for

breaching the permitted limit, as it already had close to 74% of foreign investment. The penalty

amount will be decided by RBI.

Religare AMC to raise Rs 750 crore through close-ended debt fund Religare Global Asset Management is planning to raise Rs 750 crores through a close-ended

debt fund. It has already raised Rs 300 crore in its first round of money raising.

November 15, 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 368.20 +2.75%

Dabur 231.10 +2.32%

Marico 329.45 +9.05%

Colgate 1990 +16.08%

Nestle 6317.10 -0.26%

FMCG Index gains on GST roll out hopes; HUL ,Colgate hits 52 wk high

Hopes of the passage of GST bill in the parliament have increased with the Congress likely to

back the proposal if there are no material changes made to the original bill that was proposed

by the UPA. This has led to an increased buying in the FMCG stocks as the investors

see the demand picking up and the margins improving after the roll out of GST.

According to Ashwani Gujral, the buying momentum is likely to continue in the near term and

the FMCG sector should see a rally of around 10%.

Margins of FMCG firms to improve on account of low oil prices

Low oil prices are expected to boost margins of companies like HUL , Colgate etc by

60-70 basis points on an average on account of lower input costs.

In July-September, operating margin of Marico’s India business was 15.1 per cent against

17.6 per cent a year ago before corporate allocation. The decline in margin this quarter was

mainly on account of sustained hyper-inflation in raw material prices as the company chose to

pass on only a part to the consumers, Marico said in a statement post results. The company

believes that an operating margin in the band of 17% to 18% is sustainable for the domestic

business in the medium term.

HUL management also said post results that with commodity prices falling, input costs are

expected to decline

ITC wind farms in Andhra Pradesh caught in ‘cross-fire’

Due to the complexities post the bifurcation of Andhra Pradesh, and the lack of wheeling

agreements that encourage wind energy, ITC has not been able to utilise the wind power

generated for its units in Telangana and Andhra Pradesh for the last few months. Several ITC

factories, five luxury hotels and the ITC Infotech Park in Bengaluru are powered by renewable

energy. ITC has a total installed capacity of over 130 MW in wind energy with an investment

of nearly Rs. 800 crore.

November 15, 2014

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References-

http://articles.economictimes.indiatimes.com/2014-11-10/news/55956126_1_fmcg-index-fmcg-stocks-colgate-palmolive

http://www.mydigitalfc.com/news/fmcg-firms-expect-better-margins-low-oil-prices-265

http://www.thehindubusinessline.com/news/states/itc-wind-farms-in-ap-caught-in-cross-fire/article6600041.ece

November 15, 2014

4

Pharma Sector Update

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

USFDA rebukes Cadila Pharmaceuticals over significant deviations from standard

manufacturing practices

USFDA has issued warning to Indian pharma company Cadila Pharmaceutical for lapses found in the

quality and manufacturing standards in its Ankleshwar plant in Gujarat in its inspection in March. If the

company fails to take corrective measures, the agency can ban exports to US from the plant. US

happens to be the biggest market for India's $15 billion generic manufacturing sector but a number of

warnings and sanctions over the last year have damaged India's reputation as a supplier of safe and

affordable drugs.

Sales in US takes a hit due to slowdown in the new generic drugs approval process

Dr. Reddy's Laboratories and Glenmark Pharmaceuticals reported a drop in their second

quarter US sales blaming the slowdown in the approval process. Sun Pharma managed a 15

percent rise in its quarterly profit, reporting a profit of Rs 15.72 billion for the quarter, nearly meeting

the estimate of Rs 15.88 billion, driven by strong growth in sales in the domestic market. On the other

hand, Cipla reported a 16 percent drop in its quarterly profit, hit by the sluggish sales in US market

due to slowdown in the new generic drugs approval process.

Venus Remedies gets approval to market its generic drug meropenem in Switzerland

Generic drug maker Venus Remedies received approval from the Switzerland drug authority,

Swissmedic to market its generic injectable antibiotic meropenem used in the treatment of severe

bacterial functions like pneumonia and broncho-pulmonary infections among others. The company

plans to launch the product early next year through its partner Swiss Pharma GmbH Zurich and

expects to capture 10 percent share in the meropenem market in Switzerland. The company has got

marketing approval from more than 40 countries such as UK, France, Germany, Saudi Arabia,

Australia and Italy among others.

Singapore investment company, Tesmasek acquires 10.16% equity stake in India's

Intas Pharmaceuticals

Intas Pharmaceuticals, is a leading, vertically integrated global pharmaceutical company from India

with end-to-end capabilities of formulation development, manufacturing and marketing along with

backward integration of APIs. Intas has emerged as one of the fastest growing pharmaceutical

companies of the world backed by decades of progressive strategies, productive R&D,

biotechnological expertise and investment in ten advanced manufacturing facilities across the globe.

Temasek has acquired the 10.16% equity stake by way of secondary purchase of shares from private

equity investor ChrysCapital.

November 15, 2014

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Three-year old joint venture between Sun Pharma and Merck & Co called off

Sun Pharma and Merck & Co have decided to call off their joint venture which had aimed at

developing innovative and differentiated drugs for emerging markets in Asia Pacific, Latin

America, Eastern Europe, Middle East and Africa. According to the agreement, Sun Pharma was

supposed to provide its product development skills and manufacturing facilities and Merck, its

regulatory competence and market presence. The reason for the decision is not known yet.

NPPA set to include 100 new drugs under price control

Currently, the government includes 348 medicine formulations that are listed in the National List of

Essential Medicines (NLEM). However, this list includes only specific dosages, strengths and

combinations of medicine formulations. NPPA (National Pharmaceutical Pricing Authority) believes

this loophole does not ensure price regulation of all life saving and essential medicines of mass

consumption. The move to include the new drugs is aimed at expanding the span of price control to

include medicine dosages, strengths and combinations which are commonly used and have high

market share by sales. Earlier in May this year, the NPPA had slashed down prices of 108 drugs

which were outside the NLEM under the public interest clause. However, it had to withdraw the

guidelines after the companies approached the court and the law ministry was of the opinion that the

using of the clause was not required.

Aurobindo Pharma set to buy Natrol Inc for $ 132.5 million

Aurobindo Pharma has emerged as the highest bidder to buy the US-based nutritional supplement

maker Natrol Inc owned by the Indian pharmaceutical firm Plethico Pharmaceuticals for $ 132.5

million. Natrol Inc had filed a bankruptcy application in June this year. Aurobindo believes Natrol is an

excellent strategic fit for the company and provides the right platform for creating a fully integrated

OTC platform in US and other international markets.

References

http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/aurobindo-pharma-

emerges-top-bidder-to-buy-natrol-inc-for-132-5-million/articleshow/45119155.cms

http://www.etintelligence.com/etig/researchchannels/sectors/pharmaNews.jsp

http://www.pharmabiz.com/

November 15, 2014

6

Power Sector Update

(Sector Analysis: Anshu Mishra and Ankit Bacchuka)

Major News:

July – September quarter results

Tata Power results

Tata Power posts loss of 77.75 crore for quarter ending on September 30 2014. The main reason

for this loss is because of drop in coal prices. Last year the company had posted a profit of Rs.

75 crore in the quarter. Net revenue fell 4% to Rs.8, 364 crore in the reporting quarter from Rs.8,

717 crore in the same period last year. Operating profit for the quarter dropped 14% to Rs.1, 156

crore.

Shares of Tata Power lost 2.47% to Rs.88.75 on Thursday on BSE, while the benchmark Sensex

lost 0.24% to 27,940.64 points and the S&P BSE Power index lost 0.44% to close at 2,112.08

points.

Reliance Group results

Reliance Infrastructure Ltd (R-Infra) posted a marginal increase of 1% in profit for 3rd

quarter

ended 30 September. Reliance Power Ltd (R-Power) also reported a marginal increase of 1% in

its net profit for the reporting quarter. For R-Power, higher interest costs and a lower non-

operating income dented profit growth. As of 30 September 2014, the consolidated net worth of

the company stood at Rs.28,040 crore. Due to this R-Power shares ended at Rs.74.55 on the

BSE, down 1.5% from the previous close.

New Projects

Reliance Power Ltd has started a 100-megawatt 2100 crore solar thermal plant in Rajasthan

after an 18-month delay. This project is built using technology from Areva SA.

SAARC member nations are planning to set up SAARC electricity grid that will help in meeting the

power deficit faced by member nations, is expected to be approved by SAARC nations energy

ministers during 18th SAARC summit is scheduled to be held on November 26-27.

Government is to introduce reforms and legal framework to pave way for power trading between

Nepal and India by signing Power Trading Agreement and Project Development Agreement.

Other news

DERC withdrew its power hike of 7% just in 24 hrs after attack from political parties. All three

major parties BJP, congress and Aam aadmi party had slammed DERC for price hike.

November 15, 2014

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References-

http://economictimes.indiatimes.com/articleshow/45149219.cms?utm_source=contentofinterest&utm_medium=te

xt&utm_campaign=cppst

http://economictimes.indiatimes.com/articleshow/45149219.cms?utm_source=contentofinterest&utm_medium=te

xt&utm_campaign=cppst

http://economictimes.indiatimes.com/articleshow/45146390.cms?utm_source=contentofinterest&utm_medium=te

xt&utm_campaign=cppst

http://www.livemint.com/Politics/RF1DNKYHCWe20TMndgw7hN/DERC-withdraws-power-tariff-hike-within-24-

hours.html

http://www.livemint.com/Companies/POilipHFgDfy0BM1VVEdiJ/Tata-Power-posts-Rs7775-crore-loss-in-

September-quarter.html

November 15, 2014

8

Oil and Gas Sector Update

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

Major News:

Oil Ministry seeks Rs 8,183 crore in fuel subsidy

The Oil Ministry has sought over Rs 8,183 crore cash subsidy to make good one-third of the

losses that retailers like IOC incurred on selling diesel and cooking fuel below cost in the

September quarter. Fuel retailers sold diesel, domestic LPG and kerosene at government-

controlled rates which are below market price in Q2. The loss they thus incur is made good

through cash subsidy from the government and dole from upstream firms like ONGC.

Round III of fuel price cuts, reduction likely on November 15 State oil firms plan to cut petrol rates for the seventh time since June and diesel for the third time since the fuel was decontrolled on October 18 as Indian consumers gain from the sharp fall in global oil prices. Fuel prices are reviewed and aligned with global trends in the beginning and

middle of every month, Companies are likely to reduce pump price of petrol and diesel by about Rs 1 per liter by the end of this week

Excise on petrol, diesel hiked; no increase in retail rates

The government has raised the excise duty on petrol and diesel by Rs 1.50 a litre to raise

Rs 6,000 crore in the current fiscal without raising retail prices, as crude oil's sharp fall is

helping both consumers and the exchequer. Industry sources said the increase in excise

duties would significantly reduce the reduction in rates, they may also defer the price cut which

was stated to take place on 15th nov. State oil companies were earning additional revenue of

about Rs 2.25 per litre on petrol and diesel before the increase in excise duty. According to

industry estimates, the increase in excise duty would help the government raise about Rs

13,000 crore additional revenue in a full year.

References-

http://economictimes.indiatimes.com/articleshow/45096154.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst http://economictimes.indiatimes.com/articleshow/45116602.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

http://economictimes.indiatimes.com/articleshow/45136486.cms?utm_source=contentofinterest&utm_

medium=text&utm_campaign=cppst

November 15, 2014

9

Telecom and IT Sector Update

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

Major News:

Recent developments in Telecom & IT industry

Telcos are offering SMSes in vernacular languages for rural India to increase

revenue growth With SMS revenue slowing to a trickle under the onslaught of instant messengers,

telecom operators have begun to consider offering it in vernacular languages or

bundled with data in a bid to keep alive a service that at one time was among the

cheapest modes of communication.

While a large chunk of the SMS revenue has fallen due to the advent of applications

such as Whatsapp, Facebook and others, telecom service providers feel that the

massive Indian populace in rural areas would still.

There are 300 million people yet to get connected, who will use SMS as a primary

means of sending messages. So, even though SMS usage is declining, it will not go

away completely in a market like India, as said by Rajan Mathews, director general of

the Cellular Operators Association of India, the lobby group representing GSM

operators including Bharti Airtel, Vodafone India and Idea Cellular.

Bharti Infratel seeks to buy Voda, Idea towers in 7 circles

Mobile tower company Bharti Infratel approached Vodafone and Idea Cellular to buy

their mobile towers in 7 out of 22 telecom circles in the country.

Infratel has over 36,381 standalone mobile towers spread across 18 states under 11

telecom circles. The company also has a 42 percent stake in Indus Towers- joint

venture between Bharti Infratel, Vodafone and Aditya Birla Telecom.

The states where Bharti Infratel has no overlapping business with Indus includes,

Jammu and Kashmir, Himachal Pradesh, Madhya Pradesh, Chhattisgarh, Bihar,

Jharkhand, Odisha, Assam and North Eastern states. These states jointly come

under 7 telecom circles.

Wipro bags $143 mn outsourcing deal from Levi Strauss

IT services major Wipro has bagged a USD 143 million 5-year outsourcing deal

from Levi Strauss as the US-based denim apparel maker looks to cut 500 jobs in a

restructuring exercise.

Levi Strauss & Co has entered into a Master Services Agreement with India's third-

largest software services firm to outsource "certain global business service activities

within the functional areas of information technology, finance, human resources,

customer service and consumer relations."The company will pay Wipro for the

services through a combination of fixed and variable charges, with the variable

November 15, 2014

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charges fluctuating based on the company's actual need for such services. The

company expects to pay Wipro a minimum of approximately USD 143 million over

the initial term of the agreement.

Mobile data subscribers to reach 501 million by FY18

Mobile data subscribers in the country are expected to grow over two times to reach

501 million by 2017-18 led by increasing consumer engagement with mobile

phones, availability of low-cost Smartphones and expansion of data networks,

making mobile data a compelling Rs 883 billion ($ 15 billion) annual revenue

opportunity.

Fuelling the expansion of data traffic are low-cost Smartphones, which have only

just begun to replace feature phones; and at 13 per cent penetration there is a huge

pent-up demand.

Social media has also been instrumental in driving engagement. Giving an

example, it said there are over 108 million active Facebook users in India and that

figure is growing at over 20 million per year.

India's Smartphone penetration of 13 per cent is still very low, but the market is

seeing an expanding range of both affordable and high-end devices.

Sistema eyes $300 mn Indian video gaming market

Sistema Shyam TeleServices Ltd ( SSTL), which provides telecom services under MTS

brand, has tied up with Nodwin Gaming to launch an online, multiplayer, video gaming

platform -- Gamegod.

ECommerce major Flipkart will be handling the pan-Indian distribution of Gamegod.

This is India's first online, multiplayer, video gaming platform. The launch also coincides with

the roll out of two globally successful games -- Counter Strike Global Offensive (CS: GO) and

DOTA 2.

In a bid to popularise the product as well as celebrate its launch, the firm is also organising an

online multiplayer gaming championship with a cash prize of Rs 20 lakh. MTS has launched

the gaming bundle in two variants.

With a price starting at Rs 1,299, the first kit includes Single Unified License (SUL) of CS:GO

along with the key to play the game and a Gamegod premium membership card with a 30 day

validity and steam wallet vouchers.

For fully loaded Gamegod kit, customers need to pay Rs 4,499 to get an MBlaze Ultra data

card.

MTS' entry into the video gaming segment is not only to expand its product portfolio but also

to cash in on the growing demand for video games in the Indian market.

References-

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

http://economictimes.indiatimes.com/

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

November 15, 2014

11

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 +1.3% TATA steel to organize ‘samvaad’ to connect with the tribals.

Sesa Sterlite -1.1% Sesa Sterlite to invest $782m in Gamsberg-Skorpion Integrated Zinc project

Coal India limited +1.9% Coal India (CIL) signs 161 fuel pacts with power plants.

NMDC +3.3% NMDC-led consortium may buy stake in Russian potash company Acron

Hindustan Zinc -1.9% Vedanta chairman discusses about Hindustan Zinc and BALCO stake sale with FM.

New legal/regulatory environment

Mining ban lift : Goa, the state that contributes most to the exchequer from metals and mining,

is seen recently lifting the ban on mining. After the judicial report by the HC in September 2012

but recently 10 new clearances were given and which are expected to go online very soon.

Estimates for the sector

Obsession with gold: The obsession for Gold with the Indians will never wear out, the moment

the government loosened the gold imports it reached a peak of 225.1 tonnes and during the Q3

the global demand has touched 5 year low during the same the world’s largest gold consumer

China has seen a 37% lesser demand.

Other news

Coal India target: Coal India limited has set a target of 1000 million tonnes of production by 2019

doubling its current capacity of less than 500 million tonnes and this will come from the growth in

the rail transport.

November 15, 2014

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Real Estate:

Stock price performance of key companies

STOCKS CHANGE RECENT NEWS

GMR INFRA +0.10 (+0.50%) GMR Infrastructure Limited net loss for the quarter ended September 30 widened to Rs 610 crore (after minority interest) against Rs 393 crore during the same quarter a year ago.

DLF +2.80 (+2.01%) DLF today said it plans to launch the Real Estate Investment Trusts (REITs) next fiscal to monetise its commercial assets and is in talks with global players for partnership.

New IPOs happening

A $495 million IPO in store for STORE Capital; Oaktree-backed REIT IPO sets terms

STORE Capital, a retail REIT formed by Oaktree Capital with 850 single-tenant properties,

announced terms for its IPO on Wednesday. The Scottsdale, AZ-based company plans to raise $495

million by offering 27.5 million shares at a price range of $17 to $19. At the midpoint of the proposed

range, STORE Capital would command a fully diluted market value of $2.0 billion.

New happening that may change legal/ regulatory environment for the sector

Govt to relax exit option for FDI in real estate

In order to give a thrust to its ambitious plan of ‘homes for all by 2022’, the government is considering

further relaxation of the FDI policy in the construction sector. It is planning to make exit easy for

foreign investors by doing away with the condition of three-year lock-in period.

Guidances/ estimates released by industry bodies for your sector

Residential real estate in 2015: Blue skies some way off

The coming year may not be any different, at least in metros and tier 1 cities, unless property

developers are willing to drop prices to a point where it become attractive to a potential buyer to own

a house instead of renting one. With the government recently relaxing foreign direct investment norms

for real estate firms, property developers have a got a fresh lease of life when it comes to funding.

That will enable them to hold on to prices for a little longer in the hope that buyers will finally throw in

the towel and buy the houses at the inflated rates.

Other sector specific news

S&P, MSCI to make real estate a new index industry sector

A change in the way publicly traded companies are categorized will result in the creation of a separate

real estate sector, bringing the number of Global Industry Classification Standard sectors to 11, S&P

Dow Jones Indices and MSCI said.