MONDAY DECEMBER 5, 2011

Economy: Downgraded

NVESTMENT climate challenging: With no respite in the broader investment climate and challenges emanating from global economy, industrial sector faces strong headwinds. Slowing exports and tax collections add to the mounting woes. While government has attempted to rollout the policy engine once again, the most important being the National Manufacturing Policy, such initiatives are not without doubt and can bring relief only in the medium term.

RBI policy turning growth supportive: If commodity price trends pan out as envisaged, inflation would ease, and RBI policy would take a definite turn toward being more supportive of growth. The current IIP print may also give reason for RBI to stick to its guidance of no further rate hike. Corporate sector still resilient: As a silver lining, the Indian corporate sector has held up its performance amidst downturn with 2QFY12 revenue growth of 21% and PAT growth of 12%. Downgrade FY12 IIP growth

to 5%: While contrasting evidence is available in various sectors including capital goods (where projects outstanding continues to be strong while new projects seems to have stabilized), industrial growth clearly has lost momentum in recent months. Downgrade FY12 GDP growth to 7.2%: Considering the possibility of further global and domestic headwinds, we have downgraded our FY12 GDP growth estimate to 7.2% from 7.6% earlier. (NMS)

MONEY, MARRIAGE & METHOD

By Shruti Kohli

Tata Sponge Iron

DJUSTED PAT for 2QFY12 declined 4% QoQ (6% YoY) to INR217m, below our estimate of INR224m on account of lower sponge iron production. Sponge iron production was down 1% QoQ (30% YoY) to 71,000 tons, as iron ore supply was impacted by local issues. Net sales grew 19% QoQ (down 1% YoY) to INR1.74b while realizations increased 23% QoQ to INR22,397/ton. We expect sponge iron production to be significantly lower at 300kt (v/s 383kt in FY11) due to iron supply issues. We have cut our FY12 volume estimate from 355kt to 300kt, reducing our FY12 EPS estimate by 4%. Radhikapur (East) coal block is on track. Coal production is likely to start in 2013. The stock trades at an attractive EV of 2.1x FY12E EBITDA and 5.6x FY12E EPS. Maintain Buy.

4.1x EV/EBITDA and USD54/ton. Maintain Buy with target price of INR466 (5x FY13 EV/EBITDA).

Dena Bank
ENA Bank's (DBNK) 2QFY12 PAT grew 21% YoY and 15% QoQ to INR1.9b. Reported NIM improved 32bp QoQ to 3.2% despite ~300bp decline in CD ratio, leading to sequential NII growth of 15% to INR5.1b. Key highlights: NIM improves QoQ: Reported NIMs improved 32bp to 3.22%. While yield on loans rose 64bp QoQ, cooling bulk deposit rates led to containment of cost of deposits (up 26bp QoQ) which aided margin expansion. Valuation and view: We expect DBNK to report EPS of INR21.8 in FY12 and INR25.5 in FY13. BV will be INR122 in FY12 and INR144 in FY13. The stock trades at 3.8x FY12E EPS and 3.2x FY13E EPS and 0.7x FY12E BV and 0.6x FY13E BV. RoA and RoE are likely to be ~0.9% and ~19% respectively over FY12 and FY13. Maintain Buy.

expected, asset quality surprised negatively. A steep increase in slippages, despite INBK shifting 100% its portfolio under CBS for NPL recognition in June 2010, reflected weakness in asset quality. However, the trend needs to be monitored. We expect INBK to report EPS of INR42 in FY12 and INR48 in FY13. BV is expected to be INR215 in FY12 and INR252 in FY13. The stock trades at P/BV of 1x FY12E BV and 0.9x FY13E BV. Maintain Buy.

Divi's Laboratories
IVI'S Laboratories' (DIVI) 2QFY12 performance was in line with our estimates. Key highlights: Divi's Laboratories (DIVI) reported 38.7% YoY growth in 2QFY12 revenue to INR3.54b (against our estimate of INR3.69b). EBITDA grew 50% YoY to INR1.26b (against our estimate of INR1.25b) and adjusted PATY grew 47.4% YoY to INR1.06b (against our estimate of INR964m). The growth numbers look very strong partly due to a low base of 2QFY11 when performance was adversely impacted by customer inventory de-stocking. We expect DIVI to be a key beneficiary of increased pharmaceutical outsourcing from India, given its strong relationships with global innovator pharmaceutical companies. It has undertaken a large capex of INR2b to set up a new SEZ, implying positive prospects for the outsourcing business (generally DIVI does not undertake capex without adequate revenue visibility from customers). We estimate 23% revenue CAGR over FY11-13 led by both the API and CCS business segments and a ramp-up in neutraceutical revenue. We expect a slightly lower 18% EPS CAGR due to the significant increase expected in DIVI's tax rate from 9% to 20%. The stock trades at 21.4x FY12E and 16.9x FY13E consolidated earnings. Maintain Buy with a target price of INR904 (20x FY13E EPS).

Colgate Palmolive

OLGATE Palmolive's (CLGT) 2QFY12 results were in line with our estimates as PAT increased 7% to INR1,076m (against our estimate of INR1,085m). Strong volume growth of 15% in toothpastes drove overall 13% volume growth, but increased investment in new launches and aggressive promotion resulted in a 45% increase in ad-spends (up 310bp), which impacted profitability. We believe CLGT's strong positioning and singlesegment focus make it a formidable competitor in the oralcare market and CLGT is likely to continue posting healthy double-digit growth over the medium term. We expect P&G to launch Oral B toothpaste in India. This will trigger fresh competition in the toothpaste market in India, which would have growth and margin implications for the entire oral-care segment. We increase our estimates for toothpaste volume growth from 12.5% to 14% but continued input cost pressures and higher ad-spends keep our estimates largely unchanged. We believe the stock, at 31.8x FY12E EPS of INR32.7 and 27.6x FY13E EPS of INR37.7, factors in all structural positives and it trades at a 25% premium to its five-year average P/E multiple. Maintain Sell. IRLA Corp's 2QFY12 performance was below estimates, with EBITDA of INR316m (v/s est INR715m) and PAT of INR261m (v/s est INR584m), impacted by lower volumes, higher costs and forex loss. Cement volumes grew just by 2% YoY (-7% QoQ) to 1.41mt (v/s est 1.45mt). Realizations declined by 6% QoQ (+3% YoY) to INR3,213/ton (v/s est INR3,023/ton), benefitting from improvement in market mix. Net sales grew by 6% YoY (-8% QoQ) to INR5.2b (v/s est INR4.9b). EBITDA margins declined by 20.4pp QoQ (970bp YoY) to 6.1% (v/s est 14.6%) and PAT de-grew by 77% QoQ (- 62% YoY) to INR261b. The board has announced interim dividend of INR2.5/share. We are marginally downgrading our FY12 EPS by 1% for FY12 to INR50.2 and FY13 by 5% to INR55.2, to factor in for higher energy cost and RM cost (due to mining issue at Rajasthan plant). The stock trades at 5.9x FY13 EPS,

Sun TV Network
UN TV (SUNTV) reported 2QFY12 PAT of INR1.8b, up 8% YoY but down 4% QoQ (10% below our estimate due to lower revenue growth and higher D&A). Revenue of INR4.5b was 6% below our estimate and EBITDA of INR3.65b was 5% below our estimate. EBITDA margin was 81% v/s our estimate of 80.3%. Advertising and broadcast revenue grew only ~1% YoY and QoQ to INR2.74b. While ad revenue environment improved in 2QFY12 due to festive demand, the management remains cautious on sustenance of the improvement. We have downgraded our FY12 advertising and broadcasting revenue growth estimates from 4% YoY to 2% YoY, implying 0% growth in 2HFY12. We are downgrading earnings by 7-11% for FY12 and FY13 led by a downgrade in advertising and subscription revenues. We expect EPS CAGR of 9% over FY11-13. The stock trades at 14.4x FY12E EPS of INR19 and 11.7x FY13E EPS of INR23.3. Maintain Buy with a target price of INR350 (15x FY13 EPS).

LONG marriage is two people trying to dance a duet and two solos at the same time. Well said. And well read. But is it well lived too? Usually not. More marriages are on the rocks these days for the lack duet-solo balance when it comes to money matters. Adjustments were easier until a few years back when money was not in the centre stage. A newly married couple followed unwritten manuals with age old rules and clauses. Everybody was following the same dictums vis a vis money. So there were no contrasting views. The Days Gone By Only the man of the house was earning and the expenses were taken care of mostly by the wife even though the areas of responsibilities were divided. Wife was not concerned even if the husband told her nothing about investments or any of his expenses. She never bothered to know anything about financial matter even if the investments were in her name. And of course the husband thought it pointless to talk math with his wife who spent the whole day in the kitchen putting together not numbers but vegetables and spices. But now that women are financially independent and well aware of the weird ways of the world and how to tackle to

them, theres a dilemma about whose money goes where. So as against the one view of yore, there are numerous contrasting views and ways. Everybody is saying something different. But at the end of the day, the fight is to make relationships work...and work peacefully. Troubled Waters Take the instance of Neha and Sajit. They got married three years back after a courtship of six long years. Both are working and earn well from their respective jobs. But barely six months after the marriage, there was tension brewing. The reasons were as piddly as who pays the electricity bill. When Neha suggested that they divide expenses among themselves, Sajit took offence and told her that he cant imagine himself living with his wife like a roommate. It was unwise on his part to have rejected the golden offer. His male self-respect was the hurdle. He had always imagined a conventional family setup where the husband managed the family upkeep with his salary. But with the salary/expenses ratio gone awry in an inflationary backdrop, it was tough for him to digest the fact that his wife contributed to family expenses along with him. The Other Couple Even though his salary was only good enough either to meet his own material desires or the family essentials, he hated it that Neha shared the burden. A

year later, Neha discussed the problems with her colleague Anisha who had got married around the same time as Neha. On hearing Nehas story, Anisha told her that there were problems in her married life too but the situation was exactly the opposite. Here Anisha refrains from spending a single penny on joint expenses like house rent, electricity bill, WiFi and TV network bill, groceries and other things of common usage in a household. This does not go down very well with her husband Ankur. Just last month, he was all set to buy an expensive audio set for his car. He had been saving for this for a long time. Just then, it so happened that their old airconditioner conked off beyond repair and they had to buy a new one. So, all his saved money was spent on buying a new AC for the house. Womans Money, Pocket Money At this point, Neha looked intrigued. She asked Anisha why didnt she buy the AC. After all both of them were going to use it and she very well knew about Ankurs wish. Anisha zapped at her with her eyes bulging and eyeballs almost popping out. She told Neha how could she sound so dumb. In an Indian household, the husband is meant to provide for the needs of the family. Men are groomed that way. So they are used to it. Womens money is like pocket money. It has to be spent to fulfill their own needs. She showed Neha the new diamond ring she bought the day before on her way back from office. Anisha said that her husband would never have been able to buy this for her anytime soon. Just because she keeps all her money to herself, she could manage all the expensive dresses and jewellery. Though Neha wasnt convinced, she didnt counter Anishas sublime opinion. Operation Sort-It-Out But as she rehearsed the conversation through the day, she had an idea by evening...an idea that worked. She found out ways to know what Sajit wanted to buy. She started gifting him those things. Sajit questioned her the first few times.

But Neha smartly told him that it makes her happy to gift him things. Later she had a conversation with him that if they both spent together, theyll be able to handle the finances in a better way. She told him that it was no shame if the wife contributed to the family expenses. This heart-toheart had a miraculous effect on their scheme of things. Sajit would now accept all gifts with a smile thereafter and would not crib about letting Neha share the household expenses. Also, it was not just the husband getting all the goodies. Neha indulged too. She bought clothes and jewellery for herself every now and then. Duet-Solo Balance Now as things were getting streamlined, they made sure that a part of their salaries were saved. They invested some of it. Each of them had a separate bank account and they also had a joint account. So they struck the duet-solo balance with ease. They lived together even as they lived their own lives, freely. People would say this is a fairy tale arrangement. Well, it is not. Its about your will. If you want to work it out this way, things will move in that direction. Try it. Youll know how real you can make it. Fourth year of their marriage on and Neha and Sajit are a happy couple looking forward to their first baby. They have even planned that when the baby grows up, he will get pocket money from his mom. Thats because moms are always right Neha tells Sajit on a lighter note. Meanwhile, Anisha is only erratically seen in office as her divorce proceedings have had her occupied for some time now. Earlier it were the endless visits to the marriage counsellor that kept her occupied. It was very thoughtful of Neha and very co-operative of Sajit to have worked out a middle path to make their marriage work. They understood gradually that after marriage its not just your money, my money. It has to be expanded to your money, my money, our money. (The author is FounderEditor, MoneyQuin.com, money magazine for women)

N ASSUMPTION on behalf of the reader: we all know that children need to know the ways of money and it should not be left to destiny or to be learnt by trial and error later on in life. what and how to teach your children about money Winston Churchills famously quoted I love to learn, but cant say the same thing about being taught. With children and more so with teenagers it is never easy to teach, they simply dont want to be taught. But they

after school. Sit down with the child and find out how much he normally would spend on this snack every day. Lets say he spends Rs.20.00 on the daily snack. For five days in a week he would spend Rs.100.00. So every Monday you could give him Rs.120.00 (20% extra for the child to use his discretion on what to do). Now, it is simple, instead of giving him Rs.20.00 everyday or whatever he asks for now and then, you are giving him Rs.120.00 every week to manage his snack expenses. If, he tends to spend more on the

make you a cup of tea after a tiring day, she shouldnt be asking for money to do so. Encourage the child to put aside money as savings for planned larger expenses like if her friends birthday is round the corner and she wants to buy a gift, she can put away part of her allowance starting 2-3 months in advance to cover up the extra expenditure. In any case she does get a bit more than what she absolutely needs. And sometimes skipping snacks or buying something less expensive is not too bad either. The 3 box idea is a good one too. Keep 3

Jubilant Foodworks

Birla Corporation

Indian Bank

NDIAN Bank's (INBK) 2QFY12 PAT grew 13% YoY and 15% QoQ to INR4.7b (4% above our estimate), driven by higher than- expected top-line growth. Key highlights: Margins up 30bp+ QoQ: Reported margins in 2QFY12 improved by ~33bp QoQ to 3.76%, resulting in higherthan expected NII growth. Resultantly, NII at INR11.4b, was up 15% YoY and up 10% QoQ (4% above our estimates). One-off income, higher recoveries boost other income: Non-interest income grew strongly by 21% YoY and 37% QoQ to INR3.4b, driven by sequentially higher recoveries of INR400m against INR180m in 1QFY12, and INR400m in interest on income-tax refund (clubbed in other income), which is one-off in nature. Adjusting for the interest on income-tax refunds, non-interest income grew 7% YoY and 21% QoQ. Valuation and view: While margin performance in 2QFY12 was better than

UBILANT Foodworks (JUBI) has posted lower than expected results for 2QFY12, with adjusted PAT at INR237m v/s our estimate of INR262m. SSS growth disappointing: For the first time in seven quarters, JUBI's same store sales (SSS) growth disappointed us. SSS grew 26.7%, as weakening demand and high base took a toll. We maintain our estimate of 28% SSS growth in 2HFY12 on the back of a relatively low base and aggressive management focus to increase SSS momentum. Valuation and view: We maintain our SSS growth estimate of 28% for 2HFY12 on the back of a relatively lower base and management's focus to increase SSS momentum. Any slowdown in SSS growth can reduce operating leverage due to rising costs associated with new store openings. We reduce our earnings estimates by 4-6% for FY12 and FY13 to factor higher input costs, increased advertising spends and set up costs for Dunkin Donuts. Stock trades at 51x FY12E EPS of INR16.1 and 34x FY13E EPS of INR24.2; valuations leave little room for negative surprises. Maintain Neutral. (NMS)

Money talk with kids!

should just know. They should know about money. Yeah, but what is that, they should know about money? Your child should know that Money is a scarce resource and has to be used judiciously Money has to be earned and doesnt come free How much you want and how much you have will not always match Money is really not everything. It is important but not the only Important thing in life Youve to get them to learn, by themselves in an easy and fun way, so they own it up, take pride and practice. And with something like money, which can be a bit tricky, sensitive and sometimes dangerous how do you do this effectively without sounding preachy? The answer is a well designed and executed Allowance Plan! Give your children pocket money. Now, dont jump off your seat. Read on Children who are ten years of age are ready for an allowance plan. Regular (monthly / fortnightly / weekly) allowance money can be given to them that they may use to handle some of their expenditure. How much money will depend on what all expenses they will handle. For example: One could start with some basic expenses like say, snacks after school. The child may want to buy a drink or grab a quick snack from the canteen during or snack because he has more in his pocket, well, he will learn that money is a scarce resource when you say Sorry, this weeks quota over if he wants a replenishment middle of the week. You could gradually increase the amount and the expenses he may handle himself. The allowance could be linked to some chores in the house. All basic work, like putting away her books and keeping her room clean are to be done anyway and cannot be linked to allowances. But some work which generally children are not expected to do like clean the insides of the car once a week / clear the table after dinner and put away washed vessels / soap and clean furniture once a fortnight can be linked to allowances. You will have to insist that the work be completed 100% to be eligible for allowance. Shoddy work should not be condoned. A sense of seriousness has to be instilled in the process. This will teach the child that money has to be earned and understand that time and effort goes into earning money. But tread the line carefully so as to not permit the child demand money for small helps - like you ask your child to

transparent boxes and name them SPENDING SAVING SHARING. The allowance once received is split between these three boxes, say Rs.100 for spending, Rs.10 for saving and Rs. 10 for sharing. The saving box is to be used for planned expenses and the sharing box can be opened and the contents donated to a nearby orphanage or animal care centre whatever cause your child is passionate about. Make sure to collect a receipt in the name of the child and safe keep it. Imagine the childs pride for having contributed her bit. Whatever goes right, whatever goes wrong, learning is a continuous process for both you and your child. Enjoy the journey. But always remember Allowance is not the childs birth right. It is only a tool to learn how to handle money.