Download - Advice For The Wise May'11
ADVICE for the WISE
Newsletter –May’11
2
Economic Update 4
Equity Outlook 8
Debt Outlook 13
Forex 15
Commodities 16
Index Page No.
Real Estate 19
Dear Investor,
There have been several important developments in the recentweeks. Sustained high inflation and RBI’s hawkish stance in light ofit has fundamentally shifted the growth expectations downwards.This will have a cascading effect on the expectations of IIP, creditgrowth, infrastructure development and fiscal deficit. While acontinued increase in interest rates through this year was alwayson cards, an explicit statement by RBI about potentially lower GDPgrowth has made most investors and market watchers to peg theirgrowth expectations lower as well.
The reaction from equity markets in the short term has beennegative. Our expectation is that the subdued mood wouldcontinue amongst investors for a while since most of the effects ofthe monetary policy are important and long lasting in nature.However, since the pricing of Indian stocks is still quite in line withtheir fundamental attractiveness and there are very few majornegative shocks that can be expected in near term, we continue torecommend investing into Indian equities at this point of time.Different sectors will be impacted differently through this changeof expectations. Infrastructure will probably languish for sometime to come while technology might emerge as a winner since itis free from inflation concerns and is largely immune to interestrates as well. A more detailed discussion on the same is includedin the equity markets outlook.
Debt markets saw an increase in the long term yields since arate hike of 50 bps was not fully factored in. In light of futurerate increases we continue to maintain a negative outlook onlong term debt and a positive outlook on short term credit.Fixed Maturity Plans are a suitable vehicle for taking anexposure to short term credit.
On the real estate front, the cash crunch for developers islikely to continue. This does create some opportunities interms of specialized lending to credible developers atattractive interest rates for investors. At Karvy Private Wealthwe have been working on two proposals based on this.Owing to the relatively stable equities markets and fairly highyields on debt instruments along with advent of severalinnovations such as real estate backed debentures andstructured products linked to equities and gold, it would beadvisable for clients to clean up their portfolios. By includingproducts with suitable risk-reward ratio in the portfoliospectrum, clients can look to improve average expectations ofreturns or reduce the overall risk.
3“Advisory services are provided through Karvy Stock Broking Ltd. (PMS) having SEBI Registration No: INP000001512. Investments are subject to market risks. Please read the disclaimer on slide no.24”
Change over last month
As on Apr 30th 2011
Equity markets
Debt markets
Commodity markets
Forex
markets
Change over last year
* Indicates SBI one-year FD
19,1365,7491,3649,850
8.14% 5.75%8.25%
4,40522,140
126.6
44.3881.73
(1.6%)(1.4%)
2.8%1.0%
16 bps(350 bps)
0 bps
3.0%6.6%
8%
0.6%1.4%
9.0%8.9%
14.9%(10.9%)
7 bps181 bps225 bps
34.0%30.1%
47%
1.1%15.1%
BSE SensexS&P NiftyS&P 500 Nikkei 225
10-yr G-Sec YieldCall MarketsFixed Deposit*
RICI IndexGold (`/10gm)Crude Oil ($/bbl)
Rupee/DollarYen/Dollar
4
10 yr Gsec
Gold
70
80
90
100
110
120
130
Ap
r-10
May
-10
Jun
-10
Jul-
10
Au
g-10
Sep
-10
Oct
-10
No
v-10
Dec
-10
Jan
-11
Feb
-11
Mar
-11
Ap
r-11
Sensex Nifty
S&P 500 Nikkei 225
6.8
7.3
7.8
8.3
8.8
Ap
r-1
0
May
-10
Jun
-10
Jul-
10
Au
g-10
Sep
-10
Oct
-10
No
v-10
Dec
-10
Jan
-11
Feb
-11
Mar
-11
Ap
r-1
1
15000
16000
17000
18000
19000
20000
21000
22000
23000
42
43
44
45
46
47
48
Ap
r-1
0
May
-…
Jun
-10
Jul-
10
Au
g-1
0
Sep
-10
Oct
-10
No
v-1
0
Dec
-10
Jan
-11
Feb
-11
Mar
-11
Ap
r-1
1
`/$
5
US
Europe
Japan
Emerging economies
• The HSBC China Manufacturing Purchasing Managers Index, remainedunchanged in April at 51.8.
• Chinese economy is expected to slow down to grow at 9.6% in 2011. Theretail sales increased by 18.5 percent year-on-year basis in April
• The Conference Board Consumer Confidence Index, which had decreased inMarch, improved in April. The Index now stands at 65.4 up from 63.8 inMarch. This is due to consumers’ short-term outlook, which had soured inMarch, improved moderately in April.
• US m-o-m unemployment rate dropped to 8 per cent in Apr 11.
• Euro-zone PMI increased to 57.8 in April from 56.6 in March 11. This was thesecond-highest reading since June 2007, defying that rising energy prices andthe prospect of a Portuguese bail-out would dampen growth.
• Unemployment rate in the Euro zone remained unchanged in March ‘11 at9.9%.
• The Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonallyadjusted 45.7 in April, reaching the lowest since April 2009, down fromMarch’s 46.4, owning to substantial reduction in manufacturing output amidongoing disruptions caused by the earthquake and tsunami.
• Japan’s unemployment rate remained unchanged at 4.6% in March ’11.
6
• The GDP growth rate for Q3 FY11 came in at 8.2%backed by a strong growth in agricultural outputand amidst high inflation, high interest rates andlower government expenditure.
• The economic activities which registeredsignificant growth in Q3 agriculture, forestry &fishing at 8.9 per cent, construction at 8.0 percent,trade, hotels, transport and communication at 9.4per cent, and financing, insurance, real estate andbusiness services at 11.2 per cent.
• The Finance ministry is targeting FY11 growth at~8.50% - 8.6%. We believe the current target issustainable as the agricultural growth is expectedto drive growth in the next few quarters whileindustrial growth will remain moderate.
IIP monthly data
GDP growth
• Industrial output as measured by the Index ofIndustrial Production (IIP) slowed to 3.6% (y-o-y) inFebruary ‘11 as compared to an upward revised3.7% in January ’11.
• Though 15 out of 17 industry group recordedpositive growth, manufacturing slipped to 3.5percent from 16.1 percent last year. Mining andCapital goods sectors were the majordisappointments with mining collapsing to nearzero.
• We believe that monthly indicators are not a veryefficient way of indicating growth and the lowernumbers could also be attributed to higher baseeffect. But, the growth will eventually moderate out.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
4
5
6
7
8
9
10
FY09 (Q4) FY10 (Q1) FY10(Q2) FY10(Q3) FY10(Q4) FY11(Q1) FY11(Q2) FY11(Q3)
• Bank credit growth declined to 21.2 percent in Aprilfrom 23.2 percent in the month of February whileDeposits grew by 16.7 percent compared to 16.4% inFebruary 2011 though moderation was seen inMarch at 15.8%.
• Growth of credit demand and tight liquidity had putpressure on the banks to raise their deposit rates.We have seen a rate hike of 50 bps in the May policyreview but high inflationary pressure may lead theRBI to increase rates further in the coming year.
• We expect credit growth to settle at ~20% levels inthe coming quarters.
• Inflation as measured by WPI increasedmarginally and stood at 8.98% (y-o-y) for themonth of March 11 as compared to 8.31%during February 11. Rising oil prices and highfood prices have led to high inflation in themonth. These figures are based on the newbase year and WPI list.
• We expect WPI inflation numbers to moderatein m-o-m inflation numbers due to the expecteddecrease in food inflation and the monetarytightening stance by RBI, but increasing fuelprices may be a cause of worry.
Growth in credit & deposits of SCBs
7
Wholesale Price Index
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%Bank Credit Aggregate Deposits
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
Mar
-10
Ap
r-1
0
May
-10
Jun
-10
Jul-
10
Au
g-1
0
Sep
-10
Oct
-10
No
v-1
0
Dec
-10
Jan
-11
Feb
-11
Mar
-11
8
April turned out to be a lacklustre month for markets with nifty being down 1.4%. FII investments continued in April with a total amount
of 7000 crore invested in addition to the 7,000 cr invested in last week of March. There has been a net inflow of around 5000 crores by
FIIs so far in this calendar year.
RBI announced the annual policy for FY12on 3rd May. Policy actions undertaken are as follows:
• Repo Rate increased by 50 bps to 7.25%
• Reverse repo to be now a derived value fixed at 100bps discount to Repo. The new rate is 6.25%
• MSF, a new programme for banks to borrow overnight from RBI, with the rate fixed at 100bps premium to repo rate (8.25%).
• Savings Rate increased by 50 bps from 3.5% to 4%.
• Provisioning requirement for certain non-standard assets increased.
All the measures combined could lead to margin compression for the banking space. The savings rate hike would lead to a 12-13bps
pressure in banks margins. So far, demand for both industrial and consumer credit has held on quite well. However, if demand softens,
banks may not be able to fully pass through interest rate hike to clients resulting in further margin pressures. Also, higher interest rates
might lead to NPL creation. There could be some pressure on Capital Goods space as cost of capital increases and the order inflow
activity slows down. Home loans would become expensive.
The tone of the policy was clearly hawkish. RBI stressed on managing inflationary expectations as its number one priority. It expects the
high crude oil and commodity prices to sustain at these levels and even gain going forward. RBI has forecasted the Fy12 growth at
8%. There could be downside risks to that if infrastructure and manufacturing activity slows down further. RBI also expressed concern
about the ongoing fiscal consolidation with the budgeted crude oil and fertilizer subsidies being clearly insufficient. This might lead to
enhanced government borrowing programme in H2 FY12 putting further upward pressure on bond yields.
9
• FIIs After pulling out ` 9,400 Cr. in this year (Jan & Feb) FIIscontinued buying and invested `7213 Cr. in the Indianmarkets in the month of April’11. High growth prospects inthe Indian market are a driver for these investments.
• Mutual Funds witnessed outflows of around ` 1365 Cr. inthe month of April.
FII & MF data
We would expect a GDP growth of 8% for this year which would be slightly lower than FY11. The reviving global economic growth
augurs well for Indian IT and Metal companies. Also, we believe that consumption stays strong and with the expectation of a good
monsoon, discretionary consumption should stay buoyant.
The earnings season is on and most of the companies have come out with inline results for Q4 FY11. While banks have generally
delivered a good set of numbers, companies in Oil and gas and cement space have disappointed. Some pressure in margin is visible for
engineering and construction companies due to increase in commodity prices and rising interest rates, but that should get
compensated by the increase in earnings of Metal companies. We expect a steady earnings growth of 17-18% for Nifty as a whole for
Q4 FY11.
While we remain concerned about rising interest rates & high crude oil prices in the short term, we continue to expect a robust
earnings growth of 20% for FY12 which will drive equity market returns in the medium to long term. The market looks inexpensive and
is trading at 14-15 times FY12 and 12 times FY13 earnings. After the recent correction in banking space, we believe valuations have
become attractive. We prefer private sector banking names as they fare better on asset quality issues vis-à-vis their PSU peers. Also,
sectors like Information Technology, Healthcare which are relatively lesser impacted by interest rate and inflation risks, should do well
going forward.
-15000.0
-10000.0
-5000.0
0.0
5000.0
10000.0
15000.0
20000.0
25000.0 FII MF
10
Sector Stance Remarks
Healthcare Overweight
We believe in a large sized opportunity presented by Pharma sector in India. India’s strength in
generics is difficult to replicate due to quality and quantity of available skilled manpower. With the
developed world keen to cut healthcare costs, and a vast pipeline of drugs going off-patent, Indian
pharma players are at the cusp of rapid growth. We would bet on the opportunity in Generics and
CRAMS space
Automobiles Overweight
Demand outlook remains very robust with strong earnings growth despite raw material price hikes
and raging competition. We are more bullish on commercial vehicle and agricultural vehicles segment
due to lesser competition and higher pricing power.
FMCG NeutralWe prefer “discretionary consumption” beneficiaries such as Cigarettes and branded jewellery, as the
growth in this segment will disproportionately higher vis-à-vis the increase in disposable incomes.
E&C Equalweight
The USD 1 trillion Infra opportunity is hard to ignore. We believe Power sector to be a better play over
other sub sectors such as ports, roads and telecom infrastructure, because of favorable economics
under PPP model. Within power, we like on the engineering companies over utilities, T&D and other
infrastructure owners because of their superior profitability and better competitive dynamics.
BFSI Equalweight
Financial sector is undeniably the lubricant for economic growth. Whether the growth comes from
consumption or investments, credit growth is inevitable. Being a well regulated sector, BFSI in India
has good asset quality and capital adequacy ratios. Despite the increasing in interest rates, we believe
banks will be able to pass on higher cost of funds to clients as demand remains strong
11
Sector Stance Remarks
IT/ITES Equalweight
Robust volume growth led by some uptick in pricing makes IT an attractive investment. Market
share gains led by deeper and wider expansion of global delivery model will drive earnings
growth. Best played through Tier I stocks.
Metals Equal weight
Indian metal companies will benefit from global upturn in demand. Commodity prices have
moved up significantly as recovery takes place in US and Europe. Positive on the producers of
Steel, Copper and Aluminium.
Energy Underweight
The regulatory cap on RoE does not allow a vast value creation opportunity in the infrastructure
owning companies. We would stay away from oil PSUs, due to issues of cross subsidization
distorting the underlying economics of oil exploration and refinering businesses.
Telecom Underweight
The regulatory hurdles, competitive pressures and leverage prevent any return to high profitability
levels in the short to medium term. The huge capex incurred in the rollout of 3G services will put
further stress on the already stretched balance sheets. Remain cautious on Sector’s prospects.
Cement UnderweightCement demand will certainly grow over the next three years. But the issue is on the supply side.
We do see an oversupply situation for the next 3-4 quarters.
Power Utilities Underweight
We like the growth prospects of power sector but believe that value will be created by
engineering services providers. Merchant power rates have been sliding downwards and coal
prices have been on the way up putting pressure on return ratios.
Basic Theme
A diversified portfolio of stocks that seeks Alpha through superior stock selection. The Portfolio Management adopts a comprehensiveapproach and invests across sectors, investment themes and market capitalization categories.
Portfolio Details
Placement fee 2%Exit Load Nil (Full management fee to be levied if redeemed before 1 yr)
Management Fee2.5% for investments below Rs. 1 Cr.
2% for investments above Rs. 1 Cr.
NIL
Profit Share NIL NIL 15% of all gains
Top 10 Holdings
Comparatives 3 Month Since Inception
Alpha Portfolio 4.7% 16.7%
S&P CNX Nifty 4.4% 10.1%
Sector Allocation Performance (as on 30th Apr 2011)
Absolute Returns (%)
4.7%
16.7%
4.4%
10.1%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
3M Since Inception (30/11/09)
Alpha Portfolio Nifty
12
Reliance Industries Ltd. 7.9
HDFC Ltd. 6.3
Infosys Ltd. 6.0
Axis Bank 5.7
Punjab National Bank 5.9
Titan Industries Ltd. 5.5
Larsen & Toubro Ltd. 4.8
Bharti Airtel Ltd. 4.7
Tata Motors Ltd. 4.6
Bharat Heavy Electricals Ltd. 4.6
Top 10 Stock Concentration 55.9
BFSI25.90%
Metals8%
Healthcare
8.20%
IT10.30%
Others12.50%
Auto8.50%
Capital Goods12.70%
Cons. Goods13.90%
13
• The benchmark 10 yr G-sec yield increased from8.0% in the month of March ‘11 to close ataround 8.15% in April‘11.
• With no respite from the high inflation in spiteof monetary tightening, we may see a few moreinterest rate hikes in the year.
10-yr G-sec yield
Yield curve
• We expect yields at the longer end of the yieldcurve to remain stable. High inflation, monetarytightening and rising credit growth will keep theyields at the longer end range bound.
• After the rate hike by RBI in May, the 10 year GSec yields are trading around 8.15%. A hike wasseen in the yields as a 50 bps hike was notcompletely factored in.
(%) 7.60
7.80
8.00
8.20
8.40
8.60
8.80
9.00
9.20
0.0
2
0.9
4
1.8
6
2.7
8
3.7
0
4.6
2
5.5
4
6.4
6
7.3
8
8.3
0
9.2
2
10
.15
11
.07
11
.99
12
.91
13
.83
14
.75
15
.67
16
.59
17
.51
18
.43
19
.35
Spot Interest rate
6.8
7
7.2
7.4
7.6
7.8
8
8.2
8.4
Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11
OutlookCategory Details
Long Tenure Debt
With tight liquidity and inflationary pressure being high, weexpect more rate hikes in the current year. As the inflationarypressure begins to settle down, these may be attractiveinvestments but currently, we would recommend staying out ofthe longer term investments.
Some AA and select A rated securities are very attractive atthe current yields. A similar trend can be seen in the FixedDeposits also. Tight liquidity in the system has alsocontributed to widening of the spreads making entry atcurrent levels attractive.
14
We recommend short term bond funds with a 6-12 monthinvestment horizon as we expect them to deliver superiorreturns due to high YTM. We have seen the short term yieldsharden due to reduced liquidity in the market andconsecutive rate hikes prompted by inflationary pressures.Hence, Short term bond funds and FMPs provide aninteresting investment option.
Short Tenure Debt
Credit
15
• The rupee depreciated against all the currencies except the USD. Speculation regarding the economic recovery of U.S. and continuation of the Quantitative Easing plan resulted in depreciation of the USD against a basket of currencies.
• Going forward, the rupee will be helped by the narrowing of the current account deficit and the inflow of funds into the domestic markets as the longer term market outlook remains strong. However rising oil prices remains a cause of concern.
Rupee movement vis-à-vis other currencies (M-o-M) Trade balance and export-import data
• Exports for the month of February increased by 43.85% (y-o-y) while imports increased by 17.27% over last year. Thetrade deficit decreased to USD 5.6 bn.
• Capital account balance continues to be positive throughFY11 and stands at `241293 Cr. for the Q1 – Q3.
• We expect the capital account balance to remain positiveas higher interest rates would make investment in theIndian markets attractive hence drawing investments intothe market.
0
20000
40000
60000
80000
100000
120000
140000
FY 09 (Q4) FY 10 (Q1) FY 10 (Q2) FY 10 (Q3) FY 10 (Q4) FY 11 (Q1) FY 11 (Q2) FY 11 (Q3)
Capital Account Balance-5.0%
-4.5%
-4.0%
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
USD GBP EURO YEN-15000
-10000
-5000
0
-20
0
20
40
60
80Export Import Trade Balance (mn $)
16
Precious
Metals
Oil & Gas
Gold prices continue to remain stable amid demand from
emerging economies including China, where the investment
demand growth was strongest last year. The global political
uncertainty and growing Middle East tensions shall continue to
support prices. Further, the seasonal demand during Akshaya
Tritiya in India is likely to support prices. Nevertheless, we do
not expect any sharp spikes in the yellow metal in the near
term; however the falling dollar is a concern and shall push the
metal prices higher.
Although the Middle East status quo remains, crude oil prices
found support from the renewed demand for conventional
energy after the Japanese Nuclear fiasco. The difference
between WTI and Brent continues to wide. Crude is expected
to remain stable in the near term amid declining dollar aiding
its rise.
Crude
Gold
15000
16000
17000
18000
19000
20000
21000
22000
23000
Ap
r-10
May
-10
Jun
-10
Jul-
10
Au
g-10
Sep
-10
Oct
-10
No
v-10
Dec
-10
Jan
-11
Feb
-11
Mar
-11
Ap
r-11
60
70
80
90
100
110
120
130
Apr 10
May 10
Jun 10
Jul 10
Aug 10
Sep 10
Oct 10
Nov 10
Dec 10
Jan 11
Feb 11
Mar 11
Apr 11
17
Tenor 36/40 months
Issuer Karvy Financial Services Limited
Reference Index S&P CNX Nifty Index
Principal Protection 100%
Initial Fixing Level Official Closing level of S&P CNX Nifty Index as on DDA
Final Fixing Level Average of Official Closing Level of S&P CNX Nifty Index as on 34M, 35M and 36M
Exit Nifty Level Official Closing level of S&P CNX Nifty Index as on DDA +36M
Participation Rate 200%
Knockout Level 150% of Initial Fixing Level
Knockout Rebate 30%
Payoff2 * Max {0, (Final Fixing Level / Initial Fixing Level) -1}, if Knockout event is nottriggered
Overview
• Aditya Birla has launched a private equity fund targeting
innovation themed growth capital investments within sunrise
sectors – Lifestyle, Lifeskills and Education, Lifecare and
Applied Technologies.
Attractiveness
• We believe that the sectors that they have selected are
attractive growing annually at 20% plus supported by benefits
of higher disposable income and improving infrastructure in
the country.
• The managers have had a successful track record in similar
sectors and have delivered consistent returns. Operational
value addition and domain knowledge would be the drivers of
IRR.
• Based on the Investment team’s extensive business network in
overweight sectors 60 high quality early stage proposals have
been received over the last 12 months
Product Features
• Fund size: Rs. 350 Cr. + green shoe option of Rs. 150 Cr.
• Sponsor Commitment: 10%
• Fund tenure: 6 years with an option of a 1 year extension
• Commitment Period: 30 Months from date of initial closing
• Minimum Commitment: 1,000,000
• Indicative Draw-down:
INR 10 lakh 100%
INR 15 lakh–45 lakh Higher of 20% of commitment or
INR 7.5 lakh
> INR 45 lakh 10% of commitment
• Expected IRR: 25% gross p.a.
• Upside Sharing: 20% of net profits of the fund with catch up
• Management fee: 2% p.a. of the total commitment amount
• Setup fee : 2.25% upfront
18
19
Asset Classes Tier-1* Tier-II**
Residential This sector is the only one to be left out of the correction
wrath. Heavy media reporting’s on probable correction, 40%
down-trend in sales and unavailability of finance to
developers are the major factors putting pressure on this
segment to correct. The investor community also varies on
the assumptions on account of bad sales and gives their “no
confidence motion” towards any visible appreciation. Markets
like NCR, Pune, Hyderabad and Chennai would set the course
of correction on the forthcoming over-supply.
These cities still manage to sell from the attractive entry point
(Avg. Rs.2800-3600 per sqft) but are getting over-supplied in
pockets. A recent report from Knight Frank suggests that these
cities have seen lot of investor confidence between 2007-2009
which for some reasons have seen 30% down-trend. Typically
the investor’s early buy-in and upfront payment of the total
consideration for best discount gives the developer strong hold
time for local demand. Ironically, across markets Investors
contribute not more than 15% of sales.
Commercial/IT Still in the shadows of over-supply and cautious expansion
approach by corporate, this segment has gone through
correction. Rates per sqft have seen almost 30% down-trend
and will be stagnant for the coming 2-3 quarters. Surely, the
segment is at the down-tip of the cycle, and is the best
opportunity for companies looking for long term holding of
real estate office space. Since most of the commercial growth
had happened in 05-06, many lease agreements are getting
expired giving way for companies to shift base, re-negotiate,
etc. IT/ITEs would remain the main driver for consumption.
Commercial segment not that significant, but unlike Tier-I the
price differentiation is double favoring commercial since most
of them are in CBD areas.
Retail Sales have definitely recovered but distress in the over-
supplied market is evident. Many deals have been done on
Revenue Share, giving more control to the Lessee to hold
price per sqft for a longer time-frame
Unlike the Tier 1 markets the retails is unable to cope with sales
and thus the sales to rent ratio is becoming bigger pulling down
the rent paying capacity. Important point also is that, unlike the
Tier 1 markets more than 40% of any mall in these cities are
operated by local franchisees making cash-flows not regulated
Land Land is highest in demand and still a maintaining a steady
growth of 15-20% per annum
Very similar to the trend in Tier 1 cities. Opportunistic
investment can really give great returns since N.A land is still
available cheap (between 200-300 per sqft)
20
Markets Major Locations/Zones Total Sqft (In Mn), Expected in
2011-2013
Established Builders
Bangalore Hebbal, Whitefiled, Hosur Road, Jayanagar, MG Road,
Malleshwaram
74Mn Sqft, out of which 60% supply is
in Hosur & Whitefiled followed by 18%
in Hebbal
Shobha, Prestige, Salarapuria,
Purvankara, Brigade Group, Nitesh
Estate, Mantri, Confident group, Pride
Group
NCR Gurgaon - DLF city, Sohna Rd, Manesar
Noida – Sec 14,15,92,93,128 and Greater Noida
Ghaziabad – Indirapuram, Vaishali
Faridabad – prime chandanwood village, Sec 78,89
436 Mn sqft, out of which Noida-32%,
Ghaziabad-21%, Gurgaon-24% &
Faridabad-12%.
Parsavnath, Emaar MGF, DLF, Unitech,
Ansal properties, M2K, Uppal, Cosmos,
Suncity, Vipul
Mumbai Prime Residential Among Zones
Napean Sea Road, Tardeo, Worli, Lower Parel, Bandra,
Andheri West, Juhu and Powai
Mid Segment Among Zones
Prabhadevi, Ghatkopar, Goregaon, Malad, Gorbunder,
Kalyan, Dombivili, Belapur and Panvel
183 Mn Sqft, out of which 69% is
accounted from Prabhadevi, Ghatkopar,
Goregaon, Malad, Gorbunder, kalyan,
Dombivili, Belapur and Panvel.
Malad/Goregaon accounts for more
than 23mn sqft and other btw 10-12Mn
sqft
Hiranandani Developers Pvt Ltd,
Marathon Realty Pvt Ltd, Akruti City
Ltd, Kalpataru Ltd, K Raheja Universal
Pvt Ltd, K Raheja Corp, Lokhandwala
Group of Companies, Sheth,
Rustomjee, DB Realty, Godrej
properties, Oberoi to name a few.
Hyderabad Banjara hills, Shameerpet, Securabad Contonment,
Ghatkesar, Old Hyderabad and Shamshabad
58 Mn sqft, out of which 58% supply is
expected in and around Hi-Tech city
DLF, Jayabheri, Manjeera, Mantri,
Saisree, SMR Holdings, Aliens Group
Residential Market Snapshot (Supply and Developers)
As you would find out from the below mentioned table, most cities have supply concentrated in a particular zone and investment in these zones would belucrative (entry point being low) with a long term view, since the supply would always keep the capital value appreciating to 5-7% per annum. Rest zoneswould be always speculative and demand led behavior. The only differentiator would be quality development which could command premium.
Pune Pimpri Chichwad and Chakan,
Hinjewadi, Baner, Audh, Wakad and Balewadi
Kothrud, Kondwa, Hadapsar, Central Pune
Kalyani Nagar, Viman Nagar, Kharadi
93 Mn Sqft, out of which over 70% is
accounted by Pimpri Chinchwad,
Hinjewadi and Kalyani Nagar zones
Kumar Builders, Gera, Lunkad,
Konark, Goel Ganga, Marvel,
Magarpatta, Rohan
Kolkata CBD Areas-Ballygaunge, Carmac street and Park street
Salt Lake & EM Bypass
North 24 Parganas-Rajarhat, Barasat, madhyamgram
South 24 Parganas – narendrapur, Sonarpur
Batanagar & Mahestala
55Mn Sqft, out of which North 24
Parganas accounts for more than 50%
of supply
Ekta Developers, Eden group, Fort,
Mayfair, Merlin, Srijan group,
Swastic, Somani, Godrej, GM Group,
nangalia, Orbit, Bengal Sharachi, Sriji
Developers
Chennai North Chennai – Ayanavaram, Kilpauk, Korathur, madhavaram, Perambur, Villivakam
South Chennai – Adambakam, Chromepet, madipakkam, Medavakkum, Sholinganur, OMR, Selaiyur, tamabaram, Urapakam, Velachery
West – Ambattur, Annanagar, Avadi, KK Nagar, manapakam, Nolambur, Porur, salingramam, Sriperumpudur, Vadapalani
Central – Adayar, Alwarpet, Egmore, mataliyapuram, Nungampakkam, Parry’s, Tnagar
68 Mn Sqft, of which South Chennai
accounts for 64% of supply
Emmar, Ozone, Chaintanya, Mantri,
Doshi, Sabari, Hiranandani, L&T,
Unitech
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Please Note:1.Tier I* markets include Mumbai, Delhi & NCR, Bangalore, Pune, Chennai, Hyderabad and Kolkata2.Tier II* markets includes all state capitals other than the Tier I markets3.The IC note is proposed to be presented every quarter
Overview
• An unlisted secured NCD issue with a fixed coupon of 18% per
annum. NCD is a debt instrument used to raise short-term
loans from HNIs. The funds raised through this issue will be
utilized by the developer for aggregating the land for an
upcoming residential project in Sus Village in Pune.
Product Features
• Issue Size – Initial two series of 5Cr each and following two
series of 7.5Cr each
• Tenure – 24 months
• Minimum Investment – INR 10,00,000
• Set Up Fee – 1% upfront
• Management Fee – 0.5% p.a.
• Guaranteed Coupon – 18% p.a.
• Frequency of Interest – Monthly
• Principal repayment – 4 equal quarterly installments starting
end of fifth quarter
Attractiveness
• The cash flow schedule is very attractive driven by interest
inflows and principal repayment starting early. A good
proportion of the total return is realized over the tenure of the
product through regular monthly payouts starting from the
second month itself. This considerably reduces the risk to total
returns for investors.
• The debentures are secured with a security cover of at least
two times the outstanding debenture amount. Both the
principal and the interest are securitized and hence the default
risk is negligible.
• The IRR for this structure stands at 19.16%. This can give a
considerable boost to the overall returns of one’s fixed income
portfolio.
• This product is a good bet on the high interest rates prevalent
in India now. The investors can lock in high yields which are
not likely to increase much further.
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Product-neutral advice
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The information and views presented here are prepared by Karvy Private Wealth or other Karvy Group companies. Theinformation contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouchfor the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any lossincurred based upon it.
The investments discussed or recommended here may not be suitable for all investors. Investors must make their owninvestment decisions based on their specific investment objectives and financial position and using such independent advice,as they believe necessary. While acting upon any information or analysis mentioned here, investors may please note thatneither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use ofthis information and views mentioned here.
The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentionedcompanies from time to time. Every employee of Karvy and its associated companies are required to disclose their individualstock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investmentrecommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation haseither been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders onlythrough Karvy Stock Broking Ltd.
The information given in this document on tax are for guidance only, and should not be construed as tax advice. Investors areadvised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expectsignificant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability and incidenceof tax on investments
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