zen money mantra aug2011

8/4/2019 Zen Money Mantra Aug2011

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Inside the issue...Market Review - July 2011 ....................... 1Market Outlook for August 2011............... 2Rising interest rates and its impact .......... 2Economics of Gold .................................. 3-4SIP - How it works.................................... 4

MARKET WATCH

MARKET REVIEW

Issue No : 131 August 2011

Just have patience and make sure youre confident about the margin of safety in each investment.

-Peter Cundill

Focus Stocks .................................................5-6

Stock List.......................................................... 7

EV/EBIDTA Ratio ............................................... 7

Zen Money Services......................................... 8

Major IndicesMajor IndicesMajor IndicesMajor IndicesMajor Indices 29/07/1129/07/1129/07/1129/07/1129/07/11 30/06/1130/06/1130/06/1130/06/1130/06/11 % VAR% VAR% VAR% VAR% VAR

S&P CNX Nifty 5,482.00 5,647.40 -2.93

S&P CNX 500 4,424.05 4,522.95 -2.19

BSE Sensex 18,197.20 18,845.87 -3.44

BSE 200 2,256.48 2,314.65 -2.51

NASDAQ 2756.38 2,773.52 -0.62

DOW 12143.20 12414.30 -2.18

FTSE 5815.19 5945.71 -2.20

NIKKEI 9833.03 9,816.09 0.17

Other IndicatorsOther IndicatorsOther IndicatorsOther IndicatorsOther Indicators 29/07/1129/07/1129/07/1129/07/1129/07/11 30/06/1130/06/1130/06/1130/06/1130/06/11 % VAR% VAR% VAR% VAR% VAR

FOREX (Rs/$) 44.19 44.70 1.14

BRENT CRUDE ($/Barrel) 116.81 111.68 4.59

GOLD (Rs/10Gms) 23,185.00 21,965.00 5.55

Top GAINERS - BSE 500Top GAINERS - BSE 500Top GAINERS - BSE 500Top GAINERS - BSE 500Top GAINERS - BSE 500 CMPCMPCMPCMPCMP % VAR% VAR% VAR% VAR% VAR

Himadri Chemical 56.65 51.27

Aptech 139.10 51.20

Future Capital 186.10 38.11

Amtek India 115.65 37.60

Anant Raj Inds 81.65 31.91

Top LOSERS - BSE 500Top LOSERS - BSE 500Top LOSERS - BSE 500Top LOSERS - BSE 500Top LOSERS - BSE 500 CMPCMPCMPCMPCMP % VAR% VAR% VAR% VAR% VAR

Crompton Greaves 169.2 -34.81

Lanco Infratech 17.95 -26.43

KGN Inds. 50.45 -24.42

Orchid Chemicals 206.35 -22.76

GTL 74.85 -21.75

BSE Sectoral IndicesBSE Sectoral IndicesBSE Sectoral IndicesBSE Sectoral IndicesBSE Sectoral Indices 29/07/1129/07/1129/07/1129/07/1129/07/11 30/06/1130/06/1130/06/1130/06/1130/06/11 % VAR% VAR% VAR% VAR% VAR

CD 6,755.67 6,653.72 1.53

FMCG 4,093.12 4,045.42 1.18

REALTY 2,041.40 2,019.84 1.07

HC 6,420.74 6,397.96 0.36

AUTO 8,758.83 8,798.48 -0.45

PSU 8,307.52 8,542.74 -2.75

BANKEX 12,447.83 12,821.05 -2.91IT 5,835.44 6,100.30 -4.34

OIL & GAS 8,799.49 9,208.26 -4.44

POWER 2,455.87 2,612.01 -5.98

CG 12,995.81 13,905.62 -6.54

METAL 14,016.72 15,061.89 -6.94

Institutional Activity - July 2011 (Rs. Cr.)Institutional Activity - July 2011 (Rs. Cr.)Institutional Activity - July 2011 (Rs. Cr.)Institutional Activity - July 2011 (Rs. Cr.)Institutional Activity - July 2011 (Rs. Cr.)

InstitutionInstitutionInstitutionInstitutionInstitution BuyBuyBuyBuyBuy SellSellSellSellSell NetNetNetNetNet

FII 54,077.70 46,047.60 8030.10

MF 10,969.30 10,425.50 543.80

Sensex - July, 2011

1st Week 2nd Week 3rd Week 4th Week 5th Week

19,200

19,000

18,800

18,600

18,400

18,200

18,000

17,800

17,600

The month of July saw Ind ian markets dragged lower by disapp ointing global as well

as dom estic cues though the only respite was the persistent FII inflows. By the end ofthe month, Nifty pruned about 2.9% or 165 points to settle at 5482, while Sensex lostarou nd 3.4% or 649 points to close at 18197.

The market started the m onth on a weak note on th e back of slower growth in six coreinfrastructure industries (growth of 5.3% in May as against previous 7.4%) and CBIraids on ex-DGH following the CAG reports of inflated costs in RILs explorationactivity. However, robust monthly auto sales data, incessant FII inflows and easingconcerns on Greeces debt helped the market to move up and Nifty touched its 11-week high of 5740.

Approval of new Mining Bill, continued fears over the spread of euro-zone debt crisis,weak set of Q1-FY12 results from the IT ma jor Infosys, less-than-ant icipated May 2011sIIP numbers (5.6%), disappointing European banks stress test results and Mumbaiblasts fuelled the downward movement. But the downside was capped on back oflower-than-anticipated Jun es WPI inflation (9.44%), 30% increase in d omestic ind irecttax collections in the April-June quarter and EUs Greek bailout plan.

RBIs decision to hike the repo rates by more than expected (50 bps), stalemate in USover raising th e $14.3 trillion borrowin g limit, worries that Eur o-zone debt crisis wou ldworsen after rating d owngrad es of Greece & Spain an d disappointing Q1 results fromIndian corporates fizzled ou t all signs of upw ard m ovement.

FIIs continued to be net buyers of Indian equities for second consecutive month andnet bought Rs.8030 crore during th e month. Mutu al Funds w ere yet again net buyersto the tun e of Rs.544 crore in equ ities.

During the month Rupee continued its northward journ ey to settle at Rs.44.19/ $ on theback of continuous FII inflows and weak dollar. Crude oil prices surged 4.6% to settle at$116.81/ barrel, on account of weakening d ollar against basket of currencies and interest ratehikes. Yellow metal prices continued th eir upward journey on account of safe haven buyingand weak dollar. By the end of the month , Gold zoomed 5.6% to settle at Rs.23185/ 10gms.

During the month, Metal counters were the biggest losers in view of the higher royaltyprescribed in the new mining bill and the mu lti-crore illegal mining scam in KarnatakaCapital Goods space witnessed selling pressure on a ccount of lower IIP data and poor

results by the companies in the sector. Consum er Durables space was the top gaineron account of robust Q1 FY-12 results from index m ajors. Defensive FMCG continu edto witness buying interest amid higher volatility in the market du ring the month.


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Market Outlook forMarket Outlook forMarket Outlook forMarket Outlook forMarket Outlook forAugustAugustAugustAugustAugust20112011201120112011

Market Outlook for August 2011

RBI has increased th e repo rat e by 50 basis points (bp s) to 8% in July 2011, wh ich is 325 bps h igher than the r epo rat e in the beginnin g

of 2010. As the repo rate is directly related to the lending and borrowing rates of banks it w ill have a pass throu gh effect on all thefloating interest rates on all the loans for retail as well as corporate sector. This in-turn w ill have an impa ct on consumer spen ding as

well as on corporate earnings growth.

RBI is und er imm ense pressure to devise a m onetary policy that strikes a balance between managing economic

growth and controlling the spiraling inflation. But in the last few m onths it ha s taken th e anti-inflationary stance

even at the expense of a little slowdown in economic growth. Its action of increasing the key policy rates reflects

its discomfort tow ards the near double d igit inflation even after a series of key policy rate h ikes.

A few market participants however wonder, how monetary policy alone will control the inflation triggered by inadequate supply

response to the broad based demand at gross levels; this is because rising interest rates will fuel further price hikes leading to a

spiraling effect. Overall, the reality is, market participants are staring at stubborn inflation and high interest rates, which could

slowdow n the consumer d emand as well as capex plans. While some sectors would be affected d irectly by the rising interest rates

some other sectors will be affected due to slowdown in the economic growth which in-turn is a result of the rising interest rates.

Other sectors will be affected as a result of shrinking margins due to rising interest rates because of an increase in the interest

expense. At this juncture a look at the sectors' sensitivity to interest rates w ill help investors make informed investment d ecisions.The rising interest rates will have direct impact on the consumers w ho have taken loans for housing an d au tomobiles, which will in-

turn m oderate dem and in Automobiles, Housing Developers and Banks & Housing finance compan ies.

Any slowd own in growth in Auto sector could have a cascading effect on Auto comp onents, Tyres, Automotive Battery and other

forging companies.

As the real estate / infrastructure d evelopers have to borrow at higher interest rates houses / infra projects become costlier. Real-

estate, construction and Infrastructure sector's growth could h ave an impact on cement, steel, alum inium, glass, Ply boards, Ceramics

and Sanitary w are sectors. This will also decrease the dema nd for white goods.

Capital goods sector growth is affected by rising interest rates, as corporates are likely to go slow on their capex plans in anticipation

of slowdown in d emand.

BFSI sector is affected by rising interest rates as the credit growth will be slower and also

there would be pressure on the net interest margins. The rising interest rates could also

increase the risk of NPAs in th e banking system.

Sectors like, FMCG, Pharma & Health care, Telecom, IT services, Oil & Gas, Media are in

general not directly impacted by the rising interest rates. Even though, one can factor the

broad trend of the sector's sensitivity to interest rates in general; Company specific factors

like the total debt on its books (domestic as well as foreign loans component) and the

company's operating efficiency play a major role in the rising interest rates scenario.

Clearly, in a rising domestic interest rate scenario where p olicy makers are cautioning about

further rate hikes till the inflation comes within the comfort zone, investors will be better

placed if they move away temporarily from highly leveraged companies to companies with low debt, irrespective of the sector,

especially if they have h igher exposure to domestic borrowings.

Also it pays to enter into those stocks where the expansion plans are sup ported m ore by internal accruals and by d emand from end

consumers.

In the month of August, the performance of the global markets would largely dictate the domestic marketmovem ent. If the issues related to the US debt ceiling remain un resolved and the lingering Euro zone debt crisisdeteriorates then the market could witness a further correction. The subdued global economic conditions arealso expected to put pressure on crude oil prices.

On the d omestic front, the earning season is well under way an d the resu lts have been mixed so far. While majorityof comp anies witnessed grow th in their top line, margins were un der pr essure du e to higher operating costs andrising interest rates. The markets would keenly track the rest of the result season to gauge the earnings guidance for the next fewquarters considering the recent interest rates hikes. In the short term, stock-specific action based on the earnings announcement is

expected to continue. Further, the trends in FII fund flows are also expected to play a major role in determining the direction of themarket movement.

The outcome of the ongoing investigations by CBI and other investigating a gencies on various scam s is likely to trigger stock specificaction if any corporate names surface during the investigations.

Markets would closely watch the developments in the monsoon parliamentary session that begins from 1st August, 2011. Monthlydata of Auto sales, Telecom subscriptions, Cement dispatches would trickle in during the first week of August and sector specificaction could be witnessed based on it.

Markets would closely watch the Weekly food article inflation data that is scheduled to be released in the first week of August. TheFood article inflation has witnessed a slowdown during third week of July. Continuation of this trend due to higher base effectcoupled with improved food supplies as a result of good monsoon, would boost investor confidence.

Rising interest rates and its impact

RBI Repo Rate (%)


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Economics of GoldEconomics of GoldEconomics of GoldEconomics of GoldEconomics of Gold

India's traditional love for gold is well known. According to World Gold Council estimates, India owns over 18,000 tons

of above the ground gold stocks worth about $800 billion, which represents 11% of global stock. India is the largest

consumer of gold in tonn age terms, followed by China. During the four qu arters ending Sept 2010, India's gold d emand

accounted for nearly 22% of global gold demand.

Demand- Supply Economics:Mine production and above ground stocks (includes official sector sales & recycled gold)

are two sources of supply for gold into the m arket. Above the ground stocks are estimated to be around 150,000 tons. The dem and

for gold comes in the form of fabrication (jewelry and industrial uses) & investments. In 2010,fabrication accounted for 2483 tons

(63%)and investm ents accounted for 1487 tons (37%).

Economics of Gold

Gold demand in Fabrication (Jew elry & Industrial Uses): The demand for gold in the form of jewelry is mainly driven by

India and China. India is the largest market for gold jewelry in the world. Jewelry accounted for 75% of total Indian gold

dem and in 2010. On the other hand , China is the fastest growing m arket for gold jewelry. Jewelry accounted for 64% of

total gold demand in China. Demand has more than doubled in the last 7 years, from 224.1 tons in 2004 to 451.8 tons in

2010. In many respects China and India share a similar gold culture and h eritage.

The high therm al and electrical conductivity along w ith outstand ing resistance to corrosion are the key features that generate deman d

for gold in electrical component industry. Gold's resistance to bacterial colonization and corrosion create demand for the metal in

various biomedical applications too.

Gold d emand in Investments:Investing in gold centers on the role it can play as a portfolio diversifier, vehicle for risk management

and as a store of value. Investors have access to invest in gold through Exchange Traded Funds (ETFs), Coin & Bar purchases and

throu gh OTC mar kets. Durin g 2010, USD 58 billion came into investment category, up 34% compared to 2009 and 74% comp ared to2008. This growth in demand on the back of 25% year on year increase in prices proves the safe haven theory of gold and increasing

app etite of investors to trade in various gold trading instru ments at their disposal.

Investment in gold th rough Exchange Traded Fun ds (ETF) has seen a pickup in recent years as an alternative to buying p hysical

gold. Investm ents in ETF had gone u p from USD 8.99 billion du ring 2008 to USD 19.29 billion, an increase of 114%. While the size ofthese holdings is miniscule compared to the gold consump tion in India, the rate of growth seems to show a pattern of heightened

interest of retail investors in using gold ETF as an investment tool. During 2010 the demand for physical gold as a investment tool

has gone u p by 86%. This might be because of the weakening d ollar and the d ebt crisis taking center stage in the US and Europe.

Investment dem and is also generated by the need s of Central banks of various countries to hold gold reserves for managing risks in

their macro-economic environment and enhancing liquidity in their respective markets. Central banks and multinational organizations

(such as the IMF) currently hold just un der one-fifth of global above-ground stocks of gold as reserve assets (amounting to a round

30,500 tons).

Over the past decade, the key trend has been the growth in Identifiable Investments, which has increased from 370 tons (2001) to

1,514 tons (2010). In 2010, it accounted for approximately 38% of world gold demand. Also investment in physical gold bars has

increased by 22%.

2006 2007 2008 2009 2010 % Change (09-10)

Total Supply (in tons) 3575 3488 3469 4083 4156 2.90

Mine Supply 2076 2026 2044 2354 2586 9.80

Official Sector Sales 370 485 279 34 -76 -

Recycled Gold 1129 977 1146 1695 1646 -1.10

Total Demand (in tons) 3409 3526 3658 4081 4155 1.80

Fabrication (Jewelry&Industry) 2744 2861 2568 2223 2483 11.70

Total Bar &Coin Demand 405 411 769 778 1149 47.70

ETF' s and similar 260 254 321 617 338 -45.20

OTC Invest. & Stock flows - - - 463 185 -60.00

London PM fix (US$/oz) 603.77 695.39 871.96 972.30 1224.50 25.90

2008 2009 2010 %change

(in $ Mill) (in $ Mill) (in $ Mill) 2009 vs 2010

Investments (I+II) 33638 43604 58559 34%

I. Total Bar and Coin (a+b+c) 24642 24312 45250 86%

a. Physical bar demand 17436 15318 33619 -

b. Official Coin 5252 7153 8155 -

c. Medals/ Imitation Coin 1955 1841 3477 -

II. ETF & similar products 8996 19291 13308 -

Source: World Gold Council.

Source: World Gold Council.

(Contd. Page 4)


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SIP - How it worksWhat is SIP?

A Systematic investment p lan (SIP) is an effective method of investment strategy for wealth creation over a long period oftime. In a SIP, small sums of money are invested regularly say m onthly or qu arterly for a long period of time. It is similar toa recurring dep osit in a bank or the post office wherein we p ut a sm all amount every m onth or qu arter or year. SIP could bestarted with an amount of as little as Rs. 100. SIP gives you a combination of two powerful investment strategies i.e.compounding and rupee cost averaging. Currently SIP route can be done in the case of equity and fixed income funds.

How is SIP different from one time investment?One-time investment is better only when there is a high degree of certainty that the market is going to go through arising trend, but predicting the m arket is very d ifficult. Also for most investors, one-time investment m ay not be feasible due to a lack ofresources. In case of SIP, it is not necessary for the investor to accumu late a huge amoun t at one go before making an investment as hecan accum ulate small amounts and invest regularly thus maximizing returns in the long run.

Example of SIP: Sup posing Investor X invested a fixed sum of Rs. 1000/ month for 16 years in HDFC Equity Fund, H is investmentswould have grown to Rs.29.93 lakh at the end of June 2011

How does SIP works?A SIP enables an investor to invest a pre set amount in a scheme every month/ quarter based on th e NAV on the date chosen. One cangive either a post d ated chequ e or opt for the Electronic Clearance Service (ECS) from their ban k and un its will be cred ited to th e accoun tdepend ing on the app licable NAV on that day. While the sum invested rem ains same, the units allotted d uring bearish market w ill be

as one is habituated to save & invest regularly. Power of Compounding: The concept of compou nding investment earn s higher returns on investments. Rupee Cost Averaging: SIP is an effective way of investing as rupee cost averaging, lowers the risk of losses in the long run. Income Tax Benefits: By investin g in SIP-ELSS, one can avail tax benefit on u pto a maximum of Rs.100,000/ - und er section 80 C. SIP-

ELSS has the shortest lock-in p eriod as comp ared to other tax-saving instruments. Capital G ains Tax: Long-term capital gains earned on Mutu al Funds/ SIP are taxed at zero on holdings for a period of more than 12

months. While, short-term capital gains are taxed at 15% on holdings for a period of less than 12 months. Investing thr ough SIP at early age makes you r investments earn faster Flexibility to redeem units (except ELSS, which h ave a lock in period of 3 years) at any time or make changes in monthly/ quarterly

investment amounts.Finally: SIP is one of the best investment strategies for long term investors d uring th ese volatile market times w hen timing the m arketsbecomes next to impossible. It is ideal for small investors who don't have lum p-sum to invest or the time to track their investments. Toget maximum returns from SIP, investors will have to select the best p lan suited to them based on their investment objectives, amount tobe invested and time frame (monthly, quarterly).

Total period 198 months (Jan 1995-June 2011)

Monthly Invested Rs. 1000

Total Sum Invested Rs. 1,98,000

Value of Investmen t as on 30th June,2011 Rs. 29.93 lakh

Annual Rate of Return 28.54%

more compared to the units allotted during the bullishmarket, thus lowering the average cost of purchase.

Benefits of SIP Reduces Risk: Fixed investments every month makes

volatility in the market irrelevant. Disciplined Savings: More disciplined in one's savings

Factors to watch going forward: US fiscal policies & depreciating US dollar. Euro-zone sovereign debt crisis Middle East turmoil and oil produ ction India and China's growing appetite for gold, their em erging economies & inflation expectations. Growing popularity of gold ETF, making gold more accessible to more investors. Safe haven value.To conclude: Strong sup port is provided to gold prices because of growing jewelry dem and from emerging economies like India an dChina. In add ition, global factors such as the weakening d ollar, sovereign debt crisis in Europe and inflation will certainty boost d emandfor physical gold as a safe haven investment. It is encouraging to see that the demand for physical gold as an investment tool hasincreased m any fold over th e last decade in spite of increasing p rices. Gold as an investment tool is expected to grow as the activity inETF remains robust and continues to offer alternative strategies for investors. For the sh ort term, as gold has ru n u p very fast, technicalcorrection might be on the h orizon. This correction would provide a good buying opp ortunity for the long term.

For investing inGold ETF / Futuresplease visit the nearest branch or

call our h elpdesk @040 - 44232323 or email us [email protected]

To know more on how we can help you invest in Mutual Funds, please visit the nearest branch or

call our h elpdesk @040 - 44232323 or email us [email protected]

Category 2001 % of Total Demand 2001 2010 % of Total Demand2011 % Change 2001-2010Tons Tons

I. Jewelry Consumption 3,009 80 2,017 50 -33II. Industrial & Dental 363 10 466 12 28

III. Identifiable Investment (a+b+c+d) 370 10 1,514 38 309

a. Physical Bar Investment 259 - 880 - -

b. Investment in ETF & Related Products - - 338 - -

c. Official Coin 83 - 207 - -

d. Medals & Imitation Coin 29 - 88 - -

Total (I+II+III) 3,742 100 3,997 100 -Source: World Gold Council.

SIP - How it worksSIP - How it worksSIP - How it worksSIP - How it worksSIP - How it works

Economics of Gold (Contd . from Page 3)


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Focus StocksFocus StocksFocus StocksFocus StocksFocus Stocks

CMP: Rs. 100.60 GNFC EPS (TTM) : Rs. 17.15Company Profile:GNFC, incorporated in 1976, is a joint sector company promoted by the Government of Gujarat and Gujarat StateFertilizers and Chemicals Limited. The company mainly operates in two segments namely, Fertilizers (53%) and Chemicals (46%).GNFC manufactures and distributes nitrogenous and phosphatic fertilizers, such as urea, ammonium nitro-phosphate (ANP) andcalcium ammonium nitrate (CAN). The company is engaged in handling and importing Urea, Diammonium Phosphate (DAP) andMuriate of Potash (MOP). In addition, GNFC also handles traded fertilizers like Single Super Phosphate (SSP) DAP and Urea. It also

manufactures chemicals such as Methanol, Formic Acid, Nitric Acid and Acetic Acid which are mainly used in rubber, textiles,tanneries and p harmaceuticals indu stry and are also being exported to international markets. The comp any has recently completedcapex projects of around Rs. 2000 crore out of a total capex outlay of around Rs. 4000 crore planned to be completed by FY13.

Outlook: GNFC's recent capacity expansion of Weak Nitric Acid (WNA II plant), commissioning of Ethyl Acetic, TDI plant and the

ongoing feedstock conversion of FO (Fuel Oil) / LSHS (low sulphu r high stock) urea u nits to natu ral gas (NG) units, are expected to

result in higher r evenues and profits for the comp any, in the coming years. The compan y's joint-ventures w ith GSFC and GACL in

Dahej along with a favorable policy revision of increasing NBS subsidy augur well for the company in the long term.

Concerns: Volatility in key chemicals like Nitric acid,

Formic acid, Methanol etc is adding pressuresto the profit margins of the comp any.

Higher interest expense and rising input costswill affect the margins of the company.

Primary Marketing Zone, comprising of Gujarat,Maharashtra, Madhya Pradesh and Rajasthanare largely drought-prone areas.

Strengths:

The Company h as Long-Term/ Annu al Contracts for sup plies of most of the criticalraw materials like Fuel Oil, Coal, Rock phosp hate, Benzene, Toluene, Caustic SodaLye, Chlorine and packing materials etc. which are essential for continuous

Strengths: At current price, the stock is trading at a significant discount to the combined

valuation of its operations and its 57% stake in TVS Motors, which it is holding

either directly or th rough its subsidiaries. The scheme of arrangement could un lock value for shareholders. For every TWO

shares of Sundaram Clayton the existing shareholders will get, ONE share ofSundaram Clayton (SCL) wh ich w ill be left with castings business and ONE share

As a preferred vendor for Aluminium castingsfor major OEMs in Ind ia and abroad, SCL is likelyto benefit from the h igher capacity utilization aswell as recent capacity additions

CMP: Rs. 145.40 Sundaram-Clayton Limited EPS (TTM): Rs. 9.83

Concerns:

The compan y's revenues are dependent on u serindustries like automobiles which are prone toeconomic downturns.

Company is susceptible to the fluctuation in theprices of raw materials. Any adverse movementin prices of Aluminium could adversely affectits profit margin.

Outlook:The company is expected to unlock the value for its shareholders through the scheme of arran gemen t, which when implementedwou ld result in listing of two entities each with core aluminium casting business and investments in TVS motors. Post this arrangem ent,the core business of the company i.e. Aluminium casting is expected to benefit from the higher capacity utilization as well as from therecent capacity add itions, due to the company's strong relationship with th e global as well as domestic OEMs. The listed investmententity could mirror image the p erformance of TVS Motors, thus creating value for sharehold ers.

Company Profile : Sund aram -Clayton Limited (SCL) was incorp orated in 1962 and is a part of $4 billion TVS grou p comp any based inChennai. SCL is a leading supp lier of alum inium pressure die castings, gravity die-castings and low-pressure d ie-castings for heavycommercial vehicles, passenger cars and two wheelers. Some of its p rodu cts are flywheel housing, gear h ousing, clutch housing, etc.The company has three plants in Tamil Nadu that are located at Ambattur, Hosur and Padi. Two of the plants are engaged in theprod uction of aluminium die-castings. Its dealer netw ork is spread across the country. In 2009, the Clayton Deward ie Holdings hassold its entire stake in the company an d TVS group currently own s 80% of the stake in the company.

of Sundaram Investments (SIL) which owns majority stake in TVS Motors. Thelisting of SCL and SIL is subject to statutory approvals.

production.

GNFC is the only manufacturer of Glacial Acetic Acid through the cutting-edgeMethanol route in India and it has a market share of 38% & 32% respectively in the

Key Financials (Rs. Cr.) FY 07 FY 08 FY 09 FY 10 FY 11

Total Income 2829.56 3479.37 2989.03 2603.53 2989.45

OPM (%) 21.81 20.14 16.79 13.92 17.42PAT 326.68 373.48 228.30 128.37 266.53

Equity 155.44 155.44 155.44 155.42 155.42

Reserves 1415.19 1690.26 1858.68 1923.63 2131.45

Total Debt 351.58 313.51 355.90 555.05 1139.50

EPS (Rs) 21.02 24.03 14.69 8.26 17.15

Book Value (Rs) 101.04 118.74 129.58 133.77 147.14

Equity Dividend % 42.50 42.50 32.50 32.50 32.50

Promoters Holding 41.18 41.18 41.18 41.18 41.18

30.00

20.00

10.00

0.00

-10.00

-20.00

-30.00

GNFC. Sensex

29Jul,10

12Aug,10

26Aug,10

09Sep,10

23Sep,10

07Oct,10

21Oct,10

04,Nov,10

18Nov,10

02Dec,10

16Dec,10

30Dec,10

13Jan,11

27Jan,11

10Feb,11

24Feb,11

10Mar,11

24Mar,11

07Apr,11

21Apr,11

05May,11

19May,11

02Jun,11

16Jun,11

30Jun,11

14Jul,11

28Jul,11

50.00

40.00

30.00

20.00

10.00

0.00

-10.00

-20.00

-30.00

Sundaram-Clayton Sensex

29Jul,10

12Aug,10

26Aug,10

09Sep,10

23Sep,10

07Oct,10

21Oct,10

04,Nov,10

18Nov,10

02Dec,10

16Dec,10

30Dec,10

13Jan,11

27Jan,11

10Feb,11

24Feb,11

10Mar,11

24Mar,11

07Apr,11

21Apr,11

05May,11

19May,11

02Jun,11

16Jun,11

30Jun,11

14Jul,11

28Jul,11


Total Income 4300.47 5006.01 4068.12 4484.26 5423.35

OPM (%) 10.46 8.16 4.99 3.93 5.50

PAT 145.45 85.28 -70.99 -177.14 -131.23

Equity 18.97 18.97 9.48 9.48 18.97

Reserves 671.60 735.43 587.67 422.59 529.40

Total Debt 891.37 1315.12 1558.43 1929.53 1536.42

EPS (Rs) 79.33 45.24 -37.44 -93.43 -34.59

Book Value (Rs) 364.03 397.68 314.95 227.89 144.54Dividend (%) 120.00 170.00 75.50 40.00 50.00

Prom. Hold (%) Last 5 Quarters 80.00 80.00 80.00 80.00 80.00

ModerateInvestor

ConservativeInvestor

The Company regained its p rofitability as it recommissioned its operations in am monia plantwhich w as shutd own for most p art of 2010.

Concentrated Nitric Acid & Weak Nitric Acid market.


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Company Profile:Jyothy Laboratories Limited (JLL), incorporated in 1992, is a leading FMCG manufacturer engaged in man ufacturing an dmarketing of fabric whiteners, soaps, detergents, mosquito coils, incense sticks and personal care products. The company's well knownflagship brand 'Ujala' is a market leader in its category w ith over 70% share. The compan y's key brand s include Ujala, Maxo, Exo, Jeeva andMaya. JLL forayed into the laundry segment in 2009 through its subsidiary Jyothy Fabricare Services Limited under the brand name"FabricSpa". In add ition to its own brand s, Jyothy Labs has ventu red into the bu siness of coffee, tea and sp iritual/ astrological dhoops. Thecompan y recently bought Hen kel AG's majority stake in its Indian su bsidiary - Hen kel India Ltd. (HIL) for Rs 617 crore. The deal includesHenkel's entire portfolio that includes H enko and Chek detergents, Pril dish cleaners and Fa d eodorant.

CMP: Rs. 238.00 Jyothy Laboratories EPS (TTM): Rs. 8.53

the premium home care segment since most of Henkel's produ cts are positioned at the prem ium end . The company's future earningswou ld d epend on how well it is able to synergize the combined prod uct line in the coming years. JLL has already started an aggressiveturnaround strategy to revitalize HIL's business and is expecting positive results from the acquisition from 2012-13 onwards.

Concerns:

The FMCG market is highly competitive leavinghardly any scope for price hikes, which putspressure on the margins.

The comp any's over dependence on its Ujala brandis a major concern as th e fabric wh itener market isalready saturated; this leaves the company withlittle growth prospects for the brand.

Post acquisition of HIL, the interest cost burd en ofJLL has increased pu tting pressu re on its earnings.

Strengths:

The comp any continues to d ominate the fabric whitener category with its flagshipbrand 'Ujala'. Its other brands -- Exo and Maxo, have also garnered significantmarket share in the d ish-wash and mosquito repellent segments respectively.

JLL's business model of targeting un explored an d u ntapp ed segments an d its focuson both ru ral and u rban mar kets differentiates it from its peers.

The comp any's established bran d equity with successful brand extensions, a strongdistribu tion netw ork of 3,500 distributor s and d irect reach to over 2.9 million retailoutlets enables it to compete with leading FMCG compan ies.

Outlook:The acquisition of HIL has enabled JLLto become a sizeable player in the Indian FMCGsector and has provided it with an entry point to

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Jyothy Lab Sensex

29Jul,10

12Aug,10

26Aug,10

09Sep,10

23Sep,10

07Oct,10

21Oct,10

04,Nov,10

18Nov,10

02Dec,10

16Dec,10

30Dec,10

13Jan,11

27Jan,11

10Feb,11

24Feb,11

10Mar,11

24Mar,11

07Apr,11

21Apr,11

05May,11

19May,11

02Jun,11

16Jun,11

30Jun,11

14Jul,11

28Jul,11

healthy rate (of 51% in Q1 FY12, Y-o-Y and 29.3% in FY11 Y-o-Y). Off-late the company's main busin ess d ivision na mely, bu ildingproducts has also been maintaining a healthy growth rate. The company with its broad product portfolio is well placed to takeadvantage of emerging opp ortunities in the building solutions space.

Strengths:

The compan y has second highest m arket share of 14% in the fiber cement/ asbestoscement sheet products segment in India.

Everest's steel buildings division has clocked a growth of 51% (Y-o-Y) in Q1 ofFY12 and cont ributed 22% to the compan y's top -line in FY11.

In the last three years company's top-line has grown at a CAGR of 32.33% and thebottom line of the company at 68.22%.

The Comp any is expected to clock a growth r ate of above 20% (Y-o-Y) in top -linein FY12.

Concerns:

The demand for company's main productAsbestos Cement sheets and other derivedproducts is significantly affected by monsoonsand is restricted mostly to the rural areas.

The margins in steel buildings business isbetween 6 to 7 percent.

The compan y's main raw materials, Cement,Asbestos and Steel continue to be at very highlevels thus affecting the profit margins.

CMP: Rs. 169.50 Everest Industries Ltd. EPS (TTM): Rs. 34.13

Outlook:The company's new business venturenamely, Steel Buildings division is growing at a

Company Profile : Everest Indu stries is one of the biggest building solutions company in India. The company's prod uct line stretches

across: Roofing, walls, ceiling, flooring, cladding, door and steel building. The company manufactures roofing sheets from its five

manu facturing p lants wh ich have a combined man ufacturing capacity of more than 5 Lakh MTPA. The compan y also has an installed

capacity of 136,000 MT for manufacturing of Fiber cement boards. The company's steel buildings business has been growing very

rapidly in the last few years and presently has 5% market share in the same. As a par t of its sales network, the company h as over 6000retail points spread across the country, supp orted by 1285 highly qualified an d experienced engineers, designers and technicians.


Total Income 314.54 308.46 542.91 670.07 748.73

OPM (%) 9.36 10.50 9.90 10.45 10.35

PAT 11.69 7.34 13.53 30.03 35.50

Equity 14.80 14.80 14.80 14.82 15.08

Reserves 119.72 126.54 136.53 158.88 193.42

Total Debt 71.35 135.22 189.20 128.18 122.69

EPS (Rs) 7.90 4.96 9.14 20.26 23.54

Book Value (Rs) 90.89 95.50 102.25 117.21 138.26

Equity Dividend % 40.00 40.00 25.00 45.00 45.00

Promoters Hold ing % 50.17 50.06 49.97 49.86 49.83

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Everest Ind. Sensex

28Jul,10

11Aug,10

25Aug,10

08Sep,10

22Sep,10

06Oct,10

20Oct,10

03,Nov,10

17Nov,10

01Dec,10

15Dec,10

29Dec,10

12Jan,11

26Jan,11

09Feb,11

23Feb,11

09Mar,11

23Mar,11

06Apr,11

20Apr,11

04May,11

18May,11

01Jun,11

15Jun,11

29Jun,11

13Jul,11

27Jul,11


Total Income 410.65 390.37 369.52 614.11 642.65

OPM (%) 15.96 19.27 15.25 17.85 14.87

PAT 51.72 44.91 38.36 74.34 68.76

Equity 7.26 7.26 7.26 7.26 8.06

Reserves 285.34 318.23 339.61 380.50 623.04

Total Debt 0.78 0.52 0.52 13.05 69.06EPS (Rs) 7.12 6.19 5.28 10.24 8.53

Book Value (Rs) 40.30 44.83 47.78 53.41 78.30

Equity Dividend % 125.00 200.00 200.00 400.00 500.00

Promotors Hold ing 70.13 63.12 63.12 63.16 63.75

ModerateInvestor

AggressiveInvestor


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Stock ListStock ListStock ListStock ListStock List

We have provided below a short list of companies which we feel are currently available at attractive valuations, particularly when viewed with a

medium\long term perspective. The CMP and the Market Cap. are based on 29/07/2011

EV/EBIDTA Ratio

* Trailing 12 Months; M = Medium Term (3-12 Months); L = Long Term (12 Months and above)

AGGRESSIVE INVESTOR (High Risk Profile)

Sl.Sl .Sl .Sl .Sl . Company NameCompany NameCompany NameCompany NameCompany Name IndustryIndustryIndustryIndustryIndustry CMP(Rs.)CMP(Rs.)CMP(Rs.)CMP(Rs.)CMP(Rs.) EPS*EPS*EPS*EPS*EPS* BV*BV*BV*BV*BV* FVFVFVFVFV DivDivDivDivDiv EquityEquityEquityEquityEquity Market CapMarket CapMarket CapMarket CapMarket Cap TimeTimeTimeTimeTime

No.No.No.No.No. (29/07/11)(29/07/11)(29/07/11)(29/07/11)(29/07/11) (Rs.)(Rs.)(Rs.)(Rs.)(Rs.) (Rs.)(Rs.)(Rs.)(Rs.)(Rs.) (Rs.)(Rs.)(Rs.)(Rs.)(Rs.) (%)(%)(%)(%)(%) (Rs.Cr)(Rs.Cr)(Rs.Cr)(Rs.Cr)(Rs.Cr) (Rs.Cr)(Rs.Cr)(Rs.Cr)(Rs.Cr)(Rs.Cr) FrameFrameFrameFrameFrame

1 GSFC Fertilizers & Chemicals 400.75 98.24 372.84 10.00 70.00 79.70 3193.98 M,L

2 OCL India Cement & Refractories 97.50 20.11 155.33 2.00 200.00 11.39 555.26 L3 Inox leisure Film Exhibition 46.00 0.81 50.97 10.00 0.00 61.90 284.74 L

4 Ashiana Housing Realty 152.50 23.28 94.01 10.00 17.50 18.61 283.80 L

5 Everest Inds Building Solutions 169.50 34.13 155.64 10.00 45.00 15.08 255.61 L

MODERATE INVESTOR (Medium Risk Profile)

Sl.Sl.Sl.Sl.Sl. Company NameCompany NameCompany NameCompany NameCompany Name IndustryIndustryIndustryIndustryIndustry CMP(Rs.)CMP(Rs.)CMP(Rs.)CMP(Rs.)CMP(Rs.) EPS*EPS*EPS*EPS*EPS* BV*BV*BV*BV*BV* FVFVFVFVFV DivDivDivDivDiv EquityEquityEquityEquityEquity Market CapMarket CapMarket CapMarket CapMarket Cap TimeTimeTimeTimeTime


1 Oil India Oil Drilling & Exploration 1317.10 134.59 684.20 10.00 375.00 240.45 31669.67 M,L

2 Jyothy laboratories Household Products 238.00 8.53 79.30 1.00 500.00 8.06 1918.28 L3 GNFC Fertilizers & Chemicals 100.60 17.15 147.14 10.00 32.50 155.42 1563.53 L

4 JB chemicals Pharmaceuticals 141.85 13.96 84.41 2.00 100.00 16.90 1198.63 M,L

5 Venky's Packaged Foods 601.85 77.77 292.00 10.00 50.00 9.39 565.14 L

CONSERVATIVE INVESTOR (Low Risk Profile)

Sl.Sl .Sl.Sl .Sl. Company NameCompany NameCompany NameCompany NameCompany Name IndustryIndustryIndustryIndustryIndustry CMP(Rs.)CMP(Rs.)CMP(Rs.)CMP(Rs.)CMP(Rs.) EPS*EPS*EPS*EPS*EPS* BV*BV*BV*BV*BV* FVFVFVFVFV DivDivDivDivDiv EquityEquityEquityEquityEquity Market CapMarket CapMarket CapMarket CapMarket Cap TimeTimeTimeTimeTime


1 Power Grid Power Transmission 104.90 6.19 44.12 10.00 5.00 4629.73 48565.87 L

2 Bharat Electronics Defense 1756.60 107.68 623.21 10.00 156.00 80.00 14052.80 M,L

3 Piramal Healthcare Ltd. Pharmaceuticals 381.75 25.00 706.15 2.00 600.00 33.58 6409.58 M,L

4 Sundaram - Clayton Ltd Auto Parts & Equipment 145.40 9.83 74.26 5.00 50.00 18.97 551.65 M,L

5 Noida Toll Bridge Roads & Highways 25.70 2.09 24.48 10.00 0.00 186.19 478.51 L

Disclaimer

This document was prepared by Zen Securities Ltd (ZSL), on the basis of publicly available information, internally developed data and other

sources believed to be reliable. The material contained h erein is for information on ly and u nder no circumstances should be d eemed as an offer to

sell or a solicitation to buy any security. ZSL or its employees, may, from time to time have p ositions in the stocks mentioned in this docum ent.

While all care has been t aken to ensu re that th e facts are accurate and the opinions ar e reasonable, ZSL shall not be liable for any loss or dam age

howsoever arising as a result of any person acting or refraining from acting in reliance on any information contained th erein.

EV/ EBIDTA ratio is the Enterprise Multiple used to d etermine the value of a compan y. It is the ratio of the

Enterprise Valuation of the company compared to the EBIDTA that the company generates. The enterprise

multiple looks at a firm as a potential acquirer would, because it takes debt into account - an item not

includ ed in other multiples like P/ E ratio.

In EV/ EBIDTA, EV refers to Market cap italization + Debt Cash & Equivalents w hile EBIDTA is the Earnings

before interest, tax and depreciation.

For Example, if EV of a compan y A is Rs. 50000 Cr and EBIDTA is Rs.5000 Cr, then EV/ EBIDTA ratio is calculated as

50000/ 5000 = 10

A low ratio indicates that a company m ight be und ervalued. Enterprise multiples can vary d epending on the indu stry. Therefore,

it's importan t to compare the m ultiple to other comp anies or to the industry in general.


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