JaiprakashAssociates_Q4FY10 money.umakant.info Q2 2010

					    Result Update
                                                                                                                                                                                                                                June 1, 2010
Rating matrix
Rating                                                            :             Strong Buy                                                                   Jaiprakash Associates (JAIASS)
Target                                                            :             Rs 160
Target Period                                                     :             12-15 months                                                                                                                                            Rs 124
Potential Upside                                                  :             29%
                                                                                                                                  WHAT’S CHANGED…
Key Financials                                                                                                       (Rs cr)
                                                                                                                                  PRICE TARGET .............................................................. Changed from Rs 180 to Rs160
                                               FY09                      FY10                       FY11E             FY12E
Net sales                                     5764.2                   10088.9                     12933.0           14383.2      EPS (FY11E) ................................................................... Changed from Rs 5.4 to Rs 5.5
EBITDA                                        1676.0                    2624.9                      3030.7            3238.9      EPS (FY12E) ................................................................... Changed from Rs 6.8 to Rs 5.7
Adj. Net profit                                892.5                     893.9                      1165.3            1211.7
                                                                                                                                  RATING.......................................................................................from Buy to Strong Buy
Valuation summary
                                                     FY09                       FY10                 FY11E               FY12E
                                                                                                                                  Quarterly numbers below expectation…
EPS (Rs)                                               4.2                        4.2                   5.5                 5.7   Jaiprakash Associates’ (JAL) results were sharply below our
PE(x)                                                 29.7                      29.67                 22.76                21.9   expectation due to lower other income of Rs 11.9 crore in Q4FY10 (vs.
Target PE(x)                                          76.1                       76.0                  58.3                56.0   Rs 42.9 crore in Q4FY09), higher interest expenses and taxes. However,
EV/EBITDA(x)                                          21.9                       15.0                  12.9                12.3   the operating performance came largely in line with our expectation.
P/BV(x)                                                4.0                        3.5                   3.1                 2.7   We have now incorporated these changes into our estimates and have
RoNW(%)                                               15.9                       12.5                  14.4                13.1   revised our earning estimates. In terms of valuation, we are now valuing
RoCE(%)                                                8.4                       10.0                  10.3                10.1
                                                                                                                                  the JAL cement business at close to its replacement cost (US$102 per
                                                                                                                                  tonne). Also, we have valued JAL’s stake in Yamuna Expressway at a
                                                                                                                                  20% discount to the CMP in our SOTP valuation. Hence, we are revising
                                                                                                                                  our price target to Rs 160 per share and upgrading it to STRONG BUY.
Stock data
Mcap                                                                                                    26522.5          crore            Q4FY10 results below our expectation
Debt                                                                                                      799.6          crore
Cash & Invst                                                                                               67.4          crore
                                                                                                                                          JAL’s revenues grew 58.8% YoY to Rs 3345.2 crore, above our
EV                                                                                                      27254.7          crore            expectation, driven by the construction division (up 80.2% YoY to
52 week H/L                                                                                             180/110                           Rs 1974.1 crore) and cement division (grew 70.2% YoY to Rs 724.8
Equity cap                                                                                                 53.0          crore            crore). However, the adjusted net income declined by 39% YoY to
Face Value                                                                                                Rs 10                           Rs 244 crore, below our expectation due to lower other income on
MF Holding (%)                                                                                               9.9                          account of adjustment of VAT in the cement division and higher
FII Holding (%)                                                                                            26.0                           interest expenses and tax rate.
Price movement (Stock vs. Nifty)
                                                                                                                                          Consolidated numbers remained muted in FY10
  200                                                                                                                6000
                                                                                                                                          JAL’s consolidated revenues grew 36% YoY to Rs 6526.6 crore in
                                                                                                                     5000
  150                                                                                                                                     FY10 and remained below standalone revenues of Rs 10,088 crore
                                                                                                                     4000
                                                                                                                                          on higher inter segment revenues. In terms of adjusted net profit, it
  100                                                                                                                3000                 declined 27.4% YoY to Rs 372.7 crore due to a sharp rise in interest
   50
                                                                                                                     2000                 expenses to Rs 1286 crore in FY10 from Rs 706.2 crore in FY09.
                                                                                                                     1000
                                                                                                                                          Monetises Rs 590 crore on Jaypee Infratech IPO
    0                                                                                                                0
                                                                                                                                          With the completion of the Jaypee Infratech IPO, JAL has
        Jun-09
                 Jul-09
                          Aug-09
                                   Sep-09
                                            Oct-09
                                                     Nov-09
                                                              Dec-09
                                                                       Jan-10
                                                                                 Feb-10
                                                                                          Mar-10
                                                                                                   Apr-10
                                                                                                            May-10




                                                                                                                                          successfully monetised Rs 591 crore through an offer for sale of six
                                            JAL(LHS)                            Nifty
                                                                                                                                          crore equity shares. However, we have now revised our valuation
Analyst’s name                                                                                                                            for JAL’s stake in Yamuna Expressway at a 20% discount to CMP.
 Deepak Purswani                                                                                                                  Valuation
 deepak.purswani@icicisecurities.com
 Bhupendra Tiwary
                                                                                                                                  At the CMP, the stock is trading at 21.7x FY12 earning estimates and 2.7x
 bhupendra.tiwary@icicisecurities.com                                                                                             P/BV. We are upgrading the stock to STRONG BUY and revising our
                                                                                                                                  SOTP based price target to Rs 160.

                                                                                                                                   Exhibit 1 Financial performance
                                                                                                                                    Particulars                   Q4 FY10 Q4FY10E Q4FY09 Q3FY10 YoY Gr (%) QoQ Gr (%)
                                                                                                                                    Net sales                      3345.2   3077.7 2106.5 2852.4      58.8       17.3
                                                                                                                                    EBITDA                          853.7    774.3  764.7  773.8      11.6       10.3
                                                                                                                                    EBITDA Margin (%)                 25.2    25.2   36.3   27.1
                                                                                                                                    Depreciation                    133.4    112.4  104.3  110.9      27.9       20.2
                                                                                                                                    Interest                        298.9    255.9  168.7  276.2      77.2         8.2
                                                                                                                                    PAT                             244.0    363.9  399.7  314.0     -39.0      -22.3
                                                                                                                                   Source: Company, ICICIdirect.com Research

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 Jaiprakash Associates (JAIASS)




                                                              Q4FY10 results below our expectation
                                                              • JAL’s revenues grew 58.8% YoY to Rs 3345.2 crore, above our
                                                                 expectation. The growth in topline was driven by the construction
                                                                 division (up 80.2% YoY to Rs 1974.1 crore) and the cement division
                                                                 (grew 70.2% YoY to Rs 724.8 crore)
The growth in topline was driven by the construction
division and the cement division. The adjusted net profit
                                                              •     The OPM declined by over 10 percentage points to 25.6% due to a
came below our expectation due to lower other income
                                                                    decline in EBIT in the cement division (down 550 bps to 24.3%) and
and adjustment of VAT in Q4FY10
                                                                    construction division (down 13.1% to 19.8%) during the quarter

                                                              •     However, the adjusted net profit declined 39% YoY to Rs 244 crore,
                                                                    below our expectation. The results came below our expectation due
                                                                    to lower other income of Rs 11.9 crore in Q4FY10 vs. Rs 42.9 crore in
                                                                    Q4FY09 due to an adjustment of VAT in the cement division, higher
                                                                    expenses and tax rate

                                                              Exhibit 2: Q4FY10 performance

                                                                                                          Q4FY09     Q4 FY10        Y-o-Y%
                                                              Net sales                                     2106       3345           58.8
                                                              Other operating income                          22           1          -94.1
                                                              Total Revenues                                2128       3347           57.2
                                                              Raw material cost                             1105        1947           76.2
                                                              Staff cost                                      38         140          271.5
                                                              Other expenditure                              199         404          103.3
                                                              Total expenditure                             1342        2492           85.7
                                                              Operating profit                               765        855           11.8
                                                              Depreciation                                   104         133           27.9
                                                              Interest                                       169         299           77.2
                                                              Other income                                    43          12          -72.3
                                                              PBT                                            557        435           -21.9
                                                              Taxes                                          157         189           20.5
                                                              Adjusted Net profit                            400        246           -38.6
                                                              Exceptional items                                0          -2
                                                              RPAT                                           400        244           -39.0


                                                              Margin (%)
                                                              OPM                                           36.3        25.6
                                                              NPM                                           19.0         7.3
                                                              Source: Company, ICICIdirect.com Research



                                                              Monetises Rs 590 crore on Jaypee Infratech IPO
                                                              Recently, JAL completed the IPO of Jaypee Infratech. Along with the IPO,
                                                              the company also made an offer for sale of six crore equity shares and
   The company made an offer for sale of six crore equity     monetised Rs 591 crore. The proceeds from the same are expected to be
   shares and monetised Rs 591 crore, along with the IPO of   booked in Q1FY11. However, we have now revised our valuation for
   Jaypee Infratech. The proceeds from the same are           JAL’s stake value in Yamuna Expressway at a 20% discount to the CMP.
   expected to be booked in Q1FY11




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                                                                                                                                 Page 2
Jaiprakash Associates (JAIASS)




                                                           Segmental Performance

                                                           Cement division revenues grow 70.2% YoY
                                                           Cement division revenues grew 70.2% YoY to Rs 1233.4 crore in Q4FY10.
                                                           On a sequential basis, cement division revenues grew 30.1% driven by
Cement division revenues grew 70.2% YoY to Rs 1233.4       volume (grew 25.5% to 3.6 MTPA) and realisation (grew 4.1%
crore in Q4FY10                                            sequentially to Rs 3379 per tonne). In FY10, the company’s cement
                                                           division capacity has increased from 14.7 MTPA to 21.3 MTPA (including
                                                           2.2 MTPA in JV). Going forward, the company plans to scale it up to 33
                                                           MTPA in FY12.
                                                           Construction division – strong show again
                                                           Construction division revenues grew 80.2% to Rs 1974.1 crore on the
                                                           back of execution of Yamuna Expressway and Karcham Wangtoo project.
Construction division revenues grew 80.2% to Rs 1974.1     EBIT margin in the division stood at 19.8% in this quarter, largely in line
crore on the back of execution of the Yamuna Expressway    with our expectation. In terms of order book, the company currently has
and Karcham Wangtoo project                                an order book of Rs 10,000 crore (excluding Ganga Expressway).
                                                           Real estate – muted performance in the quarter
                                                           On a standalone basis, the real estate division’s performance was muted
                                                           in this quarter. Overall, the company has sold 1.4 million sq ft in Jaypee
                                                           Green Luxurious project at an average realisation of Rs 5,500 psf. At the
                                                           Noida Land parcel, the company has sold 20.35 million sq ft at an average
                                                           realisation of Rs 2,000 psf and collected approximately Rs 1660 crore
                                                           against this sale.
The performance of the real estate division was muted in   Exhibit 3: Revenues details (Rs cr)
this quarter                                                                                           Q4FY09     Q4 FY10       Y-o-Y%
                                                           Cement & cement products                      724.8     1233.4          70.2
                                                           Construction                                 1095.7     1974.1          80.2
                                                           Power                                           4.6         4.0        -13.0
                                                           Hotel/Hospitality                              40.2        45.8         14.1
                                                           Real Estate                                   273.7       124.4        -54.5
                                                           Investment                                     42.9        11.9        -72.3
                                                           Infrastructure projects                         0.0         0.0
                                                           Others                                         15.5        25.6        64.9
                                                           Unallocated                                    28.3        33.0        16.4
                                                           Total                                        2225.7     3452.2         55.1
                                                           Less: Intersegment Revenues                    54.4        93.8        72.4
                                                           Total Revenues                               2171.3     3358.4         54.7
                                                           Source: Company, ICICIdirect.com Research

                                                           Exhibit 4: EBIT details (Rs cr)
                                                                                                       Q4FY09     Q4 FY10       Y-o-Y%
                                                           Cement & cement products                      215.8      299.7          38.9
                                                           Construction                                  360.9      391.6           8.5
                                                           Power                                           -1.4        0.2       -114.2
                                                           Hotel/Hospitality                                9.5        3.9        -58.7
                                                           Real Estate                                   150.3        38.8        -74.2
                                                           Investment                                     42.9        11.9        -72.3
                                                           Infrastructure projects                          0.0        0.0
                                                           Others                                          -0.6        7.0
                                                           Less: Unallocable Expenses                     52.0        21.1        -59.3
                                                           EBIT                                          725.4      731.9           0.9
                                                           Source: Company, ICICIdirect.com Research




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 Jaiprakash Associates (JAIASS)



                                                            Exhibit 5: EBIT margin (%)
                                                                                                                    Q4FY09         Q4 FY10
                                                            Cement & cement products                                   29.8            24.3
                                                            Construction                                               32.9            19.8
                                                            Power                                                     -30.5             5.0
                                                            Hotel/Hospitality                                          23.7             8.6
                                                            Real Estate                                                54.9            31.2
                                                            EBIT                                                       33.4            21.8
                                                            Source: Company, ICICIdirect.com Research



                                                            FY10 consolidated performance remains muted
  The growth in the consolidated topline was lower than     • JAL’s revenues grew 36% YoY to Rs 6525.6 crore. The growth in
  standalone revenue growth due to inter-segment revenues       topline was driven by the construction division (up 83.8% YoY to Rs
                                                                5,338 crore) and cement division (grew 62.2% YoY to Rs 3966 crore).
                                                                However, the growth in the consolidated topline was lower than
                                                                standalone revenue growth due to inter segment revenues.

                                                            •    However, the adjusted net profit declined 27.4% YoY to Rs 372.7
                                                                 crore due to a sharp rise in interest expenses. Interest expenses
The sharp rise in interest expenses was on account of the        increased to Rs 1287 crore in FY10 from Rs 706 crore in FY09. The
sharp rise in the debt. The consolidated debt increased          sharp rise in interest expenses was on account of the sharp rise in
from Rs 19320.2 crore to Rs 35271 crore in FY10                  debt. The consolidated debt increased to Rs 35,271 crore in FY10
                                                                 from Rs 19320.2 crore

                                                            Exhibit 6: FY10 consolidated performance
                                                                                                           FY09           FY10       Y-oY%
                                                            Net sales                                     4799.2         6525.6         36.0
                                                            Other operating income                         190.1          247.1         30.0
                                                            Reported Net sales                            4989.3         6772.7         35.7
                                                            Consumption of raw material                   1905.5         2557.7         34.2
                                                            Staff cost                                     295.5          382.2         29.3
                                                            Other expenditure                              808.9         1080.4         33.6
                                                            Total expenditure                             3009.8         4020.2         33.6
                                                            Operating profit                              1789.4         2505.3         40.0
                                                            Depreciation                                   332.6          472.2         42.0
                                                            Interest                                       706.2         1286.4         82.2
                                                            Other income                                      6.0          16.1       168.3
                                                            PBT                                            946.7         1009.9          6.7
                                                            Taxes                                          433.1          637.3         47.1
                                                            Adjusted net profit                            513.6          372.7        -27.4
                                                            Exceptional items                                -1.0        1021.1
                                                            RPAT                                           512.6         1393.8       171.9
                                                            Source: Company, ICICIdirect.com Research




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Jaiprakash Associates (JAIASS)



                                      Exhibit 7: Consolidated revenue details (Rs cr)
                                                                                         FY09           FY10         Y-o-Y%
                                      Cement & cement products                          2439.0         3966.8           62.6
                                      Construction                                      2903.5         5337.9           83.8
                                      Power                                              773.6          737.9           -4.6
                                      Hotel/Hospitality                                  162.6          154.3           -5.1
                                      Real Estate                                        441.4          653.6           48.1
                                      Investment                                           6.0           16.1          168.3
                                      Infrastructure projects                            554.5          640.8
                                      Others                                              15.5           39.0         151.2
                                      Unallocated                                        120.2          145.6          21.2
                                      Total                                             7416.3        11691.9          57.7
                                      Less: Intersegment Revenues                       2420.9         4903.2         102.5
                                      Total Revenues                                    4995.3         6788.8          35.9
                                      Source: Company, ICICIdirect.com Research



                                      Exhibit 8: Consolidated EBIT details (Rs cr)
                                                                                             FY09         FY10       Y-o-Y%
                                      Cement & cement products                               680.5       1056.1         55.2
                                      Construction                                           101.7        494.2        386.1
                                      Power                                                  575.1        541.1         -5.9
                                      Hotel/Hospitality                                       29.6           9.0       -69.6
                                      Real Estate                                            217.7        259.8         19.3
                                      Investment                                                6.0        16.1        168.3
                                      Infrastructure projects                                166.1         22.7
                                      Others                                                   -0.6         -1.0
                                      Less: Unallocable Expenses                             124.2        107.6         -13.3
                                      EBIT                                                  1651.9       2290.4          38.7
                                      Source: Company, ICICIdirect.com Research



                                      Exhibit 9: Consolidated EBIT margin
                                                                                                         FY09            FY10
                                      Cement & cement products                                            27.9            26.6
                                      Construction                                                         3.5             9.3
                                      Power                                                               74.3            73.3
                                      Hotel/Hospitality                                                   18.2             5.8
                                      Real Estate                                                         49.3            39.8
                                      EBIT                                                                33.1            33.7
                                      Source: Company, ICICIdirect.com Research



                                      Valuation

                                      We have revised our earning estimates downwards to reflect the lower-
                                      than-expected other income. Our revised earning estimate now stands at
                                      Rs 4.9 per share for FY11 and Rs 5.8 per share.
                                      At the CMP, the stock is trading at 21.7x FY12 earning estimates and 2.7x
                                      P/BV. We continue to value the stock using SOTP valuation method. In
                                      our SOTP valuation, we are now valuing the JAL cement business at
                                      close to its replacement cost (US$102 per tonne). Furthermore, we are
                                      now valuing JAL’s stake in Yamuna Expressway and treasury shares at a
                                      20% discount to CMP in our valuation. Consequently, we are revising our
                                      price target to Rs 160 per share and upgrading the stock to STRONG
                                      BUY.




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                                                                                                                   Page 5
  Jaiprakash Associates (JAIASS)



Exhibit 10: Valuation Summary
Business                                    Value (Rs cr)     Per share    Comment

Cement Division                                   12347              58 7.5x FY12E EV/EBITDA implying EV/tonne of US$103 on FY12 capacity of 26.8 MTPA

Construction Division                             10162              48 6.4x FY12E EV/EBITDA , in line with mid cap construction players


Power Division                                    12751              60 Value power portfolio using FCFE and have considered COE of 12% for operational
                                                                        projects, 13% for projects upto FY15 & 16% for the projects expected beyond FY15
Real Estate Division                                9234             44
 Yamuna Expressway -                                8068             38 At 20% discount to CMP
 Jaypee Greens                                      1166              5 at 1x of its NAV

Hotel Division                                      218               1   7x FY12 EV/EBITDA
Ganga Expressway                                    274               1   1x P/BV
Himalayan Expressway                                 95               0   1x P/BV
Wind Power                                          490               2   2x P/BV
Captive coal mine                                    41               0   1x P/BV
Treasury shares                                    1893               9   18.9 crore valued at 20% discount to CMP
Total Enterprise Value                            47505             224
Less: Net debt                                    13477              64   FY12E Net debt
Target                                            34028             160
Source: Company, ICICIdirect.com Research




                                             Exhibit 11: Valuation Table
                                                            Sales (Rs cr) Sales Gr (%)      EPS (Rs) EPS Gr (%)      P/E (x)   P/BV(x) RoNW(%) RoCE(%)
                                             FY09                 5764.2          44.7           4.2       49.4        37.3        5.0     15.9     8.4
                                             FY10                 9821.4          70.4           4.8       13.4        32.9        4.4     14.1     9.7
                                             FY11E               12104.3          23.2           5.4       13.7        28.9        3.8     14.0     9.7
                                             FY12E               14258.6          17.8           6.8       24.4        23.3        3.3     15.2   10.3
                                             Source: Company, ICICIdirect.com Research




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  Jaiprakash Associates (JAIASS)




ICICIdirect.com coverage universe (Construction)


JP Associates                                                   Sales (Rs Crore)   EPS (Rs)   PE (x)   P/BV(x) RoNW (%)   RoCE (%)
Idirect Code                   JAIASS CMP           124 FY09             5,764.2        4.2    29.7        4.0     15.9        8.4
Mcap (Rs crore)                 26523 Target        160 FY10            10,088.9        4.2    29.7        3.5     12.5       10.0
                                      % Upside     29% FY11E            12,103.4        4.9    25.4        3.1     13.0        9.6
                                                        FY12E           14,395.4        5.8    21.7        2.7     13.4       10.2

Simplex Infra                                                   Sales (Rs Crore)   EPS (Rs)   PE (x)   P/BV(x) RoNW (%)   RoCE (%)
Idirect Code                  SIMCON CMP           488 FY09              4,662.7      23.2     20.5        2.6     13.9       14.7
Mcap (Rs crore)                  2467 Target       521 FY10              4,455.6      21.4     22.2        2.4     11.2       12.3
                                      % Upside     7% FY11E              5,403.5      31.6     15.0        2.1     14.7       14.7
                                                       FY12E             6,430.3      40.5     11.7        1.8     16.3       17.2

Unity Infra                                                     Sales (Rs Crore)   EPS (Rs)   PE (x)   P/BV(x) RoNW (%)   RoCE (%)
Idirect Code                   UNIINF CMP           104 FY09             1,130.8      10.4     12.3        2.0     18.0       18.8
Mcap (Rs crore)                   761 Target        125 FY10             1,476.8      11.7     11.0        1.7     17.6       18.8
                                      % Upside     20% FY11E             1,801.0      13.6      9.4        1.4     16.5       18.7
                                                        FY12E            2,055.0      15.5      8.3        1.2     16.2       19.2
Source: Company, ICICIdirect.com Research




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    Jaiprakash Associates (JAIASS)




RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Add, Reduce and Sell. The performance horizon is two years unless specified and the
notional target price is defined as the analysts' valuation for a stock.

Strong Buy: 20% or more;
Buy: Between 10% and 20%;
Add: Up to 10%;
Reduce: Up to -10%
Sell: -10% or more;

                                  Pankaj Pandey                                          Head – Research                                       pankaj.pandey@icicisecurities.com

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                                                                        ICICI Securities Limited,
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compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment
banking or other advisory services in a merger or specific transaction. ICICI Securities and affiliates expect to receive compensation from the companies mentioned in the report within a period of three
months following the date of publication of the research report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific
transaction. It is confirmed that Deepak Purswani MBA (FINANCE) Bhupendra Tiwary MBA (FINANCE) research analysts and the authors of this report have not received any compensation from the
companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings from Investment Banking
and other business.

ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the
research report.

It is confirmed that Deepak Purswani MBA (FINANCE) Bhupendra Tiwary MBA (FINANCE)                 research analysts and the authors of this report or any of their family members does not serve as an officer,
director or advisory board member of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use
of information contained in the report prior to the publication thereof.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.




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