Technical Views on CIPLA

Cipla has made a triple top between 255-260 levels. Once it manages to cross 260 one can buy it with for a target of 280.

Satyam spike to spoil Tech Mahindra's public offer

A sharp surge in the shares of Satyam Computer Services means its new parent will likely need a second preferential issue to gain the majority stake in the company at the centre of India's biggest corporate fraud.

Tech Mahindra won a auction in April for control of Satyam. It bought a 31 per cent stake of new equity, and on Friday launches an open offer to buy up to 20 per cent of shares in the open market at Rs 58 a share to take its stake to 51 per cent.

But Satyam shares now stand at Rs 80.85, having risen by their daily 10 per cent limit on each of the three days since the firm released financial details on Tuesday that showed it remained profitable despite the fraud.

"Logically, people will not tender their shares for a price that is sharply lower than the current market price, even if we assume some correction in the days ahead," said Tejas Doshi, head of research at Mumbai brokerage Sushil Finance.

Tech Mahindra can revise the offer price till June 22, but analysts see little reason for it to do so.

If the offer is not fully subscribed, under the auction conditions Tech Mahindra can opt for a second preferential issue from Satyam to raise its stake to not more than 51 per cent of the further expanded share capital.

ABAN OFFSHORE LIMITED (FIRST GLOBAL)

The Story…

What all can change in a month!

Aban, written off for dead, is back. And if you think about it…what really is the problem with
company?

Sure, oil prices were down. But that was yesterday. Now oil prices are headed back up to the $80
levels and beyond, given the weakness of the US Dollar.

Aah…yes, the company has a bit of debt.

Excellent! That's precisely what we are looking for these days. We all loooooove companies with
loads of debt these days, don't we…Because we wanna give them moneys in QIPs, FCCBs, PE, off
balance sheet the way Ramalinga gave to Satyam…whatever…

Short point is: Aban's twin problems are receding fast, and before you know, they'll have
disappeared altogether. Let it get some equity, and a whole new company emerges from the
chrysalis.

Valuations are totally undemanding at 4-5x earnings. The stock had an all-time high 5.5x higher than its current price.

That's good news.

Because there is plenty of room for the stock to run before it hits the wall. Global peers in the form of oil services companies are also seeing their stocks do well. No reason for Aban to sit out the party.

Aban could so easily be a Rs.2000 stock…Buy it.

(See Full Report)

INDIAN NATURAL GAS (CITI)

■ GAIL new top pick, TP of Rs339 — Given the recent run-up in the markets, we take a fresh look at our stock recommendations among Indian gas utilities. We now prefer GAIL over other gas utilities driven by recent underperformance (-10% vs. Sensex in the last month) and strong performance by GSPL, our erstwhile top pick (+12%). Our TP increase (from Rs288 to Rs339) is driven by lower WACC and subsidy assumptions, with further upside possible given conservative assumptions on tariffs and no value accretion from city gas.

■ Maintain Buy on GSPL — While GSPL growth outlook is more pronounced than GAIL, outperformance will likely be contingent on a change in the outcome, likely or perceived, of the social tax issue. We are increasing our TP to Rs70 following our lower WACC assumptions. While we continue with 30% social tax contribution, we are now assuming it to be tax deductible. Further upside could come from partial or complete revocation of the directive by the state gov’t.

■ PLNG stays Sell; prefer Ggas among city gas distributors — We maintain Sell (3H) on Petronet LNG, the best-performing stock in our universe, outperforming Sensex by 40% in last two months, as a robust global long-term LNG outlook drives uncertainty on the future viability of R-LNG in India. Amongst the city gas distributors, we prefer Ggas, Buy (1L), to IGL, Hold (2M), due to relatively lower regulatory risk and negligible impact of proposed increase in APM prices.

■ Increasing TPs on lower cost of capital — We are increasing TPs across our universe driven by our lower cost of capital assumptions, which now factor in riskfree rate of 6.5% and equity risk premium of 6.0%.

See Full Report.

Oil India IPO by September, 09

Oil India IPO by September; no disinvestment in ONGC, IOC

Oil exploration major Oil India Ltd (OIL) is likely to launch an initial public offering (IPO) in September, Petroleum Secretary R.S. Pandey said here Tuesday.

He, however, ruled out disinvestment in other state-owned oil giants Indian Oil Corp (IOC) and Oil and Natural Gas Corp (ONGC). "There is no plan to divest stake in IOC and ONGC," Pandey told reporters, adding: "But we expect an initial public offering of Oil India by September."

He pointed out that OIL's disinvestment had been in the pipeline for a long time, but was postponed repeatedly due to adverse market conditions. OIL chairman N.M. Borah said the company board had been informed of a roadmap for the IPO. Besides OIL, the government is also planning to sell stake in a few other state-run entities to raise resources to fund infrastructure projects.

PSU stocks give 40% returns

MUMBAI: PSU stocks are on a roll. Market expectations that the UPA government, without the baggage of its Left allies, would push forward with the divestment of PSU companies, is driving these stocks.

As a result, since May 16 the investor euphoria for stocks of government-run companies, the PSU index on the BSE has gained 40%, double the sensex gain of 20% during the same period. While the sensex is near its nine-month-high level, the PSU Index touched a 52-week high on Friday. Among the PSU stocks, NMDC, MMTC and Neyveli Lignite were the top gainers.

Additionally, there are four PSU stocks in the elite sensex 30 scrips: BHEL, NTPC, ONGC and SBI. And all the four hit new 52-week highs after the poll results were announced two weeks ago. Also among the 47 stocks that constitute the PSU index, nearly two in every three hit new 52-week highs since May 16, the day the Lok Sabha results were announced. All these gains have come despite some of the PSU companies registering ordinary results, market players said.Part of the rise could also be attributed to the new government’s indications that it could move to free petro-product prices from the currently regulated set up, brokers and dealers said. Such expectations have also attracted investor interest in oil refining and marketing companies like Indian Oil, BPCL and HPCL, they said.

The frenzied buying in these counters have also made the government richer by a substantial margin, and in matter of weeks. The combined market cap of 50 PSU stocks have gone up by Rs 4.4 lakh crore in 10 post-results trading sessions: An average gain of about Rs 44,000 crore on each trading day. As of May 29, among the top 10 most valued companies in India, six were being run by the government. However, this composition has not changed from what was before the poll results were announced.
(Source: ET)