It was an eventful September; Indian markets came very close to their all time highs. The month also saw high action in primary markets. After almost 15 years, 16 issues came up in a month, grossing about Rs.4000 Crore. India continues to strengthen its position in global Automotive industry with stronger sales numbers month after month. Heavy rainfall brought cheers for the agriculture sector. Kharif crops have been sown in 990.58 lakh hectares area so far. It is 76.25 lakh hectares more than the acreage on this date last year (923.32 lakh hectares). The sowing of all major crops this year is more than that in the last kharif season. The new WPI series was introduced during the month based on FY 2004-05 as base replacing earlier series that used 1993-94 as base. Besides, the number of commodities increased to 676 from 435 and Weightage of primary articles marginally decreased (22% to 20.11%), whereas Weightage of finished products increased marginally (63.74% to 64.97%). The annual rate of inflation, based on monthly Wholesale Price Index, stood at 8.51% (Provisional) for the month of August, 2010 (over August, 2009) as compared to 9.78 % (Provisional) for the previous month. This figure is based on the new WPI series. The figures as per the old base year came in at around 9.5%. Inflation remains a key concern. Contradictory actions were seen in Equity from FIIs & Mutual Funds in September 2010. FIIs net bought worth Rs.24978 Crore. Mutual Funds net sold worth Rs.7236 Crore. Although both were buyers in Debt market. FIIs net buying Rs.7689 Crore MFs putting in net Rs.20504 Crore (Source: sebi.gov.in). There were bullish sentiments round the globe: INDEX 31 Aug 10 Close 30 Sep 10 Close Points Change % Change Monthly High Monthly Low

DOW 10014.72 10788.05 773.33 7.72 10960.99 10016.01

NASDAQ 2114.03 2368.62 254.59 12.04 2400.06 2141.95

DAX 5925.22 6229.02 303.8 5.13 5339.97 5876.43

INDEX 31 Aug 10 Close 30 Sep 10 Close Points Change % Change Monthly High Monthly Low

NEKKEI 8824.06 9369.35 545.29 6.18 9704.25 8796.45

BSE 30 17971.12 20069.12 2098 11.67 20267.98 18027.12

NSE 50 5402.4 6029.95 627.55 11.62 6073.5 5403.05

There was buying across the sectors in Indian equities. Financials were the best performers. Power, Oil & Gas started moving recently, after long consolidation. Sectoral Moves Banking Reality Metal Info Tech FMCG Infra Healthcare Auto Power Oil & Gas

31 Aug 2010 10746.35 435.15 14977.64 5974.91 3385.07 3391.8 5543.93 8813.79 3033.05 9920.62

30 Sep 2010 12366.35 491.75 16864.91 6613.4 3719.54 3719.3 5995.71 9527.64 3235.14 10446.98

% Change 15.07 13.01 12.60 10.69 9.88 9.66 8.15 8.10 6.66 5.31

India’s growth story should continue to attract more foreign money and positive inflows are expected from Mutual Funds also. However, now the markets are near all time highs and FIIs have pumped in huge amount, there is no margin of error in the Q2 FY 2011 result season. There is high optimism built in especially in sectors like Financials, Auto, IT, Reality etc. Even slight disappointment will be punished hard. What Investors can do: Get rid of Junk. Where investors were trapped when markets peaked in 2008 and prices fell off the cliff. Wherever, the prices have recovered and in past 2 years of holding, found managements not very comfortable, off load the junk. Book Profits in Mid-Caps & Small Caps: Scrips that have been multi baggers and trading volume is always an issue. Book profits as corrections are also sever in such scrips. Its better to take profit & regret if prices move further up than getting stuck, if prices crash down. Invest in Large Caps & Churn Portfolio: Large caps with proven management can be good option to invest and as some profit accrues take it. Volume is never an issue in such scrips. Low BETA sectors with visible growth offer good cushion at high levels. Hedge Long Term Folios through OPTIONS. Strategies Suggested in “Technical Outlook” Section Look at Quality Issues in primary markets: Where business model is robust and there is value left on table by issuers. (Page 1)

MARKET OUTLOOK

Stock specific view technically for Investors only:

Nifty made a low of 4786 on 25th May 2010 and since then our market has witnessed a handsome rally and it has appreciated more than 30 % by 1st week of October 2010. As we all know very well that historically October has been a bear month in the past few years. So it is time to be “Cautious and Careful”. Reckless speculation can become fatal.

Stocks like Tata Motors, LIC Housing Finance SBI, BPCL , Hind Unilever, ITC, ACC, Ambuja Cement still have a lot of steam left for upside. So accumulate these stocks on any substantial decline. Majority of investors are trapped in underperforming sectors like Reliance group stocks, Reality Sectors etc. Exit from these stocks on rally and shift into the performing sectors as mentioned above.

Technically Nifty is trading very near to its all time high of 6357 which was made on 8th January 2008. This level can become a good resistance point as Nifty has already undertaken a long journey to reach this level and looking a bit overheated.

OPTION STRATEGY FOR OCTOBER 2010:

Our market has so far outperformed major global indices and now either it will take a rest here and consolidate for few weeks before resuming its uptrend. OR a big correction of around 10-20 % not ruled out. In both the cases Investors are advised to keep some cash and be stock specific.

Buy Oct 6300 CE @ 39/Buy Oct 6000 PE @ 54/Both in equal quantity. Investment / Risk: - 93 points. Profit potential: - Unlimited on either side break out. Those who wish to retain their portfolio should properly hedge it by following option Strategy Buy one lot Oct 6000 PE @ 54/Sell equal quantity Oct 6300 call @ 39/Sell double the quantity Oct 5700 PE @ 13/-

NIFTY MAJOR SUPPORT AND RESISTANCE LEVELS FOR OCTOBER 2010: Support: - 5932-5810-5640-5350

Resistance: - 6250-6357-6410-6520

(Page 2)

Sector Analysis: Indian Power Sector Visible robust growth in demand makes the sector attractive for Medium to Long Term Perspective. More so, all other major sectors have seen huge run up in last few months, make this defensive sector a good investment destination……

Low Consumption base and Demand –Supply Mismatch

Massive Investments in Power Sector and Public Private Partnership

India is the world’s 5th largest economy (after US, China, Japan & EU). After China it is the fastest growing among large economies.

Power Sector gets the top priority among infrastructure of the Indian economy. For 11th 5-year plan Govt. planned US$ 581.68 Billion expenditure on infrastructure. Power Sector was given the lion’s share of US$176.91 Billion or Rs.7.25 Lakh Crore (30.4%). Next sector Roads were planned US$89.47 Billion (15.4%). (US$=INR 41 was estimated)

The country has 2nd largest population of about 1.2 Billion humans. Further, with economic growth purchasing power is also on the fast rise. The nation is also emerging as global hub for industries like IT & ITes outsourcing, Automotive, Engineering etc. India has very low per capita power consumption of 705 Units/Year compared to the world average of 2750 Units/Year and there is wide gap between increasing supply falling short to meet the fast growing demand. The nation has about 93000 villages (out of 5 Lakh villages) yet to get electrification. About 2/3 of Indian population lives in rural areas. The rural areas which have power supply, availability of power is very poor. Infact most parts of the nation face power cuts & shortages. Even with increased supply, the shortage is likely to continue as besides industrialization, there is sharp increase in Electronics equipments at household levels and with low base this is to grow many folds. Gadgets like TVs, Refrigerators, Washing Machines, Mixers, Computers, Air Conditioners etc. that are essential in most of the urban households, are yet not there, into most of the rural households. In FY 2010 demand was about 830 Billion Units. The expected demand for Power with different projected economic growth level is as: Billion Units FY 2012 FY 2017 FY 2022 FY 2027

8% 1097 1524 2118 2866

9% 1167 1687 2438 3433

For 12th 5-year plan, Government has estimated about Rs.41 Lakh Crore Rupees for infrastructure spending, Power sector estimate is taken as Rs.11 Lakh Crore. India’s total capacity stood at 132 GW at the end of 10th plan ending FY 2007. During 11th plan about 78 GW of new capacity was planned to be added, taking total capacity to about 210 GW in FY 2012 terminal year of 11th plan. Further, during 12th plan ending FY 2017, the nation aims to achieve installed capacity of 310 GW. (1GW=1000 MW). The country has already added about 32 GW of planned capacity till August 2010. In next 12-15 months another 46 GW capacity is likely to come up. The share of Private Sector is gradually going up. In FY 2007, out of total capacity of 132 GW, private sector accounted for 17 GW i.e. 12.8%. At the end of 11th plan private sector is likely to have 39 GW i.e. 18.5% Share of 210 GW planed capacity by FY 2012. State Governments which are considered inefficient have seen falling share from 55.3% (73 GW) in FY 2007 to 45.2% (95 GW) by 2012. Central Government Share is seen rising from 31.9% (42.2 GW) in FY 2007 to 36.2% (76 GW) in FY 2012. Besides generation, The Private sector participation is growing fast in Transmission & Distribution. T&D were dominated by inefficient State Electricity Boards. With more involvement of private sector, T&D losses can be curtailed. (Page 3)

Entry Barriers in “Sellers’ Market” and Operations Integration Huge Capital requirements and long gestation periods create entry barriers, resulting in only handful players in the industry including Government (Central & State) and a few big corporate houses like Reliance-ADAG, Tatas, GMR, GVK, Jindals, Goenkas, Indiabulls, Adani Group, Jaiprakash Group etc. Most of the players have integrated operations i.e. from Raw Materials (Coal, Lignite, Gas etc.) sourcing to generation, power trading to transmission & distribution to derive the maximum benefits. Traditionally power was purchased by SEBs (State Electricity Boards) through long term PPAs (Power Purchase Agreements). Now players are themselves entering into T&D. Merchant Power is the new upcoming opportunity for the industry, where higher prices are realized by supplying power on short term basis. In past there were delays in many projects due to delay in installation of plant & machinery, T&D infrastructure etc. Many players are themselves setting up power ancillary units or entering in JV with engineering companies. NTPCBHEL JV, JP Group, RPG Group, Jindals, Tata Group etc. are to name a few.

New Emerging Sources of Power & Government Support Presently, the major sources of Power are Thermal (Coal, Gas & Diesel) and Hydro. Nuclear & RES (Renewable Energy Sources) are new areas.

Figures in MW Thermal (Coal) Thermal (Gas) Thermal (Diesel) Thermal (Total) Nuclear Hydro RES Total

Public Sector 78002 10769.35 602.61 89373.96 4560 35853.4 2789.39 132576.75

Private Sector 9856.38 6605.5 597.14 17059.02 1233 13640.03 31932.05

Total 87858.38 17374.85 1199.75 106432.98 4560 37086.4 16429.42 164508.8

Hydro & Coal based Thermal plants dominate power generation, presently. RES, Gas based Thermal and Nuclear are the upcoming sectors. Private sector dominates RES, whereas in Nuclear Energy only a few PSUs like Nuclear Power Corporation (NPCL) are allowed. Nuclear is likely to remain under strict Govt. control due to its sensitivity to national security. Apart from NPCL, NTPC is also foraying into Nuclear Energy. Present Thermal, Hydro etc. power producers are also foraying into cleaner fuel like Wind & Solar (RES). Issues like environment & declining equipment costs have also motivated RES capacities. Power sector enjoys benefits of “Infrastructure” Status. Govt. (through The Central Electricity Regulatory Authority (“CERC”) has laid down tariff regulations to ensure adequate returns to the sector. The central Govt. has started APDRP i.e. Accelerated Power Development & Reform Programme to bring down the technical and commercial losses in the distribution network power system of the country..

The Major players in the Power Sector: Public Sector Rs. Crore NTPC NHPC Nevyelli Lignite GIPCL SJVN FY 10 Total Sales 49246.65 4892 4720 953 1908.73 FY 10 PAT 8728.2 2090 1247 106.78 972.74 Equity (FV 10) 8246.45 12300 1677.7 151.25 4136.63 EPS 10.58 1.70 7.43 7.06 2.35 Present Capacity (in MW) 33000 5255 2490 557 1500 Capacity by FY 2012 end 45000 6600 3240 807 1500 CMP (Rs./Share) 217 33 165 116 24 Market Cap 178948 40590 27682 1755 9928 M Cap/MW 5.42 7.72 11.12 3.15 6.62 M Cap/MW (FY 2012) 3.98 6.15 8.54 2.17 6.62 PAT (%) 17.72 42.72 26.42 11.20 50.96 FY 10 based PE 20.50 19.42 22.20 16.43 10.21 Note: Power Grid is into Transmission. M Cap/MW for Power Grid is M Cap per Kilometer of network.

Power Grid 7504 2041 4208.8 4.85 72000 Km. 80000 Km. 112 47139 0.63 0.59 27.20 23.10 (Page 4)

The Major players in the Power Sector: Private Sector Rs. Crore FY 10 Total Sales FY 10 PAT Equity Face Value EPS Present Capacity (in MW) Capacity by FY 2012 end CMP (Rs./Share) Market Cap M Cap/MW M Cap/MW (FY 2012) PAT (%) FY 10 based PE

CESC 3449 433 126 10 34.37 1225 1225 396 4990 4.07 4.07 12.55 11.52

Tata Power 18985.8 1966.84 237.33 10 82.87 3000 4200 1398 33179 11.06 7.90 10.36 16.87

Adani Power 466 180 2180 10 0.83 990 4620 137 29866 30.17 6.46 38.63 165.92

JSW Energy 2441 846.67 1640 10 5.16 995 3140 123 20172 20.27 6.42 34.69 23.83

KSK Energy 275.87 127.05 372.63 10 3.41 279 819 178 6633 23.77 8.10 46.05 52.21

Ind Bulls Power 70 37.72 2021.7 10 0.19 Nil Nil 29 5863

53.89 155.43

Note: KSK, Adani Power, JSW Erg & IB Power get significant earnings from IPO proceeds investments as “Other Income”

Rs. Crore FY 10 Total Sales FY 10 PAT Equity Face Value EPS Present Capcty (in MW) Capacity by FY2012 end CMP (Rs./Share) Market Cap M Cap/MW M Cap/MW (FY 2012) PAT (%) FY 10 based PE

GMR Infra 1298.63 28.44 389.24 1 0.07 810 2660 58 22575.92 27.87 8.49 2.19 793.81

GVK Power 497.45 33.39 157.92 1 0.21 900 1440 48 7580.16 8.42 5.26 6.71 227.02

Rel Infra 10817 1151.69 244.91 10 47.03 941 508 1114 27282.97 28.99 53.71 10.65 23.69

Rel Power 843.35 683.89 2396.8 10 2.85 1500 6500 168 40266.24 26.84 6.19 81.09 58.88

JP Power 717.79 241.79 2095.68 10 1.15 700 1700 69 14460.19 20.66 8.51 33.69 59.80

Note: GMR, GVK & Rel Infra have interests in Other Infrastructure areas also like Roads, Air Ports, MRTS etc. 433 MW is transferred from Rel Infra to Rel Power. Rel Power PAT includes “Other Income” of IPO amount.

Picks from the Sector: Oh! Yes. There is one for everyone Investment Profile Value Pick Long Race Horse

Steady Growth Short Term

Under Valued Compared to Peers For Long Term Portfolio

GIPCL

Buy 100-115

NTPC NHPC

Near 200 Near 30

Slow & Steady Mover Expect short term movements

Tata Power KSK Energy JSW Energy

Near 1300 170-175 115-120

Target 160

Period 9-12 Months

270 45 16501700 200 135

12-15 Months 12-15 Month 6-9 Months 3-6 Months 3-6 Months

High Risk appetite Investors may look at other scrips also like CESC, Adani Power, Indiabulls Power, ADAG Group (Rel Infra & R-Power) etc.

(Page 5)

Saraswati Industrial Syndicate CMP Rs.1385 (FV 10) A Hidden Gem to get explored. The fair value looks to be Rs.3175/Share…..

Sector Key Executives

Regd Office Registrars

Engineering Ranjit Puri Nina Puri Aditya Puri Vinod K Nagpal Radur Road Yamunanagar, Haryana Alankit Assignments Jhandewalan, Delhi

BSE Code NSE Code (Not Traded on NSE) 52 Week High 52 Week Low CMP Face Value Equity Book Value

533033 SARASIND

Shareholding (%) Promoters Bodies Corporate Public Others Total

As on June 10 57.48 10.56 31.82 0.14 100

Rs.1484 Rs.790 Rs.1385 Rs.10 Rs.7.37 Crore Rs.463/Share

Background Started at Yamunanagar (Haryana) as Indian Sugar & General Engineering Company (ISGEC) was established in 1933. ISGEC Group diversified into 2 mainline businesses: Saraswati Industrial Syndicate (Engineering) Saraswati Sugar (100% subsidiary of Saraswati Industrial Syndicate into Premium Sugar business). Presently, Saraswati Industrial Syndicate (SIS) is a fast growing engineering company with interests in niche Engineering products like Sugar Plant Components, Pressure Vessels, Boilers, Gas Containers etc. Besides India, it has global operations across 74 nations. It has offices in USA & Germany to cater to the 2 biggest economic zones viz NAFTA & Eurozone.

The company has plants located at: Yamunanagar: Pressure Vessels & Heat Exchangers, Presses- Mechanical & Hydraulic, Boilers, Castings, Sugar Machinery Bawal (Haryana): Standard Presses Noida (UP): EPC Muzaffarnagar (UP): Castings - Steel & Iron The total land size under its plants is about 250Acres.

Technology driven Entity, Run by Technocrats It has been constantly upgrading its technology to perfectly match global standards. In 1964, it tied up with UK based john Thompson for engineering products. ISGEC-John Thompson was later merged with Saraswati Industrial Syndicate. The Company has signed an agreement with a Japanese company, Hitachi Zosen, for technology transfer for the manufacture of Chrome - Moly Vanadium Reactors and critical Equipments for the Fertilizer sector. Further, SIS and Foster Wheeler North America Corp, USA are proposing to enter into a technology transfer agreement for design and manufacture of sub-critical and super-critical boilers. Presently, it has 2 Agreements for technology transfer with Foster Wheeler, USA: 1.For Circulating Fluidized Bed Combustion (CFBC) Boilers upto 99.99 Mega Watt (electrical). 2.For Oil & Gas Shop Assembled Water Tube Packaged Boilers upto 260 Tonnes per hour. It has supplied boilers under agreement but also progressively moving towards higher sized ones. SIS staff has been trained by Foster Wheeler and it is likely to independently design these boilers in time to come with some minimal help from Foster Wheeler.

Increased penetration in Global markets Inspite of the global slow down, it is able to increase its exports. In FY 2008, its exports stood at Rs.364.93 Crore, in FY 2009, exports increased to Rs.514.81 Crore. Its customers are from diverse Geographies like North & Latin America, Europe, Africa etc. After the economic slowdown, new orders from sectors like Oil & Gas, Exports had dried up. With better global economic sentiments, robust orders inflows can be expected going forward. (Page 6)

Financial Highlights (Trailing 6 Quarters) Rs. Crore Net Sales Other Income Total Income Operating Expenses PBDIT Interest Depreciation PBT Tax PAT Equity (FV 10) EPS PBDIT (%) PAT (%)   

June 10 431.03 2.9 433.93 401.96 31.97 3.32 7.9 20.75 6.74 14.01 7.37 19.01 7.42 3.23

Mar 10 440.64 20.53 461.17 408.99 52.18 3.4 7.22 41.56 8.95 32.61 7.37 44.25 11.84 7.07

Dec 09 350.35 2.29 352.64 315.44 37.2 3.27 7.05 26.88 8.87 18.01 7.37 24.44 10.62 5.11

Sep 09 514.11 8.64 522.75 470.08 52.67 4.34 7.19 41.14 15.14 26 7.37 35.28 10.24 4.97

June 09 429.54 2.88 432.42 403.55 28.87 4.69 7.59 16.59 5.64 10.95 7.37 14.86 6.72 2.53

Mar 09 455.72 2.37 458.09 423.28 34.81 6.76 9.48 18.57 6.51 12.06 7.37 16.36 7.64 2.63

It has shown marginal growth in Sales in June quarter YoY basis. PAT has shown 28% YoY growth, due to better operating margins coupled with reduced Debt cost. On QoQ basis performance has declined due to fall in other income. Further, for engineering industry March is a better quarter than June. September is expected to be better than June quarter.

Financial Highlights (Annual Results) Rs. Crore Net Sales Other Income Total Income Operating Expenses PBDIT Interest Depreciation PBT Tax PAT Equity (FV 10) EPS PBDIT (%) PAT (%)   

FY 2008 1298.73 3.81 1302.54 1213.71 88.83 19.23 21.38 48.22 20.87 27.35 7.37 37.11 6.84 2.10

FY 2009 1699.91 16.22 1716.13 1584.5 131.63 23.27 28.32 80.04 28.91 51.13 7.37 69.38 7.74 2.98

FY 2010 E 1742.26 30.22 1772.48 1597.07 175.41 13.19 30.17 132.05 39.13 92.92 7.37 126.08 10.07 5.24

The company has rewarded the shareholders very well. In FY 2009, it paid Rs.10/Share Dividend (100%). For FY 2010, it has already paid interim dividend of Rs.9/Share (90%). The scrip has Book value of Rs.463/Share, given small equity base, make it candidate for very liberal Bonus (2 for 1 or 3 for 1). Its almost 2 decades when it gave last Bonus (1:1 in 1991, 1:2 in 1987) The Company has Hidden value of Rs.725/Share in its Sugar Subsidiary. (Page 7)

Undervalued compared to peers Rs. Crore T 12M Total Sales T 12M PBDIT T 12M PAT Equity Face Value T 12 M EPS CMP (Rs.) T 12 M PE PBDIT (%) PAT (%) Networth Debt Debt: Networth YoY Sales Growth (%) YoY PAT Growth (%) PEG Book Value Price/Bk Value Dividend Rs./Share

SIS 1770.49 174.02 90.63 7.37 10 122.97 1385 11.26 9.83 5.12 340.53 137.93 0.41 31.74 86.94 0.13 463.05 3.00 10

Praj 596.82 115.28 98.92 36.95 2 5.35 78 14.57 19.32 16.57 532.34 0.00 -18.90 -12.23 -1.19 28.81 2.71 1.45

Shriram EPC 1185.17 123.86 68.29 43.94 10 15.54 274 17.63 10.45 5.76 379.54 265.44 0.70 21.60 11.59 1.52 86.38 3.17 1.2

Mc Nally Bharat 1488.29 100.62 39.68 31.09 10 12.76 284 22.25 6.76 2.67 196.00 151.03 0.77 49.25 3.35 6.64 63.04 4.50 1.5

Hind Dorr 939.58 108.41 59.3 14.4 2 8.24 129 15.66 11.54 6.31 175.34 15.57 0.09 65.73 82.00 0.19 24.35 5.30 0.8

Major Risks   

Adverse economic conditions, adversely impact the industry. The contracts are won, after competitive bidding, aggressive bidding can impact margins. There are risks with volatile movement in raw materials prices, forex etc.

Valuation & Recommendation Saraswati Industrial is a fast growing Engineering company. Given its growth potential & undervaluation compared to peers, the fair value of the engineering business looks at about Rs.2450/Share i.e. about 5 times its FY Sept 2009 book value of Rs.463/Share and 20 PE on Trailing 12 months EPS of Rs.122.9/Share and there is hidden value of about Rs.725/Share. The combined value comes to Rs.3175/Share. At CMP Rs.1385/Share, it is at just 0.44 times, steep discount to its fair value. As the market realizes the actual business model, a lot of hidden value remains to be unlocked.

(Page 8)

Gujarat Industries & Power Company Limited CMP Rs.116 (FV 10) Undervalued scrip from the sector with visible sustainable long term growth…. Sector

Power PSU

Key Executives

D J Pandian K K Joshi Shekhar Chaudhri P K Das

Registered Office

P O Petrochemical Vadodara (Gujarat)

Registrar

Link Intime

BSE Code

517300

NSE Code

GIPCL

52 Week High

133

52 Week Low

94

CMP (Rs.)

116

Face Value

10

Equity

151.25

Book Value

82

Shareholding (%)

As on Jun 2010

Promoters

58.21

Mutual Funds

6.87

Insurance Co

10.59

Central/State Govt

7.87

FII

2.43

Body Corporate

1.45

Public

12.01

Others

0.57

Totals

100

Background Vadodara (Gujarat) based GIPCL was started in 1985 to set up power generation plants. Its promoters include Govt of Gujarat, Gujarat Urja Vikas Nigam (erstwhile Gujarat Electricity board), Gujarat State Fertilizer Company, Gujarat Alkalies & Chemicals and Petrofils Co-operative Ltd. Its plants are located at: Vadodara: 145 MW Gas Plant 165 MW Gas & Naphtha based Plant. Surat: 500 MW Lignite based Plant. (250 MW productions was started only in Q2 2011, its impact on profitability can be seen from FY 2012 numbers).

Further, 500 MW expansion has started for Lignite based capacity at Surat.

Highlights GIPCL is state owned PSU; the Govt is focusing to boost up power generation capacity, through PSUs to meet the deficit. GIPCL has long term PPA (Power Purchase Agreements with Gujarat Urja Vikas Nigam). The company has tied up with Reliance, GAIL and another Gujarat PSU GSPL for supply of Gas/Naptha to its Vadodara plants. The company is expanding capacities, based on Lignite, where it has own captive mines to support generation. Its Vastan mine has reserves of 40 MMT and Mangrol mines has reserves of 211 MMT, to support its Surat Power plants, where it plans to take up the capacity to 1000 MW . Upcoming Coal & Lignite based power capacities in nations like India & China can spurt up the prices of these black hard fuels, companies with good captive mines can see upward revision in valuations. It is scouting for more mines for further expansion and to sell Lignite. Selling Lignite can substantially expand margins & change the valuation of the company. GIPCL has healthy balance sheet with Rs.1246 Crore Net worth against total Debt of Rs.1064 Crore. In the industry Debt: Equity ratio of 70:30 is acceptable. Future fund raising is easy for GIPCL as its Debt: Equity ratio is 0.85:1 (FY 10). Its new capacities enjoy benefits under 2009 Electricity Regulations. Return on equity on pre-tax basis at a base rate of 15.5%, to be grossed up by the normal tax rate as applicable for the respective year. For projects commissioned on or after April 1, 2009, there is an additional return of 0.5% if the new projects are completed within the timeline specified in the 2009 Regulations. At CMP Rs. 116/Share, the scrip is at 1.4 times its Book value of Rs.82/Share. It is shareholder friendly company, with record of regular dividend payment in last 8 years.

(Page 9)

Financial Highlights (Trailing 6 Quarters) Rs. Crore Net sales Other Income Total Income Operating Expenses PBDIT Interest Depreciation PBT Tax PAT Equity (FV 10) EPS PBDIT (%) PAT (%)

June 10 252.56 0.44 253 188.52 64.48 4.08 21.47 38.93 -2.92 41.85 151.25 2.77 25.53 16.54

Mar 10 254.09 0.17 254.26 208.34 45.92 -12.93 21.7 37.15 1.04 36.11 151.25 2.39 18.07 14.20

Dec 09 238.25 0.49 238.74 178.17 60.57 3.47 21.94 35.16 6.35 28.81 151.25 1.90 25.42 12.07

Sep 09 204.62 1.26 205.88 159.21 46.67 3.97 22.3 20.4 7.85 12.55 151.25 0.83 22.81 6.10

June 09 252.9 1.19 254.09 190.84 63.25 5.49 22.11 35.65 6.25 29.4 151.25 1.94 25.01 11.57

Mar 09 285.58 -0.34 285.24 218.64 66.6 6.2 22.41 37.99 8.73 29.26 151.25 1.93 23.32 10.26

Financial Highlights (Annual Results) Rs. Crore Net Sales Other Income Total Income Operating Expenses PBDIT Interest Depreciation PBT Tax PAT Equity (FV 10) EPS PBDIT (%) PAT (%)

FY 09 1162.77 8.41 1171.18 944.84 226.34 29.56 88.35 108.43 23.11 85.32 151.25 5.64 19.47 7.28

FY 10 949.86 3.11 952.97 720.32 232.65 16.24 88.04 128.37 21.59 106.78 151.25 7.06 24.49 11.20

FY 11E 1399.98 4.5 1404.48 1063.98 340.49 26.75 118.50 195.24 35.14 160.10 151.25 10.59 24.32 11.40

Major Risks    

Power projects require huge capital expenditure and gestation period is long. Any delay in project execution can have adverse impact on the business. Being a PSU, State Govt. has significant influence on the company. Any populist decision by the Gujarat Govt. can adversely impact business. Any trouble in mines due to weather etc. can impact the performance of plants.

Valuation & Recommendation GIPCL is a small state PSU into power generation. The scrip is at attractive valuations, compared to peers. The company also has own captive mines with over 250 MMT of Lignite reserves. The scrip looks undervalued, given the potential in power sector and mines assets owned by GIPCL. Investors can accumulate between Rs.100 & 115, for a target of about Rs.160 in a year’s time as the value unlocks in Lignite mines, besides growth in power business. (Page 10)

Mutual Funds & Bonds Dear Friends. Session of tax planning is begun and every one needs good instruments for tax planning. In this year you can save tax on Rs. 120000 u/s 80C i.e. Rs. 1, 00,000 in traditional Tax Plan Instrument and Rs. 20000 in Infrastructure Bond. At present IDFC Infrastructure Bond are available in the market. The main features are as follows:Rating Security Bond Face value & issue price Subscription amount Minimum Maximum Tax Benefit

Who can apply Investor should provide Maturity / redemption Lock In period Buyback Listing Loan against Bonds

“LAAA” (ICRA) indicates stable outlook and is the highest credit quality rating assigned by ICRA Fully secured with first pari passu floating charge over secured assets and first fixed pari pasu charge over specified immovable properties of the Company Rs 5,000 per bond Rs 10,000 or 2 bonds. The bonds can be of the same series or two bonds across different series 1,2,3 & 4 based on different Interest rates {7.5% or 8% P.A.} and interest payment options Annual or Cumulative. No Limit Under Section 80CCF of the Income Tax Act the amount, not exceeding Rs. 20,000 per annum, paid or deposited as subscription to long-term infrastructure bonds during the previous year relevant to the assessment year beginning April 01, 2011 shall be deducted in computing the taxable income. This is over and above the Rs 1,00,000 tax benefit available u/s 80C, 80CCC & 80CCD read with section 80CCE Resident individual or HUF PAN Number and Demat Account No 10 years from the deemed date of allotment 5 years from the deemed date of allotment 5 years + 1 day from the deemed date of allotment NSE & BSE Bonds cannot be pledged or hypothecated for obtaining loans during the lock in period

In Mutual Fund Product range “Equity Linked Saving Plan (ELSS)” is one of the best product as a tax saving instrument. ELS Scheme has a lock-in period of three years but you can receive some part of your corpus every year by opting Dividend option plan. In last three years these instruments gives 20 to 25% annualized returns in spite of market’s bad phase form January, 2008 to till date. ELSS schemes give double benefit as compared with other diversified equity schemes. They give you tax saving on investments and are also exempt from long term capital gains tax. These tax saving schemes are special diversified equity funds, which have to invest at least 80% of their corpus in equity. Now a days ELS Schemes are very popular for tax saving u/s 80CCC but people make one mistake as they think about these schemes only once a years when they thing about their income tax saving. Whenever you have some money for long term and wants good returns on it then also you must have to think about these schemes. The SIP rout are also very good option for tax saving by which you not only save tax on it but also you can make averaging of your fund with creeping investment. There are various schemes of different AMCs in the market, in which some good funds are as follows:  HDFC Tax Saver  DSP Merry Lynch Tax Saver  Canara Robaco Equity Tax Saver  Frankline India Index Tax Fund (Page 11)

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