TOP 50 Blue Chip companies India

1) RELIANCE INDUSTRIES

India’s largest company by marker cap, has largely underperformed the Sensex in the last few months. This was due to concerns about the sustainability of CRMs, RIL-RNRL dispute etc. But with Singapore GRMs showing a marked improvement we feel that this will push RIDs GRM back into double digits. RIDs upstream business also remains on track with the ramp-up of KG D6 and whatever bottleneck is there will soon be sorted out. On the basis of SOTP (sum of total parts), one can expect 20-25 per cent of upside from the current level over the next few quarters.

2) SBI which controls about a fifth of the marker share in bank credit, will be the primary beneficiary of credit expansion. In addition to this what is in favour of SBI is the huge infrasrructure expenditure that is lined up by the government for the next core operating profit growth and its current price to book few years. Also, the likely consolidation of SBI’s associates with the bank will further improve its performance. We feel that with the revival in the interest margin the bank is expected to deliver value of 2x is attractively valued.

3) JINDAL STEEL & POWER is a part of the USD 12 billion Jindal Group. It is engaged in the production of metallics, steel products and power. ‘Vith the revival in the steel sector and the government’s special fillip to the power sector, the company stands to benefit and post better figures in the near future. Also, with increasing merchant power tariffs and rise in steel prices, the company’s financials will surely get a boost. These events will help the company to maintain its growth momentum of the last five years wherein it has progressed at a rate of more than 30 per cent CAGR at all such levels as the topline and bottomline.

4) GUJARAT STATE PETRONET is a 38 per cent subsidiary of Gujarat State Petroleum Corporation and is engaged in the development and maintenance of a state-wide gas transmission network in Gujarat. The company currently operates about 1,420 kms of transmission network, covering 15 out of the 25 districts in Gujarat, and has a capacity of 50 mmscmd. The company that saw its sales and profit doubling in the first nine months of FY10 due to a huge jump in volumes transported (an increase of 96 per cent) is also trading at a discount to some of its peers like Gujarat Gas and make sense to invest in the counter.

5) IDFC which is involved in providing financial assistance for infrastructure projects, also has an asset management company and an investment banking division. The company earns almost 54 per cent of its income from interest and this includes loans advanced for infrastructure projects and treasury income. The balance of the total revenue comes from non-interest income and includes fees from asset management and inveitment banking. Considering the future growth in infrastructure lending and the robust capital market, we feel that the stock is going to outper form in the broader market.

6) TATA CONSULTANCY SERVICES India’s largest software exporter, provides a wide range of IT services, outsourcin and business solutions. TCS derives maximum revenues from North America and for Q3FY1O it was 52.5 per cent. When we analyse the company’s revenues segment-wise, it is dominated by the BFSI sector and for Q3FY1O it contributed with 45 per cent, followed by telecom and retail & distribution that contributed 12 per cent each. Going forward we can see a strong upside on the back of an increase in demand from the US. Moreover, recovery from Europe is expected to further increase the demand.

7) BANK OF BARODA is one of the strongest public sector banks that has again demonstrated its strong fundamentals through its Q3FY1 0 results. There was a 9.5 per cent jump in the Nil primanly due to a better than expected rise in credit off-take, which was 23.5 per cent against an average of around 20 per cent for PSBs. Even its quality of assets is one of the best in PSBs, with the PCR at 89 per cent, net NPAs at 0.31 per cent and restructured loans at just 3 per cent of outstanding loans. The scrip of the bank is trading at P/BV of 1.9 of FY1OE and this certainly looks reasonable enough.

L&T is India’s largest engineering and construction companies offering exposure to an entire capex cycle. It has 23 subsidiaries and 27 associates focusing on a diverse range of products and services and several BOOT projects to get contracts for its EPC business. It’s NBFC (L&T Finance) andsoftware subsidiary (L&T Infotech) have begun to grow rapidly and might go for separate listings by the next fiscal. L&T offers the best proxy play on the entire capex cycle in India. Improved visibility in the new order pipeline and a shift in sales in favour of higher margins, oil & gas and manufacturing sales will boost L&T future growth.

9) SUN TV NETWORK is a part of Sun Network, one of India’s largest media conglomerate, and has a reach of more than 95 million households in India. Currently the company has 56 lakE subscribers who pay Rs 26 per month and the company expects this base to grow to 80 lakhs by FY12. With increasing budget allocation towards regional advertising since there is strong competition in Hindi GEC space, Sun TV Network will stand to benefit quite a lot. This is already evident from its Q3FY1O results wherein its advertisement revenue has posted growth of 46 per cent.

10) PETRONET LNG

which is into imports and re-gasification of liquefied natural gas (LNG), is an outcome of the support of four Navratna PSUs namely GAIL, bC, ONGC and BPCL. PLNG imports LNG from Ras Gas, Qatar and supplies it to three of its promoter. The best part of this is that the Gas Sales Purchase Agreement is for 25 years and hence guaranteed off-take from promoters ensures better earning visibility. Moreover, PLNG gets a 5 per cent increase in tariff each year. PLNG’s Q4FY1O results are going to be better as the 2.5 MTPA additional supply from Ras Gas will commence from January 2010.

11) CIPLA is India’s largest pharmaceutical company by sales. The company has a different business model from other generic players as It has tied up with local players in the international market instead of a direct presence in the market, making it less vulnerable to generic competition. These partners have filed 64 ANDAs till date and have received 36 approvals of which 23 products have been commercialised.The company is also negotiating with MNCs such as Pfizer, GSK, and Boehringer for long-term supply agreements. Its launch of CFC-free inhalers in the EU and the US remains a key long-term trigger.

12) SESA GOA has achieved 15.1 MT of iron ore sales in FY09, registering a volume groh of 22 per cent on a YoY basis. Going forward, the sales volume are expected to grow at a CAGR of 25 per cent in FY09- 1 2E due to a continuation in Chinese demand and Sesa Goa’s ability to maintain a high share in India’s iron ore exports to China. Additionally, capacity expansion of pig iron from 0.25 MTPA to 0.625 MTPA along with expansion of met coke capacity will give this company a boost.The company is also looking to set up a 5-6 MT steel plant in Jharkhand and Orissa through aJV.

13) IVRCL INFRASTRUCTURE & PROJECTS is India’s leading player in EPC contract. It has also entered the real estate development space through its subsidiary IVR Prime. It has one more listed subsidiary, Hindustan Dorr Oliver, which recently acquired a UK-based heavy engineering concern called Davy MarkEam.The company has also ventured into the asset owner- ship space by bagging three BOT toll road projects and a water desalination project. Its order book at the end of Q3FY1O was 22,000 crore with roads and water projects comprising a major portion

14) PENINSULA LAND is a part of the Ashok Piramal Group and is a real estate developer with exposure to commercial, residential and retail projects located primarily in Mumbai. But now the company has spread its reach to other cities like Nasik, Goa, plete projects of 4.1 million sq feet in the next couple of years and Pune, Hyderabad etc. It is expected thatthe company will 11.4 million sq feet of projects are expected to generate revenues over the next six years. It has a very low debt-equity ratio of 0.3x at the end of FY09. Presently the stock ofthe company is available at just 9.5 times of its last 12-month earnings.

15) GTL is a part of Global Group of companies and is India’s largest network services player in India having presence in 51000 cell sites at the end of FY09. GTL addresses the network life cycle requirements of telecom OEMs and carriers. With the total global spend on telecom sector by 2012 expected to be anywhere around USD 57 billion, companies like GTL having presence in 44 countries (FY09) and addressable market of USD 16 billion there is immense possibility to grow. Company’s 9MFY1 0 profit and is currently trading at26 times its last 12 month earnings.

16) HDFC BANK is one of the most fundamentally sound banks in India. In the rising interest rate scenario, banks with strong retail and CASA deposits are best positioned to tackle the situation. In Q3FY1O the bank saw its margins improving sequentially by 10 bps to 4.3 per cent, driven by strong traction in CASA deposits which are up by 38 per cent and now form for 51 per cent of the total deposits. Even the asset quality is under control and delinquency rates have declined from 2.1 per cent in 1HFY1O to 1.2 per cent in 3QFY1O. The total restructured assets

17) ORACLE FINANCIAL SERVICES SOFTWARE of the best Indian IT companies when it comes to product play, is one with focus on high margin banking product segments. This segment of the business contributes more than 60 per cent of the total revenue. With the US economy already showing signs of revival we feel the market forthe company’s main product Oracle Flexcube is going to pick up. What entices confidence in the company is its parentage of Oracle, one of the most successful product companies. This helps it in getting access to the big banks which are already clients of Oracle.

18) ING VYSYA BANK (IVBL) is one of those banks which have shown continuous improvement in their performance in the last few years, including FY09 that was tough for the entire sector. For example, its cost to income ratio has declined from 84.3 per cent in FY05 to 64.5 per cent in FY09 and gross NPAs declined from 5 per cent to 1.9 per cent in the same time. We think IVBL gives an opportunity to participate in the growth of the Indian banking operations helped by a major foreign financial partner viz, the ING Group. The current price to adjusted book value provides the perfect opportunity to enter the counter.

19) INDIA INFOUNE straddles the entire financial services space with offerings ranging from equity research, equities and derivatives trading, commodities etc. The company has a network of 976 business locations (branches and sub-brokers) spread across 365 cities. In Q3FY1O its income stood at Rs 319.48 crore, up by 38.7 per cent YoY. Its profit before tax stood at P.s 96.85 crore, up by 113.5 per cent YoY. With the increase in the levels of disposable income in the hands of an individual more saving is likely to pour into the equity markets and hence such a company with extensive reach is going to benefit from the move.

20) KARUR VYSYA BANK has maintained its old generation private bank status with measured and consistent growth. In Q3FY1 0 its growth came in close to 30 per cent on NIT, fee income and PAT, advances have increased by 26.5 per cent YOY basis. Its NIMs continue to be steady at 3.1-3.2 per cent, asset quality has remained under strict control with slippage this quarter at an incredibly low Rs 1 crore, NPAS remained negligible and provisioning has been high at close to 90 per cent. Apart from the performance, KVB is an attractive takeover candidate given its niche positioning.

21) POWER GRID CORPORATION OF INDIA (PGCIL) a Navratna public sector enterprise, has the distinction of transmitting about 45 per cent of the total power generated in the country. The current inter-regional capacity of PGCIL is more than 20,800 MW and is expected to increase to 37,700 MW by 2012 through the strengthening of regional grids and more inter-regional links. On the valuation front, the company’s share price is available at 21 times of its last 12 month earning which is lower compared to its industry peers.

22) USHA MARTIN The Usha Martin Group is a Rs 3,000 crore conglomerate engaged in the manufacturing of steel and steel wire ropes. The company’s sales volume is expected to get a boost in the next few quarters as the new DRI kilns and the SMS mills will be operational by that time. But the real fillip in the company’s margins will come by FYi 1 when the bacard integration of the company will be fully operational as the company has started extracting coal from its mines. The company will use even its captive sponge iron. The CMP discounts its last 12 month stand alone earning by 33.5 times.

23) INFOSYS TECH NOLOG!ES India’s second largest software exporting company will benefit with improvement in the external environment that will lead to a better pricing regime and will generate good volumes going forward. Even though the company largely remains conservative in its guidance, it has increased its earning and revenue guidance for FY10 compared to a drop in revenue that was predicted earlier. Moreover, the hike in IVIAT is not likely to effect the company as it is paying tax higher than MAT. The current share price of the company discounts its last 12 month earning by 24.8 times.

24) ONMOBILE GLOBAL is a niche player and one of the largest value-added servicesstock price seems to be stretched with a trailing PE of 37.72 times, it is just Red because of its debt-free status and the exponential growth that the company may witness in its revenue and margins after its international operation starts contributing to the company’s financials. (VAS) companies for mobile, land-line and media service providers. Apart from having a strong domestic presence, the company has international footprints too. Though the present valuation of the company’s

25) ERA INFRA ENGINEERING is a diversified infrastructure company with presence in construction, turnkey projects and public private partnership projects with plans to venture into new business verticals like irrigation, hydro power, etc. The current order book of roughly Rs 8,000 crore is 3.3 times of the FY09 revenue, thereby providing good earning visibility. What is good about this order book is that more than 50 per cent of this is from the infrastructure sector with 75 per cent of it being government contracts. Presently the stock is trading at just 9.71 times as compared to its last 12 month earnings.

26) SHRIRAM TRANSPORT FINANCE CO. (STFC) is a non-b anking financial companyconstruction equipment financing business. The scrip that is currently trading at around 2.8 times of its adjusted book value will get a further boost once it acquires a banking license which will substantially reduce the of funds. with a niche presence in financing pre-owned trucks and small truck owners. The company has a market share of 70 per cent in old vehicle financing and 30 percent in new vehicles. STFC is also angling for a banking license. The company is planning to enter the

27) HAVELLS INDIA is a leading player in the electric equipment sector in India. The company operates in four segments viz.switchgears, cable & wire, lighting & fixture and electrical consumer durables. They contributed 36.9 per cent, 9.5 per cent, 19.7 per cent and 28.3 per cent respectively. The company has recently entered into the manufacturing of ceramic metal halide and plans to produce 1 million units annually, 90 per cent of which will be exported. The scrip is currently trading at 15.4 times of its last 12 month earning which does not look overvalued if one were to take into consideration its growth plan.

28) CADILA HEALTHCARE is an Ahmedabad-based company that is involved in developing, manufacturing and selling pharmaceutical products in India and overseas. It is active in certain segmWnts of therapeutic areas that include cardiovascular, gastro Market intestinal etc. The company has formed a new joint venture with Novavax Inc called CPL Biologicals which will be developing and manufacturing vaccines, biological therapeutics and diagnostics. The strong traction in the domestic and export businesses, and the increasing visibility of business from Hospira JV, augurs well for the company’s continued growth prospects.

29) BLUE STAR This company is India’s largest central air-conditioning provider. The company operates in three strategic business unit (SBU) areas viz. electro-mechanical projects & pack— aged ac systems, cooling products and professional electronics & industrial systems. It is the first SBU whose contribution is 78 per cent, followed by cooling products that contributes 16 per cent. The order book of Rs 1,890 crore at the end of December 2009 is around 75 per cent of its FY09 revenue. Looking at the cheap valuation and the company’s order book, one can picked up the scrip for ‘cool’ profits.

30) ASHOK LEYLAND India’s second-largest truck maker Ashok Leyland, which showed a lagged performance earlier, has started showing signs of catching up. For the month of February, sales of the company jumped two-fold. The company’s financials will get a further boost after the recent commissioning of its Uttarkhand Plant with a capacity of 75,000 units per annum that will allow it to obtain excise duty and income tax benefits. The current price of the share discounts its last 12 month earnings by 28 times which might look a little expensive but looking at the future growth potential, one would do well to invest in the counter.

31) BAJAJ ELECTRICALS is a diversified electrical company and operates with different business units such as engineering & projects (E&P), luminaries and consumer durables. It is the con- sumer durables’ segment that contributes most to the topline with 42 per cent share of total revenue followed by E&P with 32 percent. BEL has recently raised Rs 160 crore through QIP (at a rate of Rs 785 per share), part of which is being used to repay the debt. Currently the stock is trading at a price earning ratio of 13.8 times and one can certainly look forward to ‘electrifying’ returns.

32) Divi’s LABORATORIES is a Hyderabad-based pharmaceutical company focusing on CRAMS and is a well-established player in the custom chemical synthesis and API/intermediate segment. Divi’s custom synthesis clientele includes 20 of the top 25 pharma companies. Its recent entry into carotenoids is yet to scale up and hence would provide further room for revenues. DLL has been a consistent dividends paying company. Its margins are one of the best in the industry and moreover it is available at 22.76x. Our recommendation is that investors should buy this scrip at its current levels.

33) MAHINDRA & MAHINDRA FINANCIAL SERVICES Strong and sustained growth in the automobile sector is definitely going to help M&M Financial Services. Further, its noteworthy financial performance for Q3FY1O is an added advantage. For Q3FY1O its total revenues were Rs 393 crore and its bottomline was Rs 95 crore as compared to Rs 353 crore and Rs 44.5 crore in Q3FYO9. On the valuation front, the scrip is trading at 2x of its adjusted book value. As regards the other details, its net NPAs were at 2.30 per cent (3.8 per cent in Q3FYO9) and this has been adequately capitalised with a CAR of 19.4 per cent.

34) SINTEX INDUSTRIES operates in two divisions’ viz, textiles and plastics. Though it started as a textile cpany, it will be its plastic division which will drive future growth. This is because of the government’s emphasis on infrastructure and a pick-up in private capex. The monolithic segment of the company has an order book position of around Rs 1,500 crore. The integration of its foreign subsidiaries will further boost its stock’s performance. At its CMP of Rs 258.65, the stock is trading attractively at 9x of its FYi 1E earnings. Anot er important t ing a out t e company is its cash in hand of Rs 1,200 crore.

35) LIC HOUSING FINANCE (LICHF) will be one of the primary beneficiaries of the rising interest rates for at least afew years because 85 to 90 per cent of the company’s outstanding asset portfolio is on a floating rate basis while only 50 per cent of the total sourcing of funds is on a fixed rate basis. LICHF had a total outstanding mortgage portfolio of Rs 34,170 cr. at the end of Dec. 2009. The assets’ quality of the company is well under control and the net NPAs at the end of Q3FY1O were just 0.77 per cent. The stock is currently trading at two times of its adjusted book value. This certainly looks attractive.

36) EXIDE INDUSTRIES is India’s largest manufacturer of lead acid storage batteries with a revenue share of 25 per cent. The company has a strong presence in the branded automotive battery market with a market share of over 72 per cent. It also has a 50 per cent stake in ING Vysya Life Insurance Co. The battery demand in India is expected to remain strong due to the rising sales of vehicles and the demand for replacements. The scrip is currendy trading at 18 times its last 12-month earnings. Vhat make the scrip attractive are its robust sales growth linked with improvements in the auto sector and the declining cost.

37) THERMAX is a zero-debt company with its ROE consistently greater than 25 per cent. Engaged in providing solutions in the sector of energy and environment engineering, the total order backlog of the company at the end of Q3FY1O was Rs 5,612 crore, which is 1 .45x times of its FY09 stand-alone earnings. This provides good earning visibility for the next 18 months. Moreover, we feel that the expected entrance of the company into the super-critical boiler segment will re-rate its valuations. The company’s stock is currently trading at 21.3x of its FY20 11 EPS, which is attractive enough to make investors buy into this one.

38) VOLTAS a Tata Group company is well diversified geographically and in business segments and is india’s leading air conditioning and engineering services compant. It is also the largest MEP contractor in the Middle East. The company will largely benefit from the improving economic environment and increasing oil prices. It has also increased its stake to 100 per cent in the Saudi Arabia subsidiary. Its CMP of Rs 171 discounts its last 12-month consolidated earning by 18 times which we feel is low as it will be re-rated once the growth momentum picks up in the Middle East and India.

39 ) TORRENT PHARMACEUTICALS is engaged in the manufacturing and sale of branded as well as non-branded generic pharmaceutical products domestically and internationally with a focus on chronic therapeutic formulations for cardio- vascular and central nervous systems, Torrent has planned capital expenditure of around Rs 600 crore over the next 3-4 years for setting up new plants to increase production capacities. It plans to invest Rs 350 crore for a proposed formulation plant at the Dahej SEZ to cater to the demands of the US market.

40) OPTO CIRCUITS is a Banglore-based company engaged in the design, development, manufacture and marketing of medical electronic devices and healthcare products in India, Europe, US and the rest of Asia. Its healthcare products include pulse oximeter, pulse oximeter sensors, fluid warmers, cholesterol monitors etc and the company supplies its products to OEM in the medical electronics’ field. The contracts entered into by the company’s subsidiary Criticare in the US and Europe will drive future growth. Its newly launched product Dior (catheter) has been well-accepted in India and Europe.

41) EDUCOMP SOLUTIONS This is one of the companies that thrive on spending allocated for education. It therefore is a recession-proof company and is expected to grow at an astounding pace backed by higher budgetary spends on education by the Indian government. The company is investing heavily to derive advantage from this opportunity and plans to increase the number of schools under its Smart Class business from 2,574 to 20,000 in the next 5 to 6 years. We expect the company to maintain its growth rate of above 45 per cent in both topline and bottomline for the next three years.

42) TITAN The company which believed in creating a segment rather than entering into one offers a wide range of products ranging from watches to eyewear and jewellery. The company commands a 60 per cent market share in the organised watch market. However, it is the jewellery division which contributes more than three-fourth of the company’s total revenue, followed by watches that chips in with 20 per cent while the rest is taken up by eye- wear and precision engineering. With gold prices finding easy acceptance by the consumers and the favourable base effect, we believe that this scrip will add glitter to your portfolio.

43) COLGATE PALMOLIVE has maintained its leadership in the Indian oral care market of approximately Rs 4,500 crore. It commands a total market share of 46 per cent in oral care and almost 52.4 per cent in the toothpaste segment that contributes up to 70 per cent of the company’s total revenue. Going forward we feel that the company as well the total market will grow primarily due to a shift of people from using tooth powder to toothpaste and lower penetration of the oral care market in India. The per capita consumption level in India is just 108 gms/year compared to 255 gms/year in China.

44) SIMPLEX INFRASTRUCTURE is an eight-decade-old company and has completed more than 2,100 projects so far. The order backlog of the company at the end of December 2009 was Rs 10,606 crore. A majority of this order book comprises the power sector (28 per cent) followed by building and housing (19 per cent). Now the company has entered into real estateinvestment. development through a joint venture to expand its business. Interestingly the company is trading at a discount to its peers like Nagarjuna Construction, making it attractive for

45) DABUR INDIA is one of country’s leading players in the FMCG segment. It operates in eight consumer categories viz. hair oil, health supplements and foods. Dabur’s topline and bottomline has grown consistently in the last five years and will continue to do so with a slew of new products to be launched soon. The company also has the advantage of commanding good pricing levels. Different products in the OTC pharma category and skin care are likely to be launched in FYi 1 and this will help the company to maintain its momentum.

46) CROMPTON GREAVES is a part of the USD 3 billion Avantha Group. The company is organised into three business groups’ viz, power systems, industrial systems and consumer products. The current order book of the company roughly stands at Rs 6,000 crore which is a little more than 70 per cent of its FY09 revenue. It was slowdown from the international market which resulted in a decrease in orders. Going forward, as the economic cycle improves andinvestment cycle picks up, the company will see its order book growing.

47) CUMMINS INDIA is a 51 per cent subsidiary of Cummins Inc USA, the world’s largest indpendent diesel engine designer and manufacturer for units above 200 horse power. It also caters to the growing market for gas and dual fuel engines. It is its engine business which contributes almost 88 per cent to the total revenue. The company has lined up new products such as small generators. It is virtually debt-free with a debt equity ratio of just 0.01 and has returns on net worth higher than 30 per cent. The has been consistently paying dividends and for FY09 the yield was 2 per cent.

48) BHEL Forming the backbone of the Indian energy sector, BHEL is equipped to meet the national agenda of providing ‘Power to All by the Year 2012’. ‘With its capacity of 10,000 M’V of power generation systems per annum, BHEL is India’s largest engineering enterprise in energy related infrastructure sector. The company is expanding its manufacturing capacity to 15,000 MW per annum, which is proceeding apace, and to 20,000 per annum by December 2011. The company sets generate 73 per cent of the total power generated in the country. The scrip is currently trading at 31 .63x its twelve months trailing earnings.

49) YES BANK has outpaced many of its peers and industry average in terms of financial performance. The topline of the bank increased by CAGR of 167 per cent whereas its bottomline increased by more than 80 times during the five-year period ending FY09. And we expect that the bank will continue its perfor- mance going forward as it intends to expands its reach by increasing its branch network by five times over the next five years. The current price to adjusted book value of the bank at approximately three times may appear somewhat stretched but looking at the growth rate we feel that there still is room for further progress.