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Summary
of Contents
PULSE TRACK
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July 2006 Infra
Index grows 9% albeit on lower base
STOCK UPDATE
3i Infotech
Cluster: Emerging
Star
Recommendation: Buy
Price target: Rs244
Current
market price: Rs174
3i Infotech acquires G4 Soft
3i
Infotech has acquired 100% stake in the Mumbai-based G4 Software
Technologies (G4) that specialises in providing enterprise
application integration services and solutions in the niche areas of
payment and back office exception processing
services.
G4 has staff strength of 50 people and annual
revenues of around Rs8.4 crore (or $1.8 million). It broke even at
the operating level during the last fiscal. The acquisition has been
made for a consideration of $1.1 million, which amounts to valuation
of around 0.6x G4's annual revenues. It is a relatively small
acquisition and would not have any significant impact on our FY2007
and FY2008 estimates for 3i Infotech.
International Combustion
(India)
Cluster:
Cannonball
Recommendation: Buy
Price target:
Rs519
Current market price: Rs302
Outsourcing card plays out
ICIL's
key end users like steel, sugar, chemicals, non-ferrous metals, and
mineral and mining sectors are on an expansion binge. This
translates into a huge opportunity for the company's products like
sizers, screeners and feeders. With its market leadership position
and quality product offerings ICIL is well placed to capitalise on
the opportunity. Besides this ICIL is leveraging its ties with
overseas companies to increase exports/outsourcing, with exports
earning 25% of its revenues in the next three years.
ICIL is
currently trading at a price/earnings ratio of 6.4x its FY2008E
earnings and 4.0x its FY2008E enterprise value/earnings before
interest, depreciation, tax and amortisation. We maintain the Buy
recommendation on the stock with a price target of
Rs519.
SECTOR
UPDATE
Banking
UWB—apple of everyone's
eye
The Reserve Bank of India (RBI) suspended the operations
of United Western Bank Ltd (UWBL) on September 2, 2006. The RBI had
ordered a moratorium on the bank's operation for a period of three
months. The moratorium order was issued as a consequence of the
deteriorating financial health of the bank.
Since then there
have been many suitors for the bank from both the private and the
public sectors. Public sector banks like Andhra Bank, Canara Bank
and Allahabad Bank, and private sector banks like ICICI Bank and
Federal Bank have expressed their interest to acquire the ailing
bank and merge the same with themselves (the Federal Bank board is
yet to formally express its interest in UWBL).
While
the board of directors of UWBL are likely to come up with a
restructuring plan of their own, the strong interest of the above
mentioned suitors is quite understandable looking at the strong
semi-urban and rural branch networks of UWBL in the state of
Maharashtra. We believe that among all ICICI Bank would benefit the
most from an amalgamation of UBWL with itself if the same were
allowed.
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