Indian Mutual Fund Investors must get MIN

Indian Mutual Fund investors who invest more than Rs 50,000 in one go are now expected to get a MIN – Mutual Fund Identification Number without which he will not be able to invest from Jan-01-2007. Regulators want to know more about funds and investors under the “Know Your Customer – KYC” policy such that their is no illgeal channels of fund flows into the country.

A P Kurian, Chairman of AMFI explains the need for MIN in the following video,

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HSBC – Global Emerging Market Fund in India

HSBC Mutual Fund India has filed a draft offer document with SEBI for launching a new fund that will invest in emerging markets.

The significance of this fund is, it will not only invest in Indian Stocks but also stocks of other emerging markets such as Argentina, Brazil, Russia, China and East Europe. The fund will have both BSE 200 and MSCI Emerging Market Index as its benchmark.

One should invest some sum in this fund as well as you see India has been an underperformer in 2006 compared to China and India is also a very expensive emerging market at P/E of 18. In such situations, these funds will reduce exposure in India and move their money to other lucrative markets such as Brazil.

Stay Tuned, I’ll review the fund and post more views on it when it will be launched [ maybe Q1-2007].

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Merill Lynch Investment Update – BUY IndiaBulls

DSP Merill Lynch in its Investment update has put a BUY recommendation on IndiaBulls Financial Services Ltd. It has also revised the target for IndiaBulls to Rs 750.

The upward revision is mainly due to the rise in value of its Real Estate Holdings. The NAV of Real estate business is estimated at Rs423/share (FY08) by Merill Lynch, a 47% discount to KF’s value of Rs796/share principally owing to the difference in SEZ valuation. They have pegged SEZ valuations at the price paid by Farallon last month (Rs173/shr v/s RS496/shr done by KF) owing to uncertainty in SEZ policies and extended timeline of SEZ. Hence, SEZ valuations may remain muted at 0.5-1.0x NAV.

Merill Lynch is however, positive on the non-SEZ properties, where our value of Rs250/shr is just 13% lower than KF’s value largely owing to absence of any price escalations. These properties could trade up to 1.2-1.3x NAV.

IndiaBulls Financial Securities business is valued at 15-17x FY08E earnings as markets remain
buoyant. Consumer finance business valued at 1.5-1.8x FY08E book given the rapid rise in earnings and loan book.

Total value of real estate business valued at Rs337-498/share. Total ‘sum of parts’ valuation range at RS650-855/share, underpinning our PO of Rs750.

The record date of Demerger of IndiaBulls Financail Services Ltd and IndiaBulls Real Estate / properties is fixed at Jan-09-2007.

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Apollo Hospitals and Bharat Forge – Underperformers

India’s leading Hospital Chain Apollo Hospitals Ltd and leading Auto Component manufacturer, Bharat Forge Ltd are likely to underperform in the next 2 quarters said a research note by HSBC Global Research.

HSBC said that margin recovery maybe delayed as Apollo embarks on another round of capital expenditure. The stock has consistently been rerated on the back of expectations of medical tourism taking off, improving macro parameters and more importantly as the only available play in the Indian hospital sector. However, HSBC believes that valuations continue to look expensive.On the DCF model, they set a target price of Rs 375 from current levels of Rs 430.

HSBC expects slowdown in sale of commercial vehicles in the US in 2007. HSBC has cut EPS estimates of Bharat Forge Ltd by 18% for FY2007 to Rs 13 and for FY08 to Rs 16 on lesser margins from subsidiaries. On a 3 stage DCF methord of valuation, HSBC is underweight on Bharat Forge Ltd and has set a price target of Rs 320 from current levels of Rs 350.

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Merill Lynch Bullish on Panacea Biotec Limited

Merill Lynch in its research report has highlighted about its recent company visit and talks with the management of Panacea Biotec.

WHO pre-qualification process is in advanced stage for three combination vaccines (US$500mn market size); exports to WHO likely to begin by mid-07. Combination vaccine exports to WHO have potential to scale-up five-fold in FY09E YoY. Near doubling in growth expectations for the Indian vaccine JV, Panacea-Chiron. Plans for dossier filing of anthrax vaccine (Phase II A) by mid-end 2007. EU filing for Pharma NDDS dossiers targeted for 2007; launch likely in 2009

Panacea Biotec now has a Debt free status as of Oct’ 06; about US$40mn net cash position; tax rate likely to reduce to 25% levels by FY09 (current 30% tax rate). Merill Lynch Reiterates a Buy and strong earnings outlook. ML expects Panacea Biotec to deliver 156% EPS (FD) growth in FY07 and 34% growth in FY08 due to 34% core revenue CAGR (FY06-08E), in turn led by strong growth in vaccines in both institutional and private markets. OPM expansion to 29.2% in FY08E (from 22.1% in FY06), noting the entry into high margin markets. Tax and excise duty savings on account of operations in tax friendly zone of Baddi (Himachal Pradesh).

Merill Lynch has set a 12 Month price target of Rs 515 from current levels of Rs 390. EPS estimates for FY2007 and FY2008 are Rs 19.86 and Rs 26.55 respectively.

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