[August 25, 2006] Buy & Sell Calls

[ViJiT]

State Bank of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,116
Current market price: Rs908

Amendment to SBI Act positive
The Cabinet has passed an amendment to the provisions of the State Bank of India Act of 1955. The amendment will allow the State Bank of India (SBI):

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to increase its authorised capital to Rs5,000 crore
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to reduce the stake of the Reserve Bank of India (RBI) in it to 51% and raise new capital
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to access the capital markets to raise funds through preference share capital to reduce the face value of its share from the current Rs10 per share

However, the amendment has maintained that the global depository receipt and financial institutional investor holdings in the bank will be part of foreign holdings, which will be capped at 20% of the bank's paid-up capital. It also does not mention anything about the government buying out the RBI's stake in SBI.




NIIT Technologies
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs296
Current market price: Rs188

Annual report review
The growth is expected to pick up as NIIT Technologies is through most of its restructuring initiatives in both software service and BPO businesses. The incremental revenues from the recent acquisition would further aid the overall revenue growth. The margins are guided to remain flat this fiscal. The downside risk is limited due to the stock's attractive valuation and a reasonably decent dividend yield.

At the current price the stock trades at 8.6x FY2007 and 6.8x its FY2008 estimated earnings. We maintain our Buy recommendation on NIIT Tech with a price target of Rs296.




Marico Industries
Cluster: Apple Green
Recommendation: Buy
Price target: Rs634
Current market price: Rs500

An eventful year FY2006
FY2006 was an action packed year for Marico Limited. The company completed four acquisitions during the year, including the prize catch of Nihar from HLL. The focus brands led the strong top line growth and benign material prices helped the operating margins expand. Marico released its annual report for FY2006 detailing its achievement for FY2006 and the outlook for the coming years.