India leads Asian gainers

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The benchmark Indian indices today managed to recover most of the losses seen in yesterday’s session. Riding on the prospects of higher GDP growth and increased demand for commodities, stocks from the cement and metal sectors led the pack of gainers. Starting off close to the dotted line, the indices gathered momentum as buying interest intensified across heavyweights. The mid and smallcap stocks kept pace with their larger peers and their respective indices managed to end the session with gains of 0.6% and 0.5% respectively.

While the BSE Sensex closed higher by around 188 points (up 1.2%), the NSE Nifty gained around 54 points (up 1.1%). As regards global markets, most Asian indices closed strong today while European indices have also opened in the positive. The rupee was trading at Rs 46.18 to the dollar at the time of writing.

In a proactive move to safeguard their margins, commercial vehicle manufacturers have decided to hike prices on account of the new emission norms that are to be implemented from April 2010. Passenger cars and commercial vehicles will have to switch to Bharat Stage IV emission norms in 13 cities, while rest of the country will become Bharat Stage III compliant. As the new emission norms warrant use of upgraded technology, the manufacturers are looking to pass on some of the rise in costs to customers. The quantum of rise however varies company to company. While Ashok Leyland has already announced a rise of 15% for its vehicles, Tata Motors is contemplating a rise of 2% to 3%.

As per a business daily, Bharti Airtel which has offered US$ 10.7 bn for Kuwaiti telecom company Zain's African assets, is likely to finance the entire deal with foreign currency loans. The Zain bid comes after Bharti’s failed talks with MTN and in the midst of an intense price war in the Indian telecom sector. Zain's African business forms about 45% of the group's total revenues and 60% of the subscriber base. Nigeria is the biggest market within Africa and contributes 16% and 21% of Zain's revenues and subscriber base (total 71 m) respectively. The company's average revenue per user (within Africa only) ranges between US$ 3 per month and US$ 25 a month (as compared to Bharti's ARPU of about US$ 5 per month).

As for Bharti's balance sheet strength to manage this acquisition, the company has a net debt of Rs 19 bn currently. It is the only free cash flow positive company among all the telecom players and also has a low debt to equity ratio (of around 0.26 times). This should help the company take on the additional debt on its books to fund Zain Africa's acquisition. The stock of Bharti, which lost nearly 9% in yesterday’s trade closed 4% lower today.

MNC pharma major GSK Pharma announced its full year results (calendar year ending company) yesterday. The company’s topline grew by a robust 20% YoY, which could be attributed to the active promotion of priority products including vaccines (accounting for one third of revenues), which registered a double-digit growth. New product launches could also have played a role in contributing to revenue growth. Operating margins expanded by 2.3% to 32% during the quarter led by changes in the product mix. While the bottomline declined by 50% YoY, this was largely due to the extraordinary income that the company received in 4QCY08. Thus, on excluding the same, net profits grew by 20% YoY in tandem with the growth in sales. For the full year, revenues and net profits grew by 12.5% and 15% respectively.

Going forward, GSK Pharma intends to continue its focus on priority products, which account for a third of its revenues and increase the contribution from the chronic therapy segment through in-licensing opportunities. Launch of new products from its parent’s product folio will also go a long way in enhancing revenues in the future.