Companies & Sectors
Nomura pegs Power Grid Corporation a BUY at Rs140

Power Grid Corporation’s muted earnings and certain risk factors continue to remain. Despite somewhat negative news, Nomura remains upbeat on the power utility. The management of the company remains tight-lipped about divestment rumours

Nomura takeaways from the Power Grid Corporation (PGC) analyst meet noted that despite disappointing earnings and risk of “equity overhang”, it expects company to do well going forward. Nomura said in its report: “We remain upbeat on PGC but note that the risk of an equity overhang (secondary and/or primary issuance) seems to have resurfaced.” Nomura is referring to the divestment agenda, possibly in FY14, which could dilute shareholders’ returns vis-à-vis higher number of shares in the market. However, the management is tight-lipped about the same.
The results of PGC were average at best. The company recorded sales of Rs32,617 million as against a consensus of Rs31,698 million, which is 2.9% higher. Its EBITDA was at 28,231 million which is 4.5% higher than the EBITDA. However, reported PAT was 10% higher than consensus at Rs11,291 million. 
One of the main concerns about Power Grid Corporation despite its dominance in the Indian power utilities market is the gap between capex committed and asset commissioned i.e. the gestation period of the an investment. Being a capital intensive business, in a sector besotted and riddled with problems, red tape and corruption, it is a plausible concern. The management, however, has downplayed concerns. The report cited, ”management reiterated focus on minimizing the gap between capex and commissioning, but alluded that ramp-up in commissioning to match the step-up in capex of Rs200 billion per year in the 12th Plan would take time”. Normally, it would take around two to three years to get a project from start to finish. 
This brings us to focus another important aspect of the company—receivables. Is it having enough current assets to fund day-to-day operations? In an industry characterised by long gestation periods, cash-flow from existing project prove crucial, especially those projects where break even is yet to occur. The Nomura report said, “Overdue receivables remain broadly in check, debtors outstanding for greater than 60 days stood at Rs5.5 billion, of which Rs3 billion relate to dispute in Point of Connection (PoC) charges issued by the regulator. 
While the company is in line to achieve its targeted capex and has been awarded several contracts, the issue is when it can complete projects and earn more cash.  Short-term open access (SOTA) seems to be healthy and up for the third quarter (22.5%) ended December 2012. SOTA refers to the market where corporate and state government bid for short-term electricity, mostly on a needs basis. Sometimes, power purchase agreements (PPA) with individual power plant break down and the only way to access power is by buying it from a grid.
Despite short-comings, Nomura remain bullish. The report concludes, saying, “PGC remains our top pick in the power utilities space on the back of a robust earnings outlook and a highly execution-focused management."
To check other company-related reports, click here.


Volume outlook in domestic MHCV industry remains weak, says Nomura

Volume growth for JLR should remain robust in FY14F led by strong growth in China, says Nomura Equity Research in its report on Tata Motors

Volume outlook in the domestic MHCV (medium and heavy commercial vehicle) industry remains weak at least in the near term. The recent decline in market share in MHCVs partly reflects lower dispatches due to inventory adjustments. Further, as per Tata Motors (TML), competitors have added inventory which has impacted TML’s market share; retail market share is much higher for TML than the share based on wholesale volumes.


The company has reduced inventory in the passenger car segment over the last few months. Thus, retail volume run-rates in this segment are higher than wholesales seen over the last few months, according to the company.  In terms of new launches, the company will launch more trucks under its Prima range in the MHCVs and ACE family in the LCV segment over the next one year. Further, there will be entire new range of vehicles which will be launched in FY14F in the LCVs segment called ‘Ultra’ range, according to the management.  In the car segment, there will be new variants and refreshments launched for different models over the next one year. The company maintained its capex target of Rs30 billion annually.  This is Tata Motors’ domestic scenario in a nutshell, according to Nomura Equity Research analysts in its report on the company.


Volume growth for JLR should remain robust in FY14F led by strong growth in China. Nomura expects margins to remain in the 15%-15.5% range over the next two years. Global slowdown remains a key risk, while stronger-than-expected success of new models could present upside to medium-term volume growth. 


According to Nomura, JLR will look to expand its dealer network to 150 dealers over the next one year (120-130 dealers currently). 4QFY13F should see the full benefit of the launch of the new Range Rover and start of All Wheel Drive (AWD) and smaller engine models in Jag XF, XK models. This should particularly help improve demand growth in the US market, according to the company.  The new XF Sportsbrake will be launched in this quarter, while F-TYPE model will be launched in 1QFY14. 


Adverse currency movements (quarter-on-quarter) impacted margins by around 50 basis points in 3QFY13. Further, margins were also impacted by an inferior product mix, higher variable marketing expenses and launch expenses of the new Range Rover.  The Castle Bromwich plant (manufactures Jag models) is now working on a two-shift basis (compared to one-shift earlier) due to the new model launches. The other two plants at Solihull and Halewood continue production on a three-shift basis.


JLR’s margins should improve driven by product and geographic mix, while the domestic business will likely continue to face headwinds. Given the bullish stance of its China Autos team on the luxury segment, Nomura has revised up its volume estimates for JLR, but reduced its estimates for the India business. Overall, its consolidated EPS estimates are down by 5% for FY14F and up by 2% in FY15F.


Nomura analysts note that Bloomberg consensus FY15F EV/EBITDA multiples of other luxury car companies average around 2.5x, compared to 3x for JLR; thus already factoring in a stronger performance.


TML’s 3QFY13 adjusted net profit of Rs18.1 billion was below Nomura’s estimate of Rs25.3 billion. JLR’s net profit at GBP296 million was in line, but a domestic net loss at Rs4.5 billion was significantly below Nomura’s estimate (loss of Rs1.4 billion). Margins for JLR at 14% were in line, while those for the stand-alone business at 1.4% were a negative surprise, according to Nomura analysts.


Nomura remains ‘Neutral’ on whether to buy or sell the Tata Motors share in the stock exchange.


Is AIMA’s obscenely expensive doctorate program legal?

The AIMA’s board is represented by some of the illustrious names in Indian industry. Yet AIMA’s doctorate program resembles some of the “fly-by-night” educational institutes and costs a lot of money. Very few candidates make it through

Typical Indian families across social and economic levels have big aspirations of which education is among the most important. This is now often the second or third highest single investment expense involved in a lifetime. So high are the numbers that education is now priced high and without much effective regulation.

Until a few decades ago, it was considered a safe bet, largely because it was mostly run under the government entities. Not any more, as privatisation and liberalisation sweeps across the country, especially, but not restricted to, higher education.

It is easy to point fingers at sub-standard schools and colleges, dotting the country, operated like money-minting machines by a vast variety of carpetbaggers. The easiest to spot are those named after politicians or their relatives. Others have acquired high brand status for themselves on sheer dominance of creative advertising. Certainly, there is no denying that such institutions fill a space, since the government as well as social sectors which previously handled these wants and needs have simply not kept pace with change.

An apt example is education and training in my own profession—the Merchant Navy. Till a few decades  back, training for the Merchant Navy was pretty much through government-run institutions and onboard ships which one “came ashore” for exams.

Paying for education usually goes like this: You pay a fat sum of money running into lakhs per year. Then, you go and spend time attending classes. After some time, you learn that the institute may or may not be recognised by an assortment of  “accredition bodies". Other times, after some few years, you may get a certificate of some sort without any classes ever having been held. The list and variations go on. Most cases, these are institutes which from a distance can be recognised as not much better than fly-by-night.

But what do you do if the educational promises are held out by an organisation that has the best of corporates and government entities on its board and management?

Here’s one described according to its website:

  • Created as an apex body of professional management with active support of the Government of India and Industry in 1957;
  • Represented on a number of policy making bodies of the Government of India and a number of national bodies/organizations;
  • Active member of the Asian Association of Management Organisations (AAMO), which is the Asia-Pacific regional body of the World Management  Council (CIOS);
  • Maintains close links with a number of overseas professional institutions like the American Management Association, Chartered Institute of Management (UK), all the National Management Organisations in the Asia Pacific Region and St Gallen University of Switzerland among others.


And this is none other than the AIMA (All India Management Association).

Look at who sits on its board. It reads like a who’s who of the Indian corporate horizon.

  • D Shivakumar, President AIMA; Sr Vice President - IMEA, Nokia
  • Preetha Reddy, Sr Vice President AIMA; Managing Director, Apollo Hospitals Group
  • HM Nerurkar, Vice President AIMA; Managing Director, Tata Steel Ltd
  • P Dwarakanath Treasurer AIMA; Director, Group Human Capital, Max India Ltd


You can access rest here:


The Centre of Management Education (CME) division of AIMA runs a PhD program which it calls as joint AIMA-AMU PhD in Business Administration (AMU – Aligarh Muslim University). Hundreds of students enroll for the program but only about 10 to 15 candidates are actually selected for the real PhD research phase, every year.

Usually, after the entrance exam and interview, candidates must receive an admission to PhD by an authorized university because only a university can run a PhD degree program. However, in case of AIMA’s PhD, after the entrance exam and interview, there is no admission letter or any registration done by the university i.e. AMU in its PhD program. A letter deceptively stating that admission to foundation phase of PhD is given by AIMA and in reality its students get admission to this deceptively planned almost two years of foundation phase of AIMA with no communication or letter from AMU or any formal registration at AMU.

AMU does not have capacity to handle hundreds of students for PhD and yet AIMA goes ahead and enrolls candidates. University Grant Commission (UGC) regulations points 7,8,9 (UGC  Minimum Standards and procedure for awards of PhD degree regulations 2009, Gazette of India, July 11, 2009) clearly stipulate  that the number of seats in PhD have to be decided in advance and communicated on websites and advertisements and so on.

If a student is lucky not to get shunted out of the foundation phase and clears it in about two years, he/she is allowed to write a synopsis but has not provided any internal supervisor from the university at the synopsis stage because: a) he/she is not registered with the university and b) there will be accountability with the faculty at AMU about high failure rate.

AIMA boasts about its “high quality” and competitive programs but this is a deception. In reality many UGC norms are being flouted and, in reality, AIMA is de facto running an Advanced Diploma in Management (in the garb of foundation phase of PhD program) with only a 10% chance to reach real PhD research to obtain a degree. It is inconceivable how UGC regulations are flouted and a university like AMU lets it happen.

The net outcome is that AIMA makes crores of rupees by way high fees from hundreds of enrolled candidates. If a student does not clear 11 exams or passes them with an unsatisfactory grade, then it is ‘goodbye’ for him/her. If he/she clears the exams he/she is allowed to write a synopsis and is given just two chances to get it accepted. If not, then goodbye again.

Almost 90% of enrolled students fail to clear after spending insane amounts of money.

AIMA itself refused to respond to direct queries. Discreet enquiries by MoneyLife revealed that this has been going on for years, that this is known to all, and that this continues to this day.




4 years ago

AIMA Conducts a national management quiz for corporate .It collects exorbitant entry fees from the corporate teams which is the highest entry fee in India.In return it pays peanuts to the Winners in the form of some token gifts sponsored by some small companies.It organises such competitions free of cost at SOME newly coming up B-schools,which are desperate for some publicity.It also hardly pays anything to the Quiz masters who are mostly from PSUs like SAIL OR NTPC.


nagesh kini

In Reply to SIDDHARTHA PANI 4 years ago

That's because the corporates are conned into sponsorships!

nagesh kini

4 years ago

With all and sundry dishing out doctorates left, right and centre I wonder how many of the dissertations really represent original thinking. Most turn out to be plain and simple cut-n-paste jobs. The so-called 'guides' to be blamed equally for the rot in the system.
Even the bean counting accountants seem to join the bandwagon!

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