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Sunday, May 20, 2007

Anagram - Derivative Wrap - May 21 2007

Anagram - Derivative Wrap - May 21 2007

Prabhudas Lilladher - UTV Software

Prabhudas Lilladher - UTV Software

Credit Suisse - India Telecom Additions

Credit Suisse - India Telecom Additions

Macquarie - HDFC

Macquarie - HDFC

Granules India & Bartronics India

Granules India

Bartronics India

Asia the top investment choice for expats - survey

Asia has overtaken continental Europe as the top investment choice for investors living outside their country of origin, according to a survey published on Sunday.

The survey of 350 expatriate investors conducted by online broker Internaxx in March and April showed that 39 percent had exposure to Asia, up from 33 percent a year ago.

Thirty-seven percent of investors have exposure to continental Europe, while 29 percent are exposed to the United States and 26 percent have investments in Britain.

A year ago, continental Europe was the most popular region, followed by the United States, Asia and the UK in the survey by Internaxx, a joint venture between Fortis Banque Luxembourg and brokerage company TD Waterhouse.

"The reasons for non-exposure to Asia -- lack of knowledge, concerns about corporate governance, market volatility and uncertainty over economic prospects -- have reduced," Internaxx Managing Director Robert Glaesener said.

MSCI's measure of Asia Pacific stocks excluding Japan rose 29.0 percent last year and has added a further 11.2 percent since the start of this year.

In comparison, the MSCI World index returned 18.0 percent last year and has risen 8.0 percent since the start of this year.

Among emerging markets, 42 percent of investors in the survey said they viewed China most positively, while 32 percent picked India.

Only six percent of international investors opted for Russia, due to concerns about a lack of transparency, the political climate and unstable governance. Five percent chose Brazil, where investors are worried about nationalisation and a risky political situation, the survey said.

The survey also showed that 90 percent of investors believe markets will rise or stabilise in 2007, up from 80 percent a year ago.

"Expatriate investors are very much like international investors," said Glaesener. "They have quite a progressive view of what to invest in."

Wkly Tech Analysis: Nifty poised for new highs

The markets last week began on a positive note, and exhibited strength throughout the week with some help from the global markets. Banking and oil stocks were in demand while technology stocks were subdued.

Continued buoyancy in the market should see the Nifty cross its all-time high of 4245 this week, with the index just 30 points shy of the target. Last week, the benchmark touched a high of 4232 before settling down with a gain of 138 points.

One of the main concerns for the markets would be any cooling-off in the global markets, which could have a spillover effect. Dow Jones, Hang Seng and Shanghai Composite have been at all-time highs during the past few trading days.

Once above 4245, the Nifty is likely to rally to 4315 where the index may counter some serious resistance. On the downside, the index is likely to find support around 4155-4135-4115. If the index drops below 4115, then 4085 becomes a crucial support for the current upmove.

The Sensex rallied to a high of 14,353, and is 370 points away from the peak of 14,724. The index finished last week with a gain of 507 points at 14,303.

The 14,000-level will be the key level for the Sensex to sustain the current upmove. On the upside, the index is likely to face stiff resistance around the 14,600-level before rallying to new highs.

The weekly support and resistance level for the index are as follows:- Support 14,125-14,070-14,015, and resistance around 14,480-14,540-14,600.

Religare - Weekly Technicals, Weekly Trend Report, Daily Technicals

Weekly Technicals

Weekly Trend Report

Daily Technicals

Motilal Oswal - State Bank of India, Bhushan Steel, Wockhardt

Motilal Oswal - State Bank of India
Motilal Oswal - Bhushan Steel
Motilal Oswal - Wockhardt

Merrill Lynch - ONGC

Merrill Lynch - ONGC

Merrill Lynch - Financial Services - Consumer/Commercial Life Insurers

Merrill Lynch - Financial Services - Consumer/Commercial Life Insurers

Merrill Lynch - Suzlon Energy

Merrill Lynch - Suzlon Energy

Sharekhan Eagle Eye (equities) & Derivatives Info Kit for May 21, 2007

Sharekhan Eagle Eye (equities) & Derivatives Info Kit for May 21, 2007

Sanghvi Movers: Buy

Investors with a one to two-year perspective can consider taking an exposure in Sanghvi Movers, one of the largest crane-hiring companies in India. At current market price, the stock trades at about 12 times its likely FY08 earnings per share.

With a market share of more than 50 per cent in the crane-hiring market in India, Sanghvi Movers is likely to be a leading beneficiary of the robust demand environment for such services.

This apart, an expansion in capacities and market presence also point to strong earnings growth. Sanghvi derives a significant portion of its revenues from windmill manufacturers, mainly Suzlon Energy. A robust order-book for Suzlon and the increase in sops and tax rebates for wind power generation could translate into strong order flow for Sanghvi. Though the company's recent earnings performance has been unimpressive, this is unlikely to be the trend over the next few quarters. For the quarter ended December 2006, revenues dipped by about 12 per cent in comparison to the corresponding quarter last year and profits declined by about 31 per cent.

The blip in sales can be explained by a base effect caused by the shutdown of Reliance's Jamnagar refinery in the third quarter of last year.

This generated additional sales for Sanghvi. Apart from lower revenues, earnings were impacted by a change in depreciation method and higher interest costs. Though these charges could continue to expand costs, we expect this to be offset by strong volume growth.

In an effort to increase it market presence, Sanghvi has lined up a capex of Rs 330 crore for FY08. Margins are also likely to get a boost from the proposed merger of its group company, Sanghvi Projects with itself. This apart, the recent acquisition of land in Mumbai-Pune highway could also contribute to savings on transportation cost for equipment.

The risks to business arise from the capital-intensive nature of this business; Sanghvi's ability to manage the overall utilization of its cranes is crucial. This apart, high dependence on the wind power segments for earnings, is also a risk as any slowdown in this segment could pressure performance.

Britannia Industries: Book profits

Influenced by factors such as excise duty exemptions and an improving earnings outlook, the Britannia Industries stock saw a 17 per cent appreciation in price over the past month. Investors can use the recent price appreciation to book profits on part of their holdings.

Though the earnings over the next two years are likely to improve on the back of recent excise duty exemptions, price hikes and new launches, the current valuations for the stock seem to capture improved earnings prospects.

At 21-22 times its expected earnings for FY08, Britannia Industries trades at a significant premium to its historical valuations.

What is more, this valuation places Britannia on a par with FMCG companies such as Marico Industries and Hindustan Lever though the company has a lower margin profile and a narrower product portfolio.

Persistent pressures on raw material costs and competition also continue to pose risks to the earnings growth.

Lower margin profile

Britannia Industries is the leading player with roughly a 30 per cent share of the domestic biscuits market. Dairy and bakery products account for a small proportion of its overall revenues. The narrow product portfolio makes Britannia's profit margins more sensitive to fluctuations in raw material costs and competitive pressures, than is the case with many of its FMCG peers.

Over the past year, Britannia's profit margins have been under pressure from rising raw material costs (due to spiralling wheat and milk prices) accompanied by considerable competitive pressures (from ITC through its Sunfeast range and several local brands).

In the 12 months ended December 2006, Britannia's net profits fell 25 per cent, even as sales growth accelerated by a strong 21 per cent. Operating profit margins dropped to 6.7 per cent from 13.2 per cent, as rising material costs were unmatched by price increases on products.

Improving outlook

The earnings picture is likely to improve on the back of company initiatives as well as some external factors. Britannia's recent move to rationalise pack sizes and raise prices on select brands should improve unit realisations in the coming quarters. The recent amendment to the Budget proposals to exempt certain categories of biscuits from excise (biscuits costing Rs 100 a kg, instead of the earlier Rs 50, will now be exempt from excise duty) will also deliver a one-time boost to margins over the next year.

After sluggish new launch activity over the preceding years, Britannia also stepped up new launches in recent months — rolling out products, Treat Fruit Rollz and NutriChoice Sugarout. Efforts are also on to broadbase the product portfolio through the acquisition of a 50 per cent stake in Daily Bread, a specialty bread manufacturer.

Acquisition of a bakery business in West Asia may help the company broadbase its geographical footprint.

Input Price Pressures

Though these factors point to strong revenue growth for Britannia Industries and a recovery in earnings over the next fiscal, certain risks to the earnings picture remain.

For one, though Britannia has already taken a few price increases on its products to offset input cost pressures, input prices are likely to continue on their uptrend.

Firm trends in prices of wheat and milk, key inputs for Britannia, appear likely to persist over the next few quarters. The significant domestic supply deficit for wheat in the face of growing demand and possible legal hurdles to imports, suggest that wheat prices will remain firm.

Milk process similarly are likely to remain upward bound on global influences as well as domestic shortages. Second, competitive pressures from ITC and other local brands in the core biscuits business are unlikely to abate to any significant extent.

Despite VAT issues pressuring ITC's core cigarette business, thanks to its diversified profile, the company's cash coffers may remain healthy enough to fund its investments in its FMCG businesses.

Keeping these factors in mind, current valuations for the Britannia Industries stock already appear to capture much of the likely improvement in earnings. Institutional buying related to the stock's inclusion in the MSCI index also drove some of the recent appreciation in the company's stock price. With these influences waning, the stock price could cool off in the near term. Investors could wait for future opportunities to re-enter the stock, if there is a significant decline in valuations.

Hindustan Construction: Sell

Hindustan Construction's revenue and profit numbers continued to disappoint on the back of start-up and execution delays and mounting losses from the Bandra-Worli project.

The company's balance-sheet also faces the pressure of fresh capital for the various projects in its core business and real-estate ventures. HCC's strong order backlog therefore does not provide much visibility in the near term.

Investors can consider switching to other infrastructure stocks to prevent any opportunity loss given the bright prospects for the sector. Hindustan Construction's performance over the next couple of years may provide direction for fresh investments

At the current market price, the stock trades at about 32 times its expected earnings for FY-08 on a diluted basis. This valuation is at a premium to a number of peers and also appears to have captured earnings the potential of its real-estate ventures. But we believe this to be a bit premature, given the long-term nature of real-estate projects, and HCC's ventures being at a preliminary stage. We would be comfortable valuing the real-estate projects once the realisations trickle in.

Huge orders, less comfort

While Hindustan Construction's order backlog of Rs 9,300 crore provides optimism, the execution has not been smooth to provide the much-needed visibility to earnings growth. Apart from natural hazards, such as heavy rain and snowfall that have delayed projects, the company has been facing delays due to non-completion of land acquisition by clients.

This apart, the above order backlog includes Rs 1940-crore worth of HCC's share of the Sawalkote hydel project, which is subject to the decision of High Court. The company has also decided to remove Rs 151 crore of the Icha Dam project, as there is no development on that front though the order award stands. Our concern on the delays stems from the fact that apart from delaying revenue flows, such projects may become unviable or less profitable by the time the execution begins.

Power projects account for 48 per cent of the current order backlog. While this is a positive (as the segment provides relatively lucrative margins), hydel power projects typically have a long gestation period and require fresh capital investments.


The company continued to book losses from the Bandra-Worli Sea Link project and expects to book another Rs 110 crore of losses. The losses arose, as the Maharashtra State Road Development Corporation did not accept some price variations apart from new additions to the project work not bargained for initially.

While there is some optimism in receiving claim for the latter issue, the rest is subject to arbitration. Any positive ruling in HCC's favour may well see improvement in margins. For now, the losses are expected to be booked up to 2008 and would continue to drag the margins over the next few quarters.

There was a steep rise in HCC's staff and interest costs. The interest coverage ratio for FY-07, though comfortable at 2.9 times the profits, has nevertheless declined from over four in FY-06. We do not expect the interest cost to ease as the debt component can only go up, with the company tying up with banks for partly funding the real-estate projects.

A positive feature is that the company has managed to maintain its OPM in the 9 per cent range as raw material and construction costs remained under control. As power projects now form a larger chunk of the order book, the OPM may improve once these projects start yielding returns.

On the removal of Section 80 IA benefits, the company had to effect only accounting treatment and did not have any cash outflows as it had either paid taxes and made claims or created provisions for the same. Hence, the net profits have not been affected as much as other peers on account of this issue.

Real-estate Investments

The company has so far invested Rs 550 crore in the Lavasa Project and would require additional investments of Rs 300 crore over the next couple of years. While the company plans to launch the first phase in the market in October 2007, the 12,500-acre project is a long-drawn one and may see revenue flows in a phased manner.

Investors need to watch the development in this project before factoring any income from the company's real-estate venture. Further, that the company has shelved plans for a township in Navi Mumbai and decided to convert its Vikhroli (a Mumbai suburb) project into a corporate park instead of an IT Park planned earlier appears to reflect lack of clear strategy and foresight for these projects.

While real-estate is a natural extension for an infrastructure player and a number of companies have ventured into this space, our caution stems from the following: HCC's project portfolio have traditionally been long-term in nature. Its foray into real-estate has been made with the over 10-year-old Lavasa project. A long-term pay-back period, possible dilution in earnings as a result of huge capital necessitated by the nature of projects and execution risks do not augur well for this otherwise established company's earnings visibility in the medium term.

If the pace of execution of the company's core and real-estate business improves and arbitration issues get sorted quickly, the medium-term picture may turn positive. This possibility remains the principal risk to our recommendation.

Alfa Laval: Reject

Shareholders in Alfa Laval India need not tender to the open offer by its Swedish parent, Alfa Laval AB. Given the Indian arm's bright prospects on the back of a robust demand environment and increased exports to group companies, there appears to be a significant scope for earnings growth over the long term.

Following a lukewarm response to the previous offer price of Rs 875, the parent company recently revised the offer price to Rs 1,300. This price discounts Alfa Laval India's likely FY-08 earnings per share by about 24 times. There may be some scope for appreciation from this price in the light of the growth expectations. Furthermore, as the parent company is only looking at upping its stake to about 89.99 per cent, with no immediate intention of delisting from the bourses, shareholders could stand to gain by remaining invested.

Investment Rationale

Alfa Laval India is likely to see healthy growth given the robust demand environment across its user industries such as marine and shipbuilding, power, pharma, general engineering and automotive components. While at home the resurgence of interest in breweries, vegetable oil and ethanol businesses could spell good times for the company, export revenues could get a leg-up on increased sourcing by group companies. The company is also likely to benefit from the parent's shift in focus towards establishing a presence in emerging markets such as India.

Notwithstanding the muted revenue growth for the fiscal ended December 2006, the outlook for the current year appears positive. A 28 per cent rise in opening order backlog of about Rs 314 crore over the corresponding period last year, coupled with a proposed capex of Rs 30-35 crore towards increasing capacities and expanding the product range lend more confidence to the company's growth prospects.

For the calendar year ended December 2006, while the segment profits of the equipment division witnessed a 39 per cent growth, the process technology division, on the contrary, witnessed a 20 per cent drop in earnings. This de-growth in this segment can be attributed to project overruns and product recalls. As it was a one-time occurrence, the contribution from the process technology division can be expected to rise.

This is a conditional offer, with a minimum acceptance ratio of about 72 per cent. In this context, it needs to be noted that as a significant chunk of the company's shareholding (about 19 per cent) rests with foreign and institutional clients, their response to the offer could be crucial. Though the business prospects for the company appear sound, investors who hold on to the stock should factor the liquidity risk into their calculations if they opt not to tender to the offer.

Offer details

The offer is to acquire 4,702,500 equity shares at Rs 1300 per share representing 25.89 per cent of the paid-up equity capital of Alfa Laval India. The offer, that opened on May 7, will close on May 26. HSBC Securities and Capital Markets (India) Private Limited is the manager to the offer.

Market View

The market looks healthy, trading in the range of 12500-13000-plus levels as recovery continues. Corporate earnings are strong. The fact that India has under-performed the EMs (emerging markets) may suggest that some catching up could take place, given that investors seem to have regained confidence in Indian equity on signs that Corporate India is in good shape. Despite a positive outlook, bouts of volatility cannot be completely ruled out as the Indian capital market, economy and businesses are no longer insulated from global geo-political and economic events. On the domestic front, the market could remain cautious on account of the RBI's monetary tightening and its consequent impact on the growth momentum. Hence, high return expectations may be difficult to sustain. The market, however, seems to have factored these concerns into current price levels.

ICICI Prudential Mutual

The market continues to witness heavy buying on any sharp correction. The phenomenal strength in global markets has been a major reason for the firmness. Short covering and under-ownership generally have also aided the firmness. However, it has been seen that buying interest reduces considerably at Sensex level of over 14,000.The strong rupee and continued measures to contain inflation could impact profitability in a few crucial sectors. Strong global markets, positive flows and huge cash balances waiting to be deployed provide support from any major correction. Our strategy would be one of caution.

Trader's Corner

The first tenet of technical analysis is that price patterns repeat themselves. The reason why stock price movements display recurring patterns is because stock markets worldwide are driven by men.

The basic needs and emotions of men have not changed from primitive times. There is no way we can do without food or sleep. Similarly, human emotions like love, greed, exuberance, depression, contentment, etc., will stay no matter how rapidly technology changes. Human behaviour, exposed to certain set of circumstances can be fairly constant and predictable.

Many of the tools of technical analysis are based on this psychological basis. The twin tools of supports and resistances are one such example. Supports are nothing but troughs (reaction lows) from where a downward movement can reverse. The sellers turn tentative at these levels and the buyers have the chance to wrest the advantage here. The reverse is true with resistance, which are previous peaks. The buyers get edgy at these levels and sellers gain more power.

How do these support and resistance levels work? Well, these are important points of reversal in the past. Every time the price nears these levels, the memories of investors go clickety-clack. They say to themselves, "hey, the price turned from here once so it can very well do so again". That is how these levels prove to be so effective. The human element!

The supports and resistances discussed above pertain to the highest price on a day when a major peak is formed or the lowest price on a day when a significant trough is formed. Other ways in which supports and resistances are derived are with the aid of trend lines, trend channels, Fibonacci retracement levels, moving average lines etc.

If a stock has reversed from a certain price more than once in the past such supports and resistances gain greater credibility. Once a support level has been effectively breached, it turns in to a resistance level for future upward movements. Similarly resistance levels, once crossed emphatically turn in to supports for future downward movements.

The BOGOF effect

Consider this. You walk into a mall and find two stores that sell clothes. You can buy a shirt in the first store at Rs 750 and get one free. The other store sells the same shirt at 50 per cent discount to the marked price of Rs 750. Which store would you prefer? If you are a typical consumer, you would prefer to go to the first store, which gives you a free shirt. Why?

The human mind is attracted to anything that is free. "Buy one get one free" (BOGOF) is a marketing strategy to persuade people to buy things.

The alternative would be a price a product at 50 per cent discount. When a product sells at a discount, it is natural for us to suspect that it is defective.

We, therefore, do not prefer to buy such product, unless we want to go bargain hunting.

It was this behaviour at work that my friend and I saw at a mall recently, where one store was attracting the crowd because it had adopted the BOGOF strategy.

We display similar behaviour in the stock market. A one-for-one bonus share or stock dividend means you get one share free for every share held. There is great demand for stocks of companies that offer bonus shares.

Do bonus shares enhance your investment value? Not quite. The stock price represents the market's perception of the company's fundamental value.

When the company issues bonus shares, it gives additional ownership from existing value. It is similar to you having two small slices of pizza instead of one large slice of the same pizza. Yet, people like to buy stocks that provide free shares- because of the BOGOF effect.

Event packed week for stocks

The week began with the public sector banking giant State Bank of India coming out with better-than-expected fourth quarter numbers. The Lok Sabha passed SBI Amendment Bill 2006 allowing the bank to reduce its stake in seven subsidiary banks to 51 per cent. It will now be able to raise additional capital to meet the new risk provisioning norms and growth plans. Other bank stocks took a cue from SBI to follow suit.

Technology stocks witnessed subdued action on continued appreciation of the rupee against the dollar. Reports from two US lawmakers that some Indian IT firms were misusing the H1B visa programme may also have triggered caution.

The stock of Raj TV was conspicuous during the first half of the past week for a sudden spurt in volumes. On Tuesday, over 27.36 lakh shares were traded in the NSE and the stock gained 20 per cent. The stock surged 19 per cent on the same day to close at Rs 226.4. The company attributed the heightened interest in the stock to expansion plans by the channel.

Suzlon Energy's stock lost about nine per cent after the company reported a 3.4 per cent decline in consolidated net profits in the fourth quarter.

Alfa Laval and United Spirits were the news on Wednesday. United Spirits, after the company clocked handsome gains after it agreed to buy Scottish Liquor maker White and Mackay for $1.18 billion (Rs 4800 crore).

Bajaj Auto witnessed a steep fall in the latter part of the week as it announced its demerger plans

Market heavyweight Reliance Industries witnessed buying interest after reports that the company had made two natural gas discoveries. The stock touched a record high of Rs 1,705 before settling just below Rs 1,700 on Friday.

Renault Logan: The French connection

The only French presence in the Indian automobile market was the Peugeot 309, a boxy sedan that was manufactured by a joint venture, in which the Indian partner was already losing its hold on the passenger car market.

The Peugeot 309 was launched when multinational carmakers were just beginning to corner the Indian market. The car was too early for its times in terms of the demand in the segment it was being positioned and it quickly became dated in terms of design. It only had a small fan following, that is, among those that appreciated good engineering.

So, it is no surprise that despite the Peugeot 309, the average Indian could recall the Japanese, the Americans and the Germans as being the big automobile manufacturers of the world, but the French were still a people that were more popular as wine makers.

But that was before Renault and Mahindra & Mahindra announced the Logan project. The Logan, as we all know by now, was originally conceived by Renault along with Dacia (the Romanian company that the French auto major acquired) and is currently sold successfully in Europe. A car that was originally developed for emerging automobile markets such as India and Eastern Europe, the Logan has actually done remarkably well even in developed markets such as France.

The car is now being manufactured by M&M at its Nashik facility and delivers on its promise of good engineering, great value and low prices. But it still will have to face up to and get over a number of issues on the way before its Indian innings can be counted amongst its successes worldwide. This, despite the killer pricing and feature-rich package that is being offered with the India-made Logan.

One of the issues that may not work in its favour is the Logan's unexciting, overly simplistic design. The design was conceived with a purpose — to keep manufacturing and maintenance costs low — especially in cost-sensitive markets such as India. But as you go up the price segment in the petrol sedan category, buyers are more demanding even in the design department.

The Indian Logan has seen a few design changes in the front, and features a new bonnet grille, headlamps and bumper. The changes make the Logan look different from some of the existing entry-level sedans, which, otherwise, it may have seemed to share a few identical bits with.

Straightforward design

The Logan's design lines are simple and straight and its low cost manufacturing strategy has also been carried forward by choosing windscreen glass that is almost flat. Some of these ideas, including sharing the same outside rear view mirrors for both the left and right are not new and we have seen them being tried out even by Ford in the Ikon. The Logan's rear design is weaker with the Dacia Logan's tail-lamp cluster and rear body panels being carried forward.

The Mahindra Renault Logan epitomises the concept of frugal engineering that the French company's CEO, Mr Carlos Ghosn, has been praising as a positive trait amongst Indian manufacturers. Overall, the Logan successfully conceals the fact that it is a product of frugal engineering or cost cutting, as we would call it in common parlance.

But there are few areas where its cost cutting shows. The Logan's bumper integration and relatively poor line matching, wide panel gaps and the lower quality bumper paint job are some of the slips. Features such as the single reverse indicator and the awkward windscreen wiper have been chosen for their practicality, but these may actually spoil the car's looks.

The interiors of the Logan have a much better finish. The dashboard layout is simple, but precise and pleasing. There are no evident signs in the interiors of the frugal engineering that the Logan represents, and except for the seemingly lower quality of dashboard plastic that has been used, the overall fit, finish and feel is good. But despite the use of matt-aluminium inserts on the dashboard and some fabric inserts on the door panels, the Logan does not have an upmarket feel, unlike the Honda City's or the Suzuki SX4.

With a high seat position and a vertically oriented dashboard centre console, some of the controls are a bit difficult to reach for the driver. Smooth shifting five-speed gearbox and short throw stick shift are a big plus for the Logan. Safety features in the car include front disc brakes as standard in all variants and a driver's side airbag in the top-end petrol and diesel variants. But anti-lock brakes are not offered even as an option.

Engine trio

The Logan comes with three engine options — two petrol and one diesel. It is clear from the choice of engines and their power rating that the focus has been on fuel efficiency for both the 1.4-litre and 1.6-litre petrol engines.

Generating a peak power of 75bhp and 84.5bhp respectively, the engines have been tuned to deliver only adequate power for city driving conditions. Reminding you of the Honda City ZX's i-DSI engine, both the petrol engines in the Logan deliver a little more power than the former.

However, the comparison ends there. Unlike the Honda engine, refinement levels in both the Logan petrol engines are notches lower. As tested, the engines tend to be noisier than their peers in the segment. But the above-average noise levels and the strain on the engine seem to show up only at higher rpm levels. At lower rpm levels, the Logan's petrol engines are sedate performers and the interior of the car is as quite as the competitions' — while driving in city traffic conditions, for instance. But on the highway or under higher acceleration and coupled with a NVH (noise, vibration and harshness) packaging that is less efficient at insulating the passenger cabin from all of the engine and road noise, the Logan's petrol engines don't sound all that refined.

However, with most buyers in this segment expected to use the car mostly in the city, the cabin noise levels won't be an issue that will annoy too many. Moreover, though the engine refinement levels are lower, Renault and Mahindra would have ensured that reliability of the engines are maintained at a high standard.

Diesel, a performer

Thanks to its performance, the 1.5-litre dci, common rail diesel engine variant would be our automatic choice . It would be the chosen one for thrifty sedan buyers for its promise of low running costs, and it is also the most refined of the three. Featuring a second-generation common rail direct injection system, this 1.5dci engine is still used by Renault for a number of its other cars.

This diesel mill is not powered for the kind of thundering performance that the Hyundai Verna can offer. The Logan diesel misses some top-end whack, with its 65bhp of peak power tapering off at 4,000 rpm. But with all of the 160 Nm of torque being available from as low as 2,000 rpm, this is a very tractable engine that is in its elements in the city, and not too troubled on the highway either — traits very similar to the Ford Fiesta. In fact, the specs of the Logan's 1,461cc dci diesel engine are almost identical to the Ford Fiesta's 1.4-litre Duratorq engine.

Suspension, ride quality

The Logan's extra-long wheelbase and wide body means that the car has loads of shoulder room and legroom for rear seat passengers. Adding to the comfort of the rear benchers is the suspension set-up, which has been chosen to offer a firm but pliant ride. With a laden ground clearance of 155mm, the Logan is also very capable of handling the worst and biggest speed breakers in town.

But for owner-drivers, some of the features that have not been changed or reengineered for our right hand drive sedan market, like the turn indicator stalks, the bonnet release lever at the left extreme and the absence of a remote boot release may be irksome. Top-end variants of the Logan get some premium bits such as a single DIN CD-player and music system with four speakers, glove box light, trunk room light, rear defogger, remote door locking and driver's seat height adjustment.

The bottomline

The whole story of the Renault Logan lies in its unabashed attempt at offering Indians more bang for their buck. It should capture the entry-level sedan buyer's imagination with its size, ride quality and build relative to its price positioning.

Size matters for Indians and the Logan offers enough of it in every department except the choice of engines, which is again very relevant for us given the buyer's fixation with fuel efficiency.

To compare the Renault Logan with the Toyota Corolla or the Mercedes Benz C-class sedan is like comparing a hard-boiled lick-lolly with a Godiva specialty truffle. But if you are a sweet tooth on a tight budget, the lick-lolly will be the automatic choice.

So, forget the wheelbase and boot-size comparisons with the higher priced luxury sedans. The Logan clearly belongs in the entry-level sedan segment and its competitors are the Ford Ikon, the Tata Indigo and the Maruti Esteem. This, we believe, is the set of petrol-engine sedans that the Logan's petro-models will have a clear edge over.

On the contrary, the Logan's diesel will, in our opinion, be the most preferred variant and it has the ability to wean away those looking at higher priced petrol-engine sedans such as the Ford Fiesta, Honda City, Hyundai Verna and the Suzuki SX4. But, that of course, will be the case only if the buyer is undecided about his choice of engines and his focus is only value and running costs. He, then, will invariably tend to gravitate to the diesel.

Clearly, if the buyer only wants a petrol sedan and is looking for a combination of performance, build quality and reasonable fuel efficiency, then he is going to look beyond the Logan at sedans such as the Suzuki SX4 and the Honda City, which are more expensive, but also offer more premium fit, finish and feel.

The Logan's pricing is what makes it even more attractive for those looking to purchase their next car from the premium hatch or the entry-level sedan segments. The 1.6-litre petrol engine is offered with only one fully loaded variant — the 1.6 GLS — and is priced at about Rs 5.75 lakh (ex-showroom). The 1.5-litre diesel engine comes in two trim variants — the 1.5 DLE and the 1.5 DLS, priced at about Rs 5.6 lakh and Rs 6.56 lakh respectively.