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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 3
Monday, December 3 - 9, 2007
Pages 23
FII funds needed
for a sustainable rally
By Sanjay R. Bhatia
The markets displayed a range bound trend due to lack of follow-up buying at higher levels. Traders and speculators
were active in metals, oil & gas, mid-caps, small-caps, banking, realty, capital goods, telecom, IT and power stocks. The
volumes recorded have been low along with the negative market breadth for the week. Incidentally, FIIs remained net
sellers in the cash segment but were net buyers in the derivative segment. Domestic institutional investors, on the other
hand, remained net buyers during the course of the week.
Global cues have remained mixed. Crude oil prices remained
volatile ahead of the OPEC meeting on December 5. The global
markets also displayed a mixed trend. The Rupee has continued to
depreciate against the U.S. dollar. The market trend continues to
remain tentative at higher levels on lack of follow-up buying. FII
fund flows have remained lacklustre. Now, it is important that the
markets consolidate at the present level to form a good base. It is
also important that fund flows improve especially from the FIIs if a
sustainable rally has to be witnessed. In the meanwhile, the markets
would take cues from the global markets, crude prices and the
rupee-dollar equation. Stock specific movement will be witnessed
amidst intermediate bouts of volatility and profit booking at higher
levels.
Technically, the market sentiment is tentative due to lack of fund flows and follow-up buying at higher levels. Unless
strong fund flows are witnessed, the markets are unlikely to display a sustainable rally, even though it has shown a firm
closing on Friday.
On the upside, if the Sensex manages to sustain above the 18,737 level, then it is likely to test the 19,650 level. The Sensex
has support at the 18,737 level followed by the 18,419 level. If the Nifty manages to sustain above the 5,617 level, then it is
likely to test the 5,887 level. The 5,520 followed by the 5,428 are important support levels for the Nifty.
Traders and speculators could buy HCL Tech with a stop loss of Rs.299 and a target price of Rs.349.
1
Politically speaking…
By Fakhri H. Sabuwala
The finance minister's reply in parliament concerning the ailing textile segment and the remedial measures announced to
safeguard the jobs of workers is a warm response from a politician rather than an economist. All these days, the FM
justified the Rupee's strength and asked exporters to come to terms with it. But the political winds compelled him to
safeguard his vote bank. No wonder, the relief package in the form of cuts in custom duties and other sops is only the
beginning of what is to follow in coming months. Suddenly, the common man is at the centre of all political thoughts and
may be the theme of the ensuing budget too! Is the market factoring such thinking in the values of today? Perhaps not!
Union Railway Minister, Lalu Prasad, too, was categorical in his statement that there shall be no hike in railway fares and
this time the railway budget will be the 'aam janta's budget'. Will the industry foot the bill for reliefs to the janta?
Politically, the answer is not far-fetched. The government's inaction to raise petrol, diesel, kerosene and LPG prices is a
proof of the paralysis in thinking due to political compulsions. How long will it take to wipe out the networth of oil PSUs
is anybody's guess. Sanity will prevail but before that a big jolt is not ruled out.
Under such circumstances, investors must prepare themselves for a downward push and pray that the macro
fundamentals do not get derailed in the bargain. The government, too, understands the price it may have to pay in
derailing the momentum of growth. Treat such jolts as opportunities to pick up large cap blue chips. Till then, keep a
close tab on political expressions of ministers and the outcome of the Gujarat polls.
Stocks to be picked at declines
* Tata Motors: Although the auto segment may be experiencing a slowdown, this company by virtue of being the largest
automobile maker has rolled out its one millionth Indica last week and achieved this target in a span of just eight years.
The milestone of the first lakh was achieved in March'01, half a million in February'05 and the journey from 9 lakh to a
million in matter of just seven months. Backed by a steady sale in trucks and multi-utility vehicles and the renewed
promise to launch Rs.1 lakh car on the road soon lends 'jaan' to its growth story.
* IGL: Gas is the in thing and the fuel of tomorrow. Hence, gas distributors like Indraprastha Gas Ltd. (IGL) come out as
winners. A joint venture of GAIL and BPCL, this company operates mainly in National Capital Territory (NCT). Over the
years, IGL has set up 153 CNG stations including 67 mother stations, 42 online stations, 38 daughter booster stations and
six daughter stations. It also supplies piped natural gas (PNG) connections to over 75000 domestic and 300
commercial/industrial establishments such as hotels, hospitals, embassies, restaurants etc. it also supplies re-gasified
liquefied natural gas (R-LNG) to industrial consumers in NCT.
During FY07, IGL's net sales grew 17% at Rs.614 cr. and net profit jumped 30% at Rs.138 cr. During HIFY08, its net sales
are higher by 16% at Rs.336 cr. and net profit by 30% at Rs.82 cr. The demand for CNG is likely to go up with the
introduction of CNG based cars and LCVs apart from the incremental demand from new users such as Northern Railway
and introduction of radio taxis and high capacity buses for the Commonwealth Games. And hike in petrol and diesel will
make CNG an economical fuel necessitating consumers to convert their vehicles to CNG. The company's initiatives in
making CNG available on the highways too through 'Mobile CNG Dispensing Schemes', will also encourage CNG
conversions.
Testing the Top is the test
TRADING ON TECHNICALS
By Hitendra Vasudeo
Support for the time being looks to have been held. The Sensex
weekly movement was narrower in comparison to the earlier
few weeks. The Sensex had opened with a gap up from
18852.87 to 19171.25. This gap was covered as the Sensex later
dipped to a low of 1884.20 to finally close the week at 19363.19
and thereby showed a net rise of 510 points on a week-to-week
basis.
Resistance will be at 19698-19976-20238. Support will be at
18907-18852-18333-18182.
The weekly trend has turned up but is unlikely to be sustained
and the trend will oscillate and provide alternative week buy or sell signals unless a breakout and close above 20238 is
witnessed.
Overall, the Sensex can move sideways in a wider band of 20238-18100. Expect significant directional move on a breakout
above 20238 or on fall and close below 18100. As the Sensex has done well last week and held on to the support levels, it
will now be under test for the resistance levels. How well the Sensex sustains at the resistance range and will it give a
breakout and close above 20238 needs to be seen in the days to come.
Broad Market Indices Review
Across the board on the indices, we have seen week to week gains. The top gainer last week was the BSE Realty Index
notching 8.6% gains on a week-to-week basis. A breakout and close above 10900 can bring about movement and
momentum in the Realty space. BSE Metal Index was the next top gainer with 6.90% on a week-to-week basis. BSE Metal
has series of resistances in the band of 17900-18600 range. A comprehensive breakout above 18600 can bring about an all
round movement in front-line metals stocks. BSE Consumer Durables was the 3
rd
top weekly gainer with a rise of 5.20%.
Its support of 4939 is important and must not get violated but must cross and sustain above 5564. The CNX Mid Cap 200
needs to maintain above 3030 and cross 3504 to close the week above it as well for a sustained mid cap rally. BSE IT
2
gained by 4.5% but could
offer only a pull-back rise.
Support of 4068-4017-
3929 are its important
support levels. On a fall
and close below 3929, the
BSE IT will dig a deeper
hole. Nifty Junior Index
has
been
showing
strength for some time. It
approached its important
target of 10800 to witness
an extended form of rally.
The Nifty Junior needs to
cross and close the week
above 10800. The earlier
performing index BSE
Cap Good Index will be
under
sideways
movement
and
can
therefore underperform
in the short-term due to
possible
WEEKLY UP TREND STOCKS
Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy
with what ever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to
Level 3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value
then the trend will change from Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal
of the up Trend.
Last
Center
Relative
Weekly
Up
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Stop
Loss
Buy
Price
Buy
Price
Book
Profit
Book
Profit
CENTURY TEXTIL
1112.00 967.7
1066.7
1120.3
1165.7
1264.7
65.7
1088.3
03/08/07
DLF
943.90 814.8
893.7
922.3
972.6
1051.5
65.7
915.8
30/11/07
BALAJI TELEFILMS
345.95 263.3
321.3
354.7
379.3
437.3
65.4
322.6
26/10/07
JSW STEEL
1009.00 820.0
938.0
985.0
1056.0
1174.0
65.0
950.3
16/11/07
IDFC
204.55 149.1
184.8
200.8
220.6
256.3
64.9
190.2
31/08/07
WEEKLY DOWN TREND STOCKS
sideways/corrective
moves.
Review of the Elliot Wave
Count to get the broad
market picture
Preferred First Count:
Wave 1 – 2594 to 3758;
Wave 2 – 3758 to 2904;
Wave 3 – 2904 to 20238
3
Internals of Wave 3
Let the price move above Center Point or Level 3 and when it move back below Center Point or Level 3 then sell
with what ever high registered above Center Point or Level 3 as the stop loss. After selling if the prices moves to
Level 2 or below then look to cover short positions as the opportunity arises. If the close is above Weekly Reversal
Value then the trend will change from Down Trend to Up Trend. Check on Friday after 3.pm to confirm weekly
reversal of the Down Trend.
Last
Center
Relative
Weekly Down
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Cover
Short
Cover
Short
Sell
Price
Sell
Price
Stop
Loss
SPICE TELE
48.50
44.2
46.9
48.1
49.6
52.3
17.73
48.39
09/11/07
AVENTIS PHARMA 988.00
938.7
970.7
985.3
1002.7
1034.7
18.34
988.00
13/07/07
INFOSYS TECH
1604.00 1498.7
1565.7
1594.3
1632.7
1699.7
19.55
1622.25 19/10/07
LUPIN
525.55
490.4
515.4
530.2
540.4
565.4
20.20
538.25
02/11/07
GLAXO SMITHKLIN 948.00
770.3
900.3
982.7
1030.3
1160.3
20.74
1006.25 30/11/07
Wave i – 2904 to 6249
PUNTER'S PICKS
Wave ii – 6249 to 4227
Wave iii – 4227 to 12671
Wave iv - 12671 to 13799
Wave a- 12671 to 8799
Wave b- 8799 to 14724
Wave c- 14724 to 12316
Wave d- 12316 to 12316
Wave b –12316 to 15868
Wave e – 15868 to 13799
Wave v-13799 to 20238
Wave 4-20238 to 18182
(Current on going move)
Confirmation
of
termination of Wave 4 yet
to be received and only a
breakout and close above
20238 can confirm the
termination of Wave 4.
If the top of 20238 is not
crossed immediately then
we are leaving the door open for deeper
Note: Positional trade and exit at stop loss or target which ever is earlier. Not an intra-day trade. A delivery
based trade for a possible time frame of 1-7 trading days. Exit at first target or above.
Scrips
BSE
CODE
Last
Close
Buy Price
Buy On
Rise
Stop Loss Target 1 Target 2
Risk
Reward
ARIHANT FOUNDATIONS 531381 649.95
636.10
651.00
625.10
667.0
692.9
0.69
BRUSHMAN INDIA
590061
74.30
67.50
74.30
64.00
80.7
91.0
0.62
CREATIVE EYE
532392
25.70
25.10
26.50
24.00
28.1
30.6
1.38
FAG BEARINGS INDIA
505790 619.35
603.00
624.00
539.20
676.4
761.2
0.71
GARNET CONST.
526727
68.05
66.00
70.60
61.40
76.3
85.5
1.24
KHANDWALA SEC.
531892
53.15
51.00
61.80
48.25
70.2
83.7
3.47
KSL AND INDUSTRIES
530149 201.00
196.00
205.60
190.10
215.2
230.7
1.30
MANGALAM TIMBER PRO 516007
34.30
32.25
34.85
30.15
37.8
42.5
0.83
RELIABLE VENTURES IN 532124
41.85
40.60
41.95
36.05
45.6
51.5
0.65
R SYSTEMS INTERNATIO 532735
92.65
90.00
94.50
83.05
101.6
113.0
0.93
SUPREME TEX MART
531934
40.00
39.15
41.00
37.00
43.5
47.5
1.16
VISHNU CHEMCIALS
516072 145.55
139.00
149.55
131.25
160.9
179.2
1.07
ZODIAC CLOTHING CO.
521163 479.55
458.50
485.00
440.00
512.8
557.8
0.84
correction. Therefore, it is
very
4
important the we give a
breakout and close above
20238 at the earliest.
If the breakout is not
witnessed then we can go
through
a
corrective
phase of the entire rise
from 2904 to 20238. The
23.6% correction is at
16166
and
38.2%
correction is at 13662.
The level of 1336-2 is
very near the wave IV
level of 13779.
The
reverse retracement of
the fall from 20238 to 18182 is placed at 17385-16900.
BUY LIST
Scrip
Last Close Buy Price Buy Price Buy Price Stop Loss Target 1 Target 2
Monthly
RS
ESSAR OIL
241.95
174.90
151.32
127.75
51.45
374.7
574.4
70.58
JINDAL STAINLESS
217.70
204.94
195.38
185.81
154.85
286.0
367.0
68.94
R.C.F.(RASHTRIYA CHE
75.00
72.92
69.12
65.33
53.05
105.1
137.2
64.65
VSNL (VIDESH SANCHAR
626.60
573.44
552.17
530.91
462.05
753.7
933.9
59.69
INDIAN OVERSEAS BANK
164.45
153.01
149.00
144.99
132.00
187.0
221.0
56.52
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
ZEE ENTERTAINMENT
287.65
302.86
309.95
317.04
340.00
242.8
41.28
UNITED BREWERIES
331.35
334.81
342.48
350.14
374.95
269.9
42.27
JUBILANT ORAGANOSYS
302.40
315.19
320.50
325.81
343.00
270.2
44.54
3M INDIA
1975.00
2028.59 2095.50
2162.41
2379.00 1461.6
45.13
NESTLE INDIA
1321.00
1439.90 1482.50
1525.10
1663.00 1078.9
46.3
RELIANCE IND. INFRAS
1889.00
2289.48 2434.50
2579.52
3049.00 1060.5
50.1
In case of a fall and close below 18100, expect a slide down to 17385-16900 at least. Further levels down will be 16166 and
13662.
On the immediate front, the focus is to monitor whether the top will get crossed in the current up move.
Strategy for the week
Exit long positions in frontline stocks when the Sensex hits the resistance range of 19698-19976-20238. Signs of weakness
can be witnessed on fall below 18900 and the weakness gets aggravated on a further fall below 18100. A breakout and
close above 20238 can continue its dream run without further interruption.
* A leading FII is accumulating shares of Vakrangee Software from the open market. Scrip may see a vertical rise in
coming days.
TOWER TALK
* Despite FIIs exiting El Forge, the scrip is buzzing on Dalal Street. A well-known domestic broking firm has accumulated
a good chunk and is tipped to take it to a new orbit.
* Artson Engineering is on fire and making new highs. Company may make some positive announcement in the near
future. Accumulate at declines
* Bilpower is looking extremely strong on the charts. After a long consolidation, it has given a good breakout and is
heading to make a new high in coming days. Hold on to it.
* Some informed buying is taking place in Indo Asian Fusegear as well as Syncom Formulations. Both may continue
their upward movement in coming week as well. Sit tight on your holdings.
* Avantel Softech is the only manufacturer of Pico Repeaters, which have been mandatory for both GSM and CDMA
telecom operators to enhance usage of the allotted spectrum bandwidth. Scrip may touch Rs.120 in the near term.
* PG Foils at Rs.85 is attractive as it has allotted warrants convertible to equity at Rs100 per share.
* Asian Oilfield is expected to report EPS of over Rs.40 in FY09 according to an analyst. A leading group known for
identifying multi-baggers is reported to be taking stake at a price of Rs.190.
* Macmillan India is at a low and is a good accumulation pick for patient investors.
* Coral India Housing is a good pick as it has sizeable real estate in Mumbai and also runs health resorts.
* The grey market premiums on recent IPOs have again firmed up with Kolte Patil Developers at Rs.48-52, Renaissance
Jewellery at Rs.28, BGR Energy at Rs.395/405, Jyothy Labs at Rs.230-235, Edelweiss at Rs.735/750, Burnpur Cement at
Rs.4/6, e-Clarx at Rs.65/70 and Kaushalya Infrastructure at Rs.12-13.
* Proxy IPO application forms for Rs.1 lakh retail application are quoting Rs.3200 for BGR Energy and Rs.2500 for eClerx.
Wanbury Ltd. (Code: 524212)
Rs.135
BEST BETS
Wanbury Ltd. (Wanbury) came into existence with the merger of two diverse companies, Wander and Pearl Organics.
These two entities are now functioning as the independent business units of Wanbury. While Wander Ltd. became the
formulations division catering to the domestic market, Pearl Organics manufactures bulk drugs for the international
market under its API division. Ironically, Wanbury is the world's largest producer of Metformin Hydrochloride - a
diabetes management product and Salsalate, an anti-inflammatory drug. Presently, more than 50% of its revenue comes
from exports to over 50 countries serving 200 customers including three of the top five generic players in USA. Notably,
65% of the total export is to regulated markets like USA, UK, Europe etc. The key bulk drugs manufactured are ibuprofen,
glucosamine, promethazine, tramadol, atenolol, sertraline etc. In the formulations business, the company's product
profile comprises of anti diabetic, neutraceuticals, antibiotics, cough & cold solutions, anti- inflammatory & analgesics
with specialization in gynaecology, orthopaedic pediatrics, nutrition etc. Wanbury also offers telemedicine and video
conferencing services, which is a new revolution in the healthcare industry.
After its recent amalgamation with Pharmaceutical Products India and Doctors Organic Chemicals (DOCL), Wanbury
now boasts of three world class large scale plants spread across Patalganga & Tarapur in Maharashta and Tanuku in
Andhra Pradesh. Of these, its Patalganga and Tanuku facilities are USFDA approved for multi-products and compliance
to EDQM standards. Apart from its corporate office in Vashi, Navi Mumbai, it has set up two hi-tech R&D centres - one in
Turbhe-Navi Mumbai for API and another at Chembur I in Mumbai for formulations. Currently, Wanbury has 23 DMFs
with USFDA and is looking to file another 45 DMFS in the near future. Of late, it has introduced 2 new brands 'C-Pink'
and 'Rabiplus' in the domestic market and both are doing exceedingly well. As a part of its growth strategy, the company
has launched a super specialty research division `Osteolife' catering to orthopaedic health issues such as osteoporosis,
osteoarthritis and pain management. Besides, with the acquisition of DOCL, Wanbury has got into CRAMS business also
and does contract manufacturing for leading MNCs like Pfizer etc.
Importantly, Wanbury has recently acquired the generic ethical formulation business division of Industrial Farmaceutica
Cantabria, Spain for approx Rs.250 cr. through its wholly owned subsidiaries. Interestingly, only 40% payment is to be
made upfront while the balance 60% is to be paid in two years and the assets of the Spanish firm will be used as collateral
to raise loans to fund the acquisition. Cantabaria, which owns 17 brands in various therapeutic segments like
traumatology, pain management, asthma, anti depressants, anti eplileptics, anti ulcerants, cephalosporins, beta blokers etc
is targeting a revenue of Euro 33 million (i.e. Rs.200 cr.) with an EBITDA of Euro 8-10 million (i.e. Rs.50-60 cr.). Moreover,
it has product development worth Euros 6 million in the pipeline for the next year and is expected to grow at CAGR of
1520% over a five year period. In short, its first overseas acquisition has propelled Wanbury into new dimension.
In April 2007, the company issued FCCB
aggregating Euro 15 million in order to fund
the
Cantabaria
acquisition,
organic
expansion, related diversifications and new
R&D activities. Out of this, Euro 8 million is
fully paid up whereas only 10% is paid-up for
the balance 7 million. These FCCBs can be
converted into equity shares at approx Rs.140
per share. Apart from modernising and
expanding its manufacturing capacity, the
company is also in the process of acquiring
domestic ethical brands. Moreover, the rise in
outsourcing of pharma activities to low-cost
offshore destinations like India bodes well for
Wanbury as the company is now in a unique
position to offer a single point of contract for
R&D, process development and commercial
production. For FY08, on a consolidated basis
including the Cantabaria business, it is
expected to clock a turnover of Rs.375 cr. with
PAT of Rs.35 cr. This will lead to an EPS of
Rs.26 on its current equity of Rs.13.60 cr.
However, on its fully diluted equity of Rs.21
cr. (post conversion of all warrants and
FCCBs) the EPS works out to Rs.17. This can
move up to Rs.20 for FY09. Hence at a
reasonable discounting by 12 times against its
FY09 earning, the scrip has the potential to
cross Rs.240 in 12-15 months. At the same
time, if the rupee appreciation continues, its
bottomline may get affected to some extent.
PROFITRAK POWER
A product for Trading and Investments
A new offering based on the Power of Relative Strength
Per month – Rs.2500 per month (1 month subscription by email only)
What you get:
* One buy and one sell every trading day
* One weekly buy- every week before the week starts
* One monthly buy- every month before the month starts
Per quarter – Rs.6000 per quarter (3 months subscription by email only)
What you get:
* One buy and one sell every day
* One weekly buy every week before the week starts
* Three monthly buys every month before the month starts
* One quarterly buy every quarter before the new quarter starts
Per half year – Rs.12000 per half year (6 months subscription by email only)
What you get:
* One buy and sell every day
* One weekly buy every week before the week starts
* Six monthly buys every month before the month starts
* Two quarterly buy-every half year before the new quarter starts
Per full year Rs.20000 for 1 year subscription (by email only)
What you get:
* One buy and sell every day
* One weekly buy every week before the week starts
* Twelve monthly buys every month before the month starts
* Four quarterly buys every half-year before the new quarter starts
* One yearly pick on the first of January
To subscribe contact Money Times on moneytimes@vsnl.com or 022-22616970
5
Linc Pen & Plastics (Code: 531241)
Rs.44.25
Established in mid 70's and founded by Mr. S. M. Jalan, the Linc group has over the past three decades established itself
as one of the market leaders in the writing instruments industry. Today, Linc Pens & Plastics Ltd (LPPL) boasts of a
product portfolio of over 200 SKUs including stationery equipment. It offers a wide range of writing instruments from
ball pens to gel pens and markers to pencils. Its products are primarily targeted at the mass markets, schools and offices.
The USP of the company has been quality product at reasonable price i.e. value for money through economically priced
products with a great price-to-performance ratio. It was the first company to launch a gel pen at Rs.10 when the
prevailing price of other brands was over Rs.15. Subsequently, it was again the only one to introduce gel pen at Rs.5,
which helped it to become brand leader in the gel pen segment and increase its market share considerably. Incidentally, it
is also the sole marketer for premium international brands like Lamy, UniBall and Bensia. Lamy is not only the market
leader in Germany but has also become one of the renowned brands for fountain pens, ball point pens, roller ball pens,
multi system pens and mechanical pencils across the world. On the other hand, Uniball is the most popular brand of
Mitsubishi, Japan, and Bensia is a well known manufacturer of non-sharpening pencils.
LPPL has three large state-of-the-art manufacturing facilities with two in Goa and one near Kolkata. Apart from having
ISO 9001:2000 certification, its plants are also approved by some of the world's leading retail chain stores like M/s.
Walmart Stores Inc, Tesco International, W.H. Smith etc. Presently, 20% of its revenue comes from exports to over 30
countries. The primary focus of the company has been on private label contracts with top chain stores like Steadtler,
Liquimark, Poundland, ICO, Stypen, Dollar Tree, Office Works, CVS, John Lewis, Coop Norden etc to name a few. Here
in India, LPPL has ventured into lucrative retailing business with two format stores namely – 'Just Linc' and 'Office Linc'.
While the former stocks only 'Linc' products, the latter is one-stop shop for all kinds of stationery products required in an
office, from pins to laptops. 'Office Linc' has roped in channel partners like Airtel, DHL, Blue Dart, Microsoft, Music
World, Book Cellar, Anderson Printing, Presto, Aqua Java, SKP Moneywise and Talk, who will stock their products and
provide after-sales services as well. Two stores of 'Office Linc' and 10 shops of 'Just Linc' are already operational and the
company intends to have a pan India presence in future. Importantly, LPPL has appointed Rediffusion DYR, the fourth
largest ad agency for brand building and has allotted more than Rs.7 cr. for an ad campaign.
Last fiscal, the company revamped its product mix by phasing out couple of high volume low value brands due to which
the average realization per pen increased from Rs.2.25 to Rs.2.60. It was also successful in increasing the average
realization per refill from Rs.0.82 to Rs.1.16. In order to develop better information system, LPPL is implementing ERP
system from SAP and has chosen M/s. Price Waterhouse Coopers as its implementation partner. The increasing working
population, growing level of literacy, burgeoning middle class, huge retail revolution etc – all these augurs well for the
growth of LPPL. After reporting flat performance for FY07, the company is now growing at healthy pace and has
registered 20% and 30% growth in sales and net profit respectively for H1FY08. Thus it is expected to clock a turnover of
Rs.175 cr. and PAT of Rs.5.50 cr. for FY08 i.e. EPS of Rs.7 on an equity of Rs.8 cr. With a 52-week high/low as Rs.52/28, a
book value of Rs.36, dividend yield of nearly 4% and specially considering its brand value, the company is available fairly
cheap at an enterprise value of Rs.60 cr. At a reasonable discounting by 8 times, the scrip has the potential to touch Rs.60
(i.e. 50% appreciation) in 12-15 months. However, investors should keep in mind that the company is in a very price
sensitive business with cut throat competition and is operating at very low net margin of 2-3%.
Hawkins Cookers Ltd.: For cooking decent profits
ANALYSIS
By Devdas Mogili
Hawkins Cookers Ltd. (HCL) is a 48-year old Mumbai based company established in 1959. It was formerly known as
Pressure Cookers and Appliances and before it re-christened itself after its popular brand name, Hawkins. The company
manufactures pressure cookers, cookware, idli stands and both hard anodised and non-stick range of cookware. Brahim
Vasudev is the chairman and managing director of the company.
HCL is a leading manufacturer of cookers and has carved out a good 32% market share despite severe competition from
both the organised and unorganised sectors with more than 100 models of cookers. It has an extensive product range
consisting of pressure cookers, cooker accessories, non-stick cookware, cuisinettes etc., which are marketed in the
domestic market under the brand name 'Hawkins'.
6
HCL also successfully launched the 2 litre Hard Anodized Contura and 8 litre Ekobase Pressure Cookers. In cookware,
the company launched six items viz. Futura Hard Anodised Sauce Pan (Handi) with two short handles; Futura Hard
Anodised Kadhai 2.75 litre; Futura Hard Anodised Cook-n-Serve Stewpot 5 litre with glass lid; Futura Non-stick Cook-
n-Serve Stewpot 3 litre and 5 litre with glass lid and Futura Hard Anodised Ezee Pour Sauce Pan 1.5 litre.
Exports: The company exports its products to the US under the brand name 'Hawkins'. It is sold in some of the top
departmental stores in Europe and America. HCL also exports to Yugoslavia, Japan, Panama, Mexico, Finland and the
Netherlands.
Performance: The company posted impressive figures for FY07. It clocked net sales of Rs.173.24 cr. with a net profit of
Rs.7.49 cr. netting an EPS of Rs.14.17 for FY07.
Financial Highlights:
(Rs. in lakh)
Latest Results: HCL has come out with
highly encouraging results for Q2FY08. It
registered net sales of Rs.49.91 cr. with a net
profit of Rs.2.70 cr. posting a basic/diluted
EPS of Rs.5.10. The annualized EPS works
out to Rs.20.40.
Particulars
QE 30/09/07
QE 30/09/06
YE 31/03/07
Sales Inc Excise dty
5281.1
4663.4
18459.6
Less: Excise Duty
290.2
301.5
1135.4
Sales net of ex duty
4990.9
4361.9
17324.2
Other Income
37.5
14.1
52.9
Total Income
5028.4
4376.0
17377.1
Expenditure
a. Inc/Dec in stock
(147.9)
235.5
33.8
Financials: The company has an equity base
of Rs.5.29 cr. and with reserves of Rs.11.37
cr., the book value of its share works out to
Rs.31.49. As on 31
st
March 2007, it had
RONW of 49.67% while ROCE is at 47.84%.
It has a debt equity ratio of 0.86.
b. Raw Materials
1828.2
1588.0
6291.0
c. Pur of traded gds
556.5
395.3
1862.3
d. Emp cost
643.5
581.8
2478.9
e. Depreciation
36.0
37.7
154.5
f. Other Exp
1630.9
1317.2
5216.6
Total Expenditure
4547.2
4155.5
16037.1
Interest
7
Share Profile: The company's share with a
face value of Rs.10 is listed on the BSE under
the Indo Next (S) segment. Its share price
touched a 52-week high of Rs188 and a low
of Rs.79. At its current market price of
Rs.177, it has a market capitalization of Rs.93
cr.
35.8
53.9
175.1
PBT
445.4
166.6
1164.9
Prov for taxation
For the year
152.0
56.1
396.3
FBT
23.6
4.2
19.2
Net Profit
269.8
106.3
749.4
Paid up equity
528.8
528.8
528.8
Res Ex Rev Resres
1137.2
Basic/Diluted EPS (Rs)
5.10
2.01
14.17
Dividends: The company has a good distribution policy as can be seen from its impressive dividend payouts as shown
below:
FY2007 - 70%; FY2006 - 50%; FY2005 - 30%; FY2004 - 10%; FY2003 - 0%; FY2002 - 10%.
Shareholding Pattern: As on 30
th
September 2007, the promoter holding was 56.03% while non-corporate promoters and
the Indian public held the balance of 43.97%.
Prospects: As per market research reports, the total pressure cooker market in the country is growing at 7.3% per annum
and HCL continues to be the Number One brand in pressure cookers in India. The outlook for the company's business is,
therefore, good and it is well-positioned to take advantage of the growth of demand in domestic and export markets to
increase its sales and profits.
Conclusion: HCL is a profit-making, dividend paying company with an impressive track record. It is a market leader in
the pressure cookers and cookware market.
At its current market price of Rs.183, its share price is discounted around 8 times against the industry average P/E
multiple of 10.41. Considering its excellent performance, good brand image and bright prospects going ahead and a low
beta of 0.5, the share is a good addition to one's portfolio for cooking decent profits.
The Sensex is hovering around 19K
MARKET REVIEW
By Ashok D. Singh
The Sensex rose 510.32 points or 2.70% to end at 19,363.19 while the NSE Nifty rose 154.15 points or 2.74% to close at
5762.75 for the week ended Friday, 30 November 2007. Although the market posted decent gains as the buying
momentum picked up in the latter half of the week, the volatility was high due to alternate bouts of buying and selling by
FIIs caused by redemption pressure in their home countries and fears of a US recession arising from US housing slump
and credit crisis. The market advanced in three out of five trading sessions in the week.
Trading for the week started on a strong note with the 30-share BSE Sensex surging 394.67 points to 19,247.54 on Monday,
26 November 2007 tracking firm global markets.
On Tuesday, 27 November 2007, the Sensex lost 119.81 points to 19127.73. Losses in the US market on renewed worries
over the fallout from the US subprime mortgage crisis dampened the sentiment
Selling continued on Wednesday, 28 November 2007 as the BSE Sensex declined 188.86 points to 18,938.87. The market
reversed its early gains in the latter part of the day on unwinding of positions by traders ahead of the expiry of
derivatives contracts.
On Thursday, 29 November 2007, the market witnessed high volatility and came sharply off the higher level in late trades
due to expiry of November 2007 derivatives contracts. It, however, settled at 19,003.26, up 64.39 points for the day.
The 30-share BSE Sensex surged 359.93 points or 1.89% to 19,363.19 on Friday, 30 November 2007. Robust Q2 GDP growth
data and healthy rollover of derivative contacts from November 2007 series to December 2007 series aided the surge.
8
As per data released on Friday, 30 November 2007, the GDP rose 8.9% in the second quarter ended 30 September 2007,
which was below a robust 9.3% growth recorded in the first quarter ended June 2007.
The wholesale price index rose 3.21% in the 12 months to 17 November 2007, above the previous week's rise of 3.01%,
government data released showed. The annual inflation rate was 5.56% during the corresponding week of the previous
year.
The NSE on 28 November 2007 said it has decided to add 15 stocks to the F&O segment with effect from Friday, 30
November 2007. The 15 new inclusions for trading in F&O segment include Jindal Saw Pipes, KPIT Cummins
Infosystems, Development Credit Bank, Hindustan Zinc, MICO, Info Edge, NIIT, Great Offshore, Wire & Wireless India,
Redington (India), Network18 Fincap, Global Broadcast News, Ispat Industries, Hindustan Oil Exploration and Gitanjali
Gems.
On Tuesday, 27 November 2007, the BSE announced that it will shift 414 scrips from trade to trade to normal rolling
settlement effective from Monday, 3 December 2007. Among the stocks being shifted back to normal rolling settlement
from trade to trade include ABG Heavy Industries, Aksh Optifibre, Ambalal Sarabhai Enterprise, Andrew Yule &
Company, Assam Company, Birla VXL, BPL, Cable Corporation of India, Dhanalakshmi Bank, Emkay Share & Stock
Brokers, Jai Corp, Jhunjhunwala Vanaspati, L.M.L., Ramkrishna Forgings.
Reliance Industries gained 1.40% to Rs.2850.75 in the week. The company sold 4.01% equity stake in its subsidiary
Reliance Petroleum by transactions through the stock exchanges. The aggregate sale consideration was Rs.4,023 cr. and
post-sale RIL's stake in RPL has come down to 70.99% from 75%.
Reliance Communications slipped 1.05% to Rs.674.85 in the week. The company reportedly plans to sell another 5% stake
in its wireless tower business in the second such transaction in this calendar year.
Reliance Energy gained 0.75% to Rs.1738.10 in the week. The company has entered into a joint venture with the country's
main transmission utility, Power Grid Corporation of India, to execute about 300 kilometre transmission lines from
Parbati to Koldam and Koldam to Ludhiana.
DLF rose 8.66% to Rs.943.90 after the company said on Tuesday, 27 November 2007 that it had partnered the founder of
Aman Resorts for a stake in the luxury hotel chain. Aman Resorts is one of the world's leading hospitality and lifestyle
business and currently owns and operates 22 luxury hotels, many with residences in 12 countries.
Tata Steel rose 0.63% to Rs.825.70 in the week. The company may reportedly pick up a 35% stake in its newly formed
Mozambique joint venture for a consideration of Australian $100 million.
L&T closed higher to Rs.4117 on reports that it had opened its third factory in China to manufacture industrial valves. The
new facility in China, envisaged with a built-up area of 30,000 square meters, would manufacture gate, globe, check and
ball valves. The unit has been opened in Yancheng in the Jiangsu Province.
On 21 November 2007, L&T signed an agreement with Raytheon for the US defence major's multi-role fighter jet
programme besides co-operation in defense projects. On 19 November 2007, L&T secured a contract worth Rs.275 cr. from
Delhi Metro Railway Corporation in consortium with Shanghai Urban Construction. On 15 November 2007, L&T in
consortium with Paul Wurth won an order worth Rs.580 cr. from the state-run Steel Authority of India to rebuild one of
its blast furnaces. On 18 October 2007, L&T bagged four contracts valued at Rs.452 cr. for projects in Andhra Pradesh. Of
the four orders, one order worth Rs.226 cr. is from NTPC for the Simhadri Coal Handling Plant. The project is to be
completed in 39 months. Three more contracts aggregating Rs.226 cr. are from Public Health & Municipal Engineering
Department, Government of Andhra Pradesh.
L&T's net profit rose 73% to Rs.348.02 cr. on 47.4% growth in net sales to Rs.5499.94 cr. in Q2 FY08 over Q2FY07. The
company manufactures a wide range of engineering products like earthmoving, industrial and chemical machinery,
switchgears, valves and welding alloys.
IT stocks advanced as the Indian rupee weakened against the US dollar. TCS rose 5.62% to Rs.1013.95, Wipro gained
4.13% to Rs.460.30, Satyam Computers advanced 5.57% to Rs.439.95 while Infosys Technologies rose 2.96% to Rs.1604.45.
Infosys Technologies expects to maintain margins in coming quarters and the US subprime crisis has not hit IT spending
by US clients, the company said on Thursday, 29 November 2007.
On 27 November 2007, Mundra Port and Special Economic Zone settled at Rs.961.70 on BSE, a premium of 118.56% over
the IPO price of Rs.440.
The BSE Sensex rose 510.32 points to settle at 19,363.19 last week. At the current 19,363.19, the Sensex trades at a PE
multiple of 18.44 to 19.36 based on projected FY09 EPS of Rs.1000-to-Rs 1050 for 30 Sensex companies. Any sharp outflow
of funds by foreign institutional investors (FIIs) may dampen the sentiment. Their selling may continue in the near term
as they may resort to year-end profit taking. FIIs follow calendar year as their accounting year.
FII outflows in the spot market in November 2007 till 28 November 2007 reached Rs.4872.30 cr. FIIs had made heavy
purchases in September 2007 and October 2007. They bought shares worth a net Rs.16132.60 cr. in September 2007 and
Rs.20590.90 cr. in October 2007. The European Central Bank and Bank of England meet on 6 December 2007 to consider
interest rates decisions.
Promoters short change small investors!
MARKET
By G. S. Roongta
Once again, the stock market proved to be lacklustre last week. After recording some improvement on Monday, 26
th
November 2007 with positive innings of nearly 393 points, which helped the BSE Sensex close over 19K at 19,245 and the
CNX Nifty closed at 5,731. Thereafter, however, it witnessed selling pressure on Tuesday and Wednesday as traders
preferred to book profits before the expiry of the F&O contracts ending on Thursday, 29
th
November 2007 due to
resistance at higher levels.
Thus the BSE Sensex lost 120 points on Tuesday, 27
th
November and 188 points on Wednesday, 28
th
November thereby
losing nearly all the gains recorded on Monday.
On Thursday, 29
th
November, the day of the F&O settlement, the Sensex opened strongly up by 200
points and was up by 300 points at 19,297 and the Nifty 90 points up at 5,725 but could not sustain itself
at this high level. The profit booking that followed washed out almost all intra-day gains leaving it with
just 64 points in the plus on the Sensex while closing at 19,003.26. The corresponding close on the Nifty
was 5,634.60 up by 17 points. Our performance was, therefore, lacklustre in relation to the past
performance of the markets as well as other markets that performed quite well that day with the Dow
Jones gaining 331 points.
With the end of November 2007 derivative contracts in the F&O market, automobile stocks as I had
stated two weeks back, displayed a positive trend. Ashok Leyland, Hero Honda, Tata Motors, Bajaj Auto and Maruti
Suzuki all gained good grounds. Bajaj Auto gained nearly 300 points last week and 500 points from the recommended
price. Hero Honda gained nearly 100 points while Tata Motors advanced to over Rs.740 that day.
G.S. Roongta
Cement shares were comparatively weak as most counters such as ACC, Grasim, Shree Cement, India Cement, etc. faced
heavy liquidation shedding 5% to 10% even though 70% of the contracts in these counters were rolled over during the
F&O settlement. This happened despite rumours of a price hike in cement bags from December 2007. This was because
traders had built up heavy long positions on the hope that the sector would continue to perform well. Next day, however,
cement stocks perked up as the business channels also gave credence of an immediate price hike of Rs.5 per 50 kg bag.
According to the TV channels, a price hike has already been effected in the South and was due for implementation in the
other regions of the country.
If this price hike turns true, I am of the opinion that cement stocks will bounce back in coming days. Presently, ACC at
Rs.1065, Grasim at Rs.3650 and Shree Cement at Rs.1365 are at most attractive levels to take a position in.
In the Steel sector, the B and B1 group of shares were distinctively strong, Bhushan Steels and Ispat Industries made a
good headway while Tata Steel, SAIL and other leading stocks faced resistance.
Going by the overall trend in the market last week, it appears that the market may remain in the trading zone in
December 2007 as the big players including the FIIs will be in a holiday mood. Besides, the pressure of tax payment and
year end considerations for some may affect the ongoing bullish trend and turn into a sideways market within a range of
400 points up or down.
I do, however, see a turnaround in the fortunes of the Tea sector, which has been lacklustre over the past two years. It
may see better days as the world tea production is likely to be lower. This is because many tea producing countries like
Kenya have suffered on account of bad weather. Also, the demand for tea has risen sharply in India. Given this mismatch
of higher demand and lower supply globally, there is every likelihood that tea stocks will shoot up.
While reviewing the market, I cannot help but observe about the games that promoters play in short changing the
common investors after having dumped them with stocks at heavy premium. While the Ispat Group and the Modi Group
come to mind but there is none to beat the Essar Group, which has failed to reward investors for over two decades while
its promoters have built themselves fancy bungalows worth hundreds of crores and a skyscraper office tower in Central
Mumbai.
Not only has the group failed to reward shareholders despite good working, there is a deliberate attempt by the
promoters to privatize their companies and delist the same with measly compensation to shareholders. They had earlier
attempted to delist Essar Steel but their failed do so as it was stoutly resisted by common shareholders and institutions as
the compensation was less than peanuts. Now they are attempting to short change shareholders having compulsorily
converted 40% of its equity into redeemable preference shares at 0% interest and offering to buy it back at Rs.12.5 per
share!
The irony is that the investors were forced to reduce their holding by 40% when its share was ruling over Rs.70 and also
two weeks back. But the offer of the buyback of redeemable preference shares has been made when Essar Steel quotes
around Rs.47 against a book value of Rs.37 and an EPS of Rs.5.5 for the trailing twelve months (TTM)! This clearly smacks
of the game plan of the management to acquire the company now that it is rich with assets and is performing well
9
without the slightest consideration for common investors. It is, therefore, in the interest of the management that the
company's share price languishes on the bourses and investors are compelled to sell.
This management had again resorted to jugglery in recording the sale of a ship in Essar Shipping and suppress its
profitability as the share would have zoomed otherwise. Today it quotes around Rs.54 around its book value of Rs.51
with an EPS of over Rs.3. Can anyone believe that such an old shipping company with such fundamentals is quoting so
low? Is it not in the interest of the management keen to delist its shares to keep the share price low so that they can buy it
back for a song?
By adopting such tactics, they were able to their stake in group companies to over 70% but are still greedy for the balance
as the companies are rich in assets and faring very well. Once their game plan succeeds, the shares of Essar Group will
zoom as also witnessed recently in Essar Oil.
What is strange is that in days when corporate governance is being propagated, shrewd promoters manipulate the
company's working and play around with the sentiment of common investors using their brute majority. Such kind of
looting in broad daylight should be resisted by one and all and the watchdog body along with the Company Law Board
(CLB) should take such managements to task.
If the concerned authorities were to do a due diligence of the group's working and trace out the management resources as
to how the promoters cornered the public shares at throw away prices by issuing convertible debentures, reduction in
equity capital and issuing 0% preference shares, the game plan of the promoters will stand exposed. But if the authorities
keep quiet, other promoters will be encouraged to adopt the same strategy and enrich themselves at the cost of common
shareholders. A clear cut policy should be made to allow company management to enhance their shareholding in a more
fair and just manner.
Investors, on their part should be vigilant about the intention of such promoters and take a lesson from the Essar Oil
shares shooting up after they were cornered by the promoters. The same will happen now with Essar Steel as the
promoters want to acquire over 90% through an open offer. Hence investors should not part with their holding in a hurry
or be discouraged by the current ruling prices, which are deliberately kept low.
If the share of Ispat Industries is shooting up daily, why is Essar Steel locked around Rs.47-48 for the past two weeks. The
zooming share price of Bhushan Steel, Ashok Leyland, Graphite India and Ispat Industries gives a fair clue to the
promoters' game plan to corner their company holding in view of the better days ahead.
Another area that needs to be checked out is the land bank story, which is the centre of attraction in all corporate
presentations. Investors do not know how much freehold land exists with the company as they are no norms of disclosure
in the printed balance sheet. No qualitative or quantitative details are show under the head 'Land'. The CLB should
therefore frame the rule and ask company managements to give a detailed schedule of land that a company possesses in
sq. mts. and the area where it is located along with the original purchase price and the notional market value today. Why
should this information be available to a few interested persons? As it is, real estate deals are rarely transacted fully by
cheque payment and the promoters/management are the sole beneficiaries of the cash component.
Last week there were reports that Escorts Ltd. had put up for sale a large piece of land for Rs.1500 cr. It was said to be one
of the biggest land deals in recent times. But the Escorts share price has been going up for quite some time and has
appreciated by over 50% in the last few weeks.
This
clearly
establishes
that
some
knowledgeable persons were buying the scrip
before the news was made public.
10
This unfair advantage by insiders could be
checked if a prime asset like land and building
is enumerated in the balance sheet.
While a great deal of checks & balances have
been introduced and there is greater
transparency after the arrival of SEBI, the
authorities need to investigate into the games
of promoters who manage to stick to the letter
of the law but whose intention in short
changing small holders needs to be curbed.
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(This column was written after the closing of the market
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th
November 2007as Mr. Roongta had to
leave for Kolkata. Interested readers who wish to contact
him in Kolkata can do so on 9867669362.)
"We have been growing at 50-70% in the international business with our
quality, reputation and strong relationships"
CORPORATE
- Mr. V. P. Mahendru, chairman & managing director, Indo Asian Fusegear Ltd.
Indo Asian Fusegear has been recommended for investment in Money Times right since December 2004 at RS.88 under
Stock Watch, Best Bets and Expert Eye by our analysts. Since then, the scrip recorded a high of Rs.320 in May 2006 and its
current 52-week High/Low is Rs.157/88. Investors can now assess the future of the company from this interview with
Mr. V.P. Mahendru, chairman & managing director.
Background
Indo Asian Fusegear Ltd. (IAFL) is among India's leading manufacturer of electrical
switchgears and compact fluorescent lamps. The company's product range include wide
range of electrical circuit protection equipment including distribution boards, switch boards,
switch panels, fuse switches, MCCBs, HRC Fuses, MCBs, RCDs, etc. It is also the largest
manufacturer of CFLs and MCB's in India.
It has grown to become the largest exporter of electrical equipments to like UK, Germany,
Middle East and South Africa and is the only company in India to produce environment
friendly Mercury less CFLs. The company is consistently developing and marketing smarter
devices that manage electrical energy optimally and enable homes, industries and the eco-
system to benefit the maximum.
VP Mahendru, Chairman & Managing Director, promoted the Indo Asian Group for manufacturing and marketing
Electrical Distribution and Safety Equipment in 1958. Mr. Mahendru is well-known in business and social circles. He is
member of the Governing Body of the Bureau of Indian Standards (BIS/ISI) contributing to the strategic policies for
formulation and implementation of Indian Standards for various electrical and electronic equipments. He is also an
executive member of various policy-making bodies of Government of India including the Central Consumer Protection
Council of India and National Productivity Council.
With increasing investments in the power sector, what trends are you witnessing?
The electrical equipment industry is a critical link between power generation and the end consumer, and hence is a key
beneficiary of the multifold investments in the power sector by the government and private players.
Government has recognized the pivotal role of electric power in economic development and also the urgent and critical
need to invest heavily to reduce the growing gap. The government has initiated reforms such as the Accelerated Power
Development and Reform Programme (APDRP), which has led to increased investments in the T&D sector. The
Government has planned 100,000 MW capacity additions by 2012 totalling over 200,000 MW. This will also entail massive
investments as Rs.4-5 cr. has to be spent on the T&D network for every 1MW of power. So, almost Rs.4–5 lakh crores of
investments would be required in the T&D sector, if the capacity addition takes place as planned. This will boost the
demand for power distribution equipments tremendously.
The key growth drivers of the industry are increasing investment in the power sector; high growth in construction & real
estate segments, increased consumer demand for value added, safe & technologically superior products; and increased
international opportunities.
Could you give us an idea about the retail electrical industry?
The retail electrical industry is divided into two sub segments namely (a) the power distribution equipment segment
which includes products such as switchgear, cables, wires and energy meters etc. (b) Consumer durables segment, which
include energy saving Compact Fluorescent Lamps (CFLs), Fluorescent Tube lights, Light fittings and Luminaries
Switches. The growth of the distribution equipment segment is primarily tied to the growth of the power Industry and
the growth of consumer durables is directly linked to infrastructure development and construction projects like housing
etc.
What are the domestic and global opportunities that could positively impact the outlook of your company?
As discussed, on the industry environment side there is increased demand for value added and technologically superior
and energy efficient products.
Also, Indo Asian has been aggressively increasing its manufacturing capacity and product portfolio to leverage the
burgeoning demand. We have commenced operations in three new state-of-the-art plants in the last one year in the tax
free areas of Haridwar, Uttaranchal, and will commence two new plants by Q4FY08. We will enjoy new revenue streams
from the wires and cable business, home & building automation products and the power distribution business.
11
12
Moreover, there is larger global opportunity with Indian manufacturing turning competitive, technologically & quality
focused. We have been registering strong growth of 50-70% in the international business with our quality, reputation and
strong relationships in the international market, and this growth is expected to accelerate even more henceforth.
You have a wide product range. Give a revenue break up of your top few products. Going ahead how is the mix likely
to change?
Our company has wide range of products, catering to the various requirements in the electrical equipment value chain.
We consider our current business in 2 segments – Switchgear Division and Lighting Division.
Switchgear business contributes around 80% of the revenues, and the balance is from the Lighting Division. The
Switchgear business is expected to continue to grow aggressively. The Lighting business is also expected to increase its
revenue and profit contribution with the growing market demand for energy efficient light sources and increase in Indo
Asian's manufacturing capacity.
Any new segments you plan to enter?
We have been aggressively expanding our product portfolio and adding new business lines to cash in on the burgeoning
opportunities in the electrical industry.
We have entered the Wire & Cable Business and expect it to contribute around Rs1.50 cr. of revenue in FY09. We have set
up a JV (51:49) with Simon, Europe, to manufacture and market high quality wiring accessories, building automation and
intelligent switching systems, especially for industrial and commercial use. We are also entering the power distribution
business where we will undertake distribution projects on behalf of state electricity boards, corporations and utilities on a
franchise basis leveraging our strong ties with SEBs for supply of Power Distribution Equipment.
What are the factors that could trigger an increase in CFL? Do you feel the need for more regulations or strictures to be
passed?
Indo Asian was the first company to manufacture CFLs in India. CFLs are far superior in terms of power conservation,
cost effectiveness and environment friendliness. With increasing awareness among consumers and governmental
incentives towards CFLs, the demand for CFLs is rapidly growing.
To further increase the usage of CFLs, the government should make it VAT free and support the industry in the CDM
certification process. The government should also promote high quality CFLs by imposing anti dumping duty on import
of low quality CFLs – either in the assembled form or otherwise.
Globally, too, many countries have formulated complete migration plans from GLS to CFLs. India should also adopt it as
it will help in conserving energy and saving the environment.
Who are your close competitors domestic and global? What edge do you have over them?
In the switchgear business, the key competitors are Legrand, L&T, Siemens, GE and Havells. In Lighting, the key
competitors are Phillips, Havell's, Crompton and Osram.
Indo Asian has a strong market reputation of anticipating customer requirements and is developing unique products. In
addition, we have strong in-house R&D, which has helped launch many products for the first time in India. This has built
our strong position of innovation and customer friendliness in the market.
Further, our products are tested and approved by internationally recognized labs including ASTA (UK), KEMA and TUV,
Holland.
You have around eight manufacturing units. How many more plants do you plan to set up? How is it being funded?
We currently have 8 plants across Punjab, Haryana, HP and Uttrakhand – 5 for switchgear business, 2 for Lighting
business and 1 for wires & cables. We are setting 2 more JV plants this year. One plant is for manufacturing home and
building automation products for the first time in India, in Joint Venture with Simon, Europe. This plant is being set up in
Uttrakhand at an initial project cost of Rs.30 cr. The second plant is in Saudi Arabia, in Joint Venture with Saudi National
Glass, for manufacturing of Compact Fluorescent Lamps (CFLs) and High Intensity Discharge Lamps (HID Lamps), at an
investment of Rs.20 cr. These are funded through internal accruals and incremental debt.
Going forward, our investment plans will be as per the opportunities in the market. For this, we will explore both organic
and inorganic growth options.
Power distribution business is a new area for you. What kind of revenue do you expect from this business? Tell us
more about the new company you are setting up for it. What would be the holding structure and investment?
We are entering the power distribution business where we propose to undertake power distribution projects on behalf of
state electricity boards, corporations and utilities on franchise basis. We have set up a wholly owned subsidiary "Indo
Asian Power Distribution and Infrastructure Pvt. Ltd. (IAPDIL)". The company has secured two contracts aggregating to
Rs.50 cr. from the Madhya Pradesh Electricity Board for distributing power in Jabalpur. The contract has been secured for
a period of three years and expects to earn Rs.50 cr. revenue over the next 2-3 years. The scope of the contracts will be to
modify, improve and replace distribution network to reduce T&D losses. We will leverage our existing relations with
state distribution companies and will seek to reduce technical and commercial losses through modifications of
Distribution system at our cost and share the profit of saving T&D losses with the Discoms (distribution companies).
You have undertaken an energy conservation drive with various parties. What is the response so far?
We have got very encouraging response from the market to our various energy conservation drives. We had entered into
a tie up with power distribution companies in New Delhi (BSES Rajdhani and Yamuna), Haryana (Dakshin and Uttar)
and Rajasthan for spearheading wider use of CFLs and introduction of host of new products – like high energy efficient
PLL lamps and FTLs, which was well received in the market.
By when will your other JVs come on stream? What kind of topline and bottomline would they contribute?
The two JV plants will become operational by Q4FY08. As these are yet to commence operations, it is premature to talk
about their revenues. But, we expect them to contribute in a major way to our growth going forward.
Brief us on your financials.
We have been rapidly growing on the back of increased demand for technologically innovative and superior products,
increased manufacturing capacity and product portfolio expansion. We achieved a turnover of Rs.22.4 cr. in FY07 as
against Rs.155 cr. in FY06, registering an impressive growth of 44%. EBITDA grew to Rs.29.7 cr. in FY07 as compared to
Rs.23.2 cr. in FY06, showing a growth of 28%. Net profit was at Rs17.4 cr. as against Rs.15.8 cr. in the previous year
recording a growth of 10%. With the commissioning of 2 new plants in Q2FY07 and 1 in Q1FY08, there is substantial
increase in interest and depreciation expenses. The full benefit of this addition in manufacturing capacity is expected to
accrue from FY08 onwards.
For the first half ended September 30, 2007, revenues recorded at Rs.134 cr., an increase of 33.90% as compared to Rs.100
cr. in the corresponding previous period. EBITDA for H1FY08 improved to Rs16.8 cr., an increase of 32.39% as compared
to Rs.12.7 cr. in the corresponding previous period.
What R&D do you do in-house? How many patents do you have for your devices?
We have very strong in-house R&D capabilities. We were the first company in India to introduce Miniature Circuit
Breakers (MCBs) in homes, Residual Current-operated Circuit Breakers (RCCBs) with internationally recognized CB
certification, double action MCBs, energy efficient CFLs and then ROHS compliant (less mercury) CFLs. We also were the
first to have fully integrated manufacturing of CFLs, mandatory BIS certification for switchgear/ MCB/ CFLs, inter-plant
integrated ISO-9001 certification.
What is your message to shareholders?
Indo Asian is fully committed to leverage the increased local and global opportunities in the electrical sector and in the
process, create high shareholder value. We are aiming at achieving a turnover of Rs.1000 cr. in the next few years from
Rs.220 cr. in FY07. Overall, we will enhance our positioning of a strong technology based and customer oriented brand.
(Courtesy: India Infoline)
HDFC Equity Schemes
By Devangi Bhuta
FUND HOUSE REVIEW
This week, we attempt to understand the strategy and future outlook for HDFC's diversified equity schemes managed by
this AMC.
HDFC
1 year Returns
(%)
Benchmark Returns
(%)
Growth Fund
62
52
Equity Fund
51
54
Top 200 Fund
53
56
Capital Builder Fund
59
53
Risk Profiler
Risk Ratio (for the 3-yr period ended October 31, 2007)
Parameters
Standard Deviation
Beta
Sharpe Ratio*
Growth Fund
6.23%
0.943
0.78
Equity Fund
6.15%
0.8976
0.77
Top 200 Fund
6.03%
0.8881
0.78
Capital Builder Fund
6.33%
0.8824
0.75
* Risk Free Return is assumed to be 5%
Source: October 2007 Fact sheet, returns as on 31
st
October 2007.
Beta is the measure of the risk in a portfolio in relation to the rest of the market. A stock that swings more than the market over time
has a beta above 1. If a stock moves less than the market, the stock's beta is less than 1. High-beta stocks are supposed to be riskier and
thus provide higher returns whereas low-beta stocks pose less risk but also lower returns.
Sharpe Ratio is a measure of the excess return (or Risk Premium) per unit of risk in an investment asset. A higher Sharpe ratio may
indicate that returns are generated from a smart investment decisions and not by merely taking on additional risk. However other
factors like correlation amongst asset classes/securities in a portfolio need to be analysed, too, while looking at the Sharpe Ratio.
HDFC Growth Fund
13
The objective is to generate long term capital appreciation and the portfolio allocation is fairly divided between large cap
and mid cap stocks. Industrial goods, pharmaceuticals and consumer non-durables are the top three sectors and this
allocation has been held on to for a long time.
The churn rate has increased over the last six months and as per the October 2007 fact sheet it stands as 92%. By and large,
the fund manager's strategy appears to be to hold on to fundamentally good stocks, although this has been exercised in
respect to a few stocks only. Apparently, momentum stocks, too, are being played on. To elucidate, the company has been
holding on to RIL, ITC, BHEL and Divi's Laboratories since a long time. Further, it has added Suzlon in the last three
months and this appears to be a good pick. Newer companies like Maytas Infrastructure have been bought into. This
scheme appears to be a decent bet for those looking at stable returns.
HDFC Equity Fund
With the objective of achieving capital appreciation, the scheme has underperformed in the last one year. It has a higher
turnover ratio of over 100% and appears relatively riskier. The top sector holdings are Industrial and capital goods with
Suzlon being a new entrant. This is followed by Banks and Consumer Non–Durables.
Pharmaceutical exposure has considerably increased since the beginning of the calendar year too. The strategy appears to
be to hold on to certain stocks for a long term and riding some others on the momentum. Surprisingly, this scheme has
exited Punj Lloyd, which appears to be a good long term stock and it has also cut its exposure in telecom stocks like Bharti
Airtel. Hence the strategy deployed by the fund manager is not discernible and is probably the reason for its
underperformance.
HDFC Top 200 Fund
The objective is to generate returns from companies in the BSE 200 index. The churn ratio has been high above 200% over
the last few months. However, it came down in October 2007. This does not really inspire an investor to park his hard
earned money.
The sectoral allocation for Software has come down and like most mutual fund schemes is the highest in the industrial
capital goods space.
HDFC Capital Builder Fund
The attractiveness of this scheme, whose objective is to generate capital appreciation, lies in the fact that it has a low churn
ratio of its portfolio. While it continues to maintain its allocation in the industrial goods, products and metals segment, it
has reduced its exposure to the transportation segment drastically as per the October fact sheet. Within this space, it has
invested in GE Shipping. The scheme also has its fair share of mid-cap stocks.
The strategy here appears to be to buy and hold and could be one of the reasons for its out-performance and may provide
stable returns in future.
Although the top holdings in these schemes are similar, the diversity is provided by the fund managers as each one had
his own strategy. Besides, there is diversification in terms of large as well as mid cap stocks. As mentioned earlier,
schemes with a low churn rate or those with a buy and hold strategy, may reward investors over a longer term horizon.
By Saarthi
STOCK WATCH
South India Paper Mills Ltd. (Code: 516108) (Rs.73.20) has a strong presence in packing paper and paper boards apart
from manufacturing writing and printing paper. On the back of robust demand for packaging grades of paper, the
company is implementing a brown field expansion at an investment of about Rs.110 cr. This will more than double its
paper manufacturing capacity to 105,000 TPA from 55,000 TPA. To support the enhanced energy requirements, it will also
augment its captive power generation capacity by 3.50 MW. Besides expansion, the company is going in for forward
integration into high quality corrugated boards and intends to have at least one 100% owned facility and possibly one
facility under joint venture near Chennai. However, the new paper capacity is expected to be commissioned by December
2008 and the corrugated board facility will start by June 2008. Meanwhile, the company continues to report decent results
and is expected to end FY08 with sales of Rs.125 cr. with net profit of Rs.12.50 cr. This translates into an EPS of Rs.17 on its
equity of Rs.7.50 cr. Considering its aggressive expansion plan and strong fundamentals, its share price can move up to
Rs.120 at a modest discounting by 7 times. A slow but steady performer.
*****
Haldyn Glass Gujarat Ltd. (Code: 515147) (Rs.71.60) is engaged in mass production of clear glass bottles and containers
with a furnace capacity of 160 TPD. It basically caters to industries such as liquor, pharmaceuticals, cosmetics, beverages,
processed foods etc. Its brand name 'Haldyn' enjoys very good reputation for top quality at competitive prices with
timely deliveries in the domestic market. Apart from having state-of-the-art manufacturing facility in Gujarat, it has full-
fledged in-house design facilities and mould shop along with captive power plant and a waste heat recovery system. It
has a coveted clientele with corporates like McDowells, Shaw Wallace, Reckitt & Coleman, Parke Davis, Glaxo, Pfizer,
Ranbaxy, Cadilla, Novartis etc. To capture the increasing demand of the user industries, the company has installed a new
furnace that is expected to go operational by early 2008. Notably, the liquor, FMCG and pharma industries who are the
14
main users of the company's products are on an upswing due to strong economic growth. This has resulted in a
substantial surge in demand for glass bottles, vials and containers. Moreover, Haldyn is looking to explore the untapped
export market as well. For FY08, it is expected to report sales of Rs.65 cr. with PAT of Rs.6.50 cr. leading to an EPS of Rs.12
on its equity of Rs.5.40 cr.
*****
ABC Bearings Ltd. (Code: 505665) (Rs.84) is India's largest producer of taper roller bearing and the third largest producer
of cylindrical roller bearings after FAG and NRB. It supplies to all auto majors including Tata Motors, M&M, Ashok
Leyland, Eicher Motors, Toyota, Swaraj Mazda etc. Currently, it has a total installed capacity of 6.5 million bearings per
annum which will soon be enhanced to 8 million through ongoing expansion plan. Due to stiff competition and in order
to reduce its dependence on OEMs, it is planning to increase its sales in the replacement market as well. Few months
back, it formed a 25% joint venture with NSK Ltd., Japan, to set up a new plant in Chennai for manufacturing of bearings
mainly for Japanese and other transplant customers. For future growth, it intends to enter the railway bearings segment
and supply wheel bearings for freight wagons. However, on the bourses, the share price has tumbled down sharply and
has hit new lows due to dismissal performance by the company in the last two quarters. Still, it is expected to register a
topline of Rs.175 cr. with profit of Rs.19 cr. excluding extraordinary expenses of Rs.4 cr. on VRS. Thus, on its equity of
Rs.11.56 cr., the EPS works out to Rs.16. Moreover, the company may still be sitting on surplus land of around 18 acres in
Lonavala. To conclude, at the current market cap of around Rs.100 cr. it's a pure value buy.
*****
KIC Metaliks Ltd. (Code: 513693) (Rs.66.05) is primarily engaged in the production of pig iron and iron casting with an
installed capacity of 1,10,000 and 18,000 MTPA respectively. Notably, it has a coke oven plant with 1,44,000 MTA capacity
for conversion of coking coal to met coke. On a small scale, it also produces and markets Portland slag cement under the
brand name 'Kajaria' and has a capacity of 33,000 MTPA. Of late, the company has installed hot stoves in the blast furnace
to bring down the consumption of met coke and is further looking to put up a sinter plant to use low priced iron ore fines.
Besides, the company is looking to set up a 4 MW captive power plant using its waste blast furnace; it has plans to install
electric steel making facility to produce steel billets initially and subsequently by putting up finishing rolling mills. Thus,
the company intends to become a mini integrated steel manufacturer of sizeable capacity and produce steel at the
cheapest cost. For H1FY08, it recorded 40% growth in sales at Rs.107 cr. with 55% increase in PBT at Rs.5 cr. Accordingly,
it may end FY08 with sales of Rs.225 cr. and PAT of Rs.6.50 cr. i.e. EPS of Rs.12 on its fully diluted equity of Rs.5.60 cr.
Keep accumulating at sharp declines.
By Kukku
FIFTY FIFTY
Investment Calls
* Paramount Communications (Rs.30.80) increased its business by 267% in Power Cables during FY07 and is confident of
continuing its growth momentum in the power cables business in in view of its strong order book and its ongoing
expansion in this segment.
The second phase of expansion was planned to set up additional capacity of 30,000 km per annum of LT Power Cables
and 2,000 km per annum of HT Power cables at the Khushkhera plant of the company. The implementation of this
expansion project is progressing well and was expected to be completed by September 2007 as per last director's report.
By adding these capacities, the tentative turnover after the second phase of expansion will be around Rs.700 cr.
During Q2FY08, the company acquired the business of AEI Cables, UK, in an all cash deal through its 100% wholly
owned subsidiary. The consolidated results shall be published at the end of the financial year.
The company has acquired 25 acres Industrial Land from RIICO in Khushkhera Industrial Area, Rajasthan for its third
phase expansion.
The Indian economy is booming above 9% growth rate which will lead to the overall development in the country. The
cable industry in India is witnessing a good demand due to heavy investment in infrastructure, railways, IT sector, power
sector and new industrial projects. This trend is expected to continue in the years to come.
The company likely to benefit from timely expansions may report encouraging results in future. There is good
consolidation in the stock and it is likely to go up once it closes above Rs.34 and can touch target of Rs.60 in the next 6
months. Earlier, we had recommended it at Rs.25 onwards for Rs.10 paid up values.
* Patel Integrated Logistics (PIL) (Rs.64) is the merged company of Patel Roadways and Patel on Board Couriers (POBC).
PIL provides unified solutions through door- to-door express cargo service, surface transport and air and sea
transportation besides offering services in warehousing and secondary distribution. Its commitment to quality, uncanny
ability to innovate and its fierce determination to protect the business interests of its customers gives it the cutting edge.
The company is branched into 8 products to attain leadership position in its segment.
It has entered the business of Express Cargo Deliveries only 6–9 months ago and has already, in a short period, clocked a
turnover of nearly Rs.15 cr. annually and expects to take to nearly Rs.100 cr. in 3 years.
15
The company has announced the acquisition of 24 Line Haul Trucks as a part of its strategy to grow its Patel Retail
(Express Operations & Time Definite Services). The new trucks acquired include 4 X 6.00 Tonners, 12 X 9.00 Tonners and
8 X 16.00 Tonners trucks.
There are indications of new developments in the company. There is talk of inviting strategic investors. With its vast
infrastructure, state-of-the-art technology, professional work force and variety of products, the company is well-poised to
take advantage of such positives.
The stock is catching the attention of market players. Stay invested for better times ahead.
* First Leasing (Rs.49) distinguished itself by emphasizing Financial Assistance to Green Energy in the form of Windmill
Leasing, recognizing that building a foundation of non toxic and renewable energy, is critically important.
The company also placed emphasis on financing Software given its importance to the economic persona of India and as a
business opportunity, since banks and financial institutions are unfriendly to financing software, given its intangibility.
First Leasing holds Triple A ratings from two Credit Rating Agencies. Fitch and CARE apart from the relevant
consideration that First Leasing consistently paid a dividend every year for 32 years, an enviable record for any company.
The present dividend recommended by Directors amounts to a tax adjusted return of 33.91%.
In this heated up market, valuations of this company look very attractive at Rs.48/49 levels as book value is around Rs.70
and expected EPS is around Rs.13/14 in the current year. It is one of the safest investment bet to park part of profits and
also to get good long-term growth. When the index was around 7000 levels, this stock was around Rs.48/50 levels. So
investors are getting this stock at fairly attractive valuations. The stock, if it catches attention of market makers, it can
cross Rs.100 levels. Accumulate this stock.
Market Guidance
* Walchandnagar Industries (Rs.8621.35) has come out with encouraging results on sales of Rs.650 cr. Its EPS is Rs.118
against Rs.44 last year. There are indications that sale may grow by 50% to 60% in FY08. The management has declared a
liberal 1:1 bonus issue and the stock is being split into five shares of Rs.2 each. Long-term investors can look forward to
more favourable times over the next few years. Stay invested for better targets.
* KCP Ltd. (Rs.556.20) there are indications that the company may come out with much better results. The engineering
unit of the company has a good order book position while its cement division is also said to be doing well due to very
remunerative prices. Full year EPS of the company is likely to be in the region of Rs.70/75. The product of engineering
division is similar to that of Walchanagar Industries, which is trading at a P/E ratio of about 80.
Seeing to the consistent track record of KCP, even if investors discount its P/E at 25, the stock can reach levels of above
Rs.1500 over the next one year. The stock is attracting the attention of fund managers and market players. Any decisive
closing above Rs.580 will give a good upward breakout.
* Tips Industries (Rs.66.25) may report a strong turnaround in the current year. Investors can take a small exposure in
this stock.
* Saregama (Rs.277) - Knowledgeable investors are adding this stock and it may see much higher levels over the next few
years.
* Asian Oilfield (Rs.226.20) has shot from Rs.26 when we recommended buying it in March 2007 to Rs.236 level in less
than 9 months. Long-term investors can stay invested for better time ahead. There is likely placement of shares to some
strong investors.
* Ashiana Housing (Rs.434) may touch Rs.600/650 levels on declaration of Q3 results. There is likely stock sale to some
investors at higher levels as per informed sources.
* Kirloskar Pneumatics (Rs.594) is expected
to benefit from its gas compressor division.
With a sharp upsurge in prices of Atlas
Copco, this stock, too, is likely to see an
upmove.
* Shiv Vani Oil (Rs.489) is under
accumulation by some fund managers.
Marketmen talk of a target of Rs.1000 plus
over the next 18 months time.
* Prime Textiles (Rs.47.95) has given strong
breakout after long consolidation. The stock
flared up from Rs.21 to Rs.45.5 level and may
see higher levels. Book part profits around
Rs.55 level.
* Ramsarup Industries (Rs.214.40) - There are
indications of new developments. Investors
Daily Fresh Buy
(for the busy investor)
PROFITRAK is pleased to announce the launch of 'Daily Fresh Buy' for
investors/ traders who are keen to focus and gain from a single stock every
trading day.
With just one daily recommendation selected from stocks in an uptrend,
you can now book profit the same day or carry over the trade if the target
is not met.
Our review over the next four days will provide new exit levels while the
stock is still in an uptrend.
This low risk, high return product for the busy investor is available for
subscription at Rs.2000 per month. For details contact
moneytimes@vsnl.com or phone on 022-22616970/ 22654805.
16
should continue to hold the company is said to be going in for a backward integration project. There are also rumours of a
mining story in the company. Stay invested for better targets.
* Wall Street Finance (Rs.26.5) - New developments are said to be taking place. Stay invested.
* Hind Oil Exploration (Rs.142.40) - Those having invested in this stock on a long-term basis are likely to see good benefit
over the long run. Stay invested.
* Revathi Equipments (Rs.1424.25) shot up last week from Rs.900 to 1681 before reacting to 1430 levels. Since the upmove
is quite sharp, investors having higher exposures should book part profits and switch partly to Atlas Copco, which is
expected to come out with very encouraging results. This way, investors can have exposure in the same field but with a
better diversified product range. The long term outlook of Revathi is very encouraging. Part holding can also be switched
to Kirloskar Pneumatics for a target price of Rs.1200 over the next 2 years.
* Hind Dorr (Rs.158.95), HCC (Rs.201.10), Balmer Lawrie (Rs.592.95), Indiabulls Real Estate (Rs.603.85) and Indiabulls
Finance (Rs.737.75) are likely to see higher levels as per knowledgeable and smart high networth investors.
* W S Industries (Rs.96.25) derives 30-35% of its revenue from exports. And out of the domestic sales, more than 50%
comes from Power Grid. Out of the balance most of it comes from sales to OEMs like ABB, Crompton Greaves etc.
Company supplies only to solvent SEBS and funded projects.
The outlook for the T&D sector is generally positive primarily because of the realization by the Central Government about
the urgency to improve the availability and reliability of quality power across the country. The Power generating,
transmission and trading organizations in the central sector have launched very ambitious programmes in this direction.
Even if these targets were achieved only partially, they would still translate into significant business for the company.
Investors should stay invested for good long term growth.
* Kalpana Industries (Rs.102) seems to have given a good breakout after long consolidation. Stay invested for target of
Rs.150/175 over the next one year.
* Gandhimati Appliances (Rs.16.5) has a very strong brand name of 'Butterfly' and is popular in the South. It is attracting
attention of informed investors. It is a real estate and restructuring story.
* Aftek (Rs.69.5) investors can think of small investment in this company.
* ECE Industries (Rs.725.70) - Besides doing well, the company has an investment portfolio with a having market value of
around Rs.59 cr. on its investment cost is just Rs.4 cr.
* Sharyans Resources (Rs.341) holds 33.33% stake in the development of approx. 2 million sq. ft. being undertaken in
Chennai jointly with the Phoenix and Future Group. This development comprises of a retail mall, hotel, service
apartments and commercial offices. The mall is being branded as 'Market City, Chennai'.
Sharyans holds 20% in the Raipur project. Raipur is one of India's fastest growing cities and also an important commercial
and industrial hub. The project spread across about 50 acres is also a city centric development. This mixed use retail
development will also have a residential complex. This is Sharyans first foray in a Tier II city.
Besides the above, Sharyans is also managing the development of 1,00,000 sq. ft. in Andheri, Mumbai. Sharyans is now
building a strong pipeline of such projects with a view and focus of earning larger rental revenues.
Besides doing well, the company also has investment in equities whose market value is around Rs.25 cr. while its
investment cost is just Rs.9 cr. With the financial sector stock attracting value buying, accumulate this stock around
Rs.330/335 levels for good long-term growth.
* Carnation Inds. (Rs.55.90) is confident of getting better opportunities in the Gulf region, USA, UK and other parts of the
world as well as from municipalities and auto sector in the local market. Stay invested as new developments are said to
be taking place.
By V.H. Dave
EXPERT EYE
Orient Abrasives Ltd. (OAL) (BSE Code: 504879) (Rs.33.85) has produced excellent results during Q2FY08 with 178% rise
in net profit at Rs.3.8 cr. The share is recommended for decent appreciation in the long-term.
OAL manufactures bauxite based high alumina raw material for grinding wheel (Vitrified, Resinoid & Coated Products)
and refractory manufacturers. Alumina grains are also used for shot blasting and cleaning purposes. The company also
manufactures castable refractory, which is supplied to different steel and cement plants.
OAL is the largest manufacturer of synthetic raw materials like Brown Fused Alumina, White Fused Alumina, Pink Fused
Alumina, White Fused Mullite, Calcined Bauxite, High Alumina Refractory Cement, Zirconia Mullite (ZIRMUL), Almag
(Spinnel). It has its own mines of raw bauxite, which is the basic raw material for its products.
The company now has two divisions viz. Abrasive grains division at Porbandar, Gujarat and Refractories division at
Alwar Dist. Rajasthan at Salem, Tamil Nadu. It has also set up a power plant at Porbandar with an installed capacity to
produce 4.2 MW of power for captive consumption by its abrasive grains division. The power plant is operating at full
capacity. Besides ensuring uninterrupted power, it also reduces the cost per unit and is a big positive for the company as
power is a critical input in this industry.
17
The company sold its bonded abrasives business at Alwar Dist. in Rajasthan in October 2006 to Grindwell Norton. This
business contributed only about 15% to the total turnover with a much lower return on investment compared to the other
two businesses. With the disposal of its bonded abrasives business OAL is now able to focus on its core businesses
namely abrasive grains, refractories and monolithics. These businesses promise significant potential for growth.
During FY07, OAL posted 15% increased sales of Rs.188 cr. but posted 28% lower net profit of Rs.11.5 cr. Its EPS was
Rs.1.8 on the face value of its Re.1 per share and it paid a dividend of 70%. During Q2FY08, sales have gone up by 10% to
Rs.55 cr. and net profit shot up by a whopping 178% to Rs.3.8 cr. on better margins.
During H1FY08, its net profit advanced by
62% to Rs.7 cr. on 16% higher sales of Rs.109
cr. Its H1FY08 EPS works out higher at
Rs.1.2 against Rs.0.7 in H1FY07.
Its equity capital is just Rs.6 cr. and with
reserves of Rs.72.6 cr., the book value of the
share works out to Rs.13. Its gross block has
increased to Rs.113.8 cr. from Rs.77.7 cr. in
FY06.
The promoters hold 53% in the equity
capital, institution/mutual funds hold 4%,
PCBs hold 5% leaving 38% with the
investing public.
The abrasives grains division at Porbander
is the first manufacturing unit set up by the
company and manufactures calcined
bauxite and fused aluminium oxide
abrasive grains. Raw bauxite and calcined
alumina are the basic raw materials used
for the manufacture of abrasive grains.
18
Raw bauxite is procured from the mines
owned by the company and others and the
calcined alumina is purchased from
aluminium manufacturers. A portion of
these products is captively consumed by
its manufacturing divisions at Bhiwadi and
are also sold in the domestic market.
Some part of the alumina grains is also
exported but the quantum is not significant
compared to its total turnover.
The unit manufactures various types of
continuous
casting
and slide
gate
refractories, low cement castables etc.,
which are exclusively consumed by the
steel plants. The division had a small plant
at Salem, Tamil Nadu, manufacturing
monolithics (tundish coating material). The
company has now reorganised its business
at Salem by an agreement with a local party
to be a supporting manufacturer for these
products.
Its refractory division exports a fair share of
its output to Egypt, Turkey, Indonesia,
Pakistan, Saudi Arabia, Oman, Greece,
Spain, Nigeria, Azerbaijan, Malaysia,
Bulgaria, Thailand, Iran and Austria.
OAL will expand its production capacity of
fused alumina products and cut costs to
compete with Chinese suppliers on price with a better quality.
January – March 2007
EBG Quarterly Performance:
100% once again
During January – March 2007, which is the second quarter of the fourth
year of 'Early Bird Gains' (EBG) – the investment newsletter that spots
multi-baggers, it has scored 100% success with all 16 recommendations
recording an appreciation.
EBG has, therefore, consistently, maintained quality while the bonus
issues in excess of 30% highlight the confidence of its recommendations.
Issue
Dated
Highest
price since
recom.
Growth
%
Buy
Price
Scrip
01-01-07
Mount Shivalik Inds. Ltd
61.30
147.4
140
01-01-07
Uni Abex Alloys Product
112.00
133.5
19
10-01-07
Sanghi Polyesters
8.35
12
44
10-01-07
Godawari Power & Ispat
100.40
323
223
17-01-07
Uniply Industries Ltd.
55.00
58
5
24-01-07
Lakshmi Electrical Cont
298.00
548
84
31-01-07
Veejay Lakshmi Engg.
130.65
152
17
07-02-07
Jindal Stainless Ltd.
124.00
236
90
07-02-07
Era Constructions (I)
488.00
635
30
14-02-07
Syncom Formulations
46.35
73
59
21-02-07
FIEM Industries
111.50
137
23
28-02-07
Roto Pumps Ltd.
55.90
76
36
07-03-07
Numeric Power Systems
312.20
889
185
14-03-07
DMC International Ltd.
49.20
89
82
21-03-07
Indo Tech Transformers
253.95
715
181
28-03-07
City Union Bank
165.85
255
54
EBG for sure profits
EBG's special offer worth Rs.5000!
'Early Bird Gains' (EBG), our investment newsletter specialising in
multibaggers, has now entered its 5
th
year.
Since its launch on 1
st
October 2003, EBG has identified 238 scrips for medium
to long-term investment and almost all of them have resulted in gains with
several meeting the target prices earlier.
To share the joy of its success, we have decided to offer a free one year
subscription worth Rs.5000 to any EBG subscriber who motivates four new
subscribers based on his/her profitable experience.
This scheme is valid till 31
st
December 2007 and interested participants must
register with us for monitoring the scheme.
For further details contact moneytimes@vsnl.com or call us on 022-
22616970
19
The refractory business will improve further due to the increase in demand by the steel industry with the advent of newer
and bigger plants. OAL has set up another captive thermal power plant of 8 MW, which commenced production in
October 2007 and will save its power costs leading to a better bottom-line.
OAL is likely to achieve sales of Rs.220 cr. with a net profit of Rs.17 cr. for FY08, which would result in an EPS of Rs.2.8.
Going ahead with the saving in power costs coupled with the vast demand of its products, its EPS is expected to increase
to over Rs.4.5 in FY09.
The OAL share is traded at Rs.33.85 discounting its estimated EPS of Rs.2.8 for FY08 by 11.3 times and FY09 EPS of Rs.4.5
by just 7 times against the industry average P/E of 21. The OAL share has all the potential to appreciate by over 40% in 6-
9 months. The 52-week high/low of the share has been Rs.36/15.
*****
The Hyderabad-based Vivimed Lab Ltd. (VLL) (BSE Code: 532660) (Rs.137.95) is a leading manufacturer and exporter of
Triclosan, an active pharmaceutical ingredient (API). Apart from Triclosan, it also manufactures other Speciality Active
Ingredients such as Avis, Chlorophenesin, NDGA and CaGP (Calcium Glycero Phosphate). VLL caters to both domestic
as well as export markets.
VLL tapped the capital market with a public issue of 25,00,000 equity shares of Rs.10 each at a premium of Rs.60 per share
aggregating Rs.17.50 cr. to part finance its expansion project costing Rs.27 cr.
Its various APIs products include Triclosan (an anti-bacterial drug used in toothpaste and soap etc.), Chlorophenesin (an
anti-fungal preservative used in cosmetics, fibres and foodstuffs), Avis (an effective sunscreen chemical used in body
creams and lotions), NDGA (a new anti-oxidant developed by the company, which will find use in cosmetics and F & B
industry) and CaGP (used in oral care formulations for protecting dental enamel).
VLL's customers include Anchor Healthcare, Marico Industries, Unilever, Harmet International (USA), Collaborative
Laboratories Inc. (USA), Pharmed, Arnaud Group (France) Hindustan Unilever, Kreglinger Europe S. A., Belgium,
Engelhard USA, Benckiser (North America) etc.
The company is focusing on manufacturing a broad spectrum of anti-microbials and preservatives for application in
paints, plastics, adhesives, wood preservation and water treatment. Last year, it completed its new manufacturing facility
for speciality chemicals in compliance with GMP standards at Bonthapally, Andhra Pradesh. It also acquired Creative
Health Care Pvt. Ltd. from Uttaranchal State Financial Corporation, modernised and expanded its plant to meet GMP
standards.
During FY07, VLL posted 18% higher net profit of Rs.11 cr. on 33% increased sales of Rs.102 cr. During Q2FY08, it posted
55% higher net profit of Rs.3.7 cr. on 64% increased sales of Rs.40.4 cr. During H1FY08, its net profit of Rs.7.1 cr. was
higher by 33% on 56% more sales of Rs.75 cr.
Its equity capital is Rs.7.3 cr. and with reserves of Rs.52 cr., the book value of the share works out to Rs.81. The promoters
hold 47% in its equity capital, foreign holding including FIIs of 8.5 is 11%, PCBs hold 12% and mutual funds hold 5%
leaving 25% with the investing public.
The company had raised $12 million through FCCBs and it intends to use these funds along with internal accruals for
acquiring a speciality chemicals company abroad.
The acquisition is to get market and regulatory advantages in Europe. It will shift the acquired company's manufacturing
base to India, where VLL has four units in Hyderabad, Bidar (Karnataka), Hardwar (UP) and Kashipur (Uttaranchal) to
manufacture speciality chemicals. It is a major supplier of these active ingredients to global majors.
VLL has a robust pipeline of at least 23 products such as Triclosan (oral care), Avo Benzone (sunscreen), and skin, hair
care, etc. It is the country's top producer of active ingredients that are necessary to manufacture these hair & personal care
(H&PC) as well as industrial care products. With the market for these products growing substantially, VLL has set itself
on a consolidation and expansion mode.
The global market for active ingredients in H&PC is estimated to be about $25 billion, out of the total cosmetic care
industry size of about $250 billion. VLL plans to expand its presence to 50 countries by 2010 from the existing 25-30.
Japan, China, Korea and the Gulf countries are the new destinations contemplated. It has recently entered the contract-
manufacturing space and is working with six global majors.
VLL has recently approved allotment of 4,70,000 and 14,10,000 share warrants to promoters and non-promoters,
respectively, at Rs.169 per warrant of face value of Rs.10 and will also raise up to $75 million by way of
FCCBs/ADRs/GDRs in one or tranches for further expansion and acquisitions.
VLL continues to make efforts in identifying new products, processes for expansion and diversification as well as
R&D initiatives to chalk out a growth oriented future for its stakeholders.
The company's large product portfolio, regulatory approved manufacturing facilities, ability to scale up production of
active ingredients quickly and tie-up with international logistics companies would help it to grow fast in the booming
personal care industry both domestic and global.
Based on the half yearly trend, VLL is likely to post a net profit of Rs.15 cr. with EPS of Rs.20 in FY08 on sales of Rs.175 cr.
EPS would work out to Rs.20.5. VLL share is traded at Rs.120 discounting FY08 EPS of Rs.20.5 by 5.9 times and provides a
good investment opportunity for the long-term investors with a price target of Rs.180. The 52-week high/low of the share
has been Rs.239/106.
20
By Nayan Patel
TECHNO FUNDA
Hitachi Home & Life
BSE Code: 523398 & Traded on NSE also
Last close: Rs.145
It is a big name in the world of Air Conditioning with Hitachi of
Japan holding 69.9% in its equity of Rs.22.96 cr. It also makes
Washing Machines, Refrigerators etc.
For H1FY08, its sales went up by 35.30% from Rs.176.04 cr. to
Rs.238.19 cr. Profit rose 111.64% from Rs.11.94 cr. to Rs.25.27 cr.
against last year's profit of Rs.19.33 cr. The first half EPS was Rs.11.01 and it could touch Rs.18-20 for the full year. Stock is
available at a P/E of just 7.5 while Voltas is trading at around a P/E of 31.
A real undervalued stock. Buy it with a stop loss of Rs.135. It can zoom to Rs.155 level in a short span of time and to
Rs.178 & Rs.200 level thereafter. A safe investment stock at current levels.
Linc Pen & Plastic
BSE Code: 531241
Last close: Rs.44.25
Another undervalued stock in a volatile market. Company has an equity of just Rs.8 cr. Promoters hold 48.16% stake,
corporate bodies and institutions hold 23.65% stake while the Indian Public holds 27.69%. It manufactures Ball Pens,
Pencils & Refills. In the first six months, net sales zoomed more than 21% and Net Profit jumped more than 30% and went
up to Rs.3.34 cr. against whole of last year's profit of Rs.3.31 cr. It may post net profit of around Rs.5.50-6 cr. this year. The
share is available at a P/E ratio of just 7. Keep a stop loss of Rs.38 and buy this stock. On the upper side expect it to rally
up to Rs.52 and cross over to Rs.55-58 level in coming days. Company pays 12% dividend.
Indsil Electrosmelts
BSE Code: 522165
Last close: Rs.84.35
This 15% dividend paying stock is ready to hit a century in the very near future. The company has an equity of just
Rs.9.45 cr. Whole of last year's profit was only Rs.4.90 cr. but this time in September'07 quarter, Net profit went up by
702% and came to Rs.4.09 cr. Stock is undervalued at current market price. Keep a stop loss of Rs.76 and buy this stock.
On the upper side, it will go up to Rs.93 and on close above 93, it will hit a century.
Twilight Litaka
BSE Code: 506985
Last close: Rs.94.50
It is one of the rising stars in the Pharmaceutical sector. First six month's sales rose more than 41.46% and profit rose by
62.60%. It may record an EPS of Rs.11-12 this year. Stock is available at forward P/E ratio of just 8. It is good bet for
investors. Buy with stop loss of Rs.83. Stock will go up to Rs.105 in a short span of time.
BGR Energy Systems IPO opens on 5
th
December
MONEY FOLIO
Review
- Syncom Formulation recommended last week at
Rs.65.85 went up to Rs.73.45.
- IOL Chemicals recommended at Rs.110 zoomed to
Rs.132.05 on Friday
- Surana Corporation recommended last week at
Rs.78.75 kissed Rs.100.35.
BGR Energy Systems Ltd. (BGR), a supplier of systems and equipment for the power, oil & gas, refinery, petrochemical
and process industries, and a provider of turnkey engineering project services engaged in engineering, manufacturing,
procuring, constructing and commissioning projects in the power and oil & gas sectors, proposes to enter the capital
markets with a public issue of 9,136,000 equity shares of Rs.10 each through 100% book building process in the price band
of Rs.425 to Rs.480 per equity share. The issue will consist of a fresh issue of 4,320,000 equity shares and an offer for sale 0f
4,816,000 equity shares by Mr. B.G. Raghupathy and Ms. Sasikala Raghupathy (The selling shareholders). The issue opens
on Wednesday, 5
th
December and will close on Wednesday, 12
th
December 2007. The issue will be listed on the NSE and
the BSE.
The company proposes to utilize the net proceeds of the issue to augment long term working capital requirements,
expand its production capacity by establishing additional manufacturing facilities in India, China and the Middle East
and fund expenditure for general corporate purposes.
21
BGR has entered into agreements on 6
th
November 2007 with certain investors for a placement of 2,880,000 equity shares
and a transfer by its promoter of 1,440,000 equity shares. The company proposes to complete the above transaction after
the closing of the Bidding/Issue Period and before the allotment of equity shares in the Issue to successful Bidders. Upon
the determination of the issue price, the objects of the Issue will be reduced to the extent of moneys raised from the of
2,880,000 equity shares placement.
For FY07, it reported a total income of Rs.790 cr. with a PAT of Rs.40 cr. and posted an income of Rs.244.5 cr. with PAT of
Rs.17.5 cr. for the 3 month period ending on 30
th
June 2007.
Burnpur Cement IPO closes on 3
rd
December
Burnpur Cement Ltd. (BCL), one of the established cement manufacturers of eastern India, is entering the capital market
with its IPO of 2,19,00,000 equity shares of Rs.10 each for cash at a premium of Rs.2 per share. The issue opened on
Wednesday, 28
th
November and will close on Monday, 3
rd
December 2007 and will be listed on the BSE and NSE.
BCL manufactures Portland Slag Cement at Asansol, West Bengal. As a part of its expansion plans, it has proposed a
backward integration by setting up an 800 TPD capacity Clinkerisation and Cement grinding unit expandable to 1,600
TPD at Patratu in the Hazaribagh District of Jharkhand for manufacturing Clinker, Ordinary Portland Cement (OPC),
Portland Pozzolona Cement (PPC) and Portland Slag Cement (PSC).
Of the total expansion cost of Rs.120.90 cr., Rs.80.60 cr. would be by way of a term loan and the Rs.26.28 cr. would be the
proceeds from the proposed IPO. For the debt component, it has tied up with eight public sector banks with State Bank of
India as the lead banker for a consortium term loan. The commercial production will commence by the end of 2008. The
proposed site of the plant at Patratu is located near vast limestone deposits, which is basic raw material for the production
of cement.
The company has made a technical tie-up with ThyssenKrupp Industries India Pvt. Ltd., one of the reputed suppliers of
cement equipments and who would later provide the know-how.
As on 30
th
June 2007, BCL posted net sales of Rs.7.26 cr. with a PAT of Rs.35 lakhs. For full year FY07, it had net sales of
Rs.23.66 cr. with a PAT of Rs.1.14 cr.
eClerx Services IPO opens on 4
th
December
eClerx Services Ltd., which provides data analytics and customised process solutions to global enterprise from its offshore
delivery centres in India, is entering the capital market with IPO of equity shares of Rs.10 each through a 100% book
building process in the he price band of Rs.270 and Rs.315 per equity share. The Bid/ Issue will open on Tuesday, 4
th
December and will close on Friday, 7
th
December 2007. The issue will be listed on the BSE and NSE.
This issue has been graded by CRISIL Ltd. and has been assigned the 'IPO Grade 3/5' indicating average fundamentals.
The issue comprises a fresh issue of equity shares and an Offer for Sale by P. D. Mundhra, Anjan Malik and Burwood
Ventures Ltd. of 890,000 equity shares. The proceeds of the issue will be used, interalia, to fund acquisitions, make
infrastructure investments, set up additional facilities and avail of listing benefits.
The company's portfolio of services comprises data analytics, operations management, date audits, metrics management
and reporting services. It provides service solutions using a mix of custom designed data processes with the assistance of
delivery teams comprising generalists and domain specialists, and in-house software to automate processes. It currently
offers its services to clients in the financial services, retails and manufacturing industries. Some of its largest clients in
terms of revenue contribution include leading global corporations with whom it has multi-year partnerships. As of FY07,
the company had 1021 employees with operations in India, UK, US and Ireland.
Its unconsolidated revenues grew to Rs.86.2 cr. in FY07 from Rs.47.8 cr. in FY06 with PAT of Rs.40.5 cr. and Rs.24 cr.
respectively. For H1FY08, its unconsolidated revenues were Rs.51.4 cr. with PAT of Rs.16.5 cr.
Kotak Mahindra AMC launches Indo World Infrastructure Fund
Kotak Mahindra Asset Management Company has launched Kotak Indo World Infrastructure Fund, which opened for
subscription on Tuesday, 27
th
November and will close on Saturday, 22
nd
December 2007. It is a three-year closed-ended
equity fund and seeks to generate long-term capital appreciation from a portfolio of equity, equity related securities or
units of overseas mutual funds, which are likely to directly or indirectly contribute to or benefit from the growth in
infrastructure in India /across the world.
The fund will primarily have a bottom up approach following a growth style to identify and create a diversified portfolio
of companies, which present the most attractive investment opportunity. Within each sector in the infrastructure space,
individual stocks would be identified based on their present status and future earnings potential to provide investors
with an optimum risk adjusted long term return. The fund will have no sectoral or market capitalisation bias. This will
lead to a sharper coverage of companies across sectors leading to potential growth stocks for investment.
The asset allocation will be 65% to 90% in equity and equity related securities in India related to infrastructure, 10% to
35% in overseas equity and equity related securities or class of share/units of overseas mutual fund related to
infrastructure and 0% to 35% in debt and money market instruments.
Accordingly, it will be benchmarked with the S&P SNC Nifty to the extent of 65% of the portfolio and MSCI World Index
to the extent of 35% of the portfolio.
The scheme offers growth, dividend reinvestment and dividend payout and the minimum amount for investment is
Rs.5000 each and in multiples of Re.1 thereafter for both dividend and growth options. In case of investors opting to
switch into the scheme from existing schemes of the fund during NFO, the minimum amount is Rs.5000 and in multiples
of Re.0.01 thereafter.
UTI Mutual Fund launches UTI-Investment Bond Fund-Plan-1
UTI Mutual Fund has launched UTI-Investment Bond Fund-Plan 1. The NFO opened on Monday, 26
th
November and will
close on Monday, 31
st
December 2007. Units can be purchased only during the NFO period. It is a close ended income
scheme comprising of four series of Plan 60 (60 months) viz. Plan 1, 2, 3 and 4 and is presently launching Plan-1.
The fund aims to generate regular returns by investing in a portfolio of fixed income securities normally maturing in line
with the maturity period of plans. Each Plan will invest in a distinct portfolio of securities.
The plan is open to resident individuals, institutions, eligible Trust as well as to NRIs and FIIs. The units are priced at
Rs.10 each and have a maturity period of 60 months from the date of allotment. The scheme has both Retail and
Institutional Option with dividend payout, dividend reinvestment and growth sub options.
Koutons Retail wins two awards
Koutons Retail India Ltd. has won the prestigious 'Chain Store of the Year' Award at the National Awards for 'Excellence
in Apparel Business' organized by the Clothing Manufacturers Association of India (CMAI).
Koutons is also credited with another award of 'Brand Entrepreneur of the Year' award. This award function coincided
with the Asian Apparel Conference hosted by CMAI, where leaders in Apparel industry from 10 Asian countries
including China, India, Vietnam, Indonesia, Pakistan and Bangladesh participated.
Ashok Leyland launches 4921 Tractor Trailer
LCV manufacturer Ashok Leyland unveiled 4921 TT, a 6x4 tractor with a gross combination weight of 49 tonnes. This
heralds the entry of Ashok Leyland into the highest weight class of commercial vehicles permitted under the Motor
Vehicle Act.
The Ashok Leyland 4921 TT features a powerful 210 HP indigenously developed 6 cylinder H-series engine. The H–series
of engines is renowned for its fuel efficiency and reliability. The 9–speed ZF 9S109 synchromesh gearbox facilitates
effortless gearshifts and aids fuel efficiency. Anti-lock braking system and a trailer control valve for synchronized
braking of tractor and trailer further enhance the safety of 4921 TT.
ASUS launches two PDA Phones
ASUS Technology Pvt. Ltd., world's leading technology manufacturer (US$ 17.4 billion), unveiled its mobile
communication product strategy for India. The formal initiative to enter the Indian market has been kick-started with the
launch of two of its premium PDA phones for business professionals.
India Digital Lifestyle Distributors Pvt. Ltd. (IDLDPL) will distribute PDA-phones to large format and mobile phone
retailers across the country. The company is also in talks with various mobile telecom service providers to bundle Asus
PDAs with their new subscribers.
Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources
that are deemed to be reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does
not accept any liability for the use of this column for the buying or selling of securities. Readers of this column who buy or sell
securities based on the information in this column are solely responsible for their actions. The author, his company or his
acquaintances may/may not have positions in the above mentioned scrip.
22
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