$$ DreamGains !! $$ Wednesday Telefolio : Supreme Industries : Oct 24 2007

 

Supreme Industries

A supreme growth plan

India's largest producer of plastic products is on a sustained growth path through focus on higher margin value-added products in all its divisions

Buy	Supreme Industries
BSE Code	509930
NSE Code	SUPREMEIND
Bloomberg	SI@IN
Reuter	SUPI.BO
52-week High/Low	Rs 285 / Rs 151
Current Price	Rs 256 (as on 24th October 2007)

Founded in 1942, Supreme Industries is an acknowledged leader of India's plastics industry. It handles volumes of over 100,000 tonnes of polymers annually, effectively making it the country's largest plastics processors. The company also offers the widest and most comprehensive range of plastic products in India.

Over the years, it has gone into almost all segments of plastic products and put up plants at various locations in the country. Its product range caters to both, the industrial and consumer segment. It manufactures injection-moulded items, extruded items, industrial moldings, crates, furniture, polyethylene foam and polypropylene foam, PVC pipes and fittings, multi-layer sheets and products thereof, and multi-layer films. In fact, Supreme is credited with pioneering several products in India. These include Cross- Laminated Films, HMHD Films, Multilayer Films, SWR Piping Systems, PP Mats and more.

The company has 20 manufacturing sites spread throughout the country. They are located at Daman, Derabassi, Durgapur, Guwahati, Halol, Hosur, Jalgaon, Kanpur Dehat, Khopoli, Khuskheda, Kolkata, Malanpur 1, Malanpur 2, Manesar, Mumbai, Nandesari, Noida, Pondicherry, Silvassa, Talegaon. These wide location of the manufacturing sites enables the company to provide improved service to the customers of respective region by reducing the freight cost with minimum lead-time to meet their requirements.

The company has excellent relationship with it’s distributors. The distributor numbers are increasing in all the product groups.

Superb Q1 performance - PBT before EO is up 150%

During the quarter ended September 2007, it registered sales growth of 11% to Rs 254.02 crore. However, OPM soared by 250 basis points to 11.8%. This took its OP up by 40% to Rs 29.88 crore.

Other income grew 77% to Rs 1.33 crore and interest cost was up 30% to Rs 8.29 crore. After providing for depreciation (down 11% to Rs 9.08 crore), PBT rose by a stunning 150% to Rs 13.84 crore.

EO gain was nil against Rs 8.25 crore. Even then PBT after EO was flat at Rs 13.84 crore against Rs 13.78 crore.

After providing for tax (up 15% to Rs 4.55 crore), PAT fell 5% to Rs 9.29 crore.

The company has discontinued its business of Rigid PVC Films & Food Service ware Divisions since May 2007 and June 2007 respectively. Excluding these discontinued business the total income, Operating Profit and Profit Before Tax were:

(i) Rs 207.71 crore, Rs 20.31 crore and Rs 6.09 crore respectively during First quarter of previous year and

(ii) Rs 1092.81 crore, Rs 130.58 crore and Rs 65.11 crore respectively for the whole of the previous year 2006-07.

Scope for further expansion of profit margins

To improve it’s operating profit margins; the company has accelerated initiatives in three dimensions.

• To withdraw from certain low profit margin products.
• To increase the share of value added products in every product segment.
• To reduce cost especially in overall energy consumption.

These initiatives will not only soften the impact of increase in raw material cost (if any) but will also improve the operating margin.

The company is actively working to improve its OPM. OPM has improved in the first quarter of the current year to 12.83% as compared to 10.08% of the first quarter of the last year for the continued businesses of the Company. This margin improvement is as a result of withdrawing from non-performing product segments, above average growth in high margin product segments, an improved product mix and benefits from operational efficiency programmes.

The prospects of all its divisions are bright

The company operates in 4 broad business segment of Plastic Piping Division, Consumer Products, Industrial Products and Packaging Products.

Product wise, plastics piping system contributed 37.26% to the turnover in FY 2007 as against 35.36% in FY 2006. Consumer products contributed 14.78% compared with 16.89%. Industrial products contributed 20.65% over 19.99%. Packaging products contributed 27.31% compared with 27.76%.

Plastic Piping System division

This division consists of PVC pipes, Injection Mouilded System fittings and handmade fittings, Polypropylene random Co-polymer pipes and fittings

In line with the application of piping products, the company intends to categorize it's products into two broad main categories, namely; a) Building and Installation and b) Civil & Infrastructure.

Building and Installation will have products used above ground level. This will include SWR System, Aqua gold system, PPR system, ASTM Threaded Pipe, Plumbing Pipes used for hot and cold water connections. The company has five systems in this category. The company is adding two new systems in the current year. One for rainwater harvesting and one additional for Hot and Cold water plumbing.

With the continuing boom in construction industry the company's Building Industry related products are in good demand. It is expected that this segment will register a sustainable growth of over 25% in coming years.

Civil & Infrastructure comprises mainly products used below ground level. This business will include pipes used for Drinking water supply, Irrigation, casing and submersible pipes, Underground Drainage. Storm water system and Sewage system. The company's current product range is further classified in separate systems. The company presently supplies four systems. The company plans to add two new systems in this category in the current year, one for Gas distribution and the other for Industrial usage.

Due to the government focus on Irrigation, Drinking water supply schemes, Storm water, underground water systems and Drainage system and Sewerage Pipes, this sub division is also poised for decent growth going forward.

The company's plumbing product range mainly, Indogreen for hot and cold water and Aquagold for cold water has been seeing rapid growth. The company strongly believes that these product lines have high growth potential as they are targeted to replace GI Pipes. The advantages of Indogreen PPR Pipes and PVC Aquagold Pipes over GI Pipes are numerous. The system is well accepted in international market. With superior properties, they also enjoy cost advantage. The company therefore, has initiated steps further to enhance the capacity for these product lines to meet the growing demand of plumbing system.

The underground Drainage System is proving to be cost efficient based on life performance. Presently the company is supplying products to Punjab Sewerage Board and Punjab Health Dept. who in turn are using the Pipes for Sanitation in 190 Villages as a Pilot project. After completion of this project and looking to the success of the project, Punjab Govt. is determined to take-up this project to many other villages. The company is convinced that many other State Govt. will also follow the same route to improve the hygiene and sanitation condition in rural India.

The Govt. is planning to bring millions of hectares of un-irrigated land under irrigation through irrigation projects. The State Govts are actively working to ensure that most of the villages are supplied with adequate quality potable water. There is further thrust on rainwater harvesting and improvement in sanitation conditions. These initiatives taken by Central and State Govts. will see enormous growth for piping products.

The Govt. has announced many schemes for improvement of Primary/Secondary Education, Primary Health Centers and tourism. This has brought in the latent growth potential through renewed construction activity for Educational Institutes, Shopping Malls, Hospitals and Five Star Hotels / Budget Hotels. The country's IT sector is booming. The country is now seeing high growth coming through retail sectors. All these requirements along with infrastructure projects will ensure that the demand for Piping products will grow steadily beyond 20% p.a. over next 10 years.

In all the company has 4268 Nos of products and accessories to cater to these nine systems. Several hundreds of new products are going to be further added in the coming year.

Consumer Products Division

Its Consumer products division consists of Furniture and mats business.

The company continues to concentrate on its furniture manufacturing activity at 4 locations viz: Pondicherry (Union Territory), Durgapur (West Bengal), Lalru (Punjab) and Guwahati (Assam). The company is focusing to broaden the range of value added furniture products, which help to build the superior brand image of the Company's products for its durability and aesthetics. Such products command better price realization and are relatively less affected by raw material cost volatility. The company increased the Premium Item Range by launching new products during the year. The company is the only supplier of Painted Upholstered Plastics Chairs. There has been a growth of more than 45% on sale of premium products compared to last year. More over the share of such products sale had gone up to 19% in value during FY 2007. The company intends to increase its share of such products to 30% in the next two years.

The company has set up few Exclusive Showrooms displaying entire range of Supreme Furniture in a pleasant ambience. The current number of eight exclusive show rooms will be increased to 22 by the end of next year. The company also started few Model Showrooms giving better display of Supreme Furniture range. The company intends to increase such display in the coming years at more locations.

The company's furniture products enjoys good acceptance in the market for its quality, design, colour and range. Supreme brand is perceived as a premium brand in the country.

The demand for exports of the mat business is good. As a result, the company has increased its production capacity by 15%. This is expected to be in full production by the end of Aug, 2008. The management expects the Division to grow by 10% this year.

Industrial Product business

This division consists of Industrial Products, material handling crates and pallets.

The demand of industrial products is good. The company performed well in products for automobiles, household appliances and televisions. Prospects are also encouraging.

This was another year of better demand for Industrial products. Improved Business in Automotive, Household & Consumer Electronics has pushed up growth to more than 20% in sales revenue over that of the previous year. A major order of Electronic Voting Machine parts was executed in a record time. Company performed quite well in all its industrial products segments like Automotive, Consumer electronic, Household Appliances and EVM parts.

The company expects further improvement in demand during the current year. The Company added to its list Mahindra & Mahindra as an OEM customer. This is expected to result in improved business in the current year. The capacity expansion, which was carried out at Noida and Talegaon during the previous year has fully gone into production. Improved demand resulted in better capacity utilization at all the plants.

Khushkera factory at Rajasthan was relaid, modified and modernized to manufacture only auto components. The supplies of these products has commenced from Nov'06. The facility at Pondicherry factory has also been relaid, so that industrial products can be separated from other product divisions. This has resulted into better administration at factory level. The expansion of Pondicherry unit was completed and has resulted in improved sales revenue. The Company has taken and is in the process of taking various actions to increase Value Added Business by improving in-house PUpainting capabilities and doing sub-assembly for auto parts.

Supplies of industrial products from Durgapur unit have been fully streamlined. The company may consider expansion at Durgapur in view of expected increase in demand of Auto parts.

The company is embarking on various Re-engineering measures in Industrial Products Division to achieve the Divisional Mission of becoming world class Injection Moulded Components and Assembly System Supplier. Towards achieving the goal, some of the actions on anvil are:

• The capacity and capability enhancement through adding bigger capacity machines to facilitate moulding of large parts,

• Augumention and expansion of paint shops at all locations,

• Improving Capability in PU painting,

• Replacement of old and inefficient machines by modern and efficient machines,

• Putting up Centralized Design and Technical Centre to cater to the needs of OE to offer Total Plastic Parts Solutions,

• Establishing modern Quality Control Labs,

• Installation of improved material handling and storage systems to facilitate effective Inventory Management and

• Training and development of Human Resources.

Packaging Product business

On the lines of economic buoyancy, the Packaging Product business is also expected to do well going forward. In anticipation of high demand, the company’s new seven-layer linehas commenced in production December 2005. This has enabled the company’s capabilities to offer high value products to its customers providing better barrier properties, thereby replacing several laminates market as well as being used for several high barrier laminate. As consumption of ready to eat food is also expected to increase, the requirement of these packaging materials are expected to grow.

Awaiting real estate bonanza

The construction of Commercial Complex at company's site at Veera Desai Road in Andheri (Mumbai) is in full swing. The entire complex consisting of 10 floors with all modern facilities and ample parking spaces is likely to be ready for occupation during the last quarter of Calendar Year 2008. The company has invested Rs 34.91 crore on the project till 30th Sept. 2007.

The company also has many other sites where real estate development can be done in future.

Raw material scenario is stable

The raw material situation continues to remain affordable. In spite of high prices of crude, the international prices of raw material remain in a narrow band though at a higher level. The appreciation of Rupee has also helped.

Introduction of VAT throughout the country with a phased reduction plan of Central Sales Tax is reducing the size of unorganised sector’s business enabling higher growth of organized sector's business volume.

Huge well-planned capex to supplement growth

The company has made a capital investment plan of around Rs 240 crore for the year 06-07 and 07-08. A sum of Rs 132 crore has already been spent in FY 2007.

Major capital expenditure has been planned for the followings:

Establishing a Mega plastics product complex at Gadegaon near Jalgaon manufacturing varied plastics products with world class Mfg. facilities. The trial production at the complex started in the last week of September 2007. The planned capacity of first phase will be fully operational by February 2008.

Setting up high technical Protective Packaging Products facility in the new unit at Urse-near Pune. The Urse plant is expected to be operational by November 2007.

Increase in capacities of Cross Laminated film and products at Halol, Silvassa and Gadegaon.

Enhance and upgrade the Injection Moulding capacities.

Expand the range of products of Furniture, Crates & pallets businesses.

Expand the range and increase the capacity of plastics pipe fitting at Jalgaon.

These investments are calibrated with a discipline of not to increase the gearing ratio.

Buoyant outlook

The business outlook continues to remain encouraging.

The company is continuously innovating to increase share of specialty products in each products segment to meet demanding specifications from it’s end users. The proportion of such business is growing in each product segment.

The company's investment plans are going as per schedule. The trial production at Gadegaon Mega Plastics Products complex was started in last week of Sept. 2007. The planned capacity of first phase will be fully operational by February 2008.

Increased capacity of XF at 9000 TPA is producing fully during the current year. Last year, the company sold 6639 tons. The demand for the product has grown up by 80% in the first quarter. This increased capacity will be sold out in the year yielding a turnover of Rs 140 crore per annum.

EBIDTA in this product is 18%. The company has taken further steps to enhance the capacity by 2500 tons per annum at an investment of Rs 15 crore, which will be operational by October 2008.

The company is studying the market potential of newer varieties of XF film product for which its collaborator has got patents. The company has the exclusive right to produce such newer variety for SAARC countrys requirements. Once the study is complete, the company will proceed to install capacity to make newer range of XF product in the country.

The expansion of capacities in material handling system and furniture along with the introduction of new range of products are all getting implemented as per schedule at all the Five locations.

Protective Packaging Division's Urse plant may go into operation by Nov. 2007. The company is marketing several new foam products with a view to manufacture them once it reaches a critical mass. These products are speciality products and will add to both the top line and the bottom line of the division.

In Industrial Product segment, the company has augmented painting facilities at Talegaon and Noida. The company is also replacing certain machines with new generation efficient machines in order to meet rising expectations of industrial customers, improve manufacturing excellence and get better value additions.

Plastics pipe Division will be introducing newer plastics pipes & Fittings for Hot & Cold water system, infrastructure, Sewerage, Drainage and Industrial Applications at Jalgaon and Gadegaon between Nov. 07 to Feb. 2008.

The company has withdrawn from two product segments. The company has also decided to withdraw from flexible packaging film business. The divestment plans of this business and other non-functional assets are under active negotiation.

The expected net turnover of continuing plastic products business is Rs 1300 crore in this year against. Rs 1,014 crore in the previous year. The company plans to achieve a net turnover of Rs 1,600 crore in the year 2008-09.

Valuations are attractive

In FY 2008 (ending June), we expect the company to register sales and net profit of Rs 1355.17 crore and Rs 58.34 crore. On equity of Rs 27.62 crore and face value of Rs 10 per share, EPS works out to Rs 21.1. The share price trades at Rs 256. P/E is just 12.1, which is low for industry leader in a fast growing industry.

Supreme Industries: Financials

 

	0406 (12)	0506 (12)	0606 (12)	0706 (12)	0806 (12P)
Sales	796.27	814.09	982.07	1161.66	1355.17
OPM (%)	10.7	9.5	9.9	11.2	12.0
OP	85.48	77.73	97.28	129.63	163.12
Other inc.	2.42	10.03	4.66	6.67	8.43
PBIDT	87.90	87.76	101.94	136.30	171.55
Interest	24.42	22.77	26.97	33.01	41.57
PBDT	63.48	64.99	74.97	103.29	129.99
Dep.	41.39	39.29	41.34	40.25	40.69
PBT	22.09	25.70	33.63	63.04	89.30
EO	0.70	0.00	16.93	10.43	0.00
PBT after EO	22.79	25.70	50.56	73.47	89.30
Tax	1.80	2.05	10.37	23.34	30.96
PAT	20.99	23.65	40.19	50.13	58.34
EPS (Rs)*	7.5	8.6	10.3	15.8	21.1
* Annualised on current equity of Rs 27.62 crore; Face Value of Rs 10 EPS is calculated after excluding EO and relevant tax (P): Projections Figures in Rs crore Source: Capitaline Corporate Database

 

Supreme Industries: Results

 

	0709 (3)	0609 (3)	Var. (%)	0706 (12)	0606 (12)	Var. (%)
Sales	254.02	228.48	11	1161.66	982.07	18
OPM (%)	11.8	9.3		11.2	9.9
OP	29.88	21.32	40	129.63	97.28	33
Other inc.	1.33	0.75	77	6.67	4.66	43
PBIDT	31.21	22.07	41	136.30	101.94	34
Interest	8.29	6.39	30	33.01	26.97	22
PBDT	22.92	15.68	46	103.29	74.97	38
Dep.	9.08	10.15	-11	40.25	41.34	-3
PBT	13.84	5.53	150	63.04	33.63	87
EO	0.00	8.25	100	10.43	16.93	-100
PBT after EO	13.84	13.78	0	73.47	50.56	45
Tax	4.55	3.95	15	23.34	10.37	125
PAT	9.29	9.83	-5	50.13	40.19	25
EPS (Rs)*	13.5	10.8		15.8	10.3
* Annualised on current equity of Rs 27.62 crore; Face Value of Rs 10 EPS is calculated after excluding EO and relevant tax Figures in Rs crore Source: Capitaline Corporate Databases

 

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$$ DreamGains !! $$ Friday Telefolio : SKF India : Oct 26 2007

 

SKF India

Will keep on rolling faster

Sustained expansions and buoyant economy will ensure smooth growth for this MNC associate

Buy	SKF India
BSE Code	500472
NSE Code	SKFINDIA
Bloomberg	SKF@IN
Reuter	SKFB.BO
52-week High/Low	Rs 513 / Rs 264
Current Price	Rs 410 (as on 26th October 2007)

SKF India (subsidiary 53.58% of SKF, Sweden) is the market leader in the bearing industry and is the main bearing supplier to all consumer segments viz. the automotive, electrical, industrial and aftermarket. In addition to its comprehensive range of bearings being manufactured at its Pune and Bangalore plants or imported to India from any of the Group's overseas plants, SKF is also offering a wide range of bearing related products and systems such as Condition Monitoring Systems for Trouble-free Operations, Linear Motion Products, Machine Tool Spindle maintenance, Reliability Systems, etc.

Excellent September 2007 quarter results

For the quarter ended September 2007, sales revenue stood at Rs 386.98 crore, up 14%. OPM (Operating Profit Margin) increased sharply by 620 basis points to 17.6%, taking OP up by 76% to Rs 68.26 crore.

Other income increased 5% to Rs 1.81 crore and the company earned interest income of Rs 3.38 crore, up 238%. depreciation charges increased 3% to Rs 7.58 crore. Consequently, PBT stood at Rs 65.87 crore, higher by 94%.

Provision for tax (including deferred tax and fringe benefit tax) grew 95% to Rs 22.77 crore, taking up PAT by a whopping 92% to Rs 43.10 crore.

For the nine months ended Sept’07, sales stood at Rs 1148.25 crore, up 19%. OPM by 500 basis points to 16.9% and took OP up by 68% to Rs 193.62 crore.

PBT before EO stood at Rs 185.64 crore, up 80%. For the nine months ended September 2006 there was EO gain of Rs 2.69 crore against nil in the current quarter. Thus PBT after EO stood at Rs 185.64 crore which was 76% higher.

Provision for tax (including deferred tax and fringe benefit tax) stood Rs 65.13 crore resulting in PAT of Rs 120.51 crore, up 72%.

Commenting on the results, Rakesh Makhija, Managing Director, SKF India, said, ‘Our business continues to grow sharply, driven by a strong focus on our major customers and segments. Exports continue to ramp up significantly, while we drive our costs down in all areas of our operations.’

Diverse product range

SKF India locally manufactures a product range comprising about 60 sizes of Deep Groove Ball Bearings, 70 sizes of Taper Roller Bearings, Textile machinery Components, Automotive Specials, bearing accessories like housings, sleeves etc to cater to the needs of the Automotive, Electrical and Industrial OEMs and aftermarket customers. Through its wide product range it satisfies the needs of its local market, providing a bearing for any and every conceivable application.

Along with a varied product range of rolling bearing and seals, it also offers extensive solutions and services in this area.

SKF also has an increasingly important position in the market for linear motion products, high precision bearings, spindles and spindle services for the machine tool industry, electrical actuators, actuation systems and is an established producer of rolling bearing steel. Over the next five years, the management plans that the share of bearings in the total volumes may come down from 90% of the total volumes to 75-80%. SKF is also looking at the aerospace business for supplying precision bearings.

Growing its already commanding market share

SKF India's current market share is around 30%, this is higher by 2% as compared to FY 2006. Approximately 60% of the total sales of bearings are to OEMs, while the remaining 40% are market/replacement sales.

It is also gradually moving towards becoming a total solution provider by not only providing bearings, but also related other accessories as also quality service.

Demand keeps rolling from the user industries

Demand for bearings has a close correlation to the growth in the manufacturing sector. The Indian economy is growing at more than 9% with the growth in manufacturing segment being around more than 10%. This growth has spurred capital investments in many sectors for creating fresh capacity to meet the growing demand. All forecasts for the coming years show that the buoyancy in overall growth trend is expected to continue. The management aims to leverage the upturn in the economy, its market leadership and financial strength for continuous strong growth.

Automobile industry, which is also a major user industry for bearings, suffered some slowdown in recent times due to rise in interest rates. However, with interest rates gradually easing, the industry is likely to regain healthy growth rates. Due to its strong presence in industrial bearings, SKF has been able to grow significantly in spite of slowdown in the auto industry.

Aims to double turnover by 2010

SKF India aims to double its turnover over the next 3-4 years. The company has backed up significant investments to expand manufacturing capacities in India on the back of buoyancy in demand for products in the automotive and industrial businesses.

The company will invest about Rs 100 crore in every 18-month cycle to expand its existing capacities and setting up new units. The company expects an investment of Rs 200-500 crore to achieve its goal of doubling its present turnover by 2010.

Reasonable valuation

For FY2007 (ending December 2007), we expect the company to register net sales and net profit of Rs 1584.40 crore and Rs 167.50 crore. This gives an EPS of Rs 31.8. At current market price of Rs 410, the EPS is discounted only 12.9 times. This EPS is likely to rise to around Rs 40 in FY 2008. Thus at the current price, P/E falls to just 10.

SKF India: Financials

 

	0412(12)	0512 (12)	0612 (12)	0712 (12P)	0812 (12P)
Sales	581.31	781.39	1342.49	1584.40	1869.59
OPM (%)	15.5	12.0	12.4	16.9	17.5
OP	89.82	93.70	166.45	267.77	327.18
Other inc.	23.01	34.62	8.34	8.19	10.00
PBIDT	112.83	128.32	174.79	275.96	337.18
Interest (Net)	0.54	-4.74	-4.48	-12.27	-18.00
PBDT	112.29	133.06	179.27	288.23	355.18
Dep.	25.96	25.93	28.82	30.54	33.59
PBT before EO	86.33	107.13	150.45	257.69	321.58
EO	0.00	0.00	2.69	0.00	0.00
PBT after EO	86.33	107.13	153.14	257.69	321.58
Tax Expense	31.72	38.98	51.18	90.19	110.63
PAT Before PPA	54.61	68.15	101.96	167.50	210.96
EPS (Rs)*	10.5	12.9	19.0	31.8	40.0
* Annualised on current equity of Rs 52.73 crore. Face Value: Rs10 each (P): Projections EO: Extraordinary items EPS is calculated after excluding EO and relevant tax Figures in Rs crore Source: Capitaline Corporate Databases

 

SKF India: Results

 

	0709 (3)	0609 (3)	Var. (%)	0709 (9)	0609 (9)	Var. (%)	0612 (12)	0512 (12)	Var. (%)
Sales	386.98	339.38	14	1148.25	963.23	19	1342.49	781.39	72
OPM (%)	17.6	11.4		16.9	11.9		12.4	12
OP	68.26	38.70	76	193.62	115.10	68	166.45	93.70	78
Other inc.	1.81	1.72	5	5.79	5.93	-2	8.34	34.62	-76
PBIDT	70.07	40.42	73	199.41	121.03	65	174.79	128.32	36
Interest (Net)	-3.38	-1.00	238	-8.77	-2.98	194	-4.48	-4.74	-5
PBDT	73.45	41.42	77	208.18	124.01	68	179.27	133.06	35
Dep.	7.58	7.38	3	22.54	21.10	7	28.82	25.93	11
PBT before EO	65.87	34.04	94	185.64	102.91	80	150.45	107.13	40
EO	0.00	0.00	0	0.00	2.69	PL	2.69	0.00	LP
PBT after EO	65.87	34.04	94	185.64	105.60	76	153.14	107.13	43
Tax Expense	22.77	11.65	95	65.13	35.38	84	51.18	38.98	31
PAT Before PPA	43.10	22.39	92	120.51	70.22	72	101.96	68.15	50
PPA	0.00	0.00	0	0.00	0.00	0	0.00	-4.08	LP
PAT After PPA	43.10	22.39	92	120.51	70.22	72	101.96	64.07	59
EPS (Rs)*	32.7	17.0		30.5	17.3		19.0	12.9
* Annualised on current equity of Rs 52.73 crore. Face Value: Rs10 each Var. (%) exceeding 999 has been truncated to 999 LP: Loss to Profit PL: Profit to Loss EO: Extraordinary items EPS is calculated after excluding EO and relevant tax Figures in Rs crore Source: Capitaline Corporate Databases

 

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A TIME COMMUNICATIONS PUBLICATION

VOL. XVI No. 50

Monday, Oct. 29 – Nov. 4, 2007

Pages 23

Sanity returns

as market resumes upward journey

By Sanjay R. Bhatia

After last week's carnage on Dalal Street, the markets witnessed a steady rise that took the BSE Sensex pass the 19000

level once again to touch a new historic high of 19276. Clarifications by the SEBI and FM brought back some sanity on the

bourses. Although the volumes remained low due to the P Notes issue, the advance decline ratio has remained positive.

Traders and speculators were active in auto, banking, realty, capital goods, telecom, IT, power, oil & gas sector stocks.

Incidentally, FIIs remained net sellers in the cash segment but were net buyers in the derivatives segment. But domestic

institutional investors remained net buyers during last week.

The global cues have remained mixed. Crude oil price once again

spiked up to the $90 level and the Rupee has once again started to

appreciate against the US Dollar. Inflation, however, continues to

remain stable.

The P Notes issue has finally been resolved. Hopefully, all eyes will

now be focused on the earning season, which has so far been good.

However, two major events are lined up for this week: the monetary

policy on October 30 and the US Federal Reserve meeting on October

30/31. The report doing the rounds is that the US Fed will lower the

interest rates. If that happens, we may see a good rally in global

markets. But it is equally important that the RBI does not come out

with any negative surprises.

Meanwhile, the markets would take cues from global markets, crude oil prices and the rupee-dollar equation and of

course from these two important events. Stock specific movement will be witnessed due to the earnings season.

Intermediate bouts of volatility will be witnessed amidst profit-booking and selling pressure.

Technically, the market sentiment remains positive. On the upside, if the Sensex manages to move and sustain above the

19100 level, it is likely to test the 19277 followed by the 19570 level. The Sensex has support at the 19050 followed by the

18419 levels. If the Nifty manages to sustain above the 5675 level, then it is likely to test the 5737 level followed by the

5887 level. 5670 followed by the 5520 are important support levels for the Nifty.

Traders and speculators could buy Alstom Projects with a stop loss of Rs.952 and a target price of Rs.1027.

Keep an eye on the political battle!

BAZAR.COM

By Fakhri H. Sabuwala

SEBI's concerns for making the stock market a safer and a better place for investors came loud and clear after the debacle

last week. M. Damodaran, chairman of SEBI, is categorical about this and constituted a committee chaired by a non-

executive member of a concerned exchange to focus on surveillance. During its meeting on October 25, SEBI cleared its

proposal for setting up an exchange for small and medium sized corporates, the need for which is felt since long.

1

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Concerning Participatory Notes, Damodaran's views matched with that of the Finance ministry and the latest outcome in

the matter is as follows:

* Date of calculation of Assets under Custody (AUC) is September 30.

* Sub accounts will not be allowed to issue PNs.

* PNs cannot be issued with derivatives as underlying.

* Current position on such PNs to be wound up within 18 months.

* Any further issuance of P Notes by sub accounts of FIIs to be discontinued with immediate effect.

* Sub accounts issuing P Notes have to apply for registration as FIIs. And until a final decision is taken on their being FIIs,

such sub accounts can continue as normal.

* Both proprietary and corporate sub accounts will be allowed to do business till a final decision is announced.

It seems there is not much of a dilution in SEBI's stance of last week's draft proposal except that the registration process

shall be less cumbersome and rapid. In all probability, the market shall take this announcement with a pinch of salt.

During this week, agonising statements by the PM on being let down by coalition colleagues and not supporting him for

the N deal sent tremors of uncertainty. Most political observers feel that Manmohan Singh is likely to give up his post for

being disallowed to do what he thinks is right. The subsequent mid-week meeting of Communists with the leaders of the

Third Front is also raising doubts over the continuation of this government for the full term and an announcement of a

snap poll sooner than later.

The political confusion was messed up further with the release of Tehelka-Aaj Tak sting stories on the Godhra riots and

the involvement of political leaders. This release is going to change the contours of politics in the near future and will

have a great impact on the Gujarat polls and may prompt the Central Government to announce snap polls and encash on

the negative publicity against the main BJP opposition. The market is about to take note of these and in all likelihood will

retreat from here. These developments will only prove to be a momentary and a temporary dampener. Yet, it can knock

off thousand to two thousand points and return the focus once again to the fundamentals rather than on liquidity.

In these circumstances, it would be worthwhile to pay attention to the first half results of corporates, the making up of

their order book and in case of IT and Textile segments giving a contrarian call too. Technically too, the market is likely to

test last week's lows both on the benchmarks and individual scrips. It may also breach them. Some support will be

forthcoming then unless politics turn so topsy-turvy that the Sensex moves sans sense and of course sans sex. Till then,

just enjoy the rollercoaster at others' expense!

Conquering new levels no longer an issue

TRADING ON TECHNICALS

By Hitendra Vasudeo

Last week our outlook was to 'Exit at CMP or on rally'. The view

indicated at the end proved to be inappropriate as the market rallied

to make a new high without violating the important support level of

17100 on the Sensex and 5000 on the NIFTY. But if you look at the

objective of the 'Strategy of the week', it was right in its own way as

the weekly sell signal was generated with the Engulfing Bear

candlestick pattern, which warranted such a strategy. The advantage

of this strategy was that both traders and investors were able to book

profit and cut losses on rise. So, the net situation was for a positive

outcome. Cash in hand was generated, which could be deployed

back into stocks that offer strength and breakout. We might,

therefore, no longer be in weak stocks or wrong stocks now as one would have been in a fall. On the face of it, the strategy

may not appear sound. But what would have happened if the market had corrected further down after spurting to higher

levels instead of making a new high? In that case, positions would have been stuck up and profit would not have been

visible.

Last week, the Sensex last week opened at 17259.65 registered a low at 17171.45 and rallied up to a high of 19276.45 to

close the week at 19243.17. A whopping gain of 1683 points on a week-to-week basis! What was lost two weeks back was

not only recovered but also gained new grounds.

As a result of this strong move last week from the important support zone of 17100 to 19276 makes the lower range of

17600-17100 a strong base and further weakness will be seen only on a further fall and close below 17100. The range is

wider, therefore the risk is also higher as a result of such volatility. But the returns on trading moves are also higher. A

high risk: high return situation has emerged in the performing stocks.

2

---

Page 3

The weekly trend has turned up after one week of down trend. The Sensex has not only given a breakout above 2 weeks

high but has closed well above it. The weekly trend will turn down on fall below 17100 or if the Friday weekly close is

below 18248.

The Yearly Level 4 mentioned in the beginning of the calendar year 2007 was 20851. This will get back into focus as a

result of the strong upmove from the lower levels of 17100. The targets for the Sensex could be much higher by the end of

calendar year 2007 if the momentum continues they way we have witnessed in the last 2 weeks. The next cluster of

resistance levels are in the range of 22000-24000. It looks like the index level is not the issue because as the Sensex moves

higher and higher both volatility and price will be higher. We can see such kind of situation and behavior in stocks from

the capital goods sector. Every time they run up, it looks that they are over stretched but yet they keep getting stretched.

Bonus or splits are offered and later we still find them going higher.

Similar kinds of moves are being witnessed on other world

indices. Hang Seng China Index moved from 10253 to 20516

in last 10 weeks. The Japanese Nikkei is another index. Its

history is such that when it moves and oscillates a few

thousand of points is not the issue. In the last 10 weeks,

HANG SENG moved from 19386 to 3025. Peru Limba

General index moved from 6192 April'06 to 23210 May'07. In

comparison, the Sensex moved from 11000 to 14500

approximately in the same time frame. In the last 1 year, the

Brazilian index moved from 39000 to 64000 approximately.

Thus we have various world indices going through similar

moves like what we have witnessed in India in the last few

months. The rise is on a sustained basis and arithmetic

provides a higher absolute range as opposed to percentage

gains or loss which remain steady. But one fine day, our markets might crash the way the Nikkei did from 1989 to 2003

from 40000 to 7000. But we cannot keep this in mind to trade or invest. Economists, Fundamental Analysts, Macro

Analysts, Strategists and Market administrators need to identify the reasons and use the crash as a case study to uncover

the hidden meaning behind such a fall. Pick up some clues and observe our market and check if we could get into any

such situation. From a technical analyst's perspective, identify termination of moves in order to catch hold of the Nikkei

situation. Regular profit booking and observing the stop loss can only help to some extent to prevent from some

unforeseen huge bear market. We are unlikely to be anywhere close to that situation for some years to come. If we look at

the 100 years of Dow Jones chart, we can see what bull markets are all about. Generally observed on the Yearly Charts:

1936 to 1949 sideways markets; 1949 to 1965: one side bull market with correction/sideways moves ranging for 6month to

2 year; 1966 to 1982: complete sideways market in a wider band; 1982 to 2000: another round of strong bull rally.

Our own Sensex went through a Sideways Market from 1992 to 2001-02 and by the time we broke out of it, it was 2004-

2005. Rallies are sustainable in case of a super long-term breakout but volatility gets added as we go higher and higher.

Corrections/Sideways moves can get stretch from 2 months to 2 years in the vertical ascend as we have witnessed.

So where do we go from here? From the support base of 17100, we have got into another launching pad for higher moves.

Shocking news flows will come and that would create volatility. Short term trading sell signals will be generated. In such

a situation get out and get

in if you are traders. Long

term investors should

wait

for

such

opportunities when they

come.

WEEKLY UP TREND STOCKS

3

Opportunities are created

for

investments

on

shocking news which take

the market by surprise.

The trading down trend

signal

turned

up

reversing itself in a week

with greater force and

vengeance creating a base

for another launching

pad.

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

JAIPRAKASH HYDR 77.45

50.2

67.0

73.4

83.8

100.6

68.0

71.6

26/10/07

DLF

910.35 683.9

821.5

870.1

959.0

1096.6

67.8

861.7

31/08/07

LANCO INFRATECH 459.55 284.0

391.6

431.3

499.2

606.8

67.7

422.7

31/08/07

HIND. CONSTRUC

200.75 123.3

171.5

190.3

219.6

267.8

66.9

174.4

31/08/07

TRIVENI ENGG

138.30

82.0

117.2

131.2

152.3

187.5

66.0

114.0

19/10/07

---

Page 4

Review of the Elliot Wave

Count to get the broad

market picture

WEEKLY DOWN TREND STOCKS

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

AVENTIS PHARMA 1091.00 889.0

1023.0

1089.0

1157.0

1291.0

15.35

1116.25 13/07/07

SPICE TELE

50.15

45.1

48.4

50.0

51.8

55.1

16.29

52.55

12/10/07

I-FLEX SOLUTIONS 1585.00 1428.3

1533.3

1586.7

1638.3

1743.3

16.32

1720.25 12/10/07

GLAXO SMITHKLI 1077.00 938.0

1023.0

1054.0

1108.0

1193.0

18.66

1081.25 14/09/07

DR. REDDY'S LABS 611.95

538.5

588.4

614.7

638.3

688.2

22.07

623.71

12/10/07

Preferred First Count:

Wave 1 – 2594 to 3758;

Wave 2 – 3758 to 2904;

Wave 3 – 2904 to 19276

(current

ongoing

upmove)

Internals of Wave 3

Wave i – 2904 to 6249

Wave ii – 6249 to 4227

Wave iii – 4227 to 12671

Wave iv - 12671 to 8799

Wave

v-

8799

to

19276(current

ongoing

upmove)

Wave i- 8799 to 14724

BUY LIST

Scrip

Last Close Buy Price Buy Price Buy Price Stop Loss Target 1 Target 2

Monthly

RS

INDUSIND BANK

94.85

81.67

77.15

72.63

58.00

120.0

158.3

68.53

NATIONAL ALUMINIUM C

312.10

310.91

303.50

296.09

272.10

373.7

436.5

63.41

SHIP.CORP.OF IN(SCI)

268.55

250.20

240.43

230.65

199.00

333.1

415.9

61.49

TATA CHEMICALS

335.05

317.08

310.00

302.92

280.00

377.1

437.1

60.78

G.E.SHIPPING

489.30

440.39

420.72

401.06

337.40

607.0

773.7

60.55

HIND. CONSTRUCTION

200.75

181.89

173.48

165.06

137.80

253.2

324.6

57.40

DABUR INDIA

110.80

105.81

103.18

100.54

92.00

128.2

150.5

51.58

Wave ii- 14724 to 13799

Wave a- 14724 to 12316

Wave b –12316 to 15868

Wave c – 15868 to 13799

Wave iii-13799 to 19198

Wave iv-19198 to 17171

Wave v-17171 to 19276

(current

ongoing

upmove)

Alternative Count

Wave 1-2594 to 3758

Wave 2-3758 to 2828

Wave 3-2828 to 12671

Internals

Wave 1-2828 to 3413

Wave 2-3418 to 2904

Wave 3-2904 to 6249

EXIT LIST

Scrip

Last Close Sell Price Sell Price Sell Price Stop loss Target

Monthly RS

CHAMBAL FERTILISERS

46.00

47.98

50.45

52.92

60.90

27.1

49.19

GUJARAT STATE PETRON

57.75

57.76

59.53

61.29

67.00

42.8

70.28

KIRLOSKAR BROTHERS

437.75

463.35

475.50

487.65

527.00

360.4

38.62

MAHARASHTRA SEAMLESS

505.70

510.29

532.00

553.71

624.00

326.3

31.01

STATE BANK OF TRAVAN

5393.00

5475.01

5578.50

5681.99

6017.00 4598.0

50.39

Wave 4-6249 to 4227

Wave 5-4227 to 12671

Wave 4 -12671 to 13779

Internals

Wave A-12671 to 9810

Wave B-9810 to 14724

Wave C- 14724 to 12316

Wave D-12316 to 15868

Wave E-15868 to 13779

Wave 5- 13779 to 19198 (current ongoing upmove)

Wave i-13779 to 19198

Wave ii-19198 to 17171

Wave iii-17171 to 19276 (Current ongoing up move)

Wave 5 get unfolded into further internals as suggest above.

Weekly resistance will be at 19955 and 22000. Support will be at 18563, 17850 and 17100.

Strategy for the week

As a result of the weekly up trend once again, short term trading outlook will be to buy on dips to 18563-17850 levels with

a stop loss 17100. Or wait for a fall below 17850 and when it moves above 17850 then buy with the low below 17850 as the

stop loss.

Look out for stocks that make 52 week highs and buy on dips to minor correction. Remain in front line and active stocks.

If the overall indices are likely to grow then the stocks that would benefit the most are the active index related stocks. The

4

---

Page 5

strongest indices are BSE Capital Goods, BSE Metal and BSE Oil & Gas. Stock from these sectors must be used on intra-

day correction, if any.

* Gujarat State Petronet, Gujarat Industrial Power, GMDC, GNFC are the four aces from the Gujarat Government fold

for creating wealth.

TOWER TALK

* Volta's Q2 net doubles. This performance creates hopes of a bonus reward to shareholders.

* Tata Steel is heading for Rs.2500 in two years. That shall announce its arrival on the global scene.

* Sell Tata Motors and switch to Mahindra & Mahindra or Reliance Communications or Bharti Tele or to Tata Chemicals. You

will not regret this switch.

* ITC enters the Far East markets. This small beginning may be a prelude to many big things to come.

* The US Treasury Secretary is critical of SEBI's move to throttle capital inflows while an official from the White House

talks of time running out on the Nuclear pact. Is this the beginning of the end of Manmohan-Bush honeymoon?

* JSW Steel's Q2 results are so robust that this steel scrip will turn into a multibagger from hereon.

* 'Rang-de-Basanti' has given UTV multicoloured profits. One movie like this every year for five years shall take the scrip

above Rs.2000.

* High crude oil prices are a great dampener for BPCL, HPCL and IOC. Book profits as there may be no respite till the

elections get over.

* Eimco Elecon has produced superb Q2 results. With a strong order book and hefty book value, it has good potential for

appreciation.

* Auto ancillaries are on the revival path. ANG Auto is at an all time low and is a good pick.

* Real estate companies with project expertise are being looked into by FIIs. Blackstone has taken a significant stake in

Nagarjuna Construction.

* Todays Writing Products has diversified into specialist product manufacturing for oil industry. The stock has a strong

growth potential.

* The exchanges are favouring the big players as the value of a contract in F&O has shot up considerably, but the lot size

has not been reduced.

T

* Despite few analysts and research firms being bearish on the cement sector, the share price of Deccan Cements will

continue to shoot up on the back of its rocking performance. It will zoom past Rs.300 mark soon.

* Some domestic broking firms are quite optimistic on the banking sector especially on PSU banks. Watch out for

Allahabad Bank, Vijaya Bank, Andhra Bank, Syndicate Bank apart from SBI.

* The Reliance Power IPO is expected to hit the market next month and will keep the power sector as well as the power

ancillary sector in action. Enjoy the rise in GIPCL, NTPC, Power Grid and Bilpower, ICSA, Accurate Transformers.

* SEAMEC has made a strong breakout on charts. It may move up sharply in coming days as the scrip has not

participated in the rally for a long time.

* The grey market premiums on forthcoming IPOs has again firmed up with Mundra Port at Rs.320/330, Reliance Power

at Rs.52/54, Religare Enterprises at Rs.230/240, Varun Industries at Rs.35/38, Barak Valley Cements at Rs.415 and

Empee Distilleries at Rs.120/125.

* Proxy IPO application forms for Rs.1 lakh retail application are quoting Rs.5000/5200 for Mundra Port, Rs.7000/7200

for Reliance Power, Rs.3400/3500 for Religare and Rs.3500/3600 for Varun Industries.

Blue Bird (India) Ltd. (Code: 532781)

Rs.58.40

BEST BETS

Incorporated in 1999 and promoted by Mr. Nitin Sontakke, Blue Bird India Ltd, (BBIL) is a leading manufacturer of paper

based notebook products such as student's books and exercise books etc. With the promoter's rich experience of over 30

years in printing, the company has a strong presence in western India and the 'Blue Bird' brand commands 48% market

share of the total sale of the organized segment in the country. Broadly, the company has segmented its business into

three divisions - stationery, publication & commercial printing. In addition to fine quality notebooks, it also produces a

range of office stationery products like executive notepads, diaries, arch-lever files, perforated pads, registers, filler papers

and folders. Although notebooks form its core business with more than 80% revenue, BBIL has of late ventured into

publishing academic textbooks and self study books for children apart from general publications in subjects such as

ayurveda and biographies. It has its own in-house academic publishing team, which works with external authors to

develop the content for educational books. Under commercial printing, it designs and prints annual reports, brochures,

catalogues, offer documents, coffee table books, calendars, greeting cards, magazines, text books, publications etc.

BBIL has set up an ultra modern factory in Pune, which can be treated as one of the best in Asia. In order to cater to the

Central and Southern markets, the company has put up a new plant each at Indore and Bangalore and which have started

production recently. Besides, the company has a strong distribution network of around 600 dealers and 9000 retailers

5

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Page 6

spread across 18 cities in India. Moreover, the company has just started to export its products to Ghana, Kenya and South

Africa. Recently, it was been successful in acquiring a big order from USA. Notably, BBIL has ambitious growth plans for

its publication division and intends to increase its share substantially in coming years. Hence, it is entering into a joint

venture with a well known publication bureau in Maharashtra. Accordingly, it has imported specialized machinery used

in printing of glossy papers especially used in newspaper supplements etc. To develop a strong pan India presence and to

penetrate untapped markets, BBIL has plans to add approximately 100 regional sales and marketing offices over the next

five years. Meanwhile, it will also augment its existing plant's manufacturing capacity through a capex of approx Rs.25 cr.

and has recently acquired land in Pune for the same.

In November 2006, the company mobilised Rs.92 cr. through an IPO at Rs.105 per share. Out of this, nearly 60% has been

utilized and the balance is being deployed for capacity expansion and setting up regional offices. For FY07, the company

recorded sales and net profit of Rs.454 cr. and Rs.27 cr. respectively. Thus it posted an EPS of nearly Rs.8 on its expanded

equity of Rs.35 cr. on which it distributed 12% dividend. In future, the company may raise External Commercial

Borrowings (ECBs) to the tune of $50 mn. by way of private placement. For FY08, it is estimated to clock a revenue of

Rs.550 cr. with PAT of Rs.34 cr. i.e. EPS of Rs.10. However, its main growth is expected to come in FY09 & FY10 on the full

impact of the expansion. The company has the potential to post an EPS of Rs.14 in FY09. Considering its IPO price of

Rs.105, book value of Rs.50 and 52-week high/low of Rs.128/55, it's one of the safest bet in such an overheated market.

Long-term investors are, therefore, recommended to buy at current levels as the scrip can give 100% return in 12-15

months.

Allsec Technologies Ltd. (Code: 532633)

Rs.137.85

Incorporated in 1998, Allsec Technologies Ltd (ATL) is a pure Business Process Outsourcing (BPO) company providing

support services for inbound customer care, technology helpdesk, inbound / outbound teleservices (sales, collections,

lead generation, market research), third-party quality assurance and HR & payroll processing. It offers response and

contact management solutions cutting across all media of delivery i.e. voice, e-mail, web chat and offline processing. Its

key focus areas are customer life cycle management, call quality monitoring for other call centres, F&A BPO, collections,

technical support, and payroll & benefits administration. ATL derives more than 90% of its revenue through exports

mainly to US clients including a 'Fortune 50' PC manufacturer, a leading mortgage & debt consolidation lender, a mid-

sized ISP, a world-renowned automobile company a Student Loan Consolidator and of course its major client Compu

credit. Hence in a very short span of time ATL has emerged as a global company, servicing veritable corporate majors

across the world on a 24x7 basis. Incidentally, ATL has the pride of being the first pure play BPO company to be listed in

the stock exchanges in India during 2005.

Currently, ATL operates with a capacity of 2,300 seats across 3 delivery centers in Chennai and one in Bangalore. Over the

past two years, it has concentrated on capacity expansion by setting up the 1000-seat facility in Chennai, which became

fully operational in FY2006 in addition to its original 700 seats. Earlier, it took over B2K Corp., a Bangalore-based

knowledge process-outsourcing firm with 600 seats and 51,000 sq. ft. facility located in Whitefield, Bangalore.

Maintaining its inorganic growth, a few weeks back ATL acquired 100% equity of M/s. Kingdom Builders Inc (KBI) a

BPO company based in Manila, Philippines, for US $1.50 mn. The operations in Manila will cater to the needs of existing

and new customers from USA, Australian and Asian markets. Hence, the company intends to expand this 150 seats

operation to 750 seats by January 2008.

Further, ATL is in the process of setting up a

200 seat call centre facility at Trichy, which is

expected to become fully operational soon. In

short, a combination of organic & inorganic

growth would lay the foundation for the

company to maintain its growth for years to

come.

To fund its expansion, ATL has raised approx

Rs.80 cr. by private placement to a high profile

international venture capital fund - First

Carlyle Ventures Mauritius at Rs.260 per

share. With its participation in ATL's

ownership, Carlyle is committed to help ATL

become a top, full-service global BPO

company. Financially, apart from being debt -

free, ATL is holding liquid cash of Rs.110 cr.,

which translates into a whopping Rs.70 per

share. This means that at the CMP of Rs.135,

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This recommendation will be followed up in the subsequent week with

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6

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Page 7

the company is actually available at a throwaway price of Rs.65 per share. Out of the Rs.110 cr., it has invested around

Rs.70 cr. in mutual funds, where it may generate other income of around Rs.8-10 cr. Meanwhile, ATL is planning to merge

B2K Corp., which is expected to become profitable at the net level with itself, in FY08, which will make ATL

fundamentally much stronger. However, company is not so aggressive in hedging and has been hit badly by the sharp

rupee appreciation. But this negative has been fully factored in its share price, which has fallen to one-third from its

recent high of Rs.375. Despite this, it is estimated to post an OPM of 20-22% (against 29% in FY07) and end FY08 with

topline of Rs.125 cr. and bottomline of Rs.25 cr. on a standalone basis. This works out to an EPS of Rs.15 on its fully

diluted equity of Rs.16.25 cr. As ATL may continue to face margin pressure in the short-term, only long-term investors are

strongly recommended to buy at current levels with a price target of Rs.210 (50% appreciation) in 12-15 months.

Solar Explosives Ltd.: An explosive growth

ANALYSIS

By Devdas Mogili

Solar Explosives Ltd. (SEL) is a Nagpur based company incorporated in 1984. The company came out with an IPO of

44,00,000 equity shares of Rs.10 each at a premium of Rs.180 per share during 2005-06, which was oversubscribed 14

times.

SEL belongs to the Solar Group, the largest manufacture and supplier of Explosives and Explosive Accessories covering

the entire range of products such as Bulk and Cartridge Explosives, Detonators, Detonating Fuse, Pentaerythritol

Tetranitrate (PETN) and Cast Boosters. It has six manufacturing facilities. The bulk explosives units are located at

Jhursuguda in Orissa, at Ramgarh in Jharkhand and at Dhanbad in Jharkhand while another unit is at Burdwan, West

Bengal. All the units are located in proximity to the mining units. Satyanarayan N. Nuwal is the chairman of the

company.

The company has three wholly-owned subsidiaries - Solar Capitals Ltd., Economic Explosives Ltd. and Solar

Components Pvt. Ltd. Its wholly-owned subsidiaries have a licensed capacity of 1,95,000 MT of explosives, which

include Bulk and Cartridge Explosives, 140 mn. mt. of Detonators, 20 mn. mt. of Detonating Fuse, 250 MTA of PETN and

60 MTA of Cast Boosters.

New Projects: The company commissioned a 10,000 MT capacity bulk explosives plant at Jharsuguda in Orissa that

will meet the requirements of the Mahanadi Coal Fields Ltd. Another 10,000 MTA capacity plant for manufacture of

bulk explosives has been commissioned in Ramgarh, Jharkhand, which cater to the requirement of the Central Coal

Fields Ltd. Another two plants of Solar Capitals Ltd. are under construction in Asansol, West Bengal, and at Dhanbad,

Jharkhand.

Exports: During 2005-06, about 659.40 MT of explosives and 41.50 lakh mt. of detonating fuse have been exported to

South East Asia, Gulf and Africa.

Clientele: SEL's clientele includea major public and private sector companies like Coal India Ltd. together with its

subsidiaries, Steel Authority of India Ltd., Singareni Collieries and Hindustan Zinc Ltd. The company also supplies

explosives and accessories to various national hydroelectric projects, cement industry, infrastructure and construction

sector, Border Roads Organization etc. Its products are also exported to African, South East Asian and Gulf Countries.

Performance: For the year ended 30

th

March 2007, the company notched net sales figure of Rs.1218.96 million with a net

profit of Rs.103.49 million posting an EPS of Rs.5.97 for the year.

Financial Highlights:

(Rs. in million)

Financials: The company has an equity base of

Rs.17.32 cr. with reserves of Rs.121.80 cr. and a book

value of Rs.80.32. SEL has a low gearing with a debt-

equity ratio of just 0.39. As on 31

st

March 2007, its

ROCE was at 10.44% while RONW was at 7.64%. It

notched up an operating profit margin (OPM) of

17.54% and net profit margin (NPM) of 8.49% in

FY08. Its working has substantially improved in

Q2FY08 as sales shot up to Rs.344.57 mn. in Q2FY08

from Rs.212.69 mn. in Q2FY07 and net profit zoomed

to Rs.41.02 mn. from Rs.13.72 mn. as the NPM shot

up to 11.90% from Rs.6.45% in Q2FY07.

Particulars

QE 30/09/07

QE 30/09/06

YE 31/03/07

Net Sales

344.57

212.69

1218.96

Other Income

31.33

27.29

100.67

Total Income

375.89

239.97

1319.63

Expenditure

298.01

208.42

1105.81

Operating Profit

77.88

31.55

213.82

Interest

15.56

8.02

53.25

PBDT

62.32

23.54

160.57

Depreciation

6.34

4.68

21.60

PBT

55.98

18.86

138.97

Tax

14.96

5.14

35.48

Net Profit

41.02

13.72

103.49

Equity Capital

173.24

173.24

173.24

Reserves

1267.56

1189.14

1218.01

Basic/Diluted EPS (Rs)

2.37

0.97

5.97

OPM (%)

22.60

14.83

17.54

Share Profile: The company's shares with a face

value of Rs.10 are listed on the BSE and NSE. Its

share price touched a 52-week high of Rs.252 and a

low of Rs.94. At its current market price of Rs.240, it

NPM (%)

11.90

6.45

8.49

7

---

Page 8

has a market capitalization of Rs.429 cr.

Dividends: Post IPO, the company paid a maiden dividend of 15% for 2006-07.

Shareholding Pattern: The promoters hold 74.60% of its equity while the balance of 25.40% is with the non-corporate

promoters, institutions and the investing public. Mutual Funds like HDFC Growth Fund, Escorts Opportunities Fund,

ING Vysya, UTI Mutual Fund, Canbank Infrastructure Fund and Kotak Opportunities Fund have added the company's

shares to their various schemes.

Prospects: The demand for explosives is directly linked to the growth in the mining and infrastructure sector. The

consumption of explosives is maximum in the mining sector, predominantly in mining of coal. Growth in the mining

sector was 5% in 2005-06 as compared to 4.3% in 2004-05 and is expected to grow further.

The main drivers for the demand of explosives are coal mining, infrastructure development and ore mining. The demand

for coal is linked to the increased need for the production of thermal power in electricity supply or used as a power source

by cement, steel and other manufacturing industries.

The Ministry of Coal has planned to increase coal production from the current 405 MMTA to 621 MMTA, by 2011-12

which, is expected to leave a demand gap of 95 MMTA. Again, the Steel Ministry has planned to raise steel production to

65 MMTA by 2011-12 from the present 37 MMTA. This massive increase will necessitate a 8-9% growth p.a. in iron ore

mining, which will call for more explosives.

The massive growth in roads under the National Highway Authority, where apart from the Golden Quadrilateral and the

North-South and East-West Corridors under construction will also require substantial explosives.

The government has laid great emphasis on increase in Hydro Electric Power Generation, which is expected to increase

by about 27,000 MW by 2011-12. All these projects besides needing explosives for excavation would also result in

increase the demand for cement. It is estimated that limestone mining will show a sustained growth of about 8% p.a.,

which, in turn, will call for larger quantities of explosives.

Conclusion: With the massive growth expected in mineral and infrastructure segment, the demand for explosives is

bound to grow significantly. The prospects for companies like Solar Explosives are therefore, bright.

At its current market price of Rs.267, the share is discounted less than 13 times against the industry average P/E multiple

of around 18. The share thus offers an explosive investment opportunity for the medium-to-long-term investor.

Sensex touches a new high and closes above 19K

MARKET REVIEW

By Ashok D. Singh

The BSE Sensex rose 1,683.19 points or 9.59% to close at 19,243.17 for the week ended on Friday, 26 October 2007. The NSE

Nifty gained 487 points or 9.33% to close at 5,702.30 for the week. The Sensex gained on all the five trading sessions in the

week.

SEBI, which had put restrictions on issue of participatory notes (PNs) and directed some exiting PN positions to be

wound up within 18 months provided partial breather to the PM participants on Thursday, 25 October 2007. SEBI said

that PNs allow foreigners to make a backdoor entry into the market, and it wants them to register to create greater

transparency on inflows. PNs are financial instruments used by foreign investors that are not registered with SEBI to

invest in Indian shares. FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with

these securities as the underlying. Expectation of a further cut in interest rate by the US Federal Reserve also aided the

rally on the domestic bourses last week.

The BSE Mid-cap index rose 682.08 points or 9.42% to 7,920.66 and BSE Small-cap index rose 750.63 points or 8.53% to

9,550.95 in the week. Both these indices underperformed the Sensex. BSE Auto index (up 6.04% to 5,616.97), BSE IT (down

1.07% to 4,635.58) and BSE (Oil &Gas) (up 8.41% to 11,103.46) underperformed the Sensex. But the BSE Bankex (up 16.25%

to 10,273.53), BSE Capital Goods index (up 20.16% to 18,540.15), BSE Metal (up 15.64% to 16,744.56), BSE Realty (up

10.68% to 10,020.75) outperformed Sensex.

The BSE Sensex rose 54.01 points or 0.31% to 17,613.99 on Monday, 22 October 2007. The market bounced back after an

initial slump caused by worries about the US economic outlook. But while the BSE Sensex managed to post gains, the NSE

Nifty settled with losses. Volatility was high due to alternate bouts of buying and selling. European and Asian markets

were trading lower on worries about the US economic outlook.

On Tuesday, 23 October 2007, the BSE Sensex posted its biggest ever single day gain of 878.85 points or 4.99% at 18,492.84.

The market spurted after SEBI provided partial breather to FIIs with respect to proposed restrictions on use of PNs and

said it would speed up regulatory clearance for foreigners keen to invest transparently after trading hours on Monday, 22

October 2007.

It said sub-accounts which intend to covert into foreign institutional investor (FII) status will have to send their letter of

intent to the regulator within 24-hours. SEBI later said that all the 20 PN issuing sub-accounts have expressed intent to

8

---

Page 9

convert into foreign institutional investor status. There are 34 PN issuing entities in the country of which some are already

FIIs. This number was 14 in March 2004.

The BSE Sensex closed higher by 20.07 points, or 0.11% to 18,512.91 on Wednesday, 24 October 2007. The Sensex posted

gains as investors flocked to blue-chip shares, inspired by robust set of results posted by them for the quarter ended

September 2007. All this came on the back of volatility, which remained high ahead of the expiry of October 2007

derivatives contracts on Thursday, 25 October 2007.

The BSE Sensex gained 257.98 points or 1.39% at 18,770.89 on Thursday, 25 October 2007. The market settled on a firm

note on buying in index pivotals. However, trade was choppy towards the fag end of SEBI's board meeting to decide on

the recently announced proposals to curb foreign inflows through PNs.

The Sensex surged 472.28 points or 2.52% at 19,243.17, an all-time closing high on Friday, 26 October 2007. The market

surged on renewed buying interest in index pivotals following healthy rollover of derivative positions from October 2007

to November 2007 on Thursday, 25 October 2007. Global cues were mixed. The market shrugged off concerns arising from

possible FII sales after SEBI put restrictions on the issue of PNs after trading hours on Thursday, 25 October 2007 and

directed some exiting PN positions to be wound up within 18 months.

The Sensex rose 1,683.19 points to close at 19,243.17 last week. The Sensex may rise for the first few trading session of the

week but a correction may be on the cards by the end of the week. Any change in interest rates by RBI in Mid-Term

Review of Annual Policy on Tuesday is not likely. It remains to be seen whether RBI raises cash reserve ratio (CRR) so as

to suck out excess liquidity in the banking system. However there are hopes that the US Federal Reserve will cut interest

rates again at its policy meet on 31 October 2007, given the recent weak US economic data. A further cut in interest rate by

the Fed, if any, will only add to global liquidity which already remains high. This in turn will ensure that FII inflows in

India will continue even as their buying vigour may not be as strong as was recently due to SEBI restrictions on PNs.

9

Market back on track

MARKET

Buy Tube Investments for long-term

By G. S. Roongta

The unexpected heavy fall by nearly 2000 points on the BSE Sensex to 17,307 from 19,200 levels within a week was

unimaginable and any further fall beyond this level would have led to a major crisis. But the correction, which I had been

anticipating and warning about since 3 weeks did come even though it was so sudden and harsh and quite unlike a

normal correction in the market. Having corrected itself, the market once again turned healthy and prompted me to

headline my last article as 'Outlook remains bullish'. Looking at the India growth story, the excellent Q2 results, the

higher tax collections, lower inflation rate and a good monsoon convinced me that the fundamentals of our economy were

strong and the fear of any further downward correction were unfounded.

The Almighty has once again helped prove me right as the BSE Sensex recovered the lost ground last

week to close at 19,243.17 for the week ended Friday, 26

th

October 2007. It also created another record

during the week when it rose by 879 points on a single day on Tuesday, 23

rd

October 2007. This was

largely on account of the short covering by FIIs but it did help neutralize the single day fall of 717 points

on Thursday, 18

th

October 2007 in the earlier week.

It really appears strange that such a sharp fall and rise in the market was linked to a particular single

issue raised by the market regulator. Should make or mar the market sentiment with such ugly volatility

without any material change in the economic or market fundamentals? The panic created on the 18

th

or

the euphoria created on the 23

rd

was totally uncalled for unhealthy and undesirable. This is especially so for our bourses

where lakhs of small investors participate and were victims of the games played by the big players and SEBI's efforts to

regulate them. On such sharp signals, even long-term investors develop paralysis and are forced to sell their stake to

safeguard against any further breakdown or eventuality.

G.S. Roongta

Nothing has changed in the market as the stock prices are back near to their highest levels high degree of volatility gives

the impression that such a in the market is now meant for big players only and there is no question of stability or surety

even for long-term investors. To have incurred such a heavy loss or washed out all gains so suddenly and so fast is a

lesson to them for the future.

The government and the watchdog body are fully responsible for creating this situation as all acts and deeds pertaining to

participatory notes (PNs) and their route was well known to them for quite some time. Hence, to impart such a rude

shock by the sudden ban on PNs overnight was an act of destabilization, which could have been avoided, if not handled

better. The authorities turning soft the next moment after the market collapsed was equally strange. It gave the

impression that the rebuff they got from the market made them change their mind, which may not be the case in reality.

There is no dispute about SEBI having taken the right step for the long-term interests of the market. But the way it was

imposed and the Finance Minister stating that the SEBI move was to curb huge capital inflows created a lot of confusion.

---

Page 10

But now that it is settled, the markets have rebounded to hit a new top on Friday, 26

th

October 2007 after SEBI clarified the

PN on Thursday evening.

The wheels are back on the rails and the market should take off hereafter. But when the Sensex will touch 20K or 25K, as

being talked about in the market, is difficult to say with conviction till this issue of PNs is totally sorted out and there is

greater clarity on the political turmoil that is developing. So let us watch how things shape up over the next fortnight

before Diwali.

Now coming to my stock recommendation for the week, I have identified Tube Investments India Ltd. (TIIL), which has a

good track record of dividend and bonus and is, therefore, an investor-friendly company. The share is available at one

third its 52-week's high but why it is so I do not know. Readers can find out on their own or let the facts emerge but they

must study its fundamentals as given below.

Tube Investments of India Ltd.: A safe, sound & promising stock

TIIL promoted by South's Murugappa Group and is located in Chennai.

Product Profile: Tube (TIIL) is a 50 year old company and has two distinct business lines i.e. manufacturing bicycles and

engineering.

(1) Popularly known as 'T.I. Cycles', it is one of the largest players in the market with trademark of 'Hercules' and

'BSA'. It produces nearly 1 crore bicycles.

(2) In the engineering segment, it manufactures metal formed intermediate products comprising steel strips, tubes,

industrial automotive chains, car doorframes and fine blanket products.

The company is also the market leader in high cold drawn welded tubes enjoying a sizeable share in the Indian auto

components market.

TIIL is the second largest supplier of automotive chains to the two-wheeler manufacturers in India, holding a significant

share of the market and is also the largest exporter of these products.

Financial Highlights:

(1) TIIL's revenue went up two fold in a decade from Rs.608 cr. in 1997 to Rs.1078 cr. by FY02 and further Rs.1762 cr.

by FY07.

(2) PBIDT went up from Rs.60 cr. to

nearly Rs.100 cr. by FY02 and further

skyrocketed to Rs.257 cr. by FY07,

achieving three fold growth in a

decade.

10

(3) PAT went up smartly from Rs.16 cr.

to Rs.36 cr. and Rs.156 cr. in the same

comparable period.

(4) Its equity capital was Rs.18.47 cr. till

2003-04 which doubled to Rs.36.95 cr.

in FY05 on account of 1:1 liberal

bonus.

Dividend Distribution: The company has

exceeded all the previous four landmarks

with the distribution of Rs.4.92 cr. in FY98 to

Rs.13.54 cr. by FY02 and Rs.86.84 cr. (special

distribution) in FY06 and Rs.27.71 cr. in FY07.

In

percentage

terms,

the

dividend

distribution works out to 75%, which is quite

good in line with the blue chip stocks and

that too on an ex-bonus basis. The special

dividend at Rs.17.50 per equity share of Rs.10

is an example of the management's friendly

approach towards shareholders.

Performance Review:

The bicycle segment performed

pretty well in FY07 with turnover

scaling higher by 10% against 5.5% in

FY06. Despite Indian

bicycles

undergoing tremendous change as its

base from urban to rural areas with

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the upward class opting for motorcycles or cars, the rural demand is also really great.

(1) Similarly, its engineering business products are required by automobile sector, boilers, bearings, stamping and

general engineering industries, ad TIIL enjoys the reputation of a Tier-I supplier to all these business segments.

In car doors there are two players in the industry and the company holds the major share of the market.

Split of Shares: The Rs.10 paid-up share was split after 1:1 bonus into five Rs.2 paid-up in 2005-06 to meet the need of

small investors to buy and hold the company's share.

Reserves & Surplus: TIIL still has very comfortable and mammoth reserves of Rs.618 cr., which will work out to 20 times

of its issued capital by the year end.

Investments: Similarly, its portfolio investment of Rs.190 cr. is valued at over Rs.670 cr. i.e. more than its Reserves &

Surplus.

Market Price: TIIL's ex-bonus Rs.10 paid-up share had ruled as high as Rs.658 in January 2006 while after splitting in to

Rs.2 paid-up, it scaled a new high of Rs.124 in June 2006. The share thereafter went into consolidation and is now quoted

around at Rs.64.50. It ruled between a low of Rs.50 and high of Rs.70 since January 2007 and the consolidation phase

seems to be completing now. Investors who wish to take position can while accumulate at current level to harvest good

gains.

Shareholding Pattern: Its shareholding pattern reveals that hardly 19% shares are left with the Indian public while out of

the balance holding 45% is held by promoters, nearly 11% by banks and mutual funds, 6.59% by FIIs, 9% by Bank of New

York in GDRs form and 9% by private corporate bodies. Thus it can be safely assumed that the shares of the Indian public

are slowly and gradually going into the hands of HNIs.

Conclusion: TIIL is a financially sound company, that is investor-friendly, can be considered as a safe and attractive buy

at the current rate.

Infrastructure Funds – A proxy on the India Growth Story – PART II

MUTUAL FUNDS

By Devangi Bhuta

Last week, we undertook a fundamental check on the Sundaram BNP Paribas CAPEX Opportunities Fund, ICICI

Prudential Infrastructure Fund and Tata Infrastructure Fund. This week, we will analyze two funds floated in the public

sector, the UTI Infrastructure Fund, one of the oldest schemes in this category and the recent entrant SBI Infrastructure

Scheme.

Fundamental Call

SBI Infrastructure scheme's main objective is to provide investors with opportunities for long-term growth of capital. It

does so through active management of investments in a diversified basket of stocks of companies directly or indirectly

involved in the infrastructure growth and in debt & money market instruments. It is a three year close ended fund; hence

those who missed the NFO will have to wait till 3 years till June 2010 for it to re-open.

UTI Infrastructure Fund was one of the earliest entrants in this space as it was launched in March 2004. The fund has

gradually increased its concentration with 33% exposure to the industrial manufacturing sector. The stocks include BHEL,

L&T, ABB and Thermax. Oil and Gas (11.4%); heavyweights RIL and ONGC are also among the top ten holdings in its

portfolio. It also has significant exposure to Telecom with Bharti Airtel and Reliance Communications. The company has

maintained a steady exposure to the Energy sector and has stocks like NTPC, Tata Power together with other power

utilities. Cement and construction companies form 12% of the fund's portfolio.

UTI Infrastructure Fund: (Source: moneycontrol.com)

11

Sector

% Allocation

Engineering

33.23

Cement

12.01

Telecom

11.88

Oil & Gas

11.4

Conglomerates

8.33

Utilities

7.34

Another attractive feature of this fund

is that it is well-diversified in terms of

large caps as well as mid-cap stocks.

This can be exemplified by the

allocation which holds heavyweights like L&T, RIL, BHEL etc and also smaller and fundamentally good comapanies like

KSB Pumps, Bharati Shipyard, Everest Kanto Cylinder etc.

Equity

Sector

Value (Rs. in cr.)

% Asset Allocation

Reliance

Oil & Gas

103.41

7.3

BHEL

Engineering

91.66

6.47

Larsen

Engineering

84.24

5.94

Bharti Airtel

Telecom

70.49

4.97

Reliance Comm

Telecom

70.41

4.97

ABB

Engineering

48.62

3.43

Tata Power

Utilities

46.99

3.32

Thermax

Engineering

44.97

3.17

ONGC

Oil & Gas

44.55

3.14

Banking/Finance

42.31

IDFC

2.99

---

Page 12

Also, the fund manager is constantly on a look out for new opportunities which is evident by the change in portfolio over

the quarters. For example they have recently added Reliance Energy to their portfolio.

During the year, total assets under management of the fund jumped by 165.40% to Rs.14,173.8 mn. in September 2007

compared to Rs.5,340.54 mn. in October 2006. It has been one of the better performers.

Investment Call

As applicable to all sector specific schemes, UTI Infrastructure Fund, too, is risky as compared to a well-diversified equity

scheme. Despite fundamentally sound stocks considering that the markets have gone up significantly, investors looking

for an exposure in this sector may wait for a decline to enter.

Prospects of the scheme appear to be promising, albeit only in the long-term and for those with a good risk appetite.

By Saarthi

STOCK WATCH

In the textile segment, Garden Silk Mills Ltd. (Code: 500155) (Rs.79.85) has posted stunning numbers for the

September'07 quarter and the scrip is hitting new highs. It recorded 45% growth in sales to Rs.435 cr. but the net profit

zoomed up 130% to Rs.17.75 cr. registering an EPS at Rs.4.60 for the quarter alone. The company is one of the major

players in the Indian polyester yarn and fabrics segment with a strong brand name 'Garden Vareli'. Importantly, it is a

backward integrated company with the second largest capacity to produce textile grade polyester chips in India. Few

months back it signed a contract with CTIEI (China Textile Industrial Engineering Institute, People's Republic of China) to

set up a continuous polymerisation plant with a capacity of 2,60,000 TPA of textile grade polyester chips which is

expected to commence production by October 2008. Besides, it also entered into an agreement with Oerlikon-Barmag of

Germany and TMT of Japan for supply of a polyester yarn plant of capacity of 55,000 TPA. Further, it has a capex plan of

Rs.240 cr. for expanding its polycondensation and POY/FDY manufacturing capacities. Incidentally, since the company is

not into exports, it is not affected by the rupee appreciation. For the financial year ending June 2008, it may clock a

turnover of Rs.1800 cr. with PAT of Rs.50 cr. i.e. EPS of Rs.13 on its equity of Rs.38.30 cr. Despite its strong fundamentals

and a book value of Rs.95, the scrip is available at an enterprise value which is even less than its gross block.

*****

Recently, Span Diagnostics Ltd. (Code: 524727) (Rs.62.25) declared fantastic result as its sales grew by 25% to Rs.18 cr.

but net profit shot up 60% to Rs.1.70 cr. for Q2FY08. For H1FY08, the picture is even more interesting with sales up by

55% to Rs.32 cr. and PAT up 375% to Rs.2.50 cr. Notably, the company is a pioneer and trend-setter of high quality

products used in the diagnostics industry by pathology & clinical laboratories and is also one of the largest manufacturer

of diagnostic reagents. Hence it supplies a variety of instruments and consumables besides reagents and kits required by

modern clinical laboratories. To strengthen its market share in the overall diagnostic market, it has formed a new

subsidiary especially for R&D on instruments. It has exclusive tie-ups with reputed companies worldwide for marketing,

distributing and servicing diagnostic products in India. Moreover, the company also undertakes contract manufacturing

of a wide range of quality reagents and kits in bulk for private labels. It may end FY08 with total revenue of Rs.70 cr. and

PAT of Rs.4.25 cr. This translates into an EPS of Rs.13 on its small equity of Rs.3 cr. The scrip has the potential to double in

a year's time.

*****

Bilpower Ltd. (Code: 531590) (Rs.180.60) has once again come out encouraging set of numbers for Q2FY08. Total revenue

increased by 35% to Rs.77 cr. and net profit zoomed up 70% to Rs.5.40 cr. It is one of the well known players in the field of

manufacturing transformers of all types, electrical laminations, stampings and cores. Besides it's a leading trader of

CRGO & CRNGO and produces the largest range of transformer cores in India. For future growth, it took over a private

company namely Tarapur Transformers for Rs.3.40 cr., which has an installed capacity of 1500 MVA for repair of power

transformers up to 200 MVA of 220 KV Class. Soon the company is expected to start manufacturing power transformers

also of its own. Besides, it acquired Sun Transtamp Pvt. Ltd., a company involved into manufacturing electrical

lamination. Importantly, Bilpower is foraying into transmission & distribution power sector as it has qualified as a

'turnkey contractor' for the EPC business by Maharashtra State Electricity Distribution Company Ltd. Further, it is in the

midst of setting up manufacturing activities for motor stampings in Wada, which is expected to commence operations by

end of this calendar year. To fund its T&D venture, it intends to raise nearly Rs.60 cr. through FCCB route in the near

future which may dilute its equity to the extent of 30%. Meanwhile, for FY08 it can register a topline of Rs.300 cr. with

bottomline of Rs.21 cr. i.e. an EPS of Rs.23 on its current equity of Rs.9 cr. Despite low promoter holding, it's a good bet

for the long-term.

*****

Last week, Bihar Caustic & Chemicals Ltd. (Code: 500057) (Rs.69.25), an Aditya Birla group company, reported excellent

results for Q2FY08. Sales improved by 35% to Rs.45 cr. but PAT almost doubled to Rs.14 cr. due to better operating

efficiency. With an impressive OPM of 51%, it posted an EPS of Rs.6 for the quarter. Recently, the company has set up an

aluminium chloride project and is estimated to produce and sell about 12000 MT of aluminium chloride in FY08. It is

12

---

Page 13

further expanding its caustic soda capacity from 225 to 265 TPD by addition of electrolysers as well by debottlenecking.

Besides, it is putting up a stable bleaching powder plant at an estimated cost of Rs.7.50 cr. to be operational by mid 2008.

Accordingly for FY08, it may clock a turnover of Rs.185 cr. with profit of Rs.40 cr. which can lead to an EPS of Rs.17 on its

equity of Rs.23.40 cr. Thus the scrip is currently discounted by less than 4 times its current earning potential. The

EV/EBIDTA ratio of the company is also very low at 3 times. Considering its reserves of Rs.125 cr. and gross block of

Rs.305 cr. it's a pure value buy at a present market cap of around Rs.140 cr. The scrip can easily appreciate 50% in 9-12

months.

13

By Kukku

FIFTY FIFTY

Investment Call

* Gujarat Apollo Industries (Rs.230) is into road construction and mining equipments. During FY07, the company

achieved a turnover of Rs.140 cr. against Rs.105 cr. in FY06 registering a growth of 33%. After accounting for interest of

Rs.229 lakh, depreciation of Rs.104 lakh, provision of taxation of Rs.94 lakh, the company has earned a net profit of

Rs.1847 lakh, an increase of approx. 76% against Rs.1047 lakh in FY06.

The continued thrust given to exports has paid rich dividends and the company has achieved a significant market share

in Saudi Arabia, Africa, Afghanistan, Australia, Bangladesh and Sri Lanka. Its prospects on the domestic front are also

bright with the Central and State Governments continuing their thrust on building roads by awarding contracts directly

as well as on BOT basis.

The company has recently concluded a technical know-how and Licensing agreement with an European company for

manufacturing 2 models of soil compactors and 3 models of tandem vibratory compactors and to add them to its range of

products. Revenue from this product range is expected from Q1FY09. This addition coupled with the recently added

range of crushers and mining equipments will further strengthen its already well-established product range and will

position the company as an all important products under one roof company. Its rollers and crusher range of products

have a much larger addressable market size and have versatile end uses, which virtually de-risks the company in the

future.

For H1FY08, the company has reported encouraging results. Sales went up from Rs.69 cr. to Rs.79 cr. while net profit shot

up from Rs.6.8 cr. to Rs.9.98 cr. on a capital of Rs.10.5 cr. If the current trend is any indication, the company is likely to

report a net profit of around Rs.25 cr. resulting in an attractive EPS of around Rs.24 for FY08.

The stock has given a good breakout closing above Rs.220 level. ICICI Prudential has increased its holding in the

company from 2.98 lakh to 7.28 lakh shares, which is a very bullish factor for a good uptrend in the stock.

Seeing to its sound track record of liberal bonus and good dividend, the stock can safely touch Rs.400 mark at a P/E ratio

of 16.

Market Guidance

* TRF Ltd. (Rs.1616) has come out with very encouraging Q2 results. On sales of Rs.69 cr. it earned a net profit of Rs.6.46

cr. against Rs.3.7 cr. in Q2FY07 on its small capital base of Rs.5.52 cr. Besides this, there was other income of Rs.10.1 cr.

from sale of investment. The company is expected to report full year EPS of around Rs.60 without other income, which is

very likely to go up to Rs.95 by next year. The stock is very likely to reach the Rs.2500 level. This stock has been a real

multibagger for readers of this column.

* Torrent Cables' (Rs.323.05) net profit rose 345.79% to Rs.8.47 cr. in the QE 30/09/2007 as against Rs.1.90 cr. during QE

30/09/2006. Sales rose 60.95% to Rs.54.11 cr.

in QE 30/09/2007 as against Rs.33.62 cr.

during QE 30/09/2006.

* Net profit of Voltas (Rs.195.45) rose 114.32%

to Rs.53.58 cr. in QE 30/09/2007 as against

Rs.25 cr. during QE 30/09/2006. Sales rose

34.51% to Rs.712.74 cr. in QE 30/09/2007 as

against Rs.529.88 cr. during QE 30/09/2006.

Investors are advised to stay invested for next

target of Rs.250 in next 6 months. This stock

has already given mutlifold returns to

investors as it was recommended from just

Rs.40 (Rs.400 for Rs.10 paid-up) onwards.

* Alumeco (Rs.23) has cleaned up its balance

sheet with various provisions like bad debts/

outdated toolings and other liabilities etc.

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---

Page 14

after the takeover by its new management. Investors should take the company as if it has just started afresh about a year

back and should look forward for better times ahead. The company has invested in its own foundry, the benefit of which

will come in the second half of the current year. Q1 of current year ending 30

th

June'08 is likely to give an indication for

future trend. Results are expected on 31

st

October 2007.

* KCP Ltd. (Rs.405) is a diversified company. Cement contributes 44% of its profits while Heavy Engineering contributes

51%. The company has five mini-hydel units aggregating to 8.25 MW capacity on the Guntur Branch Canal of the

Nagarjuna Sagar Dam. This being an irrigation canal, water is expected to be available for seven to eight months of the

year. The company also has huge surplus real estate, the valuation of which is said to be very high. For FY07, its EPS was

around Rs.37 which is expected to go up sharply in the current year to Rs.60/65 level. The stock is attracting the attention

of investors and is likely to touch much higher levels. Its engineering product is similar to that of Walchandnagar

Industries. It is possible that good values can be attained if the stock catches fancy of strong market players.

* IL&FS was recommended around Rs.185 and it has already shot up to Rs.365 before reacting to the current level of

Rs.312. Knowledgeable circles are projecting a bigger target of above Rs.500. Those holding can stay invested.

* Stelco Ltd. (Rs.40.55) is expected to report good results and the outlook for H2FY08 is even better. Investors should stay

invested.

* The Indian unit of Atlas Copco (Rs.906) is likely to become an outsourcing hub to meet the global demand of its parent

company. If this happens, it is likely to become the big story of tomorrow. Mutual funds have increased their stake in it in

September 2007 and some more funds are eyeing this scrip. Q3 results may not be encouraging due to the relocation of its

plant but the future outlook is very encouraging.

* The net profit of Ion Exchange (Rs.219.75) rose 81.33% to Rs.1.36 cr. in QE 30/09/2007 as against Rs.0.75 cr. during QE

30/09/2006. Sales rose 34.06% to Rs.122.01 cr. in QE 30/09/2007 as against Rs.91.01 cr. during QE 30/09/2006. The

company is into environment solutions - water treatment, liquid waste treatment & recycling, air pollution control, solid

& hazardous waste management and generation of energy from waste. Huge investment is planned by government on

drinking water and sanitation projects. Investors can look forward to good times ahead in this stock over the next few

years. The company has given very optimistic outlook at its recent AGM in Mumbai.

* Supreme Industries (Rs.286) has given a good breakout and is attracting the attention of market players. As compared

to Time Technoplast, its valuation is very cheap. A leading investment broker is said to have given buy call on this stock.

* As per informed sources Ashiana Hsg.'s (Rs.465) may declare a liberal bonus. Full year EPS is likely to be over Rs.75.

Abhishek Dalmiya is holds around 5% and another 3% is held by Revathi Equipments. The stock is also attracting buying

by some portfolio management schemes (PMS). It may become a mini-Unitech in future.

* TIL (Rs.352.90) Caterpillar of USA has focused on India identifying it as a major market. It has commenced

manufacturing new models in India and a larger and wider product range slated to be manufactured in the country. This

signifies encouraging business outlook for TIL, which has a techno-commercial tie-up with it. TIL is, therefore, expected

to report strong growth in earning in the near future. There is a possibility of placement of shares at Rs.500 plus levels.

Stay invested.

* Alcohol prices are very low and user industries are the beneficiaries. Some such companies are Alkyl Amines

(Rs.102.60) and Excel Industries (Rs.60.05). Stay invested in these stocks for better times ahead.

* United Spirits (Rs.1891) is now tipped for still higher targets. We had recommended this stock on account of the fall in

alcohol prices. At that time, its share price was just Rs.550. It was again recommended around Rs.850 level in this column.

* Ramsarup Industries (Rs.164.15), is of the most underpriced stocks. It is likely to see an upside as there are indications

that a leading market player has taken investment position in this stock. There are indications that the company may

report an EPS of around Rs.40 in the current year. Stay invested.

* Casting Units, Steelcast (Rs.174.85), Uni Abex (Rs.101.75) and Investment Precision Castings (Rs.127) have not

performed well in view of the increased input cost of raw materials and coke prices. Moreover, a firm rupee has also

affected margins on exports. Investors can exit these stocks.

* Khoday India (Rs.309) is attracting speculative interest on account of its huge land bank and restructuring story. If

knowledgeable circles are to be believed, the target for this stock is very high.

* Adhunik Metals (Rs.129) touched a new high this week and is strongly advised by some marketmen for a target of

Rs.175 in the near future.

* Last week many of our recommended stocks touched their all time new highs or 52-week highs. Few of them are

Walchandnagar Inds. (Rs.8169), Ashiana Hsg. (Rs.498), TRF (Rs.1616), JMC Projects (Rs.421), Hind Constructions

(Rs.205), ECE Inds. (Rs.862), Torrent Cables (Rs.334), Yuken India (Rs.349), Supreme Industries (Rs.305), Guj Appollo

Inds. (Rs.244), Emami (Rs.310), Adhunik Metals (Rs.134), Indian Hume Pipes (Rs.982) etc.

By V.H. Dave

EXPERT EYE

14

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Page 15

Alembic Ltd. (AL) (Code: 506235) (Rs.101.85) has posted highly encouraging results during Q2FY08 by posting 84%

higher net profit of Rs.45.6 cr. With a likely EPS of Rs.10 on face value (FV) of Rs.2 per share, this scrip can easily advance

by 35% to 40% in the medium-term.

AL is Asia's most respected integrated pharmaceutical company with consistent expansion and focus on new launches. It

exports pharma products to over 75 countries and is headed by Chirayu R Amin.

One of the oldest pharmaceutical companies in India, AL formerly known as Alembic Chemical Works Company has was

founded in 1907. It manufactures pharmaceuticals and chemicals, bulk drugs (penicillin and other antibiotics) and

formulations.

The company has strong presence in anti-

infective, pain management, cough and cold

and GI therapeutic groups. It focuses on

specialty segments like ENT, Pediatrics and

Geriatrics. After the recent takeover of

Dabur Pharma's non-oncology domestic

formulation business for

Rs.159

cr.

acquisition, it has entered into lifestyle

therapeutic segment swith focus on

Cardiology, Gynaecology and Diabetes.

Thus AL's extensive range of finished

dosage formulations cover almost every

aspect of human life. The basket of

formulation products contain more than 150

products in several forms belonging to

diverse therapeutic segments including

anti-infective, cough & cold products to

cardiovascular and oral anti-diabetics.

15

AL has an exclusive facility

for

manufacturing synthetic active pharma

ingredients (APIs) comprising independent

manufacturing blocks for Macrolides,

NSAIDs and other drugs. Its API

manufacturing facility at Panelav is

approved by the US Food & Drug

Administration (USFDA) and European

Directorate of Quality Medicine (EDQM).

Formulations, which account for 65% of its

total business are manufactured

at

Vadodara and Panelav in Gujarat, and

Baddi in Himachal Pradesh. The facility at

Panelav

enjoys

certifications

from

international regulatory authorities like

MHRA (UK), MCC (South Africa).

October – December 2006

EBG Quarterly Performance:

100%

During October – December 2006, which is the first 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.

Buy

Price

Highest

price since

recom.

Growth

%

Issue

Dated

Scrip

04-10-06

Cubex Tubings Ltd.

66.20

92

39

11-10-06

Conart Engineers Ltd.

26.40

48

82

17-10-06

Rane (Madras) Ltd.

110.35

128

16

26-10-06

AL is a ISO-9002 and ISO-14001 certified

company with manufacturing practices and

facilities that conform to WHO-GMP

guidelines testifying that every AL product

meets the most stringent quality standards.

During FY07, AL posted 11% increased

sales of Rs.692 cr. and earned 20% higher

net profit of Rs.83 cr. Its EPS was Rs.5.8.

During Q2FY08, sales advanced by 50% to

Rs.307 cr. and net profit jumped by 180% to

Rs.45.6 cr. During H1FY08, although sales

moved up by 37% to Rs.475 cr. And the net

profit surged by 81% to Rs.62.6 cr.

Its equity capital is Rs.27.7 cr. with reserves

Diamond Cables Ltd.

88.25

389.1

341

01-11-06

Fine-Line Circuits Ltd.

20.70

49.2

138

08-11-06

Simplex Castings

52.00

89.15

71

15-11-06

Kriti Industries (I) Ltd.

36.95

131.15

255

21-11-06

Frontier Springs Ltd.

16.25

23

42

29-11-06

Simmonds Marshall Ltd.

47.00

70

49

06-12-06

Can-Fin Homes Ltd.

62.55

74

18

06-12-06

ASM Technologies Ltd.

26.90

43.5

62

13-12-06

Jaihind Projects

42.00

134.7

221

20-12-06

Sutlej Textiles

226.00

313

38

20-12-06

Ramsarup Industries

107.00

184.2

72

27/12/06

Akar Tools Ltd.

38.00

51.5

35

27/12/06

GM Breweries Ltd.

108.00

151

40

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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

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This scheme is valid till 31

st

December 2007 and interested participants must

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For further details contact moneytimes@vsnl.com or call us on 022-

22616970

---

Page 16

of Rs.357.3 cr. give its share a book value of Rs.27.8. The value of its gross block is Rs.564 cr. The promoters hold 61% in

the equity capital, foreign holding including FIIs stands at 8% and institutions hold 10%. Leaving 21% with the investing

public.

AL has to its credit the history of three bonus issues. It issued bonus shares in 1:10 ratio in 1961-62 and 1:3 in 1965-66 and

2:1 in 2003-04.

AL is the market leader in the Macrolides segment of anti-infective drugs in India. Zero (sugar free), Glycodin (cough

syrup) and Althrocin (erythromycin estolate) are some of its popular brands. It has the largest fermentation capacity in

India at its API plant at Vadodara.

AL has received approval from MCC, MHRA and TDA for its generic formulations facility at Panelav. The current annual

production capacity of its generic formulations for 1 bn. tablets/capsules, which will be expended to 5 billion over a

period of 3 years. It has 40% of the domestic market share in Macrolides. In domestic branded generic drugs, it stands 13

th

largest in prescription drugs and is the 4

th

largest player in the respiratory segment.

The premier regulated markets of the world viz. USA, EU and Japan together account for US $495.5 bn. sales constituting

82% of the global retail sale. The share of the Indian pharmaceutical industry in the global market is expected to be over

US $15.2 bn. by 2010. AL has major market opportunities in its chosen product segments.

The real trigger for the scrip will come from the sale of its land. AL has signed MOU with Inorbit Malls, a K. Raheja group

company, for sale of land. The sale will be recorded in the financial results in Q3FYO8 at the time of execution of the

conveyance.

The share of AL is currently traded at Rs.100, discounting the estimated earning of Rs.10 for FY08, 10 times and the

projected EPS of Rs.14 for FY09 by 7.1 times. The average P/E of the pharma industry currently rules firm at 21. This

leaves scope for sizable capital appreciation in the medium-to-long term. Investment in this share is likely to yield

appreciation of about 40% in the medium term. The 52-week high/low of the share has been Rs.104/51.

*****

Tulsyan NEC Ltd. (TNEC) (Code: 513629) (Rs.85.70) has posted enviable performance during Q1FY08 and H1FY08,

which could take its price to over Rs.100 in the medium-term.

Incorporated in 1974 as National Engineering Company, TNEC is engaged in the manufacture of rolled steel products.

The company tapped the capital market in 1994 for implementing a modernisation-cum-expansion project. Its steel

products include finished steel (84,000 TPA), MS Ingots (36,000 TPA) and MS billets (72,000 TPA). TMT bars find

application in housing & construction, power, Defence & Railways.

The company later diversified into the manufacture of packaging products such as HDPE/PP woven sacks & flexible

intermediate bulk containers (17,500 TPA), which find application in cement, sugar, chemicals & fertilizers industries and

for other bulk packaging requirements.

During FY07, TNEC registered 31% increased sales of Rs.430 cr. and posted 47% higher net profit of Rs.6 cr. It posted an

EPS of Rs.11.9 and a dividend of 15% was paid. During Q1FY08, it posted 52% higher net profit of Rs.2.7 cr. on 10%

higher sales of Rs.97 cr.

During Q2FY08, sales advanced by 11% to Rs.119 cr. as net profit surged by 58% to Rs.3 cr. For H1FY08, TNEC posted a

net profit of Rs.5.7 cr. on sales of Rs.216 cr. and posted an EPS of Rs.11.4.

It has an equity if Rs.5 cr. and the book value of its share works out to Rs.67. The promoters hold 65% in the equity

capital, corporates hold of 4% leaving 31% with the investing public.

It has taken on lease a rolling mill with production capacity of 36,000 MTA in Coimbatore, Tamil Nadu and is also setting

up a new rolling mill with a 1,50,000 TPA in Tamil Nadu.

It is also enhancing the capacity of its Synthetic Division (packaging products) by 10,500 TPA. TNEC has so far invested

Rs.21 cr. towards expansion. The full effects of the expansions will be realized from FY09 onwards.

Given the booming economy leading to massive investments in roads, ports, airports, railways, power and housing &

construction will impart increased revenue visibility in TNEC, which in turn would increase its profitability.

The TNEC share is traded at Rs.77 at a P/E multiple of 3.2 on FY08E earnings of Rs.24 and 2.6 times its FY09E earnings of

Rs.30. It is recommended with a target price of Rs.120 in the medium-term. The 52-week high/low of the share has been

Rs.82/36.

Associated Alcohols & Breweries Ltd

STOCK PICK

By Suman Mukherjee

BSE Code: 507526

CMP: Rs.38.60

Book Value: 44.23

Face Value: Rs.10

16

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Page 17

17

Dividend: 2.5%

EPS: Rs.6.13

P/E: 6.6.65

Long-term Debt-Equity Ratio: 0.75

Performance: Market Outperformer

Time and Target: Short and Medium Targets are Rs.65 & Rs.90 respectively.

Introduction: Associated Alcohols & Breweries Ltd. (AABL) is the flagship company of the Associated Kedia Group. It is

engaged in manufacturing Indian Made Foreign Liquor (IMFL), distilling of potable alcohol, rectified spirit, Extra Neutral

Alcohol (ENA) etc. AABL is also bottling international brands like Smirnoff Vodka, Christian Brothers Brandy for Diageo

and Single Malt Scotch Whiskey - Glen Drummond for Mason & Summers. The company has good product range as it

manufactures single distilled, ENA and also triple distilled alcohols for reputed brands.

Shareholding Pattern: The promoters hold 47.38% while the Institutional Investors hold 0.05%. Private Corporate Bodies

(PCBs), NRIs/OCBs/Foreign others hold 23.70% and 4.30% respectively, while the investing public holds 24.57% of the

equity. Thus the company has a low floating stock. There were also some private placements some months back to the

promoters and outsiders.

Financials: For FY07, while its income rose to Rs.85.76 cr. from Rs.77.77 cr. in FY06, the operating profit jumped to Rs.6.3

cr. in FY07 from Rs.2.78 cr. in FY06 and for PAT FY07 was Rs.3.6 cr. against Rs.2.8 cr. in FY06 resulting in an EPS of

Rs.5.44 in FY07 against Rs.4 in FY06. Its reserves, too, improved to Rs.23.8 cr. in FY07 from Rs.20.3 cr. in FY06. But its

working results for Q1FY08 were impressive as its net profit rose 136.36% to Rs.0.78 cr. as against Rs.0.33 cr. during

Q1FY07, while sales rose 49.90% to Rs.29.50 cr. in Q1FY08 as against Rs.19.68 cr. during Q1FY07. This indicates the

growth of the company after sugar and molasses prices has ebbed. The season for the company started from September

and will continue till May, 2008. Hence subsequent quarters may see further improvement in its fundamentals.

Triggers:

•

AABL is one of the few distilleries making Grain Spirit in India. Its quality of Extra Fine grade of ENA is used as

raw material by many national & international brands. Shaw Wallace, UB group, Triumph Distillers & Vintners,

Diageo, Mason & Summers, Seagram's etc. are some of its customers for its Fine Quality of ENA.

•

The company has a virtual monopoly in the country liquor section in the central India and Madhya Pradesh in

particular. The company is mainly concentrating on country liquor section due to steep competition from the

IMFL space.

•

AABL's product portfolio includes all varieties of potable alcohol products: from country liquor, high quality

Rectified Spirits (RS) and Extra Neutral Alcohols (ENA), Indian Made Foreign Liquors (IMFL) of all categories

like whisky, brandy, rum, gin and vodka to bottling of premium Scotch. Its products command high customer

satisfaction at national and international levels. Smirnoff Vodka, one of the largest selling Vodka of the world, is

manufactured from the ENA distilled by AABL. It is bottling Single Malt Scotch for Mayson & Summers of

Bangalore and also for Diageo.

•

In view of its quality norms for the manufacture of products, there is always great demand for its products and its

order load is always more than the supply position. AABL products are not only used in India, but are also

exported since its quality is well accepted internationally.

•

The company is mainly operating under the bulk Alcohol segment and supplies it to the government and leading

IMFL manufacturers. Liquor consumption is growing by 8-10% CAGR which will help the company strengthen

both its topline and bottomline. Moreover, the Company's units are operating at optimum level and it is to add

some value added products to the IMFL section, to enhance margins.

•

The company is contemplating to sell / transfer 10,50,000 shares of its subsidiary M/s. Jaipur Distilleries Ltd.,

which is a loss making unit. This hiving off is expected to unlock value for AABL shareholders. The company will

use these proceeds for expansion of capacities and to clear off its debts.

•

AABL has been generating biogas from industrial effluents of the distillery, which has resulted in 40% saving in

power costs and may help it to earn carbon credits in future. By March 2008, the company will be fully self-

sufficient in captive power production.

•

The company's products are mostly sold in the domestic market; it is free from the worries of currency

fluctuations.

•

50% of AABL's order book is filled by government contracts and the balance by private companies on a long-term

basis, which ensures a steady income and ability to withstand any downturn in the industry.

•

With the substantial fall in the price of molasses, the company is making huge profits on its contracts.

•

AABL makes high quality bulk Scotch for large domestic and international brands on a contract basis and is now

contemplating to enter the lucrative beer market within a short time.

•

The expansion of its existing facilities will be completed by the end of December 2007.

---

Page 18

•

AABL has taken up massive plantation of Jatropha for better environment. Seeds of Jatropha are used for the

production of eco-friendly bio-diesel and produce an additional revenue stream for the company.

•

Utilising the residues of its distillery treated effluents, AABL has developed organic manure by the name of

'Samriddhi Vermi Compost', which is eco-friendly and cheaper than chemical fertilizers.

•

AABL also distributes the spent grain generated while processing the grains, namely Jwar and Millet as cattle

feed.

•

The scrip is trading at a low P/E of only 6.39 compared to the industry average of over 50. The comparison is

more pronounced with United Breweries, Tilaknagar Industries, Khoday etc.

Conclusion: Considering all the factors mentioned above and taking note that the scrip is trading below its book

value, it can be bought at the CMP of Rs.39.4, for some decent price appreciation over the next 6 months. Its short and

medium term targets are Rs.65 and Rs.90 respectively. The scrip has a strong support at Rs.34 and resistance at

Rs.48.5. One should keep a stop loss of Rs.35, in case the market slips or if one has a very short term view.

Disclaimer: Though due care has been taken while preparing this report, no responsibility will be assumed by the author

for the consequences whatsoever on acting on this recommendation or after reading the report.

"Investors should ignore the day to day volatility"

FROM THE FUND MANAGER'S DESK

says Tridib Pathak, Chief Investment Officer of Lotus India Asset Management Co. Pvt. Ltd. in an interview with Money Times (MT)

MT: Considering the volatility witnessed in the markets in recent trading

sessions, what is your advice to the retail investors?

The current bout of volatility has to do with the phasing out of PNotes and the

connected improvement of transparency in the stock market system being

attempted by SEBI. This is clearly very good from a systemic and long term

point of view. The current volatility has little to do with the economic and

corporate fundamentals of India and Indian equity markets.

Retail investors should ignore the day to day volatility in equity markets as

volatility is always omnipresent in equity markets due to one reason or

another. Retail investors should not attempt to time the markets as even

professional investors can never time markets. Invest for the long term. At

least for 5 years, should be the mantra. History of stock markets around the

world and in India, clearly shows that longer the time horizon of investment,

surer are the returns with lower volatility. In fact, Indian stock markets have shown that as the investment horizon rises

to around 12 years, the probability of loss reduces to zero.

MT: What is your assessment of the political situation in the country and what bearing does it have on the markets?

As investment managers, we do not have the skills and the need to have view on the political situation. Again, history has

shown that periods of political uncertainty have never had a lasting impact for more than 2-3 months on the stock

markets.

MT: What according to you are the key triggers for the Indian markets going forward?

There are two main triggers: 1) Continued visibility and sustainability of India's economic growth and as a result of

corporate profit growth which can easily average around 20-25% p.a. for the next 2-3 years. 2) Growing confidence in the

quality of India's economic and corporate profit growth in the context of the global economy. This should lead to a

valuation re-rating of Indian companies, which we think is already underway as we have seen in the past few months.

MT: Lotus AMC is coming up with an infrastructure and banking sector dedicated funds, what are the key risks in this

space?

Infrastrucutre fund – the risks are the same as that of investing in equities as an asset class. We believe there are no

additional risks as Infrastructure fund is not a sector fund or a concentrated fund. Our infrastructure fund will invest in

different sectors (a large number of them) and companies and is actually a diversied fund with infrastructure as a theme.

Banking fund – the risks are that it is a sector fund and not a diversified fund. But we will be having exposure not just to

banking stocks but also to a wide variety of financial services stocks. But yes it is a sector fund.

MT: How important is asset allocation for a retail investor. How do you think mutual funds help investors as regards

the same?

Asset allocation is extremely crucial for financial planning and financial goals management. Asset allocation, if followed

properly, brings in the basic discipline of buying an asset class when its prices are falling and selling an asset class when

its prices are rising. It allows the investors to always keep his/her investment in various assets in a predetermined

proportion according to the investor's risk taking ability, income levels, age and return expectations. Let's take a simple

example. Say an investor decides, based on the various factors stated above, that he/she should invest 60% in equities

18

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Page 19

and 40% in fixed income. With every rise in the equity market, say, he will sell his equities to bring it down back to 60%.

With every fall in the equity markets, he will buy equities to bring it up back to 60%. Asset allocation thus fosters

disciplined investing in keeping with the investors risk taking ability and goals.

Actually it is the financial advisor who should help the investor in maintaining an asset allocation. Mutual funds help by

way of managing the money and offering products across the risk-return matrix which are suitable to the different needs

of investors.

MT: Any other significant point/s you would like to make for the benefit of investors?

We think retail investors should keep in mind the following:

a) Do not invest directly in equities, as they do not have the time and professional expertise to do so. Invest through

mutual funds.

b) Invest for the long term, as explained earlier

c) Follow an asset allocation framework, as explained earlier

d) Do not time the markets.

e) Invest through Systematic Investment Plan (SIP) route.

- Devangi Bhuta

19

By Nayan Patel

TECHNO FUNDA

Tanfac Industries

BSE Code: 506854

Last Close: Rs.49.95

This Aditya Birla Group company manufacturing

Aluminum Fluoride has posted very attractive

results for September'07 quarter. While sales grew

by 51.81%, profit skyrocketed by 567.86%.

Its equity is just Rs.9.98crore and Promoters hold

more then 50% stake in the company. This 15%

dividend paying company is available at a P/E multiple of just 5.

It will be a real jackpot for investors. It also looks good on the charts. Buy with a stop loss of Rs.43. Once the stock crosses

Rs.53, it will go up to Rs.59 in a short span of time and cross Rs.75.50 in the near future.

Ador Fontech

BSE Code: 530431

Last Close: Rs.105.70

This Karnataka based Electrodes - Welding Equipment Manufacture Company belongs to the Ador group. It has an

equity base of just Rs.3.50 cr. and has posted marvellous number for the September'07 quarter. It reported 30.45% growth

in sales and 42.86% growth in profit over the previous corresponding period.

The Ador group is investor friendly as this company paid 50% dividend last year. Technically, the stock is on edge to

explode. Buy at every decline with stop loss of Rs.90. On the upper side, Rs.115 is the last hurdle for this stock. Above

Rs.115, it can go up to Rs.151 level in the next 6-9 months.

Mayur Leather

BSE Code: 531680

Last Close: Rs.37.30

This company manufactures shoes and has an equity of just Rs.4.84 cr. The board of this company meets on 27

th

October

for the interim dividend. Also expect mind blowing results for the September'07 quarter. If you are a real investor, this

may be a dark horse for you. From this price of Rs.37 it will zoom to Rs.43 in the near term and kiss Rs.65 in the next 6-9

months. Keep a stop loss of Rs.32 and hold on to this stock.

Shivalik Bimetal

BSE Code: 513097

Last Close: Rs.21.20

This company has an equity of just Rs.3.84 cr. Its Rs.2 paid-up share is going cheap for a 37.50% dividend paying

company. Buy with a stop loss of Rs.17.50. From Rs.21, it will go up to Rs.26 in the near term and thereafter it will cross

Rs.35 level in the next one year.

Religare Enterprises IPO opens on 29

th

October

MONEY FOLIO

Review

- Last week, we advised to buy Garware Offshore at Rs.185 and it shot

up to Rs.270 during the week.

- Alembic recommended at Rs.90.90 zoomed up to Rs.103.80.

- Kalindee Rail recommended at Rs.323.70 zoomed to Rs.348.

- Pioneer Distilleries recommended a week earlier at Rs.48.35 kissed

Rs.59.95 on Friday, 26

th

October'07.

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Page 20

20

Religare Enterprises Ltd. (REL), a financial services company offering a wide range of financial products and services

targeted at retail investors, HNIs, corporate and institutional clients, is entering the capital market with its IPO of

75,76,102 equity shares of Rs.10 each at a price to be decided through a 100% book-building process in the price band of

Rs.160 to Rs.185 per equity share. The issue will open on Monday, 29

th

October and will close on Wednesday, 1

st

November, 2007 and will be listed on the BSE and NSE.

REL is promoted by the promoters of Ranbaxy Laboratories and the issue has been graded by ICRA and assigned the IPO

Grade 3 on a five point scale.

The objective of the issue is to fund the future growth plans of the company including expansion of domestic operations

as well as the network of branches of two of its subsidiaries, Religare Securities Ltd. and Religare Insurance Broking Ltd.

It plans to fund the retail finance business as well as expand its financing activity, through its subsidiaries, Religare

Finvest Ltd. and Religare Finance Ltd. REL is the holding company of 11 subsidiaries, which are engaged in a wide range

of financial products and services. Along with its various subsidiaries, it offers a wide range of services ranging from

equities, commodities, insurance broking, to wealth advisory, portfolio management services, personal finance services,

investment banking and institutional broking services.

REL has entered into a investment agreement with Indopark Holdings Ltd., an indirect wholly-owned subsidiary of

Merrill Lynch & Co. Inc., wherein it has agreed to issue and allot 37,88,050 equity shares representing a 5.56% ownership

of its paid-up share capital worth Rs.606.09 mn.

As on 30

th

September, 2007, REL has 6 regional offices and 40 sub-regional offices across 392 cities and towns with 6,500

employees. Its consolidated total income increased from Rs.311.27 mn. in FY06 to Rs.3201.18 mn. In FY07 and net profit

increased from Rs.106.20 mn. in FY06 to Rs.250.21 mn. in FY07. It posted a consolidated total income of Rs.3079.64 mn.

and a net profit of Rs.367.26 mn. during H1FY08.

Barak Valley Cements IPO opens on 29

th

October

Barak Valley Cements Ltd., an ISO 9001: 2000 certified cement manufacturer in the North-East region, will enter the

capital market with an IPO of 56,60,000 equity shares of Rs.10 each for cash at a price to be decided through a 100% Book

Building Process in the Price Band between Rs.37 and Rs.42 per equity share. The Bid/ Issue will open for subscription on

Monday, 29

th

October and will close on Thursday, 1

st

November 2007 and will be listed on the BSE and NSE.

Incorporated on April 28, 1999, Barak Valley Cements Ltd. is a manufacturer of cement under the brand name 'Valley

Strong Cement' in the north-eastern region of India. It manufactures various grades of OPC (Ordinary Portland Cement)

and PPC (Portland Pozzolana Cement) using the Dry Process Rotary Kiln Technology with 4 stage Suspension Pre Heater.

Its current manufacturing capacity including its wholly-owned subsidiaries, is 760 TPD which will increase to 1050 TPD

post expansion. The cement produced conforms to BIS (Bureau of Indian Standards) specifications and is marketed

mainly in the North East. The Company sold approximately 1,60,000 tonnes of cement in FY07.

The object of this issue is to part finance expansion of its clinker capacity from 420 TPD to 600 TPD, cement grinding

capacity from 460 TPD to 750 TPD and investment in its wholly owned subsidiary — Badarpur Energy (P) Ltd. for setting

up a 6 MW biomass based power project, to meet the working capital requirements and for general corporate purposes.

Its three wholly-owned subsidiaries are Badarpur Energy Pvt. Ltd., Meghalaya Minerals & Mines Ltd. and Cement

International Ltd. — which are engaged in power generation, mining operation and cement manufacturing respectively

and its consolidated income for FY07 was Rs.74.5 cr. with PAT of Rs.14.27 cr. against Rs.53.67 cr. with PAT of Rs.11.6 cr. in

FY06. For the quarter ended June'07, the income and PAT were Rs.20.99 cr. and Rs.3.62 cr. respectively.

KKCL's Q2 sales up by 9.5%

Kewal Kiran clothing Ltd. (KKCL) has reported 9.52% higher sales at Rs.46.1 cr. in Q2FY08 as against Rs.42.1 cr. in

Q2FY07. The corresponding PAT was up by 8.7% in Q2FY08 at Rs.7.9 cr. as against Rs.7.2 cr. in Q2FY07 resulting in

quarterly EPS of Rs.6.40 as against Rs.5.89 in the previous corresponding period.

Bank of Maharashtra's Q2 net up by 47.57%

Bank of Maharashtra's total income during Q2FY08 increased by 33.66% to Rs.912.86 cr. from Rs.682.96 cr. in Q2FY07. The

interest spread increased by 17% from Rs.250.43 cr. to Rs.292.86 cr.

Its net profit increased by 47.57% to Rs.90.45 cr. against Rs.61.29 cr. for the corresponding previous period. Operating

profit increased by 34.58% to Rs.162.12 cr. as against Rs.120.46 cr. in Q2FY07.

Nitco Tile Q2FY08 Net up by 49%

---

Page 21

21

Nitco Tiles ltd., a leading manufacturer of vitrified tiles reported 49% increase in Net Profit at Rs.13.41 cr. compared to

Rs.8.99 cr. in Q2FY07 on 45% higher sales of Rs.140.90 cr. as against Rs.97.12 cr. reported in the previous corresponding

period. The EPS for the quarter Q2FY08 was at Rs.5.16 against Rs.4.04 in Q2FY07.

For the first-half of the fiscal H1FY08, net profit was at Rs.24.51 cr. up by 54% as against Rs.15.89 cr. in H1FY07. net Sales

in the same period stood at Rs.257.40 cr. up by 39% compared to Rs.185.49 cr. recorded in H1FY07.

During Q2FY08, Promethean Investments, a London based FII acquired an economic interest of 22,25,676 equity shares

which represents a 8.57% stake in Nitco Tiles Ltd. Mr. Gaurav Burman, Founder Partner with Promethean Investments,

has joined the Board of Nitco Tiles Ltd. as an Independent Director and will help in the strategic growth and planning of

the company.

Nitco Tiles plans to double its ceramic tile manufacturing capacity from 13,500 per sq. mt. to 24,000 per sq. mt. At its

Alibaug plant at a capital expenditure of Rs.85 cr. the company also entered cement import business and will import 1

mn. tonnes of cement form Pakistan.

LIC Housing Finance Ltd. Q2 net up by 53%

LIC Housing Finance Ltd. has recorded a healthy growth in business during Q2FY08. It sanctioned Rs.2268 cr. and

disbursed Rs.1599 cr. worth of loans registering growth of 69% and 36% respectively.

The Q2 net profit at Rs.116.37 cr. was 53% higher as compared to Rs.75.93 cr. in Q2FY07. Its total income for Q2FY08 was

37% higher at Rs.527 cr. as against Rs.385 cr. during Q2FY07.

For the H1FY08, it sanctioned loans worth Rs.3425 cr. and disbursed Rs.2821 cr., a growth of 48% and 25% respectively.

For the six months period, total income was Rs.990 cr. as against Rs.725 cr. last year. Net profit was Rs.163.07 cr. as

compared to Rs.113.39 cr. in the corresponding period last year, a growth of 44%.

Union Bank Q2 net up by 42%

Union Bank of India recorded 35.99% growth in Operating profit at Rs.529 cr. in Q2Fy08 as against Rs.389 cr. in Q2FY07.

Net Profit increased by 42.27% from Rs.194 cr. to Rs.276 cr.

Despite the rising cost of raising resources, Net Interest Margin (NIM) for half-year ended 30

th

Sept.'07 was maintained at

2.86% against 2.85% in the previous corresponding half.

The Capital Adequacy Ratio (CAR), however, shored up to 11.55% during H1FY08 from 10.79% in H1FY07. Its Net Worth

posted a smart rise to Rs.5231 cr. in the half year compared to Rs.4445 cr. in the previous corresponding half due to

plough back of profits.

Return on Average Assets of the bank improved from 0.85% in Q2FY07 to 105% in Q2FY08 indicating more efficient

utilization of assets. The asset quality recorded a significant improvement, with a steep reduction in Net NPAs from

1.24% to 0.65% and the Gross NPAs from 3.28% to 2.42%.

IMP Powers bags order worth Rs.65 cr.

IMP Powers Ltd., a leading player in the power equipments segment with a product portfolio of transformers, industrial

meters and testing equipments, has recently won a mammoth order worth Rs.65 cr. for supply of EHV Transformers of

132 and 220 KV class from a renowned EPC contractor for supply to Maharashtra State Electricity Board. The company is

also expanding its production of transformers and proposes to increase its production capacity from 3600MVA to

6000MVA by modernizing its plant and machinery at a cost of Rs.28 cr. and has attracted investment of Rs.19 cr. from

funds managed by Motilal Oswal Venture Capital Advisors Private Limited (MOVCAPL). It has a healthy order book

position of Rs.130 cr.

Birla Sun Life Insurance launches `Saral Jeevan Plan'

Birla Sun Life Insurance Company Ltd. (BSLI), the pioneer of Unit Linked Life Insurance plans amongst the private life

insurers has launched 'Saral Jeevan Plan', a Unit Linked Life Insurance plan which provides immediate life insurance

cover, using a simplified process.

The unique features of Saral Jeevan Plan are:

* It is an Over-the Counter (OTC) Plan. Immediate life insurance cover, made possible through process-simplification.

* Process-simplification is based on special Risk-Mitigation Strategies developed in partnership with the re-insurers.

* No medical tests.

* Launch of 'Multiplier' fund option, which invests predominantly in mid-cap stocks with an option to invest 30% in large

cap stocks as well in order to diversify the portfolio.

* 100% premium allocation - No premium allocation charge is deducted from the policy premium.

---

Page 22

Reliance Money launches free trading account

* Reliance Money takes trading to next level - customers to get free trading account for one year for trading upto Rs.5

lakh.

* First-of-its-kind initiative aimed at increasing penetration of demat accounts in the country with sharp focus on semi-

urban and rural areas.

* Ties-up with Corporation bank to offer broking services to 9.5 million account holders of the bank.

Reliance Money, the financial services and distribution arm of Reliance Anil Dhirubhai Ambani Group, has announced

free trading accounts for one year for customers opening demat accounts with the company. This initiative is primarily

targeted at increasing the penetration of demat accounts in the country - something which has remained stagnant at

around 6 million for last few years.

Reliance Money is the first company in India to offer a flat fee structure to its customers for trading in stocks,

commodities etc. on its trading platform, a deviation from the industry practice of charging percentage brokerage per

transaction.

Under this scheme, Reliance Money would waive off Rs.500, charged for trading upto Rs.5 lakh in the first year in case the

customers open account with Reliance Money during the next few weeks. Customers wanting to trade beyond Rs.5 lakh

would have to pay Rs.500 for trading upto Rs. 1 cr. (for two months) or Rs.2500 lakh for Rs. 6 cr. (for one year).

Reliance Money, present in over 700 cities in India with over 3500 outlets, would be focusing on semi-urban and rural

areas with this initiative. It also announced its tie-up with Corporation Bank, one of the largest PSU banks in the country

for providing Broking Services to the customers/clients of Corporation Bank. Under the agreement, the Depository

System of Corporation Bank would be linked with Reliance Money trading platform and customers having DP Account

with Corporation Bank would also be able to trade seamlessly through the Reliance Money Platform.

Motilal Oswal launches wealth management service 'Purple'

Motilal Oswal Securities Ltd. (MOSL), ranked among the top five broking-cum-investment banking firms, has launched

its Wealth Management business – 'Purple' - to cater to the growing demand from HNIs for expert handling of their

finances.

The new business is a wholly-owned subsidiary of MOSL and christened 'Purple', signifying wealth. Its USP lies in its 3

dimensional approach to Wealth Management:

(1) Help in managing personal investments

(2) Help in managing their business wealth for expanding business

(3) Help in managing their family's wealth for present and future generations.

Purple will dedicate an exclusive Private Banker (Purple Wealth Partner or PWPs) to look after the investment needs of

each HNI. They will dynamically monitor client portfolios and advise them about re-balancing the same with a view to

maximize returns.

Future Generali to commence insurance

Future Generali, a joint venture between the Future Group and Assicurazioni Generali S.p.A. of Italy have commenced its

Life insurance business space through the 'Future Generali India Life Insurance Company' and the non-life insurance

business through Future Generali India Insurance Company.

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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