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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 2
Monday, Nov. 26 – Dec. 2, 2007
Pages 22
Market must find its feet
and consolidate at current level
By Sanjay R. Bhatia
The markets displayed a negative trend on the back of FII selling pressure amidst regular bouts of volatility and
choppiness. Traders and speculators were active in oil & gas, mid-caps, small-cap, banking, realty, capital goods, telecom,
IT and power stocks. The volumes recorded during the week were low along with negative and subdued breadth.
Incidentally, FIIs remained net sellers in the cash as well as the derivatives segments. Domestic institutional investors, on
the other hand, remained net buyers during the course of the last week.
The global cues have also remained largely negative. Crude oil prices have
remained volatile due to supply constraints ahead of the OPEC meeting
early next month. Global markets have also displayed a negative trend on
the back of weak US economic data. The Rupee, too, has depreciated
against the dollar on back of FII selling during the course of the week.
Now, it is important that the markets find their feet and consolidate at the
present levels so as to form a good base. It is also important that fund
flows improve especially from the FIIs if a sustainable rally has to be
witnessed. In the meanwhile, the markets would take cues from the global
markets, crude oil prices and the rupee-dollar equation. Stock specific
movement will be witnessed amidst intermediate bouts of volatility and profit booking at higher levels.
Technically, the market sentiment is nervous and negative due to lack of fund flows and follow-up buying at higher
levels. Unless strong fund flows are witnessed the markets are unlikely to display a sustainable rally. The overall trend is
likely to remain range bound with tentative at higher levels. The Sensex has support at the 18419 level followed by the
17550 level. On the upside, if the Sensex manages to sustain above the 18737 level, then it is likely to test the 19650 level.
5520 followed by the 5428 and 5215 are the important support levels for the Nifty. If the Nifty manages to move and
sustain above the 5617 level, then it is likely to test the 5887 level.
Traders and speculators can buy Alstom Projects with a stop loss of Rs.908 and a target price of Rs.1042.
Buy when there is blood on the street
By Fakhri H. Sabuwala
The highest ever single day rise in the Sensex and the third largest fall ever and both coming within an interval of a few
days shows how hesitant the sentiment is on Dalal Street. The frontline stocks firming up first and then the rush of blood
at the mid caps was a sure pointer that the best is over at least for now. It was plain when the mid-caps and scrips that
hardly matter jumped by nearly 40% to 80% in three to four trading sessions and all this in the midst of FIIs liquidation of
$1.8 billion in those sessions! The inevitable followed and it was blood on the street. The fall is much deeper and the
bleeding more profuse than depicted by the Sensex or the Nifty.
Marketmen at such times look for the healing touch but the same is far fetched and hardly effective. All these days, the
advice to exercise caution as values were overstretched fell on deaf ears. Likewise, positive statements about the macro
1
economic fundamentals being in tact and that the Sensex may rise to 25000 points by 2008 are finding no takers. This is
what is known as Herd mentality. From 20000, the Sensex points to 18000 and there is a likelihood of it even touching
16000 on the credit woes of USA. This may provide investors some lovely pickings into good growth stories. The need of
the hour, therefore, is to keep the list of such growth stories ready to be picked up at near panic or in panic situations in
coming days. Remember, the age old adage "Buy when there is blood on the street".
Some of the growth stories, which the brave hearts can ponder over in coming days are given hereunder.
Gitanjali Gems: Diamonds may be forever but the glitter needs to remain in your portfolio throughout. This Indian
jewellery maker and a diamond specialist is on a big ticket marketing spree. With over dozen brands under its belt, this
company is all set for a global play. Recently, a buy-out of a US jewellery chain 'Rogers' for Rs.80 cr. gives it access to over
46 outlets in USA alone. Close on the heels of this, is a second tie-up with Italian watch and life-style major Morellato and
Sector Group for floating a 50:50 joint venture company in India for manufacturing high end watches and lifestyle
jewellery products.
Gitanjali Gems is also keen to establish its presence in China, which is a lucrative market growing at 30% annually. The
shift of consumer interest from gold alone to real diamonds is the basic driver of this scrip.
Abhishek Industries: The country's premier textile exporter plans to double its spinning capacity with a view to meet the
growing demand for its products. This flagship company of the Rs.1500 cr. Trident group is amongst the first five top
terry towels producers in the world and a leading supplier to international outlets like Wal-Mart, JC Penny, Harrods etc.
Recently, it commissioned the first phase of its expansion in Madhya Pradesh. This unit will support 1,00,800 spindles
and 400 looms and is its first unit beyond Barnala in Punjab. Besides this, the company is setting up a wide width sheeting
plant with 400 looms and an installed capacity of producing 1,00,000 metres per day.
It has been conferred with the 'Best Governed Company of India' and conferred the ICSI National award for excellence in
corporate governance 2006. It was also awarded the prestigious International Supplier of the Year award by Wal-Mart for
the years 2001, 2003, 2005 and 2006 and by JC Penny.
Sintex: As the erstwhile Bharat Vijay Mills, Sintex has come a long way in rechristening itself and building tremendous
goodwill around this brand name. Of late, the company has acquired the automotive plant business of Bright Brothers at
Rs.149 cr. On the face of it, this deal may look expensive but in reality it makes a lot of sense for Sintex as it has a great
strategic fit with its current business.
A market leader in moulded products for home, office, industrial and architectural use, Sintex has a limited exposure in
the automotive segment. But with its latest acquisition, it becomes a key player in automobile plastics and will control
74% of the market share. Thus Sintex will become a supplier to M&M, Tata Motors, Maruti, Hyundai adding Rs.150 cr. to
Rs.200 cr. in turnover and Rs.22 cr. in the bottomline. This new addition only provides the icing on the superb cake that
Sintex now is from the investors' point of view.
NTPC & BHEL: A win-win deal for both of them now that they have signed a memorandum of understanding (MoU) for
carrying out engineering procurement and construction (EPC) activities. For the former, the MOU will be backward
integration and for BHEL the gain follows in the form of absorption of super-critical technology that offers higher
efficiency with lower emissions.
This MoU will help them share the risk-reward returns of the new technology while the sector would substantially benefit
with better coordination, faster implementation and state-of-the-art equipment. Both together are working for nuclear
power programme too. Both the scrips are riding high on the power story and are likely to go much higher in coming
months. If Siemens quarterly result is any pointer, one can imagine what is in store here.
Supports need to be held on to strongly
TRADING ON TECHNICALS
By Hitendra Vasudeo
The baton was not passed correctly as we had anticipated. Or
even if it was passed, the mid-caps and small-caps could not
handle it and lost the race as the market fell by 756 points on a
week-to-week basis. The spike in small-caps and mid-caps in a
few weeks led to another bull trap for common retail traders
and investors. A handful of mid-caps and small-caps did well
but the majority of retail traders and investors got into these
stocks late when they began to lose steam.
In case of a recovery, it remains doubtful whether the prices
will be regained in the general outlook of the broad market.
Selectively, they would continue to do well. Those who land
up doing trades in such stocks would reap the benefit as such
2
stocks will keep going up irrespective of market conditions.
Last week, the Sensex opened at 19895.49 attained a high at 19971.44 and crashed down to a low of 18182.83 to finally
close the week at 18852.87 and thereby showed a net fall of about 845 pints on a week-to-week basis.
The weekly trend has turned down after last week's movement and can turn up only on breakout and close above 20238
or if the Friday weekly close is above 19358.
As usual, whenever in the past we witnessed a negative weekly trend, our first objective was always to exit long and sell
on rise to resistance level to re-enter only on breakout and close above the top. The same strategy needs to be adopted on
the stocks and the indices in days to come. The objective is to minimize the loss so that in case of a new movement,
traders can participate in stocks that get into momentum in the next phase of the rally.
Weekly resistance will be at 19698-20238. Weekly support will be at 18300-18182-18000. In case of a fall below 18000 or if
the closing is below 18300 on a sustained basis, then we could see the Sensex testing the low range of 17500-17100
subsequently.
The broad market indices, Nifty Junior has important support at 10020 and if that gets violated then expect a sustained
overall fall in the market. Similarly, the Nifty Mid-Cap 200 has support at 7178. The BSE 500 support is at 7300-7200. BSE
Small-Cap support is at 9505. If these broad market indices violate their support levels along with the Sensex sustained
fall below 18000, then expect a crash kind of situation in the market in the short-term.
The recovery after testing the support of Sensex 18300 has brought some relief to the fall. But recovering and holding on
to the support of 18300 is just not enough. The Sensex needs to cross and close above the top of 20238 in order to expect a
further sustained rally.
At this point, it looks that we could create a lower top against the resistance of 19800-20238 on the pull-back rally and can
test back the level of 18300-18000.
Most of the world indices give a similar appearance. Some have violated the bottoms and cracked sharply and some are
around their important support levels. In terms of levels comparison, some world indices are almost identical to the
Sensex at around 18300. Some have violated similar chart appearance as the Sensex support of 18300 and have gone down
to their support areas akin to Sensex at 17100-17000 in its chart appearance. The pattern formations are the same on most
world indices. The impact of the fall depends on the relative
strength. Some world indices like the Sensex have higher relative
strength, which means that if the world indices fall, we could also
fall but the fall will be of a lesser proportion.
The currency market could play vital role once again. The Rupee for
the time being looks to have settled down around Rs.39.10-mark
against the US Dollar and could weaken on the pull-back to Rs.40.10
mark. The Euro is making a new high against the Dollar and the
Japanese Yen has gathered strength against the US dollar in the last
few days as it violated the important support of 109. If the Yen
sustains below 109, then it can strengthen to 102 gradually.
The important Sensex support of 18300-18000 can get breached
comprehensively together with world indices pattern formation. This is in the belief that global cycles of bull markets and
bear markets of different time cycles are generally aligned and if not they do get aligned and some currency issues could
create trouble in the short term.
Strategy for the week
Exit long positions and sell on rise to 19700-19900 range with a stop loss of 20238. Sell further on fall and close below
18000. Book profit and exit pending stuck-up long positions in index related stocks as the Sensex spurts to 19700-20238
range. Long-term investors can look for levels of 17100 to be a good opportunity to invest. Traders will remain hopeful till
the 18300-18000 mark remains in tact. Traders and short term investors are therefore advised to lighten their positions in
order to prevent any mishap. In case of a breakout, since the cash is already generated, they can get into new momentum
stocks, which would emerge at that time.
Investment in stronger sectors by relative strength is advised on deeper corrections. The strongest sectors are Oil & Gas,
Capital Goods, PSUs, Metals and Banking. Stocks from these sectors that make new highs or are within 15% mark of the
52-week high are the strongest.
WEEKLY UP TREND STOCKS
Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy
with what ever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to
Level 3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value
then the trend will change from Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal
of the up Trend.
3
4
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
WELSPUN-GUJ STA 399.30 250.6
347.6
392.8
444.5
541.5
71.8
364.2
09/11/07
GMR INFRASTRU
244.15 180.9
222.0
240.9
263.1
304.2
69.5
216.8
02/11/07
KOTAK MAH. BANK 1124.00 897.7
1041.7
1103.3
1185.7
1329.7
67.1
1041.5
26/10/07
STATE BANK OF IN 2251.00 1889.3 2129.3
2247.7
2369.3
2609.3
64.4
2248.0
26/10/07
ATLAS COPCO
1397.00 956.0
1238.0
1361.0
1520.0
1802.0
63.9
1252.0
02/11/07
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
I-FLEX SOLUTIONS 1348.00 1090.3
1269.3
1369.7
1448.3
1627.3
16.93
1399.00 12/10/07
SPICE TELE
47.15
36.6
44.4
49.3
52.1
59.9
17.57
49.51
09/11/07
AVENTIS PHARMA 982.00
881.7
955.7
1003.3
1029.7
1103.7
18.93
1009.00 13/07/07
INFOSYS TECH
1558.00 1330.3
1489.3
1579.7
1648.3
1807.3
19.30
1698.25 19/10/07
LUPIN
528.60
464.8
511.8
541.9
558.7
605.7
21.37
548.41
02/11/07
PUNTER'S PICKS
Note: Positional trade and exit at stop loss or target which ever is earlier. Not an intra-day trade. A delivery
based trade for a possible time frame of 1-7 trading days. Exit at first target or above.
Scrips
BSE
CODE
Last
Close
Buy Price
Buy On
Rise
Stop Loss Target 1 Target 2
Risk
Reward
BANNARI AMAN SUGARS 500041 885.00
875.00
930.00
829.00
992.4
1093.4
1.92
CREATIVE EYE
532392
24.70
24.45
25.85
23.35
27.4
29.9
2.00
JAGSON AIRLINES
520139
23.00
21.75
24.70
20.00
27.6
32.3
1.53
SUPREME HOLDINGS
530677
69.55
66.55
69.85
63.25
73.9
80.5
0.70
SURANA TELECOM
517530
34.40
32.80
35.90
31.00
38.9
43.8
1.33
VISHAL MALLEABLES
505930
74.00
73.90
77.50
68.45
83.1
92.1
1.64
BUY LIST
Scrip
Last Close Buy Price Buy Price Buy Price Stop Loss Target 1 Target 2
Monthly
RS
UCO BANK
57.50
54.64
51.60
48.56
38.70
80.4
106.2
68.09
JINDAL STAINLESS
203.50
197.52
189.38
181.23
154.85
266.6
335.6
67.52
BALLARPUR INDUSTRIES
161.00
157.96
153.00
148.04
132.00
200.0
242.0
63.94
ATLAS COPCO (INDIA)
1397.00
1326.62 1278.00 1229.38
1072.00 1738.6
2150.6
57.03
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
UNITECH
339.95
352.63
362.40
372.17
403.80
269.8
40.90
UNITED BREWERIES
327.50
334.81
342.48
350.14
374.95
269.9
41.71
ZEE ENTERTAINMENT
297.95
310.34
316.00
321.66
340.00
262.3
42.97
3M INDIA
1939.00
2028.59 2095.50
2162.41
2379.00 1461.6
44.37
TITAN INDUSTRIES
1440.00
1511.18 1558.50
1605.82
1759.00 1110.2
45.15
JUBILANT ORAGANOSYS
305.10
315.81
321.00
326.19
343.00
271.8
45.43
CUMMINS INDIA
389.65
391.81
398.15
404.49
425.00
338.1
46.73
MARUTI SUZUKI INDIA
947.00
998.03
1017.50
1036.97
1100.00
833.0
46.78
GLAXO SMITH.CONS.HEA
616.00
628.27
637.00
645.73
674.00
554.3
46.84
NESTLE INDIA
1370.00
1454.12 1494.00
1533.88
1663.00 1116.1
48.46
ICICI BANK
1140.00
1181.14 1213.00
1244.86
1348.00
911.1
49.03
STERLITE INDUSTRIES
879.00
921.31
956.00
990.69
1103.00
627.3
49.42
RELIANCE IND. INFRAS
1882.00
2289.48 2434.50
2579.52
3049.00 1060.5
50.03
* Shringar Cinemas may be taken over by the ADAG group after its major expansion is completed.
TOWER TALK
* Numeric Power is likely to consider liberal bonus in the current year.
* Rolta may undertake complex projects like nuclear power plants for China with Westinghouse, in which its Stone &
Webster holds 20%.
* Honda Siel Power may consider liberal bonus with hefty payout in FY08. Its share may is touch Rs.350.
* The valuation of coal methane blocks owned by Deep Industries is whopping Rs.1100 cr., which gives it a share price of
Rs.550 on its small equity of Rs.20 cr. Marketmen expect big developments in this company.
* Investors sold Ansal Housing in panic due to the conviction of Ansal brothers in the Uphar Cinema tragedy. But Ansal
Housing is led by Deepak Ansal and is not affected.
* Operators are at work in the Bihar Tubes counter. Scrip may zoom past Rs.200 in the short term. Keep a close watch.
* JK Lakshmi Cement has come out of the CDR purview as it has already replaced high cost debt of Rs.325 cr. by cheaper
funds. The scrips may move up to Rs.220-240 is couple of months.
* Although Vakrangee Software and Tera Software is not into exports their share price is tumbling in line with other
software exporters. Since both companies are pure domestic plays not affected by the rupee appreciation, grab them at
every decline.
* A reputed broking firm is bullish on Ind Swfit Labs and is aggressively recommending it to clients for a target price of
Rs.80 in the short-term.
* JHS Svendgaard, an oral hygiene solutions company is setting up a subsidiary at UAE. The stock is a good medium
term bet as it expands its business globally.
* Majestic Auto has been witnessing increased volumes. It reportedly has a huge land bank in Ludhiana and is looking at
retailing opportunities.
* With huge orders and aggressive plans, Asian Oilfield Services is poised for a smart move. The company may rope in
strategic investors soon.
* IT stocks are available at attractive levels. Dollar concerns are mostly for BPO companies as compared to hardcore IT
companies. A good time to accumulate Infosys.
* The grey market premiums on forthcoming IPOs has again firmed up with Reliance Power at Rs.59-62, Mundra Project
at Rs.590-600, Kolte Patil at Rs.100-110, Empee Distilleries at Rs.40-42, Renaissance Jewellery at Rs.50-52, Jyothy Labs at
Rs.370-390 and Kaushalya Infra at Rs.22-24.
* Proxy IPO application forms for Rs.1 lakh retail application are quoting Rs.6500-6700 for Reliance Power.
Chemfab Alkalies Ltd. (Code: 506894)
Rs.101
BEST BETS
Incorporated in 1983 and promoted by Dr. C. H. Krishnamurthi Rao, Chemfab Alkalies Ltd. (CAL) is a reputed
manufacturer of caustic soda, liquid chlorine, hydrogen gas, hydrochloric acid, sodium hypochlorate, bleach liquor and
barium sulphate in south India. In fact, it boasts of being the first in the country to introduce pollution-free Membrane-
Cell technology which became the trendsetter in the chlor-alkali industry. It is also the first company in India to
manufacture barium sulphate from solid waste and even holds a patent for the same. It also produces industrial grade salt
for captive consumption. The company's products are consumed by variety of industries like aluminium, textiles, paper,
soaps, PVC, water treatment, vanaspati, etc. After its amalgamation with Membrane Technologies Ltd. in 2006, it now
manufactures water purifying machinery and sells packaged drinking water under the brand name 'TEAM'. Importantly,
the company has lately diversified into the fast growing retail healthcare segment and has already opened 'Team Health
Shoppe' in three locations at Chennai to market its own 'Team Eubio' care products as well as proven products from
other manufacturers. Through these outlets it offers a range of healthcare, body care, beauty care, skin care, hair care and
other nutritional food products. Its 'Energy Herbal Water', which can neutralise acidic wastes in the body and reduce
weight has been a super hit and is witnessing a strong demand. Presently, the company derives 80% revenue from chlor-
alkali segment whereas the balance 20% comes from the water and heath care segment.
5
CAL's plant is located on the east coast region about 500 metres from the seashore at Kalapet in Pondicherry. It has its
own 110 KV sub-station and receives power from Pondicherry Electricity Department. Other than power and water, the
key input for its Chlor-Alkali plant is salt for which the company has gone in for a backward integration and put up a salt
field about 40 km from its manufacturing site. Notably, the company has the lowest water consumption ratio for
producing per tonne of caustic soda. For FY07, it produced 41,027 MT of caustic soda against 38,725 MT in FY06.
Incidentally, after its merger with Membrane Technologies, CAL has become the only manufacturer of multi bore hollow
fibre ultra filtration membranes in India, the patents for which is held by Dr. Rao Holdings - a Singapore based associate
company. The international marketing of this special type membrane is done by global giant M/s. Dupont. On the other
hand, the company has been successful in creating a good brand image and reputation as a quality bottled water
manufacturer and is now spreading its marketing operations to Bangalore and Hyderabad. It is also attracting a lot of
enquiries for the franchise of 'TEAM Health Shoppe' but the company prefers to have its own outlets and is looking out
for suitable space for additional outlets in Chennai and other important cities. On the manufacturing front, the company
has plans to increase its caustic soda capacity to 66,000 MTA in future. Besides, being the largest producer and seller of
ultra pure hydrogen with 99.9999+ range, CAL has appealed to the government to employ compressed hydrogen gas as
an automobile fuel as it is safer, economical and environment friendly. In the foreseeable future, it may also diversify into
production of linear alkyl benzene, monochloro acidic acid, hydrogen peroxide and other chemicals from olefins.
Unfortunately, despite the clearance from the Pondichery government, CAL's desalination project is on hold due to
protests by local fisherman. Also a few months back, the company has to suspend the production at its caustic soda plant
on account of some labour unrest. Accordingly for the first six months, the sales remained flat at Rs.50 cr. but net profit
declined by 25% to Rs.8.25 cr. Hence the scrip hasn't participated in this whole bull run and is moving in a very narrow
range. But it seems that all the negatives have been factored in the share price and the risk reward now favours the bulls.
Secondly, with the additional large consumption of caustic soda coming up especially in the aluminium segment, the
demand-supply scenario for caustic soda is expected to remain favourable in future.
Given the increasing distaste for synthetic products and high risk of side effects, people have started turning towards
natural and herbal products for medicaments, cosmetics and nutrients, which augurs well for its healthcare division. To
conclude, the company can register sales of Rs.110 cr. with PAT of Rs.16.50 cr. for FY08 i.e. EPS of Rs.18 on its equity of
Rs.4.59 cr. with face value of Rs.5 per share. With a dividend yield of more than 5%, promoter holding of 74%, P/E ratio
at 5 times, gross block as Rs.130 cr., the company is available fairly cheap at the current enterprise value of approx Rs.100
cr. Moreover, it has the potential to register an EPS of Rs.22-24 for FY09. Investors are strongly recommended to buy it at
current levels with expectation of 50% return in 12 months time.
Royal Orchid Hotels Ltd. (Code: 532699)
Rs.129
Founded in 1973 by Chander K. Baljee, the Baljee Group, which has been re-branded as Royal Orchid Hotels is soon
becoming one of India's most recognized names in the hospitality sector with a major presence in Bangalore. Royal
Orchid Hotels Limited (ROHL) - the flagship company comprises hotel assets, their management and the branding &
marketing activities of these hotels. Apart from the having ownership of hotels, the company also undertakes
management contract with third party owners, so as to encourage the development of hotels and provide them with
professional management and a well recognized brand. From a modest beginning of owning a single hotel in Bangalore,
ROHL currently operates following eight hotels.
Importantly, the company follows a
unique business model of taking
properties on lease or entering into a
contract for managing & operating the
existing hotel instead of owning them
outright. This has helped the company
manage its funds efficiently with have
lower payback period and earn
attractive operating margins. Besides, it's very clear from the above, that the company has presence across the hospitality
category and is also de-risking its revenue model geographically. In the next few months, the company plans to open
'Royal Orchid Central' – four star category hotels in Pune (120 rooms) and Hyderabad (65 rooms) to cater to the business
class. Subsequently, it plans to operate two five star hotels under the brand Royal Orchid, one each in Mumbai and Delhi.
It is also planning to set up one near the new international airport at Devanhalli in Bangalore.
Name
Place
No. of rooms
Category
Royal Orchid
Bangalore
195
5 star
Royal Orchid Central
Bangalore
130
Business class
Royal Orchid Harsha
Bangalore
80
Budget
Royal Orchid Resort
Bangalore
54
Resort
Royal Orchid Metropole
Mysore
30
Heritage
Royal Orchid Brindavan Garden
Mysore
25
Gateway
Royal Orchid Golden Suites
Pune
71
Serviced apartment
Royal Orchid Central
Jaipur
70
Business class
Of late, ROHL has signed an agreement with New Jersey based Wyndham Hotel group which operates the Ramada
Hotels globally. Under this agreement, the company will develop and manage 10 hotels over five years under the Ramada
brand in India. In 2009, ROHL is targeting its international foray by opening hotels in Dubai and South East Asian
countries. But for this major growth, the company wants to target the lower end of the hospitality pyramid and has plans
6
to set up a chain of 50 budget hotels across India under the brand 'Pepper Mint' in the next 3 to 5 years. Out of the 50
locations planned, 11 have been tied up with Indian Railway Catering and Tourism Corporation (IRCTC) at Chandigarh,
Nagpur, Jodhpur, Agra, Bhopal, Tirupati, Jalpiaguri, Darjeeling, Jaisalmer etc. Through this tie-up, ROHL is expected to
avail of these properties on a 30 year lease for development and running the budget hotels. It also won a bid from the
Konkan Railway Corporation for developing a 60 room budget hotel in Madgaon for which land has been taken on a 60
year lease from the railway authority. Recently, the company acquired the Royal Orchid Central (Bangalore) property at a
consideration of Rs.82 cr., which it was managing till now. To summarize, the company is constantly looking to expand to
several Tier II & III Indian cities through joint ventures, management contracts, leasing or setting up of its own properties.
Notably, the current supply of 1,10,000 rooms is inadequate to meet the demand of 4.4 million tourists who visited India
last year-a figure that, according to the tourism ministry, will touch 10 million in 2010. Secondly, the hospitality industry
in Bangalore is upbeat with increase in the average occupancy of hotels as the city has emerged as an international
business destination. With the demand from IT, ITES and the financial service sector in cities such as Bangalore, Pune and
Hyderabad growing, the demand for rooms in these cities is also on the rise. Hence ROHL along with seven of its
subsidiaries is expected to end FY08 with total revenue of Rs.150 cr. (excl. other income) and net profit of Rs.35 cr. on a
consolidated basis. This translates into EPS of Rs.13 on its equity of Rs.27.25 cr. Considering its issue price at Rs.155 in
January 2006 and 52-week high/low as Rs.120/238, it's one of the safe bets in the current market. Investors are strongly
recommended to buy at current levels with a price target of Rs.180 (i.e. 40% returns) in 9-12 months.
Pioneer Distilleries Ltd.: Cheerful times ahead
ANALYSIS
By Devdas Mogili
Pioneer Distilleries Ltd. (PDL) is a 15-year old Hyderabad based company established in 1992. The company
manufactures Extra Neutral Alcohol (ENA), Rectified Spirit (RS), Absolute Alcohol (Ethanol), Denatured Spirit (DS) and
Carbon Dioxide (CO
2
). Its manufacturing facility is located at Balapur Village, Dharmabad Taluk, Naded District,
Maharashtra. K. V. Rajeshwar Rao is the chairman while K. Suhan Rao is the managing director.
The company has doubled its distillery capacity from 50,000 litres to 1,00,000 litres per day at full production and has
achieved a capacity utilization of 94.56% in the current year as against 90.01% during the previous year. Its fine grade of
ENA is the raw material for many brands of renowned liquor manufacturing companies.
Ethanol: The company's Ethanol plant became operational in January 2007 and is being supplied to pharmaceutical and
petroleum companies. Keeping in view the demand for ethanol product from petroleum companies, the company has
decided to increase its capacity of from the existing 30,000 litres per day to 1,30,000 litres per day.
Carbon Dioxide: The company processes CO
2
generated in the fermentation process in the new CO
2
plant to manufacture
commercial grade CO
2
.
Expansion: PDL is further embarking on expansion by increasing its existing alcohol capacity from 1,00,000 litres per day
to 2,00,000 litres per day.
Financial Highlights:
(Rs. in lakhs)
Biogas Power Project: As a part of its
expansion and diversification programme for
2007-08, PDL is planning to set up a 5 MW Bio
Gas based power project at its factory premises
at an estimated cost of Rs.40 cr.
The
management is planning to complete the
construction during this year and expects to
start commercial production in Q4FY08 or
Q1FY09. The power generated will be sold to
the Maharashtra Power Grid. Revenue
generated from this activity will be an added
source of income for your company.
Particulars
QE 30/09/07
QE 30/09/06
YE 31/03/07
Net Sales
1739.82
1279.67
5333.10
Other Income
5.48
5.30
15.95
Total Income
1745.30
1284.97
5349.04
a. Inc/Dec in stock
111.91
38.39
382.00
b. Raw Materials
485.60
650.33
2534.84
c. Staff Cost
45.59
33.62
151.39
d. Power & Fuel
223.56
145.63
813.96
e. Depreciation
86.08
60.01
246.86
f. Excise Duty
193.31
106.68
497.97
g. Other Exp
164.77
110.99
577.24
h. Total
1310.82
1145.65
4440.26
Interest
81.50
38.91
178.31
PBT
352.98
100.41
730.47
Prov for taxation
a. current tax
40.13
11.07
82.50
b. FBT
1.31
1.75
3.51
c. Deferred Tax
11.34
0.00
116.79
d. Total
52.78
12.82
202.80
Net Profit after tax
300.20
87.59
527.68
Paid up equity
1117.12
1061.32
1061.32
Res Ex Rev Reserve
432.89
EPS Basic (Rs)
2.79
0.83
6.07
EPS Diluted (Rs)
2.42
0.68
4.97
Clientele: The company supplies ENA to UB
Group, Shaw Wallace, Radico Khaitan etc.
while the Ethanol is supplied to oil companies
like HPCL, BPCL and IOCL.
Performance: The company reported highly
encouraging results for FY07. It clocked a
turnover of Rs.53.33 cr. with a net profit of
Rs.5.28 cr. registering a basic EPS of Rs.6.07 and
7
diluted EPS of Rs.4.97 for the year.
Share Profile: The share of PDL is listed on the BSE under the B1 segment and touched a 52-week high of Rs.109.65 and a
low of Rs.15 90. At its current market price of Rs.104, it has a market capitalization of Rs.120 cr.
Shareholding Pattern: As on 30
th
September 2007, the promoter holding in the company was to the extent of 49.08% while
the balance of 50.92% is held by the Indian public and others.
Prospects: The company continues to be a significant player in the ENA market. Further, the CO
2
, produced by the
company has great demand in the market, due to its quality particularly being 100% odourless.
As the government is encouraging the mixture of ethanol in petrol in order to control pollution, the demand for ethanol is
likely to exceed supply in the days to come. Moreover, following the capacity expansion in ethanol and the proposed
setting up of Bio Gas based power plant, the company foresees a much improved financial and operational performance
in the current financial year.
Conclusion: PDL is a profit making and dividend paying company with an impressive performance. It operates in the
alcohol and alcohol related business, which is enjoying boom times on the bourses. However, the plus point for the
company is the changing demographics, the rising middle class and the shifting nature of consumption patterns, which
augur well for companies like PDL. Further, the government's thrust on the use of ethanol with petrol will lead to
increased offtake of ethanol and benefit ethanol manufacturers like PDL.
At its current market of Rs.102, the share is discounted less than10 times its estimated EPS for FY08 against the average
industry P/E ratio of above 50. Investors may recall that Empee Distilleries had only a few weeks ago floated its IPO in
the price band of Rs.350 to Rs.400 at a P/E multiple of 30. Applying the same P/E ratio of 30 to PDL, the share has the
potential to race towards the Rs.330 mark in a buoyant market. Thus PDL offers good investment opportunity for
investors in the medium-to-long-term.
Sensex may lose further ground
MARKET REVIEW
By Ashok D. Singh
The BSE Sensex fell 845.49 points or 4.29% to 18,852.87 for the week ended Friday, 23 November 2007. The NSE Nifty fell
298.25 points or 5.04% to 5608.60 for the week. The market lost ground as FII turned sellers and withdrawing funds from
India amidst growing unease over US economic outlook and weakening credit markets in the US. Housing sector slump
in USA coupled with the weak US Dollar and surging oil prices weighed on global markets.
Crude oil prices climbed back above $97 a barrel in thin trades on Friday, 23 November 2007 buoyed by the unrelenting
decline in the US Dollar. London Brent crude rose 35 cents to $94.85 a barrel, while the US light crude for January delivery
stood at $97.35 a barrel.
The Japanese Yen strengthened to a two-year high against the US Dollar and also gained against the euro as investors
reversed carry trades, where they borrow yen to buy high-yielding but risky assets.
The wholesale price index rose 3.01% in the 12 months to 10 November 2007, below the previous week's rise of 3.11%,
government data released on Friday, 23 November 2007, showed. The annual inflation rate was 5.39% during the
corresponding week of the previous year.
SEBI chief, M. Damodaran, told a business conference on Wednesday, 21 November 2007 that a number of FIIs have
approached SEBI for registration in the past one month.
The BSE Mid-Cap index fell 3.33% to 8,228.50, while the BSE Small-Cap fell 2.02% to 10,171.43.
On Monday, 19 November 2007, the 30-share BSE Sensex lost 64.53 points or 0.33% at 19,633.36. The broader CNX S&P
Nifty was up 0.8 points or 0.01% at 5,907.65. The market lost ground in late trades as index heavyweight Reliance
Industries dropped and ITC slipped.
On Tuesday, 20 November 2007, the market slipped deep into the red in late trade as IT and metal stocks tumbled. The
30-share BSE Sensex lost 352.56 points or 1.8% at 19,280.80. The S&P CNX Nifty ended down 126.75 points or 2.15% to
5,780.90.
On Wednesday, 21 November 2007, the 30-share BSE Sensex lost 678.18 points or 3.52% at 18,602.62. At day's low of
18,515.30 Sensex had lost 765.50 points. The broader CNX S&P Nifty was down 219.85 points or 3.8% at 5,561.05.
On Thursday, 22 November 2007, the market bounced back in late trade as banking and auto stocks jumped amidst
volatile trade. The Sensex ended down 76.30 points or 0.41% at 18,526.32. The S&P CNX Nifty ended 41.7 points or 0.75%
lower at 5,519.35.
On Friday, 23 November 2007, the market shrugged off the blasts in Uttar Pradesh and galloped in late trade on a volatile
day of trading. It snapped the last six day losses by posting decent gains. The 30-share BSE Sensex rose 326.55 points or
1.76% at 18,852.87. The S&P CNX Nifty rose 89.25 points or 1.62% to 5,608.60. Jindal Steel & Power jumped 20.70% to
Rs.12096 on Friday and was the biggest gainer among the BSE A group shares. On 21 November 2007, its board approved
sub-division of each equity share of Rs.5 into 5 equity shares of Re 1 each.
8
The BSE Bankex fell 5.35% to 10,414.36 in the week ended Friday, 23 November 2007. ICICI Bank fell 6.49% to Rs.1140.35
in the week, State Bank of India declined 3.20% to Rs.2251.20 and Axis Bank fell 4.58% to Rs.929.95.
The BSE Capital Goods index fell 6.43% to 19,316.12 in the week. L&T fell 6.29% to Rs.411.50, BHEL dropped 8.73% to
Rs.2543.20 and Jaiprakash Associates gained 6.93% to Rs.1625.95.
The BSE IT index declined 3.41% to 4,017.10. Infosys Technologies fell 4.03% to Rs.1558, Wipro fell 3.55% to Rs.442.05 and
TCS declined 2.26% to Rs.985.50.
The BSE Power index fell 6.74% to 4,282.35. Reliance Energy declined 5.51% to Rs.1725.10, Neyveli Lignite fell 0.60% to
Rs.214.30, Power Grid Corporation of India fell 2.92% to Rs.151.20 and NTPC slumped 10.48% to Rs.236.60.
Financial services provider Religare Enterprises debuted on 21 November 2007. The stock debuted at Rs.323.75, a
premium of 75% over the IPO price of Rs.185. The stock settled at Rs.521.70 on BSE on that day, a premium of 182% over
IPO price.
Varun Industries, a Mumbai-based exporter of stainless steel kitchenware, debuted on exchanges on 22 November 2007.
The stock debuted on BSE at Rs.105, a 75% premium compared to its issue price of Rs.60. It ended at Rs.112.65 on BSE, a
premium of 87.75% over IPO price.
Allied Computers International, a Mumbai based IT hardware company, debuted on BSE on Friday, 23 November 2007 at
Rs.21, a 75% premium compared to its issue price of Rs.12. It settled at Rs.37.70 on BSE, a premium of 214.16% over IPO
price.
Barak Valley Cements, which manufactures various grades of ordinary portland cement, debuted on BSE on Friday, 23
November 2007 at Rs.65, a 54.76% premium over IPO price of Rs.42. It settled at Rs.56.05 on BSE, a 33.45% premium
compared to IPO price.
Rathi Bars, which manufactures cold twisted deformed steel bars and thermo-mechanically treated steel bars, debuted on
BSE on Friday, 23 November 2007 at Rs.38, an 8.57% premium over IPO price of Rs.35. It settled at Rs.31.90 on BSE, an
8.85% discount as compared to IPO price.
The Sensex fell 845.49 points to close at 18,852.87 last week. The market has been volatile over the past few days on
concerns over the impact of the US sub-prime mortgage problems on the US economy. These concerns may continue to
cast their shadow on the markets in the weeks to come. As per provisional data, FIIs sold shares worth a net Rs.2487.71 cr.
on Thursday, 22 November 2007.
The Sensex is likely to lose further ground.
Market to remain volatile till end of settlement
MARKET
By G. S. Roongta
Last week will surely be remembered for the dramatic fall in the indices mid-week and for the slaughter of innocent
investors who had taken a position in mid-cap and small-cap stocks. Money Times had anticipated the rise in these two
sectoral stocks three weeks back and had begun recommending them for investment. Our expectation was 100% right as
the earlier two weeks witnessed a sharp rise in mid caps and small caps but last Wednesday and Thursday proved to be a
disaster for them as they suddenly fell out of favour and joined the league of the large caps to usher in a panic and create
the a semblance of a bear market. That this was a game, was clearly established by the end of trading on Thursday, 22
nd
November 2007, when the indices recovered almost 80% of the fall during the day. At one point the
Sensex was down by 562 points to 18183 from the day's high at 18744.55 and the Nifty by 204 points to
5394.35 from the day's high of 5608.65 but they recovered sharply in the last 15 minutes of trading to
close at 18526.32 and 5519.35 respectively. If proof was needed further to establish this prognosis, the
markets opened very strongly with a gap on Friday, 23
rd
November 2007 and appeared confident in all
sectors.
There was no fundamental reason why the markets should have crashed mid-week the way they did.
While it is true that they lacked triggers for any upside movement, there were no negative triggers either
and minor political debacles were blown out of proportion to justify the sudden down swing. In fact, news on the
corporate front remains positive and which should have kept up the momentum in the mid caps and small caps, which
had just found favour some 10-12 days back. They again pepped up on Friday and could continue their upward journey
this week and one cannot but feel sorry for the common investors who had jumped on the mid-cap and small-cap
bandwagon very recently. Those who had been holding stocks in these two sectors for long at much lower purchase
prices were spared and can look forward to better times ahead.
G.S. Roongta
But small investors who had breathed a sigh of relief after the mid-caps and small-caps started moving up are now
concerned as they are unsure about the future of their holdings in the games being played in the market. Although we
had forecast the forthcoming fancy to these segments and it did materialise but it failed to sustain the rally in them and
was thus short-lived.
9
Earlier, the rally in mid-caps and small-caps used to last for at least 4-6 months but ever since the holding of small and
medium investors has reduced, the rally in these stocks lacked interest without any follow-up action from other small
investors. This is not surprising as most stocks have been acquired by HNIs or mutual funds as small investors started
booking profits from 2003 onwards. And given the runaway prices, they were unable to buyback these stocks as has
happened in the case of cement, steel, engineering, power, construction and infrastructure stocks, which have risen very
high and very fast.
This does not mean that the rally in these stocks will not return but it certainly stands truncated at this point of time much
to the disappointment of small and medium investors and analysts who had also started echoing the same view as Money
Times did for the past two weeks.
An example of the games played was the sharp run up in fertiliser stocks as there were no supporting fundamentals to
justify this sharp spurt. The rally in fertiliser stocks was prompted by reports that the government was thinking of
providing them with gas as their feedstock as against power & fuel based on naphtha, coal and electricity. As a result,
fertilizer stocks quickly jumped by 25% to 50%. They jumped so fast and so suddenly that people started wondering as to
what had happened in this sector to merit this sharp price rise.
GNFC, GSFC, Chambal Fertilisers, RCF, National Fertiliser, FACT etc. touched their 52-weeks high last week but crashed
in the blood bath on 21
st
and 22
nd
November 2007. Thus the small-cap and mid-cap rally stood punctured as sensitive
stocks started showing signs of a free fall.
The BSE Sensex which had closed at 19698.36 on Friday, 16
th
November'07 lost not only all its gains but fell below its
previous support level of 18333 on 12
th
November'07 to hit a low of 18182.83 on Thursday, 22
nd
November'07.
Correspondingly, the Nifty too lost significant ground below 5400 to touch 5394.35.
In terms of sentiment, Wednesday, 21
st
November witnessed a panic which only got aggravated the next day on large
scale liquidation with hardly any stock in the green. The trading screens on both those days looked totally red as stock
prices tumbled by 8% to 10% without any support levels. The reason for such large scale liquidation as cited by the TV
channels and the pink papers was that FIIs were selling on weak global cues and the subprime crisis in the USA which
was not yet over.
10
But what I gather is that behind the negative
global cues is also the tussle between two
branches of an industrial family that are
trying to outsmart each other and their
animosity is spilling over into their stocks,
which are highly fancied in the markets.
Readers must have observed the large
volumes built in the Reliance group of shares.
Prominent among them is Reliance Petroleum
in which a heavy outstanding short position
has been built in the F&O segment. The rival
group, in turn, has built up a huge plus
position in the same segment in the hope if
making some quick gains. But it is unable to
square up as the short sellers are sitting tight
with the end of the F&O transaction drawing
to a close next Thursday, 29
th
November 2007.
Similar is the case with some more stocks
where the concerned parties have a greater
interest in F&O trading but did not get any
chance to square up their positions at the
prevailing market prices. Grasim, L&T,
Reliance Capital, Reliance Petro, Reliance
Inds., BHEL etc. are some such stocks whose
prices have turned so volatile.
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But on the downside, Grasim lost nearly 500
points and L&T 600 points from the recent
peaks. Other stocks were equally influenced
by these lime lights and developed a bearish
trend. The game played by the big players in
the F&O market is the only reason for the market taking an U-turn last week. The volatility thus ushered will continue till
the F&O transactions are fully squared up or rolled over to December 2007.
This game will soon be exposed once the position of either side gets squared up rolled over to the next month. Who will
gain in this fight is not so important in as mush as this feud has caused a loss of Rs.500-1000 cr. It may not matter to both
the warring factions as they are super rich but it has hurt investors and traders who earn their daily bread by trading and
the smooth functioning of the market is most vital for them. SEBI may come into the picture and issue the postmortem
report once the game is over but it will be too late.
The market breadth on Thursday, 22
nd
November as reflected in NSE stocks turned so negative that there were over ten
losers against every single gainer whose gains were very minor and momentary whereas the losers lost substantially. In
terms of turnover, the F&O position exceeded over Rs.1,00,000 cr. as against the cash market turnover of Rs.20,000 to
Rs.28,000 cr. witnessed on both the exchanges.
The FII trading turned alarmingly negative as against being positive in the previous week. They are reported to have sold
stocks worth Rs.5,000 cr. last week. Thus it is good when common investors imitate the big players when buying but
really disastrous for them when the biggies sell off as happened last week. Had the domestic institutions not come
forward to support the markets, the parties that we had at 18K, 19K and even 20K would have turned sour and rotten.
Since both 20K and 19K have been breached by a wide margin, let us pray to God that 18K remain in tact as otherwise we
may face yet another painful and disastrous period.
Investors should, therefore, wait and watch till the expiry of the F&O contracts on Thursday, 29
th
November 2007, after
which only the market will give a definite clue about its future.
New Fund Offers – Thematic Funds (Equities)
FUND ANALYSIS
By Devangi Bhuta
1) Sundaram BNP Paribas Select Thematic Funds-Energy Opportunities
(NFO – Period - November 12 to December 11, Minimum Investment: Rs.5000)
Objective: The objective of the scheme is to seek long term capital appreciation by investing primarily in the equity and
equity related instruments of domestic companies predominantly focused on the energy sector.
Analysis: The energy sector in the scheme broadly includes oil & gas, power and any other energy related generators,
distributors or ancillary companies. The power sector has recently witnessed an upsurge and may continue to do so,
given the huge demand-supply gap in India and the increased government thrust by way of budgeted outlays.
Power transmission and distribution companies will benefit from the higher power generated and the government's
ambitious plan of 'Power for all by 2012'. For power equipment companies, not only the domestic demand but also
exports have been the revenue drivers and provide future growth opportunities. With the India growth story, the
demand for oil & gas is bound to rise although subsidies have pruned the growth of public sector companies here.
Nevertheless, they remain attractive bets in the long-term. In the medium term, big IPOs in the energy sector are
expected, which raise the prospects of this sector.
The overall performance of the fund house appears to be good in the past.
2) JM Agri & Infra Fund
(NFO – Period - November 19 to December 18, Minimum Investment: Rs.5000)
Objective: The investment objective of the scheme is to provide long-term growth by investing predominantly in
equity/equity related instruments of companies that focus on agriculture and infrastructure development of India.
Analysis: The scheme is a unique combination of two very potent segments in India. The infrastructure space includes
power, roads, railways, urban infrastructure, aviation, ports, telecom as per the offer document. Although the prospects
appear promising at present, strong macro-economic parameters would be a prerequisite for good performance of these
stocks. This space is also witnessing many IPOs which are witnessing premium listings further facilitating good returns in
the medium term. Picking fundamentally good companies with quality order books wherever applicable and scalability
would drive the returns in this space in the long term. The agri sector encompasses agri commodities like sugar, tea, rice
etc, inputs like seeds, fertilizers, agro chemicals, infrastructure like irrigation systems, pipes, pumps etc, food processing
like fruit pulp, oils etc and rural consumption products. With a burgeoning population on the domestic front and export
opportunities, the demand for agri industry products is expected to remain strong. On the flip side, government
regulations and the lack of infrastructure hamper the growth of these segments. However, the potential is there and in the
long term, this space appears to hold promise.
The overall performance of the fund house appears to be average and various schemes have been underperformers as compared to the
benchmark indices.
NOTE:
11
•
Both the schemes are close-ended equity scheme for three years after which they will be converted into an open-
end scheme.
•
Asset Allocation: 65%-100% in equity and equity related instruments in the targeted sector and 0%-15% in debt
and money market instruments.
Caveat Emptor:
NFOs are usually made at low value per unit. Investors must, however, note that this does not necessarily translate into
reasonable valuations. The market levels must be taken into consideration to gauge the risk. Besides, investors may
consider similar schemes like Reliance Diversified Power Scheme, UTI Energy Fund in case 1 which at least have a track
record and discernible strategy.
Further, investors looking at NFOs must keep in mind that they may not have any track record of the fund manager's
expertise in that particular segment or/as regards investment strategies.
Moreover, the above two NFOs are sector specific and thus entail a higher risk as compared to diversified equity schemes.
As in the case of all Equity Mutual Fund investments, investors must review their overall sector allocation by taking into
account their cash market investments if any.
By Saarthi
STOCK WATCH
Despite all the cats and dogs that have rallied sharply in the recent bull run, the share price of Sukhjit Starch &
Chemicals Ltd. (Code: 524542) (Rs.135) hasn't moved anywhere for quite a long time. The company manufactures edible
and non-edible maize starch, dextrine, liquid glucose and dextrose monohydrate. It also produces sorbitol, maize oil,
maize gluten, maize husk, high maltose syrup, oxidized/pregelatinized starch etc. It has an impressive clientele including
corporates like Britannia, Dabur, Colgate, HLL, Heinz, Ballarpur, Berger Paints, JCT, Mahavir Spinning, Wockhardt etc.
Although its Q2FY08 numbers were not that encouraging for H1FY08 it recorded 15% growth in sales to Rs.85 cr. and 40%
increase in PAT at Rs.10.30 cr. posting an EPS of Rs.14 for six months. Notably, it is the only multi-locational group in
India with a combined installed capacity of 1,50,000 tonnes corn grind per annum. In July 2007, the company started
commercial production at its new unit in HP, which has enhanced its capacity by nearly 25% and is dedicated for high
margin starch and derivative products especially for the pharmaceutical industry taking shape in Baddi, Himachal
Pradesh. On a conservative basis, it is expected to end FY08 with sales of Rs.175 cr. and net profit of Rs.18.50, which
translates into an EPS of Rs.25 on its equity of Rs.7.40 cr. The scrip has the potential to appreciate 30% in 6-9 months.
*****
The share price of Rama Paper Mills Ltd. (Code: 500357) (Rs.28) which hit a high of Rs.59 in 2005 is hovering around at
half that level in 2007, in spite of improved fundamentals. Of late, the company has increased its paper production
capacity to 44,500 TPA and is expected to enhance it to nearly 60,000 TPA by March 2008. It is also putting up an
additional line of paper manufacturing machine to produce tissue and poster paper with annual capacity of 18,380 TPA at
a capex of Rs.24 cr. The civil and fabrication work is in progress for the same. More importantly, the company has put up
6 MW co-generation power plant for captive consumption that commenced operation recently and will result in
substantial savings in power and fuel cost. However, the company reported lower sales for Q2FY08 maybe due to some
disruption at its manufacturing facility. Hence for FY08, it may clock a turnover of Rs.80 cr. with profit of Rs.5.50 cr. on
the back of higher operating margin. This can shoot up to Rs.100 cr. of sales and Rs.8.50 cr. of net profit for FY09. With
means an EPS of Rs.6 and Rs.9 for FY08 and FY09 respectively on its fully diluted equity of Rs.9.70 cr. Last fiscal, the
company raised around Rs.16 cr. through the equity route by making a preferential allotment to promoters and others at
Rs.35 per share. As of today, the promoters are holding 41% stake. At the CMP, the company is available at an economic
value (EV) of Rs.70 cr., which is even less than its gross block of Rs.79 cr. Buying is strongly recommended as its share
price can shoot up Rs.75 in 12-15 months.
*****
Although Deccan Cement has more than doubled, the share price of Anjani Portland Cement Ltd. (Code: 518091) (Rs.37)
is range bound since more than a year. Under the leadership of Mr. K. V. Vishnu Raju, the company has made a strong
turnaround in FY07 and is growing at a healthy pace in FY08. It is continually increasing capacities by modernisation and
upgradation. Last fiscal, it installed balancing equipment and pollution control equipment to increase capacities and
reduce pollution. In line with its modernisation and diversification plans, the company has acquired a grinding unit in an
open auction conducted by A.P.I.D.C that has further augmented its grinding capacity. Besides, the company has a
captive limestone mine, a captive power generation unit and state-of-the-art technology from Nihon of Japan. On the back
of robust performance, the company gave maiden dividend of 10% for FY07. For H1FY08, it registered 50% growth in
sales to Rs.59 cr. and 60% rise in net profit to Rs.8.60 cr. On an estimated OPM of around 26-27%, it can record a topline of
Rs.125 cr. with PAT of Rs.16 cr. for FY08. This works out to an EPS of Rs.9 on its equity of Rs.18.40 cr. Its share price can
easily appreciate 50% in six months or so making it a screaming buy.
*****
12
The core competency of Albert David Ltd. (Code: 524075) (Rs.96) lies in the manufacture of bulk drugs, speciality
formulations, herbal/ayurvedic products, disposable syringes & needles and intravenous (IV) solutions. It has technical
collaboration with the world's largest manufacturer of amino acids, Ajinomoto Co. Inc. of Japan and with Roussel
Morishita of Japan for manufacturing and marketing a wide range of crystalline amino acids, infusion solutions, oral
solids and liquids in India. To maintain its market share, the company is undertaking a modernisation-cum-expansion
programme at all its manufacturing units involving a capital expenditure of about Rs.52 cr. The last phase of this
programme is likely to be completed by this fiscal itself. For H1FY08, its sales as well as profit grew by 20% to Rs.89 cr.
and Rs.6.90 cr. respectively. In the near future, the company is planning to include some new products such as Alamin-
Xtra - a nutritional supplement, Evaston - a gynaecological product, Betahistine - an antivertigo drug and an
Opthalmological range for the eye care products. It is also looking to launch a brand extension product like Actibile-SR
and Ferrochelate-XT (a new iron compound haematinic). For FY08, it may clock a revenue of Rs.175 cr. with net profit of
Rs.12.50 cr., which can lead to an EPS of Rs.22 on its equity of Rs.5.71 cr. At a modest P/E ratio of 7, the scrip has the
potential to touch Rs.150 level in the medium-term.
13
By Kukku
FIFTY FIFTY
Investment Call
* Revathi Equipments (Rs.1101) - Investors can look at following points for investment in this company:
1) The company is operating in high growth areas like mining & construction equipments, where in the future outlook is
very encouraging.
2) The growth initiatives undertaken in the last two years and its continued focus thereon during this year should start
yielding results from the current 2nd half onwards.
3) In construction equipment, the company makes the wider range of concrete equipments comprising batching plants
that prepare the concrete mix, transit mixers that transport the concrete mix and Concrete pumps similar to Schwing
Stetter – a leader in the field. Greaves Cotton is another manufacturer in India but the Revathi range is much wider to
suit the Indian requirements where by the company expects strong growth in sales and profits over the next few years. In
the current year, sales from this division likely to be Rs.30 cr., which may go up sharply to Rs.125 cr. by next year as its
new plant goes on stream in March'08. Its projected sales for FY09 is likely to be Rs.250 cr. and the initial feedback from
the customers is highly encouraging.
4) Its association with Bucyrus International, USA in developing sizes of drills which will increase its range of offerings.
These drills have undergone thorough testing and have been demonstrated to different customers. Bucyrus is confident of
sourcing them from the company. It has export orders on hand worth Rs.22 cr. which is being executed in this year
only. The global demand for these drills is strong and expected to grow in coming years. The management expects to
increase their sales substantially leading to growth in profitability. This will reduce its dependence on Coal India.
5) It has invested surplus funds into other companies and mutual funds, wherein it is said to have realized gains of Rs.12
cr.
6) Morgan Stanley Research Europe has recently come out with a research report on Atlas Copco, wherein it mentions
that its parent company expects the contribution from India to go up by 50% in group's total sales, which is a very
encouraging statement. Blast hole drills are
essential for the production of coal, iron ore,
lignite etc. The major requirements come from
coal mines. Hence Revathi will also benefit
from this expected growth, as the offtake from
Bucyrus, too, will go sharply in line with the
statement of Atlas Copco.
The global demand is very strong and Atlas
Copco is unable to meet this demand, which
will benefit Revathi Equipments immensely.
7) Associate Companies: The company made
two strategic investments last year and
expects both these companies to post a robust
growth.
(a)Monarch Chemicals Pvt. Ltd., Mumbai, is a
company engaged in speciality chemicals and
Revathi acquired a 26% stake in it. Monarch
has carried out substantial expansion,
the benefit of which will come in this year.
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(b) Potential Service Consultants Pvt. Ltd. is a Bangalore based Engineering Design Services company providing total
engineering solutions to the building & construction sector. Revathi has acquired a 40% stake in the company and has
agreed to acquire another 11% stake on pre-determined basis by July 2009. This company is largely Bangalore centric with
some operations in Hyderabad and Chennai. Its order position is more than Rs.150 cr. This itself can become a big story in
future.
There can be good unlocking of values in both these companies if they go in for an IPO or for private equity in future.
Revathi reports a standalone EPS of around Rs.55 in the current year, which can touch around Rs.100 with other income if
realized and income from associate companies. Its standalone EPS is expected to go up sharply to about Rs.90/100 by
next year. At Rs.1100, its stock valuation looks very attractive compared to Atlas Copco, wherein the full year EPS may
not exceed Rs.40 in the current year and around Rs.55/60 next year.
About two years back, when the Sensex was around 9000, Revathi was quoting around Rs.1200. Hence investors are
getting the stock at Sensex value of 9000, when it should have doubled in keeping with the market sentiment. Long-term
investors can keep accumulating this stock for good long-term growth over the next few years as it can touch Rs.1400 by
April 2008 and Rs.2000 level by April 2009.
Market Guidance
* We have discussed the fundamentals of ECE Industries (Rs.743) a few weeks back. It holds 33,749 shares of Manjushree
Plantations, 8 lakh shares of Mangalam Cement, 2.25 lakh shares of Kesoram Industries. Investors can keep on adding this
stock on reactions at Rs.725 level for good long-term growth.
* PNB Gilts (Rs.34.65) was recommended as one of the safest investment bets a few weeks back at Rs.22/23 level. It has
given good return. Book partial profits at around Rs.38/40 level.
* Investors can add Advanced Micronic Devices (Rs.80) as it is likely to be merged with Opto Circuits at an attractive
ratio which may result in the stock appreciating by 100%.
* Atlas Copco (Rs.1396.95) has shot up from its recent low of Rs.840 to Rs.1480. Investors are advised to stay invested as it
is ramping up its manufacturing of CNG (compressed natural gas) which started this year. The cost of a kg of CNG is
about half of a litre of petrol and 6 major cities are already focused on expanding CNG usage as the only energy source
for public transport while another 29 would do the same by 2009. Its construction & mining equipment demand is driven
by significant private investments in coal mining and infrastructure construction, while its industrial tool division is
boosted by 30-40% annual growth in vehicle production and transition from two to four-wheelers.
Seeing to the expected strong growth, the company is looking for more acquisitions in India. There are indications that it
may report record sales in the 4
th
qtr with expansion in margins. Investors can stay invested with one year price target of
Rs.2500.
* Those who booked partial profits around Rs.11,000 plus level can think of buying back Walchandnagar Industries
(Rs.8074.55).
* Those who booked partial profits around Rs.1300 plus levels can re-enter Indian Hume Pipe (Rs.1039.85).
* Jaihind Project (Rs.154.45) is being added by informed investors. Stay invested for good long-term growth or even add
on reactions.
* W S Industries (Rs.87) has orders in hand of Rs.200 cr. It is setting up an export unit for capacity of 800 tonnes which
will start from June 2008. Its 59% subsidiary (WS Electric) along with the Chatterjee group of Kolkata is developing a 16-
lakh sq. ft. IT park at a cost of Rs.250 cr. in Chennai, the first phase of which is nearing completion and revenues will start
from FY09. Investors can buy this stock on reaction for good long-term growth.
* Valuations of Ion Exchange are attractive
around Rs.197 level. Investors can add.
* Encouraging reports are pouring in about
the outlook of Hindustan Dorr Oliver
(Rs.166.05). Strong investors are said to be
buying the stock.
* The market is very likely to bounce back on
short covering when investors should book
partial profits and remain in cash. Do not
make bigger commitments at higher levels in
stocks which have already flared up because
of feeling left behind and desire for more
profits.
* Balmer Lawrie (Rs.587) looks attractive on
strong fundamentals like book value of
Rs.165. Last year EPS of Rs.43 and current
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14
year expected EPS of around Rs.50/55, good dividend track record as last dividend was 135%. Since many PSUs are in
action these days, investors can take a small exposure.
* Surana Telecom (Rs.34.40) is likely to report better results and the stock shows firmness. Closing above Rs.37 should
give a good breakout. Stay invested or add on reactions.
* Dish TV (Rs.78.90) is being accumulated by informed sources. Stay invested.
* Better trend of Q2 results is likely to be sustained in future also by Yuken (Rs.318.95). Compared to Dynamatic
Technologies, this stock looks much cheaper. Investors are likely to get good benefit over the long run.
* Pratibha Industries (Rs.307.65), Ramsarup Industries (Rs.221.35) and Madhucon Projects (Rs.360) are
attracting mutual fund buying.
* Jenson & Nicholson (Rs.7.40) restructuring is said to be taking place and it may become a turnaround story.
* Khoday India (Rs.271.10) after a black deal at Rs.240 level may now see higher levels.
* Asian Oilfield Services (Rs.205.15), Deep Industries (Rs.178.55) and Shiv-Vani Oil (Rs.441.10) are attracting strong
speculative cum investment buying. Stay invested.
Note - Liquidity is driving up the market much ahead of fundamentals, which may not last for long as there is margin
pressure in sectors like retail/hotels/textiles/sugar/autmotive/technology etc. due to increase in input costs like
manpower, raw material, coal, power etc and import is becoming cheaper at the same time due to weakening of the
dollar. Hence India may lose its advantage of outsourcing in the longer run. Investors will do well by booking profits at
higher levels and lock a part of it out of the market in fixed maturity plans (FMP) or debt funds.
By V.H. Dave
EXPERT EYE
Jindal Poly Films Ltd. (JPFL) (Code: 500227) (Rs.240) has declared excellent H1FY08 results reporting 181% higher net
profit at Rs.68.1 cr. on 33% higher sales of Rs.613 cr. as against Rs.24.2 cr. in H1FY07. A reputed brokerage house, which
tracks JPFL, projects an EPS of Rs.60 in FY08 and recommends investment in the share with a target price of Rs.360 in the
medium-term.
Incorporated in 1974, JPFL, a flagship of the BC Jindal group, is India's largest manufacturer of flexible packaging films. It
operates the world's largest single location facility for flexible packaging films at Nashik in Maharashtra and employs
modern technology to produce high quality products at a lower cost.
It makes polyester films (BOPET), polypropylene films (BOPP), metallised films and coated films with in house ability to
produce polyester chips for captive consumption. JPFL is among the few manufacturers to offer speciality BOPET and
BOPP films such as specialized hot stamping foils, isotropic films, pinhole free yarn grade films, low oligomer milky
white films, flame treated five-layer films and high speed tobacco over wrapping films.
With its new unit at Silvassa going operational recently, its production capacity stands enhanced to BOPET (1,11,000
TPA), BOPP (90,000 TPA), metallised film (40,000 TPA), coated films (18,000 TPA), polyester chips (70,000 TPA) and
polyester yarn (54,000 TPA). The company's facility to produce polyester yarn has been closed temporarily due to adverse
market conditions.
BOPET & BOPP films are primarily used in packaging apart from a wide range of applications such as photography/x-
ray, LCD and flat screen televisions, printing, electrical insulation, audio/video tapes, cartridges, adhesive tapes, print
laminations and other industrial applications. JPFL has a well-established international marketing network in over 40
countries with several Fortune 500 companies as its end users.
To fund its expansion plans and to set up a new unit in Silvassa, JPFL had come out with an FPO of approx. 83,33,000
shares at Rs.360 per share to raise Rs.300 cr. in June 2005. It also made a preferential allotment of 13,00,000 shares at Rs.360
to DEG, Germany, in February 2005.
During FY07, JPFL posted 23% increased sales of Rs.1025 cr. and reported 26% higher net profit of Rs.59 cr. yielding an
EPS of Rs.21.
During Q2FY08, its sales rose by 35% to Rs.323.5 cr. and net profit by 86% to Rs.29.3 cr. As a result, with a higher margin
of 24%, EBIDTA rose by 110% to Rs.69.4 cr. PBT rose by 262% to Rs.49.77 cr.
There is notional gain of Rs.14.4 cr. during H1FY08 due to exchange rate difference in its outstanding Foreign Currency
Loans taken for acquisition of fixed assets. They have not been recognised in the above results and will be recognised at
the end of the accounting year.
Its equity capital is Rs.28.1 cr. and with reserves of Rs.754 cr., the book value of its share works out to Rs.278. The
promoters hold 55% in the equity capital, foreign holding is 17%, institutions/MFs hold 12% and PCBs hold 6% leaving
10% with the investing public.
The company has approved capital expenditure of Rs.343 cr. for setting up two new BOPP Lines of aggregate capacity of
90,000 TPA and two metalizers of capacity of 14,000 TPA. Both these expansions will be completed by FY09.
15
Due to growing preference for premium and sophisticated packaging, TQPP (Tubular Quenched Polypropylene Film) is
being fast replaced by BOPP and is the preferred choice for packaging of clothing and food products like confectionery,
biscuits, snack foods, pasta, bakery, dried foods and meat.
Currently, the flexible packaging industry is witnessing strong demand growth thanks to the healthy rise in demand for
products of the user industries. The packaging market in India is estimated at Rs.11,000 cr. with the domestic speciality
packaging material market at Rs.2500 cr., growing at a CAGR of 15%.
The rise in demand for JPFL's packaging products, its operational improvements with a defined plan to increase
profitability and the full impact of its expansion gives visibility to its sustained earning potential in coming quarters
despite the concern on crude oil prices.
Since the full impact of the expansion has started to kick in, the company is estimated to clock a turnover of about Rs.1400
cr. with PAT of Rs.175 cr., which would yield an EPS of Rs.60. The JPFL share is traded at Rs.240 at a P/E of 4.3 on FY08E
and is recommended with a target price of Rs.360 in the medium-term at a conservative P/E of 6. The 52-week high/low
of the share has been Rs.278/139.
*****
The shares of the entertainment industry are on an upswing. The shares of multiplex companies, too, have been attracting
investors and the share of Adlab Films recently touched a 52-week high of Rs.1030. Within this segment, the scrip of
Shringar Cinema Ltd. (SCL) (Code: 532631) (Rs.93.20) is recommended for decent gains with a price target of Rs.150 in
the long-term.
SCL is promoted by South Yara Holdings and India Value Fund, a venture capital fund. It has a major presence in the
western region and is headed by Shravan Shroff. It operates multiplexes under the brand name 'Fame'. To fund its
expansion plans, SCL came out with an IPO of Rs.43 cr. comprising 81,50,000 equity shares of Rs.10 each at a price of
Rs.53 per share in April 2005. Big Pictures and Shringar Films Pvt. Ltd. are two subsidiaries of SCL.
In total, SCL has 13 properties, 44 screens and 14,292 seats. The average occupancy at its theatres is stable at 33% whereas
average ticket price has risen to Rs.131 in Q2FY08 from Rs.126 in Q2FY07. SCL has plans to scale up its multiplexes to 115
screens from the present 44 with a pan India presence. During FY08, SCL's total number of properties would increase to
21 with 75 screens.
Going forward, the Fame multiplex chain would build 175 screens across 20 cities over the next 3-5 years at a total
investment of around Rs.230 cr. to be completed by March 2011. The number of screens will increase to 227 spread across
50 sites.
During FY07, SCL posted an income of Rs.51.6 cr. and earned a net profit of Rs.9.8 cr. Its EPS was Rs.3.1. During H1FY08,
SCL registered 67% increased revenue of Rs.38.6 cr. and recorded 135% higher net profit of Rs.9.2 cr. Its H1FY08 EPS
alone works out to Rs.2.9.
The financials of SCL are very strong. Last year, SCL raised $20 million through an FCCB with a tenure of five years with
a coupon rate in the range of 0-0.5% and an yield to maturity (YTM) of 6.5-7.5%. The conversion of the bonds has been
structured such that 60% of the proceeds get converted into equity shares at Rs.90 per share and the balance $8 million at
a premium of Rs.107 per share. Its consolidated gross block has gone up to Rs.106 cr. in FY07 from Rs.75 cr. in FY06. It had
cash of Rs.68 cr. as on 31
st
March 2007, which is being utilized for further expansion.
Its equity capital is Rs.31.6 cr. and with reserves of Rs.23 cr., the book value of the share works out to Rs.17.3. The
promoters hold 48% in its equity capital while foreign holding is 21%, institutions hold 4%, PCBs 7% leaving 20% with the
investing public.
SCL is focused towards achieving dominant growth in the large metros. Its main focus will be on Mumbai, Pune,
Bangalore, Chennai and Kolkata as its
growth drivers that are located in
IT/ITES/SEZ zones.
The future of multiplex companies
appears highly promising in view of the
fast
changing lifestyle
of Indian
consumers, favourable demographics,
low multiplex penetration, increased
organised retail consumption, production
of quality movies and rising disposable
incomes.
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SCL is likely to end FY08 with a revenue
of Rs.85 cr. on a stand-alone basis and a
net profit of Rs.22 cr., which would give
an EPS of Rs.6.9. Its revenue is expected to
16
move up to Rs.125 cr. with a net profit increasing to Rs.30 cr. in FY09 when the EPS would go up to Rs.9.5.
The shares of SCL are currently traded at Rs.93.20 at a P/E of 12 on FY08 EPS of Rs.6.9 and P/E of 8.6 on FY09 EPS of
Rs.9.5. The P/E ratio of the entertainment industry currently rules firm at 43, which makes the investment in the SCL
counter highly attractive. The share is recommended with a target price of Rs.150 at a forward P/E of 15 in the medium-
to-long term. The 52-week high/low of the share has been Rs.87/44.
*****
The shares of the steel industry have been attracting lot of attention from all quarters given the bright prospects of the
industry. Within this segment, the share of Sathavahana Ispat Ltd. (SIL) (Code: 526093) (Rs.45.35) is recommended for
decent appreciation in the medium-to-long term.
Incorporated in 1989, Sathavahana Ispat manufactures pig iron through the mini blast furnace route with an installed
capacity of 1,20,000 TPA. Since then, the capacity has been hiked to 2,10,000 TPA. It is spearheaded by K. Thanu Pillai as
Chairman and A. S. Rao as Executive Vice-Chairman.
As part of its diversification and backward integration programme, the company has set up a project to manufacture
4,50,000 TPA Metallurgical Coke with 30 MW co-generation of Power at its greenfield site in the Bellary district of
Karnataka at a cost of Rs.174 cr. While the metallurgical coke plant was commissioned in March 2007, the co-generation
facility is expected to commence during the third/fourth quarter of FY08.
During FY07, the company earned over 999% higher net profit of Rs.14 cr. on 34% higher sales of Rs.243 cr. The EPS was
Rs.5.34. During H1FY08, it reported 2.5% lower net profit of Rs.11.6 cr. on 8% lower sales of Rs.131 cr.
Its equity capital is Rs.26.3 cr. and with reserves of Rs.65 cr., the book value of the share works out to Rs.34.8. Its debt-
equity ratio is a bit high at 1.8:1 on account of loans taken for major expansion. The value of its gross block, including the
capital work-in-progress is Rs.277 cr. as against Rs.169 cr. reflecting an increase of Rs.108 cr.
The promoters hold 38% in the equity capital, PCBs hold 8% and institutions/mutual fund hold 2% leaving 52% with the
investing public.
SIL operates in the iron and steel industry, which is considered as core sector. It uses the mini blast furnace technology.
Earlier, the company had replaced Tata-Korf technology with Chinese-Shougang technology and partially absorbed the
new technology.
Pig Iron is the basic raw material for most engineering products and for use in the construction and capital goods
industries. Given the significant growth in the user industries like automobiles, construction, foundries the demand for
iron and steel has increased considerably. The total production of pig iron has increased from 1.59 million tonnes in 1991-
92 to a peak level 5.22 million tonnes in 2003-04 but dropped to 4.96 million tonnes in 2006-07. It is, however, higher than
4.69 million tones in the previous year as per statistics (provisional) released by the Joint Plant Committee (JPC) attached
to the Ministry of Steel.
Metallurgical coke is a key input for iron making. With the production of metallurgical coke, SIL has integrated itself
backward for this key input material. It sells the surplus coke in the open market.
India is the 5
th
largest steel producer with a production of 49.39 million tonnes. The apparent steel consumption also
grew from 39.19 million tonnes in last year to 43.74 million tonnes in FY07 recording an impressive growth of 11.6%. This
augurs well for the prospects of pig iron manufacturers.
There was robust growth in the global demand for iron and steel mainly driven by the increasing Chinese appetite for
steel followed by the USA and the European Union virtue of the resurgence in their economies. India is expected to
become the second largest steel producer after China by 2015-16.
SIL's pig iron enjoys brand value and since it is one of the low cost producers there is an opportunity for enhancing its
market share. The simultaneous modernizing of its plant, not only ushers great efficiency and reduction in process costs
but also enhances volumes. The company is continuously modernising its existing operations to improve it efficiency
parameters and bring down operating costs.
With the augmentation of its pig iron capacity, coke making capacity with latest technologies together with the upcoming
cogeneration of power at its greenfield site, SIL will take full advantage of the current uptrend in the iron and steel
industry.
SIL is all set to register sales of Rs.300 cr. with a net profit of Rs.28 cr., which would give an EPS of Rs.10.6 for FY08. Net
profit is expected to further advance to Rs.45 cr. in FY09 on sales of Rs.425 cr. and EPS would go up to Rs.17. The share of
SIL is traded at Rs.51 at a P/E of 4.8 on FY08E and P/E of 3 on FY09E is recommended with a target price of Rs.70 in the
medium-term.
By Nayan Patel
TECHNO FUNDA
Syncom Formulation
BSE Code: 524470
17
Last close: Rs.65.85
It is a high-risk, high-profit stock for short-term investors. Buy with strict stop loss of Rs.57. On the upper side, it can go
up to Rs.73. On cross over, it can go up to Rs.85 level in
coming days.
IOL Chemicals
BSE Code: 524164
Last close: Rs.110.10
The company manufactures Ethyl/Butyl Acetate, Acetic
Acid, Acetic Anhydride and Ibuprofen-Bulk Drug and
has an equity of just Rs.12.05 cr. The promoters hold 53.31% while corporate bodies hold 23%. For the Sept'07 quarter, Net
sales jumped 88.59% but net profit zoomed 169.92%. For FY08, it is likely to touch sales of Rs.300 cr. with net profit of
about Rs.11-12 cr.
India Star Fund, Citi Group's investment ARM, has bought preferential shares at Rs.75 per share. Buy with stop loss of
Rs.100. On the upper side, it can go up to Rs.122.50. After cross over, it can go up to Rs.150+ level in coming days.
Surana Corporation
BSE Code: 531102
Last close: Rs.78.75
This is Chennai based Surana Group's flagship company. It has an equity of just Rs.19.36 cr. and the promoters hold
above 80%.
For the first nine months, the company gave mind blowing results. Net sales was Rs.813.20 cr. with net profit up by
151.37% at Rs.10.08 cr. against Rs.4.01 cr. in the previous corresponding period. Last year's profit was only Rs.10.91 cr.
The company is in the trading business and currently all trading related stocks are on fire. .STC India zoomed to Rs.1736
from Rs.173 in just 2 months, MMTC kissed Rs.56931. Surana Corporation is thus an undervalue share and can go up to
Rs.85.50. Thereafter, it may go up to Rs.97, Rs.105 levels in coming days. Keep a stop loss of Rs.71 and buy this stock for
investment.
'India growth story continues': Experts
MONEY FOLIO
Review
- Kulkarni Power recommended last week at Rs.189 zoomed and
kissed Rs.255 in a highly bearish market.
- Ferro Alloys recommended last week at Rs.32.70 hit Rs.36
despite the prevailing weak sentiment.
"If crossing the 20,000 mark seems like a remarkable feat for the Sensex, please remember the time when the Sensex was at
4000 and I stood here and urged you to invest in equities. Those of you who took my advice then are now considerably
wealthier," said Mr. Nilesh Shah, Deputy Managing Director & CIO, Prudential ICICI AMC Ltd.
"Today, the India growth story is being driven by very large numbers of entrepreneurs, including IIT graduates with their
own 'garage startups', for whom availability of capital from investors and institutions is no longer a constraint", he added.
"Our economy is currently at USD 1.1 trillion
and over the next 15-20 years, it will grow
multifold and so will the market cap. Grab the
investment opportunities now while you still
can, but avoid the pockets of insanity that exist
in the market, " said Mr. Shah, speaking at a
seminar on 'Equity Market: Where are we
heading?' held at Indian Merchants' Chamber,
on Wednesday, 21
st
November.
Other speakers at the seminar were Mr. Sanjay
Sachdev, India & Regional Manager (South East
Asia) - Fund Management, Shinsei Bank, and
Mr. Raj Nair, Chairman, Avalon Consulting.
Mr. Sachdev opined that India's is an extremely
stable economy, and no amount of political change at the Centre would change that. "We are at the beginning stages of a
40-year super-cycle of growth," he asserted, adding that only external factors like happenings in Pakistan, China and USA
could affect the market.
L-R:
Mr. Nilesh Shah, Dy. M.D. & CIO, Prudential ICICI AMC Ltd.; Mr. Niraj Bajaj, President, IMC; Mr.
Sanjay Sachdev, India & Regional Manager (South East Asia) Fund Management, Shinsei Bank and Mr.
Raj Nair, Chairman, Avalon Consulting speaking at a seminar on 'Equity Markets: Where are we
heading?' organised by the Indian Merchants' Chamber held on Wednesday 21st November 2007
Earlier welcoming the speakers, President of Indian Merchants' Chamber, Mr. Niraj Bajaj emphasized on the growth story
of Indian. He affirmed if we can sustain this rate of growth, per capita income can double in about 9 years. "This high
growth has been facilitated by an unprecedented increase in the rate of investment from 22.9% in 2001-02 to an estimated
35.1% in 2006-07" he added.
Mr. Nair, however, struck a cautious note pointing out that a global debt crisis was impending, owing to the vast amounts
of bad debts accumulated by foreign banks such as Citigroup. "A debt mountain has been created by banks collateralizing
18
19
the primary debt to create cash loans. In the US alone, debt derivatives of $485 trillion are riding on the US GDP of $60
trillion" he cautioned. A number of banks would be hurt as they were sitting on valueless debt instruments, he elaborated.
"USA is anticipating a recession in 2008, and China has decided not to allow any bank lending in order to cool down its
overheated economy. When fresh investments cease in China, 6 months down the road, what will be its impact on the
global and Indian markets?" Mr. Nair enquired.
DBS Chola MF launches DBS Chola Small Cap Fund
DBS Chola MF has launched its three year close-ended fund, DBS Chola Small Cap Fund that seeks to generate long-term
capital appreciation by investing predominantly in equity and equity related instruments of companies with small market
capitalisation. Small Cap companies, as defined by the fund's objective are those companies whose market capitalisation
falls betweens the highest and the lowest constituent of the BSE Small Cap Index. The NFO opened for subscription on
20
th
November and will close on 20
th
December 2007.
To pursuer its investment objective, it will rely on its own independent research to locate the best investment
opportunities available in the market. The fund will invest at least 65% of its net assets in stocks of small companies.
When choosing the stocks, it will look at one or more of the following characteristics – Capable Management; Attractive
business niches; Pricing Flexibility/Valuations; Potential or demonstrated ability to grow revenues; potential for value
unlocking.
Stock selection will reflect either growth or value investment approach. The fund is benchmarked to the BSE Small Cap
Index.
The scheme offers both cumulative and dividend options. Units will be offered at Rs.10 per unit. The minimum
application amount is Rs.5000 and in multiples of Re.1 thereafter.
Reliance Life Insurance launches unique `Reliance Secure Child Plan'
Reliance Life Insurance, a fast growing life insurance player in the country has launched Reliance Secure Child Plan
wherein the plan offers the benefit of fixed income at a rate of 10% of the sum insured under the policy, per annum,
payable to the child throughout his/her life in the event of total and permanent disability of the child due to an accident.
The plan also offers an inbuilt waiver of premium benefit in the event of the death of the insured proposer (parent) that
protects the future of the child by paying at the future premiums, so that the plan remains in full force.
Another novel offering is the playground program - an online community that addresses the educational and recreational
needs of the child through fun-filled quizzes, puzzle, games, online jokes, contests and kid zone and offers redeemable e-
Points for his/her achievements.
ING Investment Management launches ING Global Real Estate Fund
ING Investment Management India has launched the ING Global Real Estate Fund, an open-ended Fund of Funds (FoF)
scheme for Indian investors. The scheme opened on 20
th
November and will close on 14
th
December 2007. The earliest
closure date is 7
th
December 2007. The scheme will primarily invest in the Cayman Islands registered ING Global Real
Estate Securities fund that seek to provide investors with diversified returns consisting of income and capital appreciation
over time. This will be India's first open ended real estate fund and the first fund to offer Indian investors access to global
property markets.
Speaking on the occasion, Vineet K. Vohra, Managing Director and CEO, ING Investment Management India, said "This
fund opens up a new asset class for India investors and aims to offer returns that are better than a fixed income product
but with lower volatility than an equity fund. It is the right time to bring such a product to India, as in today's volatile
markets it potentially helps lower an investor's portfolio risk due to its low correlation with Indian equity and bond
markets. This product diversifies across 21 countries and invests in commercial properties such as offices, shopping malls,
healthcare facilities, hotels, apartments etc. As on date, the fund does not have any exposure to the US sub-prime housing
sector."
ING Global Real Estate Fund will act as a feeder fund for the Cayman registered real estate fund, which is sub-advised by
ING Clarion Real Estate Securities, a part of ING Real Estate. ING Real Estate is the largest real estate investment manager
in the world with almost $145 billion in real estate assets under management.
Lotus India AMC launches India's first Quant based ELSS Scheme
Lotus India AMC has launched India's first Quant based ELSS Scheme, Lotus India AGILE Tax Fund (Alpha Generated
from Industry Leaders Fund). The investment objective of this scheme is to generate capital appreciation by investing in a
passive portfolio of stocks selected from the industry leaders on the basis of a mathematical model designed by the
20
LIAMC Team. It's a Closed Ended Equity Linked Savings Scheme with a maturity of 10 years that will invest in 11 stocks
(9% each) determined by a mathematical model. The portfolio will be reviewed and reset every month.
The New Fund Offer priced at Rs.10 per unit opened on 15
th
November and closes on 15
th
February 2008. The fund will
invest 90-100% in equity and equity related instruments and 0-10% in debt and money market instruments. The fund
offers two options i.e. Growth and Dividend. The Dividend option offers Dividend Payout and Dividend Re-investment
facilities. Investments made under this scheme will have a lock-in for a period of 3 years.
Elevator News Network – a new medium
ENN-Elevator News Network, a Mumbai based company, in collaboration with the US based Helius, a world leader in IP
(Internet Protocol) Technology, launched this new media in Mumbai.
It is introducing this service in 120 elevators in different buildings in Mumbai where the television screens would beam
news and advertising for 24 hours every day, which will have the support of 4 huge servers in Mumbai and 2 back-up
servers in New York. It is tying up with some prestigious commercial buildings, residential towers, 5-star hotels and
shopping malls in Mumbai for this service. It is also in talks with advertisers, media and advertising agencies to include
this unique communication tool in their media plans.
Lotus India FMP – 3 Months – Series XIX mops up Rs.227 cr.
Lotus India Asset Management Company Private Limited that seeks to generate income by investing in a portfolio of debt
and money market instruments normally maturing in line with the duration of the scheme has announced collections of
around Rs.227 cr. during the NFO of the Lotus India Fixed Maturity Plan – 3 Months – Series XIX, which closed on
November 14, 2007.
Acme Tele Power plans IPO
Acme Tele Power Ltd. (ATPL), provider of innovative energy conservation solutions and products to companies
operating in the global telecommunications industry, proposes to enter the capital market with an IPO of 17,283,580
equity shares of Rs.2 each through the book-building route.
Prior to the proposed public issue, the company has placed through the private equity placement route, a total of
2,856,502 shares of Rs.2 each at a price of Rs.688 per share, representing 1.66% of its expanded capital base, aggregating to
Rs.196.5 cr. approx. (US $50 million). Out of these, 2,283,066 shares have been placed with DB International (Asia) Ltd.,
428,088 shares with Earthstone Holdings Pvt. Ltd. and145,348 shares with Kotak Mahindra Capital Company Ltd.
Its net turnover increased from Rs.34.5 cr. with cash profit of Rs.9.3 cr. in FY04 to Rs.647.4 cr. with cash profit of Rs.228.3
cr. for FY07 on consolidated basis.
V- Guard Industries plans IPO
V-Guard Industries Ltd, a company engaged in the manufacturing and marketing of electrical and electronic products
based in Kerala proposes to tap the capital market with an IPO of 80,00,000 equity shares of Rs.10 each through a 100%
book-building issue. V-Guard proposes to use the proceeds from the IPO primarily for setting up of facilities for Cable
manufacturing in Coimbatore and Uttranchal, for setting up of Enameling plant at Coimbatore, for setting up
Development and Pilot Production Plants for water heaters, Fans and Pumps at Himachal Pradesh and Coimbatore and
for setting up Service and Distribution Centres at Bangalore, Hubli and Vijaywada.
The company is engaged in the manufacturing and marketing of Electronic Voltage Stabilizers, Monobloc, Jet,
Submersible, Compressor pumps and Electric Motors, Insulated Electrical Cables (House Wiring, Industrial), Electric
Storage & Instant Water Heaters, Solar Water Heaters, UPS, Electric Fans and is also in generation of Power in a small
way. The products are sold through a network of over 7000 retail dealers and 105 distributors Pan India.
Vakrangee Group to acquire 14.48% in Beryl Drugs Ltd.
Vakrangee group a Mumbai based e-Governance company has given consent to subscribe to 10,00,000 shares/warrants of
Beryl Drugs Ltd. (BDL). Vakrangee Group's consolidated holding after the proposed allotment will be 12.50 lakh shares
constituting 14.48% of the post allotment equity of BDL.
BDL is in the business of manufacturing of I V Fluid, Small Volume Injectables and having facility to produce 40,000 I V
Fluid and 40,000 Small Volume Injectable per day. It plans to double production for which it is issuing 15,00,000 lakh
shares and 20,00,000 convertible warrants to promoters and strategic investors.
K Sera Sera H1 net zooms to Rs.10.06 cr.
K Sera Sera Productions Ltd., among the largest entertainment software producers and distributors, has reported a 1468%
jump in net profit to Rs.10.06 cr. for H1FY08 while its total income zoomed 123% to Rs.46.92 cr. over the previous
corresponding period. Its annualised EPS stood at Rs.10.1.
For Q2FY08, it posted a net profit of Rs.8.2 cr. compared to a loss of Rs.2.1 cr. for Q2FY07 and the total income increased
to Rs.33.7 cr. from Rs.18 cr. over Q2FY07 recording an EPS of Rs.4.12.
Kohinoor Broadcasting Q2 net at Rs.45.8 lakh
Kohinoor Broadcasting Corporation Ltd. has reported that its net profit stood at Rs.45.8 lakh in Q2FY08. Operating
income stood at Rs.3.7 cr. and the EPS was Rs.0.64.
The board has approved the allotment of 75,000,000 equity shares of Rs.10 with underlying 7,500,000 GDRs issued in the
name of Deutsche Bank Trust Company Americas and issuance of share certificate thereof.
Dun & Bradstreet launches Infrastructure industry publication
Dun & Bradstreet, a leading provider of global business information, knowledge and insight launched its inaugural
publication on the Indian infrastructure industry called India's Leading Infrastructure Companies 2007. The publication,
an authoritative reference on the major Infrastructure companies in India, chronicles the major players in three sectors -
Power, Telecom and Construction.
The publication has ranked the following sector wise.
COMPANY*
#
RANK
Construction
Power
Telecom
1
L&T
NTPC
Bharti Airtel
2
Nagarjuna CCL
Tata Power
Reliance Communications
3
Unitech Ltd.
Reliance Energy
MTNL
4
Hindustan CCL
Nuclear PCIL
Idea Cellular
5
IVRCL
Bangalore Electricity Supply
Tata Teleservices
* Minimum income of Rs.100 cr., # Ranking based on Total Income
Best Performing CFO awards
CNBC-TV18 in association with HSBC Bank has announced the 'Best performing CFO Awards'. The award has been
instituted to recognise the financial stalwarts and the enormous contribution they have made towards the outstanding
success of their organisations.
Adjudged by a jury comprising world-respected management strategists, academics and corporate personalities, the
candidates were evaluated on their ability to create short-term advantage, long-term value, a competitive edge and the
demonstration of leadership in the business community.
Best Performing CFO in:
(1) Auto, Aviation & ancillaries Sector: Mr. Bharat Doshi, Mahindra & Mahindra Ltd.
(2) FMCG & Retail Sector: Mr. Ravi Nedungadi, UB Group.
(3) Healthcare Sector: Mr. Saumen Chakraborty, Dr. Reddy's Labs.
(4) Financial Services Sector: Mr. Keki Mistry, HDFC Ltd.
(5) IT and ITES Sector: Mr. S. Mahalingam, TCS Ltd.
(6) Commodities Sector: Mr. Koushik Chatterjee, TATA Steel.
(7) Oil & Allied Services Sector: Mr. R.S. Sharma, ONGC.
(8) Infrastructure Sector: Mr. Y.M. Deosthalee, L&T.
(9) Best Deal in the M&A Category: Mr. Koushik Chatterjee, Tata Corus
(10)CFO of the year: Mr. Bharat Doshi.
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.
21
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