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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 20
Monday, March 31 – April 6, 2008
Pages 17
Positive divergence seen
as Sensex targets 16,600
By Sanjay R. Bhatia
The markets opened the week on a positive note on the back of good global cues. The Sensex recorded its second highest
point gain on Tuesday by closing with gains of 928.09 points and followed it with a 355 points gain on Friday. Traders
and speculators were seen covering short positions ahead of the derivatives segment expiry and also taking selective
buying positions. The volumes recorded have improved amidst
positive breadth of the market. Incidentally, FIIs remained net
buyers in the cash as well as the derivatives segment. Mutual Funds,
too, were net buyers buying at lower levels.
Global cues remained more or less positive with crude oil prices
continuing to remain stable and global markets rallying on mixed
US economy signals. The domestic cues were remained mixed.
Inflation, however, continues to remain a cause for concern as it
soared to 6.68% for the week ended 15
th
March 2008. Fund flows
have shown marginal improvement but need to improve on a
continuous basis. It is also important that global markets continue
with the current rally and no big negatives emerge from the US
economy. In the meanwhile, the markets are likely to keep a close
watch on global markets, crude prices and the rupee dollar equation. Intermediate bouts of flare-ups amidst bouts of
volatility and selective buying will be witnessed. However, rise in funds flow and increase in volumes is needed if a
sustainable rally has to unfold.
Technically, as indicated in the issue dated 17
th
March 2008, a positive divergence pattern is unfolding that will take the
Sensex to 16,600 level. The Sensex touched a high of 16,452 on 28
th
March 2008. The good thing is that the rollover to April
series is low and we are entering the new series with less baggage. The markets are likely to bottom out and if the Sensex
can close above the 16,600 level, then it is likely to test the 17,200 level.
On the upside, the Sensex faces resistance at the 16,608 and 17,022 and 17,200 levels but has support at the 15,699 and
15,332 levels. On the upside, the Nifty faces resistance at the 5025 and 5156 levels but 4899 and 4482 are its important
support levels.
Traders and speculators could buy Bharti Airtel with a stop loss of Rs.803 and a target price of Rs.890.
1
The downfall is arrested
By Fakhri H. Sabuwala
The volatility may remain but a distinct characteristic of the market over the last few days is that the fall has been
arrested. That's a pleasant change and a change for the better. It is amidst this change that the confidence has to be
restored and smiles to return on fearful faces. It would be worthwhile to remember that the market reflects the truth. The
rates, the prices are the ultimate truth whether they fit into your thinking or into your bill is another matter. Your
perception can only discover value but the reality is the price – the prevailing rate whether high or low. "Truth is not a
crystal that one can put in one's pocket but an infinite fluid into which one falls headlong", says Robert Musil and how
correct he is in the context of the market.
"It is observed that in the last two months the Sensex has dipped to 14,000 from its high of 21,200. If such a free fall was to
sustain then India would be available for free in the next 60 days! Will Indian businesses close down?" That's how one
thinks at Dalal Street says analyst Gul Teckchandani. If the Sensex 21,000 level was not too high in the midst of the
prevailing optimism, then how could one say that the Sensex may go down further? None of us could experience the
crazy feel at dizzy heights and none of us could see such a fall coming. So how could we prophecise any further fall from
hereon. It's time to be free from such 'firmaans' (proclamations) of analysts either on TC channels or print media and
instead evaluate scrips and situations on value parameters. Experience has taught us that the market is prone to excesses
on the upside on account of euphoric sentiment. Likewise we do so on the downside gripped by panic. Market is
something that cannot be predicted from minute to minute, then how can one predict it hour to hour or day to day or
even week to week leave alone month to month? The stock market is real time dynamics. So just be with it. Don't get
carried away by the commentaries of experts either in print or television.
Just about the time when confidence is returning, albeit slowly it would not be out of place to have faith in some biggies
which are moving and may spin money for investors. A few such growth ideas are enumerated hereunder.
* BHEL: Indiabulls in its recent study of the scrip recommends this capital goods major at the current price and expects it
to earn at least 33% in a year from now. Upgrading BHEL to 'Buy' and a target of Rs.2850 within the next 12 months is
mainly due to three factors mentioned herein.
Firstly, during Q3FY08, BHEL registered in strong order inflow growth of 91% YoY basis to Rs.10,900 cr. taking the order
book to Rs.78,000 cr. as on December 2007 up by 67% on YoY basis. Moreover, during January & February 2008, it bagged
an additional order worth Rs.9280 cr., which resulted in its order book touching Rs.87,280 cr., which is 5.1 times its FY07
turnover.
Secondly, the company has huge capacity in place to support the large order book. A 50% rise in manufacturing capacity
from 10,000 MW in December 2007 to 15,000 MW by December 2009. Boiler plant at Trichy is also being upgraded and so
is its ultra modern blade shop at Haridwar. A new fabrication plant and a central stamping unit are coming up at
Jagdishpur. All these investments mean a speedy execution of orders thereby boosting its top as well as bottomline.
Last but not the least, the controlled material expenditure in its overall costs come out as a clear winner. Its raw material
to sales ratio dropped sharply by 213 bps on YoY basis in Q308 while it dropped 92 bps YoY for the 9 months ending 31
st
December 2007.
The key risks that the company faces are increased competition from Chinese manufacturers, raw material price
fluctuations, project execution delays and company's failure of projects involving super critical technology. Despite them,
the company is poised to maintain a CAGR of 39% in the bottomline during FY07 to FY09.
* Sical Logistics: The Indian Railways has opened up private container transportation in 2005-06 by allowing private
firms to operate freight trains to handle the growing volume of traffic ending a decade long monopoly of the state owned
Container Corporation of India.
Filling up the vaccum are many players of which Sical Logistics through its subsidiary, Sical Multimodal and Rail
transport, needs a special mention. This company offers total multimodal logistics solution to its clients in handling raw
materials as well as finished products.
The number of trains run by private sector operators is expected to increase to 55 by end 2008 from 44 trains at present.
The railways have set higher targets for
private carriers to achieve and it supports this
by
higher
investments
in
building
infrastructure like dedicated freight corridors,
additional rail lines, signaling works and
flyovers. A total outlay of Rs.75,000 cr. in 7
years has been set aside by the Railway
Minister that may eventually reduce the
transaction costs and the time in moving
goods from inland locations to the ports. It
may also get a share of the iron ore and coal
transportation by the railways.
Sical is on its way to invest heavily in rolling
stocks, containers and in developing rail
linked Inland Container Depots (ICDs),
container freight stations (CFSs) and port side
Daily Fresh Buy
(for the busy investor)
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With just one daily recommendation selected from stocks in an uptrend,
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2
container terminals (PCTs), which will act as multi modal hubs together with efficient trucking and warehousing services
for its customers.
Sical will also invest in high speed flat container wagons capable for carrying a 20 ft. container and running at 100 kmph
thus reducing running and turnaround time. Ownership of rolling stock may give Sical an edge over others.
3
Pull-back likely
TRADING ON TECHNICALS
By Hitendra Vasudeo
Last week, the Sensex opened at 15093.77, attained a low at 15056.09 and moved up to form high for the week at 16452.08
before closing the week at 16371.29 and thereby showed a net rise of 1377 points on a week-to-week basis. The strongest
week to week gains since its fall from the top of 21206 was witnessed on the Sensex last week. The Sensex had actually
opened with a gap up against the previous week's closing. The low of last week was also above the previous week's
closing. Later, the Sensex crossed the trading lower top of 15465.
In last week's update, we had indicated that a rise and close above 15465 will be the first indication of some kind of
reversal. The level of 15465 was crossed with a gap up opening on 25/03/08 and the Sensex recorded a strong gain of 928
points. The weekly trend has turned up and can turn down on a sharp fall below 14677 or if the Friday weekly close is
below15775.
Last week, the Sensex crossed first trigger at 15465 and its next trigger
point is 16683. Initial resistance will be at 16683. In the last couple of
weeks, the Sensex had violated the trend line taken from the low of
4227 and 8799. The same trend line value is placed at 16653. Weekly
level 3 is placed at 16863. The 0.618 level of the fall from 18314 to 14677
is placed at 16923. The Sensex has cluster of resistances at 16683-16923.
If the Sensex is able to cross and close above the resistance of 16923,
then we will be once again forced to take a pull-back of the broader fall
from 21206 to 14677. In that case, the 0.382, 0.500 and 0.618 levels are
placed at 17177, 17947 and 18717 respectively. Weekly support will be
at 15959-15467-14994-14677.
On the daily chart, the trading higher bottom is at 15869. If the trading
higher bottom is not violated, then momentum will remain intact for a pull-back. The next important support gap on
daily chart is at 15612-15351.
Sensex Wave Analysis
Wave I-2594 to 3758
Wave II-3758 to 2904
Wave III- Internals as follows:
Wave 1- 2904 to 6249
Wave 2-6249 to 4227
Wave 3-4227 to 12671
Wave IV- 12671 to 8799
Wave V- 8799 to 21206
Wave A-21206 to 14677
(Looks likely to
be
complete but needs for
additional confirmation of
completion)
WEEKLY UP TREND STOCKS
If Wave A is complete,
then we will look for
Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy
with what ever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to
Level 3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value
then the trend will change from Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal
of the up Trend.
Last
Center
Relative
Weekly
Up
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Stop
Loss
Buy
Price
Buy
Price
Book
Profit
Book
Profit
REI AGRO
1486.00 1174.0
1368.0
1444.0
1562.0
1756.0
87.9
1399.5
28/03/08
CAIRN INDIA
230.10
154.2
200.5
217.1
246.8
293.1
77.1
221.9
28/03/08
HINDUSTAN UNILE 242.20
208.5
229.8
238.7
251.1
272.4
72.5
231.5
08/02/08
ITC
206.30
174.8
194.0
200.8
213.2
232.4
65.1
193.1
28/03/08
CIPLA
217.55
193.5
208.2
213.5
222.9
237.6
64.7
206.8
22/02/08
Wave B which will have
an up direction. The up
direction of Wave B will
be termed as the pull
back rally. The question
now is: Will Wave B be a
Flat pattern or a Zig Zag
one? If Wave B is a Zig-
Zag pattern, then the
extent of the rise can be
towards
17177-17947-
18717. If Wave B is a Flat
pattern, then the rise can
get extended towards
19578-20394.
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
MAX INDIA
148.75
101.0
130.9
142.9
160.7
190.6
23.10
147.54
11/01/08
PURAVANKARA PR 243.10
112.4
191.4
218.7
270.4
349.4
24.51
252.97
18/01/08
SHREE PRECOAT 171.45
122.4
151.8
161.6
181.3
210.7
24.86
171.56
11/01/08
UNITED BREWER
180.05
115.0
156.3
173.8
197.6
238.9
27.69
191.38
25/01/08
BAJAJ AUTO
687.00
490.7
612.7
660.3
734.7
856.7
28.28
759.00
07/03/08
The second confirmation
of the Wave A completion
would be if the Sensex is
able to cross and close
above 16923.
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
HTMT GLOBAL SOLUTION 532859 322.25
310.00
325.00
275.00
355.9
405.9
0.71
RAISAHEB REKHCHAND 530047 110.80
109.00
111.00
96.95
119.7
133.7
0.64
Conclusion
The support gap of 15612-
15351 is an important
support. If the support
gap is not violated, then
the pull-back rally will
attempt to move to
higher
levels. If the gap of
15612-15351 is violated
and the close is below it,
then once again the
Sensex can move down
to test the low.
Strategy for the week
The short sell stop loss
indicated last week of
15465 has been crossed.
Corrective dips to 15959 and 15467 can be used for buying with a stop loss of 14677 or a Friday weekly closing stop loss of
15775. Check on Friday after 3 pm, if the Sensex is below 15775 then exit long positions. Traders can monitor Sensex
levels and execute on Nifty Future. Traders who are already long can take profit at 16683-16923. Re-enter long on close
above 16923 to subsequently exit at 17177-17947-18717.
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
BANK OF INDIA
272.25
277.38
291.65
305.92
352.10 156.5
37.94
EIH
134.70
138.94
146.00
153.06
175.90 79.1
36.13
JAIN IRRIGATION SYST
604.00
622.30
650.50
678.70
770.00 383.3
37.9
KARNATAKA BANK
203.35
216.41
225.50
234.59
264.00 139.4
35.87
SAIL (STEEL AUTHORIT
197.50
207.67
215.75
223.83
250.00 139.2
37.1
SINTEX INDUSTRIES
360.15
362.58
381.35
400.12
460.90 203.5
35.52
S.KUMARS NATIONWIDE
88.95
107.71
116.55
125.39
154.00 32.8
31.95
STATE BANK OF IN(NEW
1680.00 1776.06 1836.00
1895.94
2090.00 1268.1
38.65
AXIS BANK
805.00
818.93
853.50
888.07
1000.00 525.9
36.78
WALCHANDNAGAR INDUST
420.00
560.79
612.00
663.21
829.00 126.8
38.25
* Lakshmi Energy & Foods may attract HNIs as it is recommended for investment both by Parag Parikh Financial
Services and the market savvy Edelweiss Securities.
TOWER TALK
* Is the marwari bear cartel slowly cutting their short positions and preparing for a build up of longs? The volumes of last
four days say so.
* FIIs are slowly returning. Once the sub prime pain eases and healing starts, India may be the safest emerging market.
* Can you believe this? The Pharma sector, which has been listless for the past few years, may be the smartest performer
in 2008. Thanks to the finance minister.
* All the stocks that were eroded by 60% to 70% of their values in the last two months have become good bets by default.
A technical pull-back may give 30% to 50% return from their recent lows.
* Buybacks abound in mandi times as it gives immense advantage to rich managements to reduce equity by buying
shares at a very low price.
* Bodal Chemicals is a value buy as it has come to very attractive levels. Once its rights issue is completed, the stock may
seek upper levels.
4
* PBM Polytex, a dividend paying company with good plans ahead, is quoting under Rs.17. It's a value buy at current
levels.
* A Mumbai analyst recommends Asian Oilfield Services, Asian Electronics, Bihar Tubes and Avon Organics at current
levels. Is there magic in these stocks?
* ANG Auto, which is at Rs.90 level is a good medium term investment. The company, which is in a niche trailer market,
has the first mover advantage in the branded trailer segment.
* MacMillan India can be bought for long-term as the company is available at a price close to its book value. Its many
acquisitions will come into play in coming years.
* Micro Technologies has recently launched another high growth product called MICRO – VDP (Video Door Phone) for
housing complexes and apartments. A screaming buy below Rs.200 level.
* Jupiter Bioscience is acquiring a manufacturing facility of Merck Life Sciences in Switzerland. Scrip may see a sharp
rally in coming days.
* Bhagyanagare India is betting high on Solar photo voltaic business and its joint venture has already placed the order for
supply of 57 MW production line. Keep a close watch on this scrip.
* Patels Airtemp is quoting less than one third from its recent high of Rs.146 in January 2008. Technically, the scrip seems
to have bottomed out around Rs.40 level. A risk-free bet in the engineering space.
* GM Breweries is tipped to come out with encouraging results for March'08 quarter on 3
rd
April. Buy for short term
gains.
By Saarthi
BEST BETS
Tera Software Ltd. (Code: 590020)
Rs.50.60
Founded in 1994, Tera Software Ltd. (TSL) is one of the leading e-governance solution providers. It undertakes data
entry/scanning works for digitization of information maintained under Right to Information (RTI) Act. It focuses mainly
on long term projects under BOOT/BOOR/BOMT for providing end-to-end solutions to different public interface
departments for effective e-governance and good governance. It also undertakes short-term projects like issue of photo ID
cards, ration cards and election commission cards. Currently, TSL caters to transport, land registration, revenue
management for distribution and supply companies of electricity and water, sales tax, education and public distribution
systems. It also helps in creating IT infrastructure, facility management (maintaining database) and logistics operations.
Its customers include the most prominent State governments active in the e-governance space like the governments of
Karnataka, Andhra Pradesh, Kerala, Goa, Maharashtra, West Bengal and Bihar. Besides, it also serves various public
sector enterprises, Govt. of India (GOI) undertakings and many large organisations including Indian Railways, BHEL,
BESCOM, NRSA, NIC, SARC, Zee Telefilms, Shantha Biotech to name a few.
Although its major revenue comes from e-governance, TSL also offers IT enabled services, software development and
consultancy, system integration and networking which contributes nearly 20% of its revenue. For this, it has entered into
a strategic partnership with companies like CISCO, EPSON, HP, Wipro, IBM, D-Link, EMC etc. It even operates an in-
bound as well as out-bound BPO service on a small scale at Hyderabad. However in consortium with Electronics
Corporation of India Ltd (ECIL), TSL has bagged huge e-governance order taking its total order book position to around
Rs.250 cr. to be executed over the next five years. Its current projects include:
•
Complete automation of department for Road Transport Authority, Kerala and AP
•
Capturing beneficiary information and printing Biometric ration cards for Civil Supplies Dept, AP.
•
Computerisation in schools and high schools - Directorate of Education, Goa
•
Supply and installation of spot billing machines along with software – MSEB, Pune
•
Computerisation of Sales Tax Department – Maharashtra
•
Total revenue management solution for electric company – Karnataka, Maharashtra & WB
Importantly, TSL has bid for number of other projects like issue of ration card in the States of MP, Jharkhand & Orissa,
computerisation of Transport Department in Karnataka, Punjab & Bihar, Sales Tax automation in Goa and West Bengal,
land computerisation in Kerala, contract for Nagaland, revenue management for electricity boards in Orissa and
Rajasthan. Moreover, the company has been empanelled vendor for rollout of IT services in the government sector
through National Informatics Centre Services Inc (A Government of India Enterprise under NIC), Ministry of
Communications & Information Technology for a period of one year which can be extended by another one year. This
will boost its topline by another Rs.1520 cr. per annum. In short, its future earning visibility is very strong and with the
State governments increasing their budget allocation every year for computerisation and e-governance, TSL is bound to
grow at a healthy CAGR of around 30% over the next few years.
TSL derives 100% of its revenues from the domestic markets and is, therefore, unaffected by the recent rupee appreciation
against the US dollar. It recorded 70% growth in its topline to Rs.60 cr. and net profit was up 90% at Rs.11.70 cr. for FY07
5
registering an EPS of Rs.10. For the first nine months of FY08, its revenue increased by 45% to Rs.44 cr. whereas profit was
higher by 35% at Rs.9 cr. Accordingly, for FY08 it may report total revenue of Rs.75 cr. with PAT of Rs.14 cr., which
translates into an EPS of Rs.11 on its equity of Rs.12.50 cr. For FY09, it may register an EPS of Rs.14. TSL also has 20 acres
of land with 1.60 lakh sq. ft. constructed area, which it plans to either sell or enter into JV with an infrastructure company.
Once this long pending decision is taken, it will trigger the share price to a new high. Meanwhile, at a very modest
discounting by 8 times against FY08 earnings, its share price can touch Rs.90 in 9-12 months.
Accurate Transformers Ltd. (Code: 530513)
Rs.93.85
Established in 1987, Accurate Transformers Ltd. (ATL) is the flagship company of the Delhi based Accurate Group, which
has diversified interests in transformers, overhead line conductors, energy meters, insulating oils & chemicals. Notably,
ATL began the manufacture of transformers at a time when most electrical equipments were imported. With an installed
base of nearly 1500 transformers, the company is now among the foremost manufacturers of transformers. Presently, it
manufactures power & distribution transformers ranging from 1 MVA to 160 MVA up to 220 KV class. Power
transformers are used to transform power voltage from the generation point to the transmission point whereas
distribution transformers are used to transform power voltage from transmission point to distribution of power to the end
user. These transformers are mainly supplied to state electricity boards (SEBs) of Uttar Pradesh, Rajasthan, Punjab,
Maharashtra and West Bengal on a made-to-order basis. As its transformers are in operation for years, the quality and
reliability of ATL products is well established. In fact, the company boasts of having the highest rate of repeat orders from
SEBs. In addition, it also offers total technical support and customer service throughout the life of its transformers – may
it be spare parts or repairing of transformer in case of a breakdown.
Being a two-decade old company, ATL has set up huge manufacturing facilities spread across Ghaziabad, Sikandrabad,
Greater Noida, Dehradun & Haridwar. All its plants have ISO 9001:2000 certification from DNV. However, two of its
plants that are in tax exemption zones i.e. Dehradun and Haridwar are relatively new. Although these plants are not
equipped with latest hi-tech equipments, it still has a total installed capacity of more than 8000 MVA, which is quite huge.
Besides, it has recently ventured into fast growing rural electrification projects, which involves the complete distribution
of electricity in remote areas including laying of lines, poles and substations. It has already implemented two such
projects one in Etah district of Uttar Pradesh and another in Nainital District of Uttaranchal. Regrettably, however, due to
mounting debtors and shortage of funds the company has been working at very low capacity utilisation of around 50%.
Hence it has ample scope to ramp up its operation provided it manages to get sufficient money as working capital.
Moreover to cash on the infrastructure boom, ATL has taken forward steps in rural electrification, which is an upcoming
business and thrust area under the Rajeev Gandhi Development Programme of the Central Government. Besides, it
further wants to diversify in the energy sector and has ambitious plans of venturing into power generation & distribution
in future.
The government's rural electrification initiatives such as APDRP, 'Power for all by 2012' programme, restructuring of
SEBs, entry of the private sector into the transmission & distribution (T&D) segment etc. have all led to a substantial jump
in the demand for transformers. Accordingly, ATL recorded 20% growth in sales to Rs.180 cr. with 40% rise in profit at
Rs.6 cr. for FY07 i.e. EPS of Rs.20 on its tiny equity of Rs.2.96 cr. Notably, ATL is earning very low profit margin compared
to its peers and has scope of improving its margin in future. For the first three quarters, while its sales increased by 10% to
Rs.102 cr. the net profit shot up by 50% to Rs.4.50 cr. on the back of higher margin at the operating level. Since Q4 is its
best quarter, ATL is estimated to report a turnover of more than Rs.200 cr. and PAT of Rs.8 cr. for FY08 on a conservative
basis i.e. EPS of Rs.27 on its current equity. This means that the ATL scrip is currently trading at P/E ratio of less than 3
times. However, as per market rumours, SEBI has halted its preferential issue of 31 lakh warrants at Rs.56. Hence the
company will have to go for fresh fund raising programme as per SEBI guidelines. In a way, it is a positive for
shareholders as the placement will now be done at higher price with low equity dilution. Hence a transformer company
having an installed capacity of massive 8000 MVA is available for a song at a market cap of merely Rs.23 cr. Investors are,
therefore, strongly recommended to buy this scrip at current levels as it can easily double in a year's time.
Transformers & Rectifiers (I) Ltd.: For the medium-term
ANALYSIS
By Devdas Mogili
Transformers & Rectifiers India Ltd. (TRIL), formerly known as Triveni Electric Company, is a 13-year old Gujarat-based
company established in 1995. Its name was changed to the present one in 1995. The company's business mainly
comprises of manufacturing and selling of various kinds of transformers such as power, distribution transformers,
furnace transformers, rectifier transformers and specialised transformers. The company's two manufacturing facilities are
situated at Changodar and Odhav both in Ahmedabad, Gujarat. Jitendra U. Mamtora is the chairman and managing
director of the company.
6
The company entered the capital market during December 2007 with its IPO of 29,95,000 equity shares of Rs.10 each at a
premium of Rs.455 per share. The issue evoked adequate response from the investing public.
The company acquired the Odhav unit in 2006 as part of its expansion plans. In 2006, TRIL enhanced the production
capacity of its plant at Changodar from 4000 MVA p.a. to 6000 MVA p.a. With a view to effectively augment its
production capacities, the company has initiated several expansion and de-bottlenecking procedures to facilitate
expansion like installation of new winding machines, separate oven for coil drying, segregation of dispatch area along
with 100 MT capacity EOT crane etc.
Subsidiaries: During the year, the company acquired 100% stake of M/s. Transweld Mechanical Engineering Works Ltd.
and 51% of Transpares Ltd., which are now its subsidiaries.
Expansion: The company has also firmed up an expansion project involving setting up of a new unit at Changodar with a
capacity to manufacture transformers up to 400 KV Class in the first phase having an installed capacity of around 8000
MVA p.a. The company has already started implementing the said project, which is targeted to become operational by
June 2008. This will increase its production capacity from 7200 MVA to 15200 MVA p.a.
Clientele: TRIL's clientele includes State Electricity Boards like Gujarat Electricity Board, Tamil Nadu Electricity Board,
Rajasthan Electricity Board, Kerala Electricity Board, Karnataka Power Transmission Corporation, Maharashtra State
Electricity Board, Himachal Pradesh State Electricity Board, Meghalaya State Electricity Board and Uttar Pradesh Power
Corporation. In the private sector, its clientele includes L&T, Chennai, Siemens, ABB, NTPC, NEG-Micon, Areva T&D,
Torrent AEC Power, Shah Alloys, Rohit Ferro Tech, Prakash Industries, Suzlon Energy and Jai Balaji Group etc.
Exports: The company exports transformers to Nepal, UAE, Indonesia, Pakistan, Bangladesh, Ghana, Sri Lanka, Kenya,
UK, Zimbabwe, Phillipines, Kazakhastan, Dakar (Africa), Saudi Arabia, Australia, Tanzania, Iran, Bhutan, South Africa,
Zambia and Azerbaijan.
Performance: For FY07, the company registered net sales of Rs.218 cr. with net profit of Rs.16.66 cr. posting an EPS of
Rs.18.23.
Financial Highlights:
(Rs. in lakh)
Latest Results: For
Q3FY08,
the
company recorded
net sales of Rs.68.45
cr. with a net profit
of Rs.7.35 cr. netting
a basic/diluted EPS
of
Rs.7.28.
The
annualised
EPS
works
out
to
Rs.29.12
Particulars
QE 31/12/07
9 M 31/12/07
YE 31/03/07
Net Sales/Income
6845
19477
21800
Other Income
63
160
86
Total Income
6908
19637
21886
Expenditure
a. Inc/Dec in Stock
(1011)
(2032)
(1055)
b. Raw Materials
5688
15505
16920
c. Pur of traded goods
-
-
17
d. Employee Cost
159
415
358
e. Depreciation
52
143
159
f. Other Expenditure
758
1947
2194
Total Expenditure
5646
15978
18593
Interest
147
550
525
Profit before tax
1115
3109
2768
Tax
Financials:
The
company has an
equity
base
of
Rs.12.92 cr. with a
book
value
of
Rs.138.97.
380
1127
981
Net Profit
735
1982
1787
Extrordinary items
-
-
121
Equity Capital
1292
1292
709
Reserves (Ex Rev Reser)
3323
EPS (Rs.) basic/diluted
7.28
19.85
18.23
EPS (Rs.) basic/diluted after extraordinary items
7.28
19.85
16.99
Share Profile: The share of TRIL with a face value of Rs.10 is listed both on the BSE and NSE under the B group. Its share
price touched a high of Rs.938.50 and a low of Rs.345.50. At its current market price of Rs.426, it has a market
capitalization of about Rs.500 cr. It has a high beta value of 1.5, which implies that it is a stock with high volatility.
Dividends: The company has been paying dividends as shown: 2006-07 - 18%; 2005-06 - 15%.
Shareholding Pattern: The promoters' holding in the company is 76.82% while the balance 23.12% is held by non-
corporate promoters, institutions, mutual funds and the Indian public. Among mutual funds, SBI Magnum, UTI,
Canbank, Principal, ING Vysya, Escorts, Birla Sunlife, HDFC, ABN Amro, Tata and JM Financial have added the
company's shares to their different schemes.
Prospects: The company is operating in the high growth infrastructure segment viz. Power Generation and Distribution,
which is poised for a sustained, long-term growth. Accordingly the company's prospects are really bright.
Further, the company has orders worth Rs.308 cr. in hand. It has had prestigious orders from reputed government and
non-government bodies.
Conclusion: TRIL is engaged in the high growth and high margin business of power and distribution transformers, which
has a very bright future given the Central Government's mission of 'power for all by 2012'.
7
At its current market price of Rs.426, the share is discounted less than 13 times its earning against the industry average
P/E multiple of over 30 for the electrical equipment sector. The share is thus cheaply valued comparatively speaking. A
few months ago, the TRIL share had been moving at a fast pace but owing to the current downward trend, it has retraced
to the present level. In fact, the share is quoting less than its IPO price of Rs.465, which is a 17% discount to its issue price.
The share may be added to one's portfolio on every decline with a medium-to-long-term horizon.
Sensex bounces back and closes above 16K
MARKET
By Ashok D. Singh
The Sensex surged 1,376.46 points or 9.18% to 16,371.29 for the week ended Friday, 28 March 2008. The NSE Nifty rose
368.05 points or 8.04% to 4,942 for the week.
The market started the week on a buoyant note taking cues from positive global markets with the Sensex surging 928.09
points on Tuesday 25 March 2008 – its second biggest single-day rally in points as well as percentage terms. The expiry of
March 2008 derivative contracts kept the market volatile later. However, it ended the week on a positive note shrugging
off the high inflation data announced on Friday. Buying by FIIs supported the market. The Sensex rose in 3 out of 5
trading sessions in the week.
The BSE Mid-Cap index rose 558.69 points or 9.37% to 6,522.79 in the week. The BSE Small-Cap index rose 679.78 points
or 9.41% to 7,901.98.
The Sensex rose 294.57 points or 1.96% at 15,289.40 on Monday 24 March 2008. A strong rebound was witnessed in late
trades. Positive cues from global markets supported the domestic bourses which opened after a long weekend. The
market sentiment remained edgy on reports that Monsoon Capital LLC, a $1.20 billion hedge fund firm run by Gautam
Prakash, has been hit hard by a slump in Indian stocks this year.
The Sensex rose 928.09 points or 6.07% to 16,217.49, its second biggest single-day rally in points as well as percentage
terms on Tuesday 25 March 2008. The index gained 972.98 points at the session's high of 16,262.38, hit at the fag end of the
trade. Buoyancy was visible across global markets. The rally was triggered by JP Morgan raising the Bear Stearns
acquisition price by 5 times and US economic data showed that US new home sales had risen 3% in February 2008. On the
domestic front, all sectoral indices on BSE ended higher. The market breadth was strong.
The Sensex lost 130.66 points or 0.81% at 16,086.83 on Wednesday, 26 March 2008. Mixed global cues and imminent
expiry of March 2008 derivative contracts kept the market volatile throughout the day. Concerns about the US economy,
which is said to be already in recession, resurfaced following data that showed that US consumer confidence fell to a five-
year low in March 2008. Uncertainty about the US outlook kept a lid on Europen and Asian markets and investors turned
cautious after the previous day's 6.1% jump.
The key indices ended the highly volatile session on a mixed note on Thursday, 27 March 2008. The Nifty ended almost
steady even as the Sensex declined. The imminent expiry of March 2008 derivatives contracts caused volatility. Most of
the Asian indices slipped on worries that there will be more bank write-offs in the US after a prominent analyst lowered
first-quarter profit forecasts for four major US banks namely - Citigroup, Bank of America Corporation, JPMorgan Chase
& Co, and Wachovia.
The key benchmark stock indices surged on
Friday, 28 March 2008. Positive cues from
Asian and European markets propelled the
market higher. The Sensex rose 355.73 points
or 2.22% to 16,371.29. The market shrugged off
a surge in inflation and overnight slide in US
stocks. Capital goods stocks soared at the fag
end of the session followed by metal and IT
stocks. Banking shares, which hovered in the
negative territory on surge in inflation, turned
green at the fag end of the trading session.
Mid-caps and small-caps surged with their
barometer indices on the BSE outperforming
the Sensex.
FIIs bought shares worth Rs.2227 cr. in the
first three trading sessions of the week till 26
March 2008. FII outflow in March 2008
totalled Rs.772.90 cr. (till 26 March 2008). FII
outflow in calendar year 2008 totalled
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8
Rs.11,749.30 cr. (till 26 March 2008). Mutual funds were net sellers of shares worth Rs.2,173.50 cr. this month, till 26 March
2008.
India's economic growth is expected to close around 9% in FY08, Finance Minister, P. Chidambaram said on Wednesday
26 March 2008. He also said problems stemming from the credit markets will also affect India, even though only one
Indian lender had exposure to US subprime mortgages.
The wholesale price index rose 6.68% in the 12 months to 15 March 2008, surging from the previous week's rise of 5.92%,
government data showed on Friday. The rate is highest since 27 January 2007, when inflation was 6.69%.
The Sensex gained 1,376.46 points to close at 16,371.29 last week. Market participants are cautious after the market reeled
under global and domestic pressures recently. The next major trigger for the market is Q4 results of Indian companies
which are slated to hit the market next month. The market will also closely look at further global cues.
Marketmen are keenly awaiting Q4 and full year FY08 results from corporates. Robust corporate advance tax payments in
Q4FY08 indicate that corporate profit growth will be strong in the quarter. Advance tax figures showed banks, hospitality
and software firms are doing better than sectors like automobiles and cement.
Media and the market matrix
MARKET
By G. S. Roongta
The stock market bounced back last week gaining 1376.46 points during the week. The BSE Sensex had gained 1223 points
on the first two days itself as it opened the week with a gain of 294.57 points on Monday, 24
th
March 2008, which
skyrocketed to a gain of 928 points on Tuesday, 25
th
March 2008 defusing the alarm created by the troubled Bear Stearns
the week before in USA.
With great pessimism hovering around in Asian markets till week before last on this issue, technical experts also kept on
projecting a new bottom on popular business channels and print media. This, however, led me to change
my view over the last two weeks itself. Readers may recall my bold headlines 'Pull-back rally expected'
and 'Market it bottoming out' of the last two issues. This is because I have never believed in extremes
and whenever something happens in excess, I am quite sure that the opposite will soon emerge.
Thus when the market gurus started talking about Sensex 12,000 or even lower, which to me looked quite
absurd, I started expressing my unhappiness and dissent. I did the same during the peak of the bull
market as I felt that it had risen too fast and too much. Readers may recall that I was the first one to
express concern at the rise of 1000 point rally on a single day when the BSE Sensex started galloping
above 18,000. I had sarcastically commented that bulls should not be lost in celebrating the 1000 point party so frequently
like celebrating Dussehra, Diwali, Christmas and the New Year together and has advised readers to book profit. I kept on
repeating this advice as even well-known bear operators appeared to change colours and started projecting a Sensex of
25,000 before the Budget.
G.S. Roongta
Since this was the general perception in the euphoria that prevailed nearing end 2007, the excess of 3000 points rise
invited the wrath of the bears and they decided to act and for which the overenthusiastic bulls had to pay a very heavy
price over the last two months. It was indeed a matter of great shame that a three-year old bull rally could be halted in
just two days on 21
st
& 22
nd
January 2008 and has lasted so far. The bulls could do nothing even after making huge profits
over the past three years continuously after the bears brought them down to their knees and the Sensex lost over 7000
points from its high of 21,200 on 10
th
January 2008.
Likewise, if the bears start demoralizing the market beyond limits or Sensex 14,000 level, they, too, are bound to receive a
tight slap from bull operators who have been weathering the bear onslaught for the past two months. The bears must take
lesson from the rise of 1200 points on the first two days of last week when there was no supporting change in
fundamentals in the economy or global cues.
The second largest single day rise of 928 points on Tuesday, 25
th
March 2008 is a sufficient clue for the bears to realize that
heroes and horses change dramatically in a battlefield. New stars emerge and take the battle to new heights when
excesses and injustices are heaped on the unsuspecting majority. It will, therefore, not be a question of liquidity or the
source from where money will come. The stock market is an ocean where the money will flow in once again as equities
start returning profits. This is because the returns from the stock market cannot be matched by any other sector of the
economy and big investors would not like to miss such profitable opportunities.
I often wondered why the FIs, FIIs and HNIs who found value in Indian stocks at Sensex 21,000 to 25,000 were missing at
Sensex 14,000. What negatives had suddenly emerged that they could not come out and support the market at such a low
level? Even if the GDP rate falls by half a per cent or even a full percentage point from the peak levels or the inflation rate
shoots up to 5%, where is the need for pessimism overnight? The inflation rate had risen to over 5% even earlier this fiscal
but no one bothered because the market sentiment was bullish. But now that it was bearish this marginal rise in inflation
or half per cent fall in GDP growth rate began to look so monstrous!
9
According to me, it is all absurd and meaningless to turn gloomy and create panic among investors when there is no real
basis for it. When our Finance Minister, who is armed with all the data, repeatedly says that global cues and recession in
USA may dent our economy slightly but there is nothing to worry about our sound financial footing, where is the
justification for this pessimistic outlook?
Secondly, one should realize that no country can maintain the same rate of growth year after year as the economic base
keeps on growing every year and a large economy can be hit by problems in a certain sector due to natural calamities or
the vagaries of the weather. There are hundreds of factors that are responsible for economic growth and one or two of
them may get affected and could lead to a slowdown. Thus we suddenly found ourselves in a fearful mood as we neared
the end of this fiscal.
But I feel we must enter the new fiscal with a positive outlook and should not get perturbed because of unforeseen
circumstances. Fear and greed are the driving forces in the stock market and lead to a herd mentality when investors do
not apply their minds and get carried away by rumours or fall prey to wily promoters or cunning operators who are often
the source of this fear or greed. I have maintained this stance over years and my regular readers would find that I have
been cautioning them against this herd mentality right since 1986 when I started writing.
However, if a well-known bear operator is given so much prominence by the TV channels and the print media and is
allowed to confess his change in viewpoint to project a Sensex level of 25,000 and now the same person talks of a Sensex
in four figures, who is to be blamed? Is not the media responsible for letting this person misguide common investors
when I was advocating caution and recommending readers to book profit? And now when I state that the market has
bottomed out, this market expert talks about a Sensex below 10,000! While I do not advocate any bar or control on the
media, I am really surprised why such people are given so much prominence when their track record speaks for itself.
The media can take shelter by the disclaimer that the views expressed by the analyst or expert are his/her personal but
they cannot be excused in allowing such persons to misuse the media platform repeatedly. And if they do so, then
obviously someone or the other in the media house has a vested interest. Since the media plays such a powerful role in
financial markets, it must exercise greater care and demonstrate its responsibility knowing full well the outcome of
irresponsible promotion of vested interests.
At the same time, we must be thankful to the other media, whether big or small, that have played their role in cautioning
investors or bringing to the notice of the authorities the malaise that is afflicting the market. Readers will be happy to
learn that SEBI has finally realized how true and right we were. We had highlighted the problem in the F&O segment and
were the first to vociferously protest against the unilateral decision by the brokerages to compulsorily square off customer
accounts without consulting them and had continued the stance till last week.
SEBI has accepted the view first aired in Money Times that there should be circuit filters in F&O Futures similar to the
cash market to prevent any dramatic downfall. It has also accepted that the compulsory squaring up of client positions
was improper and unethical on the part of the brokers. It was, therefore, a great solace to read the front page of Economic
Times on 24
th
March 2008 with the broad headline 'Brokers to give daily margin information to clients' based on the
complaints from investors.
What emerges from the above two examples of media responsibility and concern? Does it not prove that this weekly has
equal strength like any other major print media or TV channel and is far ahead in protecting investor interest? Earlier,
this column was the first to hint and caution about insider trading in Reliance Petroleum, which finally came to the
attention of the authorities two months later. Similarly, it highlighted the demerits of Reliance Power offer, which the
company seems to have accepted itself by the bonus lollypop!
My advice to investors is to remain ever vigilant and not get carried away by the analysts and experts glamourised by the
media and apply their minds to the economic fundamentals and market reality when taking investment decisions. I have
already suggested that this is the right opportunity to invest in stocks that have turned so cheap thanks to the bear
hammering.
Market rebound: Hope or despair for MFs?
MUTUAL FUNDS
By Devangi Bhuta
The last week saw the equity markets rebound and it registered a positive gain of 9.18% which saw NAVs of mutual fund
schemes zoom upwards. So is this a trend reversal?
Just last week, we suggested that investors should stay invested in debt schemes for the time being till there are some
signs of trend reversal? Is one week enough to justify a trend reversal? The other option investors could look at are
balanced funds, which invest funds both in debt and equity. But with close to 70% in equities, are these funds really
balanced? In January 2008, these schemes provided returns of about 50% or more but have plummeted sharply over the
last two months in the backdrop of market volatility.
10
Returns Table:
(Source: mutualfundsindia.com)
But is it really time
for a trend reversal?
Methinks not. The
sharp run up in the
stock
markets
witnessed
was
fuelled by liquidity
more
than
fundamentals.
Given the health of
many
FIIs
and
Financial
Institutions aboard,
liquidity is as easy
as before. At home,
Mutual Funds that
had collected huge
amounts in NFOs in
last 2/3 months are
sitting
on
over
Rs.20,000 cr. in cash,
which they need to deploy soon in view of the guidelines. Thus they may provide an exit to the FIIs who are facing
problems in home markets.
Scheme Name
1 mth
3 mths
6 mths
1 yr
3 yrs
Franklin India Balanced Fund - Growth
2.64
11.99
8.56
38.33
32.65
DSP Merrill Lynch Balanced Fund - Growth
-7.65
-18.22
-1.55
25.83
28.53
PRINCIPAL Balanced Fund - Growth
-9.25
-19.97
-2.44
23.23
22.2
Reliance RSF - Balanced - Growth
-8.89
-19.39
-1.72
21.96
NA
Sundaram BNP Paribas Balanced Fund - Growth
-9.82
-17.56
-4.72
21.39
22.78
Tata Balanced Fund - Growth
-11.72
-21.76
-5.19
20.75
26.68
LIC Balanced - Plan C (Growth)
-14.39
-30.84
-1.19
19.54
23.16
SBI Magnum Balanced Fund - Growth
-10.58
-21.42
-5.08
19.27
30
ING Balanced Fund - Growth
-9.04
-18.52
0.52
18.68
23.2
HDFC Balanced Fund - Growth
-9.8
-15.31
-1.37
16.92
19.6
UTI Balanced Fund - Growth
-10.83
-18.75
-6.94
15.53
19.65
ICICI Prudential Balanced - Growth
-10.62
-19.48
-6.14
11.26
23.88
Birla Balance Fund - Growth
-6.24
-16.99
-8.98
11.01
20.13
JM Balanced - Growth
-14.99
-27.63
-19.96
7.61
23.34
BSE Sensex
-10.16
-20.78
-6.62
21.9
34.99
For the time being, mid-cap and small-cap schemes may not augur too well since liquidity may not flow in here first.
Even if we do see some liquidity it is most likely that blue chip companies may see some relief.
Only for those with a favourable risk appetite and surplus funds, buying in a staggered fashion and over a longer time
frame in blue chip equity schemes may augur well. The downside, as already mentioned last time, may be poor rainfall or
unexpected political developments.
Finally, the asset allocation principle of investments in gold and debt along with equities must never be overlooked.
By Saarthi
STOCK WATCH
From its recent high of Rs.370 in January 2008, the Bilpower Ltd. (Code: 531590) (Rs.170) share has crashed more than
50% in the last two months. It is a well-known manufacturer of transformers, electrical laminations, stampings and cores.
Besides, it's a leading trader of CRGO & CRNGO and produces the largest range of transformer cores in India. For future
growth, it acquired Tarapur Transformers, which has an installed capacity of 1500 MVA for repair of power transformers
up to 200 MVA, 220 KV Class for Rs.3.40 cr. Soon it is expected to start manufacturing power transformers on its own.
Besides, it amalgamated Sun Transtamp Pvt. Ltd., a company involved into manufacturing of electrical lamination with
itself. Importantly, Bilpower is foraying into the transmission & distribution (T&D) segment of the power sector as it has
been qualified as a turnkey contractor for the EPC business by Maharashtra State Electricity Distribution Company Ltd.
Further, it is in the midst of setting up manufacturing activities for motor stampings in Wada. As per market rumours, the
company has is likely to enter into a joint venture with NTPC, which will change its fortune vastly. Recently, the company
allotted 20 lakh warrants to be converted at Rs.350 to the promoters. For FY08, it is estimated to clock a turnover of Rs.300
cr. with PAT of Rs.21 cr. i.e. an EPS of Rs.23 on its current equity of Rs.9 cr. For FY09, it can report an EPS of Rs.28 on its
fully diluted equity of Rs.12.50 cr. Keep accumulating at declines.
******
Belonging to the IFB Group, IFB Agro Industries Ltd. (Code: 507438) (Rs.58) is engaged in the production of Extra
Neutral Alcohol (Rectified Spirit), Indian made foreign liquor (IMFL) and marine products. It has very successful brands
like Volga Vodka, Gold Cup Brandy, Blue Lagoon Gin & IFB Select Whisky in this segment. The company is also a
pioneer in 50* UP category with bestselling brands like Baluba Rum, 3 Cheers Whisky & Russki Vodka. In order to reduce
its dependence on molasses and for providing better quality of potable spirit, the company has undertaken a project to
produce spirit from grains. This project was recently completed and commenced its operation from September 2007. On
the other hand, its marine division last year launched its first ready to fry product 'Prawn Pops' and has plans to
introduce more such products in the ready to cook and ready-to-eat segments. In fact, its marine division is poised to
become an integrated business and serve all the inputs from the farm to the final consumer. Although it posted poor
results for the December 2007 quarter, sales for the first nine months increased by 15% to Rs.156 cr. and net profit stood at
11
Rs.6.40 cr. Hence it may end FY08 with topline of Rs.200 cr. and a bottomline of Rs.10 cr. i.e. an EPS of Rs.13 on its equity
of Rs.7.70 cr. Buy at sharp declines.
******
Sundaram Brake Linings Ltd. (Code: 590072) (Rs.229) is a part of the TVS group and is engaged in manufacturing
automotive, non-automotive and industrial friction materials with specialization in asbestos-free brake linings and pads.
Its products are extensively used in commercial vehicles, passenger cars, tractors and motorcycles. Apart from being a
preferred supplier to some of the well-known axle manufacturers as original equipment, it also services the Indian
aftermarket through more than 140 TVS owned wholesale outlets spread across major towns. Moreover, to service the US
and Canadian markets instantly and establish brand recognition, it has a warehousing facility in North America along
with a business representative in USA who works closely with the US/Canadian brake re-builders and distributors. In
view of the changing trend, from drum brake linings to disc brakes for commercial vehicles, the company is focusing
special focus on CV Pad business. In the process, it has created a wide range of 39 references and is aggressively
marketing the same worldwide. With more and more countries banning use of asbestos based friction material products,
the future prospects of the company, being a pioneer, looks promising. For FY08, it is estimated to report total sales of
Rs.190 cr. with profit of Rs.14.50 cr. i.e. an EPS of Rs.54 on its very tiny equity of Rs.2.70 cr. A good opportunity to buy at
such cheap valuations.
******
Murudeshwar Ceramics Ltd. (Code: 515037) (Rs.60) is one of the leading manufacturers of vitrified tiles, ceramic tiles and
granites with its popular brand 'Naveen'. Importantly, the company derives nearly 80% of its revenue from the sales of
vitrified tiles, which enjoy higher margins than the other two. On the back of constant expansion, its present capacity
stands at 6.3 million sq. mtrs. of vitrified tiles, 2.7 million sq. mtrs. of ceramic tiles and only 72,000 sq. mtrs. of granites.
Institutional clients constitute 60% of total sales, which retail clients constitute the balance 40%. This is backed by a strong
marketing network with 6 distributors, 74 show rooms, 45 depots and about 400 dealers spread across India. With the
ongoing construction boom, the mall culture and the strong demand for hi-tech commercial complexes, the future
prospects of the company are quite promising. For FY08, it is expected to report a topline of Rs.240 cr. with a bottomline
of Rs.26 cr. on a conservative basis for FY08. This works out to an EPS of Rs.15 on its equity of Rs.17.50 cr. Notably, its
cash EPS stands at whopping Rs.30. As the current fiscal is the Silver Jubilee year for the company, it may declare a liberal
bonus or a special dividend for its shareholders. At CMP, the scrip is trading at a P/E ratio of less than 4 and is available
at an EV of Rs.300 cr., which is well below its gross block value of Rs.470 cr. However, the icing on the cake is the 20 acres
surplus land owned by the company near the Electronic City where it intends to develop an IT park. A screaming buy.
By Kukku
FIFTY FIFTY
Investment Call
* Finolex industries (Rs.66.10) is an integrated manufacturer of PVC pipes with its own PVC manufacturing capacity. It is
setting up a captive power plant facilitating further integration and reducing operating costs. It contributes to some of the
core sectors of the Indian economy viz. Agriculture, Water Distribution, Construction and Telecom with each one playing
a vital role in the health of the economy.
It is the largest manufacturer of PVC pipes, the consumption of which is set to increase on the back of strong growth in
construction and irrigation activities.
Of 142.6 million hectares of cultivated land, 57 million hectares (40%) is irrigated. The remainder 85.6 million hectares
(60%) is rain fed. In the coming 25 years, there will still be about 65 million hectares to irrigate calling for extensive piping
systems.
Finolex has a capacity to manufacture 2,60,000 MT of PVC and 69,600 MT of PVC pipes per year. It is in the process of
expanding the capacity of PVC pipes to 1,00,000 MTA, which is expected be commissioned by March 2008. The global
demand for PVC-based products continues to be robust and the domestic demand is in excess of the production capacity.
It has 80 acres of land at Pune, which has the potential for residential and commercial development and the company
could realise Rs.550 – 600 cr. by the sale of this land.
The company has been performing consistently well over the last few years and has paid regular dividend of 30%. If the
result of the first three quarters is any indication, the company is likely to report an EPS of around Rs.6/6.5 against Rs.4.3
last year. Its share has a book value of Rs.43 and at the current market price, the dividend yield, too, is good. Besides, the
stock is available at less than half its 52-week high of Rs.126.
Investors can safely accumulate this stock for strong long-term growth over one year and also for good dividend yield.
Risk Factor is the higher crude oil prices as its raw material is crude based.
Market Guidance
12
* Jaihind Projects (Rs.77.60) is expected to report full year sales of around Rs.125 cr. and bottomline of Rs.6.25 - 6.5 cr.
Long-term investors can accumulate this stock at current levels as the outlook of the company is encouraging.
* ABG Shipyard (Rs.686.15) - India's current share of global shipbuilding market is a mere 0.5%. But Indian shipyards
have benefited from the current shipbuilding boom as most of the orders that have flowed into India are only because of
the lack of berth availability in major shipbuilding nations.
The company has a very strong order book position with an encouraging outlook. Investors should take benefit of this fall
to accumulate this stock for good long-term growth.
* PG Foils (Rs.54.45) - Promoters & strategic investors recently converted part of preferential allotment at full payment of
Rs.100 while the market price is just Rs.48. This indicates their confidence in the company whose fundamentals are intact.
* Kamat Hotel (Rs.178.85), which we had recommended earlier also is expected to come out with encouraging results for
March 2008. Full year EPS is likely to be around Rs.26/28 level. The stock commands a present P/E of just 6 or so.
* HCC (Rs.139.45) is likely to attract investment support from FII and some leading domestic fund managers. Stay
invested.
* Renaissance Jewellery (Rs.72.20) - is under accumulation by smart investors at the current price. Book value is Rs.87. Its
high since listing is Rs.200 while the low is Rs.50.
* Ashiana Housing's (Rs.88.80) fundamentals are said to be intact. The company is said to have achieved record sales in
this quarter too. Full year net profit is likely to be around Rs.40 cr. The stock seems to have bottomed out.
* Ecoboard Inds. (Rs.18.55) – Long-term outlook for Wood Free Particle Boards continues to look positive. The dues of
IDBI and IIBI have been paid off in full. It is likely to become debt-free company. Investors can keep watch to add this
stock on dips. It may become a turnaround story.
* Futura Polyesters (Rs.21.10) restructuring will get over in next few weeks. Long-term investors can accumulate this
stock on dips.
* Fundamentals of Grauer & Weil (Rs.95.25) are intact. The stock reacted from its high in line with the change in
sentiment. Stay invested.
* Gujarat Glass (Rs.309.40) (old name Kojam) – Long-term investors likely to see good benefit. Stay invested.
* Sharyans Resources (Rs.204.95) - As per informed sources fundamentals and growth plans are good. Stay invested.
* Mundra Port (Rs.619), Gammon India (Rs.397) and Dredging Corpn. (Rs.645) are other good stocks likely to go up in
the near future.
* Strong reports are pouring in for Assam Company (Rs.25.50). Investors can hold on to the stock.
* Zenith Fibres (Rs.23.20) results may not be encouraging for the Q4FY08. So book profits on pull back.
* The selling that emerged after bonus shares of Walchandnagar Industries (Rs.420.10) were credited in shareholders
account seems to have been absorbed. The stock seems to have bottomed out at current levels. Stay invested.
Note: Sharp rise in raw material and other input cost like manpower cost and lease rentals is pinching industry, which it
is not able to absorb. Growth rate is likely to slow down. We may see revival of growth from Q2 of 2008-09. Investors
need to be very cautious in buying stocks. They should remain invested with strong & growth oriented managements
having proven track record. Avoid all speculative stocks.
Those who bought at recent low levels should book part profits to remain in cash. We may see higher valuations on 31
st
March 2008 as there is likely to be value buying in good mid-cap stocks by mutual funds to improve their NAVs.
Decisive closing above 5100 on the Nifty will clear view for a further upmove. Investors should use the upmove to exit
weak fundamental stocks.
By V. H. Dave
EXPERT EYE
The share of Mudra Lifestyle Ltd. (MLL) (Code: 532820) (Rs.38) has come off its high of Rs.115 and is available at a steep
discount of 68% and by 54% to its IPO price of Rs.80. Based on its expansion plans, MLL's future prospects appear bright
and the share is recommended with a likely appreciation of 50% in the medium-term.
MLL started operations in 1986 and is in the textile industry with facilities for fabrics & garments manufacturing,
processing, design development and sampling etc. As on 31
st
March 2007, MLL had 177 automatic looms producing
approximately 10.62 million metres of woven fabrics per annum, 700 sewing machines with capacity of 3.15 million
garments per annum and processing capacity of 80,000 metres per day. MLL has in-house facilities for design studios,
sampling units, weaving units, processing units and garmenting unit. It has pan India presence with a network of over 75
dealers and also supplies to various customers globally.
In February 2007, it tapped the capital market with an IPO priced at Rs.80 per share and mopped up Rs.77 cr. for 95.8 lakh
equity shares of Rs.10 each.
The company is expanding its manufacturing facilities by setting up a new integrated unit with facilities for yarn dyeing,
weaving, processing and garment manufacturing near Bangalore and Tarapur near Mumbai at a cost of Rs.177 cr.
Under the expansion, MLL is adding up 84 weaving machines to its existing 177 while the processing capacity is being
enhanced up to 1,85,300 metres per day from the existing of 80,000 metres per day. The garment manufacturing capacity
13
at the Bangalore unit is being increased to 35,500 pieces per day from 10,500 pieces. In addition, the company is adding up
a 2,000 kg per day yarn dyeing facilities.
MLL sells its fabrics both in the domestic and global markets under the brand name 'Mudra', which commands a
premium. It intends to further strengthen its brand by investing in promotional and brand building activities such as
advertising, organizing conferences, participating in national and international events.
MLL is a preferred fabrics exporter to various overseas markets. Shirting fabrics and dress material are exported to USA,
Europe and the Middle East. It is now concentrating on developing export of shirting fabrics to other territories too.
During FY07, MLL registered 58% higher sales of Rs.163 cr. and posted 93% increased net profit of Rs.18 cr. yielding an
EPS of Rs.4.7 on its enhanced equity of Rs.36 cr. During Q3FY08, net profit went up by 77% to Rs.8.4 cr. For the first nine
months of FY08, although sales advanced by 74% to Rs.191.5 cr. net profit shot up by over 108% to Rs.23.4 cr.
Its equity capital is Rs.36 cr. and with reserves of Rs.111 cr., the book value of the share works out to Rs.41. The promoters
hold 55% in the equity capital, foreign holding is 3%, PCBs hold 9%, institutions/mutual funds hold 7% leaving 26% with
the investing public.
MLL is a multi-product, multi-fibre and multi-market player covering the entire textile value chain. With a target market
that is a diverse mix of the domestic market, institutional sales, garment export trade and exports ensures the spread of
risk with stability of earnings.
The garments business, which caters to the demands of domestic branded players, has begun to make a stronger
contribution. Its growth has come on the back of some capacity expansion, but indicates that orders are beginning to flow
into this segment.
More significant is the strong demand that is likely to flow in from branded apparel outfits and retailers such as Raymond
and Madura Garments, which are expanding their retail presence through their own outlets and multi-branded outlets
(MBO). They are likely to outsource more of their production to players such as MLL. The likes of Reliance Retail and
Bharti, too, are likely to be on the lookout for units that can produce private labels. Against such a backdrop, MLL's scale
and integrated facilities would be seen as an advantage.
The growing contribution from garments could lead to better margins and a higher return on capital. MLL hopes to
achieve a revenue mix of 50:50 for fabrics and garments by FY08.
MLL is likely to achieve sales of Rs.275 cr. and earn a net profit of Rs.35 cr., which would yield an EPS of Rs.9.7. After
expansion, sales are expected to touch Rs.500 cr. in FY09 with a net profit increasing to Rs.60 cr. EPS would work out to
Rs.16.7.
The MLL share is traded at Rs.38 at a P/E of 3.7 on its FY08 estimated EPS of Rs.9.7 and 2.2 on projected EPS of Rs.16.7 for
FY09 and is recommended with a target price of Rs.55 in the medium-term. The 52-week high/low of the share has been
Rs.115/33.
******
The share of Nelcast Ltd. (Code: 532684) (Rs.105) is available at a substantial discount of 60% of its IPO price of Rs.219 in
June 2007.
Promoted by P. Radhakrishna Reddy, who is the Chairman & MD, was established in 1985, Nelcast has since been a
significant and diligent participant in the ferrous casting industry producing superior quality castings for various
industries. It has shown an astounding growth rate of 140 times of its original size to reach its current capacity of 84,000
MT. It plans to double its capacity in about two years. Its corporate office is located in Chennai while the international
office is located in Illinois in USA.
It tapped the capital market in June 2007 with 43,50,000 shares priced at Rs.219 aggregating Rs.95.27 cr. for expansion and
working capital needs.
Its two manufacturing units are located in Gudur, Andhra Pradesh and Ponneri in Tamil Nadu. Both the units have a
locational advantage of proximity to the Chennai Port and being well-connected by rail and road.
It manufactures around 200 different castings in SG and grey iron, cylinder blocks, flywheels, flywheel housings,
housings, hubs, spring shackle, brackets, transmission case, axle housings and exhaust manifolds. Beginning as low as 0.5
kg, Nelcast offers parts upto 250 kgs and in
several grades of Grey & Ductile Iron.
It manufactures parts to be used in various
applications in automobiles such as the
engine, transmission, suspension, axle, brake
and steering. It caters to the tractor industry
for their requirement of various housings as
well as engine, transmission and axle
components. The other users are the railways
and the pipe fittings industries.
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14
Nelcast moved in accordance with international quality standards. It has the ISO 9002 certification and is certified to QS
9000 standards and TS 16949 accreditation. Its clientele includes Tata Motors, Ashok Leyland, Eicher Motors, Tata
Cummins, Mahindra & Mahindra, TAFE, International Tractors and New Holland India. It exports to the US, Europe and
Australian markets, where it caters to Arvin Meritor, Volvo, SIGMA and Dobbie Dico Meter.
During FY07, sales surged by 29% to Rs.306 cr. and net profit by 128% to Rs.8.1 cr. During Q3FY08, sales advanced by
23% to Rs.94.8 cr. and net profit by 42% to Rs.8.7 cr. During the first three quarters of FY08, although sales advanced by
10%, net profit grew by 42% to Rs.20 cr.
Its IPO was to meet the cost of expansion of the existing production facilities from 72,000 TPA to 1,50,000 TPA estimated
at Rs.65 cr. and incremental working capital requirement of Rs.25 cr.
Part of the expansion was carried out in FY07 resulted in the capacity increasing to 1,02,000 TPA from 72,000 TPA in
H2FY07.
Nelcast also completed phase I of its capacity expansion at its new facility at Gudur and started the commercial
production from end September 2007 resulting in an increase in its installed capacity from 1,02,000 TPA to 1,26,000 TPA.
The capacity is being enhanced to 1,50,000 TPA by September 2008.
Its equity capital is Rs.17.4 cr. and with reserves of Rs.121.4 cr., the book value of its share works out to Rs.79.8. The
promoters hold 68.4% in the equity capital, foreign holding is 1.9%, mutual funds/institutions hold 2.5%, corporates hold
6.2% leaving 21% with the investing public.
Globally, the output of SG iron castings is growing at more than twice the rate of grey iron castings. Foundries are
shutting down in developed markets due to rising labour costs, shortage of skilled labour and environmental concerns.
This provides Nelcast with significant growth potential in domestic and overseas markets. In India, the demand for SG
iron castings far out-strips supply.
Going forward, Nelcast is in the process of moving up the value chain and plans to increase the share of high-margin,
machined castings in the total production to 20-25% in the next two years from 10% in FY07.
The company is taking steps to expand its customer base by focusing on new large customers like Indian Railways, cast
iron pipe manufacturers for domestic as well as for exports to shore up its revenue & margin.
During FY08, Nelcast is expected to garner sales of Rs.360 cr. and earn a net profit of Rs.30 cr., which would give an EPS
of Rs.17.2.
Going forward, sales would go up to Rs.475 cr. in FY09 with a net profit increasing to Rs.42 cr. and the EPS would go up
to Rs.24 on further expansion.
The Nelcast share is traded at Rs.105 discounting its estimated EPS of Rs.17.2 by 5.2 times and its projected EPS of Rs.24
for FY09 by 3.7 times. The industry average P/E of the forging industry currently rules firm at 13, which leaves good
scope for quality share like Nelcast to improve further. At a conservative P/E of 7, the share has all the potential to touch
Rs.168 in the medium-to-long-term. The 52-week high/low of the share has been Rs.285/82.
15
By Nayan Patel
TECHNO FUNDA
Anuh Pharma
BSE Code: 506260
Last Close: Rs.208.45
Anuh Pharma is S. K. Group's bulk drug manufacturer company. S. K.
Group is serving the pharma industry since 1932 and has a proven track
record and expertise in manufacturing, importing, exporting & distribution of Bulk Drugs, Fine Chemicals and Pharma
Formulations. It also exports surgical, hospital requisites, medical equipments, pharma machineries, packing materials,
electrical items and building materials to several countries.
Anuh Pharma has an equity of just Rs.1.39 cr. Its promoters hold 71.86% stake in the company and it paid 140% dividend
last year.
For the December 2007 quarter, its net sales zoomed by more than 55.34% and it recorded an EPS of Rs.8.97. For the first
nine months of this fiscal, the company's sales zoomed by 35.88% to Rs.78.89 cr. with an EPS of Rs.21.74.
For FY08, the company may post a turnover of Rs.110 cr. with net profit of Rs.9 leading to an EPS of Rs.30. The stock is
traded now at a P/E ratio of just 7.
It is safe and strong investment stock for medium-to-long-term investors in the current market. Buy with strict stop loss of
Rs.191. On the upper side, its share price can go up to Rs.237 in the medium-term and if we apply a P/E ratio of just 10,
the stock can easily touch Rs.300 level.
MONEY FOLIO
Review
Last week, we recommended Tera Software
at Rs.44.70 and during the week it zoomed
to Rs.51.25 level.
Union Bank to issue PAN/TAN & accept TDS/TCS
Union Bank of India and Alankit Assignment Ltd., a leading financial services provider company and authorised
franchisee of NSDL, have tied up to offer services viz. Issuance of PAN/TAN, acceptance of TDS, TCS and Paper Returns
both in physical and electronic form to customers of Union Bank of India and general public through the wide network of
Union Bank branches.
Through this strategic alliance, selected branches of Union Bank will act as Point of Service of Alankit Assignment and
provide following services to its customers and also general public.
(a) Acceptance of application for allotment of PAN & TAN numbers.
(b) Acceptance of change request in PAN/TAN numbers.
(c) PAN registration facility.
(d) Acceptance of TDS, TCS, AIR, eTBAF and Paper Returns in both electronic & physical form.
Federal Bank crosses 600 branches
Federal Bank, a leading private sector bank headquartered at Kochi, Kerala, has expanded its branch network to more
than 600 centres opening 26 branches on Wednesday, 26
th
March 2008.
It is the only traditional bank other than SBI to be listed on London Stock Exchange apart from the BSE & NSE.
Federal Bank's total business has crossed Rs.42,400 cr. with deposits over Rs.24,500 cr. and loans and advances over
Rs.17,900 cr. It has 602 branches, 10 extension counters and 525 ATMs spread over all important locations in India,
supported by 13 regional offices with all its branches working under the Core Banking platform.
ICICI Pru Life Insurance adds two Priority Circle branches in Mumbai
ICICI Prudential Life Insurance inaugurated two Priority Circle branches in Mumbai at Chembur and Fort for clients who
seek holistic financial planning for their wealth management needs. Priority Circle branches are unique and exclusive as
they are staffed with advisors who have special training in both wealth management and financial planning to help
consumers.
Following the inauguration of the two Priority Circle branches, ICICI Prudential Life now has 40 Priority Circle branches
across the country including the existing branch at Juhu in Mumbai.
In recent times, insurance has graduated from being viewed as a mere tax saving tool, to a versatile protection-oriented
and wealth creation investment tool that also offers tax benefits. ICICI Prudential Life offers a variety of need-based
insurance solutions to suit the varied needs of individuals at different stages in their lives – be it securing the future of
their families, asset accumulation, providing for their children's education, saving for their retirement, or insuring against
critical illnesses. Each product can be customized to meet specific life-stage requirements, and is sold after assessing the
needs and aspirations of the customers.
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.
16
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