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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 22
Monday, April 14 - 20, 2008
Pages 18
Rangebound market
with a positive bias likely
By Sanjay R. Bhatia
The markets displayed a rangebound trend amidst intermediate bouts of volatility and choppiness last week. Selling
pressure was evident at higher levels. Traders and speculators were seen taking fresh long positions but were also seen
booking profits at every opportunity and even going short at higher levels. The volumes recorded have improved amidst
the positive breadth of the market. FIIs remained net buyers in the cash as well as the derivatives segments, albeit they
were occasional sellers too. Mutual Funds also remained net buyers during the course of last week.
Global cues were mixed with the US Federal Reserve again identifying
inflation as a risk in its minutes while crude oil prices once again
spiked due to low US inventory data. Bank of England cut its interest
rates by 25 bps. Inflation touched a 3 year high of 7.41% and continues
to remain a risk for the Indian economy and of course the markets. The
likelihood of RBI taking some stringent measures is gaining strength,
which it might announce in its monetary policy on 29
th
April or even
earlier.
The IIP numbers declared have been good along with the Trade
Policy, which was on expected lines. The markets continued to face
selling pressure and profit booking at higher levels and follow-up
buying remained absent until Thursday. But positive IIP numbers and
Trade Policy helped the markets to sustain gains on Friday.
The fund flows have shown improvement. Now, it is important that fund flows continue to remain buoyant, which will
help improve the sentiment and, in turn, hopefully the volumes. The results are also likely to impact the market sentiment
and positive surprises are needed if the markets have to witness any sort of sustainable rally. Any negative surprises will
only act as a trigger for a sell-off on the bourses. The next week being a truncated week, with only three trading days,
participation is likely to remain low. The overall trend is likely to remain range bound with a positive bias. Short selling
should be avoided, as the market seems to have bottomed out for the short-term.
On the upside, the Sensex faces resistance at the 16,372 and 16,608 levels. It has support at the 15,699 and 15,332 levels. On
the upside, the Nifty faces resistance at the 4899 and 5025 levels. The 4647 and 4482 are important support levels for the
Nifty.
Traders and speculators can buy Aventis Pharma with a stop loss of Rs.775 and a target price of Rs.860.
Stock specific moves prevail
By Fakhri H. Sabuwala
The pendulum swings are on. The way the market is behaving and may unfold tomorrow is developing a predictable
pattern. Do not trust the big fall nor get carried away by that rise. Analysts are busy calculating how deep the benchmark
1
shall dip and how long shall the pain last. Despite all this, some scrips were singularly good or bad and the price
movements in them were independent of the prevailing market mood or sentiment.
Orchid Chemicals, the pharma company from the South, was badly caught in the Bear & Stearns sell-off. Its Managing
Director, K. Raghavendra Rao, who currently holds 17% stake, is a weak stakeholder after incurring a loss of over Rs.75
cr. in stock value in the sell-off. Ranbaxy has already purchased over 9% of Orchid through its group company, Solrex
Pharma. No wonder, Orchid jumped to Rs.240 from a fortnight back low of Rs.106.50 even though the market was
volatile, swinging large ups and downs.
2
Ranbaxy, the Indian pharma major, encashed on this God given opportunity and is
likely to increase its stake to just 14% to avoid the open offer. It makes great sense for it
to acquire Orchid at a P/E multiple of 8 against the industry's P/E multiple of 17.
Orchid's Cephalosporin and other formulations give Ranbaxy a chance to consolidate
its anti-biotic range further.
With the Orchid promoter unwilling to handover control and taking the fight to the
finish means that some more fireworks are likely in this counter.
The moral of the story is that Mr. Rao would have been better off managing the
company rather than dabbling in the F&O trading of his own company. Orchid's share
price would have moved northwards even otherwise on its own molecule and
formulations portfolio.
Bharat Forge, the stellar performer from the Kalyani stable is believed to have acquired
89% stake in a French forging company, Groupe Sifcor. This acquisition will give Bharat Forge an entry into the French
automotive market and give it an exposure to clients like PSA Citreon and Renault. Little wonder, the scrip picked up a
neat 5% in value despite the ups and downs in the market.
NOTICE
The next issue of Money
Times dated April 21 –
27, 2008 will be released
in Mumbai on Friday,
18
th
April 2008 in view of
the market holiday on
account of Mahavir
Jayanti on Friday.
HUL, a market leader in its 75
th
year dedicates itself to remain as dedicated, relevant and strong over the next 75 years
too. Devising a five fold strategy of growth, the company plans a quantum jump in revenues as well as becoming more
responsive to social changes.
Banking stocks under the leadership of ICICI Bank, HDFC Bank and BoI did manage to dodge the volatility in the Sensex
successfully. The rally in banking may sustain if the RBI does not increase the interest rates and inflation is handled by
managing the supply side and controlling commodity prices. This hope has given a new impetus to banking stocks!
JP Hydra Ltd.'s 200 MW hydro-power plant at an investment of Rs.25,000 cr. in Arunachal Pradesh by 2016 may be the
most expensive project calculated on a per MW basis. But its cost is high considering the length of the project as it has
factored in a cost escalation of about 5% p.a. and also accounts for a huge interest pay out at about 12% p.a. These two
factors along have brought about a cost burden of Rs.12,000 cr. into the project cost.
Its first hydro-power plant with a capacity to generate 1000 MW of electricity in Himachal Pradesh by 2010 has an outlay
of Rs.5,500 cr.
JP Hydro has signed a power purchase agreement (PPA) with Power Trading Corporation (PTC) to sell the electricity so
generated. With these two mega projects under its belt and a 600 MW power project in Arunachal Pradesh and two more
in Meghalaya with a combined capacity of 1000 MW, it joins the big league.
Market range: 16500 - 15300
TRADING ON TECHNICALS
By Hitendra Vasudeo
Last week was a painful market for traders as the fluctuation
and volatility got narrower. At the end of the week, some relief
to traders was witnessed as we saw a week-to-week net positive
move.
Last week, the Sensex opened at 15390.15 attained a low at
15321.56 and moved to a weekly high of 15957.24 before it
finally closed the week at 15807.64 and thereby showed a net rise
of 467 points on week-to-week basis.
Weekly resistance will be at 16609, 16450 and 16705. Weekly
support will be at 15433-15297, 14994 and 14789-14677.
On daily charts, important support is at 15300. A fall and close
below 15300 will take the Sensex down to test the low of 14677
and could subsequently violate to make new low of the current
falling leg from 21206. If the Sensex falls and closes below 14677, then expect a slide down to 14100-14000. The 0.382 level
of the fall from 2594 to 21206 is placed at 14097.
Importantly, the Sensex must cross and close above all the weekly resistances. A close above 16500 can extend the pull
back towards 16900 at least and to 17646 to an outer extent.
Sensex Wave Analysis
WEEKLY UP TREND STOCKS
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
Internal of Wave A is as
follows:
Wave a-21206 to 15332
Wave b-15332 to18895
Wave c-18895 to 14667
(not yet complete)
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
1513.00 1257.0
1415.0
1475.0
1573.0
1731.0
86.4
1466.3
28/03/08
HINDUSTAN UNILE 235.15 206.4
227.8
241.9
249.3
270.7
73.6
236.1
28/03/08
ITC
204.15 186.0
198.9
206.4
211.7
224.6
72.5
199.7
28/03/08
CAIRN INDIA
252.75 202.8
233.1
243.8
263.4
293.7
71.3
232.8
11/04/08
NESTLE INDIA
1514.00 1346.0
1466.0
1538.0
1586.0
1706.0
68.9
1476.0
28/03/08
Now if we assume that
the Wave A is complete
then we will have a pull
back rise of Wave A. In
that case, a retracement of
the fall from 21206 to
14667 can be expected
which can take the Sensex
to 16900 at least and to an
outer extent to 17646.
WEEKLY DOWN TREND STOCKS
If Wave A confirmation is
received, then Wave B
will have the following
internals.
Wave a -14667 to 16452
Wave b-16452 to 15303
3
Wave c-15303 to 15953
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
OMAXE
200.50
184.6
195.3
200.7
206.0
216.7
28.70
202.63
04/04/08
PARSVNATH DEVE 197.10
180.7
192.7
200.4
204.7
216.7
33.08
201.80
29/02/08
ICICI BANK
788.00
654.0
745.0
793.0
836.0
927.0
34.10
788.25
18/01/08
SOBHA DEVELOP
589.55
551.0
579.0
596.5
607.0
635.0
34.30
600.35
07/03/08
HT MEDIA
141.60
117.2
135.1
146.5
153.0
170.9
34.43
151.49
29/02/08
This wave count will be
applicable till 15300 is not
violated.
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
ELPRO INTERNATIONAL
504000
712.00
665.00
713.00
625.00 767.4
855.4
0.64
EMMSONS INTERNATION
532038
180.95
176.10
180.95
160.05 193.9
214.8
0.62
Conclusion
A
range
bound
movement in the band of
16500-15300 is
being
witnessed and an either
side course of movement
would
decide
the
subsequent direction of
the market.
Strategy for the week
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
NATIONAL ALUMINIUM C
421.35
436.92
444.00
451.08
474.00 376.9
50.08
SHRIRAM TRANSPORT FI
326.50
329.95
335.50
341.05
359.00 283.0
43.99
Exit long positions on rise to weekly resistance levels, which will be at 16609, 16450 and 16705.
* Micro Technologies has launched Micro LNTS (Lost Notebook Tracking System), which can locate stolen laptops from
any corner of the world leveraging the World Wide Web. Keep accumulating the scrip at declines.
TOWER TALK
* Something is cooking in Selan Exploration. The scrip has shot up 70% in couple of weeks on the back of serious buying
by some smart cookie.
* Vakrangee Software is betting more on private sector orders rather than the government sector, which implies a better
discounting to the scrip. The scrip looks strong technically as well.
* This is the best time to accumulate SEAMEC at such cheap valuation. Its fourth vessel SEAMEC-Princess has been
deployed for the next 18 months at a charter rate of more than $70,000 per day. Simply buy and hold for handsome
returns.
* Fortis Healthcare is on a consolidation spree inviting private equity (PE) players to part fund its expansion plan in the
disgnostic chain.
* The Goa festival of media planners acknowledges the increased clout of the TV medium boosting the prospects of
NDTV and TV18.
* Realty stocks have yet to complete the correction. Inflation may spook the balloon in realty stocks.
* ABB, BHEL, Siemens, Areva T&D and Alstom Projects are identified by a foreign fund for investments in power
generation.
* BHEL along with Areva T&D and NTPC are working on a nuclear energy project which marks their foray into atomic
energy.
* Arvind Mills has come out from the thirties range after a long time. This breakout may take it to Rs.50 plus in the next
round of the rally.
* IndBank Merchant Banking is available at attractive valuations and is fancied for its holdings in unlisted stocks. A fair
buy at current levels.
* Q4 results of companies may be affected by high steel prices and inflation. Hence all short-term investments need to be
carefully undertaken.
* Bodal Chemicals with 20% interim dividend is an attractive buy for the medium-term.
* ANG Auto is an auto stock available at cheap valuations but full of value.
* Orchid Chemicals is hovering around Rs.230 levels uncertain of the takeover story. But even at current levels it is
available at attractive valuations.
By Saarthi
BEST BETS
HBL Power System Ltd. (Code: 517271)
Rs.277
Founded in 1977, HBL Power Systems Ltd. (HBL) is an acknowledged leader in design, development and manufacture of
industrial & specialized batteries, allied electronic products and DC systems in India. DC power systems are used across
the world for a variety of applications where the traditional power supply system cannot be sustained/supported. It is
specifically required in mobile (non-stationary) applications like rail coaches, aviation etc. The company, therefore,
focuses on five key sectors of telecom, aviation, railways, defence and other industrial segments of oil & gas, power,
petroleum, steel etc. In these applications, usage of conventional sources of power/electricity is not possible and the DC
power supplied through batteries is to be relied upon. Notably, HBL offers a diverse portfolio of products, which can be
classified into the following three segments:
A. Batteries: HBL is a technology focused manufacturer of several ranges of specialised application batteries i.e. nickel
cadmium (pocket, fibre, and sintered plate), lead acid (VRLA, Tubular, LMLA), silver oxide zinc, lithium, thermal, etc. In
fact, it is the market leader in VRLA (valve regulated lead acid) and NCPP (nickel cadium pocket plate) batteries and
enjoys 50% market share in the domestic telecom market. Moreover, HBL is among the very few companies in the world
making ultra high specialties batteries for military use like thermal, reserve and torpedo batteries. It also produces
passenger and military aircraft batteries, which are mainly for export. Notably, HBL has made a selective and focused
entry to supply high quality pure lead tin batteries to the vehicles of State road transport corporations. It is also working
with manufacturers of electrical vehicles to design advanced technology batteries for these future products. To encourage
the use of green, non-polluting power usage of solar energy is expected to grow fast. And as each equipment based on
solar power needs batteries to store and supply the power, its potential is very substantial.
B. Railway Electronics: Traditionally HBL has been supplying batteries for train lighting, air conditioned coaches,
locomotives, signalling and communications. Of late, it has designed and developed a wide range of microprocessor
based signalling products and power systems to cater to the needs of Indian Railways. It now offers integrated power
supplies for railway stations and does turnkey signalling works contracts including design, installation and
commissioning. It even has a dedicated division to execute end-to-end turnkey railway signalling works, starting from
yard design, estimation, procurement, installation and commissioning. The company is now also working closely with
IRISET, RDSO and other agencies to showcase and implement its other innovative electronic products like data loggers,
automatic train charting systems, high frequency track circuits, solid state interlocks, digital axle counters, etc. This
segment is expected to be the major growth driver in coming years since the railways have embarked upon a
modernisation programmes of signalling systems all over the country.
4
C. Defence Electronics: HBL boasts of supplying several specialized, tailor made batteries to the Army, Navy and the Air
Force. In fact, it is the most dependable supplier to the defence services for critical application areas like torpedoes,
missiles, aircraft ignition, ground power units etc. which no other manufacturers can cater to. Besides, HBL also deals in
several electronic products like electronic warfare, radar, field telephone exchanges, electronic proximity, time fuses,
radio relays, laser weapon sights, night vision devices, opto electronics, thermal imagers, simulators, mine and grenade
electronics etc. Unlike batteries and railway products where almost all development is done in-house, HBL has
collaborated with IAI - ELTA of Israel for most of the defence electronics products. This joint venture has already bid for
two defence contracts worth Rs.500 cr. to be finalized by the end of 2008.
HBL also manufactures other power electronics such as thyristor controlled rectifiers, earth leakage monitors, battery
monitoring systems, industrial chargers, uninterrupted power systems, distribution boards etc. To meet the rising
demand, HBL has constantly expanded and modernised its production facilities at Hyderabad, Manesar (Delhi) and
Haridwar. Recently, it put up two new factories at Vizianagaram and SEZ Vizag in Visakhapatnam at a capex of Rs.150
cr.
HBL ranks 3
rd
globally for Nicad passenger aircraft batteries and 2
nd
for industrial alkaline batteries. It derives nearly 15%
of its total revenue from exports to Europe, USA, Gulf, China, South East Asia etc. Incredibly, HBL has developed
strengths in areas of limited competition and focused on direct marketing to chosen customers/market segments. The
direct sales approach through a network of more than 10 branches in India with a growing team of sales & service
engineers has enabled it to win selected customers and become their preferred supplier.
Fundamentally as well as financially, HBL is on a strong footing and doing extremely well. For the first nine months
ending 31
st
December 2007, it has recorded 100% growth in sales to Rs.688 cr. whereas PAT zoomed by 125% to Rs.47.50
cr. thereby surpassing the entire FY07 net profit of Rs.32 cr. by a huge margin. Accordingly, it is expected to end FY08
with sales and net profit of Rs.1000 cr. and Rs.72 cr. respectively. This works out to an EPS of Rs.30 on its equity of
Rs.24.30 cr. Hence the scrip is currently trading at a P/E ratio of less than 9 times against its FY08 earnings. At a
reasonable discounting by 14 times its share price can touch Rs.425 (i.e. 60% return) in 12-15 months. Moreover, with the
cool off in nickel and lead prices, HBL's margin is expected to improve going forward. Accordingly, it is estimated to post
an EPS of more than Rs.40 for FY09. Investors are strongly recommended to buy at current levels and add at every
decline. A solid bet.
Kamanwala Housing Construction Ltd. (Code: 511131)
Rs.97
Kamanwala Housing Construction Ltd. (KHCL) was originally incorporated in 1984 as Kamanwala Housing
Development Finance Company to cater to middle class buyers by constructing low cost housing and financing it at
nominal rates. Attar Apartments and Kamanwala Nagar at Virar were built under this programme. Subsequently, it
acquired a few old buildings and tenements and transferred the ownership to tenants at reasonable rates after carrying
out repairs and renovation. Later in 1995, the company diversified into manufacturing of steel ingots for its own
construction requirement and was renamed as Kamanwala Industries Ltd. However, the company does not undertake
this activity any longer. Hence in 2006, it changed its name KHCL to reflect the focus of its core activity i.e. construction.
Today, from the low cost housing projects it started out with, KHCL has transitioned itself to executing prestigious
projects of high quality in prime locations.
With a track record of more than two decades,
KHCL has completed the execution of 18
projects in Mumbai with a saleable area of
more than one million square feet. Few of its
well known constructions are Manavsthal-
Andheri, Krishna Kunj-Goregaon, Mukta
Apartment-Khar, Manavsthal I & II-Goregaon,
Vaibhav Apartment-Bandra, Maker Kundan
Garden-Andheri etc. Till now, the company
was into residential segment only on a small
scale but of late, on the back of the boom in
the real estate sector, it has entered into the
commercial segment as well and has drawn
up an ambitious expansion plan of a much
larger scale. In the last couple of years, it has
acquired a good land bank in Mumbai for
future projects. Its ongoing and future projects
are:
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5
Manavsthal - Saki Naka, Andheri (E): This project has emerged as a premier project that helped KHCL to come out of
difficult times. It is a residential project divided into three phases consisting of 240 Flats. Phases I and II have already been
completed and sold out. Phase III is now on a completion stage with 70% area sold.
Pinnacle Corporate Park – Bandra Kurla Complex: This is a commercial project comprising 75,000 sq. ft. out of which
43,000 sq. ft. area has already been sold. It is expected to be completed by 2008 and will enhance the image of the
company in the construction industry.
Rishi Tagore - Santacruz (W): Being in a prime location, the company is planning to develop this into a luxurious 60,000
sq ft residential complex for which the land cost alone is 35 cr.
Residential Project - Malad (W): This project is being taken up at Marve Road under the Slum Rehabilitation Authority
(SRA) scheme. Architectural plans for this Rs.33 cr. project have already been approved and the financing obtained.
Implementation is in full swing and this project of 2,03,000 sq. ft. is slated for completion by September 2009.
Vallabh Terrace - Opera House: KHCL has purchased an existing building at Opera House admeasuring about 15,000 sq.
ft. for redevelopment/upliftment and subsequent conversion of tenancy rights into ownership rights. It will be completed
during the current year.
Commercial cum Residential Project - Versova, Andheri (W): The total cost for this project is Rs.40.50 cr. for developing
1,00,000 sq. ft. area. As soon as the architectural plans are approved by the concerned authorities, construction work will
commence.
To de-risk its business model further, KHCL has undertaken geographical diversification as well and entered into a joint
venture agreement having 20% share with M/s. Prajay Engineers & others for the development of a land admeasuring 35
acres at Patancheru, Hyderabad. It has also purchased an additional 2 acres in Hyderabad for Rs.1.60 cr. to construct
commercial/residential buildings. KHCL has also acquired some land in Mahim under SRA scheme. In a 33% joint
venture with Aspen Property Pvt. Ltd., it is developing a property at the famous Filmistan Studio, comprising both
residential and commercial units. Meanwhile it is negotiating for few projects at 4 Bungalows, Andheri-Kurla Road,
Mulund and Bandra-Kurla Complex phase-II.
To conclude, KHCL has entered into an exponential growth trajectory and the market is bound to re-rate this company
sooner than later. For FY07, it made a strong turnaround for FY07 with sales of Rs.83 cr. (against Rs.11 cr.) and net profit
of Rs.13 cr. (against Rs.0.50 cr.) posting an EPS of Rs.26 on its equity of Rs.5 cr. To fund its working capital requirement,
KHCL made preferential allotment of 15.84 lakh equity shares and 19.95 lakh warrants at Rs.98 per share in December
2006. Recently, the company has amalgamated its subsidiary called M/s. Doongursee Diamond Tools Ltd. with itself.
Notably, this subsidiary is holding one lakh FSI for its Malad project. Meanwhile for the first nine months ending 31
st
December 2007, its topline remained flat at Rs.67.50 cr. but bottomline shot up 80% to Rs.15 cr. Being in the real estate &
construction sector and following the revenue model of sale on agreement basis, the company is bound to post erratic and
lumpy results on a quarterly basis. Accordingly for FY08, it is estimated to report total revenue of Rs.90 cr. with PAT of
Rs.18 cr. This works out to an EPS of Rs.25 on its fully diluted equity of Rs.7.20 cr. Although its profit margin seems too
high and the company has debt of more than Rs.50 cr., still it has the potential to give handsome return over a period of
time. Considering its 52-week high/low as Rs.229/68, investors are advised to buy it at current levels as it can easily give
50% return within a year.
Balasore Alloys Ltd.: For the medium-term
ANALYSIS
By Devdas Mogili
Balasore Alloys Ltd., (BAL) formerly known as Ispat Alloys Ltd. belonging to the Ispat group, is a 24-year old Balasore
(Orissa) based company established in 1984. The other group companies are Ispat Industries Ltd., Ispat Metallics India
Ltd., Ispat Profiles India Ltd., Gontermann Peipers India Ltd.
The company manufactures silicon ferro alloys. Different types of ferro alloys are produced in a custom built submerged
electric arc furnaces (EAFs), where oxide ores are reduced by carbonaceous reducers in a temperature range of 1500
0
C -
2000
0
C. BAL has 5 furnaces of different capacities and can produce 1,00,000 MTA of various ferro alloys. Pramod Mittal is
the chairman while L. K. Poddar is the managing director of the company.
The company has set up a Rs.132-cr. chrome ore pellet plant at Orissa, a Rs.100-cr. project in Tripura and a Rs.624-cr. gas-
based sponge iron project in Maharashtra. The company is setting up a 1 MMTPA hot-strip mill in Lysva, Russia, in a
joint venture with Lysva Steel Works. The company is investing $5 million to acquire 41% equity in a Mexican company
named Compania Minera Autlan.
The company produces ferro chrome/charge chrome from chrome ore sourced from its captive chromite ore mines.
BAL's chromite ore mines are located at Sukinda Valley, Jajpur, Orissa and the recently acquired manganese ore mines at
Hathoda, Madhya Pradesh.
6
The company has also increased its captive power generation capacity by installing two new imported DG Sets of 10.5
MW each and has also placed an order for a DG Set of 11.54 MW from MAN B&W for its unit in Balgopalpur, Orissa. The
Government of Orissa has allocated it 50% area of the chrome ore mines in Sukinda Valley. The company can source its
raw material at a comparatively cheaper price improving its profitability. The company has successfully commenced
chrome mining operations and is also taking steps for benefication and conversion of chrome ore.
Exports: BAL has been exporting ferro alloys since 1991-92 to quality conscious countries like USA, Japan, Korea, Europe
and Taiwan etc.
Clientele: Its clientele includes companies like Jindal Strips, Shah Alloys, Mukand Ltd., Chandan Steel and Synergy Steel.
Performance: The company's past performance is lacklustre. In fact, it came out of the BIFR following a rehabilitation
package. However, the company has announced pleasing results for the 15 months period ended 31
st
December 2007. On
net sales of Rs.341.33 cr. it clocked a net profit of Rs.6.22 cr. netting a basic EPS of Rs.1.15 (FV: Rs.5) and a diluted EPS of
Rs.1.10 (FV: Rs.5)
Financial Highlights:
(Rs. in lakh)
Latest Results: The latest
quarterly results ended 31
st
December 2007 have been
quite impressive to say the
least.
On net sales of
Rs.111.89 cr., it registered a
net profit of Rs.9.97 cr.
posting a basic/diluted EPS of
Rs.1.60. The annualized EPS
works out to Rs.6.40 (FV: Rs.5)
Particulars
QE 31/12/07
(3 Months)
QE 31/12/06
(3 Months)
YE 31/12/07
(15 Months)
Net Sales/Income
11189.13
7486.37
34132.59
Other Income
459.68
373.25
620.66
Total Income
11648.81
7859.62
34753.25
Expenditure
a. Inc/Dec in Stock
(132.57)
531.43
435.92
b. Con of Raw Materials
4426.96
2596.82
12549.14
c. Purchase of traded goods
-
-
320.83
d. Power & Fuel Cost
2255.16
1955.88
9762.16
e. Employee Cost
345.48
286.02
1364.64
f. Depreciation
377.34
383.14
Financials: The company has
an equity base of Rs.31.06 cr.
with a book value of Rs.38.93.
It has a debt : equity ratio of
0.72 while ROCE is 7.16% and
RONW is 2.10. Recently, the
company decided to allot
65,00,000
zero
coupon
convertible
warrants
to
promoters on a preferential
basis, which will entitle the
warrant holders to an equivalent number of equity shares of Rs.5 each at a price of Rs.70 per share.
1847.14
g. Other Expenditure
2162.25
999.63
5200.05
h. Total Expenditure
9434.62
6752.92
31389.88
Interest
611.13
725.31
2199.33
Prior period items
-
-
34.43
Profit Before Tax
1603.06
381.39
1129.61
Tax Expenses
Current Tax
130.67
58.05
103.52
Deferred Tax
467.31
79.32
377.03
FBT
8.04
3.80
27.48
Net Profit
997.04
240.22
621.58
Paid up eq. share cap. (FV: Rs.5 each)
3106.47
2814.52
2814.52
Reserves Ex Rev Reserves
21082.24
Basic EPS (Rs)
1.60
0.43
1.15
Diluted EPS (Rs)
1.60
0.41
1.10
Share Profile: The company's share with a face value of Rs.5 is listed and traded on the BSE under the B group. Its share
price touched a 52-week high of Rs.78.15 and a low of Rs.8.34. At its current market price of Rs.49, it has a market
capitalization of Rs.314.70 cr.
Dividend: The company is currently in a consolidation zone and has not come out with any dividend.
Shareholding Pattern: The promoters hold 47.23% while the balance 52.77% is held by non-corporate promoters,
institutions and the Indian public. Among mutual funds, UTI Mutual Fund has been adding BAL's shares to its various
portfolio schemes like Mid Cap Fund and Equity Fund schemes during January and February 2008.
Prospects: 2006 saw a jump in world stainless steel production from an estimated 24.62 MMTA in 2005 to 28.12 MMTA in
2006. This quantum jump was mainly due to the buoyant demand for stainless steel particularly in US, Europe, Japan,
and China. The demand in China and Japan continues to be robust and is estimated that ferro chrome prices are likely to
remain firm over the next few quarters.
The Steel industry in India performed remarkably well with all major steel companies posting good results in terms of
production, sales and profitability. There was an increase in stainless steel production by an estimated 42.2% in China in
2005-06, which is expected to continue, although the global production of stainless steel is to remain the same. China was
expected to produce 6.7 MMTA of stainless steel in 2007 as compared to 4.9 MMTA in 2006. This development in China
augurs well for Indian ferro chrome producers particularly due to their proximity to Chinese markets and lower logistic
costs. A favourable international market for ferro alloy products has prompted the company to focus more on exports to
various quality conscious countries.
Conclusion: BAL primarily operates in ferro alloys. The prospects of mining companies are bright given the overall
economic growth and stronger growth witnessed in the steel sector in India and China.
7
At its current market price of Rs.49, the BAL share discounts its expected earnings less than 9 times against the industry
average P/E multiple of 15. Considering its excellent performance and the bright prospects for mining companies, the
BAL share may be added to one's portfolio in small quantities on every decline for good appreciation in the medium-to-
long-term.
8
Enjoy bottom fishing!
MARKET
By G. S. Roongta
Despite several negative domestic and global news last week the stock market has now started to discount them fully
after it was badly impacted by reports of inflation at a 3-year high at 7% and ICAI's recommendation of adopting a new
accounting standard AS30 in the previous week. Together, they took a toll of 1031 points on the BSE Sensex on week-to-
week basis.
However, this toll of 1031 points was high considering the fact global markets, particularly Asian markets, were positive
throughout that week and only our markets allowed the bears to make merry just like the bulls celebrated at every 1000
point rise in the latter half of 2007 in quick succession and at short intervals.
In my last article, I had pointed out that there is a tough fight among the bulls and bears at the Sensex
level of 15,000 as both of them want to maneuver the market in their respective favour. This means that
the bears want to break the Sensex 14,000 level whereas the bulls wish to push the Sensex beyond 16,000.
As a result, last week's trading was a live example of traders glued to the terminals witnessing frequent
rises and falls by 100 points or so just like a wrestling match wherein one wrestler topples the other by
turn.
Thus on Monday, 7
th
April 2008, the market made a good start gaining 413 points on the Sensex at
15,757.08 and 114.20 points on the Nifty to touch 4761.20. But on Tuesday, 8
th
April, the bears gained upper hand
although they could dent the Sensex by only 170 points at 15,587 and the Nifty lost only 52 points at 4709. Next day on
Wednesday, 9
th
April, the Sensex again gained 202 points and the Nifty was up by 37 points despite several negative news
items featured on the front pages of the print media such as:
G.S. Roongta
(1) RBI dictat to tweak the rules of banking and ask banks not to accept stocks as collateral against loans for
calculating capital adequacy ratio (CAR) – the minimum capital that banks are supposed to set aside.
(2) UTI to sell its stake in L&T, ITC and Axis Bank worth nearly Rs.9000 cr. at a time when FIIs have posted negative
figures with a net divestment of Rs.12,229 cr. till 7
th
April and domestic mutual funds registered a net sales of
Rs.664 cr. upto 7
th
April this month and over Rs.545 cr. till 7
th
April in 2008.
(3) Realty and Housing sector may take a big hit if builders are required to quote built-up property on the basis of
carpet area instead of the prevailing super built-up basis. Once this is passed by the Maharashtra Legislature, the
builders will suffer and this may lead to higher percentage of black in property transactions.
(4) Several other petty issues like rise in unemployment rate in USA coupled with fears of a hike in interest rates in
India to counter inflation and permitting FIIs to short sell in the cash market against a margin like the others.
When such negative news could no longer damage the market beyond the realistic levels, it clearly indicates that the fear
ridden long-term investors have gathered courage to face the worst without divesting their long-term holdings even if a
panic is created by short sellers or the strong bear hug.
This weak trend, however, continued on Thursday, 10
th
April, with a loss of 124 points on the Sensex at 15,668 and 23
points on the Nifty at 4724 but reversed again on Friday, 11
th
April as the Sensex gained 112.54 points to close at 15,807.64
and the Nifty gained 44.8 points to close at 4777.80.
Thus on a weekly basis, the Sensex gained 465 points and the Nifty gained 131 points indicating that the market had
bottomed out and could pull back from the current levels.
Broadly speaking, if we go through the details of the Sensex and the Nifty and do a stock specific survey, we find that the
indices are actually at the same level of the low that they hit on Tuesday, 22
nd
January 2008 when the worst crisis hit our
stock markets in the recent past. If we examine the rise or fall in Sensex stocks, we find it is just a replacement of buying
and selling of specific stocks. Those stocks that were beaten heavily at first gained in the subsequent rally thereafter while
those that faced resistance levels fell down sharply with other active stocks.
For example, the shares featured in the table resisted the steep fall in the fourth week of January 2008 have fallen steeply
now while those shares that collapsed in that period have recovered maintaining the indices at the level of 15,000 on the
Sensex and 4600 on the Nifty even in the extended bear phase till now.
Thus one third of the Nifty related stock prices as referred in the table were pruned further by an average of 15% to 20%
while the highest fall of 40% was recorded by Reliance Energy. ICICI Bank fell by 34%, SAIL and L&T by 32% each.
Stocks like ACC, Bajaj Auto, Cipla, Hero Honda, Hindalco, ITC, Nalco, Siemens, Sterlite Inds., Tata Power etc. are some
stocks that were quoting higher against their January 2008 fall or the few that have advanced by over 10%.
When lead Sensex stocks have corrected beyond 30% to 40% while the Sensex, as a whole, has corrected by 25% only,
what does it mean? This means that market players were selling high priced stocks and accumulating beating down
stocks knowing full well that these battered stocks could not be hammered any further. They did this keeping both the
popular indices within rangebound limits recording a rise or fall of less than 200 points on the Sensex on a daily basis.
Last week's trading is a live example of this kind of trading.
The daily rise or fall of 500 points on the Sensex
witnessed earlier has now been set to 100-200
points with a view of mass consolidation without
much risk. The bears are equally concerned
about the Q4 results to be announced soon. If
they are viewed positively by analysts on the
back of the weak market scenario where share
prices have been hit by over 30%, it might prove
risky if the market bounced back on favourable
corporate earnings.
Price in Rs. on
Scrip
25/01/08
08/04/08
Net Fall
%age Fall
Bharti Tele
915
819
96
10
Grasim
3026
2576
450
15
HDFC
2715
2407
308
11
ICICI Bank
1261
836
425
34
Idea Cellular
118
102
16
15
L&T
3892
2637
1255
32
M&M
673
607
66
10
PNB
667
517
150
18
Power Grid
117
96
21
20
Reliance Inds.
2615
2418
200
8
Reliance Energy
2028
1177
851
40
SAIL
230
157
Stock prices of mid cap and small cap stocks are
the worst lot in the current crisis and provide
ample opportunity to gain by 50% to 100% at
least if the market bounces back soon.
73
32
SBI
2407
1693
714
30
Tata Motors
710
631
79
11
Zee Tele
260
238
22
9
Promoters and corporates are re-rating their stock valuations and are keen to enhance their stakes through a buy-back of
shares or by absorbing the excess supply made available by weak holders. Few corporates have already initiated buy-
backs. Orchid Chemicals is a live example where the promoters were ruling on a minor stake below 30% and might
hurriedly up their stake given the current low prices. Mr. Kumar Mangalam Birla also appears keen to enhance the
promoters' stake in Hindalco and Grasim and might consider a buy-back proposal.
Technical analysts may try to find the bottom and market experts may give two-way advice but bottom fishing has
already begun by HNIs and retail investors given the current behaviour and trend in the market. The bears are finding it
hard to beat down the market further and if they try to push their luck, it might just rebound on them exactly as it
happened with the bulls who kept on pushing the market up and up without a proper break from 16,000 to 21,000.
Small investors and retail investors should, therefore, start bottom fishing picking stocks of their choice in sectors like
Power, Infrastructure, Engineering, Tea Plantations, Pharma, Automobiles, Cement and Steel.
NFO Analysis
MUTUAL FUNDS
ICICI Prudential Focused Equity Fund
By Devangi Bhuta
(Minimum Investment – Rs.5000, Entry Load – 2.25% below Rs.5 cr.)
NFO Dates: April 8, 2008 to May 7, 2008.
Scheme Objective: ICICI Prudential Focused Equity Fund seeks to generate long term capital appreciation and income
distribution to unit holders from a portfolio that is invested predominantly in equity and equity related securities of about
20 companies and the balance in debt securities and money market instruments. If the total assets under management in
this scheme goes above Rs.1000 cr. the Fund Manager reserves the right to increase the number of companies to more
than 20.
Analysis: The scheme has large cap orientation, which is an attractive proposition as it plans to invest in profitable
companies which are leaders in the industries in which they operate. The other criteria is that these companies should
have rapid growth potential over the next 3 to 5 years and a track record of superior proven management and solid
balance sheets. Moreover, with the recent market corrections large caps will be the first ones to rise in case the market
rebounds as liquidity is expected to flow in here initially.
Further, it also intends investing in depository receipts including American Depository Receipts (ADRs) and Global
Depository Receipts (GDRs), debt securities convertible into common shares, preference shares and warrants. However,
this may enhance the risk of this scheme significantly for retail investors as the currency factor would also come into play.
The entry load is extremely high at 2.25%. Add to it the management and other expenses and the scheme becomes costly.
Recommendation: While large cap stocks may be attractive picks at the current market levels, diversification and sector
exposure will have to be monitored. Investors may wait and watch as this is an open-ended scheme before taking a
plunge as in the backdrop of the current market volatility, they may be able to get in at a lower rate.
By Saarthi
STOCK WATCH
9
Cera Sanitary Ltd. (Code: 532443) (Rs.116) is the third largest company in the organized sanitaryware segment with over
20% market share in the domestic market. It has wide product range including WCs, wash basins, whirlpools, bath tubs,
shower panels, shower cubicles, shower temples, bath fittings, kitchen sinks, tiles etc. It has a strategic tie-up with Pozzi-
Ginori, an Italian designer of sanitaryware for importing premium sanitaryware and marketing it in India. Presently, the
company derives 40% revenue from institutional sales whereas the major 60% comes from retail sales. The company has a
strong distribution network with 400 dealers, 4000 retailers, 9 depots and 14 zonal offices across the country along with
CERA bath studios at eight locations. To encash on the rapidly increasing demand, it recently expanded its production
capacity to 24,000 MTPA from 16,500 MTPA. It is now planning to increase the production of sanitaryware and also
establish itself as bathroom solutions provider by offering all the durables that go into a bathroom. For FY08, it is
expected to clock a turnover of Rs.125 cr. with PAT of Rs.8.50 cr. on a conservative basis. This translates into an EPS of
Rs.14 on its current equity of Rs.3.10 cr. with a face value of Rs.5 per share. Couple of months ago, the company made a
preferential allotment of 8 lakh warrants at Rs.162 each to promoters. Considering its strong brand value and robust
fundamentals, the scrip is available extremely cheap at an enterprise value of Rs.100 cr.
*****
Numeric Power Systems Ltd. (Code: 532051) (Rs.575) is India's No. 1 manufacturer of uninterrupted power supply (UPS)
systems, stabilizers and power conditioners. It also undertakes turnkey projects and offers end-to-end solutions for
SCADA/EMS package, large network of industrial processes, power transmission support systems and distribution
management. Last year, the company entered into a joint venture with the French UPS major SOCOMEC SA to distribute,
market and service 3 phase range of UPS systems (greater than 10 KVA) products to customers in India. Around 75% of
the ATMs in the country are fitted with its UPS systems. With power deficits likely to continues and the ubiquitous
outages and voltage fluctuations, its products will enjoy significant market potential in the country. For FY08, it may
report sales of Rs.375 cr. with profit of Rs.38 cr. i.e. an EPS of Rs.75 on its equity of Rs.5.05 cr. At a reasonable discounting
by 12 times, its share price can shoot up to Rs.900 within a year. Secondly, with an estimated reserve of more than Rs.125
cr. on its tiny equity of Rs.5 cr., the scrip is fully ripe for a liberal bonus as well.
*****
Asian Granito India Ltd. (Code: 532888) (Rs.61) is one of the largest producers of vitrified tiles under the brand name
'Asian Tiles' and offers a wide range including glazed, unglazed, rustic, matte, homogeneous and non-homogeneous
body, water jet cutting and tailor made designs as per client requirements. In July 2007, the company raised around Rs.68
cr. through an IPO priced at Rs.97 per share for setting up a wall tile unit and expanding its vitrified tile capacity.
Accordingly, it recently expanded its vitrified tile capacity to 16,000 sq. mt. from 14,000 sq. mt. tiles per day. Importantly,
the company has begun the trial run in January 2008 at its new wall tile plant having a capacity of 9300 sq. mt. per day.
On the other hand, its wholly-owned subsidiary, Asian Tiles Ltd. manufactures ceramic floor tiles with a capacity of 7,000
sq. mt. per day. Financially, it is expected to clock a turnover of Rs.200 cr. with net profit of Rs.26 cr. i.e. an EPS of Rs.12
for FY08. For FY09, it is estimated to post an EPS of Rs.15. Considering its brand value and future prospects, the scrip is
available fairly cheap with the company commanding an enterprise value (EV) of Rs.175 cr.
******
Led by Mr. Malvinder Singh - 'Mushroom Rattan' award winner, Agro Dutch Industries Ltd. (Code: 519281) (Rs.29) is
the world's largest producer and exporter of mushrooms even surpassing 'Royal' mushroom of France. Last year, the
company set up new facility to produce 14,000 tonnes of frozen mushrooms thereby taking the total mushroom capacity
to whopping 50,000 tonnes per annum. Remarkably, the company alone accounts for nearly one fourth of the total US
imports of mushroom. Importantly, it is a
fully integrated mushroom company with in-
house composting, in-house processing and
its own can manufacturing plant. Further, the
company is setting up new easy-open-ends
can unit and a six colour metal printing line in
Tamil Nadu at an investment of Rs.55 cr. To
fund this, the company has already made a
preferential allotment of 1 crore warrants at
Rs.27.50 to the promoter group. For FY08, it is
estimated to clock a turnover of Rs.225 cr.
with a healthy PAT of Rs.26-27 cr. on the back
of huge 'other income' from Visheh Krishi
Gram Udyog Yojana Scheme. This translates
into EPS of Rs.7 on its fully diluted equity of
Rs.39.50 cr. Although it is a non-dividend
Daily Fresh Buy
(for the busy investor)
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This low risk, high return product for the busy investor is available for
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moneytimes@vsnl.com or phone on 022-22616970/ 22654805.
10
paying company and there are some promoter concerns, aggressive investors can still take a punt on it for handsome
gains in the medium-term.
By Kukku
FIFTY FIFTY
Investment Calls
* Sujana Towers (Rs.110) emerged after the transfer of the Towers Division of Sujana Metal Products Ltd. pursuant to the
Scheme of Arrangement and Amalgamation as approved by the Hon'ble High Court of Andhra Pradesh in Hyderabad on
10
th
April 2007. STL manufactures galvanised steel towers used in power transmission and as telecom towers. It is
acquiring more and more customers in the power and telecom sectors.
The demand for the telecom and power transmission towers is expected to be higher on account of government policies
for the development of telecommunications and make electricity available to all by 2012. The company is capable of
quickly adapting to changing market conditions to sustain the projected growth in sales and profits.
Sujana Towers reported net profit of Rs.18.41 cr. in the 1st half ended 31
st
December 2007 and reported sales of Rs.265cr.
for the quarter ended 31
st
December 2007. Full year FY08 EPS likely to be around Rs.11/12.
Few leading mutual funds have taken a good exposure in the stock. It has reacted from a high of Rs.235 to the current
level and looks attractive for investment.
* Kesar Enterprises (Rs.68) has one of the most modern and efficient sugar factories in the country. With a capacity of
6,500 TCD located at Baheri, Dist. Bareilly in Uttar Pradesh, which is the largest producer of sugarcane in the country.
It has one of the most modern and highly sophisticated processes of continuous fermentation of molasses, which gives
higher yields and produces the finest quality of spirit. The company manufactures Rectified Spirit, Extra Neutral Alcohol,
Country Liquor, IMFL like whisky, rum, gin, vodka etc.
It also has storage division. Due to the steady rise of crude price and higher demand for storage space for strategic reserve
for crude oil and finished petroleum products, the Storage industry has come into focus. Every country is planning to
maintain 90 to 180 days storage capacity to absorb oil price volatilities. Existing companies in this business are trying
to increase capacities on available land at their disposal.
The company has increased its capacity from 90,000 KL to 115,000 KL comprising another 10 additional tanks, which will
further increase to 127,000 KL comprising another 10 tanks. This division is said to be doing very well.
As per the Preferential Issue Guidelines of SEBI, 4,51,600 warrants were converted into 4,51,600 equity shares of Rs.10
each at a premium of Rs.87 per share while the current market price is around Rs.68.
The company is restructuring and with firming up of sugar prices, it is expected to do well in the current year.
Long-term investors can take a small exposure in this stock for good long-term growth. Its price is likely to touch Rs.125
to Rs.150 mark over the next one year.
Market Guidance
* Indbank Merchant Banking Services (Rs.26) is engaged in Merchant Banking, Stock Broking, Depository Participant
and allied activities and is a member of the NSE, MSE and OTCEI and registered with NSDL as a Depository Participant
The market value of its investments (cost - Rs.5.49 cr.) as on 31
st
March 2007 was Rs.42.82 cr., which has further shot up to
around Rs.80 cr. in FY08. The company also has good investments in unlisted companies whose valuations are good.
For the first nine months, it has reported an EPS of around Rs.6.77. Thus its full year EPS is likely to be around Rs.9.
Investors can keep watch on this stock to add on reactions. The stock had touched a high of Rs.52.
* Mukand Ltd. (Rs.85) has a strong manufacturing base. Long-term investors are likely to get a good benefit. Stay
invested or add on dips around Rs.83/84 level.
* If closes above Rs.45 decisively, then First Leasing Company (Rs.46) may see higher levels.
* Sugar stocks are likely to remain in action as the price of sugar is strong and is expected to firm up further over the next
one year. Shree Renuka Sugars (Rs.104), Bajaj Hindustan (Rs.207), Kesar Enterprises (Rs.68), Balrampur Chini (Rs.92)
and Rajshree Sugar (Rs.54) are good long-term investment bets.
* Atlas Copco India (Rs.990) has entered into Share Purchase Agreement with the shareholders of Prisma Roctools Pvt.
Ltd. (Prisma) and Focus Rocbit Pvt. Ltd. (Focus) for acquisition of 25% shares of both companies with an option to acquire
the balance 75%, subject to necessary approvals. Both companies are located in Hyderabad. Prisma is engaged in the
manufacture and sale of DTH Hammers and Bits and other complementary products and services for Rotary and down-
the-hole (DTH) drilling segment while Focus is engaged in the manufacture and sale of Rotary Bits and complementary
products and services for the surface mining segment.
The company is likely to report strong growth in the current year. Stay invested.
* Revathi Equipment (Rs.1029) - Informed sources aver of favourable developments in the company. More acquisitions
are expected in the near future. It is a good long term wealth creation story.
11
* RPG Cables (Rs.37) is likely to be a good turnaround story. Add at current levels as positive developments are taking
place.
* Hotel stocks have come down to attractive valuations and the sector is said to be faring well. Stay invested in Kamat
Hotels (Rs.165), EIH Ltd. (Rs.140), Indian Hotels (Rs.109), Oriental Hotels (Rs.284) etc.
* Jyoti Ltd. (Rs.82) is said to be doing well. Its revenue is said to have crossed Rs.200 cr. for FY08 and it is likely to get a
big order in the near future. A small exposure can be taken at current levels.
* Mather & Platt Pumps' (Rs.142) March 2008 quarter results may not be encouraging in view of the sharp rise in
steel/casting prices.
* Sesa Goa (Rs.3094), Tata Metalik (Rs.144), Tata Sponge Iron (Rs.264), Rohit Ferro-Tech (Rs.79.60) & Ferro Alloys
(Rs.23) to report good results. Stay invested.
Note: Avoid stocks of companies, which have high percentage of raw material inputs like steel, castings & forgings, as
their prices have shot up very sharply and is affecting the margins of the user companies.
By V. H. Dave
EXPERT EYE
The share of Accentia Technologies Ltd. (ATL) (Code: 531897) (Rs.170) is recommended for steady appreciation in the
medium-to-long term. With major acquisition plans ahead, ATL is likely to perform well.
ATL with its integrated focus on Medical Transcription, Coding, Billing and Insurance Claims offers the gamut of
integrated value chain of a healthcare BPO, which is unique in concept. Such integration reduces the costs for hospitals
and helps them realize their receivables in a shorter time. Thus the demand for ATL's integrated healthcare BPO services
is receiving a good response.
ATL recently acquired Bangalore-based Asscent Infoserve Pvt. Ltd. (now a subsidiary) for using its infrastructure facilities
meant for HRCM (Healthcare Receivables Control Management) services and has access to outsource this 600 seater
spread across 7000 sq. ft.
ATLs back office operations are conducted through its state-of-the-art facility spread across 8,000 sq. ft. at Technopark,
Trivandrum apart from 7000 sq. ft. Asscent facility at Bangalore. These two facilities engage a workforce of over 1400
professionals.
ATL has major plans to increase its outsourcing infrastructure to cater to the increasing demand for its services through
domestic acquisitions and third party outsourcing providers across India and Philippines.
The company utilises sophisticated internet technologies combined with its global delivery model to offer its services to
US healthcare providers.
ATL has firmed up measures to buy out as many as eight companies this year. The targeted companies, all players in the
healthcare BPO segment, include three foreign and five Indian firms.
It has already acquired three US-based healthcare BPO companies - Florida-based GSR Physician Billing Inc and GSR
Systems Inc. and Oregon-based medical transcription services provider DenMed Inc., for about Rs.80 cr. that it bought in
a cash-cum-stock deal.
Recently, it acquired 51% stake in Oak Technologies (OT) of USA in an all-cash deal. OT is an integrated services provider
in HRCM operating from 5 units in USA and Hyderabad, Nagpur and Bhubaneshwar in India. Through this acquisition,
ATL got into its fold a global workforce numbering 700.
ATL has allotted shares to the shareholders of the erstwhile Iridium Technologies (India) and Geosoft Technologies,
Trivandrum, pursuant to the scheme of amalgamation. Accordingly, its equity has gone up to Rs.11 cr. and the book
value of its share stood at Rs.35 as 31
st
March 2007.
For FY07, ATL posted a net profit of Rs.7.3 cr. on sales Rs.33 cr. For Q3FY08, it reported a net profit of Rs.10 cr. on sales of
Rs.34 cr. and for the first nine months of FY08, its net profit stood at Rs.24.4 cr. on an income of Rs.81 cr.
The promoters hold 15% in its equity capital, foreign holding is 12%, PCBs hold 12% leaving 61% with the investing
public.
ATL's acquisitions add to the company's portfolio in the HRCM space. In USA, 49% of the transcription, coding, billing
and collection work in the healthcare space is outsourced by US hospitals to US-based service companies and only 1%
work is offshored to India making entry barriers in the sector extremely difficult.
But since the three US companies have 60-65 clients each with long-term contracts, ATL would be in a better place to
penetrate the market that is valued at nearly $2.2 trillion.
When considering outsourcing to India, US and UK based hospitals look beyond traditional medical transcription
services. Leading hospitals in USA have shown a keen interest in the integrated value chain software for tracking
developed by ATL as it provides the complete range of end to end solutions for hospitals.
12
During FY08, ATL is expected to garner a net profit of Rs.33 cr., on sales of Rs.120 cr., which could fetch an EPS of Rs.30.
Going forward on the back of expansion, its net profit is expected to increase to over Rs.40 cr. when its EPS would go up
to Rs.36.
The ATL share is traded at Rs.170 at a P/E of 4.9 on FY08 EPS and 4.1 times its FY09 EPS is recommended with a target
price of Rs.200 in the medium-term. The 52-week high/low of the share has been Rs.278/61.
******
The share of Man Industries (India) Ltd. (MIL) (Code: 513269) (Rs.116) is recommended for decent appreciation in the
long-term.
MIL, the flagship company of the Man Group, is a leading manufacturer of large diameter SAW pipes and coating
systems for high pressure applications like transportation of oil, gas and other petrochemical products.
MIL is an ISO 9001, ISO-14001 and ISO-18001 certified company and all its facilities hold valid API licences, which is a
mandatory requirement for production of high pressure pipes for hydrocarbon applications. Its plants are located at
Pithampur in MP and at Kutch in Gujarat. During the last three years, MIL's capacity has dramatically increased to
6,80,000 TPA from 3,75,000 TPA in longitudinal submerged arc welding (LSAW) and helical sub-merged arc welding
(HSAW) pipes.
MIL recently commissioned its windmill near Kutch in Gujarat and has reported revenue from wind energy for the first
time. It is now putting up an additional capacity of 4.5 MW in wind energy.
During FY07, the company increased sales by 33% to Rs.1060 cr. and earned 58% higher net profit of Rs.55.3 cr. yielding
an EPS of Rs.10.1 and paid a dividend of 30%. During Q3FY08, while sales advanced by 29% to Rs.401 cr., net profit shot
up by 26% to Rs.20.7 cr. During the first three quarters of FY08, sales have surged by 32% to Rs.1043 cr. and net profit by
36% to Rs.57 cr.
Its equity capital is Rs.26.6 cr. and with reserves of Rs.248 cr., the book value of its share works out to Rs.57.6 on the face
value of Rs.5 per share. The value of its gross block is a whopping Rs.307 cr. and the debt : equity ratio works out to 0.9:1.
The Man Group of UK holds 12.4% and the Mansukhanis, the Indian promoters, hold 28% in the equity, PCBs hold 9.5%,
Institutions/Mutual Funds hold 15.4%, foreign holding is 18.6% leaving 16.1% with the investing public.
MIL's manufacturing facilities have also
won the approval of Gazprom, the Russian
natural gas company and orders worth
Rs.600 cr. have come from companies in
USA, Nigeria and West Asia, while Indian
companies have given orders worth Rs.100
cr. The total orders on hand amount to
Rs.1600 cr.
April – June 2007
EBG Quarterly Performance:
100% once again
During April – June 2007, which is the third quarter of the fourth year of
'Early Bird Gains' (EBG) – the investment newsletter that spots multi-
baggers, it has scored 100% success with all 15 recommendations
recording an appreciation.
MIL has embarked upon an expansion
project in the HSAW division at Anjar to
increase the installed capacity for HSAW
pipes by 300,000 MTA. Earlier, MIL
completed its GDR offering of $35 million
at Dubai International Financial Exchange
and the funds are to be used for
refurbishing its capacity and as long-term
working capital.
EBG has, therefore, consistently, maintained quality while the bonus
issues in excess of 30% highlight the confidence of its recommendations.
Issue
Dated
Scrip
Buy
Price
Highest
price since
recom.
Growth
%
04/04/07
Panama Petrochem
129.00
270
109
11/04/07
13
MIL plans to locate its 3,00,000 MTA
HSAW pipes new manufacturing facility on
a 162-acre site at the Little Rock Port in
Arkansas, USA. The company will invest
approximately $100 million (Rs.400 cr.) in
the facility, which will employ 250 people
and production will begin by early 2009.
MIL is also planning to set up a pipe
production facility in China under a $75-
million joint venture. The company is in
negotiations with three Chinese steel
manufacturers for this purpose. MIL, which
will be the majority shareholder in the
venture, is closing down its 1,35,000 MTA
Pithampur facility in Madhya Pradesh and
will shift the machinery and equipment to
Rolta India
335.90
780
132
18/04/07
Metalman Industries
18.19
47
158
25/04/07
Indag Rubber
31.00
113
264
02/05/07
Paradyne Infotech
116.45
440
279
09/05/07
Pochiraju Inds. Ltd.
22.60
64
183
16/05/07
Asian Oilfield Services
73.95
446
503
23/05/07
Hanung Toys & Textiles
165.50
300
81
23/05/07
XL Telecom & Energy
119.30
595
400
30/05/07
Bharat Gears
73.00
89
22
06/06/07
Kanpur Plastipack
22.75
34
49
13/06/07
Deepak Fertilisers
89.30
178
99
13/06/07
MSP Steel & Power Ltd.
19.15
89
365
20/06/07
Bihar Tubes Ltd.
103.65
222
114
27/06/07
Astral Poly Technik Ltd.
105.00
235
123
EBG for sure profits
14
China in three months.
Coming to its future prospects, MIL's products find application in high growth areas such as oil, gas, petrochemicals and
water transportation. The massive expansion by oil & gas majors augurs well for the prospects of MIL.
MIL has set up a new company in the realty sector called Man Infrastructure Projects. The company focuses on
developing IT and IT SEZ projects and has initiated the process for developing an IT SEZ near Indore. The land for the
SEZ has been acquired and the feasibility study has been completed. The MP government has cleared MIL's proposed
Rs.14,000 cr. IT SEZ, which will be developed over 265 acres in 10 years, developing a million square metres each year.
MIL has already demerged its Aluminium Division to enhance shareholder value. The de-merger envisaged a share
exchange ratio of an equity share of face value of Rs.10 each, of the resulting company, for every eight held in Man
Industries. The shares of Man Aluminium are currently traded at Rs.39 on the BSE.
The major application for seamless pipes is in oil exploration, boilers, ball bearings, roller bearings, automobiles,
fertilisers, petrochemicals, etc. With the boom in the oil & gas sector and in drilling and laying of cross-country pipelines,
the pipe & tube industry is witnessing an unprecedented demand driven growth.
On the domestic front, it expects to bag a significant chunk of the 1,000-km GAIL project. To service its clients in India and
West Asia, it is raising the capacity of its Anjar plant in Gujarat by 3,00,000 TPA is also eyeing the Chinese market and
plans to set up a plant there with an annual capacity of 300,000 TPA. Once all these expansions fructify, MIL's production
capacity excluding the China plant will nearly double to 1.3 MTPA by Q2FY09.
With bright prospects of the pipe industry, MIL is confident of continuing the momentum of growth. The booming user
industries augur well for its growth and it is all set to post an EPS of about Rs.14.5 during FY08, which would increase in
coming years on the back of various projects being implemented.
The MIL share trades at a forward P/E of 8 on its estimated FY08 earning. In view of the robust business prospects and
the company's ability to grow fast coupled with its strong fundamentals, it looks attractive for the long-term capital
appreciation. The 52-week high/low of the share has been Rs.177/86.
******
Cords Cable Industries Ltd. (CCIL) (Code: 532941) (Rs.90) very recently tapped the capital market in January 2008 with
an issue of 31 lakh shares of Rs.10 each at a premium of Rs.125 aggregating Rs.41.9 cr. to part-finance its expansion of
Rs.70 cr.
The proceeds are being used to set up a Rs.57 cr. manufacturing facility with the remaining fund provided by ICICI Bank
through the external commercial borrowings (ECBs) route. The new facility, to be commissioned by March 2008, will
manufacture rubber cables and HT (high tension) power cables, which are new business segments for the company.
CCIL manufactures cables including instrumentation and control cables up to 1.1 Kilovolt (KV) at its facility in Rajasthan
for various applications including industrial, utility, buildings as well as for power transmission.
The power sector accounts for nearly 55% of its revenue followed by the cement sector at 11% and 33% by steel and other
industries. Within the product group, instrumentation and control cables account for 75% of the company's revenue and
also command better margins.
Its clients include BHEL, National Thermal Power Corporation (NTPC), Hindalco Industries, ACC, HPCL, GAIL, Tata
Steel, Siemens, Honeywell, Larsen & Toubro, Mangalore Refinery & Petrochemicals (MRPL).
For FY07, CCIL posted 75% higher sales of Rs.92 cr. but earned 139% higher net profit of Rs.7 cr. During Q3FY08, it
reported net profit of Rs.3.6 cr. on sales of Rs.52 cr. During the first 9 months ended 31
st
December 2007, it registered a net
profit of Rs.9 cr. on sales of Rs.119 cr.
Post-IPO, its equity stands at Rs.11.4 cr. and with reserves of Rs.58.3 cr., the book value of the share works out to Rs.61.
The promoters and associates hold 73% in its equity capital leaving 27% with the investing public.
The demand for cables is set to increase significantly given the ongoing capex in power and infrastructure and the strong
growth in transport industries such as metro rail, shipping and aviation.
In the light of the robust demand undercurrent, CCIL's capacity expansion in low tension (LT) power cables and addition
of HT power cables, rubber and speciality cables to its product portfolio appears promising.
CCIL's established track record of over 15 years with approvals and pre-qualifications from companies such as NTPC,
BHEL, Power Grid and Reliance Energy also lend confidence to its ability to penetrate the cable market further.
While the company has so far not enjoyed any significant exposure to the export market (1% in FY07), it plans to export to
over 15 countries by FY09 broad basing its current spread of over five countries. In this context, CCIL has already tied up
with companies in West Asia such as Petroleum Development, Oman, and Saudi Electric Supply Company.
CCIL's order-book pegged at about Rs.100 cr. lends visibility to revenues, which could also get a lift from the
management's renewed focus on the export market.
CCIL witnessed compounded earnings growth of over 328% on the back of 67% growth in revenues during the last four
years. During this period, operating profits enjoyed a CAGR of about 127%; operating profit margin expanded by 8.9% to
about 14.7%. Going forward, margins may witness a further expansion given CCIL's foray into higher value-added
products. Besides, post-expansion, CCIL may also benefit from better utilisation of capacities.
CCIL may further be able to further extend its reach into sectors such as railways, shipping and wind power after the
proposed expansion of its capacity and the addition of new products. CCIL offers a proxy exposure to the ongoing
infrastructure and power growth story. The robust growth in its sales and profitability, its diverse revenue mix, its
established clientele and the proposed entry into HT (high tension) power, rubber and specialty cables segment, portend
good prospects for the company.
During FY08, CCIL is likely to achieve a net profit of Rs.13.5 cr. on sales of Rs.180 cr. and the EPS can would work out to
Rs.11.8. Sales are expected to move up to Rs.250 cr. in FY09 on the back of expansion with net profit increasing to Rs.17 cr.
enhancing its EPS would enhance to Rs.14.9.
At the current market price of Rs.90, the share is traded at a P/E of 8.6 on FY08E and 6.8 on FY09E earnings. We
recommend buying with a medium-term target of Rs.140. The 52-week high/low of the share has been Rs.156/83.
15
By Nayan Patel
TECHNO FUNDA
R Systems Ltd.
BSE Code: 532735
Traded on NSE also
Last Close: Rs.88
R Systems is a New Delhi based company providing BPO services,
enterprise services & IPLM services. For 3 years continuously, it was
among the 500 fastest growing private companies in USA.
The company has an equity of just Rs.13.51 cr. in which promoters
hold 42.09% stake, corporate bodies and government financial institutes hold 20.72% while the Indian public holds
36.61%. Reliance Capital holds 8,72,451 shares (6.42%) stake in the company and GE Capital, Mauritius, holds 5,96,695
shares in the company.
For 31
st
December 2007 ending financial year, while the company's sales jumped 32.35%, its net profit zoomed by 140.50%
to Rs.24.17 cr. and the EPS was Rs.13.97. Currently the stock is trading at a P/E of just 7. It declared 18% dividend for 2007
and the record date for dividend is 25
th
April. The stock is available cum 18% dividend at the current level. Buy with stop
loss of Rs.83. On the upper side, the stock can go up to Rs.96 level. Cross over will take it to Rs.105 level in coming days.
Its all time high price is Rs.265 and the all time low price is Rs.75. So, at current level, the stock is looking highly
undervalued and its stock price can rise smartly in a good market.
ABC Bearings Ltd.
BSE Code: 505665
Last Close: Rs.88
This Mumbai based bearings manufacturer was established in 1961 and is a prominent player in the bearings business. It
has an ultramodern plant in Bharuch, Gujarat. Last year, it has started a new joint venture company with NSK, Japan, at
Chennai. The company also exports its products to USA, Canada, Dubai, Peru, Italy, Singapore, Indonesia, Bangladesh &
Sri Lanka.
It has an equity of just Rs.11.35 cr., promoters hold 31.23%, government financial institutes & corporate bodies hold
15.20%, foreign holding is around 27.37% while the investing public holds 26.20% stake in the company. LIC holds
5,37,284 shares, Oriental Insurance holds 3,61,517 shares and Goldman Sachs holds 1,86,481 shares.
For the December 2007 quarter, its net profit zoomed by 18.88% to Rs.5.54 cr. and it may post an EPS of around Rs.16-17
for FY08. Last year, it declared 40% dividend. The stock is traded at just Rs.88. At current level, the share is available with
attractive dividend yield if it maintains the same level of dividend.
Buy with a strict stop loss of Rs.82. On the upper side, the share price can go up to Rs.95 and Rs.105 level in coming days.
Aishwarya Telecom IPO opens on 15
th
April
MONEY FOLIO
Review
Last week we recommended Shivalik Bimetals at
Rs.21. During a volatile last week, it zoomed to
Rs.25.50 level.
Infotrek Syscom recommended at Rs.37 last week
skyrocketed to Rs.57.40 level in the week.
Hope short-term investors earned handsome profits
from these two trades.
Aishwarya Telecom Ltd. (ATL), an ISO 9001:2000 company manufacturing Test & Measuring (T&M) Instruments like
Mobile Tester, Fibre Optic Tester, Data Tester, Cable Fault Locator, is entering the capital market with a public issue of
40,00,000 equity shares of Rs.10 each through the 100% book building process in the price of Rs.32 to Rs.35 per share. The
issue will open on Tuesday, 15
th
April and close on Thursday, 17
th
April 2008 and will be listed on the BSE. The issue has
been graded 2/5 by CARE signifying 'below average' fundamentals.
ATL manufactures T&M equipments. It currently manufactures products for Telephone Service Providers, Defense
Sector, Railways, Telecom equipment manufacturing companies and Cable TV Operators. The Company has its
manufacturing units at Yanam in the State of Pondicherry and at Dehradun in the State of Uttaranchal and a R&D facility
at Hyderabad.
The sharp growth of the Indian Telecom sector has stimulated the growth of T&M Instruments industry. Private and
public sector telecom service providers are continuously investing in expanding their network to support the exploding
number of mobile subscribers giving a fillip to the demand for mobile and broadband testers. The massive investment
plan in wireless and broadband segments is driving the Test & Measuring Equipment market. With the expansion of
existing networks and construction of new ones, more test equipments are being used in various stages like planning,
installation and testing/maintenance.
ATL is raising capital to finance the expenditure on its proposed business plans, to meet additional working capital
requirements and to meet expenses of the issue.
For the nine months ended on 31
st
December 2007, ATL posted net sales of Rs.22.08 cr. with a PAT of Rs.3.14 cr. For FY07,
it registered net sales of Rs.21.74 cr. with a PAT of Rs.3.03 cr.
Arthaeon Financial's Money Management supermarket
Arthaeon Financial Services has announced an ambitious foray into India's retail personal finance industry by launching a
unique money management service.
Launched under the brand name 'Artha Money', the the company proposes to offer a single-stop, multi-product, multi-
brand financial services for the retail Indian consumer, whether living in India or abroad. These services will be available
to the customer across multiple distribution channels, including a branch network, the internet and the telephone.
The availability of all products under one roof will enable consumers to "learn about personal financial products,
compare between various brands and finally, execute their informed choice. Simply put, this will be a Supermarket for
personal finance products, with personalized services offered by Artha Money's trained money managers. This is the first
time that an Indian company is launching a holistic money management service in India.
AIG Investments launches 'AIG World Gold Fund'
AIG Investments has launched AIG World Gold Fund – an open ended Fund of Funds Scheme investing in companies
engaged in the extracting, processing and marketing of gold through an international fund.
The primary investment objective of the Scheme is to provide long term capital appreciation by investing predominantly
in units of AIG PB Equity Fund Gold based in Zurich. The New Fund Offer will be open for purchase from 15 April - 14
May 2008 and will re-open for ongoing purchase/redemption no later than 12 June 2008.
When gold prices rise, profitability of gold companies shoots up, which can provide long-term capital appreciation. Thus
stocks of gold companies have the potential to outperform gold prices by a significant margin over the long run.
Principal PNB AMC ties up with South Indian Bank Ltd.
Principal PNB AMC has entered into a strategic alliance with South Indian Bank Ltd to distribute all its mutual fund
products to enhance its distribution reach. As per the agreement, South Indian Bank will offer the entire bouquet of
Principal PNB AMC's products across its network of branches in the country.
Property 2008 starts on 17
th
April
'Property 2008' exhibition organized by the Maharashtra Chamber of Housing Industry (MCHI) – 12
th
Real Estate &
Housing Finance exhibition will be held at the Bandra Kurla Comples, MMRDA Grounds from 17
th
to 20
th
April 2008,
from 11 am to 8 pm.
The exhibition is co-organised by LIC Housing Finance and SBI. The Gold Partners are HDFC & ICICI and the Silver
Partners are DHFL and Axis Bank.
Spread over an area of 25,000 sq. mt. consisting 3 A/c halls, Property 2008 will have leading property developers and
Housing Finance Institutions (HFI) participating from Mumbai, Navi Mumbai, Thane and rest of India along with
international property developers.
Austral Coke plans IPO
Austral Coke & Projects Ltd., a manufacturer
of Low Ash Metallurgical (LAM) Coke and
Refractory proposes to go for and IPO for its
expansion plans. The company has an
installed capacity of 1,75,000 MTPA of LAM
Coke and is in the process of expanding it to
the tune of 2,00,000 MTPA in Kutch, Gujarat.
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Austral has integrated plant for manufacturing of Refractory, which is a key input for coke ovens and steel industry. The
company has received clearances from BSE and NSE and has filed papers with SEBI. The company aims to become largest
producer of LAM Coke in Non ISP (Integrated Steel Plants) category in 3-5 years.
The company recorded a turnover of Rs.176 cr. in FY07 while its net worth was Rs.84 cr. with PAT of Rs.9.14 cr.
Nutek India wins service quality award
Nutek India Ltd., a major telecom infrastructure services provider, has been felicitated by Huawei Telecommunications
with the 'Year 2007 - Excellent Supplier Award' for its excellent project deliverance capabilities verified on various
projects across the country. Nutek is the only company to have worked with the Chinese telecom giant on all its projects
in the country.
This was the first time Huawei had conducted such an event in India, whereas it has been conducting such events
overseas for Asia Pacific market for the past couple of years. Over 40 Indian suppliers starting from small local service
providers to pan India service providers like Nutek, GTL, Wipro, HCL and infrastructure material providers like Icomm,
Aster, HBL Nife and Eltek SGS participated in the event.
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.
17
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