Sensex

Sunday, September 21, 2008

DG - Bigger bull run yet to come: Rakesh Jhunjhunwala

Published on Sat, Sep 20, 2008 at 20:16 , Updated at Mon, Sep 22, 2008 at 10:15
http://www.moneycontrol.com/mccode/news/article/news_article.php?autono=356959

Source : CNBC-TV18

 

Here is a verbatim transcript of Investor and Trader, Rakesh Jhunjhunwala's exclusive interview with Mitali Mukherjee on CNBC TV18's Wealth Creators show. Also watch the accompanying video.

http://www.moneycontrol.com/news_image_files/Rakesh_Jhunjhunwala_120.jpgRakesh Jhunjhunwala is India’s most successful investors; one of the stock market’s most successful stories. The sometimes maverick, often mercurial but always a respected voice. He is a wealth creator and a man who anyone who enters the stock market wants to be.  

 

Q: You are the first Individual Wealth Creator we are chronicling. I am curious to know, what does the term mean to you?

 

A: I don't know when I started on in life, I had some ambitions. My parents never liked the idea that I should go to the stock market. I started life financially with just USD 100 or only Rs 5000 and my first thought was that when I went to the markets, I had just come from Chartered Accountancy; used to earn Rs 150 a month. So my first concept in life was that I should be financially independent. I never started with the idea that I will be a great wealth creator and I will have some great wealth or anybody will know me. I thought I must be able to earn my daily bread. I loved the markets. I thought India was in a very initial stage and this would be one of the places which will develop and the opportunity would be huge. 

 

Q: Do you also find it odious sometimes because you are a wealth creator in your own right and I don't think you have taken on the mantle of leading a lot of people with you. But you get that. A stock that you would pick up will be picked up by others. They would want to know why Rakesh bought it - why he is buying so much or why he wants to buy more?

 

A: I think these are all misconceptions. When you buy stocks, you should be ensured that other people will buy stocks. Then only you should buy the stocks. I have a different concept in life. If a stock is beautiful, the suitor will come. If a girl is beautiful a suitor will come. If a stock is beautiful, a suitor will come. So I don't search for suitors when I buy the stock.

 

Q: Tell me where you have to be the most patient with the market?

 

A:  I think my greatest patience with the market was in 2001 September to April 2003. That was because I was a lone bull. I wrote an article in the Economic Times in June 2002 that India is on the threshold of a structural secular bull market and people said, he has bought stocks and he is caught and now he is asking us also to come into the cage. People didn’t just believe what I thought or what my opinion was. That was a testing period.

 

Q: Did it bring confidence down to its knees for you?

 

A: You have your conviction and  I always staked what I could afford. So say, when markets went down in August 2002, I had no problems there. In spite of my opinion, I did not stake so much that if markets did not go up in the manner that I thought, I would be on the roads. I was well-off absolutely. So you know it was a trying time. But then there was a great dividend; the kind of bull market we had - 3000 to 21000.

 

Q: And you really rode it didn’t you? There are so many terms people use about you - The young tiger, pin up boy of the bull market, India’s Warren Buffet. Do you find it pointless? Do you find it flattering? How do you take it?

 

A: I don't know. I have learnt two things about the press and wives. When they something – don’t react.

 

Q: Are you the same guy that you were? Are you the same guy you were 15-years back?

 

A: Why are you asking me? Ask my friends, if I have changed in any way.

 

Peer View:

 

N Jayakumar, CEO, Prime Securitie says, “As earthy as it comes, he is as raw as it can be and he is as direct as it can hurt. He is all of this and I think at the end of the day it is not because he is a wealth creator, he is all of this, but he has been that since the time I have known him and he has just remained much of the same.”  

 

Q: Is It tough to be tight with people from the same community - the stock markets? Can you be close to some one who is part of the same?

 

A: I am close to a lot of people from the stock market. Actually, my best friend and whom I consider my guru, Mr. Radhakrishna Damani - he is from the stock market. Actually he has taught me so much in life and we are the best of friends. We can discuss anything. We go on holidays together. We’ve done so many things together and my other friends - they are from the stock market. Also let me not pretend. I don't have much interest in life other than the stock market.

 

Did you know:

 

The name of Rakesh’s organisation is actually a combination of his initials and his wife’s initials. So, Rakesh plus Rekha equals RARE Enterprises. As Rakesh says, she is the only one he likes being answerable to.  

 

Peer View:

 

Samir Arora, Helios Capital says, ” I am very impressed with Rakesh not because he has done so well in the stock market which itself is very impressive but to have done that without raising any controversy, without creating enemies, which is a problem in India for successful people.” 

 

Q: You are very much into the individual behind the business. Who runs it and how well it is run. Tell me how carefully you look at that when you look at a business that you wanted to be a part of?

 

A: I look at the situation. I look at the possible outcomes and then I think what could be the outcome? For example, when I invested in Titan, my thinking was, can Titan become India’s largest specialist retailer? That was the question I asked myself. Will it always occupy a 50-60% share in branded jewellery? Will it always remain a leader in Indian watch industry? Will it enter into other areas of retailing? I asked myself all these questions and the answer I thought was yes.

 

So this is the basic analysis I did. Then I went to the office - Titan office was like a young advertising agency. So I thought marketing is in their blood. I met their management team including their Managing Director. I was thoroughly impressed by them. I took the decision. I put my life behind it. 

 

Q: What impressed you?

 

A: Their sheer approach. The Managing Director told me that the task is difficult. But we'll overcome it. We have to suck the capital and increase the profits and that's what they have done. So, when I take a decision there are three-four matters that I consider - opportunity. I am from the investment thought which says nobody can be bigger than the opportunity. Second, I look at the competitive ability. In a capitalist society, you cannot deliver product and make a profit unless you do it in a competitive manner and competitive does not mean the most expensive. Then I look at scalability. Scalability is very important. When I invested in Pantaloons, the biggest idea was can ten stores become five-hundred? It was written behind a Maruti -- when I grow will I be a Mercedes? Great are the challenges of scalability.

 

Then what I look at is valuation. It’s important what you buy. It is more important what price you buy. Somebody bought Hindustan Lever at an Index of 2900 - the price was Rs 320. When the Index was 7000 - the price was Rs 145.  You bought Hindustan Lever - best quality company, best pedigree and everything and I made lot of money by buying United Breweries and McDowell’s at a valuation of Rs 200 crore. There was no corporate governance. People told you you’re down the drain. I made five-times my money in two-years. 

 

Q: Sometimes there are tough lessons to learn as well? Just on the subject of valuations, you would be watching the media space and there are a couple of howlers over there by way of stock performance, for example, MiD DAY (Multimedia) - have there been more tough lessons to learn? 

 

A: Every mistake teaches you a lesson. There is always a risk in investing in midcap stocks because if they succeed, the gains are huge. If they don't succeed and scalability does not come, then the losses are also huge. I don't regret having invested in MiD DAY because I always allocate my assets and I don't do it in a planned manner. I don't put more than a certain percentage of my wealth in incomplete situations. So, I might have made a mistake. The decision is tough, but okay, the good comes with the bad. 

 

Peer View:

 

Atul Suri, Rare Enterprise says,”I have known Rakeshji for over five-years and I have traded on his behalf. I use technical analyses but not once has he interfered in a single trade of mine and that is very special. For a very accomplished trader to see a different approach in trading and not interfere with him and that really comes from the basic thing I have noticed in him is that he respects other disciplines also to the markets.”     

 

Q: You're very patient, though?

 

A: What is the choice?

 

Q: The choice is to book out.

 

A: Well, its not that I’m not booking out because I’m afraid to take a loss. I’m not booking out because I still think there is reason to believe that things can change. 

 

Q: Were you surprised Rakesh - could anybody have seen where we are right now in January this year?

 

A: I have made presentations to show in October, that this is going to be an unprecedented fall. And I have reasoned out how much is the lending to subprime, and that this problem cannot be stopped by reducing interest rates. The American bull market has come to an end. It may be a long correction.

 

I’ve made these presentations in writing. I have them on record. I don't say I foresaw the failure of any particular organisation but I thought it'll be very tough and I didn't rule out in my mind that some organisations can fail. 

 

Q: Is there any question in your mind that we as well are in a bear market? 

 

A: In India?

 

Q: Yes.

 

A: What is a bear market, what is a bull market, I don't know. Numerically - surely, since we have broken the last lows that we had in August 2007, we'll have to term it as a bear market. But I don't think the long-term Indian stock bull market has ended. I think it’s in interruption mode.

 

This bull market is based on two factors. One is economic growth of India, which I think is based on factors that are irreversible, whether democracy, whether skills, whether demographics, whether cultural factors. They are irreversible. I think India’s economic growth will always trend upwards.

 

Then it is based on the platforms that we have created to attract money into the Indian markets -- the trading strategies, the regulation and the under-exposure of Indians to equity. I will surely say that it’s an interruption. How long? Nobody knows.

 

Q: You've been cautious, though, Rakesh, right till since last Samvat you've been striking a cautious note?

 

 

A: If the Index instead of going from 3,000 to 21,000 had gone from 3,000 to 13,000, and then back to 11,000 - would that not have been a bull market? Then it would have been termed a bull market correction. So at levels, where you saw the participation, the valuations, you saw what was coming in the Western world, you saw the sheer corporate greed in India; you saw the senselessness with which people in India just wanted to buy anything. They were all indicators - so what is wrong in being cautious?

 

Q: Are you feeling better about all those indicators? Do you think things have cooled down now?

 

A: I think now we've begun to reverse slowly. Now things will be overdone but that’s the way markets are. As I told you, markets are like the weather. Whether you like it or not, you have to bear it. 

 

Q: There is courage of conviction as well, to be a wealth creator? If someone were to sit you down and ask you, do you think that over the next five years, Indian equities is still the place where you'll see the most significant wealth creation, would you say yes?

 

A: I would think so, as far as Indian assets are concerned. I don't have much knowledge about global assets. My good friend Mr. Shankar Sharma has said, equity has one quality - it is always an asset which trends upwards. India will remain in a phase of very good economic growth for the next 30 years.

 

Q: Do you feel we will have to be a lot more patient with it though, this time around?

 

A: As I told you markets are like women, you have to be patient. 

 

Q: No, but you know we've had a fantastic run. We've had the mother of all bull runs in the past three years.

 

A: I disagree with you.

 

Q: You do?

 

A: The mother of bull runs is still to come

 

Q: Really?

 

A: In my opinion, yes. But it could start after one-year. It could start after eighteen-months or after six-months. But the next high and the next bull market will be far bigger and have far more participation and far more excesses than we had in the last one-year.

 

Peer View:

 

Ramesh Damani, Member, BSE says, “He is so free with his information. He will willingly share with you his ideas. He will willingly share with you his investment style or his thought processes with the market and there is almost leisurely number of young men or Turtles as we call them on the street who’ve benefited enormously and handsomely from his advice including myself. Earlier in my career he really helped open my eyes, showed me how to dream and allowed me how to take position with the market. So above all, we respect that – the ability to share that information in a business that is so secretive - he is an open book, always willing to help.”

Q: Do you see a lot of people who are part of the stock market, returning back some of the wealth creation? I know that you have a Jhunjhunwala Foundation. You're actually actively part of a lot of NGOs and you donate significantly amounts over there. Is that an important part of being a wealth creator for you - to spread it as well?

A: I cannot forget my late father, who has never asked me ever that what is your wealth? The only thing that he would ask is how much charity have you done this year, and are you going to continue it or not? So, I’m making my own efforts towards some good social cause that I’m supporting. I’ve built a Home for 400 boys in New Bombay. God has given me one daughter and I’m going up 400 children. I cannot give them absolutely what I’ve given my daughter but I’ll send them to English medium schools. I’ll see that they have all the needs of life and I want to bring them to a stage where they can get good jobs and they can contribute back to the Home.

I think the greatest wealth is giving the person ability to learn. Then I’m supporting lots of causes with children like girls' education. I'm supporting other small causes for street children. We're building a temple in Lonavala. It is my target in life. This year by budget is Rs 10 crore, next year it should be Rs 12.5 crore and on my twenty-fifth wedding anniversary, which is on February 21, 2012, the gift I want to give my wife is - I’m going to give Rs 500 crore to her foundation.

Q: Is this a bigger high than being part of the stock market?

A: I don't think it is a high. It is a duty. To donate and to help others are very good attributes.

 

Urmila Jhunjhunwala, Rakesh Jhunjhunwala’s Mother says,” When he was a little boy, whenever our friends used to come, he used to tell them which shares are good to buy.

 

Rekha Jhunjhunwala, Rakesh Jhunjhunwala’s Wife, says, “I think the market is only first priority for him. His first wife is only market. When he started, he had nothing, absolutely nothing. Everyone used to say, what will you do in stock market? But he wanted to do that only.”

 

Q: What's your biggest faith?

 

A: Myself. I am confident of myself and I don’t rely on anybody.

 

Q: What's the big dream for Rakesh Jhunjhunwala - the wealth creator because we have had entrepreneurs who say I want my business to go to XYZ level, I want my turnover to double, triple, four-times?

 

A: I have two-three dreams in life. The first dream is that when I die and only truth of life is death, how many people come to my funeral and say, a good man has died. That is the greatest ambition in my life. Second thing is I want to earn the greatest wealth of the world in the most legitimate manner; practical legitimate manner and leave the largest part of it to charity.

 

Rapid Fire:

 

Q: Favourite trade – long or short?

 

A: Long.

 

Q: Rank the following companies on a scale of 1 to 10:

 

Q: Reliance.

 

A: I would rank it 2.

 

Q: Infosys

 

A: 1.

 

Q: RNRL

 

A: 9.

 

Q: Titan.

 

A: 8.

 

Q: Answer the following questions with just bullish or bearish:

 

Q: Crude.

 

A: Bearish.

 

Q: Gold.

 

A: Neutral.

 

Q: The S&P 500.

 

A: Bearish.

 

Q: The Indian bond market.

 

A: I expect the yields to go down. I am bullish on the bond market.

 

Q: The Nifty 50

 

A: I am bullish.

 

Q: If you weren’t a man of the market, what would you be?

 

A: I never think about it because being man of the market is so good and exciting.

 

Q: The worst advice someone has ever given you about the market.

 

A: You can never earn money in the market. You will go bankrupt.

 

Q: And the best advice someone has ever given you about the market.

 

A: Be careful. Be responsible. It’s fire.

 

Q: You have told me what you want to be remembered as. But what's the one piece of advice you would give someone who wants to get into the stock market?

 

A: First advice is respect the market. Have an open mind. Know what to stake. Know when to take a loss. Be responsible.

__._,_.___
Regards

BigGains !!
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Money Times Monday, September 22 - 28, 2008

 
Page 1
T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 45
Monday, September 22 - 28, 2008
Pages 18
Buying at higher levels needed for any rally to sustain
By Sanjay R. Bhatia
Early during last week, the markets displayed weakness on the back of negative global cues. Broadbased and sustained
selling, especially by FIIs was witnessed during the week as negative news from USA and other European economies due
to sub-prime losses spoilt the market sentiment globally. However, the markets staged a smart recovery on Friday on the
back of US measures. Traders and speculators were seen selling and also going short. Incidentally, FIIs remained net
sellers in the cash market but were net buyers in the
derivatives segment. Mutual Funds, however, remained net
buyer during the week.
The global cues continued to remain weak. The failure of US
corporates like AIG, Morgan Stanley, Lehman Brothers and
others due to the sub-prime crisis saw the global markets
meltdown. Six central banks had to pump in liquidity to
stabalise the liquidity crunch, which helped the global markets
to rally. Change in norms for naked short selling in US
markets also helped the US markets to rally. However, all said
and done, the larger problem of the sub-prime crisis continues
to remain. Crude prices remained rangebound and witnessed
occasional spikes on the back of low US inventory data.
However, it has fallen below the $100 level. The rupee
continued to depreciate, as indicated in the last issue, and touched Rs.47 to a dollar before the RBI intervention.
1
Now, it is important that the markets witness higher participation and follow up buying at higher levels, which has so far
remained elusive. It is also important that markets witness institutional buying if the markets have to witness the
unfolding of a sustainable rally. The markets are likely to remain volatile and choppy due to the expiry of the derivatives
segment next week. The next trigger for the domestic markets would be the Q2 earnings season, which would start from
the 2
nd
week of October. It is important that these results meet market expectations. In the meanwhile, the markets would
continue to take cues from global markets and crude oil prices. Any negative news of a financial crisis could trigger a sell
off. Stock specific action will be witnessed.
On the upside, the Sensex faces resistance at the 14141, 14677 and 15000 levels but has support at 13791, 13454, 12961,
12575 and 12400 levels. On the upside, the Nifty faces resistance at the 4482 and 4647 levels while 4189, 4108, 4074, and
4016 are its important support levels.
Investors should wait and watch, and book profits at higher levels.
The crisis of the century
By Fakhri H. Sabuwala
Allan Greenspan, former US Federal Reserve chairman was candid when he said "This is a once-in-half-century, probably
once in a century, type of an event." This is just a natural outcome of the US banking crisis, triggered last year by
excessive lending to non-creditworthy home loan borrowers. The full scale meltdown in US banking is endangering the
global economy and impacting India, which is bruised by rising interest rates, rising inflation and the sharply declining
rupee. The dent in the Sensex and Nifty is already made and is healing.
The crash and the bail out story began in September 2007 with Northern Rock, the fifth largest British mortgage lender,
which was bailed out by the Bank of England. The collapse Bear Stearns in March 2008 was bailed out by JP Morgan.
Then it was the turn of California's Indy Mac Bank, followed by the US Government's bail out of Fannie Mae and Freddie
Mac just a few days back. Now it's the nail hitting the key player, Lehman Brothers, which has filed for bankruptcy.
Merrill Lynch, which agreed to a buyout by Bank of America for $50 billion. AIG, which was breathing its last and sought
a $40 billion survival package, was bought over by the US Government at $85 billion for 79.9% stake. Had the US
Government not done so, the crisis on Wall Street would have worsened.
While the US crisis remains fluid and may in its flow roll some more heads, die hard optimists believe that with every
passing day the mega-multi-billion dollar uncertainty is coming to a close albeit a little slowly and painfully. The falling
crude oil price, a positive trigger in its own right, is momentarily ignored in the wake of the depreciating rupee. The
market is worried and rightly so of the flight of foreign capital in the wake of the sharply falling rupee and a
simultaneous falling market.
The developments in USA may shake the confidence of Indian retail investors who have put their trust, faith and hard
earned money in various investments and insurance schemes of large financial corporates. Such developments raise the
questions of how solvent are the foreign insurance companies and whether they can withstand the crisis of the century.
Real estate companies may be the big casualty of this crisis as housing prices are falling worldwide and the hype of the
real estate boom is fizzling out. Many of our real estate companies were promised huge finance by Lehman Brother for
their mega projects but what unfolds now may jeopardize the development of such projects.
As such an unprecedented crisis progresses and the fear of the worst still looms large on the horizon, it's time to pay heed
to what the prophets of doom have to say. John J. Jansen, a bond dealer of three decades standing and the man who has
survived the Black Monday of October 1987 has interesting observations to make. On his blog, aroundthecurve.com, he
writes though chillingly "We are headed for a very, very ugly end to this story. The worst case scenario would be that
people totally hunker down, nobody trusts anybody else, nobody lends to anybody else and people spend their time
building their own resources and being within themselves". This, he reckons, would worsen the crisis.
He adds "Capitalism, demands pain. Good risk is rewarded and imprudent risk is punished. We are engaged in an orgy
of imprudent risk-taking for nearly a decade, and now a heavy price will be paid for the violation of so many simple and
common sense percepts of trading".
In the Indian context we have a lot to go through. The structured product industry, which by unconfirmed estimates is
around Rs.10,000 cr. is in for a nasty surprise. It will wipe out a lot of HNIs of their hard earned money. These are the
unsecured debentures issued by Citibank, Merrill Lynch, Kotak, Edelweiss, etc.
2
Volatile swings
TRADING ON TECHNICALS
By Hitendra Vasudeo
Last week, the Sensex opened at 13666.28, attained a
low of 12558.14 and moved to a high of 14097.44 and
closed the week at 14042.32 and thereby showed a net
rise 41.51 points. Following was the view indicated
last week: "Thus the support of 14000-13727 was
tested last week as it made a low of 13933. This
support of 13727 will be tested again in days to come.
If this support of 13727 is violated, then expect a slide
down towards the 12822-12514 range at least. A
breakdown and close above 13727 will also confirm a
head and shoulder (H&S) pattern, which has a bearish implication. A false breakdown will be witnessed if after violating
13727 its crosses 14433 and closes above it. As a result of last week's candle movement, an engulfing bear candlestick
pattern was formed which has bearish implication. The H&S pattern formation confirmed this week and engulfing bear
candlestick pattern suggest that stock prices will drift down."
The low registered last week was 12558.14 against the expected 12822-12514. The fall was on the back of the pattern
formation on candlesticks and the H&S pattern. The effect of the pattern was completed in the range of 12822-12514 and it
closed higher.
Thus our forecast was bang on target.
Last
week's
candle
formation was once again
encouraging for bulls. The
low registered in July
2008 when the Sensex
made a low of 12518 had
formed a Hammer. Again,
last week the Sensex
recovered from the low of
12558. Therefore,
the
importance
of 12822-
12515-12316 has improved
and has become a strong
support range for the time
being.
WEEKLY UP TREND STOCKS
On the immediate front,
expect a pullback of the
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
SPICE COMMUN.
76.05
74.2
75.3
75.7
76.4
77.5
72.2
75.3
08-08-08
CADILA HEALTH.
337.20
267.8
310.8
327.4
353.8
396.8
71.3
329.3
05-09-08
BANK OF BARODA 323.85
244.1
294.8
316.4
345.5
396.2
70.0
303.1
29-08-08
GLAXO SMITHKLIN 1179.00 1056.0
1136.0
1173.0
1216.0
1296.0
68.2
1177.3
01-08-08
ONGC
1072.00 783.0
959.0
1022.0
1135.0
1311.0
66.1
1047.3
05-09-08
fall from 15579 to 12558.
The 0.618% of this fall is
placed at 14425. Further
resistance can be at 15107,
15130 and 15579.
WEEKLY DOWN TREND STOCKS
Weekly support will be at
13565, 13034, 12558-12518
and 12316.
Overall, we could find
price moving up and
down in the wider band
of 14686-15579 on the
upper side and 12822-
12515-12316 on the lower
side.
Sensex Wave Analysis
3
Normal Count
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
BRAHMANAND HIM 12.65
7.3
11.1
13.4
14.9
18.7
8.30
15.51
29-08-08
SOBHA DEVELOP. 214.00
137.7
191.7
223.3
245.7
299.7
18.53
253.85
12-09-08
INDBULLS REAL
224.05
120.2
186.7
215.9
253.2
319.7
23.14
261.08
22-08-08
IDFC
81.50
50.5
71.0
81.0
91.5
112.0
23.33
88.86
16-05-08
UNITECH
126.30
63.8
107.2
131.6
150.7
194.1
23.45
149.42
22-08-08
Wave I-2594 to 3758
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
BANG OVERSEAS
532946 274.80
256.10
274.80
237.00
298.2
336.0
0.62
MAYTAS INFRA
532907 466.80
457.00
478.00
407.00
521.9
592.9
0.92
RICHA INDUSTRIES
532766 108.05
101.60
108.05
97.70
114.5
124.8
0.62
Wave II-3758 to 2904
Wave III- Internals are 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 W-21206 to 14677
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
SUN PHARMACEUTICAL I
1393.00
1428.22 1453.00
1477.78
1558.00 1218.2
46.36
Wave X-14677 to 17735
Wave Y- 17735 to 12514
Wave X- 12514 to 15579
Wave Z- 15579 to 12558 (not yet complete)
Conclusion
Volatile moves will be witnessed in the wider range of 15558-12518 and the immediate bias is to test the resistance level
during the week.
Strategy for the week
Use the spurts to resistance levels of 15107, 15130 and 15579 to exit as and when the opportunity rises.
* One may still make good by selling scrips like Bihar Tubes, Artson Engineering, Flat Products, Zen Technology, Selan
Exploration, Panoramic Universal etc. Fundamentally, they appear richly valued and can fall sharply in the near future.
TOWER TALK
* The sharp fall of the rupee against the US dollar augurs well for exporters and EOUs. Keep a watch on export oriented
IT and textile companies.
* Hindustan Sanitaryware is trading at a multiyear low level. Long-term investors should grab this opportunity to buy
and hold for two years for handsome returns.
* The share price of transformer companies like Accurate Transformer, Bharat Bijlee, Emco, Diamond Power, IMP
Power, Alfa Transformer are hitting new lows. Grab them as they will rebound on the back of massive investments in the
power sector.
* Gujarat Alkalies has tumbled down to attractive levels. At the current market cap of Rs.900 cr., it is available cheap
with a minimal downward risk.
* Century Textiles is good for the medium-term given its composite business and massive real estate plans in heart of
Mumbai.
* Ranbaxy is witnessing a sell off because US FDA has banned some Ranbaxy drugs. The stock is valued high by the
promoters and is available below half the acquisition price. A buy for the medium-term.
* Oracle Financial Services & Software (formerly I-flex) is one of the very few subsidiaries of Oracle, which is listed. The
stock can be considered for investment with a two year perspective.
* Elgi Equipments is considered a decent buy with good growth prospects in the core capital goods industry.
* Visaka Industries has posted Q1FY09 EPS of Rs.9 and an EPS of Rs.28 for FY09 is expected. The share is poised to touch
Rs.100.
* Supreme Infrastructure is doing well with Q1FY09 EPS of Rs.7. Company circles expect an EPS of Rs.30 in FY09 and the
share can easily touch Rs.100.
* With 7% equity stake by Patel Engineering, KNR Constructions is all set to garner an EPS of Rs.18 in FY09 and Rs.26 in
FY10. Some analysts recommend the share with a target price of Rs.120 in the long-term.
* Mazda Industries is likely to post an EPS of Rs.22 on a small equity of Rs.4.3 cr. The share is heading towards the 3-digit
mark.
* Hariyana Ship Breaking, which registered Q1EPS of Rs.8, is all set to register an EPS of Rs.18 in FY09. The share may
cross the Rs.60 mark.
* Goa Carbon is expected to clock sales of Rs.500 cr. with a net profit of Rs.40 cr. EPS could work out to Rs.43. The share is
poised to move up.
* Some analysts are bullish on Core Projects. The shares are being bought by circles close to the management, which
expect the share price to cross the Rs.350 mark in the short-term.
* Some investors have evinced interest in the counter of Savera Industries. The share can move up.
By Saarthi
BEST BETS
EMCO Ltd. (Code: 504008)
Rs.91.50
Incorporated in 1964, EMCO Ltd. is the third largest manufacturer of transformers and a leading player in electronic
energy metres and turnkey electrical projects. With acquisitions, joint ventures and growth strategies, Emco has ensured
its presence in all the major areas of the power sector and has come a long way from being a product supplier to a
provider of end-to-end solutions in the transmission and distribution sector. The company has spread from one
manufacturing location to seven manufacturing locations and is now poised to make its presence felt globally. For better
efficiency and to focus on each business unit, Emco has segmented its business into the following four divisions:-
Transformer Division (65%): This is the flagship division of Emco with three manufacturing plants having a
combined installed capacity of 20,000 MVA. It offers a wide range of transformers from 5 kVA, 11 kV right up to 315
MVA, 400 kV for power generation, transmission & distribution (T&D). It is one of the leading players in
manufacturing special application transformers like furnace transformers (for Steel Industry), large rectifier
transformers (for Chemical Industry) and traction and locomotive transformers (for Railways).
Meters Division (5%): This division has a state-of-the-art fully computerised manufacturing facility with an installed
capacity of 1.3 million metres per annum - one of the largest in Asia. It offers metering solutions like tamper proof
electronic energy metres, automatic metre reading solutions, prepayment metering solutions and high-end metering
like Trivector metres, Grid metering etc. It also offers a total energy and revenue management solutions to customers
in the distribution business.
Projects Division (30%): This division offers turnkey solutions from concept to commissioning of large electrical
substation projects in the power sector. It focuses on turnkey projects in the T&D area catering mainly to high voltage
and extra high voltage substations up to 400 kV and strengthening the sub-transmission and distribution network. It
also undertakes entire industrial electrification work from designing to execution. Besides, with the acquisition and
amalgamation of Urja Engineers Ltd., Emco has moved into the transmission line business enabling it to offer a wide
4
portfolio of products and solutions for transmission and distribution of power under a single roof to various
customers. It can now construct EHV Power Transmission Lines upto 765 kV on a total turnkey basis and boasts of
having a tower manufacturing facility up to 45m000 MT/Annum. It also provides custom built outdoor packaged
substation upto 1 MVA.
International Division: This division basically offers the products and services of other divisions to the global market
and currently derives around 20% of total sales from exports. With supplies to global majors such as Shell, Global,
Petrofac (UAE), Parsons (UK), Peebles (UK) and other leading power utility multinationals in over 30 countries, Emco
has the experience of designing transformers to meet various global standards like BS, IEC, ANSI, CSA etc and
meeting the approval of independent inspection agencies such as BVQI, Lloyds, Crown Agent, SGS and others.
With a goal to achieve 30% of revenue from international business, Emco has decided to set up a transformer
manufacturing plant in South Africa to meet the growing demand in the African region and neighbouring countries.
For this, it has entered into a MOU with Edison Power (Pty) Ltd., a leading electrical contracting company from South
Africa. It has also floated a 100% subsidiary in Singapore which has already made investments in solar renewal
energy company in USA and in a coal mine company in Indonesia.
Apart from the above, Emco has setup 7 wind mills of 1.5 MW each in Maharashtra. Besides additional revenue on sale of
electricity generated to MSEDCL, Emco has also registered this project with UNFCCC under CDM and is expected to start
trading in CER from current year. Moreover, the company is also in the process of setting up a 540 MW coal-based power
project near Nagpur for which it has already obtained the coal linkage from Government of India and has procured the
land for the project. The plant is expected to be commissioned before mid-2010 at a total estimated outlay of Rs.1100 cr.
Further, the company has plans for synergic diversification into the switchgear business of upto 400 kV, which would
further boost its topline and bottomline. Incidentally, the management intends to double the company's turnover every
two years.
Fundamentally, Emco has been performing well and has substantially benefited from the strong surge in investments
towards improving the country's
dilapidated T&D framework as also
adding new transmission capacities. It
caters to several government and
private entities such as MSEDCL,
NTPC, APSPDCL, NDPL, Power Grid,
IRCON, CSEB, KPTCL, ACC, Reliance
Group, Tata Group, Essar Group,
Aditya Birla Group, Jindal Group, Jai
Balaji etc. to name a few. For FY08, it
registered 45% growth in net sales at
Rs.944 cr. whereas its profit shot up 60%
to Rs.64.50 cr. posting an EPS of Rs.11
on its equity of Rs.11.77 cr. having a face
value of Rs.2 per share. Recently, the
company went in for a stock split of its
shares to a face value of Rs.2 from Rs.10.
On the back of satisfactory Q1FY09
results, it is expected to clock a turnover
of Rs.1250 cr. with PAT of Rs.70 cr. for
FY09. This translates into an EPS of
Rs.12 on its current equity. At a
reasonable discounting by 12 times, the
scrip can appreciate 50% within 12-15
months.
5
JMC Projects (India) Ltd.
(Code: 522263) Rs.143.70
Founded in 1982, JMC Projects Ltd.
(JMC) was originally promoted by Mr.
Suhas Joshi & Mr. Hemant Modi as
Joshi & Modi Construction Pvt. Ltd.
Later, it was renamed as JMC Projects
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Ltd., which was taken over by the renowned and well diversified Kalpataru Group in 2004. Since then under the new
corporate leadership, JMC has been growing by leaps and bounds and is among the top seven players for building and
factory construction in India. It has also been recognised as India's sixth fastest growing company by Business Today.
Importantly, JMC caters to all major sectors of the economy namely industries, buildings and infrastructure. It provides
all types of construction services including fabrication and erection of structural steel components, pre-casting and allied
works. It has successfully ventured into the fields of turnkey execution involving civil, mechanical, electrical, HVAC, fire
fighting, architectural and landscaping works. Over the years, JMC's major thrust has been in industrial plants, which
include automobiles, textiles, heavy engineering, chemicals, cement, pharmaceuticals, sugar, power plants etc. and
institutional building comprising hospitals, software parks, hotels, educational institutes etc. It boasts of several landmark
projects such as construction of IIM Ahmedabad campus, three elevated Delhi Metro railway stations, Software Park for
Infosys in Bangalore, residential/commercial complex at Bhopal for MP Housing Board, Vardhman Medical College at
Delhi, software development centre in Pune for Syntel International apart from constructing factory/plant for Nirma,
Arvind Mills, Maruti Udyog, Hindustan Motors, Indian Rayon, Alstom Projects etc.
Of late, apart from industrial and building project, JMC has started focusing on infrastructure and power projects. It is
aggressively bidding for contracts to construct bridges & flyovers, roads & highways, railways stations, marine work,
water supply & irrigation projects and construction of power plants. Importantly, JMC owns & operates a large fleet of
the best and latest construction plants & equipment, which ensures availability of the pertinent equipment for a particular
task. Last fiscal, the company made an additional investment of over Rs.100 cr. in fixed assets to increase its project
execution capacity. Today, JMC is among the few construction companies certified under ISO 9001:2000 quality
management system by TUV Management Services of Germany. Because of its excellent track record, technological &
execution capabilities and strong backing by the parent company i.e. Kalpataru Power Transmission Ltd., JMC has been
successful in getting some major orders from prestigious clients such as BHEL, Wipro, MPRDC, NHAI, Prestige Group,
EISAI Pharma, JP Greens, RGA Software etc. during FY08. This has resulted in a massive order in hand position of more
than Rs.2000 cr. as on 31 March 2008, which is twice its FY08 turnover. In future, the company intends to enhance the
railways, airports and water management projects on an EPC basis, which will further add to its bulging order book.
Ironically, despite the robust performance quarter after quarter, its share price has been decimated to one fourth from its
high of Rs.575 in November 2007. For FY08, its revenue jumped by 80% to Rs.915 cr. and PAT almost doubled to Rs.31 cr.
posting an EPS of Rs.17 on its equity of Rs.18.14 cr. Even for Q1FY09, when most construction companies announced
disappointing results, JMC registered 75% rise in topline to Rs.313 cr. and 50% jump in profit to Rs.8 cr. Last year to fund
its working capital requirement, the company raised Rs.25 cr. through issue of preference shares to be converted into
equity shares at Rs.202 per share. With respect to the CMP, the chance of conversion into equity shares is low and it may
get transformed into redeemable preference share. Considering its strong order book position, JMC is expected to clock a
turnover of Rs.1350 cr. with PAT of Rs.32 cr. for FY09, which will lead to an EPS of Rs.18 on its current equity. Investors
are recommended to buy at current levels as at an average discounting by 12 times, its share price has the potential to
shoot up to Rs.220 (60% appreciation) within 12 months.
Ess Dee Aluminium: Good prospects ahead
ANALYSIS
Selection Criteria
Time Communications (India) Ltd, the publishers of MONEY TIMES and its directors are in no way connected with the share trading business.
Equity analysts, investment advisors, chartists market observers and other specialists who contribute to MONEY TIMES are individual free-lancers
who may or may not have a position in the scrips recommended.
— Editor
By Devdas Mogili
Ess Dee Aluminium Ltd. (EDAL), a 4 year old company established in 2004 operates in advanced packaging solutions. It
is a leading supplier of primary packaging materials providing tailor-made aluminium, foil based flexible packaging
laminates and PVC based thermoforming solutions to a wide range of clients in India and abroad. EDAL has three
manufacturing units with two units in Daman and one in Goa. Mr. Sudip Dutta is the chairman and managing director of
the company.
The company has extended its product portfolio to include specialised packaging for the Food and FMCG sectors. EDAL
is the first in India to manufacture dedicated high-end pharma packaging products like cold form blister and child-
resistant-blister packaging. The new pharmaceutical applications include cold form blister packs, oral rehydration salts,
PVDC-coated PVC, child resistant packs, cough lozenges and anti-TB combo packs.
6
The company has also established its presence in the prophylactics segment and provides specialised aluminium foil
based laminates for large contraceptive brands. Its facility at Daman has been approved by contraceptive manufacturing
companies like TTK and Hindustan Latex.
Subsidiary: Flex Art Foil Pvt. Ltd., a wholly-owned subsidiary of the company provides facilities for printing on
aluminium blister for pharmaceutical companies for their packaging solutions at various locations across the country. It
is now setting up an unit in Sikkim to augment its aluminium foil printing capacity.
Forays: Recently, EDAL forayed into the Food and FMCG segments. With the enhancement of its cold rolling facilities at
the Daman plant, the company is in a position to cater to these segments. Chewing gum wraps, confectionery, frozen
desserts are some of the areas where the company has commenced supplies and plans to expand into areas where
aluminum is the core substrate.
EDAL along with Madras Aluminium Ltd. (MALCO), a Vedanta Group Company, will be infusing funds to revive India
Foils Ltd.. The company envisages major synergies therein in terms of manufacturing capacities, access to export markets
and finally, raw materials. The benefits of this initiative are expected to start accruing shortly.
Export Markets: The company has customers all around the world such as China, Southeast Asia, Brazil, Mexico, Russia,
US and Eastern Europe. The company has also spread its wings in Columbia, Chile, Nigeria, Egypt, Dubai and Ghana.
Performance: EDAL registered impressive results for FY08. On net sales of Rs.316.94 cr., it clocked a net profit of Rs.73.45
cr. posting an EPS of Rs.27.02.
Financial Highlights:
(Rs. in lakh)
Latest Results: The company recorded net sales
of Rs.106.82 cr. with a net profit of Rs.21.41 cr.
registering a basic/diluted EPS of Rs.7.69. Going
forward, the annualised EPS works out to
Rs.30.76.
Particulars
Q1FY09
Q1FY08
FY08
Net Sales/Income
10681.98
7261.70
31694.40
Other Income
23.47
143.68
799.56
Total Income
10705.45
7405.38
32493.96
Total Expenditure
a. Inc/Dec in Stock
(299.49)
(332.45)
(854.60)
b. Raw Material
7
Financials: EDAL's paid-up share capital has
increased from Rs.26.41 cr. to Rs.27.82 cr.
pursuant to the preferential allotment of 14,10,000
equity shares of Rs.10 each at a premium of
Rs.565 each to Morgan Stanley. It has reserves
excluding revaluation reserves of Rs.344 cr. and
the book value of the share works out to
Rs.133.65. It has a low debt equity ratio of 0.19
while RoCE is 23.50% and RoNW is 22.54%.
7483.72
5209.61
21637.97
c. Staff Cost
219.62
225.78
981.15
d. Depreciation
113.35
54.28
353.65
e. Other Expenditure
312.68
233.43
1087.12
f. Total
7829.88
5390.65
23205.29
Interest
229.77
186.58
763.08
Profit Before Tax
2645.80
1828.15
8525.29
Tax Expense
505.26
199.61
1180.94
Net Profit After Tax
2140.54
1628.54
7344.65
Paid up equity capital (FV: Rs.10)
2782.48
2641.48
2782.48
Reserves Ex Rev Reserves
-
-
34409.16
Share Profile: The company's share with a face
value of Rs.10 is listed and traded on the BSE and NSE under the B group. Its share price touched a 52-week high/low of
Rs.843/Rs.291. At its current market price of Rs.300, it has a market capitalisation of Rs.863 cr. and a beta value of 0.6.
Basic/Diluted EPS (Rs)
7.69
6.17
27.02
Dividends: The company has been paying 20% dividend for FY07 and FY08.
Shareholding Pattern: The promoter holding in the company is 59.96% while the balance 40.04% is held by non-corporate
promoters and the investing public. Among mutual funds Morgan Stanley, Franklin India, Fidelity, Tata Equity,
Sundaram SMILE Fund, Sahara and Principal Tax Saving Fund have been adding the company's shares for the last
several months.
Prospects: The demand for EDAL products is primarily from the Pharmaceutical industry. The role of packaging is
paramount here as the packaging directly touches the medicines and requires extremely high quality and standards to be
maintained. The demand for pharma products is expected to remain robust given the increasingly stressful lifestyles.
Further penetration of healthcare insurance will boost the demand for better healthcare needs. Incidentally, companies
are spending huge amounts on research and development (R&D), which ultimately leads to the growth of pharmaceutical
packaging products.
The company has also forayed into the FMCG and Retail space. Here the role of packaging is multi-dimensional as it not
only protects the products but also enhances its brand recall and gives it a unique identity. With increased investments
from private players, the organised retail segment is expected to grow.
As per ASSOCHAM estimates, the organised retail segment is set to grow by 30-35% p.a. over the next 3-4 years calling
for an additional investment of US $70 billion by 2010. Thus EDAL's products are expected to see good demand in view
of the robust prospects of the user industries.
Conclusion: India is passing through an economic growth phase and witnessing the opening up of retail chains across the
country, which calls for increased packaging requirements. Aluminium foil remains best suited for products requiring
longer shelf life and preservation of properties. EDAL has been ranked No.1 in the Packaging sector for 2007 based on the
ranking of the Top 500 Indian Manufacturing SMBs.
At its current market price of Rs.300, its share price is discounted less than 11 times, which is also the industry average
P/E multiple. However, in view of its consistently good performance and robust prospects, the share may be considered
for investment with a medium-to-long-term perspective.
The undertone is still weak
MARKET REVIEW
By Ashok D. Singh
The BSE Sensex closed only marginally higher by 41.51 points or 0.3% to settle at 14,042.32 for the week ended Friday, 19
September 2008. The NSE Nifty gained 16.80 points or 0.39% at 4,245.25 for the week.
A deep financial crisis engulfed global markets including the Indian markets earlier during the week when the US
investment banking giant Lehman Brothers filed for bankruptcy, Merrill Lynch was bought over by Bank of America in a
distress sale and the world's largest insurer AIG had to seek US government help to thwart an imminent collapse.
However, the domestic market recovered all the losses posted earlier in the week as global stocks witnessed a fresh lease
of life on Friday, 19 September 2008, after US Treasury Secretary, Henry Paulson, proposed to the US Congress
lawmakers a proposal that would create an entity to deal with the billions of dollars of bad debt still choking the financial
system.
So far, the BSE 30-share Sensex is down by 6,244.67 points or 30.78% in calendar year 2008 from its close of 20,286.99 on 31
December 2007. It is 7,164.45 points or 33.78% away from its all-time high of 21,206.77 struck on 10 January 2008.
Inflation based on the wholesale price index rose 12.14% in 12 months to 6 September 2008, marginally above the
previous week's annual rise of 12.10%, data released by the government on 18 September 2008 showed.
Crude oil for October 2008 was hovering at $97.88 a barrel on the New York Mercantile Exchange. It had fallen to as low
as $90.51 earlier in the week, continuing an almost steady decline since hitting a record $147.27 on 11 July 2008.
The Top 20 corporate taxpayers gave out mixed signals with almost 35% paying lower advance tax in September this
year. 15 September 2008 was the last date for payment of the second installment of advance tax.
NSE on Tuesday, 16 September 2008, said there were no outstanding open positions/settlement obligations of Lehman
Brothers Securities in the cash market segment or the derivatives segment of NSE.
The BSE Mid-Cap index fell 308.36 points or 5.57% to 5,228.78 in the week ended Friday, 19 September 2008. The BSE
Small-Cap index slipped 495.55 points or 7.38% to 6,215.99 in the week.
BSE Realty index (down 12.59% to 4,102.64), BSE Oil & Gas index (up 3.86% to 9,468.42), BSE IT index (down 3.68% to
3,666.75),), BSE Power index (down 0.66% to 2,529.79), BSE Metal index (down 7.79% to 10,033.59), BSE Capital Goods
index (down 0.82% to 11,740.07), BSE Auto index (up 0.16% to 3,958.25) underperformed the Sensex in the week. BSE
Bankex outperformed the Sensex rising
1.15% to 7,109.88 in the week.
8
FIIs sold shares worth Rs.6,995.70 cr. in
September 2008 till 17 September 2008
and sold shares worth Rs.35,509.50 cr.
in the calendar year 2008. Mutual funds
bought shares worth Rs.1,031.20 cr. in
September 2008 till 17 September 2008.
The Sensex lost 469.54 or 3.35% at
13,531.27 on Monday, 15 September
2008. Bears ruled the roost on the
bourses for the fifth consecutive day
after Lehman Brothers filed for
bankruptcy protection, making it the
largest and highest-profile casualty of
the global credit crisis. Nonetheless,
news that China's central bank has cut
interest rates helped the domestic
bourses cut steep intra-day losses.
The Sensex slipped 12.47 points or
0.09% at 13,518.80 on Tuesday, 16
September 2008. Buying in index
pivotals coupled with short covering
after five straight days of fall helped
key benchmark indices erase sharp
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9
d.
early losses in a highly choppy session. The higher Dow Jones & Nasdaq and crude oil at a 7-month low aided the intra-
day reboun
The Sensex lost another 255.90 points or 1.89% at 13,262.90 on Wednesday, 17 September 2008. Intense selling pressure in
key index pivotals dragged the key benchmark indices lower in volatile trade. ICICI Bank shed over 4.5% and Reliance
Industries shed over 3%.
On Thursday, 18 September 2008, the Sensex reversed the earlier trend and rose 52.70 points or 0.4%, to close at 13,315.60.
A coordinated effort from global central banks to ease a funding squeeze in money markets helped the key benchmark
indices reverse sharp early losses and end in the green. A $21.7-billion deal by British bank Lloyds TSB to prevent another
UK victim of the credit crisis also helped ease investor jitters after the US stocks hit a three-year low on Wednesday, 17
September 2008.
A huge jump of 726.72 points or 5.46% in the Sensex close at 14,042.32 was seen to on Friday, 19 September 2008. Frenzied
buying in battered index pivotals along with short covering triggered a solid rally in the key benchmark indices. Markets
across the globe rallied on hopes of a more comprehensive US government approach in taming the global credit crisis.
ICICI Bank fell 3.79% to Rs.628.10 in the week. The bank's chief executive officer K V Kamath said in a media interview on
Friday, 19 September 2008, that the bank is an extremely healthy institution and has ample capital. Kamath further added
that Indian banks are in a different position and ICICI Bank being an Indian bank with limited exposure to the global
market place and a strong balance sheet and a strong capital adequacy position is different from a global bank.
State Bank of India surged 3.46% to Rs.1564.60. The bank paid 48% higher advance tax at Rs.1,560 cr. in Q2FY08 over
Q2FY07.
Tata Power Company rose 2.46% to Rs.1,027.30. The company said on 117 September 2008 it has submitted a bid for
setting up four hydroelectric projects in Himachal Pradesh with a total capacity of 1,125 MW.
Ranbaxy Laboratories slumped 21.39% to Rs.356.85. The reports on 17 September 2008 said the US government has
banned more than 30 generic drugs made by the company citing poor quality in two of its Indian factories.
Maruti Suzuki rose 5.39% to Rs.74.65. As per reports on 15 September 2008 the company may sell a million units in the
domestic market within the next two years. A newspaper report quoted Shinzo Nakanishi, Maruti's managing director, as
saying that Maruti is on track to sell a million units in the domestic market within the next two years besides exporting
another two lakh units. This, despite the current downturn and the impending launch of low-cost cars such as the Tata
Nano. Tata Motors was also up (2.67% to Rs.422.85).
The Sensex added 41.51 points to close at 14,042.32 last week. The market will be keenly watching the news emanating
from the US financial sector. The market sentiments remain fragile on sustained selling by foreign institutional investors.
Any further bad news from abroad will impact domestic bourses. The market will also eye development on the Indo-US
nuclear deal. Reports from Washington indicate that the US Congress aims to vote on the deal before it adjourns in a
week's time ahead of the November presidential elections. The civil nuclear agreement between the US and India, if
approved, is seen as a milestone in bilateral relations and will give India access to western technology and cheap atomic
energy.
Market bounces back
MARKET
By G. S. Roongta
With the Lehman Brothers filing for bankruptcy under Chapter 11 after failing to find a suitor and Merrill Lynch rescued
by Bank of America and the AIG taken over by the US Government, the financial crisis resurfaced in USA and shook the
whole world in the bargain. Was this the end of the tremors of the sub-prime crisis that surfaced in USA a year back?
While nobody can hazard a guess, it is fairly evident that the financial crisis of the century has peaked
out although a few more casualties may emerge. Thus the ashes of the sub-prime crisis have not fully
cooled down.
It was really unfortunate that the highly respected and fourth largest US investment bank, Lehman
Brothers had to bite the dust so suddenly. Till March 2008 it posted a profitable quarter and its CEO took
a bonus of $22 million for the excellent performance till 31 December 2007. All this happened after the
sub-prime crisis was in evidence in USA and investment banks like Northern Rock and Bear Stearns had
already bowed out while big daddy, Citibank, had resorted to massive asset sales and restructuring to
save itself. Yet Lehman Brothers appeared unscathed through this period as if it was well insulated from the sub-prime
woes in USA. But the truth could not be hidden for too long and the bank collapsed after failing to attract funds from the
government or any other bank.
G.S. Roongta
Coming on the heels of the $50 billion bail out of Merrill Lynch by Bank of America, the demise of Lehman Brothers was
too shocking to global financial markets and bourses worldwide started tumbling. The whole world was stunned by this
development in the previous weekend and it was taken for granted that the stock markets worldwide would take a heavy
toll when they open on Monday, 15 September 2008.
Accordingly, the BSE Sensex tanked by 850 points to 13150.81 repeating the history of an earlier 'Black Monday'. Panic
and fear engulfed the market and speculators spread the news that the market was sure to crackdown below Sensex
12,000 in no time and touch 10,000 immediately thereafter. Thank God, their nefarious plan did not succeed as the market
posted a sharp recovery of 381 points to close at 13531.27. Hence it lost 470 points but was well above the 12,000 level that
the bears had set as the immediate target.
The recovery next day, Tuesday, 16 September 2008, was an attempt by the RBI to heal the wounds as it issued notice
placing restrictions on the Indian subsidiaries of Lehman Brothers and it was found that the exposure of Indian banks to it
was negligible. The largest exposure of $80 million was made by ICICI Bank to the Senior Bonds of Lehman Brothers. This
amounted to 0.1% of the ICICI Group's total assets. This news put at rest any fears on this count and the market closed at
13518.80 with a minor loss of 12.47 points only. This must be viewed in the backdrop of the sharp gap down opening of
450 points at 13086.02 and the low of the day at 13051.73. Thus by all means it was a handsome recovery during the day.
But as the adage goes, when misfortune strikes it does not end easily and delivers a full blow. This is exactly what
happened in USA as the largest US insurer, American Insurance Group, sought a bail out of $40 billion, which was not
readily forthcoming. The US Government, however, chose to takeover the company infusing $85 billion for 79.9% stake in
the company. Had the US Government not intervened, the crisis would have turned into a calamity. This was mirrored by
the loss of 256 points on the Sensex, which closed at 13262.90 despite its strong opening at 13620.74 on Wednesday, 17
September 2008.
The collapse of reputable US financial companies one after the other despite varied efforts to save them and the
movements on the bourses on the first three days of the week created ripples of fear in global markets as such bail out
efforts were seen as momentary comforts and bound to be short-lived. This was evident on Thursday, 18 September 2008,
as the Sensex recorded a gap down opening of 550 points at 12712.82 and drifted lower to 12558.14 before it recovered
sharply to cover the entire loss and close with a gain of 52.7 points at 13315.60. This sharp turnaround is attributed to the
bottom-fishing by mutual funds and domestic institutions that emerged around 1:30 p.m. and provided great relief to all
investors.
That the mood had changed worldwide was in evidence on Friday, 19 September 2008, as global markets opened strong
and posted handsome returns. The Sensex opened with a gap of 448 points at 13763.83 touching an intra-day high of
14097.44 to close the day at 14042.32 with a gain of 726.72 points. The cheerful mood was created by the positive attitude
of central banks worldwide in extending a helping hand to stave off the financial crisis and the ban on short-selling in
several markets.
The Sensex reverting into the green on Thursday & Friday has warded off any fears of a bear maul that was in the offing.
Since India is comparatively insulated from global markets given its negligible exposure to global financial assets and its
strong economic outlook, the Sensex was not impacted negatively even though crude oil prices shot up on Friday to touch
$100 at one time and the inflation figures were marginally higher than last week.
The RBI also took the bold step in announcing that liquidity in the system will not be a problem and money will be
infused if needed. This announcement boosted the market sentiment and put at rest any fears about our financial sector
being hit by the crisis in the US financial
markets.
10
While the jerks and jolts will continue, the
markets will continue to struggle amid panic
sales and support levels as the US crisis
cannot be totally written off and some more
hiccups may be there as evident by Morgan
Stanley, another giant investment bank,
seeking fresh funds or a buyer to bail it out.
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forced to cover their short positions at higher levels. Having resorted to short covering every now and then, the bears are
aware that their strength is weakening and the day is not far off when they are caught with huge short positions one fine
morning!
I have already stated earlier that the bottom of the market has already been established around Sensex 12,000 and the
CNX Nifty level of 3800-3850 and any attempt to pull the markets below these levels may prove futile. The FIIs, too, have
realized this by now and may not press any further panic sale as stocks will merely move from one set of strong hands to
another. The domestic institutions will give a befitting reply to any panic sales as evident last week.
The Indian economy's GDP growth at around 8% is among the best in the world and the stable conditions of our financial
markets will make India the choice destination for investments. Since there an economic slowdown in USA and the
reputed investment banks are collapsing, US citizens may choose to invest in India, which today offers higher comfort
levels.
But the ball is now in the court of the Ministry of Finance to figure out how to attract these funds by making investments
on Indian bourses more attractive and free of any encumbrances. Mr. Rakesh Jhunjhunwala has rightly said so in his TV
interview on Thursday, 18 September 2008, when he said that it is not a bear market and the bull run continues as the
Sensex is well above 4500, the mark from where the bull run started in 1992 and we are still in a bull market despite the
corrections.
Over the last two week, I have been highlighting the investor response to the conservative distribution policies of the
Aditya Birla Group and gave the examples of Hindalco Industries and Idea Cellular Ltd. Readers must have observed
that both the shares along with Grasim closed in the red despite the sharp market recovery by over 700 points on
Thursday. Even the strong gain of 726 points on Friday had a negligible impact on these stocks. This clearly proves that
investors have started shying away from the Aditya Birla Group because of its investor unfriendly attitude.
Idea Cellular, on Thursday, fell below its issue price of Rs.72 and Hindalco does not exude any charm even as its second
rights issue is nearing. But the management will be happy to grab all the unsubscribed portion to enhance its stake in line
with my forecast. A popular business daily has already headlined a story 'Promoters' holding in Hindalco set to climb' on
Thursday. Its for readers to realize how this column is ahead of the popular media in forecasting corporate moves before
they occur.
By Saarthi
STOCK WATCH
In the current meltdown, the share price of Sujana Towers Ltd. (Code: 532887) (Rs.48.50) has fallen more than 80% from
its high of Rs.235 in January 2008. The company manufactures galvanized steel towers used for power transmission and
as telecom towers. It also offers various services including engineering and consultation, turnkey installations, inspection
and maintenance of towers etc. It has set up two large scale units at Hyderabad to emerge as India's largest galvanized
steel tower manufacturing company. It has expanded its towers capacity at Hyderabad by 1,00,000 TPA from 28,125 TPA
of galvanized towers to 128,125 TPA. In view of the fast growing demand for power transmission towers and telecom
towers and associated services within the country as well as in neighbouring countries, it is in the midst of setting up
another 1,00,000 TPA manufacturing facility at Chennai. It also intends to set up/acquire subsidiaries in the Middle
East/South East Asia in the area of power transmission and telecom infrastructure services. Recently, it acquired 51%
shareholding in Telesuprecon Ltd. of Mauritius undertaking telecom infrastructure contracts in various East/Central
African countries. For the trailing twelve months ending 30 June 2008, it reported total revenue of Rs.582 cr. with profit of
Rs.46 cr. i.e. an EPS of Rs.11 on its current equity of Rs.20.70 cr. A screaming buy at current levels.
******
From a high of over Rs.1000 earlier this year, the share price of KLG Systel Ltd. (Code: 531269) (Rs.309.35) has currently
tumbled down to sub Rs.300 level and hitting new lows. The company specialises in technological solutions to entire the
business lifecycle i.e. right from concept and creation, through plant design, project execution and management
operations & optimisation to expansion/revamp. It also provides on-line IT solutions to distribution utilities, using its
self-developed software Vidushi, SG61 Technology and solutions for determining the transmission & distribution losses,
fixing the areas of power theft, on-the spot billing & cheque collection, enhancing revenue collection efficiency of utilities
and address consumer grievances. Recently, it demerged its power systems solutions business into a new subsidiary
named 'KLG Power' in which an IBM group company has invested Rs.12 cr. for 1.2% stake, thereby valuing KLG Power
Ltd. at a whopping Rs.1000 cr. Ironically, KLG Systel, the parent company, which holds the balance 98.80% in KLG
Power, is available at a market cap of less than Rs.400 cr. For FY09, it is expected to clock a turnover of Rs.350 cr. with net
profit of Rs.60 cr. i.e. an EPS of Rs.41 on its estimated diluted equity of around Rs.14.50 cr. Keep accumulating at sharp
declines.
******
Indo Asian Fusegear Ltd. (Code: 532658) (Rs.70.45) manufactures a wide range of electrical circuit protection equipment
including distribution boards, switch boards, switch panels, fuse switches, MCCBs, HRC Fuses, MCBs, RCDs, etc.
11
Besides, it is one of the largest manufacturers of CFLs and MCBs in India. To capitalise on the ongoing boom, it is
diversifying into the power distribution business on behalf of state electricity board on a franchise basis. Lately, it has
forayed into cables & wires manufacturing business with a planned investment of Rs.100 cr. in phases. For the higher end
segment, it is setting up a plant in Haridwar under a joint venture with Simon Holding of Spain for manufacturing home
and building automation products for the first time in India. At the same time, it is putting up a facility in Saudi Arabia
through a tie-up with Saudi National Glass for production of Compact Fluorescent Lamps (CFLs) and High Intensity
Discharge Lamps (HID Lamps). For FY09, it is expected to clock a turnover of Rs.325 cr. with PAT of Rs.15-16 cr. on a
conservative basis, which works out to an EPS of Rs.10 on its current equity of Rs.15.30 cr. At the current market cap of
Rs.100 cr., it's available fairly cheap.
******
Vakrangee Software Ltd. (Code: 511431) (Rs.173.75) is a leading provider of complete document and data management
solutions encompassing large-scale data capturing & management, scanning, digitization and printing. It has three
business segments, viz. document management services, printing management services and ITES catering to various
verticals like the Central and State Governments, banking and financial services industry, telecom, power, retail, aviation
and others. In fact, the company has the largest scanning and variable data printing capacity in India with 5.6 million
pages per day and 2.40 million pages per day respectively. Last year, it entered into a strategic alliance with Eastman
Kodak company to offer mass customisation & personalisation of customer communication practices in India and has
been granted with the Kodak Gold Plus accreditation status. Of late, it has started to cater to the private sector and
intends to generate over 50% of the total revenue from this segment. It is expected to end FY09 with total revenue of
Rs.300 cr. with net profit of Rs.60 cr. i.e. an EPS of Rs.28 on its equity of Rs.21.40 cr. Thus the scrip is currently available at
a P/E multiple of less than 6. Besides, the company is contemplating to come out with a rights issue in the near future.
By Kukku
FIFTY FIFTY
Looking at the current market sentiment, following defensive stocks are advised for buying on dips. Most of these stocks
are likely to give good dividend yield except Yash Papers. Thus apart from protecting your capital, there is good
possibility to earn 40/50% over one year on these investments at current levels.
Investment Calls
* GNFC (Rs.99.65) has a strong book value of Rs.118, a 52-week high/low of Rs.231/92 and FY08 EPS of Rs.23. 43% of its
turnover is from the chemical sector, which is said to be doing very well. With a good monsoon in the current year, the
stock is one of the safest investment bets at current levels. Dividend yield, too, is attractive as last year dividend was 43%.
* With an expected EPS of Rs.32/35 in FY09, GSFC (Rs.144.40) looks attractive for accumulation on every dip. The book
value of the company is around Rs.184, 52-week high/low is Rs.370/132. Moreover, its investment in shares at a cost
value of Rs.99 cr. has a current market value of around Rs.444 cr. The new policy announced on 26 June 2008 will provide
the industry the much needed relief. It will also give the indigenous industry an opportunity to grow by aligning itself
with the global market in the current sentiment. This is one of best stocks to buy on dips.
* Sirpur Paper (Rs.55.95) has strong fundamentals like book value of Rs.133, 35% dividend, FY08 EPS of Rs.20 and FY09
expected EPS is likely to be between Rs.20/24 levels. The company is facing some problems in expanded capacity and is
not able to get the full capacity benefit. This problem is likely to be sorted in the next few weeks and its H2FY09 results
are expected to be far better. Investors can safely accumulate this stock for good long-term growth and to get regular
dividend.
Market Guidance
* J K Paper (Rs.26.35) has a strong book value of Rs.49, annualised dividend of 20% with expansion benefit to come in the
current year and is available at Rs.26. The stock looks very attractive for long-term investment.
* Yash Papers (Rs.7.49) is manufacturing quality pulp and is focusing on niche paper varieties fetching no less than
Rs.35,000 a tonne, which will strengthen realisations by Rs.5,000 to Rs.8,000 per tonne. Interestingly, a major part of this
increment will be bottomline-accretive as integration, economies-of-scale and maximum utilisation of bye-products will
enable it to maintain a tighter cost control.
In FY08, it earned by way of carbon credits 15,878 CERs (Certified Emission Reduction), translating into an income of
Rs.1.20 cr. from captive energy generation through agro-wastes completely replacing fossil fuels. Going forward, the
company intends to be credited with 30,000 CERs per year on account of the 6 MW captive power plant running at full
capacity.
Surplus pulp capacity of nearly 30 TPD has placed the company in a competitive position to supply this critical resource
to pulp-starved paper mills. Pulp prices are currently ruling at around Rs.21,000 per tonne and are expected to increase
further.
12
The book value of the share is Rs.16.5, 52-week high /low is Rs.17/6, its IPO was at Rs.11. At the current market price, the
stock looks attractive and risk-free investment with long-term view.
* Rishi Laser (Rs.55.40) - More updates from the recent AGM held on 16 September 2008.
Turnover in first five months is Rs.51.88 cr. as compared to Rs.31.11 cr. in the corresponding period of the previous year.
New plant at Savli near Baroda has gone on stream in July and has already bagged orders from GEC Alsthom and ABB to
the tune of Rs.10 cr.
The Bangalore unit, which has been transferred to the joint venture with L&T Komatsu, had contributed Rs.8 cr. to the
turnover in FY08. This unit is expecting sales of Rs.25 cr. and the current loan of Rs.12 cr. is also being transferred to this
unit. It is expected to generate sales of Rs.40 cr. in 2009/2010.
At present JCB and L&T are contributing to almost 30% of its sales.
Risk Factor: Slowdown in the construction industry may affect sales. Also, promoters' stake is low.
* Like Walchandnagar Industries, the promoters of Nagarjuna Construction (Rs.115.60) have also withdrawn from
converting warrants into equity shares due to the prevailing market sentiment. In the process, promoters have just lost
10% while investors who invested or stayed invested on these developments lost 50-80% from the peak values. Investors
should be careful in such stocks.
* Few weeks back, Atlas Copco (Rs.815.05) announced buy back or open offer for delisting. Thereafter, the stock flared up
to above Rs.1400 from Rs.900 level. But on the date of the meeting, the company decided to defer the decision. The stock
had gone up with good volumes, which indicates investors got trapped at higher levels. So far, there is no clarification on
why the company deferred the decision.
* Atul Ltd. (Rs.61.05) is another defensive stock that investors can buy at every fall. Keep accumulating below Rs.60 level
to get good dividend yield and good capital appreciation over the long run. The stock has good built in values.
* Oudh Sugar's (Rs.49.75) recent rights issue, which was at Rs.60 closed on 29 August 2008. It is a fully integrated sugar
company from the KK Birla Group. In view of firm sugar prices, the company is expected to report encouraging results as
the crushing season starts next month. The stock can be picked at current levels of Rs.50 for price target of Rs.75 in the
next 6 months.
Note: Is the situation in our market bad? Many stocks have come down to 1/3
rd
to 1/5
th
of their peak values but there is
still fear in the minds of large investors. Credit Suisse recently surveyed 86 Indian corporates and surprisingly found that
more than 60% are denying that there is any
kind of slowdown. Thus in the current state of
the market, the worst seems to have been
discounted because except for a few
heavyweight stocks most stocks are quoted
corresponding to Sensex 5500 to 9500 levels.
Many of the stocks are at half the book values
and the dividend yields too have become
attractive. This is attracting good investment
buying by smart and even old time investors.
13
A few weeks ago, the general feedback was that most large investors were fearful and were sitting on huge cash in
expectations of a fall. At current levels, there is a lot of value buying with a long-term view by these investors.
In such a situation, investors are advised to start accumulating strong fundamentally defensive stocks. Few of them have
already been recommended in this column for purchase in small quantity on every dip.
International steel scrap prices have fallen sharply, which is good for the user industry as steel prices may come down
further. Nickle is trading at a 30-month low while copper has come down to 8-month low. With crude already below US
$100 levels, the inflation rate will come down in the coming few weeks. Hence we may even see a reduction in interest
rates from RBI.
An uncertain situation is always the best time to strengthen your portfolio by picking up good stocks at attractive
valuations.
During the boom period, this column had advised from time to time to book part profits and lock it in Fixed Maturity
Plans (FMP) or out of the market. Now is the time for investors to bring back part of the money and invest in safe,
fundamentally strong stocks, which are trading below book values and offer good dividend yields. Investors will get
better returns compared to FMPs or bank FD over the next one year.
By V. H. Dave
The share was earlier recommended under Early Bird Gains (EBG), our investment newsletter specializing in multi-
baggers, at Rs.18 in June 2007. Since then it touched a high of Rs.89 resulting in a gain of 394%. Now that it has fallen
with the rest of the market, we are recommending it once again as it has a great potential in the future.
EXPERT EYE
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14
Promoted by the Rs.600-cr. MSP Group of Industries, MSP Steel & Power Ltd. (MSPL) (Code: 532650) (Rs.45.15) was
originally incorporated as Adhunik Rollers Pvt. Ltd. in 1968 but its name was changed to MSPL in 2003.
The MSP Group is a leading steel manufacture in the secondary sector in Eastern India. It has a diversified portfolio,
ranging from sponge iron to steel to power generation to rolling mills to ferro alloys etc. The group is fully integrated
across the value chain and boasts of manufacturing facilities all over India with a turnover of about Rs.600 cr. It has
different projects in the steel sector and industrial gases in West Bengal, Orissa, Chattishgarh and Jharkhand. MSPL is
headed by Suresh Kumar Agrawal.
MSPL came out with an IPO of 1.6 cr. equity shares of Rs.10 each for cash at par in June 2005 to raise Rs.16 cr. for its
Rs.138-cr. integrated steel plant along with ancillary projects. The company has completed its expansion and
modernisation project of 80,000 TPA of rolling mills, additional 8 MW of power plant (taking its total power capacity to 24
MW), MS billets plant of 46,100 TPA and 3,45,600 TPA of coal washery and has also started a 2.4 km private railway
siding. Its Waste Heat Recovery based captive power plant has been registered with UNFCCC a Clean Development
Mechanism (CDM) project for a period of 10 years and eligible for carbon credits.
Its phase-II programme envisaging 40,000 TPA of billets, 1,90,000 TPA of sponge iron and 2,30,000 TPA of coal washery
was to be completed by FY08. It requires about 1.44 lakh tonnes of coal for each kiln of 1 lakh-tonne capacity, which is
being sourced from Mahanadi Coalfields and South Eastern Coalfields initially. After coal mining from its joint venture
company begins, it will source its coal requirements from captive mines.
MSP has already undertaken the expansion for setting up a Pelletisation plant of 3 lakh TPA, structural rolling mill of
64,000 TPA. In May 2007, it signed a MOU with the Government of Chhattisgarh for its expansion programme at a
proposed investment of Rs.850 cr.
During FY08, sales advanced by 72% to Rs.361 cr. and net profit shot up 131% to Rs.47 cr., yielding an EPS of Rs.8. During
Q1FY09, sales went up by 71% to Rs.108 cr. whereas net profit shot up by 147% to Rs.17.5 cr.
Its equity capital is Rs.58 cr. and with reserves of Rs.72 cr., the book value of its share works out to Rs.22.4. The promoters
hold 72% in the equity capital, PCBs hold 17% leaving 11% with the investing public.
Under a consortium of 5 companies including Hindustan Zinc, MSPL has already been accorded the coal block of
Madanpur (South) by the Ministry of Coal to meet its coal requirement for the next 30 years. As a step towards further
backward integration, MSPL plans to acquire iron ore mines in the near future.
Its other major investment plans include a 2 MTPA integrated steel plant together with a 300 MW captive power plant at a
proposed investment of Rs.2500 cr. In addition, it plans to set up a 5 MTPA iron ore beneficiation plant at a proposed
investment of Rs.200 cr. as per the MoU with the MP Government on 16 February 2008. M P Trading Investment &
Finance Facilitation Corp., an arm of the MP Government, has agreed to help it obtain captive mineral mines for the
aforesaid projects and shall also recommend it to the Central Government.
In yet another MoU with the MP Government on 29 & 30 July 2008, MSPL plans to set up a 1000 MW thermal power plant
in Madhya Pradesh at an estimated investment of Rs.4200 cr.
MSPL has also signed a MoU with Government of Chhattisgarh on 7 August 2008 for setting up a clinker & cement plant
of capacity 1 MMTPA & 1.5 MMTPA respectively and a captive power plant of 50 MW capacity at an investment of
Rs.200 cr. The State Government will also consider grant of mineral concession of a limestone mine for 'captive use' in
Chhattisgarh.
The MSP Group is thus venturing into mining, pelletization, value added specialised steel, non-conventional energy and
cement. The strategic location of the new plants along with benefits of transportation, coal linkage and allotment of coal
reserves will help boost MSPL's profitability.
The Steel sector is expected to grow by 8-10% year-on-year (YoY) basis. The increased thrust on infrastructure
development and rural construction coupled with the steady performance of user industries like Automobiles, Consumer
Durable, Construction, Infrastructure etc. augurs well for the Steel industry.
Its ambitious expansion plans, initiatives for coal linkages, expected carbon credits firm steel prices and the bright
prospects of the user industries give visibility to MSPL's earning potential in coming years.
During FY09, sales are expected to go up to Rs.600 cr. with net profit to Rs.90 cr., which would give an EPS of Rs.15.5.
The MSPL share currently trades at Rs.45 at a P/E of 2.7 on FY09 estimated EPS of Rs.15.5. The share is recommended
with a price target of Rs.60 in the medium-term. The 52-week high/low of the share has been Rs.89/25.
******
The stock markets have suffered a sharp setback in view of the global financial crisis. Fundamentally good and sound
stocks are available at attractive prices. One such share is Numeric Power Systems Ltd. (NPSL) (Code: 532051)
(Rs.514.50), which is trading at a forward P/E of just 4.5 on an estimated EPS of Rs.105 for FY09.
NPSL, a corporate house with established nationwide presence, is the single largest source for a wide range of UPS
systems. Incorporated in 1994, NPSL has emerged as an Indian multinational with eight manufacturing facilities in India
(Pondicherry, Chennai and Parwanoo) and Sri Lanka supported by its subsidiaries in Singapore, Mauritius and partner
offices in USA and UK. Numeric Lanka Technologies Pvt. Ltd. in Sri Lanka, Numeric Power Systems Pte. Ltd. in
Singapore and Numeric Power Systems (Mauritius) Pvt. Ltd. in Mauritius, are subsidiaries of NPSL.
The company manufactures UPS systems, Constant Voltage Constant Frequency Systems, AC-DC Converters, C-DC
Converters, AC Drives, Inverters, Stabilisers, Custom Built Power Conditioners and Isolation Transformers. Its products
find application in various segments of the market including IT, Telecom, Software, Healthcare, Banks and Financial
Institutions, government projects and small-scale industry.
NPSL is a national distributor for SLA batteries manufactured by Panasonic Industrial Asia Pte. Ltd., a member of the
Panasonic Group of Japan. By this distribution arrangement with Panasonic, it offers the complete range of Panasonic
high performance SLA batteries to the Indian market directly and through their appointed channel partners.
NPSL has already implemented an auxiliary power system as a turnkey project involving design, supply and installation
of total power conditioning systems for Power Grid Corporation in all the north-eastern States.
With this, NPSL has elevated itself to an integrated player in power protection systems. The company has plans to
expand its overseas operations by setting up a UPS assembling facility in Mauritius.
During FY08, NPSL posted 51% increased consolidated sales of Rs.395 cr. and earned 107% higher net profit of Rs.42.6 cr.
yielding an EPS of Rs.85. During Q1FY09, sales went up by 44% to Rs.12.9 cr. on 17% higher sales of Rs.89 cr.
During FY08, it invested Rs.14.5 cr. for expansion & modernisation taking its gross block to Rs.51.3 cr. Despite this, its
debt-equity ratio stands at just 0.12:1. The company's equity capital is Rs.5 cr. and with reserves of Rs.142 cr., the book
value of the share works out to Rs.294 making it a potential bonus candidate.
NPSL makes power protection products such as UPS used for computer or network protection and process automation.
The company has a wide range of products catering to IT and ITES, medical applications, financial and insurance sectors,
small and medium enterprises and homes.
Given India's power deficits and the ubiquitous outages and voltage fluctuations; NPSL's products have significant
market potential in the country. The IT and BPO boom in the country has further propelled the demand for its products.
NPSL has a dominant position in the UPS
segment and has clients such as Intel,
Infosys and Veritas.
15
NPSL's ability to offer remote monitoring
through customer IT networks and web-
enabled solutions has not only helped
capture overseas market but has also
facilitated cost-control through efficient
servicing.
The company's fully-owned subsidiary in
Sri Lanka and its export-processing unit in
Chennai cater to the overseas markets.
Other subsidiaries in Singapore and
Mauritius, which trade in the company's
products, have helped it tap the markets in
Africa and USA.
NPSL has entered into solar power and
started implementing
projects in a
commendable way to address the
standalone and distributed mini grid
systems, solar hybrid UPS systems, grid
connected solar power farms for energy
generation using photo voltaic modules.
October – December 2007
EBG Quarterly Performance:
100% once again
During October – December 2007, which is the first quarter of the fifth
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.
EBG has, therefore, consistently, maintained quality while the bonus
issues in excess of 30% highlight the confidence of its recommendations.
Issue
Dated
Scrip
Highest
price since
recom.
Buy
Price
Growth
%
03/10/07
Its sustained topline growth, effective cost-
rationalisation measures, its capability for
executing total turnkey power conditioning
systems and its profitable subsidiaries give
NPSL potential earning visibility in coming
years.
During FY09, its consolidated sales are
expected to advance by 30% to Rs.515 cr.
with net profit conservatively by 25% to
Rs.53 cr., which would give an EPS of
Tyche Peripherals Sys.
64.15
116.4
81
35.00
72.5
107
10/10/07
Hilton Metal Forging Ltd.
Hind Aluminium Inds.
60.10
102
17/10/07
70
24/10/07
Kamdhenu Ispat Ltd.
29.00
62.25
114
31/10/07
CHD Developers Ltd.
18.30
37.4
104
31/10/07
160
62
G M Breweries Ltd.
99.00
07/11/07
Asian Granito India Ltd.
94.00
135
44
Mudra Lifestyle Ltd.
78.85
114.9
14/11/07
45
21/11/07
Lumax Auto Technologies
80.75
115.65
43
28/11/07
Vybra Automet Ltd.
36.95
73.9
100
05/12/07
138.5
43
Avantel Softech Ltd.
96.85
12/12/07
Micro Forge (India) Ltd.
26.65
36.9
38
19/12/07
Mayur Uniquoters Ltd.
57.45
74
30
26/12/07
Arvind Remedies Ltd.
4.35
6.68
54
26/12/07
Relaxo Footwear Ltd.
68.75
88.65
29
EBG for sure profits
Rs.106.
At the CMP of Rs.515, the share is trading at a P/E of 4.7 on its estimated EPS of Rs.106 for FY09. The share is
recommended with a medium-term target of Rs.650. With its book value increasing to over Rs.400, investors can expect a
liberal bonus in the current year. The 52-week high/low of the share has been Rs.1199/433.
******
Another fundamentally sound stock, which has fallen drastically from its recent high of Rs.245, is Micro Technologies
(India) Ltd. (MTIL) (Code: 532494) (Rs.188.90). MTIL is a leading global developer, manufacturer and marketer of IT
based security solutions for its clients across the globe. Its product range includes the much-needed security devices, life
support systems and web-based software. Promoted in 1992, MTIL is the pioneer in developing messaging-based security
systems based on embedded technology. It is an ISO 9001 certified company located in Mumbai and Pune.
Its products, Vehicle Black Box (VBB), Home Security Systems (HSS), Micro VBB-Ecar, CDMA Fleet Monitoring, Lost
Mobile Tracking System (LMTS), Electric Black Box (EBB) hold immense growth potential. MTIL's core strength lies in
product innovation and has restructured its business model to ensure a research-centric approach, while outsourcing a
bulk of its product manufacturing.
The company has two subsidiaries - Micro Secure Solutions (MSSL) that focuses on Premises (commercial & residential
premises) Security Business and Micro Retail for establishing the retail chain of Micro Shoppes.
Micro Retail was created with an objective of expanding the retail business of the company enabling it to bring IT and
security to the masses. Utilising the strength of MTIL, which is R&D oriented, all its products shall be sold through this
retail outlet chain.
During FY08, MTIL posted 75% higher consolidated sales with 194% higher net profit of Rs.55 cr. yielding an EPS of
Rs.50. During Q1FY09, net profit further went up to Rs.17.4 cr. on 67% higher sales of Rs.58 cr.
During FY08, its equity capital has gone up to Rs.10.95 cr. from Rs.10.5 cr. by the issue of preferential shares of 4.5 lakh
shares to promoters (2 lakh shares) and Bennet Coleman & Co. Ltd. (Times of India Group) (2.5 lakh shares) at Rs.250.40
each. The book value of the share now stands at Rs.191.
MTIL has also approved the issue of 24 lakh warrants to the promoters group and other investors with the option to
convert them into shares at a conversion price of Rs.256.88 within 18 months from the date of allotment.
It is spending Rs.37 cr. for enhancement of products & services. Another Rs.19 cr. for the development of new products.
MTIL has recently signed an agreement with I-Tech Innovative Technology Solutions for distribution of its products in
Yemen, Egypt and select Middle East markets for selling 1 lakh pieces for Rs.100 cr.
For meeting its fund requirements for various capital expenditure plans in the Middle East and USA, MTIL has
completed its FCCB issue of US $15 million (Rs.60 cr.).
MTIL is expanding its business in the Kenyan market to provide highly advanced security solution products across the
country. Kenya is the regional hub for trade and finance in East Africa with a population of 38 million and 11.44 million
mobile users.
The immense acceptance of its products, the launch of innovative shop security system, new disaster management system
for municipal corporations, introduction of Chinese version of LMTS in the international market and its further expansion
in the security space give visibility to MTIL's increased revenue & profitability.
The company is well positioned to be a significant force in the global market for security devices, life support systems and
web-based software. With host of new product launches and its further investments in the technology sector, MTIL is
likely to reap a rich harvest in the future.
MTIL is all set to earn a net profit of Rs.77 cr. on sales of Rs.270 cr. in FY09, which would fetch an EPS of Rs.70. The share
at Rs.189 is trading at a P/E of 2.6 on FY09 estimated EPS. A reasonable P/E of 4 will take its share price to Rs.280, which
would fetch a gain of over 50% in the medium-term. The 52-week high/low of the share has been Rs.385/177.
By Nayan Patel
Archidply Industries
BSE Code: 532994
NSE Code: ARCHIDPLY
Last Close: Rs.35
Archidply Industries Ltd. is the flagship company of the Archidply Group that has been associated with plywood
manufacturing for more than 30 years. The Group has grown from a small saw mill in Assam to a modern state-of-the-art
manufacturer of wood panel products and decorative surfacing products in three locations (Rudrapur, Mysore and
Assam) with a network of branches, distributors and dealers across India.
The company came out with IPO at Rs.70 per share in April 2008. At the current level, the stock is available at 50%
discount to its IPO price at a P/E ratio of just 5. It is India's leading plywood product manufacturing company. Investors
TECHNO FUNDA
16
can buy at every decline with a stop loss of Rs.31. On the upper side, the stock will go up to Rs.40 level and will cross
Rs.50 in less then 4 months. Its 52-week high/low is Rs.75/33.
Western India Shipyard
BSE Code: 531217
Last Close: Rs.12.36
Western India Shipyard Ltd. (WISL) with India's largest composite ship & rig repair facility in the private sector is one of
the world's advanced multi-dimensional and multi-purpose yard offering modern, streamlined, sophisticated ship & rig
repair facilities and services.
WISL's state-of-the-art Floating Dry Dock has a capacity to repair ships up to 60,000 DWT and can accommodate ships up
to 225 metres length and 32.5 metres in width. Now ABG Shipyard has taken over this company. At the current price, the
stock is available dirt cheap. Investors can buy at every decline with a stop loss of Rs.11. On the upper side, the stock will
go up to Rs.17.50 level in a short span of time while it can double from hereon in coming 12 months. Its 52-week high/low
is Rs.51/11 and the share has a face value of Rs.2 paid-up.
NSDL's 'Investor Awareness' seminars in Mumbai
MONEY FOLIO
National Securities Depository Ltd. (NSDL), India's first and the largest depository, holding more than 80% of the
securities held in dematerialised mode in India, will be conducting another round of series of Investor Depository Meets
(IDMs) in Mumbai.
There is no entry fee for attending these awareness seminars. The seminars will be held between 5 to 7:30 p.m. as follows:
These seminars aim at spreading awareness
about the depository processes and about the
safety and benefits of depository system.
These seminars will provide an opportunity to
the investors to interact directly with NSDL as
well as its Depository Participants (DPs).
Senior officials from NSDL will be available at these seminars to resolve the queries of investors. Investors queries on
demat, suggestions and feedback will be solicited.
Date
Place
Venue
20-Sep-08 Borivali (W)
Mega Marriage & Party Hall
21-Sep-08 Dombivli (E)
Suyog Mangal Karyalay
27-Sep-08
Malad (W)
Malad Medical Association Hall, 5D Banquets
28-Sep-08 Vasai (W)
Sunrise Service's Marriage Halls
Patel Engineering bags Rs.696 cr. order
Patel Engineering Ltd., a civil-infrastructure construction company, has bagged orders worth Rs.695.57 cr. from the
Andhra Pradesh Government for the modernisation of the Krishna Delta System.
The project includes modernisation of the major river delta systems to boost irrigation potential along the Bantumilli
Canal, Polarj Canal, Campbell Canal, Dosapadu Channel, Kunderu Channel, East Bank Canal, Gudivada Channel and
their distributaries. It is part of a programme to boost the irrigation potential. The projects are expected to be completed in
next 36 months.
Garware Offshore bags $15 million contract
Garware Offshore Services Ltd. has signed a 3-year contract for its new 60T Anchor Handling Tug cum Supply vessel
(AHTSV) to be deployed in Africa. The revenue from this contract is estimated to be approximately about $15 million
(Rs.60 cr.) and is likely to commence in January - February 2009.
This deployment in Africa, is a new market for the company. In July this year, the company had deployed a 60T AHTSV
in Vietnam for a 3-year contract.
17
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Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources
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