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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 5
Monday, December 17 - 23, 2007
Pages 24
Markets lack lustre
ahead of the festive season
By Sanjay R. Bhatia
The markets displayed a rangebound trend amid intermediate bouts of volatility last week. Initially the markets saw a
positive bias on the back of the 25 bps cut in interest rates by the US Federal Reserve and even touched new historic highs
moving against the weak global sentiment. However, this did not last long as selling pressure and profit booking was
witnessed at higher levels. Traders and speculators were active in
banking, metals, oil & gas, mid-caps, small-caps, realty, capital goods,
telecom, IT and power. The volumes recorded have been good along
with positive market breadth. Incidentally, FIIs remained net sellers in
the cash as well as the derivatives segment. Domestic institutional
investors, on the other hand, remained net buyers helping the markets
to scale new highs.
The global cues have largely remained negative. Crude oil prices have
once again spiked up to move above the $92 level. Global markets
have given a thumbs down to the US Federal Reserve's decision to cut
interest rates by 25bps only against the market expectation of 50bps
and this triggered a correction, especially in Asian and emerging
markets. The Rupee continued to appreciate against the dollar. The
markets continued to struggle at higher levels even though they were able to touch new historic highs. Lack of FII inflows
and the lack of any trigger have kept the market tentative.
With the festive season round the corner, the markets are likely to remain rangebound as FII inflows are likely to remain
lacklustre till the first fortnight of the New Year. In the meanwhile, the markets would take cues from global markets,
crude prices and the rupee-dollar equation. Stock specific movement will be witnessed amidst profit booking and selling
pressure at higher levels.
Technically, if the Sensex manages to sustain above the 20,000 level, it is likely to touch 20,250 followed by the 20,576 level
on the upside. The Sensex has support at the 20,000 level followed by the 19,700 and 18,737 levels. If the Nifty manages to
move up and sustain above the 6050 level, then it is likely to test the 6100 and 6245 levels. The 5900 level is an important
support level for the Nifty.
Traders and speculators could buy Air Deccan with a stop loss of Rs.253 and target price of Rs.325.
1
A great relief in the offing!
By Fakhri H. Sabuwala
The collection of direct taxes in the last three quarters has been so robust that the Finance Minister is in a mood to reward
tax payers' compliance and integrity. Not only that, the reward would also boost the government's image in the eyes of
the large middle class population just months ahead of the Lok Sabha polls. It is believed that the compliance collection in
corporate tax, personal income tax and service tax may compel Finmin to do a positive rejig in income tax exemption
limits and rationalise the tax slabs. Even corporate tax payers may be in for a pleasant surprise.
The market is already smelling these positives and the late rally in the big earners can be attributed to this. Tax collections
which are up by 40% on year-to-year basis, may prompt the Finmin to raise income tax exemption limit to Rs.1,50,000
from Rs.1,10,000. Such a demand is also being made by the left parties apart from the seniors in the ruling front.
The instruments eligible for exemption have already been expanded by bringing in the senior citizen scheme and the 5
year post office time account. There is a strong likelihood of inviting investments in infrastructure bonds to boost
infrastructure development and encourage savings amongst the tax paying population. Experts in the tax field feel that
the surcharge may be done away with and at a personal level, new slabs could be 10%, between Rs.151000 to Rs.250000,
20 % between Rs.2.51 lakh to Rs.5 lakh and 30% beyond Rs.5.01 lakh. Already the Ministry of Finance officials and CBDT
staff are burning the midnight oil in devising a once more amnesty scheme especially for non-tax payers who can disclose
their wealth amassed over a period of time, pay plain tax and get an exemption or amnesty from interest and penalty at
the same time. It may also spring a surprise scheme of disclosure by floating a zero interest five year infrastructure bond,
the source of investments in which may not be questioned.
All these make sense at a time when the economy is doing well and will keep the country's GDP on a higher trajectory of
growth. The spending of such huge collections, in turn, will propel the wings of growth further and bring all round
development.
In the backdrop of such a macro growth story and our immunity from other global economies and their sub prime crisis,
the Indian economy and the capital market is in for a real solid consolidation from hereon which is already visible. Of
late, the market shows signs of consolidation as the leading benchmarks remain under control and the mid caps and other
sectoral indices are showing strength.
The year end consideration of FIIs and the long Christmas and New Year holidays may put pressure on the market. Large
caps may develop fatigue and may leave the track open for mid caps and small caps to sprint. This is quite evident from
the number of all time highs scored in this category. Certain scrips from this lot deserve a closer look and have a lot of
steam still left in them. The surprise performer in the pack could be the pharmaceutical scrips like Arvind Remedies,
IndSwift Labs, Orchid Chemicals, Dabur Pharma, Morepen Labs, Torrent Pharma, Twilight Litaka Pharma, Cadilla
Healthcare, Solvay Pharma, Surya Pharma, Ishita Drugs, Guj. Themis and Hester Pharma.
Entertainment and media stocks are the ones preparing for the great flight – just the way the realty stocks took to wings in
2007!
Breakout Point shifts to 20,500
TRADING ON TECHNICALS
By Hitendra Vasudeo
In last week's update, we had expressed a doubt whether
the breakout will happen. The breakout did happen but was
not convincing enough to be called a breakout.
Last week, the Sensex opened at 20087.77 attained a low at
19834.11 and moved to a high of 20498.11. The Sensex finally
closed the week at 20030.83 and thereby showed a net rise of
64 points on a week-to-week basis. At the point of breakout
at 20238 at the end of the week, the Sensex has formed a
Long Legged Doji which indicates a halt to the preceding
move or indecisive behaviour at the point of breakout.
Weekly resistance will be at 20238-20500. Now the breakout
point gets shifted to 20500. Expect continuation of the upmove only on breakout and close above 20500. Last week, we did
see a breakout above 20238 but the close is below it at 20030.83. The closing last week was the highest weekly closing and
for the first time is above the 20000 mark. As a result of its failure to sustain in the high range has resulted in a resistance
getting generated at the higher range. Weekly support will be at 19743-19446-19363.
Only a comprehensive breakout and close above 20500 on a weekly basis can bring about a strong directional up move. If
that happens then expect the Sensex to move towards 22000 at least.
On Thursday, 13
th
December'07, the Sensex formed a Dark Cloud Cover candlestick pattern after attaining a high of
20500. Last time also when the Sensex formed a high of 20238, it had formed a Dark Cloud Cover pattern which resulted
in its slide to 18182 ultimately. Now once again, the occurrence of this pattern after a rise can bring down the Sensex all
the way down to 18182 at least or near about it if it fails to cross and close the week above 20500. Therefore, a further
breakout and close above 20500 is a must for any further rally. Otherwise, it will get into a sideways to corrective phase
2
before it further attempts to cross the high again. On the weekly chart, occurrence of Long Legged Doji also indicates a
halt to the proceedings
for the time being.
WEEKLY UP TREND STOCKS
Review of the Elliot Wave
Count to get the broad
market picture:
Preferred First Count:
Wave 1 – 2594 to 3758;
Wave 2 – 3758 to 2904;
Wave 3 – 2904 to 20238
Internals of Wave 3
Wave i – 2904 to 6249
Wave ii – 6249 to 4227
Wave iii – 4227 to 12671
Wave iv - 12671 to 13799
Wave a- 12671 to 8799
Wave b- 8799 to 14724
3
Wave c- 14724 to 12316
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
DECCAN AVIAT
290.35 201.9
257.3
279.6
312.7
368.1
79.4
244.5
23/11/07
JSW STEEL
1337.00 908.0
1176.0
1283.0
1444.0
1712.0
79.3
1118.8
16/11/07
PATEL ENGINEER
886.00 718.3
821.3
859.7
924.3
1027.3
78.5
806.8
31/08/07
SESA GOA
3894.00 3217.3
3626.3
3767.7
4035.3
4444.3
76.4
3564.0
14/12/07
MRPL
134.90 112.8
128.4
137.6
144.0
159.6
75.6
125.3
02/11/07
Wave d- 12316 to 12316
WEEKLY DOWN TREND STOCKS
Let the price move above Center Point or Level 3 and when it move back below Center Point or Level 3 then sell
with what ever high registered above Center Point or Level 3 as the stop loss. After selling if the prices moves to
Level 2 or below then look to cover short positions as the opportunity arises. If the close is above Weekly Reversal
Value then the trend will change from Down Trend to Up Trend. Check on Friday after 3.pm to confirm weekly
reversal of the Down Trend.
Last
Center
Relative
Weekly Down
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Cover
Short
Cover
Short
Sell
Price
Sell
Price
Stop
Loss
SATYAM COMPUT 411.10
350.1
395.3
424.6
440.5
485.7
25.97
427.89
14/12/07
HERO HONDA MOT 711.00
646.7
687.7
705.3
728.7
769.7
33.63
708.75
07/12/07
TITAN INDUSTRIES 1473.00 1333.7
1432.7
1491.3
1531.7
1630.7
40.85
1494.00 14/12/07
GUJARAT GAS CO. 339.70
302.1
329.1
345.6
356.1
383.1
41.25
346.64
07/12/07
TULIP IT SERVICE 931.65
756.1
877.0
943.4
998.0
1118.9
43.61
951.29
14/12/07
Wave b –12316 to 15868
Wave e – 15868 to 13799
Wave v-13799 to 20238
Wave 4-20238 to 18182
Wave 5- 18182 to 20498.11
(current
ongoing
up
move)
Strategy for the week
Book profit and exit long
positions on rise to 20300-
20500. Re-enter long on
close above 20500 in
frontline stocks.
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
ADVANCED MICRONIC
517552
90.00
88.95
91.00
82.10
96.5
105.4
0.82
BANNARI AMAN SUGARS 500041 929.00
885.00
944.00
864.00
993.4
1073.4
0.99
CCL PRODUCTS (INDIA)
519600 253.25
247.50
258.75
233.00
274.7
300.4
1.06
COUNTRY CLUB (INDIA)
526550 892.00
875.00
900.00
857.00
926.6
969.6
0.99
DCM SHRIRAM INDUSTRI 523369 132.45
129.85
132.45
117.80
141.5
156.2
0.62
DISHMAN PHARMACEUT 532526 304.90
301.00
309.00
279.50
327.2
356.7
0.88
EVINIX ASSCESSORIES
532818 209.60
204.05
210.80
197.00
219.3
233.1
0.77
FIEM INDUSTRIES
532768 109.50
107.50
118.70
98.15
131.4
152.0
1.93
KAMANWALA HOUSING
511131 222.30
218.40
226.55
210.25
236.6
252.9
1.19
KANORIA CHEMICALS &
506525 135.30
131.50
136.00
130.00
139.7
145.7
0.83
KINETIC MOTOR CO.
505190
35.70
34.50
36.30
33.65
37.9
40.6
1.09
KOPRAN
524280
38.70
36.95
38.70
35.60
40.6
43.7
0.62
MACMILLAN INDIA
532440 242.85
229.50
249.00
217.15
268.7
300.5
1.01
RAJAPALAYAM MILLS
532503 834.00
800.00
834.00
684.00
926.7
1076.7
0.62
SUBEX AZURE
532348 350.75
342.00
353.05
325.00
370.4
398.4
0.76
UT
526879
56.25
52.10
59.90
48.55
66.9
78.3
1.38
BUY LIST
Scrip
Last Close Buy Price Buy Price Buy Price Stop Loss Target 1 Target 2
Monthly
RS
BIOCON
607.05
566.06
549.40
532.74
478.80
707.3
848.5
74.63
FERTILISER CHEMICAL
42.45
42.04
41.28
40.51
38.05
48.5
54.9
71.54
ESSAR SHIPPING
102.80
88.32
82.05
75.78
55.50
141.4
194.5
70.03
HFCL INFOTEL
49.65
47.91
46.40
44.89
40.00
60.7
73.5
67.31
GAMMON INDIA
611.25
591.54
581.20
570.86
537.40
679.1
766.7
59.59
EMPIRE INDUSTRIES
683.00
643.65
631.50
619.35
580.00
746.7
849.7
55.88
MOTHERSON SUMI SYSTE
110.40
106.39
104.05
101.71
94.15
126.2
146.0
52.92
JUBILANT ORAGANOSYS
336.50
327.70
320.50
313.30
290.00
388.7
449.7
51.18
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
CUMMINS INDIA
406.15
415.66
420.50
425.34
441.00
374.7
46.86
* HFCL is locked in upper circuit despite the Reliance denial of having anything to do with it. Smoke too and sure fire!
TOWER TALK
* After being caught on the wrong foot by a bull cartel, a smart operator was made to square off his short position in the
Nifty and fan the fire in mid-caps.
* Bharti Airtel's loss is Idea's and RCom's gain!
* Bank of India may consider a bonus issue. All it needs is a nod from the finance minister and he is in a good mood
these days.
* IOC, BPCL, HPCL and GAIL may see the flow of free scrips despite the subsidy burden. FM has hinted at this.
* After hitting a high of Rs.200 few days back, Bihar Tubes has corrected sharply to Rs.170 level giving a good
opportunity to buy. The scrip can shoot up to Rs.220 in the short term in such market sentiment.
* Last week, lot of bulk deals has taken place in Syncom Formulation. Most of the selling is absorbed and scrip is tipped
to take a u-turn and start hitting upper circuits again. A high risk, high return stock.
* Ansal Housing is expected to make some preferential allotment in the near future. Scrip may remain in action till then.
But don't forget to book profit around Rs.340 level.
* After a long time, GM Breweries has come back into action and hit a new 52-week high. Scrip can easily move up to
Rs.175180 in the coming week and to cross Rs.200 in a month or so. Just buy and hold.
* Crew BOSS has appreciated by more than 75% in a very short term. Investors should book partial profit immediately.
* A well known domestic broking firm has come out with a buy report on Numeric Power with a price target of above
Rs.1200. The scrip has already consolidated and is poised for a sharp upmove. Grab it before it shoots up.
* Amar Remedies with good earnings is available at attractive valuations. Company has shown huge increase in sales in
the current year.
* Ashiana Housing is a good cum bonus buy as future earnings may be around Rs.50 per share.
* Futura Polyester has caught the attention of value buyers. The company has unlocked value in its subsidiary and plans
to offer one share of the subsidiary free for every one share held.
* Shivalik Global is a stock with good performance in textile and garments. The company has also unlocked its real
estate worth Rs.300 cr. A stock with good value for the medium-term.
* Sybly Industries is a textile play with good expansion plans which are under completion. There is also some talk of
company acting on its real estate in the at outer Delhi area. At current levels, it is a stock to watch.
* The grey market premiums on IPOs has again firmed up with Jyothy Labs at Rs.185, BGR Energy at Rs.440, e-Clerx at
Rs.40, Transformers & Rectifiers at Rs.385, Brigade Enterprises at Rs.25, Burnpur Cement at Rs.7, Aries Agro at Rs.9,
Manaksia at Rs.25, Porwal Auto at Rs.12 and Precision Pipes at Rs.35.
* Proxy IPO application forms for Rs.1 lakh retail application are quoting Rs.2600 for BGR Energy, Rs.1600 for e-Clerx,
Rs.2100 for Transformers & Rectifiers and Rs.2200 for Brigade Enterprises.
Indoco Remedies Ltd. (Code: 532612)
Rs.303.85
BEST BETS
4
5
Promoted by Mr. Suresh Kare in 1947, Indoco Remedies Ltd. (IRL) is engaged in research & development, manufacturing,
marketing and distribution of pharmaceutical products and services in the domestic and export markets. Basically, it
manufactures APIs, formulations and provides contract research and manufacturing services (CRAMS). Besides, it has a
unique revenue inflow from the dossier development and marketing them. Over the years, IRL has a built a strong brand
portfolio of 120 products across 11 major therapeutic segments. Earlier, it was focusing on acute therapies like respiratory,
anti-allergy, anti-infective, dental, ophthalmic etc which are volume led businesses. But of late, it has also ventured into
the high growth and lucrative lifestyle segment like anti-diabetes, cardiovascular, central nervous system, nutrition,
dermatology etc. It has a strong presence in the domestic formulations market with more than 75% of total revenue
coming from it whereas the balance 25% comes from export to over 33 countries globally including regulated and semi
regulated markets. Notably, the company boasts of 10 brands that are among the top five in their respective segments
with Febrex Plus, Cyclopam, Vepan, Sensodent and ATM being the most successful ones. In order to ensure a focused
sales approach, IRL has created separate marketing divisions namely Indoco, Spade, Warren and Surge-Radius, each with
specific therapeutic focus and working as an independent profit centre. This year the company created two more
divisions – Warren Excel and Spera.
Presently, IRL has five facilities for formulations - Goa Plant I, Goa Plant II, Baddi and the two plants at Aurangabad &
Tarapur for the non regulated market. Post acquisition of La Nova Chem and merger with SPA Pharma Ltd., IRL is now
backward integrated to manufacture API for captive consumption as well as export with two commercial manufacturing
facilities - one at Patalganga and the second at New Mumbai. Importantly, the company's Goa plant II is USFDA certified
for ophthalmic and injectables whereas the Goa plant I is approved by MHRA-UK and Darmstadt, Germany. To fully
integrate into the CRAMS space, IRL has set up a state-of-the-art standalone R&D Centre at Rabale, near New Mumbai
equipped with facilities like synthetic chemistry labs, F&D, AMD, regulatory and IPR cell. The unique feature of this R&D
lab is the Kilo-lab, which can produce one gram to several kilogram quantities of APIs and key intermediates for pre-
clinical phase to phase-III clinical studies. The lab intends to take up NDDS research and expects to commercialize the
first NDDS product in calendar 2008. In order to maintain the growth momentum for domestic formulations, the
company has been launching around 25 new products every year and is expected to maintain the pace over the coming
two years as well. However, it looks forward to capitalize on the export opportunities in the high margin regulated
markets like USA and UK. Under contract manufacturing, the company has 21 projects for Germany, 9 for UK and 6 for
Eastern Europe. More importantly, IRL has entered into the US market through a supplying pact with Nexus Opthalmic
and has already made one shipment. It has also finalised a long term joint venture partnership with Amneal Corporation,
New Jersey (USA) to develop and manufacture ophthalmic formulations for marketing it in USA.
IRL is taking initiatives to increase its presence globally. Apart from 14 projects in formulation research, it has undertaken
six projects for custom synthesis (molecules under Phase-I, II, III) with innovator companies. To summarize, IRL has laid
the foundation and is now poised to enter into a strong growth trajectory in the coming years.
Although the company doesn't have any capex plan, it intends to set up a second manufacturing facility in Baddi, HP,
with the same capacity as in the present plant over the next two years. Financially, the company has amalgamated La
Nova Chem (India) Pvt. Ltd., Indoco Healthcare Ltd. and the Pharma Division of SPA Pharmaceuticals Pvt. Ltd with
itself. For FY07, company recorded net sales of Rs.326 cr. with PAT of Rs.42 cr. thereby posting an EPS of Rs.35. It
reported encouraging Q1 results as well. Accordingly, it is expected to clock a turnover of Rs.375 cr. with net profit of
Rs.48 cr. for FY08 ending June 2008. This translates into EPS of Rs.39 on its current equity of Rs.12.30 cr. Hence at
reasonable discounting by 12 times, the scrip has the potential to touch Rs.475 (60% appreciation) in 15-18 months.
Investors are strongly recommended to buy at current levels.
Z F Steering Gear (India) Ltd. (Code: 505163)
Rs.206.30
Belonging to well known Firodia group of the Kinetic fame, Z F Steering Gear India Ltd. (ZF) was incorporated in 1981 to
manufacture mechanical - worm & roller and power steering gears in financial and technical collaboration with M/s. ZF
Friedrichafen AG Germany, the world's largest independent steering gears manufacturer. Today, ZF is market leader in
both mechanical and hydraulic power steering gears especially for commercial vehicles (CVs) and the tractor industry. Its
product range includes ball and nut power steering gear, rack and pinion power steering gears, worm and roller manual
steering gears, intermediate shafts, vane pumps, steering columns, bevel gears box, universal joints, servocom steering
gear etc. It has an enviable clientele including all auto majors like Tata Motors, Ashok Leyland, M&M, Eicher Motors,
Escorts, Bajaj Tempo, Swaraj Mazda, PunjabTractors, Volvo, L&T John Deere, New Holland etc. Of late, it has entered the
passenger car segment by supplying rack & pinion power steering gears for the 'Indica' car. In the near future, the
company is looking to develop new products such as collapsible steering column for cars, telescopic steering columns for
HCV, aluminum pump for higher HP engines, pump parts localization etc.
ZF's state-of-the-art manufacturing plant at Pune-Maharashtra is equipped with advanced specially designed machinery
from ZF Germany for manufacturing critical components and it has its own in-house heat treatment facility consisting of
sealed quench furnaces, pit carburised furnaces for case carburising, nitriding etc. To cater the rising demand, the
company expanded its installed capacity of power steering fears from 150,000 to 240,000 per annum and of mechanical
steering gears from 100,000 to 120,000 per annum at a capital expenditure of approx. Rs.7 cr. in FY07. Against this, it sold
124,811 units and 92,155 units respectively for entire FY07. Moreover, in view of encouraging response from the
automobile manufacturers, ZF is in the midst of further expanding the production capacity to 300,000 units of power
steering gears and 150,000 units of mechanical steering gears. Secondly, it has entered into a 26:74 joint-venture with its
collaborator ZF Lenksysteme, GmbH, to promote a new company for developing and manufacturing new products which
will be different and not competing with its current product range. Importantly, sales of CVs are increasing due to
improvement in road-infrastructure and also the ruling of Supreme Court to ban overloading of CVs, which recorded a
growth of 33% to producing 5,20,000 in FY07 from 3,91,083 in FY06. On the other hand, tractors also recorded 20% rise in
sales on the back of increased focus by the government in providing subsidies. Thirdly, with India emerging as the hub
for small-car manufacturing, many players have announced capacity expansions and many new international-players
have taken an initiative in setting-up their state-of-art production facilities in India. And since ZF's future prospects are
closely linked to the demand for CVs, multi-utility vehicles and tractors, it is expected to do much better in coming years.
Financially, ZF is by and large a debt free company. In fact, it has invested around Rs.37 cr. in unlisted firms which yields
handsome dividends in the form of other income. Promoters currently hold about 72% in its equity, of which the German
collaborator is holding 26% stake and Bajaj Tempo holds nearly 10% stake. The management of the company is very
professional and investor-friendly with an impeccable track record of uninterrupted dividend payment since the last two
decades. For FY07, it paid 80% dividend which gives a yield of 4% even at the current market price (CMP). Ironically, ZF
has still not tapped the global market which presents a huge opportunity to be explored in future. At the same time, with
zero revenue from exports it is not affected by the sharp rupee appreciation unlike other auto ancillary companies. In fact,
it has benefited to some extent as it imports some of its raw material. For FY07, it registered 15% growth in sales to Rs.217
cr. whereas net profit increased by 20% to Rs.27.50 cr. posting an EPS of Rs.30. However, the first two quarter results for
FY08 are not so encouraging as sales declined by 10% to Rs.95 cr. and net profit remained flat at Rs.11.75 cr. Hence on a
conservative basis, it is estimated to clock a turnover of around Rs.205 cr. with net profit of Rs.24 cr. which will lead to an
EPS of Rs.27 on its equity of Rs.9 cr. Considering its debt free status, the company with a healthy cash EPS of Rs.40, huge
reserves of Rs.80 cr., strong promoter holding, high dividend yield and 52-week high/low as Rs.297/160, its fairly a value
buy at the current market cap of Rs.180 cr. Investors can expect 40% appreciation in 12-15 months. But at the same time
one should note that rising import of cheaper power steering gears from China is a threat to the company.
Jhunjhunwala Vanaspathi Ltd.: A tasty pick
ANALYSIS
By Devdas Mogili
Jhunjhunwala Vanaspathi Ltd. (JVL), a 18-year old Varanasi, UP-based company established in 1989, is engaged in the
production of vanaspati ghee and refined oil. JVL tapped the capital market in March 1995. D N Jhunjhunwala is the
chairman & managing director of the company.
JVL is the single largest unit manufacturing vanaspati ghee in India under the brand name 'Jhoola'. The company has a
strong marketing network and its brand is very popular and has become a household name in northern India.
JVL uses modern technology for refining oil in place of the traditional method of chemical refining as losses in the
chemical refinery process are very high in comparison to the physical refinery. The company enjoys ISO 9001-2000
certification for its quality and services and has created a strong sales network across the country.
Expansion: JVL is also planning an expansion either by the organic or inorganic route. Recently, the company has
acquired a unit for manufacturing mustard oil at Alwar, Rajasthan. The production has started and it is also marketed
under the brand name 'Jhoola'. The company has also formed a wholly-owned subsidiary in Singapore called M/s. JVL
Overseas Pte. Ltd.
Marketing: JVL has a network of 17 depots for the smooth and regular supply of vanaspati ghee and refined oil within
UP. The product is also sold in Bihar, Gujarat, Jharkhand, Maharashtra, Madhya Pradesh, Rajasthan, Delhi, Punjab,
Haryana, West Bengal and other states.
Captive Power: The company has also set up a 3-MW power plant in the factory premises to meet its power
requirements, which will help mitigate its power costs.
Awards: JVL has been selected as the emerging company of 2007 by Globoil India, an international forum for research &
analysis and dissemination of knowledge on vegetable oils and related industries.
Performance: JVL has been reporting highly encouraging results for the last several quarters. During 2006-07, it registered
net sales of Rs.692.62 cr. with a net profit of Rs.14.15 cr. posting an EPS of Rs.18.87 for the year.
6
Financial Highlights:
(Rs. in cr.)
Latest Results: JVL has announced
very impressive results for Q2FY08. It
clocked a net sales turnover of
Rs.267.24 cr. with a net profit of
Rs.5.83 cr. netting a basic EPS of
Rs.7.77. The annualized EPS works out
to Rs.31.08. The company recorded all
round improvement in sales and
profitability margins.
Financials: As on 30
th
September 2007,
JVL had an equity base of Rs.7.50 cr.
with a book value of Rs.90.01. As on
31
st
March 2007, it had a debt:equity
ratio of 1.71. ROCE is 11.36% while
RONW is at 17.98%.
Particulars
QE 30/09/07
QE 30/06/06
YE 31/03/07
Net Sales/Income
267.24
166.94
692.62
Other Income
0.90
1.32
2.92
Total Expenditure
a. Inc/Dec in stock
2.10
6.29
(1.38)
b. Raw Materials
229.20
135.62
606.07
c. Staff Costs
0.62
0.47
1.20
d. Other Costs
28.30
22.05
70.02
Interest
0.49
0.41
1.64
PBDT
7.43
3.42
17.99
Depreciation
0.85
0.55
2.04
Profit bef taxation
6.58
2.87
15.95
Prov for taxation
0.75
0.25
1.80
Net Profit
5.83
2.62
14.15
Paid up equity
7.50
7.50
7.50
Res Exc Rev Reserv
49.23
EPS (not annualized) (Rs)
7.77
3.49
18.87
Share Profile: The share of JVL are listed and traded on the BSE under the Trade to Trade segment and touched a 52-
week high of Rs.192.40 and a low of Rs.45. At its current market price of Rs.160. It has a market capitalisation of Rs.120 cr.
Dividends: The company has been paying dividends as shown below:
March 2007 - 15%; March 2006 - 12.50%; March 2005 - 10%.
Shareholding Pattern: As on 30
th
September 2007, the promoter holding in the company was 51.53% while the balance of
48.47% is held by non corporate promoters and the Indian public. Among mutual funds, Escorts Opportunities Fund has
added JVL's shares under its various schemes like Tax Plan and Growth Plan etc.
Prospects: The penetration of the vanaspati industry is approximately 15% at an all-India level leaving a huge market to
be tapped. Further, the growth of the vanaspati industry is directly related to the growth in population and there is ample
scope of further expansion.
The vegetable oil & ghee industry plays a crucial role in the development of the Indian industry. The production of
vanaspati ghee is much less compared to the demand within the country. Since the middle-income group and low-income
groups largely use vanaspati ghee and refined oil as a cooking medium, the growth of the industry is inevitable and is
expected to be robust in the near future.
Conclusion: JVL is an existing, profit-making, dividend paying company with a consistent track record of the last three
years. The change in the demographic profile of the economy and the rise of the middle-class and disposable income
augurs well for consumption stories like JVL. Moreover, the benefit of captive power will result in substantial increase in
JVL's bottomline in days to come.
At its current market price of Rs.160, the share price is discounted less than 5.97 times against the industry average P/E
ratio of over 18. In view of its increasing margins, robust earnings and bright prospects, the share may be bought for
significant appreciation in the medium-to-long-term.
The Sensex closes above 20K
MARKET REVIEW
By Ashok D. Singh
Strong Index of Industrial Production and a 25 basis points rate cut by the US Federal Reserve boosted the sentiment of
the domestic markets last week. Global markets though, were subdued on disappointment of 25 basis points only and not
the more aggressive 50 basis points that they had hoped for. The BSE Sensex and the NSE Nifty struck lifetime highs
during the week. Small and mid-cap shares surged on momentum buying. The 30-share BSE Sensex rose 64.83 points or
0.32% to 20,030.83 in the week ended 14 December 2007. The NSE Nifty gained 73.40 points or 1.22% to 6047.70 in the
week.
The Index of Industrial Production jumped 11.8% in October 2007 from 4.5% in October 2006. IIP stood at 9.7% in April-
October 2007 compared with 10.1% in April-October 2006. Industrial output data for September 2007 was revised
upwards to 6.8% from 6.4%.
The domestic inflation rate jumped to its highest in 3 months as food and energy prices rose. The central bank is likely to
keep its tight monetary stance with a possible hike in fuel prices to come. Annual inflation, based on the wholesale price
index (WPI), climbed up 3.75% in the week ended 1 December 2007 from 3.01% in the week ended 24 November 2007.
The BSE Small-Cap index surged 853.23 points or 7.52% to 12,195.50 in the week. The BSE Mid-Cap index rose 449.98
points or 4.99% to 9,471.94 in the week. Both these indices outperformed the Sensex.
7
On 10 December 2007, the market edged lower as the political concerns resurfaced after communist allies warned the
government against going ahead with a civilian US nuclear deal. The Sensex shed 35.32 points or 0.18% to 19,930.68. The
Nifty lost 13.7 points or 0.23% at 5,960.60.
On 11 December 2007, the market surged on renewed buying in blue chips in anticipation of the United States Fed rate
cut. The Sensex jumped 360.21 points or 1.81% to 20,290.89. The broader Nifty jumped 136.65 points or 2.29% at 6,097.25.
On 12 December 2007, the market surged on steady buying for index pivotals. The Sensex rose 84.98 points or 0.42% to
20,375.87, a record closing high. The broader Nifty closed at an all time high of 6175.65 on that day.
On 13 December 2007, the market tumbled in the late trade following a sudden sell-off in blue-chip stocks, in sync with
other markets across the globe. The Sensex slumped 271.48 points or 1.33% to 20,104.39. It struck an all time high of
20,498.11 in early trades. The Nifty declined 101.2 points to 6,058.10. It also hit a record high of 6,185.40 in early trade.
On 14 December 2007, the market ended slightly lower in what was a highly volatile trading session, seeing series of
gyrations in either direction. The Sensex declined 73.56 points or 0.37% to 20,030.83. The Nifty declined 10.4 points or
0.17% to 6,047.70.
Meanwhile, the Government of India has reportedly allowed the Postal Life Insurance Fund and Rural Postal Life
Insurance Fund (RPOLIF) to enter the stock markets through investments in public sector mutual funds. The Union
Cabinet on Thursday, 13 December 2007 appointed UTI MF and SBI MF as managers for the over Rs.10,000-cr. corpus of
these two funds.
Reliance Industries gained 1.67% to Rs.2889.05. As per reports, Reliance Industries has struck a deal to explore uranium in
Australia, as soaring demand and prices turn the heavy radioactive metal into a lucrative commodity. RIL, through its
subsidiary RIL (Australia), has signed an agreement with Uranium Exploration Australia to buy 49% in eight exploration
blocks owned by the company in South Australia and Northern Territory, reports suggest.
The Sensex gained 64.83 points or 0.32% marginally higher to 20,030.83 last week. Of late, global markets have come
under selling pressure on concerns that credit market crisis may intensify further. Any major sell-off there may cast its
shadow here as well. As it is the indices appear to be sitting on the peak of the mountain.
Reemergence of political concern arising from the Indo-US nuclear deal may impact the market. Prime Minister,
Manmohan Singh, brushed aside on Tuesday, 11 December 2007, a new threat from his communist allies to force early
elections over a controversial nuclear deal with the United States.
8
Sensex to touch 21,200
MARKET
By G. S. Roongta
Week before last, I had observed that the market has already witnessed breakout as far as CNX Nifty was concerned. This
was followed by the Sensex last week on 11
th
December 2007 as it touched an all time high at intra-day trades at 20333.06
while closing slightly lower at 20290.89.
The CNX Nifty gained further to an intra day high of 6111.20 while closing at 6097.25 despite opening lower on weak
global cues as the Dow Jones, Nasdaq composite and other Asian Market also witnessed sharp declines even after the US
Federal Rate was reduced by 25 basis points.
The stock market had developed euphoria on expectation of a reduction in the Fed Rate scheduled on
11
th
December 2007. Prior to the announcement of the federal rate reduction, the market had generated
high hopes of the rate cut to be as high as 50 basis points. But when the rate cut was only 25 basis points,
the market hopes were shattered, resulting in global markets witnessing a sharp decline. The Dow Jones
lost over 200 points while the Nasdaq, too, suffered by over 50 points followed by Asian market like the
Hangseng, Nikkei etc.
Our markets, too, trailed global cues initially when the market opened with an overnight loss of 150
points in the BSE Sensex and 60 points in the CNX Nifty. But soon, short covering changed the sentiment
after mid-term trading and the market not only recovered all the losses of the week but closed much higher as reported in
the earlier para. The trend continued till Wednesday, 12
th
December 2007. But as global markets continued to display
weakness, the markets also suffered modest losses of 271.48 on Thursday, 13
th
December 2007 and 73.56 on Friday, 14
th
December 2007.
G.S. Roongta
As I observed last week, the market is turning stock specific and scrip movements are determined by their fundamentals
and their outstanding positions in the Futures & Options segment that creates the technical grounds.
Several stocks from the same sector are gaining or declining without any impact on the Sensex. The rise or declines are in
the A group stocks as well as B1, mid caps as well as small cap stocks.
The advance decline ratio continued to be healthy and positive with several stocks hitting their upper limits each day.
Prominent among them are several stocks which were recommended for investment on this column.
Ballarpur Industries has hit its lifetime high at over Rs.185. This stock was recommended by me several times right from
its price of Rs.62 two years back and is poised to cross the Rs.200 mark any time in the near future.
Bellary Steel, Chowgule Steamship, Gulshan Polyoils, Graphite India , Elecon Engg, Eimco Elecon, Hindustan Motors,
Mukand Ltd., Mukand Engineers, Sarda Plywood, Sathvahana Ispat, Sarda Energy are but a few stocks which have
recorded their 52 week high and witnessed smart gains.
Mukand Engineers smartly shot up to Rs.70 from its Rs.28-30 level a few weeks back. Sarda Energy hit a new high of
Rs.556. Sarda Plywood, too, hit its new recent high of Rs.48 against Rs.30-32 two weeks back. There are several similar
stories of mid cap and small cap stocks, which are witnessing smart gains on a daily basis, vindicating our earlier
recommendation made a few weeks back to shift to mid-caps and small caps.
Last week, I had recommended few stocks such as PNB, DISH TV, IOC, BILT and Hero Honda mentioning that I am very
bullish on these stocks. Readers might notice that all of them have smartly shot up gaining 15% to 20 % in just 4-5 days of
trading. IOC shot up to Rs.680 from its Rs.580 level. PNB, too, smartly rose by over Rs.100. Hero Honda spurted by Rs.50
in a week and BILT hit a new high at Rs.186. All this in just one week!
The stock market, according to me, will remain bullish and several stocks in the B, B1 and small cap segments that have
yet to gain will rise steeply.
Stocks like JK Lakshmi Cement, Power Grid, Hero Honda, Hindalco, Tata Tea, Tata Motors have yet to gain smartly.
Under the B1 stocks, Bellary Steel, BCL Forgings, Cimmco Birla, Hind Syntex, Steel Tubes, Penta Media are yet to gain
smartly and are waiting to spurt further.
Under mid cap stocks, Dish TV, Greaves Cotton, Gulshan Sugar, Mukand Ltd. and Mukand Engineers are all set to make
new highs in the near future.
Although Tisco, Hindalco, Tata Tea, IOC, GE Shipping, SCI, BILT and L&T have witnessed a smart rally, they will all
make fresh breakouts and rise further.
The Sensex will hit 21,200 mark initially and will witness further smart to modest gains. Readers of Money Times can gain
smartly by following what is recommended as in the past. BILT, Mukand Ltd., Dish TV, Elecon Engg., Garden Silk,
Greaves Cotton, KSB Pumps have yet to gain further fresh grounds based on their strong fundamentals.
Investors should also keep an eye on Anil Mody, BCL Forgings, Suryalata Spinning and Steel Tubes being small cap
stocks. They have turned out to be dark horses in the current ongoing rally.
By Ankita Jain
9
'Sell' on Voltas
Current Price: Rs.252.90
Target Price: Rs.130 within 2 months and Rs.60 within 6 months
Voltas is into manufacturing of Air conditioners and engineering projects. It has a high level of competition with LG,
Carrier Aircon, Blue Star, Godrej, Samsung, etc. and is not faring well in this competitive market. There is 40% reduction
in selling price of its product due to competition. Its raw materials price is on the increase (Steel and plastic) by 50% in
the last 2 years. Its projects in countries like Abu Dhabi, Dubai, Saudi Arabia, Hong Kong, Singapore, etc. were decided 2
years back when US Dollar rate was at Rs.46. Today it's quoting only Rs.40. Hence it has 12% loss in these projects. Also
because of winter, its sales go down drastically.
In the engineering agency and services business, clients from the auto and auto components sector have started deferring
deliveries of orders placed with Voltas. Small contractors, who buy equipments like forklifts etc. are affected by higher
interest rates and are also deferring deliveries. Thus Voltas is seeing a definite slowdown in order inflows. It is also
witnessing some slowdown in order inflows from the textile machinery segment.
The company has a turnover of Rs.2000 cr. and as an engineering company has a big labour force of 5500 including
administrative employees, which is a huge liability.
Particulars (Rs. in lakh)
QE 30/09/07
QE 30/06/07
% Change
Segment Revenue
(a) Segment - A (Electro - mechanical Projects and Services)
42083
37828
12.24
(b) Segment - B (Engineering Products and Services)
13411
11520
16.40
(c) Segment - C (Unitary Cooling Products for Comfort and
Commercial use)
14967
33340
-55.10
(d) Others
1050
936
12.17
Less: inter segment revenue
237
255
Sales/ Income from Operations
71274
83369
-14.50
Other Income
1011
845
19.64
Total Income
72285
83338
-13.26
Exceptional income
1050
78
1246
STOCK SCAN
As per the financial results of Q1FY08 and Q2FY08, there is significant decrease in income from realization of goods sold
in Q2FY08 as compared to Q1FY08 in Segment C comprising of cooling products like Air conditioners which led to a
decrease in total income in t Q2FY08.
The increased Exceptional Income (Expenses) - Net for Q2FY08 compared to Q2FY07 comprises Reversal of provision -
Rs.109 lakh (Nil), Profit on sale of property/ compensation on surrender of tenancy rights – Rs.970 lakh (Rs.1929 lakh),
Charge of VRS expenses – Rs.29 lakh (Rs.132 lakh), Hyderabad Unit closure cost – Nil (Rs.954 lakh), Impact of revalued
gratuity liability - Nil (Rs.753 lakh).
The stock is currently ruling at Rs.240 on face value of Re.1 and its P/E ratio works out to more than 56. This cannot be
justified by its performance. This PE includes selling of property by Voltas. It has already sold its land in Thane
(switchgear unit), Parel and Hyderabad and does not have any other property to sell. Its PE if applied only on earnings on
sales of products goes across 65 which is extremely high. Although Citigroup has a huge holding of 3.7% through its
investment arm its research report recommended a Sell on Voltas in July 2007 when it was traded around Rs.150.
In 2005, Voltas was quoted around Rs.20-25 on its face value of Rs.10. In May 2006, a stock split reduced the face value of
its share from Rs.10 to Re.1. Now at Rs.240 with face value of Re.1 on its original face value of Rs.10, the Voltas stock
would have been quoting above Rs.2400, which shows that the stock is quoting 100 times its value two years while the
company's working is going down.
International projects risks, termination of principal-agent relationships, increased competition in domestic and
international markets, skilled manpower shortages and material prices are the downsides to the Voltas story, which make
it a weak stock. Fundamentally, Voltas could slip back to Rs.130 level within 6 months and can go even lower to Rs.60-70
within 2 years. A strong Sell is recommended.
Indo Borax & Chemicals: Buy
Current Price: Rs.165.90
Target Price: Rs.500
Indo Borax underwent production expansion at its plant. The rate of boric acid has been raised to Rs.75 per kg from Rs.35
per kg in 2006. Various countries like Korea & Japan are importing boric acid from India because of its superior quality
and its demand in global markets is high. This is a boon to Indo Borax, which is the leading boric acid manufacturer in
India.
Winsome Textile Industries: A winsome stock
STOCK PICK
By Suman Mukherjee
BSE Code: 514470
Face Value: Rs.10
EPS: Rs.10.02
Dividend: 7%
Introduction: It Winsome Textile Industries Ltd. (WTIL) is a part of the Winsome Group, which has its roots in a trading
company in Calcutta in 1952. The company's principal activity is the manufacture and distribution of cotton blended and
melange yarn for domestic consumption. It manufactures cotton yarn containing 85% or more cotton, containing less than
85% cotton, synthetic staple fibre yarn containing 85% or more of acrylic. The company's plant is located at Solan,
Himachal Pradesh. This low profile Chandigarh based company has been promoted by the Bagrodias and has an installed
capacity of 63,500 spindles. The company manufactures mainly 100% cotton yarn and exports it to more than 20 countries.
Around 40% of its turnover comes from exports.
Shareholding Pattern: The promoters hold 58.29% in its equity while the general public holds 41.71%. Among the public,
ICICI Bank holds 11.85%, IFCI Ltd holds 1.7% and Nitson Retailers holds 2.44%.
Financials: In FY07, WTIL achieved a sales turnover of Rs.139.96 cr. against Rs.133.33 cr. in FY06 and Exports, including
deemed exports of Rs.74.19 cr. against Rs.63.86 cr. in FY06. The sales value of production has increased by approximately
10% from Rs.127.99 cr. to Rs.144.86 cr., profit before tax has increased substantially by 126% from Rs.4.98 cr. to Rs.11.24 cr.
The company recorded substantially improved performance in FY07 as compared to FY06.
For Q2FY08, its total income was Rs.40.15 cr. against Rs.37.67 cr. in the previous corresponding period. The operating
profit was Rs.6.81 cr. against Rs.6.67 cr. while net profit dipped 10% at Rs.2.8 cr. (Rs.3.16 cr.) due to higher interest out and
depreciation. Also, the net profit and operating profit margins remained flat.
Triggers:
> The company's operations are confined to only one segment - yarn and allied activities. Due to the bumper production
of cotton again this year, the input cost of making yarn will be low but yarn prices are expected to rise due to high
demand. The textile sector will benefit from the seasonal surge in demand from India and overseas.
10
> Government of India's decision to extend the Technology Upgradation Fund Scheme (TUFS) with better terms and the
Integrated Textile Parks scheme will give the ailing textile sector the much needed cushion.
> The Textile Ministry has set a target of increasing the sector's total market size to $115 billion by the terminal year of the
Eleventh Plan (2012). Of this, the domestic market is been contemplated at $60 billion and the export market at $55 billion.
The task is formidable considering that the present market size of the industry is only $52 billion, with exports amounting
to $12.24 billion in FY07. The government is thinking of encouraging more FDI in the sector, from the measly $575.27
million since August 1991 representing just 1.22% of the total FDI received by India. The Textile ministry is optimistic that
the sector could attract FDI of $36 billion over the next 5 years.
> The appreciation of the rupee could be used by textile companies to modernise by importing the latest machinery at
cheaper exchange rates. Winsome Textiles has taken the right decision to go in for modernisation at a time when the
rupee is appreciating reducing its import costs.
> The company has started commercial production on 13,500 spindles, which were commissioned as a part of its Rs.117
cr. expansion plan. The balance expansion will be completed by March 2008. Hence the company is expected to post
strong results in FY09.
> The company will complete its 2.5 MW power project by the Q2FY09. This will result in better profits in FY09.
> The company has a monopoly in terms of 'Melange' section. Its products are chosen over other Indian brands by the
overseas buyers.
> The shares are trading
below its book value of Rs.64.
It has a mind boggling EPS of
Rs.10 and P/E of only 3.4,
which is rare in the textile
sector. These figures will
improve
further
on
completion of its expansion,
which is in the final stages.
Even if it gets a discounting of
8 times, its share price should
be Rs.80 based upon FY08
and Rs.120 based of FY09E.
> The company is increasing
the dyeing capacity to 10
tonnes per day in this
expansion.
Also,
it
is
replacing its existing spindles
with new ones. This will
enable it to produce more
dyed yarn, where the profit
margins are higher.
> The market capitalization of
the company is just Rs.27.06
cr. at the CMP of Rs.46.10 of
its
share
whereas
the
replacement cost is more than
Rs.120 cr.
11
> The scrip is trading near its
all time low and hence there
is minimum downslide risk at
the CMP.
> It manufactures products
which are cotton, acrylic,
polyester, viscose, silk etc,
which indicates its wide and
flexible product portfolio to
suit its customers.
> It holds of ISO 14001
Winners of 2007 Performance Review
All the 'Winners of 2007' released on 2nd January 2007 have gained from their recommended
levels to their respective highs.
Their performance till 7th December 2007 is also given.
The 3rd edition of 'Winners of 2008' will be released on 1st January 2008. Prospective
subscribers may please book in advance.
Scrip
Close
29/12/06
High After
Recco
% Gain
to High
Close
07/12/07
% Gain/Loss
on closing
Reliance Capital
606.40
2525.00
316.39
2399.00
295.61
Bhushan Steel
374.25
1625.00
334.20
1365.00
264.73
SAIL
89.20
292.40
227.80
274.20
207.40
Sesa Goa
1411.00
3941.00
179.31
3549.00
151.52
Jain Irrigation Syst
382.80
766.00
100.10
693.00
81.03
Champagne Indage
551.10
981.00
78.01
866.00
57.14
J.B.F.Industries
122.75
207.80
69.29
190.25
54.99
Subash Projects & Ma
251.85
421.00
67.16
388.25
54.16
Century Text.& Ind.
740.00
1174.00
58.65
1106.00
49.46
India Cements
235.10
322.80
37.30
300.40
27.78
Suashish Diamonds
209.35
269.00
28.49
260.40
24.38
N.C.L.Industries
59.95
82.90
38.28
72.50
20.93
Ashok Leyland
45.45
53.75
18.26
50.15
10.34
Elder Pharmaceutical
366.50
470.00
28.24
400.70
9.33
Kesoram Industries
546.95
634.85
16.07
582.65
6.53
Ipca Laboratories
593.75
794.00
33.73
618.85
4.23
Finolex Cables
100.42
109.98
9.52
100.05
-0.37
Mphasis
303.45
339.80
11.98
295.20
-2.72
Bombay Dyeing & Mfg.
766.00
803.00
4.83
725.00
-5.35
Lupin
612.05
755.00
23.36
567.95
-7.21
Classic Diamonds (I)
538.00
559.90
4.07
483.95
-10.05
Mahindra & Mahindra
906.00
1002.00
10.60
780.00
-13.91
Hinduja TMT
737.00
782.00
6.11
621.00
-15.74
Infosys Technologies
2241.00
2439.00
8.84
1718.00
-23.34
K.S.B. Pumps
676.00
679.00
0.44
472.15
-30.16
Sundaram Clayton
1394.00
1400.00
0.43
778.00
-44.19
Hexaware
Technologies
199.65
204.00
2.18
82.80
-58.53
Environmental Management System Certificate and ISO 9001- 2000 Quality Management System Certificate issued by
Bureau of Indian Standards.
> A somewhat stable rupee since the last couple of months will help the company in terms of exports income.
> It has been improving its financials steadily and has been investing in modernisation to increase productivity to
produce value-added yarns. Last year, it incurred capex of Rs.10 cr. for modernization of some Ring Frames and
replacement of some Carding Machines.
> The management is hard working, innovative, cost effective and reliable. Its share price may not come down even if
market declines sharply. An extremely safe bet which will give big returns to investors in future.
Concerns:
> The existing safeguards against China by major importing countries will be lifted by the end of next year under the
WTO Agreement. This will step up the competition from China.
> Apart from technological obsolescence, the Indian textile sector is already saddled with accumulated regulatory
baggage of the past decades.
> The apparel segment which accounts for almost 50% of the country's textile exports has a low brand image in overseas
markets.
> Any delay in the completion of its expansion plans, will derail all calculations and might affect the upward movement
of the scrip.
Conclusion: Looking from all angles, it is been found that the WTIL scrip, is highly undervalued at its CMP of Rs.46.10
and will soon be in for a re-rating. The scrip is lying low due to the low profile of the promoters and the ignorance of
retail investors but is likely to catch the fancy of investors in the near future and could appreciate 200% from hereon
within the next 18 months. If the Textile Ministry grants seasonal employment facility to meet the seasonal surge in
demand from overseas, the scrip could appreciate much faster.
MUTUAL FUNDS
SECTOR ALLOCATION
Reliance Media & Entertainment Fund: Invest on declines
By Devangi Bhuta
Sector Snapshot – The Media & Entertainment sector comprises a host of services which range from television
broadcasters, distributors, film exhibitors, radio broadcasters, television & film production houses besides the print
media.
The Scheme
The primary investment objective of the scheme is to generate continuous returns by investing in equity and equity-
related or fixed-income securities of Media & Entertainment and other associated companies. It has given fair returns over
the last one year.
Period
% Change in NAV
% Change in Index
1 Year
64.19
54.84
Since Inception
46.55
41.8
Top Ten Holdings:
Stock
% of Net Assets
Value
Zee News Limited
10.46
26.74
Wire and Wireless India Ltd.
10.17
25.99
Zee Entertainment Enterprises Ltd
9.01
23.04
UTV Software Communication Ltd
7.3
18.66
Jagran Prakashan Ltd
7.2
18.42
Hinduja TMT Ltd
7.17
18.34
New Delhi Television Network
6.91
17.66
Dish TV India Ltd
6.41
16.39
Balaji Telefilms Ltd
4.32
11.05
Adlabs Films Limited
3.76
9.63
Sector Allocation
%
Computer Software & Education
10.34
Current Assets
15.19
Entertainment
64.92
Miscellaneous
2.35
Printing & Stationery
7.2
Total
100%
Fundamental Analysis:
The fund has a more or less a steady portfolio and has delivered decent returns commensurate with the prospects in this
space. The top holdings comprise the Zee group stocks, which appear to have decent prospects.
UTV Software, in which this AMC has invested in under this scheme, appears to be a promising one and it has
appreciated heavily in the recent past. It is an integrated media and entertainment company. It has presence both in the
domestic and international markets and is into film production and distribution (around 47% of revenues). The company
has recently acquired Indiagames and Ignition to enter into the mobile and console gaming space which is in a nascent
stage in India but has great prospects. With the launch of 'Bindaas' channel; it has regained presence in the broadcasting
business. It also produces television content, which is a competitive segment.
12
Thus a fairly diversified business model remains its key positive. Another interesting pick is NDTV as NDTV has now
entered the lucrative non-news segment through its subsidiary, NDTV Networks Plc, de-risking itself through genre
diversification and appears to be rewarding in the long term. Newer technology companies like Dish TV and Wire and
Wireless India Limited have promising business models too and with gradual acceptance of these technologies in
conformity to regulatory reforms will enhance the prospects of this company. InfoEdge has a good business model and
has a first mover advantage in most of its internet properties together with a strong brand. However there is no major
entry barrier here and it may soon become crowded. Prime Focus, which is into post production activities and has global
foray plans, appears to be a good bet.
Surprisingly, the scheme does not have presence in the radio broadcasting segment and has exited Mid-Day Multimedia.
As for print media, the company has Jagran Prakashan as the only stock from this segment.
Investment Call:
This scheme focuses on a highly potent segment in India. However on account of sector focus in terms of risk, it is
certainly on the higher side as the scheme bets on the prospects of only one sector unlike a diversified scheme. This risk is
further raised by the fact that the stocks have run up sharply.
Again, an investor needs to compare his investments in the cash market to avoid overexposure in his overall asset
allocation to the media space or to any particular sub
segment or stocks within it.
Overall, therefore, the sector as a whole looks appealing
and considering that the scheme does not change its
allocation too heavily, it may reward in the long term.
Patient investors with a good risk appetite may consider
an exposure at declines with a long term perspective.
13
By Saarthi
STOCK WATCH
REVIEW
Reliance Diversified Power Sector Fund
NAV at the time of recommendation: 65.69 (15
th
October 2007)
Current NAV – Rs.81.3 (13
th
December 2007)
% Returns – 24% (absolute returns for 2 months)
Belonging to the Duncan Goenka group, Stone India Ltd. (Code: 522085) (Rs.158.65) is the undisputed leader in
locomotive brake systems and has a huge range of mechanical and electrical products for the railroad industry. It boasts
of having its own patented beam mounted brake system for all types for freight wagons. Of late, it has ventured into the
railway electronics business with the introduction of a slew of high value power electronic products like inverters,
converters and power supply system for coaches, locomotives, EMUs and metros. Currently, the company generates
about 90% of its revenue from the railways and has a market share of about 25-30%. It has appointed Telewira Tegas SDN
BHD, Malaysia, as an exclusive agent for turnkey project work relating to freight cars, passenger coaches and locomotive
upgradation and the maintenance of Malaysian Railways. Recently, it has partnered with the Sumitomo group of Japan
for manufacturing air springs that are technically superior to the existing mechanical suspension system. Importantly, to
diversify its product portfolio, it has set up a greenfield facility at Nalagarh, Himachal Pradesh that is likely to go on
stream this fiscal itself. Hence for entire FY08, it is expected to register sales of Rs.100 cr. with PAT of Rs.13.50 cr. i.e. EPS
of Rs.18 on its equity of Rs.7.60 cr. At a modest discounting by 12 times, the scrip can touch Rs.220 in the medium-term.
*****
Wanbury Ltd. (Code: 524212) (Rs.150.10) is the world's largest producer of Metformin Hydrochloride - a diabetes
management product and Salsalate, an anti-inflammatory drug. With its two USFDA certified plants for multi-products,
the company already has 23 DMFs with the USFDA and is looking to file another 4-5 DMFs in the near future. As a part of
its growth strategy, it has launched a super specialty research division 'Osteolife' catering to orthopedic health issues
such as osteoporosis, osteoarthritis and pain management. Recently, the company made its first overseas acquisition with
the generic ethical formulation business division of IFC-Spain, which owns 17 brands in various therapeutic segments like
traumatology, pain management, asthma, anti depressants, anti epileptics, anti ulcerants, cephalosporin's, beta blockers
etc and is targeting a revenue of Euro 33 million i.e. Rs.200 cr. with an EBITDA of Euro 8-10 million (i.e. Rs.50-60 cr.).
Hence on a consolidated basis including the Cantabria business, it is expected to clock a turnover of Rs.375 cr. with PAT
of Rs.35 cr. for FY08. This leads to an EPS of Rs.26 on current equity of Rs.13.60 cr. However, on its fully diluted equity of
Rs.21 cr. (post conversion of all warrants & FCCB's) the EPS works out to Rs.17. The scrip has the potential to touch
Rs.200-220 in the medium-term.
*****
Royal Orchid Hotels Ltd. (Code: 532699) (Rs.151.90) operates in the hospitality sector with its major presence in
Bangalore. Currently, it manages eight properties including five star hotels, budget hotels, resorts, serviced apartments
etc with a total room strength of around 655 rooms. Interestingly, the company follows a unique 'Asset light' business
model of taking properties on lease or entering into a contract for managing & operating the existing hotel instead of
owning them outright. This has helped the company manage its funds efficiently, have a lower payback period on its
projects and earn attractive operating margins. In the next few months, it is planning to open 'Royal Orchid Central' – a
four star category hotel in Pune (120 rooms) and Hyderabad (65 rooms) to cater to the business class. Subsequently, it has
plans to open five star hotels at Mumbai, Bangalore and Delhi. But for its major growth, the company is targeting the
lower end of the hospitality pyramid and has plans to set up a chain of 50 budget hotels across India under the brand
'Pepper Mint' in the next 3 to 5 years. For FY08, it may report a total revenue of Rs.150 cr. (excluding other income) and
net profit of Rs.35 cr. on a consolidated basis i.e. EPS of Rs.13 on its equity of Rs.27.25 cr. For FY09, the EPS is expected to
shoot up to Rs.16-17. Accumulate at declines.
*****
Lokesh Machines Ltd. (Code: 532740) (Rs.119.05) is engaged in the design, development and manufacture of custom built
special purpose machines and general purpose CNC (computerized numerical controls) machines along with their
components. Presently, it derives 70% revenue from its machining division whereas the rest 30% comes from the auto
components division. The company primarily caters to customers in the auto OEM, auto ancillaries and the general
engineering space. Thus it supplies mainly to Tata Motors, Bajaj Auto, Force Motors, Cummins, Bharat Forge, Kirloskar
Oil Engines, Everest Kanto Cylinders etc with separate dedicated facilities for M&M and Ashok Leyland. Of late, it has
also made a foray into overseas markets with orders from M/s. FPT Industries Spa-Italy, Honda Motorcycles-Japan and
HOWA-Japan. Further, its technical partner Wenig Wemas-Germany has also placed an initial order of 100 machines
worth Rs.20 cr. For the September'07 quarter, its sales grew by 25% to Rs.28 cr. and Net profit increased by 50% to Rs.3.40
cr. To fund its growth plans the company came out with an IPO at Rs.140 per share in April 2006 and raised Rs.42 cr. On
listing day it hit a high of Rs.300 whereas currently it's available at 15% below its issue price. For FY08, it is expected to
clock a turnover of Rs.110 cr. and PAT of Rs.14.50 cr., which leads to an EPS of Rs.12 on its equity of Rs.11.80 cr. Scrip can
easily appreciate to Rs.175 level in a year.
By Kukku
FIFTY FIFTY
Investment Calls
* Gujarat Apollo Industries (Rs.299.35) continued thrust on exports has paid rich dividends and the company has
achieved a significant market share in Saudi Arabia, African countries, Afghanistan, Australia, Bangladesh and Sri
Lanka. The total export sales including the deemed export for the year under review was Rs.59 cr., which is 41% of its
total turnover.
The prospects on the domestic front are also bright with the Central & State Governments' thrust on building roads by
awarding contracts on both direct as well as on BOT basis. As a result, many large players are entering the road
construction segment. Given the reputation of the company for quality products & services, this thrust opens enormous
opportunities for it.
In FY07, it also entered into a technical collaboration with a German company to manufacture Jaw Crushers, Impact
Crushers, Wheeled/ Crawler mounted/ Skid mounted Crushing plants, Grizzly Feeders, Screens, Conveyors, etc.
Expansion & modernisation has been taken up at its plant to improve quality and also to meet the increasing demand for
its products.
During FY07, it recorded 37.23% higher turnover of Rs.145.56 cr. against Rs.106.07 cr. in the previous year. After interest
charges of Rs.278.20 lakh, Depreciation of Rs.107.65 lakh, Taxation of Rs.915 lakh, the company has earned 73% higher
Net Profit of Rs.1811 lakh against Rs.1047 lakh in the previous year.
In the current year, it has already achieved sales of Rs.79 cr. in H1FY08 against Rs.63 cr. in H1FY07. Operating margins
improved from 18 .02% to 21.6% while net profit shot up to Rs.9.95 cr. against Rs.6.8 cr. even after making 49% higher
provision of taxes of Rs.5.25 cr. against Rs.3.53 cr. on its capital of Rs.10.5 cr.
Seeing to its strong order position, the company should be able to report a net profit of around Rs.22 cr. for the full year
filing an attractive EPS of around Rs.21.
The management has rewarded investors very well in the past as it issued bonus shares twice in the ratio of 1:1 in 2005
and 1:2 in 2007. Dividend distribution, too, was quite liberal on its enlarged capital.
In the current heated bull run, many engineering stocks are trading at a high P/E ratio of above 25. Thus in the current
sentiment, this stock can trade above Rs.400 level once it catches the attention of investors.
Stay invested or add on reactions for a long-term target of Rs.500 over the next one year.
* Indian Hotels Co. Ltd. (Rs.156.95) operates hotels under the 'Taj Hotels Resorts and Palaces' umbrella brand and is the
largest hotel chain in South Asia. It comprises hotels with 9400 rooms and over 280 Food & Beverage outlets. The total
numbers of hotels that are owned or managed by the company are 82 as against 75 in FY06. The company also has hotels
abroad in USA, Australia, Maldives, Mauritius, Malaysia, UK, Sri Lanka, Africa and the Middle East. The company owns
properties in many key business and leisure destinations directly or through its associates and partners and has built for
itself several sources competitive advantages.
Among key competitive advantages are branding, infrastructure and best-in-class services. The 'Taj' brand has been built
over the years by consciously investing into brand building, establishing high quality standards and adhering to them
14
with the objective of providing an exclusive Taj experience to its guests. Its brand equity is further strengthened by the
ownership and backing of the Tatas, a group with varied business interests operating in several countries and enjoying
high credibility.
The company has good infrastructure by way of properties at prime locations in India. It has the largest portfolio of rare
and authentic original palaces and is the largest hotel chain in South Asia. Its Sales & Marketing network, network of
Partners & Associates, Reservation network and the Information Technology Services add to its robust infrastructure. The
company has also been a pioneer in the Food & Beverage (F&B) experience in India.
It has been named as one of the eight Indian companies identified by Standard & Poor's as part of S&P's Global
Challengers Class of 2007. The selection was made out of representations from 37 countries. The list includes mid-cap
Indian companies, which show the highest growth characteristics along with other dimensions encompassing intrinsic
and extrinsic growth. These companies are expected to emerge as challengers to the World's leading companies.
The company is strategically poised to take advantage of:
* Rapidly growing market in India, South Asia and key gateway cities in source-market destinations.
* Expansion of global destinations with top-of-the-line luxury and leisure properties.
* Meeting the growing demand in the budget and mid-market segments.
* Extending product portfolio into related offerings viz. luxury residences, wildlife lodges and spas.
At present, most real estate stocks are trading at very high values. While the worth of properties of Indian Hotels is very
high but its market cap does not cover even a part of it. Hence investors are getting its business and brand value just free
of cost at current valuations.
For long term investors, it is one a safe investment bet to park one's funds.
Many investors and traders may be sitting on good profits. For them, this is one of the best stocks to lock part of their
profits and ensure good growth over the long run.
Market Guidance
* Stay invested in Madhucon Projects (Rs.423.25) as there will be favourable developments on power sector & coal
mining.
* Cement sector is likely to report very
encouraging results for the December 2007
quarter. Investors can keep watch on Madras
Cement (Rs.4752.55), Mysore
Cement
(Rs.63.45) etc. for a good upside. Jaiprakash
Associates (Rs.2155.75), KCP Ltd. (Rs.665.25)
and Century Textiles (Rs.1134.15) are other
diversified cement stocks that are likely to go
up.
15
* New developments are said to be taking
place in Rajasthan Spinning & Weaving
Mills (RSWM) (Rs.173.25) and the stock may
see a good upside. Stay invested.
*
Sharyans
Resources (Rs.404.60)
-
With significant presence in
businesses
like equity, debt, forex, commodity broking
as well as distribution of financial products
and real estate, Sharyans is a well-diversified
financial services company. It holds 40% in
Edelweiss Real Estate Advisors Pvt. Ltd.,
which manages Edelweiss Property Fund-I.
This is a close-ended Real Estate Fund and
has a corpus of Rs.110 cr. as per
knowledgeable sources. The company has
huge hidden values through investment via
its subsidiaries. The stock is attracting the
attention of market players and is likely to see
much higher levels.
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* Kirolskar Brothers (Rs.482.85) is said to
have good order position. Investors can keep
a watch to add this stock on reactions.
* Revathi Equipments (Rs.1336.90) is expected to get good orders from Coal India in the near future, which may improve
its performance sharply. Stay invested.
* Prime Textiles (Rs.63.80) - As per knowledgeable investors, its market cap is very less compared to its real estate
development. Stay invested.
* Jaihind Projects (Rs.211.25) may report an EPS of around Rs.15 on sales of Rs.175/180 cr. in the current year. Sales are
likely to go up sharply to Rs.280 - 300 cr. in the next year and EPS is likely to be Rs.27/30 on its enlarged capital. The
stock is likely to go up to touch Rs.400 plus level in the next two years. Investors who bought this stock from lower levels
may continue to hold it for good long-term growth.
* Karntaka Bank (Rs.225) is a takeover target. The stock has good potential for the upside. A good long-term investment
bet.
* Investors who bought Alumeco (Rs.38.95) at lower levels of Rs.22/25 may book part profit at Rs.39/40 levels. But its
long-term outlook is encouraging.
* Paramount Communications (Rs.41.25) has given good breakout and may witness higher levels.
* PG Foils (Rs.91.35) - Price movement indicates that good accumulation is taking place at current levels. Long-term
investors may see a good upside. The stock was recommended in this column from Rs.22/24 level.
* Patel Integrated Logistic (Rs.85.35) has moved up too sharply. Book part profits and lock it in ECE Industries for good
long-term growth.
* Oswal Chemicals & Fertilizers (Rs.70.85) - There is news of placement of stock at higher levels for new developments.
Stay invested as the stock closed at a new high.
* There are indications of favourable developments in Surana Telecom (Rs.41.70). The company is paying dividend
of 20% for the last three years and the book value is Rs.30. After good consolidation, the stock is likely to see higher
levels. Stay invested for a target of above Rs.60 in the next few months.
* Oriental Hotel (Rs.364) – In line with our expectations, hotel stocks are attracting the attention of investors. Investors
can keep a watch on this Taj group hotel stock for investment. It is a safe investment at the current price of Rs.364.
* Knowledgeable investors are very bullish on Shiv Vani Oil (Rs.589.10), MTNL (Rs.185.80), Super Spinning (Rs.23.45),
Asian Electronics (Rs.484.60), Nectar Life Sciences (Rs.294.10).
* Era Constructions (Rs.651.45) seems to have given a good upward breakout. Stay invested.
* Investors are advised to book part profit in Jayaswal Neco (Rs.66.15), Core Projects (Rs.419.55), XL Telecom
(Rs.543.15) and some of the sugar stocks where fundamentals are not that supporting.
By V.H. Dave
EXPERT EYE
This scrip was earlier recommended in Early Bird Gains, our investment newsletter specializing in multi-baggers, at
Rs.24.75 on 26
th
January 2005. Since then, it touched a high of Rs.105 and is now being recommended once again based on
its current outlook.
The shares of Haldyn Glass Gujarat Ltd. (HGGL) (Code: 515147) (Rs.86.70) are recommended for decent appreciation in
the medium-to-long term. The company is reportedly in the news of selling its property at Jogeshwari, Mumbai, which is
likely to fetch not less than Rs.80 cr. circles close to the management aver. A reputed Mumbai-based real estate developer
has shown a keen interest in it. Its Mumbai plant is being relocated at its works in Baroda, Gujarat. The money from the
sale of its Mumbai property will be used for modernisation & expansion. The share trades at a P/E of just 4.8 on its FY08
estimated EPS of Rs.15 against the industry average P/E of 18. Investment in this share could fetch over 50% return in
about 6 months.
HGGL, an associate company of Haldyn Glass is a major player in the glass container industry, was incorporated in April
1991. It has its plant in Gujarat to produce clear glass containers with a furnace capacity of 160 TPD. The company's
locational advantage gives it a competitive edge with substantial savings in freight cost of raw materials and natural gas.
This locational advantage is because of its plant's proximity to the mines in Gujarat and Rajasthan and the gasfields of
ONGC.
Its customer base includes major pharmaceutical and breweries like Glaxo India, Burroughs Wellcome, Pfizer, Raptakos
Brett, Cipla, Associated Breweries & Distilleries, Mysore Breweries etc. HGGL also caters to other market segments of the
glass industry like cosmetics, ink and stationery bottles.
During FY07, HGGL posted 15% increased sales of Rs.69 cr. and earned 63% higher net profit of Rs.8 cr. and its EPS
worked out to Rs.14.9 and it declared a dividend of 18%. During Q4FY07, its net profit surged by 240% to Rs.3.4 cr. on 5%
decreased sales of Rs.17 cr.
Its equity capital is Rs.5.4 cr. and with reserves of Rs.18.4 cr., the book value of its share works out to Rs.44. The value of
the gross block is Rs.54 cr.
The promoters including GIIC (11%) hold 54% in its equity capital, NRI holding is 8.5%, non-promoter corporate holding
is 8.9% leaving 28.6% with the investing public.
16
Coming to its future prospects, HGGL is a major player in the glass container industry. In spite of stiff competition, its
performance has been exceptionally good. It is well known for its premium products and enjoys consumer acceptance
and loyalty. Consistency in product quality is another area of its strength. Strict quality control of every batch ensures
that consumers always get uniform bottles of excellent quality.
Reduction in cost of production assumes great importance and the installation of a captive power plant in FY05 was a step
in that direction. The power plant has reduced the cost of production, helped improve quality and bring about greater
efficiency. HGGL has also obtained ISO 9001:2000 standard certification and has set up systems conforming to ISO 14001.
HGGL's full-fledged in-house design facilities can churn out over 500 different shapes and sizes of glass containers for
various industries mentioned above. The products continue to be in good demand and are poised for steady future
growth.
The per-capita glass consumption in India is only about 0.56 kg a year compared with 3.5 kg in China and 6 kg in
Thailand. Low consumption gives the players a tremendous growth opportunity in the long term. Hence, there is good
potential market in India to expand the demand of glass.
Based on the current going, HGGL is all set to post an EPS of Rs.15 in FY08. Its shares are currently available at Rs.87 at a
P/E of 5.5 against the industry average P/E of 26 for the glass industry. The HGGL share can be bought for steady
appreciation in the medium-to-long term.
In view of its small equity base, improving results, coupled with bright prospects of the glass industry, the share is a good
buy. Riding high on the consumption boom, the company is all set to post an EPS of about Rs.18 in FY09. Further the deal
to sell its Mumbai property will further increase its valuation. The share is likely to cross the Rs.120 mark in the medium-
term. The 52-week high/low of the share has been Rs.87/44.
****
Ansal Housing & Construction Ltd. (AHCL) (Code: 507828) (Rs.296.45), incorporated in 1983, has a predominant
presence in North India. The company designs, develops and markets residential buildings and townships, commercial
and retail spaces. Residential projects account for 80% of its revenues. An ISO 9001-2000 certificate holder, it has executed
successfully various commercial, residential projects, multistoried projects and independent townships. It concentrates in
areas in and around Delhi with special focus on the Noida and Ghaziabad regions of UP.
Third Eye Media Pvt. Ltd, AR Paradise Pvt. Ltd AR Infrastructure Pvt. Ltd, Fenny Real Estate Pvt. Ltd. are its
subsidiaries. AHCL has a profitable JV company in the name of Capital Cars Pvt. Ltd for sale/services of Honda Cars.
However, its major focus will be real estate development only.
AHCL has bagged 22 integrated township projects at prestigious locations on its own and through joint ventures in Tier-I,
Tier-II & Tier-III cities. The Company will also be developing an IT Park in Bangalore in addition to Group Housing
Projects in its biggest ever Group Housing Development of approx 25 lakh sq. ft. area.
Currently, AHCL has a rich land bank of 2500 acres with almost 50% in its own name while the rest under firm
collaborators' agreement. It is developing 1,200 acres. Another 1,000 acres of land is under sanctioning. The acquisition
cost of these lands is reasonably low because of which it has been registering better profit margins compared to its peers.
The value of the projects under development/implementation are in the range of Rs.6,000 cr.
Apart from other smaller towns it also has ongoing projects in Mumbai metro whereby it is building two towers under
the name 'Whispering Meadows' and 'Ansal
Heights' at Mulund and Worli respectively. It
also intends to develop holiday homes in
Shahpur-Thane spread over 150 acres.
Recently, it launched a new residential group
housing project named "Ansal's Woodbury
Apartment" at Zirakpur near Chandigarh.
The company also owns and manages club
houses under the 'Chancellor' brand name in
Ansal Townships. As a part of its
diversification, the company has also forayed
in automobile business through a joint
venture with Itochu Corporation of Japan.
During FY07, AHCL posted 59% increased
income of Rs.199 cr. and earned 146% higher
net profit of Rs.43 cr. recording an EPS of
Rs.26. During H1FY08, AHCL posted an
income of Rs.115 cr. and earned a net profit of
Rs.26 cr.
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17
Its equity capital is Rs.16.7 cr. and with reserves of Rs.199 cr., the book value of the share works out to Rs.87. The
promoters hold 40% in its equity capital, foreign holding is 21%, corporate holding is 15% and mutual fund holding is
1.5% leaving 23% with the investing public.
With a well-established track record in the housing segment, Ansal Housing is capitalising on the current demand for
high-rise apartments as well as independent houses. Ongoing negotiations with foreign real-estate players may lead to
tie-ups. This is likely to increase the company's ability to handle more projects and also boost its technical qualification.
Real Estate development in India is growing at a pace of 30 percent each year. The predominant trend has been to set-up
world-class business centres, campus style establishments, bearing a distinctive Corporate Stamp.
According to India's new FDI policy, up to 100% investment is allowed under the automatic route in townships, housing,
built-up infrastructure and construction-development projects. Construction projects would include hotels, resorts,
hospitals, educational institutions, housing and commercial premises. The government has also reduced the minimum
mandatory area to allow FDI in real estate sector from 100 acres to 25 acres.
Merrill Lynch forecasts that the Indian realty sector will grow from $12 billion in 2005 to $90 billion by 2015. Some of the
global financial institutions that are aggressively looking to invest in India's real estate space include Blackstone, Morgan
Stanley, Trikona, Duestche Bank, Goldman Sachs, Credit Suisse, Wachovia Corporation and Warbus Pincus. Experts say
that the total corpus with these funds for real estate alone is $12-15 billion.
The increased demand for space by hypermarkets and shopping malls and a possible entry of Wal-Mart and Carrefour
over the next few years may well result in a continuing phase of favourable business environment. The potential in the
sector has driven private equity funds to launch exclusive real estate funds.
The most favourable route for NRI investments is to participate in a variety of infrastructure projects like roads and
bridges in urban areas, construction of residential and commercial projects, development of townships at city and
regional level and investment in participatory ventures. NRIs can fund investments through their own funds by using
inward remittance from overseas, income earned overseas or personal savings outside India, or funds held in non-
resident external (NRE) or non-resident ordinary (NRO), or foreign currency (non-resident) (FCNR) bank account for
purchasing real estate in India.
Targeting the burgeoning market for Indian Americans investing in India's $15 billion real estate sector, AHCL has set up
a North America associate sales office in New York. The New York office will serve as a conduit for attracting
investments into Ansals residential as well as commercial real estate projects across India.
The total value of the projects with AHSL and under joint ventures is around Rs.6,000 cr. It appears well placed to
capitalise on the surging demand for real-estate in residential, commercial and retail spaces. The company will continue
to deliver the best real estate products and enhance its prestige and services to end users in coming times.
AHCL is now witnessing increased activity in its commercial division and has already forayed into malls and retail
spaces in North India. This is likely to pave the way for more projects in these spaces. A valuable land bank, its presence
in diverse markets and high earnings visibility from existing projects are key positives for the company.
AHCL is in the process of allotting 17,00,000 warrants each priced Rs.208 with an option to the warrant holders to acquire,
for every warrant, one fully paid up equity share of Rs.10 each at a price of Rs.208. This exudes lot of confidence from the
investor fraternity.
The rapid population growth, strong demographic impetus with young people, increase in job creation, rising incomes,
emergence of nuclear families, tax incentives on housing, competitive interest rates, rising FDI levels in the real estate
sector, expansion in organized retail sector, shortage of around 20 million dwelling units, the conducive environment for
investment in the housing/real estate sector give strong visibility to AHSL's revenue & profitability in the future.
During FY08, the company hopes to garner income of above Rs.280 cr. and earn a net profit of Rs.70 cr., which would give
an EPS of Rs.42. Its income is expected to go up to Rs.420 cr. in FY09 with a net profit increasing to Rs.110 cr. and its EPS
would stand enhanced at Rs.66.
AHCL share is traded at a P/E of 9.5 on FY08 EPS of Rs.42 and 4 times its FY09 EPS of Rs.66 and is recommended with a
target price of Rs.450 in the medium-to-long term. The 52-week high/low of the share has been Rs.397/151.
By Nayan Patel
TECHNO FUNDA
IG Petrochemicals Ltd.
BSE Code: 500199
Last Close: Rs.89.25
IG Petrochemicals Ltd. (IGPL) is a Goa based chemical manufacturer of Phthalic Anhydride and started production in
1988. The company has an equity of Rs.30 cr. and the promoters hold 39.56% stake in the company. Other corporate
bodies hold 34.61% stake while the Indian public holds only 23.51%. Last year, the company recorded shown sales of
Rs.580.98 cr. and profit of Rs.29.69. In H1FY08, its sales were at Rs.303.28 cr. while net profit jumped 48.91% and touched
18
Rs.21.71 cr. For FY08, net sales of Rs.625-650 cr. with net profit Rs.45-50 cr. are expected. Stock is available at P/E ratio of
just 6 against this expected earning.
IGPL has increased its production from 45,000 MT per annum to 120,000 MT per annum, making it one of the largest
manufacturers of Phthalic Anhydride. It uses the Orthoxylene Oxidation method for manufacture of Phthalic Anhydride.
The process involves an exothermic reaction that is used to produce high-pressure steam, which that makes the plant self-
sufficient in power and steam requirements. It is one of the most cost-effective Phthalic Anhydride plants in the world.
Stringent quality control parameters and regular upgrading of technology ensures global customers for a very high
quality product.
Last week, the company informed BSE about the issue of 15,00,000 share warrants on preferential basis to Financierings
Maatschappij Voor Ontwikkelingslanden N V (FMO), a Netherlands based Developmental Financial Institution, at a price
of Rs.77.50 per warrant to be converted into 15,00,000 equity shares of face value of Rs.10 per equity share plus Rs.67.50
premium in the ratio of 1:1 (one warrant into one equity share) within a period of 18 months from the date of allotment of
warrants subject to shareholders and other regulatory approvals.
Technically, the stock is looking very hot. Buy with stop loss of Rs.83. On upper side, it will go up to Rs.100 in a short
span of time and will go up to Rs.130+ levels in the next 3-4 months. It is one of the best investment stocks with low P/E
multiple.
BDH Industries
BSE Code: 524828
Last Close: Rs.44.90
It is high risk-high profit stock for short-term
investors. Buy with strict stop loss of Rs.43 for an
upper target of Rs.50-55.
KEW Industries
BSE Code: 532758
Last Close: Rs.38
Last time, we recommended this stock around Rs.30,
Technically, the share is looking good and charts
indicate some more rise from hereon. Buy with stop
loss of Rs.35. On the upper side, last resistance will
be at Rs.41.50. Close above it will take it to Rs.52 in
the next 3-4 months.
LCC INFO
Listed only on NSE (2 paid up share)
Last Close: Rs.1.80
Keep a strict stop loss of Rs.1.25 and buy this stock. On the upper side, expect a target of Rs.3-3.25. Only for penny stocks
players.
Gokul Refoils & Solvent plans IPO
MONEY FOLIO
Review
- IOL Chemicals recommended on 26
th
November 2007 at Rs.110
kissed Rs.189.50 in less than 1 month.
- Surana Corporation recommended at Rs.76 on 26
th
November 2007
touched Rs.117.30 last Friday.
- Links Pen recommended on 3
rd
December 2007 at Rs.44 touched
Rs.56 in just two weeks.
- Indsil Electro Smelt recommended at Rs.84 on 3
rd
December 2007
zoomed and kissed Rs.93.95. This stock will cross the three digit
mark very fast.
- Futura Polyester recommended at Rs.34.65 kissed Rs.46.10 last
week in just 4 trading sessions kissed Rs.46.10.
- Kisan Moulding recommended at Rs.44 for short-term trading last
week touched Rs.63.50 in just 2 days.
Incorporated in 1992, Gokul Refoils & Solvent Ltd. (GRSL) setup a solvent extraction plant and a refinery at Sidhpur and
has become a major player in the edible oil industry within 15 years. The company's business includes seed processing
unit, solvent, extraction, refining various kind of edible oils. It has also entered the non-edible oil segment in 2006-07.
Its manufacturing facilities are strategically located to take advantage of logistics. It has one port based refinery at
Gandhidham, which has a capacity to refine 900 TPD of various kinds of oils along with 200 TPD vanaspati plant. It also
has an integrated oil processing complex at Sidhpur, about 100 km from Ahmedabad and which has 680 TPD of seed
processing, 600 TPD of solvent extraction and 200 TPD of refining. Its third unit at Navi Pardi, about 25 km from Surat on
the National Highway No.8 is a refinery with a capacity of 100 TPD.
The facilities are versatile in nature, which can process various types of oils including palmolien, soyabean, cotton seed,
sunflower, mustard, groundnut, etc.
The company has set up one subsidiary in Mauritius and in Singapore for its international operations. GRSL is also a
partner in Gokul Overseas, which has setup a state-of-the-art manufacturing facility for castor oil and its derivatives. It is
one of the largest plants in Kandla SEZ. The company has also setup 4 windmills of 1.25 MW each in Kutch and a co-
generation power plant of 500 KWH at its Gandhidham unit for captive electrical consumption.
19
The company has a strong financial background, having recorded an operating income of Rs.1567 cr. with PAT of Rs.25.51
cr. in FY07 and Rs.658 cr. with PAT of Rs.20.7 cr. in Q1FY08 recording an annualized EPS of Rs.27.51 for FY07. The book
value of its share was Rs.76.43 as on 31
st
July 2007.
As a part of its expansion programme, GRSL proposes to set up a soya processing plant at Gandhidham with an installed
capacity of 1500 TPD at a capital investment of Rs.51 cr., which is expected to be operational by end December 2007. It is
also expanding the unit at Surat at an estimated outlay of Rs.12.31 cr. and wants to invest about Rs.25 cr. in its subsidiary
company apart from Rs.15 cr. in brand building and Rs.10.02 cr. in enhancing its warehousing capacity and other capex at
existing units.
To fund its expansion and marketing operations, GRSL plans an IPO in Q1 of 2008.
Nutek India Ltd. plans IPO
Nutek is a telecommunications solutions company prominent in the Telecom infrastructure space. Its core expertise lies in
its breadth of services in the Telecom infrastructure market. It has complete infrastructure rollout solution for both mobile
and fixed telecommunication networks and has become a one stop shop in the telecom infrastructure space providing
total solutions.
Today, it is a force to reckon with in the Telecom turnkey space with Multi-Site projects running simultaneously all across
India. Till date, it has successfully implemented various projects with Telecom majors in India such as Ericsson, Nokia,
Siemens, Nortel, Motorola, Alcatel Lucent, Huawei, ZTE, Reliance, Tata Tele Services, Idea Cellular, Vodafone (erstwhile
Hutch), AirtTel to name a few covering the entire length and breadth of the country which include HIL CDMA network
in Maharashtra, TTL CDMA network in Hyderabad, Shyam in Rajasthan, MTNL GSM network in Delhi and Mumbai etc.
The company undertakes turnkey infrastructure creation and installation for telecom sites which includes Passive
Infrastructure like Towers, Telecom Shelters, Power plants, Backup Power – DG sets and Battery Banks, Electrical
Infrastructure and Earthing stations etc.
Manaksia Ltd. IPO opens on 17
th
December
Manaksia Ltd., a multi-division and multi-location company focusing on manufacturing of value added metal products
and metal packaging products, proposes to tap the capital markets with a public issue of up to 15,500,000 equity shares of
Rs.2 each through the book building route in the price band of Rs.140 to Rs.160. The issue opens on Monday, 17
th
December and closes on Wednesday, 19
th
December 2007. The equity shares of the company are listed on the CSE and the
equity shares offered through this public issue will be listed on the BSE, NSE and the CSE.
Manaksia commenced operations as a manufacturer of metal closures in 1984 but has since diversified into metal
products and mosquito coils. It has 15 manufacturing units in India and 3 abroad; 2 in Nigeria and 1 in Ghana. Since
incorporation, it has responded to the challenges by redefining its core competencies and unleashing the restructuring
process. Moody International Certification Ltd. has assessed its quality management system and has certified the
company to be ISO 9001:2000 compliant.
The company intends to use the net proceeds of the issue for expansion of its metals business by purchase of capital
equipment, prepayment of certain term debts and for general corporate purposes. The expansion of the metals business
includes addition of certain equipments for de-bottlenecking to the aluminium rolling line at Haldia for production of
value added products as well as improving efficiency.
Precision Pipes & Profiles IPO opens on 17
th
December
Precision Pipes and Profiles Company Ltd. (PPAP) is entering the capital market with an IPO through the 100% book
building process in the price band of Rs.140 and Rs.150 per equity share of face value Rs.10 each. The Bid opens on
Monday, 17
th
December and will close on
Thursday, 20
th
December 2007 and will be
listed on the BSE and NSE. The issue has been
graded by CRISIL and has been assigned the
IPO Grade 4/5 indicating 'above average
fundamentals'.
PPAP was incorporated in 1978 as a
partnership firm and was later converted into
a public limited company in October 19995. It
is an OEM supplier to the automobile
industry and its clients include Maruti Udyog
Ltd., Honda SIEL, general Motors and Toyota
Kirloskar. In the white goods industry, it
supplies customized profiles to Godrej,
Voltas, Videocon and Carrier Refrigerators.
Over 90% of its revenues are derived from the
automobile segment. Since 1989, PPAP has a
Daily Fresh Buy
(for the busy investor)
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20
technical agreement with Tokai Kogyo Co. Ltd. (TKCL), Japan, which is a manufacturer of specialized profiles and
extrusions for the automobile industry. PPAP has also entered into an Automotive Parts Licensing agreement with Nissen
Chemitec Corporation, Japan, to provide new product technology to manufacture and deliver products in connection
with automotive interior parts and related products to Honda SIEL Cars India Ltd. and affiliated companies. The
company also has entered into an agreement with Power and Data Corporation Pty. Ltd., Australia for the manufacturing
of electrical outlet systems for supply to the authorized distributors of PDC. CRISIL has an SME 1 rating outstanding on
PPAP, which is valid till 17
th
May 2008.
PPAP plans to fund its expansion initiatives through term loans of Rs.25 cr. from ICICI Bank and internal accruals of Rs.6
cr. The balance amount of Rs.75 cr. will be met through the proposed IPO. At present, PPAP has 5 manufacturing facilities
in the NCR region of Delhi, with an aggregate capacity of 4.75 million kg. It has proposed a capital expenditure of Rs.95.8
cr. over the next two years to increase its capacity to 9.14 million kg by 2008-09. This expansion will be undertaken to
setup a new plant in Surajpur to manufacture automobile profiles, expand the capacity of its existing facility at Noida,
upgrade in-house Tool Manufacturing and Designing Capability, and lastly setup a new plant at Badarpur dedicated to
'Electrical Outlet System' products to be manufactured under the agreement with Power and Data Corporation Pty. Ltd.,
Australia.
For FY07, PPAP recorded a net profit of Rs.13.88 cr. compared with a net profit of Rs.7.99 cr. for FY06.
Porwal Auto Components IPO opens on 17
th
December
Porwal Auto Components Ltd. (PACL), manufacturers of SG and CI castings for automobile components, proposes to
enter the capital markets with a public issue of 50,00,000 equity shares of Rs.10 each through a book built issue in the price
band of Rs.68 to Rs.75 per equity share. The issue opens on Monday, 17
th
December and will close on Thursday, 20P
th
December 2007. The issue has been assigned `CARE IPO GRADE 3' by CARE indicating average fundamentals. The
existing equity shares of the company are listed on OTCEI ad will be listed on the BSE along with the equity shares
offered through public issue.
The company manufacturers around 12 different categories of castings such as SG Iron & Grey Iron Hubs, different
carriers and cases, bracketory components, Transmission cases, T G cases, Housings & cover components, Brake Drums,
Links components, Pulleys, Pump parts, Exhaust manifolds and Bends. These products find applications in automobile
and engineering industry. It is TS 16949 accredited company and presently 90% of its production is supplied to Eicher
Motors Ltd. The Company also caters to the requirements of other reputed companies such as L&T Case Equipments Pvt.
Ltd., Force Motors Ltd., Eicher Tractors (A Unit of TAFE Motors & Tractors Ltd.), Gajra Gears Pvt. Ltd., Shakti Pumps
India Ltd., Man Force Trucks Pvt. Ltd., Diesel Components Works, Tata Automotive Components Ltd. etc.
It has already started implementing its expansion plan from 6600 MTPA to 27,600 MTPA and the present installed
capacity of the company as on 30
th
June 2007 was 9000 MTPA. This expansion was funded through a Term Loan of Rs.12
cr. from State Bank of Indore and through the proceeds of the preferential allotment of equity shares. The expansion plan
includes setting up a windmill with 15 MW power generation capacity for captive consumption.
The company's total income for FY07 was Rs.34.63 cr. and PAT at Rs.75.39 lakh. For the six months ended 30
th
September
2007, its total income was Rs.16.70 cr. PAT at Rs.75.61 lakh.
Aries Agro IPO closes on 19
th
December
Aries Agro Ltd. (AAL), a 38-year old micronutrient and other nutritional products for plants and animals manufacturing
company, is entering the capital market with its IPO of 45,00,000 equity shares of Rs.10 each through the 100% book
building process in the price band of Rs.120 to Rs.130 per share. The issue opened on Friday, 14
th
December and will close
on Wednesday, 19
th
December 2007. The
issue will be listed on the BSE and NSE.
AAL manufactures a wide range of
products spread across five main
categories,
viz.
Plant
multi-
micronutrients, Chelated micronutrients,
Speciality soluble nutrients, Anti-bacterial
products for agricultural use and
nutritional
products
for
animals.
Micronutrients are a group of nutrients
that are essential for plant growth. The
company's
existing
manufacturing
facilities are located at Bangalore,
Mumbai, Hyderabad and Kolkata.
With and in-house R&D facility, AAL
21
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st
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22
manufactures as many as 41 products mainly utilized by the cultivators and livestock owners. AAL has 18 trademarks
already registered in its name (out of which 3 trademarks have been applied for renewal and have applied for 24
trademarks for registration). Its flagship brands 'Agromin' (chelated micronutrients) and 'Chelamin' (chelated zinc) are
sold through 4700 distributors and 65,000 dealers reaching to 375 districts in the country.
As a part of its expansion plan, AAL mainly intends to setup new manufacturing units at Ahmedabad, Lucknow, Medak
(Andhra Pradesh) and an additional unit in Maharashtra. AAL is embarking upon over a three-fold increase through this
expansion, and would add 79,200 TPA to its existing manufacturing capacity of 21,600 TPA.
To increase its global reach, AAL proposes to acquire a stake in Golden Harvest Middle East (FZC), a company
incorporated in UAE to make it a subsidiary company. Golden Harvest Middle East (FZC) is setting up a facility at
Sharjah to manufacture chelated micronutrients with a capacity of 10,800 MT per year.
The gross earnings from sale for four months period as on 31
st
July 2007 were Rs.21.71. cr. with a PAT of Rs.3.36 cr. For
FY07, gross earnings from sales were Rs.74.05 cr. with a PAT of Rs.8.69 cr.
Gulf Finance House to set up Economic Development Zone near Mumbai
Gulf Finance House (GFH) listed on the London Stock Exchange, Kuwait Stock Exchange, Bahrain Stock Exchange, Dubai
Financial Market etc. has signed a wide ranging agreement with the Government of Maharashtra to create a state-of-the-
art Economic Development Zone just outside Mumbai - one of the largest development projects in the state.
The 1600-acre zone will attract a total investment in excess of US $10 billion (Rs.40,000 cr.) and come exactly a year after
GFH signed a similar agreement with the State for the development of India's first energy business district – Energy City
India. The economic development zone announced will include Energy City India, apart from incorporating three
additional components - Telecom City Mumbai, Software City Mumbai and Entertainment City Mumbai.
SBI launches MasterCard MoneySend
MasterCard Worldwide along with State Bank of India (SBI) has launched MasterCard® MoneySend™, a card-to-card
money transfer pilot programme that offers instant online authorisation and transfer confirmation. MasterCard
MoneySend will enable MasterCard or Maestro® cardholders to transfer money quickly, easily and securely to family
members or friends.
State Bank of India is the first bank in the Asia/Pacific, Middle East & Africa Region to launch MasterCard MoneySend
that will allow its consumers to conveniently send intra-country, person-to-person money transfers using the ATM
channel. The recipient can access the transferred funds by making a purchase anywhere MasterCard and Maestro cards
are accepted, or by withdrawing cash in local currency at ATMs.
Birla Sun Life AMC launches 'Special Situations Fund'
Birla Sun Life Asset Management Company has launched the 'Birla Sun Life Special Situations Fund' which will invest in
'special situations' and contrarian opportunities in the stock market.
About 80% of the money collected under this scheme will be invested in equity and the rest will be in debt.
The fund will invest in businesses that are candidates for mergers and acquisitions (M&As), private equity (PE) deals,
open offers, delisting and buy-backs. "Whenever they happen, they take businesses into another orbit," said Vice-
President Raghvendra Nath, adding that such events often result in positive surprises, leading to better valuations and
improved chances of earning extra returns.
He said FY07 saw 782 mergers and acquisitions and private equity deals worth about Rs.1,00,000 crore as compared to 306
deals worth Rs.49,200 cr. in FY04. The number of de-listings also rose to 25 from just three during this period.
Mold-Tek Technologies de-merges its KPO business
Mold-Tek Technologies Ltd., a leading structural engineering KPO services and plastic packaging services company, has
received approval from the BSE for its proposed scheme of merger of M/s. Teck Men Tools Pvt. Ltd., into the company
and de-merge the company's plastic division into a separate listed company to be named as 'Mold-Tek Plastics Ltd'.
Following the de-merger, the KPO company (Mold-Tek Technologies Ltd.) will have equity of around Rs.3.6 cr. and the
equity of the Plastic Company (Mold-Tek Plastics Ltd.) will be Rs.7.99 cr. The company has filed the de-merger scheme
with the Honorable High Court of Andhra Pradesh for its clearance.
After de-merger, shareholders will be allotted 72 shares of Mold-Tek Plastics and 28 shares of Mold-Tek Technologies for
every 100 shares held.
Mold-Tek in due course of time will be divided into a KPO company (Mold-Tek Technologies Ltd) specializing in
structural engineering design and detailing services to its American and other clients and into a plastic packaging product
company to be named as Mold-Tek Plastics Ltd.
To enhance value addition, Mold-Tek is planning to enter into designing of high-rise buildings and has already executed
a couple of design assignments for a Canadian client. The hourly rates for high rise building designing are much higher.
It is also in the process of offering structural engineering services to European clients. This initiative will further enhance
the growth prospects of the KPO company.
Mobile content aggregation and retail platform launched
Mobile Magic, India's First & Fastest growing chain of Mobile Phone Boutiques, announced the launch of Media Magic,
the first company in the world to offer an aggregation and retail platform for legal, rich content for the mobile user like
games, applications, movies and music in an offline format.
Media Magic will revolutionize the selling and buying process of legal content for the mobile user in the country with this
offline channel. The primary focus of the company will be on the distribution model through retail outlets since India has
very low broadband penetration. The company has set a target of having over 10,000 retail outlets in place which will be
serviced by the Distributors across the country.
Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources
that are deemed to be reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does
not accept any liability for the use of this column for the buying or selling of securities. Readers of this column who buy or sell
securities based on the information in this column are solely responsible for their actions. The author, his company or his
acquaintances may/may not have positions in the above mentioned scrip.
23
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