Sensex

Monday, March 03, 2008

Money Times Monday, March 3 - 9, 2008


Page 1
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Budget Special
T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 16
Monday, March 3 - 9, 2008
Pages 19
Global cues to move markets
as there are no domestic triggers till April
By Sanjay R. Bhatia
The markets displayed volatility amidst occasional bouts of lacklustre trend last week. Traders and speculators were seen
going short on the bourses and buying at lower levels. Profit booking and selling pressure were evident at higher levels.
The volumes were low within the positive breadth of the market. Incidentally, FIIs remained net buyers both in the cash
segment as well as the derivatives segment. Mutual funds, too, were net buyers during the course of the week.
The global cues remained mixed. The US economy continued to
give out negative signals while crude oil price continued its
upward march on the back of supply constraints and political
tensions. It touched the US $103 level on Friday. Inflation
continued to remain a concern for the Indian economy even as
the government put up a brave face in its report in the Economic
Survey.
The markets have displayed a range-bound and lacklustre trend
due to the derivatives segment expiry and the Budget. Overall, it
was on expected lines due to the elections factor. It is partially
negative with the increase in Short-term Gains Tax and STT on
options premium. Meanwhile, the markets would continue to
take cues from the global markets, crude prices and the rupee
dollar equation.
Global cues would again continue to influence the market, as we do not have any triggers till the announcement of the Q4
results, which are expected in April 2008 only. Stock specific action will be witnessed due to Budget announcements
amidst occasional bouts of volatility and choppiness.
Technically, on the upside if the Sensex manages to sustain above the 17475 level, then it is likely to test the 18526 and
18663 levels. The Sensex has support at the 17475, 17022 followed by the 16545 level. On the upside, if the Nifty manages
to sustain above the 5156 level, then it is likely to test the 5484 - 5519 levels. The 5156 and 5025 are important support
levels for the Nifty.
Traders and speculators can buy Gujarat Industrial Power with a price target of Rs.120-125 and a stop loss of Rs.102.
1
BHARAT first, India later
By Fakhri H. Sabuwala
Our Robin Hood like FM suddenly brings 'Bharat' to the minds of Indians and leaves urban 'India' to fend for itself for
the time being. The market very patiently listened to the FM's speech as if it was a tear jerker soap opera which finally
drove them to tears as there was nothing in it for the investors! There was no change in STT (as if a downward revision
was expected) and no change in the dividend distribution tax (big deal). But the queen of all tragedies was the 5% hike in
the short-term gains tax. Sadly, the sentiment was so bad that without any rationale the Sensex was down by over 550
points during the session on Friday, 29
th
February 2008. It was only sentiment at play. But rationality prevailed at the end
and the Nifty closed comfortably above 5200 mark.
A scheme of debt waiver and debt relief for farmers on loan disbursed by scheduled commercial banks (SCBs), regional
rural banks (RRBs) and co-operative credit institutions up to March 31, 2007 was announced. About 3 crore small and
marginal farmers and 1 crore other farmers who qualify under this scheme also become eligible for fresh loans as per
normal banking norms. What does this mean? This means that the Rs.60,000 cr. infused into the banks as repayment by
defaulters coming back to the agriculture segment by way of fresh loans. The double edged benefit here is that the likely
NPAs in the books of the banks gets erased and the same funds find their way into the agrarian segment as fresh inputs
kickstarting growth. Call this a poll gift or whatever, it is one great gesture for the 'Kisans'.
The revision in the income tax threshold limit and the rationalisation of rates leave a huge chunk in the hands of
assessees. This may lead to higher savings and investments by retail investors.
Increase in the outlay of irrigation projects is up at Rs.20000 cr. up from Rs.11000 cr. in FY08 with Rs.500 cr. for micro
irrigation covering 40000 hectares. US$378 million agreements with World Bank to repair, renovate and restore water
bodies in Tamil Nadu, Andhra Pradesh and Karnataka. A fresh set of agreements to be signed with the World Bank for
Orissa and West Bengal. Last but not the least, Corpus of Rural Infrastructure Development Fund now stands at Rs.14000
cr. with a separate window for rural roads.
Growth stimulators that stock markets can't overlook:
* Customs duty on project imports reduced from 7.5% to 5% - benefits fresh capex.
* Customs duty on steel melting scrap is nil now making it cost effective for steel producers.
* Life saving drugs whether formulation or in form of bulk drugs invites lesser customs duty and even exemption from
excise. If it is passed on to customers, it will make the drugs affordable and improve the sentiment of the pharma sector in
general. Benefits Ranbaxy, Dabur Pharma and Biocon.
* General Cenvat rate on all goods down from 16% to 14%.
* All pharmas other than life saving shall attract 8% excise down from 16%.
* Small car excise reduced is a positive trigger for Maruti and Tata Motors.
* Reduction of excise in water purification devices, veneers, flush doors, sterile dressing pads, packaging materials and
breakfast cereals will benefit several units and help improve the quality of life.
* Excise on 2-wheelers and 3-wheelers reduced from 16% to 12%. Positive for Hero Honda, TVS Motors, Kinetic Motors,
Bajaj Auto and Force Motors.
* Excise Duty reduced from 16% to nil on a few mass consumption items including composting machines, wireless data
cards, packaged coconut water, tea and coffee mixes and puffed rice. Positive for many FMCG companies.
* Excise duty exemption on end-use basis on refrigeration equipments (compressor, condenser units, evaporator etc)
above 2 TR (Tonne Refrigeration) utilizing power of 50 KW and above.
* Corporate debt instrument issued in demat form and listed on recognised stock exchanges exempted from TDS.
* Parent company allowed to set off the dividend received from its subsidiary company against dividend distributed by
the parent company provided that the dividend received has suffered DDT and the parent company is not a subsidiary of
another company.
* Five year holiday from income tax being granted to two, three or four star hotels established in specified districts having
UNESCO-declared 'World Heritage Sites'; the hotel should be constructed and start functioning during the period April
1, 2008 to March 31, 2013.
* Banking Cash Transaction Tax (BCTT) being withdrawn with effect from April 1, 2009.
Directional movement likely
TRADING ON TECHNICALS
By Hitendra Vasudeo
Last week, the Sensex was under the shadow of the Engulfing
Bear candlestick pattern on the weekly chart. At times, we see a
minor retracement up to 50% or more of the engulfing bear
candlestick pattern. The Sensex, last week, opened at 17523.81
attained a high at 18137.28 and fell to a low of 17137.99 finally to
close the week at 17578.72 and thereby showed a net rise of 263
points on a week-to-week basis. The Sensex had penetrated the
50% zone of the engulfing bear pattern and then a fall was
witnessed. Two weeks back, the negative candle prevented the
market from moving up.
2
Support during the week will be at 17349-17100. Downside movement and momentum will begin on a fall and close
below 17100. The 200 day moving average (200 DMA) is placed at 17110 protecting and holding the market. A further
sustained fall and close below 17000 can take the market back to test the higher bottom of 16457 against the panic low of
15532. Resistance will be at 18115-18314. In case of a rise and close above 18314, it will be a short rise, which will be an
extension of the pull-back rally towards 18900 at least and to an outer extent to 19300. The range of 18900-19300 will be a
difficult zone to penetrate.
Retracement levels of the fall from 21206 to 15532 are placed at 17580, 18274 and 18968. If we ignore the low of 15532 and
take the higher bottom of 16457 as the low for a retracement of the fall from 21206 to 16457, then the pull back levels will
be placed at 18274, 18834 and 19395. The pull back retracement level of 18274 and 18834 coincides with the resistance gap
of 18274-18509.
It looks almost impossible now to take off to the resistances of 18274-18964-19335 at this point. We might see an occasional
rise to these levels but it will be a futile exercise as it will ultimately surrender all the gains.
The current situation is at the equilibrium point. The fall in the Sensex from 21206 was like a ping pong ball, which if
released from a height will fall and bounce before settling on the floor. The Sensex fall from 21206 to 15532 was the first
fall of the ball. The Sensex bounce from 15532 to 18895 has lost the motion to fall down again to 16457. Further, the Sensex
bounced again like the ball to a point of 18314 to once again witness exhaustion and fall down to 173137. The next bounce
was lower than its previous lower top and the new exhaustion point became 18314. Once again, the rise got exhausted
and fell to 17258. In this process, we see a triangle pattern. Interestingly, the triangle pattern is in favour of bulls as well as
bears. Depending on one's perspective of the market, one can take it as a bullish or bearish triangle. In short, the
immediate tight range on the daily chart is 18314-17137. Expect a directional move on either side breakout or close above
18314-17137 for the short-term.
In the current positioning on the charts, we can say that the distribution pattern formations are being witnessed before a
further breakdown. Only
a breakout and close
above 19000 or 19395 can
save the market from
falling into a lower top
and lower bottom spiral,
which will eventually take
off to the low of 15532 and
even move down further
down.
WEEKLY UP TREND STOCKS
Overall, we may get a
surprising pull-back to
higher resistance levels
but its sustainability is the
issue and the rise can
create a bull trap.
Sensex Wave Analysis
Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy
with what ever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to
Level 3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value
then the trend will change from Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal
of the up Trend.
Last
Center
Relative
Weekly
Up
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Stop
Loss
Buy
Price
Buy
Price
Book
Profit
Book
Profit
REI AGRO
1451.00 1177.3
1357.3
1443.7
1537.3
1717.3
89.1
1304.5
28/12/07
KARNATAKA BANK 263.95
232.4
252.9
262.3
273.3
293.8
71.5
257.0
29/02/08
ING VYSYA BANK
353.10
262.3
318.1
339.0
373.9
429.7
70.3
320.1
22/02/08
ESSAR OIL
258.30
189.8
232.2
248.6
274.6
317.0
69.3
233.2
15/02/08
JAIN IRRIGATION 717.00
604.7
680.7
720.3
756.7
832.7
69.3
668.0
15/02/08
Wave I-2594 to 3758
WEEKLY DOWN TREND STOCKS
Wave II-3758 to 2904
Wave III- Internals as
follows:
Wave 1- 2904 to 6249
Wave 2-6249 to 4227
Wave 3-4227 to 12671
Wave IV- 12671 to 8799
Wave V- Internals as
follows:
Wave 1-8799 to 14724
Wave 2-14724 to 12316
Wave 3-12316 to 21206.
Wave 4-21206 to 17137
Internal of Wave 4
Wave A-21206 to 15532
Wave B- 15532 to 18895
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
MOSER-BAER IND 176.85
150.7
167.6
175.3
184.6
201.5
27.75
178.60
11/01/08
TECH MAHINDRA
688.10
639.4
674.4
695.7
709.4
744.4
28.99
692.79
28/12/07
OMAXE
255.10
221.7
245.7
260.4
269.7
293.7
30.16
263.29
11/01/08
MTNL
118.40
108.3
115.7
120.3
123.0
130.4
30.97
121.98
18/01/08
PATNI COMPUTER 241.15
208.8
232.8
248.4
256.8
280.8
31.45
257.04
15/02/08
3
Wave C- 18895 to 16457
4
Wave D- 16457 to 18314
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
GREENPLY INDUSTRIES 526797 361.45
350.00
368.00
308.15
405.0
464.8
0.82
JAYPEE HOTELS
590027 203.20
195.65
204.00
176.25
221.2
248.9
0.67
KAJARIA CERAMICS
500233
30.05
29.95
30.95
26.50
33.7
38.2
1.03
TIME TECHNO PLAST
532856 891.30
851.00
900.00
815.00
952.5
1037.5
0.80
Wave E-18314 to 17137
Wave 5- 17137 to till date
movement
Wave 1-17137 to 18317
Wave 2-18317 to 17258
(Move not yet complete)
If the Sensex maintains
below 17137, then this
internal count will not be
applicable
and
the
counter will be revised.
Alternate Count
WAVE 4 internals would
be as follows in case the
market fails to sustain
above 17100 from hereon.
Wave A- 21206 to 15532
Wave B -15532 to 18314
(Formed a triangle and
now
ready
for
a
breakdown for Wave C)
Internals of Wave B
Wave a- 15532 to 18895
Wave b-18895 to 16457
Wave c-16457 to 18314
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
ADANI ENTERPRISES
687.00
749.26
779.00
808.74
905.00
497.3
38.77
ADITYA BIRLA NUVO
1714.00
1803.04 1850.00
1896.96
2049.00 1405.0
42.03
ASIAN PAINTS
1112.00
1126.46 1151.00
1175.54
1255.00
918.5
43.77
BANK OF MAHARASHTRA
55.25
62.20
65.60
69.00
80.00
33.4
44.35
CENTURION BNK OF PUN
49.15
51.89
53.80
55.71
61.90
35.7
44.94
FEDERAL BANK
296.95
299.86
303.60
307.34
319.45
268.2
46.61
HDFC BANK
1453.00
1456.17 1486.50
1516.83
1615.00 1199.2
41.05
JAIPRAKASH ASSOCIATE
262.40
309.83
331.40
352.97
422.80
127.0
39.07
J.M.FINANCIAL
2221.00
2569.43 2682.00
2794.57
3159.00 1615.4
35.13
RAJESH EXPORTS
117.85
128.45
134.00
139.55
157.50
81.5
39.08
RELIANCE ENERGY
1568.00
1729.38 1809.50
1889.62
2149.00 1050.4
48.79
UCO BANK
50.70
52.68
54.53
56.37
62.35
37.0
55.31
Wave d-18314 to 17137
Wave e-17137 to 18317
Wave C – 18317 to 17258 (Move not yet complete)
This count will be proved wrong if the Sensex rises and close above 18317. The implication of this pattern will be a slide
down to 15894-15200-14506 levels at least. The recovery or completion of the pattern can come from either of these points.
In both the above counts, a triangle pattern is visible. Which side offers directional move above 18314 or below 17137 will
decide the fate of the counts ultimately.
The next alternative count, which is another complicated count, of the same price range:
Wave 4- 21206 to till date price movement
Wave A-21206 to 15532
Wave B- 15532 to till date movement
Internals of Wave B
Wave a-15532 to 18895
Wave b-18895 to 16457
Wave c-16457 to till date movement
Internal of Wave c
Wave 1-16457 to 18314
Wave 2- 18314 to 17137
Wave 3-17137 to till date
If 17137 is violated then this count will get rejected subsequently
In that case, Wave 2 will be 18314 to till date but the price must not fall below 16457; this view will be applicable till the
prices are above 16457.
After the squeezed move for the last couple weeks, we could have a strong directional move but to figure out the
direction has become difficult. Overall bias remains for a corrective cycle and we are unlikely to see any new high in the
short to medium term. Corrective cycle means volatile, choppy moves and if triangle formations are a part of the
corrective cycles, it is equally bad.
In an overall view, even a rise up to 19000-19300, if at all we see it, will be part of the corrective cycle. Any recoveries can
only lead the market towards 19000-19300 mark and looking above it is something that is not foreseeable at this juncture.
Conclusion
Pull-back rallies of 500-1000 are meant to generate cash. Use the higher levels to generate cash. If 16457 is not violated and
18314 is crossed, then expect a pull back rise to 19000-193000 which could surrender gains to test back the lows. The
question one needs to ask oneself is: Will the top get crossed? If the top of 21206 is not expected to be crossed, then any
rise from hereon will be futile rise giving way to bottom testing again.
If without moving, the market surrenders to violate 16457, then it will be better as it will first complete the Zig Zag
pattern, which will ultimately complete the corrective cycle or the first leg of the major corrective cycle. Let the corrective
cycle be complete for a confident rise subsequent. Any rise now will lack confidence as the overhead resistances are too
many to sustain in the higher range. Reasons for the rise and failure to sustain the higher range can be correlated with
other fundamental analysts and the media.
In case a surprising rise is witnessed, then it can carry towards 19000-19300. If that happens, then traders will have
something to cheer and smile about. But be sure and clear, don't trade without stop loss. If any trading stop loss is
violated, then the panic can be significant, which will once again lead to a bull trap.
Strategy for the week
Use spurts to higher resistance levels to get into cash. Traders could trade on pull-back rise but with stop loss. Short term
traders can sell below 16400 with the high of the week stop loss of 18314, whichever is higher at the time of breakdown.
Long term investors could get an opportunity for accumulation when the market cracks to the range of 15894-15200-
14506. Invest in a SIP style in large cap and index based stocks on market panic dips. Investors with holding
capacity/liquidity/willing to see underperformance can only think of accumulating at lower panics. Otherwise, avoid.
* Atul Auto, Force Motors, Bajaj Auto, Scooters India will benefit as excise duty on three wheelers have been reduced to
12% from 16%. Reduction in excise duty on buses from 16% to 12% will have positive impact on Ashok Leyland and Tata
Motors.
TOWER TALK
* Short Term Capital Gains tax to be increased to 15% from 10% earlier. On the other hand STT paid to be treated as
deductible expense rather than rebate against tax liability. Both these are major negatives as far as the capital market is
concerned.
* 5 year tax holiday will be granted for setting up hospitals in tier-2 and tier-3 cities in the next five years. Watch out for
Apollo Hospitals, Fortis Healthcare, Indraprastha Medical, Dr. Agrawal's Eye Hospital etc.
* Excise duty on all pharma goods to be reduced from 16% to 8%. Good for all pharmaceuticals companies in general.
* Weighted deduction of 125% for outsourcing research is a win-win situation for companies outsourcing contract
research as well for companies engaged in contract research.
* For 2008-2009, Agricultural credit limit increased to Rs.2,80,000 cr. for FY09 bodes well for VST Tillers, Escorts, Liberty
Phosphates, Greaves Cotton etc.
* PG Foils is available at an attractive valuation. The promoters have issued warrants at Rs.100 while the stock is
available at Rs.60 level. Merger of Prem Cables is possible trigger in the future.
* Rohit Ferro Tech has been scaling up on many fronts with power plants, mining on the anvil. The stock is likely to
perform well in the future.
* Parsvanath is a real estate stock with lot of value. It has many ventures like group housing, hotels and also industrial
construction. The stock is good to accumulate at the current level.
* The grey market premium on Rural Electrification Corporation was quoted around Rs.19/21.
By Saarthi
BEST BETS
Greaves Cotton Ltd. (Code: 501455)
Rs.260.50
Established in 1859, Greaves Cotton Ltd. (GCL), well known as Greaves Ltd. is one of India's leading and well-diversified
engineering companies and is a part of the B. M. Thapar Group. It manufactures a wide range of industrial products to
meet the requirement of the core sectors in India and abroad. GCL's core competencies are in production of diesel/petrol
engines, gensets, agro equipments and construction equipments. Besides, it is also engaged in marketing high technology
systems for marine, aviation and electronic applications. The business operations of the company are divided into four
business groups strategically structured to ensure maximum focus in each business area and yet retain a unique synergy
in operations.
I. Engines - Power Generation Group (15%): This business group manufactures diesel engine (10 - 1000 HP) primarily for
generating sets in the 15-550 KVA range in both air-cooled and water-cooled versions and enjoys 15% market share in the
domestic market. These engines find application in barges, pilot launches, compressors, construction equipment, cranes,
forklifts and various defence applications. Notably, GCL even manufactures dual fuel engines/gensets (30 KVA to 400
KVA) and gas engines/gensets (25 KVA to 300 KVA) operating on natural gas, bio-gas and producer gas.
5
6
II. Engines - Agro Equipment Group (10%): Under this group, GCL manufactures light-weight, fuel-efficient, 2/4 -
stroke engines in 1 - 4HP range, which are either marketed as complete pumpsets for the agricultural sector or as bare
engines for multiple applications like water pumps, sprayers, construction equipments, allied agricultural machineries
and more. With its plant in Chennai, this division boasts of making different types of petrol/kerosene run portable
engines, sprayer engines, power tillers, portable gensets etc.
III. Engines – Automotive Group (55%): Engines including CNG/LPG variants manufactured by this division are for
automotive, marine and industrial applications with major revenues accruing from the light-weight diesel engines used in
3-wheelers. Incidentally, GCL has been the sole supplier to Piaggio for more than a decade. To tap the emerging 4-
wheeler SCV segment, the company has indigenously developed a new generation twin cylinder engine with a suitable
gearbox that has huge potential in coming years.
IV. Infrastructure Equipment Group (20%): GCL manufactures a wide range of products in both the road making &
concreting equipment segments such as vibratory soil compactors, heavy/light tandem rollers, transit mixers, concrete
pumps, batching plants. Secondly, the company markets the entire range of CIFA and BOMAG tunneling equipments,
which include shotcrete pumps, spritz system, tunnel forms, sprizzo, moulds, tampers, plate compactors, pneumatic tyre
rollers, recyclers & refuge compactors amongst many other machines.
It also deals in tunnel boring machine, roadheader, backhoes, stage loaders, lump breakers, conveyors, roof bolters, and
locomotives for mining, tunnelling and surface transport of famous international brands like Dosco, Clayton, WAM, SIM
etc.
Presently, GCL has six manufacturing plants spread across Aurangabad & Pune in Maharashtra and Chennai, Ranipet &
Gummidipoondi in Tamil Nadu. Last year, it set up an additional manufacturing facility for concrete mixers at its existing
location in Gummidipoondi in view of anticipated high demand. A few weeks back, it also inaugurated its Technology
Centre and a new diesel engine plant at Chinchwad, Pune, equipped with the state-of-the-art facilities to manufacture
new generation water-cooled multi cylinder medium HP diesel engines for 1 tonne 4-wheelers, gensets and industrial
applications. Last year, it also acquired Bukh Farymann Diesel GmbH (renamed as Greaves Farymann Diesel GmbH),
which is engaged in the manufacture and marketing of single cylinder diesel engines and parts worth Rs.25 cr. as a part of
its long-term strategy to position itself in the global market.
On the flip side, Piaggio – the largest client representing nearly 30% of GCL's total revenue is planning to set up its own
engine production facility, which is expected to be operational by 2010. However, the likely adverse impact of this move
will be more than offset by a combination of various initiatives taken by GCL such as diversifying the application range of
engines, focusing on global business opportunities by leveraging the 'Farymann' brand, introduction of newly developed
twin cylinder engines and tying up with new OEMs for SCV applications. Moreover, a couple of weeks back, Piaggio
Group's Indian subsidiary signed a 8 year agreement with GCL for purchase of mono-cylinder diesel engines for
application on the 3-wheeler vehicles manufactured by them. This implies that GCL will continue to be a single source
supplier of such mono-cylinder diesel engines to Piaggio.
On the other hand, its strong service and distribution network has helped GCL counter the competition from China. To
maintain its future growth, the company is putting special thoughts on greater penetration in rural sector and targeting
overseas markets for pump sets. In short, with ambitious plans to capitalise on the opportunities across the industrial,
automotive and infrastructure sectors, GCL is set to boost its brand equity in the market. It ended FY07 on quite a robust
note but for FY08 ending 30
th
June 2008 it is estimated to clock a turnover of Rs.1400 cr. with PAT of Rs.115 cr. This
translates into EPS of Rs.24 on its current equity of Rs.48.80 cr. At a fair discounting by 16-18 times, the scrip has the
potential to touch Rs.380 to Rs.430 within 12-15 months. Investors are, therefore, advised to accumulate the scrip at sharp
declines.
Paramount Cables Infratech Ltd. (Code: 530555)
Rs.34.20
Incorporated in 1978, Paramount Cables Infratech Ltd. (PCIL), the erstwhile Paramount Communication Ltd., is the only
Indian cable company to offer comprehensive range of specialised cables & wires needed by all sectors of the economy
viz. power and electricity, thermal and nuclear power plants, space research, railways, telecom, IT, oil & gas,
petrochemicals, steel, electronics and various other industries. Based on the product type, the company has classified its
business operation into three categories.
A. Power Cables: PCIL manufactures the entire range of cables for power sector including high tension & low tension
power cables, Aerial bunch cables, control cables, instrumentation cables and thermocouple cables. The company derives
nearly 55% revenue from this segment and is well positioned to take full advantage of the boom in the power sector
because of its long-standing and prestigious track record with major players in the industry including NTPC, BHEL,
Areva, L&T, State Electricity Boards, Power Grid, Reliance Energy, ECC, ABB. Alstom, Siemens amongst many others.
B. Railway Cables: Paramount is the single largest supplier of underground quad axle counter cables and underground
signalling cables to the Indian Railways. It even supplies specialised instrumentation cables for underground and
elevated Metro projects. Notably, more than 30% of its total revenue comes from the Railway alone.
C. Telecom Cables: With 15% revenue share, this segment offers a single point source for a wide range of high quality
telecommunication cables, which covers optical fibre cables, jelly filled cables, aerial telecom cables, buried service wires,
installation cables, co-axial cables, computer cables etc.
PCIL has two state-of-the-art manufacturing facilities at Dharuhera, Haryana and Khushkhera, Rajasthan. These plants
are equipped with unique swing facility which enables it to shift from one type of cable manufacturing to another
depending on the demand thereby de-risking the business and increasing its capacity utilization. Last fiscal, the company
commissioned 1,500 km HT power cable capacity at its Dharuhera plant and increased the LT power cable capacity to
25,000 km. This year it has set up additional capacity of 30,000 km of LT and 2,000 km of HT power cables at the
Khushkhera plant thereby enahncing the present installed capacity to 55,000 km of LT and 3500 km of HT power cables.
On the back of robust demand, the company is further augmenting its capacity of LT by 35,000 km and HT by 2500 km.
For this, it has already commenced land development and civil construction on 25 acres of land just opposite to its
existing plant. Post completion of this expansion that is expected to complete within this calendar year, PCIL will boast of
having a capacity of 90,000 km for LT and 6,000 km for HT.
Importantly, in September 2007, PCIL acquired UK based AEI Cables, which is among the oldest and a globally reputed
brand with numerous customer approvals and technological strengths. With a turnover of more than Rs.500 cr. AEI has a
market share of 10-15% in UK and currently operates at 60-70% capacity level at its plant in Birtley, North East of
England. Interestingly, this Rs.105 cr. acquisition was substantially funded through borrowings against the AEI Cables
assets with PCIL actually infusing only Rs.25 cr. However, AEI made a loss at the PAT level for the first half of 2008,
which PCIL is planning to turnaround by the end of the current fiscal.
In order to fund its expansion plans, PCIL had raised more than Rs.65 cr. in April 2006 through GDR route at Rs.40 per
share. Subsequently, in November 2006, it raised another Rs.120 cr. through FCCB to be converted at Rs.53 per share.
Now it is planning to make preferential allotment of 91 lakh warrants to the promoters and promoter group, which is
expected to be made around Rs.35 per share. To conclude, with huge investments in the power sector, railway expansion
plans and rapid growth in the telecom sector, the cable industry in general and PCIL in particular is on an exponential
growth. Fundamentally, the company reported stellar performance for FY07. However, for FY08 it is estimated to report
sales of Rs.450 cr. with profit of Rs.35 cr. on standalone basis. This works out to an EPS of more than Rs.3 on the face value
as Rs.2 per share on its diluted equity (post conversion of all FCCBs at Rs.53) of Rs.21.50 cr. On a consolidated basis, the
key trigger will be the turnaround of AEI cables. Once this UK subsidiary starts reporting reasonable profit, the share
price of PCIL will shoot up substantially. Hence investors are recommended to keep accumulating the scrip at declines for
a price target of Rs.50 (i.e. 50% return) in 12-15 months.
Dishman Pharma & Chemicals: Good for the medium-term
By Devdas Mogili
Dishman Pharmaceuticals and Chemicals Ltd. (DPCL), is a 25-year old Ahmedabad-based company established in 1983.
The company primarily focuses on contract manufacturing for MNC pharma companies. Mr. Rajnikant T. Vyas is the
chairman while Mr. Janmejay R. Vyas is the managing director of the company.
DPCL entered the capital market in April 2004 with an IPO of 34,33,500 equity shares of Rs.10 each at a premium of
Rs.165 for cash aggregating to Rs.60 cr. through the 100% book building process. The object of the issue was to set up
manufacturing of active pharmaceutical ingredients (APIs) and Intermediates, to setup a dedicated R&D Centre and to
expand the existing facilities and utilities at its Balva plant. The issue evoked enthusiastic response from the investing
public.
The company's business can be broadly classified into two categories i.e. Marketable Molecules or MM segment – QUATS
and Speciality Chemicals, Intermediates and APIs & CRAM segment – Contract Research and Manufacturing Services
(CRAMS).
DPCL manufactures Quats phosponium and ammonium quatenary compounds (essentially a commodity business),
speciality chemicals, APIs and intermediates. The company's manufacturing facilities are located at Bavla and Naroda.
CRAMS business is the core of its business model and increased from 52% of its total turnover in FY06 to 56% in FY07.
Subsidiaries:
DPCL's subsidiaries are Dishman Europe Ltd., Dishman Cyprus Ltd., Dishman USA Inc., Dishman Intr. Trading
(Shanghai) Co., Dishman FZE, Dishman Africa (Prop) Ltd., Pharma Syn B V (PS) and Dishman Holland BV. In December
2005, the company acquired in Bern, a Switzerland based contract research company, M/s. I03S Ltd., through its
ANALYSIS
7
subsidiary Dishman Switzerland Ltd. The company completed the acquisition successfully and the business of Carbogen
Amcis AG. (CA) was integrated with it in August 2006.
Joint Ventures:
Its associate company is Schutz Dishman Biotech, a 50:50 JV with Schutz GmbH based in Germany. DPCL holds 22.33%
stake in the JV, Schutz GmbH holds 50% while the promoters of DPCL hold the rest. The JV is engaged in the
manufacture and sale of bulk drugs intermediates etc. that are manufactured at Bavla.
The company acts as a contract-manufacturing partner for the Belgium based Solvay Group supplying an API called
Eprosartan Mesylate (EM) together with its intermediates and the agreement is valid upto December 2008 and extendable
annually thereafter EM is a hypertensive drug marketed by Solvay under the brand 'Teveten' and Solvay's patent for EM
expires in 2013.
DPCL is one of Solvay's suppliers of EM and it supplies 30% of its requirement. The commercial production of EM by
DPCL started in March 2003. Further, the company has entered into a toll manufacturing contract with Solvay since May
2002 for toll production of another intermediate 7-DHC. This agreement was valid upto December 2007 but is extendable
annually thereafter.
The company's skills in process optimisation and improvements in the Quats business has opened another potential
avenue of contract research. The company views contract research as a window of opportunity to get more contract
manufacturing assignments from MNCs. To encompass the entire spectrum of the pharma business, the company has
now also set eyes on the generic business in advanced markets.
DPCL has already filed six Drug Master Files (DMFs) with various regulatory authorities abroad. It has started preparing
DMFs for production of APIs/Intermediates of generics that are likely to come out of patent in the next few years. Having
tasted success in contract manufacturing, the company is hopeful of locating marketing partners in the regulated markets
for select generic products and strengthen and expand its long-term relationship with global pharma companies.
During 2004-05, the company executed various agreements with an Arab company for Drug Industries and Medical
Appliances for setting up a JV project to manufacture 20 APIs in Arab countries not only for local sales but also for
exports.
Further, the company has entered into an agreement with NU SCAAN UK for the development & manufacture of Bulk
Actives for Neutraceutical products. This agreement recognizes the R&D capabilities of the Dishman Group including
Synprotech, the new acquisition in UK by Dishman. The company has acquired the business together with the technology
basket pertaining to a group of speciality chemical products from C6, UK.
The company is selling its products in Europe, USA, South Africa, Netherlands etc. through its subsidiaries and has an
expanding international portfolio of affiliates, joint ventures and alliances.
R&D: The company has created a state-of-the-art R&D centre and a Good Manufacturing Practices compliant (cGMP)
pilot facility at Bavla, which was commissioned in September 2006. This centre focuses on contract research at lab, kilo
and pilot plant scales. In addition to the R&D centre, there are three pilot plant facilities that are equipped with stainless
steel reactors, glass lined reactors, haste alloy reactors, SS Centrifuges, Fluid Bed dryer RVD, Cryogenic system etc. The
company has been investing systematically in its R&D activities.
Performance: DPCL's consolidated net sales turnover increased to Rs.573.87 cr. during FY07 with a net profit of Rs.91.71
cr. netting a basic EPS of Rs.13.15 and diluted EPS of Rs.111.32 for FY07.
Financial Highlights:
(Rs. in lakh)
Latest
Results: During
Q3FY08, the
company notched up consolidated net sales
turnover of Rs.206.57 cr. with a net profit of
Rs.32.05 cr. registering a basic EPS of Rs.4.22
and a diluted EPS of Rs.3.96. The annualised
basic EPS works out to Rs.16.88 and diluted
EPS of Rs.15.84.
Particulars
QE 31/12/07
QE 31/12/06
YE 31/03/07
Net Sales/Income
20657.20
17113.00
57386.68
Other Income
1249.56
290.17
2277.79
Income from associate
-
1.49
9.85
Total Income
21906.76
17404.66
59674.32
a. Inc/Dec in stock
(188.04)
250.93
(15976.71)
b. Raw Material
4319.13
2038.50
11039.88
c. Pur of goods
3577.66
1557.42
24271.81
d. Employee Cost
5474.39
4786.07
14092.22
e. Depreciation
1042.42
1555.48
2630.59
Share Profile: In October 2005, the company
sub-divided its equity share from the face
value of Rs.10 to Rs.2 per share. The share is
listed and traded on the BSE and NSE under
the B1 segment. At its current market price
of Rs.291.40, it has a market capitalisation of
Rs.2259.27 cr.
3488.97
3595.92
12317.69
f. Other Expenditure
g. Total
17714.53
13784.32
48375.48
4192.23
3620.34
11298.84
PBIT
Int & Fin Charges
767.14
674.85
1808.28
Profit before tax
3425.09
2945.49
9490.56
Tax Expense
219.80
502.38
319.66
Net profit after tax
3205.29
2443.11
9170.90
Paid up equity
1550.63
1380.95
Dividends: The company has been paying
dividends as shown below:
1444.26
(FV: Rs.2)
Basic EPS (Rs)
4.22
3.55
13.15
Diluted EPS (Rs)
3.96
3.02
11.32
March 2007 - 50%; March 2006 - 35%; March
8
2005 - 20%.
Shareholding Pattern: The promoters hold 63.16% while the balance of 36.84% is held by non-corporate promoters,
institutions and the Indian public. Mutual funds like HDFC, Magnum, Prudential ICICI, Tata Mutual Fund, DSP ML,
Birla Mutual Fund etc. have been adding the company's shares to their various schemes.
Prospects: India is regarded as a favorite outsourcing destination and the company is regarded as one of the early birds
having obtained a leadership position in this space in the pharma industry.
The global pharma industry outsourcing market is estimated at US $48 billion with a consistent growth rate of 10% over
the past 5 years and is expected to touch US $55 billion over the next 2-3 years with India capturing nearly 20% of the
global outsourcing pie.
The CRAMS business provides manufacturing and research services to global pharmaceutical and agrochemical
companies in both the innovative and generic space. The CRAMS business is expected to grow at a CAGR of 33% from
Rs.420 cr. in FY06 to Rs.740 cr. in FY08E.
Contract Manufacturing, Contract Research and Contract Sales are the broad segments of the industry. API
manufacturing, Clinical Research and Basic research are the major outsourcing services to the extent which Indian service
providers are utilised. As a result, many global pharma companies recognise India as a potential hub for outsourcing.
With the recent announcements by many MNCs of either reduction of their work force or closure of their manufacturing
units outside India, the scope of contract manufacturing has increased substantially.
India is emerging as a major destination for CRAMs with its existing pool of skilled human resource, low cost advantage,
technical expertise (IT, Chemistry, Biotechnology and Process Engineering), manufacturing capability (with highest
number of USFDA approved plants), diverse genetic pool, confidentiality and trust worthiness. DPCL being the first
mover in this space is one of the major players.
Conclusion: DPCL is a research driven company engaged in the business of synthetic chemistry research through
which it has developed cost effective processes for the manufacture of various intermediates, APIs, QUATS and
speciality chemicals. In fact, the company is focused on CRAMS, which is a lucrative from the profitability margins point
of view.
At its current market price of Rs.291.40, the DPCL share discounts earnings less than 17 times against the industry
average P/E multiple of 21. In fact, Divis Labs, which is also in the contract research space, enjoys higher discounting of
more than 30 times. Comparatively speaking, DPCL is available at reasonable valuations. In view of its encouraging
performance, good management and bright prospects for CRAM players, the DPCL share may accumulated for decent
appreciation in the medium-to-long-term.
Finance Minister fails to cheer the market
MARKET
By Ashok D. Singh
Finance Minister (FM), P. Chidambaram, posted the 5
th
Union Budget of the UPA Government last Friday. The sentiment
started turning negative after he proposed to waive all loans for small, marginal farmers. From thereon key indices
gradually slipped lower and dampened further after he proposed to hike the short term capital gains tax from 10% to
15%. He did not propose any change in corporate tax or rate of Securities Transaction Tax (STT) but said that the STT paid
will be treated like any other deductible expenditure against business income.
The BSE Sensex posted gains for 3 out of 5 days, whereas the NSE Nifty advanced for 4 out of 5 trading sessions. Small-
Cap and Mid-Cap indices underperformed the Sensex. The Sensex gained 229.65 points or 1.32% to 17,578.72 for the
week ended Friday, 29 February 2008. The NSE Nifty advanced 112.75 points or 2.20% to 5223.50 for the week. The
Sensex is down 3,628.05 points or 17.10% from the record high of 21,206.77 hit on 10 January 2008. The barometer index is
down 2708.27 points or 13.34% in calendar 2008 so far.
The FM announced changes in personal income tax slabs that will bring down tax liability of individual tax payers
substantially. With an eye on parliament elections in 2009, he also announced a package of a massive Rs.60,000 cr. of
waivers of loans of farmers.
The general Centvat on all goods has been reduced to 14% from 16%. The peak customs duty was kept unchanged at 10%.
The BSE Mid-Cap index rose 85.94 points or 1.13% to 7,680.39 in the week. The BSE Small-Cap index rose 32.72 points or
0.34% to 9,628.13 in the week. Both these indices underperfomed the Sensex.
Trading for the week started on an upbeat note with Sensex gaining 301.50 points or 1.74% at 17,650.57 on Monday, 25
February 2008. It rose 155.62 points or 0.88% at 17,806.19 on Tuesday, 26 February 2008 after Railway Minister, Lalu
Prasad Yadav provided thrust on modernising rail infrastructure in Railway Budget 2008-09 which he presented to
parliament that day.
The key benchmark indices came off higher levels in late trade on Wednesday, 27 February 2008, to settle almost flat due
to selling in IT and banking counters. The Sensex rose 19.80 points or 0.11% at 17,825.99.
9
On Thursday, 28 February 2008, the barometer index BSE Sensex ended almost unchanged in volatile trade as derivative
contracts for February 2008 series expired. The Sensex ended down 1.51 points or 0.01% at 17,824.48.
The BSE Sensex declined 245.76 points or 1.38% to close at 17,578.72 on Friday, the budget day. The Sensex hit a low of
17,258.20 in afternoon trade soon after the FM announced a hike in Short-term Capital Gains Tax on sale of shares to 15%
from 10%. At the day's low, Sensex lost 566.28 points. Sensex hit a high of 17,779.54 in early trade. At the day's high,
Sensex was still 44.94 points lower than it's previous days close.
The wholesale price index rose 4.89% in the 12 months to 16 February 2008, higher than the previous week's rise of 4.35%,
government data showed on Friday, 29 February 2008. Nifty saw a rollover of about 75% to March 2008 contracts from
February 2008, which expired on 28 February 2008. The market wide rollover was 72% to 73%.
The Sensex gained 229.65 points to close at 17,578.72 last week. The domestic market in the week will be influenced by the
analysis of fine-prints of the budget proposals. They will also be influenced by global markets. Federal Reserve
Chairman, Ben Bernanke, signalled his readiness to cut interest rates again to prevent further damage to the weak US
economy, even as he took note of rising inflation risks last week. Delivering the Fed's semi-annual report on the economy
to Congress, Bernanke made clear that the Central Bank was worried of the deepening housing slump, softening jobs
market and tighter credit could dim an already bleak economic outlook. Higher crude oil prices are also a matter of
concern.
10
Budget to benefit markets
MARKET
By G. S. Roongta
Despite three major events like the Railway Budget, Economic Survey and the Union Budget 2008-09, the stock markets
continued to drift lower last week ignoring all positive factors and initiatives that emerged from these major
pronouncements. This is indeed a matter of great concern since the market is only recognizing the negatives and ignoring
all positive developments.
While the Dow Jones Industrial Average, the barometer of the American stock markets, remained positive on three
consecutive days last week by about 240 points, 130 points and 40 points on 25
th
, 26
th
and 27
th
February 2008, the Indian
stock indices continued to drift lower and lower. Is this not strange? Because when our markets turn weak on account of
global cues, we cite the weak Dow Jones to justify it. But what about the converse when the Dow Jones is
positive on three consecutive day while our markets continue to weaken day by day? Why is there no
positive co-relation when the logic of negative co-relation is accepted?
This is because our markets have been badly hit as lakhs of investors have burnt their fingers by the
forced liquidation of their positions in the F&O segment in the third week of January 2008 and the losses
that they have suffered is unimaginable. Their absence from the market cannot be made up by a handful
of FIIs or some HNIs and the markets may limp along till retail investors return and bring back life into
the markets. Currently, the market is very hollow and will remain directionless till firm retail
participation helps establish a trend.
G.S. Roongta
We have written on this subject for the past four weeks and had suggested an enquiry by the watchdog body with
suitable punishment to brokerages that acted unilaterally in an undemocratic manner and compensation to their victims
i.e. retail investors but the Finance Minister (FM) has been too busy with the Budget while there was a change of guard at
the watchdog body and this matter lies ignored and unresolved.
Otherwise, how does one explain that a good Railway Budget with reliefs to almost every traveller followed by a growth
oriented Economic Survey the next day and a good Union Budget the day after could not trigger the long awaited
uptrend on the bourses? The Budget is a major trigger and was expected to shore up the sentiment that had turned weak
since mid-January 2008. But alas that was not to be as the markets responded negatively to these three magnificent events.
Thus three years of bull market stand destroyed without any justification so far as the Indian economic situation is
concerned. The FM has openly admitted in his Budget speech that the Indian Growth Story is still intact and the GDP
growth of 8.9% for 2007-08 is not wishful thinking and can be achieved as against the 8.7% average GDP growth for the
past three years.
If this average GDP growth is intact and was the single foremost reason for our stock markets to boom all these years,
then why should it stop recognising the current stage of strong growth all of a sudden? Is there no one in the government
or the regulatory authorities concerned enough to enquire into this sudden reversal of trend without any basic
justification? But if the authorities choose to remain silent, they will have to pay a high price as the stock markets will
continue to lie low for a long time as happened earlier during 1996 to 2002 till the retail investors returned to the stock
markets. It is amazing that the authorities appear unconcerned when lakhs of crores worth of market capitalization has
been drained out by this sudden reversal in trend. The longer they take to rectify the situation, the longer will be the
recovery.
Coming specifically to the Railway Budget and the Union Budget, let us admit that they were on expected lines as the
ruling UPA government was expected to play to the galleries and woo the 'aam aadmi' to return back to power in the
ensuing general elections slated in 2009 or else advanced earlier. This being the final year of the government, distribution
of goodies by way of reliefs, concessions and incentives was only to be expected.
Thus there was not a single spot of burden on the common man whereas he stood to gain by all round reduction of
railway fare and concessions. Even the railway coolies were not let out and granted a formal status with economic
benefits within the railway establishment. All in all, the Railway Budget was path breaking and growth oriented.
The Union Budget 2008-09 also attempted to win the common man and began addressing the woes of the poor farmers
many of whom were driven to suicide under the burden of debts, which they could not repay. At one stroke, the FM has
written off Rs.60,000 cr. advanced by banks to 4 cr. small and marginal farmers. This is surely going to fetch rich
dividends to the ruling coalition in the rural areas.
Further, 10% to 15% higher allocations for rural development, education, health, roads and housing and the creation of a
rural infrastructure fund are other positives to win the rural masses.
The reliefs in excise duty on a wide range of products including 2-wheelers, 3-wheelers, small cars, paper & pulp and
packaging items are again moves to win the middle-class votes.
The centre-piece of his Budget offering was the move to win over tax payers by raising the income tax exemption limit
from Rs.1.10 lakh to Rs.1.50 lakh per annum for men and from Rs.1.40 lakh to Rs.1.80 lakh per annum for women and
from Rs.1.59 lakh to Rs.2.25 lakh for senior citizens.
Reduction in custom duty while keeping the peak rates intact is another step to gain support of the business class.
Prominent among these are development projects, melting iron and aluminium scrap wherein the duty has been
scrapped.
But all these generous offerings fail to impact the markets positively. Possibly, marketmen have not understood the long-
term benefit of these moves. Although there was nothing specific for the stock market, the 5% hike in Short-term Capital
Gains Tax will not have any adverse impact while the liberalisation in the Securities Transaction Tax (STT) is a welcome
step and will mitigate the impact of the rise in Short-term Capital Gains Tax.
Mutual funds benefit indirectly
BUDGET IMPACT
By Devangi Bhuta
As was expected, the Union Budget 2008-09 wore the populist cloak at the street as the idea was to keep major segments
of the vote bank happy. In line with this, the agriculture and related segments like seeds, soil and fertilizers saw many
positive announcements while other major beneficiaries include the pharmaceutical, education, auto and textiles to an
extent.
As such the Mutual Fund industry did not have any direct impact but the indirect benefit will accrue by the 50% increase
in short-term capital gains tax and encourage serious investing, service tax on Unit Linked Insurance plan and TDS
exemption for corporate debt.
Equity schemes with scrips from these segments can be expected to do well.
As there is no major negative or
positive impact on the markets on
account of the budget, they are to
remain rangebound. Thus investors
wanting to park funds in Mutual
Funds may follow a few simple
guidelines:
Stagger your purchases over a
period of time to avoid
getting caught on the wrong
foot and average out your
purchase price. This will also
inculcate
a
disciplined
approach to investing.
Booking losses is not easy, but
sometimes it is better to do so
and invest in funds that not
only help an investor recover
the loss but also make some
Swing
Trading Seminar
Useful for layman to high-end analysts
Attend Swing Trading Seminar between 3 to 6 p.m. on Saturday, 8
th
March 2008 to develop your own signals of change in stock trend and
money management techniques for trading.
No technical knowledge required. It's very simple. Even housewives are
able to follow and profit from it.
Seminar fee: Rs.1200 per person.
Limited seats available. Call NOW to book your seat.
MONEY TIMES
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Tel.: 022-22654805 Telefax: 022-22616970
11
decent gains.
At any point in time, asset allocation cannot be overlooked and a fair weightage must be given to gold and debt
instruments along with equities. Many a time, investors tend to calculate the returns they would have generated
had they parked their current debt exposure in equities, especially during a bull market. What is more important,
however, is the converse. That is, during a market crash debt and gold exposures provide a cushion against the
loss in equities.
Investing in mutual funds should ideally be for the long-term period of 1-3 years to generate sufficient returns.
Tracking NAVs daily and making impulsive buys or sells may not augur too well for one's portfolio.
Lastly, understand the risk associated with a scheme and the diversification it provides with one's cash market
equity exposure. For example, a sectoral fund would typically carry a higher risk as compared to a diversified
equity scheme, which may follow a buy and hold strategy. Again, a fund manager betting on momentum is
adopting a riskier approach compared to one adopting the buy and hold approach.
Thus investing some time before making investing one's hard earned money may stand one in good stead over a period
of time.
By Saarthi
STOCK WATCH
Lok Housing & Constructions Ltd. (Code: 500256) (Rs.208.25) has a land bank of whopping 1222 acres across Mumbai,
Pune and Bangalore with development potential of 62.5 million sq. ft. Most of the land was acquired long back at very
low cost and is located at Ambernath (80 acres), Kalyan (92 acres), Vasai (136 acres), Turbhe (180 acres), Pune (425 acres),
Bangalore (240 acres) and the balance 69 acre spread across Andheri, Malad, Khar, Thane & Virar in Mumbai. With the
recent merger of Lok Shelter, the company is now involved in the lucrative business of urban rehabilitation and
reconstruction projects as well. Hence, it has already submitted a proposal to the State Government to rehabilitate tenants
of about 300 unsafe cessed buildings in Mumbai and simultaneously develop 6 million sq. ft. in the heart of the city in
association with MHADA. At the same time it has several residential townships under construction at Mulund,
Ambernath, Khar, Virar, Thane, Kalyan, Marol etc. Importantly, it has finalised preferential allotment of 50 lakh warrants
at Rs.354 to the promoters. Keep accumulating at declines.
*****
Yuken India Ltd. (Code: 522108) (Rs.196.15) is a reputed manufacturer of power saving hydraulic pumps & valves that
are used in the heavy engineering industry as an effective means of automation and hence find extensive use in various
key sectors like machine tools, material handling equipment, construction machinery, drill rigs, automobiles, defence,
steel, power and cement plants, plastic machinery etc. Besides, it also manufactures complete hydraulic power units as
per customer specification, cylinders, parison controllers, actuators, accumulators and power packs. Due to the huge
demand, the company recently doubled its hydraulic casting products capacity to 2400 TPA and is further augmenting it
to 6000 TPA within the next 2-3 years. Besides, it made a tie-up with Hydrocontrols SPA, Italy, to produce and market
state-of-the-art mobile control valves especially for agriculture, construction, earth moving and lifting machineries. For
FY08, it is estimated to clock a turnover of Rs.100 cr. with PAT of Rs.5.50 cr., which translates into an EPS of Rs.18 on its
tiny equity of Rs.3 cr. For FY09, the EPS could shoot up to around Rs.25. It is a screaming buy as the scrip as corrected
50% from its recent high of Rs.400.
*****
3i Infotech Ltd. (Code: 532628) (Rs.126.60) is the fourth largest Indian software products company offering a
comprehensive range of software products & solutions primarily in banking, insurance, capital markets, mutual funds,
telecom, manufacturing, retail and distribution industries. It provides complete end-to-end outsourcing solutions to
various industries mainly in the domestic market and specializes in non-voice based BPO services. It is also recognised as
a major player in the e- Governance consultancy space in India. Importantly, the company derives revenues from
products and services in a 1:1 ratio, which differentiates it from other IT companies. In order to beat the competition and
grow at a rapid pace, the company is betting high on the inorganic route and has adopted an acquisition-led strategy to
acquire new capabilities and foray into new geographies in the BFSI space. With net dollar inflow of less than 10%, the
company is hardly affected by rupee appreciation. On the back of excellent performance and considering its strong order
book position, it is expected to report total revenue of Rs.1200 cr. with net profit of Rs.175 cr. on a consolidated basis. This
works out to an EPS of Rs.10 on its fully diluted equity of Rs.175 cr. A good contrarian bet.
*****
Aurobindo Pharma Ltd. (Code: 524804) (Rs.329.75) is among India's top five pharmaceutical companies with operations
in over 100 countries and marketing over 180 APIs and 250 formulations. In fact, it is one of the largest players in Semi
Synthetic Penicillin and Cephalosporin space and is backward integrated into manufacturing the key raw material P-Gen.
Presently, the company derives nearly 70% of its revenue from the sale of APIs and intermediates while about 30% comes
from formulations. Interestingly, it is one of the largest DMF filer with the US FDA from India with 114 DMFs filed to
12
date. Besides, it has filed 100 ANDAs in USA and 40 ANDAs in Europe, out of which 62 approvals (both final and
tentative) have been received from USA and only 7 approvals from Europe. In order to increase its foothold in Europe,
the company earlier acquired Pharmacin in Netherlands with a portfolio of 203 market authorisations and Milpharm in
UK having 100 market authorizations. The company is now planning to invest around Rs.200 cr. in a SEZ at Jedcherla
near Hyderabad, and Rs.160 cr. in Pharma city near Visakhapatnam. To fund its growth plans APL has raised nearly
Rs.900 cr. through the FCCB route to be converted into equity shares at Rs.1014 and Rs.879 in tranches. On a standalone
basis, it is expected to register a topline and bottomline of Rs.2200 cr. and Rs.280 cr. respectively for FY08 i.e. EPS of Rs.52
on its current equity.
13
By Kukku
FIFTY FIFTY
Investment Call
* EBIDTA margin of Hindustan Construction Company (HCC) (Rs.165.85) moved up by 12.9% during Q3FY08 against
11.1% in Q3FY07 – an improvement of 180 bps. The key reason for improvement in margin is the change in the revenue
mix skewed towards hydro projects, which substantially reduced the losses from Bandra-Worli Sea Link project.
The management guidance for FY2008 order book stands at Rs.12000 cr. as it has submitted tenders for projects worth
Rs.5830 cr. and it is L1 in projects of roads, tunnels and bridges worth Rs.4000 cr. The company is pre-qualified to bid for
projects worth Rs.7200 cr. The composition of its order backlog as of 31
st
December 2007 stands as Power – 44%,
Transportation – 34% and Water Projects – 22%.
Update on Lavasa: During Phase 1 of bookings that commenced from October 2007, HCC has already sold residential
area of 1.2 million sq. ft. for Rs.32 cr. The launch rates were Rs.2950 per sq. ft. for villas and Rs.2450 per sq. ft. for
apartments. The management has indicated that they have achieved the sales target for FY08 and new bookings will now
open in FY09.
For Bandra-Worli Sea Link project, the Maharashtra State Cabinet has approved part of the cost escalations (increased cost
from changes in project scope and design) of Rs.160 cr. against claims of Rs.230 cr. As per the revised timeframe, the
project will be completed by December 2008 (4 lanes). Till date, the company has booked cumulative revenues of Rs.250
cr. on this project and incurred cost of Rs.480 cr., thus incurring a cumulative under-recovery of Rs.230 cr. (loss in P/L
account). The company expects to complete the project by December 2008.
It has several hydropower projects, which required quick mobilisation in terms of enhancing the on-site equipments and
manpower, which in turn increased the costs in FY07. During FY08 and FY09 as these projects will start contributing to
revenues.
Development of Vikhroli land: Construction work on the Vikhroli IT park has commenced (developable area of 1.95
million sq. ft. and the company plans to offer offices for fitouts by Dec 08 and occupation by March 2009. Revenue
booking from the project would start from Q4FY09. The management has indicated that expected rentals from the project
will stand at Rs.100 cr. per annum.
HCC may report net profit of Rs.80 cr. during FY08 (up 47% YoY), Rs.120 cr. in FY09 (up 54% YoY) and Rs.200 cr. in FY10
(up 68% YoY).
Investors are advised to accumulate this stock
on reactions around Rs.160/165 level for good
long-term growth.
Market Guidance
* Tilak Nagar Inds. (Rs.200) has come out
with encouraging results. The first 9
months' net profit is Rs.11 cr. against Rs.3.25
cr. in the same period last year. Operating
profit margin improved from 9.92% to 18.63%.
If this trend is any indication, full year EPS is
likely to be between Rs.26 to Rs.28 level. The
company intends to expand and develop an
all-India
presence.
Sales
in
existing
territories are being enhanced by suitable sales
and marketing inputs. Efforts are being
undertaken to further modernise its distillery
to increase production efficiencies and reduce
input costs, which has already started yielding
good results.
FOR WEEKLY GAINS
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The stock reacted from Rs.317 to around Rs.200 level and looks attractive for investment.
* Era Constructions (Rs.680.25) - Current full year EPS is likely to be around Rs.48/50 level as the first 9 month EPS is
Rs.36. The stock has reacted from Rs.950 to Rs.700 level. Stay invested.
* Positive reports are pouring in about Assam Company (I) Ltd. (Rs.33.75). Stay invested or add around Rs.30/31 levels.
* Cairn India Ltd. (CAIL) (Rs.228.80) is 69% owned by CAIRN Energy PLC, UK, an India-centric upstream oil & gas
company that aims to explore and develop the promising potential of hydrocarbon resources in India.
In January 2004, following the largest oil discovery by any company in India since 1973, CAIRN added the Mangala
oilfield in Rajasthan to its assets portfolio along with other discoveries in Rajasthan which form the core of its future
developments in India.
CAIRN divested 31% of its stake in CAIL through an IPO in December 2006. Subsequently, on 9 January 2007, CAIL was
listed on the NSE and BSE. The IPO attracted a number of high-quality investors including PETRONAS, which holds 10%.
The company is poised to reap the imminent upside from its world-class assets in Rajasthan that are under development
and move towards the first oil production by CY09 and the long-term growth potential in upstream oil & gas. Prospects
for India-centric companies are particularly bright based on the large unexplored acreage of sedimentary basins with
hydrocarbon prospects. India has 3.2 million sq. ft. of sedimentary basins bearing hydrocarbons traces. Out of this, only
44% has been explored.
As per informed sources, the company is likely to report an EPS of around Rs.9 for FY09, which is likely to go up further.
The company is attracting the attention of large investors with a long-term view. Stay invested or add on reactions.
* Revathi Equipments (Rs.988.80) has entered into an agreement to acquire a manufacturing facility near Chennai with
land of approx 10 acres and built up area of 30,000 sq. ft. for expanding the construction equipment business. As per
informed sources, the company is likely to report a sharp jump in sales over the next few years in construction
equipments, where the other major manufacturer is Greaves Cotton. There are also indications that there may be some
restructuring and the Drilling Equipment division may get demerged. Investors are advised to stay invested.
* Budget 2008-09 is good on the whole except the hike in short-term tax, which is raised by 50% and will hurt short term
investors. Capital goods sector, banking sector and the Steel sector are likely to do well.
* Stocks likely to benefit from the Budget are HCC, Hind Dorr Oliver, Indian Hume Pipe, Supreme Industries, Mather
& Platt Pumps, Finolex Pipes, Garware Wall Ropes, Central Bank, IOB and IDBI.
By V. H. Dave
EXPERT EYE
This scrip was earlier recommended in Early Bird Gains (EBG), our newsletter specialising in multi-baggers at Rs.243 on
18
th
July 2006. Since then, it has touched a high of Rs.275 on its split face value of Rs.2 fetching an absolute gain of 465%.
The share of Amara Raja Batteries Ltd. (Code: 500008) (Rs.220) is recommended at the current price as it is likely to touch
Rs.300 mark based on the sustained strong increase in the earning, fundamentals and promising future.
ARBL is a prominent player in the storage & automotive battery industry. It was promoted by R. N. Galla. Johnson
Controls Inc., a Fortune 500 company, with sales of US$ 22 billion holds 26% in the equity capital of ARBL.
ARBL initially set up a plant for the manufacture of sealed maintenance-free lead-acid stationary batteries for industrial
applications with an installed capacity of 1 lakh units per year. ARBL's plant is located in Karakambadi, a village 12 km
from the temple town of Tirupati in Andhra Pradesh.
ARBL manufactures a wide range of industrial and automotive batteries. It is a major player in the valve regulated lead
acid (VRLA) batteries that are used in industrial applications such as telecom, power and information technology, among
others. It is the preferred supplier to major telecom MNCs, like Siemens, Lucent, Alcatel, Ericsson, Motorola, Nokia and
VSNL, BSNL, MTNL, Airtel, and Indian Railways, besides a host of companies in industries such as power, oil & gas and
UPS systems.
In the automotive batteries segment, ARBL manufactures batteries only for passenger cars and commercial vehicles. The
existing facility is ISO9001, QS9000 and TS 16949 certified by RWTUV Germany and it supplies its automotive batteries
exclusively to Ford, General Motors- Opel diesel vehicles, Daimler Chrysler and preferentially to Hindustan Motors,
Telco, Mahindra & Mahindra, Ashok Leyland, Honda, Fiat and Swaraj Mazda under the 'Amaron' brand name.
ARBL's aftermarket retail network has been expanded and now comprises 135 franchisees from 125 at the end of FY07.
The Company currently has a pan India sales and service network with 135 franchisees, 99 Pit stops and over 12000 active
retailers.
Sales during FY07 went up by 64% to Rs.594 cr. Net profit jumped by 97% to Rs.47 cr. resulting into an EPS of Rs.8.1 on
the face value of its share of Rs.2. During Q3FY08, while sales advanced by 111% to Rs.308 cr. net profit moved up by
206% to Rs.29.7 cr. For the nine months ended December 2007, net profit jumped by 114% to Rs.68 cr. on 93% higher sales
of Rs.779 cr.
14
ARBL is in sound financial health. It has a small equity of Rs.11.4 cr. With reserves of Rs.232.3 cr., the book value of the
share works out to Rs.43 on the face value of Rs.2. The value of its gross block as on 31-03-2007 stood at Rs.264 cr. With
borrowings of Rs.144 cr., its debt-equity ratio was 0.58:1.
The promoters hold 52% in its equity capital. FIIs hold 9%, domestic institutions/mutual funds hold 10.5%, PCBs hold
10.2% leaving 18.3% with the investing public.
ARBL's expansion for raising its capacity of automotive battery to 3.6 mm units per annum at a cost of Rs.16 cr. and
industrial 2 Volt VRLA Battery capacities by nearly 50% from 240 mm AH to 350 mm AH per annum envisaging an
investment of Rs.11 cr., was completed in FY07.
ARBL has invested of Rs.88 cr. to increase the automotive battery capacity by 50% from 3.6 mm units per annum to 5.4
mm units per annum. The expansion is expected to be completed by the last quarter of FY08.
ARBL has invested Rs.113 cr. in setting up a facility at Tirupati for the manufacture of small Valve Regulated Lead acid
(VRLA) batteries for two wheelers and small VRLA batteries for the telecom sector spread over 3 years. The capacity of
the said facility would be 5.74 million units.
In the telecom sector, there was increased demand for VRLA batteries from both the private and public telecom
companies.
ARBL is a market leader in Singapore and also has a sizeable presence in the quality conscious Japanese market which is a
testimony to its claim of being a high quality product.
0ARBL is all set to increase its sales by about 90% to Rs.1130 cr. with net profit improving by about 112% to Rs.100 cr.,
which will result in an EPS of Rs.17.5 in FY08. The EPS could increase to Rs.25 in FY09 on the back of expansion and the
booming economy and industrial growth.
The shares of ARBL are currently traded at Rs.220 discounting its FY08 estimated EPS of Rs.17.5 by 12.3 times and FY09
projected EPS of Rs.25 by 8.6 times.
The industry average P/E of the electrical equipment segment, in which ARBL operates currently rules firm at about 38
leaving tremendous scope for the ARBL scrip to rise further.
Investment in this share is likely to fetch decent appreciation of more than 40% in about 6-9 months. The 52-week
high/low of the share has been Rs.275/64.
*****
Aftek Ltd. (AL) (Code: 530707) (Rs.52.85), which was incorporated in 1986 and went public in 1995, commenced
operations by developing its own branded PCs, IBM PCs and embedded software. Its facilities are located in Mumbai,
Bangalore and Pune.
AL provides software services and product development in the area of embedded software - one of the fastest-growing
segments in IT. The software products developed by AL includes the infrastructure management product - PowerSafe
and an enterprise-wide UPS management solution.
In the embedded software space, AL's products include PDAs, security gateways, bus validators that are contact-less,
smart-card enabled and wireless capable. These products find application in transport, network communication, banking
and automation industries. Opdex Inc, the American arm of AL has tied up with the US-based MGE UPS Systems to
market Aftek's PowerSafe solution.
Over the years, AL has grown through acquisitions and growth. During FY07, AL reported consolidated sales of Rs.352
cr. with net profit of Rs.111 cr. and recorded an EPS was Rs.12 on the face value of Rs.2 per share. During Q3FY08, its net
profit advanced by 10% to Rs.27.8 cr. on 16% higher sales of Rs.105 cr. During the first three quarters of FY08, it posted 9%
lower net profit of Rs.78 cr. on 16% higher
sales of Rs.299 cr.
Its equity capital is Rs.18.7 cr. and with
reserves of Rs.563 cr., the book value of its
share works out to Rs.62.2. As on 31
st
December 2007, the promoters hold 17% in its
equity capital, FIIs and GDR represent 21.6%,
PCBs hold 23.7%, institutions hold 2% leaving
35.7% with the investing public.
Following the acquisition of Seekport, a pan
European search engine in 2004 through
Arexera Information Technologies in which
AL has 100% stake the company has increased
its presence in the search engine business. It
focused on Great Britain and France after
having made inroads in German-speaking
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15
16
countries.
Seekport is not only spreading its wings geographically but has also become a talk of the press and television media. The
company has strongly grown in Germany, France and the UK. Seekport provides search technology to internet
advertising agencies like Espotting on a B2B basis or to retail users on its portal on a B2C basis and its speed can be
favourably compared to Google or Yahoo.
In 2004, AL also acquired 17% stake in V-Soft Inc., a US based company headquartered in Saratoga, California. V-Soft is a
provider of high quality customized engineering solutions to clients in USA using engineering resources from India. The
company has retained the option of acquiring V-Soft after a period of four years.
V-Soft provides a single, local contact for all business and technical communication making the management interface
between USA and India effectively transparent for its US clients. V-Soft has chalked out a growth plan for its operations
covering the entire US market, utilising the engineering skills of the company as its prime business partner. V-Soft's
clientele includes HP and Honeywell in the Business Process Outsourcing (BPO) segment. Microchip, Alcatel, Cisco
Systems and FEI are a few examples in the engineering services sector.
AL has acquired a stake in Elven Micro Circuits with the intention to integrate the company fully with itself. Elven is in
the open system interconnection model that depicts communication as a structured, seven-layer stack. Elven in turn has
bought C2Silicon, a Bangalore based company. AL has successfully completed the merger of Elven Micro Circuits Pvt. Ltd
(Elven) and C2Silicon Software Solutions Pvt. Ltd. (C2) with itself.
Recently, AL bought 25% stake in Pune-based Digihome Solutions, which provides digital home gateway solution
addressing six different needs of any modern home siz. security, safety, automation, entertainment, information and
communication including video surveillance, fire and smoke detection and access control in homes and townships. AL is
slowly increasing its stake to become a 51% shareholder. It has also appointed Grant Thornton as its auditors for shaping
up for a rerating.
With core competency in communications, AL is now into networking, telecommunications, semi-conductors and
automobile verticals offering customised application development products engineering and soft testing services. Today,
its market spreads in Europe, Australia, UK, Spain, Germany, France, Japan and the USA.
Due to increasing complexities, the size of IT projects rapidly changing technology and lack of skilled resources, many
organisations are outsourcing their IT services to external providers. Global IT spending is dominated by key industry
segments, such as government, banking and financial services, manufacturing, infrastructure, retail and healthcare.
Global IT services spending are projected to grow at a CAGR of 6.4% to reach $512.8 billion by 2008 according to
International Data Corporation.
Elven and C2 have enhanced AL's embedded skills by bringing embedded ICs or VLSI skills to the company. Apart from
marquee clients in Japan and USA, this merger has positioned AL very strongly in the Embedded Engineering Services
market. Looking at Nasscom's report, it appears that this is the next big thing that is happening with maximum growth
attributed to this sector. It is expected that Engineering Services would grow from the current US $4.9 billion to $50 billion
by 2020. Automotive, Aerospace, Technology, Telecom, Utilities are expected to be the top 5 verticals in the Engineering
Services Outsourcing.
Based on the current going, AL is all set to post a consolidated net profit of Rs.110 cr. on sales of about Rs.400 cr. in FY08.
This would give an EPS of Rs.11.8. The AL share is currently traded at Rs.52.85 at a P/E of 4.7 on its estimated EPS of
Rs.11.8 against the industry average P/E of 14.
In view of the bright prospects of the IT industry, the excellent outlook for the AL's business, the AL share is
recommended with a target price of Rs.75 in the medium-term. The 52-week high/low of the share has been Rs.103/46.
*****
The share of VST Tillers Tractors Ltd. (VSTTTL) (Code: 531266) (Rs.161.10) is recommended for decent appreciation in
the medium-to-long-term. An analyst with a reputed brokerage house recommends the share with a target price of Rs.225
in the medium-term.
VSTTTL is a major player in the power tiller industry and is cashing in on the tractor boom. It also has an integrated
facility for engine components. Its products find application in dry tilling, cultivating, deweeding, water pumping,
ploughing, ridging, wet puddling and transportation of goods. Its engine components have great export potential.
During FY07, sales moved up by 25% to Rs.162 cr. (Rs.130 cr.) and net profit advanced by 69% to Rs.12.5 cr. (Rs.7.4 cr.)
yielding an EPS of Rs.21 and it paid a dividend of 40%. During Q3FY08, VSTTTL posted 6% lower net profit of Rs.3.4 cr.
on 11% increased sales of Rs.40.5 cr. compared to Q3FY07. For the first nine months of FY08, sales advanced by 13% to
Rs.131 cr. as compared to Rs.45 cr. in the same period of FY07, and the net profit at Rs.9.3 cr. advanced by 9%.
Against VSTTTL's tiny equity of Rs.5.8 cr., the reserves stood Rs.52 cr., which gives its share a book value of Rs.99 making
it a potential bonus candidate. The value of its gross block is a whopping Rs.53 cr. With borrowings of just Rs.7.8 cr., its
debt-equity ratio works out to 0.13: 1.
The promoters hold 55.6% in its equity capital. Mitsubishi Heavy Industries holds 3%, non-promoter corporates hold 7%
leaving 34.4% with the investing public.
VSTTTL has 30 acres of land in prime areas of Bangalore and Mysore. It has 23 acres land vacant as its plant occupies only
7 acres and its land value is believed to be pegged at a whopping Rs.300 cr. Sources say that VSTTTL might consider
relocating its plants due to traffic inconvenience. If this happens, it will unlock substantial value for shareholders.
The government's policy on agriculture and the introduction of the Bharat Nirman Programme for creating massive rural
infrastructure that will directly boost the demand for VSTTTL products. Overseas, several importers realizing the
business potential for its power tillers have begun imports. These low cost tillers qualify under subsidy schemes that
could intensify competition abroad.
The demand for VSTTTL's tractors started on a buoyant note especially in Maharashtra and Gujarat. With higher volumes
planned, new markets for low horse power (HP) tractors are being established. The growth of the power tiller and tractor
industry is directly linked to the GDP growth of the Indian economy.
The Central and State Governments have given priority to agriculture and rural development by providing subsidies to
small and marginal farmers. It is pertinent to note that almost 70% of the power tillers sold by VSTTTL are through
government schemes. As such the prospects for VSTTTL look extremely bright.
Based on the current going, VSTTTL is likely to register sales of Rs.190 cr. with a net profit of Rs.14 cr., which would
result in an EPS of Rs.24, which may increase to Rs.32 in FY09.
The VSTTTL share is traded at a P/E of 6.8 on FY08E and 5.2 on FY09E, can be bought with a target price of Rs.225 in the
medium-to-short term. In the event of its foreign collaborator hiking its holding, the share would be rerated and its value
will shore up significantly. Any move of shifting its manufacturing base from its prime location in Bangalore and Mysore
will unlock substantial value for its shareholders. The 52-week high/low of the share has been Rs.259/112.
17
By Nayan Patel
TECHNO FUNDA
Pharma sector is the biggest beneficiary from this budget
This is first time after so many years that the Pharma sector attracted so
much relief.
We have found one good share in the Pharma sector, which is low-priced
but is likely to give high returns in coming days.
Short-term Capital Gains Tax increased from 10% to 15%, which is negative for the market. Sensex was down by 245
points. FM wants investors to go for the long-term and avoid the short-term.
Twilight Litaka Pharma
BSE Code: 506985
Last Close: Rs.62
This Pune based high growth Pharma company has an equity of Rs.10.64 cr. and the promoters hold 63.74% stake in the
company. It has a face value of Rs.5 per share. Since the last 3 years, the company has been farinf well and has reported
fantastic results. Net profit jumped 51.80% to Rs.15.62 cr. while Net sales jumped 46.43% to Rs.214.81 cr. in the first nine
months of FY08. We expect the company to post an EPS of Rs.10 this year. As such, the stock is available at PE ratio of just
6.2.
Last month, its stock price touched Rs.107.80 but in this poor sentiment it is available at just Rs.62. Buy with medium-to-
long-term investment point of view with a stop loss of Rs.55. On the upper side, the stock price can touch Rs.72, crossover
will take it to Rs.87 in medium term. The stock price can cross it's 52-week high in the next one year.
Tata Growing Economies Infrastructure Fund
Tata Mutual Fund has launched the Tata Growing Economies Infrastructure Fund, an open ended equity scheme with a
two plan option for investors.
The scheme aims at leveraging the performance of infrastructure and other infrastructure related sectors in the growing
economies of the world and in India. The objective of the scheme would be to invest primarily in equities of
infrastructure companies overseas.
The New Fund Offer, priced at Rs.10 per unit (plus applicable load) opened for initial subscription on 18
th
February and
will close on 19
th
March 2008. The scheme will re-open for ongoing subscriptions not later than 30 days from the closure
of the NFO.
DSP ML Natural Resources and New Energy Fund opens on 3
rd
March
MONEY FOLIO
Review
Last week we recommended Sarup Tannery
at Rs.34.20. During the week, the stock
touched the Rs.36.50 level.
DSP Merrill Lynch Fund Managers Ltd. is launching DSP Merrill Lynch Natural Resources and New Energy Fund, an
open ended equity growth scheme investing in companies which form a part of the Natural Resources, Energy and New
Energy sector.
A minimum of 65% of the scheme's corpus will be invested in Indian companies, which are a part of these sectors. The
scheme also has a provision to invest a maximum of 35% of its corpus in Merrill Lynch International Investment Funds –
New Energy Fund and Merrill Lynch International Investment Funds – World Energy Fund and/or through securities of
companies domiciled overseas and principally engaged in the sectors of natural resources and alternative energy. The
NFO opens on Monday, 3
rd
March and closes on Friday, 27
th
March 2008.
The natural resources sector is in the middle of a super cycle with large amounts of capital being allocated to this sector.
With strong growth in the levels of industrialisation and urbanisation in the emerging markets, the demand for natural
resources is fast outpacing the levels of supply.
Rapid urbanisation, increasing income levels & rising affordability, positive demographics and easier availability of credit
drive the consumption side of natural resources in India whereas Airports, Railways, Roads, Ports and Power, increased
role of public-private sector partnerships, private sector driven investment demand for natural resources and increased
focus on Special Economic Zones drives the investment side of creation of physical infrastructure. India is at an inflection
point with its GDP per capita in excess of USD 3,800 and at an estimated rise in the urbanisation rate to 86% by 2030.
The tightening of oil supply is likely to support price for oil and associated equities. This rise in price has also generated
interest in the alternative energy sector. The Government's policy on climate change and energy security along with
technological and operational advances has also helped drive interest in this sector.
Glory Polyfilms plans major expansion
Glory Polyfilms Ltd., a leading player of multi-layer films and laminates used in the packaging industry, has planned a
major expansion from 3,000 TPA to 33,016 TPA and is also introducing seven-layer films at its latest, state-of-the-art
manufacturing unit equipped with latest R&D facilities at Daman.
It is also enhancing its laminating & printing capacities from 1,500 TPA to 7,000 TPA and its printing capacity from 5,544
TPA to 15,456 TPA.
Cox & Kings plans IPO
Cox & Kings (India) Ltd., one of the oldest and most reputed travel organizations in India, proposes to enter the capital
market with an IPO of 8,700,000 equity shares of Rs.10 each for cash at a price to be decided through the 100% book-
building process.
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.
18
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per issue as courier charges)
Winners:- Rs.2000 yearly.
By email
By post
Courier (Add Rs.25 per issue as courier charges)
Name (in capital):______________________________________________________________
Address: ______________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Tel. No.: (O) ___________________ (R) ___________________ (M)___________________
Email ID: ______________________________________________________________________
Are you an Investor
Trader
Broker/Sub Broker
Investment Adviser
Banker
Date & Place _____________
Signature ________________

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