indian stock market

How to pick potential stocks

2011-12-23T13:47:00.001+03:00

Investment tips: How to pick potential stocks

18 Dec, 2011, 0546 hrs IST, Kavita Sriram, ET Bureau

After the correction, the markets have almost reached the bottom. Perhaps, this may be the ideal time to add some new stocks to your basket. Here are some popular stock-picking strategies:

Bottom up investing

Here, the investor filters stocks of companies that have inherently strong fundamentals . Companies are evaluated for strength and efficiency of the management team as well. The ability of the management team in strategic decision-making and building value is a significant contributor to a company's growth.

In a bottom up investing approach, it must be noted that the investor picks a company's stocks based on its performance and fundamentals and not on performance of the sector. Historical performance of the company and its growth prospects also help assess it.

This approach is usually considered a narrow strategy where the broader economic climate and industry performance is not factored in. Investors believe that these companies are fundamentally stronger than the others in the sector, based on their past performance and efficiency of operations. Hence, external factors are believed to have little influence in the stock picking.

Some analysts feel the broader sector trends could impact future performance of the company and not analysing them could blur the decision-making process.

Top down investing

In this method, investors analyse the broader market before narrowing down to individual stocks. GDP, health of the economy and market, interest rates, inflation , geopolitical scenario and global factors are first studied. This is unlike the bottom up method where fundamentals of individual stocks are first analysed before taking into account the expansive global economy.

Next, sectors where investments are prudent to make are identified. Finally, individual stocks from these sectors are identified based on fundamental and technical analysis. An extensive analysis of individual stocks is made by the investor.

A top down approach helps determine the overall market condition and economic climate. It helps build a diversified portfolio with exposure to numerous sectors that are performing well.

In the bottom up approach where investors narrow down on the stocks before considering the economic climate, the possibility of over-exposure to equity is high. A top down approach, on the other hand, could fail if the analysis of the overall economy goes wrong.

Picking bargain stocks at lows could be quite a challenge . Careful analysis and study can help you sail through turbulent times.

CIPLA

2011-11-30T18:52:00.001+03:00

Investment Focus - Cipla: Buy

Srividhya Sivakumar

November 26, 2011:

Investors looking for long-term additions to their portfolio can use the ongoing market correction to accumulate the stock of Cipla. Improving financial performance, better utilisation of its newly set up manufacturing facility at Indore SEZ, besides promising growth prospects make the stock an attractive investment bet. At the current market price of Rs 316, the stock trades at about 20 times its likely FY13 per share earnings. This seems justified considering the company's strong generic pipeline, entry into bio-similars and the likely commercialisation of its CFC-free inhalers in the next couple of years. A manageable debt on its books is also a positive.

In the quarter ended September 2011, Cipla reported a 10 per cent increase in sales to Rs 1,732 crore and 17 per cent increase in profits to Rs 309 crore. While its domestic business grew by about 12 per cent (48 per cent of total sales), exports reported a growth of 9 per cent. Thanks to an improved product mix and higher output at its Indore SEZ facility, the company reported a 2.2 percentage point expansion in operating margins to 24.6 per cent. Notably, Cipla's new facility at Indore SEZ had so far only added to its overheads and had dogged its performance in the last few quarters. The September quarter has seen a significant improvement on this score, with the facility contributing about Rs 150 crore in sales. While these are early signs — it would take a couple of years before the facility reaches optimum utilisation levels — it does reduce uncertainty.

While a strong domestic sales network, and entrenched presence in inhalers and acute/chronic therapies provided Cipla a stronghold in the local market, it is exports that hold the key to future growth. It is currently developing eight CFC-free inhalers for the US and European markets — the management hopes to launch the inhalers in Europe in the next three-four years. It has filed 11 products related to the inhaler business in the EU market and has received four approvals; six are under various stages of processing.

Cipla has maintained its growth guidance of a revenue growth of about 10-12 per cent this year. It expects its bottom-line growth to be in line with its half-year performance (about 8 per cent). The planned higher focus on exports and reduction in sales of its low-margin antiretroviral would help the company improve its margins. While the draft national pharmaceutical pricing policy, if implemented, could affect realisations , the company expects only a 2-3 per cent impact on its domestic sales.

Pipavav Defence soars on nod for preferential issue to strategic investor

2011-11-22T13:26:00.000+03:00

Pipavav Defence and Offshore Engineering Company surged 9.02% to Rs 61.65 at 11:19 IST on BSE after the company's board approved issuing 8.18 crore equity shares on preferential basis to an international strategic investor at a minimum Rs 110 each.

The company made this announcement during trading hours today, 22 November 2011.

Meanwhile, the BSE Sensex was up 184.88 points, or 1.16% to 16,130.98.
On BSE, 46.81 lakh shares were traded in the counter as against average daily volume of 26.29 lakh shares in the past one quarter.
The stock hit a high of Rs 62.20 and a low of Rs 55.65 so far during the day. The stock had hit a 52-week low of Rs 50.65 on Monday, 21 November 2011. The stock had hit a 52-week high of Rs 92.60 on 13 September 2011.
The stock had underperformed the market over the past one month till 21 November 2011, declining 33.59% compared with the Sensex's 5% fall. The scrip had also underperformed the market in past one quarter, falling 8.79% as against 1.21% decline in the Sensex.
The mid-cap ship builder has an equity capital of Rs 665.80 crore. Face value per share is Rs 10.
Pipavav Defence and Offshore Engineering Company said the proposed preferential issue to the strategic investor will be made at a price not less than Rs 110 per equity share or price to be determined pursuant to formula prescribed as per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, whichever is higher.
Pipavav Defence and Offshore Engineering Company said the aforesaid investment by the strategic investor in the company will be a long term strategic investment in the company. The investor will initially subscribe to 5% of the paid-up capital of the company and within specified time will increase its holding in the company to upto 10% of the paid-up capital of the company, the company said in a statement. The company further added the investor is a leading and extremely reputed global conglomerate with strong interest in defence sector. The investor will bring in critical technology required for manufacture of complex and critical equipments, systems required by armed forces i.e. navy, army and air force. The investor will have a right to nominate one director on the board of the company, the company added.
Pipavav Defence and Offshore Engineering Company also said that it has successfully delivered "The Golden Suek", a 74,500 DWT Panamax bulk carrier, to Golden Sapphire Inc, nominated by Golden Ocean Group, a company headquartered in Norway.
Pipavav Defence and Offshore Engineering Company reported a net profit of Rs 9.41 crore in Q2 September 2011 compared with a net loss of Rs 2.20 crore in Q2 September 2010. Net sales jumped 155.7% to Rs 449.15 crore in Q2 September 2011 over Q2 September 2011.
Pipavav operates the largest shipyard in India, covering over 200 hectares with approximately 720 metres of sea front and 685 metres of outfit quay. The company also has a license to build warships for the Indian Navy.

ALOK INDUSTRIES--BUY

2011-11-14T00:27:00.000+03:00

November 12, 2011:

A varied product mix, backward integration, strong export standing and low valuations make the stock of Alok Industries a good bet in the textile space for investors with a 2-3 year perspective. At Rs 20, the stock trades at four times trailing four-quarter earnings, at a steep discount to closest comparable Bombay Rayon Fashions.

Ranged presence: Over the past two years, Alok has gradually brought polyester yarn into its product offering to diversify out of its cotton concentration. In international markets, man-made textiles have a stronger presence than natural fibres such as cotton. In the first six months of this financial year, polyester accounted for as much as 36 per cent of revenues. It also deepened product lines; for instance, it introduced terry towels in the home textiles segment. Alok's product range includes apparel fabric, garments, home textiles, and polyester and cotton yarn.

Alok derives about a third of sales from exports. While the biggest consumer markets of the US and Europe are troubled, Alok's large capacities serve it well. As global retailers look to contain costs, they may consolidate suppliers and source more from fewer vendors. Those able to ramp up production to meet higher demand could thus benefit.

During the previous recessionary phase, Alok had been able to grow exports by virtue of its capacities. In the six months ended September 2011, exports have expanded a healthy 28 per cent. As fresh capacity expansion across product categories comes on stream by the end of December, revenues could see better growth. It also plans to deepen presence in domestic retail; however, with its franchise route of expansion, extensive capital will not be required. Further, retail accounts for less than one per cent of revenues.

Debt and interest: Revenues for the first half of this financial year have grown by 48 per cent, helped by price and volume growth. Operating margins stood at 26 per cent, down from the 29 per cent in the year-ago period on a higher contribution of low-margin polyester in revenues. With prices of inputs such as cotton cooling off over the past several months, the earlier margin pressures from material costs have lightened. Backward integration into spinning of yarn has also helped it record better margins than peers.

However, with debt-equity at 3.1 times, interest costs have hurt Alok. Net profits grew by 10 per cent for the first half of this financial year; interest outgo rose 35 per cent during this period. Still, some of the debt comes under government schemes which have long repayment periods. It has also begun to dispose of its real estate, raising about Rs 100 crore thus far. It aims to collect about Rs 1,400 crore through such sales by the end of 2012 which will significantly reduce interest burden.

TTK Prestige has managed to create a buzz in the pressure cooker silo

2011-11-13T23:55:00.002+03:00

High On Pressure

TTK Prestige has managed to create a buzz in the pressure cooker silo

Venkatesha Babu

TEXT SIZE : A | A | A

"Irrespective of economic conditions, we will continue to grow as we sell every day utility stuff” says T.T. Jaganathan chairman of TTK Group (Photographs: Jagadeesh NV)

You would think it would be difficult to innovate with something as mundane as a pressure cooker. But, challenged by new appliances that not only looked better but also cooked faster, the 56-year-old company, TTK Prestige, has picked up the gauntlet. It has come out with a microwave pressure cooker, Microchef.

The new product, launched in 2011, showcases TTK’s makeover drive. For decades, the company had been selling seemingly-unchanged kitchen items such as pressure cookers, pots and pans along with kitchen electrical items. But over the past few years, it has been innovating and has brought out new, consumer-friendly products. Net result: revenues and profits have jumped. In 2010-11, it had a more than 50 per cent growth in revenue and net profit. For the six months ending 30 September 2011, it recorded a revenue of Rs 536.62 crore and a net profit of Rs 59.05 crore — 55 per cent up from the same period last year. The strong performance reflected in the stock price as well — the scrip has risen more than 40 per cent this year.

But things were not always so. A decade ago, the company’s reserves and surplus were very low, and it was on the verge of knocking on the doors of the Board for Industrial and Financial Reconstruction (BIFR). “We went through a bad patch. In 2001-02, TTK Prestige was seen as a single-product company — aluminium cookers. There too, excise and sales tax made up 45 per cent of the retail price. Moreover, customers were moving from branded to unbranded (products),” says T.T. Jaganathan, chairman of the Rs 2,000-crore TTK Group, which, apart from kitchen appliances, sells everything from innerwear to condoms, from deodorants to life-saving heart valves.

Its other problem was that it was considered chiefly a south Indian player. Hawkins and smaller regional players dominated the other parts of India — they sold inner-lid cookers, while Prestige sold outer-lid ones, which were preferred in the south. Moreover, labour trouble plagued the company, and Jaganathan struggled with ill-health. Even though by 2006-07, things improved — Rs 11.77 crore net profit on revenues of Rs 293.25 crore — there were rumours that the company was up for sale.

The Innovations
Prestige realised that it had to come up with new products. While the Prestige brand (the name under which it sells its cookers) had a strong and loyal customer base, its other kitchen appliances lagged brands such as Bajaj Electricals, Philips, Kenstar and Morphy Richards. Korean giants LG and Samsung were also making a strong play in microwaves.

The first new product was launched in 2003-04 — a ‘smart’ pressure cooker, which had features such as quick steam release and a better safety mechanism. But it bombed in the market. “We had pushed 300,000 of them. But they did not sell for multiple reasons. We had to take them back from our dealers. And in a year when we were selling a mere million cookers,” says Jaganathan.

TTK Prestige’s distribution network was mainly based on patra-kadai (utensil shops), which did not sell electrical appliances.

So Prestige made two bold, and in hindsight, rewarding bets. It aggressively pushed kitchen appliances and introduced new ones — wet grinders, mixer grinders, induction cook tops, LPG stoves, electric kettles, toasters, coffee makers, non-stick cookware, hoods, hobs, kitchen knives, irons and barbeque tables, among others. It also set up its own exclusive stores. “The idea was to showcase the entire product range and market it; not necessarily sell,” says Chandru Kalro, executive vice-president of marketing at TTK. Seeing the increasing footfalls at the franchisee exclusive stores, neighbourhood utensil dealers, who were initially reluctant to stock Prestige products, started doing so.

The company now has a retail footprint in 30,000 outlets across India, and 320 Prestige exclusive stores (though these contribute only 20 per cent to total sales).

Urbanisation and nuclear families meant a ready market for TTK Prestige’s new products. In its mainstay, pressure cookers, it launched an inner-lid model in 2005, as also newer designs, colours and innovations for Indian cooking. For instance, non-stick cookware on which steel spoons and ladles could be used.

break-page-break
Similarly, it redesigned induction cook tops so that heat was dispersed uniformly. Such cook tops were not popular in India because they were mostly imported from China and not adapted to Indian cooking — the food would get burnt. Prestige’s redesign also took into account voltage fluctuation. In the past six months, since its launch, the company has sold Rs 90 crore worth of induction cook tops.

Another new product was the colourful, apple-shaped pressure cookers that it launched a couple of years ago. Prestige realised that kitchens, too, had to reflect the owners’ upwardly mobile lifestyles.

From a single product, TTK Prestige today sells over 350 products and aims to get 80 per cent of its projected Rs 1,200 crore revenue for this year from launches in the past five years by boosting margins. Last year, this share was about 50 per cent. For example, the apple cookers cost 25-30 per cent more than their plain cousins. Prestige Popular, their mass-market 2-litre brand, costs about Rs 780, while an aluminum apple cooker of the same capacity costs Rs 1,030, and a hard anodised one, Rs 1,300.

The Microchef microwave cooker is the result of continuous feedback on the need to reduce cooking time. “It took us 12-18 months to launch a finished product as we worked on things like visual pressure indicator and a secondary safety device,” says Kalro. Microchef is expected to increase its share among the 5 million cookers TTK Prestige sells annually.

On Full Steam
Jaganathan says the pace of launches will only accelerate — 100 in just this year. “I expect us to continue growing 50 per cent-plus for the next few years. Irrespective of economic conditions, the company will continue to grow as we sell every day utility stuff whose cost varies from a Rs 75-soup ladle to a Rs 15,000-kitchen hood.”

Branding and business strategy consulting guru, Harish Bijoor, CEO of Harish Bijoor Consultants, says, “TTK Prestige, while an old brand, has managed to don a young avtaar. It has adapted and even started leading change in the marketplace. Kitchens are no more a hot hole. They represent lifestyle statements.”

Apart from kitchen ware, Jaganathan says the company will soon enter newer markets such as water purifiers, kitchen gadgets, kitchen storage, and segments such as the Rs 5,000-crore ceramic cookware market.

“In water purifiers, for instance, there are strong existing incumbents. But when we launch in the next few months, we will have a key differentiator. This is the same kind of strategy we have adopted to penetrate and grow in other markets,” says Kalro.

But the company will not venture into white goods. “I see no innovation — in technology, pricing or supply chain — that TTK can do there. And I cannot compete with the Samsungs, LGs or the Japanese brands. The Prestige brand resonates in all things kitchen and that is where we will focus,” says Jaganathan.

"When we launch water purifiers in the next few months, we will have a key differentiator” says Chandru Kalro executive vice-president, marketing, TTK Prestige

Also, TTK Prestige will continue to focus on the domestic market. Exports form less than 10 per cent of its revenues. While it has 2,000 employees, the company is investing Rs 250 crore more on new manufacturing facilities, which are expected to come up in Gujarat and Uttarakhand.

All this is not lost on competition. Says the CEO of a regional kitchen appliances company who did not want to be identified: “They have been able to effectively leverage the Prestige brand into newer categories in the kitchen. However, it remains to be seen how far they can stretch the brand. In storage, for instance, they will come up against strong players such as Tupperware. Ceramic cookware is mainly a premium segment and I do not know whether they can compete with international brands there.”

The recent good run by TTK Prestige has given the conservative, family-run group a second wind. “The family owns 75 per cent (in the company), and there is no question of us selling. Experienced and competent professionals run operations. Ownership and management are two separate things and they are divorced,” adds Jaganathan.

The markets will be closely watching to see how long the steam lasts.

venkatesha(dot)babu(at)abp(dot)in

(This story was published in Businessworld Issue Dated 14-11-2011

Catch Them Young

2011-10-10T19:46:00.001+03:00

Small companies with robust financial performance could be multi-baggers of future

Equities can deliver flying returns in a matter of days or investors have to wait patiently for years. They have the ability to outperform other asset classes in the medium to long term. Among the different categories of stocks, the best returns are provided by small- and mid-cap companies. Small but well managed companies can graduate to the mid-cap category and become large-cap companies. The natural progression is based on robust financial performance on continual and sustainable basis.

Small companies are a must in the portfolio of investors looking to earn spectacular returns. Infosys Technologies, Cipla and Wipro started as small-cap stocks and graduated to the large-cap category over a decade. There are many such examples. More small-cap companies now have the potential to become big looking at the country's promising long-term future. An economic growth rate of over 6% is almost given in the coming decade, which means opportunities in abundant for Indian investors to profit from.

It is extremely difficult to discover the next big theme or multi-baggers. Capital Market, nevertheless, has made an attempt to discover companies that can make big in the medium to long term (see attached CSV file CatchThemYoung.csv). The criteria adopted were exhaustive and stringent. The sample base was over 2,500 companies listed on the Bombay Stock Exchange (BSE) with market cap under Rs 1000 crore. Subsequently, several filters were applied including

positive net worth,
dividend payout,
compounded annual growth rate (CAGR) in net sales and profit after tax (PAT) of above 20%, and
return on capital employed (ROCE) and return on equity (ROE) above 10% over the last five years.
PAT was adjusted for extraordinary items while determining ROCE and RONW.
Only those companies that outperformed the market were taken into consideration. For this, absolute change between 21 September 2011 and 21 September 2006 was considered. The BSE Sensex gained 39% in the period.
At the end, there were 24 companies.
From these, Balmer Lawrie Investments was removed as it holds 61.8% equity stake in Balmer Lawrie & Co Ltd (BLCL) and has only two sources of income: dividend from BLCL and interest on surplus funds. Thus, its revenue is capped.
Thereafter, 23 companies were left. Several of these 23 companies are unexplored with nil mutual fund holdings.
These 23 companies are from various industries such as chemicals, finance, pharmaceuticals, steel, engineering, aluminium and aluminium products, glass and glass products, breweries and distilleries, auto ancillaries, ceramics, software, automobiles, and agrochemicals. Thus, investors can have a diversified portfolio of small firms.
Among these 23 companies, the top five with maximum appreciation in shareholders' wealth included Bliss GVS Pharma (717.6%), ABM ABM Knowledgeware (642.5%), VST Tillers Tractors (598.4%), Acrysil (490.6%), and Tilaknagar Industries (477.9%).
Companies delivering superlative growth in turnover over the last five years comprised Bliss GVS Pharma (107.9%), Karuturi Global (104.6%), ABM ABM Knowledgeware (57.7%), Muthoot Capital Services (54.4%), Dhanuka Agritech (54.2%), and Parekh Aluminex (53.2%).
Apart from Bliss GVS (102.9%), other companies to have reported robust growth in net profit consisted of ABM ABM Knowledgeware (113.1%), Tilaknagar Industries (100.8%), Karuturi Global (88.9%), Dhanuka Agritech (65%), IL&FS Investment Managers (57.3%), Muthoot Capital Services (55%), and Parekh Aluminex (54.1%). The figures in bracket represent five-year CAGR.

The filters that have been applied are by no means the best way to narrow down small firms that can make big tomorrow as this methodology ignores loss-making or negative networth companies. These counters could turn around and deliver superior returns in future. Ignoring such companies, thus, could mean losing on good investment opportunities.

However, the filters applied allow only well managed companies with fairly stable financials to appear in the shortlist. The various stipulations ensure that companies with fairly robust financial and operational performance emerge as top pickings. For instance,

a good dividend track record means the profit reported is real and not merely a book entry.
Consistency in profit is ensured through the criterion of net profit in each of the last five years.
Stock-market outperformance enables to check if financial performance is driving the counter in the medium term.
Outperformance over the medium to long term is a big deal.

There are several risks attached to investing in small firms. First, small companies can remain small forever. Investors even face the probability of losing capital. Many small caps create hype whenever a bull-run kicks in and vanish from the trading ring once bears attack. Focus on stable finances and robust operational performance could safeguard from this vulnerability.

Liquidity is another headache for investors. A small equity capital means lesser number of shares available for trading. Lack of volumes could turn small firms volatile on the trading floor. This could impact price discovery. Veljan Denison is a case in point. The manufacturer of hydraulic and pneumatic products has equity capital of a mere Rs 1.8 crore since 2006, with promoter holding over 73%. One can imagine what volumes Veljan Dension can attract on the trading floor. Its volumes seldom exceed double digits. Institutional investors like mutual funds, insurance companies and foreign institutional investors avoid small companies due to illiquidity. Banks do not lend against shares of small caps. This curtails interest in small firms. These factors make it difficult for small companies to attract attention. This should not be a big concern for long-term investors, who believe in the story. Volumes generally increase as the growth story becomes evident to the market.

A critical issue is inconsistent financial performance. Wild ups and downs in the top and bottom lines could scare investors during intermediate periods. Such movements are common as small companies are among the first to be affected by business and economic cycles. Investors need to overcome their fear and stay put during such challenging periods. That is the reason Capital Market has looked at CAGR growth in net sales and PAT instead of consistent year on year growth. CAGR provides point to point change without any emphasis on intermediate ups and downs.

Nectar Lifesciencereported a decline in PAT to Rs 52.9 crore in the fiscal ended March 2009 (FY 2009) from Rs 74.7 crore in FY 2008 on increased interest and depreciation due to enhanced capacities and fall of the rupee against the US dollar, which pushed up its import bill by 34.26%. Its phytochemicals business shrank 44% due to lower demand from China. Nonetheless, the company did well subsequently, with PAT bouncing back to Rs 92.2 crore in FY 2010 and Rs 102.8 crore in FY 2011. Nectar is planning to enter the US market with a number of (Anda) filings for its cephalosporins range this fiscal. Further, it intends to explore the European market, particularly France, Germany, the UK, Italy, Spain, Poland and Hungary next fiscal.

A striking feature is that several of these firms have strong balance sheets and are cash rich. This could add to the comfort level of investors as cash-rich firms are in a better position to weather economic and industry downturn. For example, Tata Sponge Iron had cash balance of Rs 188 crore end March 2011. This is 40% of its current market cap of Rs 466 crore. Similarly, ABM Knowledgeware, a company with almost zero debt, had cash balance of Rs 13.6 crore as against its present market cap of Rs 70 crore.

One of the biggest advantages of small companies is that they can focus on their businesses owing to the small scale of their operations. They can utilise their resources in a far better way compared with large companies. The management bandwidth dedicated to small companies could be on the higher side. Judging the promoters' commitment, passion and efforts is a difficult task as limited information is available about small companies. But these limitations provide hidden opportunities not known to the market at large. Hence, these stocks could deliver superior results in the medium to long term.

Many small companies have expressed their optimism about the future in the annual reports. Based on its progressive investments and initiatives, Parekh Aluminex has set a target of Rs 2000-crore top line by 2014. The company reported a turnover of over Rs 900 crore in FY 2011. Sanco Trans is planning to increase warehousing facilities by constructing additional multi-storied warehousing capacity of 1.2 lakh square feet, with a capital outlay of Rs 12 crore. The company expects to improve its capability to meet anticipated increase in the volumes of business and also reduce operating costs. Considering its net worth of Rs 34 crore on 31 March 2011 and market cap of Rs 46 crore, this particular investment is significant for the company. If one looks at its humble beginning, Sanco Trans is a ragsto- riches story that could grow bigger and better in future.

The scale of the opportunity, that is the industry size, is important as firms should have enough space to grow. A small- sized industry would limit the scope for growth. Tata Sponge Iron achieved capacity utilisation level of 98.2%, with production of 3.83 lakh tonnes FY 2011. This is a record production for the zero-debt company. With manufacturing capacity of 3.9 lakh tonnes, it is addressing a big market, which stood at 2.3 crore tonnes of hot briquetting iron and sponge iron in FY 2011. The company is in the process of installing a boiler-based power plant, with capacity of 25 MW, to utilise the solid waste. The project would be financed through internal generation and borrowings. Tata Sponge currently has installed capacity of 26 MW and sells surplus power, which is over two-thirds of its output. The new plant would further add to the bottom line.

Strategies that would drive growth are also an important qualitative factor to look at while picking the right small-cap stock. Bliss GVS Pharma, deriving 90% of its business from export of anti-malarial products, plans to set up local manufacturing units and a joint venture (JV) abroad to increase the growth momentum. It incorporated a 100% subsidiary, Bliss GVS International PTE, in Singapore in FY 2011 to oversee exports and entered into a JV in Kuwait to establish a suppository manufacturing facility. The firm reported a five-year CAGR of 108% in the top line and 103% in PAT.

Acrysil, the maker of quartz kitchen sinks, claims to be the largest sink manufacturer in the non-steel category in the domestic market and aims to be the number one across categories. The company is forming subsidiaries and establishing branches in the overseas market. It has incorporated a subsidiary in Germany, which has already begun supplies. Acrysil is in the process of ramping up its annual production capacity to 2.5 lakh units from 2.2 lakh units and increasing the reach and penetration in the domestic market. It has floated a subsidiary, Acrysil Steel Pvt Ltd, to manufacture stainless steel kitchen sinks to cater to domestic and export markets.

A small-cap quality stock operating in a niche market could be looked at based on future growth projections for the industry and the market share commanded by the firm. ABM Knowledgeware is mainly into egovernance software and has several state governments apart from the Central government as its clients. It is an almost debt-free company. Nesco owns Bombay Convention & Exhibition Centre (BCEC), which is the largest and permanent exhibition centre in the private sector in the country. BCEC is the cash cow for the company, with revenue contribution of 45% in FY 2011. The remaining revenue comes from engineering and realty businesses. Nesco is in the process of finalising expansion plans of BCEC. An architect firm has been appointed. The construction of the first new convention and exhibition hall is expected to start before the end of FY 2012. Further, its IT park's third building is nearing completion and it would start contributing to the top line in this financial year and achieve full occupancy in FY 2013. The firm has appointed an architect for the fourth IT building and work is expected to start in December 2011. These plans provide reasonable visibility about incremental revenue.

There is risk associated with expansion as failure to garner forecasted volumes could put companies in trouble. But what matters is the commitment and vigour of management to overcome difficulties. Equity is inherently risk capital and wealth is created by taking risk on a continuous basis. One of the most important criteria for investors, therefore, is to check the quality of the management and promoters. Good credentials are a must. This is something difficult to quantify. Stable financials, sound record of dividend payment and readiness to walk the talk could be some of the parameters to test promoters' credibility. A critical study of annual reports and every announcement by the company is important to fill the information lacuna.

While running a check on the promoters, investors should also search for any linkages with other group companies with dubious records. With over 2,500 companies traded on the BSE, establishing such a nexus could be difficult but an essential task. Companies with a muddy record move into the silence zone for a couple of years after being caught in the act. Such companies try to re-enter with a reinvented face once market memory feds. Investors should stay away from stocks with even the slightest doubt about their past.

Last, investors should put in money with long-term commitment as the story needs to be told and retold to grab market attention. The market should appreciate the financial performance of the company for it to become investors' favourite. This could take years and, thus, funds not needed by investors in the immediate future should be invested in small companies.

How long to hold or when to sell a small cap? The ideal answer is never, except in unavoidable situations like family emergency. But investors can liquidate in case of serious corporate governance lacuna. Another strategy would be to offload to the extent of original investment after capital appreciation. Investors who sold during intermediate periods of uncertainty have missed out the mouthwatering returns generated by Infosys, Cipla and Wipro.

A sharp appreciation in few of the small stocks shortlisted over the last five years should not act as a deterrent. The focus should be on valuation rather than appreciation in stock price. Out of these 23 stocks, only two stocks are commanding price to earning (P/E) in double digits. The rest are available at P/E in single digits. The dividend yields of IL&FS Investment Managers (4.8%), Banco Products (4.1%), Acrysil (3%) and Sukhjit Starch (3%) work out to be on the higher side and, thus, offer reasonably decent protection from sharp dips. Five stocks among these 23 are available below their book values: Gulshan Polyols (0.49), A.K.Capital Services (0.66), Nectar Lifesciences (0.75), Karuturi Global (0.87) and Tata Sponge Iron (0.92).

Investors have to look at their existing equity portfolio while exploring the option of investing in small companies. A mix of large, mid and small caps is must depending on the age-profile, risk appetite, objective of investing and duration of investment. Investment in small caps should be with long-term commitment. This is essential as small companies could witness sharp plunge owing to bear assault and may remain at low levels for years.

Investing in a basket of small companies from diverse industries could help to reduce risk and also increase the probability of unearthing real gems. But too many small companies could spoil the quality of the portfolio and would look more like a game of chance rather than investment based on research.

(source: CM mag Vol 26 Issue 16 Oct 3 - Oct 16, 2011)

TTK Prestige--BUY

2011-10-10T16:20:00.000+03:00

TTK Prestige jumps after strong Q2 results

TTK Prestige rose 5.54% to Rs 2,765.55 at 13:37 IST on BSE, after net profit surged 54.63% to Rs 33.71 crore on 51.85% growth in net sales to Rs 303.48 crore in Q2 September 2011 over Q2 September 2010.

The company announced the results during trading hours today, 10 October 2011.

Meanwhile, the BSE Sensex was up 236.53 points, or 1.46% to 16,469.07.
On BSE, 96,000 shares were traded in the counter as against an average daily volume of 43,293 shares in the past one quarter.
The stock hit a high of Rs 2,810.60 and a low of Rs 2,583.15 so far during the day. The stock had hit a record high of Rs 3,200 on 26 July 2011. The stock had hit a 52-week low of Rs 1,101 on 15 October 2010.
The mid-cap stock had underperformed the market over the past one month till 7 October 2011, sliding 11.81% compared with the Sensex's 4.88% fall. The scrip had, however, outperformed the market in past one quarter, falling 7.32% as against 14.92% decline in the Sensex.

The company has equity capital of Rs 11.35 crore. Face value per share is Rs 10.

TTK Prestige makes kitchen appliances under Prestige brand.

CM MAGAZINE

2011-10-09T17:01:00.000+03:00

A Class Apart
Stocks with consistently high return on equity have a better probability to outperform the market
It is fashionable during a market downturnto announce that stocks are available at attractionvaluation. The various exhibits displayedto justify the proposition includeP/E, BV and dividend yield. Another oftquotedcurrency is return on equity (ROE).The belief is that the market favours companiesgeneration high ROE.
Take for instance, Cummins India. Thestock has consistently outperformed theoverall market in calendar years 2006, 2007,2008, 2009 and 2010. The maker of dieseland natural gas engines gained 392% comparedwith the BSE Sensex, the benchmarkequity index, which returned 118.2% between30 December 2005 and 31 December2010.
The clues to Cummin India’s marketperformance can be found in its financials.The stock has delivered superior ROE overthe last five years. Its ROE stood at 35.1%in 2010-11, 30% in 2009-10, 34.7% in2008-09, 27.6% in 2007-08 and 28.2% in2006-07%. Moreover, it is almost debt-free,with loan of mere Rs 18.2 crore againstshareholders’ fund of Rs 1806.2 crore.
Two other companies have outperformedthe Sensex in each of the last five years. Theseare Gruh Finance, which has delivered pointto-point return of 468.7%, and Pidilite Industries,with a return of 271.4% between2005 and 2010. In both these cases, ROE ison the higher side. Gruh Finance’s ROE is inthe range of 23.6% and 31.4% in the last fiveyears. Pidilite Industries has posted ROEbetween 21.3% and 34.6%.
Among the various financial ratios thatare considered important to evaluate stocksfor investment, ROE is one of the most important.
ROE is determined as net profit upon shareholders’ fund.
Net profit refersto profit after tax minus preference dividend,if any.
Similarly, preference share capital isdeducted from shareholders’ fund.
Shareholders’ fund basically has twocomponents: equity share capital and
reserves and surplus.
This is done to calculatereturns generated on funds invested bythe equity shareholders in a company.
Preferenceshare capital carries a predeterminedand fixed dividend.
It is not completely arisk capital. Preference shareholders get precedenceover equity shareholders in redemptionof their shares if a company goes intoliquidation.
A high RoE, expressed in percentageterms, reflects superior returns generatedby the company. This ratio is also known as return on net worth (RONW).
ROE of various players in an industrycan be compared to determine who is betterwithin the business.
Investors can have a lookat ROE of companies across industries toarrive at sectors that can generate better ROE.This even helps investors to churn their portfolio,and move to stocks with higher ROE.
A gradual or year on year gain in ROEis an indicator of improving efficiency inutilisation of equity capital.
It shows themanagement is making good use of moneyentrusted to it by equity shareholders.
Castrol India has reported increase in ROEin each of the last four years. The company’sROE stood at 93.5% in the year ended 31December 2010 compared with 78.5% in2009, 57.9% in 2008, 51.5% in 2007 and38.2% in 2006.However, such improvement is exceptional.Investors instead could focus onstocks with lower volatility in ROE and improvementin ROE over a shorter period.
Companies to have seen increase in ROEover the last two years include VST Industries,TTK Prestige, Ador Fontech, WendtIndia, Titan Industries, ITC, Gruh Finance,Grindwell Norton, GlaxoSmith ConsumerHealthcare, City Union Bank, and SuranaCorporation.
Capital Market checked around 2,800companies listed on the Bombay Stock Exchange(BSE) to pick companies with superiorROE. For this, companies with marketcapitalisation of over Rs 100 crore wereselected. Only those companies whose latestfinancial results were available weretaken into account.
The median ROE for all these companiesin each of the last five years was determined.
Only those companies that had generatedabove median ROE in each of the lastfive years were shortlisted.
This way, greatersignificance was attributed to companies withconsistent track record of profit and also generatinghigher ROE.
At the end there were 85 companies (see googledocs file CM High ROE Stocks v26i13
As only profit-making companies in eachyear were included, the median ROE for eachyear is on the higher side.
In that sense, these85 companies outperforming the medianROE in each of the last five years is commendable.
The median ROE for companiesstood at 18.3% in 2010-11, 19.4% in 2009-10, 18.2% in 2008-09, 21.7% in 2007-08 and20.9% in 2006-07.
Internationally, ROE of15% is considered as a benchmark.
All these85 companies are well above this threshold.
The chief drawback of the filter is thatturnaround stocks are left out.
Turnaroundstocks could deliver superior returns. Thisis because consistency in ROE varies.
Out of these 85 companies, 23 belongto the large-cap category (market cap Rs10000 crore and above),
44 are from themid-cap category (market cap between Rs500 crore to Rs 10000 crore), and
the remaining18 are from the small-cap category(market cap below Rs 500 crore).
Out of these 85 stocks, 63 stocks haveoutperformed the Sensex, which reported again of 118.2% on point-to-point return between2010 and 2005.
This means 74% ofthe companies with consistently high ROEover the last five years have managed to outperformthe overall market. The bottom lineis companies with consistently higher ROEhave the potential to deliver better returns.
In the current calendar year, 75%, or64 companies, of the 85 beat the marketbetween the BSE closing on 26 July 2011and 31 December 2010. The Sensex lost9.7% in this period.
The prominent gainers in 2011 so farinclude Elantas Beck (23.2%), VST Industries(99.1%), TTK Prestige (90.3%),Ador Fontech (82.7%), Wendt India(54.4%), Hawkins Cookers (50.2%),CRISIL (39%), Novartis India (37.9%)and Foseco India (36.5%).
The star performers in the large-cap categorybased on stock market performancebetween 2005 and 2010 comprised ExideIndustries (558.5%), Sesa Goa (548.8%),Lupin (526.5%), Hindustan Zinc (457.6%),Asian Paints (397.9%), Crompton Greaves(393.2%), and Cummins India (392.6%).The gain is based on the BSE closing as on31 December 2010 compared with closingas on 30 December 2005.
Among mid-cap companies, the biggestgainers were Hawkins Cookers (1756%),TTK Prestige (1171.8%), Coromandel International(790%), Amara Raja Batteries(643.1%), City Union Bank (537%), BajajElectrical (473.2%), GRUH Finance(468.7%), CMC (464%), Thermax(359.3%), and Areva T&D (357.8%).
Among small-cap companies Bliss GVSPharma (1706.3%), Muthoot Capital Services(1073.8%), Ashiana Housing(703.4%), VST Tillers Tractors (514%), andGujarat Reclaim (473%) emerged at the top.
The trends emerging from the ROE toppersreveal certain interesting facts. Out of these 85 companies, 26 are debt-free. Theprominent debt-free companies includeInfosys, Hindustan Unilever, GlaxoSmithConsumer Health, Crisil, Abbott India,Alfa Laval, Castrol India, Nestle India, andP&G Hygiene.
Further, 15 companies have negligibledebt (less than 2% of total shareholders’fund). Colgate Palmolive, Novartis India,Siemens, Hindustan Zinc, Exide Industries,Wyeth, Glaxosmit Pharma, CromptonGreaves, Cummins India, TCS and ITC areamong the companies with insignificant debt.
Companies from industries such as pharmaceuticals(11), personal care (6), chemicals(5), software (5), engineering (4), andfinance & investment (4) dominate the listof 85 companies with consistently high ROE.
Another trend is that many companies command rich valuations. For instance, 20companies’ P/E is in excess of 30. Another20 companies’ P/E is in the range between20 and 30. Astrazeneca Pharma (54.8),Elantas Beck (53.3), P&G Hygiene (50.2),Titan Industries (47.2), and Nestle India (47)are the most expensive stocks.
The recent market carnage offers goodopportunity to investors to pick stocks withconsistently higher ROE as several stockshave reported sharp correction. These includeCrompton Greaves (-43.6%), JyotiStructures (-35%), Voltas (-34.2%), BlueStar (-33.9%), and Thermax (-31.5%).
ROE has certain drawbacks. It providesno hint about debt levels. Equity could below, pushing the company to borrow to fundits business growth. Borrowing could begood way to finance growth when marketconditions are robust. But in difficult timeshigh debt could put companies in trouble ifprofitability dips. Interest cost is mostlyfixed and would not decline in case of slowdownin business.
For instance, Balaji Amines has a debt-to-equityratio of 1.4 times, with debt of Rs165.4 crore compared with shareholders’fund of Rs 112.4 crore on 31 March 2011.The stock has underperformed the marketin the current calendar year so far.
Anotherexample is Jyoti Structures, which hasunderperformed the market. Its debt-to-equityratio stood at 0.8, with debt of Rs 476.6crore as against equity of Rs 576.1 crore.So like all other parameters, ROEshould not be viewed in isolation but consideredas one of the checklists to shortlistor validate a stock’s selection for inclusionin the portfolio.

(source: CM mag Vol 26 Issue 13 Aug 22 - Sep 04 2011)

Bharti Airtel, Idea Cellular tumble in firm market

2011-10-07T16:23:00.000+03:00

Bharti Airtel, Idea Cellular tumble in firm market

Bharti Airtel and Idea Cellular fell 4.97% and 6.35%, respectively, at 13:47 IST on BSE on reports the Department of Telecommunications is planning to issue notices to five mobile phone operators for misreporting revenue and paying lower license fees

India's largest listed telecom operator by sales Bharti Airtel fell 4.97% to Rs 348.80. India's third largest listed telecom operator by sales Idea Cellular tumbled 6.35% to Rs 88.60.
However, Reliance Communications (up 0.62%), and Tata Teleservices (Maharashtra) (up 3.36%), rose.
The BSE Sensex was up 458.24 points or 2.90% to 16,250.65.
Telecom secretary R. Chandrashekhar was quoted by media as saying that the Department of Telecommunications (DoT) will issue notices to five mobile phone operators including Bharti Airtel, Reliance Communications and Idea Cellular after the country's top auditor the Comptroller and Auditor General of India (CAG) found that the carriers misreported revenue and paid lower license fees to the government.
All the operators have previously denied any underreporting of revenue. The notices seek to have telecom service providers pay the license fees on actual revenue as calculated by the auditor, Chandrashekhar said.
Telecom operators currently pay between 6% and 10% annually as license fees for basic mobile phone services, depending on the service areas they operate in, while others such as national and international long-distance calls command lower fees.
The CAG has reportedly audited the accounts of Bharti Airtel, Reliance Communications, Idea Cellular, Tata Teleservices and Vodafone Essar for the financial years starting April 2006 through March 2009.





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TTK Prestige gains on acquisition buzz

2011-09-30T09:49:00.002+03:00

TTK Prestige rose 3.50% to Rs 2,622 at 10:45 IST on BSE, on reports that the company is set to buy the ailing Indian unit of Italian firm Bialetti.

Meanwhile, the BSE Sensex was down 26.70 points, or 0.16%, to 16,671.37.

On BSE, 14,000 shares were traded in the counter compared with average volume of 28,000 shares over the past two weeks.

The stock hit a high of Rs 2,628 and a low of Rs 2,510.15 so far during the day.

According to reports, Bialetti's Indian unit, Triveni Bialetti Industries, will help TTK Prestige expand production capabilities. TTK plans to merge the entity with itself before the year ending March 2012. TTK Prestige has almost sealed the takeover for about Rs 25-30 crore, reports added.
Reports suggested that Triveni Bialetti has a state-of-the-art, automated manufacturing unit in Khardi in the Mumbai suburbs, which caters to Indian and global markets.
TTK Prestige's net profit rose 58.1% to Rs 25.34 crore on 60.4% rise in sales to Rs 233.14 crore in Q1 June 2011 over Q1 June 2010.

TTK Prestige makes kitchen appliances under Prestige brand.

How to analyse a company

2011-08-21T11:02:00.001+03:00

Over the past few weeks, we have, in this column, explained facets of fundamental analysis. But where, as some of our readers have asked, is the information on financials, corporate plans and histories required to analyse a company, available? Here's listing a few sources you can tap for the same.

Announcements and reports

The first source would be the documents and updates that companies themselves put out. Take the annual report. These are usually treasure troves of information on financials, material developments through the year, management strategies and outlook. The how-to guide for reading annual reports has previously been detailed in this column. An added bonus in annual reports is the industry analysis, which appears in the Management Discussion and Analysis segment.

Next, companies routinely make announcements about their operations such as orders secured; clients added, deals signed, mergers and acquisitions, and so on. Reading up on these will allow you to keep track of the developments in your company. Quarterly results announcements are sometimes accompanied by an additional release which gives a background on results.

Websites

Talking of company announcements brings us to the websites of stock exchanges and there's a lot to glean from these! The BSE and NSE websites give broad market information such as historic index levels with price-earnings multiples for a few indices, bulk deals, turnover and volumes, and even a basic guide to main concepts. Stock-specific data includes historic stock prices, volumes, shareholding patterns, financials and corporate actions, annual reports and much more. Price-earnings multiples of key indices such as the Sensex are also available.

Most companies have their own websites, which can be quite informative. General information about the company, such as the products it offers, its history since inception, significant milestones, management and board can be useful in developing an understanding of the company. Some companies go to greater lengths than others in offering important and relevant information on their websites. For instance, the website of Shoppers Stop provides transcripts of analyst conference calls. Annual reports, quarterly result reports, shareholding patterns, investor presentations can also be found on company websites.

Finally, there are other websites such as www.myiris.com, which contain a wealth of information. In myiris, for example, research reports put out by brokerage houses are available. Main ratios such as return on investment, margins and debt ratios are already calculated, saving you the trouble of doing so. Data is available for up to five previous years. Mutual funds holding the stock are also listed. And what's more, all this data, together with management interviews (where available) on such websites is grouped stock-wise, making it easier to collate information.

News

This brings us to the final important information source - the simple news item. Keeping an eye out on the happenings in the business world could help you track material developments in your company or industry. Here's a tip - you can program weekly Google alerts with relevant key words and catch up on your reading over the weekend!

investment world

2011-08-21T10:18:00.002+03:00

August 20, 2011:

The stock decisively broke through its key long-term support band between Rs 2,150-2,200 by tumbling 7 per cent with good volumes last week. This decline has strengthened its medium-term downtrend. Moreover, the stock has been on a short-term trend from its July peak of Rs 2,529. Its decline can continue until it finds support at Rs 2,000, which is key base level. Trader with short-term perspective can consider holding their short positions with stop-loss at Rs 2,090 levels. Nevertheless, an emphatic move beyond Rs 2,150 will push the stock higher to Rs 2,270 levels. Next resistance is at Rs 2,350.

The stock continues to be in a medium-term downtrend trend. Strong dive below Rs 2,000 will pave the way for a decline to its subsequent significant support at Rs 1,900 in the upcoming months.

Reliance Industries (Rs 731.2)

RIL slumped almost 4 per cent last week. Reinforcing the stock's medium-term downtrend, it fell below our medium-term support level of Rs 750 and touched the first support level of Rs 722 on Friday. Short-term traders can hold their short positions as long as RIL trades below Rs 750 with this level as stop-loss. Downward targets are Rs 712 and Rs 700, which is a significant long-term support. Next medium-term support is pegged at Rs 650.

On the other hand, a strong move above Rs 750 can take the stock higher to Rs 773 and then to Rs 790 in the short term. Medium-term trend is down for the stock from its April peak of Rs 1,065. Only an emphatic close above Rs 900 will mitigate this downtrend.

Tata Steel (Rs 459.2)

Tata Steel fell 3.6 per cent last week, contrary to our expectation of a corrective up-move. However, the stock is currently testing its key long-term support level of Rs 450, from which it had bounced up in June and July 2010. Daily indicators are featuring in the deep oversold levels. If the stock's current base level provides support, it can witness a corrective up move to Rs 472 and then to Rs 485. Subsequent resistance is at Rs 500. Inability to move above Rs 472 will confine the stock to a sideways move between Rs 450 and Rs 472 in the near term. Therefore, short-term traders should tread with caution in the ensuing sessions.

A conclusive breakthrough of the stock's long-term support at Rs 450 can drag it further down to Rs 400 and to Rs 380 in the medium-term.

Infosys (Rs 2,225.4)

After moving sideways within the range between Rs 2,350-2,460, the stock plunged 5.8 per cent on Friday. The stock has tumbled 19.5 per cent in this month and 6.3 per cent for the week. It is now testing an important support at Rs 2,200 levels. Reversal from this support can lift the stock higher to its immediate resistance at Rs 2,300 and next at Rs 2,350. Next medium-term key resistances are pegged at Rs 2,400 and Rs 2,500. Conversely, failure to surpass Rs 2,300, can pull the stock lower to Rs 2,200 and then to Rs 2,172 in the near term.

Medium-term trend is down for the stock since its April peak of Rs 3,316. Decisive move below Rs 2,172 will accelerate the stock downtrend and the stock can decline to Rs 2,100 and Rs 2,000 in the months ahead.

Hindustan Zinc hits a new high on record metal production in Q4

2011-04-11T08:48:00.001+03:00

Hindustan Zinc galloped 3.56% to Rs 148.35 at 10:03 IST after the company's mined metal production rose 19% to a record 2.31 lakh tonnes in Q4 March 2011 over Q4 March 2010.

The Hindustan Zinc stock rose 2.95% to Rs 143.25 on Friday, 8 April 2011, when the company announced its production data during trading hours that day.

Meanwhile, the BSE Sensex was down 52.91 points, or 0.27%, to 19,398.54.

On BSE, 4.28 lakh shares were traded in the counter compared with average volume of 4.78 lakh shares over the past two weeks.

The stock hit a high of Rs 149 so far during the day, which is also a record high. The stock hit a low of Rs 144.

Hindustan Zinc's mined metal production rose 9% to 8.40 lakh tonnes in the year ended March 2011 over the year ended March 2010 due to higher contributions from Rampura Agucha and Sindesar Khurd mines.

Refined zinc production rose 29% to 1.94 lakh tonnes in Q4 March 2011 over Q4 March 2010. It rose 23% to 7.12 lakh tonnes in the year ended March 2011 over the year ended March 2010. The new 210 kilo tonnes per annum (ktpa) Rajpura Dariba Smelter, which was commissioned in March 2010, contributed 46,000 tonnes and 1.65 lakh tonnes in Q4 March 2011 and in the year ended March 2011, respectively.

Lead production fell 10% to 18,000 tonnes in Q4 March 2011 over Q4 March 2010. It fell 13% to 63,000 tonnes the year ended March 2011 over the year ended March 2010.

Silver production was 50,000 kilograms in Q4 March 2011, in line with Q4 March 2010. Silver production for the year was marginally higher at 1.79 lakh kilograms.

Commissioning of the 100 ktpa lead smelter at Dariba is expected to be completed in Q1 June 2011, which will increase lead and silver production. The new 1.5 million tonne per annum (mtpa) mill at Sindesar Khurd (SK) mine in Rajasthan is ramping up well, and is expected to achieve its rated capacity in the year ending March 2012.

The 48 megawatts (MW) of the 150 mw expansion in wind power generation capacity announced in January 2011 was commissioned during the quarter, and the remaining 102 MW is expected to be commissioned in the year ending March 2012. Post the expansion, the company's wind power generation capacity will increase to 273 MW. With the commissioning of second 80 MW captive power plant (CPP) unit in 11 February 2011, full 160 MW CPP capacity at Dariba is operational.

Hindustan Zinc's net profit rose 12.3% to Rs 1289.58 crore on 17.4% increase in net sales to Rs 2601.47 crore in Q3 December 2010 over Q3 December 2009.

lal Street Choice Scrip Buy Calls – Panacea Biotec

2011-03-30T11:02:00.001+03:00

HERE IS WHY
- The company trades at a P/E 7.30x and its EV/EBITDA stands at 7.85x.
- Received orders to supply 75 million doses of pentavalent vaccine
with a sales value of USD 222 million over CY10-12.
- Focuses on niche segments.
Panacea Biotec (PBL) is the first Indian pharmaceutical company to
launch innovative branded combination vaccines such as Ecovac,
Easyfour and Easyfive. The market for combination vaccines is still at
a nascent stage as there are only four companies globally who have the
required WHO prequalification to supply the pentavalent vaccine that
covers five diseases to the UN agencies. PBL has entered into a very
lucrative agreement with the UNICEF to supply 75 million doses of the
pentavalent vaccine Easyfive. The order will generate close to USD 222
million cumulative sales for the company from CY10-12. Easyfive is an
extremely low competition product with only four players (Panacea,
GSK, Berna Biotec and Shantha Biotec) having WHO pre-qualification
globally. Also, the company's new facility in Baddi should be
operational by Q1FY12 which will benefit the company as it will be
able to sell combination vaccines to private practitioners apart from
UN agencies.

The company has received an order for 130 million doses of the
Bivalent Oral Polio Vaccine (BOPV) this year. The overall sales
generated are believed to be close to USD 20 million in FY11. The
EBIDTA margin in the BOPV space is also significantly higher and its
sales are expected to go up as it has been found to be a better
product than TOPV and MOPV. It is believed that the BOPV vaccine will
be used significantly by the Indian government as a single drop
protects against two deadly strains of polio i.e. P1 and P3. PBL is
also the only second Indian company after Cadila to have launched the
swine flu vaccine. The company has a capacity of producing 45 million
doses. PBL has an SBU-based domestic formulation business model with a
clear focus on only niche segments like organ transplant, pain
management, oncology, diabetes, CVS, osteoporosis and gastro diseases
that are growing at a much higher rate than the overall domestic
pharma growth due to the lifestyle changes in India. The company has a
strong field force of 1,485 with fresh sales employees added during
the year to expand its reach into newer regions in India. The Baddi
facility has received USFDA approval and is expecting product launches
to happen in the USA and Germany from Q2FY12 onwards. This will shoot
up its formulation exports significantly.
For the recently concluded 9MFY11 period the company has witnessed
better performance in terms of both topline and bottomline. Its
topline witnessed a growth of 26 per cent on a YoY basis for 9MFY11
and was Rs 807 crore as against Rs 581 crore. The bottomline witnessed
a significant jump as it has improved from Rs 22.50 crore in 9MFY10 to
Rs 92 crore for 9MFY11.
The operating and net profit margins were 25 per cent and 11 per cent
respectively for 9MFY11 as against 20 per cent and 5 per cent during
the same period last year. The company discounts its trailing 12-month
earnings by 7.30 times and its EV/EBITDA stands at 7.85 times. We
believe that the company is an ideal candidate to find place in one's
portfolio with an expected return of 10 – 15 per cent from the present
levels for a one year time horizon.

hdfc sec Place off market orders at your convenience

2011-02-09T10:46:00.001+03:00

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Fertiliser stocks rally ahead of policy meet

2011-02-04T07:28:00.001+03:00

New Delhi, Feb 3:

Ahead of Committee of Secretaries' (CoS) meeting on urea pricing issue, major fertiliser stocks on Thursday rallied by upto 3.58 per cent on hope that the soil nutrient would also be freed from controls in line with phosphoric and potassic fertilisers.

"The Committee of Secretaries will meet on February 7 to look into the issue of introduction of nutrient-based subsidy (NBS) scheme on urea," a senior fertiliser ministry official told PTI.

In anticipation of the CoS meeting, fertiliser stocks moved up in sync with Sensex, which also zoomed 2.1 per cent to 18,462.09 points today.

Chambal Fertilisers and Chemicals, Deepak Fertilisers and Petrochemicals and GHCL gained by 3.58 per cent, 1.81 per cent and 1.23 per cent to close at Rs 73.85, Rs 160.40 and Rs 41.15 per share at the close of trading today.

A Group of Minister, headed by Finance Minister Mr Pranab Mukherjee, had last month refrained from taking any decision on urea by referring the issue to a CoS and asked it to submit a report in a month to it, which will then take a final call.

Secretaries from the planning commission, fertiliser, agriculture and finance ministries would attend the meeting.

The Government has already freed potassic and phosphoric fertilisers with the introduction of NBS (nutrient-based subsidy scheme) with effect from April last year. However, it kept price and movement of urea under control, which consists of nearly half of India's total fertiliser consumption.

The official said that besides urea price deregulation, the panel is also expected to discuss on removal of import and export restrictions to steer a total free market in urea.

The introduction of NBS into the urea sector is likely to bring in a lot of investment in the cash-starved sector.

During 2010-11, the country is expected to consume 26 million tonnes of urea, 11 million tonnes of of DAP, five million tonnes of MOP and 10 million tonnes of various complex fertilisers.

TTK Prestige jumps 8% in two days

2011-01-13T12:23:00.001+03:00

TTK Prestige surged 3.77% to Rs 1606 at 12:50 IST on BSE, extending gains for the second day, after the company signed a pact with the state
government of Gujarat for setting up a manufacturing facility for making pressure cookers & kitchenware.

The stock had risen 4.45% to Rs 1547.60 on Wednesday, 12 January 2011, after the company made this announcement during trading hours.

Meanwhile, the BSE Sensex was down 174.65 points, or 0.89%, to 19,359.45.

On BSE, 33,971 shares were traded in the counter compared with the average volume of 44,617 shares in the past one quarter.

The stock hit a high of Rs 1646.05 and a low of Rs 1547.40 so far during the day.

The stock has risen 8.39% in just two trading sessions from a recent low of Rs 1481.65 on 11 January 2011, boosted by the company's expansion plan.

The company has an equity capital of Rs 11.35 crore. Face value per share is Rs 10.

TTK Prestige's net profit rose 28.8% to Rs 21.80 crore on 43.4% increase in net sales to Rs 199.86 crore in Q2 September 2010 over Q2 September 2009

TTK Prestige - Surging on the back of growing consumerism in India !!

2011-01-08T16:23:00.001+03:00

Almost each and every person is aware about the Trend, Momentum & Growth in TTK Prestige. Few years back it was called as penny stock and at current levels company has given so much of return to its investors. Now it is called as a very promising stock by general investors. Professionals followed it at a very early stage. Stock has appreciated almost 1600% in 18-19 months. If you don't want to miss the opportunity then do subscribe to professionals to get the best at the very early stage. Let me talk about the company that how it maintained its growth momentum in the recent years.

The company is floated under the arms of TTK Group, it has emerged as India's largest kitchen appliances company catering to the needs of home makers in the country. It is one of the world's largest manufacturers of Pressure Cookers and it has been forefront in introducing several innovations like Gasket Release System (GRS), Gasket Offset Device (GOD) and Double Locking System, all firsts in India.

Company has the widest range of product covering all aspects of the Kitchen making it the only brand to offer TOTAL KITCHEN SOLUTIONS. The product range includes Pressure Cookers, Non-Stick Cookware, Rice Cookers, OTG's, Kitchen Hoods (Chimneys), Hobs, LP Gas Stoves, Coffee Makers, Kettles, Sandwich Toasters and many other small electrical appliances. Modular kitchen is another such segment in which TTK is venturing.

Exporting its products to USA, Europe, South Africa, Kenya, Australia, Singapore, Middle East, Sri Lanka and many other countries makes TTK a global brand. The company presently has manufacturing facilities in Hosur, Coimbatore and Roorkee and branches located across the country to cater to the needs of all the markets.

Financial:

Company has maintained a very good record over the past 5 years. Talking about the CAGR over the last five years will definitely give a clear picture of growth. Let us see some numbers which will give the reason to believe that the company is growing at a rapid pace. CAGR of Revenue for the last 5 years is 23% and the PAT is growing around 64%. Net Profit Margin of the company is also increasing YOY. 42% Return on Assets shows that the company is utilising its assets very well. Investors are also happy with the 42% Return on their Equity.

Company is also paying its debt continuously. In the recent quarterly result (Sept'10), it has posted a revenue of 202 crore with an EPS of around Rs. 20. For FY11 H1, TTK has already shown 68% revenue compared to total revenue of FY10. Company has posted Rs.33 as EPS for FY11 H1. P/E of the stock is as high as 28 but still the brand is very good and it has the potential to move forward. The company has the brand value which is helping it to command a high P/E. Its real gem to invest at dips. Happy Investing!! Hats off to this gem!!

How to reduce tax when selling shares

2010-12-19T12:16:00.002+03:00

http://in.finance.yahoo.com/news/How-reduce-tax-selling-shares-bankbazaar-2846348923.html

Investors looking for high returns and willing to take high risk, use equity/stock markets as an investment avenue. As an investor, do you know what the tax implications of gains/losses from this investment are? Are you aware of the impact corporate actions (rights issue, bonus, split, dividend) have on you from a tax perspective? If not, it is essential you understand the same so that you're able to minimise tax incidence and increase return on investment.

Securities traded on the stock exchange are treated as a capital asset. Hence transacting in securities will lead to a capital gain or a capital loss. Anil purchased 200 shares of Axis bank at Rs. 740 on 10th May 2009, and sold it off at Rs. 820 on 15th March 2010. There was a gain of Rs. 80 per share, which is termed as 'capital gain'. Capital Gain/loss can be either short-term or long-term depending on the tenure for which the security is held.

Short-term Capital Gain/Loss

If securities are sold on the exchange within a period of one year of purchase, it is short-term in nature. Short-term capital gains are taxed at 15%. Short-term capital loss can be set off against short-term capital gain & long-term capital gains.

Long-term Capital Gain/Loss

Securities held for tenure greater than a year, are termed as long-term. Long-term capital gains are tax free. Long-term capital loss can be set off only against Long-term capital gain.

In Anil's case, since Axis bank is held for a period less than one year, his gain will taxed @ 15%. So his capital gain tax would be 15% of 200*(820-740) which is Rs.2400. So his income would be reduced to Rs. 13,600. However, if Anil had sold off his shares anytime after 10th May 2010, his gain would be Rs. 16,000.

If Long-term and short-term capital losses cannot be set off against the capital gain of that particular year then it can be carried forward for the next 8 consecutive years. Losses under the head "Capital Gains" cannot be set off against income under other heads of income whether salary, Business & profession, House Property, Income from other source.

Impact of corporate actions on taxable income

Dividend on shares: It is not taxable in the hands of the recipient, as the company declaring the dividend has already paid dividend distribution tax.

Bonus shares: These are free shares given to the shareholders depending on current holding of the share holder. If a bonus of 1:3 is announced, it means a shareholder will be given 1 share for every three shares held. For tax purposes, the ex bonus (at which the price is adjusted for corporate action on the stock exchange) date fixed by the company is considered to be the date of acquisition of the shares and the cost of acquisition is zero. So depending on when it is sold, it will be treated as short term or long term.

Rights issue: When additional shares are offered to existing shareholders at a price, it is termed a rights issue. The price at which the rights issue is done is treated as the cost of acquisition which is normally at a discount to the market price. The date of allotment of right shares is treated as the date of purchase at the rights issue price. Accordingly it will attract tax depending on the tenure for which it is held.

Stock splits: This refers to reduction in the denomination of the shares by reducing the face value of the share. That will result in a corresponding change in the market value. The date of buying the original shares is treated as the date of acquisition and the gains are taxed in the same proportion as the split. Suppose Anil has 100 share of XYZ Company at a face value of Rs. 10 purchased on 10th January, 2009 at a price of Rs. 500. On 10th March, 2010, the company reduced the face value of the share to Rs. 5. On 30th March, Anil sold off the shares at Rs. 305.

The impact is as follows:

Change in number of shares held: On account of the split, Anil will have 200 shares of XYZ Company and his purchase prices will now be Rs. 250 per share

Tax liability on gains: Although the split has been done on the 10th of March, 2010, the date of acquisition for Anil will continue to be 10th January, 2009. Since the period of holding is greater than one year, it is categorised as long term capital gain. So his gain of Rs.11, 000 (Rs. 305-250), is tax free.

Tax Tips

Make sure you look at the holding period before sale of the security. You may want to wait for a few more days, to move from short term to long term tax treatment, if you're making profit on a transaction, so that you enjoy tax free earnings.

As long term capital loss cannot be set off against short term capital gain, you will be able to minimize your tax liability if you sell a security making huge losses for you within a period of one year.

In order to reduce your tax liability you may have sold stock before the month of March. You need to take note of the same, so that you could take position of the same stock after 1st April. This way you could save taxes, and also hold shares of the entity you sold, to book losses and hence offset gains. While calculating net gains, make sure you take the transaction cost of buying and selling into consideration.

Shiva Cement – Expansively Inexpensive

2010-12-04T08:38:00.001+03:00

There are certain counters which usually go unnoticed by the investors despite having the potential to provide decent returns. Shiva Cement Limited (SCL), the Orissa-based cement manufacturer, is one such company. Though relatively unknown, there are many reasons to recommend the same to our investors in this column. The first and foremost factor is its expansion plan that will increase its capacity by almost four times to 6.6 lakh tonnes. Further, it is also planning to build a 25 MW (10 MW in Phase I and 15 MW in Phase II) power plant which will help the company reduce its operational cost. The best part is that the expansion is being carried out at a much lower cost while its margins are expected to go up by 7-7.5 times.

Further, the promoters have themselves subscribed to warrants convertible at Rs 11 (in the next 18 months) which is higher than its CMP of Rs 8.55. So this provides comfort to the investors. Another advantage is that SCL sells its whole production under the brand name of ACC, with ACC holding a 14.34 per cent stake in SCL.

But the most exciting factor is that after the completion of Phase I of the expansion, its replacement cost of Rs 315 crore will be higher than its enterprise value of Rs 240 crore. The replacement cost of its 6.60 lakh tonne capacity will be Rs 265 crore and the replacement cost of its 10 MW plant will be Rs 50 crore. This provides a good upside for the counter going ahead. Our recommendation is to buy the scrip at its current levels with a target price of Rs 12.50 in the next one year.

Phase-I of the expansion plan is expected to be completed by Q2 FY12. In Phase II the cement capacity will be expanded to 2 million tonnes and additional 15 MW will be added till Q4FY13. The total capex till FY13 will be Rs 800 crore. In an interview with a television channel, the company's official spokesperson had stated that with the implementation of new technology and a four-fold increase in capacity, its EBITDA margins were expected to increase by 7.5 times. The first stage capex is estimated at Rs 155 crore and SCL has lined up a debt of around Rs 80 crore while the rest will be in the form of equity. SCL has already issued 1 crore warrants at Rs 11 to the promoters to raise Rs 11 crore. The rest is expected to be carried out either through a rights issue or through private placement. Hence equity dilution of around 40 per cent is expected. As regards the valuations, as mentioned earlier its replacement cost will be Rs 315 crore and the EV will be around Rs 265 crore. This provides scope for further upward movement.

In FY09 there was a plant shutdown for more than 101 days. Hence the numbers are not comparable. But for 9MFY10 it has posted a topline of Rs 35.53 crore and bottomline of Rs 1.81 crore. For FY10 the management is expecting a topline of Rs 48 crore and EBITDA of Rs 10 crore. The scrip is therefore worth a buy in view of the long term factors.

Steel prices seen moving upwards by USD 25-30 in 3-4 months

2010-11-29T20:14:00.001+03:00

Steel prices seen moving upwards by USD 25-30 in 3-4 months

MUMBAI: Driven by a strong domestic demand from the automobile, infrastructure and other allied sectors, steel prices are likely to increase by USD 25-30 (Rs 1,000 1,200) per tonne in the next three to four months, industry officials said.

Steel-makers feel that better international prices and increase in coking coal and iron ore prices would also lead to the metal's price increasing. It is currently pegged at Rs 30,000 per tonne.

"We expect steel prices to firm-up in the coming months. In the next three to four months, prices may go up by another Rs 1,000 per tonne as domestic demand firms up. Prices of coking coal as well as input costs have risen," a top official at Essar Steel said on condition of anonymity.

Costs of iron ore and coking coal have surged this year after miners moved to a quarterly pricing mechanism, thus affecting the margins of steel companies.

The growth in the auto sector is also directly affecting the steel prices.

Auto components-maker, Steel Strips and Wheels, that makes wheel rims for most of the global auto players such as Nissan, BMW, Audi, Toyota, GM, Honda, Tata Motors and Honda, is also contemplating a hike in steel prices.

"Prices will go up by USD 25-30 per tonne on the back of growth in the auto sector and rise in input costs by March-April," Steel Strips and Wheels' chief general manager, (Corporate and Raw Material), S Raghuvanshi, said.

Meanwhile, a senior official at Jindal Steel and Power also said that there is an upward pressure on steel prices and prices would harden further on the back of an increase in domestic consumption by 10 per cent

Alok Industries mulls Rs 800 cr capex in next 2 years

2010-11-21T23:40:00.001+03:00

MUMBAI: Leading textile player, Alok Industries Ltd has drawn up Rs 800 crore capex plan for the next two years period, a top company official said here.

"We have invested Rs 7,000 crore in the last six years in our expansion programme. In the next two years period, we will further invest around Rs 400-450 crore per annum for our on-going expansion plans," Alok Industries CFO, Mr Sunil Khandelwal said on the sidelines of a conference here.

The company will finance the said funds through internal accruals and debt, Mr Khandelwal said, adding that it has already made a rights issue aggregating Rs 449.59 crore last year and QIP of Rs 425 crore in March 2010.

The company also seeks funds through government's TUFF scheme, which is expected to revive now, he said.

During FY10, the company had incurred a capital expenditure of Rs 1,522.90 crore across various divisions. A major portion of these were towards Phase III and Phase IV expansions, which have been fully completed, setting up of second Continuous Polymeris ation (CP) Plant at Saily in Silvassa, expansion of texturising and regular capex. - PTI

IDBI BANK

2010-11-21T09:49:00.001+03:00

IDBI Bank (Rs 179.4): IDBI Bank is in a structural uptrend since the March 2009 low of Rs 39.7. The third leg of this up-move was in progress from August this year. This leg has already achieved its target of Rs 200 and is currently reversing lower. It is possible that the stock now corrects the entire up-move from March 2009 to November this year. That gives the stock minimum downward targets of Rs 153 and Rs 140.

Investors should therefore wait for a decline to these levels before buying the stock. There is a higher support at Rs 170 that can also act as a reversal point for the stock.

If it fails to move to these targets but reverses higher, then wait for a close above Rs 205 before purchasing the stock.

Please let me know the long-term trend of Alok Industries purchased at Rs 26.

2010-11-21T09:43:00.001+03:00

Please let me know the long-term trend of Alok Industries purchased at Rs 26.

Alok Industries (Rs 29.2): Alok Industries has not yet emerged from the bear market that gripped the stock in January 2008. The stock was in a sideways range between Rs 17 and Rs 27 for an extended period from last June. This sideways move ended in June this year and the third wave of the up-move from March 2009 is in progress since then.

Simple 1:1 extrapolation of this move gives us the target of Rs 36. The stock is currently reversing lower after recording the peak of Rs 35. Investors therefore need to tread carefully at this juncture since the stock can now decline to Rs 26 or Rs 20 over the ensuing months. Investors can hold the stock as long as it trades above the first target.

Protracted sideways move between Rs 26 and Rs 36 for a few months can help the stock move higher to Rs 43 over the next 12 months. It is hard to envisage a move beyond this level just yet. Subsequent long-term targets are Rs 54 and Rs 64.

Dalal Street Low Priced Scrip - Menon Bearings

2010-11-19T11:18:00.001+03:00

There are quite a few companies that maintain a low profile and

quietly but steadily continue to put up a decent performance year

after year. Such companies are better picks due to their low

valuations and the good upside they present. Menon Bearings (MBL) is

one such company. In fact, after an insightful discussion with the

company's CFO, Suhas Kulkarni, we believe that the scrip does merit a

second look. MBL manufactures three types of products i.e. the bi-

metal bearings, bushes and thrust washers. These products, which are

fitted inside an engine block, perform the function of reducing wear

and tear load of crankshaft due to friction between crankshaft and

engine body. Through these products MBL mainly caters to the

automotive segment, which generates 90 per cent of its revenues. Its

products also find application in compressors, refrigerators and air-

conditioners, which bring in the balance 10 per cent. MBL has a good

mix of revenues wherein its 20-25 per cent of revenue is derived from

the replacement markets, 40 per cent is through OEMs and the balance

40 per cent from exports. This diverse revenue stream helps MBL derisk

its business as there is no major dependence on any single segment.

Second, MBL's products have high entry barriers as OEMs are averse to

changing the bearing supplier since it's a very critical component in

an engine and replacing one new bearing requires more than 10,000

hours or more than a year of testing to get the final approval - a

lengthy process indeed. Third, MBL has an enviable list of clients,

which includes GM, Tata Motors, Cummins, John Deere, Maruti Suzuki.

These companies make up for 60-70 per cent of the revenues. MBL is a

single source vendor for John Deere, Maruti Suzuki and Tata Motors in

some applications. Thus any increase in demand from these customers

benefits MBL directly. The management has also stated that the demand,

both on the domestic as well as international front is buoyant, and

has been witnessing an uptrend. To cater to this increasing demand,

MBL is raising its capacity by more than 30 per cent with a capex plan

of Rs 5 crore to be funded through internal accruals and debt and will

be executed during next two years. This would push MBL's revenues to

another trajectory altogether. If that wasn't enough, MBL, which had

flat realisations in FY10, is now negotiating for a price hike of at

least 10-15 per cent. The management is optimistic about it and if

this is successful it will increase MBL's growth rate further. On the

financial front, for 9MFY10 MBL's revenue increased by 26.26 per cent

to Rs 39.80 crore (Rs 31.52 crore), while profits dipped by 18 per

cent to Rs 3.66 (Rs 4.47 crore) on account of higher tax provision.

The management expects to close FY10 with revenues and profits of Rs

55 crore and Rs 7 crore respectively. At these estimates, MBL is

available at a PE of a mere 4.9x compared to its peers Bimetal

Bearings' 10x and Federal Mogul's 11x. On EV/EBDITA to MBL is

available at just 4.6x. Besides, a consistent dividend track record,

high dividend yield of 3.5 per cent and the fact that the scrip

underperformed the broader markets are factors which will help MBL

catch up with the valuations. This scrip therefore is worth buying at

Rs 40 with a target price of Rs 50.

Stock split broadens investor base of company

2010-11-16T19:01:00.001+03:00

Ashish Gupta, ET Bureau

A stock split is the partitioning of outstanding shares of a company into a larger number of shares, without affecting stockholders' equity or the total market value of the stock.

For example, if a company declares a 2-for-1 stock split of its stock, which has a current market value of Rs 100 per share, and 1,00,000 shares are outstanding

Before the split:

Outstanding shares: 1,00,000

Market value: Rs 100

Market capitalisation: Rs 1 crore

After the split:

Outstanding shares: 2,00,000

Market value: Rs 50

Market capitalisation: Rs 1 crore

Essentially, in the 2-for-1 stock split, the company's outstanding shares are simply doubled and the stock price is divided in half. The market capitalisation, or market value of the stock, remains the same. This is because stock splits have no impact on the value of a company's stock.

A stock split is merely an accounting transaction in which no equity is exchanged. Companies can split their stock in any number of ways. These splits occur in different combinations (2-for-1, 3-for-1, 3-for-2, 5-for-4, etc).

When a company declares a stock split, the price of the stock will decrease, but the number of shares will increase proportionately.

For example, if you own 100 shares of a company that trades at Rs 100 a share and it declares a two-for-one stock split, you will own a total of 200 shares at Rs 50 a share after the split. A stock split has no effect on the value of what shareholders own. If the company pays a dividend, your dividends paid per share will also fall proportionately.

Companies often split their stock when they believe the price of their stock exceeds the amount smaller individual investors would be willing to pay. By reducing the price of the stock, companies try to make their stock more affordable to these investors.

Usually, stock splits have a positive affect on the stock price. Over the long term, stock splits seem to have a considerable effect on the company's stock price. Although stock splits have no direct effect on a company's equity, the event of a split does forecast hints and signs of how the company is performing. Companies usually tend to split their shares when they have an optimistic view of their future and operations.

The announcement of a stock split can be a symbol that a stock has attained a certain level of success. The fact that a company has a record of multiple stock splits usually indicates that the company is among one of the faster growing firms, since their stock has been split numerous times.

Generally, a company is motivated to split its stock to attract more investors with a lower share price. Many investors would rather buy a stock at Rs 200 per share than at Rs 2,000 per share even though the cost basis will be identical

However, some investors can only buy lower-priced stocks because they may not have the buying power to make a larger investment.

Thus, they wait until a stock splits so they can afford some shares. Just because a company declares a stock split, it does not mean that the stock price will inevitably rise in reaction.

There are many other variables that influence investor decision in the event of a stock split including economic reports, market stability, earnings, interest rates etc.

Companies also split their shares if they need to broaden their shareholder base and make more shares available to investors. A motivation for this could be a company's defence to a potential hostile takeover. Stock splits make the company more liquid, allowing more investors the opportunity to purchase an ownership in their company

What are the key dates important to investors?

The two key dates that are important to investors are the announcement date and the payment date. The announcement date is important because no one knows for sure if and when a company a will declare a split of their stock. Thus, investors speculate on whether a company will announce it and when it will announce it.

The payment date is crucial as well because this is the day before the company actually splits its share price, after which investor activity changes as the new share price targets a different audience.

Also, companies tend to try to keep their stock within a certain price range. Therefore, when a stock hits the company's price target, the company, upon approval of the Board of Directors and the shareholders, will announce a stock split.

A stock split simply involves a company altering the number of its shares outstanding and proportionally adjusting the share price to compensate. This in no way affects the intrinsic value or past performance of your investment, if you happen to own shares that are splitting

IDBI Bank: Buy

2010-09-13T09:26:00.001+03:00

Waiving of service charges on low-cost deposits and ambitious branch expansion will help the bank improve its deposit base.

Mr R. M. Malla, CMD…The bank is cashing in on infrastructure financing.

M. V. S. Santosh Kumar

Fresh investments with a two-to-three year time horizon can be considered in the stock of IDBI Bank, the youngest of the public sector banks. The bank focuses mainly on infrastructure lending, a segment expected to contribute heavily to the incremental credit growth of the banking system, going forward.

The recent, much-needed capital infusion from the government will help IDBI Bank support high credit growth. Higher levels of capital would also help decrease cost of funds (by reducing dependence on deposits) for the bank, thereby aiding net interest margin (NIM) expansion. High cost of funds from the time of the IDBI-IDBI Bank merger has been a drag on the bank's NIMs. IDBI Bank's relatively lower cost-income ratio and higher contribution from fee income are key positives. It is one of the largest loan syndicators in the financing space which enables it to earn steady fee income and supports loan book growth.

At the current price of Rs 139.7, the stock trades at 10.2 times its estimated FY-11 earnings (after taking into account the equity dilution) and 1.07 times the estimated FY-11 book value. In terms of price-book value, the bank seems to be the cheapest in the large public sector bank space. Its investments in equities worth Rs 2,698 crore work out to Rs. 27 per share.

On the flipside, IDBI Bank's profitability ratio (return on net worth) is still among the lowest in the industry (12 per cent in 2009-10), though it has improved steadily from 9 per cent levels in 2006-07. Also, the net non-performing asset ratio of the bank (1.19 per cent) is higher compared to its peers. However, these two parameters (return ratio and asset quality) are set to improve, thanks to improving NIMs, the bank leveraging its expertise in fee-based activities, and improving recoveries from large sub-standard corporate accounts.

Targeting low cost funds

The merger of IDBI Bank with IDBI (the development financing institution) in 2005 led to high NPAs, low profitability and increase in the investment book (which offers lower yields ).. High-cost borrowings also increased post-merger. However, over the years, the bank has succeeded in shedding part of its high cost borrowing and securitising some of its long-term investments.

Around 70 per cent of its total deposits come from the wholesale segment (high-cost) which the bank intends to prune, going forward. Initiatives such as waiving of various service charges on current and savings bank accounts and ambitious branch network expansion plans (275 branches expected to be opened by end-2010-11) will help the bank improve its low-cost deposit base significantly and provide avenues for fee income growth. This is a significant initiative, given that the bank's low-cost deposit ratio currently is only around 13 per cent compared with over 30 per cent for its public sector peers.

Buoyant growth in advances

As of June 2010, IDBI Bank's advances grew by 38 per cent year-on-year, far higher than the industry growth of 21.7 per cent. While the credit growth levels may moderate marginally going forward, it is still expected to be above the industry average.

The recent capital infusion of Rs 3,119 crore by the government by way of preferential allotment will aid this loan book growth. The advance book is skewed towards the corporate segment (77 per cent ) while the retail loans which carry higher yields constitute only 23 per cent. Despite a low retail proportion, the bank's latest yield on total assets stood at a competitive 8.4 per cent, thanks to better yields on the long-term loans..

The capital adequacy as of June 2010 would work out to 13 per cent up from 11.3 per cent before the recent capital infusion. Besides, there is head room still available for raising an additional Rs 6,500 crore in the form of other Tier-I hybrid instruments and Tier-II instruments.

With the government stake up at 65 per cent, post capital infusion, IDBI Bank is comfortably placed to raise core-equity again next year. Improving profitability , additional head room and a possible primary market issuance next fiscal would provide the bank adequate capital to propel loan book growth over the next three to four years.

Financials

While its yield on advances has been inline with the banking sector, IDBI Bank's cost of funds continues to be above that of most of its peers. The bank's consolidated loan book grew at 30 per cent compounded annual growth rate over the period 2007-2010. The high loan book growth, however, did not translate into proportionate profit growth (net profits grew at only 20 per cent), due to higher interest and credit costs.

In the latest June quarter, the bank's net profit grew by 46 per cent on a Y-o-Y basis, thanks to improving NIM and fee income. NIM in the quarter improved to 1.67 per cent from 1.27 per cent in 2010, which itself grew from 0.99 per cent in the preceding year. Despite this, there is still catching up to do with industry averages, towards which the current initiatives will help.

Fee income contributes as much as 30 per cent of IDBI Bank's net income, sufficient to cover most of its operating costs. Also, the bank's cost-income ratio at 36 per cent for the latest quarter was higher than the industry average, thanks to high employee productivity.

The bank's asset quality continued to slip in the June quarter with the gross NPA ratio (1.94 per cent) higher than that in March 2010 (1.53 per cent). This coupled with 6.7 per cent of the assets being restructured (as of March 2010) makes IDBI Bank's portfolio riskier than most other banks'.

However, with the improving business environment, most of these accounts which belong to large corporates is expected to witness improving payouts. This should better asset quality. Also, the bank's provision coverage ratio as on June 30 stood at more than 70 per cent, higher than that mandated by RBI. Adverse impact of rising yields on the bank's significant investment book has been mitigated to some extent with the reduction in duration of the available-for-sale portfolio (which is marked-to-market periodically)

In the early ascendant part of the current interest rate cycle, IDBI Bank's NIM will improve, with yield on advances rising more than cost of funds.

As the bank prunes excess investments and high-cost borrowings, its business metrics would come in line with most of its peers over the next three-four years

PVR: Buy

2010-09-05T19:44:00.001+03:00

Bringing in more audience.
K. Venkatasubramanian
Investors with a two-year horizon can consider buying the shares of PVR, a leading multiplex operator, given the revival in the movie exhibition business, increasing average ticket price as well as occupancies.
A broad-based revival in the economy, a slew of movie releases that held/hold promise and increasing consumer spends which could help augment earnings, with higher food and beverages sales, also underscore our recommendation.
At Rs 173, the share trades at 13 times its likely FY-12 earnings. That is lower than its peer Inox Leisure as well as its own historic valuation levels, which also makes it an attractive bet.
The multiplex industry had an extremely challenging FY-10, what with their standoff with distributors over revenue-sharing and a string of unsuccessful movies.
Almost the entire first quarter of last fiscal went without any movie releases as a result of the tiff with distributors. A recovering economy not enabling discretionary consumer spends and, critically, two IPLs within one year also took away audiences.

This is reflected in revenues for PVR in FY-10 falling by 5.1 per cent to Rs 334.1 crore, while net profits at a mere Rs 1.3 crore took an 84.5 per cent dent over FY-09. But starting from the fourth quarter of FY10 and the recent June quarter, the company's growth trajectory appears back on track.
Helped by a series of good movie releases, the two quarters saw PVR register triple-digit profit growth over the corresponding previous period. The company has also opened several new screens in metros such as Chennai and other cities over the last several months with reasonable occupancies.
Key metrics expand
PVR has been able to systematically drive up its average ticket price (ATP) quite strongly over the last one year. With a resurgent economy and a revival in the job market leading to more discretionary spends, the company has seen ATP increase from Rs 132 last year to Rs 159 currently. Ticket sales contribute 60 per cent of PVR's revenues.
The spending by audience on food and beverages too has increased. The realisation per person (spend per head) is now at Rs 40.9, up nearly 9 per cent over the past year. This trend is especially desirable for PVR as the segment is a high-margin one and contributes to over 18 percent of overall revenues. Occupancies that had dipped to a dismal sub-20 per cent level last year too are witnessing significant revival. It now has occupancies of over 29 percent across its properties. Advertising revenues too are up substantially from last year.
PVR presently has 136 screens in operation, up 26 per cent from last year. Movies such as 3 Idiots, Avatar, Rajneeti, Kaminey, and My Name is Khan drew a large audience to its screens.
Recent hit movies such as The Inception, Peepli Live, and Once Upon a Time in Mumbai too are expected to set the cash registers ringing for PVR. That PVR's screens consistently account for over 10 percent of most movies' revenues, makes it an attractive proposition for movie makers to screen their films here.
Concerns and challenges
However, its film production division, being dependent on film content, remains vulnerable to the vagaries of the box office hits and misses. Aisha, a film that PVR co-produced, has not been successful and, therefore, could turn out to be a drag.
The rapid growth of DTH has meant that some new movies may be broadcast quickly on television. This has the potential to reduce occupancies. That this phenomenon so far has mostly been restricted to films that have bombed at the box-office provides some comfort.

MNC stocks shine on delisting hopes

2010-06-08T17:40:00.001+03:00

Minimum public holding rule generates buying interest.

Jayanta Mallick
Kolkata, June 7
The announcement by the Government about the minimum public holding, by way of an amendment in the Securities Contract Act (Regulation) Rules, generated some buying interest in certain multinational companies having public holding below 25 per cent, expecting possible delisting move.
According to SMC Capital, there are 22 MNC outfits listed here, which have less than 25 per cent public holding. "Considering the nature of the MNCs, their foreign parent companies may not be that willing to offload their stake or dilute control. Probably, they may choose the route of delisting," it said.
According to Mr Avinash Gupta, Assistant Vice-President - Research Equity, Bonanza Portfolio Ltd, on Monday, there was buying interest in the companies where the holding of the promoter is higher than 75 per cent with pronounced purchases in case of subsidiaries of MNC's.
In a note, Asit C Mehta Investment Intermediate Ltd said the modification in rule increased probability of de-listing of foreign owner-controlled companies.
The note said, "At the end of the March quarter, the holding of the overseas parent of Oracle in Oracle Financial Services Software Ltd (OFSSL) was 80.47 per cent. This will require OFSSL to make fresh issue of shares to the extent of 7.3 per cent of the existing share capital otherwise Oracle will have to reduce its stake by 5.47 per cent. Considering Oracle's practice of de-listing its subsidiaries world-wide and increase in its holding in OFSSL through preferential allotment, open offer and acquisition from the open market over the span of last five years, we believe the new modification in rule increases probability of delisting of OFSSL by Oracle."
On the contrary, the brokerages thought that local promoters with larger holding than the rule prescribed, were likely to dilute their holding and unlikely to go in for delisting. Asit C Mehta felt Wipro might opt for ADR issue to comply with modification in rules.
According to Edelweiss, some of the MNC-controlled entities – such as Bosch Chasis, Lotte India, Madras Aluminum, Matrix Labs, FCI OEN Connect and HSBC Invest Direct - have already displayed the trend of delisting.
According to observers, BOC India, in which promoters' holding is more the than what is required under the modified rules, may find the current situation tricky. So far, the overseas parent has meticulously avoided delisting by not raising their stake, even though it resorted to direct periodic infusion of funds through external commercial borrowings

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IDBI Bank net slightly up at Rs 318 cr in Q4

2010-05-01T07:32:00.001+03:00

MUMBAI: IDBI Bank Ltd reported a net profit of Rs 318.41 crore for the fourth quarter ended March 31, 2010 as compared to Rs 313.67 crore during the corresponding quarter last year. Total income for the March quarter of 2010 has increased to Rs 4,628.45 crore from Rs 3734.50 crore in the year-ago period.

For the year ended March 31, 2010, the bank has posted a net profit of Rs 1,031.13 crore (Rs 858.54 crore) on a total income of Rs 17,563.59 crore (Rs 13,021.55 crore).

The board of directors of the bank at its meeting held on April 30 has recommended a dividend of Rs.3 per share.

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IL&FS Transportation Networks emerges lowest bidder for four-laning of Chenani to Nashri Section

2010-04-04T16:03:00.001+03:00

IL&FS Transportation Networks has announced that with reference to its bid with the National Highways Authority of India (NHAI) for four-laning of Chenani-Nashri Section of NH-1A from km 89.00 to 130.00 (new alignment) of NH-1A including 9 km long tunnel (2-lane) with parallel escape tunnel in the State of Jammu & Kashmir, the company has emerged as the lowest bidder for the aforesaid project. The bids were opened on April 1, 2010. The project is on annuity basis with concession period of 20 years including a construction period of 1825 days with an estimated cost of Rs 2519 crore. The company has quoted a semi-annual annuity of Rs 317.52 crore for the project.

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Hero Honda to pay 4,000% dividend

2010-04-03T22:10:00.001+03:00

NEW DELHI: Hero Honda declared its highest dividend yet on Tuesday, and held out the possibility of another payout next month, part of the company's

push to reward shareholders as it celebrates its silver jubilee this year.

The world's largest two-wheeler maker by volumes will pay a 4,000% interim dividend of Rs 80 on each share of Rs 2 face value, which in percentage terms is the highest payout by an Indian company to date.

The Munjal family-controlled Hero Group and Japan's Honda Motor Co, owners of 26% each in the company, will gain nearly Rs 486 crore each after the payout. The interim dividend will result in an outgo of Rs 1,869 crore. A second board meet on April 19 would decide on another dividend from this year's profits, said Hero Honda CFO Ravi Sud.

"In the last 3-4 years, we have accumulated quite a bit of cash, and ... the board thought this is the right time to take care of shareholders," said Mr Sud.

Hero Honda had cash reserves of Rs 5,400 crore as of today, helped by strong sales and tight capital management. The company hopes to close the year to March 31 with sales of 4.5 million two-wheelers. Its net profit rose 78.3% to Rs 535.77 crore for the quarter ended December 2009 from a year ago.

Hero Honda invested Rs 350 crore this year to expand production capacity and on new products. It is also building a new plant. "With high level of profitability and high EBIDTA margins, cash will continue to accumulate unless the payout ratio is increased substantially," said Mr Sud.

Shares in the firm closed nearly 2% down at Rs 1,966.70 on Tuesday. Analysts said news of the dividend was discounted by the market. Investors were expecting a big payout from Hero Honda, as it's a cash-rich company and treasury returns have not been good in recent months, said Vaishali Jajoo, analyst with Angel Broking in Mumbai.

Hero Honda is known for its double-digit dividends, but its latest interim dividend payout is around four times the final dividend payouts of each of the previous five years. The company paid Rs 20 dividend on every Rs 2 share in 2004-05 and 2005-06. It paid Rs 17, 19 and 20 respectively in the next three years.

The company has set April 15 as the record date for paying the special dividend, it told NSE. That means shareholders will receive the dividend from April 22.

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How to invest in dividend stocks

2010-04-02T20:36:00.002+03:00

If dividends and capital gains are the two components of return to an investor, how much do Indian investors value dividends? Not much, it seems.

Rajalakshmi Sivam
Indian investors tend to put their money on stocks more for their ability to deliver capital gains than for their yearly dividend payouts. This is also justified by the fact the Indian market as a whole doesn't deliver much of a return by way of dividend.
The current dividend yield for the constituents of the Nifty index (dividends/market price) is less than 1 per cent. Nevertheless, investing for dividends does make sense for investors due to a few reasons. If last year's evidence is anything to go by, dividend payouts tend to be less volatile than company profits, which decide valuations. While the market as a whole may not sport a high dividend yield, investors can still bet on the few stocks that do. Here's an analysis of the trends in dividend payouts of Indian companies and dividend yield stocks, based on a study of the CNX 500 stocks.
Less volatile
Despite 2008-09 being one of the worst years in recent times for the Indian economy and its companies, the latter did not materially cut back on dividend payouts. Even as the overall net profit of the CNX 500 companies dipped by 6 per cent between 2007-08 and 2008-09, their total dividend payout saw only a 2 per cent dip, falling to Rs 52,500 crore from the Rs 53,360 crore in FY08.
The overall dividend payout ratio actually edged up a little from 24 to 24.8 per cent, as companies dug deeper into their pockets to pay dividends. The number of companies that declared dividends in 2008-09 was 364, just 17 short of the previous year.
Quite a few of the companies that paid dividends last year maintained their dividend rates despite a fall in net profits — Amtek India, Godrej Industries, Jindal Saw, Nirma and Tata Chemicals being some instances. Tata Steel maintained its dividend rate at 160 per cent despite a small 10 per cent growth in its standalone profits. The message to investors is that dividend payouts may be less volatile than per-share earnings. During a downturn, this makes it preferable for investors to bet on dividend paying companies rather than non dividend payers.
Consistent payers

Investors looking for consistent dividend payers over the long term however may not have too many stocks to choose from. Scanning through the CNX 500 companies throws up a few names — Neyveli Lignite, Chambal Fertilisers, Hero Honda Motors, Geometric, Havells India and Elder Pharma.
The trick in identifying consistent dividend-paying companies seems to be low payout ratio. Most companies with a regular payout appear to have set a record of consistency by paying a limited share of profits as dividends; payout ratio has been less than 30 per cent in eleven of these companies.
Elder Pharma has been declaring 25 per cent dividend every year in the last five years. But this is just 9-12 per cent of its profits. Geometric has been declaring 40 per cent dividends which are again just 10-20 per cent of its profits. A low payout ratio probably allows dividend-paying companies to maintain the payments even through ups and downs in earnings over the years.
Higher stock valuation?
If dividends and capital gains are the two components of return to an investor, how much do Indian investors value dividends? Not much, it seems. The market doesn't actually give higher valuation to companies that pay out consistent or high dividends. Hero Honda Motors with an annual dividend Rs 20 per share, for example, has never traded at valuations higher than TVS Motor (whose dividends have fallen from Rs 1.30 per share to 70 paise per share) in the last five years.
Tata Chemicals (dividend per share risen to Rs 9/share from Rs 6.5 five years back) has been trading at lower valuations compared to RCF (dividend per share Rs 1.70-1.20); State Bank of India too (dividend per share up from Rs 12.5 to Rs 29) has been trading at a lower PE than HDFC Bank (dividend per share Rs 10, up from Rs 4.5).
The markets also don't seem to mark down a stock's valuations when dividends are cut or don't materialise for a particular year. For example, JSW Steel's dividends dropped sharper than that of SAIL in FY09 but the market continued to give it a higher PE than the latter.
Given that valuations are a function of a company's perceived "growth" potential, markets appear to value companies that plough back profits into the business better than those that pay out dividends. This means that if you are a dividend seeking investor, you may actually find your stocks trading at a valuation discount to peers.
Dividend yield stocks
Turning from dividend payouts to dividend yield (dividends as a proportion of stock price), though the index's average yield is low, there are a handful of stocks in the CNX 500 that have consistently delivered high yields to investors; with dividends rising in proportion to the market price of the share.
Some stocks that have consistently delivered a 3-7 per cent yield every year over the last five years are Supreme Industries, Karur Vysya Bank, Wyeth, Nava Bharat Ventures, Supreme Petrochemicals, LIC Housing Finance and Andhra Bank. In some of these cases, the high dividend yield made up for the capital loss in the stock during the 2008 meltdown.
In the case of Wyeth for example, dividends added 8.17 per cent (Rs 37/share) in FY09 to the returns of investors who had bought the share a year ago. This almost made up for the loss in the value of the share (Rs 38/share) in that period on crash in the stock market. However, investors basing their decision mainly on a stock's historic dividend to get at the yield may at times be misled by companies cutting back on dividends or reducing payouts after exceptional years. Someone who invested in Indo Rama Synthetics in March 2008 looking at its attractive 13.5 per cent dividend yield was likely to have been disappointed the following year. With the company reporting a loss of over Rs 90 crore on a fall in sales and spike in interest cost the next, it didn't declare dividends at all.
In the case of Monsanto India, the company's one-off dividends of Rs 297/share in 2007-08 lifted the dividend 'yield' to very high levels; but dividends normalised the very next year to Rs 25/share. Another instance of a company making a large payout due to one-time income was EID Parry which declared a 1000 per cent dividend in FY09 out of windfall profits on sale of investments. This however may not be the case in the current year.
An unusually high dividend yield may also be a direct reflection of the low valuations that the market is willing to grant a particular stock due to uncertainties surrounding the business.
Findings so far suggest three key takeaways for dividend seeking investors:
Dividends for the more consistent companies may be less volatile than their profits;
Look for a low payout ratio if you seek consistent dividends; and
Beware of one-off payments while determining yield.
Finally, are there any specific sectors that investors can look to, to unearth high dividend yield stocks? Investors though don't have too many choices. But fertiliser makers and banks seem to figure more often on the list of dividend yielding stocks.

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Fortis Healthcare in the pink of health after overseas acquisition

2010-03-12T13:28:00.001+03:00

Fortis Healthcare jumped 3.53% to Rs 184.65 at 9:48 IST after the company said it will buy 23.9% of Singapore's Parkway Holdings from US buyout firm TPG Capital as a part of its expansion drive into Asia and the Middle East.

The announcement was made before trading hours today, 12 March 2010.

Meanwhile, the BSE Sensex was up 50.90 points, or 0.30%, to 17,218.86.

On BSE, 17.51 lakh shares were traded in the counter as against an average daily volume of 5.87 lakh shares in the past one quarter.

The stock hit a high of Rs 187.45, a record high. It hit a low of Rs 180 so far during the day. The stock had hit a 52-week low of Rs 65.60 on 17 March 2009.

The stock had outperformed the market over the past one month till 11 March 2010, soaring 17.45% compared with the Sensex's 6.29% rise. It outperformed the market in past one quarter, spurting 51.46% as against 0.29% decline in the Sensex.

The mid-cap healthcare chain has an equity capital of Rs 317.34 crore. Face value per share is Rs 10.

The current price of Rs 184.65 discounts the company's Q3 December 2009 annualised EPS of Rs 1.56, by a PE multiple of 118.36.

The $685 million deal will give Fortis a foothold in Singapore and Malaysia and make it the biggest private hospital network in Asia, it said.

Parkway has 16 hospitals with 3,400 beds spread over six countries, including India and the United Arab Emirates. It also has a controlling stake in Parkway Life REIT, a property trust that owns hospitals and nursing homes across Asia.

The latest deal will increase Fortis' hospital network to 62, which the company said would make it the biggest hospital network in Asia, with more than 10,000 beds.

Fortis' chairman Malvinder Mohan Singh was quoted by the media as saying that the company intends to move into other parts of Asia and the Middle East.

Fortis has no immediate plans to raise its stake in Parkway and plans to work with the Singapore firm in expanding across the region, added Singh, who will be nominated as chairman of Parkway.

Fortis will be the largest shareholder in Parkway, with a stake slightly higher than the 23.32% held by Malaysian state fund Khazanah Nasional Bhd.

Fortis' latest purchase follows its $187 million acquisition of 10 hospitals of Wockhardt Hospitals in August 2009.

Last month, the hospital chain's board approved a proposal to raise Rs 1250 crore through preference shares, overseas shares or foreign currency bonds.

Fortis Healthcare reported a net profit of Rs 12.40 crore in Q3 December 2009 compared with a net loss of Rs 1.67 crore in Q3 December 2008. Sales rose 12.4% to Rs 49.44 crore in Q3 December 2009 over Q3 December 2008.

Fortis Healthcare is engaged in healthcare services. The company's network of hospitals includes multi-specialty as well as super-specialty centers.

Promoters have pledged 2.76 crore shares, or 8.71% of the equity capital of the company. The total promoter shareholding in the company is 76.47% (end December 2009).

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Suppose you want to know the retail subscription of a current IPO.

2010-02-26T21:45:00.001+03:00

1. First go to the NSE's current IPO's page.

http://nseindia.com/content/ipo/ipo_current.htm

2. Select the IPO from the list.

3. Note the "No.of shares offered/reserved" in "Retail Individual Investors (RIIs)" category.

4. Click on "View NSE-BSE Demand Graph".

5. Note the "Total Bids Received at Cut-off Price".

6. Divide figure obtained in Step 5 by figure obtained in Step 3.

7. Multiple the figure obtained in Step 6 by 1.07. (We are multiplying by 1.07 as retail subscription is usually 5%-7% higher than the cut-off subscription.

8. The figure obtained in Step 7 is the approximate current retail subscription figure.

It is not possible to know the exact figure until the end of the day. However the approximate figures are very close to the actual figures.

maithan alloys ltd--multibagger

2010-02-12T16:32:00.002+03:00

Maithan Alloys is one of the largest and most profitable manufacturer of manganese alloys in one of the most competitive production locations in the world.
The Company's business model can be encapsulated across the following
points:

The Company commenced commercial production in 1997
with 10 MVA; it grew its installed capacity by 7.5 MVA in 2000 and 8.26 MVA
in 2004 when the market for manganese alloys was weak, indicating its
commitment to the business. The result is a capital cost per attractively lower than the prevailing greenfieid benchmark.

The Company enjoys a long-term power supply agreement with
DVC but going ahead, is commissioning 95 MW at its 15 MVA Meghalaya
facility. The Company also possesses a manganese ore mine in Orissa,

The Company has successfully completed the construction of manganese alloy
plant and captive power plant at Byrnihat in Meghalaya. The project was
commissioned during 1st week of April, 2009, enhancing Company's
manganese based ferro alloy capacity from 49 MVA to 64 MVA and captive
power capacity to 15 MW.

Company has its own mines in its one of the subsidiary where lease is expired & it is in process of reviving the same .

It has reported net profit of Rs 9.01 crore in the quarter ended December 2009 as against net loss of Rs 47.78 crore during the previous quarter ended December 2008. Sales rose 6.98% to Rs 134.34 crore in the quarter ended December 2009 as against Rs 125.57 crore during the previous quarter ended December 2008.

For the 1st nine months it reported eps of rs 18.5 , as current price realisation is better at around 53000 per tonne, 4rth qtr earning likely to be much better . Thus full year eps likely to be around rs 28/30 levels .

Last year export sales were around rs 380 crs which is around 57 % of total sales .

Equity base of company is low at rs 9.71 crs & promoter holding is around 74.62 %, investors can accumulate this stock on dips below rs 100 for long term target of rs 250 over next one year time .

stocks to buy

2010-02-08T21:50:00.000+03:00

1infosys cmp2350 target rs 3175

idfc cmp144 target rs 185

tata steel cmp 530 target 650

shares to buy

2010-02-08T05:46:00.001+03:00

the three are good investments - SUZLON is expected to get some relief in the coming budget while FORTIS - target price is 500 in 48 months solid investment (if the market falls to 13,500 levels FORTIS can be bought around 100)

I feel that L& T is a bit overpriced for now.

You may buy SBI / AXIS BANK / IDBI BANK/ SOUTH INDIAN BANK/ FEDERAL BANK / YES BANK ETC ....BANK SHARES ARE EXPECTED TO DO WELL IN 6 MONTHS UNLESS RESERVE BANK CHANGES SOME POLICY....

HRHR - HIGH RISK HIGH RETURNS - WIRE AND WIRELESS

All the best

Best Regards,
Ramanathan N.S.
00968 96915246(Mob-Oman)

ARSS Infrastructure — IPO: Invest

2010-02-07T21:23:00.000+03:00

A sizeable order book, strong sales and profit growth, and a secure client base in government contracts bode well for the offer.

Major exposure to the Railways segment provides high margins.

Bhavana Acharya

A relatively low asking price and a focus on government projects make the offer from ARSS Infrastructure Projects a reasonable bet, but only for investors with a high-risk appetite.

A construction contractor in the Railways and roadways segment, the company plans to raise Rs 103 crore from this issue to fund working-capital and joint ventures.

In its price band of Rs 410-450, the offer is at a valuation of 8.6 to 9.5 times the estimated FY-11 per share earnings on a post-offer equity. Reasonable valuations notwithstanding, given the risks to the business, investors are advised to exit the stock if it touches about a 21 per cent return.

ARSS has a high exposure to Railways (which offer higher margins) and roadways, a sizeable order book, strong sales and profit growth, and a secure client base in government contracts. The company also uses joint-ventures to bid for and execute bigger projects and build on execution capabilities. Strong margins and post-issue lower debt-equity are other positives for the company.

However, the order book has several contracts with a relatively short execution period. ARSS will have to keep up the pace of securing fresh orders to maintain current rate of growth.

A promoter facing criminal investigations, past instances of default in payment of power bills, default in servicing debt and decline in working capital turnover pose significant risk.

Background

ARSS executes construction contracts in Railways (laying and linking of tracks, earthwork and construction of bridges) and roadways (widening and strengthening of roads), with a recent move into irrigation. Geographically concentrated in Orissa, the company has moved into regions such as Tamil Nadu, Rajasthan, Jharkhand and so on. Almost 90 per cent of the contracts come from government-based institutions such as Ministry of Railways, Orissa Public Works Departments, and so on, providing a secure repeat client base. The company also has in-house design capacities.

Current order-book stands at Rs 2,877.5 crore (4.6 times 2008-09 revenues), and is well-diversified with 41 per cent in the Railways segment, 40 per cent in roads, 3 per cent in irrigation and the balance in other smaller works.

The order book is represented by over a hundred contracts, a smaller average contract value (about Rs 21 crore), and bulk of the order book is executable by FY-11 providing near-term earnings visibility. However, maintaining current growth rate depends on the company's ability to continually secure fresh contracts which provide similar margins.

Issue objects

ARSS has used joint ventures with players such as Kalindee Rail and Patel Engineering to execute projects where it lacks capability. Such ventures could help it build on its own expertise and allow a bidding capacity for bigger and more varied projects.

Besides, gradual build up of expertise could help it eventually qualify for projects on its own strength. About Rs 5 crore from the issue proceeds will go to funding such joint ventures and Rs 86 crore towards working capital.

Turnover of working capital, however, has gradually declined from 3.36 in FY07 to 1.67 times (as of December 09). Huge increases in inventory could partly explain this slide.

The order book just about doubled in FY-08 over the year before, but work-in-progress (WIP), a part of inventory, jumped about nine times. This has continued in FY-09 as well where WIP more than doubled against an order-book growth of 64 per cent.

Financials

Sales recorded a strong 118 per cent three-year CAGR while net profits put up a 149 per cent growth. Given a higher component of railway projects, and price escalation clauses built into a majority of the contracts, operating margins have been maintained above 10 per cent FY-07 onwards, standing at 12.5 per cent for the nine months ended December 09.

Net profit margins as well have stayed at about 8 per cent. Funding position appears comfortable with debt-equity on a post-issue basis on the lower side at 1.23 times, and interest cover at 2.7 times (December 09). The company has, however, defaulted on interest and repayment of loans in FY-06, FY-04 and FY-03.

Offer details

The issue is open from February 8-11. IDBI Capital Market Services and SBI Capital Markets are the lead managers.

Power Finance Corporation: Buy

2010-02-07T21:22:00.000+03:00

Fresh investments can be considered in the Power Finance Corporation (PFC) stock that appears a good defensive bet within the financial sector.

The company's loan book grew at a strong pace of 20 per cent in 2009 despite lower demand for credit witnessed by the banking sector. At current market price of Rs 252, the PFC stock is trading at 10.5 times its estimated FY11 earnings and two times its estimated adjusted book value, which does not reflect the strong earnings growth posted by the company.

Near-zero non-performing assets and a high proportion of floating rate assets (87 per cent) allow PFC to pass on interest hikes and minimise credit risk. Strong earnings growth (36 per cent for nine months ended December 31, 2009, adjusted for extraordinary items), superior profitability (Return on Equity of 17 per cent) and the insatiable funding requirements of the power sector make for bright growth prospects.

The outlook for power financing looks promising given that investments of Rs 10 lakh crore are expected in the power generation alone over the next eight years. PFC being the market leader may corner a chunk of this pie.

With a minimum 70 per cent of every power generation project to be funded with debt, PFC may continue to witness high levels of sustainable loan book growth over next few years. That power companies have preferred the domestic market to overseas borrowings also benefits PFC.

The gap between PFC's sanctions and disbursements stood at around Rs 1.25 lakh crore by December 2009 due to project delays until previous quarter. However, in the third quarter, the disbursements outpaced sanctions, indicative of improving investment environment for power project development. Loans sanctioned (not disbursed) amount to 1.72 times its loan book.

A sovereign credit rating gives it opportunity to borrow at reasonable rates. The majority of liability profile is fixed allowing it to lock-in at low interest rates. Going forward, the asset-liability mismatch, however, is a lingering concern with loan tenures of over 15 years, while liabilities typically have the highest tenor of 10 years. Currently, the average maturity is 5.8 years for loans compared to 4.55 years on borrowings.

With interest rates hardening, PFC's margins may be held (4.2 per cent for nine months ended December 2009). Currently, the State electricity boards are the key borrowers, but the proportion is coming down. Incremental sanctions are likely to be driven by the private sector. PFC may also look at chipping in for the equity portion of power projects, which may bolster returns on investment.

Fee income may improve as new Ultra Mega Power Projects are awarded. The consultancy and APRDP (Accelerated Power Development and Reform Programme) also improve the fee income. The company is also entering coal mining and equipment financing.

PFC has a comfortable capital base (currently 17.6 per cent) allowing it to expand its loan book seamlessly without raising additional capital.

M.V.S. Santosh Kumar

Blockbuster third quarter for multiplexes

2010-01-30T22:09:00.000+03:00

Back-to-back hits ensure rising revenues for multiplexes.

Varada Bhat

Mumbai, Jan. 29

The smiles are back on the faces of multiplex operators thanks to a buoyant third quarter. This has largely been propelled by a good line-up of movies and higher ticket prices.

Cinemax's net profit increased almost five times to Rs 10.59 crore (Rs 2.05 crore) for the period ending December 31, 2009. Revenue from operations was up 81 per cent to Rs 59.39crore (Rs 32.72 crore).

Inox more than doubled its profit to Rs 8.74 crore (Rs. 3.99 crore) while revenues jumped 29 per cent to Rs. 84.28 crore (Rs. 65.48 crore).

PVR, likewise, reported a higher profit of Rs 7.37 crore (Rs 4.5 crore); its income was up to Rs 114 crore (Rs 88.29 crore).

"The good line-up of movies, be it Hindi, English and regional languages, contributed significantly to our performance." said Mr. Deepak Asher, Director, Inox Leisure.

According to Mr Anil Arjun, Chief Executive Officer, Reliance MediaWorks, this quarter alone saw 16 big releases such as Wake up Sid, Azab Prem ki Ghazab Kahani, Paa and 3 Idiots along with Hollywood fare like Avatar, 2012 and New Moon which led to an increase in footfalls.

"During the first weekend of 3 Idiots, we recorded nine lakh customers across Big Cinemas," he said. The Anil Ambani-promoted multiplex chain has 509 screens across the globe.

Dearer tickets have helped boost revenue with most multiplex operators increasing prices twice by an average of Rs 25-100 during the quarter. Nearly 75 per cent of income comes from ticket sales while food and beverage sales and advertisements make up the rest. Operators are equally upbeat about this quarter with big ticket releases like My Name is Khan, Teen Paati and Kites.

nokia shortcuts

2010-01-30T09:46:00.003+03:00

*#0000# displays the phone model, software version, and date the software
was made. The phone model displayed may be Nokia's internal phone model
code, which is different from the modfel number under which the phone is
sold.
> *#06# displays the IMEI (International Mobile Equipment Identifier) of
> your phone.
> *#2820# (*#BTA0#) shows the bluetooth address of your phone.
> *#62209526# (*#MAC0WLAN) displays the MAC address of the wireless LAN
> adapter in your phone. This only works if your phone has Wi-Fi.
> *#92702689# (*#war0anty#) displays the life timer of your S60 phone (the
> total time of phone calls in hours and minutes). The only way to reset
> this timer is to flash your phone's firmware.
> *#7780# (*#rst0*) is the code to soft-reset your phone. This
> non-destructive reset will reset phone settings like profiles, themes and
> shortcuts. Data like contacts, calendar and notes are not removed.
> *#7370# (*#RES0#) resets your phone to default factory settings, i.e. the
> state of your phone when you bought it. It will not reset the life timer.
> All data that you added yourself will be deleted, so make sure you have a
> backup.
> The Vulcan Death Grip for Nokias: switch off the phone, then press and
> hold call (green key), * (star key), 3 (three), and switch the phone on
> with the power button while holding the three other keys. This resets your
> phone to virgin factory state the same way *#7370# (*#RES0#) does. The
> Vulcan Death Grip is a last resort method to revive your phone if you
> can't boot it. It doesn't work on all Nokia phones.
> The following codes check the call divert settings. This is a network
> service. You'll need to hit the green call key after entering these codes.
> *#21# checks if "all calls" are diverted, and to which number they are
> routed (usually your voicemail).
> *#30# checks if your phone number is hidden or not.
> *#43# checks if call waiting is enabled. If it is, you'll be notified if
> incoming calls if you're already calling someone else.
> *#61# checks if calls are diverted if you don't answer your phone, to
> which number they are routed (usually your vocemail), and how long your
> phone will ring before the call is diverted.
> *#62# checks if calls are diverted if you're out of network reach, and to
> which number they are routed (usually your voicemail).
> *#67# checks if calls are diverted if your phone is busy, and to which
> number they are routed (usually your voicemail).

Govt to dilute stake in 3 shipping cos

2010-01-25T00:55:00.000+03:00

MUMBAI: The government will divest its stake in three shipping companies Cochin Shipyard, Shipping Corp of India (SCI) and Dredging Corp of India (DCI) in the next fiscal, a top Shipping Ministry official said.

"We have received a proposal from Cochin Shipyard for an IPO to raise funds for expansion. This could be through an issue of fresh equity shares of about 10 per cent," K Mohandas, Secretary - Ministry of Shipping, said.

In both SCI and DCI, the government is likely to dilute at least 10 per cent stake, he said.

The shipping ministry is evaluating the disinvestment process in SCI and DCI and will take a final call on the issue early next fiscal (2010-11), Mr Mohandas said. Cochin Shipyard is likely to come out with its IPO first, he said.

While he would not commit a time-frame, it is understood that both the IPO and Government disinvestment process would take place in the next six to nine months. - PTI

13 SHARES TO BUY IN 2010

2010-01-24T08:06:00.001+03:00

Greetings. I feel that the following 13 shares will give good returns in 2010 -
THOUGH HIGH RISK PLAYERS....MOUNT EVEREST

TODAY'S WRITING
NOIDA TOLL
ALOK INDUSTRIES
BHAGAWATI GASES
GEOGIT BNP
GEMINI CIMMUNICATIONS
HMT
ITI
WIRE & WIRELESS
TAINWALA CHEMICALS
ASSAM CO
AFTEK LTD

recommaded by RAMANATHAN(OMAN)

Allahabad Bank: Buy

2010-01-18T07:42:00.000+03:00

The bank's strategies to increase low-cost deposits and reduce dependence on whole-sale deposits have started yielding results .

As the bank becomes 100 per cent CBS-enabled, fee-income may improve.

M.V.S Santosh Kumar

Investors can consider accumulating the Allahabad Bank stock, which is a defensive pick in the banking space. The bank has posted higher-than-industry credit growth so far this fiscal with lower slippages, thereby increasing its market share in advances. The Allahabad Bank stock is trading at a significant valuation discount to its peers.

At current market price of Rs 133, the stock is trading at a price earnings multiple of nearly 5 times on estimated FY10 earnings and a price to FY10 adjusted book value (estimated) of 0.88.

The bank had formulated strategies to increase low cost deposits and reduce dependence on whole-sale deposits while improving yields and fee income. These have started yielding results, with the bank witnessing sharp improvement in operating efficiency (cost-income ratio of 38 per cent for September 2009 against 49 per cent a year ago) and asset quality (net Non Performing Assets (NPA) of 0.35 per cent). Fee income as a proportion of operating expenses has also increased from 31 per cent to 42 per cent for the half year ended September 30, 2009. Fee income may get further fillip as the bank becomes 100 per cent core banking solutions (CBS)-enabled.

Strong loan growth

Allahabad Bankhas high concentration in the North and Eastern parts of India. The bank has a strong presence in rural and semi urban areas (accounting for 60 per cent of the network). The low-cost deposit base improved to 36 per cent as of September 30, 2009.

The loan book grew at a compounded rate of 29 per cent during the period 2004-09 while net profit growth was inconsistent and grew at an annual rate of 9 per cent. Credit growth as of September stood at 17.7 per cent against the industry credit growth of 12 per cent.

The loan growth of the bank was primarily driven by the small and medium enterprises and corporate advances. While the credit growth this year may be moderate, we expect credit growth to pick up beyond this fiscal.

The low rate of profit growth during the last few years was a function of higher cost of funds, provisioning for NPAs and depreciation. Two of these three issues have been sorted out by the bank. One, the bank has been reducing its dependence on high-cost wholesale deposits. The proportion of wholesale deposits to total deposits has come down from 25.5 per cent to 12 per cent on a year. Two, the bank has made adequate provisions for NPAs (79 per cent).

In addition the bank has also re-priced assets and improved yields on advances. The net interest margin (NIM) of the bank has improved from 2.62 to 2.88 per cent in a year, with net interest income growing 28 per cent. Allahabad Bank's net profit for the half-year ended September 2009, grew by 370 per cent over the same period last year with write-backs and treasury gains bolstering profits (it took write-offs last year).

There is still scope for improvement in the NIM of the bank as a larger proportion of high cost deposits get re-priced at a lower rate.

Overall, from here on, the net profit growth for the bank would get support from improving credit offtake and better margins, even as it may face some pressure on its treasury portfolio.

Asset Quality

Allahabad Bank is the one of the few banks to witness a fall in its gross NPA ratio from 1.81 to 1.73 per cent , from March to September 2009. The improvement in provision coverage to 79 per cent from 59 per cent helped the bank reduce the net NPAs significantly.

Well-capitalised

Despite government holding 55 per cent in the bank which is close to the mandatory 51 per cent, the bank is currently comfortably placed in terms of capital adequacy ratio (CRAR) (14.9 per cent) with core capital contributing more than 9 per cent. The bank also has additional head room to raise more than Rs 1,800 crore, which, along with the internal accruals, would be enough to fund a loan growth of 20 per cent for the next few months and yet maintain CRAR at over 12 per cent. The Indian government is also set to recapitalise public sector banks for which Allahabad Bank is a likely candidate.

Some concerns

Allahabad Bank has a very high proportion of government securities in its investment portfolio. While some profit booking may have been done in the December quarter, the bank may have to provide for the mark-to market losses, as gilt yields touch a 15-month high.

During the first half of this year, Allahabad Bank converted a proportion of its securities in the available-for-sale category to held-to-maturity, thereby shielding itself from a spike in yields to some extent. Only Rs 4,065 crore of government securities are now exposed to market yields. However, the duration of the investment portfolio is on the higher side, leading to concerns of treasury losses. The bank's non-gilt securities are in the form of liquid mutual funds and certificates of deposit which are not as vulnerable to interest rate spikes

Disinvestment talks trigger buying in PSUs

2010-01-17T05:25:00.000+03:00

'Several mutual funds have launched PSU Funds'.

Our Bureau

Mumbai, Jan. 15

Shares of Government-owned companies gained between 5 and 20 per cent on Friday on talks of stake sales in some of them.

The BSE PSU index gained 2 per cent. Sensex and Nifty closed in the red.

Engineers India Limited gained 20 per cent and hit the upper circuit after the Government announced a 10 per cent divestment in that company. The State owns a 90.40 per cent stake in Engineers India. The stock closed at Rs 2079.70 on the BSE.

The other such counters that gained on Friday were State Trading Corporation, Dredging Corporation of India Ltd, Hindustan Copper, NMDC, Rashtriya Chemicals and Fertilisers Ltd, MMTC, BEML. The Government's holding in these companies is more than 90 per cent.

The Cabinet approval for disinvestment in Engineers India has brought renewed buying interest in other PSU stocks such as NMDC, GMDC, FACT, RCF, ITI, HMT, HOCL, National Fertilizer Ltd etc, said Mr Alex Mathews Head, Research Centre Geojit BNP Paribas Financial Services.

According to a Sharekhan report: "Disinvestment remains one of the trump cards for the Government in managing fiscal deficit. However, the ambiguity over the pace of disinvestment and the absence of any visible progress in disinvestment has led to uncertainty over willingness of the Government to play the disinvestment card. Having said that, the recent announcement (all profitable listed PSUs to have minimum 10 per cent public ownership) gives the much needed traction to the disinvestment programme."

Year 2010 can expect huge issuances from the Government . As India is moving from a $1 trillion economy to a $2 trillion one, it has appetite to absorb these massive investments mainly due to the 38 per cent savings rate, a report by Arm Research Private Ltd said.

PSU divestment has created value for investors in the long run. Taking this into consideration, several mutual funds have launched PSU Funds which would tend to benefit from the PSU divestments, the report said.

$100 bn investment potential in education sector over 5 yrs: Experts

2010-01-10T10:42:00.001+03:00

NEW DELHI: The country's fast-growing education sector holds a
potential to attract a whopping $100 billion (about Rs 4.57 lakh
crore) investment over the next five years driven by demand for
skilled professionals and need for infrastructure development, say
experts.

Sector experts are upbeat about the growth visible now and believe it
could turn into one of the most preferred sectors for investment by
venture capitalists and private equity players going forward.

"The education sector presents an investment potential of $100 billion
over the next five to six years. Venture capitalists and private
equity players will have a role to play in the expansion going
forward," KPMG director Strategic and Commercial Intelligence Dushyant
Singh said.

Moreover, experts feel by enabling private participation in education,
private players can have a significant role in expanding the sector.

According to education and training provider Zee Learn, which is a
division of ETC Networks, there is huge growth potential in the sector
with increasing demand for educational institutions.

"The sector is not well capitalised and there is need and potential
for private investments in the space. To tap this growth, Zee Learn is
also planning to set up 20 more schools and 660 pre-schools in the
country this year," Zee Learn CEO Sumeet Mehta said.

The sector offers opportunities to increase capital as education still
lacks good-quality infrastructure in the country and investors have
the opportunity to build it, experts believe.

"The sector has various drivers for growth, including very low school
going population, need for educated and skilled professionals and
infrastructure requirements," Singh said.

However, there are some regulatory hurdles as an educational institute
in the country has to be a non-profit making organisation.

Singh said investors can become part of the sector through investments
in service and infrastructure providing for schools and institutions.

Moreover, there is a need for large players in the sector as the space
is currently fragmented, he added.

Meanwhile, Zee Learn's Mehta also said robust hiring will take place
in the sector in the coming years as the expansion in the education
sector is increasing the need for school teachers and other staff.

According to official statistics, the education sector faces a
shortage of 8,00,000 teachers in the primary and upper primary schools
and over the next 10 years, secondary schools would have to recruit
5,00,000 teachers.

Source: E.T

--
"Invest in Knowledge, Share with Others, Grow Together"

how much i should pay tax for buying shares

2009-12-28T20:20:00.002+03:00

Making money from Indian stock market was never so simple. Even though markets are in the upswing we can find more and more people losing in stocks. A close study shows non understanding of financial markets as the major reason for this. Fundamental study helps you to identify potential winners which can be multi-baggers. Technical analysis helps to time the markets. But there is one more important factor that affects the profits of your investments that is Tax. In this article we have briefly explained different types of Taxes that influences your Returns.

There are thousands of companies in India all of them require capital for functioning and they issue securities to get funds.

Securities Transaction Tax (STT)

Securities Transaction Tax (STT) is a tax on the evalue of shares bought and sold on a stock exchange. The Tax has to be paid irrespective of your profit or loss; it is a turnover based tax. STT has been introduced in the in the year 2004-05. It is levied on the purchase or sale of equity shares, derivatives, equity-oriented funds and equity-oriented mutual funds.

The current rate of STT is 0.125% of the transaction volume

Capital Gain Tax

A Capital Gain can be any income generated by selling a capital investment. A capital investment can be anything like stocks, business, paintings, houses, family businesses, farmhouses, etc.

Tax on Short term and Long term Capital Gains

Capital Gain	Tax Rate
Short-Term	15%
Long-Term	Nil

Some do's and don'ts about Cost Averaging

2009-12-23T04:05:00.002+03:00

One of the most common problems that many investors face is whether to
sell or to resort to cost averaging when the price of a stock, or the
NAV of a mutual fund, drops just after a purchase is made.

A typical question I face goes something like this: "I bought a stock
at 80, and when it dropped to 40 I bought some more to bring my
average cost price down to 60. Now the stock has dropped below 30.
Should I sell to reduce further losses, or buy some more to bring the
average cost down further, or just hold on till I get back my average
cost price of 60?"

There are no easy answers to such a question. The answers will depend
on the type of stock, the investor's risk tolerance and holding
period. So, instead of providing answers, let me try to list out some
do's and don'ts that can better prepare investors to face a similar
situation.

Do's about Cost Averaging

1. Before you pick any stock or fund, do a due-diligence. Find out
as much as you can about the track record of the promoter or fund
manager and the performance of the stock or fund through bull and bear
periods
2. Learn the rudiments of reading a price chart, or at the very
least find out about the 52 week high and low values of the stock/
fund; try to buy at, or near, a 52 week low
3. Decide whether you will indulge in short-term trading or long-
term investing
4. Accordingly, set either a tight stop-loss or a wider stop-loss
5. If the stop-loss is hit, be ruthless about selling the stock/
fund
6. If steps 4 and 5 are followed, the need for cost averaging won't
arise if the price falls after purchase
7. If the price rises after purchase and you are convinced about
the future of the stock/fund, buy more. In other words, average your
cost upwards.

Don'ts about Cost Averaging

1. Don't ever buy a stock/fund just because a friend or colleague
or TV analyst has suggested a 'buy'; learn to take responsibility and
decide for yourself
2. Don't buy a stock/fund trading at or near a 52 week high
3. Don't be overconfident of your stock-picking skills just because
you've tasted a few successes; always remember to set a stop-loss -
whether you wish to trade or invest
4. Don't become a long-term investor by default because your trade
failed and the loss became too large, and you hesitated about selling
at your stop-loss
5. Never cost average downwards, as a general rule and particularly
for mid-cap/small-cap stocks/funds (which tend to fall the most during
bear markets)

Please remember that your cost price is known only to you. The market
doesn't care two hoots about whether you are making a loss or a
profit. So you need to develop an investment style that can minimise
loss and maximise profit.

A related problem, though not quite as nerve-wracking, is when the
price of a stock (or the NAV of a mutual fund) which hardly moves up
or down for a prolonged period starts to move up as soon as an
investor gets rid of it!

This problem is quite easily solved if you learn the art of partial
profit booking.

From C. Kutumba Rao - Nov 30, 2009

2009-11-30T13:15:00.001+03:00

Rattled by Dubai's debt crisis, stock markets slumped on fears that although the major central banks have stabilised the financial system, some of the 'excesses' simply refuse to disappear and may disrupt the system again.

Erasing most gains of three-week rally, the benchmark indices fell by more than two per cent during the week ended. On the BSE, the Sensex fell by 390 points to end at 16,632 and the Nifty on the NSE shed 110 points to close at 4,942. However, the bounce back from intra-day lows on Friday reflects the bullish undertone and resilience of the markets.

Fears over tax on capital inflows and withdrawal of stimulus packages have been allayed by the finance minister, but the impact of rising food inflation is a cause of concern. Dubai's effort to reschedule its debt is a sign that government spending alone won't be enough to protect markets.

Differentiation between riskier and less risky asset classes in which correlatio-ns have risen, making it difficult to make money simply by riding the liquidity wave from central banks. Stock volatility will jump sharply as countries and companies default on loans.

Markets still look bullish with the government giving big push to the reform agenda but the rise in risk aversion is likely and investors have to start focusing even more on the fundamentals.

For the week ahead, chartists predict a trading range of 16,250 and 17,100 for the Sensex and 4,800 and 5,120 for the Nifty. Crucial supports for the indices are last week lows at 16,210 and 4,806. Traders fear that below the-se levels, indices might test lows of November series.

Immediate resistances for the indices are at 16,880 and 17,100 and 4,980 and 5,060. Be bearish only below 4,850-level on closing basis. Whatever is hard to do in the market is generally the right thing; and whatever is easy is usually the wrong thing to do.

Futures & Options

Despite hyper volatility and wild swings of November series, the rollover of positions to the December series was in line with last three months average at 84 per cent. However, stock futures witnessed a lower rollover reflecting the lack of confidence among the market players over the near term direction of many individual stocks. Option activity indicates a strong support for Nifty at 4,800-4,850 level and strong resistance at 5,050-5,100 level.

Adopt strangle strategy in index options by buying Nifty4,900 strike put and Nifty5,000 strike call options, to take advantage of directional change in the markets. Sectors that witnessed higher rollover are metal, banking, telecom, engineering, sugar and power.

Stock futures looking good for further gains are Ranbaxy, BEL, Lupin, PFC, India Cement, BPCL, JP Hydro, Neyveli and GAIL. Among the momentum pack, Educomp, IFCI, Suzlon, Unitech and Hotel Leela may rally further from the current levels.

Punters predict some speculative activity in the ADAG group. Buy Reliance Infra and Reliance Capital keeping last week lows as stop loss for sharp returns. Lower crude prices may trigger further buying in PSU refiners. Pharma stocks are attracting buying on every dip. Buy on declines Dr Reddy, Ranbaxy, Cipla, Aurobindo, Biocon and Lupin.

Corrections in banking and auto stocks are likely to be short lived ones. Buy state owned banks as rise in interest rates to curb inflation is expected in next couple of quarters. Use sharp declines to accumulate stocks in auto and auto ancillary sectors.

Stock scan
Jain Irrigation Systems, a company synonymous for drip irrigation equipment, has over the years emerged as a diversified multi-product agri company. It is the largest manufacturer of polyethylene pipes and also the largest manufacturer of Tissue Culture Banana Plants in India. It has world class food processing facilities for dehydration of onions, vegetables and production of fruit purees, concentrates and pulp. IFC, a affiliate of World Bank has picked up stake in the company. Buy at current levels for a target price of Rs 1200 in the next few months.

Volumes have improved remarkably in HBL Power after the stock has gone ex-split. The company is a pioneer in the design, development and manufacture of specialised batteries, DC systems and associated electronics. It supplies to aviation, defence, railways, telecom and other engineering industries. Buy HBL Power at current levels for price target of Rs 100 in medium term.

Cravatex is one of the largest manufacturers of sports and casual wear for leading companies like FILA and Slazenger.

The company represents several reputed international brands of fitness equipment in India and offers a range of advanced international beauty therapies catering the new quest for fitness, exercise, health and beauty. Buy this only ISO-certified and listed company in the sector for unexpected a price target of Rs 275 in the medium term.

By C. Kutumba Rao - November 16th, 2009

2009-11-16T03:43:00.000+03:00

Propelled by robust industrial numbers and positive global cues markets extended their gains during the week ended.
On the Bombay Stock Exchange (BSE), the Sensex gained 690 points to end the week at 16,849 and the Nifty on the National Stock Exchange (NSE) scored double century to close barely below 5,000-mark at 4,999.
The government's assurance that there will be no withdrawal of stimulus packages till the global economy stabilises, fast track clearance of disinvestment of some public sector units and a renewed buying from institutional investors kept the market sentiment positive.
Keep an eye on the four important Bills to be tabled in the Parliament in the Winter Session. A quick passage will indicate the present United Progressive Alliance (UPA) government's resolve to implement reforms on the fast track.
Barring any unforeseen negative cues from global front or any "ruckus" in Parliament over the UPA government's aggressive reform agenda, markets are expected to remain range bound with upward bias.
For the week ahead, chartists predict a trading band of 16,540-17,360 for the Sensex and 4,800-5,260 for the Nifty.
Continuation of high intra-day volatility is likely; monitor positions cautiously. Be bearish only below 4,900 on closing basis. Cut longs if Nifty trades below 4,860 level.
Market players expect Nifty to face a strong resistance at 5,100 level; 4,900-4,950 level to act as strong support. New short term highs for indices not ruled out during the week ahead.
The best part of the stock market is that "everything repeats". This is huge plus, and a huge secret to making money with stocks.

SATTA GUPSHUP
* Recession-proof hospital stocks are back in the buying lists of savvy fund managers. Apollo Hospitals and Fortis Healthcare are good buys at current levels.
* Management's conversion of warrants in Apollo Hospitals clearly vindicates their confidence. Positive news on cards in next few weeks say insiders. Buy for target price of Rs850 in medium term.
* Fortis Healthcare is reportedly "snapping" up another hospital chain to strengthen its pan India footprint. Buy on declines for target price of Rs200.
* Select midcap and smallcap stocks like Camlin Fine Chemicals, Pace Textiles and Marg are attracting the attention of shrewd market players. Buy on declines the counters for steady returns in medium term.
* Results of Dish TV clearly indicate that a turnaround is on cards in next few quarters. Buy for target price of Rs 60 in next few months.
* Pace Textiles is a 'purely' speculative bet doing rounds in the markets. Sharp spurt is indicated by sources close to the management. Buy only for speculative gains.

F & O
Expectedly, Nifty futures logged 200 points on short-covering coupled with a fresh buying interest. Overall, open interest is now just a shade above Rs 1,00,000-lakh-mark at Rs 1,11,000 crore. Nifty OI PCR has jumped to 1.56, indicaton of shorts getting piled up.
A strong short squeeze expected in near term. Buy OTM call option of 5,200-strike for unexpected returns tip punters.
Hedge portfolio longs by buying 4,900-strike put option. Among the stock futures that witnessed long build up are JSW Steel, Infosys, Tata Consultancy Services, Tata Motors, ICICI Bank, Voltas, Hindustan Constructions Company, IDBI Bank and Biocon.
Ahead JSW Energy IPO, sources indicate a price target of Rs 1,150 for JSW Steel.
Pharma stocks are attracting a renewed buying interest from savvy market players. Rerating to trigger fresh buying in Biocon and Orchid, say market watchers. Banking and technology stocks are witnessing good buying interest at lower levels.
Midcap IT stocks FSL, Polaris, Mphasis and Patni may move fresh buying interest.
Among the smaller PSU banks, positive bias indicated in Dena Bank, Indian Bank, Andhra Bank and Vijaya Bank. Reports of M&A activity in PSU banks are resurfacing again.
Among the side counters KFA, GSPL, Kotak, BEL and Century look good for further gains.
Market cycles that used to take years to play out can now happen in months, sometimes even in a single day. Flexibility is the only sensible response to volatile markets and stocks with generous trading ranges.

C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.

Honing stock-selection skills

2009-11-15T07:04:00.003+03:00

To reap gains in the stock market over the long term, understand what type of investor you are and then make your investment moves accordingly.

Manish Shah

Investing in equities may seem like a simple business, but more often than not, it is more complex than one would imagine. The moot question is that with all of the hundreds of thousands of stocks available in the market for us to choose from, how does one know which stocks to invest in? Should one pick a stock because it is in an industry that interests him or her? Or should investors let their emotions drive their stock picks?

Here, we look into the mind of a value investor to understand how one should go about investing in the equity markets in order to realise gains on a long-term basis.

But before that, you may have to understand what type of investor category you fit in.

Type I

This class of investors does not have the time or the ability to make judgmental calls on the stocks/sectors. There are investors who have very little time to make judgements and invest in equities, based on the above two approaches. Mutual funds, therefore, assume a significant role here, helping this class of investors invest their money and reap returns.

Professional portfolio managers, who manage the mutual funds, therefore assume an important and responsible role. It is a win-win situation for both the client and the fund manager in that the investor benefits from the ability of the manager to pick good stocks by paying a small fee.

Also, there are portfolio management services (PMS) provided by various wealth management companies that manage the client's fund in equities in a highly efficient manner.

The only difference between mutual fund and PMS is that the units of mutual funds are readily traded on the market and the updated net asset value is available daily for the investor to monitor while, in the case of PMS, exiting the scheme takes more time than the mutual funds.

Type II

These investors do not have the time or the inclination to engage in tracking investment information on a regular basis. For example, the investor here does not have the time to go through the annual reports, keep a track of quarterly numbers, keep a tab on important happenings related to the company. For such investors, it is best to go through the various research reports published by the research and broking houses.

The research-cell analysts have access to key data, management, etc. Hence, they are better placed to present facts and ideas. After going through the fundamental research report, an investor can make up his mind about the sector and stock to be invested in.

Type III

You will fall under the third category if you have both the time and the inclination to monitor your portfolio on a consistent basis. The investor here is interested in going about building his own portfolio commensurate with the risk and returns that he desires. Such an investor purchases investments and continuously monitors activity in the company as well as markets in order to exploit profitable conditions.

What distinguishes such an investor from the other investor classes is his high involvement in the investing activity. The investor possesses the know-how needed to analyse stocks, read and infer annual reports, take cues from various important events, etc. In short, the investor knows how to separate the wheat from the chaff.

It is the last-mentioned type of investor who would have to seriously equip himself with stock-picking skills. Here's how such investors can select their stocks.

Begin by understanding your own risk profile: The most underestimated but probably the most important of all rules for you as an investor is to understand yourself in terms of your risk-taking capability and objectives. Once your risk profiling is clear, you are all set to look at stocks to invest in.

Choose the stock to research from an industry/sector you are comfortable with. You should choose a company you can keep track of. Often, the annual report of a company itself gives a fairly good overview of the industry along with its future growth outlook. Annual reports also tell you about the major and minor competitors in a particular industry.

Time for some ratio analysis: Ratio analysis serves as a complement to the fundamental analysis. Some of the ratios that can be analysed are price-to-earnings ratio and price-to-book-value ratio. While these are not the only ratios, they do help in understanding what the stock price discounts.

Look for management capability, track record: It is often said that there are no good or bad companies, only good or bad managers. Key executives, therefore, are responsible for the future of the company.

Determine fair value and decide what price you want to pay: Based on the fundamental valuation and ratio analysis, you would be in a position to decide about the worth of the company. If you are a value investor, look at the intrinsic worth of the company. Growth investors can accord higher weight to the earning potential.

Make a decision and stick to the rules: Once you have gone through this process, you may have to make the decision to invest in a particular company. But remember that even after deciding on the stock pick, a minor fluctuation in price can influence or even upset the decision.

So, it is absolutely important to have faith in one's own values and principles, on which the investment is made. Never let the small fluctuations in the price of the investment deter/encourage the sell/buy argument.

Cox and Kings (India) — IPO: Invest

2009-11-15T07:04:00.001+03:00

The company's strong brand image, wide geographical reach, synergies of operations and the economies of scale it enjoys are positives.

Mr A. B. M. Good, Chairman, and Mr Peter Kerkar, Executive Director.

Srividhya Sivakumar

Investments with a long-term perspective can be considered in the initial public offering of the global tour operator Cox and Kings (C&K). The company's strong brand image, wide geographical reach — both within the country and across major global markets — synergies of operations between its various subsidiaries and the economies of scale it thus enjoys are positives to the offer.

Despite last year's declining trends in the global travel and tourism space, C&K managed to not just grow it revenues but also improve its operating margin and profits. C&K's strong domestic market position helped by improving discretionary spends by Indian consumers and its newly acquired presence in high potential markets of the US and Australia offers it bright growth prospects.

The highly fragmented domestic travel market, with few organised tour operators, also leaves sufficient scope for market share gains. The valuation, though a tad stiff given the current market conditions, is at a discount to that of Mahindra Holidays and Resorts (29 times its likely FY10 per share earnings).

The offer price of Rs 316-330 discounts the C&K's likely FY-10 per share earnings by 22-23 times on post-offer equity base. The company's superior growth rates, high operating margin in this business and the likely scarcity premium for the business do offer room for premium valuations.

Business prospects

The company's domestic business straddles leisure travel, corporate travel, forex and visa processing. While it designs packages for both individuals and groups for their domestic and international travel-tagged outbound travel, it also offers destination management and ground handling services for foreign tourists visiting India.

C&K has also built a web of subsidiaries that complement each other's business offerings. For instance, while on the one hand, its overseas presence through its subsidiaries help attract business for the domestic inbound business, on the other, it also helps keep a check on service levels and costs.

Similarly, its UK subsidiary, ETN, that does destination management for European sites stands to gain from its acquisitions in Australia and the US, both of which enjoy a high outbound travel volume to Europe. The high synergies and travel volumes afford the company better bargaining power with airlines and hotels, in turn, helping it competitively price its products and services.

Other ventures such as Maharaja Express, a luxury train to be launched in January 2010 in collaboration with IRCTC and visa-processing business for which it has received approvals from six countries, also offer long-term growth potential.

Marketing presence

On the whole, C&K has presence in 19 countries. In India, which made up more than half its overall revenues last year, the company has 255 points of presence covering 164 locations through a mix of owned and franchised sales shops, general sales agents and preferred sales agents.

The company, may need toimprove its reach in order to keep competition at bay. Its franchise distribution model holds potential in this regard. Not only does it offer a cheaper expansion mode, it may also help convert potential competitors into partners; the established client relationships of converts offering an added advantage.

C&K may also have to fight with vacation ownership companies for consumers' wallet share. In that, however, tour operators appear relatively better placed as besides being asset light, they offer a wider basket of travel destinations.

Results and IPO proceeds

Over the last three years, C&K has grown its revenues and profits at a compounded annual growth rate of about 66 per cent and 80 per cent, respectively. In the same period, it managed to expand its operating profit margin by 10 percentage points to 42 per cent. Attributable mainly to increasing interest burden, the company's NPM fell to 22 per cent from 28 per cent. With C&K seeking to use a portion of the IPO proceeds (Rs 129.6 crore) to repay loans, its interest outgo can be expected to come down significantly. C&K also plans to earmark IPO proceeds for acquisitions (Rs 150 crore), invest in overseas subsidiaries and upgrade corporate office.

Offer Details

The company seeks to raise Rs 584-610 crore from the issue, which also comprises an offer for sale of 3,046,640 equity shares by Lehman Brothers Opportunity Ltd, Deutsche Securities Mauritius Ltd and Merrill Lynch Capital Markets Espana.

The offer is open from November 18-20

Retail investors set to get rich pickings of Central PSUs

2009-11-14T07:46:00.001+03:00

Shares to be offered at a discount; NTPC, Satluj Jal and REC divestment this fiscal.

Plans ahead
Govt hopes to mop up Rs 8,000 crore from NTPC disinvestment

Disinvestment Dept initiates talks with Ministries to identify cos for divestment

Ramesh Sharma

Shedding stake: The Disinvestment Secretary, Mr Sunil Mitra, and the Joint Secretary, Ms Minakshi Ghose, at a press conference in the Capital on Friday.

Our Bureau

New Delhi, Nov. 13 The Government is likely to offer public sector shares at a discount to individual investors as part of its disinvestment programme.

The next offering could be NTPC. The Government expects to garner at least Rs 8,000 crore through the sale of an additional 5 per cent of its stake in the power major. The mop up target is three times the Rs 2,700-crore that the Government got in 2004 for sale of a 5.24 per cent stake in NTPC.

The other two PSUs identified for disinvestment this fiscal are Satluj Jal Vidyut Nigam Ltd and Rural Electrification Corporation (REC). "We will complete all the three approved transactions NTPC, Satluj and REC during the current fiscal," Mr Sunil Mitra, Secretary, Department of Disinvestment in the Finance Ministry, told reporters here today.

The Cabinet Committee on Economic Affairs (CCEA) had last month approved divestment of a 5 per cent stake in NTPC. After this stake sale, the Government holding in NTPC would come down to 84.5 per cent from the current 89.5 per cent.

In his first interaction with the media after taking charge on August 1, Mr Mitra said that differential pricing to retail investors could be considered for the follow-on-public offerings (FPO) of listed Central public sector enterprises (CPSEs). He highlighted that SEBI, the capital market regulator, has now allowed differential pricing in FPOs. Mr Mitra also did not rule out the introduction of auction process for the qualified institutional buyers (QIB) category.

"Our effort would be to incentivise retail participation in the stake sale process," he said.

PSUs waiting in wings

Mr Mitra said that the Department of Disinvestment has estimated that about 10 listed CPSEs will need to meet the mandatory listing norm of at least 10 per cent public ownership. Based on the financial performance data available up to 2007-08 from the public enterprise survey board reports, the Disinvestment Department estimates that there are 50 unlisted CPSEs with three-year net profit track record that could be eligible to get listed in the stock exchanges.

On November 5, the Centre asked all listed, profitable CPSEs to meet the mandatory listing norm of at least 10 per cent public ownership.

It also asked all unlisted CPSEs with positive networth, no accumulated losses and a net profit track record in the three preceding consecutive years to get listed.

Meanwhile, Mr Mitra also said that the Department of Disinvestment has initiated talks with various ministries including that of Steel, Coal (for Coal India) to identify the CPSEs for disinvestment.

In the case of Steel Ministry, the disinvestment candidates are likely to be NMDC and SAIL. He also said that talks are on with the Telecom Ministry on the matter of BSNL.

"We are in discussions No specific disinvestment candidate has been finalised other than the three already identified. As of now, it is only our estimate that 10 CPSEs could qualify for the 10 per cent public ownership norm and 50 unlisted CPSEs could get listed," Mr Mitra said.

He said that each disinvestment candidate will be considered on a case-by-case basis and that there was no sectoral approach to the disinvestment programme. So far this fiscal, disinvestment has been carried out in two companies NHPC and Oil India which fetched the Centre

PVR firmly in the picture as promoter hikes stake

2009-11-11T00:31:00.000+03:00

PVR galloped 7.79% to Rs 137 at 15:22 IST on BSE, after one of the promoter group companies hiked its stake in the firm.

The company made this announcement after market hours on Monday, 9 November 2009.

Meanwhile, the BSE Sensex was down 54.08 points, or 0.33%, to 16,444.64.

On BSE, 1.40 lakh shares were traded in the counter as against an average daily volume of 1.03 lakh shares in the past one quarter.

The stock hit a high of Rs 138.10 and a low of Rs 129.50 so far during the day. The stock had hit a 52-week high of Rs 157.70 on 25 September 2009 and a 52-week low of Rs 57.50 on 2 December 2008.

The small-cap stock had underperformed the market over the past one month till 9 November 2009, falling 8.99% as compared to the Sensex's 0.86% fall. It had also underperformed the market in the past one quarter, rising 5.74% as compared to the Sensex's return of 8.83%.

The company's equity capital is Rs 23.01 crore. Face value per share is Rs 10.

The current price of Rs 137 discounts the company's Q2 September 2009 annualized EPS of Rs 9.06, by a PE multiple of 15.12.

Bijli Investments, a promoter group company, has increased its stake from 21.98% to 22.31% after acquiring 74,554 shares representing 0.32% of the equity capital of the company from open market in two tranches on 3 November 2009 and 4 November 2009. Increase in stake by promoters in a company helps bolster investor confidence.

Total promoter shareholding in the company is 41.24% (as on 30 September 2009).

PVR's net profit rose 10.4% to Rs 5.21 crore on 4.7% fall in net sales to Rs 78.68 crore in Q2 September 2009 over Q2 September 2008.

PVR is engaged in film production and distribution. It also operates multiplexes under the brand name 'PVR' cinemas.

Promoters have pledged five lakh shares representing 2.17% of the equity capital of the company (as on 30 September 2009

By C. Kutumba Rao - November 9th, 2009

2009-11-09T09:30:00.001+03:00

Recovering most of its losses during the early part of the week, markets ended a highly volatile week finishing higher for the week.

On the Bombay Stock Exchange, the Sensex gained 262 points to end the week above 16,000-level at 16,158 and the Nifty on the National Stock Exchange (NSE) logged 85 points to close at 4,796.

Statements from the Union finance ministry putting at rest speculation about the withdrawal of stimulus packages, positive news flow about the public sector units disinvestment policy and clarifications over the implementation of new direct tax code have helped markets "recover" quickly.

A renewed buying support from both foreign and domestic institutional investors and positive global cues turned the sentiment positive for near term.

Keep an eye on IIP (Index of Industrial Production) numbers (expected to be weak on underperformance of the infrastructure sector in September) and cues over global economies from G-20 conference in Scotland.

For the week ahead, chartists predict a trading band of 15,620-16,800 for the Sensex and 4,600-4,980 for the Nifty.

High intraday volatility is back; traders are cautioned to trade lightly. Be bullish only above 16,400 or 4,900 on the closing basis.

You can trim long positions, if the Nifty trades below 4,700-level. Market players expect 4,650-4,700 level to act as a strong support; and 4,850-4,900 level as strong resistance for the near term.

Investment ideas are about information and insight. Information is valuable if it is proprietary.

Insight is valuable if we know what that information means. Identifying likely losers is every bit as important as picking winners.

F&O

Nifty futures recovered 300 points from the intraweek low on technical basis. Overall open interest incre-ased by nearly Rs 10,000 crore to Rs 94,000 crore. VIX has shot up from 25 to 29 suggesting a high short-term volatility.

Punters suggest strangle strategy by buying OTM call option of 4,900 strike and OTM put option of 4,700-strike in the Nifty to take advantage of high volatility.

Among the stock futures that witnessed long build up are Ranbaxy, Biocon, Ashok Leyland, Voltas, Mphasis and Bajaj Hindustan.

After the acquisition of Shantha Biotech by Sanofi-Aventis SA, MNC market watchers are looking at a next possible candidate. Punters put a target price for Biocon at Rs 350 in next few weeks. A rebound in realty, metals, banking and autos was on expected lines.

Select counters like HDIL, Sterlite, Tata Steel M&M, IOB, Andhra Bank and PNB may move up further on sustained buying. From the infrastructure pack, NCC, HCC, Lanco Infratech and IVRCL look good more returns in near term. A heightened buying in Lanco Infra on news flow may see it touch Rs 575 in coming days tip punters. Among the side counters, Voltas, Trive-ni, Cummins, Welspun Guj, LIC Housing, GSPL and PTC grab attention.

SATTA Gupshup

* Arshiya is setting up FTWZs across various locations in India and commissioned rail container transportation business through its 100 per cent subsidiary ARIL. Buy for a target price of Rs 250 in medium term.
* Volume action in Gateway clearly indicates that some major 'news' development in near term. Buy for short term target of Rs175 with suitable trailing stop loss.
* Gati has reported excellent second quarter numbers and a preferential issue at high premium reflects that worst is over and that the company is back on rails. Buy for a target price of Rs 85 in medium term.
* SE Investments focuses on microfinance and works with low income families to provide financial solutions. It also has a wind energy division. Buy on declines for a target price of Rs 300.
*M&M Financial Services can be treated as a proxy for micro finance company since the company operates in the underpenetrated rural financing segment. Its plans to diversify into mutual fund business have triggered buying interest in the counter. Buy for a medium-term target of Rs 350.
* HBL Power is the pioneer in the design, development and manufacture of specialised batteries and DC systems in India for defence, aviation, telecommunication and railway sectors. Available cum split, the stock is a good bet for an ex-split target of Rs 60.
* Indo Borax is synonymous with Boric Acid and has market leadership in the segment. A steady growth makes the counter a good long-term bet for a target price of Rs 90.
* Fresenius Kabi (earlier Dabur Pharma) is attracting buying interest due to its robust performance. Buy on declines for a target price of Rs 125.

PSU stocks react positively to disinvestment plans

2009-11-08T00:28:00.000+03:00

Timing, pricing of public issues would be vital: Analysts.

Our Bureau

Mumbai, Nov. 6 Shares of PSUs with more than 90 per cent Government stake gained between 10 and 20 per cent in Friday after the Cabinet decided to raise public shareholdings in the companies to at least 10 per cent.

The Cabinet Committee on Economic Affairs on Thursday approved a mandatory minimum 10 per cent public ownership in all listed and profit making PSUs. The committee also approved listing of all the unlisted but profitable PSUs.

"This is a very positive move as it will bring more accountability and more transparency to the Government companies," said Mr Gopal Agrawal, Head of Equity, Mirae Asset AMC.

All the PSU stocks registered gains after the stock market opened on Friday, but the gains were the most in those listed PSU with less than 10 per cent public shareholding.

The stock of MMTC (Rs 10 face value) gained 20 per cent to close at Rs 36,146.85 on the BSE. Public holding in MMTC is less than one per cent, with the Government holding a 99.33 per cent stake.

PSUs with more than 90 per cent Government holding that gained heavily on Friday were HMT (Government stake 98.88 per cent), Hindustan Copper (99.59), NMDC (98.38), State Trading Corporation of India (91.02), Rashtriya Chemicals and Fertilizers (92.50), and Engineers India Ltd (90.40).

The BSE PSU index closed with a gain of 3.91 per cent on Friday while the Sensex rose only 0.59 per cent.

But timing of the issues by the public sector companies would be vital to their success, said market experts.

National Hydroelectric Power Corporation's Rs 6,000-crore IPO had a subdued listing and its shares are trading below the issue price of Rs 36.

However the stock bounced back on Friday and closed with a gain of 6 per cent on the BSE at Rs 32.65.

"They (IPOs) should be made at a time when the retail investor sentiment is good or else they might not be received well," Mr Hitesh Arawal, Head of Research at Angel Broking Ltd, said.

"Also if investor sentiment is not positive, then instead of fresh money coming into the system, retail investors might pull out from the secondary market to invest in the primary market. In that case the secondary market will be impacted and the IPOs might not fetch good valuations," Mr Agrawal said.

The unlisted and profit-making PSUs that are strong candidates for listing include Nuclear Power Corporation, Coal India, BSNL, Rashtriya Ispat Nigam, North Eastern Electric Corporation, Satluj Jal Vidyut Nigam, said market-men.

"The pricing of the IPOs of these companies should be reasonable for substantial retail investor interest," said Mr Agrawal.

Directive on PSU listing opens disinvestment tap

2009-11-07T05:00:00.000+03:00

Proceeds to directly fund social sector schemes till March 2012.

Big push
All listed, profit-making units to meet the mandatory minimum of 10 per cent public ownership.

All unlisted profitable PSEs have to get listed.

Eligible candidates include behemoths such as NMDC, MMTC, Neyveli Lignite Corporation, Rashtriya Chemicals and Fertilizers, National Fertilizers, Coal India, BSNL and Engineers India

Our Bureau

New Delhi, Nov. 5 Giving its disinvestment programme a big push, the Centre has asked all listed, profitable central public sector enterprises (CPSEs) to meet the mandatory listing norm of at least 10 per cent public ownership.

It has also asked all unlisted CPSEs with positive networth, no accumulated losses and a net profit track record in the three preceding consecutive years to get listed.

Both these decisions are likely to lead to a slew of equity offerings including follow-on public offerings (FPOs). The eligible candidates include behemoths such as NMDC, MMTC, Neyveli Lignite Corporation, Rashtriya Chemicals and Fertilizers, National Fertilizers, Coal India, BSNL and Engineers India.

Timing decision

No time-frame has been specified for the CPSEs to comply with the decisions, but the timing decisions are likely to be governed by market conditions.

The Government has also decided to change the rule on use of disinvestment proceeds by altering the basic scheme underlying the National Investment Fund (NIF) that was launched in 2005. While the disinvestment proceeds would continue to be channelled into the NIF, for the 2009-12 the mop-up would be used as capital expenditure in social sector schemes determined by the Planning Commission and the Department of Expenditure.

Special dispensation

"In view of the tight fiscal situation and the need to fund social sector programmes, a special dispensation is being made for the three-year period 2009-12," Mr P. Chidambaram, Union Home Minister, told reporters after the Cabinet Committee on Economic Affairs (CCEA) meeting here.

He clarified that the money garnered so far this fiscal from the stake sale in NHPC and OIL India would not be governed by the new rule. An official statement said that the corpus comprising deposits from April 2009 till March 2012 would be available in full for investment as capital expenditure in specific social sector schemes.

Hitherto, disinvestment proceeds were channelled into NIF and the corpus handed over to fund managers. Only the returns from the corpus were used for social sector spending.

The earlier position will be restored from April 2012.

By Kutumba Rao - Nov 2, 2009

2009-11-04T19:38:00.001+03:00

It's time to focus on earnings visibility

November 2nd, 2009

By C. Kutumba Rao

Spooked by the hawkish stand of the Reserve Bank of India in its mid-year policy review, none too enthusiastic results, scepticism over the global recovery, markets fell like a set of bowling pins during the week ended.

On the Bombay Stock Exchange, the Sensex tumbled by 915 points to end the week at a two-month low below 16,000-level at 15,896 and the Nifty on the National Stock Exchange crashed by 285 points to close at 4,712.

The sell off was broad based with realty, banking, oil and gas and metals being the worst hit.

The five per cent to 15 per cent correction that many people have been calling for since the summer is finally in place, say old timers. With the end of results season, it is time to pick the companies that have shown good performance and have good earnings visibility for next few quarters.

It is pertinent to note that both domestic institutions and FIIs were buyers on Friday, the day when market fell 500 points during the day. Avoid aggressive shorts at current levels. For the week ahead, chartists predict a trading band of 15,260 and 16,400 for the Sensex and 4,520 and 4,940 for the Nifty.

Immediate supports for the indices are at 15,540 and 15,280 and 4,580 and 4,490. Any pullback rally may see indices face resistance at 16,140 and 16,450 and 4,820 and 4,940.

Markets look oversold for the near term, cover shorts during the early part of next week, advise savvy market players. Sell on rallies approach should be adopted till Nifty conclusively closes above 4,900-level.

Every speculator knows the danger of too much "company." When in doubt do nothing. Don't enter the market on half conviction; wait till the convictions are full matured.

SATTA Gupshup

* A careful perusal of the results of Fenoplast clearly indicates a cash EPS of Rs 14 for full year. The company has reportedly become largest PVC film manufacturer of the country after recent expansion. Buy at current levels for target price of Rs75 in medium term.
* Smart card biggie Bartronics has come out with excellent numbers for the second quarter. Good earnings visibility coupled with exciting prospects for the industry make it good buy at current levels for target price of Rs 200.
* Nagarjuna Agrichem has reported better-than-expected results. The company has emerged as a leading crop protection chemicals player with diversified product portfolio. Buy on declines for a target price of Rs 250.
* Continuing its good run, training simulator manufacturer Zen Technologies has reported excellent second quarter numbers. Annualised earning per share is likely to be Rs 30 plus. Buy at current levels for target price of Rs 400 in medium term.
* A revival in demand from OEM manufacturers and introduction of new high margin products has helped Subros Ltd, India's largest auto air conditioning manufacturing company, to post robust performance. Buy on declines for a price target of Rs 55.

F&O

The "uncomfortable" level of open interest triggered a sharp sell-off in many momentum counters. A high-level of complacency and confidence about the pre-Diwali rally led to 'trapping' of bulls in many active counters.
Rollovers were unimpressive indicating some loss of confidence over the near term direction of markets. Sentiment indicators like open interest, implied volat-ility and put/call ratio indicate the continuation of rough patch for some more time.

Among stock futures, short build up seen in ICICI Bank, RCom, JSPL, RIL, HDIL, DLF, Bharti, BOI and JP Associates. Selective longs were seen in M&M, United Spirits, Wipro, TCS, Biocon, Tata Chemicals, PTC, Ashok Leyland and Crompton Greaves.

Hike in SLR by the RBI triggered selling in realty and banking stocks. Buy in the current correction at lower levels the smaller PSU banks like Allahabad Bank, Vijaya Bank, Dena Bank and Andhra Bank. Bottom fishing can be attempted at lower levels in realty stocks. Renewed strength in dollar may spark renewed buying in IT counters. Hold positions in frontline IT biggies and add on declines for steady gains in medium term. After the robust gains for better part of the year metal prices look set for sharp correction in near term. Avoid large bets and buy selectively in 'tune' with trends. Weak results may see Divi Labs, RCom. and RIL extend losses.
Best of the times are over for Divi Labs say industry observers. Shrewd players suggest a shift to DRL. Hei-ghtened activity indicated in side counters like Voltas, Crompton Greaves, Biocon, MTNL, Firstsource, Bombay Rayon and Sun TV.

mulling proposal for fewer trading holidays

2009-11-01T20:59:00.001+03:00

MUMBAI: Market regulator SEBI is looking into a proposal by several investors to allow fewer trading holidays on stock exchanges in line with the global practice.

"SEBI is actively considering the proposal to reduce the trading holidays at bourses and is likely to take a decision on the matter soon," an official close to the development said. According to analysts, this move by Securities and Exchange Board of Ind ia (SEBI) will increase the trading volume in domestic bourses and would also attract foreign investors.

SMC Capitals Equity Head Jagannadham Thunuguntla said, "From the global standards, India has more number of trading holidays. The reducing of holidays would increase the participation of investors, including the foreign ones, and would increase the tradi ng volume," he said.

For 2009, the Bombay Stock Exchange has 19 listed trading holidays and these exclude the weekly Saturday and Sunday off. In developed countries the trading holiday at leading bourses are far less. For 2009, there are only nine trading holidays on the New York Stock Exchange. - PTI

Rural Electrification Corp: Buy

2009-11-01T11:47:00.001+03:00

Fresh investments can be considered in the stock of Rural Electrification Corporation (REC), a navratna public sector undertaking, which finances all the segments across the power value chain.

Secured advances with a high asset quality (net non-performing assets of almost zero) coupled with sustainable spreads are the key positives for REC when compared to most finance companies. Even after gaining more than 165 per cent this year, the company's stock is trading at a modest 12 times its estimated FY10 earnings (assuming 15 per cent equity expansion post-offer) and at 1.6 times its estimated book value.

A power sector debt funding requirement of more than Rs 15 lakh crore over the Eleventh and Twelfth Plans is the major growth driver for REC. Its proposed follow-on public offer will augment the capital base, enabling balance sheet expansion.

The Reserve Bank of India's recent policy change which pegs bank's risk weights to the borrowers credit rating, will also favour the company given its AAA rating. The profits of REC rose 70 per cent in the first half of this fiscal, helped by loan book and disbursements growth of 32 per cent and 22 per cent respectively. This bettered overall bank credit growth of 20 per cent. Improvement of spreads from 3.34 per cent to 3.47 per cent, helped by better yields and lower costs, also aided the company's net profit growth.

We expect the loan growth to continue at robust pace on the back of the wide Rs 1,50,000-crore gap between sanctions and disbursements. The margins may get some support as the proportion of private sector borrowers trends up.

At current market prices, the follow-on offer may raise Rs 2,600 crore, given the proposed offer size. This will increase its net worth by 32 per cent and bring down the debt-equity ratio from 6.3 to 4.8, reducing the risk to its credit rating. Increase in costs due to reduced reliance on tax-free bonds, may be compensated by the fall in borrowing costs from banks.

Delays in power projects leading to late disbursement and rescheduling of loan repayments, are the biggest risks for the company. Asset-liability mismatch arising out of lower maturity deposits and high duration loans is also a potential risk. Increase in interest rates later in the year may put pressure on margins as the company predominantly has fixed-rate loans, with three- or 10-year reset.

M.V.S Santosh Kumar

Will it last?

2009-10-31T13:38:00.001+03:00

Ram Prasad Sahu / Mumbai October 26, 2009, 18:25 IST

While there are visible signs of a recovery in the real estate market, price hikes by developers and any increase in interest rates could halt this momentum.

The realty sector, which was the worst affected by the downturn last year, seems to be exhibiting early signs of a recovery. Price cuts on projects over the last six months and healthy pre-sales during the festive season seems to suggest that demand, which had all but disappeared in the third and fourth quarter of 2008-09, seems to be trickling back. Developers are tweaking their business model by launching smaller apartment sizes and playing the volume game to keep prices low and create buyer interest. What has helped matters, believes Ramnath S, director, Research, IDFC-SSKI, are factors such as job security and affordability, which are gradually improving, and a lot of companies likely to revise salaries upwards as against a freeze last year. The benign interest rate environment has also helped. Ramnath believes that pay commission hikes will also increase disposable income of government employees.

Higher sales...
While demand as of now seems to be buoyant in the residential space and is likely to gather momentum, is it significant? Says Sanjay Dutt, CEO, Business, Jones Lang LaSalle Meghraj, a realty consulting firm, "The slowdown hit the market shortly after the Navratri-Diwali season in 2008 after registering the usual 30-35 per cent upsurge in sales typical of the period. Sales increased 25-30 per cent this time around and is significant as this is the first upsurge in demand after a prolonged downturn." Driving home the point, Ramnath cites the sales of DLF and Unitech, India's largest listed realty companies, during the current financial year. "Unitech has launched about 17 million square feet (mnsqft) worth of properties across the country selling over 40 per cent of that. Incrementally, Unitech has launched about 6 mnsqft of affordable housing properties selling about 1 mnsqft of properties till date. DLF too has sold a total of about 4 mnsqft of properties till date. These events indicate an uptick in volumes in the sector."

...leading to higher prices
The uptick has however led realty players to increase prices. Ramnath believes that new properties launched in Mumbai, for example, were offered at 10-15 per cent higher prices as against their lows in March 2009 quarter. Moreover, developers are now offering properties without any discount and freebies (such as waiver of stamp duty and registration charges). Says Dutt, "Developers in key cities have been hiking prices to test the flexibility of the market. At first, this trend was evident only in the luxury and semi-luxury segments, but it has now percolated down to the mid-income housing segment as well." A good example is DLF's Capital Greens project in Delhi. DLF increased its prices at Phase II of this project to Rs 6,750 per square feet in September 2009, which is at a 30 per cent premium to those in Phase I launched in April 2009.

Market's liking it too
The improving fundamentals of developers on the back of price hikes, increased liquidity through QIPs, asset sales and pre-sales observed over the last few months is not lost on the market. The BSE Realty index, the worst performer of 2008 is up 248 per cent since its March 2009 lows. This indicates that current valuations are not cheap. In a bid to cash in on the recovery, leading realty companies are planning to raise money from the primary markets to the tune of over Rs 14,000 crore. This could also suck out liquidity and may cap appreciation of prices of listed scrips, say analysts.

Profitability impact
Ramnath believes that improvement in profitability will depend on future projects. "Profitability will improve only after subsequent new projects are launched at higher prices as compared to previous projects which we believe is unlikely in the current scenario. Developers are likely to hold on to current (increased) price levels until demand increases significantly from current levels." The worrying factor for realty players continues to be the commercial and retail space, which suffer from oversupply and will take at least another two quarters to recover. In a recent report on the sector, a J P Morgan report says that rentals for office space have already corrected by 30-40 per cent from their peak levels on the back of slow demand and leasing activity and vacancy rates remain high at over 10-15 per cent across key markets.

The research firm believes that while demand from domestic corporates has started to firm up, IT/ITES demand is likely to remain subdued. We review the operations of the largest players by market capitalisation in the sector.

DLF: Attractive price points and a revival in the fortunes of the sector have helped India's largest realty player lure buyers for its residential properties. The company is likely to maintain its mid-income housing focus which has yielded good results in Delhi where it was able to sell 1,400 units (2 mnsqft) and 1,250 units (1.8 mnsqft) at the Delhi Capital Greens project (phase I and II, respectively) and 0.5 mnsqft in Bangalore over the last six months. Including the above, the company has launched about a third of the proposed 15-16 mnsqft residential projects for the fiscal. The story is not as rosy on the commercial and leasing segments. While the company sold over a 1 mnsqft of commercial and office space in the first quarter and demand seems to be improving, the fortunes of this space is likely to see a significant upswing only next year. Its leasing business, too, is going through a similar business cycle.

While things are looking up, the slow and gradual pick up in volumes will continue to be a drag on its revenues. Analysts estimate that its September quarter revenues will be down by half y-o-y. Ebidta margins are likely to shrink 900-1,000 bps to about 50 per cent as the company realigns its focus towards affordable housing segment (below Rs 30 lakh per unit). The company plans to exit non-core business (wind power, SEZs) and land bank to raise Rs 5,500 crore in 2009-10. This will help it to improve its cash position, manage debt repayments of Rs 1,165 crore and increase pace of execution. Though the stock trades at a discount to its NAV, a fall of 10-15 per cent in its share price would make it attractive from a long term perspective.

HDIL: Increasing prices of transfer of development rights (TDR), which had bottomed in the March quarter of 2008-09, augurs well for HDIL. TDR prices have spiked 80 per cent from levels of Rs 1,100 per sqft in March 2009 quarter and will benefit HDIL which is executing the first phase of the airport slum rehabilitation project where it has TDRs of nearly 45 mnsqft. Almost all the revenues in the current fiscal are likely to come from the sale of about 3 million sqft of TDRs. The company launched three residential projects totalling 1.9 mnsqft in Andheri and Kurla, in Mumbai. Considering the high demand (it has managed to sell 80 per cent of the 1,814 units at these sites), the company raised prices between 5-14 per cent. In addition to these, HDIL plans to launch 2 mnsqft of residential projects in Mumbai in the current fiscal. A key concern for HDIL was the debt levels, which have come down significantly post the Rs 1,688 crore QIP in July 2009. The company has used over 80 per cent of this to repay debt and bring down its net debt-equity ratio to manageable levels of 0.44. While the residential project launched in different parts of Mumbai will yield revenues in 2010-11 and 2011-12 (the company follows the completion method of accounting) and the increasing prices of TDRs are a plus, the current quarter revenues and operating profit are expected to come down by 64 per cent and 79 per cent to Rs 200 crore and Rs 97 crore, respectively. At the current levels, the stock is expensive.

Indiabulls Real Estate: Indiabulls Real Estate (IBREL) has been able to lease out 0.7 mnsqft of space at the One Indiabulls Centre (Mumbai) at Rs 175 sqft per month. Considering that this is higher than the earlier rates of Rs 150 per square feet, both at the Jupiter and Elphinstone Mills, and future negotiations are likely to be at the new rate, it should boost cash flow of its Singapore-listed subsidiary Indiabulls Properties Investment Trust, which undertakes the leasing operations. A rights issue by IPIT to the tune of Rs 600 crore should also help reduce a part of its Rs 636 crore debt. On the residential sales front, IBREL sold all the units (0.53 mnsqft) of the first phase of its Sky project in Mumbai and has also launched three residential projects next to its One Centre. While the company launched about 9 mnsqft in 2008-09, it is planning to launch about 10 mnsqft in 2009-10, of which 5 mnsqft has already been launched. The company has also been the highest bidder at Rs 1,376 crore for the Mantralaya development project in Mumbai, which could add 1.5 mnsqft to its land bank and about Rs 29 to its NAV. The Rs 1,500 crore IPO of IBREL's subsidiary, Indiabulls Power, should help it to fund the capital requirements of power projects in Maharashtra.

While the cash flow from the proposed rights issue of IPIT, IPO of its power subsidiary and the QIP (Rs 2,650 crore) of IBREL should help matters, growth in its various businesses will depend on the pace of execution. In realty, while thus far the construction work at its NCR and Chennai work is going on, other properties are facing delays according to an ICICI Securities report. While cash is not an issue for IBREL (it has Rs 3,000 crore worth Rs 75 per share), any delay in execution of it's residential, SEZs (not yet notified) or power projects could be costly. Analysts peg the sum of parts valuations (power and real estate) between Rs 335-355 indicating that returns of about 21 per cent from the current prices.

VALUATIONS
FY10E	Market Price	NAV/ Share	Premium/ (discount)	Sales	Operating profit	Net profit	FY10 P/E	FY11 P/E
DLF	454.70	546	-16.72	7,390	3,890	2,390	32.7	24.0
Unitech	98.65	88	12.10	3,380	1,710	1,080	21.9	23.5
HDIL	376.40	282	33.48	1,321	532	365	35.5	20.9
IBREL	276.30	220	25.59	389	83	139	78.9	32.5
Source: Analyst estimates

Unitech: Unitech has had positive newsflow recently with the government approving Telenor's (a partner in telecom venture) proposal to hike the stake in Unitech Wireless to 74 per cent. The company has had a good first seven months (March to September) going by the response to its launches aggregating to 21.30 mnsqft of residential and commercial property. The company has managed to book sales Rs 4,000 crore from the sale of 10.11 mnsqft. It plans to launch about 30 mnsqft and achieve about 20 mnsqft of pre-sales in this fiscal, says an analyst. Of the past projects which total an area of 22.31 mnsqft, the company has delivered about a fifth and expects to complete delivery of the rest by March 2011. Improved cash flow from the sale of hotels and plots (Rs 940 crore), two QIPs (Rs 4,400 crore) and Rs 386 crore from Unitech Wireless have helped bring down debt levels to about 0.6 times from 1.7 times last year.

Like DLF, the company is eyeing the affordable housing segment and has launched projects under the Unihomes brand catering to budgets between Rs 10-30 lakh range. After the sale of about 900 units at its Unihomes project in Noida, the company is planning to launch more apartments under this brand. Analysts estimate that the company is likely to have a strong second quarter on the back of higher project and asset sales. Considering the recent spurt in sales at its new launches and balance sheet deleveraging is already factored into the current price and it is trading at a premium to its NAV, expect little upside to flow through in the current fiscal.

SEBI allows stock exchanges to go 9-5

2009-10-24T19:58:00.001+03:00

Our Bureau

Mumbai, Oct. 23 The Securities and Exchange Board of India (SEBI) on Friday allowed stock exchanges to extend trading time by almost two-and-a-half hours, permitting them to operate between 9 a.m. and 5 p.m.

An NSE official said the extended trading would commence "very soon" on that exchange, although he would not commit to a specific date. The BSE too "welcomed" the move.

"It has been decided to permit the stock exchanges to set their trading hours subject to the condition that the trading hours are between 9 a.m. and 5 p.m. and the exchange has in place risk management system and infrastructure," a SEBI circular said. SEBI had earlier said that this was considered to allow Indian players to take advantage of the global information flows.

Currently the cash and equity derivatives market is open from 9:55 a.m. to 3:30 p.m. The currency derivatives market is open from 9:00 a.m. to 5:00 p.m., while the commodity derivatives market is open from 8:00 a.m. to 11:30 p.m.

Stock brokers unhappy

The stock broking community greeted the news rather bitterly. There was some consternation that the move might benefit only the larger players such as FIIs and the exchanges themselves, as volumes would increase with stretched trading hours.

"This extension was really not needed and the existing hours of trading were enough," said Mr Dharmesh Mehta, Head of Broking at Enam Securities, while some other brokers said that theoretically an increase in trading hours could mean higher volumes and profitability for brokers.

While this move does align the Indian market its global counterparts, FIIs, especially London-based ones, stand to benefit the most as they can hedge risks best as they have better global information flow, said brokers.

Retail investors too seemed unenthusiastic. "It doesn't really matter whether the markets run for five hours or seven hours as a retail investor needs to buy or sell at a certain level and for that the current trading hours were sufficient," said Ms Vanita Joshi, a regular retail investor

NTPC posts Rs 2,151.95 cr profit in Q2

2009-10-23T15:14:00.000+03:00

MUMBAI: State-run power producer NTPC on Friday reported a marginal rise of 1.96 per cent in its net profit to Rs 2,151.95 crore for the second

quarter ended September 30.

The company had a net profit of Rs 2,110.51 crore during the September quarter last financial year (2008-09).

Net sales of the company rose to Rs 10,782.79 crore in the latest quarter of the current financial year from Rs 9,661.42 crore of the corresponding period a year earlier, NTPC said in a filing to the Bombay Stock Exchange (BSE).

Shares of NTPC were trading at Rs 213.95, up 0.47 per cent in afternoon trade on the BSE.

Sensex may reach 19,000 level by March 2010: JP Morgan

2009-10-21T00:44:00.001+03:00

MUMBAI: The Bombay Stock Exchange's benchmark index Sensex may reach 18,000-19,000 points level by end-March 2010 led by improved investor

confidence, a survey by J P Morgan Asset Management company said.

"Both investors and advisors expect (the) Sensex to reach 18,000-19,000 in March 2010. Ninety-three per cent of advisors and 68 per cent of retail investors expect the Sensex to rise from current levels," J P Morgan said in a report 'Investor Confidence Index'.

The BSE index today closed over 17,223 points. J P Morgan said these expectations hinged on prospects of a global economic recovery coupled with a sustained confidence in the Indian economy across the board.

According to the survey, the Investor Confidence Index stood at 146.4 in September 2009, up by 10.5 points from July 2009, the survey said.

The report said about 50 per cent of corporate investors considered GDP growth and the possibility of India exceeding the 7 per cent target for FY 10 as the biggest positive indicator, while retail investors considered the rise in stock markets as the biggest indicator.

It added that advisors, on the other hand, viewed the inflow of foreign money as the most positive indicator.

The nest six months Indian retail investors would seek more investment.

"Retail investor confidence has improved on both portfolio appreciation and likelihood of increasing investment further. Combined with the high expectation from the BSE Sensex and the improved global prospects, the findings suggest that the retail investor will be seeking suitable investment opportunities over the next six months," J P Morgan said.

As much as 56 per cent of retail investors anticipated their incomes to increase, while indicating that they would make additional investments over the next six months against 48 per cent in July 2009, the survey found.

This wealth may be created by money pouring into stocks, as investment activity in mutual funds dropped to 70 per cent from from 82 per cent, J P Morgan said.

Banks, however, exuded maximum confidence on expectations of "global recovery and an increased expectation from clients to increase investments further over the next six months".

However, investors and corporates opined inflation as the most negative economic indicator in India, while advisors viewed the high Government borrowing or fiscal deficit with concern, in the current scenario, the survey said.

J P Morgan's respondents include 1,639 retail investors, 52 corporate treasuries and 293 advisors, that had invested in instruments excluding savings accounts, time deposits, retirement and insurance products, property, gold and other bullion over the past 12 months.

Metal shares shines on rally in metal prices on LME

2009-10-20T09:31:00.001+03:00

Eight metal shares rose by 0.32% to 2.78% at 11:01 IST on BSE after a gauge of six metals traded on the London Metal Exchange jumped 3.16% to 3,024.80 on Monday, 19 October 2009.

The BSE Metal index was up 1.42% to 16,007.52 and was the second best performer among the sectoral indices on the BSE. It outperformed the Sensex, which was up 0.27% to 17,372.46
The BSE Metal index outperformed the market over the past one month till 17 October 2009, rising 8.94% as compared to the Sensex's 3.68% rise. It had also outperformed the market in the past one quarter, surging 41.77% as compared to the Sensex's return of 17.50%.
Sterlite Industries (up 0.32%), Steel Authority of India (up 2.78%), JSW Steel (up 0.86%), Hindalco Industries (up 2.71%), Tata Steel (up 1.96%), Jindal Saw (up 1.77%), Hindustan Zinc (up 1.50%), Jindal Steel & Power (up 1.26%), gained.
Metal prices surged on the London Metal Exchange (LMEX) after the US dollar tumbled to 14-month lows against the euro, drawing investment funds into commodities.
Back home, metal shares have been on an uptrend recently after most of the metal companies announced good sales figure for Q2 September 2009.
Shares of Tata Steel rose 8.12% in one month to 17 October 2009 after steel sales from its Indian operations rose 19% to 1.46 million tonnes in Q2 September 2009 over Q2 September 2008. Steel sales rose 21% to 2.88 million tonnes in April-September 2009 over April-September 2008. Sales of long products, used in construction, jumped 49% in the same period.
JSW Steel gained 14.47% in one month to 17 October 2009 after reporting 54% rise in crude steel production to 15.39 lakh tonnes units in Q2 September 2009 over Q2 September 2008. Production of flat rolled products rose 28% to 9.23 lakh tonnes and long rolled products jumped 216% to 2.17 lakh tonnes in Q2 September 2009 over Q2 September 2008. The company has achieved the highest ever-quarterly production, JSW Steel said in a filing with BSE.
Tata Steel will announce its Q2 September 2009 results on 27 October 2009. Steel Authority of India and Hindustan Zinc will unveil their Q2 September 2009 results on 22 October 2009. National Aluminium Company will report its Q2 results on 30 October 2009 and Hindalco is scheduled to announce its Q2 earnings on 31 October 2009

Centre clears 5% stake sale in NTPC, follow-on offer by Dec

2009-10-20T09:25:00.001+03:00

Proposed sell-off may fetch Rs 8,800 cr at current share price.

Our Bureaus

New Delhi/Chennai, Oct. 19

The Centre has cleared partial sale of its stakes in state-run power major NTPC Ltd and an unlisted hydro-electric firm Satluj Jal Vidyut Nigam Ltd (SJVNL) through the book-building route in the domestic market.

The Cabinet Committee on Economic Affairs (CCEA) on Monday gave its nod to sell 5 per cent of the Centre's stake in NTPC and 10 per cent in SJVNL, the Commerce and Industry Minister, Mr Anand Sharma, told reporters after the meeting.

GOVT HOLDING

In the case of NTPC, which made an initial public offer in 2004, the Government will divest stake through a follow-on public offer, which is likely by December, a senior Power Ministry official said.

Post the stake dilution, the Government's holding in NTPC would fall to 84.5 per cent from the current 89.5 per cent. "To make it inclusive and participatory, part of the shares would be offered to the employees of the state-run firms," Mr Sharma said.

At the current price of Rs 216 a share, the proposed 5 per cent NTPC stake sale could mop up about Rs 8,800 crore.

"On disinvestment of the proposed equity, it is expected that the market capitalisation of NTPC would be higher and it would help the company raise resources in the international market on competitive terms," he said.

The CCEA also approved offloading 10 per cent of the Centre's 75 per cent stake in SJVNL a joint venture between the Union Government and the Government of Himachal Pradesh (which holds the remaining 25 per cent stake). The paid-up equity of the company is Rs 4,108.81 crore.

The proceeds would go into the National Investment Fund, which was set up in 2005.

According to market analysts, a follow-on public offer of NTPC, the second most valued public sector company with a market capitalisation of over Rs 1.77 lakh crore, would serve as an overall sentiment booster.

RECENT IPOs

The performance of recent public issues at the secondary market, however, has been rather lacklustre. Of the 10 latest offerings, only three Oil India, Jindal Cotex and Mahindra Holidays are quoting above IPO price.

NHPC, which raised about Rs 6,000 crore through the IPO and got subscribed by over 23 times, has been teetering around the Rs 33-35 range against the issue price of Rs 36.

The other power major Adani Power is ruling around the issue price of Rs 100.

However, Oil India has managed 13 per cent returns since its listing on September 30. Retail participation in recent IPOs has been lukewarm.

NHPC got subscribed 23 times in the qualified institutional buyer portion compared with just three times in the retail category.

JSW Energy, Indiabulls Power, Cox and Kings (India) and Emaar MGF are some of the companies that plan to raise funds through capital market.

TTK Prestige: Buy

2009-10-19T08:55:00.001+03:00

The demographic shift in favour of the young and a higher floating population in urban areas translate into higher demand for pressure cookers in India.

The company is roping in new customers through its retail chain, 'Prestige Smart Kitchen' .

Rajalakshmi Sivam

Demand for pressure cookers in growing consumer markets never runs out of steam. This augurs well for TTK Prestige, the company which owns the single largest pressure cooker brand in the country. Against the 8 per cent growth reported by the industry last year, TTK Prestige reported a 17 per cent growth in its sales volumes. With the company roping in new customers through its retail chain 'Prestige Smart Kitchen' its auxiliary products (kitchen electrical appliances, cookware) are also doing well in the market with a growth of over 25 per cent in the last five years. The stock trades at 14 times its trailing one-year earnings. Investors can add this small-cap stock to their portfolio.

The industry

Pressure cookers are a fast growing segment in the Indian consumer durables market. The demographic shift in favour of the young, an expanding working population and a higher floating population in urban areas are trends that translate into higher demand for pressure cookers in India. Makers of branded cookers are also benefiting from a shift from unbranded to branded products, as safety issues prompt consumers to opt for tried and tested products.

After starting out as a manufacturer of pressure cookers, TTK Prestige now offers complete kitchen solutions with a product range comprising non-stick cookware, rice cookers, gas stoves, kitchen hoods, kettles, sandwich toasters and many other small electrical appliances. The company is also into the modular kitchen segment.

The single largest brand

The average annual production of pressure cookers over the last five years was 40 lakh units. In 2008-09, TTK Prestige, which sold 23.7 lakh units of pressure cookers, accounted for over half this number. The company has been seeing a sharp increase in sales year after year, suggesting that it has managed to gain market share.

TTK Prestige's sales have grown at an average 21 per cent in the last five years, while industry growth rates were in single-digits.

Hawkins Cookers, the only other listed player, is the company's major rival with a presence mainly in North India. However, Hawkins is much smaller, with just about half TTK Prestige's revenues. Apart from TTK Prestige, several smaller regional players such as Premier, Pigeon, Butterfly also compete in the Southern market.

However, the safety aspect does lead to strong brand preferences in the pressure cooker market, giving an edge to established players such as TTK Prestige. TTK Prestige pressure cookers are certified for safety under the Indian (ISI), German and US standards.

TTK Prestige's cookware and kitchen electrical appliances are also making headway. Their contributions to revenue rose to 15 per cent and 18 per cent in the last year from a little over 12 per cent five years ago.

The company sees considerable opportunity for expansion in these segments, with revenues set to increase sharply once these products are marketed more aggressively.

Unlike the pressure cooker market, competition in the kitchen electrical appliances segment is tough with a number of branded and large regional players in the fray as well. TTK Prestige's export sales have also been on the rise. Though the last year was challenging due to recession, exports grew over 10 per cent in 2008-09.

Expansion plans

The company's current installed capacity in pressure cookers is 40 lakh units. But as it is running only at 50 per cent of its capacity, there is room for scaling up production with demand expected to rise in the coming years. The company will enjoy higher revenues as the market grows in size with no additional capex/interest.

The company's new gas stove and kitchen electrical appliances manufacturing unit in Uttarakhand, which is to begin production by March 2010, may lift margins due to excise duty and tax savings. The company has been importing a few kitchen electrical appliances for selling in the domestic market, the initiative of producing those appliances domestically now will be an advantage for the company.

Further, the company will see almost nil interest outgo from the current year (last year's interest outgo Rs 5.65 crore) as it has repaid all outstanding loans. In 2008-09, the company repaid Rs 26 crore of outstanding loans and another Rs 20.7 crore since April this year.

Supplementing its core business, TTK Prestige has 6.5 acres of surplus land in Bangalore, having shifted its pressure cooker unit from this location. This area is now being developed into a residential and office space, rentals from which will start flowing from 2012. Cash flows could be furthered strengthened from these rental incomes in the coming years.

Margins strong

In the last five years TTK Prestige has reported a solid 56 per cent growth in profits after tax (as revenues rose 21 per cent). Operating margins too have improved from 6 per cent to 9 per cent in this period. Net profit margins grew from 2 per cent in 2005 to 5 per cent in the last year. There was an increase in tax outgo in the last year as the company moved to normal tax regime from MAT (minimum alternative tax).

The company enjoys pricing power to pass on raw material (aluminium and stainless steel) price increases to consumers, given its strong market position. So any steep price rise in inputs from here on may not dent profit margins. As the demand for pressure cookers is price in-elastic, price hikes will not impact off-take.

TTK Prestige has also been quite generous in declaring dividends. A minimum of 30 per cent dividend has been declared every year in the last three years

A member asked for C. Kutumba Rao's Article

2009-10-14T09:47:00.001+03:00

IGNORING GOOD news such as positive global cues, liberal bonus issue
from Reliance Industries and better-than-expected results from
Infosys, markets tumbled from highs on heavy selling pressure during
the week ended.

On the Bombay Stock Exchange (BSE), the Sensex plunged 492 points to
close at 16,643 and the Nifty on the National Stock Exchange (NSE)
fell by 138 points to 4,945.

Market breadth was negative during the most part of the week
reflecting caution among market participants ahead of the "festival
week."

Telecom and IT scrips proved to be the biggest drag on the indices.
FMCG and metal stocks were in demand on sustained buying interest.
With several companies sucking liquidity by issuing QIP, IPO, GDR and
other instruments, money flow to the secondary market is getting
limited.

Simultaneously capital inflows have led to strengthening of rupee
hitting hard the export-oriented companies. A result of one company
does not change the overall outlook; keep track of broader markets to
see whether the real recovery is in place.

For the week ahead, chartists predict a trading band of 16,060 and
16,970 for the Sensex and 4,780 and 5,100 for the Nifty.

Immediate supports for the indices are at 16,460 and 16,060 and 4,860 and 4,780.
A close below 4,870 on the Nifty could see it plunge to 4680-level if
the news flow dries up. Expect resistance to the indices at 16,880 and
17,160 and 4,980 and 5,040.
You can be bullish only above 16,900 on the BSE or 5,020 on the NSE on
closing basis. There is still enough scepticism about the recent rally
and enough cash waiting to be invested at lower levels, feel analysts.
You have to be just as willing to sell short as you are to buy. Shri
Lakshmi Cotsyn is a diversified textile manufacturer with a product
range from embroidery, quilting, fusible interlining and army products
like camouflage fabric uniforms and bullet proof jackets. It has a
fullyowned subsidiary for manufacturing bullet-proof armoured vehicles
for armed forces and the police. The commissioning of new plants has
made the firm an integrated textile player with diversified revenue
mix. Buy for target price of Rs 150.

TeleCanor is engaged in niche segments like mobile VAS, IVR-product
solutions and payment gateways. Recently the company has tied up with
Buongiorno, one of the largest mobile entertainment and VAS firms. It
has a huge chunk of land in Visakhapatnam near the petro corridor. Buy
on declines.

Henkel India is reportedly going to launch its international brands in
cosmetics and toiletries. It is restructuring its operations like
disposal of Kolkata factory and also beef up operations with the help
of MNC parent.
Buy at current levels.

Gitanjali Gems is the largest integrated diamond jewellery retailer in
India. It has 150 retail stores in the US by virtue of two
acquisitions made last year. Adopting FMCG model to jewellery
retailing, the company has grown from $300 million in 2005 to $1.2
billion in 2008. Restructuring of debt and improving economic
environment spell good times for investors in the firm in the coming
days.
Buy for a target price of Rs 200. VOLUMES WERE robust in both cash as
well as the derivative segments. Overall open interest is presently
close to Rs 1 lakh crore mark pointer of high speculative build up.
Nifty PCR has fallen to 1.25 on higher addition of calls. A relief
rally is not ruled out. VIX rose sharply to 30.25 reflecting concerns
over sustainability of uptrend and bumpy road in near term.
Accumulation of short positions seen in the counters of ACC, Bharti,
Idea, Infosys, TCS, RIL, Unitech, Maruti and Tata Motors.

Unwinding of long positions seen in SBI, ICICI Bank, Reliance Infra,
JP Associates, M&M, BHEL and L&T. Stocks showing positive bias are
Century Textiles, Hotel Leela, IDBI Bank, HCC, GAIL, NCC, Neyveli,
REC, Opto Circuits, Voltas, Welspun Guj and HDIL. These stocks are
good for targets of Rs 525, Rs 45, Rs 145, Rs 155, Rs 420, Rs 190,
Rs160, Rs 220, Rs 225, Rs 175, Rs 300 and Rs 385.

Industry experts feel that `bashing' of telecom stocks on the basis of
tariff wars is highly overdone. Gutsy traders can attempt buying in
telecom counters Bharti, Reliance Communication, and Idea for short
term `relief' gains.

Metal stocks have been moving up on reports of weak dollar and
expectations of higher demand.

However, valuations are stretched for near term view, avoid fresh
exposure and book partial profits.
Fears of rupee strength are again haunting IT stocks.
Use sharp declines to buy and avoid aggressive shorts for present.
Realty counters are attracting buyers at lower levels. Stay invested
for further gains. Sugar, power, capital goods and pharma are likely
to witness renewed buying interest.

C. Kutumba Rao is a Hyder abad-based stock market analyst. The views
expressed and the recommendations made are those of the author.
Readers are strongly recommended to consult their financial advisors
before making any financial invest ments. This newspaper is not liable
for investment decisions made on the basis of recommen dations in
these columns.
--~--~---------~--~----~------------~-------~--~----~
"

Reliance Infrastructure builds on buzz of new order win

2009-06-19T09:58:00.001+03:00

Reliance Infrastructure rose 3.03% to Rs 1237.65 at 10:52 IST on reports a consortium of the company and Hyundai Engineering is likely to win a contract worth Rs 1500 crore to connect Mumbai's Bandra-Worli sea link with Haji Ali.

Meanwhile, the BSE Sensex was up 65.46 points, or 0.46%, to 14330.99.

On BSE, 2.45 lakh shares were traded in the counter. The scrip had an average daily volume of 20.64 lakh shares in the past one quarter.

The stock hit a high of Rs 1259 and a low of Rs 1217.90 so far during the day. The stock had hit a 52-week high of Rs 1373.70 on 1 June 2009 and a 52-week low of Rs 354 on 27 October 2008.

The stock had outperformed the market over the past one month till 18 June 2009, rising 19.96% as compared to the Sensex's 0.13% decline. It had also outperformed the market in the past one quarter, soaring 150.05% as against the Sensex rise of 58.92%.

The large-cap private sector utility and infrastructure developer has an equity capital of Rs 226.42 crore. Face value per share is Rs 10.

The current price of Rs 1237.65 discounts the company's year ended March 2009 EPS of Rs 50.38, by a PE multiple of 24.56.

The consortium is the only bidder in the fray for this corridor called Western Freeway, which would connect the newly-built Bandra-Worli Sealink to Nariman Point.

Separately, some media reports also suggested that Reliance Infrastructure (RIL) has started negotiating with domestic banks to tie up funds for the second phase of Mumbai's metro rail project, though the company is yet to win the contract.

According to reports, the reason for the company's confidence is because it was the lone bidder for the 32 kilometre (km) metro project and the award of the contract will just be a formality. Reliance Infrastructure quoted a viability gap figure of Rs 2,298 crore, which was much less than the permissible limit of 40% (or Rs 3,064 crore) of the total cost of the project, which is Rs 7,660 crore.

The Reliance Infrastructure stock was in demand recently on speculation it will benefit from gas supply from Reliance Industries (RIL). The Bombay High Court in a verdict on Monday, 15 June 2009 said that Anil Ambani's Reliance Natural Resources (RNRL) will get assured gas supply of 28 million metric standard cubic metre per day (mmscmd) of gas from RIL's Krishna-Godavari basin for 17 years at $2.34 million per metric British thermal unit (mmbtu). This is much lower than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 mmbtu.

The favourable verdict lends better visibility to Reliance Infrastructure's gas-based ultra mega power plant (UMPP) at Dadri, Uttar Pradesh which is under construction. The plant, which was originally planned with a 3,750-megawatt (mw) capacity, was later scaled up to 7,450 mw. The first phase of the gas-based power project comprising 1,400 mw is likely to be operational by mid-2010.

The Dadri project, was planned before the split of the Ambani brothers with lack of clarity on gas supply keeping it from achieving a financial closure.

On 9 June 2009 Reliance Infrastructure's shareholders approved a proposal to de-merge and transfer various divisions of the company to separate wholly owned subsidiaries.

As per the proposal, the 500-megawatt (MW) Dahanu power station will come under a separate subsidiary Reliance Energy Generation, and Goa and Samalkot power stations under the Reliance Goa and Samalkot Power respectively. The power transmission division will be under Reliance Power Transmission and power distribution division will go to Reliance Energy. While the toll roads division will become Reliance InfraVentures, the real estate division will become Reliance Property Developers.

The de-merger would benefit the respective companies as well as stakeholders as it would create a simplified & transparent business structure and aligning the interest of various stakeholders, the company said. It can attribute appropriate risk and valuation to different businesses based on their respective risk-return profile and cash flows.

Further, the de-merger will give a more focused management and optimal financing structure, greater visibility, tax efficiency and possibility of investments by strategic players in different businesses.

Reliance Infrastructure had on 25 May 2009 said it plans to raise Rs 4300 crore by issuing share warrants to its founders as it gears up to bid for infrastructure contracts. The company will issue 4.29-crore warrants convertible into shares at Rs 1000 each to the Anil Dhirubhai Ambani group.

Reliance Infrastructure's net profit rose 11.2% to Rs 346.18 crore on 42.5% rise in net sales to Rs 2339.67 crore in Q4 March 2009 over Q4 March 2008.

The company is engaged in generating, transmitting and distributing electricity. It also provides electrical contracting, engineering, procurement and construction contracts and computer services.

Promoters of the company have pledged 3.72 crore shares, or 16.45% equity. The total promoter holding in the company is 37.55% as on March 2009

Bonus shares offer big tax benefits?

2009-06-17T03:24:00.001+03:00

Can you please confirm if what explained in this article still is true?

Bonus shares offer big tax benefits

Nikhil Lohade & Nimesh Shah in Mumbai | April 15, 2004 10:10 IST

With big technology and pharma companies announcing bonus share
issues, it's time to reveal a secret: Bonus shares can be effectively
used a tax saving tool.

How is this done? Simply, the loss incurred after selling a stock once
it turns ex-bonus can be used to set off against short-term capital
gains.

Bimal Doshi, Mumbai-based chartered accountant and management
consultant, explains how shares of the company which announces bonus
shares can be effectively used as a tool of tax planning.

As per the Income Tax Act, the cost of acquisition of bonus shares is
taken at NIL, while cost of original shares remains at the cost at
which there were purchased i.e. cum-bonus price. How effectively tax
can be saved is explained by the following example.

Suppose short-term capital gain realised by an individual is Rs
200,000. An individual also has other income amounting to Rs 1,50,000
on which deduction under Section 80l is not available.

Further assume that you have fully invested for all tax planning
investments like 10,000 for 80CCC, Rs 1.00.000 for section 88, etc.

In such case tax liability works out as follows:

Suppose, the individual intends to by a stock which he will hold for a
longer period. He may look for a scrip in which bonus is issued.

Take, for example, Infosys, which announced a bonus in the ratio of 3
shares for one held. If the investor buys Infosys shares, say at a
cum-bonus price of Rs 5,400 per share.

The ex-price of the share will work out to Rs 1,350 share. The
investor can sell the original shares purchased at the ex-bonus price
and incur taxable short-term capital loss, which he can set-off
against his taxable STG.

Now suppose the investor buys 50 shares of Infosys at cum-bonus price
of Rs 5,400 per share. He will receive 150 bonus shares on the
original 50 shares at NIL cost.

The ex-bonus price will work out to Rs 1,350 per share. If the
investor sells original 50 shares which he had purchased at Rs 5,400
per share at Rs 1,350 per share, thereby incurring total loss of Rs
2,02,500. Thus his tax liability shall work out as follows:

Thus, effective tax outflow can be reduced to the extent of Rs 59,000.
The investor will have 150 shares of Infosys at cost NIL value. He may
hold the same for a period of one year and take advantage of the
long-term capital gain too

Some sectors hold promise for investors

2009-06-14T19:03:00.001+03:00


By Vikas Agarwal, ET Bureau The domestic stock markets have been through a spectacular rally over the last three months. The markets recorded a sharp rise in some of the most beatendown sectors during the last year. After the formation of stable government at the centre, the first budget of the newly-elected government is to be announced in first week of July. Investors have high expectations from the first budget of this government and hence there is some very bullish undertones in the markets. Here are some significant factors that investors should look for in a sector before choosing stocks from it:

Auto

Stocks in the auto sector have been in an uptrend during the last few months and therefore, the valuations in the auto sector stocks are no longer cheap at the current levels. Those invested in auto stocks can book some profits and hold the remaining with a tight stop-loss target.

The expected initiatives from the government for rural development could bring some positives for the auto sector in the upcoming budget. On the other hand, the rupee appreciation against the US dollar will work against the auto companies involved in exporting their variants.

Power

Power is one of the sectors that have a huge potential to grow here. However, it requires huge investments to execute the various ongoing projects. With a stable government at the centre, more reforms and some relaxation in terms of structural issues to execute these projects are expected. Investors with a longterm horizon can accumulate stocks in the power sector at dips.

Banking

Bank stocks registered a spectacular performance in May after the election results. The new government raised the expectations on implementing banking and financial sector reforms.

The expectations from the upcoming budget include dilution of government stake in certain public sector banks, consolidation of public sector banks and a hike in the foreign direct investment (FDI) limit in the insurance sector. Given these expectations, the banking sector stocks will be in the limelight during the pre-budget season.

FMCG

The stocks in FMCG segment remained out of favour in the current bull run as FMCG as a sector is considered a defensive sector, and generally, defensive sectors under-perform during a bull run. However, given the unidirectional market movement, it is better to diversify and invest a part of the portfolio in FMCG stocks as many investors in the markets are expecting a deeper correction in the short term.

IT

The stocks in the IT sector also moved up with the markets in anticipation of a global recovery. However, investors should exercise caution in taking fresh positions in IT sector stocks.

There are many concerns that need to be addressed in the IT sector like increased competition, anti-outsourcing wave, growth in the developed economies and rupee appreciation. Analysts expect the finance minister to extend the tax benefits for the IT companies by a couple of years. This will bring some cheer to the IT counter.

Real estate and infrastructure

The real estate sector is one of the biggest gainers in the stock market bull run after the election results. The formation of a stable government has increased investor confidence in the real estate sector. However, the valuations of real estate stocks have gone up quite significantly in the last one month and investors can look at booking some profits while holding the remaining with a tight stop-loss level.

Metals

Stocks in the metals sector out-performed the broader market indices in the recent bull run. The outlook for the metals sector (especially steel) remains quite positive as analysts expect many measures from the government in the upcoming budget. Some analysts are expecting the government to impose import duty on various metals (including steel and aluminum) which would protect the domestic industry from cheap imports. Also, increased infrastructure spending is expected to provide cheer to the sector.

Telecom

This is one of the fastest growing mobile phone markets in the world. Telecom companies here recorded the highest subscriber growth base anywhere in the world. The main reasons behind the growth in this market are reducing costs of ownership and increasing geographical coverage.

Investor interest in telecom stocks is due to expectations and positive signals around the auction of 3G licenses. Investors should look at investing in telecom stocks with a long-term perspective.

Buyers find PSU stocks attractive on divestment hopes

2009-06-09T22:58:00.001+03:00

Our Bureau

Kolkata, June 9 PSU stocks witnessed targeted buying as market expected fresh Government initiative for divestments.

Of the 45 listed PSU stocks, those with negligible or very small public holding evoked increased interest from the market.

"If the Government plans to sell its stake up to 51per cent in the listed PSUs, the total sale proceeds could be over $95 billion, based on the current market prices of listed PSUs. This works out to about 9.48 per cent of the current GDP," according to Mr Jagannadham Thunuguntla, equity head of SMC Capitals.

Mr Saurabh Mukherjee, head of the Indian equity at Noble, said investors have appetite for PSUs, most of which have strong fundamentals and high growth prospects. "But there could be resistance by unions, particularly bank unions, against Government holdings going below 51 per cent. Limited resistance, however, is likely if divestments are restricted to 51 per cent."

There are several PSUs with Government holding above 75 per cent. But those with holding at 90 per cent and above such as Hindustan Copper (99.59 per cent), MMTC (99.33 per cent), NMDC (98.38 per cent), Neyveli Lignite (93.56 per cent), Rashtriya Chem & Fertilisers (92.50 per cent), State Trading Corporation (91.02 per cent) and Engineers India (90.40 per cent) are likely to be considered for divestments in the short term.

NMDC, with the highest market capitalisation among the PSU pack, moved up 4.06 per cent on Tuesday. On weekly terms, however, it is still trailing by 4.78 per cent. It clocked a traded quantity of 2.19 lakh shares on the BSE.

MMTC, thinly traded and priciest among the State-owned companies, continued its appreciation spree and gained 10 per cent to close at Rs 37,229.

Hindustan Copper improved 5 per cent with surge in volume (over one lakh on BSE against fortnightly average of 83,190 shares).

REC gained 6.45 per cent with a BSE volume of over 10 lakh shares. Power Finance Corporation was 2.56 per cent with a traded quantity of 2.58 lakh changing hands on BSE.

NTPC closed marginally down, but its traded volume of over 30 shares

note : I had hold 700 shares of idbi&600 shares of sail

Financial Technologies leaps as unit to divest 18%

2009-06-05T16:39:00.001+03:00

Financial Technologies India gained 1.83% to Rs 1475 on 14:20 IST on BSE, after the company said that the MCX Stock Exchange plans to divest 18% of its equity to Indian banks.

The company made this announcement after trading hours on Thursday, 4 June 2009.

Meanwhile, the BSE Sensex was up 141.61 points, or 0.94%, 15,150.29.

On BSE, 37,804 shares were traded in the counter. The stock had an average daily volume of 2.38 lakh shares in the past one quarter.

The stock hit a high of Rs 1525.10 and a low of Rs 1461 so far during the day. The stock hit a 52-week high of Rs 1900.05 on 9 June 2008 and a 52-week low of Rs 404 on 23 January 2009.

The mid-cap stock had outperformed the market over the past one month till 4 June 2009, surging 82.87% as compared to the Sensex's return of 25.57%. It had also outperformed also the market in the past one quarter, galloping 237.75% as compared to the Sensex's return of 80.27%.

The company's current equity is Rs 9.18 crore. Face value per share is Rs 2.

The current price of Rs 1475 discounts the company's Q3 December 2008 annualized EPS of Rs 37.64, by a PE multiple of 39.19.

Multi Commodity Exchange (MCX) has already divested 6.48% equity with Union Bank of India and Bank of India through a primary offering for Rs 87.5 crore. The exchange is also expecting another 11.52% divestment to other public and private banks.

Financial Technologies India currently holds about 32% in MCX.

Financial Technologies (India)'s net profit fell 43.94% to Rs 43.19 crore on a 47.76% decline in sales to Rs 62.40 crore in Q3 December 2008 over Q2 September 2008.

Financial Technologies develops software solutions used in online trading terminals.

The company had in February 2009 announced that the promoter did not pledge any shares of the firm.

PSU IPOs provide better returns than private peers: Study

2009-06-04T22:26:00.001+03:00

NEW DELHI: With a host of public sector firms waiting to enter the capital market, investors have something to cheer about as PSUs, which had come

out with their initial public offers in the last five years, have given better returns than their private sector peers, a study says.

The returns provided by PSUs, which came out with IPOs in the last five years 2004-09, have more than doubled, while their private sector peers gave returns of 3.45 per cent in the same period, according to data compiled by SMC Capitals.

The findings indicate that there exist divergence between the returns of PSU IPOs and private sector peers, with a positive edge to PSU IPOs.

"People have burnt their fingers with the private sector IPOs in the past. Now they would want to reap returns and the investor community will invest in the big-ticket upcoming IPOs," SMC Capitals Equity Head Jagannadham Thunuguntla said.

Pricing of IPOs and strong balance sheet makes PSUs better placed than their private sector counterparts.

The government's aim to divest stake in major state-run firms is set to perk up the IPO space, with about six PSUs including Air India, BSNL, Oil India and NHPC, gearing up to sell equity sale in the primary market, analysts said.

"The two IPOs of NHPC and OIL would hold the key to revival of the primary market as foreign investor community would be looking at how the demand shapes up," Thunuguntla added.

Between 2004-2009, there was as many as 278 IPOs totaling $ 25.12 billion, of which 88 are currently trading in profit while the remaining 190 were in the re

the past five years, of 13 PSU IPOs launched worth $ 6.2 billion, 12 were trading in profit. However, of the 265 private sector IPOs totaling $ 18.92 billion launched, only 76 were in the green.

In 2004, when the UPA government came to power with Left as an ally, it had planned to divest stakes in the PSU entities like Neyveli Lignite, Coal India and Power Finance Corporation, but that was stalled by the Leftists allies.

Moreover, with a sharp downslide in the secondary market and a downturn in the global economy, fund mobilisation by the government by way of IPOs declined in 2008.

There was only one PSU IPO of Rural Electrification Corporation, worth Rs 1,421 crore.

In 2007, there were four PSU IPOs, including those of Power Grid Corp and Power Finance Corp worth Rs 5,580 crore.

Sectors and stocks which stand to gain

2009-05-25T14:18:00.000+03:00

These are the sectors and the stocks, which we believe would benefit the most if the reelected Congress-led government succeeds in fulfilling its

promises. But forget not, these are the long-term bets and hence are prone to the short-term fluctuations in stock markets!

CEMENT

The cement sector during FY 09 had already benefited from rural housing and government-funded infrastructure projects, which helped total despatches rise 8% y - o-y to 181 million tonnes. And if the re-elected UPA government takes fresh steps to expand infrastructure and rural projects, cement companies will be the direct beneficiaries.

OUR PICK

ACC (CMP: Rs 729, P/E: 11)

For instance, Holcim-controlled ACC, which is an pan India player and one of the leading players in the sectors, would benefit from such an infrastructural push by the government. During CY 08, this company had grown its despatches by 4.9 % y-o-y to 20.86 million tonnes.

BANKING

The government's initiatives to infuse growth in rural infrastructure and to stabilise overall economy will have a trickle down effect on the banking sector. The government had earlier emphasised that public sector banks should have capital adequacy ratio of 12% to strengthen their operations.

OUR PICK

SBI (CMP: Rs 1731.7, P/E: 12.1)

Being the default banker to the government, State Bank of India (SBI) is expected to be a major beneficiary of the government's expansion plans. Also now that Congress led UPA government with other allies has a majority in the parliament, it will now be far easier for SBI to integrate its six associate banks with itself.

AUTO

Companies in the auto sector that focus on entry level market of two and four wheelers meant for cost conscious customers would see buoyant demand scenario once the rural income gets a boost due to government's thrust on rural growth.

OUR PICKS

Hero Honda (CMP: Rs 1294.1, P/E: 20.2), Maruti Suzuki (CMP: Rs 960, P/E: 22.8)

While Hero Honda leads the pack in the economical two wheeler segemts, Maruti Suzuki leads the market for entry level cars. Both the companies are expected to see higher demand from rural markets in near future.

TELECOM

Mobile operators have been rapidly expanding their operations in rural India. The process will get a further boost given the government's focus on taking telecom services to the grass root level. UPA government has also promised in its manifesto to spread broadband services in the whole country in next three years. The sector can also expect further rationalisation in tariff rates and license fees, which may boost operational efficiencies.

OUR PICK

Bharti Airtel (CMP: Rs 857.9, P/E: 21), Tata Comm (CMP: Rs 585.9, P/E: 61.3)

With over 60% share of rural penetration, Bharti is slated to be the biggest beneficiary of the government's thrust on rural development. WiMax is a favoured technology to take broadband to rural areas. Tata Communications with its Wimax initiatives is likely to play a major role in this venture.

POWER

Power sector is likely to get a big boost due to government's programme to electrify every nook and corner of the country. A thrust on nuclear energy and subsequent agreement with the US Department of energy to secure future fuel needs, suppliers to this segment would benefit.

OUR PICK

Rural Electrification Corpn (CMP: Rs 138.6, P/E: 10.6)

Power Finance Corpn (CMP: Rs 200.3, P/E: 17)

NTPC (CMP: Rs 216.4, P/E: 24)

Areva T&D (CMP: Rs 317, P/E: 33.9)

CAPITAL GOODS

The sector so far has been benefited by strong demand from government's infrastructure projects . This is likely to continue given the UPA's thrust on its 'Bharat Nirman' project, which includes development of roads, water resources, electricity and other nationwide infrastructure work.

OUR PICKS

L&T (CMP: Rs 1301.4, P/E: 22.1)

Siemens (CMP: Rs 455.1, P/E: 16.1)

Bhel (CMP: Rs 1982, P/E: 33.4)

All the three companies are leaders in their segments . Being India's leading engineering and infrastructure company, L&T will gain from any government plans to expand infrastructure. The other two will be benefited from the reforms in the power generation sector.

PHARMA

The sector will gain from government programme to aggressively expand healthcare facilities in the country. Moreover, improvement in infrastructure will also help in imporving the logistics and hence penetration of pharma companies in far flung areas.

OUR PICKS

Cipla (CMP: Rs 222.3, P/E: 22.5)

Glaxosmithkline Pharma (CMP: Rs 1094.4, P/E: 15.5)

These companies being leaders in domestic market are likely to be benefited with any government expenditure in the healthcare space.

FMCG

The National Rural Employment Guarantee Scheme (NREGS) and Sixth Pay Commission have helped in boosting rural demand. This is likely to benefit the FMCG sector.

OUR PICK

Hindustan Unilever (CMP: Rs 231.9, P/E: 24.2)

Being India's leading FMCG company, Hindustan Unilever will gain from any government expenditure.

AGRICULTURE

The government has promised to achieve food security by enacting a 'Right to Food' Act. This will need a significant increase in food-grain production, which in turn will raise the demand for fertilisers and pesticides. UPA also expects to increase the total arable land area under irrigation over next few years. All such initiatives bode well for companies that cater to these segments.

OUR PICKS

Coromandal Fertilisers (CMP: Rs 169.5, P/E: 4.5)

Rallis India (CMP: Rs 649.4, P/E: 10.9)

Jain Irrigation (CMP: Rs 567, P/E: 33.4)

Agro-chemicals manufacturer Rallies and fertilisers maker Coromandal are likely to be beneficiaries of UPA's food for all initatives. Jain Irrigation is well positioned to be benefited from the government's plan to bring more farm areas under micro irrigation.

STEEL

The domestic steel demand seems to be intact and India is one of those few countries in the world which is expected to register a growth rate of 5-6 %. The UPA govt. initiatives in different rural development programs and higher spends on infrastructure would definitely boost the domestic steel demand.

OUR PICK

Sail (CMP: Rs 158.5, P/E: 9.3)

Sail is focused on domestic market where the demand is expected to remain stable. It has zero debt, no foreign operations, not expanded its capacity recently and is partially integrated. All these factors augur well for Sail during such challenging times.

RETAIL

The retail sector's wait for opening up of the FDI route for foreign retailers seems to be coming to an end. As the UPA government would no longer need the support of the Left front, which was opposing the change in the FDI policy and allowing foreign players into the domestic industry, retail sector seems to be poised for growth.

OUR PICK

Pantaloon (CMP: Rs 300.4, P/E: 38.5)

Being the largest player, Pantaloon Retail would benefit with the change in the FDI policy. Not only would this increase the fund flow into the sector but also help the industry gain from the experience of some of the established international player.

Contributed by Amriteshwar Mathur, Karan Sehgal, Kiran Kabtta Somvanshi, Ranjit Shinde, Santanu Mishra and Supriya Verma Mishra

http://economictimes.indiatimes.com/articleshow/4573549.cms?flstry=1

PSU stocks: On divestment hopes

2009-05-18T10:43:00.001+03:00

With the UPA set to form the Government without the support of the Left but with a number of smaller parties, the PSU firms are expected to tap the stock market route in an aggressive way for raising resources as the smaller parties have no ideological objection to the arrangement.

Counters such as BEML, Bharat Electronics, BHEL, Container Corporation, Dredging Corporation, Engineers India and Neyveli Lignite Corporation could see immense activity in the days ahead.

Banks: Betting on reforms

Expectations are high that financial sector reforms may see a big push.

Relaxation of FDI cap in insurance, a free hand for banks in branch and ATM expansion and consolidation of the sector by merging underperforming small banks and stake dilution in some public sector banks are some of key reforms that might happen soon.

Watch out for stocks such as Central Bank of India, Canara Bank, Indian Bank and Bank of Maharashtra besides banking behemoth SBI.

Retailing: FDI expectations

With Left out of the governance equation, retailing stocks such as Pantaloon Retail, Koutons Retail, Vishal Retail, Indiabulls Retail, Shoppers' Stop, Trent, AB Nuvo, Provogue, Raymonds and Bombay Dyeing might see investors' interest on expectation of allowing foreign direct investment. The sector witnessed significant transformation in the past decade from small unorganised family-owned retail formats to organised retailing. With the growth in organised retailing, unorganised retailers are fast changing their business models retailing is one of the few sectors where big activity could take place.

Agri-related stocks

With Government set to focus on rural economy, agri and agri-related stocks such as Tata Chemicals, Coromandel Fertilisers, Zuari Industries, Deepak Fertilisers, RCF, Jain Irrigation, Rallis India and Chambal Fertilisers and other fertiliser stocks could be on the investors' radar.

Nuclear Deal

Stocks such as L&T, Areva T&D, Gammon India, HCC and Tata Power would benefit as the Government would go speed on nuclear deal.

When to sell your stock

2009-05-17T09:48:00.001+03:00

When to sell your stock

Good investment decisions involve not only buying at the right price, but also selling at the right moment. Here are some guidelines to help you.

A.V. Pai

Consider a situation where you have to buy a stock at, say, Rs 100. See it climb to Rs 200 and then plunge back to may be Rs 80 in no time.

Then it takes months or may be years for that stock to reach Rs 200. You rue your decision not to sell when the stock had touched Rs 200.

Investor behaviour is motivated by greed. That makes us think that a rising stock will climb further. But until you sell, the capital appreciation is only on paper and, therefore, likely to vanish if prices start tumbling.

Yet, the right time to unload shares is one of the toughest calls an investor has to make. Even investment analysts and fund managers admit it can be difficult. Here are a few guidelines you can follow while making the decision:

Targeted return: Whenever you buy a stock maintain a target price at which you will sell the stock partially or fully. When the target price of your stocks has been reached, taking a selling decision is easy.

The targeted return could be 25 per cent or 40 per cent, based on your risk appetite or it could be based on what you think is the fair value for the stock. This discipline of booking profits will stand you in good stead as you will accrue profits, without giving in to greed during a rising trend.

Stop-loss trigger: By having a stop loss trigger you sell a stock, not to book profits, but to minimise your losses. A stop-loss sell order is a contingent order that will get triggered only if the stock does fall to a particular price.

For instance, the stock you have decided to sell is quoting at Rs 100. You have reason to believe that the stock will go up but you need to protect your profits.

So you may place a stop-loss order for the stock at Rs 80 as trigger i.e. in case it goes below Rs 80 you will compulsorily sell it.

Stipulated time or event: It may happen that you are targeting a specific sum for a particular event like a child's education, marriage or vacation. In case you have an opportunity to realise this sum before the time period is over, you can do so and park it in a safer avenue such as fixed deposits, bonds.

By doing this, you may avoid exposing your investments to the volatility in the stock market closer to your goal.

Asset allocation: Sometimes, because of a relentless rise in a particular stock or stocks, the weight of that stock or stocks in your portfolio could rise substantially, making your portfolio lopsided.

Prudence demands that you reduce exposure to the stock to rebalance your portfolio. The change in asset allocation could also be due to change in preference with growing age.

As you grow older, try to increase the percentage of fixed income instruments in your investment portfolio.

Changes in fundamentals of the stock: There could be fundamental reasons why you should think of selling the stock that you have long owned. It could be a sudden about turn in the company's financials or prospects — the loss of market share, declining margins, or liquidity problems that peg up the risk of holding the stock. By selling out now, you may get a chance to buy later at a lower price.

Mismanagement: In case you come across any mismanagement in the company or issues of corporate misgovernance then it is better to get rid of the stock at the earliest opportunity.

The Satyam Computer stock has been the sole stock not to participate in the recent market rally. A lesson that companies which lack in corporate governance may not benefit you in the long run.

New investment avenue: Another reason to sell your stock could be the opening up of a new investment avenue that can deliver better returns than your existing investment. While evaluating returns it is also necessary to evaluate risk, an investment that delivers a 12 per cent return with no risk may be superior to one which delivers 15 per cent with risk to your capital.

The above are some of the triggers for selling. There can be a few more which may be relevant to individual investors.

Whether it is a bull phase or a bear market rally, there will always be stocks in your portfolio that merit selling or replacing with other options.

Long term wealth creation requires you to be, not a passive investor, but an investment strategist who aims to maximise gains.

Booking of profits is not a bad idea at all; after all, it leaves you with liquidity, which can be handy when there is an opportunity to buy.
The author is a freelance writer.

http://www.thehindubusinessline.com/iw/2009/05/17/stories/2009051750541400.htm

Promoters hike stakes in 2 out of 5 cos in 2008-09

2009-05-12T05:48:00.000+03:00

Take advantage of the sharp decline in share prices witnessed in 2008.

S. Hamsini Amritha

BL Research Bureau When the foreign institutional investors were busy selling in the equity markets for the better part of last year, promoters weren't exactly sitting idle.

A study on S & P CNX 500 companies indicates that two out of every five companies have witnessed an increase in promoter holding over the year ended March 2009. Equity holdings as of March 2009 are available for 484 of the CNX 500 companies.

Making use of offers

It has not always been open market purchases. More often than not such increases in promoters' stake have come about through rights offers where they ended up subscribing to shares of entitlements surrendered by other shareholders.

Take the instances of Hindalco and Tata Motors. Promoters ended up increasing their holdings from 31 per cent to 36 per cent and 33 per cent to 47 per cent respectively, to ensure that the rights issue was fully subscribed.

A number of open offers that came through in this period also increased the promoter holding, especially the stakes held by foreign promoters.

Ranbaxy-Daiichi Sankyo and UTV-Walt Disney are two such prominent open offers where foreign promoters increased their shareholding to obtain controlling majority in the companies.

Japanese pharma major Daiichi Sankyo, increased its stake to 64 per cent by way of open offer after acquiring the 34 per cent share holding from Ranbaxy's promoters.

In the case of Walt Disney, it held 32 per cent equity interest in UTV Software as of March 2008.

Through the open offer route, the former increased its interest to about 51 per cent in the latter.

Most promoters took full advantage of the sharp decline in share prices witnessed in 2008.

Price advantage

They increased stakes in their companies, when the prices were tumbling down and in a sense this instilled some faith in the investors, as well as helped the stock prices recover from their respective lows!

Promoters of Mahindra and Mahindra steadily pumped up their holdings from 22 per cent to 29 per cent between April 2008 and March 2009, when its share price plummeted from Rs 695 to Rs 383 in this period.

This exercise is evident even in cases of Essar Shipping, Era Infrastructure, Zandu Pharma and Gitanjali Gems, where promoters hiked their holdings by about 20-30 per cent, constantly throughout the year.

Reducing stakes

However, the period also promoters' shareholding decline in 128 companies.

From Rs 116, in October 2008 Unitech's prices declined to Rs 34 by March 31, 2009 as promoters offloaded their stake to mitigate the liquidity crunch.

Companies such as Akruti City, Fortis Healthcare and Reliance Power have also witnessed 5-10 per cent decline in promoter stakes.

Promoters' holdings appear to have stabilised during February and March 2009, which coincided with the abatement of the relentless fall in stock prices witnessed till then

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A member asked for C. Kutumba Rao's Article