Sunday 4 June 2023

 Winning Strokes

The trading pattern of the Singapore stock exchange's SGX Nifty suggests that the Nifty could open with a 40-point gap up. Overseas, Asian equities are up on Monday on expectations that the Federal Reserve would stop rate hikes this month following a mixed US jobs report, while crude oil jumped after Saudi Arabia vowed significant output cuts in July. You now have to pick up good small and mid cap stocks for the upcoming June - September rally. Photo: Equity Bulls.

#The stock of Zomato Ltd (Rs.71.15) made an intraday high of Rs.73.20. With this move all the short term targets have been achieved. Book profits and wait for dips to enter.

#The stock of Dhani Services Ltd (Rs.34.35) is consolidating at the current ranges. One of companies, Yaari Digital Integrated Services Ltd (Rs.12.90), whose promoter is Sameer Ghelaut, hit the upper circuit last Friday. This is expected to give a positive rub off to the shares of Dhani Services Ltd, since Dhani Services Ltd (Rs.34.35) also has Sameer as the promoter. Keep accumulating for targets mentioned in Twitter and Facebook.

#The share of A2Z Infra Engineering Ltd (Rs.8.15) which is into two happening sectors like Waste Management and erection of Telecom Towers, could be accumulated for targets of Rs.12/14. The 5G telephony service requires lot of telecom towers, especially in cities. Hence, the demand for telecom towers will continue to see an upward trajectory. Accumulate!! 

#Nahar Spinning Mills Ltd (Rs.262.10) should do well in the coming days. According to news reports, Nahar Spinning Mills has last year undertaken an expansion plan of 31200 spindles. The project's construction is proceeding well. Orders for the machinery have already been placed, and the project is planned to be completed by June 2023. After the expansion is completed, the company's spindle capacity will stand at 5,73,376 spindles and 1080 rotors. The stock is expected to cross Rs.400 in the near future. 

In addition, the company is adding 8 Vortex machines with 96 positions each to its spinning unit. The machinery orders have already been placed. The project is expected to be completed by June, 2023.

Furthermore, the Company's upgrading of the spinning and garment facilities is proceeding as planned. Under this plan, the corporation will replace the 33 old Ring Frames with the New Ring Frames. In addition, new Speed Frames, Card Machines, and Contamination and Control Machines are being installed. The machines have already been ordered, and the modernisation is expected to be completed by June, 2023. Accumulate!!

#Since crude oil is showing some positive momentum, you can buy the shares of Aban Offshore Ltd (Rs.40) near the CMP for short term targets of Rs.47/51.

#The stock of RTN Power Ltd (Rs.3.50) has started to move up. Accumulate for targets of Rs.4.30/Rs.4.60.

#The stock of the pharma giant Wockhardt Ltd (Rs.169.90) is trading at a dirt cheap price. Accumulate for targets of Rs.221/272.

Wockhardt is a global pharmaceutical and biotechnology organisation providing affordable high quality medicines across the world.

It has 14 comprehensive manufacturing facilities across India, US and Europe which are approved US FDA, UK MHRA and EAMA compliant sites.

Wockhardt is a global pharmaceutical and biotechnology organisation providing affordable high quality medicines across the world. It has 14 comprehensive manufacturing facilities across India, US and Europe which are approved US FDA, UK MHRA and EAMA compliant sites. Wockhardt has a global footprint with 75% of its business outside India. It is present in various segments like generics, biotechnology, injectable and antibiotic discovery. Wockhardt is focusing in 4 areas of business to be the strategic pillars for future growth. 

The Wockhardt stock has been in a downturn over the last few years due to high debt and falling sales. But now with external debt restructuring, fresh capital infusion and new contract agreements the company is poised to do well over the next few years. There is a new vision and energy in the company during the last one year and this should propel the Wockhardt to newer heights. The Wockhardt stock quoting at Rs.169.90 on the bourses can be accumulated by portfolio investors for long term solid gains. It has the potential to become a multibagger.

Tuesday 4 April 2023

Indiabulls Real Estate Ltd: Buy before the merger announcement 

CMP: Rs.50.50

Market Cap: Rs.2648 Cr

Book Value: Rs.80.47

Target: Rs.110 

Time Frame: Next Deepawali.

Introduction:  Indiabulls Real Estate Ltd is one of India's leading real estate enterprises, with a diverse presence in residential projects ranging from affordable to mid-income to premium to super-luxury segments.

Geographically, its area of operation is basically concentrated around  Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR) of India. 

The Company is one of the leading real estate companies in India, with 17 ongoing projects totaling 44.59 million square feet. It also has commercial development with a leasable area of 25.5 million sq.ft. under construction.

It possesses 1424 acres of SEZ land at Nashik, Maharashtra.

The Company has delivered over 25 million square feet of commercial and residential projects through its SPVs/subsidiaries, including the renowned Indiabulls Blu Estate & Club residential towers in Worli and commercial properties One Indiabulls Centre and Indiabulls Finance Centre in Lower Parel.

Triggers:  

💥The recent appointments in the company indicate that the Embassy Group, with which the company's merger is in the final stages of National Company Law Tribunal (NCLT) evaluation, now has more authority over the company.

💥The reigns of the Indiabulls Real Estate Ltd will soon fall in the hands of a Sindhi Businessman, Jeetendra (Jeetu) Virani, the CMD of the Embassy Group.

According to the investor presentation by the company, the proposed scheme for the amalgamation of NAM Estates and Embassy One Commercial Property Developments into IBREL is underway. NCLT Bengaluru has concluded the hearing on the merger scheme.

💥After the merger, the entity will have presence in both the commercial and residential verticals in the states of Karnataka and Maharashtra. Post merger, Indiabulls Real Estate #Ltd may have a direct buyer in the form of Embassy Group, who may use those Properties for rentals.

💥Indiabulls Real Estate’s net debt as of December 31, 2022, was #NIL (debt free) and it had a cash surplus of Rs.580 crore as against a cash surplus of Rs.136 crore in the September quarter.

💥In April, 2022, Indiabulls Real Estate Ltd raised Rs.865 crore in the form of QIP at Rs.101.10, for buying land and reducing. Post that we have seen substantial reduction of debt in FY23. The fund raising resulted in an overall 15.8% dilution for the shareholders.

Going forward, the merged conglomerate will have both the scale and resources to take on bigger challenges and deliver.

💥Realty companies remain optimistic on the demand environment on the hope that the rate hike cycle might have peaked out.

💥 Meanwhile, The Mint on 14 February, 2023 wrote:

The residential real estate market in India had astounding progress in 2022, setting new sales records of 68% YoY, further demonstrating the industry's prominence as one of India's fastest-growing industries. 

After two years affected by COVID, Tier 2 and Tier 3 cities have arisen as fresh major real estate trends in 2022, and the real estate market has set unprecedented benchmarks which continued its growth momentum from 2021 amid the global slowdown.

The growing awareness of home ownership and the government’s favourable affordable housing schemes has led to significant growth in the affordable housing segment.

Conclusion: The shares of Indiabulls Real Estate Ltd, post merger will have both the residential and commercial wings.

It is one of the country's largest real estate players, with a significant footprint in and around Mumbai. Its development initiatives are in some of Mumbai's best neighborhoods, including the popular Worli. 

The company owns 1856 acres of land in Mumbai, NCR, and Chennai. The company's entire landbank is 3280 acres. Blu Estate & Club, Worli, Sky Forest, Lower Parel, Indiabulls Greens, Panvel, One Indiabulls, Thane, and other projects are under development by the firm.

Buy at the CMP for some stupendous returns by Deepawali.

Monday 30 January 2023

Indowind Energy Ltd: Buy

CMP: 13.45.

Book Value: Rs.25.74.

Market Cap: Rs.169 crore.


Introduction

Indowind Energy Limited (IEL) has been in the business of power generation through wind mills since its inception in July 1995. It is one of the pioneers in the renewable energy sector and is managed by professions with experience in diverse fields.

Shri Bala Venckat Kutti, Indus Finance Limited, and Loyal Credit & Investments Limited are the company's promoters. 

Over the course of 27 years, the company has consistently grown in this sector. The Company set up its first wind Mill in Tamil Nadu having a capacity of 225 MW.

Interestingly, the windmills of the company are situated in the highest wind potential areas in the states of Tamil Nadu and Karnataka. As on date,  Indowind Energy Ltd is having 123 windmills having capacity of 49.645 MW spread across the states of Tamil Nadu and Karnataka (Tamil Nadu: 29.55 MW and Karnataka: 20.095 MW). 

Apart from this another 12.50 MW capacity windmill will be operational within the next 6 - months; the capacity of this windmill will be increased to 50 MW, within a couple of years.


Salient features:

💥 Indowind Energy Ltd is the First Independent Power Producer to commercially exploit wind for generation of Electricity.

💥It has nearly 3 decades of experience in the Wind sector.

💥In has proven track record and technical expertise to generate power from wind.

💥It sells power sales to Electricity Boards and large Corporates. Better realisation is achieved through private sale.

💥It is the 1st Wind Energy Company to get carbon credits from UNFCCC and has registered “Green Power” as its trademark.

Shareholding Pattern: 

The promoters hold 44.76%, while  of the general public holds 55.24% of the shares of the company, respectively. 

Among the general public, the Export Import Bank of India holds 4.46% of the shares of the company. On the corporate side Commendam Investments Pvt Ltd holds 1.59% of the shares of the company. 

Financials:

The company came out with good set of numbers for the December 2022, quarter:

💥Revenue: ₹75.7 million (up 80% from 3Q 2022).

💥Net income: ₹1.43 million (up from ₹2.16m loss in 3Q 2022).

💥Profit margin: 1.9% (up from net loss in 3Q 2022). The move to profitability was driven by higher revenue.

💥EPS: ₹0.01 (up from ₹0.024 loss in 3Q 2022).

Source: Simply Wall.

This positivity is expected to continue in the following quarters (post rights issue), as the interest outgo will decrease substantially. 

Rights Issue: The Company has come with Rights issue of 3,58,96,594 shares of Rs.10 each, at a premium of Rs.2 per share; aggregating to Rs.430.8 million (Rs.43.08 crore). 

Details:

Issue Opened: 27 Jan, 2023

Issue Closes: 10 Feb, 2023

Issue Size (shares): 3,58,96,594

Issue Size (amount): Rs.43.08 crore 

Issue Price: Rs.12/share 

Record Date: 13 Jan, 2023 

The main objective of the Rights Issue is to substantially reduce the secured loans and progress towards making the company, DEBT FREE.

National Company Law Appellate Tribunal (NCLAT) Case: 
Few weeks back, the two prominent stock exchanges, the BSE and the NSE decided to stop trading in the scrip, for a couple of days, due to delay made by the company in sending the notice regarding postponement of the hearing to 20 January, 2023, to them.

It will be pertinent to mention here that, in September, 2020, Exim Bank dragged the company to NCLAT for the settlement of its loan. The settlement amount was pegged at Rs.48 crore out of which the company has already paid Rs.15 crore. The company will pay the remaining Rs.33 crore from the proceeds of the Rs.43.08 crore Rights Issue and become almost DEBT FREE – only a small debt of Rs.5.35 crore from a lender will be left.

Cons

💥Selling of “Green Power®” given the nature of its business, concentration of the plants in few States and also the issue of shortage of power, demands special marketing setup to cater to the requirements of clients, since the power generated from its wind farms are sold under Group captive scheme to Corporates. 

💥Though there are not many IPP’s in India, in the wind energy space, selling power to corporates puts IEL in direct competition with the SEB’s.

💥 Closing of Accelerated Depreciation Scheme in 2017, has slowed down the wind energy space.

Upcoming Projects: 

The company is in the process of setting up and acquiring wind farms in Karnataka and Tamil Nadu. The company has already acquired land banks in Tamil Nadu & and Karnataka and completed the Micro sitting and Wind Resource Assessment study. The company has around 300 acres of land bank in Tamil Nadu and Karnataka.

Wind Power Sector: 

While the Indian Power Sector is undergoing significant growth, sustained economic growth continues to drive electricity demand in India. 

The Government of India is focussing on attaining “power for all" and this has accelerated capacity addition in all segments of the sector. India is the third largest producer and second largest consumer of electricity worldwide, with an installed power capacity of 401.01 GW as on 30th April 2022.

Wind Power Policy of the Union Government:

💥Concession on import duty on specified wind turbine components.

💥10 year income tax holiday for wind power generation projects.

💥Concessional custom duty exemption on certain components of wind electric generators

💥100% exemption from excise duty on certain wind turbine components.

💥REC Mechanism.

💥Waiver of Inter State Transmission System (ISTS) charges and losses for inter-state sale of solar and wind power for projects to be commissioned up to March, 2022.

💥Permitting Foreign Direct Investment (FDI) up to 100% under the automatic route.

💥Implementation of Green Energy Corridor project to facilitate grid integration of large-scale renewable energy capacity addition.

💥Technical support including wind resource assessment and identification of potential sites through the National Institute of Wind Energy, Chennai.

💥IREDA finance scheme for wind power projects. Now, getting finance has become quite hassle free.

💥Special incentives provided for promotion of exports from India for various renewable energy technologies under renewable sector specific SEZ.

💥Feed-in-Tariff (FIT) scheme for wind projects upto 25 MW.

💥GBI scheme for grid interactive wind power projects commissioned before 31 March 2017.

Source: Indian Wind Energy Association.

Conclusion: Since IEL sells power under the banner “Green Power®”, many triple “A” rated corporates directly buy from IEL to meet their CSR needs. This gives the company, some sort of stability in its earnings.

Moreover, the company maintains high quality while supplying power. It meets the norms of the Grid code so that the electricity produced is fed into the grid at the desired frequency without affecting the regional Grid operations.

Besides, while selecting the wind turbines, proper screening is done based on site and wind conditions to match the appropriate machine to be installed.

Considering the above points, the investors can take position in the shares of Indowind Energy Ltd near the CMP of Rs.13.45 for medium to long term targets of Rs.25 and Rs.32. SL: Rs.12.60.

Thursday 20 October 2022

 Winning Strokes

The BSE Sensex was last seen trading at 59,060.28 down 12.00 points (-0.08%), while the  Nifty was seen consolidating above the supports. The Nifty50 was seen trading at 17,507.20 up 10.45 points (+0.06%).

Yesterday, the Dow Jones closed flat that the US Fed might either trim down their interest rate brinkmanship or maintain status quo, to gauge the previous interest rate hikes over a period. It is a known fact the effects of any monetary tightening policy acts with a time lag. The US economy is doing fine and so is India's, and all those hoopla surrounding an impending recession is just a media speculation. Hence, buy good quality stocks from the happening sectors and keep holding.

#The energy prices are shooting over the roof, with the Crude Oil basket within an arms length of touching $100 per barrel. In such circumstances, try to be long on Crude Oil related counters.

My old favour, MRPL (Rs.59.90) is already up more than 3%. So, keep eye on (accumulate) the shares of India's largest oil exploration company in the private sector, Aban Offshore Ltd (Rs.50.20).

#The shares of wind energy company, Indowind Energy Ltd (Rs.15.90) hit 🎯 another buy freeze. We can look forward for targets of Rs.32/37 in the coming days.

#The textile sector is all set to do well in the near future due to arrival of fresh cotton at reduced prices.

The government of India is expected to come up 2nd PLI scheme, very soon. Moreover, the depreciation of INR Vs USD will bring additional revenues for the export oriented Textile companies like Nahar Spinning Ltd (Rs.297.55), Nitin Spinners Ltd (Rs.209), etc.

# The hotel and restaurant stocks are expected to do very well in future. I have already recommended some names on Twitter, kindly accumulate the shares of those companies.

#Some of the bank stocks like my old favourite Central Bank Ltd (Rs.20.20) are moving up due to operator action. In a rising interest rate scenario it is always advisable to stay clear from Banking counters, as their loan books might shrink and NPAs might rise due to higher interest cost.

#The stocks from the sugar sector, are expected to rally in the near future since as per media reports, the government is contemplating to allow sugar exports. Moreover, the ongoing fesrival season will keep the sugar market buoyant. I've already recommended the scrip of Bajaj Hindustan Ltd (Rs.10.40).

#The monsoon clouds have almost receded from the horizon, giving way to pleasant autumn. 

The construction activities have again started to gain momentum. Today, I've recommended Indiabulls Real Estate Ltd at Rs.75.20 on Twitter.

You may also continue to accumulate, Dilip Buildcon Ltd (Rs.219) and Patel Engineering Ltd (Rs.21.80).

Tuesday 18 October 2022

Winning Strokes

The domestic bourses are doing pretty well. The BSE Sensex was last seen trading at 58,940.55 up 529.57 points (+0.91%), the Nifty has been trading comfortably above the supports mentioned in my earlier post and is now trading at 17,482.60 up 170.80 points (+0.99%). The Indian bourses will continue to trade in the Green till Deepawali, with occasional bouts of buying and selling. You should accumulate good stocks at reasonable valuations.

#Buy the shares of Bajaj Hindustan Ltd near the CMP of Rs.10.60, for targets of Rs.17/19. SL: Rs.9.70.

Bajaj Hindusthan Sugar has 14 (fourteen) manufacturing plants, all located in Uttar Pradesh. It ranks amongst the top two sugar producers in India along with Shree Renuka Sugars.

Record-high sugar prices are seen in the European Union --- nearly three times levels seen a year ago following extreme weather and a surge in energy costs. The government of India should now allow sugar companies to do massive exports to EU. Photo: Equity Bulls.

#Buy the shares of Steel Authority of India Ltd (Rs.79), for short term targets of Rs.85/87.

#The stock of Coffee Day Enterprises Ltd (Rs.50.40) made an intraday high of Rs.51.50. The Book Value of the shares of Coffee Day Enterprises Ltd is a whopping Rs.178.61 Vs CMP of Rs.50.

Which one is Cheaper? 

As of Sept, '22, Tata Coffee (Rs.215.80, FV: Re.1) had ₹11.1b of debt. It has ₹2.17b in cash => Net debt ~₹8.95b or Rs.895 Cr. 

Debt of Coffee Day Enterprises (Rs.50.40), FV: Rs.10) is ~Rs.1500 Cr + valuation of 20,000 acre of coffee plantation business + plus Rs.1000 Cr - plus valuation of its veding machine business + Cafe Coffee Day business + buoyancy in the Robusta Coffee beans.

The stock of Coffee Day Enterprises Ltd should double from the CMP.

#The stock of RTN Power Ltd is waiting for the next level of upmove. Buy the shares at the CMP and keep holding for targets of Rs.10/12.

Both its Amravati and Nasik plants have huge land holdings (I mentioned about the quantum of land in my earlier posts). The company hopes to become debt free within 2025. Accumulate!!

#The stock of Aban Offshore Ltd (Rs.51.35), India's largest offshore drilling companies in the private sector, made an intraday high of Rs.52.50. The high crude oil prices will push up its bottomline. Accumulate for targets of Rs.72/77.

#The share of my old favourite Indowind Energy Ltd (Rs.14.45) hit the buyer freeze today in the opening trade. If you remember, I have been continuously recommending the scrip, since the last few weeks. Hope you have either taken fresh holdings or have averaged your previous purchases.

The company is shortly having a board meeting, where it is expected to deliberate about the proposed Rs.50 Cr, rights issue. It is a low debt company into wind energy sector. 

Its Q1FY23 results were fine.

#The stock of Nahar Spinning Mills Ltd (Rs.301.50) made an intraday high of Rs.309.05. It is a part of the portfolio of the ace investor, Dolly Khanna, whose portfolio is managed by her husband.

The company has superb fundamentals. Once, the textile rally picks up momentum the stock will double from the current price. Accumulate!!

#The stock of Dilip Buildcon Ltd (Rs.219.60) made an intraday high of Rs.224. The company has a massive order book of ~Rs.27,000 crores. Accumulate!!

Sunday 16 October 2022

Coffee Day Enterprises Ltd: Buy

CMP: Rs.50.15

Targets: Rs.71/85

SL: Rs.47.

The meteoric rise of the Café Coffee Day brand remains one of India's greatest success stories of home-grown businesses.

The coffee beans used in Café Coffee Day outlets are grown on the company's own plantations.

Furthermore, the Café Coffee Day outlets stood out for their distinct colour schemes and custom-made furniture pieces, which gave them a distinct identity. 

Coffee Day Enterprises Ltd (CCD) is India's largest coffee chain and is owned by Coffee Day Global which is a subsidiary of Coffee Day Enterprises.

Café Coffee Day opened its first outlet in Bengaluru in 1996. By 2011, it had grown into a major business conglomerate with over 1000 locations across the country. 

During the lockdown period, Malavika Hedge took over as CEO of the company, and the company's health began to improve. Photo: Manorama Online.

Aside from her trailblazing efforts to reduce the company's debt, she also had great success in the export of high-quality Arabica coffee beans. Her 20,000-acre coffee plantation's coffee beans are in high demand in many foreign countries.

Malavika Krishna, the daughter of former Karnataka Chief Minister SM Krishna, was born in 1969. She received her engineering degree from Bangalore University. She married VG Siddhartha in 1991 and has two sons, Eshaan and Amartya.

Triggers:

💥Post lifting down of nationwide lockdowns, the hotels, tourism and hospitality sector has received a new lease of life, with the increase in footfalls (in hotels, restaurants, shopping malls, etc). The trend has gained momentum during the last few weeks and will continue at least till this Deepavali, the festival of light. Photo: Retail4growth.com.

After that marriage season will pick up steam and this will continue till March - April next year. Then there is Christmas, Saarwswati Pooja, Makar Sankranti, Basanti Pooja, Baishakhi, and so on. The ongoing festival season is going to boost the bottomline of restaurants.

💥Meanwhile, the debt levels of Coffee Day Enterprises Ltd (CDEL) have reduced significantly from Rs.7,214 crore as of March 31, 2019 to Rs.1,898 crore, at the end of March 31, 2021 and to Rs.1,810 crore, at the end on March 31, 2022. The current debt of the company ~Rs.1500 crores.

💥Moreover, CDEL also informed that the amount of Rs.3,430.67 crore due by Mysore Amalgamated Coffee Estates Limited (MACEL), to various subsidiaries and a joint venture of the company is yet to be recovered. This money will further provide muscles to Coffee Day Enterprises Ltd.

💥CDEL's subsidiary, Coffee Day Global Ltd, owns and operates the popular coffee chain Café Coffee Day (CCD). 

It owns 495 cafes in 158 cities and 285 CCD Value Express kiosks. There are 38,810 vending machines that dispense coffee in corporate workplaces and hotels under the brand. This is a massive company. In the pre-pandemic FY 2019-20, the total number of cafes stood at 1,192.

💥It came up with an IPO of Rs.1,150 crore at an issue price of Rs.316 - 328 per equity share. The IPO opened for subscription on Oct 14 2015. The issue was subscribed 1.64 times.

💥The market cap of Coffee Day Enterprises Ltd is ₹1,067 Cr as of 12 October, 2022. In comparison, its FY21 - 22 income was Rs.6,578.80 million. 

💥In May last year there were media reports that a Tata Group firm, Tata Consumer Products, was in talks to acquire the CCD's coffee vending business, held through a subsidiary Coffee Day Global Ltd (CGDL) at a consideration of at least Rs.1, 000 crores.

💥According to https://munafasutra.com the targets of Coffee Day Enterprises Ltd, for this month are Rs.62.96 and Rs.84.86 on the upside, and Rs.46.54 on the downside.

Sunday 17 July 2022

 Wockhardt Ltd: Buy for superb returns!

Face Value: Rs.5

CMP: Rs.212.40.

Market Cap: Rs.3,012 crore.

Market Cap: Rs.3059.84 crore.

CEPS: Rs.2.22

Total Revenue in FY22: Rs.1,372.00 crore.

Introduction
: Wockhardt is a leading, research-based global healthcare enterprise, with interests in pharmaceuticals, biotechnology, and has a network of advanced Super Speciality Hospitals.

Wockhardt is a true Indian MNC employing 8600 Associates from 21 different nationalities worldwide. It has 3 (three) research centers and 12 (twelve) manufacturing plants. Its products include pharmaceutical and bio-pharmaceutical formulations, active pharmaceutical ingredients (APIs), and vaccines. PhotoMoneycontrol.com

Wockhardt Hospitals, a subsidiary of Wockhardt Ltd, is an Indian tertiary care and super speciality healthcare network. These hospitals provide services in Cardiology, Orthopedics, Neurology, Gastroenterology, Urology, and other specialties. PhotoLive Mint.

Wockhardt is headquartered in Mumbai, India, and has full-service operations in the United States, United Kingdom, Ireland, and France. It also markets in Russia, Brazil, Mexico, Vietnam, the Philippines, Nigeria, Kenya, Ghana, Tanzania, Uganda, Nepal, Myanmar, Sri Lanka, Mauritius, Lebanon, and Kuwait.

Shareholding Pattern: The promoters hold 67.13%, while the general public holds 32.87%. Among the public shareholding, FPIs and NRIs hold 2.88% and 1.09% respectively, of the shares of the company. The big bull, Rakesh Radheshyam Jhunjhunwala holds 2.08% of the shares of the company.

Triggers:

🏵️Mumbai-based Wockhardt and Serum Life Sciences, a subsidiary of the Serum Institute of India (SII), have formed a collaboration to manufacture 150 million doses of SII vaccines in Wockhardt's UK facility. The vaccine is expected to be ready within 6 - months time. With repeated waves of Covid - 19 pandemic, the vaccine business will give steady income for the company. PhotoMedical Dialogues.

🏵️The company has bulk vaccine and fill-finish manufacturing facilities at Waluj and Shendra, Aurangabad, Maharashtra. The cutting - edge automated manufacturing facilities in Aurangabad are dedicated to producing world-class high-quality injectable products.

🏵️The debt of the company has now come down below Rs.1000 crore. One of the highly placed sources, who refused to be named, put the debt figure at around Rs.600/700 crore, which is nothing as compared to FY22, revenues of the company. The company recently sold 2.08% promoter's holdings to clear the debt of a group company or the money involved actually flew to cut down the debt of a group company.

🏵️Wockhardt Ltd recently came out with the rights issue of Rs.748 Crores at Rs.225 per share in the ratio of 3 rights equity shares for every 10 fully paid-up equity shares held by the eligible equity shareholders on the record date, that is on Wednesday, March 9, 2022. The proceeds of the rights issue, will be used to meet its financing needs for debt repayment, research & development initiatives, and general corporate purposes -- to make repayment of subordinated debt and company's borrowings including interest partially or fully, the allocated amount shall be Rs.590 crores and for general corporate purposes the allocated amount shall be Rs.152 crores.

🏵️The sudden crisis which arose in the Russian Vaccine front due to the Ukraine - Russia war is expected to calm down in the nesr future as the war is coming to an end. Once the war end, the Pharma basket is likely to be first on which restrictions will be removed.

🏵️Wockhardt Ltd in February, 2022 said it had received approval from the Central Drugs Standard Control Organisation (CDSCO) to export up to 10 crore doses of Russian COVID-19 vaccine Sputnik. As the war between Russia and Ukraine is in its final stages, the embargo by the EU might be lifted soon. Thus Sputnik vaccine is likely to generate good revenues for the company. Incidentally, more than half of its revenue is generated in Europe.

🏵️The loss in the March 2022 quarter was mainly due to the stoppage of manufacturing of Russian Covid - 19 vaccine.

🏵️The company basically caters to European and the US markets, which currently generates over 76% of its revenues. With current Rupee depreciation, this is likely to give a good additional revenue for the company.

🏵️The company at the end of June, 2022, sold some loss-making approved generic versions of certain over-the-counter drugs to Mumbai-based Glenmark Pharmaceuticals in the US for an undisclosed sum. The company sold ANDAs for Famotidine Tablets USP, 10 mg and 20 mg (OTC), Cetirizine Hydrochloride Tablets USP, 5 mg and 10 mg (OTC), Lansoprazole Delayed-Release Capsules USP, 15 mg (OTC) and Olopatadine Hydrochloride Ophthalmic Solution USP, 0.1 per cent (OTC) in the US to Glenmark Pharmaceuticals. However, the amount involved in the said deal according to the sources is very nominal and is not going to have a significant effect on its balance sheet. The move infact is expected to strengthen a little of its bottomline , as it is a part of the company's debt reduction efforts and give more focus to its profit making verticals.

🏵️The company is currently focussed on the business of new chemical entities (NCE), original new drugs in the pipeline, certain high value products, in-licensed drugs from other companies and biotech drugs like insulin. According to the sources, some new molecules developed in the last few years through in-house research and development are waiting for final approvals from the authorities. These will cater to both emerging and developed markets.

Conclusion

Wockhardt is a fully integrated pharmaceutical company with a solid research foundation in Generics, Biotechnology, New Chemical Entity (NCE), and Novel Drug Delivery Systems (NDDS). Its world-class manufacturing facilities follow strict cGMP protocols and are in compliance with international regulatory agencies such as the US FDA, the UK MHRA, ANVISA, and others.

The stock of Wockhardt Ltd fell from a high of around Rs.2100, made in 2013 to the CMP of Rs.212.40.

Technically speaking the scrip is ready for a bounce from the current levels. The medium term investors can buy the share for targets of Rs.341/406; considering that the company is likely to get compensated for its Sputnik fiasco, by the vaccine  made through collaboration with Serum Institute. It is also coming up with a few new medicines to bulwark its diabetic portfolio. 

Moreover, a couple of antibiotics are in the final stage of trials and will be ready for global markets within a couple of years. The company is also looking to strengthen its presence in the African continent. Wockhardt’s emerging market presence spreads across South-East Asia, Far–East Asia, Africa, Russia, CIS and Latin America countries.

The stock at the CMP is available at a dirt cheap price. This is a risk free investment at the current price.

Friday 10 June 2022

 RattanIndia Power Ltd: Buy

CMP: Rs.3.85

Major Triggers:

💥Fall in the price of coal and rise in demand for power, post relaxation of Covid - 19 restrictions.

💥The widening of the consolidated loss in the December quarter was due to non-operation of Nashik Thermal Power Plant (Sinnar Thermal Power Ltd). 

That exposure has no bearing on parent RattanIndia Power Ltd, as Sinnar Thermal Power Limited (STPL), is a subsidiary of RattanIndia Power Ltd and is a separate SPV holding Sinnar Thermal Power Plant. PhotoJust Dial.

💥All units of Sinnar Thermal Power Plant at Nashik are commissioned, but not operational at present.

💥STPL's debt exposure is ring fenced and has no bearing on the parent RattanIndia Power Ltd. There are no obligations of RattanIndia Power Ltd on debt repayment of STPL in any manner whatsoever.

 💥The company's standalone net profit jumped three-fold to Rs 104.44 crore in the third quarter of FY22 from Rs 33.44 crore in the quarter ended in December 2020.

💥RPL has demonstrated excellent operating performance in current FY 2021-22 amidst COVID-19 and acute coal shortage in the country affecting coal based thermal power plants.

Hence, now when the coal prices are falling across board, we can expect excellent performance by the company.

 💥Amravati Thermal Power Plant has achieved the Plant Load Factor (PLF) of 74 per cent and Plant Availability Factor (PAF) of 85 per cent up to Q3FY22 and stands out as one of the best thermal power plants in Maharashtra.

💥The 1,350 MW Amravati Thermal Power Plant has been supplying its entire power to MSEDCL under 25-year term PPAs (power purchase agreement) based on long-term coal linkage from South-Eastern Coalfields Limited for the entire contracted capacity.

💥Pursuant to debt rationalization in December 2019, RPL has successfully paid back Rs.2,001 crore (principal and interest) in the last eight quarters (January 2020 to December 2021) including Rs.450 crore as prepayment.

💥 According to a report published in ET on 21 January, 2022, RattanIndia Power Ltd (RPL) expects to become debt-free in nearly 2 (two) years based on revenue from its thermal power plant at Amravati in Maharashtra and accumulated dues from power distribution companies.

💥The company is working on debt resolution with the lenders to its 1,350-Mw power project at Nashik in Maharashtra.

The company has Rs.4,000 crore regulatory assets and receivables from Maharashtra, some of which are at final stages of realisation, expected to accelerate the deleveraging process.

💥As on December 31, 2021, the external secured-term debt obligations of the company stand at Rs.1,953 crore on a networth of Rs.5,000 crore.

💥The ministry of power on May 5 notified that all imported coal-based plants must run on full capacity under Section 11 of the Electricity Act to meet rising electricity demand.

💥 According to a report published in the Financial Express on 15 May, 2022, plans for *Capital Infusion* in coal-based plants such as Rattan India’s Sinnar plant in Nashik and Reliance Power’s Vidarbha power plant are being worked out and operations may start soon.

💥The Power Ministry on May 11 directed PFC and REC to take necessary action to arrange short term loans for a period of 6 (six) months with adequate safeguards, for imported coal-based plants which are under stress or in NCLT, at the earliest.

💥Following the successful recast of debt for the 1,350 MW Amravati power plant, RattanIndia Power, backed by Aditya Birla ARC and Varde Partners, is in talks with a consortium of lenders led by PFC for the recast of around Rs.7,100 crore debt of its thermal power plant in Nashik, Maharashtra, according to a Financial Express report.

💥Aditya Birla ARC, which is backed by Varde Partners, has purchased a 15% stake in RattanIndia's Amravati power plant.

💥Furthermore, Q4FY22 standalone numbers only include the operational Amravati power plant and exclude the Nashik Plant, which is owned by Sinnar Thermal Power, a subsidiary of Sinnar. RattanIndia Power is not obligated to pay the Nashik power plant's debt. 

💥The company has paid Rs.2,000 crore in dues of the Amravati plant in the last two (two) years and has an outstanding due of Rs.1,950 crore, which the company expects to pay off in the near future given the annual Ebitda of around Rs.1,000 crore and the recovery of regulatory assets of over Rs.4,000 crore.

💥The India Express reported on June 10, 2022, that banks, taking cues from the Reserve Bank of India (RBI), are likely to decide against funding the working capital requirements of 13 imported coal-fired power plants — key to the Union power ministry's proposal to revive these units as part of a broader range of measures to address the country's ongoing electricity shortage.

Power Outages: As temperatures rise, demand for electricity reaches a new high of 209.8 GW (gigawatts) on June 8, surpassing the previous high of 207 GW set on April 29 this year.

This increase in demand has been met in part, owing to a 16% annual increase in domestic coal dispatches to thermal plants, as well as coal imports and increased hydro and wind power generation. While the demand spike has been managed thus far, demand is expected to peak at 220 GW between July and September, when the monsoon has an impact on coal mining and dispatches.

Financial Results (Year Ended FY2022) - YoY Comparison:

The company has reported total income of Rs.3669.16 crores during the Financial Year ended March 31, 2022 as compared to Rs.2634.16 crores during the Financial Year ended March 31, 2021.

The company has posted net profit / (loss) of Rs.(-)1981.45 crores for the Financial Year ended March 31, 2022 as against net profit / (loss) of Rs.(-)941.61 crores for the Financial Year ended March 31, 2021.

Conclusion: RPL is a turn-around story in the Indian power sector with superlative operating performance. The company has showcased how stressed thermal assets can be resolved efficiently and put to use in the service of the nation.

The Rs.10, Face Value shares are trading at a dirt cheap price of Rs.4. 

The prudent investors, need to accumulate the stock of RattanIndia Power Ltd, for good ROA in the next 3/6 months time frame.

Pick of the Week:

Kernex Microsystems India Ltd: Basking on Huge land Holdings:

BSE Code: 532686
CMP: Rs.82.6

Book Value: Rs.105.43

Market Cap: Rs.103.25 Cr

 

Introduction: Established in 1991 and registered as 100% Export Oriented Unit with Software Technology Parks of India, Department of Electronics, Govt. of India, New Delhi, it is a ISO 9001:2000 certified company with expertise in Software, Hardware development and Systems Integration. It is presently engaged in the business of manufacturing, installing and maintaining of anti-collision systems as well as conceptualizing, designing, and developing certain railway safety and signal systems for Konkan Railways Corporation Ltd. These safety and signal systems are suitable for medium to low speed & density railway tracks like in India and other developing countries.

The company entered into a technology partnership with Konkan Railway Corporation Ltd, Navi Mumbai for design, engineering and development of anti-collision systems which provides safety to trains in Railways. It holds exclusive license for manufacturing, installation, commissioning and maintenance of anti-collision systems in India. It also has an outsourced facility for the Konkan Railways Corporation Ltd for manufacture and supply of ACDs and related accessories. It is also a technology partner for the development and implementation of ADDs for Metro Sky-Bus Urban Transportation System, Advanced Railway Signal Systems and other safety systems. It holds exclusive marketing rights of ACD systems all over the world except India.

Based on the concept and domain knowledge provided by Konkan Railway Corporation Ltd, it has developed the networked Anti-Collision Devices, using Global Positioning System, Radio Data Communication, Application Logics and Inter facing these with an Auto Breaking System developed by KRCL. With operations in USA and planned operations in Far East, Africa and Middle East, Kernex is truly a global player in the offing.

 

Shareholding Pattern: The promoters hold 55.74% while the general public holds 44.26%. Moreover FII hold 1.55%, while mutual funds/UTI holds 1.11%.

 

Shareholding belonging to the category
"Public" and holding more than 1% of the Total No.of Shares

 

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

SMS Holdings Pvt Ltd

273,181 

2.19 

2

Somerset Emerging Opportunities Ltd

193,217 

1.55 

3

Enam Investment Services Pvt Ltd

137,500 

1.10 

4

UTI Mid Cap Fund

139,156 

1.11 

5

Vinaya Kumar Gavini

160,267 

1.28 

6

Challa Subrahmanay Sarma

186,212 

1.49 

 

 Total

1,089,533 

8.72 

 

 

Financials: For Q1FY10, the company came out with flat topline and a slightly subdued bottomline. The total income of the company for Q1FY10 came out to be Rs.5.82 Cr as against Rs.5.97 Cr in the same period previous year. The net profit of the company for Q1FY10 dipped due to higher interest and tax component to Rs.52.3 lakhs as against Rs.1.07 Cr in the same period previous year.

 

Triggers:

  1. The company would benefit from the Indian Railway’s move to focus more on signal modernization and increased usage of automated signaling systems. Kernex Microsystems (India), the Hyderabad-based railway safety product manufacturer is the only player in anti-collision devices for the Railways and is set to capitalize on the public sector transporter’s thrust on ‘safety’.
  2.  Kernex Microsystem last year announced to foray into infrastructure projects and power sector, the two most happening sectors of today.
  3. The company has redrawn its plans to carry on the expansion programme, wherever required, as against plans mentioned in the prospectus dated December 6, 2005 in regard to scheduled time of completion. However, establishment of new manufacturing centre for ACID, ADDS and Advanced Signal Systems, construction of various buildings, including machinery & external services, electrical supply, roads, sewage &  compound  walls, gates  and  other related security arrangements and also training centre, cafeteria and transit accommodation for trainees, R&D Block, administration and  manufacturing  facility is nearing completion.
  4. The Phase-1 of development of ACD systems has been completed and pilot project commissioned in the Q1FY10. Railways have accepted the ACD system for deployment in all the Railways. Orders are expected through Konkan Railways Corporation for Southern, South Central and South Western Railways in the near future.
  5. Honourable Railway Minister during the Railway Budget speech on 26th February, 2008, stated that ACD is found working satisfactory and therefore, proposed to be deployed in South Central and South Western and Southern Railways.  According to Railways Corporate Safety Plan, ACD deployment is to be completed all over Indian Railways by 2013-2014. This is music to the investors in Kernex Micro Systems.
  6. The Company has signed a contract in November, 2008 with Egyptian National Railways, Egypt for development and supply of 136 Semi-Automatic Level crossing Gates. The Contract is under execution.
  7. Its unique product, Multi-Section Digital Axle Counter has been developed under technical collaboration on schedule time and is under cross approval by RDSO, Lucknow, Indian Railways. It is to be noted that the company earlier dropped the product called TAWD, consequent to the dropping of the same by the Indian Railways, in view of anticipated huge demand for the product called 'Digital Axle Counter’.
  8. Its R&D Division has done number of improvements and changes in the application software and hardware as required by the Konkan Railway Corporation. This includes AMSS, upgradation of ACD Reporting System & ACD survey automation system.
  9. The company’s International Marketing division continued marketing operation for selling the ACD and related systems in Egypt, South Africa, Brazil, Pakistan, Australia and South Asian countries. Consequently the ACD System is short listed as one of the viable system for Egyptian Railways. South African Railways is also examining the possibility of integrating the ACD system with OBC system already installed in South African Railways, spoornet.
  10. The company has also been working on development of 'Multi Section Digital Axle Counter’ in collaboration with M/s Altpro, Zerob, Croatia.  Complete test data, technical details, company details and Safety case has been submitted to RDSO, Indian Railways. Discussions with Altpro, to jointly manufacturing the product and KMIL to Market the product to Indian Railways is in progress. Meanwhile M/s Altpro, Croatia has appointed Kernex as their Sole technology partner  / Altpro Agent / Joint Venture partner in Indian subcontinent  for their  product  range like Digital Axle Counter,  Train  detection  System, ATPS, SIFA, incident recorder and for other safety system.
  11. The company has entered into technology partnership with Tiffien Batch, Germany for providing Automatic & Semi Automatic Level crossing system, up to Sit 3 levels. This  should  help  Kernex  to  enter  into International markets in semi developed and under developed countries  like Africa  and South Fast Asia and Australia for the supply a  Level  Crossing Systems.
  12. The  company  has so far purchased over 243 Acres of land at  the  Warangal highway  near  Yadagirigutta and has also acquired over 157 Acres  land  at Amanagul,  Mehboobnagar  district and acquisition of further Land,  in  the area  is planned.  All equipments required for this project have been fully acquired. In case of SPAD, planning is in progress and the project is expected to be completed by Dec, 2009 as against the revised scheduled month of June, 2008. This is due to delay in finalization of specifications and requirements by Indian Railways.
  13. The development of Hot Box and Wheel Vibration Detection systems is in progress and is expected to be completed by 31st Dec, 2009 as against the revised scheduled month of Nov, 2008. This is due to delay in finalization of specifications. Another opportunity waiting in the wings is the provision of ATP system for Metro Trains that are planned in major cities of the country.  With technological collaboration, the company can become one of the important players in this field too.
  14. New Offices of the company are being established in Delhi, Chennai.  Guntakal and Hubli based on the release of new orders and also central survey centre at Hyderabad. Other  locations  will  be  taken up  in  phased  manner  as  per  the commencement of work ordered by Indian Railways. Kernex Microsystems (India) set up a 100% subsidiary in the US in September 2000 to implement software products of the company in that country. It is now engaged in developing and implementing software for the US corporate hospitals.

 

Concerns:

  • The biggest threat the company faces is from Multi Nationals, who want to sell their equipment in India. To gel over this competition, the Company is upgrading the technology at a fast pace.
  • Any delay in decision making, administrative and departmental procedures could delay the receipt of orders, making its facilities idle and under productive.

 

 

Chart Check and Conclusion: Considering the points mentioned above the stock could be purchased at the CMP of Rs.82.6 for 6 months to 9 months time frame for at least 50% appreciation from the current price. Moreover, an encouraging fact is that the promoters are technocrats and have wide experience in electronics/software industries, both in India and abroad and hence they possess a deep understanding of the business of the company. Another point which is worth noting is that the stock is trading below its book value of Rs.105.43

Now from the charts it has been found that the stock is in highly oversold territory and a small bounce cannot be ruled out in the short term. Though Bollinger bands are in buy mode however, other momentum parameters are still not giving an immediate buy for the scrip. Also, though the MACD is not giving an immediate buy signal but it could slowly drift towards the buy mode. The stock needs to close above Rs.85 on closing basis, to start rising again. If it crosses Rs.95 which looks probable the stock could touch as high as Rs.130. Please keep a SL of Rs.67 for any short term trade.

Pick of the week

DECCAN CHRONICLE HOLDINGS LIMITED

BSE Code: 532608

Face Value: Rs.2

CMP: Rs.37.85

EPS: Rs.5.5

P/E: 6.88

Dividend: 150%

Book Value: Rs.43.58

Market Cap: Rs.926.86 Cr

52-Week High/Low: Rs.224/Rs.36.15

 

Introduction: Deccan Chronicle Holdings Ltd, erstwhile Deccan Chronicle was formerly engaged in weekly and daily journals in Andhra Pradesh. The company acquired a news paper publishing business in December 2002; post which it established a strong foothold in the state. The company aims to be the leading publishing house in the country.

Deccan Chronicle, the flagship newspaper of the company is the leading English daily in Hyderabad and Andhra Pradesh. It publishes seven editions of the Deccan Chronicle in Andhra Pradesh from their printing presses located at Hyderabad/Secunderabad, Vijayawada, Rajahmundry, Vishakapatnam, Anantapur, Karimnagar and Nellore. It is the fourth largest circulated and read English daily in India. Besides Deccan Chronicle, the Company also publishes Andhra Bhoomi in Telugu (daily, weekly and monthly).

Deccan Chronicle covers latest local, regional, national and international news. The newspaper also provides business, sports, weather, city culture, beauty, and health related news and information through its online portal.

 

Shareholding Pattern: The promoters hold 63% while the general public’s holding is 37%. Among the non-promoters are a number of Mutual Fund houses which holds substantial stake in the company.

Shareholding belonging to the category
"Public" and holding more than 1% of the Total No.of Shares

 

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

 EQ Advisors Trust - EQ/VQN Kqmpen Emerging Markets

2,715,990 

1.11 

2

 Deutsche India Equity Fund

3,166,001 

1.29 

3

 Merrill Lynch India Equities Fund Mauritius Ltd

3,542,473 

1.45 

4

 Ward Ferry Management Ltd A/C WF Asian Smaller

4,268,064 

1.74 

5

 Morgan Stanley Investment Management Inc A/c Morgan

3,888,224 

1.59 

6

 Life Insurance Corporation of India

3,429,892 

1.40 

7

 Franklin Templeton Mutual Fund A/c Franklin India

3,200,000 

1.31 

8

 Morgan Stanley Mutual Fund A/c Morgan Stanley Growth

3,675,000 

1.50 

 

 Total

27,885,644 

11.39 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Financials: For Q3FY09, the company came out with almost flat topline and subdued bottomline, due to general downturn in the world economy.

The total income of the company for Q3FY09 rose to Rs.228.3 Cr as against Rs.226.5 Cr in the same period previous year. Deccan Chronicle Holdings’ third quarter net profit fell 75% to Rs25.67 crore over the corresponding period a year ago. The net profit of the company for Q3FY09 came out to be Rs.25.7 Cr as against Rs.102.94 Cr in the same period previous year. For the nine-month period ended 31 December, Deccan Chronicle posted a net profit of Rs131.92 crore, a 51% decline from Rs269.29 crore last year.

The operating and net profit margins of the company decreased considerably Y-o-Y. The net profit suffered due to high raw material price (Rs.129.04 Cr in Q3FY09 as against Rs.82 Cr], higher staff cost (Rs.13.53 Cr in Q3FY09 as against Rs.6.53 Cr), and almost doubling of other expenditure (Rs.17.73 Cr as against Rs.9.8Cr). However with the government expected to come out with special package for the media sector, the company’s top and bottomline could change dramatically on the positive side.

 

Investment Rationale:

  • Advertisement, the main growth driver: Advertisement is the key revenue driver in the Indian newspaper giant. DCHL’s advertisement revenue accounts for nearly 80%-90% of the total revenue. The media industry, both print and electronic, is facing the impact of the global financial crisis in the form of decline in advertisement revenue. However, representatives of the print media had already approached the I & B ministry seeking an upward revision in rates of government advertisements. The government has almost assured to some stimulus package to the media industry and to tide over the situation.
  • Foray into new business: The Deccan Chronicle group has floated an international cargo airline company “Flyington Freighters Ltd”. The new company, which will start services from July this year, has placed orders for purchase of six A330-200F cargo planes from Airbus at a cost of $175 million each. While the aircraft delivery is slated for 2009-2010, Airbus has agreed to lease two aircraft to the company in the mean time.
  • Launching New Editions: In the middle of last year, Deccan Chronicle Holdings Ltd launched its Mumbai Edition of "Financial Chronicle" in association with the "International Herald Tribune". During the year, 2008, DCHL entered the Business daily market by launching its newest print offering, Financial Chronicle simultaneously from Hyderabad and Chennai and extended its presence in Bangalore and Mumbai recently. Also, it announced a tie up with International Herald Tribune for launching its branded 'World Business Section' inside Financial Chronicle. The Mumbai edition of the Financial Chronicle would have four pages of IHT's World Business Section and its logo would be put on the front page of the daily. But one should remain cautiously optimistic on DCHL's foray into this space as it is already crowded with several offerings by other big Print Media houses. During May 2008, the company finally launched its much awaited Bangalore edition of Deccan Chronicle.
  • Strengthening its base in Southern India: The company had already launched the Bangalore edition of Deccan Chronicle and approved an initial investment of Rs.25 Cr in addition to the use of existing assets in other locations.
  • Inorganic expansion: The company is expanding its reach through inorganic expansions. It had acquired control of Asian age Holdings, which publishes newspaper “The Asian Age” in five cities. The acquisition will help strengthen the brand image of Asian Age at the back of increasing print run. The company had also acquired Odyssey India Ltd (Odyssey) for Rs.61.2 crore, in a cash deal. Odyssey is a growing leisure retail chain, is engaged in sale of books, music, toys, greeting cards and FMCG products. This move was intended to notch advertisement from FMCG giants.
  • Buy Back of Equity Shares: The Board approved the proposal for buy back of equity shares of Rs.2 each of the fully paid up equity share capital of the Company, at a price not exceeding Rs.100 per equity share aggregating to Rs.180 Cr from equity shareholders other than the Promoters and persons in control of the Company. The maximum number of shares to be bought back through the Stock Exchanges shall not exceed 3, 50, and 00,000 Equity Shares of Rs.2 each which represents 14.29% of the paid up capital of the Company. However the Promoter Holding in the Company shall not exceed 75% of the Paid up capital of the Company post buy back. The minimum number of Equity Shares (minimum buy back shares) to be bought back is 1,00,00,000 Equity Shares of Rs.2 each.
  • Stimulus Package for the Media Sector to boost growth: Taking note of the difficulties faced by the media industry due to the financial crisis, the government last week said it will shortly announce a stimulus package for the sector. The I & B ministry has already sent certain recommendations about the package to the Finance ministry and the government is expected announce it soon. Moreover, the good point is that the said package is mostly concerning the print media and hence the scrip is expected to be positively effected more than those in the electronic media.  
  • Indian Premier League (IPL)--Profitable in the first year itself: Deccan Chronicle had bagged the rights for the IPL team of Hyderabad for US $107mn payable over the next 10 years. The IPL Hyderabad rights would be a part of Sieger Solutions. DCHL named the team Deccan Chargers and spent around $5.9mn in annual fees to recruit players. While there is every chance that the venture would achieve breakeven only after a couple of years, management has indicated that the IPL venture turned profitable for the company in the first year itself. DCHL clocked around Rs107.5cr revenue and incurred expenses to the tune of Rs88cr during its first year of operations. Hence, it made a neat profit of Rs19.5cr from the venture. Also Deccan Chronicle Holdings Ltd will not sell its Indian Premier League cricket team, Deccan Chargers, as there were no buyers in the market, a top official said. Deccan will review the decision to sell Deccan Chargers in three years from now as this downturn cycle was likely to be extended till 2012. It is to be noted that, Deccan Chronicle had in 2008 paid $107.01 million for the Hyderabad team for Indian cricket board’s Twenty20 series for 10 years.
  • Sieger Solutions – Potential unlocking on the cards: Sieger Solutions, a wholly owned subsidiary of DCHL, was formed in July 2006 to handle media space selling for DCHL for a pre-defined commission. However, Sieger has stopped clocking revenues from this model and now houses all the internet portals – Deccanchronicle.com, Papyrusclubs.com and Mydigitalfce.com. For FY2008, Sieger Solutions registered revenues of Rs.72 Cr and PAT of Rs.35 Cr primarily driven by a subscription based model from a website called Papyrusclubs.com (student community forums) under which it has tied up with several institutes to publish and share campus news over the Internet. Recently, DCHL also entered into an outsourcing agreement with New York Times (NYT) to manage their internet properties out of India as well as some of the development activities connecting to the digital space. Sieger Solutions is expected to rake in incremental revenues of Rs.150 Cr from this arrangement in FY2009. DCHL is also in talks to sell 5% equity stake in Sieger Solutions to NYT.

 

Conclusion:  During FY2008-10, we can expect DCHL to post a CAGR growth of 16% in Revenue aided by 18% CAGR growth in advertising revenues and 8% CAGR in circulation revenues. On the Earnings front, we can expect DCHL to report a CAGR of 15% largely boosted by a decline in interest costs

However, on the operating front, the DCHL is expected to post a subdued growth owing to a sharp decline in Operating Margins on account of stiff competition in Chennai, initial losses on account of the Bangalore edition and the Financial Chronicle launch, and higher newsprint prices. Hence, we can expect DCHL to post a CAGR growth of 9% in EBITDA during FY2009-10.

However, there are valid concerned on DCHL owing to its poor quality of growth (funding working capital requirements through Balance Sheet), scalability issues (too much dependence on single region), poor corporate governance (management not delivering on promises made – buyback, un-locking in subsidiaries) and unsustainable Margins (60% OPM as against peer average of 20%). While management has addressed some of these concerns – reduced debtor days to 90 days by securitization with ICICI for a 12% discount, and initiated talks with NYT to unlock value in Sieger, still some more clarity on the same is expected. Moreover, depreciating rupee is negative for the company as it imports newsprints.

Growing awareness among the common mass is leading to the rise in the circulation of newspaper. The growth was triggered mainly by India and china. DHCL occupies second position in the print industry and caters to the most part of the Southern India. Its paper Deccan Chronicle is the most read newspaper in Andhra Pradesh, Chennai and Hyderabad. The company is also eying a substantial share in Bangalore and is expanding to newer geographies which include Mumbai and Pune. Revenues of the company will also be triggered, by the upcoming expansion plans of Odyssey.

At the CMP of Rs.37.85, the stock is trading at dirt-cheap valuations considering its future upsides from the Sieger Solutions deal with NYT and IPL’s good performance. The valuation can also be corroborated by the growing advertisement revenues and increasing subscription.

Note: This Report is from the Yesterday's (08-02-09) Sunday Report which was sent to the Paid Groups, Yesterday (8th February, 2009

Is Satyam Computers Services Ltd, a buy at Rs.39.95 ??!!

To understand this fact, let us consider the following points, a little meticulously .........

                         Satyam Computer Services Ltd

 

Scrip Code :  500376

Quarter ending :  September 2008

 

Shareholding belonging to the category
"Public" and holding more than 1% of the Total No.of Shares

 

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

 Aberdeen Asset Managers Ltd A/C Aberdeeninternational India Opportunities Fund ( Mauritius ) Ltd

23,800,000 

3.53 

2

 Fidelity Management & Research Company A/C Fidelity Investment Trust - Fidelity Diversified International-Fund

23,000,000 

3.42 

3

 ICICI Prudential Life Insurance Company Ltd

16,621,682 

2.47 

4

 Lazard Asset Management LLC A/c Lazard Emerging Markets Portfolio

14,490,567 

2.15 

5

 Aberdeen Asset Managers Ltd A/C Aberdeen Global Asia Pacific Fund

10,680,500 

1.59 

6

 Life Insurance Corportion of India

9,959,281 

1.48 

7

 Citigroup Global Markets Mauritius Pvt

8,203,186 

1.22 

8

 JP Morgan Asset Management Europe SARL A/c Flagship Indian Investment Co Maurities Ltd

8,179,448 

1.21 

9

 LIC of India Money Plus

7,941,345 

1.18 

10

 Swiss Finance Corporation Mauritius Ltd

7,515,806 

1.12 

11

 Government of Singapore

7,128,885 

1.06 

12

 Morgan Stanley Mauritius Company Ltd

7,096,342 

1.05 

 

 Total

144,617,042 

21.47 

 

The following Fund Houses sold shares yesterday in the open market due to too much panic created  by the "Media Terrorists":

 

1. SWISS FINANCE CORP MAURITIUS LTD===> Sold 7786759 shares at Rs.74.61
2. ABERDEEN INTERNATIONAL INDIA OPPORTUNITIES FUND MAURITIUS LTD===>Sold 9830811 shares of the company at Rs.43.41
3. ABERDEEN ASSET MANAGERS LTD ABERDEEN GLOBAL ASIA PACIFIC FUND===>Sold 4179064 shares at Rs.43.41 

 

Hence it can be concluded from the above data that Majority of Fund Houses feel that Satyam Computers Ltd will be able to come out of the mess created by its Founder Chairman Mr. B Ramalinga Raju??!!

Moreover, Sukumar Rajah, chief investment officer (CIO) of equity in India at Franklin Templeton Investments, which manages $4 billion of assets in the country, said in an e-mail, “This unfortunate development will be a short-term negative for market sentiment,”. Still, by forcing regulators to improve oversight, the incident “should be a Long Term Positive,” Rajah said.

 

According to a well known and reputed financial web-site, developing-nation stocks are trading near their cheapest levels in a decade after the global economic slowdown and a slump in commodity prices sent the MSCI Emerging Markets Index down 54 percent in 2008. In comparison, the MSCI World Index dropped 42 percent. Shares in the MSCI emerging-markets index trade at 8.8 times reported earnings, while developed shares fetch 11.5 times profit. Sensex companies trade at 9.5 times earnings.

Aberdeen Asset Management Asia Ltd., Satyam’s largest institutional investor as of September, said its investment outlook for India hasn’t changed. Funds run by Aberdeen own at least 5.12 percent of Satyam, according the Hyderabad-based company’s filings for the quarter ended Sept. 31.

“People will grow a bit more dispassionate, but you can say the same for the U.S. and elsewhere,” said Hugh Young, managing director at Aberdeen’s Asian unit, which manages $37.3 billion. “India has great companies that do the right things. Hopefully this is a one off.” He declined to say how many Satyam shares Aberdeen holds, or whether any were sold recently.

India’s $1.2 trillion economy may grow 7 percent in the year ending March 31, the slowest pace since 2003, according to government forecasts. The economy may expand at close to that rate in the next fiscal year as the global recession cuts exports and domestic demand wanes, Junior Industry Minister Ashwani Kumar said in New Delhi yesterday.

To understand the mammoth-ness of Satyam Computers Services Ltd let us take note of the following facts: Satyam Computer Services Ltd, employs 53,000 people, operates in 65 countries and serves almost 700 companies, including 185 Fortune 500 companies. More than half of its revenue comes from the United States.

The most encouraging news came from www.cnn.com which writes: "Analysts say Satyam is ripe for a takeover, and the government is expected to submit a formal report on the matter Thursday".

Therefore, can we construe that those highly skilled stock market professionals, who have purchased some shares of Satyam Computers Ltd will have a field day in the next few months??!!

However, the most horrifying part of this event is that that cash balance that was non-existent got certified by one of most reputed auditors in the world map, PricewaterhouseCoopers LLP.  This reputed auditor of Satyam Computers Ltd’s, declined to comment on the scandal, according to an e-mail from the New York- based firm’s public relations adviser, Edelman.

I had earlier discouraged all my  Paid Clients not to enter Satyam Computers Ltd, when it fell to around Rs.179---I was anticipting something like this, from my exprience durring the dotocm boom-bust cycle in the 1990s and early 2000. But is it time to buy this stock at the CMP of Rs.39.95, for the short term gains??!!

 

Prajay Engineers Syndicate Ltd: Accumulate on all declines;

BSE Code: 531746

Face Value: Rs.10

CMP: Rs.17.70

Book Value: Rs.152.34

EPS: Rs.17.87

P/E: 0.99

Dividend: 25%

Market Cap: Rs.70.26 Cr

Buying Price: The scrip should be bought above Rs.18.5

 

Company Background: Prajay Engineers Syndicate Ltd (PESL) was promoted by Mr. Chandra Mohan Reddy. It’s a 25 years old partnership firm converted into a public limited company in the year 1994. It pioneers in construction activities in the twin cities of Hyderabad-Secunderabad. Its Key developments include residential flats, townships, shopping malls, office buildings and group housings.

The company has developed around 6.7 million square feet over the past twenty years across more than 75 projects and a further 10.7 million square feet of land is under various stages of development. Prajay has a significant presence in the hospitality segment also, with three landmark ventures in the city: Prajay's luxury resort, the Celebrity Holiday Retreat and the 30 room Celebrity Boutique Hotel (located 500 metres away from the airport). Prajay has been the leader in identifying new locations that are today of strategic importance, which has given it huge cost advantage.

 

Shareholding Pattern: The promoters hold 16.42% while the general public holds, 83.58%. Among the general public FIIs hold a whooping 58.78% of the shares of the company.

 

 

Shareholding belonging to the category "Public" and holding more than 1% of the Total No.of Shares

 

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

Copthall Maritius Investment Ltd

1,808,085

4.55

2

Goldman Sachs Investment Mauritius Ltd

852,543

2.15

3

Citigroup Global Markets (Mauritius) Pvt Ltd

2,130,796

5.37

4

ABN Amro Bank N.V. London Branch

1,518,952

3.83

5

Merrill Lynch Capital Markets Espana S.A.S.V.

1,487,223

3.75

6

Morgan Stanley Investments Mauritius Ltd

617,200

1.55

7

Swiss Finance Corporation Mauritius Ltd

1,047,459

2.64

8

S Madhuri Reddy

410,000

1.03

9

N Ravinder Reddy

2,020,100

5.09

10

Merlin Securities Ltd

5,336,134

13.44

11

GRA Finance Corprate

457,701

1.15

12

Clsa Mauritius Ltd

1,361,942

3.43

13

ABN Amro Bank N.V. London Branch

424,211

1.07

14

 BSMA Ltd

760,000 

1.91 

15

 Deutsche Securities Mauritius Ltd

2,358,893 

5.94 

 

 Total

22,591,239 

56.91 

 

 

Financials:  Though for Q2FY09, the total income was almost flat the net profit of the company suffered due to higher expenditure and higher depreciation, as can be seen below. The fact that the interest cost was more or less flat comparing Q-o-Q was a good sign. Moreover, the tax component was also less in Q2FY09, as compared to the same quarter previous year. However, due to the downturn, the operating margin and net profit margin took a quantum hit. However, this is going to correct in the next few quarters, due to the fall in the price of raw materials, in the last few quarters and also due to seasonal demand.

 

Standalone Result of Prajay Engineers Syndicate Ltd

 

Type

Un-Audited

Un-Audited

Un-Audited

Un-Audited

Un-Audited

Audited

 

Period Ending

30-Sep-08

30-Jun-08

31-Mar-08

31-Dec-07

30-Sep-07

31-Mar-08

 

No. of Months

3

3

3

3

3

12

 

Description

Amount (Rs. million)

 

Net Sales / Interest Earned / Operating Income

418.44

222.10

907.03

1,369.56

462.46

3,440.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income

1.92

1.78

6.83

0.96

0.91

9.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Income

420.36

223.87

913.86

-

463.37

3,450.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditure

-270.24

-144.32

-904.12

-

-200.17

-2,061.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

-27.06

-24.94

-11.61

-27.97

-27.69

-90.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit Before Depreciation and Tax

123.06

54.61

-1.87

-27.97

235.51

1,297.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

-9.11

-8.66

-7.89

-

-4.96

-22.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before Tax

113.95

45.96

-9.76

705.01

230.55

1,274.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax

-39.03

-15.92

-41.06

-49.75

-76.58

-246.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Profit

74.92

30.04

-50.82

655.26

153.97

1,028.67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Capital

396.96

396.96

396.96

275.91

248.57

396.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS after Extraordinary items

1.89

0.76

-1.85

25.47

6.58

37.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS after Extraordinary items

1.89

0.76

-1.85

17.32

4.05

37.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nos. of Shares - Public

33,178,576.00

33,178,576.00

33,178,576.00

22,473,112.00

20,017,152.00

33,178,576.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of Shares-Public

83.58

83.58

83.58

81.45

80.53

83.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit Margin

35.88

35.82

1.07

-

56.91

40.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Profit Margin

17.90

13.53

-5.60

47.84

33.29

29.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash EPS

2.12

0.97

-1.08

-

6.39

26.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

Notes

Notes

Notes

Notes

Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Detailed

Detailed

Detailed

Detailed

Detailed

Detailed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Highlights:

            The company earns 95% of its revenue from Real Estate and from Hospitality segment.

            In March 2007 the company posted a turnover of over Rs.2,000 million and profits of around Rs.800 million. It achieved Rs.1,000 million turnover in one quarter.

            Last year the company signed a joint venture with Sunway Group, Malaysia for development of residential condominiums projects in Hyderabad.

            Prajay Engineers' Land bank stands at approximately 850 acres 80% of which is in and around Hyderabad

            In the last twenty years of its existence, PESL has delivered 75 projects and developed around 6.7 million square feet.

 

Investment Rationale:

            The increased demand for residential units and commercial, office space for the IT and ITES companies suggest that the spurt will continue for years to come. An estimated inflow of Rs.5,508 billion investments in this sector will usher in development at a remarkable pace.

            Government thrust on infrastructure spending has given a tremendous boost to construction sector in terms of market size resulting in higher demand across the sector.

            Prajay Engineers Syndicate's base in the twin cities of Hyderabad and Secunderabad offers it a myriad of opportunities in the real estate sector. The rapidly growing IT/ITES industry in Hyderabad has its roots in the proactive role of the state government pitching Hyderabad as the 'Hi-Tec' city of India.

            The Government's decision to launch Bio Tech Park and Fab City has further given a boost to technology driven growth in Hyderabad.

            The company currently has around 31 projects underway and plans to construct around 37.6 million square feet in the next four to five years. All projects have credit Rating of A+ by FIs.

            With its visionary approach and contemporary building practices, cutting edge management discipline, Prajay is at the forefront of imparting dynamism to infrastructure development industry.

            The company is foraying into Tier II cities of Andhra Pradesh like Vizag and Vijaywada, by FY10.

            The company want to invest around Rs.500-600 Cr in the coming years to develop the hospitality segment; to create 1000 room capacity by 2009 in the 5 star, 4-star and the 3- star business class categories; and to develop 31 projects including residential, commercial, retail and hospitality projects, aggregating to around 37.57 million square feet over the next five years.

            PESL’s 100% subsidiary Prajay Holdings, has received a commitment of FDI recently, to the tune of rupees equivalent of US $ 36 million for one of its prime projects at Hyderabad wherein a development of around 40 lac square ft has been planned by the company.

            The company is riding high on the real estate and infrastructure boom: it has set a target of reaching Rs.1000 crore turnover by FY10.

            Future Focus: Premium Apartments, Ultra-modern Townships, Development of Golf course, Independent premium bungalows, Development of 3 and 5 star hotels, Infrastructure development, Shopping Malls. These are all high volume and high margin activities.

 

Conclusion:

As the trend of spiraling growth continues, there are miles more to go, and further milestones to achieve. With 31 planned and ongoing projects, which will culminate into construction of around 38 million square feet and the residential segment comprising of about 84 percent of the total area under development, the company is expected to do well in future. The stock at the current market price provides an investment opportunity and one should invest in it taking a call for 12-15 months horizon for at least 50% from the CMP of Rs.17.7.

Chartical Indicators: For the short term, buy the scrip only if it closes above Rs.18.5 on a daily closing basis. The MACD and CCI are in perfect buy mode, while Stochastic, Bollinger Bands, and Williams%R are also in buy mode.

Moreover, in the Candle Stick Chart Pattern, the inverted hammer, formation indicates that a significant decline has taken place in the stock price and the shorts are beginning to cover their positions---a very bullish indicator.

With this Candle Stick Chart Pattern, it is imperative to watch the next day's trading action. If the stock opens strong and remains strong during the day, then a key Reversal is likely in progress—a perfect time to bag the scrip.

 

Note: This stock was recommended to the Paid Groups in the Sunday Report of 30-11-08.