What is the ideal business to invest now?

Nov 23 2017 7:00PM
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Warren Buffett: The ideal business is one that generates very high returns on capital and can invest that capital back into the business at equally high rates. Imagine a $100 million business that earns 20% in one year, reinvests the $20 million profit and in the next year earns 20% of $120 million and so forth. But there are very very few businesses like this. Coke has high returns on capital, but incremental capital doesn't earn anything like its current returns. We love businesses that can earn high rates on even more capital than it earns. Most of our businesses generate lots of money, but can't generate high returns on incremental capital -- for example, See's and Buffalo News. We look for them [areas to wisely reinvest capital], but they don't exist.So, what we do is take money and move it around into other businesses. The newspaper business earned great returns but not on incremental capital. But the people in the industry only knew how to reinvest it [so they squandered a lot of capital]. But our structure allows us to take excess capital and invest it elsewhere, wherever it makes the most sense. It's an enormous advantage.See's has produced $1 billion pre-tax for us over time. If we'd deployed that in the candy business, the returns would have been terrible, but instead we took the money out of the business and redeployed it elsewhere. Look at the results!

Charlie Munger: There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested -- there's never any cash. It reminds me of the guy who looks at all of his equipment and says, "There's all of my profit." We hate that kind of business.We like to be able to move cash around and find it's best use. We'd love to have our companies redeploy cash, but they can't. Gillette has a great business, but can't sensibly reinvest all of the profit.We don't think the batting average of American industry redeploying capital has been very great. We knock other people doing what has made us so successful.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Modison Metals ltd: Readers query answered

Nov 22 2017 7:00PM
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Q) I own 6500 shares of Modison Metals at 52 rs. Please give a brief overview about the company. Do you see any upside potential in the company? Shall I hold the shares? (Prem Doshi from Calcutta)

 

IEM) Modison Metals Ltd was founded in 1965 by Girdharilal Madanlal Modi, Rajkumar Mohanlal Modi and Sureshchandra Purshottamdas Modi.The company is an established manufacturer of electrical contacts made of silver and silver alloys for low, medium and high voltage switchgear industry. It makes contacts like pure silver, silver copper, silver cadmium, silver cadmium oxide (by powder metallurgy and internal oxidation), silver nickel, silver graphite, silver tungsten, silver tungsten carbide etc. These contacts are manufactured in various forms and sizes as per customer s drawings and specifications.Over the last 10 years, the company’s top-line has grown at a CAGR of  8% to INR 190 crore. Although, margins have been widely fluctuating but, going forward, with the introduction of new value-added products and higher contribution from the high-margin HV contacts, we expect the company to have better margins than FY17,as already being witnessed in first quarterly performances of June. What we like is, that, the company has consistently ended up with positive operating cash flow for last ten years; the company despite posting decent growth has not incurred major capex and played it safe. The company has been able to manage its short-term and long term borrowings well.Going forward, conservatively assuming that the company will achieve a turnover of INR 260 crore in FY19 with an operating margin of 15-16% (again on conservative basis, considering the commodities bottoming-out; any increase in raw-material procurement is likely to offset by the rise in contribution from high-margin products) which will enable the company to have a net margin of over 7%, thereby, an earnings of nearly INR 6 per share is not questionable. Given its high market share and less competition on account of entry barriers, the company can easily command a P/E multiple of 20x – showcasing a good upside potential from current levels of stock price. Further, promoters holding showcase creeping acquisition over the last few years,although quite tiny but gradual increase depicts a positive picture. Additionally, on a lighter note, having a look at the shareholding pattern, most of the public shareholders (not classified under promoter category) above 1% are Modis’ which further boosts our confidence. The company has consistently paid dividend for past 10 years. 

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Market whispers:Shiva Texyarn and MRSS India

Nov 21 2017 7:00PM
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1) Shiva Texyarn: KG as he is fondly known by in the investment circles is highly bullish on Shiva texyarn.The microcap predator opines,"Its part of banari Aman group lead by a visionary MD (vice chairman of ITTA) who is not interested in commodity products, has superb reputation built in defence industry (if the defence guys want any product, they approach Shiva first to make it). There's a demerger to increase focus on specialty segment, huge opportunity size available (already supplied orders for NBC suits and amongst 2 being approved for trial order for siachen). Company has a good brand and growth in quick dry, also trying to develop wulf brand for retail market, have appointed new people from golkadas exports for marketing and posses a very good R&D team".He expects the company to be a multibagger within the next few quarters.

 

2) MRSS India: An Ahmedabad based PMS manager is highly bullish on the company. He says it is one of the only market research player to be listed in Asia. The company is managed by a very enthusiastic and experienced management with wide experience from companies like Nielsen, IMRB, etc. MRSS have been growing 100% on a small Base, Singapore execution if turns well it could be even bigger or equivalent to the parent in terms of revenues. Company aims to do around 150 crs in next 2-3 years.Given the huge mkt size of 7000-8000 crs in India,Company can do wonders both in terms of operational numbers and rich stock price appreciation.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Market Whispers

Nov 20 2017 7:00PM
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1) Inditrade capital: Lot of action is expected in the counter of commodity financer and MFI player Inditrade capital as the Company aspires to build a loan book of around 3000 Crores within a period of 3 years.The company to achieve that mammoth figure is banking on new initiatives such as e-warehouse receipt which are likely to boost commodity exchange trading in the country.  It is managed by Sudip Banerjee who was primarily responsible for building Reliance money. With sectoral tailwinds backed up by an able and dynamic leader,Inditrade could well buzz big time in the bourses. 

 

2) Butterfly gandhimathi: This is another company which market informed insiders believe it to be at an inflection stage. They suffered in the last few quarters owing to sticky nil margins Govt orders,Demonetisation,GST etc. The promoters in the past too lacked a good perception from the market participants and had allegations of siphoning off. Fair winds private equity which owns a significant stake has appointed their own guy as the CEO of the company. Butterfly promoters too have given him a free hand to operate.The perception is bound to get better now. Third quarters numbers are expected to be robust just like second quarte which will further set the trend for the remaining quarters.Company is expected to remain in action in the shorter to medium term duration.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Ambika cotton Ltd: Readers query answered

Nov 19 2017 12:10PM
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Q) I own Ambika cotton since last 7 years. It's been a great multibagger for me. What's your take on the business of the company? I understand it may not be a multibagger from present levels but can I expect steady 15% kind of returns from it? Please help. (Raju patel from Vadodara)

 

IEM) Incorporated in 1988 in Coimbatore (Tamilnadu), Ambika Cotton Mills Ltd. is engaged in the manufacture of premium quality cotton yarn for hosiery and weaving. Today, the company has become an established player in the global yarn market with exports comprising majority of its revenues. The company makes both, compact ring yarn and eli twisted yarn, though, majority of the production is of compacting system. Oflate it has also entered the knitting segment. The company has four manufacturing facilities at Dindigul, (Tamilnadu) with a total spindle capacity of over  100,000; of which a high percentage of  spindles are of compacting based system. Compact spinning is recognized as a revolution in ring spinning. This technology is claimed to offer superior quality and better raw material utilization. The company is said to be a whiz in the shirting segment and is considered to be the preferred client of all top quality shirt and t-shirts manufacturers across the world for its specialty cotton yarn. The company, over the years, has managed to carve out its own niche in the huge cotton yarn market by focusing on producing the specialty cotton yarn.Since  the company has carved out its own niche,it remains isolated from the usual cotton and textile demand-supply economics of the country. The company also boasts of several exclusive things as compared to other players in the industry; the company does not carry much debt and inventory on the books along with very low receivables which is quite a trend in this industry. This loudly speaks out of efficiencies employed in the work, demand and quality for its products and efficient working capital management with low credits.During the last 10 years, the company has grown at a CAGR of 15%  from Rs.140ncrores to Rs.528 crores while the PAT have grown over Rs.17crs to Rs.55 crs during the same period. Since, the cotton prices are hovering at low levels while the demand is likely to remain consistent in the mid-term, we expect company’s operating margins to remain to 20% plus levels. It should continue to grow its bottomline at 15-18% CAGR for next 5 years. You will probably achieve your returns target here.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Alembic Pharma ltd: What's cooking here?

Nov 18 2017 3:10PM
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One of the best pharma analyst of the country who picked 100 bagger companies like Caplin point during the initial stages is highly bullish on Alembic pharma.A midcap pharma company with exceptionally strong management which has previously delivered when they changed their strategy and opted to enter the US business. Their main US portfolio is simple generics with pending 40+ filings having 40% Para IV filings. These filings should materialize over the next 3-5 years.The main reason for looking into the stock is on account of another change in their strategy, as they are shifting their US based business model from simple generics to a complex generics portfolio and building a product basket targeting Oncology, Ophthalmology and Dermatology filings coupled with Injectable products also. They have commenced capex plan for a derma and Onco plant, Injectables plant and an Oral Solid Dosage facility.They have expanded their API capacity, doubling it. Capex to complete in H2FY19E. This would increase their US capacity from 1 plant to 5 plants. Filings for these products will come online from FY20E. The company is vertically integrated for majority of its products. This would make them adept to handle the structural transformation in the US and also give them the position into the complex space.Domestic portfolio is pretty robust with 40% portfolio in acute products and management should enhance focus on the chronic portfolio going ahead improving their field force productivity from current levels.He concludes,"I believe Alembic is an attractive bet to play on from a standpoint of a company trying to migrate from a medium sized player to a large player with diversified product and dosage forms in their kitty.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Kamat Hotels – Management Meeting Key Takeaways

Nov 14 2017 7:00PM
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Started in 1986, Kamat Hotels (KHIL) has firmly established hotel brands such as The Orchid “An Ecotel Hotel in the 5-Star segment”, Fort Jadhavgadh and Lotus Resorts. Currently, the company has 9 residential hotels in 4 & 5 star categories. These hotels are situated in the prime locations in various cities like Mumbai, Pune, Bhubaneshwar, Konark and Puri, Goa etc having around ~1140 keys – a mix of owned, leased/licensed and managed. The focus of the Company is in positioning its hotels to the business segment in the mid to up market category.KHIL came out of CDR in the year 2014 and reported profits in FY17 after several years of losses due to heavy interest burden.

 

Key management personnel: Dr. Vithal V Kamat (CMD), Vishal V Kamat (Director)

 

Average occupancy: City hotels +80% / Resorts 65% - differs for hotels at different locations and season to season; Mumbai leads; good scope for improvement in Pune; Oct – Mar is the key season

 

Average cost/key: Mumbai ~Rs1.5-2 cr / Pune ~Rs1cr / Orissa Rs0.75cr.Margin: Rooms (50%-60%) / F&B (25%) / Blended (40%-45%) Vs 30%-35% Industry average.Eco friendly concept – requires little more capex but saves in opex

 

Capex:Require Rs150cr capital over Sep’17 – Jun’18 for rebranding, room additions.Work going on to renovate and convert ‘VITS’ Mumbai to ‘The Orchid’ brand; 50 rooms will be added to the existing 195 rooms; may need ~20cr bridge funding out of Rs60cr of total capex; ARR will expand from ~Rs4,500 to ~Rs6,500 at 80% occupancy level. Taking 2-star ‘Lotus Goa’ resort into a Boutique upscale beach resort. The Orchid Goa’ at Rs10cr capex; ARR will expand from ~Rs2,500 to Rs5,000; timeline - 4 months. Upgrading 3-star VITS Bhubaneshwar into Boutique city hotel –The Orchid Bhubaneshwar (Rs8-10cr); timeline – 4 months. Lotus Resort, Konark to rebrand to The Orchid Konark (Rs35-40cr); timeline 1.5-2 yrs. Mahodadhi Palace – to expand to 90 rooms from 25 rooms currently (Rs35-40cr); timeline 2 yrs

 

Going forward:While expansion in Orissa is on card, East India will be the next focus area for the company.Large Hoteliers have approached KHIL for tie-ups; talks are in advance stage with few.Funds raising for capex may not require immediately as company now has good cash flow visibility.Current debt position is ~Rs350cr in standalone book (~470cr in consol) which will go down gradually. Co has repaid Rs140cr of debt in the last 2.5 yrs and ~Rs30cr repayment is scheduled in FY18. Current rate of interest is Base Rate + 1%, which was 14% earlier.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Ace Tech Exhibition Visit Takeways

Nov 13 2017 7:00PM
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Leading companies participated :Century Ply, Havells, Supreme Industries, Astral Poly, JaIn Irrigation, Bosch, Siemens, Whirlpool, Asian Granito, Somany Ceramics, Kajaria Ceramics, HSIL, Everest Industries, APL APOLLO.

 

Among unlisted companies leading names like Polycab, Prince Pipes, Prince Plastics, Ajay Pipes, RAK and tile companies from Morbi / Gujarat such as Simpolo Tiles (Rs1200 cr revenue), Varmora Tiles, Restile Ceramics (Rs300 cr revenue), Glacier Tiles (Rs200 cr revenue) , Nexio Tiles were present.  

 

Demand outlook:Most Companies said demand has been muted led by slow real estate sector and muted dealer restocking post GST rates (due to uncertainty over rates revision). Most companies also faced elongated WC situation. Project business has slowed down considerably though retail, government demand is good.  One leading tile company promoter said never seen such weak October demand since more than a decade.

 

GST:Most leading players across product categories high concurred GST rate @ 28% has been a deterrent.Competition from unscrupulous unorganized players has been rampant as high GST rate act as incentive to circumvent the tax system by dealing on cash basis. Exemption from carrying E-Way bill further intensified competition from such market players.Most Companies senior management though were hopeful that GST rates on cables, plywood, particle board, MDF, tiles, sanitaryware will be revised to 18% from 28% within next one to two months.  

 

Display:Havells had good display of new generation LED lighting and solar lighting.Kajaria had largest variety of tiles and Kerovit Sanitaryware at display.HSIL too showcased large variety of sanitaryware and fittings across price points.Century Ply had big display of laminates, MDF, wooden flooring, ready-to-fit doors etc. The product quality of MDF has been well accepted by the market and the company started MDF billing since Sept 30 and sold over 6000MT (Rs15 cr) worth of MDF in 35 days mainly in Northern region. Now expanding into other markets. Also to launch pre-laminated MDF by December / January.   

 

Astral Poly has expanded its adhesive and resins product range for multiple applications such as glass, wood, stone, tiles/marble, water proofing, construction chemicals, sealant, maintenance etc.Somany  Ceramics besides wide variety of tiles showcased its expanding sanitaryware portfolio with over 50 models. It has dealer network of over 500 for sanitaryware / fittings and expanding.         

 

Prince Pipes and fittings (five manufacturing  plants, turnover of ~Rs1200 cr, dealer network of 2500) manufacturers all varieties of pipes : PVC, CPVC, Polyproplyne, HDPE pipes. The company has filed RHP for IPO. Another Company Prince SWR Systems (four plants Turnover Rs700 cr) is in to PVC, PPR, CPVC pipes.

 

Many tiles players from Morbi had excellent collection of tiles on display. Also unlisted players from Delhi, Haryana. Gujarat  wood product companies were present with large collection of laminates and veneer.One modular and office furniture manufacturer said particle board is most widely used for institutional and commercial furniture followed by MDF. Plywood is requisitioned by a few large corporate customers.Overall mood across marketing persons and management seem to be positive expecting business to improve over next two / three months.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

When to buy and exit a Commodity Stock?

Nov 12 2017 7:00PM
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For investing in commodity stocks, my broad framework is NOT to delve much on the Commodity price. That will be reactive investing and hard to time especially with my timing skills. But the good things is price follows the supply and demand eventually. To me, entry and exit in commodity stocks has to be based on study of gap between capacity and its utilization in the industry. When there is evidence this gap is on course to start shrinking in near future, is a good time to consider investing. When there is evidence the gap will start increasing, is a good time to consider exiting.

 

Waiting for the Commodity's price to top out is too late. Ofcourse some handle on valuations is important. To me, commodity investing is about watching the supply side intensely. It's easier to see the larger picture from this angle and in time. Demand side is much tougher to predict.A lot of news keeps flowing about supply side consolidating or slowing.Shut downs, consolidation, over leveraged BSs implying no more borrowing possible to expand, etc etc. It takes its time to play out but the evidence keeps building. Keeping an eye on supply side is very remunerative.

 

Courtesy: Deepak Kapur(one of our humble mentor)

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

Zuari Agro Chem AGM notes

Nov 11 2017 7:00PM
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1) Zuari Maroc Phosphates Private Limited (ZMPPL), a 50:50 joint venture with Office Cherifien Des Phosphates (OCP) S.A., was established as a Special Purpose Vehicle (SPV) for acquisition of stake in Paradeep Phosphates Limited (PPL). At present, ZMPPL is holding 80.45% of the equity stake in PPL.PPL’s total revenue from operation for the year ended 31st March, 2017 was ` 3696.71 crores as against `4798.36 crores during the previous year.The Profit before Exceptional Item for the year ended 31st March, 2017 was 192.09 Crores as against 65.53 crores during the previous year. Profit after Tax for the year was ` 86.91 crores as compared to 65.09 crores in the previous year. Company expecting PAT 200cr this year.

 

2) They have expansion plan for zuari goa and mangalore chemical this year for capacity expansion.Clarity on purchase of land from subsidiary company - the company using land to educate farmer and growing crops on that.

 

3) Last year sales figure was low due to fall in price of urea and natural gas.DBT in fertilizer will apply from nov and dec in some states and will apply from jan 2018 in whole country as per gov officials right now with companies of industry later on direct with farmer.

 

4) As per management this year company will earn 33 cr from Mangalore chemicals, 2 cr from zuari specialty(crop business),2.5 cr from zuari agri science, 240 cr from zuari maroc 80% holding and zuarifertilizer can post 10 cr of loss from 113 cr loss last year when we combine this it can post around 267 cr profit by dividind this to outstanding shares of 4.16 cr shares the eps whould be around 64 on consolidate basis.

 

5) They said government is focusing on agriculture and if agriculture business will grow the demand of fertilizer will increase. We have confidence that things are changing which will big beneficiary for us.Company realized 3 cr from 27 cr and expecting that whole amount will realize in two year time frame as loss realize on supply of material which is not upto standard.

 

6) Clarity on purchase of nagarjuna share that the shares were bought from market that’s why have some variation in reported figure to exchange and annual report submitted to exchange.The clarity on tax payment that we have paid tax as per high court order and that is true.

 

7) Zuari global transfer land to zuari agro at 32 cr which have book value of 9 cr but the actual value of that land is around 48 cr as per management which they have bought for agri business development and education of farmers.The sales figure is low previous year because uera price fall from $ 20 to $7  which is highly depends on price of natural gas.

 

Courtesy: Our in house expert Nishant. Note only meant for sharebazaarapp.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

DCB BANK – AGM Highlights

Nov 10 2017 7:00PM
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1.The  key points for the idea of Expansion are opening of additional 40 new branches this year which would sum up to 300 branches in FY 17-18 (majorly Bihar and UP).

 

2. As per the management, the breakeven point for the branches is 18 to 24 months.

 

3. After 12 years, DCB bank has announced dividend of 5% and submitted the Dividend policy to RBI.The recommended dividend will increase gradually year on year basis with profitability.

 

4.DCB is sound in technology upgradation and has launched the first Aadhar based ATM in India and have been awarded ‘Bank’s Data Centre’ in 2016

 

5. DCB has undergone various strategic tie ups for offering new product.

 

6.Its mojor focus is on Retail Banking as compared to Corporate Banking leading to efficient management of NPA’s.

 

7.In comparision to other players of the industry, Management Integrity and honesty of DCB is reflected with the fact that it is always the first one to publish its Results by getting the Financials timely audited.

 

8.As per RBI verification, the NPA of DCB matches with the NPA records verified by RBI.

 

9.  There is a steady growth in the Financial Statements i.e Balance sheets, P&L, Cash flows.They target to double in forthcoming 3years

 

10. The Credit Rating agencies have accredited DCB : A1+ for Short term and A+ for long term, which is very good as per Industry norms.As per Industry standards, the company is managing at a lower rate of NPA of 0.79%, also it has managed very well in tough times by having ‘Zero’ Coporate NPA last year i.e no corporate defaulters.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

What just happened in Uniply Industries?

Nov 9 2017 7:00PM
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 Sometimes irrespective of stock prices you gotta admire and appreciate the intellect of entrepreneurs. In our cumulative stock market experience of over 20 years,we have never ever witnessed what just transpired in Uniply Industries. The brainchild of Keshav Kantamneni take a bow!!.We must confess we went in a tizzy after the first glance on its announcement. Check out:-

 

Year 2014 to till date scenario:Uniply Industries was in deep mess with promoters appointing Globality ventures(Investment Banking firm owned by Keshav Kantamneni) to find a buyer.Keshav all of just 33 years,was quick to spot an opportunity and he convinced the Uniply owners to sell it to him. On Words of the market veteran Mudar Patherya,"Before Keshav acquired Uniply , he researched. He worked on the shopfloor (with the erstwhile promoter's consent), comprehended the manufacturing process, spoke to employees, interacted with the trade, called customers, and examined global trends".The deal materialised with Keshav acquiring 36% in Uniply for 2.5crs. Uniply also had debt of around 113crs then.

 

With new promoters and their grand plans,stock price of Uniply rocketed from 12 to 150 in no time. In between he raised some funds and convinced the Likes of Ramesh Damani,Radhakishan Damani,Vallabh Bhansali etc to invest in it through private placement route at price of 100 bucks.

 

Company in its maiden year under Keshav turnarounded and made a tiny profit.Keshav further did two smart acquisitions through debt and equity funding. Acquired euro decor plywood(Engaged in plywood business)for 42crs and Vector projects for 64crs. Vector is into high end interior decoration. Uniply in early 2017 also acquired around 9% in UV boards for an undisclosed sum and made it an associate company. The old owners of Uniply,the Benganis owned Uv Boards. 

 

When Keshav acquired the company in 2014,Uniply had revenues of 146crs and a loss of 3crs. Cut back to fiscal 2016-17-Uniply ended the year with consolidated revenues of 280crs and a Pat of 13crs. Company had borrowings of around 180crs.

 

Climax: Keshav is selling the plywood business of Uniply to its associate company UV boards for a total consideration of 300crs. Out of 300crs,UV boards will issue shares of worth 111crs to Uniply. It's a business to equity swap. Post the deal,Uniply will own 37% in Uv boards. With rest of the money,Uniply debt of 145crs will be gone. In short it will be a debt free company. The Trademarks of Uniply would be licensed to UV boards for a total fee of 75crs,to be paid equally over 10 years in advance at the start of the year. Uniply with Vector projects have also won projects worth 1050crs to be completed over next 12-15 months.

 

Quintessence: Keshav buys Uniply for 2.5crs. Keshav acquires euro ply,Vector projects and 9% in Uv boards through debt and equity funding. Keshav sells plywood business of Uniply to UV boards for 300crs. Keshav gets 37% and becomes new owner in UV boards as UV issues 111crs of shares to Uniply. Keshav makes Uniply debt free. Uniply will get 7.5crs royalty from Uv boards for next 10 years. Keshav with his Vector projects bags order of 1050crs. 

 

Give Keshav a Cookie guys. Either this fellow will create massive massive wealth for himself or for himself and his shareholders. If past track record is considered,he well qualifies in the later category as post his charge at helms,Uniply stock price has moved from 10 to 365 before correcting bit to 280rs now. 

 

First quarter numbers: Uniply delivered splendid first quarter numbers. Sales vaulted to 77crs vs 39crs and PAT at 5.8crs vs 1.8crs earlier. Numbers are not comparable as this are consolidated numbers. Plywood division and its interior decoration vertical posted PBT of 5.63crs and 3.2crs respectively.

 

Full year estimate and valuation: Since plywood business is sold to UV,we are only looking at the the interior division first quarter numbers multiplied by four quarters,we arrive at PBT of around 13crs. The royalty of 7.5crs gets added to the PBT too. So without even considering any growth in the profits for the remaining quarter,it would already be higher than the consolidated profit of last fiscal. The 1050crs present order book position presents huge revenue visibility for the company. Uniply's debt of 145crs would be gone too saving huge interest costs which would further inflate the bottomline. Since Uniply will also own shares worth over 100crs in UV,the EV would look further cheaper. 

 

Conclusion: Uniply at Enterprise Value of around 550crs look very very interesting.Regarding whether it's a buy or a sell or a hold we leave that choice to you guys. You have read about him enough now. Needless to say one would seldom find such intelligent,visionary first generation entrepreneur with so much fire in belly.Young Keshav is sure to go places. Present prices suggest Mr market is bit confused. It would take more than a good reading of the last 3 years to fathom the potential of this company. Also there's a difference between bagging orders and execution, market is closely tracking and as the execution ability gets proven with time,stock will find more sanity.

 

Btw:It was our Special Diwali coverage on Uniply Industries(part of our Diwali magazine edition hence price and EV adjustments should be considered)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

DHFL Concall Highlights

Nov 8 2017 8:00PM
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1..Large disbursement growth driven by LAP and SME-Company saw 51% increase in sanctions, which was driven by 248% and 108% increase in LAP and SME. These two segments now accounted for 30% of total sanction vs overall guidance of keeping them at 20% of overall book. Core Home loan growth picked up as well-Home loan sanction was 28% YoY and 11% QoQ, however, % saw a decline due to higher growth in other segment. 

 

2..LAP and SME Book – higher than targeted as management. See this as a great short term opportunity-Combined LAP and SME is now 21% of total AUM vs mgmt. earlier guidance of not exceed of not exceeding beyond 20%. Management said that lot of business are converting into white and hence we are seeing lot of demand and we want to capitalise it. 

 

3..Project finance book growth was muted - On YoY basis, disbursement was up just 9%, however, it is now 15.1% of total AUM and mgmt. target is not to exceed 16% for project finance. Incremental growth in core home loan was driven by affordable housing - Management said that large part of incremental growth came from affordable housing, as of Aug, 6,000 cases has been pending at NHB for subsidy totalling to Rs100cr. 

 

4..Balance transfer run-rate has slowed down-Balance transfer rates have come down from 18-20% to 8-12% as we are becoming more agile. Large growth in non-interest income-Non-interest income increased to Rs1,11cr vs Rs38cr YoY and Rs55cr QoQ. Management said that increase in processing fees (from Rs26cr to Rs61cr) and increase in insurance commissioning (Rs8cr to Rs25cr) was the primary reason for overall increase. 

 

5..Full year guidance-Disbursement guidance 30% YoY and AUM guidance 20% YoY. Margin remained flat- Margins were flat YoY and QoQ at 3.05%, which was bit surprising and asked by few analyst also that why despite changing product mix, margins are not improving.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Oricon Enterprises ltd: Event and Managment meet Update

Nov 7 2017 7:00PM
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Quote: We recently met the Management of Oricon Enterprises to understand the recent event; following are the key takeaways from the BSE notification and our conversation with the Management.

 

Note: Oriental Containers Ltd. (OCL), a 100% subsidiary of Oricon Enterprises Ltd. (OEL) has proposed to transfer its closure business to its subsidiary company Oricon Packaging Ltd (OPL), following which OCL will sell 51% equity shares of OPL to Italian company, Pelliconi C & SPA (Pelliconi) at an Enterprise value of Rs.419.40 crores. On completion of the transaction, OPL, will become a joint venture company with Pelliconi with 51% stake and OCL at 48.80%. 

 

1..Pelliconi is one of the world's leading manufacturers of crown corks, metal and plastic caps for the beverage industry. Pelliconi C & SPA was incorporated in 1939 in Italy and is registered by Italian Chambers of Commerce and Industry. The Pelliconi Group has production plants in Italy, Egypt, USA and China having aggregate annual production capacity of over 29 billion metal and plastic caps for the food and beverage industry. OCL is a leading closure manufacturing company in India which manufactures several varieties of closures. It has plants at Murbad and Goa with aggregate capacity of 17 billion closures.This association will provide OPL an access to new technologies to manufacture Maxi P. Maxi P is the latest closure being used by beverage industry more particularly beer industry. The association would also help the joint venture in expanding the market.

 

2..On a different note, in order to consolidate its corporate structure OEL has proposed to merge its wholly owned subsidiaries OCL and Shinrai Auto Services Ltd. During August, 2017, the company had announced sale and transfer its Toyota dealership business of Shinrai Auto Services to Madhuban Motors Pvt Ltd as a going concern on a slump sale basis for a total consideration of Rs.28.35 cr. According to the Management, Shinrai Auto Services Ltd. doesn’t have any business and merger would help them get some tax-benefits and would ease some complications. 

 

Following the restructuring, OEL will broadly have the following businesses:

 

3..Existing business of trading and manufacture of pentane & others;the Management doesn’t have much focus on these businesses but through these OEL owns a 17 acre land at Khopoli which can fetch them some handsome gains due to its vicinity to the proposed international airport at Navi Mumbai.  

 

4..The planned manufacturing unit to manufacture preforms for beverages industries in the state of Odisha with the expected investment of about Rs. 100 Crores in two phases.The allotment of land has been completed and the orders for machineries have been placed. The Management is aiming at Rs.100 cr turnover by March, 2019 and another Rs.100 cr in a year or so. This upcoming plant is in proximity to Coca-Cola which is also going through a substantial expansion currently and Coca-Cola currently being the leading client of the company may get ready business for the company. The foray into Odisha will also fetch them unexplored market – access to a huge untapped market for preforms. According to the Management, 16 of the Indian states don’t have any pre-forms manufacturing facility and they will eventually hold a substantial position in this space too. Further, the scalability potential for the business is good, particularly when the company would be sitting on huge pile of cash. 

 

5..1 Acre land in Worli, Mumbai, the Management is in talks to get a deal for this land as well. Considering the rising demand for commercial spaces in this area, and recent association with Indiabulls on the project BLU, the company might fetch another good deal for this additional piece of land where the current corporate office is situated.  2 Acres land in Worli, Mumbai for which JDA has been signed with subsidiary of Indiabulls Real Estate; the deal still has scope for further improvisations in terms of tenure, incremental area in case if it goes commercial.    

 

6..48.80% Stake in OPL, the JV with Pelliconi;the global leader will not only help the JV providing a boost to the exports but also will get the crucial technologies like Maxi P without any consideration or arrangements like royalty and all. According to the Management, only two companies in the world, Toyo (Japan) and Pelliconi have such technologies. Further, the huge international brand name of Pelliconi will help the JV to strengthen its relationship with existing key clientele like Coca-Cola.  

 

7..64.29% stake in United Logistics Limited;India's largest marine logistics company handling dry cargo operating at various minor ports across few states. According to the Management, the cut down in coal imports had led to slowdown in the business, however, the consistent demand and incapacity of Coal India to meet the demand will again lead to rise in coal imports with an anticipated action in power sector. Meanwhile, USL has added a couple of additional floating cranes to reach 3 units. In addition, the business has forayed in Sri Lanka in order to diversify and make-up for the current erosion in the domestic business.    

 

8..Going forward, the company will get ~180 cr from the sale of their 51% stake in OCL; earlier, in March, 2015, the company had bought back 70% stake from Mauritius based OC Holdings for Rs.105 cr. The company doesn’t have any further capex plans for next couple of years. Earlier, during June 2016, the company had received Rs.310 cr from Indiabulls for the Joint Development Agreement they had signed. The company further expects to receive incremental approximately Rs.380-400 cr from the deal in the due course of time. With no significant capex lined up as of now except for the Odisha plant and huge cash position building-up, it presents a number of opportunities like inorganic growth, buyback, special dividend, etc.  

 

Courtesy: Sushil Finance

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Update on Balmer Lawrie & CO Ltd AGM Meet

Nov 6 2017 7:45PM
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1..In spite of GST effect and severe price competition from PSU Oil companies, the company successfully posted gross turnover of INR1901.17 crores VS INR1778.36 crores, higher by 6.91%, YoY.Also, the company registered 6% growth at its PBT figure, YoY basis.The Company’s effective tax rate stood at 34-35% as on March 31, 2017.Balmer Lawrie reported higher interest cost expenses in FY 2017 as compared to last year. However, the total finance cost came lowe at INR322.44 lakh VS INR306.11 lakh last year on the account of lower bank charges.The increase in the total interest expenses was due to the new debt raised on capex for new plants and capacity expansion.

 

2..The company is setting up its Multi Modal Logistics Hub project at Vizag in partnership with M/S Vishakapatnam Port Trust.The project will attract INR300 crores as capex and the project will be completed by March FY2018.Currently the company comes under the Indian Government’s MiniRatna segment. The management plans to enter Navartna companies in the next two years.

 

3..Balmer Lawrie does not expect any new orders from the Government of India’s initiative of integrating oil companies going forward. As per the norms, the order will go for all the MSME companies in India. So no major benefit is expected form the move.The Company’s logistic segment achieved the highest ever topline and profit before taxes growth of 13% during the FY2017. 

 

4..The Company’s lubricant and Industrial packaging business are expected to gain traction. Although the company did not provide any guidance but plans to invest to add capacities.Balmer Lawrie sources its 94% of its raw material domestically, whereas imported 6%.It is exposed to both interest risk and foreign currency risk,so any volatility in these two could hamper the company’s financial performance.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Kriti Industries: AGM Notes

Nov 4 2017 7:40PM
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1..Due to demonitisation last year completely shattered peak season of Oct-dec, and thus resulted in lower sales being down from 460 crs in FY16 to 360 crs in FY17. Under unit II  they set up manufacturing water tanks and cpvc pipes and it became operational just before demonitisation (Plant has been expanded).15cr has been spent last year in modernisation and automation of the existing plant which would result in operational efficiencies in coming years. The same can be seen in Addition to Fixed Assets under Fixed Assets chart.

 

2..Current overall capacity is 80k MT and runs at 100% during peak season of from Oct-Dec. However overall utilization can be max 60-65%. However in Q 1 (2017-18) numbers significant improvement in plant utilisation has been seen. from 60-65 % to further upside of 5%.

 

3..Due to GST, Lot of destocking have been done by dealers and that affected the sales for a month or so.Demand is improving and they are hopeful it will pick up during peak season of Oct-dec. All govt schemes and housing for all will create significant demand for pipes n fittings going ahead as per the management.Replacement of PVC with CPVC the major revenue contributor. 

 

4..Volatility has been seen in PVC resin prices and due to that there would be inventory gain/loss depending on the price movement. Dumping from China is increasing. But the monopolistic market will subdued the effect.Sustainable operating margins are 9-10%, in a good year can do around 10%.

 

5..Their main strength is agricultural pipes and fittings, in CPVC pipes they are going slow as they are seeing tough competition there. Current capacity is around 1500MT.Normal capex is 5 cr every year.They are looking to buy a plant in South and also planning to shift some products in their Pune subsidiary plant to cater to Maharashtra and neighboring places, which would save logistic cost.

 

6..For FY18 they are hopeful to do 500+ cr kind of turnover (Surpassing FY 2015-16 turnover) as they see demand improving and with good monsoon next year they said thay can easily cross 600 cr mark. Ebitda margins can slightly improve from here. On a 600 cr revenue in FY19 with around 8-8.5% ebitda margins they can easily do 22 cr PAT. Substantial Debt reduction will be done in coming years. Looking on the basis of 2020 Profits will substantially inprove from present level and will achieve 36 to 40 Crore mark on PAT.

 

Courtesy: CA Nishant(Our in house research expert. Note only meant for sharebazaarapp)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Key takeaways from Paushak Ltd AGM

Nov 2 2017 8:15PM
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1..Part of the Alembic group which is into pharmaceutical.Company primarily into agrochemical and specialty chemical business.Phosgene manufactured by the Company and used as raw material for end products which are subsequently sold to customers across industries like pharmaceutical, paints etc.

 

2..Current capacity utilisation at 70 - 80 %. Share of domestic sales at 84% vs export of 16%. Efforts on R & D for new products, 10 to 15 products in the pipeline in the next 2 - 3 years.Increasing margins with long term contracts.Ambitious plans to expand steadily over the next 2 years both upstream and downstream.

 

3..No plans for buyback, to utilise the reserves of Rs 76.5 cr for future growth. EBITDA of 20% maintainable.Focus on profitable business to improve bottom line. Primary competitor is Atul Ltd.- enough business for both to survive.

 

4..Total CAPEX of Rs. 17 cr in FY 17 out of which Rs. 15 cr was in windmill which helped in reducing utility cost by almost 50% in FY 17.Regular CAPEX to continue in FY 18 for upgrading the plant. CAPEX of Rs. 70 cr as per the feasibility report would take 3 - 5 years as the Company is in the process of obtaining approval from GOI for addition of capacity of phosgene which is a licensed product as it is made from carbon monoxide which is highly dangerous.

 

5..Company a very small player in the global market of phosgene as companies liker Bayer etc. have their own phosgene plant. Phosgene not a licensed product outside India. Company to build strength by technology, contacts and people.

 

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

RKEC Projects:- Our Mentors View in it

Nov 1 2017 7:00PM
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They have 4 competitors --- L&T; Navayuga, Afcons and ITD Cementation. Their focus is sub Rs. 400 cr orders where they have eligibility based on experience and balance sheet size. They expect there would be many opportunities in this segment and L&T may vacate this space. 

 

The margin is expected to remain around 13% - 14% at EBITDA and about 6% in PAT level and expect to achieve a revenue of Rs. 500 cr in next 2 - 3 years. The people requirement would go up from present 287 to 320 maximum to achieve Rs. 500 cr turnover. Their administrative cost of 30% include all contract labor and administrative overhead and all other expenses. It would hover around that level or max come down by 2%.The cash in books is tied to BG of 75 cr. They have 20 cr LC, 120 cr BG and 15 cr CC limit and need to provide 15% bach margin for BG. Going ahead since the company is listed and company can be rated, BG margin may come down from 15% to 10% and their pledging of shares may also act as guarantee freeing up more cash. Company said 10% mobilization advance and bank limit are enough for starting the work and hinted that other companies waste the mobilization advance by diverting funds to other needs and non-project specific purposes which they never allow in RKEC. It helps them in keeping tight leash on project schedule and hence project milestone payment. The other company Narem Enterprise helps them in making some material in house and help them have control on quality and delivery schedule.

 

Based on above info,RKEC at 260 cr market cap and minimum 30 cr PAT in two - three years and 30% + ROE may be a company where downside is protected.

 

 

Courtesy: Aveek Mitra

 

Mahindra Logistics: Analyst Meet

Oct 31 2017 7:00PM
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Key business USPs:-

 

1) Asset light model: Scalable solution for customer. Flexible customized solutions. Working capital requirement is very low - as low as 2 working capital days.

 

2) Large captive customer in form of MM for 8 years. Because of that were able to garner 1000+ business partners, which company now uses to service other businesses. It's a Technology heavy business. 

 

3) Engagement with Business Partners:Categorise business partners in Gold silver Bronze categories which are decided based on SLAs in terms of operation and total volumes catered.Additional benefits offered to Gold BPs. Operates Business partner engagement cell to educate staff of Business partners Continuous driver training.

 

4) Technology - a key USP: Capex primarily in technology, material handling equipment. Technology and control tower is a key differentiator for company. Provides end to end truck, track and trace option (time management, minimize idle time, maximize truck utilisation), Dispatch planning (optimize truck planning, capacity utilisation), value added services.

 

Pricing contracts:-

1) Vanilla transportation contracts are annual contracts based on rates and volumes given to the company

2) Value added service/infactory logistics - 3-5 year contacts.

3) Annual inflation built into contracts

4) Prices customers based on volumes offered and quantum of saving sharing with customer.

5) Fuel escalation clause both in customer and vendor. Formula is based on percentage/absolute increase decrease of fuel.

 

Profitability:-

1) Profit difference between MM and non-MM customers not shared at the meet.

2) Business segment wise warehousing boasts of higher margins vs transportation. 

3) In SCM segment, Transportation:warehousing mix at 86:14% vs Industry comp at 89%:11%. Targets to take warehousing mix higher with GST related benefits for industry. Profitwise mix would stand at 60%:40%.

 

Other details:-

1) No conflict of interest with other Auto OEMs. Infactory logistics  for Mahindra group has provided expertise for working with other clients in Automotive vertical (works with VW and Ashok leyland.)

 

2) Consultancy fees: Expect pending fees  of Rs 9cr in FY18 (last year of such fees).

 

3) Inorganic growth - may look for any opportunity that complements business possibly in technology startup space. Likely in India only.

 

4) Competitive space: DHL, TVS Logistics, Tci, Bluedart, Small time land owners who operate regional warehouses - expected to get impacted with GST benefits.

 

5) Seasonality - not really between the quarters.

 

6) Advance Tax issue  in Balance sheet expected to go away. Currently, 2% of transport revenue is paid out as advance tax, this number could fall to 0.5% of transport revenue in future.

 

7) Customers: Have 180 Non-MM customers. Top 25 contributes 70% of Non-MM business.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Cabinet approves Bharatmala Project - What Does it Mean?

Oct 29 2017 7:00PM
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Cabinet approves Bharatmala project - Phase 1 to develop 40000km road projects by 2022

 

1..The Union Cabinet has approved the biggest ever highway development plan to develop and expand approximately 83,000 km of roads at an investment of Rs 6.9 lakh crore by 2022.

 

2..The Government also approved the Phase 1 of Bharatmala project to develop and expand approximately 40,000 km of roads at an investment of Rs 3.5 lakh crore by 2022. The project involves constructing 24,000km of fresh highways. The project includes construction of feeder routes alongside national highways.

 

3.. Bharatmala highway project includes connecting border areas, improving international, port and coastal connectivity besides improving highway corridors connecting key economic and commercial hubs. 

 

4..Around 80% of Bharatmala will be based on a government funded, EPC model while the rest will be a HAM mode.

 

5..It is believed that NHAI will be empowered for approving Bharatmala projects in order to ensure faster clearance for projects.

 

6..Only BOT projects requiring viability gap funding will need CCEA approval. Currently, all highway construction projects above Rs1,000cr need CCEA approval.

 

Positive: The approval of mega highway development plan provides multi-year awarding visibility for NHAI as the NHDP programme comes to an end with balance awarding of 10,000km.Key beneficiaries : Dilip Buildcon, Sadbhav Engineering, KNR Construction, PNC Infra, NCC, Ashoka Buildcon, IRB Infra etc.

 

Courtesy: Systematix

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Asian Paints Q2FY18 Conference Call Takeaways

Oct 28 2017 7:00PM
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1.. A mixed quarter – implementation of GST led to sluggish growth in July and August while September saw recovery in sales growth. The company’s retail channel is now completely GST compliant; it has stopped transacting with retailers that do not have a GST number.

 

2.. The increase in raw-material costs in Q1 continued to dent until July; mid-August onwards, costs have been stable. Has not taken any prices hikes after the ones in March and May. Future price hikes will depend on market conditions and raw material prices. As of now, the management expects raw material prices to stabilise.Indirect tax rate after GST has remained unchanged; there have been no major inputtax-credit advantages.

 

3.. The unorganised sector is trying to become organised. The company has not seen a major change in the competitive landscape. In Q2, Nepal, Bangladesh, and Oman saw good growth while Egypt was impacted by currency devaluation. Ethiopia was hurt by unavailability of forex.

 

4.. Capex for FY18 will be Rs 12bn, which will include Mysore and Vaizag plants capex of Rs 10bn. These plants will be commissioned in FY19. Tax rate for FY18 stands at 33%.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Govt's 3 Steps to Kickstart Growth and Employment

Oct 27 2017 10:00AM
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1. Proposed injection of Rs 2.11 lakh cr as recap bonds in capital-starved PSBs will act as a force multiplier for their growth needs. It will help in accelerating their tepid credit growth which was  constrained due to lack of adequate capital and arrest loss of market share verses well-capitalizsed private sector banks & NBFCs.Ideally the govt should structure the bonds as zero-coupon bonds with a very long maturity of say 15 to 20 years and a one-time bullet repayment at the end of the maturity period. This would impart the bonds a characteristic similar to equity capital and provide much-needed relief to banks from providing for annual interest payments.The infusion must strictly be in line with objective performance- improvement criteria. Markets would certainly give a thumbs up to this bold initiative and kickstart a virtuous cycle leading to rise in PSB share prices. This in turn would make it easier for them to raise equity capital from the market. 

 

2. Govt's Rs 14 lakh cr capex plan over the next 5 years in key infrastructure sectors like roads, power, railways, digital and housing will have a significant  multiplier impact on aggregate demand and employment.Sectors such as Construction, Engineering/ Capital goods, Cement, Steel etc will benefit from this massive capital spend. 

 

3. Highly stretched working capital cycles was a key  impediment for growth for a majority of MSMEs. Both access and cost of capital was holding back these large employment generating enterprises. By forcing large PSUs to register themselves on TReDS platform and clear their dues to MSMEs within 90 days it will address one of their biggest concerns. Govt should follow this up by appealing to all Industry bodies like CII, FICCI to ask their members from the private sector to follow suit immediately

 

Courtesy: Author is Ajay bodke (CEO & Chief Portfolio Manager PMS Prabhudas Lilladhar )

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Vishnu Chemicals Ltd (Extracts from AGM)

Oct 26 2017 8:00PM
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• The MD, Mr. Krishna Murthy took a positive stance on the overall Chemical business outlook of India.According to him, Indian chemical business is fast catching up with the global front in terms of volume of supply and demand. India is placed within top 10 countries on global stage, both in terms of supply and demand, and with world demand for speciality chemicals increasing and Indian products finding a niche for themselves, Indian story can be expected to move up the ladder and our company is expected to greatly benefit from the same.

 

• Directing towards the results, Mr. Murthy highlighted the reasons for weak results over the previous two quarters being GST issues and significant forex loss on account of forex fluctuation. He said that Company had been facing cash problems and had its working capital cycle effected due to adoption of GST. Suppliers had been asking for advance payment and that resulted in destabilization of the cash cycle. However, he said that these problems were all a thing of past and once The Company gets adjusted to the cycle, it will be easier for the company to cope up with it.

 

• To cope up with the problems of forex loss, he said that the company can’t control foreign exchange fluctuation, but what it can do is reduce the dependence on foreign supply. The company has been hence taking steps regarding the same by arranging for procurement of raw materials within the country and also going back in the vertical supply chain by producing the raw materials for their consumption by themselves.The company also laid down capex program for the same, which is almost finished and is expected to result from the next quarter.

 

• The MD further aided the reason for –‘ve growth in the current financial year due to fierce competition from Import. On this front, company is said to have been paying attention to minimize the effect by filing a plea to Government of India for imposition on anti-dumping duty. The GOI is to hear the case in the near future. The company expects the case to be in its favor, and that can say bottom line growing up by 10% straight away.

 

• The result of the extensive capex made would be seen from third quarter onwards, with increase in the production.The company is expecting INR 650-700 crore revenue in the current fiscal and is eyeing INR 800 crore of revenue in the next fiscal. Q3 and Q4 revenue is expected to be 200-225 crore each.

 

• The company has introduced value added products to its force and is expecting a revenue of INR 200 crores out of it and a conservative margin of 10% out of it. The value added products will be 3 chemicals adding to its current fleet of products.

 

• Regarding the subsidiary, MD said that the development is good and the demand has been exceeding supply. The company, infact, looking at the bright scope of subsidiary is looking to change the product mix (From 40% export & 60% domestic in the last fiscal to 60% export and 40% domestic). INR 90-100 crore of sales can be expected every quarter going forward from the subsidiary.

 

• The Company at present faces no competition from Chinese market as the products they produce are produce elsewhere in USA, Turkey, etc. but not in China.The company is expecting good results out of Barium products as now the contribution is increasing from it.

 

• The directors are considering giving up preferential dividend to infuse cash in the company. However, no decision has been taken in this regard.Overall, The MD seems very optimistic about the future course of The Company and he said that the same will get reflected in the financials of The Company from Q3 itself.

 

Courtesy: Ankur Gupta(One of our sharpest inhouse predator)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Key takeaways From V2 Retail meet

Oct 23 2017 1:00PM
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 1..In an effort to increase its competitive advantage over peers, V2 is looking to get into private labels to cut the procurement costs by about 10% for 50% of its portfolio which is core/basic products. The company will procure the cloth and get it stitched on job-work basis to save about 8-10% cost after factoring in the cost of financing and logistics.

 

2..The company is looking to increase its store network by a minimum of 20-25 stores every year and still expects a base sales per sq ft month of Rs 1000 with an aspiration to reach a number over Rs 1200 on a base of over 100 stores in next 3 years.

 

3...In addition to taking up the average selling price per piece from Rs 260 currently to Rs300, the company expects sales efficiency to improve on account of the various inventory management, merchandise planning and space planning tools the company is deploying across its stores.Company expects significant leverage on the head office costs once it reaches an optimum retail space of about 1.5 mn sq ft from about 0.5 mn sq ft currently.

 

4...Against current metrics of Rs 1000/300/100/55 of revenue/gross profit/EBITDA/PAT per sq ft per month, the aspiration is to reach Rs1250/375/175/100 respectively.At current metrics, ROE is 25% and the near-term objective is to deploy the recently raised money of Rs 760 mn and current year’s cash flows at an equal or better ROE.

 

5...After setting up a strong talent pool and providing them ESOPs, the management feels it is now ready to get on an aggressive expansion at the front end.Another big competitive advantage is the strong control mechanism which will ensure micro-level tracking of inventory and the automated technology-driven operating procedures which will ensure best retail operating practices.

 

6.. V2 is one of our top picks in the space where we expect a 36% revenue CAGR, 50% PAT CAGR over FY17-20e currently trading at 15x FY19e EV/EBITDA and 27x P/E.

 

Courtesy: Systematix.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Western India Plywood AGM Update

Oct 22 2017 7:00PM
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1..Western india plywood is a more than 50 year old company with many specialised products.Company is well known for its high corporate governance and quality products.Makes highest grade hardboard and Plywood, used in aircraft and in luxury cars.Q1 was bad because of GST de-stocking.

 

2..Company has a good R&D set up and specialised products.They do 20% export and major domestic clients are railway,hyundai etc.Factory is situated in a 40 acre land and manufacturing set up alone worth 400cr against the marketcap of 50 cr.

 

3..Last year was a bad year because of multiple headwinds like demon,railway order cancellation etc.Management is very conservative and sleepy nature and have no immediate plans for value unlocking.Expecting to do 110 cr sales this year.

 

4...LIC is holding good qty,they will trim their holding in near future and it will improve the liquidity.Few more additional points on western.Demo notes were converted to pulp in their factory,this alone shows their high promoter integrity.

 

Courtesy: Shanid(Our Inhouse research member)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Nandan Denim: AGM Updates

Oct 21 2017 4:55PM
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1) Expanded capacities did not reap any benefits due to low demand (because of gst)

 

2)Cotton is the major raw material used by the company and they believe that going forward cotton prices will soften , which will strengthen their margins .

 

3) Currently our company has the largest capacities in our sector.

 

4) Company has setup up its own fire brigade by internal accruals so as to fight frequent fire breaks in their Ahmadabad pant (As cotton is very sensitive towards fire), they are taking all the measures.

 

5) GST is very beneficial to us , as we are organised and have many unorganized competitors, hence we will benefit from it in long run though we got short term pain.

 

6) No planning for any capex in the coming quarters as they have sufficient capacities in place to server the expected demand.

 

Courtesy:Rushikesh(Inhouse research team)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Santosh Khemka: The Stock Market Winner

Oct 18 2017 8:35PM
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Stock market winner series:-(As you all know we have recently joined the Board of a magazine called Indian economy and markets. Sharing the magazine post to be loyal to our online audience too)
 
In our quest to add further value to your esteemed magazine,we have decided to interview the real winners of stock market who are not much in public domain as they keep a low profile. You have heard a nomenclature of times about the strategies of stalwarts and how the likes of Mr Rajesh Jhunjhunwala or Ramesh Damani over the years made tons of money. Our winners have been no less either with some of them compounding even at 40% for the last 12-15 years. We believe it would be a fascinating experience for all our readers to learn from them. So without further ado,let's get our first guest speak his heart out.
 
Self-made millionaire and an Investment Veteran: Mr. Santosh kumar Khemka
 
Coming from a very modest background Mr. Santosh Kumar Khemka was a chemical engineer by profession. In late ‘90s he decided to focus full time in investing. For last 27!years he has been a very successful investor in Indian stock market with several multi-baggers under his belt. In a conversation with Indian economy and markets,Mr. Khemka laid out his investment philosophy and suggestions for how any investors can do better in their investment decision making. Following is the crisp transcript of our conversation.
 
Indian economy and markets(IEM)Could you tell us a little about your background,how you got interested in investing, and how you’ve evolved over time as an investor
 
 Mr. Khemka (MK): I was extremely fortunate to be born to a set of parents who imbibed very early into my thought process the value of good education and prudent behaviour. I was quite ok at academics and I ended up being a chemical engineer. In early ‘90s I started my journey into investing. Those days were different as our market was in its nascent stage. There was not a lot of internet those days and hence I couldn’t really catch up with the Buffetts, Mungers of the world as early as I would have liked to. While I was happy as an engineer, deep in my heart I always wanted to spend all my waking hours learning about businesses, valuing them and finding the next great wealth creator.
 
IEM:What's your broad investment philosophy? What are the most important things for you as an investor?
 
 MK: I have learnt over the years that each of us should first understand ourselves before we understand what style might suit our temperament. Right from the beginning, I knew that you either have to multiply your money 10x or it’s not worth the pain. My whole philosophy rests on doing things that I understand. I do not think I can call myself as a ‘value investor’ per say, since I do not think there is a difference between value investing and growth investing. If you pay reasonably for growth, its value too!For me, the most important things as an investor are: • Doing things I understand and ignoring the rest
 • Being ethical in all aspects of investing
• Being independent in thought process and decision making
 
IEM:Talking about picking up high quality businesses,what are some of the characteristics you look for while picking a stock?
 
MK: I look for a few key things as follows:
? Is the business cyclical or secular growth? I strike out the cyclicals.
? Can the market cap be 10x the current value in less than ten years...and if yes, will the corresponding top line and bottom line at 10x valuation look achievable and/or reasonable?
? Is the business generating free cash flow?
? Is the return on total capital greater than at least 2 times the risk free rate?
? Is there a scope for ROE expansion? Will it play out in the next couple of years?
 
IEM: Can you give us an example of a stock which has turned out to be multibagger for you? And how and why did you exit it?
 
 MK: There are several stories. One that I can think of right now is Gujarat NRE Coke. In my early days,I found it at dirt cheap valuation at around Rs.5 and exited after few years at Rs.160. That has been a prominent stock for me as it gave me a huge confidence in ability of sitting tight after you enter at a fair price.Now in terms of exit, one should keep a stern eye on any sign of discrepancy. First sign came when Gujarat NRE stopped paying dividends. Then they kept on taking loans and became high debt company which was disproportionate to their assets. You must exit at the first sign of danger.
 
  IEM: How can an investor improve the quality of his/her decision making?
 
MK: I suggest a very simple technique which can be helpful; whenever you take a decision (buy or sell), take your pen and paper and write down at least 6-7 points as to why you are taking that decision. Trust me, it will be extremely hard to do! When you start writing down things you will realise that you have not thought much about it in depth. When you write things down, you cannot escape or justify yourself later and are forced to face yourself. This will surely improve decision making.
 
  IEM: How do you decide whether the managers have the capacity to take the business to the next level from where they are currently, and whether they are honest?
 
MK: Management should be hungry for growth but at the same time be conservative to not bet the company during the good times. So essentially what we should look for is profitable growth that is self-funded.Management quality will be reflected in the numbers if one looks at the right things and compare the numbers within the same sector. As Mr Buffet says, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
 
 IEM:What's your short advice to someone just starting out in the realm of investing? What should he/she do, and what he/she must avoid.
 
 MK: First, understand yourself well. Do you really want to be a value investor? Or you are doing it just because it’s currently the coolest thing in investing? There is no shortcut! There is no alternative to hard work and spending time in the market. So don’t expect that you will read 4-5 ‘recommended’ books and immediately become a ‘value investor’. Enjoy the process! If you find that you are forcing yourself to be a value investor, you will never become one!
 
IEM:Can you enumerate a few big lessons from your journey that you have learned and would like to reinforce?
 
MK: Stay humble and respect the market. Unless you are super confident of the underlying business, it pays to respect the price. This is not to say that markets are efficient but to say that unless you’re very well proficient with the business you can never say if the price is efficient or not. So the options are to either respect the price or learn enough about the business to say that the market is wrong. Keep your winners and cut your losers. I can’t repeat it enough.
 
IEM:Your recommendation for top 3 books on investing and related subjects? What is that one big idea you’ve learned from each of these three books?
 
 MK: I think books create a base for your overall investing philosophy and thought process. Though it’s not enough, book can serve as a strong foundation on which a good investment process can be built. Following are the books I would recommend to be read by all aspiring investors:
? Common Stocks and Uncommon Profits by Phil Fisher
? The Essays of Warren Buffett edited by Larry Cunningham
? The Snowball: Warren Buffett and the Business of Life by Alice Schroeder
? Tap Dancing to Work: Warren Buffett on Practically Everything by Carol Loomis ? Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger
 
IEM)Any stock ideas that you would like our readers to take notice?
 
And) I do like Indo amines and Panasonic energy where I own over a percentage in both of them. Most details about them are in public domain. Reading the annual reports for the past 10 years would help a lot. Your readers can certainly study them. I must add these are acquired many months ago and cost of acquisition price would be pretty negligible but they still can compound at a superlative rate even from present levels.
 
IEM: It was a pleasure having you Mr khemka.Anything that you would want to end the interview with?
 
 MK: Thanks a lot for having me.You guys are doing a fantastic job too.Keep doing the work with passion and it will be evident that you all will succeed, you have my blessings. To sum up,would like to use a quote of my guru. We read a lot. I don’t know anyone who’s wise who doesn’t read a lot.But that’s not enough: You have to have a temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them.”– Charlie Munger

AGM notes of Lincoln Pharmaceuticals

Oct 16 2017 7:00PM
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1) Company is exporting to 50+ countries as of now, have 2 different plants, both of them located in Ahmadabad.Company has 80 Scientists working in R&D presently 1500 people permanent and 700 non permanent workers.

 

2) Company has put 2 windmills (in Rajkot and another in Porbandar) , all done by internal accruals , they are producing 60lakh units/year and doing a saving of 4CR per year. 62Cr invested on them in last 2 years.

 

3) 21 applications for patent have been put by the company out of which 4 got approved and another 21 are in process.Company is paying tax in MAT format.

 

4) Management expects that Gujarat plant will be more viable in coming quarters because of GST. Recently received an award from government msn.

 

5) Vision- Will set R&D for developed countries and planning for USFDA approval plant. Already bought 2 lands for the same purpose and they will come up within 1-2 years if all goes according to plan.

 

6) Margins were unstable because of GST , as goods were returned to the company, from stores for the period of may-june. Management expects coming quarters to be good, with stable and consistent margins. 

 

7)  On my 1 request to the management, they sent me for industry visit, I should tell that it was great experience , They showed me each and everything and explained each and every process in detail, it took about 3 hrs for the visit. Management is very kind and listens to shareholders suggestions very closely, I suggested company secretary that their AR is containing very less resources(Abt management experience , their future vision, their plans, capex requirements , revenue breakup etc), to this he agreed and noted my requirements and even told me that they are planning to hire staff to prepare their AR from next year in which they have planned to make it very informative, include all the useful information required by the shareholder, improve AR quality etc. Many points were discussed on that note. 

 

Courtesy: Rushikesh(Inhouse research member)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Kisan Mouldings: AGM Notes

Oct 15 2017 7:00PM
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1.They are targeting sales to reach 900 cr with 12-13% EBIDTA in 2 years.Current is less than 50%,optimal is 85%.They said with the existing capacity company can touch 1000crs of turnover.Existing customers/dealers can give them business till 600crs. Big B factor can help the company to reach to 1000crs top line. Also they said that any increase in RM price is immediately passed on to customers.

 

2.Incremental focus on 2 states AP and UP as they believe smart cities project is onky really taking off here.Company expects Dealer enrolment to grow at 20%.Dealer margins and terms will be status quo even though new funding is for working capital.

 

3.Company expects cost savings by shutting down 5 out of  9 factoies including Baddi.Expects realisation of 15 cr to cut debts. All machinery will be shipped to other locations.

 

4.No capex plans in the near future.Banking big time on Amitabh effect.Marketing campaign on air going live from October.Cost will be staggered and confidential. Duration of contract is 2 years.

 

5.Debt reduction by calendar end targeted to 180 cr.Huge inventory liquidation also planned on account of shutting of factories and possible remelting of useless inventory. They will continue with the large range of SKUs since it believes in full range offering for competitive reasons. Looking at 7% moulded furniture and rest 50:50 plumbing and irrigation.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation.

 

Key Takeaways from NCL Industries AGM

Oct 14 2017 7:00PM
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• NCL Industries reported almost flat profits of Rs. 54.73 crores for FY17.  Total Income saw a decent increase of 12.95% to Rs. 865.73 crore for FY17 Vs. Rs. 766.51 crore for FY16.

 

• Co witnessed improvement in capacity utilization and sales during the year contributing to the company’s healthy performance. However, for the second consecutive year the operations of the Energy Division were adversely affected due to bad monsoon resulting in only 7.91 million units of hydel power generation compared to 12.89 million units in the previous year.

 

• In the Cement Division : The company plans to spend Rs. 180 crore for expansion of their clinker capacity from 1.60 MTPA to 2.60 MTPA and cement grinding capacity from 0.96 MTPA to 1.71 MTPA at Simhapuri in Telangana.  Company commenced the production of the clinker unit.

 

• In the Boards Division : The company plans to spend Rs. 35 crore for setting up a third Board’s plant of 30,000 TPA capacity at Simhapuri in Telangana. The company has commenced the production of the boards unit.

 

• NCL Industries has crossed the milestone of Rs. 1,000 crores of gross turnover during the year 2017. Company remains positive on the outlook for the rise in demand for cement in the country on account of the government initiative in the field of housing and infrastructure.

 

• Company plans to raise an amount not exceeding Rs.250  Crores by issue of Equity Shares by way of QIP in order to pay off the expensive high interest debt taken by the company in order to help them exit the CDR mechanism in 2016. The management said that this exercise would dilute the promoter holding from around 50% to around 40%.

 

Courtesy: Jagdish bhai(Our inhouse research team expert)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Shiva Global: AGM notes

Oct 13 2017 7:00PM
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Quote: This is Pankit shah here. I met you guys during Mumbai share bazaar app meetup. I enquired about Shiva agro and you replied that it's good company, go and meet the management.I Was inspired by the way you guys work. So I actually visited Shiva global AGM on 29th September at Nanded. Here's my note:-

 

1.Targeting 7/- e.p.s. this year FY 2018.Own all the lands of every factory. Have lot of idle land near factory area. Market value of that will cross 80 cr.No term loan. Only working capital loan is there. Aim to be debt free in 3 years.

 

2.Management wanted to give dividend last year itself, but bankers were not comfortable. Management is confident of giving dividend this year.Recently started manufacturing water soluble fertilizer and planning to get into production of growth promoters.

 

3.Currently working at nearly 50% of capacity, so no need of expansion. Doing good in soil conditioner segment. From 49 lacs in 2016 to 6.6 crore in 2017.Karnataka received good rain in last 15-20 days. Dams are full now. It will help Belgam unit to perform better because there were drought from last 2 years. 

 

4.Currently working with 300 dealers.Keeping dealers meet regularly and almost 75% dealers are ready for DBT.Received good advance in seeds business this year.Deepak marivas son Mohit marival has recently joined the company. He is chartered accountant with work experience in EY.

 

5.Management wants to reach 70% holding stake in 3 years. From current 55%.Management is not fully focused as they were planning to buy stake in some logistics company for regular cash inflow.Seeds business is shaping well. Expecting 15 to 20% growth this year.The business consists more of family members. Lacks professionals.

 

Note:Met a fertilizer dealer in nanded to get an idea of quality and demand of product.Brand is popular in that area but it will not stand against biggies like coromandel etc.Management was really happy seeing people attending all the way from Mumbai.We were 3 of them.Deepak marival personally took us for factory visit.

 

ShareBazaar app team: Brilliant work Mr Shah. We feel so pleased that we could inspire you. Keep up the good work. Guys as you can see our readers have started contributing too. The intention is to cover as many companies as possible to help retailers get information which they were always depreived off. Do mail us folks if you happen to attend companies and AGMS at arunsharemarker@gmail.com. Happy investing.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Alphageo (India) Ltd AGM Highlights

Oct 11 2017 7:00PM
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• Alphageo reported a substantial increase of 334% in the net profits from Rs. 11.63 crore during FY16 to Rs. 50.55 crore for FY17. Total Income too recorded a substantial increase of 240% at Rs. 308.09 crore for FY17 Vs Rs. 90.45 crore for FY16. 

 

• FY17 has been a remarkable year for the Co which was awarded contracts for acquiring 2D Seismic Data under the National Seismic Programme of Government of India worth Rs. 1300 crores (excl taxes) from ONGC in addition to a contract worth Rs. 102.42 crores from Oil India Limited. 

 

• Management clarified that the recent approval given by CCEA for undertaking and documenting the 2D seismic data for 48,243 Line Kilometer (LKM) amounting to Rs. 3000 crore includes the Rs. 1300 crore order received by Alphageo from ONGC. 

 

•The value of orders to be executed stands at Rs. 1200 crores. These orders’ completion date is December 2019 and hence there is earnings visibility for the next 3 financial years at least. The company has succeeded in procuring all the required equipments and personnel for all its projects, hence the company would now see free flow of cash from revenue earned. The overall working capital for the company is around 2 months.

 

• Mgt said that their main objective is to sustain and maintain the current growth rates and having realised that seismic is not going to keep supporting this growth the company needs to look at various options for diversification. The management is mostly focusing on opportunities that are niche and which utilise the company’s strengths in operations. Co has recently bid for Aerial Geophysical surveys which is a very niche segment. The international operations for the sector remained subdued due to the fall in crude prices however the company plans to give more stress to international operation in the coming years. 

 

• Mgt said that Aerial Geophysical survey activities have been quite limited so far. These are predominantly used for Hydrocarbons and also for mineral exploration. This is a completely different vertical which would need a completely different set of equipment and a new set of operations. However, the option to either lease them or buy them will be decided later by the management and relative capital expenditure would then be incurred. 

 

• Till recently there were no Indian players who were capable of doing this kind of activity. The Phase I tenders of the Department of Mining are out valuing around Rs. 135-140 crores, Alphageo has bid for these contracts and it is pretty likely that they will get them. The Phase I consists of 15% of the total activities. 

 

• Company is now focusing on increasing their capacities and hence have not bid for any contracts after being awarded Rs. 1300 crore contract from ONGC as it felt that bidding for new projects would distract management attention and dilute priorities. 

 

• When asked about the effects on the surveys due to the uncertainties going on in the North East, the management said that these activities would normally start in November or December. The management said they have dealt with such unrest in the past and hence do not see any problem in executing the order. 

 

• The resolution to raise a Rs. 300 crore is more of an enabling resolution. The company is looking at opportunities for growth which would require the ability to immediately utilize capital. Hence, this resolution would provide easy compliance which would allow the company to raise funds whenever there is a need. As such there is nothing fixed or no specific plan to raise the loans as on date of the AGM.

 

Courtesy: Jagdish bhai(Inhouse research member)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Fineotex chemicals Ltd(FCL): AGM Notes

Oct 10 2017 7:00PM
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1) Gst has affected their sales and management is expecting to benefit a lot from GST in the coming quarters.

 

2) They have expanded in places like South Africa , Russia and 7 different geographies.

 

3)The company launches 5-7 products every year and are now planing to accelerate it by spending more in their R&D, and focus on value added (high margin) products.

 

4) They have launched new product in Malaysia, Aquastirke VCF, which is a non toxic and ecofriendly mosquito killer liquid, it is seeing good demand in Malaysia(management is optimistic about their new product) and management is in process of taking permission from Indian government to launch the same product in India, but it will take some time.

 

5) Management feels that India will see even more demand for their new product(Aquastrike)  as our country has more mosquito problems(Diseases) than Malaysia . But this might take some time, they are currently in process of the same. 

 

6) Company has no big capex plans going further, and if needed then they will do it from internal accruals(because of less requirement of capital ).

 

Courtesy: Rushikesh(Inhouse Research team)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

TV Today AGM Notes

Oct 9 2017 7:00PM
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1.Mail today is operating at breakeven level.100% owned by tvtoday. 50 journalist from print . Content advantage,supporting tv content also No digital no magazine . Will merge in tvtoday.Tax loss of 300 crs accumulated. 100 cr benefit accrued over 5 years. 2.5 lakh reader category A reader . 

 

2.News channel: Subscription is less then 20 cr combined. All competitors went free to air. Only news channel which is free and paid somewhere . Next year the subscription revenue loss is over hence can see 10 % revenue growth.Got 40 million additional viewers due to FTA.

 

3.Aajtak inventory 18 minutes fully used .Rate upside possible and average rate is 6000 per 10 sec . Second guy is half the rate .Aajtak makes the money rest is all breakeven.Digital AajTak adv model non subscription.Digital revenue should be 30 /40 cr. Currently it owned by tvtoday but run by living media .Only transfer of net profit which ranges between 0 to 3 cr. Digital business is in Investment mode.

 

4.India today inventory used is 13 minute can go to 16 minutes. Times now  is Rs 6000 per 10 sec.They get Rate avg is 2500. NDTV loosing revenue , hence redistribution of revenue. Hopefully they get the benefit 

 

5.New channel: speaker cost / distributor cost ( is normally 30 cr ) non entertainer . Not decided till trai order comes on distribution. To Expand inventory new channels.National channel cost  70/80 cr .Regional channel cost 30/40 cr with 2 year gestation ,They have advantage of content. Buy back is possible but only after expansion plan.Delhi AajTak and TEJ has scope to grow. Living media not loss making and merger not on cards . 

 

6.Sony was their agent nad they were part of bouquet. Now it has to be sold separate can't be bundled. Radio Sale migrated to phase 3 . Lockin gets over in march 18 .Allowed to sell after permission. Board so far not interested in radio.Regulatory hurdle over .Hence renewed and migrated by paying 80 cr for 15 cr.Will breakeven at operating level .

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

PSP Projects Ltd: AGM Notes

Oct 8 2017 11:00AM
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1. The company started in 2006 with a small capital of Rs 2 lakhs a proprietary firm and became private limited in 2008 and in 2017 became a public limited company via the IPO in 2017.? When company came with an IPO they were debt free and cash rich then why the IPO? As post IPO they shall now be able to go beyond 400-500 cr revenue execution as post IPO Bank Guarantees were lot easier and flexible. In a BG of Rs 100 cr they ask for 40% margin of which 10% is FD and rest 30% as mortgage.

 

2. The company is now capable of doing all works like civil, mechanical, plumbing, interiors & design build. So PSP is a one stop shop for all kinds of work which helps to get clients along with their repeat orders. Now with their fantastic execution track record many even MNC companies have done enquiries for project work. Some projects PSP can execute at par in terms of quality with likes of L&T and SP group.

 

3. Company is targeting newer regions within Gujarat like South Gujarat : work for a Ceat plant at Halol, for another company at Vapi etc. Also out of Gujarat Company is going selective and executing on orders from companies like: International Food and Fragrance Institute, MRF tower in Goa, Grasim Tower in Goa, Brigade Enterprises in Bangalore along with their GIFT City project.

 

4. Company proudly mentions that they received orders worth Rs 505 cr in Q2 FY17-18. These orders are like design and built for Zydus Hospital at Dahod, BSE Brokers Forum at GIFT City, Karnataka Federation Dairy in Madiya District, Delhi: Interior project work for BJP Kendriya Karyalay etc.

 

5.As on March2017 company had order book of 729crs+172crs as on June 2017 so total of 901crs out of which they executed Rs 155 cr so left with Rs 746 cr + Rs 505 cr won in Q2. So a total of Rs 1251 cr as on date. (Assume Q2 run rate of execution same as Q1 from this number). Company has lined up bid worth Rs 3038 cr for various type of orders which are in and out of Gujarat. Also from the IPO proceeds of Rs 151 cr to the company so far only 44 cr has been used for working capital and capex. Rest can still be used as per newer project needs.

 

6. To conclude the company is extremely well placed for solid execution, well capitalized and shall execute orders at healthy margin. Company is bottom lined focused and shall make sure they execute timely and earn good margins.

 

Courtesy: Parthiv( Inhouse research team member)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

If not Modi? Who else?

Oct 7 2017 7:55PM
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Annat Jain is the founder of Acropolis Capital Group, a private equity firm that invests in India. He writes:-

 

Recent weeks have witnessed an enormous amount of hand-wringing in the press about India’s economy. These articles share a common thematic trajectory: they start with a recitation of statistics that highlight a slowdown, lay it on the doorsteps of demonetisation and GST, and in the grand tradition of the blood-sport which is Indian politics, either use these statistics to settle personal scores, or, as in the case of the political opposition, use it to prepare oneself for 2019 with nervous glee. None of this hand-wringing is accompanied with any insight or solutions beyond the obvious.

 

The fox knows many things. The hedgehog knows one important thing.

 

In a now famous essay written when he was an Oxford Don in the 1930’s, Isaiah Berlin classified people into foxes and hedgehogs as a means of making a distinction about people and the different ways in which they confront reality. Foxes, according to Berlin, may know many things, but a coherent worldview is beyond their comprehension. The hedgehog, however, knows one great truth, and steadfast in its pursuit, remains unreconciled until he/she reaches it.

 

This parable is perhaps the best way to understand Narendra Modi and his actions surrounding the economy. Modi is the hedgehog who knows what India needs to do to become prosperous, but importantly, is also willing to act upon it.Indeed, PM Narendra Modi may be the only politician in contemporary Indian history who has undertaken structural reforms out of choice rather than, like our ex PM Narasimha Rao in the 1990’s, being compelled to do so.*

 

Structural reform is thankless: costs are borne upfront, and rewards come later. (The currency for this transaction is political capital, and Arun Jaitley has paid the most for his role as the able knight who is the face of such change.) For years, it was the very absence of these structural reforms that armchair foxes have bemoaned. Now that the reforms are occurring, the foxes are coming out of the forest, and unwilling to pay the price, claim that these are ill-timed, ill-conceived or ill-executed.

 

Through his decade-long executive leadership of one of India’s richest states, Modi knows what the foxes don’t: First, that there’s never a right time to make a hard choice, and second, the slowdown is the result of a fundamental fragility of the Indian economy baked into India’s economic foundation at its creation: the government’s overwhelming role in the economy.

 

Modi is seeking to eliminate this fragility by recalibrating the entire engine of India’s economic growth methodically: Jaitley’s increasing of the states’ share in the divisible pool of union taxes in 2015, digitisation/demonetisation of the economy in 2016, the GST in 2017, Piyush Goyal’s work in the power sector over the last three years, Nitin Gadkari’s ongoing work in transportation, all are transformative and quantifiable contributors to the structure of the economy, and designed to create a robust and higher equilibrium for the Indian economy from which it can propel itself higher.

 

That these reforms are happening without any taint on any senior politician of the government is in itself a first in India’s modern history. The republic was lucky to survive through years of pillage under the Congress, and if it were nothing else but just that the BJP is taint-free, we would still have much to be thankful for.But Modi’s toughest test is yet to come. Just as Modi fought the culture wars and reshaped our national discourse on identity and nationhood for all time, and just as how he is transforming India’s foreign policy through a new Modi-doctrine, he must now dismantle the greatest vestige of Jawaharlal Nehru’s and Indira Gandhi’s legacy: the socialist superstructure that is the curse of India. Only when he is finished, will he have succeeded in his undeclared personal ambition: to bury Nehru and Indira Gandhi forever.

 

To do so involves treating the economic organisation of a society not merely in transactional terms, but as a moral issue inextricably linked to individual rights and dignity, and moving wholeheartedly towards the only economic system that provides for such: a free-market system adapted to help those on India’s economic margins.In doing so, he would do well to reduce his reliance on ever wiser economic councils and bureaucrats, but follow his hedgehog instincts which have yielded such sharp results in foreign policy and India’s culture wars. (As an aside, I note with some amusement a lesson from my first class in economics with Professor Jagdish Bhagwati: “India did so badly in the 50’s and 60’s not because it had too few economists, but because it had too many!”)

 

This then, is the call to arms. In addition to a dogged focus on anti-corruption (a necessary issue for 2014 but insufficiently ambitious for 2019), Modi needs to speak to the country in civilisational terms about the manner of its economic organisation, and seek the mandate to put the nation on the path to double-digit growth for decades to come.In practical terms, and as a first step, it requires the sale of the government-owned banks and PSU’s in their entirety. Not re-capitalisation, not mere NPA-resolution, not partial-disinvestment of loss-making PSU’s etc. A complete sale. These are giant black holes that destroy capital, or at best, use it sub-optimally. Modi cannot rebuild a nation without removing the termites from its foundation.

 

By seizing the time still available in 2017-2019 (and perhaps for five years thereafter), Modi may still live up to his own revolutionary declaration of 2014: “Government has no role in business”. Modi may represent the last best hope for the Indian economy to achieve true greatness. If Modi doesn’t do it now, India will be condemned to this middling, snakes-and-ladder growth pattern for another several generations.If not Modi, then who? If not now, then when?The hedgehog knows.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

AGM Highlights of Lux Industries

Oct 3 2017 7:00PM
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• The revenue of the company was growing at a CAGR of 11.34% over the last five years. The proportion of revenues derived from premium brands increased from 3.90% in FY2013 to 9.25% in FY2017 which shows the company’s competence is enhancing portfolio premiumness. 63% of its revenue comes from northern, eastern and western parts of the country.

 

• Raw material cost as a proportion of revenues declined from 64.27% in FY2013 to 42.81% in FY2017.Lux strengthened its EBITDA margin from 6.29% to 12.39% over the last 5 years. Lux profit from every rupee is invested in brand spending and it has increased from 5.74% in FY13 to 7.76% in FY17.The company invested around an aggregate INR277 crores (around 8% of annual revenue) to strengthen its brand building over the last five years.

 

• The company continued to maintain ROE of around 30% over the years.The products of the company are exported to around 50 countries over the world largely comprising Middle East, Africa, Australia and Europe.In 2016-17, the company commissioned its Dankuni facility to manufacture 5 lakh pieces a day spread across 11.48 acres which had a capex of INR83 crores.

 

• The company has six manufacturing units across five locations in India– 1 in Tirupur, Tamil Nadu, 2 in BT Road, Kolkata, 1 in Dankuni, Kolkata, 1 in Dhulagarh, Kolkata and 1 in Ludhiana, Punjab.The company is ranked 1st in producing innerwear in volume terms and Indian exporter of innerwear respectively.The Dankuni manufacturing facility which was commissioned during the second quarter of the fiscal has achieved 78% utilization and projects it to increase to 85% by FY18. The facility accounts for 35% of its overall manufacturing capacity. The unit is integrated across the knitting, processing and cutting functions.

 

• Lux has a manufacturing capacity of 1825 lakh garment pieces a year (14 lakh pieces per day) across six manufacturing facilities.It enjoys 14-15% market share of the organized men’s innerwear market in FY2017.The company was awarded with ‘Star Export House status’ from the Ministry if Commerce and Industry.As on 2016, the size of the Indian innerwear market is pegged at INR15870 crore, where women’s innerwear market accounts for 60% share and rest by men’s innerwear

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Update from Source Natural Foods AGM

Oct 2 2017 7:00PM
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1. Company has began manufacturing 12 new company single herbs and these herb are to be used in developing other food and nutrition segments product. This new products lead to volume growth.

 

2. Because of Ayush Primium mark company able to secure order for end manufacturing. In past company has been focusing only doing job work.

 

3. Company's long term view is to cater large space including export market where opportunities are huge. Looking into this company's manufacturing plant operates international standard practice and certificate and registration. Company is also working for standardisations of ayurveda and recognising ayurveda as system of medicine worldwide to cater export market.

 

4. Company had already filed patent application for OJASVITA. Approval expected in this financial year.

 

5. Company is leaving no stone unturned to see that every aspects of retail opportunity to get across through. 

 

6. This year company's focus is to get maximum sales from existing products and establish OJASVITA as house hold main stream brand. 

 

7. Through marketing initiatives by way of sampling reaches to consumer across the India to increase sale of OJASVITA. Company's product Chocolate and malt chocolate drinks have seen great acceptance and recall from regular customer.

 

8. Company has very strong board of management have diverse quality in the area of marketing, finance, production, organisation building capability and in depth knowledge of the area in which company operate.

 

9. Company has developed enough capacity to meet future demand and capacity is also scalable.

 

10. Association with Sri Sri Ayurveda is great push for the Company. From this year onward sri Sri Ayurveda see aggression in market place. 

 

11. Going forward management expect much more quantum jump in volume growth as market is picking up.

 

12.  There are negative cash flow because of company expanding into Main stream FMCG company.

In short management was very confident to take small companies at respected position in long run and generate huge wealth for share holders.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Key Takeaways from Pokarna Ltd AGM:

Oct 1 2017 7:00PM
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1.Pokarna reported a PAT of Rs 69.70 crores, an increase of 36.11% YoY.  The EPS stands at Rs. 111.79.Co sought shareholders’ approval to sub-divide Equity Shares from FV of Rs 10/- to Rs 2/- .Co reported a 20.15% de-growth in the Granite segment and the Apparels segment reported a 11.35% growth in segment revenues for Q1FY18. Granite segment recorded profits of Rs. 32.91 crores and the Apparel segment reported a loss of Rs. 6.71 crores.

 

2.Despite the headwinds in the form of demonetization and challenging industrial scenario during FY17,company managed to report strong bottomline growth mainly on account of the management’s focus on profitability and high margins. The granite industry remained under pressure due to lower realizations and excessive supply. Co shifted its focus to the customized ‘cut-to-size’ segment where margins tend to be higher. 

 

3.In future plans, the management plans to expand the capacity of Quartz surfaces by 130% with an estimated investment of Rs. 325 crore to become the largest manufacturer and exporter of premium quartz surfaces. Co entered into an exclusive contract for supply and installation of premium Quartz surfaces with the best ready-to assemble furniture maker in the world, IKEA. IKEA has plans to open 25 stores across the country with first store being in Hyderabad with planned investment of Rs 1000 crore in each store with plans to increase their focus on the kitchen models. Currently Pokarna has begun working on the mock-ups in the Hyderabad store of IKEA which is set to open later this year.

 

4.When asked about the rise in the Chinese’ market share from 9% to 40% in the last few years, the management said that since this market was price sensitive China had the benefit of selling products at a cheaper price. However, they also said that Pokarna and the Chinese products have a different customer base and a different market for both their products. Pokarna enjoys the advantages of a strong Brand Value and repeat customers. Management said that the quality of Pokarna products is far superior than the Chinese products. Co continues to focus on innovation and new ideas.

 

5.Regarding the delay in starting their new facility, the management said that the land which was earlier allotted to them by the state government in Telangana is now being used for government purposes and hence they have to continue looking for a suitable land. Once the new facility starts the company has plans to breakeven in 2 years.Co continues to gain market share in the UK. Further, the company is in the final stage of acquiring a TFT Certificate of the Final Grade 1 which would result in increasing in acceptance in the European and the American Markets.

 

6.Post the expansion plans, the company’s peak debt would continue to remain at Rs. 320 crore. The current debt of the company shall be repaid in around 4 years and the new borrowings are to be repaid in approximately ten years. During the year, Co commenced operations in their new quarry ‘Creame Cashmere’ while the requisite approvals are sought from environmental ministry in respect of other 4 new quarries.Outlook for the granite business remains positive in the medium to long term. Heightened competitive intensity may impact volumes, realizations and profitability in the near term. Outlook for the Quartz segment continues to remain positive.

 

Courtesy: Jagdish bhai( Inhouse research)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

MRSS AGM Takeaways

Sep 30 2017 7:00PM
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1.Market big enough to support growth vision of company.  And it's growing at 15%. Confident of achieving 100% growth for next few years (organic+inorganicb2b).Confident of maintaining the 30% ebitda margins going forward. Gaining market share steadily from biggies like nielsen, gfk, ipsos. Traditional /digital share may remain 70:30 going forward for co.

 

2.Exploring airport biz (clients like delhi airport and changi ), agri space and IoT. Stressed on the need of inorganic growth going forward. Looking at atleast one acquisiton possibly every year. Acquisition candidates are small debt free companies which mrss can buy for 3 advantages - new verticals/skillset,geographical reach, client base. A possible acquisition candidate for next year already identified and is into airport biz (passenger satisfaction).

 

3.Market probe acquisition was done keeping in mind the geographical reach and new verticals. No successor to Mr. TR Rao (founder of mpa-77 years old) so MRSS got the Singabore biz at a throwaway price. Cost restructuring underway in mpa (reducing the officespace, tapping high margin fmcg and cons durable clients, etc,) to bring singapore margins closer to india levels - within 12 months. 

 

4.Market probe primarily into govt. contracts....now started pitching to private clients . Reiterated they want to be the largest independent market research agency in Asia in another 2-3 years (topline 150-200 Cr).Bonus shares 1:1 approved. Preferential issue 15000@500 to sarang approved.

 

5.Doubled remuneration for MD and Chairman. Women director shwetambari rao appointed. She is ex nielsen specializing in m&a. Aim to be dividend paying from fy18. Negligible effect of GST.Ratio of repeat business is increasing 

 

 

Courtesy: Shiv(Inhouse research member)

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

KTIL: What's going on?

Sep 29 2017 7:00PM
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KTIL is deep in debt because of the loans taken for the Kesar Multimodal Logistics project. Everything hinged on how much and how quickly this facility could add to the top and bottomline of the company.Chairman AS Ruia admitted at the AGM that he was unable to make any projection as to how much the company could earn during the current financial year. The project mainly depends on revenues from handling the goods rakes rather than the warehousing business. One of the speakers pointed out that KMML would earn around Rs 6 lakh per rake handled by it. Last year 90 rakes were handled by this facility.

 

Management could not forecast how much this would go up. Mr Ruia said the situation is very fluid at Pawarkheda. Business scenario has changed after soyabean which was produced in large quantities in MP was not moving by train. However the ban on quarrying in different parts of India has resulted in demand for sand from MP which was being sent by train. IMHO the big risk here is that environmental concerns could result in sand quarrying being halted in MP as well which would be a major setback for KMML.

 

Despite, the facilities being constructed more than a year ago, the management is still trying to convince customers to use the facilities at Pawarkheda. Trident was spoken of as a customer which was using the rail transport facilities. Other companies are being wooed but most are still resistant to shifting from their present arrangements.Ruia said management rejected an offer by an international cargo carrier to turn KMML into a sole service provider for itself.

 

Management has shelved plans to set up a food processing park at Pawarkheda and will use this for warehousing instead. I think this is another big setback because loans are available for food processing park at lower interest rates.Second phase of KMML has been postponed. No further progress in setting up new liquid terminal facilities in Kandla.Meanwhile interest on debt is ballooning and the revenues and profits from the core liquid terminal business is under severe pressure due to competition. In the chairman's speech Mr Ruia said existing clients at the liquid terminal facility were resisting price increases and were asking for price to be reduced.

 

This was reflected in the first quarter results announced shortly after the AGM.Unlike in the past, the management released the results after the AGM as apparently it wanted to do control the damage. I was told by officials that the board meeting was extended and would continue post the AGM.Meanwhile the Kilachands, the company promoters, have moved backstage leaving the management to the board of directors led by chairman A S Ruia . He admitted as much at the AGM that he was holding the fort because of his close ties with the Kilachand family. He is the oldest surviving director of Kesar Enterprises and KTIL which was demerged from the former some years ago.

 

None from the Kilachand family were on the dais at the AGM though Mrs Khiladhand is on the board of directors. Rohan Kilachand was among theaudience. He had quit as Executive Director to pursue higher studies.He is a non-executive director now.Some of the share-holders who attended the meeting wondered whether the profits from the terminal business would suffice to pay the interest incurred on the loans to set up KMML. Some even felt that KMML may have to go in for debt restructuring.With uncertainties mounting, I have chosen to play defensive and protect my capital. Hence the exit.

 

 

Courtesy: Shiv(Inhouse research member)

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

The Byke Hospitality: AGM Notes

Sep 28 2017 4:45PM
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1) Gst has caused problems in recent quarters but company will benefit, by a lot going forward.

 

2) Opened hotels at 3 new locations-Udaipur, Jaipur,Mumbai(Already known fact via con-call, but Mumbai hotel not yet functional-till date due to issues in OC-(I think occupancy certificate))

 

3) Quarterly results declined due to expenses incurred in their new hotel(Delotel-Mumbai) but revenue flow has not yet started from it. And secondly due to the problem which they faced at hotel Vijoya in Puri in previous quarter. They had canceled the lease agreement with the hotel owner, as they found out that the owner was having a criminal record. Now they have strengthened their lease policy so as to avoid such situations going forward.

 

4) Revenue breakup stands as same reported in AR, but a decrease in Room catering segment because of gst. It has been hit worse among other segments.

 

5) Their online portal will come soon , they are working on it, just delayed because of work related to GST.

 

6) Management told that they are ahead of their scheduled plan on expansion and will complete them before time. All funded by internal accruals.

 

7) No plans on equity dilution going forward , as they are self sufficient by cash(for capex requirement ) and 2nd being asset light.

 

8) No plans for loyalty or customer membership, as management believes that they are just for companies benefit and no customer will ever benefit from the same, hence management does not want to provide any membership plans/packages going forward. On the contrary discounts will be offered for shareholders.

 

9) Currently having 65% of occupancy rate and ARR-Rs3700

 

10) Going forward management has planned to lease only those hotels which have average 50 rooms.(Below 50 room hotels are not profitable for byke)

 

11) Management said that at current point of time they have repaid all of their long term debt and are standing on 0(zero) long-term debt.

 

12) They said that there are nearly no competitors to us as those who have copied our business model are currently in loss. This is because Byke only caters rooms in peak season where as other do it for full year.This is where we stand out and will continue to run ahead of our competitors as we are the first to implement this business model in India and also successful in it. We understand our business very well than any body else. 

 

Courtesy: Rushikesh( Inhouse research)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

AGM note of Force Motors Ltd

Sep 25 2017 6:00PM
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Key takeaway from the AGM-

 

1)FY 17 sales volumes were affected by a) demonetization b) Change in emission norm from BS-3 to BS-4 c) GST implementation.

 

2) Company has planned a capex of Rs 1000cr over next 2-3 yrs on programmes relating to Electric Vehicles, technology upgradation from BS-4 to BS-6, new product developments.

 

3) R&D as a percentage of sales to increase from around 3% of sales to 7-8% in next 4-5 yrs.

 

4) Management is trying to reduce raw material consumption to sales by technology upgradation and innovation.

 

5) Currently upgradation of machiney and equipments is taking place across all the plants.

 

6) New platform of existing products to be launched, Tractors in Q1FY19, Trax- Q2FY19, Traveller in Q1FY20.

 

7) Management continue to explore new business opportunity with both new and existing clients like BMW & Mercedes.

 

8) Force Motors first Electric Vehicle is under trial run. Management highlighted that its pre-mature to spend large capex on Electric Vehicle plant, capex will happen more at the R&D level.

 

9) Electric vehicles has around 400 parts compared to around 1000 parts in a car now, may effect auto-ancilliary companies in long run.

 

10) Management sounded confident in the growth in the engines business. Luxury car segment in India is at a nascent stage and has lot of scope for growth.

 

11) Worldwide people are using more of shared mobility which may have an impact growth of passenger car segment.

 

12) The company plans to build a dedicated facility at existing premises of Chakan for producing engines (for power generation & rail application) including spare parts for Indian & global market for Rolls Royce under the recently entered Joint Venture.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Notes from Mayur Uniquoters 24th AGM

Sep 24 2017 9:25PM
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1..Footwear segment (35-38% of rev) which was sluggish in FY 17 was further hit by DeMo - things are improving & this year should definitely be better than last year with double digit growth. Auto OEM (both domestic & exports) is looking better than last year as well - Mayur has signed up with 3-4 new customers & supplies for 13-14 new car models - difficult to put a number for additional revenue at this stage

 

2..PU Plant - Land has been purchased in Gwalior, MP for the same - expect to begin construction from Aug-2017 - expect to start trial run by Dec 18 - looking to start with 1-2 lines & would gradually scale it to 6 lines depending on demand.

 

3..Mysore plant - Given that almost 80% of Mayur's domestic customers are based in south - it's looking to start a production facility in Mysore - Land should be finalized within a couple of months for the same,construction should take another 12-15 months - expects 20-25% growth in biz just by being near to the customer - more flexibility / lesser time for availability of goods / lesser need for stocking at customer's end. 

 

4..Customer addition - Close to signing mercedes as a customer; expects to close the formalities by Dec-17 but revenue would flow from mid-FY 19 only.Planning a capex of Rs 150 crs for FY 18; 30-35 crs should be eligible for TUF subsidy; no equity raise planned.

 

5..PWC has been appointed as stat auditor from this year. Consulting firm (Most probably EY) has been hired to further improve the processes using TQM/ TPM.Looking to beef up & professionalize top mgt by hiring an HR head & COO.

 

Courtesy: Ankit Sharda(Our inhouse research group member)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Mercator ltd: What should you do with it?

Sep 23 2017 8:40PM
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From what I understand, the company has huge cash flow problems - even to the extent of delayed salary payments. Operations are sustaining just on a day to day basis. The closing down of the Singapore unit came as a little breather. However problems continue to loom. Its operations are severely stressed. Banks are not extending further credit to the company in the event of payment defaults.Stock prices had gone up on account of private placement - from the levels of 22 rupees odd, to the current 40. The run-up of the markets has been rather sweet to the company. 

 

Do have a look at number of management exits over the past one year - rather alarmning. Management is arguably weak and primarily family run. They have had a history of having differences with and intolerance towards professionals. The company is run mostly by the senior Mittal and his two sons - Shalabh and Adip.Kiran vadiya is the only apparent professional there, who was roped in from JBF recently. The head of the shipping division - Captain Kowshik also recently quit. 

 

A surge in coal prices is one thing that can do some good to the company - though not a convincing enough reason to buy a stock of this pedigree, especially when you have so many other options in the open out there.Might think it to be a biased view, but would suggest to go through the numbers and not rely on chairman's prospects. It's his job to sell his company to us. 

 

Markets arent always rational and stock prices can go here and there, but its a touch-me-not company in my opinion. Mr Kapil Garg was advising the company till last year. Now that association is history too. He's presently running a company called Oilmax and its listed subsidiary - Asian Oilfield. Do have a look over that company rather if you're looking to bet in somewhat same space.

 

Courtesy: Mridul(Our latest prized addition to our inhouse whatsapp ShareBazaar app research group). Note exclusively meant for ShareBazaar app.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Fluidomat Ltd: Company Meeting Update

Sep 20 2017 7:00PM
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1.Fluidomat Ltd. makes Fluid Couplings.Fluid Coupling is a Power Transmission Product.It is a Capital Good & not a consumable.Fluidomat has supplied more than 900 Scoop Control Couplings and several thousand constant fill fluid couplings on variety of applications in all sectors of industry including Coal base Power Plants, Steel, Cement, Paper, Chemical & fertilizer industry, PetrochemicalIndustry,Underground & Open Pit Coal and Mines, Harbor Handling and Nuclear Power Generation Plants in India and Abroad.Majority of the Revenues of the company are from the Power Sector.Sales growth of the company is dependent upon the Capex in these industries.

 

2.Market Size is Few hundred crores in India and several times more internationally.Huge export potential for the company.Main thrust is on the Domestic Market, though the company has expectations in Australia, Indonesia, Malaysia & Brazil(from the mining sector). The company has appointed dealers in these geographies.

 

3.Clients are ABB, BHEL, Braithwaite, Burn Standard, CIMMCO, Chemical Construction, DEMACH, DCIPS, ELECON, EPIL, FFE, Fuller KCP, Flakt, Flender, HEC, HDOL, HSML, INDURE, Krupp, Kirloskar, Kraft Engg., L&T, MAMC, MBE, Metso, MECON, Naveen, Oilex, Penwalt, Promac, Reitz, Sayaji Iron, Techpro,Thermax, TLT, TRF, Walchandnagar Industries, Warman etc.

 

4.Approvals from the Consultants:Fluidomat Fluid Couplings are approved by all leading industries and consultants in the country. The consultants include ACC, BHEL, Birla Tech Services, DCPL, Desin, HOWE India, Holtech, Jacobs, MECON, MN Dastur, NTPC, Tata Consultants,Tata Projects, Samsung, Doosan (Korea), Hyundai (Korea), Alstom (France), Sulzer (Germany) etc.Its also got a tie up with flow serve (Spanish company).They too have requirement for these couplings.Price Range of company products = Rs.12,000/- to Rs.80 lakhs.

 

5.Competitors are Premium Energy Transmission Ltd., Elecon Engg. Ltd. & Voith (German). Apart from Voith,all others have rented tech.Main competition is from voith.Voith’s pricing is 3 to 10X of fluidomat for same products.

 

6. Service cycle:FC can last for 25-30 years also,typical replacement cycle is 10-12 years.In government departments specific budgets are allocated,hence they tend to replace their couplings earlier at 5-6 years as if these budgets are not used they are extinguished.There is no unorganised sector in Fluid Couplings due to the hitech nature of the product.Also Fluid Couplings are very crucial products and reliably is a big factor. If it fails then the whole plant comes to a standstill.

 

7. The company does not require much capex.Land and building  are excess.It can grow to Rs80-100 Cr turnover by adding only CNC machines.Capex could 1-2 Cr per annum.The company has started manufacturing FCs for fans used in boilers. It is now supplying the same to BHEL. Voith is the only competitor in this segment. The company entered into this segment five years ago based on indigenious R&D.

 

8.Fluidomat has also concluded designs for less than 110 MW boilers.It will enter this market soon.Working capital requirement for company's business is 3-4  months.Cycle is long as until the entire order is ready inspections don’t start(Debtor Days thus being 100).The company does not face issues on account of bad debtors as it supplies very critical equipment.The company is vertically integrated.It has its own foundry and fabrication facilities.

 

Courtesy: One of our sharpest microcap predator Keshav Bhai. Note exclusively meant for ShareBazaar app. The ShareBazaar inhouse research team is a strong battalion of 1500 members now. Expect more amazing contents in the coming days. Happy investing folks.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Atul Ltd: AGM Notes

Sep 19 2017 7:00PM
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1.Chemicals shall stay an integral part of our economy as India has 638000 villages and more than 22% of population is still below poverty line. So with government policies focused to improve the overall economy structure Chemical industry shall play a vital role and so shall your company.It has started a major focus on retail markets and brand building. For now around 150 cr of sales in this segment without any profits or slight loss but this shall change with scale going ahead. Retail can be big for your company in Agrochemicals and Polymers.

 

2.Despite a capex of around 175 cr Company reduced debt from Rs 300 cr to Rs 150 cr. Maintained a D/E of 0.08. Focus shall remain on efficient working capital cycle.Capex projects under stabilization stage and shall reap fruits from Q3/4 FY17-18.Missed the Rs 4000 cr revenue target but confident all the major capex of Rs 600-700 cr shall help achieve this goal within next 2 years. Some product approvals from customers take slightly longer so also a delay in seeing fruits of capex.

 

3.Except for Atul Brazil rest all subsidiaries grew steadily.JV with Akzo Nobel for production of monocloroacetic acid (MCA) in India shall be one of the best facilities in the world for which the raw material shall be supplied by Atul and good part of the finished product shall be consumed by Atul for Herbicide 2,4-D , rest shall be sold or exported by Akzo Nobel. In terms of project size it’s a 2 phase capex 1st phase 30,000 ton then 2nd phase 30,000 ton. Current only other capacity in India is of max 10,000 ton. So this shall be huge & biggest plant in India. 50:50 JV.

 

4.Spent Rs 38 cr on R&D for improvement of existing products and new product development. But this has a long gestation period. Contingent liability figure in the AR shall reduce this year.Weak Q1 FY17-18: Raw material inventory was of higher cost then end product prices like Paracresol went down which in turn impacted margins of aromatics. Prices of crude derivatives like Toluene and Benzene were not entirely favorable along with currency headwinds impacted the margins in Q1. But Q2 shall show improvement and Q3/4 shall be a strong pick up. Also slight impact due to GST& stabilization issues. 

 

5.China a main competitor in Paracresol type products but costs of manufacturing in China inching up so that shall help stabilize the prices and thus margins. Plus your company has focused a lot on zero discharge policies and environmental factors so that shall go a long way to help. Environment related closures in China helpful to Indian companies. Current capacity utilization at 60-65% which shall go up going ahead and aim to be at 80-85%.

 

6.Management aims to keep margins at 20% + or – 3% going ahead. Also margins shall be stable as the company reached close to 4000 cr topline and full utilization of capex takes places. Why AMAL was not merged? Amal had Carry Forward loss of Rs 30-40 cr. So to take benefit of that loss plans for merger. But now Amal is doing well on its own and has already reduced Rs 10 cr of Carry Forwarded loss so better off on its own.

 

Courtesy: Our inhouse research member Parthiv Bhai. Note exclusively meant for ShareBazaar app.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Cupid Ltd: AGM Summary

Sep 18 2017 11:35AM
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1.They reappointed their MD and executive director, management looks optimistic to maintain their margins of 38-40% going forward. Q2 might be flat or below average but Q3 and Q4 (Fy18)will be good(on account of one gov order shift from Q2 to Q3). Pramoter stake decreased by 3.6% in last quarter on account of personal use by chairman's family(Bought new house for their children)They are expanding to South Africa in next 3 yrs, setting up a new plant. Would require 14Cr capex for the same and in return they would get 50% back as royalty.

 

2.Currently they are into 100%(Revenues wise) B2B business and are planning to shift their focus to B2C(Goal to achieve 70% B2B and 30% B2C in a span of 5 years). This is being done so as to mitigate and lower the risk of future order flow- like tender\order from government might dry out in future or is very much regulatory business right now, hence due to this company has made this decision.

 

3.Pat might be impacted for next 3 years as all the resources have to be supplied to the new South African plant from here, but once the production starts(will start in 3 years), revenues will increase.

 

4. Company is doing many promotional activities right now so as to increase their B2C business which according to the management will slowly increase. Promotions are currently being done in almost all metros-mumbai, pune, haryana . 50 Distributors have been appointed currently for quick growth in B2C business.According to the management B2C business shift is the long term survival plan, both market and competition wise.

 

5. They currently have 4 main competitors but management has told that all the companies have higher production cost and cupid is the only company which produces the same quality products at the lowest cost.Current order book is of 103Cr in Fy18, and orders still coming in, they are also expecting an order from Indian government soon.Any capex requirement (if any)will be for promotional purpose and for the new South African plant.

 

6.They are also planning to acquire a small pharma company which meets their requirements- like is currently producing a product which is related to female empowerment and is related to their main product line and at the same time will have good margin growth in future. They are still searching on this front.Currently 75% of the total Indian government order are given to HLL(their biggest competitor) and only 25% to the private companies. Last year all the private companies have challenged the government that this is not fair. Still the case is pending, and company is expecting a positive decision on this front soon.

 

7.New products are ready to be launched, but will be launched not before march fy18. These products are- Hand sanitizers, vaginal vipes, second generation female condoms. All these products have high margin 35-42% .Currently having 3 years contract with UNFPA from heron to supply male and female condoms globally.Company has seen some declines in order flow(from US) due to trump's play.

 

Courtesy: Rushikesh(one of our youngest whatsapp sharebazaarapp research group inhouse member)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Sanghi Industries Limited: Management Interaction

Sep 16 2017 7:00PM
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a. Management expects volume growth to pick up in 2HFY18, led by pick-up in infra spend due to upcoming elections in Gujarat. 

 

b. SIL will continue to see strong volume growth, led by higher sales to Mumbai market by way of coastal operations post the acquisition of two ships from China. 

 

c. SIL expects profitability of its core units to improve meaningfully, led by improved utilization of present operations on account of increased sales to Mumbai market. 

 

d. Commencement of WHRS of 13MW by FY18-end would further reduce power and fuel cost. 

 

e. Significant savings are likely to be achieved as SIL plans to change its product mix to 45% PPC as against current levels of 35%. 

 

f. SIL is planning to increase its capacity from current levels of 4.1mt to 8.2mt by FY20 at a capex of Rs 12.5b of which Rs 8b will be through debt and Rs 4.5b through internal accruals.

 

Courtesy: Jagdish bhai( Our inhouse whatsapp research group microcap predator)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

6 facts which you should know about Corporate India

Sep 15 2017 7:00PM
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1.Pace of construction of rural roads jumped to average 117km/day vs 97.29km last yr. Target to construct 57K km of roads in FY18 at average 156 km/day.

 

2."Stressed Assets Higher Than The Net Worth Of Indian Banks" Says McKinsey. Some of the PSU banks are bound to go burst with pathetic asset quality.

 

3.There's Housing Crisis(Pakka houses) in India. Estimated shortage of appox 19m households. If not tackled, approx 889m Indians will live in slum by 2025.

 

4.Mission Ganga Cleanup:Sewage from 118 town:4800mn ltrs/day. Functioning capacity to treat sewage:1017mn ltrs/dat.

 

5.India Employment Imbalance: Number of Jobs to be created in 2017-2022:6.5mn per year. Number of people entering workforce:23mn per year

 

6.Before IPO: Promoter has vision and investor has money.After ipo:Promoter has money and investor has vision 

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Denis Chem Lab: Annual Report Snippet

Sep 14 2017 7:00PM
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NEW PROJECTS - The Management has envisaged an increased demand for various I. V. fluids in India in the future considering the development of health related instruments and steady population increase.

 

Addition of 100 ML products to our ‘Aquapulse’ Brand:We are in the process of implementing a project that will add 100 ml Eurohead products to our portfolio. Based on feedback from our Marketing Team and due to the fact that our Eurohead 500 ML was received well we are confident of expanding our reach in the Euro head Category with this project.We expect the project to be operational in H1 FY19.

 

Our Competitive Strengths - Diverse Product Portfolio -Wide sales, marketing and distribution network -Wide range of fill volumes-Experienced management team and well qualified senior executives Adoption of superior technology for manufacturing sterile injectables. Our contract manufacturing and institutional sales business stabilizes our revenue stream -Targeting new domestic and export markets -Wide range of Sterile Injectable Products. The recent growth of Pan India hospital chains presents a significant opportunity for us to cater to their infusion requirements via our ‘Aquapulse’ brand.

 

We expect to grow at market rates in the near future. The various cost cutting measures will also lead to expansion in operation margins. We also have had success in penetrating high end customers such as Pan National hospital chains. Expansion in the higher end of the value chain will lead to expansion in margins also. We have also begun the process of expanding and consolidation of our product portfolio to optimize our throughput. We expect all of these to have an impact in H1 of FY 2019.

 

RIGHTS ISSUE OF EQUITY SHARES - In view of expansion of the existing facility to manufacture LVP in Eurohead bottles and to meet General Corporate Purposes, the Board of Directors has decided to raise funds up to 18 Crore subject to receipt of necessary approvals from statutory authorities,as applicable, by way of issue of equity shares of the Company to its shareholders on a rights basis.

 

Our Take: Company is on an inflection point and with recent 5X addition in net block it's well placed to enter in the top league. As the above note says it's further expanding which speaks about the demand in this segment.The Annual report snippets are self explanatory. This is one stock to watch out for the next 2-3 years. Rights at 84rs looks very compelling for the shareholders.

 

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Key Highlights from Avenue Supermarts (D’Mart) AGM

Sep 13 2017 7:00PM
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•D’mart is raising Rs.10bn by way of debentures as the company can use the IPO funds of Rs 3.6bn for construction and purchase of fit outs for new stores but cannot purchase land from that money, D’mart believes that due to stress in the real estate market it can use this opportunity to buy land for future store expansion. 

 

•Store opening in Q4 at 14 stores was accelerated as bunching of store opening happened in Q4, the construction of stores usually slows down in Q1 and Q2 due to monsoon because of which store opening in Q4 always remains high. 

 

•Of the Total 131 stores 113 are owned and balance 18 are on lease.D’mart is looking to open 20-25% of the new store addition in new geographies, though these store in new areas are margin dilutive, however D’mart believes that it is necessary to open pilot store in new areas for increasing geographical reach. D’mart also believes that since these stores in new areas are very few it won’t be margin dilutive to a great extent.

 

•D’mart has opened 40 D’mart Ready stores, the avg store size is between 200-500 sq.ft and all of them are on lease. Dmart ready is right now run on pilot basis and is only operational in Mumbai. The initial traction from these stores has been reasonable as D’mart is experiencing initial Inertia from consumers in the pick up model.

 

•D’mart has started private label in FMCG space in Coffee and Toilet soaps, however the contribution to overall sales in negligible and is a non focus area. GST impacted sales for 15 days of July however business is now back to normal, at present the company is not able to quantify any positive benefits from GST

 

Courtesy: Our whatsapp inhouse research team.

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Centrum Capital: AGM NOTES

Sep 12 2017 6:50PM
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1.FOREX: Revenue break-up 50% airports & 50% non airports. Overall growth of 18-20% easily manageable for a long time. Forex is a highly underpenetrated business, having huge appetite for growth & many capital providers for that business. India has around 23 million travelers and in over 10 years around 100 million shall travel. So a massive upside in this business. Also the quality of PE money that we got in forex business and they tend to invest for 6-7 years before even thinking of an exit.

 

2.HFC: Only 2 states for now & 3rd would be Maharashtra by end of the year. Even if the company can focus on these 3 states a huge scope for growth in AUM over next 5 years. The company just needs to execute its strategy well. Target market shall be tier 2-3 cities with loan size of Rs 3-15 lakhs. Also relatively less competition as loans also given to non salary class to whom banks and other financiers are reluctant to lend.Major part of these markets have unorganized lending practices.

 

3.INSURANCE: For now company with its network of clients is better off as a distributor of various insurances of health, life, general etc through many providers. It’s a business with very good growth potential and has decent fee based income.

 

4.MFI: Company is looking to expand its book in MFI via an inorganic route and then scale that business.Won’t overpay but look for deals in around 1-2X P/B range. Digitization would be key to growth of all business verticals of Centrum. Company prefers to be a technology company selling financial services.

 

5.If GDP can grow at 6-7% Centrum is very confident to grow its lending business by atleast 3 times the GDP growth rate along with maintaining the quality of the book. Huge untapped market in rural non salaried class. Aiming at huge market share from unorganized lending to organized. It’s just that a lot of focus of the company would be on proper execution of that strategy. Only 22% of MSME is financed by formal institutes.This covers 40% of GDP & 45% of exports market. So Centrums strategy to start with SME lending is to eventually move to MSME lending via a solid digital platform.

 

6.DEFENSE LENDING: See a huge scope of growth in this vertical over next 5-10 years. Company is working towards NSE listing.

 

Courtesy: Parthiv Shah(our inhouse whatsapp group research predator)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Highlights of Pfizer AGM 2017

Sep 10 2017 7:00PM
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1. FY17 earnings were impacted by Corex discontinuation in Dec'16 (FDC ban), NLEM related price cuts (negative WPI of 2.7% & revision of ceiling prices), new additions to NLEM (Zosyn) & transfer of 4 brands back to Abbott.Sales from newly launched Corex-T (Codeine+Tripolidine) is expected to be ~ Rs 350 mn in FY18E (Pfizer guidance).

 

2. Old Corex (Codeine+CPM) sales was Rs 1.86 bn in FY17 (was discontinued in Dec'16). For FY16, Corex sales were at Rs 2.45 bn.Two key brands from AstraZeneca viz. Meronem (licensed from Pfizer Inc, sales of Rs 1 bn in India) & Neksium (acquired for Rs 750 mn from Astra, sales of Rs 250 mn) would help to mitigate Corex discontinuation impact in FY18E.

 

3. 18% of current sales for Pfizer come from product under price control (NLEM). These include key brands like Folvite, Mucaine, Amlogard, Minipress, Zosyn.Vitamins and Minerals segment (key brand, Becosules) contributed ~ Rs 2 bn in FY17.

 

4. At its Goa plant, the company manufactures hormone and contraceptive products. Remaining products are outsourced from 34 contract manufacturers in India.Deal for sale of Thane land has been signed and received Rs1.5 bn as advance.Going ahead the company plans to launch 2-3 new products a year.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Key Takeaways from Heritage Foods AGM

Sep 9 2017 7:00PM
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1..Dairy division accounted for 70.76% of revenue and 23% from value added products.One major event in the last FY was the slump sale/Demerger of the retail business from Heritage Foods. The decision to restructure was in line with the decision to focus more on the diary segment.  *Retail business was then sold to FRL for a consideration of Rs 295 cr in an all-stock deal. Heritage Foods in turn was allotted 1,78,47,420 shares of Rs 2 each.* 

 

2..Heritage Foods acquired dairy business of Reliance Retail Ltd (RRL) in a slump sale. This acquisition enables the company to geographically diversify into States like Punjab, Uttarakhand and Rajasthan and to gain strong synergies in markets like Mumbai and Delhi-NCR. Breakeven of Reliance Dairy unit could be around Q4FY18.

 

3..Co set a mission of reaching the Rs. 6000 Cr revenue by 2022, and aims to enhance the contribution of value added products from the current levels of 24% to 40% over the next five years.Co expects to clock a CAGR growth rate of around 25% in the next five years to reach the revenue target.

 

4..Over the next 5 years, Co plans to set up five processing plants each with an investment of Rs. 20-30 Cr, which would enable the company to handle 30 lakh litres of milk per day by 2022 as against 18.90 lakhs at present.Co plans to foray into beverages segment with the launch of Ready to drink Tea to widen its’ portfolio of value added products and brighten its’ growth prospects. 

 

5..Co recently set up a JV with Novandie SNC, France with an investment of Rs 16 cr. to manufacture and market fruit and flavoured yogurts and western style desserts.   Commercial operation of this JV is expected during 2018.Management indicated that it has a capex of Rs. 100 Cr every year till 2022, including 5 green field facilities, to achieve its ambitious target of Rs. 6000 Cr revenue by 2022.

 

6..Co proposed to achieve revenue of Rs. 6000 Cr by Geographical diversification, Deeper penetration into Tier-II/III towns,  Creating more capacities, increasing manufacturing, marketing in value added segments and acquisitions/inorganic growth opportunities.Co is rebranding itself, and has set 1% of revenue as marketing expenditure.

 

7..Curd will continue to remain highest value contributor in Value added segment in the medium term as well, and company has plans to penetrate into untapped potential markets for Curd.Co said that Milk procurement would likely improve from October on account of reasonably good monsoon, and currently *Heritage sells its’ products with a premium of around Rs. 1-2 to its competitors.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Prima Plastics AGM Update

Sep 8 2017 7:00PM
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1. Company into design and manufacture of plastic moulded furniture like chairs, baby chairs, dinning tables, stools and teapoys in a wide range of attractive colors. Current manufacturing facilities at Daman, Ernakulum in Kerala and Ongole in Andhra Pradesh.

 

2. Established a subsidiary Prima Union Plasticos SA with 90% stake in Guatemala, Central America with a capacity of 3000 MTPA. 1st phase with a capacity of 2250 MTPA commenced production in March 2017. New distributors added. High growth in FY 19 with target turnover at Rs 20 crores as against current turnover of Rs 10 crores. New machines to be added in due course.

 

3. Capacity at JV Prima Dee-lite Plastics SARL Cameroon, West Africa increased from 4500 MTPA to 8500 MTPA. Enhanced commercial production started in Jan 2017. Good demand from Africa and export to nearby countries.Commercial production at the new Greenfield plant in Ongole, Andhra Pradesh with a capacity of 1500 MTPA started in Feb 2017. This would cater to states like Orissa and others*

 

4. Focus on more expansion in India specially Northern India & abroad. Focus on growth in deep pockets within India. Small CAPEX of around Rs 7 crores in FY 18. Domestic capacity at 11500 MTPA with 80% capacity utilization, Cameroon at 8500 MTPA and 3000 MTPA in Central America.Overall growth of 10 - 15% in turnover in medium term. 30 - 40% growth with EBITDA of 29% achieved in Africa to be sustained in future. Exports at around Rs 17 crores out of total turnover of Rs 88 crores in FY 17*

 

5. New products like crates using roto moulding manufactured from Ongole plant. Scope for manufacturing of furniture, ice-box, road barriers, water tanks etc. in future. Orders for supply of garbage bins under Swachh Bharat Abhiyan (SBA).Walmart has approved Company’s chairs which are being supplied at a particular store. Repeat orders given to the Company. Possibility of supply to other stores and locations*

 

6. Increase in orders from government institutions with orders worth approx. Rs 5-6 crores from government institutions in Ahmedabad for regular chairs. Orders under SBA and government institutions in addition to current order book.Consolidated Sales target for FY18 Rs 150 crores and growth of 25% in FY 19 against Rs 127 crores in FY 17*

 

7. Export sales in USD except those in EURO in Africa. Marketing on local level through radio channels etc. during festive season. Challenges faced due to demonetization.No effect of GST as tax rate at 28% in line with pre-GST tax liability except in states where VAT was less as compared to current taxes under GSR.

 

8. Shift from unorganized to organized sector possible owing to GST. Almost all dealers GST compliant. Organised dealers started pickup in July'17 post GST and market growing.Restocking to being in Q2 FY 18.Logistics major cost component.Plastic products a localized market.Major competitors being Neelkamal, Wimplast and Supreme Industries.Debt of around Rs 10 crores as against cash balance of Rs 9.2 crores.

 

Courtesy: our whatsgroup inhouse research member the genius Vishal kothari.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Power Mech Projects: Concall Updates

Sep 7 2017 7:00PM
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1. Strong 1QFY18 closing order book of Rs 41bn with ~27% from international market. Consolidated revenues for 1QFY18 stood at Rs 3,584mn (+10% yoy), consolidated EBITDA was at Rs 460mn (+10% yoy) and PAT at Rs 215mn (+27% yoy).Order inflow for 1QFY18 remained strong at Rs 7,130mn which led to strong 1QFY18 closing order book of Rs 40,620mn. Out of total order book, international orders are of Rs 11,000mn (~27% of total). Out of international orders of Rs 11,000mn, O&M orders are worth Rs 3,000mn and rest is ETC.

 

2. Out of total order book of Rs 40,620mn, ETC order book is at Rs 22,000mn, civil order book is at Rs 9,400mn and O&M order book is at Rs 9,220mn.Domestic ETC business remained very low while international ETC business is picking up with projects coming up in Nigeria and Bahrain. The company is continuously tracking opportunities in domestic ETC business.

 

3. Debt for 1QFY18 is in line with 4QFY17 number. There is good development on working capital side; uncertified revenues of Rs 2.0bn in Mar’17 have come down to Rs 1.6bn in Jun’17 and those customers have gone for certification due to GST. For FY17, Noida workshop contributed Rs 50-60mn of revenues and the company is targeting Rs 300mn of revenues from it in FY18E. In 1QFY18, Rs 40mn contributed by Noida workshop.

 

4. The company is targeting Rs 25bn of order inflow for FY18E. And revenues growth guidance is ~15% for FY18E. In FY18E, the company should receive Rs 800mn of retention money back and there will be addition of Rs 550mn so, retention money should come down by Rs 250mn.

 

5..Looking for opportunities beyond power sector. The company has looking for opportunities beyond power sector. One such diversification is Railways in which the company could get orders worth Rs 2,600mn and project is going well. Apart from that, the company got one project in T&D sector worth Rs 780mn and will go selective it that sector.

 

6. On the domestic side, the company is focusing on the Oil & Gas sector for ETC and Civil works. All the Oil & Gas projects need to be converted to Bharat 6 standards from Bharat 4 standards by 2020. These will be huge opportunity going ahead and the company is trying to qualify for the business.

 

7. On the FJD business side, 122GW of projects have been identified for FGD and out of that tenders have been called for 27 NTPC projects which has installed base of nearly 21GW in 2 lots. These FGD opportunities will come up and on each unit it can be of Rs 500mn-Rs 700mn. The company will target couple of FGD projects this year and it is in discussion with one Spanish company for partnership.

 

8..Planning restructuring of the company with 7 Strategic Business Units (SBUs). The company is planning restructuring and simplification of business to grow further. Power Mech has two focus business areas: (i) Industrial Services: Operations & Maintenance and reconstruction of power plants for both domestic and international markets. (ii) Construction: This will include ETC and Civil construction. Civil construction to be further divided into (a) Power related Civil and (b) Non-power related Civil. Non-power related civil will include Railways, Roads, and Irrigation.

 

9. On the electrical vertical side for T&D, the company will be doing 11kV to 33kV to 66kV to 110kV to220kV up to 400kV where there is no qualification and looking for domestic and foreign partner for work.

 

10. On the International overseas business, after Middle East, the company is planning to expand into Africa in bigger manner and looking at two projects there. The company also has the spare parts work shop at Noida and supply spare parts to the power plants. Another subsidiary is Hydro Magnus where the company has order booking of Rs 250mn.So, the company has identified 7 strategic business units (SBUs) and planning to appoint head of each SBU who will be responsible for development of that business area.

 

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Key takeaways from Precision Wires India Ltd AGM

Sep 6 2017 7:00PM
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1. Manufacturer of insulated enamelled wires and other insulated electric conductors. Largest manufacturer of winding wires in the country.Share in revenue from power sector, auto and industrial equipment being 20% each; consumer durables 10-15% and balance from other sectors

 

2. Volume growth of 8% and 5% value wise in FY 17.1/3 rd of revenue from job work.Major raw material being copper which is procured domestically from Vedanta and Hindalco as well as imported depending on the price. Change in copper prices not have major impact on profitability as the same is procured on the customer's account

 

3. 90% of sales is to OEM. Company biggest supplier to auto manufacturers among competitors. GOI Rural electrification program a big boost for growth of the Company. Company regularly participates in international exhibitions to enhance product visibility and exposure in international markets*

 

4. Benefits of GST in the long term as it would lead to consolidation from the unorganized to the organized sector in the next 5 years.GST rate of 18% applicable with no major change from the previous tax liability under excise and VAT.

 

5. Total market size of Rs 8000 -9000 crores (2,00,000 tons) with share of organised sector in the range of 50-60%.Company has significant plans of capacity expansion and modernization which would increase profitability.

 

6. CAPEX plans to be announced shortly. It takes 9-12 months for being operational post CAPEX. Vision to set a global benchmark. Company's products used for generation of power from fossil fuels as well as from renewable sources. Exports decreased by 10% in FY 17 on account of tariff discrimination which is in the range of 2 – 10%.Major competitor – Ram Ratna Wires.Wires is a low value added industry.

 

Courtesy: CA Prashant Shah

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation.

Atul Auto: Management Outlook and Concall Highlights

Sep 5 2017 11:50AM
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1. Management expects at least low double-digit growth in volumes in FY18. ATA expects the growth momentum to continue in export markets in FY18. Company exports to six countries in Africa and three in Latin America and expects to further consolidate its position in these markets.

 

2. Electric 3W was launched in Bihar and Gujarat in 1QFY18 though volumes remain insignificant. It plans to offer E-rickshaws to all of its dealers across the country over the next one to two quarters. The electric 3W market is dominated by unorganised players; management estimates an aggregate market size of ~120k pa.

 

3. E-rickshaws can travel up to 80kms on a single charge and it takes around seven to eight hours to fully charge the battery; battery life is ~8-10 months.? A small inventory of BSIII vehicles remain in the channel (versus 3k vehicles in the previous quarter). ATA does not expect any additional costs to clear its BSIII inventory, as these vehicles can be upgraded to BSIV.

 

4. Capex plan for FY18 would be evaluated in 2HFY18, as current capacity utilisation is not optimal. Company incurred Rs450mn till date for capacity expansion at Ahmedabad, while Rs1bn of capex is yet to be incurred.

 

Courtesy: Systematix Equities

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

An interesting take on the Hospital stocks.

Sep 3 2017 10:00AM
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Jefferies: Indian hospitals need to alter their business model to focus on affordable healthcare and patients outside Tier-I cities to sustain the rich valuations. The premium segment is slowing on rising competition and narrowing supply-demand gap with margins under pressure too. In this context, NARH and HCG (we initiate with Buy) appear best placed given their growing presence outside Tier-I cities. We initiate on APHS with Hold as growth/margins challenges may endure.

 

Narayana and HCG preferred picks: The Indian hospital sector is trading at 17x FY19E EV/EBITDA on expectations of 20% EBITDA CAGR over FY17-20E. We initiate on HCG with Buy and Apollo Hospitals at Hold. We retain Buy on Narayana.Narayana, in our view, with its focus on affordable care, looks the best placed to address the large latent demand. We expect it to report 25% EBITDA CAGR over FY17-20E; retain Buy with a PT of Rs390.

 

HCG's hub and spoke model and oncology specialization has allowed it to profitably expand outside Tier I cities (c40% beds outside Tier I). It has also shown strong execution, achieving breakeven in most new centers in c12M. With large expansion phase coming to close, we expect it to report 27% EBITDA CAGR over FY17-20. It is trading at a discount to peers at 15.7x FY19E EV/EBITDA and we initiate with Buy and PT of Rs325.

 

Apollo - While we expect 19% EBITDA CAGR over FY17-20E for Apollo, we estimate its core hospital business EBITDA to grow at 11%. Its key markets are seeing increased competition. While the company is working on improving payer mix, this limits growth over the medium term, as the large market is not targeted. With the stock trading at 17.5x FY19E, we initiate at Hold with a PT of Rs1,150.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Genus Power Infra: Concall takeaways

Sep 2 2017 12:15PM
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1. ECC segment losses dent 1QFY18 margins. 1QFY18 sales stood at ~Rs 1.83bn (-1% yoy), EBITDA at Rs 219mn (-28% yoy) and PAT at Rs 143mn (-12% yoy). EBITDA margins were lower at 12% due to losses in the ECC segment which reported 1QFY18 revenues of only Rs 120mn. 1QFY18 order book stands at Rs 7.06bn, of which metering order book was at Rs 4.30bn and ECC order book at Rs 2.76bn. ECC order book comprises two large orders in the state of Uttar Pradesh (UP).

 

2. Current debt is Rs 1.76bn, of which Rs 140mn is long-term debt.Positive trends in metering Industry with tenders for smart meters coming up. Metering industry has turned positive as of now post a decline in FY17.Growth is clearly visible with smart meters tenders also coming up ahead. Recently, EESL floated 5mn of smart meter tenders on behalf of Haryana and UP governments. Management highlighted that demand for smart meters exists across all states, and not one or two states.

 

3. There was some disruption in July due to order revisions because of GST (18% vs.~15% tax earlier).Post that, transit to the GST regime was smooth.? On the exports side, the company is targeting Singapore, the Middle East and African countries and seeing good traction in these markets.

 

4. FY18E metering revenue guidance at ~Rs 7.25bn.There are pending tenders for 25mn meters in the market, which should be  finalised in the next 3-6 months; the company has a market share of ~25%. Of 25mn,smart meter tenders are pegged at 6mn..

 

5. From 2QFY18E, ECC revenues will be higher and EBITDA margins should be ~10% for the ECC business. The company has guided for FY18E meter revenues of Rs 7bn.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Concall with Compuage Infocom Management

Aug 28 2017 6:00PM
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1...Buy from manufacturer and sell to reseller only.Have 750 employees, 45 warehouses all on lease, 45 branches, 30 brands, 10,000 resellers and reach in 800 cities.Top five customers contribute 60% of revenue, company has policy of maximum 30% revenue from single customer .85% of revenue comes from IT (Computers, Laptops, Printers, networking devices etc) and 15% from mobility.

 

2..In mobility working capital cycles are shorter and have exclusive contract for particular area.They have 55 service centers,which have better margins of 12-15%. This business is very small can contribute upto 12-15Cr, so will add around 1-1.5Cr in bottom line.

 

3..Credit cycle-IT  21-90 days,Mobility 15-30 days. Their 100% debt is secured, but bad debts are lower than premium paid, in case of bad debt will get only 85% of covered amount due to industry norms.

 

4..Expecting growth of 25-30% Yoy, have target of $1 billion revenue by FY2020. Scale of operation will increase with increased proportion of mobility,working capital will decline. Co will add more vendors to increase reach to newer cities. Gross margins will not increase, but due to increase in efficiency bottomline will increase.

 

5..Inventory write off. Some company have return policy some dont have. Sold products are sold at discounted price and difference is compensated by vendors.Few brands are doing direct sales e-commerce or their own sites, but 90% of the sales are through distributors

 

6..Margins are similar across India but lower in case of sale to ecommerce. GST will benefit,can reduce infrastructure will see in next 3 months.

 

7..Have 100Cr of cash. Have to keep cash for new business. They are in talk for Apple accessories which will require around 70-80Cr of cash.Talking with other 2-3 brands also.Have around 700Cr of limits available.

 

8..There is partly consolidation in the industry, no new player is coming. In compare to last 5 years, margins have gone down but will not go down from here.

 

Courtesy: Shankar( Inhouse whatsapp research group member)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Future of Micro Finance in India: A take by Amit Dutta

Aug 27 2017 11:05AM
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Micro-finance no longer a new concept in India and it become a traditional business in India. Regulatory framework is also in place since last 3 years which make the industry matured and also bring transparency.Till date industry is dominated by 71 NBFC-MFI and newly converted SFBs (Small Finance Bank).

 

A lot of people/investors may think that industry is getting crowded even though we are able to reach just 4-5 Million households whereas more than 250 Million households are residing in our country. Further current statistic also shows that out of our total micro-finance portfolio only 31% portfolio is representing agriculture and allied portfolio. This data itself shows the inability of the MFIs to reach rural areas where 68% of our population is residing.

 

Gross Value Added (GVA) at current prices for agriculture and allied sector is estimated at INR 23.82 lakh crore representing lowest shares 17.32%. To change the status,significant infusion of capital is essential in agriculture and allied sector. Hence micro-finance institutions (MFI) can play a significant role in rural areas and can be a growth partner of our country. Therefore MFIs need to shift their focus from urban areas to rural areas.

 

A number of people/investors have also a perception that there is a huge competition and the scope for the differentiations would be limited in micro-finance sector. Yes it’s true that competition is increasing day by day and therefore MFIs should have clear marketing strategy to cope up with the situation. It is also true that the scope of the differentiation is also limited in terms of product feature as you can play only with price, tenure and may be with ticket size. Use of technology may bring efficiency and transparency but may not create a big differentiation.  So what the MFIs will do to bring differentiation and segregate them from other players?

 

To bring differentiations we need to go back to the basic theory of the marketing and should analyze the need and profile of our customer. If we analyze the need and profile of our customer revealed that-

 

The need of the MFI customers is a continuous in nature and people need to take loans from MFIs throughout a generation. It’s not like us where we are taking loans only 2-3 times in our life cycle.People are not bothering much about the cost of borrowing in terms of interest but installment amount and the frequency of the payment would be more important for them. Whereas in our case cost of borrowing and tax rebates are important factor to choose a loan product.Efficiency in the loan processing, simple loan documentation, assurance for getting further loans and behavior of the field staff would also be relevant factors for a MFI customer.

 

Apart from financial assistance households also need a lot of supports in other areas which may include financial literacy, trusted option of savings, assistance in income generation activities, support in quality education, basic healthcare support etc.Considering the outcomes technology can play a significant role to bring efficiency in processing loans, reducing operation cost, arranging financial literacy program etc.However technology may not able to bring long term differentiation for any MFI. Further as scope of the differentiation in terms of product would be limited MFIs need to focus more on their ancillary products/services which they can sale/provides by using their distribution network.

 

Actually most MFI has a huge distribution network and this network can be leverage to sale/facilitate different products/services. The scope of differentiation is huge as a MFI can chose more than 100 products/services to leverage their distribution network. However while doing so the need of assortment and analysis of customer profile would be important to select a particular product/service as random section of product/service may increase the overall credit risk for the MFIs.

 

At the end of the day conclusion is to- MFIs should come out from the cell of another financial company and should project them a larger distribution network through which different needs (financial as well as non-financial) of the households, residing at the bottom of the pyramid, can be fulfilled. Till there is a enormous opportunity for the growth and business in the sector if we will opt an integrated approach.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

High Energy Battery: AGM Notes

Aug 24 2017 4:50PM
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1)Company has shown massive turnaround in the defense battery business. FY 18 also looks good in terms of order book and execution of defense batteries.

 

2)As on date pending orders are around 50 cr and more orders of around 20 cr in pipeline looks likely unless any government delays.

 

3)Lead Acid battery is undergoing tough times. Management has decided not to take LAB orders at any rate.Not worth sending overheads on distributors and then get stuck in receivables. So management shall wait for atleast cost + basis private label work as and when it comes. 

 

4)Bankers are very supportive for working capital needs due to the turnaround. Going ahead plan to start repaying debt once sufficient cash flows are generated. Also company aims to reinstate dividends. 

 

5)Company can do around 13-15% EBITDA margins for FY18. Q4 margins were high due to execution of high margin orders. Margins vary as per the order in terms of naval, airforce etc 

 

6)Company is working on some specialized batteries which are still under approval stage. Government and different channels takes time for approval post which ordering etc. But company is confident these new segments of batteries in defense shall help to add more revenues and better margins. (Company did not disclose which segments due to confidentiality).To conclude FY 18 shall be a lot better than FY17 and good turnaround is expected.

 

Courtesy: Our inhouse research member Parthiv Shah. Note exclusively meant for the users of ShareBazaarApp.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Bodal Chemicals: What are factors to be considered for investment?

Aug 23 2017 7:05PM
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Q) One of our sharpest microcap predator MR Vinay ambekar(VA)has been tracking Bodal Chemical for quite a while now. We asked him regarding the factors to consider before investing in the company.

 

VA) Hi – since you asked specific to Bodal, I will not cover the industry related factors.I will be tracking the following:

 

Percentage of basic chemicals (BS) being used in Dye Intermediates (DI), which is currently 45% and % of DI being used in Dyestuff (DS), which is currently 40% - these percentages should be in an increasing trend.Price of their products fluctuate due to external/global factors, and hence impacts their profitability. But if these 2 percentages are increasing QoQ, then it is a sign that atleast, internally, the company is on the right track in terms of increasing the share of their more value added products. If realisations of DI and DS are supportive, then margins should keep on expanding. However, if price realisations fall, then profit margins may fall, but that should not be seen as a negative if the trend of volume shift (from BS to DI to DS) is positive.

 

The above shift will also indicate how their expansion is progressing, which should be monitored. Increase in DS capacity from current 17mtpa to 25mtpa by mar’18 is the 1st leg. Thereafter from 25 to 41 over 3-4 years, but that’s a little way off. Right now there are no plans to increase DI capacity, which is good. But if they announce, then the reason should be very strong as to why they are doing this, and whether they are doing this at the expense of DS capacity expansion. Maybe their 2nd leg of DS expansion may need some more DI capacity which is fine. But that should happen only after say 2 years.

 

They have stationed the 58% owner of Trion in USA to market their water treatment products. Progress of that should me monitored. It will be better if they can increase their stake in this company from current level of 42%.They have taken 70% stake in SPS and they have said that it was very inefficiently run and that they can double the volumes and margins using their expertise. This should be montitored because SPS can meet their increased requirement of DI which they will need to feed their DS capacities.

 

LABSA and Liquid Dyestuff which are high margin products – sales and profits from this should be tracked. LABSA production has already started, so how are they ramping it up. Liquid dyestuff production is in trial run. A quick completion of this can give a new line of profitable product to the company in its core related field but diversify its risks away from textiles into paper and other areas.

 

ROA levels (not monitoring ROE and ROCE because the E is very low due to past accumulated losses - however if you are mathematically inclined, you can track incremental return on incremental equity and on incremental capital employed). ROA will be a quick dirty measure which should show increasing trend. 

 

And most important, whether they have the necessary pollution control measures (Effluent treatment plants etc) to take care of all the above expansions (somehow no one has asked them about this in their concalls and broker reports), but if pollution control board does not give them permission to expand, then the entire thesis collapses. Currently they have the largest ETP of 1mn litres capacity. Whether this is enough.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

India Home Loans: AGM Notes

Aug 20 2017 12:35PM
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1..Loan book at the end of 1QFY18 at INR650mn.Target for 2QFY18 is ~INR1b. Growth in the last quarter was relatively less as funding from banks didn’t hit the India Home Loans account. In 2Q expects to disburse ~INR400mn.Asset quality in FY17 was at 2.71%, the same in 1QFY18 was at 1.5%. The reduction is on account of the absolute GNPA amount coming down. At the end of FY17, 22 files were GNPA the same at the end of 1QFY18 are 15.

 

2...Capital Raise: Looking to raise capital in FY18. Likely to happen in 3Q or more likely in 4Q. Planning to raise INR500-800mn. Promoters also want to participate in capital raise and are looking to invest ~INR100-120mn in the capital raise exercise.Additional funding from SBI (INR250m at 10%); AU Bank – INR50m; SIB –INR50m; Kotak-INR50mn at 9.75%; Federal Bank ( These are sanctioned amounts, not necessarily draw downs)

 

3..Have started operations in Jodhpur. Dividend at 10paise/share will continue and would like to increase the same on the basis on company’s performance.Non-housing book as of now is at 20% of the total book. 5% is LAP (~INR30mn) rest is developer finance (~INR90m).Most of the disbursements in 2Q, to the tune of INR300m would to housing loans in government schemes.  HLs yields are at 11-13% and LAP yields are at 18-20%

 

4..Risks: Limited field investigation capabilities. Relying more on the fact that government flats- property papers are in place; post that personal interview of the borrowers, in case of married couples- interview of both husband and wife.

 

courtesy: Harsh(Our inhouse ShareBazaar app research expert). Note exclusively penned for Sharebazaarapp.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Notes from Prism Cement AGM

Aug 18 2017 7:00PM
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On a consolidated basis the net sales have reported a marginal reduction at Rs. 5562.04 Cr for FY17 Vs  Rs. 5758.92 for FY16. Company repaid Rs. 231.88 Cr of loans during FY17 resulting in a reduction in finance costs by 22.70%. The operating profits of the company have seen a slight fall at Rs. 454.60 Cr 

 

Management said that:

 

1. The implementation of GST would lead to transparency in business. Further, the shift from the unorganised to the organised sector would benefit the H & R Johnson (India) and RMC Readymix (India) segment as these segments face severe competition from the unorganised markets on the basis of pricing.

 

2. RERA resulted in developers facing difficulties with the registration and compliance. However, RERA is beneficial to the company as it would lead to quick recovery of their receivables because as per RERA the funds for a certain project must be utilised into that project only. Further, the government's ‘Make In India’ and the ‘Housing For All’ campaign followed by Affordable Housing being granted an infrastructure status would result in initiatives and tax benefits to developers.

 

3. The second half of the previous year was severely impacted due to demonetization. Further, Satna received a very heavy monsoon this year but fortunately the company’s plant did not suffer any damage. The selling price per bag in Satna is Rs. 280 and the company’s profits would be around Rs. 75 per bag.

 

4. The company’s efforts in consolidating their product line and reduce logistic costs in the Cement Division resulted in savings in the operating costs. Prism Cement acquiring stake in BLA power has resulted in a fall in cost of cement production. The use of Pet coke has further reduced the costs. The company’s agreement with ECO Cements has resulted in the Company optimising transportation costs and enabling it to tap the growth in the Eastern markets like Bihar.

 

5. Ban on sand mining coupled with the ban overloading the trucks were severe headwinds in the      Q1FY18. The company has a capacity of 52.19 tonne Cement and Clinker and this segment could witness a growth of 15% on the back of new products launched.

 

6. TBK segment would benefit from GST as the sector preference would shift from the unorganised to the organised sector. However, due to uncertainties regarding the implementation of GST dealers had resorted to destocking and the last 15 days of the June quarter the dealers did not give any fresh orders. 

 

7. The RMC segment witnessed a 1% fall in the turnover because of the uncertainties surrounding the implementation of RERA. The order book for the road segment has increased sharply. The management sees a 10% growth in the current year and a 20% growth next year onwards on the back of reduction in cost.

 

Courtesy: Jagdish bhai(Our inhouse whatsapp group member). Note exclusively meant for the Sharebazaar App.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Result Update: ITD Cementation Ltd

Aug 17 2017 7:00PM
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ITD Cementation Ltd (Q2 CY17): Weak performance; outlook remains strong - IIFL

 

ITD Cementation (ITDC) delivered weak Q2 CY17 numbers with topline de-growth of 41% on the back of slow order execution. The margins, however, continued to show improvement and rose by 156 bps yoy to 11.2%.This was primarily due to sharp decline in sub-contracting expenses. During the quarter, finance cost declined marginally as Company continued to improve on its working capital position. Significant improvement in contribution from Joint Venture (JV) led to PAT doubling to Rs.207 mn. The Company has received massive order inflows during Q2 CY17 and its total order book currently stands at ~Rs.82 bn (~2.7x CY16 revenues). In addition, the Company stands L1 in orders worth ~Rs.24 bn. With the strong order book, the focus now shifts to execution. The expected pickup in execution would lead to strong topline performance in the coming years. Improvement in operating performance and higher contribution from JV to be key drivers of earnings growth over next few years. The focus on cost control and debt reduction would further aid bottom-line performance. We lower our estimates to factor in the weak quarter performance and slow progress in certain orders. We maintain our Accumulate rating on the stock with a revised target of Rs.162.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Apar Industries: Concall Summary

Aug 16 2017 8:45PM
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1. Among top 3 largest producer in conductors and Specialty Oil in the world. Supplies conductors to all top 25 global turnkey operators and leading utilities. Preferred supplier to over 80% of its specialty oil customers in India.60% market share in power transformer oil and 40% in distribution transformer oil in India. Among largest bare overhead aluminum conductor manufacturers in India, market share of 23%.

 

2. Orders by key T&D has increased by 35% in Q1 which will turn in orders of product manufacturers like Apar.TBCB (tariff based competitive bidding). Visible projects by UDAY scheme. Health of DISCOMS is improving a lot. Under UDAY, losses of state discoms have reduced 22% to Rs 40,295 crore. Of the 27 states and union territories that joined the scheme, 23 are exhibiting improvement in aggregate technical and commercial loss reduction or narrowing of gap between power costs and revenue. Improving health of the discoms will have a positive impact on T&D infrastructure spending.

 

3. June, July has been affected due to GST. GST successfully implimented.More clarification needed from Govt. on some process. Plans for FY20 might be achieved in FY19 for conductors. Order book as on June 30, 2017 is at Rs 1,162 crore compared to Rs 1,519 crore as on March 31, 2017. Target of September closing 1500cr order book projected.

 

4. Chinese players benefited from lower Aluminum price in last quarter. From July the price is narrowed so it will be positive. Key competitors no longer has the CST benefit after GST. Due to which real improvement seen in September for Apar. 

 

5. Products selling to Defense sector which is out of GST bracket.Optical fiber at 50% capacity utilization for optical fiber. Got order from BSNL. New UAE plant running at 50% utilization. Only player in UAE. Target is to increase the capacity utilization to mid 60s in this year.

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Key takeaways from Avanti feeds (AFL) AGM: Demand remains strong

Aug 14 2017 12:10PM
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Demand greater than AFL could supply: AFL was short on feed capacity by ~15000 MT in the last quarter, if it had the capacity, AFL could have roped in another ~Rs 1000mn of sales in the quarter.

 

Feed capacity addition: AFL is putting up additional capacity of 1,75,000 MTPA in AP. The capex will be Rs 500mn and it shall be operational by Mar’18

 

Sustainability of margins:  Current EBITDA margins are exceptional due to weak RM prices but given the kind of volumes AFL is doing, 15% EBITDA margins in feed may be sustainable ( vs 10-12% in previous years) 

 

New processing capacity:  Additional capacity of 15,000 MTPA is under trial operations now , commercial operations shall start by end of August . AFL expects 40-50% utilization of this additional capacity in first year of operations.

 

Exporting to end users: Though there are lot of processing companies, but major players like AFL export directly to end user restaurants and retailers like Walmart. There are no re-exporters in their value chain 

 

Market size: Total feed manufacturing capacity in India is ~20 Lac MTPA but the requirement is ~11 Lac MTPA.  Industry is over capacitated but most players are not able to utilize even 50% of their capacity

 

Market share in feed business: AFL current market share is ~43% and they are aiming for 50-55% share in next 2 years.

 

 

Regards, 

Depesh Kashyap | Equirus Securities

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation. 

 

Kilpest India: Another Microcap Gem?

Aug 13 2017 6:50PM
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1. Agrochemicals division was struggling for 3 years due to poor monsoons and intense competition. Their formulation products for pharma werent doing well either because of issues in pharma sector. They don't have any innovative products so wasn't  easy for them to make money in that environment. This year they are seeing better traction due to good monsoons and better demand. Managment said agrochemicals division has bottomed out and will see 20-25% growth this year and 35-40 Lacs profit. 

 

2. Main story is all about the subsidiary 3B blackbio. Their entire focus is to grow this stuff. They now own 97%.Will soon own 100% as the other partner is bankrupt. They did the JV for tech transfer and access to European and latam markets. The owner of that Spanish company is now dead so Europe and latam not easy.So focus right now is on India and then eventually African markets. 

 

3. Company said competition in India is low as the quality is very poor from Indian companies. Their quality is comparable to global counterparts. Global companies have good quality but products are expensive. So they have been able to replace some global companies in supplying to global companies like quest diagnostics and core diagnostics. 

 

4. They expect to grow at 100% this year. Expected growth for next 4-5 years could be 50% cagr. This year 3b can do 6-8 crore revenues with 1.8-2.2 CR PAT. They expect to scale up to 15-20 CR in the next 3-4 yrs.Margins from fy17 levels will go down 4-5% as they don't expect to sustain these margins. They need to invest a lot in good marketing people and hire professional mgmt to scale this company. 

 

5. They have been growing at a measured pace despite high demand because they need funds to grow.Current cash flow generation is not enough. Still they have been investing whatever they make into the business only. Even agrochemicals profits go here. 

 

6.  Maybe at some point of time I presume they can do a SME IPO of the subsidiary or sell some stake at better levels. With such high growth rate and considering the prevailing raging bull market,3B will definitely be able to command more than decent valuations.

 

Courtesy: Hemant Bhai again(our mentor cum one of the sharpest microcap predators). Article exclusively meant for the #ShareBazaarApp.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

 

Key takeaways from TCPL AGM

Aug 12 2017 6:00PM
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1. One of India’s largest manufacturers of folding cartons, and India’s largest standalone converter of paperboard manufactures folding cartons, printed blanks and outers, litho-lamination, plastic cartons, blister packs and shelf-ready packaging. Ventured into the flexible packaging industry, with capability to produce printed cork-tipping paper, laminates, sleeves and wrap-around labels.

 

2. Only Indian packaging company to have offset plants in all four geographies of the country. Packaging for tobacco, liquor, food & beverages, FMCG, pharma and other industries. Speciality Packaging Unit in Haridwar is equipped with an 8 colour UV press from KBA, Germany with pioneering new cold foil technology which is also equipped to produce corrugated cartons as well as “CEKA” liner cartons*

 

3..Share of export in revenue stands at 17-18% and balance being domestic sales. The only standalone packaging company in India to have gravure printing technology. Whisky cartons constitutes significant contributor. Company is in top 2 carton makers. Major challenges faced due to demotisation, liquor ban on highway and rupee appreciation. Organized sector much smaller than the organized market.

 

4. Growth of 5% during FY 17,  declined for the 1st time in 27 years. Developing European market by supplying to FMCG companies and cake boxed to offset challenges of rupee appreciation in future.

 

 5. Management foresees a stable growth and has a satisfactory outlook. Average growth of 15 -20% on account of CAPEX done in FY 17. Reduction of debt from current Rs 200 crores to Rs 150 crores.No major CAPEX in FY 18, to utilize capacity available on account of huge CAPEX in FY 16 and FY 17

 

6. No major GST impact as the tax is passed on to the customer. Consolidation from unorganized to organized possible. Reduction in raw material prices. GST on raw materials is 12% while on finished product is 18%.

 

7..Total installed capacity post CAPEX is 100,000 tons which can generate a revenue of Rs 1000 crores. Current capacity utilization at 60-65% and focus to improve to 75-80%.

 

8..Additional equity infusion of Rs 24 crores from DSP Blackrock Core Fund, VEC Indian Special Situations Master Fund and VEC Strategic Value Fund.

 

9..Many customers added in FY 17 major being Philip Morris (Marlboro cigarettes) for India and Bangladesh markets. Company trying for outside India markets also. Other being Dabur, ITC food division, Modi Industries, Reliance Jio, Depro, Kuber etc.

 

10..Company started supplying to Patanjali who also has plan to start its own packaging plant.Major entry barriers being requirement of huge CAPEX, challenging nature of business, people and relationships.Major competitor being Parksons packaging and ITC (manufactures for in-house consumption)*

 

11. Design centre caters to value addition for the customers. Top 20 customers contribute to 80%  of the revenue and top 5 cater to 35-40%. Maximum revenue from a single customer not over 15%. HUL being the largest customer*

 

12..Largest segment contributing to revenue is FMCG being 35%. Advantages of multi-locational plants and scale. Colgate serviced from 3 plants. Listing of shares on NSE possible.Flexible packaging market much higher than carton market.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

 

Rishi Techtex: What's the future looking like?

Aug 11 2017 3:50PM
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1. Company is now being managed by Abhishek Patel, MD who took over the control of the company 2.5 years back. Company is now being transformed from a lala company being run by old munshis etc to bring run by professional management. 

 

2. They ran at full capacity in fy17 and hence the topline growth was limited.But due to price negotiations with clients,price increases are directly flowing to the bottom line hence margins are constantly improving. 

 

3. They used to do job work for some clients which has stopped completely now, which also led to a bit of decline in topline but this also led to margin improvements.

 

4. They paid off a bit of debt last year leading to reduced financial costs. 

 

5. They have recently expanded capacity by purchasing few new machines. New capacity can lead to increase in topline by 35%. This will lead to small increase in debt as internal accruals not yet enough to fund the expansion. Management is looking to expand further capacity in future by purchasing old machines from plants being shut down instead of buying new machines.

 

6. They have two main areas of business right now. 1) making bags for packaging for paint companies like Asian paints and other fmcg companies. 2) shade net. They have set up r&d teams to expand into other areas. Sister company of rishi tech has worked on some meditech products which will be launched through rishi from q3 onwards. 

 

7. They are targetting to use all their new expanded capacity this year. So internal target is to increase topline by 30% and bottom line by 40% due to continued improvement in margins. Targetting 130-140 cr revenues and 8% net margins within 3-4 years(yet to see how they deliver). 

 

8. MD feels there is immense scope for growth by expanding into more products and geographies as their base is still very small. 

 

9. They have increased their stake by 5% through conversion of warrants. They want to increase their stake every year by sebi permissible limit. 

 

10. Overall, it's a story to watch as to how it unfolds. MD is taking all the right steps to guide the company from a lala company of 2 yrs ago to a more professional run company. Base is small and it's early days to judge.

 

Courtesy: Hemant Gupta( one of our favourite mentors)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

 

Kotak on Shankara Building Products ltd

Aug 10 2017 7:00PM
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Business background: Shankara Buildpro is one of the leading organized retailers of home improvement and building products in India based on number of stores, operating under the trade name Shankara BuildPro. Company was founded by Mr Sukumar Srinivas, an alumnus of the Indian Institute of Management, Ahmedabad, and a first generation entrepreneur, currently having 33 years of experience in the building products industry. As on date, company operates 112 Shankara BuildPro stores spread across 9 states and 1 union territory in India. It caters to a large customer base across various end-user segments in urban and semi-urban markets through their multi-channel sales approach, processing facilities, supply chain and logistics capabilities.Company’s operations are strategically suited to benefit from growth in housing demand which is continuously growing owing to increasing customer involvement in home solution decisions. It operates in three segments –

 

Future growth strategy:

 

Enhancing product offerings - Company expects to increase the product offerings in product categories such as electrical and decorative paints. It would also focus on building strategic relationships and strengthening existing relationships with suppliers and manufacturers of home building products to enhance the product offering.

 

Inorganic acquisitions - Company has in the past successfully acquired and integrated certain companies such as CRIPL for roofing solutions and VPSPL for tube and strips processing. This has enabled it to backward integrate its business operations and strengthen the value chain. it also intends to continue to explore such business opportunities, including through inorganic acquisitions, and foraying into new product verticals, depending on market conditions and emerging business opportunities. This would enable it to expand its product range and its customization capabilities

 

Scaling retail presence through addition of more stores - Company has 112 Shankara Buildpro stores spread across 9 states and 1 union territory and total area under retail presence now stands at 0.401 mn sq ft. Company plans to take the total number of stores to 200 by 2021. Company’s retail operations are spread across Andhra Pradesh, Goa, Gujarat, Karnataka, Kerala, Maharashtra, Odisha, Tamil Nadu, Telangana and Puducherry. Currently, Karnataka constitutes a significant proportion of 52% of revenue mix across states. With expansion in stores, company targets to achieve cash breakeven at store levels within a year of the store being set up. Retail segment sales also has higher margins and hence this will help in improving margins going forward.

 

Focus on building brand - Currently the spend on advertising is limited and in order to increase the brand visibility and higher customer recall, company would inch up the spend in branding going forward.

 

 

Outlook:Company expects to increase the number of retail stores to 200 by 2021 and retail stores have higher margins as compared to other segment sales. So it expects revenues to grow by 15% going forward with improvement in operating margins to 7-7.5% going forward. With efficient working capital cycle and lower leverage, company expects net profit margins to improve from current levels.Company is present in a niche segment of providing one-stop solution for all the home improvement needs. With enhanced product offerings, increase number of stores and investment on building brand, company expects to maintain the growth trajectory.

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

Kalyani Steel AGM notes

Aug 9 2017 7:00PM
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1. Global scenario for now looks stable in terms of steel production forecasts for FY 17 and 18.

 

2. India could outperform on an overall basis in terms of steel production and consumption due to various government incentives. Domestic procurement of steel policy in railways, defense, power etc could help domestic steel makers over next 2-3 years. But all depends on domestic demand.

 

3. Biggest risk to Indian Steel companies and also Kalyani Steel : China manipulating the prices of ore and coal. Due to anti dumping duties and MIP by almost all nations where China dumps steel, China is now making these country’s steel producers have an increase in cost of production via higher ore and coking coal prices which in turn makes them increase prices of end products which above MIP levels makes China start dumping again. Not helpful especially to companies like Kalyani Steel as we don’t have captive coal and ore mines. Also there are limitations to cost optimization one can do.

 

4. But despite these risks company is trying very hard to create a moat around its business via better utilization rate, faster cycle turns, max debottlenecking and enhancing capacities by 5-10% with speedier turn times etc (Asset Sweating). Also trying for a road map of new product approvals which shall help reduce competition and help and try sustain margins.

 

5. Company has decided to stay in a very prudent financial health as global customers worries if financial health of suppliers not in the best share. The company has acquired land and got some clearances for expansion, but in view of the current uncertainty the management shall take a call on a later date. Also management believes any major greenfield capex shall have a gestation period of 3-5 years for any material +ve impact on the financials. So management moving ahead very prudently in this aspect.

 

6. Regarding captive raw material the company had hired consultants for Iron ore & coal mining. But the auction prices were way ahead of what company & the consultants though fit & would have drained the financials. Also company needs relatively smaller mines as requirement of ore is lower as compared to bigger players like JSW Steel who also have beneficiation plant which Kalyani Steel does not have. So company has to go very selectively in terms of which mines to bid for, especially mines with high grade of ore.

 

7. Company has 3 Blast Furnaces and 2 are always in use. The 3rd one company uses only for Pig Iron and that too if the market is conducive for it.? Company has a subsidiary Lord Ganesha mine which was purchased for around Rs 100+ cr. Since last 5+ years management is waiting for its clearance. Having a hard time tackling its clearance with Karnataka Government on the same. Has around 6-7 Million Tones of good quality ore.? DGM a subsidiary was set up with a view to conduct R&D activities as Hospet was not the best place for it. No major initiatives have come out of DGM as yet.

 

Courtesy: Parthiv Shah(Our whatsapp group inhouse member)

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

 

Notes from Hester Biosciences AGM

Aug 8 2017 7:00PM
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1. Focussing on back yard poultry. It means small farmers which have 7 - 8 chicks and 1-2 sheeps. Targeting Orissa, Jharkhand and Chattisgarh for this. Potential - 6 to 8 million chicks. 

 

2.Though the market size of the animal health products worldwide is pegged at around $30 billion, the Indian market is a mere $700 million. In the wake of a resurgent interest in the health and longevity of cattle following the Centre’s diktat to ban cow slaughter, there is immense scope for growth. The company, thus, is busy promoting awareness on large animal health in the hinterlands and is simultaneously exploring possibility of new product launches.

 

3. It is also working with GALVmed, a British-based NGO supported by the Bill and Melinda Gates Foundation to market its thermostable Newcastle disease vaccine in India. The two partners are aiming to create a sustainable distribution network, which is linked with Hester’s current network?

 

4. GST effect - prices drop by 20%. Greenfield project to be planned in Tanzania. May have to raise debt for this(Didn't disclose how much) 

 

5. Hester Biosciences now is one of India’s leading animal healthcare companies as also the country’s second largest poultry vaccine manufacturer.Profitability is higher in diagnostic kit but market size is vey low. 

 

6. Looking at Europe market for diagnostic kit(not sure whether for importing or exporting) .Brucella has lot of potential. Indian govt is also looking to eradicate this.

 

 

7. Company confident of posting decent double digit growth for next many quarters. At an inflection point with the whole market dynamics changing and expanding at a rapid speed.

 

My notes from the Piramal AGM

Aug 7 2017 8:30PM
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1. Definitely saw more sell side analysts and youngsters in the AGM this year. Investor perception is changing indeed. This reminds of the debate at the AGM 4 years ago, when one of the business owners went on a long rant regarding the poor quality of investor communications that our company had. So the next year Ajay Piramal told a few people after the AGM that they are thinking about that suggestion and may increase investor focus in terms of communication. However, he mentioned that it will take some money. Of course the next shareholder complaint was, "But why are your wasting money on all this?" !!! So overall, can see this mini project at work.

 

2. Going into Housing Finance and approvals 'should' be in place by August'17. Asked Mr. Satwalekar regarding the timing of this allocation. Ajay Piramal normally sells into Euphoria. DS said that their bottom-up approach to the market was perhaps the competitive edge. 

 

3. Ajay Piramal was very pleased with the distribution network in pharma. 4 lakh plus touchpoints now. Every year he has focussed on this single point. My own understanding is that he thinks of this 'distribution' has a the core asset around which he can buy and sell brands. This growing distribution system has a faster investment cycle for building brands. There is some operating leverage which he seems convinced on.Interesting.

 

4. His view on NBFC vs Bank debate : He personally believes that building a liability side in the lending business is a choice between the upfront capital expenditure to build a strong liability brand versus your ability to get competitive rates as a borrower. His own take was that Piramal has very well liked by the best creditors in the market and thus he can get money at competitive rates and at the moment doesn't feel that it is worth investing in building a lliabilities side brand for a lower cost of blended capital.

 

5.  Ajay Piramal's take on market valuation of Piramal : Towards the end of the AGM a gentleman asked him about his own stake and why doesn't he raise it given that SEBI allows him to do so. AP replied by saying 

(a) He thinks 50%+ is high enough.

(b) Even if he wanted to buy it , he couldn't afford to at the present price (insert laugh).

I particularly found this comment insightful. Considering that 5 AGMs ago he was vocal regarding the value in the company.

 

6. For sometime now I have been hearing stories regarding the asset quality at Shriram Transport. Ajay Piramal now seems to have developed the capacity to suffer in this bet of his. Is willing to stick it out for he still believes in the value that is there. My own take is that, even he screwed up in this deal , it is okay. I knew he would make individual mistakes in allocating capital. The best do so. The key was that he would come out on top at a portfolio/business level. Remembered that element of my own thesis today.

 

7. Nothing else really caught my attention this year. I now pay little attention to what he plans to do, because over time even he doesn't know what he's going to do over the next 12 months. His is a true opportunist and that's what I am betting on.

 

 

Courtesy:Aniket Krishna(Our whatsapp group inhouse research member)

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

 

 

 

Bajaj Corp: Quoting at a 45% Discount

Aug 5 2017 7:00PM
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Q)Why JM Financials has a buy on Bajaj Corp?

 

 

Ans) Bajaj Corp’s 1QFY18 earnings report remained weak with sales down 3.6% - steeper sequentially (4QFY17 sales declined 1.9%). Its flagship Bajaj Almond Drops’ (BAD) volumes fell 6.6%; EBITDA and adjusted net profit declined 14.5% and 10.5% respectively. The weak performance was completely attributable to GST led destocking, significantly in the wholesale channel; this is also corroborated by the sharp growth in net-realisation (4.1%) despite absence of any hike in retail selling prices (wholesale channel deals largely in lower priced SKUs). The company has thus far refrained from taking any price hikes as it expects the impact of GST being largely neutral on profits; there could be some near-term pressure from RM costs inflation, though. Key positive takeaway from the result was the retail volumes of Bajaj Almond Drops which grew at a healthy 12.4% rate signalling a possibility of consumer demand witnessing a sharp improvement – this augurs well for Bajaj Corp’s volume growth trajectory, which could recover back to double-digit growth level as seen in the past. The stock quotes at a steep 45%+ discount to the sector’s forward multiple (ex-ITC) and a recovery in volume momentum would be the much-needed catalyst for stock performance.

The Stock Market Cricket Match?

Aug 4 2017 7:00PM
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In a limited overs cricket match, an asking rate of 8 runs per over is considered a bit too high. But whether the team chasing should panic or not will depend on the stage of the innings. Chasing 8 runs per over with 9 wickets in hand & 10 overs remaining may not be such a daunting task as chasing 400 runs in 50 overs.However, to win, the chasing team still needs to score those 80 runs in 10 overs.

 

Similarly in stock market P/E of 24 or 25 (current P/E level) is considered expensive. But whether investors should panic or not depends on the stage of the earnings cycle. Such P/E level at the peak of the profit cycle (after strong earnings growth in preceding years) could be a reason for panic but if you are at the bottom of the earnings cycle (with almost no or dismal earnings growth in preceding few years - which is where we are currently in terms of earnings cycle in India), it may not warrant panic. However, we still need to have corporate earnings growth in at least mid teens range for investors to make good returns over the medium term.

 

 

Also, given the high asking rate, the team chasing 80 runs in 10 overs with 9 wickets in hand could easily lose a few wickets while chasing the score. Similarly given a P/E ratio of 24 or 25, a 10-12% short term correction cannot be ruled out.

 

All about the Bull Market Fuss!!

Aug 3 2017 7:00PM
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Last week we celebrated NSE 50 index crossing 10000 for the first time. Newspapers are filled with index targets over the next few years and guesses about when it will hit 20000! IPOs are listing at large premium, everyone has started believing that it is time to invest now and brokers’ offices are busy again. This is the time to remind ourselves of a few things about the bull market.

 

"Very early in my career, a veteran investor told me about the three stages of a bull market. Now I'll share them with you. The first, when a few forward-looking people begin to believe things will get better.  The second, when most investors realize improvement is actually taking place.  The third, when everyone concludes things will get better forever.  Why would anyone waste time trying for a better description? This one says it all.  It's essential that we grasp its significance. "Howard Marks

 

"The further you get away from a bear market, the greater the number of people who have convinced themselves they can handle the downside – until the next time, of course. In the interim, if the indices are performing well, then you can bet that many investors – individuals and professionals, alike – are going to feel pressure to do whatever they can to ride the bull." Steven Romick

 

"In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond." Warren Buffett

 

"In a bull market, it is advisable to restrain one's greed. There is an old wall street saying "The bulls make money, the bears make money. But what happens to the pigs?" You can't make 101 percent. You shouldn't even strive to make 100 percent. Your goal should be 66.6% of a big move. Get out and then reinvest in something that has been newly studied" Roy Neuberger

 

"Common stocks should be purchased when their prices are low, not after they have risen to high levels during an upward bull-market spiral. Buy when everyone else is selling and hold on until everyone else is buying—this is more than just a catchy slogan. It is the very essence of successful investment" J Paul Getty

 

 

"During 'bull' markets, many investors tend to give themselves too much credit for favourable results and to give insufficient credit to the positive environment that played a large role in creating the results. This can lead to overconfidence on the part of the investor and resulting mis-assessment of risks" Ed Wachenheim

 

Indian PVC Companies:The next big wealth creators?

Aug 2 2017 6:00PM
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In the past few years, the Government of India has initiated many new projects and investments in the

irrigation sector. The focus of the Government is on rural water management, which will be fulfilled only when there will be proper infrastructure for the transportation of water to the end-user. This factor will remain as one of the major drivers for the growth of PVC pipe industry in the country along with the expansion of housing sector and increasing replacement demand for CPVC. The PVC pipes and fittings market in India is projected to register strong growth of 15% CAGR in FY15-19E and is expected to reach ` 391 bn in FY19E as compared to ` 225 bn in FY15.

 

Indian Industry Scenario:PVC Pipes segment of Indian Plastic industry has performed exceptionally well in past few years, since it has crossed the mark of ` 9,000 Crores. India's Plastic market is growing at a steady rate of 12%. PVC commands plastic pipe market by dominating over 84% share of the market. In areas like Soil & Waste Drainage over last few years, PVC pipes have significantly made their presence felt and plastic piping systems continue to gain ground. In bigger cities, PVC has captured a large portion of the market. Plastic PVC pipes are the most suitable and poised to replace cement pipes. In areas like roof, gutter drainage, PVC pipes have vital role to play. In the building and construction section, PVC pipes has a total market of around ` 2,000 crores which forms 31% of the current market. New area for penetration of PVC pipes is Roof gutter systems which have a total market share of 5%, i.e. ` 1,200 crores. India's Irrigation demand is significant and the demand for quality PVC pipes remains firm.

 

 

P.S: Watch out for companies like Amulya leasing(Apollo Pipes),Kriti Industries,Kisan Mouldings,Dutron Polymers,Captain Pipes etc.

 

VGuard Industries: That required Crisp Update

Aug 1 2017 5:50PM
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One of our inhouse research expert Priyan met with the management of the company recently and here's his crisp meeting notes:-

 

Company reported subdued numbers for the first quarter.While commenting on company’s performance, management said, the first quarter has been significant disruption on account of transition to the GST Regime.

 

Further, company expects good set of numbers in coming quarters due to trade to start re-stocking once initial GST hiccups are out of the way. Company also expects to reap benefit from GST in long run due to market shift from unorganised market to organised market.

 

The company is Firing on all cylinders. 20% minimum Turnover growth and Return on equity of 25% even for new business or any value chain integration. 

 

Increasing share of manufacturing from current 40 percent with plans to go upto 60-65% over next 5-6yrs. This also coming from higher share going forward of complex and high value products.

 

2 brand new manufacturing units in Uttranchal and Sikkim with 10 year tax holiday will give the leg up.Rebranding and Digital push for much higher cunsumer connect.

 

Is it the era of the NBFCs?

Jul 30 2017 10:30AM
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Nineties in India saw BFSI dominated by Non Banking Finance Companies (NBFCs). These were active in raising term deposits; extending lease, hire purchase, bill discounting to mid size corporates and SMEs; facilitating IPOs through their merchant banking services. These were also pioneers in providing retail loans for automobiles, commercial vehicles and two wheelers. There were no mobile phones, social media and credit bureaus then. 

 

However we saw these NBFCs sunsetting (with a few exceptions) as the banks rushed in to dominate this space. The last decade and half has witnessed banks - especially SBI and private sector banks - building huge retail franchise and fuelling rapid growth of GDP. Banks made those NBFCs irrelevant. 

 

 

Aren't we noticing silent but sure footed reemergence of NBFCs? They are treading into waters where no one's swum before. These NBFCs seem to be creating new opportunities in retail credit - even micro credit less than 6500 bucks. They are using data, generated in copious quantities by smart phone wielding, social media flocking, card swiping, interconnected millennials. They mine this data to lend money in real time when a consumer wants it and where she wants it. This time let's hope these upstart startups will stay here longer.Happy investing folks.

 

Are you becoming too adventurous in markets?

Jul 25 2017 5:00PM
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The manner in which cats & dogs are rising indicates the return of uninformed gullible retail investors in the market. Large number of penny stocks,the likes of Guj NRE Coke, Nagarjun Oil etc etc are moving in upper limit with huge volumes. Going by historical facts, there could be a sell off. This I call the Albatross-A bird which flies along with the wind and falls back to its place when the wind stops.One thing is for certain though, market sell off or not it doesn't matter as good companies would move up,consolidate for some time before moving up in the northward trajectory again. Craps would move up in staircase and fall back on escalator. So selection becomes very important. Another point which I keep on repeating is kinda,"no need to be adventurous"-It's way better to be in cash if you ain't finding opportunities". We as a matter of fact keep adding to our old positions rather than stretching out for new stories. Happy investing folks.

How Real Business is Done

Jul 24 2017 8:30PM
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A story from the book 'The science of persuasion-Influence' by Robert Cialdini. It's a great persuasion technique.
 
2 brothers, who used to run a tailor shop in 1930, used the most clever sales tactics to sell their stuff.
 
When the salesman, Sid, had a new customer trying some fancy suits, he would admit to a hearing problem and as they talked, he would repeatedly ask the customer to talk a little more loudly. Once the customer liked the suit and asked about the price, Sid would call out to Harry- his brother and head tailor, asking about the price. Greatly exaggerating the response, Harry would say "For that beautiful, all wool suit, the price would be $42". Pretending not to have heard, he'd ask again to hear Harry say "$42".  At this point, Sid would turn to the customer and say "Harry says $22". Many customers would hurry to buy the expensive suit and quickly run out of the shop with the "expensive=good" bargain before Poor Sid discovered his "mistake"! 
 
The customers always left with a smile and a sense of achievement, blissfully unaware of how the brothers had used their sound understanding of human psychology to smartly close a sale!
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

The Scary Reality - Must Read

Jul 22 2017 6:00PM
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We had a meeting with one the listed diagonistic companies chain while doing some scuttlebutt the discussion took an irrevelant deadly turn which may not count in the context of Indian stock market but in terms of ones personal life it's sure to send shock waves. Here's the quintessence:-
 
It takes approx  ?1.20 Cr for a 4.5 years course to become a MBBS/ Doctor. How will these MBBS ordinary Doctors recover this 1.20 Cr,and interest on Education loans?
 
- By tie up's with Pathology Labs for commissions of 20-40%.
 
- By tie up's with Nursing homes/ Hospital for commissions of 15-25%.
 
- By tie up's with Pharma Cos for commissions of 20-40%.
 
No wonder Heathcare industry has become Wealth Loot industry. Not only there will be severe overcharging but spare a thought for the quality of treatment. Scary times to say the least indeed. What's the remedy to it? We remain clueless.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

Why VB likes Lancer Containers?

Jul 20 2017 6:00PM
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They have about 6000 containers,Costs abt 60000. Now container cost have also moved to above 80000,different issue though.They are adding 2000 more. So quite a scalable business.They charge point to point cost including ocean charges,book space in ships for their containers.
 
They except owing ship do everything. I am yet to segregate the container rental part included in total cost they charge but i think it should be 100-200 rupee per day. So basically 200 per day-200*200 days utilisation gives 40000 rupee. On something that cost 60000-80000. So like this model as scalability not an issue. From 6000 container they can move to 20000-25000 as was told. Even 25000 is nothing in container business.
 
Ebitda of 8 cr now. 15 year life of second hand container can be increased if maintained. New container costs double. They have a Tie up with caru, tex which are global leaders in container rentals. The sector seemed unorganised. So they seem to move in organised way,opening branches. Ipo was for 2 cr.  Promoter issuing warrants giving shares to themselves at 30.5. They plan to maintaining the promoter holding of 75%. Company can easily grow at a growth rate of 30% plus for next many years. A sme stock to watch out for.
 
P.S: Vivek Bhauka ji is one of your sharpest small cap predators. Happy to have him to help benefit the members of ShareBazaarApp.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

Why Bella Casa Fashion is hitting life time highs?

Jul 19 2017 7:00PM
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Story:- Bella Casa Fashion is a branded play on the domestic home furnishings and garment businesPromoter family has only this business. 2 generations involved in the biz – handling different functions. Next gen is aggressive, especially Saurav Gupta (NIFT Gold Medalist – joined biz in 2004).2 factories with 150-160 cr. capacity slated to go up to 200 cr  in FY18.
 
Apparels business:- Focused on women’s Indian wear,dedicated plant spread over 1 lac sq ft. It's only B2b business. top customers – reliance trends, lifestyle, ABRFL (Pantaloons), Max, Shoppers Stop. Reliance is the largest customer with 40% share of revenue in this biz. Current capacity 60cr per annum.Capacity set to increase to 100cr in july 17. Reliance has underwritten (assured offtake) full increased capacity. This is against bulk discounts. Gross margin stands at 30%. 
 
Home Furnishing:-Into branded bed sheets and quilts.Dedicated plant spread of .5 lac sq feet capable of delivering 100cr revenue. Fully automated quilt plant with 1000 quilts/day capacity. 75%  branded biz under own brand Bella Casa. Balance 25% sells to sleepwell and Kurlon. 25%  blended GM. Branded 27%, non branded 18%. Over time the share of branded will keep going up. They focus on brand visibility through instore mktg in Hypermarket/cash n carry/dept store channel ( spend up to 4-5% of branded HF revenue).TV sales on homeshop 18 account for a lot of sales.Celebrity endorsements under discussion. Ecomm – they sell to flipkart etc on outright basis,so entire cost/efforts to sell is borne by the website. They also export ..mainly to Middle East (landmark group).5 cr exports. Exports will grow,But real focus will be on domestic market as they see much bigger opportunity here
 
Other points to note:-Raw material cotton is a pass through. Expect cotton prices to be subdued this year. Capex of 9 cr on expanding apparels capacity (3cr for capex and 6cr for w/c) will be incurred shortly.Can do PAT 6 cr. in FY18.Projected to do 12-13 cr pat in FY20 with 200 cr+ sales. It will move to mainboard in Dec’17. Current roce 17%.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

ShareBazaar Apps Tower Talk

Jul 18 2017 12:00PM
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1) As per our strong sources,One Japan is expected to acquire a majority stake in Eastern Gases ltd. Strong accumulation of the past few weeks hints at informed insiders activity. Company may continue to buzz in the bourses. Delivery volumes are on the rise for the company.
 
2) Kingfa science is expected to more than triple its profits in the present financial year. The company which was formerly known as Hydro ss has been a huge multibagger over the last 5 years. The Chinese parent from 1992 to 2013 had a 65% CAGR in China. Indian baby on its way to deliver similar numbers.
 
3) Edelweiss and few other suitors are well on course to acquire Manappuram Finance. Second generation of Nandakumar is not interested in running the business. Edelweiss has been on continuous talks with the company for quite some time now but owing to valuation mismatch the deal is yet to see the light of the day. An announcement in this regard is expected to come anyday now as per the buzz in the bourses.
 
4) Steelcast is expected to remain in action in the near future as results are expected to be superb this fiscal. Company which fell on trouble coz of heavy capex earlier finally seems to find its strong footing. From a clientele of just 5 a couple of years ago it now boasts of nearly 30 clients. Pick up in economic activity will certainly help the company to attain the operating leverage play. Steelcast peak margins can go as high as 22% EBITDA.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

Missing the Forest for the Trees

Jul 17 2017 9:55AM
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We are in an ambivalent investment environment globally. Risk assets find themselves in a strange conundrum. While low interest rates have ensured that there are no cheap bargains out there, the feeling increasingly among capital allocators is that everything is fully priced. Animal spirits seem to be confined in a few individuals like Elon Musk and Jeff Bezos and it seems like not much else is happening elsewhere. The excitement around emerging markets has disappeared and the feeling among investors is that plus ca change, plus c’est la meme chose (the more things change the more they stay the same).
 
I don’t think I am qualified enough to make a statement about every single asset class and every single geography in the world, however, I do believe that I have a good handle on things on the ground in India.  The narrative among investors allocating to India is that it is fully priced and that the risk-reward has become inverted. Markets have done well while the real economy remains sluggish.  In my investing career of 18 years, I have remained obsessively focused on asymmetry and protection of permanent losses of capital. I can tell you that investors are completely missing the forest for the trees.
 
Something transformational is under way in India. It is hard for me to explain what is happening on the ground without sounding hyperbolic. Let us discuss two very significant changes underway and their transformational impact on India.
 
Movement to a rules based system: This is unprecedented in India’s history. The law in India has always been optional and has been enforced differently for different people. Discretion is slowly being weeded out of the system and the leadership at the top has embraced decentralization and non-interference. While skeptics will quickly point to continuing grass roots anomalies and corruption, the change at the top is undeniable. If one were to assume that the current leadership will govern for seven more years, the fabric of India’s civil society will be transformed forever. While this derails the gravy train for the beneficiaries of the current system, it creates exponential growth and value creation opportunities for those playing by the rules.
 
De-bottlenecking India: India has been divided by its rulers and leaders for centuries. This policy of division continued after Independence. Division is very lucrative for those in power as it increases the value and hence the tolls for access and decision-making. Giving up power and discretion is very difficult even for the most benevolent. Unification increases transparency, reduces friction and reduces the ability of those in power to collect tolls. India has been undergoing massive re-unification and integration at a fundamental level for the last three years.  It started with the dismantling of the planning commission and the devolution of revenues to the states that strengthens the federal architecture envisaged in India’s constitution and continues with the implementation of the Goods & Services Tax (GST). Low cost information technology and ubiquitous mobile telephony has enabled the government to undertake rapid large scale deployments of e-initiatives. The mobility of the people in the United States has always amazed me. Mobility of people and workers has been severely restricted in India and people have remained unwillingly chained to opportunities in their immediate ecosystem. Initiatives like mobile employee provident fund accounts (EPFO), low cost Jan Dhan bank accounts and biometrics based Aadhar numbers have empowered migrant workers and reduced their bondage to employers. Initiatives like jurisdiction free income tax assessments and digital national agri marketplace (e-NAM) are likely to further unchain individuals from their immediate geographic ecosystem.  
 
The number of initiatives under implementation for the decentralizing and integration of India’s social and economic systems are too many to list here. Let us instead focus on what this means for India’s economy and for investing in India.  This integration completely disrupts existing business models of companies that have profited from the inefficiencies of a divided India. One can already hear the cacophony of complaints from business people who are seeing their margins compress and their businesses disappear. The old order has changed forever and the sooner companies accept it and take corrective action, the more likely they are to survive and thrive.  While the old order based on inefficiencies is getting disrupted, new opportunities for scale from servicing a national market are emerging. Companies have to invest in people, management and technology and have to improve access to organized capital to survive and thrive in this environment. For companies that manage to embrace this change the opportunities are unprecedented. This entire change is resulting in (good) deflation and is empowering the Indian consumer. Over the next decade, India is likely to see gigantic leaps in productivity growth and increases in purchasing power and standards of living. 
 
The equity markets in India offer a range of investing opportunities second only to those offered by the US markets. There are a large number of companies in India run by competent management teams with good standards of corporate governance and sensible capital allocation policies.  Many of these companies and their management teams are cognizant of the new emerging order and the opportunities it presents. They are hard at work transforming their companies to capture the emerging opportunities and to catapult themselves higher. For companies like these, trailing valuations are irrelevant.  The challenge for investors of course is the fact that not every company has what it takes to change leagues.  However, given the magnitude of the change underway in India the universe of investible companies is fairly large.  
 
Opportunities to invest in economies, markets and companies like these emerge once in a generation. It is inevitable that there will be setbacks and missteps along the way and it is true that there are no roads paved with gold in India. However, as a tour guide at Ellis Island in New York once told me, the exciting part is that the roads are getting paved rapidly and that investors (immigrants in the case of Ellis Island) have the opportunity to participate in the paving of the roads. It is therefore important for investors not to lose sight of the forest while evaluating the trees.
 
Courtesy:Atyant Capital
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

What Investors Hardly Realize:-

Jul 16 2017 1:30PM
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Estimated gold owned by Indian households = 24000 tonnes which means on an average each Indian owns ~20 gms of gold. At Rs. 3000 per gram, each Indian has investment of about Rs. 60,000 in Gold (almost 60% of country’s per capita income).
 
Household investment in equities is about US $ 280 billion (Rs. 18200 billion) which is approx Rs. 14,000 to 15,000 per person. Long term growth, regular cash flow, low transaction cost, liquidity, etc may be key decision making variables for investors around the world but not for Indians. 
 
We often come across investors who defer / avoid investing in equities due to "uncertainties" with respect to economic and political environment, new policies, global factors, etc. What these investors probably do not realize is that if everything becomes extremely certain and predictable (which will never be the case with equities), equity valuations would be so high that it would be almost impossible to earn a return that is substantially higher than risk free rate.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

Five Relevant "Jumlas" for Present Market Condition

Jul 15 2017 5:00PM
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1) World is waiting for Nifty to crash & Nifty is waiting for your patience to crash.
 
2) Before IPO Promoter has vision and investor has money. After ipo the Promoter has the money and investor has vision.
 
3) Now Indian markets cannot come down. Why? 'Bull slaughter banned'. 
 
4) Men who slept with Avanti,Ajanta,Shilpa are still having wow nights. Even newly married with the likes of Vidhi ain't doing bad either.
 
5) What is Bubble Market? The quality of stocks in one's portfolio tends to go down. We sell our big ships to buy speedboats.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

"Value investing” a Good Investment Strategy?

Jul 14 2017 6:00PM
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Q) Is “value investing” a good investment strategy for long-term investment goals like income during retirement years?
 
Ans) Buffett has provided the best answer to this question in his 2011 annual letter: "Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power – after taxes have been paid on nominal gains – in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.”
 
Regular monthly investments in high quality businesses at fair prices for long periods of time is possibly the most effective way to build up a sizeable retirement corpus and strong purchasing power during one’s retirement years. Because you are buying more stocks when they go down and less when they go up, this technique helps you to make rational buying with the potential for better risk-adjusted returns over time. In finance parlance, this is called “dollar cost averaging” and it works – as long as you’re not buying into bubble-level valuations like in 2000. For people with full-time jobs, building wealth has a very simple formula: “Spend less than you earn, and invest in a group of high quality businesses over long periods of time.”
 
Courtesy: Gautam Vaid(Our whatsapp inhouse research team)
 
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

Recent Developments in WPIL LTD

Jul 13 2017 7:00PM
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1. Closure notice for Mather Foundries given and it will be shut down by September 2017 and losses will be restricted to 7-8 crores vs 21 crores in FY-2017. The sale of land of Mather could fetch 30crs which will be used to reduce debt. 
 
2. Around 12 energy efficient pumps have been launched in Italy and 5-7 products being planned to launch in India in second half of FY-2018
 
3. In next 2 years Indian topline will go to 500+ crores with EBIDTA margin of 18-20%. Current domestic order book is 850cr+ which is almost 3x of current revenue and provides decent revenue visibility over next few years and order pipeline also remain strong due to emerging opportunities in irrigation, river linking and cleaning, water supply projects,  and industrial sector. 
 
4. NTPC's plant modernisation plan pump order started tendering. Competition in Engineered pump from foreign players almost evaporated, which was there during 2005-2012(they are unable to service).
 
5. European subsidiary have strong revenue visibility with 50-55mln euro for 2018 and 60-65 mln euro in 2019 with 11% ebidta margin. 
 
6. Company has planned to repay 90 crores of debt in 2018 with expected EBIDTA of 100-110 crores vs 70 crores in 2017  and around 140-150 cr in FY19. 
 
 7. No major capex for next 2-3 years and depreciation in Rutchi pump to go down also in FY19. Thus overall interest and depreciation cost will also go down meaningfully over next two years thus boosting return ratios. 
 
So WPIL LTD is expected to do 50-55 crores of PAT in FY18 and 80cr+ in FY19. Assuming 20x, potential market cap could be 3X of present market price.
 
Courtesy: ShareBazaar app inhouse whatsapp research team
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

PTL Enterprise AGM notes

Jul 11 2017 6:00PM
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1. Artemis listing to happen in 15-20 days as all approvals are in place.This was the only good part of the happenings
 
2) There was voluble ruckus on 2 matters up for vote. Both very serious. Board which is filled with cronies of Kanwars plan to take out 300cr into vague investment plans or provide loans but refuse to provide any details. 
 
3) Shareholders wanted the funds or more to be used for expansion, modernisation etc but they just laughed over it. Secondly was the matter of measly increase of 20pct in lease to Apollo locked till 2030 but Kanwars feel they are doing a favour to the facility .
 
4) The entire approach was pathetic. Total thuggish. Heard there were rumbles in Apollo AGM too.
 
Courtesy: Priyan(Our inhouse whatsapp research group)
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

GST - The Benefits & The Misconcepts

Jul 10 2017 1:00PM
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We must welcome the biggest tax reform in the history of India. It is a game-changer. Any big change does bring some disruption. But transition has been less disruptive than what I estimated. I am sure soon people will adapt. 
 
The advantages of GST are many:
 
1) One nation One Tax. Gives a level playing field to all.
2) System makes it difficult to evade taxes. If overall taxes go up (indirect and direct), 2 things can happen. Either taxes will come down, or more money will be spent on infrastructure, welfare of poor, etc. I think it will be a mix of both.
3) It gives the honest a chance to compete. Which is always good for the society and the country. As when honesty and integrity gets rewarded, the nation goes on a completely different growth trajectory.
4) Cost of logistics also come down. As check posts, entry posts, octroi posts, etc go, and movement of goods become faster. We are already seeing that. This does bring down the price of the goods.
5) Removal of cascading effect. Since current system had different taxes, it was difficult to claim credit for one tax against the other. For example, under previous tax regime, the service tax paid on input services cannot be set off against output VAT. Under GST that will be possible.
6) Far lesser compliances and returns.
 
Also, there are many misconcepts among businessman regarding GST. It is far simpler than what people make about it. Far less returns then what one was filing. The 37 returns people talk about is actually incorrect. There are only 11 returns.
 
A trader friend told me "First we had 6% and now we have 18% on a particular item". The answer to it is that there was a 12% excise on it at manufacturing stage. Which got lost during the chain, but is built onto the price.The 6% is VAT and 12% excise is built into the price. Somewhere in the chain, someone was not able to take credit of the 12% excise. With GST, it will be 18% from manufacturer stage to end-consumer and all people in the chain from manufactureer onwards will be able to get 18% setoff and only pay tax on incremental value-add. Far simpler and efficient, and in fact, will mean lower taxes.
 
Another misconcept is this "Service tax was 15%, now GST is 18%. This will increase prices". In many services, service provider could not take credit of many inputs which had VAT, etc. Now he will be able to take credit of all his input GST and hence should bring down the cost of the service by about 3% and make it neutral for the end-consumer.
 
In textiles, there are many segments, where there was credit of 6-8 months. These businessman opposing GST as they say they will have to pay GST without actually receiving it from customer. Very valid point. But think about it, is this a good practice to give credit of such a long time. Shouldn't it change ? And if it does, would it not be good for the businessmen involved ?
 
Many oppose the fact that if GST paid by them is not paid by their supplier, then they will have to bear it. Which is a valid grievance again. But one must understand, that this is status quo as per previous VAT rules. Previously too, if your supplier did not pay VAT, u had to pay it. In fact, in many cases, u came to know about this after a year or more. And then u had to pay the VAT, interest and penalty. Now u will know in a month. Your loss will be limited to just the GST amount. And also, a system is planned for ratings. So, u can check rating of your supplier before doing business.
 
There are many such misconcepts. I would advise all to stay positive and embrace the change.
 
I think reasons of many opposing are different. GST makes it difficult to evade taxes, and unfortunately, that is a major reason for discomfort, for man. All businesses which wanted to do legal and proper business, in fact should be happy. As they now have a level playing field against the people who were evaders and bending the system to their advantage.  Think about it.
 
P.S: From one of our mentors Jitu Bhai who has been a massive multibagger himself over the last 20 years. Thanx for your exclusive post for the ShareBazaar app.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

Meera Industries:-What's cooking here?

Jul 9 2017 1:00PM
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Company has been a recent listing in the SME platform. Decent debt free company with market cap in the 20 odd crore range.Now about the businesses-They are mainly into the manufacturing of textile machines.Incorporated in 2006, Meera Industries Ltd (MIL) is engaged in the manufacturing of Yarn Twisting, Winding and Heat-Setting Machine for textile industries. Company's products are sold under the brand name "MEERA".MIL cater to the domestic market as well as Exports the products to continents like America, South America, Africa, Europe and Asia and major countries like Germany, Spain, Turkey, Thailand, Belgium, USA etc. They have government recognized in-house R&D Center by Department of Scientific and Industrial Research, Government of India located within the manufacturing unit.
 
- 1 plant in Surat speard over 1.6 acre appx.Has the capacity to do 30cr of revenue at full capacity. Did 13.45cr of revenue , up 64% yoy.Did 1.75cr of EBIT...almost 13% margin, up 75%. Did 1.06cr of PAT..almost 8% margin, up 158%
 
What I like about this co:-
 
- 1st generation entrepreneur who does business the way I would. No debt. Day receivable only 27 days. Double digit operating margins. 
 
- All this at a plant which is currently operating at 45% capacity...full operating leverage yet to play out.
 
- Part of the IPO will be used to setup a showcase yarn manufacturing center using their own machines. This will work as a demo place as well as an independent profit centre.
 
- Co. has also planned a similar forward integrated setup in USA. They have won several awards for R&D.Out of 3.83 EPS, dividend payout was 1/- more than 25%
 
 Valuation projection:- By 2020, I expect revenue at 50cr (30cr machinery + 20cr yarn ), with blended 12% net magin. 15 EPS and with three years horizon in mind you can arrive at the target which Kinda would be way above the present market price.
 
P.S: Author is one of the better microcap pickers who keeps a low profile and doesn't want us to name him in public domain.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

Capital First AGM Notes

Jul 6 2017 9:10PM
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Demonetization: no change in business due to this because of underwriting policy of business. ECS went up 400% & become more digital 

 

GST: welcome move by govt. no change in business due to this 

 

We are growing company & investing a lot in business. Profit go up significantly over period of time.

 

We have no interest for SFB & MFI business. Even not interested in insurance business, better to distribute insurance policies and getting commission.

 

Due to conservative management , they kept high provision on books. Despite write off- growing 30 to 40% annually.

 

HFC business can grow 70 to 80% over few years

 

ROE continue to grow over period of time. May achieve ROE 17 to 18% by four years conservatively.

 

Courtesy:-Our Inhouse Research Predator group

 

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

 

Why Haldyn Glass is a Serious Investment Candidate?

Jul 4 2017 7:45PM
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Quote: Imagine you have an Inhouse research team of 1500 guys which covers each and every industries and sectors. Do you need anything else? That's what the strength of Share Bazaar App look like. We have 6 Whatsapp groups and have shortlisted each and every candidate who are experienced,passionate and believer of value addition. One such team member happens to be Vinay Ambekar and here's why he is upbeat on Haldyn Glass.
 
Haldyn Glass – The company’s website gives information about their history and products and hence will not repeat there. They have completed an expansion and modernization program in Mar’16 quarter and the effects were seen in Fy17 numbers which showed YoY improvement. Q4 fy17 sales and profits were flat (profit showed increase only because of increase in other income) and hence stock corrected 25% from high of 47-48 odd to 36, from where it has recovered. The reason for the relatively poor Q4 is not exactly known (there are no company specific factors in public domain), and could be due to demonetization.
 
I was trying to see how the expansion could benefit the company going forward. Being a manufacturing concern and very capital intensive (furnaces and machine lines), fixed asset turnover is a right parameter to gauge efficiency. In Fy 15, 16 and 17, net fixed assets increased from 56 cr to 84cr to 109 cr (on consolidated basis, including the fixed assets of their JV company, which started operations in end Fy‘17). The company has achieved average net fixed asset turnover of 2.4 to 2.5x from 2011-15. In Fy07, it was 1.8x and dipped to 0.96x in Fy08 due to a similar expansion they had undertaken wherein Fixed assets doubled from 33cr to 69cr.Subsequently it showed an improving trend from 2009 till 2015 and then dipped in 16 and 17 (due to the expansion mentioned above). Their ROEs have followed similar trend. Debt equity has been low of late.
 
Glass melting furnaces and new machine lines take time to get stabilized and achieve their optimum efficiency levels. It is fair to assume that the same will happen going forward also. At steady state, if they are able to achieve historical levels of 2.4-2.5x FAT (fixed asset turnover) then they can do sales of 260cr odd over current fixed assets of 109cr. Which can happen over next 2 years (Fy 18 and 19). Which is about 20% cagr. Given that their upgradation is more modern with latest technology, they can achieve higher FAT, however that has not been factored in.
 
Now coming to profitability. Historically their PAT margins have fluctuated a lot with max being 14.45% in 1 year (mostly around 10-11% on average). Fy17 margin was 7.2% (Q-wise it was 4-6-10-8%). With stabilization of operations and efficiencies creeping in over time, say they get back to generating 10% margin by 2019 (they have generated much higher margins in the past), and with this they will be able to achieve net profit of 26cr by Fy19. Current mcap is 211cr,giving 2-yr forward PE ratio of 8-9x. This looks cheap for a company that can generate 20% CAGR sales. Is debt free, has completed expansion and no significant capex is envisaged for atleast the next 2 years. Good product demand. RM cost expected to remain low and they are foraying into higher margin products through their 50-50 JV with German company. As free cashflows increase (since all expansion is done), payout ratio can improve as well. Although they are giving 50% div, payout ratio is just around 20%.
 
Risk is that if they achieve the above sales in quicker time, then there is no further sales visibility (market pays for growth). For this they will have to expand capacity again. This can be in 2 ways (have to guess because figures are not available) – either the furnace capacity is to be expanded (or a new furnace is added) or if the existing furnace has higher melting capacity, then additional glass bottle manufacturing lines can be added. One other possibility is to increase the share of higher margin products like perfume or liquor bottles.
 
P.S: Disclosure not invested. Studied just for educative purposes and sharing. Content exclusively meant for Share Bazaar App.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 
 

Vidli Restaurants Ltd:- Why Your portfolio should dine here?

Jul 2 2017 7:00PM
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Vidli Restaurant Ltd. engaged in the hospitality business and runs chains of restaurants through franchise operated outlets. Presently company is operating 61 outlets (2 own, 4 employee managed and 55 franchise outlets) across geographies. The group is known for its brands "Vithal Kamat" and' Kamats'. VRL has recently launched Ready to eat snacks (Chivda and Bhujia ) in 4 different variants which they will sell through their outlets and also through distribution channel, Company plans to launch 8-10 more variants till end of this year which will include gift hampers for Diwali and other festivals. Mrs. Vidhi V. Kamat is Managing Director of the company and Mr.Vikram Kamat is Chief mentor to the company, both of them are Hotel management professionals and have more than 10 years of experience in running Branded hotels and Restaurants.

 

Business-VRL have outlets at all major locations on highways across Maharashtra, they have outlet at Delhi Airport, at Railway stations in Mumbai and at various malls in Mumbai and Pune. They have started outlets in Gujarat, Rajasthan, Delhi, Punjab and Manali too. Presently VRL’s operations are categorized into family dining (1500-200 Sq ft), khaojao(500-700Sqft ) and Kiosk models(65-100 Sq ft). VRL supplies all the Ingredients and Raw material for making the food items at their outlets. The key objective of procuring and supplying the raw material is to get benefit of large scale purchases and controlling the quality and hygiene; Due to this the consistency in taste is also maintained across outlets.

 

ROI for the franchisee owner comes around 30-40% and operationally they break even from the second month itself, due to this there is a healthy enquiries for the new franchisees and so is high stickiness.

An outlet would be at breakeven position even if that operates at 80 customers per day with average spending per customer of INR 100 to 150. VRL predominantly has a presence in Maharashtra and In the last one year has worked tirelessly on system and processes. Now company is aggressively planning to increase their presence in other states. Earlier company was servicing majorly the south Indian food items but due the huge demand now they have added main course items to the menu like chola masala, Rajama Masala, Paneer butter masala , Dal makhani and others.In the Trial run of 3 months the outlets where the main course items were introduced have shown increase in sales by 50 -60% .

 

Industry outlook -According to FICCI the combined F&B service market is worth INR 309,110

crore in the year 2016 with the CAGR of 10%  is expected to touch INR 498,130 crore by 2021. The sector is dominated by the traditional segment. Indian origin and multinationals have not optimally penetrated the market so far and provides very large opportunity for organized players.

 

Key shareholders:Girik Capital advisors holds 8% stake

Jignesh madhukant Mehta – 2.9 %

Nirbhay mahawar (N Square capital) – 3.55%

 

FINANCIAL HIGHLIGHTS :VRL Recorded a Total Income of Rs. 621.24 Lakhs during the year ended 31st March 2017 vis a vis Rs. 441.32 Lakhs during the year ended 31st March 2016 i.e growth of 41%. Recorded a EBITDA of Rs. 100.75 Lakhs during the year ended 31st March 2017 vis a vis Rs. 67.17 Lakhs during the year ended 31st March 2016 i.e growth of 50%. Recorded a Total Income of Rs. 345.06 Lakhs during the half year ended 31st March 2017 vis a vis Rs. 248.61 Lakhs during the half year ended 31st March 2016 i.e growth of 39%. Recorded a EBITDA of Rs. 60.15 Lakhs during the half year ended 31st March 2017 vis a vis Rs. 28.82 Lakhs during the half year ended 31st March 2016 i.e growth of 109%. Served Approx 13.30 Lakhs Customers. VRL and is cash rich company with cash & cash equivalent in balance sheet of INR 5.4 crores.

 

 QSR food chain Faaso’s has a valuation of 1500 crores when it is operating 130 outlets presently.

VRL is on track to open 250 outlets by the end of fy 2020, at that stage due to its asset light and high operating leverage business model the company may command a premium valuation.

 

 Risks factors –1. Labour intensive model. 2. Successful addition of outlets outside their core Geographies. 3.Company has to implement Transparent Billing & Revenue collection system as cash transactions are involved. 4. Road map for centralized warehousing and supply management outside core Geographies.

 

 

Courtesy: Vijay Rawat(Share Bazaar apps whatsapp research group)

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

 

Interest Costs: A trigger for Indian Economy and Markets.

Jul 1 2017 7:00PM
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Interest rates in India during last three years have fallen by almost 250 basis points if one goes by the yield on 10 year government bonds. From 8.90% in April 2014 the yield has fallen to approximately 6.50% currently. We think it has a potential to fall by another 50-100 basis points, if not more, in next 2 years given fiscal discipline of central government. The fall in interest rates could be a trigger that would help Indian economy takeoff in medium term. It should also help corporate profits return to its normal level leading to much faster earnings growth rate. Corporate profits as a percentage of GDP has fallen from approximately 7.8% in 2007-08 to less than 4% in 2016-17. Return of normal corporate profitability would take markets to higher levels by driving corporate earnings.

 

Companies which would benefit most would be the ones which are not facing debt problem and cater to discretionary consumer demand and industrial investment.Overall consumer demand should see significant increase as the lower cost debt becomes available to them. The consumer demand in housing, auto and durables should ultimately aid in private capital expenditure thereby reviving animal spirits in the economy. The companies which have a debt problem are unlikely to do well and may see huge equity dilution as loans are converted to equity at terms favorable to lenders. That would also be positive in long term for overall economy.

 

Corporate Debt Blues will Disappear: There is a crisis like situation in large corporate loan markets in sectors like power, telecom, steel and infrastructure. The amount of bad and stressed loan amount is huge. This was largely due the fact that some companies took too much debt for projects which turned out to be unviable. May we also suggest that there was crony capitalism at play here?  Just 12 insolvent accounts that have been sent by RBI to insolvency courts accounts for 25% of the total toxic assets. The period from 2007-2015 saw a huge increase in interest costs, much of it because of inefficient allocation of debt to cronies. For BSE 500 companies (excluding Financials, trading and oil PSUs) in decade to 2015 while revenue grew at 19 %, interest costs increased at 28% resulting in net profits growing only at 10%. During last five years corporate profits have stagnated. Interest burden is a major reason for the same.

 

There is not going to happy ending for companies under restructuring. However we can expect that losses would be booked by banks and assets would be sold. This would release capital and with further infusion of capital either by government or markets or both banks might be in better position to lend.  Though, one cannot be too sure about PSU banks ability to lend in future. Meanwhile private sector banks and NBFCs would continue to gain market for PSU banks share improving credit availability. They should make up for much larger incremental share of the market. That would be more efficient for the economy. As a percentage of GDP corporate debt in India is around 50 % compared to 170% in China and there is a significant scope for increase. If more of lending is done by private sector it is likely to be more efficient.

 

Transmission of Fall: Though interest rates in terms of 10 year bond yields as well as repo rates have fallen we have not seen a similar fall in interest rates whether for consumer or for healthy part of corporate sector.According to RBI governor Urijit Patel till February out of 175 basis point (bps) cut that RBI has done during this round of rate cutting only 85-90 basis points has been passed on. Since then there has been further passing on of the cuts however there is still a significant scope for further fall in lending rates at the level of financial institutions. We also think that RBI itself would cut the repo rates further by 50-100 basis points in next 12-18 months.

 

Longer dated loans are especially affected by reduction in rates. A 20 year home loan becomes about 15% cheaper at 8% rate of interest compared to 10%. This triggers two kinds of demands. One, demand for refinancing of older loans which saves money for existing loan borrowers. Two, fresh demand as homes become more affordable for new buyers. Auto loans have also become more affordable. Housing and auto demand would help many sectors of economy improve capacity utilization paving way for further investment. Household debt to GDP ratio for India is around 10% which much lower than countries like Malaysia (70%), China (36 %) and Thailand (70%). With lower interest rates loan uptake can be much faster than GDP growth.

 

 

The fall in interest rates would also help project financing of companies easier as interest costs become more manageable. India has one of the highest rates of interest that makes financing debt riskier for companies.  Compared to a prime lending rate in India of about 9% in China lending rate is around 4.5%. So on average Indian companies are spending twice in interest costs. That makes many projects unviable. A reduction in rate thus costs would help finance private capital expenditure.  That would be the last missing piece for economy to take off. 

 

The Future of Oil - What's in Store?

Jun 30 2017 10:00AM
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The oil industry faces a straight race between a supply shortfall and peak demand. If prices persist around $45pb for a significant period, then production is unlikely to grow to the levels required to starve off a shortfall by 2020, as prices below $50pb will be unable to support the investments needed. And if investments do not pick up, then the industry will get one last boom before peak demand arrives.

 

The definition of an oil boom in this new paradigm is one where prices exceed $60pb. Such a boom becomes more likely if the extended OPEC-led cuts succeed in bringing inventories down to the 5-year average. Yet, it would only take a 1 – 2 million bpd supply disruption for prices to rally, a prospect that can’t be ruled out considering the current state of global affairs. Of particular concern is the unrest in Venezuela, a country that analysts now say is primed for a Soviet-style collapse, putting its 2.5 million bpd supply at risk.

 

Barring any disruptions, there remains only a 3-year window for an oil windfall, as once the policy actions by China and India take hold, the deployment of EVs will begin to adversely affect oil demand by 2023.Afterwards, the falling costs of batteries, efficiency gains, fuel-switching and the spread of self-driving technology and ride-sharing services, will all combine to bring about peak demand between 2025 and 2030.

 

At the same time, the industry will experience a shift as oil will be increasingly valued as a chemical feedstock and less as a transport fuel. Organisations need to take concrete steps to position themselves for the coming upheaval and avoid the kind of collapse that has been experienced in the coal industry. Multinationals like Shell and Total have made shrewd moves by divesting into renewables and participating in initiatives like the Climate Leadership Council. Such activities must accelerate to enable such companies to hold onto their leadership positions in the global energy landscape.

 

Engineering companies, service providers and equipment manufacturers also need to leverage their expertise by taking bets that will boost their chances of survival in this new landscape. Amid change lie enormous opportunities – energy storage (such as compressed air storage), industrial CCS (for refineries, petrochemicals, steel and cement) and biotechnology (as an alternative route for chemical feedstocks) – are just 3 areas out of many that will experience exponential growth in the coming decades. As the world moves to a greener and sustainable energy system, the time has arrived for the companies that led the way in the 20th century to break the mould, and evolve from being oil companies to become energy companies.

 

 

How Dr Datson Lab cheated the Shareholders

Jun 29 2017 8:30PM
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FRAUDS Committed by Dr Kannan Vishwanath, ex MD of Dr Datson Labs Ltd, former name Aanjaneya Lifecare Limited ( herein after referred as DDL ).An expose by Joginder Kanaujia. List of fraud are as follows:-

 

(1)  DDL had 15 patents which Dr Kannan got registered with Controller General of Patents, however, only 12 were registered in the name of DDL rest three were registered jointly in his name and his father Mr Kashi Vishwanathan, though these were intellectual property of DDL. 

 

(2) In 2011 / 2012 it was decided by him to buy Apex Drugs, Hyderabad based unlisted company for DDL for an amount of Rs 250 Cr by taking loans from Banks and as approved by them as per Dr Kannan. He paid an amount Rs 80 Cr by cheque as advance to Apex Drugs and further gave them Rs 50 Cr worth of DDL shares.Later it was stated that that deal was cancelled as banks backed out. Till date there were no efforts made by him to retrieve this amount from Apex Drugs, may be because of his personal interest. My request is that Rs 130 Cr with interest be retrieved from Apex Drugs and credited in the a/c of DDL.

 

(3)  Fair Success (HK) based at Hong Kong was incorporated in 2012. I have not been able to find out who was its promoter, it appears he was close associate / relative of Dr Kannan. In 2013 it was bought by Dr Kannan for DDL for a sum of Rs 250 cr, proceeds of first FCCB, In reply to my mail DDL office intimated me that it has been bought because of 15 patents Fair Success ( HK ) had. It started operating as 100 % subsidiary of DDL wef 29 July 2013. On further scrutiny of patents it was found that these patents were same which belonged to DDL. That means these were sold to Fair Success (HK) before it was bought by DDL. For how much amount Dr Kannan sold these patents is mystery but estimated amount could be around Rs 250 to 300 Cr. This amount was not credited in the a/cs of DDL and hence siphoned off, could be in his / his relative / close associate account abroad. A very serious fraud and needs further investigation. Again my request is that this amount be retrieved and credited in DDL’s a/cs.

 

(4) May 06, 2011 – Aanjaneya Lifecare entered into the capital market with an IPO of 50,00,000 equity shares. Issue Price: Rs. 234 Per Equity Share, Issue Size: Rs. 117.00 Crore.  Aanjaneya Lifecare was subsequently named as Dr Datson Labs Ltd. It is alleged that Dr Kannan Vishwanath misused some of this money.As per Annual Report FY 2013 – 14, Dr Datson Labs had two world class R&D Centres at Mangalore and Bangalore.Subsequently what has happened to them is not known. Have they been sold and if yes where is the money from its proceeds?

 

(6) Dr Datsons office was alleged to be fraudulently registered by Dr Kannan Vishwanath on his name using backdated stamp paper wef 2011 and in Jun 2015 it was transferred on his father / mother’s name.

 

(7) Dr Kannan Viswanath has  started (backdated) Hong Kong base company Windsonn Exim Limited. Its board members as per its site are, (i) Dr Kannan Viswanath MD, (ii) Mr Arthure Kibble, based at UK, (iii) Dr. Rajendra Kamat, and (iv) Ing Alex Eens (President). Patents belonging to Dr Datson Labs are shown as belonging to Windsonn Exim Limited also. Is it possible for two companies to hold same 15 patents?

 

In these frauds Dr Kannan has been assisted by his father, Mr Kasi Vishwanathan. Dr Rajendra Kamat, ex Non Exe Chairman, CFO and Company Secy werwe aware of it by virtue of their posts. Also Mr Kishore Iyengar, a close confidant of Dr Kannan Vishwanath is alleged to have been deeply associated in all the fraudulent activities of Dr Kannan Vishwanath.

 

Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

 

Next Big Crash in NBFCs

Jun 27 2017 6:50PM
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P.S: The note happens to be the exclusive personal view of AJ, Head research KR Choksey. We may or may not agree with his views but expect such unbiased,unconventional and different thought process only in your Share Bazaar App. Happy Investing Folks.
 
NBFCs are darling of market in recent times.Affordable housing could lead to next big crash in financial markets specially in housing finance markets. What actually is affordable housing? For me its a marketing tool to get votes by politicians. All housing finance companies are working on low RoE and lesser NIMs due to business characteristics. 
 
In terms with growth on name of affordable housing which is impossible in metro cities even in tier 3 , tier 4 major share likely to remain with psu banks or hdfc . Hfc business dont have any pricing power and it's easy to move from one player to another player. If HFC was such a great biz, GE would not have sold its portfolio at par to Magma. Affordable housing doesnt impact dynamics of buyer in buying real estate.
 
It's Pretty easy to say because of government push on affordable housing, these companies would grow multifold. And lot of portfolio can be shifted from one institution to another in the fastest manner. Kinda a Sbi would be happy to buy clean account of HFCs where difference are between 200-800 bps. We have real instances in urban area where people have shifted their housing loan on 50bps differnces and we would see lot of exapmles in our environment who have shifted their loans. I cant see any loyalty factor at all in this business. 
 
Growth is the word which has been favoured by investors during bull markets and most of HFCs managment are doing same in real manner. They want to raise as much as capital possible. Same thing was liked by market for micro finance companies just few quarters back . I wont be surprised that this waiver scheme can move to home loans also,if that happens, GIC and even Canfin would be in for real mess.Any one who think housing loan is much safer and way different than all the previous busted things should meticulously read about SBI home finance . It used to be a listed company in 1990s and early 2000s.
 
In terms with NBFCs,Some one told me that they are fast in processing but why would a Good sme take loan from Au financiers at 700 bps higher than SBi or other bank loan rates?Sanity ain't in vogue for sure, Giving loan is easiest thing, MMFIN did exactly same between in 2010-2013. They raised money and grew at much higher rate, making investors happy. But every one is aware what happened later.Its becoming crazier with days-Some one told me their driver got the car loan in 4 days and in much faster manner but again giving loan is easiest thing and impact is likely to be seen in x plus 2 and x plus 3 years. 
 
One should completly avoid or be selective in this financial balloon.One more thing , with jan dhan & credit rating agency-a large proportion of untapped guys are already in system which questions model of NBFCs itself. Few may exist in long term but the kind of nbfcs are available now a days, I doubt they would sustain this valuation.
 
 

Why Source Natural Food Looks Interesting

Jun 26 2017 3:30PM
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We are fortunate to have some amazing Share Bazaar App readers who are not only incredibly talented  human beings but their investment track record can put many experts(read paid puppets with pathetic track record yet regular to the idiot box) to shame. Check out the logic of Source Natural by one of our Share Bazaar App user:-
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1. Company run by nephew of Sri Sri having more than 36 crores follower worldwide. That's Kinda 5X more than our Ramdev Baba.
 
2. Value migration from traditional FMCG products to Ayurveda / herbal / natural products going forward.Ministry of AYUSH promoting Ayurveda products. 
 
3. Company's main product OJASVITA is health drink. This product has huge potential to catch market share of total Rs 11000 crores market of health drinks. At national level there are few brands like HORLICS, boost , COMPLAN etc
 
4. Company  started aggressively focusing from devotee to non devotee base by expanding distribution channel across modern trade, general trade, franchise etc at national level. 
 
5. Till last year company sale was largely from their Devine shops only. With low base and store expansion it can expand very fast.
 
6.  Baba Ramdev effects and aggression makes the other similar players focus more too.Company has increased sales and marketing team as well as gradually increasing advertisement budget. Considering the above I checked in the company which has absolutely massive potential. Happy investing folks.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation. 

Promoter Selling out Rumours & What it Means

Jun 24 2017 9:45PM
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In the last couple of weeks there were rumours of promoters of a couple of large IT firms planning to sell their holdings in these companies.In both cases the promoters immediately denied it categorically.Ignoring the denials, let us investigate further and think about this phenomenon as a value investor. In general, if a promoter is considering selling their holdings, it most likely means:
 
They can sell the stock at a price higher than its value; typically, seen in IPOs
 
·They no longer have management capabilities to run the business or even oversee it; possibly due to old age of the founder-manager
 
They have lost interest in the business; possibly due to generational change
 
·The fundamentals of the business have deteriorated irreversibly
 
Let us consider each of the possibilities:
 
Given that the IT stocks are selling at such depressed prices and experiencing negative sentiments, it is highly unlikely that the promoters see it as a way of selling it at a price higher than its value. So we can eliminate the first bullet point as a possibility.
 
While the management capabilities have been lost in one case, they continue existing due to the young and most likely capable second generation with strong ownership in the other case. Even in the former case, they continue having capability to oversee it. But are probably struggling to establish a protocol to do that better on an ongoing basis while maintaining their original values and culture. It is unlikely that they have lost interest in the business given the level of involvement and response to board and management actions in both cases
 
 This is the primary reason being given by most that fundamentals of the sector are in secular decline and the companies are doomed. Hence promoters are trying to exit. This is highly unlikely, given that the companies are extremely resource rich. Both the companies are sitting on cash of $5 billion or so and have cash flow generation in the range of $2 billion per annum. These companies enjoy fat margins of 25% or so. Revenues and earnings have been stable. With this kind of a status, it is easy for these companies to hire the best possible talent from across the world as top management. They can spend for organic growth or acquisitions in new areas, such as, digital or automation or artificial intelligence, data analytics etc. Given this situation it seems highly unlikely that the promoters are planning to sell at all.
 
Then why are such rumours floating? It could be that the promoters are actually trying to find out from savvy private equity or strategic buyers what is the price they are willing to acquire the shares at. This can be a price discovery mechanism and then it automatically could catalyse the value unlocking of these companies and the sector. 
 
Since, so far there is no authentic information, but a rumour, a value investor would try to think about the implications. If it is a rumour then who would benefit? This is akin to reason out a murder mystery based on “Who benefits from the murder?” Since rumours for two companies came out in quick succession, it looks more like engineered information. But a value investor always considers all aspects before reacting.
 
Courtesy:Vikas Gupta
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

Mental Mistakes in Stock Markets

Jun 22 2017 5:50PM
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Stock indices have had a huge run-up recently.The price rise has been particularly sharp in the midcap segment,i.e,in stocks that have a low capital base and relatively low liquidity.It may be the time to step back a bit,book profits and look for fresh oppurtunities in attractively valued stocks that have not participated fully in the rally so far.Profit booking is the key to succesful investing in bull markets.Those investors who books profits regularly have a higher risk taking ability as they can afford to invest in stocks where others have not moved in yet.Over-owned stocks pose a higher risk of loss when the markets turn down.
 
There are so many common mental mistakes investors make,that often lead to losses.Some of these avoidable errors are:-
 
1)Overconfidence- This can lead to complacency and over exposure.It is the most common mistakes investors make when they are making profits.In equities you can never throw caution to winds.
 
2)Herdlike Behaviour - driven by a desire to be part of the crowd or an assumption that the crowd is right-If midcaps are rising people buy these stocks without even knowing anything about the companies.There are so many companies in our markets which only exists on paper,they moves with the winds or faces some unscrulpous activites,the simple gullible investors gets in at the top and that leads to a paralysis when the price suddenly falls and as soon as that happens you are stuck badly unable to take a call on the stock.
 
3)Excessive Aversion to Loss- Inability to book a loss when an investment goes wrong is the single biggest cause for losses to investors.Unless a stock has been bought on strong conviction of long term value,those who make investments for quick gains must learn to exercise stoploss.
 
4)Fear of Uncertainity- This leads to inaction.If we book profits and the stock still moves higher,we feel bad.Therefore if a stock is moving up most investors refuse to book gains.And many a time this ultimately leads to losses.
 
5)Fear of making an Incorrect Decision and Feeling Stupid- This too leads to inaction.People often opt for inaction when faced with fear of making a wrong choice.However little do they realise that not acting in time too is a choice that they made unknowingly.
 
6)Reluctance to admit Mistakes- This is another behaviourial pattern that leads to incorrect decisions.In markets,we are loathe to admit that we made a wrong decision.However admitting a mistake and taking corrective measures often saves a lot of money.
 
7)Following Tips of Self-proclaimed Advisors aware of Nothing- In a bull market so many self proclaimed analyst grows,they wud just name the company backed by nothing,the scrip moves up 10% and bang he is the next big bull that we all are looking for.This is another classical behavioural patern.Now simple investors would opt for that scrip without having any confidence or conviction and as soon as the price falls down,the villain is no where to catch hold of.
 
8)Failing to Accurately Assess their Investment Time Horizion- Most investors make investments for the short term but when the trade turns into a loss,they stick to it claiming that it was a long term call.This could often lead to huge losses.
 
9)Forgetting the Powerful Tendency of Regression to the Mean- This is the most important lesson for all investors.All stock prices must ultimately revert to their long term averages.All sharp run ups on dubious companies comes to an end in an most unpleasant manner.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 
 

 

Sastasundar Venture:- Company Meet Updates

Jun 20 2017 6:30PM
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Sastasundar is an online platform for selling prescribed pharmacy to customers. Currently they operate in West Bengal only, looking to expand to Maharashtra next & then eventually go pan-India.SS is not a retailer but a wholeseller as it doesn’t own the retail shops, it buys drugs from the CNF & then sells to the individuals through franchisees called Healthbuddy's. Its an asset light model.
 
Healthbuddy: It’s an inventory-less pharmacy store solely for sastasundar. The orders are made by customers through the apps, the order comes to the healthbuddy depending on the area. The healthbuddy, after receiving an order informs the warehouse & the medicine is delivered to the customer through this healthbuddy. The healthbuddy verifies the prescription while delivering. There are over 200 healthbuddies currently & the company aims to take it to 300 by fy18 The healthbuddy also keeps a pharmacist in the store for consultation to a patient.
 
Why this model is working?
 
Painpoints which customers faces: 1. Availability, 2. Fake drugs. Sastasundar eliminates both of these through its strong tie-ups and there is no scope of fake since it buys directly from the CNF. The aim is to buy from the company directly which is possible with greater volume.
 
Competitors are 1MG, Netmeds in WB. The company has 3% market share there. 
 
The company said it will keep making losses & growing till it becomes pan-India, not looking at ROE, ROCE till that time. Will think about profitability only after that. It may take 5 years for that.
 
WB should break-even in FY18 with ROE. At 300 GMV, company will be profitable in Bengal, have done Rs 75cr by sep, 2016.
 
Investment on technology has been made already for pan-India. The app not just enables the customer to buy but it profiles the customer. It sends daily links, articles depending on the type of medicine it purchases.
 
Next is maharashtra, company is looking for a master-franchisee who will own the warehouse. Company is sitting on Rs110 cr cash now on sale of Microsec business. The sale generated Rs110 in net & that’s the cash the company has and it will be used to expand in Maharashtra. Microsec will cease to exist from the consolidated earnings. The company has further raised 30crs from a Japanese Investor looking to expand into pan-India. Company doesn’t have any debt currently.
 
The company has plans to enter into wellness & diagnostics after pharmacy. The existing Healthbuddy stores will be used for the same and tie-up with a diagnostic centre will be done for the services.
 
Subham(Sharebazaar app's inhouse team)
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 
 

My Biggest Mistakes

Jun 19 2017 7:05PM
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It’s not as if they were born with their stock-picking skills. They learned–and are still learning–the hard way. Says BSE (Bombay Stock Exchange) broker Rakesh Jhunjhunwala: "You learn the stock market by trial and error. Without making mistakes in the market, you will never be able to progress in it." What’s important is to spot the mistakes, learn from them, and move on.Five veterans of the Indian stock markets talk about their worst blunders, and the lessons they learned the hard way.There are great lessons and many little nuggets of investment wisdom–on market behaviour, valuation methods, portfolio management, investor mindsets–in their stories. Over to the gurus in their own words.
 
1)Motilal Oswal
Chairman and managing director, Motilal Oswal Securities
 
In 1992-93,I bought shares of a glass company at Rs 1,600. The price crashed, and I exited when it was Rs 60. Why did I buy the stock? The outcry system was in vogue, and everyone on the floor used to share information, which was our idea of research. If I liked an idea,I just bought the scrip.
 
We never invested with a time horizon. If the share price went up, we booked profits. We followed no investment strategy and did not bother with research. At one point, I had 125 scrips in my portfolio. Eventually, at the end of the year, I sold those that made a profit and held on to those that showed a loss. Obviously, the total return on my portfolio was not worth the effort put in.After that, I decided to prune my portfolio to 30 stocks–and booked more losses in the process. I decided to invest the money left with me wisely, balancing my portfolio with a long-term outlook. Now, I hold every stock for at least one year, and then, depending on the market situation, decide what to do with each.
 
Lessons:Do your homework well.While choosing a stock, you could use either the top-down approach or the bottom-up approach.Don’t follow the herd.Don’t buy (or sell) just because everybody and his dog is buying (or selling). Research the com-pany as thoroughly as possible before deciding to buy or sell. Don’t buy in an overheated market and don’t sell when there is panic.
 
 
2)Gul Tekchandani
Chief investment officer, Sun F&C Asset Management
 
Every time I blunder in the market, it’s because of excessive greed. When share prices move up and I hear favourable stories, I don’t think of selling and always hope to make more. I remember buying shares of a plastic furniture company at Rs 30. I had analysed the company and predicted the stock would go up to Rs 90. I was right: the price touched Rs 110. That’s when I started hearing stories of the company doing so well that the price would touch Rs 200. So I decided to hang on, in spite of knowing better. Today, the stock trades at 6.
 
Lessons:Discipline is the key.The market has a mind of its own, one which is quite likely to confuse investors. You cannot make money in the market by acting on market rumours. Listen to the stories, but do your own research–and do it thoroughly. Make your buy or sell decision based on your analysis of the company, not on what others have told you.So, if you have invested in a company for the long term, and the price falls in around three months, don’t change your strategy. The company’s fundamentals have not changed–it’s the market that’s volatile. In the long term, the fundamentals will reward you.Keep track of your investments. However, investing for the long term does not mean you forget about your holding. Stay alert, and monitor your stocks with a view to improving your returns. Keep an eye on the changing economy, because the fundamentals of a company are dynamic and change with the overall economy.
 
 
3)Darshan Mehta
Chief executive officer, Anagram Stockbroking
 
In the early nineties, the primary market was extremely active, and, like many retail investors, new issues made up a good chunk of my portfolio. Back then, pricing of public issues was regulated–and, invariably, conservative.So, even if you held on to allotted shares for no reason other than inertia, you made a notional profit. I was allotted 2,000 shares of Essar Shipping, which I held on to because their cost was significantly lower than the prevailing market price. My portfolio of 85-90 scrips was filled with the likes of Essar Shipping–neither led by a quality management nor the flavour of the season. I slept on them, and lost out–my portfolio depleted in value substantially.On top of that, the sheer size of my portfolio made it impossible for me to track even those companies in which I was invested. One fine day, I gave the list of my holdings–a whole lot of them worthless–to my broker, and asked him to sell it at whatever price he got. But the damage had been done.
 
Lessons:Maintain a lean portfolio. Don’t grow too big for your boots. There’s no point in having a portfolio of 90 stocks if you cannot track them. If diversification is what you seek, you can achieve the objective with just 10 stocks. What matters is not how many stocks you have in your portfolio, but what kind of stocks these are. Moreover, the fewer stocks in your portfolio, the easier it is to track them.Don’t lose sight of your initial objective. Invest with an objective in mind. Once that objective is met, look to exit unless there are very good reasons to stay invested. In rising markets, new issues ride on the coattails of the bullishness, and list at hefty premiums to their issue prices. But once the euphoria subsides, so does the share price. So, keep your options open.
 
 
4)Parag Parikh
Chairman, Parag Parikh Financial Advisory Services
 
I believe the key to any good investment is discipline and the ability to control your emotions. Easier said than done. There have been times when I have given in to my emotions–and paid the price.We do portfolio management for clients. Once, we took money from investors when the market was bullish. Obviously, since the market was on a roll, the risk was higher–and so were the chances of going wrong. A disciplined approach warrants that I take money from clients when there are ample investment opportunities in the market, not when people are willing to give me money. I should have had the guts to tell them, "no, don’t give me your money now, I’ll tell you when to give it". But my emotions took over, and I didn’t.
 
Lessons:Don’t get in at peaks. Stock markets are not always the barometer of the economy, or even of a company. With globalisation and hot fund flows, they have become glorified casinos and don’t always reflect the true worth of its constituents. Hence, always invest for the long term and avoid short-term momentum plays. Bear in mind that momentum works both ways: you could crash as easily as you soar.Don’t speculate.If you buy today and sell tomorrow, you’re not investing–you’re trading. And that is one dangerous proposition. If you don’t understand technicals or are not clued in to the market grapevine, the odds are stacked against you. Be flexible with your investment mix. Don’t hold stocks for the sake of holding equities. Sometimes, it’s better to hold cash or debt to maximise returns. Your investment mix should reflect your perception of the market.
 
 
5)Rakesh Jhunjhunwala
Broker, Bombay Stock Exchange
 
When I am convinced about a story, I tend to go overboard–and over-invest. At times, I have ended up investing a lot of money in illiquid stocks, which is obviously difficult to manage. It’s like putting all your eggs in one basket.In the stock markets, both in India and elsewhere, people tend to invest only when there is a wave of euphoria sweeping the markets. It’s a general tendency to act on the belief that one should not be left behind in a booming market, which is a flawed argument.
 
Lessons:Don’t be overstretched in a stock. Even if you have hit on a great idea, review your allocations in a particular stock periodically. Ideally, you should not invest more than 15 per cent of your portfolio in one stock. Overexposure can be counter-productive, more so if a stock is illiquid.
 
 
P.S: It's an old article but so relevant and worth its weight in gold. Parag Sir is no more but there's so much to learn from his wisdom. Happy investing folks.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

What is cooking on Denis Chem Lab?

Jun 18 2017 6:45PM
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Denis Chem Lab Limited, a pharmaceutical company, manufactures and markets sterile injectable products. It offers sterile intravenous injectable products in both glass and plastic bottles. The company’s products include antibiotic injections, diuretic injections, parenteral amino acid injections, plasma volume expanders, anti-anaerobic injections, anti-pyretic injections, irrigation and dialysis solutions, etc. It serves government and semi-government institutions, hospitals and nursing homes, aided agencies, and the Indian defense sector. The company also exports its products to Sri Lanka, Vietnam, Combodia, Somalia, Nepal, and Ivory Coast. This is an interesting microcap which is into manufacturing IV fluids and caters to most of the renowned hospitals in the country. They have recently done a capex which increased the net block by 5x. This overall capex will not only help them to penetrate global competitive markets but will also reduce the raw materials cost. Company is mostly focused in the BFS category of 1000 ml and 3000 ml which are niche products with few companies offering the same. The current market for 1000 ml and 3000 ml is growing at 35% its achieving 12% operating margins in 1000 ml and 20% operating margins in 3000 ml. They have also launched a brand called aquaplus which is a high margin business.  Company is expected to grow at 30% for next 3 years. Some big investors sensing the potential have acquired stake through the warrants route. Post the equity dilution at 130rs or at a market cap of 160crs,this looks interesting.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

 

Why it's Time to Look at Hindustan Zinc

Jun 17 2017 2:40PM
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We recently had a soothing chat with one of the veterans in the market,Dhiraj Dave or DD as we call him fondly. He believes Hind Zinc is worth a look at present prices. We asked him about the recent share price fall and his thesis behind the company. Here's from DD:-
 
I believe it was more due to decline in LME price. The mute point is who can chellange the position of Hindustan zinc in India. Or even globally.The advantage in my view is superior quality zinc ore which they get in mine. I just compared the other global player which has recovery of around 6-7% as against 9% for hind zinc(not sure for number, refer to note for exact details). That with second largest smelter in global (giving scale on conversion cost) and largest and best mine in globe for zinc. While it is metal company, I see it wonderful cashflow generating and sharing machine which shall be valued at higher valuation than a typical commodity company. Tata steel without corus probably would be in same league. But no other Indian metal company which I can see on competitive landscape comparable to Hind zinc.
 
 The point is everyone see it as commodity metal player, however difference between Hind zinc and other player is it requires Minimum capex for mine development and smelter increase (generally around 25% of net profit) and has huge cashflow which is available for distribution. Just look at financial without name for Hindustan zinc and let me know what is your view about the company.
 
When GOI sell more 20% stake, it has to come with open offer. Even Vedanta would love to get minority shareholder out. The yield of Vedanta pLc improved in March 2017 when Hindustan zinc declared dividend. Just glance Vedanta plc presentation to understand what it mean to group. It account for nearly 60-70% cashflow for the group
 
Over 23 years March 1995 to March 2017, adjust price (without dividend) for Hind zinc increased from ? 2.1 on March 1995 to ? 289 as on March 2017, CAGR of 25.1%. There are many companies (at least 40 more companies with price data of 20 years and listed at nse which has better yield). But for a cyclical company, this is very good and hence I feel it being good business despite being in metal. 
 
The company paid rs 41,000 cr dividend during FY17 (rs 27,000 cr) and fy16 ( rs 14000 cr) . Of course, it is one time, even that has come from accumulated profit over period without any dilution of equity or debt. Now let me know your view at this cash flow generating giant, with annualised profit of rs 8,000 cr and valuation of 100,000 cr of which rs 20,000 cr still on balancesheet as cash. So kind of 10 PE for the company which has lowest cost of production, largest scale of operation, best minority Sharholder management (forced due to GOI and Vadanat both wanting dividend from the company) and best demand supply situation among all metal in globe. This is my limited thesis. Just looking market cap without business would lead to wrong decision at times. I do not know what is upside, but definitely see very limited downside. It fact, nearly 75% of zinc sale in dormstic market. In India nearly, 70% zinc is used in galvanised which is a major raw material to affordable housing. Moment it is position as input provide to affordable housing to india (with nearly 50% sales in that segment) , it may get completely different perception. Interesting times are surely ahead for the company.
 
 
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

Azim Premji- An Untold Story by P.Kurup

Jun 16 2017 8:00PM
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In 1987,  I accompanied Premji on a call to  Bhasker Shah the Managing Director of Dynamic Marketing Enterprises (DME) - A Wipro Reseller. I was at that time heading Channel Sales in South India and was all of 27 years. Premji had a penchant for walking fast and was way ahead of me ( although he was 15 years my senior) when we reached Shah's office. He shook hands with Mr Shah (then 53 years old) and asked - " How are you doing Mr. Shah ?  Happy ? Making Money ? " I was astonished at the warmth Premji instantly generated and the emotional connect he had with Mr. Shah. The questions were genuine , reflected empathy , was straight from the heart and was eloquent testimony to Premji's belief that every  Reseller must profit from his relationship with Wipro. I have been in the IT Industry for over 28 years since then , primarily in the Gulf and have represented over 50  top-notch American Vendors and met innumerable Reseller Managers. Not once has anyone asked me if my company was making money out of the relationship with them. 
 
 
A year later in 1988 , the market scenario had changed considerably. Wipro had huge delivery problems for PCs. We used to collect 100 % advance from our Resellers , deliver after 3 months (even 6 at times) and also ended up having quality issues. Resellers were up in arms against us, were threatening to go non-exclusive & DME was at the forefront of that attack. DME confirmed that they were signing up with our competitor & moving our relationship to non-exclusive. Within 48 hours , I took a crucial call after consultation with the Regional Manager & the India Sales Manager. We terminated the relationship with DME. I was aware that Bhasker Shah had a great relationship with Premji but I felt that I had taken the right decision in the interests of the company. With a single stroke, I had killed 20 % of my business ; 3 % of my Regional Manager's business , 1.5 % of Wipro's business & approximately 0.5 % of Premji's business. ( overall company target). 
 
Premji was not in the know of things.  Several months later at the India Dealer Sales Manager's Conference in Bangalore during the break-out session, Premji suddenly looked at me and asked- "Why did you terminate Dynamic Marketing. I think you made him pay the price for all your mistakes- delayed deliveries ; poor quality ; pathetic support."  I was dumbstruck. Being one of the youngest Executives in the room I expected  my  immediate bosses to jump to my support but no one came. I looked at Premji in the eye and said, "It is my belief that the relationship between a Vendor & a Reseller is like an elephant trying to dance with an ant. The elephant will always want to  dance in front and will sometimes step on your toes. A pragmatic appreciation of this is fundamental to good Vendor-Reseller relationship. Dynamic Marketing wanted to dance in front of us and I would never allow that." There was pin drop silence in the room. Some of my colleagues must have been thinking that Premji would make Premchand history. Premji was listening very carefully. He looked at me and said with his trademark simplicity - " I still don't agree with you."  Since that episode, I continued to contribute and grow in Wipro.
 
The hallmark of Premji's style was that you could disagree with him privately or in the open; every Wipro Executive had the freedom to execute in his own way , innovate & above all make mistakes. Often costly mistakes like mine. Wipro was willing to pay the price for that learning. Fast forward to today. I spoke to Mr. Bhasker Shah. Despite the episode we shared a great equation built on mutual respect. He is 82 years , still spends 4 hours at least at the office everyday while his son Hiren Shah heads the IT Products & Services business which would in my estimate be several hundred crores in revenue. I realized how right Premji was. He had both customer insight and market foresight , while I had none at that time. Yet he allowed me to go forward with a wrong decision.  
 
Integrity of character was the cornerstone of Premji's operating philosophy. He used to always tell us that everything in life can be negotiated except Integrity. Integrity is and will always be non-negotiable.He has taught us that a "Values" driven business can be created , built and scaled in a tumultous  market environment. Wipro has created over 600 Entrepreneurs who in turn have created over 450 companies , raised over 1.5B$ of venture capital & generated a market capital of over 4.5 B$. What a legacy Premji has left.........  
 
As Premji completes 50 years at the helm of Wipro , I stand up to Salute a remarkable man who has left an indelible imprint on the minds of a huge cross-section of people...........Thank You Sir.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 
 

Why our Mentor is Betting on this Small Cap MNC

Jun 15 2017 7:00PM
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We recently asked one of our mentors, JK sir to provide some stock ideas considering almost everything is expensive in the market. Though he keeps a low profile and in no mood to disclose his identity to you readers yet he obliged with a cool stock idea.
 
Here's what made him buy Voith Paper:-
 
1) Its a 74% subsidiary of 5B Euro privately held Voith group.
 
2) Make paper machine clothing / felts - used as a consumable in paper manufacturing & also fibre cement.
 
3)30 acre faridabad plant area. Barely 25% used so enough scope for expansion, if need arises.
 
4)About 20-25 Cr capex done over last 3 years.270 Cr mcap / 113 Cr cash.
 
5) Negatives are very Low payout ratio and slow growth till now.
 
6) Expect growth to pick up on paper cycle turn & moreover as most mills have upgraded to high efficiency machines which will prohibit them from using local felts.
 
7) Voith is big in hydro , paper manufacturing machines etc.
 
8)New Indian currency all printed on voith machines. Group completing 150 years this year so something big may happen.
 
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

Don't Compare Yourself to Others:- Prashant Vaishampayan

Jun 14 2017 8:05PM
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This article by Ian Cassel is particularly useful reminder in bull markets when everyone starts talking about their investment returns. Cassel quotes Howard Marks. “To be a disciplined investor you have to be willing to stand by and watch other people make money on things that you passed on”. This quote is brilliant because it strikes a chord in each one of us. We’ve all been there. Maybe you are there today, watching someone else do well in something you passed on. It all relates back to comparisons, and comparisons are unproductive and corrosive. We all invest differently. Don’t compare yourself to others. You aren’t running their race. Compare yourself to yourself two years ago.
 
Extraordinary returns follow extraordinary discipline. An investor’s goal should always be to make as few investment decisions as possible. This means you are going to pass on many investments that will ultimately do well without you. Experienced investors should openly accept this. Why? Because doing well in something you shouldn’t have invested in doesn’t teach you anything. It means you got lucky.
 
Howard Marks writes that to be a successful investor you have to have a philosophy and a process you believe in and you can stick to even when the times get tough. This is very important. If you don’t have courage of your convictions and patience and toughness, you can’t be an investor. Absence of these qualities will constantly drive investor to fall in line with the consensus by buying at the top and selling at the bottom.
 
But, it’s important to note that no approach will allow you to profit from all kinds of opportunities or in all in environments. You have to be willing not to participate in everything that goes up. Invest only in the things that fit your approach.  The truth is, however, one of the most corrosive of all the difficult human emotions is the feeling of having to sit by and watch other people make money. Nobody likes that. 
 
To be a disciplined investor you have to be willing to stand by and watch while other people make money that you passed on. You don’t have to invest in everything. You don’t have to catch every trend. You should invest within yourself, in the things you know about and stick to it. Every investment approach, even if skilfully applied, will run into environments for which it is ill suited. As a result, even the best of investors will have periods of poor performance. Nobody performs great all the time. In order to be able to stick with an approach or decision until it proves out, which can be a long time; investors have to be able to weather periods when the results are embarrassing. This can be very difficult.
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

The Patterns of Arun and Soumya

Jun 13 2017 10:00AM
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We have conducted nearly 30 Sharebazaar App's Wholeday workshop pan India till date and even did 5 in the internationally comprising Dubai and Singapore. A lot of you guys asked us for our patterns and here it is folks. Stock market irrespective of valuations would always have lot of opportunities and this patterns will help you to pounce on such ones.
 
INVESTING PATTERNS
 
1) The negative working capital pattern where the business operates on Other People's Money (OPM) or the suppliers money. Advances from customers is a good hint to go by.
 
2) Companies which are the leaders in niche area with tiny market caps. Ones they grow and market realises them,you get huge multibaggers.
 
3) Companies where there's a promoter change or where the new generation takes over,brings efficiency and multibaggers evolve.
 
4) Where there's a demerger in a sizeable company. Fii have got market cap stipulation and hence they tend to sell out in haste. Arvind infra,Marico kaya being recent examples of huge value creation.
 
5) Companies which are eating the market share of the market leaders. Amara raja,havells are good examples.
 
6) 2nd run Companies in sectors where the leaders been multibaggers. At some time the valuation gets so stretched that investors start to look for the smaller peers and the valuation gap narrows. Avanti-waterbase,relaxo-Mirza,krbl-chaman lal are good examples.
 
7) Companies with Massive Free Cash Flow generating ability and strong leverage. At some time the capex would be covered for next 3-4 years. So all OCF goes in debt repayment and NP vaults.
 
8) Small time misc companies with pricing power or tiny companies with competitive intensity in side. Jyoti resin good example.
 
9) Turnaround companies or companies where there's been seemingly stronge changes over the last 2 quarters.
 
10) Companies which are proxy to great brands or something which has been a recent rage. Hi tech plast and JHS to patanjali.
 
11) Companies which are either outperforming strong headwinds or about to face tailwinds in there side.
 
12) Also any company which hits 52 week or all time high for the first time itself is a great pattern for us. 
 
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

Debate on Management Meet

Jun 12 2017 8:10PM
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Lot of debates going on regarding whether meeting promoters or management is of any value or not. Just discussed it in our Share Bazaar app' What's app group. Would paste it here.
 
1)Depends how one sees it. We have had meetings with over 220 companies over the last 12 years. Even in recent success stories-Had we not met management of Caplin,medicamen,Kisan,Kingfa and 100 more,would have never ever gotten convinced.
 
2)In a soft market though screener will do the work with roe of 20 and similar growth with a decent valuation.Even you will avail a good dividend yield too.
 
3)But legacy companies,turnaround bets,management change,new foundation joining you ought to meet them to know the inherent story..
 
4)Most small cap management folks are completely ignorant about the market cap power. If one takes time and efforts to educate them,huge value could get created.
 
5)It's a Win win game for both the parties. 90? of Indian folks are habituated in siphoning off. Even in very tiny caps-4-5crs siphoning is too common. With demo and If someone educates them,the same amount can get shown in books which will spiral market cap by 80-100crs.
 
6)So a promoter with hassles who used to sipphon 5crs and create no value suddenly sees his networth up 50 crs ,all white money considering even a 50% ownership.
 
 
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 

Gufic Bioscience:- Can it be a Multibagger?

Jun 11 2017 7:30PM
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Gufic Bioscience is a specialized pharmaceutical company based out of Mumbai promoted by Choksi family in 1960s. It has presence in different segments of pharmaceutical sector including some presence in Ayurveda (which was a diversification by Mr. Jayesh Choksi). Gufic in 1990s was a strong pharma company (probably bigger than Sunpharma, at that point in time!) with products in the APIs and Formulations. It strength can be gauged from the fact that its brand Mox (which was sold to Ranbaxy) was very well known in the market. Same was the case with Zole(Miconazole Nitrate). It currently has established its expertise in the speciality injectables area with specific focus on lyophilisation products. Gufic Bioscience is one of the largest manufacturers of Lyophilized injections in India and have a fully automated lyophilisation plant. The product includes Antibiotic, Antifungal, Cardiac, Infertility, Antiviral and proton-pump inhibitor segments. Being historically a pioneer in the lyophilized segment, Gufic has long time partnerships withseveral large MNC & Indian pharma companies to manufacture their products in its manufacturing facility. After the sale of such great brands, Mr. Jayesh Choksi was unable to create a focused brand based organization. With unnecessary diversification into OTC products, Ayurveda and other FMCG products, it got relegated to the side-lines. 

 
It kept meandering along till about 2004/05 when Pranav Choksi (son of Mr. Jayeshbhai) took over the mantle of the company. Pranavbhai is educated in oncology and joined Gufic after few stints in few of the MNCs in US. He gained good experience in different areas. It took him few years to get handle of the organization and in year 2012, decided to expand Gufic group with an aggressive approach and focusing on the strength of the organization. With that intent, they broke gorund for a new manufacturing facility - GuficLifescience, to cater to the advanced economies with the same product profiles as they were operating in Gufic Bioscience. Till end of March 2016, they ended up putting up their own money to the tune of Rs. 65 crs (which at the end of Sept, 2016 went upto Rs. 88 crs). For a company which was doing just about Rs. 100 odd crs revenue till about 2014, this was a big commitment and that too from the promoters personal funding. Also, promoter putting up their own money not to stretch the balance sheet of listed entity is a big positive in terms of consideration of minority shareholders
 
Capacity: Gufic Bioscience has capacity to manufacture 12lakh vials per month. With the new capacity built in GuficLifescience, the total capacity goes up to 32 lakhs in two stages. These two plants are in Navsari. In fact, the second plant built in Gufic Lifescience is a state of the art facility and many who visited the factory come impressed with the factory settings. It has 2 more plants in Belgaum and Baroda which cater to herbal products and consumer products respectively. 
 
The current capacity is used for MNCs and local market which at full capacity can clock revenue of around 250 crs to 300 crs. Since these contracts are outsourcing contracts, the EBITDA margin is not that great. Enterprise Value for shareholders will be created when the two plants for injectables operate in full capacity by 2021 where the revenue can touch upwards of 750 crs. This is being targeted with direct supply in European market since Gufic has obtain WHO GMP certification for their injectables plant. With EBITDA margin of 18 to 20% which is what is being targeted by Pranav, EBITDA can touch around Rs. 150 crs and net profit can work out to be around 60 to 75 crs..
 
Additionally, Gufic is also looking at acquisitions which can add value to the company by way of new brand, IP or allowing Gufic to enter new market. It is also learnt that Guficis looking for JV with few of the specialized injectable players in the area of Critical care Antibiotics injections which is a very high margin business since it requires a separate plant (the plant cannot be then used for any other injections). Third avenue for further growth will be with entry in US market which is not yet explored by Gufic management. Overall, Pranavbhai has literally injected new life into Guficand is helping create value for both his family as well as the shareholders. He has recently recruited marketing guys from large pharma companies to continue the momentum Gufic has gathered in the Indian market. In addition, there is a new vigour in the company and the employees taken together. Pranavbhai is slowly and steadily becoming one of the intelligent fanatics for investors in Gufic..
 
There are few risk areas which should be closely monitored – 
1) Gufic is planning to enter the US market which is a tough market and can be a stumbling block for the company if they encounter FDA issues
2) Pranavbhai is aggressive as compared to his father and can get into non-injectable area and jeopardize the growth of the organization << He is focussed…!
3) Future acquisition may divert attention from the focus area << He is focussed….!
4) Full capacity may not be achieved by 2021 and may get delayed further 
5) Large dilution of equity while merging with  guficlifescience..
 
From valuation perspective, there are different methodologies to value a pharma company but a simple yardstick is how much sales it generates and based on efficiency it can fetch enterprise value accordingly. A pharma company is a steal if available at 3 times its sales and expensive when available at more than 10 times sales. So, for reasonable valuation of Gufic Bioscience, we can consider 5 times sales which gives us valuation of Rs. 3500 crs market cap. Once the merger between Gufic Bio and Gufic Life is consummated, the current market cap can touch upwards of 750 crs. So, there is a 5 bagger for us in next 3 to 3.5 years times. On a sideline, Choksi’s are a Anchorwell known family in the pharma industry and informally they are known to be close to DilipSinghvi family. Moreover, they have very large presence in real estate sector in their personal capacity and therefore do not have dearth in funding new projects. 
 
 
P.s: The note is exclusively penned for the Share Bazaar app by our beloved Guru bhai or Gurudatta Kamath. One of the finest humble human being with razor sharp stock picking skills. Happy investing folks.
 
Note: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation. 
 
 
 

 

Interesting Message by Kotak MF

Jun 10 2017 6:50PM
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Kriti Industries: Result Update

Jun 9 2017 5:35PM
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Results: Company ended its fy17 with sales of 387crs and a bottomline of 8crs. Not going to pen a breakup for the full year and the quarter as last fiscal had the demonetisation effect which made living tough for nearly 6 months. On an overall capital employed of 92crs they did an EBIT of 24crs which is stunning. A ROCE of 27% for such a small cap only suggest how amazing capital allocators they are. Also the auto division turnarounded with sales of 22crs and a tiny PBT of 5 lakhs. With scalability,ROCE would further spike up. Company added 15crs in Net block vs an incremental addition of 3crs in Debt. As mentioned in the previous note they seem to have mastered the art of doing business through Float or on their suppliers money. With GST coming and the tailwinds of Housing boom,Kriti at .6 times EV to mcap is the cheapest domestic consumption story by a big margin. Not to forget its leadership status in states it operates in.
 
Management Words: We had a word with the management after its results. Demonetisation had impacted them for last 2 quarters. But the present situation has improved. Demand doesn't seem to be a problem now. They are running at 100% capacity in April and in May till date. They would also look to grow considering FY16 as a base and not fy17. Mind you they did a topline of 480crs in Fy16. Company is doing further capex in hdpe n other related segment used in building material. Kriti is also thinking of putting another line in Pune factory for telecom pipes which are majorly used for 3g-4g wires. They are already getting lot of inquiries for the same. Company is lacking capacity to supply,though little bit of competition is there which could affect margins. RM prices are stable on date.

Conclusion: We are fascinated by the management of Kriti,it's way of conducting efficient operations and vision for the next 10 years. Company should deliver over a 25% consolidated growth this fiscal which should see it crossing 500crs comfortably. PAT are expected to rise disproportionately as contribution from value added products and high margins segment starts. 

Intense technologies:- How Intense are the Numbers?

Jun 8 2017 8:45PM
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We asked one of our  Share Bazaar app member to pen an analysis on Intense technology,exclusively meant for the App. Here's " Thestocklady" with his analysis on the recent quarter numbers by the company. He keeps a low profile and hence has requested us to refrain from posting his name. 

 

1)BSNL revenue yet to kick in. This would have added an extra 25cr to the q4 numbers but unfortunately supreme court put a spanner in the works saying do aadhar based migration.

 

2)The migration instead of FY2017 will happen in FY18. The amount of migration revenue will also increase.

 

3)There has been a increase of 1.65 cr in employee cost ( 22% ). In my estimate, part of this would be driven by esop related expenses, and partly by additional manpower hired for the bsnl mandate. 

 

4)Finance costs have dropped by 70%, which show that the company is able to run its operations with any borroing support.

 

5)Tax incidence is 30% in q417 compared to 7% in q416.

 

6)If the employee increase would not have happened , and tax paid as last year , we would have ended up with 419 lacs as PAT, a beat both qoq as well as yoy.

 

7)Company remains cash rich with 20cr cash in hand ( almost 10 per share )

 

Investing in intense for me was always being part of a long term strategy to share the upside of a true blue IT product company from India. As such, there is nothing in this result which will make me change my mind.

Holding Your Bets v Trading Frequently

Jun 7 2017 7:00PM
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In an interesting research paper, Michael Bar-Eli, et al, analysed 286 penalty kicks in top soccer leagues and championships worldwide. In a penalty kick, the ball takes approximately 0.2 seconds to reach the goal, leaving no time for the goalkeeper to see clearly the direction the ball is kicked. He has to decide whether to jump to one of the sides or to stay in the centre at about the same time as the kicker chooses where to direct the ball. About 80% of penalty kicks resulted in a goal being scored, which emphasizes the importance a penalty kick has to determine the outcome of a game.
 
Interestingly, the data revealed that the optimal strategy for the goalkeeper is to stay in the centre of the goal. However, almost always he jumped left or right. In short, goalkeepers choose action (jumping to one of the sides) rather than inaction (staying in the centre). If the goalkeeper stays in the centre and a goal is scored, it looks as if he did not do anything to stop the ball. The goalkeeper clearly feels lesser regret, and risk to his career, if he jumps on either side, even though it may result in a goal being scored.
 
Just like the goalkeeper, professional trader too feels compelled to play every trade that is out there in the market. In most cases either the event is already priced in or it just does not play out in line with the popular belief. Despite data proving that frequent trading might be counterproductive, the norm is always to act. Action seems to always triumph inaction.
 
So the next time you feel compelled to place a trade in the market, remember sitting around and doing nothing may just be a better option.

Balasore Alloys: Why Quarterly Results seems truly an Enigma

Jun 5 2017 7:00PM
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1. Balasore with quarterly capacity of 40k tonnes just showed 345cr topline. So just around 87k/tonne realization??. Imfa showed rough realization/tonne of around 102k/tonne.  He must be kidding:)

 
2. Now the promoter infused a good amount of capital by converting his preference shares last year.
 (A) 1 cr warrants converted on 31st of March '17 paying  21.5/warrant. So 21.5cr additional equity capital.
 (B) 2.3 cr warrants converted on 3rd of Nov '16 paying 21.5/share. So 49.5cr additional equity capital.
After subtracting costs for warrants paid upfront when these warrants were issued, the balance sheet should have an incremental capital of atleast 50cr on a very conservative basis?
 
3. A company's true assessment of quality of improvement is not in P&L but in B/S. All this should reflect in Balance sheet.This was the best of the years for ferrochrome. The company generated additional ebitda of about 113cr. Net debt has gone up from ~190cr(fy16) to ~230cr(fy17). If I include receivables in the above equation, B/S will look much worser. B/S has deteriorated in such a good year when you had super ferrochrome prices & cash inflow through equity capital. Where did the capital evaporate?
 
4. Well even in the broader market at macro level - there is an oversupply of ferrochrome. So the commodity is not going to give me any positive surprise. I will mark down my ebitda expectations for fy18. 
 
5. Some amount of adjustments in commodity stocks are understandable. But Balasore results are truly an enigma!
 
P.S: The author is one of the best small cap investors from Chennai and our main go to commodity guy. Just bit shy to come in public domain. Thank you RS for your contribution. This is only meant for the users of Share bazaar app. Happy investing folks.

Emmbi Industries: The Quintessential Compounder

Jun 4 2017 7:00PM
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Emmbi Industries posted a solid quarterly performance where top-line has shown roughly 13% growth YoY and 14% growth QoQ.  Operationally, it has done even better where EBITDA margins have expanded from 12% YoY and 11.36% QoQ to 13.4% this quarter. Quarterly EPS stood at 2.31 vs 2.09 YoY and 1.35 QoQ despite higher tax expense (EPS would have been higher by 0.40 at applicable MAT rate).

 

Management “has walked the talk” in their focus on –

1. Introducing value added high margin products which have resulted in EBITDA margins at current level from 7-8% level 3 years back.

2. Reducing interest cost from over 13% to below 11%.

 

Key takeaways from the recent con-call post Q4 2017 results-

• Pre Expansion capacity was 18,000MT. Capacity utilisation stood at 92%. Company has undergone 2 expansions –

'Dedicated Pond Lining Manufacturing Unit (3,600MT) 

'Dedicated Food & Pharma Packaging Unit (2,400MT)

 

This takes total capacity to 24,000 MT and capacity utilisation to below 70%. This takes care of capacities required till 2020 that means no further capex for next 3 year except for maintenance capex (roughly 5 Crores per year.). The management has reiterated that they aren’t looking for any further debt till a really great business idea comes in its mind. Also their philosophy is to build capacity, reach a 90-95% capacity utilisation and then go for a capex to bring it down to 70% level and keep doing it over years.• The company is predominantly a B2B company. However, recently the company is focussing on developing B2C business. The company has created 2 brands for its B2C business – 

Jalasanchay” for water conservation.

Krishirakshak” for crop protection.

 

The company has also started a distributor level brand – “Dr.M” where the distributor is required to undergo  15 days training from the company. This will enable them to help farmers with technicalities of the product.

 

• In previous interviews, management has clearly said that the focus is on replacing low margin products with high margin products. This quarter, they have introduced one such product – “Emmbi Aluminium Liner – Coffee Aroma Lock Technology” – this helps in locking the aroma & freshness of coffee and can also be used for a product which needs a leak proof packing. This product helps in maintaining the freshness & quality of the inner product for a longer time.

 

 The focus of the management is to create products & processes which are hard to replicate and differentiate them from competitors.

• Newfound focus on automation ensures optimal utilization of manpower. This,combined with continuous training and up-skilling ensures lower attrition.

• Management is clear that any new business has to be ROCE accretive. On being asked if they have any timeline in mind for a magical 1,000 crore top-line, they clarified that they have never thought it this way. It will come someday but any additional business has to be ROCE accretive.

 

To conclude with numbers – 

Dedicated Pond Lining Manufacturing Unit at 100% capacity utilisation will fetch a top-line of 100 crores and the product carries roughly 16-18% EBITDA margins. 

Dedicated Food & Pharma Packaging Unit at 100% capacity utilisation will fetch a top-line of 40 crores and the product carries roughly 16-18% EBITDA margins. 

Phasing out low margin products and replacing high it with high margin products will improve the realisations/MT of the company. However, it’s tough for now to quantify the same.

No capex for next 3 years will help them reduce their debt which will further add to EPS.

 

To conclude, interesting times ahead for Emmbi and it has the potential to be a real compounder.

 

P.s:Exclusive Note for the Share bazaar app by the "Rags to riches" guy Navratan Maheshwari. He happens to be better and wiser "Maheshwari" in context to Indian stock markets.Happy investing folks. 

 

Indian Diagnostics Industry

Jun 3 2017 7:15PM
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Indian Diagnostics Industry and What Needs to be Done

The Indian Diagnostics Industry is de-regulated, unorganised, flat and in a state of randomness. The big 5 players or let me say the decent sized current 12 players - are fighting for just 20  % of the market. Rest  80% of the market continues to be unorganised.The customer profile in the unorganised 80% space is different demographics, psychographics and T-VALS (The value and lifestyle segmentation). This calls for re-modelling, re-thinking, re-setting and re-imagining. What is needed by the  decent sized 12 players  is not in-fighting  for market share but to grow the market for themselves - making healthcare better in India in terms of quality and affordability. Idea is to not fight for 20% bread, but to make new loaves of bread. Be a Market Creator. This needs a new lens of thinking, talent that can think very differently. So 80% business in India in diagnostics comes from around  75,000 labs and the rest 20% comes from  around 12 lab chains. 
 Also the 'Organised Diagnostics'  Industry should be growing at  35% minimum and not 20% as per my calculations. Anyone can grow at 20% without doing anything,believe me.That is why I say - we now need 'Innovators  in this space and not recycled talent.Because  - ' Every Business is A Growth Business ultimately'.
 
P.S: Exclusive update from Sameer Kaul,ex COO DR lal path labs.

My Learnings from Berkshire Hathaway AGM 2017

Jun 2 2017 10:10AM
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Dear Friends,
 
This year, I was privileged to attend Berkshire hathaway AGM 2017 at Omaha, US. I think for me, It was a pilgrimage, which I was looking forward to for so many years, and it’s not a trip.        
 
 Sharing some of my key learning’s:-
 
 a.  Buy Great companies with significant economic moat at reasonable prices, rather than mediocre companies at cheap prices.
 
b. Visualize the business for next 15/20/25 years
 
 c. Integrity and character of management are absolutely non-negotiable. if any compromise then company is not worth looking at.
 
d. Sitting Tight is very important.
 
 Some of my observations at century link center Omaha :-
 
 The AGM began with Warren Buffet thanking index fund king Jack Bogle for saving billions of dollars for US investors. Bogle founded Vanguard Group, the largest US mutual fund firm, in 1974 and created the first index fund that allows investors to passively invest in the stock market by tracking a market index.
 
Mr. Buffett mentioned that in his career he has himself identified about 10-12 good managers to whom he would have entrusted money and he didn’t mind paying them a hefty fee as high as 2% fixed and 20% carry. As a matter of fact there are two active managers identified and employed by him who manage over USD 10 bn each for Berkshire Hathaway. He said if Mr. Munger for instance was managing money, he would happily pay him a hefty fee. So his response is not so much to do only with prospects of active investing but more to do with individual circumstances, expectation of returns and most importantly, the ability to identify and engage good managers.
 
Biggest regret:Buffett said he regretted not investing early in Google. “Our biggest tech failure was missing Google. Walmart and Google were missed opportunities,” he said.
 
Take on Ajit Jain:This is Ajit Jain, who is creating more money for shareholders than Warren Buffett. “Nobody would possibly replace Ajit Jain if he were to leave or retire. But we have a terrific team. There are things which only he can do. A lot of things are institutionalized in business. Ajit Jain made more money for Berkshire than I have probably,” said Buffett.
 
Take on IBM:Responding to a shareholder question on the Berkshire move to sell a large stake in IBM, an investment which had earlier surprised investors mainly because of Buffett’s stated aversion towards the technology sector, the ace investor said he was wrong on IBM. “We started buying IBM six years ago as we thought it would have performed better,” he said.
 
Take on Apple:To a pointed question on Apple, a stock on which Berkshire doubled its stake in first quarter, Buffett said he looks at Apple more as a consumer stock than a tech bet.
 
Bullish on Aviation:The legendary investor said the airlines industry would have some more pricing sensibility in next 10 years and he believed airlines would operate at higher degrees of capacity in the future.
 
But the real show in 2017 was performed by the 93-years-and-four-months-old Man Charlie Munger, who stole the show with his zingers. 
 
Here are some of my favorite quotes from him. 
 
·"We were young and ignorant then; Now we're old and ignorant."
 
·"I don't think we mind killing chickens and I do think we are against nuclear war."
 
·“Fish where the fish are. A good fisherman can find more fish in China; it's a happier hunting ground."
 
·"The investment world has gotten even more tougher. Maybe now we have small statistical advantages, when before it was like shooting fish in a barrel. It's OK to have things get a little harder when you are filthy rich.
 
·"A lot of other people are trying to be brilliant and we are just trying to be rational. Trying to be brilliant is very dangerous, particularly when gambling"
 
·"If you protect your heirs from stupidity of others, you may have some good system, but I am not much interested in that subject."
 
· "Over the extremely long term, all hydrocarbons will be used, including all the coal - they are huge resource for all of humanity and have no good substitute. I am all alone on this one, but I want to save them for the next generation. We will use every drop sooner or later, even a chemical feedstock. I expect natural gas to be short in supply eventually."
 
·"I have avoided compensation consultants all my life. I hardly can find the words to express my contempt."
 
·"We don't want to go back to subsistence farming. I had a week of it and hated it growing up. I also don't miss the elevator operator sitting there with a crank. Why would we do it -- fire people? We had to in the past when businesses were dying. There's some political fallout, but nothing that isn't moral."
 
·"I give you golf lessons while you dye my hair. It's like the royal family of Kuwait. We can't have all the work so concentrated to leave so many at leisure. But a few percent per year of gain is a wonderful thing. No one has ever complained about the advent of air conditioning. I am worried more about the change not being fast enough."
 
·"We'll miss out on more, but that's our secret - we don't miss out on them all
 
· "It's a very good thing that Warren bought Apple. Either he's gone crazy or is learning. I prefer to think he's learning."
 
·“You’ve understated the horrors of the subject (depreciation) and the disgusting nature of people who brought that term to business; its like a real estate broker who said a 1,000-square-foot apartment was actually 2,000 square feet. Nobody in his right mind would think depreciation is not an expense. Now they are teaching it in the business schools – that is horror squared.”
 
·“Unemployment insurance exists for that exact reason. The capitalist system always hurts some people; there is no way to avoid it.”
 
· “Don’t start spending the money yet. Otto von Bismarck said there are two things that no one should have to watch: the making of sausage and the making of legislation.”
 
And one of my favorite Munger quote – when someone asked what is your dream?
 
“Oh, to be 90 again; if you’ve got anything you really want to do, don’t wait until you are 93 to do it.”
 
These quotes incorporate much wisdom, and both Charlie and Warren’s comments provide value-added insights for investors around the world.
 
Many Thanks,
Vikas Agrawal
Zonal Head -MOAMC

Raymond Ltd: Complete Rip-Off(Views of IIAS)

May 30 2017 2:50PM
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In its forthcoming AGM on 5 June 2017, Raymond Limited has presented a resolution to make an offer to sell its premium real estate at throw-away rates to its promoters and their extended family. Should this transaction go through, IiAS estimates that it will result in an opportunity loss of over Rs. 6.5 bn for the company and its shareholders. IiAS recommends voting AGAINST this transaction. In our opinion, the board has failed to protect the interests of the minority shareholders. The company and its directors must prepare themselves for shareholders seeking recompense.  
 
The sale of the four duplex apartments in JK House is likely to cause an opportunity loss of over Rs.6.5 bn [1] to Raymond Limited. JK House is a recently-rebuilt building located at Breach Candy, Mumbai: Breach Candy is one of the most expensive real-estate locations in Mumbai. Raymond Limited’s own valuation report states that the residential property is valued at Rs.1,17,000 per square foot (built up), putting a value on the entire transaction at Rs.7.1 bn. Raymond, however, proposes to sell the property to the Singhania family factions for Rs.9,200[2] per square foot of carpet area – an over 90% discount to market rates. 
 
IiAS estimates the opportunity loss at over Rs.6.5 bn, which is large in the context of Raymond Limited’s own limited size: it aggregates over Rs.100 per share. Raymond has spent Rs.2.7 bn – not including the cost of land - in rebuilding JK House. The sale price of Rs.9,200 per square foot is lower than JK House's average cost of construction, estimated at over Rs.11,000 per square foot. If the company were to sell the residential properties at market value, it would more than recover its cost of development.

How Lokesh Machines turned things around?

May 29 2017 7:20PM
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We would be coming out with a list of companies which had a tumultuous past time and then turned things around. The strategies,hard work that they put in. We recently reached out to Gurcharan Singh Mukker(GSM) of Lokesh machines to know how they devised a turnaround strategy.
 
GSM: In one of the board meeting it was decided to reduce the operational cost by half due to cancellation of an export order from a foreign buyer. It was difficult to work due to the severe cash crunch. We couldn’t pay salary and dues to our vendor/supplier/bankers. We were left with a single option,either follow the instruction or shut the company. We had a long brain storming session to solve the crisis. The team came out with a tough survival plan which could save us from layout. We decided to work with half the salary till the Company comes back on track. We would cut tour expenses,have no increment and concentrated on recovery of old outstanding dues and renegotiated with the vendor for revised rate/payment term and obtained delivery extension from the foreign buyer. The sales team booked new order for the existing stock and also sold export surplus at a discount. During crisis we lost many staff,suppliers,vendors,dealers,stock holder but we also had those devoted staff who stayed back,worked hard and faced the situation with patience and proved their loyalty. Within one year as you can see the Company is back to normal; old dues were paid and export orders got delivered. During the crisis we worked unitedly and faced all odds together with patience,hard work and positive attitude. Our dedicated team with focused approach had full confidence in the Leadership which turned the situation in our favour. We turnarounded and are set for much better times ahead. 

Why do we need to be an Eagle?

May 28 2017 6:55PM
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An eagle can live up to 70 years but to reach this age, it has to take a critical decision. In its 40 years, the long and flexible talons can no longer catch the prey. Its long and sharp beak is bend and making it difficult to eat food. Heavy wings due to think feathers makes it difficult to fly. Eagle is now left with two options. First one is to die starving for food and the second one is to go through a painful process of CHANGE in order to survive. 
 
It picks the second option to stay on top of the mountain for some time. There eagle knocks its beak until it is plucked out. It waits until a new one grows. With the new beak, it plucks its heavy feathers and talons. It waits until new feathers and talons are grown. It is a rebirth of the eagle where it lives for another 30 years. 
 
Just like the eagle, we too face the difficult situation that requires a CHANGE. If we can change the way we think, then we can change the way we live. When other birds hide in the rains, eagle fly over the clouds. Be like an eagle, transform yourselves, re-learn, accept pain and change for good.

Employee and Entrepreneurship at the Same Time

May 27 2017 5:55PM
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When I was a kid, there was no refrigerator in my home. My grandma, mom used to prepare delicious snacks for the festivals. To avoid ant, they used to draw a thin layer of sugar around the vessel. Thus ants don't get into the snacks vessel and eat the sugar in the outline. Ants are meant for hard work and can smell anything in that is far away. But they can be diverted by not reaching the large target by giving the small target in their hands. Similarly, hard working people can sense their victory and goal. But can also be diverted in the name of monthly salary, fear of taking risk etc. Only smart people who sees the larger targets wins in entrepreneurship beyond fear of failure.
 
P.S: Vijay anand belongs to that rare breed of entrepreneurs who has seen it all. The rags to riches story-Someone who started as a courier boy and ended up becoming a founder of few successful companies. 
 
A lot of you already may have gotten demotivated? Come on readers. There's actually another way even if you are diligent and working somewhere as an employee. The easy route of lucrative business ownership aka stock markets. We would be shortly coming out with interviews of a KRBL distributor who made 30 times more and counting in KRBL than what he has received from the company for his work in the last 12 years.Similarly a Jyoti Resin dealer who is up for the same interview has minted 18 times and counting. Exciting times are ahead as not only they would be speaking regarding what prompted them to invest in the companies but we would be getting rich insights about the business and the respective industries too-Scuttlebutt often is the real deal as you know.Happy investing folks.

Rajratan Global Wire Ltd: Company Meeting Notes

May 24 2017 11:55AM
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1) In 1991 that Rajratan Global wires ltd graduated from the traditional business of Iron & Steel trading with investment of Rs 30 lakhs and than ventured into manufacturing of bead wire for tyres. Current annual capacity is at 30000 MT each both in India and Thailand plants. Both can go up to 48000 MT each if required. Currently they are operating at 82% utilisation levels.
 
2) Currently 85% sales are contributed to Tyre Sector and rest is attributed to value added products. For tyre companies Rajratan’s products constitute around 3% of total expense hence they always prefer to go with superior quality products since it very important component of tyres .
 
3) The company had a technical collaboration and joint venture agreement with Gustav Wolf, Seil-Und Drahtwerke GmbH & Co of Germany, which was terminated in the first week of October 2003.They had 25% stake in company and promoters bought that stake in 2003.
 
4) Currently in India Rajratan’s market share is 39%, Tata Steel is 25% and Aarti steel is 12%.Aarti steel is a Ludhiana based company and is much bigger in size compare to Rajratan global wires. But they have other business also hence this business is small part of their total sales.All major tyre companies are clients for the company.
 
5)Current Thailand market is of 5000 Mt size and company’s market share is 20%. Till now company was supplying on to small players in thailand market since they were in process of getting approval from big players. They plan to get 50% market share on ASAP basis.
 
6)A high carbon wire is their major raw material. Entry barriers in this business are big since approval from Indian tyre companies take 4 years and Japanese companies take 5 years for approval.
 
7)Thailand Plant was set up in 2008 and took 8 years for break even. They invested $13 million at that point of time. Company is only player in Thailand Market for bead wires business.
 
8) But recently company has got approvals from Sumitomo and Bridgestone hence their sales have shoot up in Thailand markets. In last year they did sales of 17000 tonnes in Thailand with gross profit margins of 50%.Sales realization was at Rs 60000/tones.
 
9) In Indian Market company has done EBITDA margins of 12% and Pat margins of 5% in bad times and EBITDA margins of 17% and PAT margins of 9% in good times.Company expects improvement in sales for 40% in Thailand 12% in Indian markets. Company is trying to get Michelin tyres as a client for their business in Indian Markets.
 
10) Overall Industry size is 1.2 MT and Rajratan Global wires constitutes only 5% of overall Industry hence there is big scope of improvement. Kisewires from Korea and Bekert from Belgium are the Global giants in this business. Overall capex required is $1 million for installing 1000 tones plant.Working Capital requirement is 120 days in India and 90 days in Thailand Plant.

A contrarian view on IT Industry by K. Lakshmikanth

May 23 2017 7:05PM
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The Indian IT industry is changing. However, because of size - the top ones have more than 100,000 employees going up to 400,000 for TCS , the changes appear marginal. This is not true. Our industry captains - TCS Chandra, Infosys Vishal Sikka, Tech M CP Gurnani have clearly understood this dramatic change and the challenges of going digital, more than 2 years back. 
 
Change is a challenge for any company / individual. More so , as the change in the case of Digital is that not only of technology , but also of understanding Business. Our Consulting business is nowhere close to that of IBM or Accenture. These companies have traditionally advised their clients on technology, on business etc. An advantage which we don't have.
 
Our top companies are increasingly adding business / consulting expertise to supplement the technology. Remember, the new paradigm is to talk clients marketing, manufacturing and other business people , not just to the CTO.
 
I firmly believe that our top companies will change and succeed here too. Just as they made India the outsourcing global giant, they will lead India in the digital world too. However, it is going to be a long battle and I am sure that with their deep pockets, the Indian giants will succeed.

Rapicut Carbides:Company Meeting Notes

May 21 2017 10:00AM
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1) Company manufactures Tungsten Carbide Products which are primarily used in the mining sector as 75% of the revenues comes from this mining & its largest customer is Neyveli Lignite Ltd. which accounts for around 15% of the turnover. The remaining 1/4th sales come from the Industrial Sector. The fortunes of this company are tied up to the domestic mining sector & the greater the mineral production in the country, the higher will be its revenues. The annual demand of Tungsten consumables by the domestic mining sector is estimated at 1200-1500 tonnes p.a.
 
2)The company  manufactures consumables for Coal, Granite and O&G sectors. These consumables have a short life span & after certain hours of usage, they need to be replaced. Around 35% - 40% of sales are coming from PSU's.
 
3) Tungsten is a rare earth mineral & is not found in India. It is imported from China which is the largest global producer of Tungsten. Tungstun is traded on LME. The management is hopeless about exports as the international markets are dominated by Chinese cos.
 
4)According to the management, there are only 4 cos. which are manufacturing Tungsten products in India.
i.) Sandvik 
ii.) WIDIA -
iii.) Electronica 
iv.) Rapicut Carbides 
 
5) The other 3 companies are far larger than Rapicut in terms of size and scope of operations. Sandvik & WIDIA are MNC's with the former doing around 500Cr. of sales in India. These cos. make tungsten tools & equipment whereas Rapicut only manufacturers consumables. 
 
6) The Import Duty on the products that Rapicut manufactures is 12.5%. The management does not perceives a threat from Chinese imports.The sales are booked through tendering. The company also has a good dealer network
 
7) The company imports around 50% of its raw materials from China & the rest is procured through domestic tungsten scrap processors.The business is inventory intensive.
 
8) Company now is focusing on *value add* which is indexable inserts a 5000 cr market and even if they can grab a small share its a 30% EBIDTA margin product.Also they are now sourcing some RM from Vietnam so can ask Chinese suppliers for a discount. Company did a very low smartly done capex for indexable insert facility,that should generate high ROCE.
 
8)Co. able to pass on raw material price increases.Payout Ratio = 10-25%.
 
9) Installed Capacity pa-1.43 lakh kgs pa .Steady State NPM = 10%-12%.
 
10)Rapicut is a brand in the tungsten consumable industry. The company's registered office & factory property in Ankleshwar measures 3000 sq. meter (4 acres) and has a market value of approx Rs.60Crs.

Happy Days for the Power Equipment Manufacturers?

May 20 2017 11:00AM
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Announcement by Government of setting up 10 units totaling 7000 MW Nuclear Power Plants is sure to bring cheer to not only domestic and international equipment manufacturers like BHEL, L&T, Alstom to name a few but also to the entire bunch of construction agencies specialising in power plants who were starving for orders since long. Present operating capacity is 6780 MW and another 6700 MW is under installation. It is definitely very good news, especially when all agencies were over focussed on solar energy. Before we get over excited and start celebrations one need to pause and think about this announcement. Yes it is only an announcement of Cabinet Decision. Details like Technology, Location, Land and Environmental Clearances are still to be worked out. Last but not the least, there should be concern about from where Rs70000 Crore is going to come? It is a massive amount of money. There has been talk about new UMPPs which are yet to see the light of day. Out of eight UMPP announced in last 10 years only two have become operational, two have been scrapped and four are still on drawing boards. Can we say HAPPY DAYS ARE HERE AGAIN? 
 
P.s: The Column comes from Pravin Bhasin who is your quintessential power sector veteran with an experience of as long as 45 years. "We reached out to Kirloskar Brothers,a midcap beneficiary and this is what they opined. The Union Cabinet on Wednesday cleared a proposal to build 10 indigenous Pressurised Heavy Water Reactors for boosting nuclear power generation in the country. KBL welcomes this historic initiative of the Government of India, which has the potential to create about 33,000 jobs and generate Rs. 70,000 crores of business. We are confident that the new indigenously-developed nuclear power plants will go a long way in reducing the perennial energy deficit that the country has been living with. With the rich experience acquired through our association with BARC and NPCIL, we are all set to manufacture state -of-the-art technology pumping equipment required to support this 'Make in India's initiative of the Government of India". Even the recent conference calls and announcement of companies like ABB and Siemens suggests better days to come. Happy investing folks. 

MT Educare: Fresh Perspective by Pulkit Gupta

May 18 2017 9:10PM
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Some companies destroy value for investor by diverting from their core competency and by keep putting money in the projects where return on capital employed is very less. Moreover these companies indulge in financial management to justify the price. MT EDUCARE stock slide down from Rs 166.80(1st April 2016) to 83.80( 1st April 2017) in one year time. It has further moved down to 69 bucks as on today. We have to dig deep into the financial statements and look for anomalies that aid us to unfold the business operation.
 
1)In period 2015 and 2016-Revenue growth was 12.5% and 26.5%, but account receivable growth was 134% and 118.5%. As company booked more revenue in periods, ratio of account receivable to revenue increases up to 15.9%. This poses concern as company is increasing revenue but not collecting cash.
 
2)Company's Account Receivable is increasing at enormous rate and at the same time allowances for uncollectible are decreasing from 13.29% (fy14) to 2.38% in fy16 which may aid to reduce the expense by Rs 5 cr.
 
3)Company has shown year on year increase in the Revenue from fees but at the same time shown decrease in the Discount & concession given to the students from 13.11% to 10.54% which may aid to reduce the expense by Rs 6.67 cr.
 
4)Advance fees ( unearned revenue) is decreasing yoy and ratio of Advance fees to revenue is also decreasing which creates concerns regarding smoothing of revenue by recognizing more unearned revenue as earned revenue in the period.
 
5)Ratio of total capitalization (deferred cost asset) to total assets is increasing which means company capitalizing more cost. The ratio of amortization of total capitalized expense to revenue remains flat at 2.63% in comparison to percentage increase in the capitalization.
 
6)Company needs working capital for the Robomate business and for the government project. Promoter Mahesh Shetty pledged his shares to raise fund for the company from 6.16% to 77.36% (24th March 2017) of his holding. Company has increased the long term loans and advances to others from Rs 51 cr to Rs 77 cr which are unsecured without giving any explanation in footnotes. These funds can be used by the company for marketing and working capital needs for the UVA and Robomate projects.Problems in a company are like cockroaches in the kitchen. You will never find just one. Good luck to the investors of MT Educare.

Are we set to see "Solar Stressed Asset"?

May 17 2017 8:35PM
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Solar tariff recently fell to Rs 2.62 per unit at Bhadla solar park in Rajasthan. This is pretty drastic and almost unheard of in the perceived Sunrising Sector. We reached out to few industry veterans to know its implications and this is what they opined:-
 
1)B.Panigrahi,Power and energy Industry Veteran:-Solar parks will continue to see fiercely aggressive bids  as they are attracting large number of bidders for every tender. Primarily because there is hardly any barrier to entry. Land and grid connectivity is  taken care of by Solar Park. Bidders can source panels from anywhere in the world - no supply constraint right now. An intermediary (like SECI, NTPC ) as counter-party gives payment security comfort to international investors and lenders. There is no dearth of debt funding. As a result, anybody who can arrange a part of risk capital and put in place a commercial team can bid for these projects. You may need one or two known industry faces to give confidence to lenders and equity co-investors. When disproportionately large amount of risk capital from diverse sources chase few PPAs, every tender will see 3-4 extremely aggressive bidders hell bent on winning the PPA. At this rate, we will continue to see extremely low tariffs, tender after tender.
 
2)Krishna Chaitanya,Srei Finance:-A simple back of the envelope calculation would show that such tariffs would result in a sub 10% IRR based on current assumptions around capex, opex and PLFs.  Financing / refinancing assumptions could marginally improve the economics while the 'black box' of degradation, could over time, make or break the project economics depending on how it actually materialises. Also considering that most of the bidders are established players and most of them bidding within the 90 percentile , is the sector heading towards a low return trajectory ? Alternatively is the economy (global and domestic) converging towards lower returns ( à la japan) wherein the above returns seem to be good.Only time will answer us.
 
3)Ashwani Raina,Essar power:-Well we are in a phase of disruptive technology. No one can predict what is viable and what not. Who had thought of these prices a year back and who can predict the prices for next year. Maintenance & replacement of panels and threat of procureres not lifting power will be the highest risk factors if prices further drop.
 
4)Peyush Tandon,Tata Power:-We should definitely be aggressive with sustainable business model. We see a lot of money being burnt in companies in e-commerce space year after year with no visibility when these companies will break-even. Maybe we are looking at similar scenario in the renewable energy space. 
 
5)Dhiraj Sinha,Corporate Lawyer: It's not financially viable in long run and ultimately will increase stressed assets. Low numbers like this look appetising and attractive for headlines but will the project be managed, serviced n sustained for 20-25 years? Answer is the big NO.

MPS: Result Analysis

May 16 2017 8:20PM
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Standalone Numbers: Net profit of MPS declined 11.04% to Rs 18.86 crore in the quarter ended March 2017 as against Rs 21.20 crore during the previous quarter ended March 2016. Sales rose 3.69% to Rs 57.06 crore in the quarter ended March 2017 as against Rs 55.03 crore during the previous quarter ended March 2016. For the full year,net profit declined 1.46% to Rs 69.50 crore in the year ended March 2017 as against Rs 70.53 crore during the previous year ended March 2016. Sales declined 0.21% to Rs 223.56 crore in the year ended March 2017 as against Rs 224.04 crore during the previous year ended March 2016.
 
Consolidated Numbers: Net profit of MPS declined 28.87% to Rs 15.87 crore in the quarter ended March 2017 as against Rs 22.31 crore during the previous quarter ended March 2016. Sales rose 9.95% to Rs 71.63 crore in the quarter ended March 2017 as against Rs 65.15 crore during the previous quarter ended March 2016.For the full year,net profit declined 1.80% to Rs 69.96 crore in the year ended March 2017 as against Rs 71.24 crore during the previous year ended March 2016. Sales rose 12.24% to Rs 288.70 crore in the year ended March 2017 as against Rs 257.21 crore during the previous year ended March 2016.
 
Results Analysis:-
 
1) On standalone basis constant currency (cc) degrowth of - (2.35) % on YoY basis for FY17.
 
2) On consolidated basis, a cc growth of + 9.97 % ; interesting thing to note here is *for overall addition of 3.9 mn. USD to topline (INR converted 26.14 cr.), company spent INR 27.56 cr. in FY17 on acquisitions.*
 
3) Consolidated EBITDA margins at 32.24 % for FY17 v/s 35.38 % of FY16.
 
4) *Margins might come under more pressure going ahead if currency situation remains as it is now. For the first time since many years, Philippines, the only major competitive outsourcing destination against India for industry of our concern, has started becoming more competitve than India.* If we take FY17 average exchange rate to be the base, till 9th May 2017, Peso has depreciated by 3.59 % against USD and by 1.51 % against GBP as against INR appreciation of 3.89 % against USD and 5.96 % against GBP.
 
5) Dividend is skipped for the first time since Mr. Arora's takeover.
 
P.S: Our mentor Mahesh ji summarised the result analysis in the perfect manner. We feel there's few more quarters of average numbers coming in its away. Stock market is a place which gets fascinated by superior growth with margin expansion and good payout. The same aspects which made MPS a huge multibagger post its initial takeover days seems to be missing now.  As of now looks to be a market under-performer.

Scary Bangalore Realty Market and NBFC Implications

May 15 2017 8:30PM
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I can see a very very bad debt situation in Bangalore Real Sector. Almost all builders that I have interacted in the last 12 months are over leveraged, and that too by at least 2x. With sales at all time low how are they going to come out of this debt trap? Even debt takeover process is near its exhaustion as most of the projects have already been refinanced multiple times. A number of builders are going to default in the next one or two quarters as they are finding extremely tough to get new lenders for their projects with virtually no sales. Couple of the NBFCs, who had lent like there's no tomorrow, must brace themselves for horrible days ahead.
 
P.S: Rahul Singh is the founder of Rayting,a rating and review site dedicated to real estate projects. Inputs from guys who are experienced and keeping every possible check on realty projects definitely helps in getting aware of the developments. We will be coming out with more sectoral checks. Happy investing folks.

Are you still Committing this Mistakes?

May 13 2017 7:20PM
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Investors should lower their expectations and should not expect bumper returns like of 2014-2016.Moreover,there could be some profit booking at every rise.Partly, investors are also to be blamed for picking stocks at any price (upon hearsay) without looking at fundamentals of the company or at the valuations.This time, investors should try to avoid following mistakes:
 
1)It will double in 1 month:If it were so, why tipster will tell you to make so much money?Instead, he himself will beg,borrow or steal to have enough money and buy entire quantity of such scrip for himself.
 
2)Looks good on the chart:Intraday or short term traders may sometimes make money on this basis.However,it is a strict No No for long term investors.One should remember that no business enterprise runs on charts.Hence, how business of share investing can run on charts?
 
3)Company has got an order:One should verify what is the execution period of such an order, when and how much it will contribute to company's topline and bottomline?Sometimes,bigger the order,lower the profit margin.
 
4)They are planning an expansion:Expansion of production capacity necessarily does not mean expansion of bottomline also.Whether big investment in new capacity will yield judicious returns?Whether there is enough demand to meet expanded capacity? In the past,many big companies became BIFR case after their mad expansion.
 
5)Won some export orders:Such order will constitute how much of total turnover in percentage terms?Did management clarify whether export orders are more remunerative or less remunerative?Export orders do not necessarily translate into higher profits.
 
6)Big Bull is buying:Did they ever tell you what big bull is selling?
 
7)Big Operator is buying:By the time such news reaches you,such operator has already turned into a seller and most probably,you are buyer of his sold quantities.
 
8)CDR/OTS:In many many cases,companies became significant due to siphoning off funds by the promoters.What is the guarantee that promoters will not again siphon off the funds after CDR?Many companies became CDR case due to inefficiencies and they will continue to remain inefficient even after CDR.CDR means better future for those companies which were genuinely suffering due to bad market conditions and promoters have genuine reputation.However, investors tend to pick any CDR case company without realizing that perhaps this was the only CDR case in that industry in which most other companies were faring well.
 
9)Going for GDR/FCCB: Most of the company's stock price falls sharply after GDR/FCCB issue.It clearly shows that share price was being ramped up before such issue.Hence, investors should avoid to buy such scrips at peak valuations just before GDR.
 
10)Brokers tells you to average the scrip:It is advisable to average the scrip only if price has come down due to bad sentiment( We would rather suggest averaging up or on the rise)However, in many cases, price is coming down due to expected lower performance in view of which lay investor is not aware. It is like betting again and again, more and more on a losing horse.Instead, investors can make up for their mistakes by investing additional money only in some other companies which are doing better.
 
Equity is a long term instrument and if there is nothing wrong with the Indian companies you want to invest in, or the Indian economy and country as a whole, and if market is going down due to technical factors, investors should not panic, and wait.If, some FII are selling today,tomorrow, other FII will come to buy. There is no problem for long term investors.We should change our views only if fundamentals change.Finally, if, Indian economy is doing well and if Indian Equities are attractive,I feel that it is not due to Rahu-Ketu (politicians-bureaucrats) but INSPITE of them. Things are happening due to perseverance, intelligence, tolerance, hardwork and ambition of Indian citizens who deserve the real credit for nation building.

The Buy Right Sit Tight Strategy:-

May 12 2017 7:10PM
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INVESTRIVIUM:- Here we showcase a historical fact from the stock markets that not only motivates the investor but its a complete stream of education to speak the least.The following phrase is a lesson in itself:
 
“I invested Rs.50 lakhs in Karur Vyasa Bank in 1993 and today it is more than Rs.200 crores.”– Rakesh Jhunjhunwala (Oct, 2012)
 
Moral: Buy Right, Sit Tight! This saying is as common as air. Do you recall watching that Kaun Banega Crorepati promotional video a couple of years ago where a girl from the North-East India is quizzed about the Kohima City and she replies “Jaante Sabhi Hain, Par Maante Kitne Hain?” Such is the condition of this short and widely popular saying in the stock markets. The investment turned whooping 400x in less than 20 years;the micro-cap bank with conservative business model, strong fundamentals returned over 20x between 2002 and 2012. The residual of that initial investment of Rs.50 lakhs after booking substantial profits a couple of times now fetches an annual dividend income, yes, an annual income of above Rs.5 crores.
 

Curios Ads Pricing Case of Inox and PVR

May 11 2017 7:00PM
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The whole Sharebazaar App team recently had its outing and we went to see the latest craze in town aka the movie Bahubali. The movie was quite an experience to say the least. Now in context to the multiplexes,they must be having the time of their life. In Forum Elgin Road,Calcutta a total of around 28 mins of ads were shown. After returning we did a prima facie Ad Revenues calculation( Mind you just prima facie study and we may have missed up something) and quite a strange result popped up. Have a look folks:-
 
Ad revenues for both PVR & INOX happens to be too low. Ad revenues of both companies for FY16 added were ~275 cr, which works out to 27.5 lac per screen (1000 Screens between the 2 companies). 5 shows a day, 365 days a year works out to just around ~1500 per show they easily place around 15 mins of advertisements per show. So that works out to just around INR 100 per 1 min of ad inventory. Seems to be too low, either both of them are underpricing the ad inventory massively or you can easily guess what they are doing. 
 
Manyavar came up advertising in theatres. To put things into perspective-a company with an AD spend of ~30 cr can get 10% of the total ad inventory across both these chains, and land up with a pan india metro/tier one city brand recall. One does tend to see advertisements in a theatre unlike on TV,as they cant change the channel. This was the single largest concern we have had on this sector. Either it is a massive pricing opportunity for ad space, might be undervalued being a relatively newer advertising platform or these guys are taking...you do know what.

Banswara Syntex - Company Meet Notes

May 10 2017 8:00PM
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 1)A fully integarted textile compny right from spinning,weaving,processing fabric and garmenting.
 
2)One of the first company in banswara rajasthan to put up a plant there in 1977,has almost 100 acres of land in which the factory is based-does revenues of 1270 cr.
 
3) Clients includes all major domestic branded retail players and foriegn big retail brands.
 
4)It had done a significant capex of 425 cr from 2010 to 2014 for upgradation and capacity expansion,mostly through debt.
 
5)In the middle of 2013-14 had to end the jv with Coach which was a high margin export biz,things are on track now
 
6) Management focus is on reduction of debt and  profits with increasing margins..
 
7)Debt repayment of 65 crs every year,no major capex now.
 
8) Pat has increased from 8 cr in fy 15 to 27 cr in fy16. Fy17 last quarter will pave way for a great fy18-they might do around 50-55cr in fy18,with margins improving from 13% currently to 15% by fy18. Banswara also would be a beneficiary of the govts new package for garment export.

Sika Interplant Systems: Company Meet Notes

May 8 2017 7:30PM
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1)Largest customer is government. Biz is project related hence its lumpy. There is a large component of imports in their biz hence GMs are low. They're being guided closely by Dr Nair for biz forays and growth. Co will remain debt free and grow on internal accruals.
 
2) They want measured grown rather than fast unprofitable growth. The promoter is the chairman of a related industry body and makes represents to govt on behalf of industry.There seems to be a lot of openness in the current govt to support industry but things could move faster.
 
3) Plan to take revenues to Rs 100 Cr in the next 3 years. Happy to have Margins at current levels and continue this growth - but margins should expand. The Aerotek JV is a big deal- this is for an MRO activity for which all Indian aircraft is flying to Europe, hence no competition.
 
4) Can be for defence and civilian aircraft - they were approached by DRDO or HAL to get into this activity. The benefits to aircraft owners will be on cost and down time. Currently the downtime is approx a year, which could easily reduce by half.The same capability could be used for Aeroteks requirements in East Asia, their current European capacities are full.
 
5)The market opportunity could be approx USD 20 m in the first phase with high margins. They have spent approx Rs 3-4 Cr to set up their facility for this biz, which is complete . They would expand this facility phase wise . Also this biz will be more annuity based rather than lumpy.
 
6) Promoters son is ex- Goldman and understands shareholder value appreciation.They have large ownership and hence fortunes linked to the co's stock.

Demat a/c with discount broker risky? A take by Capitalmarket

May 7 2017 6:30PM
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Always open a demat and trading account with reputed companies with high net worth. There have been enough instances of brokers going bankrupt. The event has affected their clients' holdings. The latest example is Unicon Securities. Here the broker used clients' holding as margin in derivatives trading and also used clients' margin money to buy real estate. In short, money kept as margin by clients for their own trading was siphoned off by the broker for trading in the name of the promoters or through the company's proprietary account. There are other instances of brokers going bust. For example, Click2trade, Vasanti Securities and Royal International. 
 
This does not mean that your discount broker will also go bust. But investors need to understand the business model and analyze the risk of dealing with such companies. They may charge a flat fee per trade to their clients. The fee might be negligible compared with other brokers who charge a percentage of the traded value. Trades are executed only if the client has a credit balance in the trading account. Clients are not given any margins on their stock holdings. Thus, the discount broker might be making money by investing the clients' surplus money in fixed deposits (FDs) or liquid funds. In any case, the broker will not disclose where the money is invested. This makes opening a demat and trading account with a discount broker a risky proposition.
 
It is best to stay away from such brokers. Also, many times, the opportunity cost of the money parked in the broker's account is higher than the actual brokerage paid. For instance, a person trades once a month and parks Rs 10 lakh with a discount broker as trades take place only if he has a credit balance in the trading account. Now, the opportunity cost of this money if put in a bank FD is close to Rs 80000 a year. Most people pay lower brokerage than this to their brokers. The brokerage amount charged by a discount broker might be substantially low but the loss of opportunity huge. Thus, it is better to stick to a reputed broker with a sizable net worth.

Are you Betting on these Themes?

May 6 2017 9:00AM
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In continuation with yesterday's article-So,is  it the right time to invest? Which are the sectors and companies that would lead the next bull market? It's always the right time to invest. India is the quintessential bottom-up market, where investors can find a nomenclature of quality stocks which can generate massive returns over the longer term. Indian equity investment opportunities can be classified into eight macro themes:- 
 
(i)Unorganised to Organised sector - Plywood, adhesives, pipes,paints etc.
 
(ii)Domestic consumption/lifestyle Based - FMCG,retail,entertainment,multiplexes
 
(iii)Infrastructure spending based Opportunities - power,ports,roads, airports,mining,construction.
 
(iv)Agriculture-based Opportunities - irrigation,agri processing, fertilisers
 
(v)Banking and Financial Services - NBFC,micro finance companies. Even the proxy affordable housing companies would do very well.
 
Vi)Food Processing Companies - Organic foods: Anything which act as a value addition will do well. Organic tea,readymade processed foods,value addition in dairy etc.
 
Vii) Outsourcing Based Opportunities - Auto ancillaries,Pharma which are into the contract manufacturing area.
 
viii) Legacy Companies which are seeing the induction of new generation. The predecessors were habituated in siphoning off aka black money but the new guys who in most cases would be freshly groomed from renowned business schools,would be inclined to look at the market cap which is pure white stuff. This area offers serious money making opportunities presently. Moves likes demonetisation further vindicates our stand.
 
Your interest in each of these themes can vary,depending on ones investment profile and time frame.Allocation is imperative if you are looking to make serious money from markets.
 

How to Play Stock Markets in 2017?

May 5 2017 7:15PM
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Every time market trades higher, most market participants would have a query-"Will the same trend continue? Will the market make another high?If you people get hold of both the aspects, the cause of the bull run and its duration backed by high confidence and conviction, it would be easier isnt it?While in the long term, the market is driven by factors like economic growth, earnings, valuations etc, in the short term, only two factors work — sentiment and moneyflow or liquidity. 
 
India is among the top few countries in the world to have more than a trillion-dollar GDP and m-cap simultaneously.Since 2003, it’s total market cap has grown over 600 percent which is just second to China. Our country ranks third in GDP in terms of purchasing power parity at $8.7 trillion, but its nominal GDP puts it in a seventh place with $2.25 trillion.It is also the fourth largest market in Asia (after Tokyo, Hong Kong and Shanghai), and India's GDP growth rate is expected to be the fastest globally. The country's per capita income has risen steadily over the last few decades. 
 
We have heard of global multinational companies and the growth stories of them.Now our entrepreneurs are ready to play the global theme with the mindset of creating Indian MNCs. These easily signifies that India has reached global scale and size. The economy is on its way to becoming an economic super power. There will be some speed bumps along the way(you guessed it right, demonetisation was a great recent speed breaker)but there won't be any U-turns.As is the case globally, when economies undergo this transformation, the equity asset class creates wealth in the economy and outperforms most asset classes. India will witness the same phenomenon; equities will outperform most asset classes over next 3-5-10 years. From a macro perspective, our country can look a bit expensive, but taking into account the growth profile and possibility of value unlocking from balance sheets, it is bound to remain expensive.The idea is to take exposure in the right sectors and stocks. The next article will have few exciting themes which can lead the next bull rally. Happy investing folks.
 

Two Small Cap Takeover Bets

May 4 2017 11:48AM
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1)  Pressman Advertising: Pressman Advertising is one of India's leading independent full service advertising agencies with wide capabilities and a substantial reputation built over more than four decades. It has been a huge multibagger since its reverse merger with Nucent finance. There are strong rumours floating in the market which suggests a takeover is inevitable and for good reasons. Recent selling by promoter entities too seemingly hints at the vindication of of this particular news. After the sad demise of Mr Suchantis son,it's just a matter of time before the baton gets passed on to an able superior player. Ad agency is an immensely tough business where tiny players are swallowed by the big fishes. The company has failed to scale up in the last five years with the turnover remaining at less than 50crs. The stock is seeing never before seen volumes in the bourses. Deal may get struck any day now. Pressman as on date commands a marketcap of 165crs.
 
2) Kirloskar Electric: When terror struck Hotel Trident in Mumbai on the night of November 26, Vijay Kirloskar, was at the Oberoi. He was caught in his room with two of his friends. He and his friends were told to be locked inside the room but his Asthma aka terrifying suffocation forced him to move out of the hotel room and flee through the emergency exit. Had he remained in the room,the company would have probably gotten a new owner by now. So it's kinda he is already living his second life. Mr Kirloskar is 75 and if sources are to be believed,has no interest in running the show. He is survived by wife and daughters who again have nil interest in carrying forward the legacy of Kirloskar electric. They have inducted a professional CEO which could be first sign of things to come. Market is abuzz with a takeover offer from a behemoth MNC at many times more than the present market price. Kecl also has land assets of more than 800crs and as on date quotes at a marketcap of 250crs.

When Buffett had put 40% of his portfolio in a Single Stock

May 2 2017 11:30AM
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In 1963, American Express shares were clobbered due to its involvement with Allied Crude Vegetable Oil which was owned by Tino De Angelis. He would borrow money from a bank via a line of credit, buy shiploads of vegetable oil and store it in container ships, sell the oil and then pay back the line of credit. The oil in the tanks was inspected regularly and pledged as collateral for the line of credit. Amex provided credit to the company based upon the inventory of the company’s soybean-based salad oil. The inventory was kept on container ships thought to be full of salad oil. De Angelis ingeniously thought of a way to outsmart the banks. He would fill the containers with water and had only a few feet of salad oil on top. Since the oil floated on top of the water, it appeared to inspectors that these ships were loaded with oil. Meanwhile, De Angelis used this as collateral for taking more credit.
 
De Angelis obtained $175 million in financing on the basis of $60 million worth of vegetable oil as collateral. He used the money to speculate on vegetable oil futures (where he eventually lost all the money). In 1963, the entire operation blew up when it was discovered that the company could not account for the absence of more than $175 million in salad oil.
 
When Amex did an audit to recover their collateral, they discovered that instead of $60 million worth of oil, there was just $6 million. A cruel reality check! This con job, dubbed as the “Salad Oil Scandal”, resulted in Amex losing nearly $58 million wiping out most of its equity base as its shares went into a free fall.
 
Enter 33-year old Buffet. He was impressed by Amex's instant response to the losses, taking the hit and indemnifying many of the third-party victim.He also saw that Amex’s competitive advantage and cash-flow generating capabilities were intact and believed that fears over the eventual liability were overblown. Most importantly, he recognised that this scandal had nothing to do with Amex's core businesses - credit cards and travellers cheques, in which the company was a distinct market leader with excellent brand recognition. Before arriving at this conclusion, he spent an evening with the cashier at Ross's Steak House in Omaha. He noted that the scandal did not stop people from using their green cards. Amex's intangible qualities (trust and reliability) were intact.
 
Based on his inference that the Amex brand was still strong along with the underlying business, and the scandal was just a one-time hit against earnings, he began picking up Amex shares which had dropped from $60 to $35 over 60 days. As Wall Street bailed for the exits, he bet 40% of his investment partnership’s capital on Amex. He bought 5% of the company for $13 million.American Express made over a ten-fold move between 1964 to 1972. 
 
P.S: A wonderful article from the stable of Morningstar India. In our markets itself, often there would prevail such special situation opportunities which if studied properly, could provide massive gains in due course. Recall the case of Nestle with its Magi debacle. Lot of great Pharma companies are having temporary USFDA issues which has taken a toll on the stock prices. They may be worth a look too. Happy investing folks.

Markets at all time high-Time to withdraw from equities?

May 1 2017 2:26PM
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As markets are at all time high, I am getting queries if investments can be withdrawn? My question to those people is a very simple one-Are you investing because of markets or self financial goals? If you withdraw, what will happen to your goals? 
 
To those confused set of people, let me ask a question-As your income is at your life time high now,why don't you quit your job/business? 
 
Same applies to markets-Mr.Market was at lifetime high in 1985, 1994, 1999, 2003, 2007, 2014, 2017 and Mr Market will probably continue to make all time highs in 2021, 2026, 2034, 2040 and so on. Please continue to invest as long as you want to achieve your financial goals and what better than equities?
 
P.S: Such a simple yet brilliant message from Mr Ravi Monigari who is a CFP and a passionate investor himself. If we could further add up, even if we exclude markets and its future levels, there would be still be several companies who would make hell lot of money for themselves and their minority shareholders. Another Havells or the next Symphony or even a new Bajaj Finance can liberate you very early. If you ask us to name a few, the answer is very simple. Just keep your eyes and ears open and you may spot one heck of an investment opportunity. Often common sense is most uncommon in markets. Happy investing folks.

The Incredible Story of Southwest Airlines

Apr 30 2017 11:43AM
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Imagine an industry where majority of the players went kaput, this company has a track record of generating record profits for 44 years in a row. It's truly an awesome company which does everything possible to better up itself each passing days, months and years. They bought back shares, went into a profit sharing agreement with employees, paid a hefty dividend and earned a return on invested capital of an astonishing 30%. With a happy employee comes a happy customer and with a happy customer you get more repeat business and references. Satisfied set of customers often leads to prosperous set of shareholders. Snippet from one of the old interviews shows why this company is in a way different league:-
 
""When you divide our 1994 annual profits by total flights flown,you get profit per flight:- $179,331,000 (Annual profit) / 624,476 (Total flights flown) =$287 (Profit per flight). Then divide profit per flight by Southwests systemwide average one way fare of $58: $287 (Profit per flight) / $58 (Average one way fare) = 5(One way fares[Customers]. 
 
The bottom line, only 5 customers per flight accounted for our total 1994 profit. In other words, just 5 Customers per flight-Only 3 million of the 40 million customers we carried-Meant the difference between profit and Loss for our airline in 1994. To take it a step further to have lost the business of only one of those customers would have meant a 20% reduction in profit on that flight. That's how valuable each customer is to southwest and you."
 
P.S: No wonder the stock has been a huge multibagger since its IPO days of 1972. The airline has compounded at an amazing 26% over the last 40+ years. An investment of 1000$ then would translate into a bounty of over a couple of million USD, this is without even considering the dividends and its reinvestment.
 
Equity ownership is a lucrative soothing relaxation experience meant to liberate one early. Ones you get hold of such companies, you just don't exit them and everything gets taken care of.Happy Investing Folks.

Prakash Industries Ltd:- Recent meeting updates

Apr 28 2017 9:30AM
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1) 5th kiln is yet to get started. Most likely commissioning date would be close to june-17. Ideal output from 4 kilns is 1.6lac tonnes (earlier it was 1.5l, but with good quality coal output would increase). Thus total Sponge production could be close to 7.5lac tonnes for FY18.
 
 2) Work for 6th Kiln has started (piling work). Expected capex could be close to c.170 cr .
 
3) Furnaces operates for 7 sifts (versus aggressive assumption of 10 shifts as per mgmt) 
 
 4) Current rate of EBIDTA is? 43 crores per month. This is largely due to higher finished steel prices. However prices have corrected in last few days by? 500/ per tonne. 
 
5) Furnaces are yet to get lighted as Kiln hasn’t started, however piling work of furnaces is about to get completed by June as well. 
 
6) Mining work hasn’t started yet, no as such progression is made. However management  has stuck to its Oct-17 guidance for starting Odisha mine. 
 
7) Coal linkage is available for 7 lac tonnes p.a. ?45-50cr savings possible due to linkage coal 
 
8) Power plant is operating at 165Mw. 50MW still remains idle. 

IndusInd Bank: One-Off Exposure a Reflection of Its Risk Managment?

Apr 27 2017 10:35AM
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IndusInd Bank’s quarter ended March 31, 2017 (4QFY2017) was impacted by a “one-off” exposure to a company whose cement operations is in the process of being acquired by a top-rated company. While sell-side analysts regard it as a blip in the secular positive outlook on the bank, they are failing to appreciate that such a transaction is a reflection on the bank’s corporate credit underwriting and risk management. The obsession to report higher fees to command premium stock market valuation may be compelling banks to undertake such transactions which prudent banks may not consider. IndusInd Bank’s premium valuation currently reflects its superior asset quality and earnings growth but in the light of this disclosure, investors may need to reexamine the bank’s risk appetite.
 
P.S: The above note comes from Mr Hemindra Hazari who is a seasoned capital market professional with many decades of experience. He probably meant JP associates in context to the cement company. It's a raging bull market going on with companies hitting new highs almost every second day. Our intention remains to publish stuff which are unbiased and presents the true reality. They may not be popular but just could be enough in eradicating the positive mental biases gathered from the noisy bullish Whatsapp groups and garbage market related TV channels.

Did Mallya really Loot the Country?

Apr 25 2017 11:56AM
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Did Mallya really loot the country? Or did he try to give common Indians a luxury airlines at an affordable price? Coming from the high margin  liquor business, he probably forgot that he was running a business which with his model had paper thin margins. And the losses started accumulating. He then went into a vicious cycle where he needed more money to fund the losses. So what did he do? The same thing that most of our big business houses did before him. He used his influence to get loans when his airline was credit unworthy.  I don't know the means he used but he was neither the first nor is the last.
 
I remember an incident when KF airlines was at their peak. I was traveling on the Bangalore Mumbai sector when I noticed that Mr Mallya was in the flight. After the flight took off he came and personally talked to each passenger. I spoke to him about their cancellation policy where they would hold the money and give you a credit note. He took my card. In two days I had a cheque on my table. I sent a thank you note on his email id. He personally replied to that.I really don't think this man is a cheat when he has offered to settle the principal amount. Probably it is just that we hate to see a man having a good time and are revelling in the fall of the King of good times
 
P.S: An interesting view by Sandeep Zutshi who happens to be the founder of Zutshi associates. We are sure this is pretty debatable and many of you would disagree to the above view. Though this could be termed half baked but it's always interesting to have an insight which is fresh and self penned. We look forward to more notes from Mr Zutshi in different aspects of the corporate world.

Two Companies with Smart Expansion Plans

Apr 24 2017 1:28PM
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Retail investors were always deprived of proper knowledge and information. This app has been created to put information in public domain which were beyond reach and unheard of earlier. We present you a couple of companies which are buzzing big time in the bourses. In markets, it's not like the stock would move after any events. It's rather like the stock price would move in anticipation of the event which would take place much later. Check out what is making the below companies move:-
 
1)Emmbi Industries: Company has been a 16 bagger over the last 3 years. Emmbi in the past few weeks has seen strong accumulations by informed investors. It would be prudent to note that the current expansions are really smart and margin accretive.What's interesting is 7-8cr expansion creates a 100cr top line capacity with ebitda margins of 18%. On a conservative basis and at highest tax rates, it translates to a bottom line of 10cr. 7-8 cr capex leads to additional 10cr pat. Also, next expansion in pharma packaging (roughly 22 cr capex)will go live at the end of this month. With such smart peeps at helmcompany may continue to buzz in the bourses. 
 
2) Vikram Thermo: The company has more than doubled from its 52 week lows. Vikram has over 50% share of Indian drug coating market and also exports to the outside world.There's hardly 3-4 players in the world in this field.Let's talk about the present expansion plans. 8 cr capex will increase drug coat capacity 2x and drcoat by 5x. This will come on stream in 3-4 months and will be fully utilised within 2-3 yrs. The company is also focusing more on exports. Vikram thermo is targeting a topline figure of 150crs in 5 yrs vs 40 cr in fy16.Margins are expected to remain on same lines though. Company is a microcap with present marketcap of 75crs.

Rexnord Electronics Scuttlebutt - Knowing Ground Reality

Apr 22 2017 2:07PM
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Rexnord is one of the largest manufacturers of AC Axial Fans, DC brushless fans and also for Condensor Cooling, Evaporator, No Frost, Water Cooler and Gear Motors. Rexnord's competitors include the likes of Hicool, Sunon and EBM. 
 
Spoke to Hi-cool and Sunon’s Sales Manager -  I got the feedback that Rexnord quality is very good. Rexnord never reduces prices of its products even when huge dumping is done from china. I think this is a very good point that competitors are appreciating about your own products. EBM is far ahead than other companies in terms of product portfolio and quality. EBM distributor told that Rexnord is nothing in front of us. We have launched energy saving fans 10 years ago but Rexnord is now launching. In terms of company size, we are far bigger. I think it is not fair to compare it with EBM. It's like comparing Maruti Vs Audi. Both have leadership in their own fields.
 
Spoke to the distributor of Sunon & Hicool -  There is nothing to watch out for rexnord quality. They are very good. Rexnord is not giving new distributorship otherwise we would shift to Rrexnord now only.
 
Spoke to Chief sales & Marketing Guy, Rexnord -  He was hired recently. I asked him company is good, quality of the product is good then why the company is slowly growing? he replied growth will come now onwards. There was no sales team earlier but now they have hired me along with 7 to 8 sales guys in last 1 year. We are going to each and every customer to solve their quarries. We are taking their feedback to improve our services. We are launching a number of products. Recently came out with energy saving fans (4 inches) which will reduce power consumption but costly. It may cannibalise our sales in near term. We are working on the export market also. Management is very conservative and clean. They are very conscious about their quality.
 
Spoke to Rexnord Distributor -  he said management wants to grow steadily. They are very clean in accounting. Even one fan from my end goes back to them for repair, then entire billing is done even for 200 rs. fan.  They are taking part in many exhibitions. They will grow slowly and steadily.
 
Spoke to a person from Sales Department in cold chain exhibition - Rexnord Company has recently launched 2 products especially for chemical industry which is used as a mixer. Got an order of 1500 fans from Bangalore party. Getting a lot quarries for this product. There will be very good growth in next 3 years. The staff is increasing, the machine is increasing, marketing is increasing, products are increasing, the sales team is increasing then why growth won’t come? We have entered in agitator motor industry. We have recently launched motor which is used especially by whirlpool and Godrej. Due to winter season growth may be low but eventually, it will pick up very fast.  There is tremendous opportunity in this market. Incremental sales will come from this product. In all, very bullish for next 3 years. They have also hired a professional guy to boost export.
 

What makes a 100-bagger by Ramdeo Agarwal

Apr 22 2017 12:13PM
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Mathematically, sales volume growth multiplied by sales price growth multiplied by margin and valuations expansion is the possible source of a 100-bagger. Simply put, growth in share price will be directly influenced by growth in sales volumes and sales price, along with expansion in margins and valuations. If all these things happen simultaneously, it could be a huge game-changer. It is possible for a smaller company to grow its sales by 20-25% annually. However, sales turnover cannot be seen in isolation. If a stock is trading at 30X and margins are going to double, for me it is a 15 PE stock. We now know what margins can do to valuations. 
 
Similarly, if a stock is currently trading at 10X and after a few years starts to trade at 30X, one can imagine what impact valuations could have on a higher earnings base. It is a combination of multiple variables that have to work together to create a 100-bagger. It is impossible to think in terms of 100X sales or 100X volume growth for a particular company. But even with 20-25% annual sales growth, if other levers such as margins, return ratios and valuations expand, it is quite possible for an investment to turn into a 100-bagger.

Kisan Mouldings:- What the future holds for it?

Apr 22 2017 11:56AM
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Company is set to have a watershed year in the present fiscal of 2017-18. There are a lot of triggers aside the turnaround one which market anyway craves for. GST will pave the way for migration from unorganised to organised sector which would be a boom for Kisan mouldings. Company is also very strong in Uttar Pradesh, with the present loan waiver in the state-Its set to witness robust demand. 

Company has a Solvent division(Adhesives in its segment) which is a negative working capital business and comes with 30% Ebitda margins. It does a turnover of around 25crs. Company sees good potential in the segment and has hired a senior team to scale it up to 75crs within the next 2 years. Selling of its non-core assets which got postponed owing to demonetisation may finally see its vindication in the next few weeks. Company has also launched its Water tanks division which has been an instant hit in the market. Overall, exciting times are ahead for the company.

The Next Big Money Making Theme

Apr 22 2017 11:50AM
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Unorganised to organised sector migration can lead to huge value creation. Look for companies and sectors where the unorganised share is more and where the listed companies are quoting at a big sales to EV or market cap discount. A lot of such legacy companies are seeing a management shuffling too where new generations are taking over and they are much inclined about the market cap which is pure white money unlike their predecessors.
 
Btw: Lot of such companies have already started giving you hints. Many of the promoters are busy swallowing chunks fathoming the gigantic scaling up potential. So do keep a close eye on the tiny plywood or the small adhesive company next door. Also most of them are have got a fixed cost model and are operating at less than half capacity. Operating leverage will further ensure disproportionate profit growth for next many years. Happy Investing Folks !!
 

India is likely to Witness Shortage of Quality Investable Companies

Apr 22 2017 11:36AM
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The seeds were sown few years back with the scrapping of press note, allowance of 100% FDI in most of the sectors, buy back by listed MNCs and regulatory arbitrage available to do buy back rather than paying dividendMoreover, in many cases Initial Public Offers are from companies that have been, private equity funded leaving less room for upside for secondary market players.
 
All these factors are compounding the valuation for high quality companies to stratospheric height, leaving less room for error, if forecasted earnings are not met. Moreover, my observation is that in many areas, MNC with technological edge, global relationship, brand, superior business processes have an edge, emerging as leaders or have gained dominant markets share in respective field. Many such, not represented in the listed equity universe of India.
 
The classic example is the compressor industry, where the world technological leader is not listed anymore. This sets us in dilemma of how to invest in an excellent business, which is not listed, or invest in a second rung, average business as proxy play. Therefore, relative value trade, pitting one company against another without a deep dig, is not going to yield sustainable return. Such scenario also reinforces, hold on to the good companies you have discovered rather attempting to find new gem.
 
Manish Bhandari, Vallum Capital

Real Estate-Cash is Dead but massive opportunity for players.

Apr 20 2017 5:39PM
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The earlier difference between circle rates for stamp duty and market rates settled in cash is coming to a close. Demonetisation, a withdrawal limit of Rs 2 lakh in cash and Rs 50,000 for bullion purchase without PAN means, it will need extra special means to generate cash. This implies property deals will happen only at market rates and affordable housing will just be the icing. Also considering Modijis mission of providing housing for all by 2022,there's decent money making opportunities in affordable housing companies and their proxies-Housing finance companies.
 
Btw: If GOIs move to encourage housing for all by 2022 works out, it shall add atleast 4 per cent to GDP annually over a 5 year period - says Elara.

 

10 types of Investors in Indian Markets

Apr 20 2017 5:23PM
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The Gold class (Silent on Twitter, social media)– Age group 38-55 yrs- 100-200 crores in stocks. Self made wealth. Did 10-100x in few stocks. Investing since 2003 or earlier
 
Honest beginner value investor (usually silent on Twitter)– 50-80% of assets in stocks, usually 28-35 yr old, made some wealth (50L-2cr) in last 3-5 yrs, looking at building 5-7 cr portfolio in 3-4 years and leaving job. Subscribes to Multiple advisory services
 
Typical Twitter value investor-  Diverse age group, Asset allocation- 99% real estate (1-10cr), stocks- 1% – 1-10 lakhs. Whatsapp group name- Value investing. Discussion on- Intra-day trades, Futures, Options, Break-outs etc. Churns whole portfolio every week
 
Smart Twitter value investor-  30-40 yr old, 50% asset allocation in stocks- Sells all portfolio in demonetisation time. But keeps tweeting about value investing. After demonetisation market picks up- RTs old tweets of old stocks (in reality- could not buy them again as they have run away before he could buy again)
 
Beginner, 25 yr old- has no clue what stock market is about. Portfolio size 1-5 lakhs. Joins some groups etc to pass time. Primary motive from stock mkt- time pass & some thrill
 
The SIP investor– 30-55 yr old. Invests through SIP in Mutual funds. Doesn’t have a clue about stocks. Looks at stocks that go 10x in awe. Beginning to invest in direct stocks
 
The F&O trader/Broker- primarily gives tips on Nifty, Bank Nifty etc. Earns money via brokerage. Hasn’t made a penny in profits  (mostly losses) but portrays himself as a successful trader
 
The Networked value investor- Has networks with good stock investors. Doesn’t have a clue about value investing. Gets stock picks from others and talks about them with everyone else
 
The Sleepy value investor– a RARE breed-  Buys and holds 10-12 compounders for 3-5 years time frame (e.g pvt banks)
 
The Break out value investor– One who thinks buying break outs and value investing is one and the same! A very common breed!
 
Mother Markets Takes Care of its EVERY CHILD ????
 

Management Meet Update – Nocil Ltd

Apr 20 2017 5:17PM
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We recently met P Srinivasan, the Chief Financial Officer (CFO) of Nocil Ltd (Nocil), to get an insight into the global rubber chemicals industry and the company’s role in the value chain. Nocil, an Arvind Mafatlal Group enterprise, is India’s largest rubber chemicals manufacturer with a rich heritage spanning over four decades. It is an approved vendor at most domestic and global tyre manufacturers. Its wide product range, global presence and technical know-how make it the most strategic alternative to its Chinese counterparts. It follows an integrated approach wherein it manufactures intermediates as well as a wide range of final products across two manufacturing facilities in Navi Mumbai and Dahej with an installed capacity of 53000 tonne. As of FY15, it commands a market share of ~5.6% of the global and ~42% of the domestic rubber chemical industry, pegged at ~9.45 lakh tonne and ~65000 tonne, respectively. Citing capacity constraints (operating in 90%+ capacity utilisation levels) and robust demand for its product offerings, Nocil is undertaking a major expansion with an estimated capital expenditure of | 170 crore (funded through internal accruals) and expected commissioning by H2FY19E. In FY16, sales were at | 715.2 crore, EBITDA at | 139.4 crore (EBITDA margins 19.5%) and PAT at | 78.3 crore. However, the company is susceptible to realisation risk amid volatile crude prices.
 
Healthy balance sheet, robust cash flows, return ratios:Robust growth in EBITDA margins from 7.6% in FY12 to 19.5% in FY16 and improved working capital cycle have led to strong return ratios with FY16 RoE and RoIC at 16.7% and 28.4%, respectively. The improved performance has helped the company to generate a CFO of | 170 crore in FY16 (| 44 crore in FY14). This has largely resulted in a substantial debt reduction with debt declining from | 152 crore as of FY14 to | 25 crore in FY16 with consequent debt-equity at 0.1x (FY16). At the CMP, Nocil trades at 13.0x P/E (TTM basis) and 10.0x EV/EBITDA (TTM basis).

Think of Equity as your 3rd Child

Mar 22 2017 12:16PM
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Think of Equity as your 3rd Child ?
 
Most families have two children. We spend a lot of money over a 25 year period in educating our children, providing for all their needs, marrying them off - in short, getting them well settled in life. I tell my clients to think of equity as their 3rd child.
 
Put in the same amount each year into an equity fund that you spend on one child.
 
Do that for the same 25 years. After 25 years, whether your real children look after you or not, this 3rd child will look after you very well for the rest of your life.

How I think about Working Capital by Sanjay Bakshi

Mar 22 2017 11:39AM
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Working capital should only include inventories, receivables, other current assets (including cash) required for running the business at current levels of business volumes. Cash which is surplus to running the current scale of operations (whether kept as cash or parked in investments) should be excluded. Care should taken about seasonality. In some businesses, because of their seasonal nature, the need for cash grows during certain months of an year and then falls. In such situations if seasonally surplus cash is parked in investments, it should still count as a working capital item.

One should deduct current liabilities pertaining to amounts due to vendors (but not for fixed assets), advances from customers and other payables for running the operations. Items like provision for taxes, proposed dividends, debt due within next one year should not be considered for computing working capital.

I use this definition of working capital for estimating the working capital intensity of a business. I do this by comparing the average working capital needed in a year with net revenues of that year. More insights are often found by looking at the trend of working capital intensity over a number of years.

If, instead of measuring working capital intensity, one is testing short-term solvency, then all liabilities which are due within one year (e.g. short term debt, payables for fixed assets) should be counted and all cash items including investments should also be counted. I hardly use this version of the ratio, however, because I focus on exceptionally well financed businesses and there are other ratios to figure that out.

 

Maximise money per hour of research by Amit Arora

Mar 22 2017 11:27AM
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  1. Read books from successful investors.

  2. Stop watching TV News Channels.

  3. Nobody knows the future, so stop asking. 

  4. Money is only one of the types of Wealth.

  5. Crazy people of like nature enforce yet conceal each others' craziness. Find your craziness and tone it to saner proportions.

  6. Mean reversion is an enduring truth of market.

  7. Average common man will buy more in peaks and less in trough.

  8. Excesses in under and over valuation is an enduring theme.

  9. Find High Growth Companies in Low Growth Industries.

  10. Stop Finding companies in High Growth Industries.

  11. Find out the type of investor you are, someone who buys on borrowed tips of one who researches on their own.

  12. Find market leaders in small niches, not #3 or #4 players selling cheap.

  13. Thinking in 3-5 year time frames and not 3-4 months / quarters.

  14. Understand the business, competitive forces and ability to predict future of the business.

  15. Stop thinking solely in PE terms.

  16. Stop playing greater fool game.

  17. Bet on four stocks at a minimum, don't over concentrate, don't over diversify.

  18. Think independently. You will outperform the majority.

  19. When there is no company worth investing in the country, go all cash, to go out of the country.

  20. Get rich slow-but-sure, don't buy lotto, don't play in casino, don't gamble, don't leverage.

  21. Maximise money per hour of research, no point buying into a position requiring active monitoring. The person who makes 100 million from stock market by investing 1 hour per day wins over the person who makes 100 million by investing 6 hours a day. Time is finite and limited. Learning and knowledge is infinite.

  22. Make money and stock market both your slave, make money and forget about them. 

  23. Never retire, work incessantly.

  24. Money is means and not an end. Money is a slave to free you from your daily routine. 

  25. Show you have the creative potential and do something that nobody has ever done.

  26. Have more creative ambitions in life than earning billions, you are more than your body (thankfully) that needs to be fed on money supplied goods and services alone and very soon you will enter a dimension where money will not work. How soon ? Likely before 2500 weekends.

  27. Gradually drift into a field which you are passionate about, otherwise you are a big disservice to yourself and the society in a profession that is not your passion.

  28. Buy damaged stocks, not beaten down companies.

  29. Admit mistakes.

  30. Learn from own and others' mistakes.

  31. Explain your picks to yourself with four convincing reasons.

Raymond's - Meeting updates by D.Sinha

Mar 15 2017 9:47AM
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One of our friends had a lunch meeting with Gautam Singhania. He was joined by his team including Raymond’s CFO, CEO and Head of INR.This meeting was supposed to be a freewheeling discussion of the general economy, impact of demonetization, political and global development.We also got the opportunity to hear from the management on their vision on future business.
 
 Here are some of the key takeaways:
 
a)      Impact of the ecommerce on Raymond’s business has been very little; they do not consider it as future threat.
 
b)      Considerable focus on growing business both in domestic and global markets
 
c)       They are looking for a topline growth of 40%, with percentage of exports rising from 15% to 30% in next 2-3 years.
 
d)      Considerable focus on driving up exports through their new set up in Ethiopia, where they have set up a new plant. They emphasized that the Ethiopian government has provided all infrastructure and other supports; the cost of business is low and the country has a tax treat with Europe. Expecting export revenue to nearly double every year.
 
e)      They have adopting a focused approach on global markets; focusing on 4-5 large customers in US, Europe and Japan. Rationalize the tail end of the list.
 
f)       In the local markets, considerable increase in product range for young consumers.
 
g)      Will continue to invest in brand building through A&P spend; while as % of sales A&P is on the higher side, the management believes that this is essential to support their market visibility.
 
h)      Focus on brand building has enabled them to rank number one in Shopper Shop’s suite category; few years back they were at number 5.

 

Reliance Jio - What an investor should know?

Mar 15 2017 9:42AM
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Jio will start charging from April 1st. Yet even assuming it keeps cranking prices up and wins a third of the market, a discounted-cash-flow analysis suggests that it would be worth only two-thirds of the sum that Mr Ambani has spent. To justify that amount Jio would at some point need to earn the same amount of profit that India’s entire telecoms industry made in 2016. In other words, there is no escaping the punishing economics of pouring cash into networks and spectrum. For every customer that Jio might eventually win, it will have invested perhaps $100. Compare that with Facebook or Alibaba, both asset-light internet firms, which have invested about $10 per user.

Summary of “Common Stocks and Uncommon Profits” in Eight points by Reni George

Mar 10 2017 12:01PM
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• Buy into companies that have disciplined plans for achieving dramatic long-range growth in profits and that have inherent qualities making it difficult for newcomers to share in that growth. There are so many details, both favorable and unfavorable, that should also be considered in selecting one of these companies that one can use the details that are required to an extent to understand such type of companies.


• Focus on buying these companies when they are out of favor: that is, when either because of general market conditions or because the financial community at the moment has misconception of its true worth, the stock is selling at prices well under what it will be when its true merits is better understood .


• Hold the stock until either (a) there has been a fundamental change in its nature (Such as a weakening of management through changed personnel),or (b) it has grown to a point where it no longer will be growing faster than the economy as a whole. Only in the most exceptional circumstances, if ever, sell because of forecasts as to what the economy or the stock market is going to do, because these changes are too difficult to predict. Never sell the most attractive stocks you own for short-term reasons.However,as companies grow, remember that many companies that are quite efficiently run when they are small fail to change management style to meet the different requirements of skill big companies need. When management fails to grow as companies grow, shares should be sold.


• For those primarily seeking major appreciation of their capital,de-emphasize the importance of dividends .The most attractive opportunities are most likely to occur in the profitable, but low or no dividend payout groups.(My View in this context is different…. In India, we have seen the management act as per one’s own wishes and there are numerous instances of cash going to unwanted territories as per the whims and wishes of the Management, So if the Investors has the capability to generate above average returns, then I think he can allocate the dividends far more appropriately).


• Making some mistakes is as much an inherent cost of investing for major gains as making some bad loans is inevitable in even the best run and most profitable lending institution.The important thing is to recognize them as soon as possible, to understand their causes, and to learn how to keep from repeating that mistakes. Willingness to take small losses in some stocks and to let profits grow bigger and bigger in the more promising stocks is a sign of good investment management. Taking small profits in good investments and letting losses grow in bad ones is a sign of abominable investment judgement.A profit should never be taken just for the satisfaction of taking it.


• There are a relatively small number of truly outstanding companies. Their share frequently can’t be bought at attractive prices.Therefore, when favorable prices exist, full advantage should be taken of the situation. Any holding of over twenty different stocks is a sign of financial incompetence.Ten or twelve is usually a better number.


• A basic ingredient of outstanding common stock management is the ability neither to accept blindly whatever may be the dominant opinion in the financial community at the moment nor to reject the prevailing view just to be contrary for the sake of being contrary. Rather, it is to have more knowledge and to apply better judgement,in thorough evaluation of specific situations, and the moral courage to act :in opposition to the crowd” when your judgment tells you, you are right.

• In handling common stocks, as in most other fields of human activity, success greatly depends on a combination of Hard work, Intelligence and Honesty.

Interview with an Investment Superstar: Mr Ramesh Damani

Mar 10 2017 11:09AM
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In the realm of stock market, there have been numerous folks who have come and disappeared within few years. However, there are very few gems who have stood the test of time and have made a dent in the universe of stock market. Mr. Ramesh Damani is one such rae jewel who has been in the markets for over two decades. In a conversation with Share Bazaar Team, he shared his incredible journey and laid out his investment philosophy.

 

1. Share Bazaar Team (SB): Where do you think the current bull market stands? What do you suggest should be one’s strategy at this juncture?

Ramesh Damani (RD): There are three phases of the bull market. Phase one is the initial uptake in the markets. Phase two is the longest and perhaps the slowest phase in a bull market. Phase three is almost always a vertical rise in the markets where in majority of retail participant jumps in and a huge amount of euphoria is witnessed. In phase three it is typical to find extreme discrepancy between price and value. My sense is that we are in the phase two. Ideal strategy should be to stick to the basics which is to find and invest in good businesses at a reasonable valuations and hold it. Also one of the crucial lessons that I’ve learnt is never to try and time the market but rather time in the market. Only at rare extremes (too much pessimism or too much optimism) one might be able to time the market but otherwise it is very difficult and foolhardy to time the market.

 

2. SB: Charlie Munger talks about the mental model of Inversion and emphasizes on significance of avoiding stupidity rather than being intelligent. How vital do you feel it is to first learn to avoid inferior business than focusing on finding great business?

RD: I always tell young analysts or fresh market participants that their job should be to try and double their money every three years. So to find a stock which can double in three years, the first question one must ask is that ‘is this business going to be around three years from now and will it be better off than it is today?’ That question will itself weed out a lot of bad business as you might not have a clue about the sustainability of several business. This is a good way to narrow down the pool of business to study. In life also if you know what you don’t want and what to avoid, things become relatively easier.

 

3. SB: It is always easy to figure out what to buy, but most people don’t get when to sell. So how do you make a decision to sell?

RD: It is essential to hold on to good business. I’ve seen a lot of people who sell the stocks just because it has doubled or tripled. They say things like stock has doubled so I’ll sell half and take my money out and I feel it reflects the immaturity as in that way one can never make great amounts of wealth. Until the story and the initial hypothesis on which I bought the stock is intact, I would hold on to it. I wouldn’t sell a business just because it has given me X% of returns. Also at the first sign of danger, I would exit a stock. If I realise that my hypothesis is not playing out, I accept my mistake and sell. 

 

4. SB: How significant do you feel the role of emerging equity culture in India? 

RD: Gold is a non-productive asset and FD is barely matching inflation. In absolute terms you lose money in Gold and FD over a long period of time. Real estate has liquidity constraints. So, what is left is equity which are a very good avenues to invest and grow your money. Now our government has done a whole lot of things to promote equity culture, may it be rapid dematerialisation, transparency, zero long term capital gains tax etc. They have made it a no brainer to invest in equity market as one can compound money tax-free. Even dividends are tax-free in India. I just don’t understand why a lot of people have been ignoring all these benefits. I feel one of the ways to boost equity participation would be to open a similar scheme like jan dhan yojna, where in which everyone gets a free Demat account and awareness about the power of equities.  

 

5. SB: Naseem Taleb talks about the role of Skills and Luck in Life and Investing. We wanted to understand from your perspective what is the role of Luck in Stock market Investing? 

RD: As buffet says he was lucky in terms that he won an ovarian lottery as he was born in 1950s in America. Also to be born in India which is the land of opportunities, one needs to be lucky. But beyond that I feel there is a skillset involved. I know a lot of people who bought HDFC bank and not the Bank of India and that was not the blind luck. If you were born in Central Africa amidst civil unrest, extreme poverty, etc. that may be termed as unlucky. But understanding the market, allocating the capital in a sensible manner, saving for the future all that requires a skill set. Also one needs to understand it’s simple but not easy to make money in the markets. Just because you have invested in any particular stock you won’t end up making money. If done rightly by educating yourself, like any other skills, one can ace the game of the markets.  

 

6. SB: With advancement in technology, the information flow has become rapid and market has also started reacting quickly to the new pieces of information. A lot of people has been misusing this pace to manipulate retail participants. Do you see this disruption as a boon?

RD: I must say anyone putting his hard-earned money in the markers should exercise due diligence. If it would be so easy to get rich by someone tweeting or by a WhatsApp message, the world would be full of billionaires. Here’s my tip, ‘‘don’t follow tips’’. 

One needs to understand that market is not a get rich quick scheme. Even warren buffet earned 95% of his wealth after the age of 50. So it is best to ignore a lot of ‘too good to be true’ noise in the market. If someone tell you that he knows a stock that would double in three months, ask him has he invested his every single penny if he is so sure. Also one needs to have realistic expectations from the markets. As Charlie Munger has said, ‘’Easiest way to embrace misery is to have Unreasonable expectation in life.’’  

 

7. SB: What would be your short advice to someone just starting out in the realm of investing? 

RD: I would say market is great place to get rich, but not in a hurry. And how you get rich? By the magic of compounding. If one were to start with a reasonable base capital and let the magic of compounding work patiently, one can be fairly rich within 20-25 years. 

To give an example, when my son was 13 years old, we had organised a name ceremony for him. We invited hundreds of friends and family and all of them gave him some or other gifts. I don’t remember a single gift except one gift from a friend of mine who gave him HDFC shares worth Rs. 25,000. Today they are worth Rs. 25 lakhs and it does not include dividends. Thus you can imagine power of an appreciating assets. 

The second and most important thing is to read a lot. It is very important that one must read about Business, Economics, History, Psychology etc. It is essential to keep on learning about new developments in this disruptive era. 

Third and the most fundamental thing about investing is to buy things cheap, buy Rs.1 thing for 30-40 paise. It’s as simple as that. Also, Investment is a long-term business. When you are buying a stock, think that you are buying a part of the company's business. View it over a period of time and don't look for investment as a source of short-term returns.

 

8. SB: Going forward which sectors one should look at where disruption lies? 

RD: One thing I find interesting is the introduction of Aadhar Card in India. We have now over 100 Crore database and it is going to change the way we get identified. So I would be finding companies that has the skills set to monetize that opportunity. Also Data is going to see a huge explosion. For example if we were to measure the amount of data which we generated in 2015 that would be more than the aggregate data of the last century. So how do you play data? You play by telecom companies, storage companies etc.

 

9. SB: You have been in the markets for over two decades now, where do you see Indian market going forward?

RD: I’m convinced that there are multi fold opportunities exist in today’s market than twenty years ago. With disruption in technologies and globalization, opportunities are plentiful even for stock pickers. One thing that will never change, as far as stock market is concerned, is one needs to focus on buying bargains and buy things that are out of favour. As far as India is concerned, going forward there are going to be abundance of opportunities. India being one of the countries with youngest population, we have a huge room to cover in education, healthcare, Infrastructure etc.

Trident Debt Reduction Highlights

Feb 22 2017 9:44PM
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Finance Cost reduced by 2% to Rs. 104 crore in 9M FY17 vis-à-vis Rs. 106 crore in 9M
 
FY16. Healthy Free Cash Flow Generation led to repayment of Rs. 78.5 crore which includes prepayment of high cost debt to the tune of Rs. 8 crore during the  quarter. In 9M FY17, the Company has repaid INR 445 crore, iincluding prepayment of INR 159 crore of high cost debt.Better working capital utilisation and interest equalization scheme benefit reduced overall interest costs.
 
Management comments:-
 
“We have yet again delivered strong financial and operational performance during the quarter owing to robust contribution from our Home Textiles segment led by Terry Towels and Bed Linen. 
 
Our focus of strengthening the marketing team as well as other strategic initiatives undertaken in the past have started delivering desired results and we anticipate this traction to further improve in the upcoming quarters.
 
Overall, we remain buoyant and firmly believe that FY18 would be a milestone year for Trident as we are well on track to sweat our global scale capacities.This will enable us to deliver strong performance and notably improve our return ratios going forward.
 

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