IPO Update : Suryachakra Power corp. Ltd.

Suryachakra : Lacking the Power Punch !

Suryachakra Power corporation limited has eneterd the capital markets with an offer of 3.4 crore shares at a price band of Rs. 17-20 per share. Investment Guru is of the view that Suryachakra is a small player in its segment and hence doesn't command economies of scale which is an differentiating factor in the power industry. The IPO has also been priced very aggresively compared to company fundamentals. The outlook for power sector has been optimistic given the governments focus on infrastructural growth of India, however, it has to be seen if small plyaers like Suryachakra can really take advantage of this. The foray into power trading and Bio-diesel sector are a positive but the company's ability to succeed in these ventures is yet to be tested and proved. The IPO is rated as average.


About the Company

• SPCL is part of the Suryachakra Group and is headed by Sh. P.V Rao



• The company's vision is to be a frontrunner in power trading by developing a vibrant power market and striving to correct market distortions and to improve the commercial viability and supply power at competitive rates.



• The company is actively engaged in the generation of power. The company had set up 20 MW power plant in remote area near Port Blair, in Andaman Islands at a cost of Rs.850 millions and dedicated to the Nation. The plant is in operation for the past couple of years. It has already notched up an annual turnover of RS.800 millions.



• The Company focusing on entry into Urban infrastructure development activities and
  also had signed MOU with Zecon Engineering Berhad, Malaysia.



• The Company has been granted Power Trading license by Central Electricity Regulatory
  Authority for carrying out inter state sale (trade) of power.

Alert Areas

• The company’s group companies viz. Cocanada Fisheries Ltd. and Kalyan Marine and Agro Products Ltd were delisted due to non-compliance with Listing Agreement.



• The Company relies on a single customer for all of its income. Under the PPA, the Company is required to sell the entire power available for sale generated by the power plant to Electricity Department of A & N Administration



• Crisil has assigned a CRISIL IPO grade “2/5” (pronounced “two on five”) to the proposed initial public offer of Suryachakra Power Corporation Ltd (SPCL). This grade indicates that the fundamentals of the issue are below average relative to other listed equity securities in India.

Object of the Issue

To invest in Equity of MSM Energy Limited a wholly owned subsidiary, for setting up of two
10MW bio-mass based power plants in Parbhani and Amravati districts of Maharashtra.


Valuations

• For the Year ended March'07, total Income stood at 95 Crores while net profit stood at 1.72 Crores. Topline grew by 9.4 % while profits grew by 56%.



• The Consolidated average EPS works out to be 0.34. At the higher band of the offer price , the issue comes at a P/E of 58.82 Average industry P/E is 18.2 !!



• Return on Networth is 2.34 %



• Competitors like Neyveli Lignite is qouting at PE of 23 and has RONW of 7.7 %

Issue Opens : 25-06-2007

Issue Closes : 29-06-2007

Registrar : Karvy

IPO Allotment Status of Suryachakra

Company Website Read More!

Neclast disappoints admist sluggish market

Nelcast slips below IPO Price

The listing of Nelcast was diappointing for those who got the allotments. The stock which listed at Rs. 230 in the opening trades soon started tumbling down. Though the stock did touch 274 levels on NSE, I believe not many trades would have happened at those levels. After staying near the IPO offer price for some time the stock went into discount zone and couldn't recover from the jerk's. The IPO was reasonably priced and the markets didn't thought it fit for further premium. The stock is currently qouting at Rs. 206 down nearly 6% from the IPO price.

Read More!

Nelcast listing on June 27

Nelcast to list in the range of 260-285

Nelcast Ltd. is listing tomorrow on both BSE and NSE. The company has alloted shares @ Rs. 219 per share. The issue saw a good response and was oversubscribed by 7.36 times. the retail portion was subscribed around 4.6 times while the Institutional Investors portion got oversubscribed by 11 times.

At the offer price the stock comes at a P/E of around 20 which can be considered to be reasonable given the current valuation of auto ancilliary sector. The stock is expected to list between Rs. 260-285 given the current IPO listing trends. A listing above this level can be considered as a good opportunity to book listing gains. Read More!

Vishal Retail IPO Allotment Status

Vishal Retail Allotment Status is out. Investors who have applied in the IPO can check whether they were lucky enough to get allotment.


Check Allotment Status of Vishal retail

We will discuss the expected listing price (one thing is sure that listing is going to be a explosive one) and how to play the stock on the listing day once the listing date is available.

See Investment Guru's IPO update on Vishal retail Read More!

IPO Update: Spice Communications Ltd.

Spice Telecom- Nothing Spicy about it !

Spice Comunications has entered the capital markets with an offer of equity shares worth Rs. 523 Crores at a price band of Rs. 41-46. Investment Guru is of the view that from fundamental perspective Spice telecom issue can be safely avoided. However, with the M&A activities getting hotter in the telecom sector, Spice Communication can be a takeover candidate as company's financial position would be a roadblock in its growth plans and it cannot take advantage of the booming telecom sector on it own. Investors can consider this issue for moderate listing gains in view of company's takeover story.

About Spice Telecom

• Spice Operates in the state of Punjab and Karnataka


• It is the second largest cellular services provider in Punjab and sixth largest cellular services provider in Karnataka with a market share of 11.95%


• The company has tie-ups with over 448 international operators across 208 countries


• The company is promoted by Dilip Modi (post issue stake 40.8%)


• Telecom Malaysia holds 39.2% (post issue) equity in the company.


• The issue proceeds would be utilised towards repayment of debt, payment of license fee for national (NLD) and international long distance (ILD) communication segments and payment to vendors for network equipments.

Positives for the Company

• The company operates in the Telecom Sector which is one of the fastest growing industry. The mobile subscriber base is expected to increase from current levels of 167 million to 200 million by end of 2007. It is expected to reach 500 million by year 2010.

• Telecom Malyasia's holding in the company provides the company with opportunity to leverage the operational and strategic expertise of a major regional telecommunications player.


• The company has advantage of operating in rich states as punjab has highest per capita income while the IT city of Bangalore in its Karnataka Circle provides a big mobile using mass.


• The company has applied for licences for an additional 20 circles throughout India to provide GSM cellular services on a pan India basis.


• The company has also received LOI for license for providing NLD and ILD services. This would be an adiitional revenue source with better margins.


• The company has been able to build a brand image for "Spice" in the circle it operates.

Negatives for the company

• The company has got stiff competition from big players in its own circles and even its pan India presence plans are not so exicitng given the fact that the company is not financialy sound and may not be able to compete effectively against the biggies like Bharti, reliance and Hutch.


• The company has incurred losses in 4 out of the last 6 years on account of higher operating costs and depreciation.


• The company had accumulated losses of Rs. 6,843.57 million as of December 31, 2006. which has completely eroded its networth. The company would have tough times continuing in such circustances and desparately needs to be taken over by a Big player.


• Company faces risk of higher customer churn rate which may adversely impacts its business.


• The company does not owns the trademark "SPICE" and has acquired the rights to use this trademark from associate company MCorp.


• The stock will be listed only on BSE as NSE has turned down the listing request in view of company's net worth erosion.

Valuations

The company is incurring losses , hence no questions of P/E here. The Return on networth had been negative. Competitors Bharti is currently quoting at a P/E of 39 while MTNL commands a P/E of 15. Reliance communication is trading at a P/E of 43.In Karnataka, Hutch is giving tough fight to Spice in terms of growth in Average Revenue per user (ARPU). For the Quarter ended Dec'06, Hutch registered a growth of 14 % against 10% growth of Spice. However Spice was the only operator in Punjab to maintaina APRU growth of 3% against negative growth by the competitors. For quarter ended Dec'06 the ARPU for Spice in Punjab was Rs.221 , lower than its competitors while in Karnataka it was 254, again lowest as compared to the competitors in the circle.

Issue Opens: 25-06-2007

Issue Closes: 27-06-2007

IPO Allotment Status: Spice Allotment Status

Registrar : Karvy Computer Share

Company Website: Spice Tele

Read More!

Basic guidelines for filing New Income Tax Return

ITR-1 to make life easy, ITR-2 may provide few challenges for Tax Payers

Gone are the days of saral form (People still doubt if they were really saral, but I bet you may have to think again after going through the new forms except ITR-1 !). The Income tax department has come with a new set of forms for assesse's to file their income Tax returns. The new forms are applicable w.e.f. 14th May,2007. The new ITR's are aimed at helping the income tax department monitor the quality of tax payers more closely and accordingly decide on measures to curb instances of Tax avoidances and bring tax rationality.

There are 8 different types of forms for different types of Tax payers. However, for readers I would focus on ITR-1 and ITR-2 unless I receive any specific request or query on the other forms. I believe ITR1 and ITR-2 would cover majority of the readers on the blog.

Here are the guidelines that tax payers have to keep in mind while deciding which ITR form to use and requirements for filing the returns

• Every individual whose total taxable income exceeds Rs. 1 lac is required to file the retun of income. For females the limit is Rs. 1.35 Lac and for Senior Citizens it is 1.85 Lac.



• Individuals who have only Salary Income and Interest Income have to fill their return in form ITR-1.



• Individuals who do not have income from Business or profession, and have income from other sources are required to file return in ITR-2.



• This means that all individuals who have income from house property or those those have income from capital gains will have to file ITR-2



• Unlike previous years, there is no need to attach Form 16 (this is the form that your employers provides you detailing you Income declared to the employer and Tax deducted at source) with your return.



• You are not required to attach any documents with your return.



• You will need to provide certain details in the AIR (Annual information report) which is a section to be filled in the ITR's. I have given below the list of activities to be captured in AIR



• The last date of filing your return is 31st July,2007. If you delay, you will be charged interest @ 1% for every month of delay.



• You would be charged a penalty of R. 5000 in addition to the above interest if you file return for FY06-07 after 31st March,2008.



• You have the option of filing the return online (will discuss this in detail later)

Annual Information Report (AIR)

AIR is the new requirement and is aimed at getting details of some significant transaction done by the individual tax payer in order to assess his tax profile. Eaelier the department used to get these informations from Banks, Credit card companies and Regisrtar's office.

Following are the key transactions to be reported in the AIR

• Cash deposits totalling Rs 10 lakhs or more in a year in any savings account. If you have more than one savings account and none of the accounts individually has a balance of Rs. 10 Lacs, you don't need to provide this detail.



• Payments totalling Rs 2 lakhs or more in the year made against bills raised in respect of a credit card. Again If you hold more than 1 credit card and you have not made any payment of above Rs. 2 Lacs on a single credit card, you don't need to provide any details in AIR.



• Payment of Rs 2 lakhs or more for acquiring units of a mutual fund. Same logic applies here. You could have invested more than 2 Lacs in various mutual fund schemes, but report in AIR only if you have made a single transacion of 2 lac or more.



• Payment of Rs 5 lakhs or more for acquiring bonds or debentures issued by a company or an institution. The logic explained above applies here also.



• Payment of Rs 1 lakh or more for acquiring shares issued by a company. Please note that this covers IPO application made for a amount of Rs. 1 Lac or more even if the allotment was lesser or nothing was alloted to you.



• Purchase property valued at Rs 30 lakhs or more. The reference point here would be the Registration amount.



• Sale of property valued at Rs 30 lakh or more. The reference point would be the value considered by the Registration authorities.



• Payment of an amount or amounts aggregating to Rs 5 lakhs or more in a year for bonds issued by the Reserve Bank of India. For example if you invested 5 lac in RBI bonds duting the year at various intervals, you still need to declare this. Single payment is not a criteria in this case.

We will discuss How to fill the ITR-1 and ITR-2 in the forthcoming posts

Link for downloading ITR forms

Read More!

IPO Update : Vishal retail

Exciting Business Model admist intense competition

Vishal Retail has come with the offer of equity shares worth Rs. 110 crore at a price band of Rs. 230-270. Investment guru is of the view that Investors can consider to subcribe the issue for listing gains. The offer is valued reasonable as compared to the peers and hence provides adequate room for listing gains.

Highlights of the Issue

Current Set-up

The company currently operates a chain of 50 retail stores. These 50 stores are spread over about 1,282,000 square feet and are located in 18 states across India. The company follows the concept of Value Retail, i.e., providing goods at competitive prices by either manufacturing itslef or procuring directly from manufacturers. A major pie of the company sales comes from apparels.

Serving the Bottom of the Pyramid

An interesting thing about Vishal retails strategy is that the targets the middle and lower income class families. The middle class families are the growth drivers of the consumption boom in India and the lower income families are fast catching up with the retail formats. This provides a win-win combination for company's strategy

Expansion Mode

The company plans to expand its retail stores from 50 to 72 by Fy08. The focus would be to expand in tier III and Tier II cities. The object of the issue is to meet the expenses of establishing the new stores and enhancing brand name thorugh listing in equity markets.

Valuations

The company boasts of Value retail concept, supply chain management, Logistics and distribution network and geographical spread as qualitative factors.

Sales have increased from Rs. 288 crores in FY06 to Rs. 603 crores in FY07. Net Profit too doubled from 12.4 crores in FY06 to 25 Crores in FY07.

For the year ended 31st March,2007, the EPS stood at Rs. 13.92. This translated into a pre-issue PE of 16.5 on lower band and 19.4 on the higher band. However post issue, the PE comes to the band21-24 .

Return on Net Worth is 19.71 % which is better than peers like pantaloon and Shoppers's stop.

Pantaloon is currently quoting at a P/E of 87 while Shopper's stop is trading at a P/E of 65. Since Vishal retial is a comparatively small player and on a relatively different platform, it may not enjoy such valuations post lisitng. However, the IPO pricing do leave scope for listing gains for the investors.

Company Webiste :Vishal MegaMart

Registrar :Intime Spectrum

Vishal Retail IPO ALlotment Status

Issue Opens:June 11,2007

Issue Closes:June 13,2007

Read More!

Stock Review : Skumars Nationwide

Skumars : Demerger to Unlock Value


Based on popular demand from the readers of the blog, I am putting up a review of Skumars Nationwide. This stock has been featured couple of times on this blog and of late, I have received enquiries from the readers on the non-performance of the company in terms of stock price movement.Let's find out answers to some of the questions.


Basic Information
Company : Skumars Nationwide
Sector : Textile
CMP : RS. 81.10
52 week High /Low : 87.40 / 35

How are the latest results of the company ?

The company has recently annouced the fourth quarter and annual results for the year ended 31st March,2007. Here are the findings :

Quarterly Results

Net sales of the company increased 49.93% to Rs 3,716.6 million for the quarter ended March 2007 from Rs 2,478.9 million for the corresponding quarter last year.

• Net profit declined 38.40% for the quarter ended Mar. 31, 2007. Net profit stood at Rs 218.3 million for the quarter ended Mar. 31, 2007 as compared with Rs 354.4 million for the quarter ended Mar. 31, 2006


• The EPS for the quarter ended March 2007 increased 36.05% to Rs 2 from Rs 1.47 for the same period last year.

Why a reduction in Net profit ?

• The above reduction in Net profit is due to an extraordinary item of Rs.160.5 Million on account of providing for the Transfer of assets on demerger.
• If we see the company's performance QoQ before extraordinary itmes, the Net profit has grown from 227.6 million in Q4 Fy06 to 378.8 million in Q4 FY07. This translates into a increase of 66.4% in Q4 FY07 over Q4 Fy06.

Annual Results

• Net Sales stood at Rs 12516.8 million for year ending 31st March,2007 as compared to 8932.1 million for FY 2006. This translates into a topline growth of 40% over previous year.


• Net profit has incerased from Rs.999.4 million to Rs. 1027.8 million in FY07 resulting in a growth of 2.8 %. However if we exclude the Extraordinary items, the company has deleiverd a Net profit growth of 138 % over FY06

Other Highlights

• FY07 Basic EPS stood at Rs.7.12 per share while the Diluted EPS stood at Rs. 5.36 per share
• Promoter holding as of 31st March 2007 stood at 42.27%
• FII holding in the stock as of 31st March,2007 stood at 36.29 %
• The stock has been added to the futures and option segment with effect from 14th May,2007.

What are the positives for the company ?

• The company is the only textile major that operates in all the products segments



• Company products range is designed to cater to all socio-economic segmnets of the economy and hence has an edge over its competitors



• The company is Market leader in Uniforms, #2 in worsted suiting and is the largest institutional supplier of textiles.



• The company's boasts of strong brands like Ried and Taylor, Skumars, Tamarind and carmichael house.



• Reid & tailor is a leader in worsted fabrics and Ready to wear while Skumars is leader in Blended fabrics, work wears and Uniforms. Carmichael house is a pioneer brand in Bed, bath and Table and Kitchen linen.



• The company has a strong distributional network comprising of 3000 dealers and 30000 retail outlets.

Demerger of Retail Business

Skumars business strategy for the coming years is to develop its retail wing and promote it as a major driver of its growth. The company's board has recently approved the demerger of its subsidiary Brand House Retail Ltd. (See Naveen Bhargava's story on Skumar's retail foray in his blog-Retail in India)

As per the Deerger Scheme the shareholders of Slumars Nationwide would get 1 share of Brandhouse Retail for every 5 shares they hold in Skumars Nationwide.

The company plans to raise the number of its exclusive brand stores countrywide from 90 at present to 1,000 in next three years. It is also planning up to tie with leading global brands to sell their products at its retail outlets.

You can read more on the Textile related stuff and news on SKumars on the fibre2fabric website.

If one believes in the consuption boom story in India, the retail sector has as tremendous advantage in exporing the vast opportunity that lies in tapping the Indian markets and growing purchasing power of the Indians. Skumar's initiative in demergering its retail division is a step in right direction and would help unlock the value for the shareholders of Skumars.

Private Equity Investment in Skumar's

Recently AMD capital, a Hong Kong-based private equity firm has announced its plan to invest $107 million in Skumar's. ADM plans to invest $82 million to acquire a 10 percent stake in S Kumars Nationwide and another $25 mn will be invested in Brandhouse Retail for another 10 percent stake in the company. The investment will be thorugh issue of convertible warrants.

Future growth plans of Skumar

• Gross Revenues of INR 900 crores (USD 200 Mn.) by 2010-11(EBIDT 13.14%)



• 20 Brands (across categories) managed by BHRL by 2010-11



• 552 Exclusive Brand Outlets for 20 brands by 2010-11



• Around I million sq. ft, of retail space managed by Brandhouse by
  2010-11

(Source : Business Presentation Skumars Sep'06)

Where is the stock price headed ?

Based on the current price of Rs. 81 the stock trades at a P/E of 11.38 which is quite reasonable. The stock is currently trading in a range of Rs. 70-80. The 50 Days moving average for the stock is at Rs. 76. The stock has been able to hold above this average for some time now which is a good sign. It has resistance at Rs. 74 and a major resistance at Rs. 68. For upward journey the stock is facing resistance at Rs. 82 and once it breaks the 82 levels convincingly and holds there for few sessions, it would head for a target of Rs. 90. Fundamentally, the company is doing well and the stock is reasonably priced at current levels. Investors are advised to wait for the demerger to happen to get the benefits of value unloacking for its retail venture.

Additional Information on Skumars

Company Website

Skumars Product Range

Read More!