IPO Update : Jindal Cotex Ltd.

Too pricey to fit the bill – Avoid

Company : Jindal Cotex Ltd.

Issue Price : Rs. 70 – 75

Outlook : Avoid

About Jindal Cotex

Jindal cotex is engaged in the business of manufacturing of Acrylic, Polyester, and Polyester- Viscose, Polyester Cotton, combed and carded yarns, which are appropriate for apparels, suitings & knitted fabrics. Company has current installed capacity of 23,472 spindles for acrylic, cotton blended and polyester yarns. It manufacture and sell yarns under the trade name ‘JINDAL’.

 

Objects of the Issue

The Company is setting up a new facility to manufacture cotton yarn with a capacity of 28,800 spindles in Ludhiana in Phase I.

It will further add 21600 Spindles, Yarn dyeing facility and a Garment unit with capacity of 3000 pcs. per day in Phase II.

The company would use the funds to invest in Subsidiary Jindal Medicot which manufactures Medical Textile products. It would also invest in another subsidiary Jindal Specialty textiles which manufactures PVC Laminated products.

Financials

The company has put up an impressive top-line growth of 39% for year ended 31st March,2009. However the same momentum was not visible in the bottom line which grew only by 2.3% which suggest that operating cost increased in much bigger proportion.

 

Overall Assessment

The company is a again a classical case of greedy promoters who are asking for more than their  worth. This a trend visible in Indian markets that as the stock markets gain momentum the promoters start flooding the capital markets with issue at a aggressive premium. I strongly believe that market regulators should do something about it in the interest of at least retail investors.

Coming back to Jindal cotex, the company is asking investors to invest at a Pre issue P/E of 20.23 at lower band and 21.68 at the upper band while the Industry average is just 9.10

Investment Guru is of view that investors should give this IPO a miss.

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NHPC IPO Allotment Status & Listing Strategy

NHPC IPO allotment status is out. Click Here to check your application status. NHPC IPO got overwhelming response similar to that of Adani power. The IPO got subscribed 23.5 times with retail segment subscribed by around 3.8 times. NHPC basis of allotment can be seen in table below. Though both Adani and NHPC IPO’s have generated tremendous response from the QIB segment, the retail oversubscription has been moderate and shows that IPO investors are still shy in applying for the IPO’s.

The lukewarm or say powerless listing of Adani power has actually validated the fears of retail Investors. Both Adani and NHPC IPO’s were considered to be priced aggressively and Adani stock has already been punished. Now is it turn of NHPC IPO ? Let’s see. NHPC stock is expected to list in first week of September.

Government has fixed NHPC offer price at Rs. 36 per share, i.e., on the higher band of the offer price. Prior to listing of Adani power, the Grey market premium of NHPC was quoting at Rs. 12-14 per share. However, the latest grey market premium is in the range of Rs. 4-5 which shows that listing for NHPC might be lackluster.

NHPC is the largest Hydro power generator in the country with substantial experience in design, development, execution and operation of Hydro-Electric Projects (HEP). The company has 13 HEP plants in operation with an installed capacity of 5,175 MW. It is currently undertaking construction of 11 HEP plants with a total installed capacity of 4,622 MW and 8 of these projects totaling 1492 MW are scheduled for completion by the year 2011-12. NHPC generated 16,582 Million Units (MUs) in 2008-09 as against 14,811 MUs in 2007-08.

On consolidated basis, NHPC reported an Operating Income (OI) of Rs 34.94 billion and Profit After Tax (PAT - excluding minority interest) of Rs 12.44 billion in 2008-09 as against an OI of Rs 29.31 billion and PAT of Rs 12.07 billion in 2007-08.

NHPC’s projects are located in India’s Northern and North-Eastern regions, which have favorable hydro resources, thereby ensuring sufficient water availability for power generation. There has been comparison between NTPC and NHPC over the valuations but one clear advantage that NHPC has is that its operation does not have fuel requirement unlike NTPC which makes its operating cost very competitive.

Another advantage of NHPC is that not only are its plants located in High energy deficit areas which ensures consistent demand, NHPC sale of Electricity is backed by LC’s from banks which can be used in case of delay in payments. Further, it is supported by a tripartite agreement between the customer state,RBI and GoI, whereby NHPC can recover the payments from the central plan assistance given to the state by GoI. As a result of these measures, NHPC, for the last few years has reported almost 100% collections against the billing to the respective states.

On the Risk aspects, NHPC projects have long gestation period and hence the the proposed projects would start operating only from 2010-11 onwards. Talking of the Financials, NHPC ROCE stands at 10.18% and RONW stands at just 6.58% due to its large equity base.

Investment Guru’s overall assessment is that NHPC is a stock which may provide good returns over long term (2 Years time frame) based on its fundamentals. The stock may list in the range of Rs. 39-42 and may remain in this range from short term perspective.

Update: NHPC is going to list on NSE and BSE on Tuesday, 1st September,2009

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File your ITR-V form till 30th September,2009

The Income Tax department has extended the time limit for filing of ITR-V form.  The ITR-V form relating to returns which have been filed electronically (without digital signature) on or after 1st April, 2009 can now be filed on or before the 30th September, 2009 or within a period of 60 days of uploading of the electronic return data, whichever is later.

The ITR-V should continue to be sent by ordinary post to Post Bag No.1, Electronic City Post Office, Bengaluru, Karnataka-560100.

To assist taxpayers, a limited call center service with two agents has been established at ITD-CPC, Bengaluru. Taxpayer queries on status of ITR-V receipt at CPC, Bengaluru will be answered on 080-43456700 between 9:30 AM to 6 PM between Monday to Friday. The service will be available in English, Hindi and Kannada.

 

Check your E-filing Processing Status online

If you have e-filed your Income tax return and have already submitted the ITR-V through ordinary post, you might be interested in checking the status of your e-filing. Now you can login in to your account on Income Tax department website and check the status of your filing.

Go to https://incometaxindiaefiling.gov.in/portal/index.jsp

Log ton to your account using your PAN No. and password.

Once you log in Go to “ MY Accounts”

In “My Accounts” you will find a option of “E-Filing Processing Status”…Click this.

Now enter your E-filing Acknowledgement number (This can be found from the ITR-V form that was generated when you uploaded your return online. A copy of the same was also sent to the email Id mentioned in your return) and Assessment Year to get the status of your ITR-V form.

 

You can also call up  the Call center numbers given above to find status of your ITR-V submission.

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Stock Review: South Indian Bank

Stock : South Indian Bank

CMP: Rs 108.5    Book Value : Rs 113.76

Industry : Banking – Private Sector

 

Creation of the Swadeshi movement in India to help the business community from the clutches of greedy moneylenders, South Indian Bank has travelled a long distance in converging itself to a next generation banking destination.

Investment Guru is of the view that South Indian Bank is a good buy from short term as well as medium to long term perspective.

• SIB has put up a good show on a consistent basis. The advances have grown from Rs 5300 Crore  to 11800 Crore in last 4 years.
• Interest Income has grown at a CAGR of 33.5% over the period of last 4 years.
• SIB has also shown consistent growth in net profits with a CAGR of 100% over last 3 years.
• The stock offers an attractive dividend yield 2.78% in addition to growth prospects which creates a good combination for investors.
• SIB commands strong brand loyalty among its NRI customers.
• With EPS of 19.14 the stock is currently quoting at a Price to Book Value of 0.95 and a PE of 5.64 which shows that the stock has a strong potential to move up based on its recent performance as compared to its peers which are quoting between PE multiples of  8 to as high as 35.
• The Q1’09 results of the bank were encouraging with bank reporting 60 Crore Net profit and quarterly EPS of 5.32. Net NPA’s fell to 0.39% as compared to 0.49% recorded in Q1’08.
• FII’s hold 36.22% stake in the company as compared to 42.7% last year. However, there is no promoter holding which is partly a reason for comparative lower valuations assigned to the bank. On the other hand, this makes it a hostile takeover target and provides investor a possibility of windfall gains if that happens.

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ASBA- Welcome step for IPO Investors

Gone are the days when IPO investors had to worry about getting back their refunds in time and loosing on the interest income for the money they invested in the IPO during the period from application to getting back the refund. SEBI has introduced the mechanism of ASBA which would act as a right step in providing relief to the IPO investors from worries of delay in refunds and loss of interest income.

 

What is ASBA ?

ASBA means “Application Supported by Blocked amount”. ASBA is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn/failed.

To put it in more simpler words, when you apply for an IPO now,  you don’t have to pay the amount upfront. You just give an instruction to the bank to block the amount in your bank account to the extent of your application amount. So you don’t pay anything to the company. The application amount remains in your bank account and you continue to earn interest on it . The hold will be released once the allotment is made by the company. If you have got allotment, the amount to the extent of shares allotted would be debited to your account and the hold on balance of amount would be released. You cannot withdraw the amount of money blocked against an IPO application till the blocked amount is released on allotment/refund.

Currently the facility is available only to IPO’s with Book Building route. SEBI has issued a list of Self Certified Syndicate Banks (SCSB) who are authorized to accept ASAB application forms. Currently 10 banks have enrolled for providing this facility. Others are expected to enroll soon.

For those who apply for IPO through Online trading and their Banks are classified as SCSB, the option of applying through ASBA has been activated by default so you don’t need to take any additional steps.

Detailed Guideline from SEBI

List of SCSB’s

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NBCC offers affordable flats around NCR for 6.75 Lac

Are you looking for a One bedroom flat with Balcony, Tiled flooring in living & Bed rooms, Kitchen with ceramic walls and brass fittings and all these at a price of 6.75 Lac ? NBCC has launched the “NBCC town” to materialize your dreams.
After Tata Housing, its the turn of National Buildings Construction Corporation(NBCC) Limited to launch affordable housing scheme. NBCC has launched “NBCC Town”  scheme at Khekra on Delhi – Sharanpur  Highway. 19 Km Away from the ISBT, the flats start at a price of 6.75 Lac for One Bedroom Flat (493 Sq. ft.) at 4th Floor of Lotus  Apartments. The scheme opens from 25th August,2009.
NBCC has come up with four type of apartments. The Lotus apartments (4 Storey) will house One bedroom Flats. Lilly apartments (4 storey) will house 2 bedroom flats. Tulip Apartment (4 storey) will house 3 Bedroom and Marigold Towers (7 storey)  will also house 3 Bedroom flats but will have facility of stilt Car parking. You can check the prices of different flats on offer here.
If you are a working or retired Government / PSU Employee then you are eligible for a special discount of 5%.

The payment schedule and plan has also been designed in a reasonable manner. The application form is available at the NBCC Bhawan at Lodhi Road and Sector 41 Noida at a price of Rs 100.
The application form for NBCC Town can be downloaded here.
The forms are also available at designated branches of HDFC Bank, Union Bank, Corporation Bank and Axis Bank.

The costliest flat in the scheme is located at the First Floor in the Marigold Towers with an area of 1100 Sq. Ft. and is prices at 17.8 Lac for 3 Bedrooms with 2 Balconies. Car parking will cost additional 1.25 Lac for flats at Marigold Towers.
Optional Open parking space is available for other apartments at a price of Rs. 50,000.
NBCC is also going to launch 2/3/4 Bedroom flats apartment and 4/5 bedroom flats with Penthouse  at Gurgaon shortly.
Location Map of NBCC Town
Master Plan
Detailed Price Schedule

Update on 06th March,2011
List of Applicants who are eligible to apply for 'NBCC Heights' at Sector-89, Gurgoan
The Scheme is open from 25th February to 16th March, 2011
Download Application Form

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Adani Power- IPO Allotment & Listing Strategy

If you have applied for the Adani Power IPO, by now you would have become owner of this yet to be operational power generation company which is part of Adani Group. Check Allotment Status for Adani Power.

  The Adani IPO has brought life back to the ailing primary markets. It has received tremendous response from the Qualified Institutional Buyers who have shown huge apatite for the stock. The QIB portion was subscribed more than 39 times. The Retail Investor segment got oversubscribed by just 3 times. A similar pattern was also seen in NHPC IPO. This trend shows that retail investor has still not come out openly and is still licking the old wounds caused by turmoil in stock markets as well as dismal performance of IPO’s. However, on a positive note it shows that the interest in primary markets is building back and it speaks of better prospects for the upcoming issues.

Another thing which was quite evident from the subscription pattern was that the investing community rates India as a good investment opportunity and in particular the pace at which  infrastructure reforms are expected to take place has aroused significant interest in Power sector. In India the generation of power is far less than the demand which is estimated to rise at  a far greater rate than in last 5 years.

According to the 17th Electric Power Survey, India’s peak demand will reach approximately 152,746 MW with an energy requirement of approximately 968 billion units by fiscal year 2012. By the fiscal year 2017, peak demand is expected to reach 218,209 MW with an energy requirement of 1,392 billion units. Currently we have a Peak Availability of just 97,669 MW. This shows the tremendous scope available to companies in power sector.

 

Listing Strategy for Adani Power

The stock is expected to list on August 20th,2009. We have been hearing a lot about overpricing of the IPO by the Adani’s. Whether the issue was overpriced or not will be finally decided by the markets. The company has not started operations yet and hence doesn’t have any earnings data.  At Rs 100 per share the company would quote at a Price to Book Value of 2.8. NTPC, an existing profit making company is currently priced at 2.8 times its Book Value. This shows that Adani Power has been priced aggressively. However, one should remember the fact that Adani has certain impressive operational advantages such as location of projects in areas where peak time shortages is maximum, leverage of  presence of Adani group in Coal mining, Shipping as well as power trading.

From a long term prospective the stock looks very promising. However from the current perspective the stock is priced aggressively. The current grey market premium is ruling at  Rs. 8-10. The stock is expected to list in the range of  Rs 110-115 and may go up or down depending on the buying by the QIB’s to cover for the shortfall in allotment.  Investment Guru is of the view that Investors may book profits at a price above Rs 115 and take advantage of listing euphoria. Long term Investors can re-enter the stock at lower levels once the listing sensation is over.

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New Tax Code 2009 : Rewiring the Taxman

New Code aims to make tax laws and rates, Tax payer Friendly

I was recently discussing with a group of friends that the Indian tax rates structure needs a definite shift if the government wants voluntary compliance of tax laws and wants to increase the number of tax payers in the country. One of the discussion points was that government should introduce single tax rate of say 10% on the taxable income for individual tax payers and should do away with so many slabs and deductions. One suggestion was that income beyond 5 Lac should be taxed at 10% with no rebates or deductions whatsoever.

And here comes the New Direct Tax Code Bill, 2009  which attempts to simplify the lives of the tax payers.  Though the bill does not fulfill the wish-list of our discussion, it is surely a step towards providing a more tax-payer  friendly and simplified tax structure.

Following are the brief highlights of the New Direct tax code Bill,2009

• The objective of the new tax code is to establish an efficient , effective and equitable direct tax structure in the country.
• All direct taxes like Income Tax, Dividend distribution tax (DDT), Fringe benefit tax (FBT) and Wealth tax will be covered under this single tax code.
• New Tax Rates will be applicable w.e.f. Financial year 2011 as under

• Savings will now be taxed on EET basis. This means that Savings when done under designated schemes would be exempt from tax in the year the saving is done (First ‘E”). It will continue to be exempted together with the accumulations/accretions till the time they remain invested (that means till they are not withdrawn, this is Second ‘E’). The savings will be taxable at normal tax rates in the year in which withdrawal is made (this is ‘T’).
• However, accumulated balances as on 31st March,2011 in the Provident Fund will not be taxed.
• Deduction on account of savings has been increased from current 1 Lac to 3 Lac. However, since the new code doesn’t mention deduction in respect of Housing loan, the same may go.
• Dividends will continue to remain tax free in the hands of Investors.
• Capital Gains would now be taxed as income. The concept of short term and long term capital gains has been removed from tax perspective. Indexation benefit would be available on asset held for more than one year.
• The indexation base has been changed from 1981 to 2000.
• Since all capital gains are now taxed, Securities Transaction Tax (STT) has been abolished under the new tax code.
• Salary received in form of perks, perquisite, LTA, Rent free accommodation, Medical reimbursement will now form part of Income and will be taxable.
• Wealth Tax has been Re-introduced. Net Wealth in excess of Rs. 50 Crore  will be taxed @0.25%
• In addition to deduction of Rs 3 Lac for notified savings schemes, Rs 15,000 deduction will be available for Medical Insurance Premium for self and family , and another Rs 15000 for parents. Up to Rs 50,000 can be claimed as deduction for treatment of disabled dependant , Rs 40,000 for prescribed diseases. Rs. 50,000 deduction would be available to handicapped and Rs 75000 for person with severe disability.

The New tax code is in discussion stage. You can give your comments and suggestions on the same by writing an email to directtaxescode-rev@nic.in

Keep a watch on this blog for posts related to implications of new tax code.

Download Discussion Paper

Download Direct Taxes Code Bill, 2009

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