Stock Review:Karuturi Global

Roses for greetings and Food for thought

Founded by SRK (Sai Ramkrishna Karuturi) in the year 1994, Karuturi Global has matured into a leading producer of cut roses and has aggressive expansion plans  in the area of production of premium cereals to covert itself into a Complete Agriculture production company.

 

About Karuturi’s Business

1. Company grows roses on  an area of 239 hectares and has a capacity to produce 555 million Rose stems annually. It has operations in India, Kenya and Ethiopia which are low cost production bases. US, Europe and Japan are the key markets served by the company. Europe is the largest consumer for Roses and the company has 9% share in this market.

2. The game changer proposition however is company’s entry into cultivation of premium cereals, Edible oils and processed foods. Karuturi has acquired 3.11 Lac Hectares of land parcel on lease in Ethiopia for this purpose.

3. Out of above 3.11 Lac hectares, company has already started operations on 11 K hectares for maize and Rice cultivation. On the 3 Lac hectares, the company proposes to grow cereals and Oil Palm. The company plans to cover a major area of the above in cultivation in the next two years.

4. The agriculture business will primarily cater to the COMESA (Common market for Eastern and Southern Africa) which has a population base of 400 Million. Hence there is a ample market for company’s produce.

Positives

1. With ever increasing population and reducing area of cultivation due to conversion of agriculture land for habitation, there is a concern of acute food shortage in the coming future. Hence Agriculture as a business class would have excellent growth prospects. Karuturi has chosen a location which provides access to large area for cultivation at reasonable cost of access to land as well as low cost of production. Another added advantage is proximity to the consumer base.

2. The floriculture business continue to grow and is a good margin business. With recessionary trends still seen in US and European countries, Roses may provide alternatives to costly gifts. This may provide resistant to recessionary pressures of these economies.

3. The foray into agriculture would provide a significant boost to the Revenue and profits of the company and has the potential to make it a major player in this segment in next couple of years.

 

Major concern Areas

1. The company has embarked upon a rapid expansion plan and as such has execution risks associated with it. Any delay in execution or not being able to cultivate two crops in a year as per the plan may reduce the attractiveness of this expansion.

2. This expansion would require major capital expenditure and hence the company would need to demonstrate highly efficient use of funds.

3. Promoter stake in the company is comparatively lower at 27% and may come further down as the company would require to infuse funds for its expansion program. Lower stake of promoter in a fast expanding business may not be a looked upon as a good indicator.

 

The investment in Karuturi can turn out to be multi-bagger if the company is able to effectively execute its foray into the Agri business. The investment in this company may be suitable for those investors who have high risk apatite and are willing to hold on to the stock for a couple of years to reap the benefits as the company converts itself to a agriculture powerhouse. At  the same time it is important for investors to monitor the developments in the stocks  and take suitable actions to switch out  in case of any major failure in the company’s growth plans.

Disclosure & Disclaimer : I have a small position in this stock and I can buy further or exit my position, fully or partly, based on my investment needs and may not communicate the same on this blog. This article is my opinion on the stock and should not be construed as a Buy or sell recommendation.

Further Readings

About Karuturi Global

Corporate Fact Sheet

Read More!

Reliance declares 1:1 Bonus and Rs.13 Dividend

For those who thought that days are gone for this once evergreen stock , it’s time to be taken aback. Reliance Industries has added to the diwali celebrations of its shareholders by announcing a combo of a liberal 1:1 Bonus issue (after a gap of 12 years) and Rs. 13 per share dividend.

 

What does this Bonus means for Reliance Shareholders ?

• The Bonus issue is an attempt by Reliance Industries to instill confidence in the shareholders towards the tradition of this company to bestow Investor friendly measures.
• Bonus Issues doesn’t change anything in terms of Financial performance & fundamentals of the company and hence is EPS neutral. However, it does have an indirect impact in terms of improving the sentiments for the stock and brings in more liquidity. Historically , we have seen run up in the stocks after Bonus announcements and stocks have given better returns post Bonus adjusted prices. So, essentially, it is a sentiment booster measure.
• The timing cannot be more right for the company to announce a bonus as the stock price of reliance Industries has been a laggard as compared to sensex performance due to the ongoing tussle between Mukesh Ambani and his younger brother Anil Ambani over the Gas supply pact. The Bonus issue will provide some impetus to the investor sentiments which was clouded by the ongoing dispute.
• The Bonus issue has been on account of two major milestones achieved by the company i.e., successful commencement of Gas production from its KG6 Basin and building of new refinery at reliance Petroleum.
• The Bonus issue is also applicable to shareholders of Reliance Petroleum shares pursuant to recent amalgamation of the company with RIL. The company has fixed Record date of 29th September for reckoning the members entitled to receive 1 Share of Reliance Industries for every 16 Shares held in Reliance Petroleum.
• The Record date for Bonus has not been announced yet.

Read More!

Stock Review : Uttam Galva Steel

Will Mittal factor change the fortunes for Uttam Steel ?

Stock : Uttam Galva Steel

CMP : 113

Book Value: 71.04

EPS (Trailing) : 9.49

As the performance of the stock suggest, Markets had a clue about it ! Uttam steel has already risen by 83% in just One month.  The stock has more than doubled in last 3 months. So what’s the buzz !!!  Global Steel King L.N. Mittal is making a debut in India by acquiring 35% stake in Uttam Steel.

Mittal’s company Arcelor Mittal is all set to become the Co-promoter of the company. The promoters have signed an agreement to sell 5.6% stake in Uttam steel.  Arcelor Mittal will launch an open offer on September 7 to acquire balance 29.4% stake in the company. Mittal is offering a price of Rs. 120 per share for acquiring this stake.

If the offer by Mittal remains unsubscribed, the promoters would transfer further stake to Mittal so that both have equal stake in the company.

 

How will this deal help Uttam Steel ?

Apart from giving foothold to Arcelor Mittal in Indian Steel sector, the deal would be a facelift for Uttam steel. The association with Mittal is surely going to be big boost to the brand name of Uttam steel.

Uttam steel is set to get better availability of Raw Material. The company already sources around 50% of its raw material from Arcelor Mittal.

It will also have an opportunity to transform itself from a galvanized steel producer to a integrated Steel major. It will have access to latest technology from Arcelor Mittal and access to new product segments and geographies.

 

Demerger of Power Biz

Another important development is that recently  the Bombay high court has sanctioned the scheme of arrangement between Uttam steel and power and Uttam Galva Steel for the demerger of the power division of Uttam Steel and power into the company. The Scheme has got effective from 21st August,2009.

The demerger of power division will help separate listing of this entity and help shareholders to unlock the value of their investment in the company.

 

Current Financials

For the Year ended 31st March, 2009 company posted a top line of Rs. 4372 Crore and Net profit of 100 Crore.  Though this was a growth of  over 38% over last year, the profit were lower by 24 Crore on account of high interest outgo and higher operating costs.

Uttam steel clocked a turnover of 1073 Crore for the first quarter of the current year and a Net profit of 34.57 Crore.

Investment Guru is of the view that both the developments i.e., Acquisition of 35% stake by Arcelor Mittal @ 120 per share and Demerger of power division hold good omen for the company and would not only boost its brand image but also enable it to log a impressive growth in coming years.

Read More!

Markets set to cheer UPA Victory, expect Spectacular opening

The Results of General Assembly elections might have taken even the pundits of politics by surprise, however even a layman can tell you that markets are going to sky rocket on Monday. Yes, predicting Monday’s market opening is not a rocket science anymore. After a gap of 25 years, the Indian voters have been able to give a clear mandate to a single party to form a government and markets could not have wished better than this.

A 800-1000 Points gap up Opening Possible

Markets have built in an expectation of hung assembly and have been caught on a wrong footing! It is very likely that there will be mad rush of traders, who built on hopes of hung assembly and taken significant short positions, to cover up their trades and this may push sensex intraday rise in the range of 800-1000 points. Investors are advised to be cautious and not to buy shares on Monday for Investment purposes and wait for the euphoria to die down. However, traders can make a killing as the markets turn volatile.

I see these results as an opportunity for the markets to cheer up as the stable government would be able to take up reforms at a much better pace as compared to last 5 years since communist would not be seen in the new parliament. After the news of Global Recession, there was no major reason for markets to hold up and hence they are not likely to miss this opportunity.

FII’s are also expected to speed up their investments since they have more clarity on the political front. Domestic Investors and Mutual funds are also expected to jump on the bandwagon.

Which Stocks likely to move up?

Virtually every stock on Nifty is expected to move up since this would be a secular and broad based rally. However more focus will be on stocks which fall under sectors where the UPA government is going to focus as a part of its Manifesto.

The UPA Manifesto has out emphasis on Rural Development Schemes and Infrastructural development projects. Hence Stock of companies related to Agricultural products like irrigation and Fertilisers are set to catch fire. Keep an eye on Stocks like Nagarjuna Fertilisers and Jain irrigation. Infrastructure related companies in field of Power, Cement and Construction will also see a significant catch up. Keep a watch on stocks like ACC, GVK Power & BHEL .

Congress Manifesto also provides thrust on Education. With this stock like Educomp Solutions and Aptech are likely to remain in Limelight.

Another segment likely to fire up will be banks. Rumors are that the government may soon announce another stimulus package to drive further liquidity in the markets and decisions can be taken on revising the Bank Rates. Keep an eye on stocks like PNB and SBI and HDFC Bank.

Besides the Manifesto, the Ruling party is also expected to bring back on track its program of disinvestment in PSU companies. This had hit roadblock due to strong resistance from Left parties. Though this may not be on immediate agenda of the government, it would pave the way for Re-rating of the PSU stocks.

How long will this Rally continue ?

This a hard nut to crack. Though the new strong government has given a reason for sensex to rejoice, it would at best be a short term stimulus. The fact is that the Global economy is still in the clutches of recessionary forces created by its ill-doings. India being a open economy cannot escape the burnt. However, the First quarter result has not been as bad as thought of. This shows that the impact of slowdown in India (caused by global recession) would be lesser than perceived.

The best thing India and its government did was to get proactive in dealing with the situation. This is the difference between U.S. and India. They woke up only after ruining themselves while we were proactive enough to take steps to combat the slowdown. This may led us to believe that the worst is behind us and sensex may not retest its earlier lows. However, a lot depends on the global scenario in the coming quarters and any adverse development may well leave scars on our markets too.

Read More!

Stocks in News: MIC Electronics, Aptech, Godrej Industries

MIC Electronics

Investment major Fidelity has bought 20.3 Lac shares of MIC Electronics at a average price of Rs. 28.99. Hyderabad based MIC Electronics is a global leader in the design, development & manufacturing of LED Video Displays, high-end Electronic and Telecommunication equipment and development of Telecom software. The company has recently launched High Efficiency Solar LED. At the current market price of Rs. 30, the stock trades at a Price to Book value of 1.33 and a PE Multiple of 3.94 with Industry PE at 8.87.

APTECH

India’s most well known Investor Rakesh Jhunjhunwala has bought 10 Lac Shares of Aptech at a price of Rs. 113. Prior to this Rakesh has bought 5 Lac Shares of Aptech on 19th December,2008 at a price of Rs. 81. Rakesh Jhunjhunwala also holds the position of Chairman in Aptech Ltd. Aptech Limited is a global retail & corporate training solutions provider headquartered in Mumbai, India, with a presence across 5 continents. The company commenced its IT training business in 1986. Over the years, Aptech Limited has trained over 5 million students. At the Current Market Price of 113 the stock quotes at a Price to Book Value of 3.93 and a PE of 110.49 against the Industry PE of 39.

Godrej Industries

The stock price zoomed after the announcement of Buy-Back offer by the company of 57 Lac shares at a price not exceeding Rs. 275 per share. The stock is currently quoting at  Rs.101 and has gained around 30% in last few days. At Current price the stock carries a Price to Book Value of 3.12 and PE multiple of 114 against industry PE of 23.95.

Godrej Industries Limited is India's leading manufacturer of oleo chemicals and makes more than a hundred chemicals for use in over two dozen industries. It also manufactures edible oils, vanaspati and bakery fats. Besides, it operates real estate. GIL operates two plants, one at Valia in the Indian state of Gujarat and a second at Vikhroli in suburban Mumbai. The company's products are exported to 40 countries in North and South America, Asia, Europe, Australia and Africa, and it leads the Indian market in the production of fatty acids, fatty alcohols and AOS.

Read More!

Tech Mahindra wins bid for Satyam Computers

Tech Mahindra has won the bid to acquire 31% stake in Satyam Computers. Tech Mahindra was the highest bidder with a price tag of Rs. 58 per share  against L&T’s bid at Rs. 49.50 per share. The deal is subject to statutory clearances from Sebi and the Company Law Board (CLB).

L&T already has 12& stake in the company as is currently not interested in divesting its stake.

Tech Mahindra will have to pay Rs 1757 crore (USD 351 million) for 31% at Rs 58 per share, whereas for the total 51% stake the company will have to pay Rs 2,890 crore. The company will make an open offer at Rs 58 per share.

The real Impact of the deal on Tech Mahindra would evolve in the days to come as it aligns the maligned Software firm’s business within its frame of operations and makes sure that clients do not move away from it. The impact of litigation related to Satyam fraud would also be a challenge for the company.

Intense trading activity was witnessed on Satyam Computer counter as the stock zoomed as high as 18% at the time of announcement, just to cool down later. More than 13 Crore shares of Satyam computers were traded. Tech Mahindra stock price also jumped by more than 12% post the announcement.

Read More!

Only Buyers in Matrix Labs on Delisting plans

The share price of Matrix Labs has been soaring high on news that Mylan Laboratories (the majority shareholder in Matrix) is proposing to delist the company from stock markets at an indicative price of upto Rs.150. This is part of strategic move by Mylan to consolidate its holding in the company. The stock was quoting at Rs.141 up by 20% with no sellers and pending buy orders of more than 8 Lac shares. The stock has nearly doubled in last three months.

Mylan Laboratories had acquired 71.16% Controlling Interest in Matrix Laboratories in Jan 2007. As per the latest Shareholding pattern the Foreign Institutional Investors (FII’s) hold 16% stake in the company.

Matrix Labs has a book value of Rs. 44 Per share and the stock is currently trading at Price to Book value of 3.22

Read More!

Brandhouse Retails Limited to list on March 27, 2009

The shares of  Brandhouse Retails Limited (An entity demerged from S Kumars Nationwide) will get listed on BSE and NSE from Friday, 27th March,2009. Earlier Shareholders of S Kumars Nationwide Limited(SKNL) were allotted 1 Share of Brandhouse Retails for every 5 Shares of SKNL held by them pursuant to demerger of its Retail Business Division as a separate entity(Record date was fixed as 02 May,2008).

The issued, subscribed and paid-up equity capital of the company post arrangement comes to Rs.51.99 Crores consisting of 5,19,94,195 equity shares of Rs.10/- each fully paid up. Out of these, around 1.07 Crore Shares are under lock-in period upto April 30,2012 . The Scrip is expected to list in a price Range of Rs.13-14 and settle around Rs. 12 after initial euphoria.

The Scrip Code is 533059 and the ISIN No. is INE317J01011

Current Shareholding Pattern

Promoters                    55.7%

FII’s                             24.0%

Body Corporates         10.1%

Trusts                           6.9%

Others                          3.3%

About Brandhouse retails (BHRL)

Brand Portfolio

With retail business of Skumars in its pocket, Brandhouse retail boasts of brands like Reid & Taylor, Stephens Brothers, Carmichael House, Belmonte and Dunhill.

Financials

For Year ended 31st March,2008 the company had posted a turnover of Rs. 313 Crore against 55 crore in previous year.

Net Profit after tax stood at Rs. 13.1 Crore against 9 Lacs in previous year.

The Earnings per share stood at Rs. 2.56 Company has minimal Cash of Rs. 42.5 Lacs on its Balance sheet. It has huge Debtors of 77.5 Crore and Inventories of Rs. 63 Crore which is typical of such business.

Some of the major Expense of company includes Rentals (20 Crore), Salaries (7 Crore), Exhibitions (2 Crore), Interest on NCD (3.6 Crore) and Brokerage charges(1.5 Crore)

Recent Developments

BHRL announced its joint venture with Italy’s leading apparel brand ‘Oviesse’. This brand would address young India and provide affordable ‘fast fashion’ for men, women and kids. The total equity investment in the JV will be Rs. 161 crores over 5 years for setting up of 190 stores across Metro/Tier1/Tier2 cities. In the terms of the agreement Brandhouse will hold 62.5% of the total equity while the balance 37.5% of the equity will be in the hands of Oviesse.

Oviesse is a part of Gruppo Coin, Italy’s leading clothing retailer with a turnover of over 1.1 billion Euros. Based in Mestre, Italy, Oviesse is a benchmark in fast fashion with over 11 million customers shopping at their store every year, which amounts to a sale of over 100 million garments at a revenue of over €820 million.

Related Posts

Skumars Demerger

Read More!

Akruti City kicked out of F&O, Stock plummets

NSE vide its circular NSCC/F&O/C&S/932 dated 19th March,2009 has barred trading in shares of Akruti City in the Futures and Options Segment. The stock will continue to trade in Cash Segment. The share prices of Akruti City has skyrocketed by 290% since January 15th,2009. The stock reacted quickly to the news and was down 28% to Rs.1590. The stock had risen continuously despite the sever fall in stock markets and had raised doubts on the trading pattern.

Fallout of NSE Circular
1. All existing contracts in the underlying AKRUTI i.e. contracts with expiry dates 26 March 2009, 30 April 2009 and 28 May 2009 shall expire on 26 March 2009 and shall be finally settled at the relevant settlement price.

2. The settlement price to be reckoned for the purpose of final settlement shall be the closing price of AKRUTI in the Capital Market segment of NSE on 26 March 2009.

3. The details of final settlement in respect of AKRUTI shall be available in the F_PS03 and F_PS04 reports downloaded to members on 26 March 2009.

4. All positions in the existing futures and options contracts on the underlying AKRUTI shall cease to exist pursuant to the final settlement on 26 March 2009.

5. The Pay in/pay out of final settlement of all F&O contracts on AKRUTI shall be on 30 March 2009 (T+1 day). Read More!

Bharti Airtel down on stake sell by CEO

The share price of Telecom major Bharti Airtel plummeted by 4.5% after news that Manoj Kohli, CEO of Bharti Airtel has sold his entire holding of 1.2 Lac shares in the company on March 6 and Mar 9 due to personal reasons.

Bharti Aritel had declared a addition of 2.73 Million new subscribers in the month of February 2009. At the end of February 2009, Bharti Airtel held a market share of 32.88% with a total of 91.11mn customers, while Vodafone Essar had a market share of 23.79% at 65.92mn subscribers. BSNL accounted for 15.94% of the GSM market at 44.18mn customers and Idea held a market share of 14.98% at 41.51mn.

Read More!

Hexaware doubles on stake sell rumors

While the markets are on a very crucial stage of consolidation, it’s raining windfalls for Speculators. The Hexaware Technologies stock today zoomed to Rs. 42 as compared to Opening price of Rs. 21, on rumors that promoters are planning stake sale. The Promoters later clarified that they have neither pledged nor sold even a single share of the company nor do they have any plans for the same. Promoters have also clarified that there are no talks of any acquisition. The stock closed at Rs. 33 up nearly 65%.

The Stock carries a Book value of Rs. 47. It has a 52 Week high of Rs. 85 and 52 week low of Rs. 18.

Markets have witnessed similar bouts of speculative trading earlier in stocks like Rolta and Spice Communications. Talks are doing the rounds that some operators are actively involved in boosting the prices of small stocks for dumping them at higher levels. Investors needs to be careful of trading in small stocks that witness such up-move which is not supported by any positive developments on the counter.

Read More!

Markets bogged down by negative sentiments

Inflation, Global cues take the toll on Indian Markets
Sensex closed shop at 15,515 down by 448 points. As I discussed in my earlier post on market update, markets are going through a whole lot of negative sentiments and today's carnage was in line the same. Govt's announcing price hike in petroleum products has raised fear of higher inflation. European markets were trading lower. The fall was pretty much across the board. I am of the view that sensex may see a further fall of around 800 points from here in a worst case scenario and that would be tempting levels for buying into the equity markets.

Some stocks that are on my radar for price movements and possibilities of buying at lower levels are Punj LLoyd, Shipping corporation, Skumar, NTPC , Lanco Infrastructure, Cairn energy,Welspun Gujarat, Nagarjuna Fertilizers and Reliance Industries. Read More!

A week of IPO Listing !

IPO's showers money on investors, Mundra listing on 27th November

We saw a lot of IPO's listing this week and few more are coming to rock the markets. Before that let me give you an update that the Intime spectrum site is working and you can check allotment status for Mundra Port IPO. As far as IPO refund for Mundra port is concerned, you can expect them in your bank accounts by 27th November as per information posted by the Registrar. Mundra is listing on the bourses on 27th November and is expected to have a grand listing in the coming week. The stock may list around Rs. 1,000 levels on Tuesday.

The most rewarding IPO was the least talked about. Allied computers which listed on BSE rewarded investors with a return of 217 %. This was followed by religare which rewarded investors with 182 % return. Out of the 5 IPO's that listed this week, only one Rathi Bars disappointed the investors and generated a negative return of 9%. And all this when Sensex posted a fall of 840 odd points !

One thing is clear, the IPO euphoria is here to stay and is going to reward the investors well. Reason ? Liquidity and the ongoing feel good factor ! Investors across the spectrum have shown interest in investing through the IPO route and most of issues are getting hugely oversubscribed. This results in poor allotments and then the rush to acquire the stocks on the listing day. However, there has been a slight deviation from earlier listings. The stocks are able to maintain and in some cases even further strengthen their upmove post listing though amidst lot of volatility.

As far as valuations is concerned, there is no doubt that these stock do not deserve these valuation based on their fundamentals and the investors would do well to book profits at regular intervals in such stocks. An entry can be made at lower levels depending on the performance of the company.

Empee Distillers to list on Monday, 26th November

The IPO party is bound to continue in the coming week. Empee Distillers is listing on Monday. The issue was subbscribed nearly 7 times. The company has offered shares @ 400 per shares. At the offer price the issue was valued at a PE of 25 which is in line with valuation of its peers. The Grey market is puting a premium of Rs. 50 on the stock valuing it at Rs. 450 per share. Investors can expect the stock to listing in the range of 450-475. A price above 500 would be good fit for profit booking.

IPO's Open now

Jyothi Laboratories: Issue closes on 27th November

Burnpur Cement : Issue Closes on 3rd December

Read More!

Companies where P Note exposure is High !

Fallout of P Notes continues to haunt the markets

Following are some of the companies where the P Note exposure is considered to be relatively higher and investor should keep above in mind while dealing in these shares. These stocks can witness bouts of unwinding (though not necessary at same time) and hence investors should be careful while taking a decision to invest or otherwise.

India Bulls Financial Services

ICICI Bank

HDFC

Bharti Airtel

Reliance Capital

Reliance Energy

Financial Technologies

SAIL

IVRCL Infra

Gateway Distripark

Aptech

BHEL

(Please note, this is not an exhaustive list) Read More!

Metals shines as Sensex climbs mount 19K

Sensex defies law of Gravity, bull run goes beyond Reliance Pack

Law of gravity says that everything which goes up, comes down. Looks like this doesn't applies for the Sensex !! What a day it was ! With sensex finally climbing 19000, it made sure that the cheers comes from across the board rather than only Reliance pack holders . Today was the day for metal stocks to shine brighter and make their presence feel in the march of sensex to glorifying heights !


The beauty of today's rise was that it was secular in nature (did I say secular , sorry Tech is out flavour still, can't help it). The rally spread across the large , Mid and small cap stocks.

Let's discuss some of the stocks that I have discussed earlier on the blog and see how they are doing. One of My favourites in metal pack "JSW Steel", rose around 13% to cross the 1000 mark. The stock had a spectacular run in the last one year. Sail also rose 16% to close at new high of Rs. 260. Skumars continued its run ahead of the demerger and closed at Rs. 125. Gitanjali gems continued its glitter to close at 368. I believe that the stock still has steam left given its focus on inorganic growth. Reliance Industries continue to rule strong. Investors are advised to maintain a hold on this stock.

CCCL had a sparkling listing today. Against the offer price of 510 , the stock closed at 800 a gain of 57 % !! Recently listed IPO have been quite rewarding given the huge demand and CCCL was no exception. Short term Investors can consider booking profits at a price above Rs. 860. Long term investors can continue to hold the stock.

So are you guys all set to see the 20000 mark ???? Wondering what to do ? Yes, one question that is hounding retail investors is that whether it makes sense to buy at current levels ?

There are no signs of a pull down, the only factor of political instability has also lost its power since congress seems to have dragged its feet back on the nuclear agreement issue. It's hard to give up the throne! Q3 results so far have not thrown any major negative surprise except that the rupee appreciation has been able to dent the growth rate of IT companies. But that has already been factored ! So the only reasons for markets to fall from here can be profit booking by the FII's and that can come anytime!

The advice here would be that conservative investors would be better avoiding buying into stocks at current levels. If you are already invested and see super profits on your investments, you would be better off booking profits on every rise. After all, its equally important to bring the profits in your home rather than being happy seeing your notional profits!

Parting thoughts that may give you some insights ....power grid is still languishing at 115 levels after a powerful debut. Will nagarjuna fertilizers become part of Reliance pack ...? Will Gitanjali's recent acquisition help it cross 400 levels ? Can Bharti's tower biz help it to attain all time high !

All the best! Enjoy the current bull ride , but safeguard yourself from the jerks that this bull can give. Invest in fundamentally good stocks. As always, do write to me if you have any queries! Read More!

Bulls on the Rampage, Reliance Rules, IPO magic continues

Sensex Strikes life time high of 16616, up 2555 pts. in just 23 days
Looks like India is going through a very good phase. On one hand our cricketers are showering fours and sixes and delivering amazing performance at the world cup, on the other hand the stock markets are flaring up with sensex hitting all time high of 16616 with superstars like Reliance hitting every ball for a six !!! whatever, the game has taken an intresting turn, be it cricket or the sensex. So what's next ? Will our cricketers win over the australians ? will sensex post a new high on monday ?

We should all thank Mr. bernanke , the US Fed chief for a 50 basis point rate cut which brought cheers to markets across the globe. Markets are now expecting RBI to announce a rate cut ! Fed's decision is being seen as a helping hand to the ongoing subprime crisis. On the Indian markets, this would ensure flow of funds to indian markets and hence liquidity would continue to be a driving factor for the markets.

Reliance stocks in the thick of action
The person who been benefitted most from the upturn in the stock market is undoubtedly the Ambani brothers and of course the Reliance Shareholders. Share of all reliance group companies posted impressive gains.

I remember giving the Investment idea on Reliance Industry @978 in May last year (See the post Here) with a One year target of 1800 and since then the stock has lived up to the expectation of the investors. I would recommend invetsors to keep a hold on the stock as it unfolds it journey to new horizons. Reliance has recently announced its foray in highly lucrative shipbuilding and dredging sector.The company has anoounced oil finds in D4 block in Krishna Godavari basin. Company Infrastructure arm Reliance Industrial Infrastructure has been in the limelight for last few session and has moved to 1043 backed by continous buying support.

Reliance group stocks were in continous demand in the market. Reliance Natural Resources surged 35% to end at Rs. 76. It has applied for a license to undertake city gas distribution business in Delhi, Mumbai, Gurgaon and Noida. Reliance petroleum was up 11 % on huge demand. Punters are putting a target of Rs. 200 on the stock within 6 Months.

Kuotons and CCCL gets huge subscription

Both the IPO's were considered to be aggressively priced and see the subcription numbers ! Kuotons was subscribed 45 times while CCCL was subscribed whooping 81 times. This shows the craze to earn listing gains among the investors and why not , if a stock like Magnum Ventures can give 85% return on lsiting day, Kuotons and CCCL will follow suit and going by the trails they may also have a blasting debut on the bourses. As per unconfirmed sources, Kuotons is commanding a premium of Rs. 100 in the Grey market and CCCL is commanding a premium of Rs. 250 The figures may go further up after the news of oversubscription. Another IPO on the block is Supreme Infrastructure. An update on this IPO will be posted shortly on the blog. Read More!

Sensex to touch new high, "Vishal" listing today

Sensex to make a further new high today

Yes, We have touched a new high yesterday and yes, we would repeat it today. The sensex is on the roller coaster ride driven by all roundpositive developments. The Global clues are positive and so is the situation back home. Liquidity is ample and inflation fears have cooled down. Interest rates are also sitting quietly. The sensex which closed at 14806 yesterday after striking a high of 14828 is poised to post a new high today. Select Midcap stock would continue to remian in limelight. Watch out for Skumars, Welspun Gujarat, Bank of Rajasthan, South Indian Bank and Punj LLoyd.

Vishal Retail set for a "Vishal" listing !

Yes, that's not a news for most of the Investors. Vishal retail is all prepared to set the markets on fire and that too with a explosive listing. The company has issues shares to investors @ 270 per share. Investment Guru is of the view that the stock would list in the range of Rs. 550-600 and will actually move further up during the day. If the momentum persists, the stock may even touch the Rs. 700 mark today ! Investors who have got the allotment (lucky fellows!) are advised to hold their horses in the first few hours to take stock of the situation and then make up a mind to book profits. I would advice booking partial profits at a price above 700 and keep the balance to seek further appreciation if any.

For those who have been diappointed with refund orders in their hands ca make use of the first 15-30 minutes of the trading hours to make a entry into the stock so that they can catch hold of the stock near 600 levels and then play for the appreciation above these levels. The stock is also a good candidtae for a hold for a medium term perspective.

Skumars on the fire !

The stock has consistently been on my recommendation list and yes, finally it has performed to my expectation. All those friends who were skeptical about the stock's performance and had written to me about that would be smiling now ! Of course, if you are a investment guru blog reader, you are always set to mint money..ha..ha..ha..

Happy Investing!

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!

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!

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!