Recent Ideas

This time i am posting ideas that i added recently

Gulshan Poly @ 62
FIEM @ 215 (safir bhai's conviction)
Inox @ 86
Muthoot Capital @ 79
Speciality Restaurants @ 107
Sterling Holidays @ 65

I have added and exited Ashapura Minechem.Mentioned the reason in my twitter.

Will give detailed writeup about the companies soon

Sandur Manganese and Iron Ores

Sandur Manganese is involved in the mining of manganese ore and iron ore. The company carries out mining activity in 2,000 hectares in Bellary Region of Karnataka. The total reserves of iron ore are 50 million tonne and manganese ore is 25 million tonne. The company was a big exporter of iron ore to China and made big money in 2008 & 2009. The Reddy Brothers issue and the subsequent mining ban imposed affected the company very badly. It had to almost stop the mining activities. Recently the Karnataka High court lifted ban on mining by companies having Grade 'A' licence and Sandur got relief. This is evident from the september quarter results of the company. The company reported a sales of 80 Cr and a profit of 13 Cr compared to 30 Cr & 1.5 Cr in corresponding period last year. This year the company is expected to report an EPS of 50 Rs.

The marketcap at the current price of  Rs 625 is about Rs 550 crore. It is a debt-free company. This gives more comfort. Given the recent happenings and issues like Coal Scam,the mining sector is expected to get more regulated for licences and companies like Sandur which already have Grade 'A' mining licences will be benefited

Even during the last 3 years when the iron and manganese ore prices were at bottom, the company reported profits. There was a time when the company reported 225 Cr profit in one year. The worst is behind the company. The mining activity has already started and any recovery in global iron ore & manganese ore prices will push Sandur Manganese back to its glory days.The market has already rewarded the Superb results of Sandur. The share price hit a 52 week high of 720 Rs/- last week and is now trading at 625 Rs. I feel that one can add this mining company into the portfolio in SIP mode for long term gains

Note:-I have vested interests in SANDUR MANGANESE and its safe to assume that i am holding it from lower levels

V-MART

V-Mart Retail Limited was incorporated as Varin Commercial Private Limited in 2002. The Company started its operations in the value-for-money retail segment by opening its first retail store in Gujarat in 2003. In 2006, the name was changed to V Mart Retail Pvt. Limited. V-MART’s business can be classified 

into three verticals viz. apparels, general merchandise (non-apparels and home mart) and kirana bazaar

The company operates primarily in tier II & tier III cities with the chain of “Value Retail” departmental stores. The stores cater the needs of the entire family altogether by offering apparels, general merchandise and Kirana goods.The company has 86 stores across 73 cities in 12 states and union territories, with a total area of nearly 7 Lac sq.ft. The stores are located in  New Delhi, Gujarat, Uttar Pradesh, Bihar, Punjab, Chandigarh, Haryana, Uttarakhand, Jammu and Kashmir, Rajasthan and Madhya Pradesh. They are pioneers in setting up modern ambiance stores across various small towns and cities like Sultanpur, Ujjain, Motihari etc. As per the annual report they are focussing on a single customer type (evolving from aspiring to consuming) with an annual income range between H1 lakh to H10 lakh and largely residing in Tier-I, Tier-II and Tier-III locations in India

The company came out with IPO last year at a price of 210 Rs. The proceedings of IPO were used for setting up new stores and for working capital requirement. The promoters hold 59% stake in the company. The company is founded by the Ex-CEO of Vishal Retail. In the first year after IPO, V-Mart reported a 36% growth in its revenues and a 72.2% increase in its profit after tax in 2012-13.The company policy clearly says that it always aims to keep debt equity ratio below 0.75. 

The company intend to establish an online portal (www.vmart.co.in) to address the growing online shopping potential in Tier-II and Tier-III Indian cities without a substantial investment. In the 2012-13 annual report the company said that it was aiming to set up 25 stores this year and they have already setup 17.The most recent store was at Jhansi which was opened on 4th week of October. Though they had to close down some stores like that in Karnal due to poor footfall,they are making for it by adding mores stores in areas that attract more people

The company came up with superb results in the recent quarter.Its sales increased to 128 cr from 79 cr(comparing sept quarters) and profit more than doubled to 2.8 cr from 1.3 cr. The market gave a thumbs up for the company and the share price moved up smartly to hit a life time high of 242 rs before closing at 238 rs. Organised retail is expected to grow at 25 per cent and reach a size of US$ 200 billion by 2020.The company was aiming for a 30% growth as per the recent management conference call. I think we can expect significant upside even from current levels if the management is able to deliver their promise. Any correction in stock price may be used as an opportunity to add V-MART into your portfolio.CMP-238 Rs/-

Note:-I have vested interests in V-MART and its safe to assume that i am holding it from lower levels

ACRYSIL

Acrysil Ltd manufactures and sells kitchen sinks (installed capacity of manufacturing 2,75,000 sinks per annum).The Company markets its products under CARYSIL brand. It sells granite sinks, stainless steel sinks, and Vetro Inox sinks, as well as faucets and food waste disposers.But its main product is the niche quartz sink.Majority of companies revenues come from exports to foreign countries(export contribute nearly 80%).The company started manufacturing granite sinks through a technical collaboration with Schock & Co of Germany (it owns 10.15% stake in Acrysil. Acrysil has also entered into manufacturing of stainless steel kitchen sinks to cater to the domestic market, through its subsidiary Acrysil Steel Private Limited

Now the management of Acrysil has decided to tap the potential of domestic market & diversified its product portfolio. Recently, the company launched a range of lifestyle kitchen appliances like faucets, hoods and chimneys, hobs and cook tops, ovens and microwave ovens, food waste disposers and wine chillers. With the improvement in economic levels of people,more are ready to spent on luxury interiors.This is a major positive for Acrysil.

The operating margin of this company is about 15%.The recent rupee fall is an added advantage to Acrysil which has 80% of its revenues coming from exports. But at the same time we also should keep in mind that the main raw material Quartz is imported. So one need to watch out for the price of raw material. As Acrysil is targeting mainly the premium segment customers, i feel that the company can pass on the increase in raw material costs to it customers

The company has a low equity base of 4.5 crores.This is after the management recently giving bonus in the ratio 1:2.The management is investor friendly and the dividend payout ratio is 25%. They have sent a positive signal to the market by balancing their growth objective with sharing the profits with the shareholders. The sales growth, profit growth and ROE for company is 21%,11% and 27% over the past 5 years.This year the company is expected to do an EPS of 22 Rs per share

The company has aggressive plans of becoming a Rs.1,000 cr company by 2020.During the last one month the stock had a very good run.On 28th October the stock hit life time high of 155 Rs and is currently trading at 129 Rs.The current market Capitalization of company is just 60 Cr rupees. At the moment its too premature to compare it to TTK Prestige or Hawkins or Gandhimathi Appliances. But this is a small company where the potential for growth is good, they are into niche products & their product is perceived as a premium product. As the equity base is small, the volume of stock traded is very low. I feel its a good bet to be in one's portfolio if you are looking into a mix of export and consumption story.One can start adding at the cmp of 129 Rs in SIP mode and any fall in share price can be used to add more

Note:-I have vested interests in Acrysil and its safe to assume that i am holding it from lower levels

Godawari Power and Ispat

I strongly beleive that its time that we look into cyclicals and today i am writing about a company from steel sector. GPIL is the flagship company of Raipur based HIRA Group .This is one of the very few companies in steel sector operating in the entire value chain which includes sponge iron, billets, Ferro alloys, captive power, wires rods, steel wires, fly ash brick..etc.The company showed a growth in topline at a CAGR in revenues of 19.49% and EBIDTA 12.58% over the five years leading to 2012-13.This company is not spending a single rupee for purchasing power from outside .It is fully backed by captive power production facilities and also selling excess power to others .GPIL also having captive mining facilities from two mines allotted for them which is minimizing the uncertainties related with iron ore supply.

The company is focussing on high margin steel business and is into pelletization.In the month of September,they commissioned 1.2 mtpa plant for the same.This is in addition to the 0.6 mtpa plant that the company already had. So the total capacity now stands at 1.8mtpa. The company also commissioned 50 MW solar power plant last month.

GPIL has adopted various cost-cutting technologies. The use of coal in gasifier for pellets in place of costly ignite oil is one of those initiatives, which would save around Rs1.5bn for the 1.8mtpa pellet plant. Moreover, the company has indicated a peak debt of  Rs16.5bn, majority of which has already been drawn in FY13. The management has clarified that there wont be any new capacity addition.So the debt in company's books can easily be payable using the cash flow from business

On 25th June, 2012,the Company issued 50,00,000 equity share warrants on preferential basis to M/s Hira Infra-Tek limited (hITl), a promoter group Company, at a price of `130/- per share convertible into one 

equity share of `10/- each within a period of 18 months from the date of allotment.  hITl has exercised the right for conversion of 10,00,000 warrants into 10,00,000 equity shares of `10/- each as of March 31st 2013.This shows the confidence of promoters in their company.

For the financial year ended march 2013,the company reported an eps of 46 Rs. The company has also been a regular dividend payer and paid 2.5 rs last year.The company has been outperforming its peers for more than 2 years now in terms of perfomance while its share price has remained at almost at the same level.At the cmp of 81 rs,it can be added to the core portfolio as the best bet from steel sector.Any turnaround in the sector outlook will boost the share price

Finolex Cables

Finolex Cables, the flagship company of the Finolex Group, was established in 1958. It is one of India's leading manufacturer of electrical and communication cables. Finolex Cables Ltd has manufacturing facilities located at Pimpri and Urse in Pune as well as in the states of Goa and Uttarakhand. The company operates in mainly four business segments: electrical cables, communication cables, copper rods and others (switchgears and CFL). 

The electrical cables division is the largest amongst these and it contributes about 87% to the top-line and is the main focus area of business for the company. In 80's and the 90's the company used to declare liberal dividends, it used to declare very liberal bonus issues every four years and was one of the pioneers of buybacks. Finolex Industries in which this company owns 33 percent stake has moved up smartly & the market cap of that company moved up from Rs 750 crore to Rs 1,500 crore. And since this company owns 33 percent, the value of that stake works out to Rs 500 crore whereas the market cap of Finolex Cables is about Rs 880 crore

National Optic Fiber Network  project is set to get completed in another 36 months.The total project cost is said to be Rs 20,000 crore and huge amount of money is going to flow into optic fiber cable making. Secondly the government is laying more emphasis on actually converting the overhead transmission network into underground power transmission network.This is again very positive for Finolex Cables

The communication cables segment, which had been on de-growth till FY12 primarily due to uncertainty over spectrum allocation leading to no investments by mobile service providers, however, turned around in FY13 and registered a growth of 22.7%.The segment is expected to continue its growth rate of 20% to 25% on the back of recent developments in the telecom sector

FCL's electrical cables business has been giving a strong performance over the last four years. However, recently the growth tapered down due to a poor economic environment. The segment supplies cables to the auto and power sector.Improvement in the automobile industry will push this segment back to its old growth trajectory. 

FCL has expanded into product segments that are complementary to the electrical cable market, that is, CFLs and electrical switches. In the current fiscal, the company has already launched new lamp models including LED-based lighting systems meant for home use, street lighting and other commercial spaces. This move has brought additional market reach at minimal cost expansion. It also plans to enter the switchgear product segment and will launch a series of products within the MCB, ELCB and MCCB range during 2013-14. Finolex expects to commission a 5MW solar power plant at its Urse facility. This initiative will result in substantial cost savings not only at the plant facility, but also reduce its dependence on grid power for manufacturing operations, effectively putting to use the existing land at the facility for productive purposes.

The FY 13-14 expected eps would be around 14rs. At the cmp of 57 rs, finolex is trading at a forward p/e of 4 and is worth investing as a value pick

TV 18 Broadcast

TV18 Broadcast Ltd operates one of India's popular television broadcast networks.The company generate revenue primarily through the sale of advertisements, sponsorships and subscriptions of television channels and through theatrical and ancillary revenues of films The network reached an average of approximately 222.92 million television viewers in first quarter of the calendar year 2013.

It has channels such as CNBC-TV18, CNBC Awaaz, CNBC-TV18 Prime HD, CNN-IBN, IBN7 and IBN-Lokmat TV18 also operates a jointventure with Viacom, called Viacom18, which houses a portfolio of popular entertainment channels - Colors, Colors HD, MTV, SONIC, Comedy Central, VH1, Nick, Nick Jr. and NickTeen - and Viacom18 Motion Pictures, the group's filmed entertainment business. TV18 has also forayed into the Indian factual entertainment space through A+E Networks and operates History TV18. TV18 and Viacom18 have also formed a strategic joint venture called IndiaCast, a multi-platform'content asset monetization' entity mandated to drive domestic and international channels distribution, placement services and content syndication for the bouquet of channels from TV18, Viacom18 and other broadcasters.

After the compulsory digitalization,the broadcasters revenue is expected to grow at CAGR of 26 percent from 2012 to 2017. Increase in the declared subscriber base and aggregation of distribution on behalf of broadcasters is expected to drive up the share of subscription to total broadcaster revenue from 36 percent in 2012 to 48 percent in 2016. (Source: FICCI KPMG Report 2013). 

The advertisement market is expected to grow at a CAGR of 14 percent over 2012-17. (Source:FICCI KPMG Report 2013).

The financials doesn't give much idea about the potential of industry in which the company is operating.All the channels of the company are market leaders in respective segments.The company had huge debt burden but with the rights issue the company managed to bring down debt considerably. Many doubt about the promoter quality but i think most of it is priced in the share price already. The company is showing signs of huge growth in coming years. At the cmp of 20 rs this is one of the best digitalization growth story that can be added to one's long term portfolio

DELTA CORP

Delta Corp is a fast-growing Indian company operating primarily in two business segments – Hospitality and Gaming. It is also the largest and only listed company in this space. Delta Corp entered the Hospitality and gaming segment in 2008 with a view to provide an international gaming experience in India.Of the six offshore live casino gaming licences issued by the Government of Goa, Delta owns three, CASINO ROYALE,CASINO CARAVELA and the latest M.V. HORSESHOE(started operation just a month back). These gaming destinations offer a variety of international games, and a gaming experience similar to that in global gaming centres such as Las Vegas, Macau and Singapore

Delta owns a majority stake in Daman Hospitality Pvt Ltd and is all set to operate an onshore casino within a 5 star Hotel in Daman that will offer 1,000-1,500 gaming positions. In addition, Delta also has an expression of “in-principle” interest to set up a second onshore casino in Daman.Delta Corp also owns 11 acres of land in Srilanka and is set to develop gaming facilities on receiving the necessary approvals

Apart from gaming,delta corp has interets in hospitality sector.At present they have hotels in Daman and Goa. Deltin Suites and Villa de Penha hotels of Delta are considered as among the best in Goa.The company also has a real estate joint venture in Kenya with Reliance Industries(60:40)

Currently promoters hold about 41% in the company and the company is debt free.Looking at the financials of the company,one may not find it too interesting.But its the Gambling concept that makes me put money in it.The company has first mover advantage in this field and has set up necessary infrastructure.Now i believe that its harvesting time for the company.Goa may become the Las Vegas of India, and if so, Delta Corp with 3 out of 6 licences will be the main beneficiary.This is not a short term pick.Its a long term growth story.Investors with some risk appetite may take some limited exposure into this company at cmp of Rs62/-

The link to company's annual report is given below
Annual Report-13

Sobha Developers

This time i am writing about a sector which is totally out of favour in the market.The sector is nothing other than Realty.Sobha is a Bangalore-focused real estate developer.Its promoted by PNC Menon.It has Glazing,Concreting and Interior Divisions.The operations of the Company can be categorised into two main verticals:

1. Construction and development of residential and commercial projects
2. Contractual project

The Company has completed 85 residential projects and 228 contractual projects covering about 56.25 million sq. feet of area since inception.There are some reasons to beleive that the company will do well in the future.The reasons being

■ Development potential: Sobha currently owns a land bank with developable area of 112msf (saleable area of over 200msf) valued on its balance sheet at a cost of `19.5bn (or `175psf of developable area). The current value of this land is at least 4x its cost.

■ The Profitability: Sobha has been consistently increased its sales and profits in the last 5-6 years which was considered as a very tough time for the real estate sector.The company has also been a consistent dividend payer(7 rs in 2013)

■ The Rupee Fall:The Brand Sobha is very familiar to NRI's.Thanks to PNC Menon's good reputation for his constructions in the Middle East.The recent fall in Rupee against other currencies has encouraged the NRI's to send more money to India,especially to Kerala.This year the Company proposes to launch projects (residential and commercial) measuring about 12.02 million square feet in which it has an economic interest of approximately 8.95 million square feet of developable area in various cities including Bangalore, Thrissur, Kochi, Kozhikode and Chennai.I believe that being a South Indian focused Real Estate Company Sobha is expected to be a beneficiary of this money

■ A repaired balance sheet: Relative to its peers Sobha follows an aggressive cash collection philosophy. Furthermore, the group has consistently launched new projects of 3msf-4msf each year,and has used its operating cash flows to reduce debt. As a result, net debt:equity ratio has fallen to 0.52x in 2013 from 1.7x in FY09, debtor days have reduced to around 105 days currently from 173 days in FY09 

Valuation:Even if we assume that the Realty sector remain sluggish and  slower-than-expected execution, sales and cash collection, Sobha is expected to report at least 10% growth.At the current price of 240 Rs,the market capitalization of the company is just 2400 Crs.Trading at a p/e of 11.5, this professionally managed company with good promoter is all justified to be in one's investment portfolio from Realty Sector.Remember,its not a trading idea,but an investment idea.Due to the wild fluctuation in the market,its recommendable to buy this scrip in SIP mode

Selan Exploration Technology

• Selan Exploration is a Gujarat based Oil exploration and Production Company having rights to develop three proven oil fields in Gujarat – Bakrol,Lohar and Indora.

• As per estimates the Bakrol oil field having a reserve of 73 million barrels and Indora having much more .On an extremely conservative basis and the average oil price as $ 90 /barrel , the value of reserve will be atleast 100 times the current market capitalization of the company.


• Selan is one of the low cost producer and even after providing the share of government and deducting the production cost, company is sitting on a gold mine.

• The company has been waiting for government approvals for start drilling the wells. The oil fields at Bakhrol has proven reserves.After a long wait, recently the company got approvals for drilling the wells and have already drilled the first well.John Energy is the drilling contractor

• When they couldnt get approvals from Directorate General of Hydrocarbons and Ministry of petroleum for drilling new wells,selan has been concentrating in more Seismic data acquisition , Processing and interpretation activities.Company also awarded two more fields namely Ognaj and Karjisan. 

• The company has been a regular dividend payer since 2008. In December 2010 the company gave bonus in the ratio 1:10

• The company announced buyback of its shares at a price not exceeding Rs 350 for 10% equity.The buyback will be closing on 13th september,2013.As per the annual report,the company has purchased back 1.61 lakh shares till march 2013, out of the 5.78 lakh shares for which money is kept aside.This shows the confidence of management in the future growth


• Proven Value Investors like Porinju Veliyath and Ashish Chugh have been reccomending this stock as a value pick and they have investments in it


• At the cmp of 260/-, the market capitalization of this company is just 430 crores. Selan Exploration can do a CAGR of 50% over next 5 years.

The link to company's website is given : http://www.selanoil.com

Back to blogging after a gap of more than 4 years!!

Its always nice to be back in blogging. Expecialy after 4 years. I have posted twice in 2009. Both of them were intraday calls. I have never been a good writer and hence never tried it here. I always felt that twitter with just 140 characters is much more powerful. But after joining for my PGDM course, i am getting a lot of time to read about what i wanted. After going through such books and reading about some indian companies,i felt that i should share my understandings here. I hope to share my equity ideas soon