FIRST CHOICE SECURITIES

STOCK WATCH : RIL - BUY. CMP RS 925. TARGET RS 1150.

2010-09-01T19:46:00.000-07:00

The stock has consolidated around Rs 910/- The investment in EIH through its subsidiary is well thought out plan. The stock is available around 18 PE of its estimated earnings of FY11.

STOCK WATCH: BIRLA COTSYN (INDIA) LTD. – BUY

2010-08-23T20:36:00.000-07:00

The Yash Birla group company, one of the oldest player in textile sector, has expansion cum forward integration plan to be executed before FY 11. The company has manufacturing facilities at two places - Khamgaon and Malkapur. The company has plans to invest Rs 200cr for expansion - to increase the present capacity from 57800 spindles to 75800 spindles and for establishing a ready made manufacturing unit, Rs 300cr has been earmarked.. Going forward the company is likely to post healthy top as well as bottom line. The company recently rewarded its share holders with 1:5 bonus, apart from decent dividend payout.

The shares are currently quoting @Rs 1.40 (Rs1FV. Cum bonus and cum dividend). Limited down ward risk. Likely to cross Rs 2.00 mark before the FY 11 results are out.

STOCK WATCH: CANARA BANK – BUY

2010-08-13T01:36:00.001-07:00

CMP: RS 492

TARGET: RS 600

Canara Bank, one of the leading public sector banks, has achieved a total business in excess of 4 lac crores, in the first quarter of 2010. Net profit is to the extent of Rs 1013cr, almost 83% increase, compared to the corresponding period of 2009. Net Interest Margin (NIM) of 3%, CAR in excess of 12%, supports faster business growth momentum. The bank has plans to achieve Rs 5lac crore business and adding 200 more branches to the existing net work of 3061. All the branches are under CBS and the bank provides internet/ mobile banking services. The stock is quoting around 6 P/E. There is upside potential for this stock, on the expected income and business growth.

TEN REASONS WHY ONE SHOULD NOT INVEST IN SKS MICRO FINANCE IPO

2010-07-21T19:36:00.001-07:00

1. Unethical business: The Company is charging interest around 40% p.a. on money lent to the poor and down trodden.

2. Unsustainable business model: The business model will not sustain in the long -run.

3. No commitment from the promoters: SKS’s founder and chairman sold his shares to Tree Line Asia Master Fund (Singapore) Pte for $12.9 million in Feb. this year.

4. Look at the salary of top executives :

Suresh Gurumani - Managing Director of the Company. The total monthly salary is Rs. 12, 50,000. In addition to the above, Mr. Suresh Gurumani was paid onetime bonus of Rs. 10,000,000, in April 2009.

Dr. Vikram Akula - chairman Rs 70.00 lacs p.a. In addition, ESOP amounting to Rs10.97lacs, totaling Rs 1.79cr p.a.

5. Mohd. Yunus says - “I get very worried when investment funds come to microfinance,” said the founder of Bangladesh’s Grameen Bank, which pioneered the industry by giving small loans to rural women to start their own businesses. “I don’t want to excite businessmen that there is profit to be made here,”

6. The IPO will make the promoters, and other venture capitalists including some P/E funds that have stakes in these companies’ millionaires. The hapless borrowers continue to live in abject poverty.

7. Government /RBI will not be mute spectators to the exploitation.
They are bound to regulate the segment. This will make the business un- attractive.

8. Financial inclusion initiatives taken by the public sector banks will marginalize the micro finance business. Do not buy the theories put forth by the BRLMs to sell the issue.

9. The average cost of acquisition of shares by promoters is less than Rs50/-The Company has limited period of history and no dividend payment record.

10. The Andhra Pradesh government has constituted district level ‘Task Force Committees’ (TFCs) to investigate the unethical practices of micro finance institutions in the state. The committees were constituted after the government received many complaints against the loan shark practices adopted by some leading MFI’s of the state.

FOR IPO ANALYSIS OF SKS MICRO FINANCE LOG ON TO FIRSTCHOICEIPOANALYSIS.COM

MICRO FINANCE LENDING

2010-07-07T21:07:00.001-07:00

It is sin to charge interest @ 26-36%p.a. on the monies lent to the hapless poor and the down trodden. These MFIs are no better than the blood sucking money lenders. The argument that we can not lend below 26% holds no water. The fact remains that the MFI s are in business to make more money by exploiting the situation. MFIs should function as NGOs. If you can not do business like an NGO do not do that, no body is forcing you to do that. The government is bound to regulate interest rate. That will happen sooner than you think. The MFIs which are not functioning on the lines of an NGO will crumble. These MFIs will realize their sin. If you want to help the poor, lend it like an NGO. Even if you lend it 10 people it is a noble work.

IPO ANALYSIS: HINDUSTAN MEDIA VENTURES LIMITED – SOARING CIRCULATION, STRONG BRAND EQUITY - INVEST

2010-07-04T23:08:00.000-07:00

One of the leading print media company, which publishes, among others, ‘Hindustan‘, the third largest daily newspaper in India, in terms of Readership, with a Readership of 9.3 million readers. ‘Hindustan‘ began publication in 1936, during freedom movement and has been one of India‘s eminent Hindi newspaper dailies for over 70 years. ‘Hindustan‘ has the largest Readership in key Hindi-speaking markets of Bihar and Jharkhand, with a strong and growing presence in Delhi NCR and the states of Uttar Pradesh and Uttarakhand. It is one of the fastest growing Hindi daily newspapers in India.

‘Hindustan‘is presently printed at 16 locations in the states/regions of Uttar Pradesh, Bihar, Jharkhand, Uttarakhand, Punjab and Delhi NCR. The distribution of newspapers takes place through a multi-tiered network of agents and vendors.

They also publish two Hindi magazines, ‘Nandan‘, a children‘s magazine, and ‘Kadambini‘, a general interest magazine. The company also operates the website, www.livehindustan.com, which focuses on providing news in Hindi with regional content.

ISSUE DETAILS:

ISSUE OPENS/CLOSE ON	05-07-10 / 07-07-10
ISSUE SIZE/FV	RS 300 CR/ RS 10
PRICE BAND	RS 162-175
BRLMS	EDELWEISS,KOTAK MAHINDRA
PROMOTERS	H T MEDIA LIMITED

FINANCIALS - RS IN CRORES

	08	09	31-12-09
REVENUE	16.85	17.73	52.14
NET PROFIT	0.28	0.19	3.57
EPS	0.70	0.28	5.11
RONW	2.54%	1.74%	21%

OBJECTS:

The objects of the Issue are to raise funds for (1) setting up new publishing units (Rs 66cr) (2) upgrading existing plant and machinery (Rs 55cr) (3) prepayment of loans (Rs153cr)
CHALLENGES:

The Indian newspaper and magazine industry, particularly the Hindi newspaper and magazine industry, is intensely competitive. In each of the markets, the company faces competition primarily from other newspapers and magazines for circulation, readership and advertising. In addition, there is competition from other alternative forms of media including, but not limited to, television broadcasters, magazines, pamphlets, flyers, radio broadcasters and internet websites. These other forms of media compete with newspapers for advertisers and for the time and attention of the readers. Ad-spend by the advertisers and the ability to attract new advertisers is influenced largely by the circulation and readership, the geographical reach, readership demographics of the newspapers and the preference of advertisers for one media over another. Pricing in the short term may be affected by the Circulation of the newspapers and magazines among the readers which is an important source of revenue for the Company since its derives significant revenues from subscriptions and sales. In addition, circulation and readership significantly influence ad-spend by advertisers and the advertising rates in the newspapers. Circulation and readership is dependant on the quality and reach of the publications and the loyalty of the existing readers. Circulation in the Indian market is also largely affected by price and, therefore, the circulation of the newspapers may be adversely affected if the company fails to meet any price competition.

Changes in technology may render the current technologies obsolete or require the company to make substantial capital investments.

STRENGTH:

• Hindustan – Strong brand recognition.

• Emerging as a leading Hindi daily with leadership in key markets.

• Ability to successfully launch ‘Hindustan’ daily - in new markets.

• Strong relationship with Advertisers.

• Ability to provide local, national and international news with quality editorial content.

• Credible editorial team.

• Modern and advanced printing and technology infrastructure.

• Synergies with HT Media Limited.

• Strong management team.

RECOMMENDATIONS – INVEST

HMVL is a professionally run company and focuses a lot on adopting good corporate governance practices. It is a subsidiary of HT Media, which has been acknowledged as one of the top 25 companies adopting good corporate governance practices for 2009 by the Institute of Company Secretaries of India. HMVL draws its governance practices from HT Media itself and is expected to have similar robust board practices. HMVL
has a completely different senior and second line of management.

BHARAT BANDH: WHY CANNOT OPPOSITION RULED STATES REDUCE VAT.

2010-07-04T21:29:00.000-07:00

The BJP and some other political parties have called for Bharat Bandh on 05-07-10 against price rise and for increase in prices of petroleum products. Assuming for the sake of argument, that Center's policies are flawed and the present UPA government is anti-poor. Among others, VAT constitute any where between 24 -33% of the petroleum product prices. VAT is a state subject and the respective state governments have the power and authority to slash the rate to zero level if they are so concerned about the common man,for whose sake the strike being called.
.

DOES OUR BUSINESS HOUSES HAVE SOCIAL CONSCIENCE

2010-07-04T08:06:00.000-07:00

The Indian business houses do some charities as a public relation exercise. They do not spend from their personnel wealth. Whatever money spent is accounted in the books of the company or its subsidiary or a SPV created for publicity. We need lot of funds in the field of education, basic health care, housing and infrastructure, particularly in the rural areas. The corporates are interested in enriching themselves in the name of creating value for stake holders. We have business magnets who are ready to invest up to Rs 1000cr for a housing complex for themselves and for their beloved ones. Lakhs of houses can be built for the poor even if 10% such amount is earmarked for social cause.This is only an example. Business magnets spend mind blowing money on marriages, birthday parties / other parties.They have left the uplift of the poor entirely at the mercy of the selfish politicians. No one is worried about the poor. Expecting the Indian businesses to follow the Buffet and Bill Gates philanthropy is a mirage.

WORST PERFORMING IPOS OF 2010

2010-07-03T08:36:00.001-07:00

Name of the company	Issue price	Price as on 30-06-10	Down by %	BRLMs
Emmbi Polyarns	RS 45	RS 18.40	59.11	Keynote corporate
Shree Ganesh Jewellery	RS 260	RS 113.55	56.33	Axis bank, ICICI securities, Avendus capital
Texmo Pipes & Prod.	RS 90	RS 44.50	50.56	Almond Global,IDFC-SSKI
Tarapur Transformers	RS 75	RS 38.80	48.27	COMFORT SECT.
GOENKA DIAMONDS	RS 153	RS 74.80	44.59	SBI CAPS
Syncom Healthcare	RS 75	RS 45	39.73	Charted capital
Nitesh Estates	RS 54	RS 38.55	28.61	ICICI, ENAM, KOTAK
Hathway Cable & Data	RS 240	RS 183.25	23’65	MORGAN ENAM,KOTAK
DB Realty	RS 468	RS 377.30	19.38	ENAM, KOTAK
INFRA SOFT	RS 145	RS 118.10	18.55	COLLINS STEWART INGA, ANAND RATHI

IPO ANALYSIS: PARABOLIC DRUGS LIMITED – OVER PRICED - AVOID.

2010-06-10T04:13:00.001-07:00

The Chandigarh based bulk drugs manufacturer is entering the capital market with an IPO. The company intends to mobilize Rs 200cr from the public offerings.
The company is proposes to issue 23.50 million equity shares in the price band of Rs 75-85, including offer for sale of 2.02million shares of Rs 10/-FV.
The issue will open on 14-06-10 and close on 17-06-09.

Pranav Gupta, Vineet Gupta, PNG Trading Private Limited and Parabolic Infrastructure Private Limited promote the company.

AVENDUS CAPITAL PRIVATE LIMITED and ICICI SECURITIES LIMITED are the BRLMs.

The above BRLMs recently managed Shree Ganesh Jewellery IPO along with another merchant banker. As against the issue price of Rs 265/- the share is currently quoting around Rs130/-

BUSINESS

The company is engaged in the manufacturing, including contract manufacturing of
Active Pharmaceutical Ingredients (API) and API intermediates for the domestic market as well as for exports. APIs, also known as bulk drugs‘ or bulk actives‘ are the principal ingredient used in making finished dosages in the form of capsules, tablets, liquid, or other forms of dosage, with the addition of other APIs or inactive ingredients. The company also produces the Semi Synthetic Penicillin
(SSP) and Cephalosporin range of antibiotics in oral and sterile form, along with their intermediates.

Parabolic Drugs own and operate two manufacturing facilities at Derabassi, Punjab, and in Panchkula, Haryana. The commenced commercial operations in February 1998 by setting up a unit at Sundhran, Derabassi, to manufacture SSPs. It has six units at Sundhran, Derabassi, for manufacturing the oral and sterile range of Cephalosporin APIs and intermediates. The facility at Sundhran, Derabassi, is WHO-GMP and ISO-14001 certified. The second facility at Panchkula was established in fiscal 2005. Currently, the Panchkula facility has two units manufacturing SSPs and API intermediates such as 6 Amino Penicillin Acid. The company is in the in the process of setting up a custom synthesis and research and development centre at Barwala, Haryana, for development and scale-up of new APIs and APIs intermediates in all therapeutic segments, including non-antibiotic products. This facility is expected to commence operations in the last quarter of fiscal 2010, to focus on providing contract research services to innovator companies. In addition, the company is in the process of setting up another manufacturing facility at Chachrauli, Derabassi, to manufacture the non-antibiotic range of APIs, which is expected to commence commercial operations in the third quarter of fiscal 2011.

OBJECTS OF THE ISSUE

The company intends to utilize the funds for the following purposes:

1. Multi-purpose block III at Derabassi;
2. Sterile cephalosporin plant at Derabassi;
3. Establishment of manufacturing at Chachrauli.
4. Custom synthesis and manufacturing site II at IT Park, Panchkula;
5. Repayment / prepayment of identified loan facilities.

FINANCIALS:

The total revenue earned has increased from Rs. 15,056.33 lacs in fiscal 2007 to Rs. 39,693.70 lacs in fiscal 2009, and profit after tax has increased from Rs. 1,358.98 lacs to Rs. 2,109.20 lacs during this period. The total income and profit after tax as at September 30, 2009 were Rs. 23,342.56 lacs and Rs. 1,241.23 lacs, respectively. The net sales have increased at a CAGR of 62.50% from fiscal 2007 to fiscal 2009. Direct exports constituted 27.65% of our net sales in fiscal 2009, and 32.25% as at September 30, 2009.

MATTERS OF CONCERN.

• The company operates in a competitive business environment, both globally and domestically. Competition from existing players and new entrants and consequent pricing pressures will adversely affect the business..

• The pharmaceutical industry is highly regulated and the success of the company’s strategy of entering regulated markets is dependent on a number of factors beyond control the control of the company.

• Highly indebted company with floating rate of interest. As at September 30, 2009, the secured loan funds aggregated Rs. 30,385.83 lacs, all of which were at floating rates of interest which exposes the company to interest risk.

• Significantly dependent on imports of raw materials, particularly from China, and are to that extent exposed to risks including duties placed on imports from other countries.

• The name, business and logo of ‘Parabolic’ are not registered trademarks in the name of the Company.

• The funds requirement and funding plans are as per the company’s own estimates, and have not been appraised by any bank / financial institution.

• The average cost of acquisition of shares by promoters are as follows:

No. of shares Rs

Mr. Pranav Gupta 8, 24,100 3.50
Mr. Vineet Gupta 7, 01,550 3.42
Parabolic Infrastructure 58, 06,620 3.33

PNG Trading pvt ltd 1, 35, 70,800 3.43

IPO Grade – 2 by CARE

The grading is constrained by company’s unfavorable capital structure, project stabilization risk, volatility in prices of imported raw material along-with exposure to exchange risk because of imports and liabilities denominated in foreign currency, though partially mitigated because of direct exports. The grading factors in the strong growth in revenue reported in past, experienced management, approvals and certificates of suitability for few products from regulatory authorities in USA, EU and other regulated markets, reputed client base, strong focus on R&D activities and the company’s strategy to diversify into CRAMS business.

VALUATION AND RECOMMENDATIONS

For the FY 10 the company reported a net profit of Rs 21.10cr. The EPS on the post bonus and post issue equity works out to Rs 3.70. At the upper price band of Rs 85 the company demands valuation in excess of 20 PE. Companies like Neuland Lab and Nector life, who are in the similar line of business, are available at less than 9 PE. Grossly over priced. AVOID.

IPO FROM AN INTANGIBLE ASSET COMPANY: FAT PIPE NETWORKS INDIA LIMITED.

2010-06-06T09:48:00.000-07:00

The company earned a net profit after tax of Rs 399.37 lacs for the year 08-09, which was transferred to General Reserve. The balance at the end of the previous year in General Reserve was Rs 49.97 lacs. If you add, the profit transferred this year, to the figure it should be Rs 449.34 lacs. Simple arithmetic. However, as per the statement of accounts as furnished in the DRHP filed with SEBI, the figure is Rs 2103.04 lacs. For the difference, the corresponding entry shown in the balance sheet is Intangible assets.

Consider the following risks factors:

• The Company operates in a highly competitive environment and the competitors could gain a significant advantage by introducing a new product in a particular segment before the Company does.

• The majority of the operations of the Company are carried out from its branch offices in the USA. Risks related to FEMA.

• The funds requirements are not appraised by any Bank or Financial Institution.

• The Company proposes to acquire businesses/companies located outside India, the company is yet to identify companies/ businesses to be taken over.

• The Company has not yet tied-up for debt component for enhanced working capital needs.

• The Company has not paid dividend in the past.

• The global operations expose the Company to complex management.

• The combined employee strength is 120 and 50% are in sales and marketing.

• The average cost of acquisition of Equity Shares by the Promoters is at Rs 10/-

• Receivables out standing as on 30-09-09 are at Rs1269.69 lacs, against a turnover of Rs 2958.68 for the same period.There are debts that are outstanding for more than 180 days.

• Details cash/bank balances are not furnished. That is, in which bank the amount shown, as on balance sheet date, was kept.

• No project to be implemented. Structured IPO.

• IPO grade -2.

EPS for the year FY 10-11 is expected to be Rs. 5.50 per share. At the lower end of the price band of 82, PE multiple works out to 15 times. Similar companies in IT networking equipments / manufacturing are presently ruling at PE of around 8 times.

Investors are advised to stay away from the issue.

FIRST CHOICE, RIGHT CHOICE

2010-05-21T16:50:00.000-07:00

In the last week of April, six IPOs rushed to the market, to escape new SEBI guide lines which came in to effect from 1-May-2010.

Nitesh Estates limited offered shares at Rs 54/- now quoting at Rs 38/- almost 30% down.

Next was Tarapur Transformers. The shares were issued at Rs 75/- now 44% down quoting at Rs42/-.

Then came the big ticket IPO - JayPee infra. The shares were offered at Rs 102. On the listing day itself the shares were down more than 10% from the issue price.

FIRST CHOICE HAD RECOMMENDED TO STAY AWAY FROM THE ABOVE ISSUES. RIGHT CALL. EVERY TIME.

Mandhana Industries and SJVN Limited's IPOs were recommended for subscription. Both are trading above the offer price. (SJVNL - taking discount offered in to account).

TARA HEALTH FOODS - First choice had recommended to keep 100 km distance. The issue bombed.

AGAIN THE CALLS WERE CORRECT. THEN, WHY SEARCH ELSE WHERE FOR IPO ANALYSIS.
LOG ON TO FIRSTCHOICEIPOANALYSIS.COM

IPO INVESTING- KNOW YOUR MERCHANT BANKER

2010-05-08T06:10:00.001-07:00

The IPOs which are quoting below the issue price and

the BRLMs associated with the issues that are listed

from 01-01-10 and until date, are furnished below.

NAME OF ISSUER	ISSUE PRICE	CURRENT PRICE - AS ON 03-05-10.	MERCHANT BANKERS/BRLM
SYNCOM	RS 75	RS64	Chartered Capital
VASCON	RS 165	RS 153	Kotak Mahindra, Enam Securities
EMMBI	RS 45	RS18	Keynote
DB REALTY	RS 468	RS 436	Enam Securities, Kotak Mahindra
HATHWAY	RS 240	RS 209	Morgan Stanley, UBS Securities, Kotak Mahindra
TEXMO PIPES	RS 90	RS 62	Almondz Global
PRADIP OVERSEAS	RS 110	RS 87	ANAND RATHI
SHREE GANESH JEWELLER	RS 260	135	Axis Bank Ltd. ICICI Securities Ltd. Avendus Capital
GOENKA DIAMONDS	RS 135	101	SBI CAPS
INTRASOFT	RS 145	130	Collins Stewart, Anand Rathi

CASTE BASED CENSUS

2010-05-08T05:25:00.003-07:00

The Center has agreed to caste – based census as pressurized by the Yadav trio. The UPA has wafer thin majority in LS, RJD and SP who have twenty-five MPs, are extending outside support to the government. Their support is necessary to pass nuclear liability bill for which, there is strong opposition from the BJP and the Left parties. However, the Yadav trios are ignoring the writing on the wall, which is very clear. The next election either at the state or center will be fought on the issue of development, providing basic amenities in the rural area like- education, housing, health, infrastructure and reforms, among others. The days winning elections only based on caste, religion/region is over. The young, educated and informed voters, who constitute more than 70% of the total electorate, is definitely not going to exercise their franchise based on caste considerations. The Yadavs have to adopt themselves to the changed political dynamics. Otherwise, they are, probably serving their last tenure in the Lok Sabha.

The new census should be used for the statistical purposes and for monitoring the various programme and policies of the government and the political parties should stop using the same for vote bank politics.

Investor Awareness initiatives through long distance Trains by NSE

2010-05-01T17:55:00.000-07:00

After pioneering many initiatives to safeguard the interests of investors, India’s premier stock exchange, the National Stock Exchange has rolled out a unique initiative to promote investor awareness, literally on wheels. This is the first time that a stock exchange is conducting a mass outreach programme through the outdoor medium.

The programme was kick started on board the iconic Rajdhani Express today. The Delhi Chennai NSE Rajdhani was launched at the Nizamuddin station in the capital by the Chief Guest Mr. Prashant Saran, whole time member of SEBI. NSE’s MD and CEO Mr. Ravi Narain was also present on the occasion.

Starting today, the Delhi Chennai Rajdhani, the Delhi Bengaluru Rajdhani and the Delhi Trivandrum Rajdhani will run coaches that will carry NSE’s campaign on investor awareness. The coaches will be used on the three routes at different times of the week.

The 17 coaches have been splashed with the images of Nifty, NSE’s flagship index. Inside, important investor awareness messages have been given on panels. The motto of the campaign is soch kar, samajh kar, invest kar, a message to invest carefully.

The coaches also feature key information to investors on care to be taken before, during and after trading. These would include a list of crucial do and don’ts, importance of filling up Know Your Customer completely and correctly, important things to note while transacting on-line and understanding matters related to power of attorney, etc.

The campaign seeks to demystify Nifty 50 through pictographs and comic strips. An attempt is being made to spread awareness among investors on various products traded on NSE including Nifty futures and options, equities, equity futures and options, mutual funds, currency futures and exchange traded funds.

These messages will also be provided through audio visual messages inside the train. The idea is to empower the market participants and enhance the trading experience through focussed and relevant market-related education. The campaign is expected to cover over 2 lakh fifty thousand passengers crossing 34 locations across eleven states.

IPOS IN APRIL 2010

2010-04-21T18:15:00.001-07:00

NAME OF THE COMPANY	ISSUE OPENS ON	RECOMMENDATIONS
TALWALKARS	21-04-10	AVOID
NITESH ESTATES	22-04-10	AVOID
TARAPUR TRANSFORMERS	26-04-10	AVOID

For detailed analysis –log on to FIRSTCHOICEIPOANALYSIS.COM

IPO ANALYSIS: NITESH ESTATES LIMITED: DEBT RIDDEN - WEAK FOUNDATION - AVOID

2010-04-19T19:27:00.000-07:00

The merchant bankers, inspite of many IPOs getting tepid response for the issues, particularly from the retail investors (due to unreasonable premium) and IPOs quoting discount to the issue price after listing, have not learnt any lessons. Out of the twelve recently listed IPOs, eight are quoting below the offer price. How do retail investors get confidence to invest in new issues?

OFFER DETAILS:

The Bengaluru based real estate company is planning to raise around Rs 405cr through initial public offer of equity shares of Rs 10/- each.

ICICI Securities Limited, Enam Securities Private Limited and Kotak Mahindra Capital Company limited are the BRLM s. The issue opens on 22-04-10 and closes on 27-04-10.

BUSINESS:

The Company is in the business of real estate development and is primarily engaged in the development of residential projects in Bengaluru. Nitesh is also developing a residential and an office project in Kochi. The company is in the process of diversifying into the development of shopping-malls and are expanding the geographic reach to Chennai and Goa. The residential projects include multi-unit apartment buildings targeted at high-income and middle-income customers. Nitesh is currently developing the first hospitality project, the first ‘Ritz-Carlton’ brand hotel, on Residency Road, in the central business district of Bengaluru.

The Company since its incorporation in 2004 has completed three residential projects totaling 0.55 million sq. ft. of Saleable Area. Nitesh undertakes most of the projects through the joint-development model as compared to acquiring a freehold or leasehold interest in the land, which reduces the upfront cost of land acquisition and the total project financing costs. This allows the company to deploy the more funds towards development of the projects.

OBJECTS OF THE ISSUE:

a) To acquire joint development rights,

b) Funding Subsidiaries and the Associate Company, for repayment/prepayment of loans, redemption of debentures.

c) Repayment of loans

d) General corporate purposes.

The fund requirement and deployment of the Net Proceeds of the Issue is based on internal management appraisal and estimates.

FINANCIALS: (Rs in millions)

	Sep 09	09	08	07
Total income	458.47	868.89	688.73	240.15
Net profit	60.80	27.60	9.86	28.73
EPS	--	0.43	0.17	0.77
RONW	--	5.30	0.90	7.40

RISK FACTORS AND CHALLENGES

The joint development model pursed by the company will have negative impact on the bottom line, since the brand equity and reputation of the company is not strong enough to attract potential joint development partners on favorable terms.

The company’s ability to successfully compete in new segments across different geographies is yet to be demonstrated. The company has a limited operational history.

As per CRISIL estimate, the annual additions in units are expected to grow from 70 million units in 2008 to reach 81 million units in 2014. Estimated annual additions in units in rural areas are to grow from 174 million units in 2008 from 198 million units in 2014.

Nitesh’s business is heavily dependent on the performance of the real estate market in Bengaluru. Regional slow down or slow down in IT/ITES sectors will have adverse effect on the performamence on the company.

Nitesh had defaulted in loan repayment to the banks and financial institutions. The auditors were unable to comment on related party transactions. The company is heavily indebted and interest out go will put pressure on margins. Nitesh had negative cash flow in the last three years. A major portion of the proceeds of the issue - Rs 136cr is earmarked for repayment of loans.

The Company was irregular in the deposit of income tax, fringe benefits tax and service taxes. The company had inconsistent margin in the last three years.

Out of current and on going projects, only 4% of the land is registered in the name of the company.

VALUATION:

CRISIL IPO grade 2/5reflects the company’s entry into the highly competitive mid-income housing segment, and development of retail, commercial and hospitality projects, in which the company has a limited track record. These plans also present significant funding and execution risk. In the past, the management’s strategies have not been very successful, with NEL registering very low margins. The company also defaulted on its debt and interest payments in 2008-09, which was subsequently restructured/repaid.

Comparison with the peers

Name of the company	F V	EPS	PE	RONW	NAV
Ansal properties	5	4.6	18.7	4.8	98.5
Brigade Enterprise	10	7.2	25.7	8.6	88.6
Purvankara Projects	5	6.2	27.0	30.6	61.4
Sobha Developers	10	11.1	32.9	10.3	169.7
Nitesh Estates	10	0.41	--	5.3	8.15

RECOMMENDATIONS

For a company whose EPS in paise the price band of Rs 54-56 is on the high side.
AVOID SUBSCRIPTION.

IPO ANALYSIS: TALWALKARS BETTER VALUE FITNESS LIMITED – PREMIUM TOO FAT - AVOID.

2010-04-18T09:00:00.000-07:00

The Mumbai based fitness company, which has pan India presence, is entering the capital markets through IPO. The company proposes to issue 60, 50,000 equity shares of Rs 10 face value in the price band of Rs 123-128. The issue will open on 21-04-10 and close 0n 23-04-10. IIFL are the sole BRLM.

PROMOTERS - Madhukar Vishnu Talwalkar, Prashant Sudhakar Talwalkar, Vinayak Ratnakar Gawande, Girish Madhukar Talwalkar, Harsha Ramdas Bhatkal and Anant Ratnakar Gawande.

BUSINESS

Talwalkars are one of the largest fitness chain in India, offering a diverse suite of services including gyms, spas, aerobics and health counseling under the brand “Talwalkars”. “Talwalkars” has pioneered the concept of gyms in India and today is a recognized name in the health and fitness industry. Presently, they operate 51 health clubs in 24 cities, in 11 states, serving over 55,000 members.

OBJECTS OF THE ISSUE

For setting up of additional health clubs.
To repay certain unsecured loans.

FINANCIALS RS IN CRORES

	08	09	SEP 09
TOTAL INCOME	38.49	59.42	35.88
NET PROFIT	4.51	5.68	3.19
EPS	23.23	28.91	16.00
RONW (%)	39	33	8.34

RISKS AND CONCERN

1. Company operates in a highly competitive market and face stiff competition from other players operating both in organized and un-organized sectors. Some foreign players have also entered the Indian market.

2. Disputed brand - There exists a Group which owns and operates gyms under the same or similar name and which can claim the history of the brand. Further, any deficiency in the quality of services, equipments, training, etc. provided by these gyms may adversely affect the brand image.

3. CARE has awarded grade – 3 for the IPO indicating average fundamentals.

VALUATION AD RECOMMENDATIONS

For the half-year ended Sept -09 the net profit earned is Rs 3.19cr. This translates into an EPS of Rs 2.60 on the fully diluted post issue capital of Rs 24.11cr. At Rs 128, the company discounts FY 10 earnings by almost 50 times. The valuation is very much stressed. AVOID SUBSCRIPTION.

Promoters holding post issue will be 59.39%.

MICRO FINANCE IPOS – WHOM DO THEY BENEFIT - AVOID AT ALL COSTS.

2010-04-14T08:23:00.000-07:00

SKS MICROFINANCE LIMITED is likely to hit the market shortly. Many others in this sector have lined up for IPOs. The bubble is growing bigger each day. These companies are similar to the finance and leasing companies that mushroomed in the late seventies and early eighties and disappeared into thin air subsequently. More over, Micro financing started as a social cause enterprise is turning out to be blood-sucking business. The poorest of the poor and hapless sections of the society are being exploited. More and more entrepreneurs and PE funds are eager to do business in this segment.

The Micro Finance Institutions, instead of providing credit at affordable interest rate, exploiting the situation and looking for a return on investments in excess of 30% p.a. Micro finance should not be viewed as a business venture where one can expect very high return on investments. The borrowers pay exorbitant rate of interest. Moreover, most of their income goes for servicing the debt with no savings. This kind of situation is no better than the one the poor borrowers had experienced with the traditional moneylenders. They also defeat the very purpose of establishing the Micro Finance Institutions. The ultimate goal of microfinance is to enable the poor to build assets, increase incomes, reduce vulnerability to shocks and economic stress and improve quality of life by enabling better access to education and healthcare. How can they do that with that kind of interest structure?

Micro finance should not be viewed as a business venture where one can expect very high return on investments. Governmental and statutory regulations, including the imposition of an interest-rate ceiling, are bound to happen. This will adversely affect the
operating results. More importantly, the sector, which sucks the blood of the poorest of the poor, does not deserve any support. AVOID ALL MICRO FINANCE COMPANIES IPOS.

REVIEW OF IPO RECOMMENDATIONS

2010-04-07T03:39:00.000-07:00

NAME OF THE COMPANY	ISSUE PRICE	INITIAL LISTING/CURRENT PRICE	FIRST CHOICE RECOMMENDATIONS

1. EURO MULTIVISION	RS 75	BELOW OFFER PRICE	AVOID
2. INDIA BULLS POWER	RS 45	BELOW OFFER PRICE	AVOID
3. DEN NET WORKS	RS 195	BELOW OFFER PRICE	AVOID
4. COX & KINGS	RS 330	ABOVE OFFER PRICE	APPLY
5. JSW ENERGY	RS 95	ABOVE OFFER PRICE	APPLY
6. GODREJ PROPERTIES	RS 490	ABOVE OFFER PRICE	APPLY
7. BIRLA SHLOKA	RS 50	BELOW OFFER PRICE	AVOID
8. INFINITE COMPUTERS	RS 165	ABOVE OFFER PRICE	APPLY
9. VASCON ENGINEERS	RS 165	BELOW OFFER PRICE	AVOID
10.HATHWAY CABLES	RS 240	BELOW OFFER PRICE	AVOID
11. REC	RS 203	ABOVE OFFER PRICE	APPLY
12. MAN INFRACONST.	RS 252	ABOVE OFFER PRICE	APPLY
13. UNITED BANK	RS 60	ABOVE OFFER PRICE	APPLY
14. DB REALTY	RS 468	BELOW OFFER PRICE	AVOID
15.EMMBI	RS 45	BELOW PRICE	AVOID
16.THANGAMAYIL	RS 75	ABOVE OFFER PRICE	APPLY
17.PRADIP OVERSEAS	RS110	BELOW OFFER PRICE	AVOID
18.PERSISTENT	RS 310	ABOVE OFFER PRICE	APPLY
19.NMDC	RS 285	ABOVE OFFER PRICE	APPLY
20. TEXMO PIPES	RS 90	CURRENT PRICE- BELOW OFFER PRICE	AVOID

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SREE NARAYANA GURU CO-OP BANK TO OPEN BRANCH AT NERUL

2010-03-24T18:37:00.000-07:00

The Chembur head quartered co-op bank will open its fourth branch at Sea wood,(E), Nerul, next month. At present, the bank has branches at Bhandup(W),Chembur and Mulund (W).The group has also promoted various educational institutions in Sree Narayana Nagar,Chembur and rendering exemplary service to the society.

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IPO ANALYSIS: GOENKA DIAMOND AND JEWELS LIMITED – MAY NOT GLITTER – AVOID.

2010-03-20T22:46:00.000-07:00

Goenka Diamond and Jewels, which is in the business of diamond manufacturing and retailing of diamond jewellery, plans to raise Rs 145cr from the market through IPO. The issue will open on 23-03-10 and closes on 26-03-10. The company is offering 1, 00, 000, 00 equity shares of Rs 10 each, in the price band of Rs 135-145. CARE has awarded grade -2 for the IPO. SBI Capital Markets Limited is the sole BRLM.

BUSINESS

The company is one of the leading manufacturer and trader of cut and polished diamonds (CPDs) in the country. The company is also engaged in manufacturing and marketing of studded jewellery through its retail stores - G Wild and CERES. Goenka has state of the art facilities at Surat (Gujarat) and Goregaon (Mumbai).

Goenka Diamond initially was in the business of export of coloured stones and has since then expanded into diamond trade in 1994 and manufacturing of diamond studded jewellery in 2003. The manufacturing activity got boost in 2006, when the company established its own diamond-processing unit at an SEZ in Surat for processing of rough diamonds. In 2007, the company also set up a facility for processing of rough diamonds in Mumbai to cater to the local market and for in-house jewellery making operations. Goenka scaled up the diamond jewellery making operations by establishing a dedicated manufacturing facility in Mumbai and launched the first jewellery retail store in July 2008.

OBJECTS OF THE ISSUE

The company intends to utilize the proceeds from the issue, among others, for retail expansion, for working capital requirements and establishing a jewellery manufacturing facility.

FINANCIALS (RS IN CRORES)

	07	08	09
TOTAL INCOME	73.61	200.62	451.29
NET PROFIT	2.70	12.41	27.38
EPS (RS)	1.93	9.56	20.60
RONW (%)	7.55	27.34	37.14

COMPARISON WITH THE PEERS

	TURN OVER (FY 09)	NET PROFIT	EPS	P/E	BV
CLASSIC DIAMOND	677.20	3.50	16.60	7.5	57
GEETANJALI	2693.90	126.90	14.60	7.20	226
SU-RAJ	2417.80	33.40	5.40	6.5	123
SHRENUJ	911.40	13.40	1.90	14.80	29
GOENKA	451.29	27.38	20.60	**	55

RISKS FACTORS

1.The company faces execution risks in scaling up the retail business, where its track record is limited.

2. The diamond processing facility is geographically located in one area. Any localized unrest, political disturbances in the area could adversely affect results of operations.

3. The requirement of high working capital will put pressure on the margins.

4. Family owned, controlled business enterprise.

VALUATION AND RECOMMENDATIONS

Other than Rajesh Exports Limited (Leading gold jewellery exporter), the stocks in this sector are not fancied by investors. Su-Raj Diamonds and Geetanjali Gems, whose turnover, net profit and BV is much more than the Goenka Diamonds are available at less than 7.5 P/E. At Rs 135-145, the valuation looks expensive compared to the established players in the industry. Investors may stay away from the issue.

IPO ANALYSIS: SHREE GANESH JEWELLERY HOUSE LIMITED

2010-03-15T20:47:00.000-07:00

The Kolkata based, manufacturer and exporter of hand crafted gold jewellery is entering the capital market with issue of 1,42, 69,831 equity shares of Rs 10/- each, including the offer for sale of 21, 33,334 equity shares. The issue opens on 19-03-10 and closes on 23-03-10.

Nilesh Parekh and associates are the promoters of the company.

A Four Star Export House, exports its products to U.A.E, Singapore and Hong Kong. The Company’s export income has grown at a CAGR of 72.71% from FY 2007 to FY 2009 and Company’s share in the India’s gold jewellery exports has increased from 1.83% to 6.10% during the same period. During the FY 2007, 2008 and 2009 the company exported 86.73%, 94.19% and 99.23% of its products, respectively.

The Company’s export performance has been recognized by the Gems and Jewellery Export Promotion Council (“GJEPC”) in 2007 – 2008 and in 2008 – 2009 and has been awarded the ‘Outstanding Export Performance and Contribution in the Trade for Plain Precious Metal Jewellery Exports by Unit from EoU/EPZ’ for both the years.

Shree Ganesh Jewellery intends to utilize the issue proceeds, apart from expanding the existing facilities, to set-up new manufacturing facilities and for meeting the working capital requirements.

FINANCIALS (Rs in crores)

	07	08	09
TOTAL INCOME	827.24	1283.03	2218.20
NET PROFIT	48.53	89.66	132.45
EPS (Rs)	11.32	20.65	27.29
RONW (%)	51.39	33.45	33.31

The NAV per share as on 30-09-10 is Rs99.01

RISKS

The company proposes to diversify into the manufacture of machine made jewellery, diamond studded jewellery at the proposed plants, and intend to expand the chain of retail outlets. The limited experience in setting up and operating a manufacturing facility and under taking retail operations at a larger scale poses risks.

PUBLIC ISSUES – VALUATION THAT MATTERS, NOT MERCHANT BANKERS

2010-03-15T03:56:00.000-07:00

The government, stung by the poor response to stake sale in NTPC, REC and NMDC has decided to review the performance of the investment bankers in the earlier issues managed by them, before it gives them the mandate. Under the new rules being considered, 70% Weightage for quality aspects and 30% for transaction fees. Currently, the merchant bankers are selected purely based on bids. Again, the thinking of the government on the above matters is off the track. Although the credibility and reputation of the merchant bankers are required, you cannot sell an issue on that alone. Pricing and valuation are very important.

UBS Securities, CITI group global, Edelweiss Capital, Kotak Mahindra Capital, Morgan Stanely, managed NMDC FPO. These private merchant bankers are reputed and have good track record in issue management. However, the FPO of NMDC got poor response and had to be bailed out by government controlled financial institutions. As compared to that, in the same week NMDC FPO opened for public, SBI capital Markets Limited, a public sector out fit, managed the public issue of DQ international which was over subscribed by 86 times. There was nothing wrong with the timing of NMDC issue. Then what went wrong? Definitely, there was some thing wrong with the pricing. NMDC FPO issue had all the plus points – operating margin is in excess of 75%, net profit margin of 51% and RNOW is around 40%. Zero Debt Company. Healthy dividend pay out record. The bonus component in the capital is 66.66%. However, the investor response to the issue was poor. In the FY 2010-11, government plans to mobilize Rs 40,000cr from disinvestment. The valuations of the issues have to be attractive to get good investor response. Government should think on this aspect instead of blaming the merchant bankers.

Other than preparing a quality offer document and giving sound investment advice, the strength and capability of all the merchant bankers, so far as attracting/inducing the investors for subscription for an issue, are the same. I don't think that there is any merchant banker in the country, who can sell an issue, only on his strength, irrespective of valuations and market conditions.

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NMDC FPO -DECENT RESPONSE ON FIRST DAY

2010-03-10T06:41:00.001-08:00

The NAVRATNA’S follow on public offer received decent recent response on the first day, with bids for 17 percent of the shares on offer. Considering the size of the issue this response is very good. However, the offer received bids mostly at the lower end of its price band of Rs300.
NMDC shares ended at 379.85 rupees, up 1.1 percent in the exchanges.

RS 40,000CR DIS INVESTMENT IN NEXT FISCAL

The government is likely to go ahead with divestment in 12-15 public sector units, including SAIL, Coal India, Hindustan Copper, SJVNL and EIL and others next fiscal to raise Rs40,000 crore, as indicated in the budget.
The said divestment in some of these companies will be through initial public offers while in some others it will be follow-on public offers.