Financial & Stock ideas for Investors

Astral - 4QFY22 Result Update - Multiple Avenues of Revenues to Unfold

2022-06-05T04:49:00.004-07:00

Astral reported a healthy revenue of Rs13.9bn in 4QFY22 (up 23.3% YoY and 26.5% QoQ) vs. our estimate of Rs12.9bn. Plastic revenue increased by 22.3% YoY to Rs10.8bn, while Adhesive revenue jumped by 27% YoY to Rs3.1bn. Volume of Plastic segment rose by 11% YoY to 47,211MT, while realization stood at Rs230/kg, up 7.4% YoY. EBITDA fell by 14.8% YoY (up 9.7% QoQ) to Rs2.2bn (in line with our estimate of Rs2.2bn), while EBITDA margin dipped by 700bps YoY to 15.6%, due to the higher RM cost (+39% YoY). EBITDA margin of Plastic segment declined by 610bps YoY to 18.5%, while Adhesive business’ margin fell by 630bps YoY to 10.8%. PAT came in at Rs1.46bn, down 17.3% YoY (up 14.2% QoQ), in line with our estimate of Rs1.45bn. For FY23E/FY24E, we lower our revenue estimates by 1%/2%, despite assuming an additional revenue from the newer businesses, mainly due to a lower realization of Pipes business on a high base. Revenue from newer segments like Water Tanks, Paints and Faucet & Ceramic is likely to increase gradually. We lower our EBITDA margin estimates by 154bps/167bps for FY23E/FY24E, and thus reduce our EBITDA estimates by 9%/10% and PAT estimates by 11%/10% for FY23E/FY24E. For FY22, Astral reported 21% YoY growth in PAT at Rs4.9bn, while revenue rose by 37% YoY to Rs43.4bn.

In view of the strong all-round growth ahead, rising market share, revival in infrastructure and real estate activities, foray into new segments, it may be considered for buying , with a revised Target Price of Rs2,215 (from Rs2,840 earlier), valuing the stock at a revised target P/E of 65x FY24E earnings.

Revenue to Double in Next 5 Years; Major Capex to Complete by FY23

Astral expects its major capex to be completed by FY23 and post which, there will be a maintenance capex of Rs400-500mn every year. Construction activity of its adhesive plant in the chemical zone of Dahej (Gujarat) is on in full swing and the plant will be ready by FY23-end. The company has launched various products in the Adhesive & Sealants segment under a different chemistry, whereby revenue is expected to double in 5 years with the existing products. Astral has a market share of 9.5% in Pipes business. The additional 2 new pipe plants at Sangli and Aurangabad will increase its market share in Maharashtra and South India markets over the next 5 years. We expect the newly undertaken businesses like Water Tanks, Faucet, Sanitaryware, Paints, and Drain Pro to contribute Rs15bn revenue over the next 5 years.

Outlook & Valuation

We believe Astral would continue with its growth trajectory led by a) leadership position in CPVC market, b) opportunities in infra pipes segment, c) government’s strong emphasis on infrastructure and housing, d) strong growth potential of Adhesive business after restructuring of its distribution network and, e) new segments. We believe the company’s premium valuation will sustain, going forward, led by the leading position in CPVC pipes segment, continued focus on innovative and high-margin products and restructuring of its Adhesive business. We expect the company to report revenue and earnings CAGR of 11% and 18% respectively, over FY22-FY24E. Factoring the strong all-round growth, rising market share, revival in infrastructure and real estate activities, foray into new segments, it may be considered for buying , with a revised Target Price of Rs2,215 (from Rs2,840 earlier), valuing the stock at a revised target P/E of 65x (earlier 75x) FY24E earnings.

Adani Wilmar - IPO - A Fortune of Edible Oil

2022-01-28T22:06:00.008-08:00

Adani Wilmar - IPO - A Fortune of Edible Oil

About the Company

Adani Wilmar (AWL) is a JV between Adani Enterprises and Wilmar International, which offers most of the essential kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses, and sugar. The company’s business is categorized into 1) Edible Oil (82% of revenue): AWL is the largest player in branded edible oil, with 25% of India’s refining capacity, and has 2x market share of the next competitor. 2) Packaged Food and FMCG (5%): It ranks among the top 3 players in foods in India. 3) Industry Essentials (13%): It ranks first and is the world’s largest castor oil player, most of which is exported to Europe, the US and China. AWL produces 32% of the country’s stearic acid requirement, 23% of glycerine requirement and 9% of soap noodles requirement. It operates in 28 states and 8 UTs with 10 crushing units and 19 refineries, and the business spans to 1.6mn retail outlets. The company’s “Fortune” flagship brand is the largest-selling edible oil brand in India. Rural population contributes to 30%-35% of the edible oil share. Recently, AWL has focused on value-added products and has launched edible oil products, rice bran health oil, fortified foods, khichdi etc. The company has strong raw material sourcing capabilities and was India’s largest importer of crude edible oil as of FY21. AWL’s edible oil refinery in Mundra is one of the largest single-location refineries in India with a capacity of 5,000MT per day. In addition to the 22 plants, the company also used 36 leased tolling units as of Sept’21 for additional manufacturing capacities. The IPO’s price band is fixed at Rs218-230 per share, raising Rs36bn (at a higher band) with the fresh issue. The objective of the issue is to fund the capex of existing manufacturing facilities and develop new manufacturing facilities. The company also plans to repay its borrowings and fund strategic acquisitions.

Financials in Brief

AWL has been mostly resilient to the fallouts from the Covid pandemic. Despite a dip in the EBITDA margin from 4.4% in FY20 to 3.6% in FY21, the company reported a 62% YoY jump in PAT at Rs6.6bn, led by the saving in interest cost, which also helped to improve the net margin to 1.8% in FY21, from 1.4% in FY20. Debt-to-equity improved from 0.9x in FY20 to 0.6x in FY21. For 1HFY22, its revenue jumped by 54% YoY to Rs248bn, with an EBITDA of Rs8bn (up 23% YoY) and PAT of Rs3.3bn (up 36% YoY).

Our View: SUBSCRIBE

On FY22 annualized financials, the IPO is valued at 19x EV/EBITDA, 0.6x EV/sales and 44.6x P/E. On FY22 annualized financials, the IPO is valued at 19x EV/EBITDA, 0.6x EV/sales and 44.6x P/E. The IPO is available at ~53x TTM PE vs. the industry average of 67x TTM PE, which is a discount of ~21%. AWL is the largest player in branded edible oil, with 25% of India’s refining capacity, and has 2x market share of the next competitor. The company’s market share increased from 17% in FY20 to 18.3% in FY21, and it believes that there is great opportunity to increase it further on the back of a strong brand equity and fragmented nature of the branded market. AWL ranks #1 in large categories of soya oil & mustard oil. The company believes that a player has to be present in all types of oils that the country consumes and offer multiple SKUs across the price spectrum. Currently, its export business comprises of 3 portfolios namely food (~Rs4bn revenue), oleochemicals (~Rs15bn) and castor oil (~Rs25bn), and it looks to add more products to exports, going ahead. India would consume more value-added functional products as people are becoming aware of health issues. AWL continues to focus on sustainability and with a professional and experienced board, it looks to grow over the years. In view of the differentiated product portfolio, leading market position and extensive distribution network, decent financials, likely margin improvement from current level and valuation comfort compared to peers, we recommend SUBSCRIBE to the issue.

APL Apollo Tubes - 3QFY22 Result Update - Healthy Volume and Better Product Mix to Aid Margins

2022-01-28T21:47:00.002-08:00

APL Apollo Tubes - 3QFY22 Result Update - Healthy Volume and Better Product Mix to Aid Margins

APL Apollo Tubes (APAT) has delivered a strong operating performance, despite volume decline, beating our estimate on all fronts. Revenue grew by 24% YoY (up 5% QoQ) to Rs32.3bn vs our expectation of Rs25.3bn on the back of better realisation of Rs77,569/ton (up 51% YoY and up 19% QoQ) despite volume de-growth of 17% YoY and 6% QoQ. The company recorded EBITDA/tonne of Rs5,023 vs. our estimate of Rs4,157bn. Its EBITDA margin contracted by 266bps YoY and 94bps QoQ to 6.3% vs. our estimate of 6.6%, due to the lag effect of commodity cost inflation pass-on to consumers and higher RM prices. PAT stood at Rs1.2bn (down 12% YoY and down 12% QoQ), 29% above our estimate. The management’s current plan of capacity expansion by 1.5mnT at Raipur by FY22-end and a full ramp-up in FY23, and the focus to increase the share of value-added products would aid the company’s margins, going forward.

In view of the strong products basket, improving volume traction from value added products, healthy order book, likely margin expansion from current level, introduction of new high margin products from Raipur plant and improving return ratios, it BUY rating on the stock, with an unrevised Target Price of Rs1,100.

Healthy Demand Outlook; Margins to Expand

We expect the demand for structural steel pipes and newer framed structures in various projects would keep rising over the next decade. Moreover, the company’s new product launches in various applications with strength would provide comfort to the end user to increase its usage in various projects like hospitals, new plant & projects and office structures. APAT’s ongoing projects of a 2mn sqft hospital and a 0.1mn sqft oxygen plant in Delhi have proved its efficiency in terms of 20% less steel consumption and 10% project cost saving. This would establish it to gain market share and win new orders from various industries, going forward. The company aims for a sizable volume traction in its high-margin tricoat segment and stable volume in the low-margin general structure, resulting into superior mix and leading to an expansion in overall margins. Moreover, its Raipur facility would launch all the value added products i.e. Apollo Column, Coated tubes and Coated products in FY23, which would help volume growth and margin expansion going ahead. Thus, we expect its EBITDA margin to expand to 9.2% in FY24E, from the current 6.3%.

Outlook & Valuation

IAPAT’s estimated volume to witness 9% CAGR over FY21-FY24E. Considering the lower volume and subdued financial performance in 3QFY22, we lower our revenue/EBITDA/PAT estimates by 2%/12%/15%, for FY22E. Factoring the company’s capacity expansion plan at Raipur, we raise our revenue/PAT estimates by 3%/4% for FY23E and broadly maintain it for FY24E. In view of the expected healthy volume growth ahead, better product mix, improved earnings visibility, new margin territory and return ratios of 20%, hence , The BUY rating on APAT and maintain the Target Price to Rs1,100, valuing the stock at 30x FY24E EPS.

As on 28th-Jan2022, Apl Apollo Tubes Ltd has provided 78%return in last 1 year .

Next Read : Devyani International Ltd. - IPO

Devyani International Ltd. - IPO

2021-08-04T00:44:00.003-07:00

Devyani International Ltd. - IPO - Strong Franchise with Wide Reach

About the Company

Devyani International Ltd. (DIL), incorporated in 1991, is the largest franchisee of Yum Brands Inc. (Yum). It is one of the largest quick-service restaurant (QSR) chain operators in India with 655 stores across 155 cities as of Mar 31, 2021. Yum operates several fast food brands i.e. Pizza Hut, KFC and Taco Bell. It operates three business verticals namely: (1) core brands (KFC, Pizza Hut and Costa Coffee in India); (2) international business (stores in Nepal and Nigeria); and (3) other businesses (own branded stores namely: Vaango, Food Street, Masala Twist, Ile Bar, Amreli, and Ckrussh Juice Bar). DIL began its relationship with Yum in 1997, when it commenced operations of its first Pizza Hut store in Jaipur. Subsequently, the company continued to expand its operations with both KFC and Pizza Hut franchises. As of June 30, 2021, it was operating 284 KFC stores and 317 Pizza Hut stores in India. Notably, the company collaborates with Yum across various aspects of operations for KFC and Pizza Hut for protection and management of franchisor’s brand apart from product innovation and development, brand strategy and technology initiatives. It also works closely with Yum on advertising, promotion and marketing activities. For Costa Coffee, it enjoys operational flexibility with respect to similar parameters as well as determining menu, ingredients, suppliers and distributors.

Financials in Brief

DIL’s financial performance was significantly impacted in FY21 due to business disruptions caused by COVID-19, for which its revenue, EBITDA and PAT recorded negative CAGR of 7%, 16% and 18%, respectively over FY19-FY21. However, the company increased the number of stores from 469 in FY19 to 605 in FY21 under its core brand business i.e. KFC, Pizza Hut and Costa Coffee. Further, its EBITDA margin as on FY21 stood at 15.8%, which is superior compared to key peers like Burger King and Westlife Development. Additionally, its cash flow generation has been impressive with cumulative OCF and FCF of Rs8.2bn and Rs1.8bn, respectively over FY19-FY21.

Review: May SUBSCRIBE

The IPO is valued at 62.8x of FY21 EV/EBITDA and 9.9x of FY21 EV/Sales, which look to be reasonable compared to its listed QSR peers and Westlife Development (McDonald’s) and Burger King. Fast food culture under QSR is expected to flourish in India due to increase in working class population and continued urbanization. We note that business model of QSR is quite impressive, as each restaurant franchise starts generating significant RoE at restaurant level once it reaches utilization level of 90%, which bodes well for the long-term investors. Additionally, superior cash flow generation ability of the business offers comfort.

''In terms of valuations, the post-issue FY2021 EV/Sales works out -9.9x to (at the upper end of the issue price band), which is low compared to peers (Jubilant Foodworks-15.4x, Burger King India -14.8x, Westlife Development – 10x). Further, Devyani International has a better operating margin compared to Westlife Development & Burger king. We believe this valuation is at reasonable levels. Thus, we recommend a subscribe rating on the issue,'' Angel Broking said in a note.

The quick service restaurant (QSR) company's IPO consists of a fresh issue of ₹440 crore and an offer for sale (OFS) of upto 155.33 million shares by shareholders and promoters.

''Devyani is well placed to benefit from growing industry trends as it has a strong portfolio of highly recognized global brands which cater to a range of customer preferences. The financial performance has been tepid for the company which has further got impacted in FY21 due to the pandemic. However, the company intends to improve its unit performance which would aid better margins. Considering the current market sentiments, investors may subscribe for listing gains,'' Religare Broking said.

Hence, Investors may SUBSCRIBE to the issue.

Investors who wish to subscribe to the Devyani International IPO can bid in a lot of 165 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 14,850 to get a single lot of Devyani International. The shares will be listed on both BSE as well as the National Stock Exchange (NSE).

The applicants also must note that the cut-off time for UPI mandate confirmation is Monday, August 9, 2021, upto 12:00 pm. If they fail to do so then their application may not be considered.

Kotak Mahindra Capital Company Ltd, CLSA India Pvt Ltd, Edelweiss Financial Services Ltd, Motilal Oswal Investment Advisors Ltd are the investment bankers to the issue. The proceeds from the issue will be used for repayment of certain or full borrowings of its firm.

Devyani International (DIL) is the largest franchisee of Yum Brands in India and is among the largest chain operators of quick service restaurants (QSR) in India on a non-exclusive basis, and operates 696 stores across 166 cities in India, as of June 30, 2021. Yum! Brands Inc. operates brands such as KFC, Pizza Hut and Taco Bell and has a presence globally with more than 50,000 restaurants in over 150 countries, as of December 31, 2020.

As on 28th Jan 2022 - Devyani International has provided 35% returns .

Online Survey : 10 stocks which you would like to invest for long term in 2021.

2020-12-31T23:53:00.001-08:00

Hi All ,

Similar to last year, We are conducting an Online Survey of 10 stocks that you would like to invest for the long term in 2021.

Request you to share your responses with fav. stocks. Please share the response details in the comments section of the post.

The survey will be open from 1-Jan-2021 to 3rd-Jan-2021. The survey details will be consolidated and published in the following week.

We will also share the result of the annual performance of stocks identfited 2020 stock survey.

Happy Investing.

Other Reads: Six Months performance of the survey stocks survey 2020

Why You Do Not Need to Worry about Investments in HDFC MF Schemes Post Milind Barve’s Tenure

2020-11-19T07:07:00.001-08:00

HDFC Mutual Fund on November 16, 2020, informed stock exchanges about the appointment of Navneet Munot as the MD and CEO of the company. Munot will be succeeding Milind Barve, the current and longest-serving CEO and MD, when his term ends on January 31, 2021.

Barve’s current term officially ended on October 31, 2020, and he had expressed his desire to turn down a term extension because he is turning 63 this year. However, he agreed to an extension of term for an additional three months to provide adequate time to identify a suitable successor and ensure smooth transition and functioning of business operations.

Barve who has served as MD of HDFC Mutual Fund (MF) since its inception about two decades ago has played a key role in the growth and success of its business. Over this period, the fund house grew considerably to become one of the largest and most popular in the mutual fund industry.

During his term, the company was listed on stock exchanges, becoming only the second asset management company in India to do so.

HDFC Mutual Fund’s popularity grew leaps and bounds in the minds of investors due to strong performance of its various schemes in the past. Its asset under management now stands at Rs 3.7 trillion (as on October 31, 2020), second only to SBI Mutual Fund.

Should investors in HDFC mutual fund schemes worry about Barve's exit?

Over the past couple of years, numerous HDFC MF schemes that were once popular have been struggling to keep pace with the benchmark and have lagged many category peers. A change in senior management team could prove to be beneficial for the fund house.

Navneet Munot, stepping into the shoes of Barve, brings with him an immense experience of over 25 years in the fund management business. Munot has been the CIO of SBI Mutual Fund for the past 12 years and was previously associated with Aditya Birla Sunlife Mutual Fund as the CIO of Fixed Income and Hybrid Funds.

Munot took charge as CIO of SBI MF in December 2008 when the fund house was adversely impacted following the global financial crisis. He was successful in steering the fund house and its investment process to stability. SBI MF now manages assets worth Rs 4.3 trillion (as on October 31, 2020), the largest in the industry.

During his term, SBI won the mandate to manage funds of EPFO which coupled with decent performance across categories helped it become the largest asset manager. SBI MF became among the first to adopt the environmental, social, and corporate governance (ESG) as well as passive themes of investing during this term.

Munot's entrance in the HDFC team can therefore be seen as a positive development and is not likely to affect the robust investment process and systems that HDFC MF has in place.

Notably, HDFC MF still has star fund managers in Prashant Jain (CIO & ED) and Chirag Setalvad (Senior Fund Manager), known for their superior long-term performance record and high conviction investment bets.

What does it mean for investors in SBI MF schemes?

SBI MF has not yet announced a replacement for Munot, but the fund house seems to be well prepared to deal with his exit. Vinay Tonse, MD and CEO, SBI Funds Management in an address to media said, "The fund management structure at SBI Funds Management will continue to remain the same, as the company over a period of time has built a very capable second line with strong vintage."

What should investors do in the event of change in management?

A change in management team does not warrant any portfolio action. You should only look for alternatives if you find the performance of a fund unsatisfactory over a longer duration, based on qualitative and quantitative parameters.

Apart from the consistent underperformance of the scheme, listed below are the other circumstances when one can consider exiting their equity mutual fund scheme:

Your investment has grown to the desired corpus
To gradually shift to safer avenues when your financial goal is approaching
During portfolio rebalancing to maintain the desired asset allocation
The fund objective changes and is no longer in congruence with your own objective
The fund risk profile changes and doesn't match your current risk appetite
In case of a financial emergency when you have no other option
You wish to adopt change in investment style (value, growth, blend, aggressive, conservative, etc.)

It is important to understand the investment philosophy of the fund house and investment processes they follow. Only process-driven fund houses can give you consistent performers over the long term.

Furthermore, before making an investment decision, evaluate your investment objective, risk appetite, and investment horizon to select the appropriate scheme based on unbiased research.

Next Read : Teachers Day 2020-Five books from investment gurus every young investor should read

Teachers' Day 2020: Five books from investment gurus every young investor should read

2020-09-20T05:24:00.004-07:00

Teachers' Day 2020: Five books from investment gurus every young investor should read.

The celebrations for Teachers’ Day 2020 is abuzz. While everybody is using this occasion to thank their teachers for their valuable contributions in their life. Besides, there are few investment gurus, who through their books have given invaluable advice to people to help them grow into a successful investor. Certainly, these books would help young investors to understand better the rough and tumble of the stock, currency and commodity markets. Here are five such books from investment gurus that every young investor should read.

1) "Rich Dad, Poor Dad" by Robert Kiyosaki

One can never grow rich by earning more unless and until he saves more and invests that amount properly. Where you spend your money decides your financial fate. "Rich Dad, Poor Dad" is a book that will teach you the basics of investing, assets, liabilities and how you can make your money work for you. Robert Kiyosaki, who himself has been a seasoned investor has advocated investments that will produce regular income for investors and will help him in achieving financial freedom. This book is a must-read for every young earner who wants to create an alternative stream of income by making proper investments.

2) "The Intelligent Investor" by Benjamin Graham

Author of this book Benjamin Graham is considered as the "father of value investing". This book advocates the purchase of stocks that appear cheap relative to its underlying value. This book discusses various ways of managing your investment portfolio. The author has given the example of many companies to illustrate his views. Warren Buffett, the value investing guru has even hailed the book as the best investing book ever written.

3) "The Dhandho Investor" by Mohnish Pabrai

The book will tell you how to create wealth through low–risk, high–return approach. This book has given the example of Patels, a small business community from India, who first began arriving in the United States in the 1970s as refugees with little education and capital and now own over $40 billion in assets in the United States and pay over $725 million a year. This book tells you to use the techniques used by the Patels in making stock market investment

4)"Think and Grow Rich" by Napoleon Hill

This book conveys important insights into the psychology of success and abundance, and should be considered a priority read given the current time period's emphasis on shock-value entertainment and negative news. The author of this book Napoleon Hill has conducted extensive research based on his association with wealthy individuals during his lifetime and has published 13 principles for success and personal achievement from his observations and research. These include desire, faith, specialized knowledge, organized planning, persistence and the "sixth sense."

5) "Beating the Street" Peter Lynch

Author of this book Peter Lynch started his carrier as an intern at Fidelity Investments in the mid-60s and became one of the most successful stock market investors and hedge fund managers. By reading this book you can peek into Lynch's mind and thought process in terms of deciding whether to buy or sell a stock. According to Lync, an individual investor can exploit market opportunities better than Wall Street. He has encouraged investors to invest in what they know.

Next Story : CAMS IPO

CAMS IPO

2020-09-20T03:57:00.009-07:00

What is CAMS?

Incorporated in 1988, CAMS provides services to both mutual fund companies and investors. It provides services for verification, processing and receipt of non-financial and financial transactions for the BFSI sector, more prominently for the mutual fund industry. It also provides services to investors like consolidated account statement (CAS) generation, changing mandate and more.

The company is currently headquartered in Chennai.

Few of its subsidiaries include:

CAMS KRA
CAMS Insurance Repository Services Ltd.
Sterling Software Pvt. Ltd.
CAMS Financial Information Services Pvt. Ltd.

IPO DETAILS

Particulars	Description
IPO Subscription Dates	September 21-23
Listing Date	On or about October 1, 2020
IPO Price Band	Rs 1,229-1,230 per share
Number of shares on offer	1,82,46,600
Face Value	Rs 10 per share
Minimum Bid Quantity	12
Leading Book Managers of the Issue	1) Kotak Mahindra Capital Company Ltd. 2) HDFC Bank Ltd. 3) ICICI Securities Ltd. 4) Nomura Financial Advisory and Securities (India) Private Ltd.

Share Portions Reserved For Different Investor Categories

There are different kinds of investors: retail, institutional, non-institutional who can participate in the IPO. There is some portion reserved for the employees as well.

Employee Reserve Portion	Up to 182,500 Equity Shares
Anchor Investor Portion	Up to 5,419,230 Equity Shares
Net QIB Portion	3,612,820 Equity Shares
Of the net QIB Portion: Mutual Fund Portion	Up to 1,806,410 Equity Shares
Non-institutional Portion	Not less than 2,709,615 Equity Shares
Retail Portion	Not less than 6,322,435 Equity Shares
Equity Shares outstanding prior to and after the IPO	48,786,800 Equity Shares

What is an RTA?

RTA’s aid asset management companies in record maintenance. They also provide services to mutual fund investors as a single-window reference point for all their mutual fund investment-related information.

CAMS IPO Employees Reservation

A discount of ₹122 per Equity Share is being offered Eligible Employee Bidding in the Employee Reservation Portion. up to 182,500 Equity Shares are reserved for employees. Note:

When using UPI as a payment method, the primary account holder in the bank and demat should be the same person. Use of 3rd party UPI ID or 3rd party bank account is not allowed.

When using ASBA, up to 5 CAMS IPO applications can be applied from the same bank that offers the 3rd Party ASBA IPO application.

HUF and Minors can only apply using ASBA from the banks that offer the 3rd Party ASBA IPO application. i.e. SBI, Axis bank.

IIFL: Subscribe
The brokerage said at the upper limit of the price band, the issue is priced at 35 times FY20 EPS, which is a 10-15 per cent discount to listed AMCs, exchanges and depositories. It expects the stock to trade in-line with other comparables and further re-rate.

YES Securities: Subscribe

YES Securities values the issue at 26 times FY22 P/E and believes it is reasonable.

The brokerage said that the given CAMS would be a direct beneficiary of low MF penetration, but the growth would be lower given that fees are generally tiered in nature.

Choice Broking: Subscribe with caution

Based on its conservative estimate, Choice is expecting a 2.7 per cent CAGR rise in the topline growth for the company over FY20-23 to Rs 757.91 crore in FY23.

It sees Ebitda and PAT to grow at 1.5 per cent and 6.4 per cent, respectively.

Risks to Investors

The 4 Lead Managers associated with the Offer have handled 17 public issues in the past three years out of which 6 issues closed below the issue price on the listing date.

The PE ratio based on diluted EPS for FY 2020 for the Issuer at the upper end of the Price Band is as high as 34.61.

Average cost of acquisition of Equity Shares for the Selling Shareholder namely NSE Investments Limited is Rs 187.86 per Equity Share and the Offer Price at the upper end of the Price Band is Rs 1,230 per Equity Share.

Weighted Average Return on Net Worth for Fiscals 2020, 2019, and 2018 is 31.40%

Next Story : Six Months performance of the survey stocks

Six Months performance of the survey stocks

2020-08-23T04:34:00.007-07:00

Looking at the six months performance of the survey stocks, it looks like most of them have done well during last 2 quarters from March-2020 to August 2020. The returns percentage are approximated and may vary with actuals.

Sr no	Stock Name	votes	6-M returns in %	Comments
1	RELIANCE	27	138	does not include partly paid shares and dividends
2	HDFCBANK	23	41.46	does not include dividends
3	TCS	16	40	does not include dividends
4	DMART	16	27	does not include dividends
5	BAJAJ FINANCE	15	54	does not include dividends
6	LARSEN TUBRO	14	42.8	does not include dividends
7	INFY	13	73.94	does not include dividends
8	IRCTC	12	39.22	does not include dividends
9	HDFC	12	18.40	does not include dividends
10	HDFCAMC	12	16.66	does not include dividends
11	ICICIBANK	10	32	does not include dividends
12	BAJAJ FINSERVE	10	53	does not include dividends
13	ITC	10	36	does not include dividends
14	SBI	10	33	does not include dividends
15	KOTAK BANK	10	18.18	does not include dividends
16	HDFC LIFE	10	72	does not include dividends
17	MOTHERSON SUMI	< 10	122	does not include dividends
18	ASHOK LEYLAND	< 10	112	does not include dividends
19	HUL	< 10	16	does not include dividends
20	TATA MOTORS	< 10	45	does not include dividends
21	ASIAN PAINTS	< 10	30	does not include dividends
22	M&M	< 10	127	does not include dividends
23	BIOCON	< 10	70	does not include dividends
24	AXIS BANK	< 10	46	does not include dividends
25	IGL	< 10	38.66	does not include dividends
26	BATA	< 10	30	does not include dividends
27	YES BANK	< 10	-6.66	does not include dividends
28	ICICI PRU.	< 10	87.88	does not include dividends
29	HERO MOTORS	< 10	89.88	does not include dividends
30	NBCC	< 10	93	does not include dividends
31	ICICI LOMBARD	< 10	34	does not include dividends
32	KEC INTL	< 10	102	does not include dividends
33	BRITANNINA	< 10	87	does not include dividends
34	ADANI SEZ	< 10	71	does not include dividends

Next Story CAPS IPO

Next Story : Six Months performance of the survey stocks

Meghmani Organics Limited Corporate action update

2020-02-02T03:02:00.001-08:00

Meghmani Organics Limited (MOL) hereby informs that a Scheme of Arrangement for Amalgamation amongst Meghmani Finechem Limited (MFL) a Subsidiary and Meghmani Agrochemicals Private Limited (MAPL), a wholly-owned subsidiary of MOL is proposed.

The Proposed Scheme shall be subject to the approval of National Company Law Tribunal, Ahmedabad. Sub: Meghmani Organics Limited (Meghmani): Outcome of Board Meeting Held on 29th-January, 2020

Ref:-Intimation under Regulation 30 of SEBI [Listing Obligations and Disclosure
Requirements) Regulations. 2015 ("Listing Regulations")

The Board of Directors of Meghmani Organics Limited (Meghmani “or "the Company") on
recommendation of its Audit Committee at its meeting held on 29th January, 2020 has
considered and approved a Composite Scheme of Arrangement amongst Meghmani
Organics Limited (MOL 1’) and Meghmani Organochem Limited (“MOL 2’) and
Meghmani Finechem Limited (“MFL”) and their respective shareholders and creditors
(the ‘Scheme’)under Sections 230 to 232 and other relevant provisions of the Companies
Act, 2013 and the Rules made thereunder, which interalia provides for :-

1. Demerger of Agrochemical and Pigment Undertaking from MOL1 into MOL2, on a
going concern basis.
On Scheme being effective, the name of MOL 2 will be changed to Meghmani
Organics Limited or any other name as may be approved by ROC.

2. Amalgamation of Remaining Business Undertaking of MOL 1 with MFL and
The Board of Directors of MFL (a material subsidiary of the Company) and MOL2 have
approved the Scheme at their respective board meetings.

The Scheme is subject to requisite statutory and regulatory approvals of Central
Government, Reserve Bank of India, Singapore Stock Exchange ((SGX-ST’), National Company
Law Tribunal (NCLT), Indian Stock Exchanges (NSE & BSE), SEBI and/or any other
regulatory approvals and sanction by the respective Shareholders and Creditors of each of
the Companies, involved in the Scheme.
Attachment for reference.

Next Story : Online survey result 10-stocks for 2020.

Online Survey Result : 10 stocks which you would like to invest for long term in 2020.

2020-01-04T03:56:00.002-08:00

Online Survey Result: 10 stocks which you would like to invest in for the long term in 2020.

We conducted an Online Survey from 31st-Dec-2019 to 2nd-Jan-2020,
To understand from Retail Investors that in 2020, which 10 stocks they would like to invest in for the long term.

Results :
Over a period of 3 days, We received 436 stock names from the participants.
There were total 65 vote entries ( 1 vote can have up to 10 stocks).
In total, There were 150 unique stock entries that were received from the participants.
These stock range from large-cap, midcap, small and microcap space.

Here is the graph of the top 10 stocks which were voted most by the participants.

Looking at the top 10 stocks, it looks like Large caps are favorite among retail investors.
However, There is mix interest in good companies from midcap, small-cap and mico caps as well.

Here is the list of all 150 stocks along with their votes:

RELIANCE=27
HDFCBANK=23
TCS=16
DMART=16
BAJAJFINANCE=15
L&T=14
INFY=13
IRCTC=12
HDFC=12
HDFCAMC=12
ICICIBANK=10
BAJAJFINSERVE=10
ITC=10
SBI=10
KOTAKBANK=10
HDFCLIFE=10
MOTHERSON=7
ASHOKLEYLAND=5
HUL=5
TATAMOTORS=4
ASIANPAINTS=4
M&M=4
BIOCON=4
AXISBANK=4
IGL=4
BATA=4
YESBANK=4
ICICIPRUDENTIAL=3
HEROMOTOCORP=3
NBCC=3
ICICILOMBARD=3
KECINTERNATIONAL=3
BRITANNIA=3
ADANIPORTS=3
HIMADRI=3
AUROBINDOPHARMA=3
AMARARAJABATTERY=3
IDFCFIRSTBANK=3
EDELWEISS=3
RELIANCENIPPONASSETMANAGEMENT=2
TATAELXI=2
MEGHMANI=2
TATAELXSI=2
BEPL=2
AVANTIFEEDS=2
VENKEYS=2
NIFTYBEES=2
TATASTEEL=2
STERLITE=2
MARUTI=2
LTFOODS=2
SRF=2
JUBILANTFOODWORKS=2
ASSOCIATEALCOHOL=2
PIDILITE=2
IOC=2
ULTRATECH=2
PRAJINDUSTRY=2
MGL=2
EXIDE=1
MARUTISUZUKI=1
PNBHOUSING=1
BANDHANBANK=1
CEAT=1
LTTECHNOLOGY=1
MAXVENTURES=1
UPL=1
LTFINANCE=1
FEDERALBANK=1
PETRONETLNG=1
LUPIN=1
NTPC=1
TATAPOWER=1
GRAPHITE=1
ALPHAGEO=1
TGB=1
JKCEMENTS=1
GUJARATGAS=1
KOTAKMAHINDRA=1
EXCELINDUSTRIES=1
NOCIL=1
PAGEINDUSTRIES=1
IRCONINTERNATIONAL=1
BEML=1
MANNAPURAM=1
MRF=1
INDIANBANK=1
VARROC=1
HATSUN=1
ORIENTELECTRIC=1
NALCO=1
LLOYDSSTEEL=1
HPCL=1
ABBOT=1
OLECTRAGREENTECH=1
BALRAMPURCHINI=1
OILINDIA=1
BERGERPAINT=1
NMDC=1
MSSL=1
GAIL=1
NIPPON=1
GRAUERANDWEIL=1
CDSL=1
BEL=1
HIL=1
NAVINFLUORINE=1
AMBUJACEMENT=1
MOLDTEKPACKAGING=1
CAMLIN=1
REC=1
DIXON=1
BHEL=1
AMBER=1
NESCO=1
GPPL=1
COAL=1
ADVENZ=1
HSCL=1
WIPRO=1
EMAMILTD=1
DEEPAKNITRATE=1
TORRENTPHARMA=1
PHILIPSCARBONBLACK=1
BANKBEES=1
TATAGLOBALBEVERAGE=1
KINGFA=1
SESHAYEE=1
MPHASIS=1
SBILIFE=1
VEDANTA=1
CARBONDUM=1
RADICO=1
GNFC=1
FORTIS=1
PNCINFRA=1
RITES=1
RNVL=1
JSWSTEEL=1
SAIL=1
NESTLE=1
ANDHRASUGAR=1
HINDZINC=1
ENGINEERSINDIA=1
RBLBANK=1
PEL=1
BHARATFORGE=1
UJJIVANSAMLLFINANCE=1
CHAMANLALSETIA=1
ASTRAL=1

This suvey is informative in nature and does not provide any recommendations .
A big thanks to all participants for contibuting yo suvery .
Happy Investing :-).
Next Story : Adani ports to acquire Snowman Logistics after majority stake purchase.

Next Story : Six Months performance of the survey stocks

Adani ports to acquire Snowman Logistics after majority stake purchase.

2019-12-29T11:33:00.004-08:00

Adani ports to acquire Snowman Logistics after majority stake purchase.

Billionaire Gautam Adani’s port-to-power Adani Group acquired majority stake in Snowman Logistics Ltd. for Rs 296 crore to foray into cold chain logistics. Adani Logistics Ltd., a wholly owned subsidiary of Adani Ports and Special Economic Zone Ltd., signed definitive agreements to acquire 40.25 percent stake in Snowman Logistics from Gateway Distriparks Ltd.

Adani Logistics Limited (“ALL”), a wholly owned subsidiary of Adani Ports and SEZ Limited (“APSEZ”), has announced that it has signed definitive agreements to acquire 40.25% stake in Snowman Logistics Ltd. from Gateway Distriparks Ltd.

The purchase price of INR 44 / share represents a 3.2% premium to the market price of

December 27, 2019 and a 12% premium to 60 day VWAP.

As part of the transaction, Adani Logistics will make a mandatory open offer as per the

Substantial Acquisition of Shares and Takeover Guidelines, 2011 for a maximum 26% of the

public shareholding in the Company.The acquisition is subject to customary condition precedents and expected to close by March 31,

2020.

Mr. Karan Adani, Chief Executive Officer and Whole Time Director of APSEZ said, “We are

excited today to announce the acquisition of Snowman Logistics Ltd. The acquisition is in line with our strategy and vision to be a leader in providing integrated logistics services in India and moving from port gate to customer gate. Cold chain is key product in customer gate strategy given India’s consumer driven demand. We will double the capacity in next 5 years.

With focus on increase in utilization, higher realization from product mix and operational

efficiencies, this vertical will help further improve returns of logistics business”

Snowman Logistics Limited: (SLL)

Incorporated in 1993, SLL is in the business of integrated cold chain logistics providing

warehousing, distribution and value added services. With over 25 years of expertise, SLL is the largest organized player in the country with pan India presence operating 31 temperature controlled warehouses at 15 strategic locations.

The company infrastructure includes warehousing capacity of 1,04,343 pallets and 293 refrigerated vehicles (Reefers). SLL has a demonstrated track record of achieving scale and handling complex supply chain in cold chain industry.

With a well-diversified reputed client base, the Company derives majority of its revenue from fast growing and high yielding sectors including Seafood, Quick Service Restaurants, Meat and Pharmaceuticals

Adani Logistics Limited

Adani Logistics Limited (ALL) is a wholly owned subsidiary of Adani Ports and Special

Economic Zone Limited (APSEZL) and is the most diversified end-to-end logistics service

provider in the country with presence across all major markets. The company has expertise in handling varied customer across segments like Retail, Industrial, Bulk, Break-Bulk, Liquids, Auto and Grain Handling. ALL currently operates 5 Logistics Parks, 55 rakes ( 39 - Container, 8 – GPWIS, 1 - AFTO and 7 Agri Rakes), 400,000 sq ft of Warehousing space, 5,000 + containers, 0.9 million metric tonnes of Grain Silos and 9 Inland Waterways Vessels.

ALL has set itself a target of 15+ logistics parks, 200+ rakes, 5 million sq ft of warehouse space, 15,000 + containers, 2.5 million metric tonnes of Grain Silos and 25 Inland Waterways Vessels by 2025.

Adani Ports and Special Economic Zone

Adani Ports and Special Economic Zone (APSEZ), a part of globally diversified Adani Group, is the largest port developer and operator in India.

In less than two decades, the company has built a formidable presence in port infrastructure and services. APSEZ’s 10 strategically located ports and terminals — Mundra, Dahej, Kandla and Hazira in Gujarat, Dhamra in Odisha,Mormugao in Goa, Visakhapatnam in Andhra Pradesh, and Kattupalli and Ennore in Chennai — represent 24% of the country's total port capacity, handling vast amounts of cargo from both coastal areas and the vast hinterland.

The company is also developing a transhipment port atVizhinjam, Kerala. For more information, please visit Website - www.adaniports.com

Next Read: Bharat Bond ETF: Should you subscribe

Bharat Bond ETF: Should you subscribe?

2019-12-15T07:44:00.000-08:00

The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it.

The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio').

The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations.

Bharat Bond Exchange Traded Fund (ETF), a move aimed at deepening the corporate bond market and reducing the cost of borrowing in India.

Bharat Bond ETF is expected to create an additional source of funding for Central Public Sector Undertakings (CPSUs), Central Public Sector Enterprises (CPSEs), Central Public Financial Institutions (CPFIs) and other government organizations.

What is the product?

As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 years and the other in 10. Upon maturity, the fund will be redeemed and the money returned to the investors.

The issue size of the 3-year variant is set at Rs. 3,000 crore (with the option to extend it by an additional Rs 2,000 crore) and for the 10-year variant is Rs 4,000 crore (with the option to extend it by Rs 6,000 crore).

What makes it stand out?

The fund has a lot of things going for it.

Low-cost structure: The USP of this fund is its wafer-thin expense ratio. At 0.0005% , this bond ETF will be the cheapest mutual fund product in India and one of the cheapest debt funds in the world. In the debt segment, costs matter a lot and this provides it a massive advantage over the more conventional debt fund alternatives.

High quality portfolio: Comprising bonds issued by government-owned entities, the default risk will be low here. In the middle of credit blow-ups, the consequent side-pocketing, and the generally prevalent risk aversion, this fund offers the kind of safety the besieged debt fund investors are seeking at the moment.

Predictability of returns: The fixed maturity feature of the ETF will provide predictability of returns. If held till maturity, the investors of the 3-year variant may expect 6.69% per annum while those of the 10-year variant can hope for 7.58% per annum. It is important, however, to note that no mutual fund guarantees returns. The above figures are simply based on the current indicative yields of the indices which these funds will replicate.

Transparency: There will be daily portfolio disclosures on an independent website. On that front too, it scores over the conventional debt funds which disclose their portfolios once a month.

Tax efficiency: As with other debt mutual funds held for more than a period of three years, investors will be able to get the benefit of indexation here. In comparison to your interest from deposits which is taxed at your marginal rate of tax, the ETF at 20% inflation-adjusted rate is a better alternative. Importantly, the timing of the launch is such that you may get indexation benefit for an extra year. For instance, the 3-year variant will provide indexation benefit for four years, if held till maturity, further bumping up your post-tax returns.

What about liquidity?

Large investors who wish to buy or sell units worth Rs 25 crore or more can directly do so with the fund house. Smaller investors would be able to transact in the units on a stock exchange. The AMC claims that it will appoint several market makers to ensure that adequate liquidity is available on the exchange. Whether they are able to actually create enough liquidity will become clear only once the units are listed.

In any case, the AMC is also planning to come up with the Fund of Fund (FoF) variants almost simultaneously (expected launch date between 13th-20th December) which puts the liquidity concerns to rest. We believe the FoF variants will be better for small ticket investors or those who do not have a demat account.

Should you invest?

At the time of the ongoing mess in the debt funds space, a fixed income fund that offers high quality portfolio, predictable returns (though not guaranteed, of course!) and ultra-low costs seems too good to be true. Bharat Bond ETF comes across as a good option for fixed income investors, particularly those whose investment horizon coincides with the maturity period of the two variants.

But the ones interested in the 10-year variant should note that it can be fairly volatile in the initial years of its existence. Its long maturity profile will make the portfolio quite sensitive to interest rate movements. But it shouldn't matter much if you are looking to hold for the entire 10-year duration.

The NFO period for retail investors will be from 13th to 20th December 2019 and those interested will be able to invest in unit sizes of Rs 1,000, but only up to a maximum investment amount of Rs 2 lakh.

Insights About the Fund

The Bharat Bond Exchanged Traded Funds is no doubt a good option for investors looking for low risk, good returns and a substantial level of liquidity. Investing in this fund will ensure that your investment is done in high quality ‘AAA’ rated bonds of Public Sector Companies tracking the Nifty Bharat Bond Index with a fixed maturity tenure. As it is an ETF, once the NFO (New Fund Offer) is out, its units can be bought and sold on the stock exchange. The units will be held in your Demat account.

However, investors who don’t hold a demat account have an alternative option to invest through Bharat Bond Fund of Funds (FOF) that has similar maturity in line with underlying ETF.

Next Story : SBI Card IPO and its effect on SBI

SBI Card IPO and its effect on SBI

2019-12-14T04:37:00.002-08:00

SBI Cards files ₹9500 crores IPO papers with SEBI. SBI to divest up to 4% stake in their subsidiary SBI Cards. The SBI Cards IPO date is not announced yet. SBI Cards and Payment Services Pvt Ltd (SBICPS) is the credit card unit of the State Bank of India. The company to raise between ₹8,500 crores and ₹9,500 crores. The value of the company is estimated at around ₹60,000 crores It will be one of the largest stock market listings in the country.

Incorporated in 1998, SBI Cards and Payment Services Limited is a subsidiary of SBI, India's largest commercial bank in terms of deposits, advances and the number of branches. SBI currently holds (along with its nominees) 689,927,363 Equity Shares, constituting to 74.00 % of the pre-Offer issued, subscribed and paid-up Equity Share capital of the Company.

The company the 2nd largest credit card issuer in the country, with a 17.6% and 18.0% market share of the Indian credit card market (number of credit cards) as of March 31, 2019, and September 30, 2019, respectively, and a 17.1% and 17.9% market share of the Indian credit card market ( total credit card spends) in fiscal 2019 and in the six months ended September 30, 2019.

SBI Cards offers a wide range of credit cards to individual and corporate clients including lifestyle, rewards, shopping, travel, fuel, banking partnership cards, and corporate cards, etc.

SBI Cards has partnered with several leading names across industries, including Air India, Apollo Hospitals, BPCL, Etihad Guest, Fbb, IRCTC, OLA Money and Yatra, amongst others.

As a subsidiary of SBI, the company has access to SBI's extensive network of 22,007 branches across India. The partnership enables it to market its cards to a huge customer base of 436.4 million customers.

Headquartered in New Delhi, as of September 30, 2019, the company has a sales force of 33,086 outsourced sales personnel operating out of 133 Indian cities.

The company's total income increased at a CAGR of 44.9% and the revenues from operations have increased at a CAGR of 44.6% between fiscal 2017 to 2019. The net profit grew at a CAGR of 52.1% during the period.

According to a report by Macquarie, the IPO is expected to be around Rs 9,000-9,600 crore in size. The IPO is likely to hit the markets early next year.

SBI, which holds a 74 percent stake in the unit, along with private equity firm Carlyle Group, which holds the rest 26 percent through its subsidiary CA Rover Holdings, will together sell 13 crore shares or 14 percent of the company through the IPO. While Carlyle is looking to sell a 10 percent stake via the IPO, SBI would sell a 4 percent stake in the company.

How the IPO will impact the valuation of parent SBI

SBI holds a 74 percent stake in SBI Cards, which Macquarie currently values at Rs 27,500 crore in its model. However, the brokerage, citing media reports, said SBI expects a valuation of Rs 60,000 crore (2.2 times Macquarie's valuation of Rs 27,500 crore) for its share in SBI Cards, which translates to Rs 47 per share of SBI.

The brokerage notes that if value unlocking happens at this price, it would add Rs 16 or 5 percent to their current target price of Rs 320.

Could SBI Cards IPO make it the most expensive financial services company in India?

As per Macquarie, in case SBI Cards gets listed at a market cap of Rs 60,000 crore, it could be the most expensive financial services company in India at 11 times the book value (P/BV).

"As such there are enormous growth prospects for the credit card industry as it is significantly underpenetrated and economics of the business for successful players have significantly improved post-global financial crisis," the report quoted.

India's credit card industry

According to the global brokerage, India’s credit card industry offers vast room for growth, with less than 5 percent cards per capita, less than 1 percent of banking system loans and less than 7 percent of non-cash spends.

Business models have also become more sound with 50 percent of revenues coming from stable fee income thereby significantly boosting RoE in credit cards business at over 30 percent, said the brokerage.

Credit card issuances remain strong at 25% year-on-year (y-o-y) in the three months till June this year– a trend that we have broadly maintained since demonetisation. The three frontline private banks (HDFC Bank, Axis Bank and ICICI Bank) along with SBI Cards and Payments dominate this business with 70% share between them. RBL Bank is a relatively new player but is emerging strongly on the back of its partnership with Bajaj Finance. Despite strong growth in issuances, penetration is quite low at 4% as compared to 60% of population using cards.

Notwithstanding the cyclicality that is inherent to this business, Market experts believe that the Indian banks would continue to show solid growth in issuances given the demographic advantage and strong investments in payment infrastructure.

SBI Cards is the second-largest credit card issuer in the country with 9.46 million credit cards and has an 18 percent share of the Indian credit card market as of September 30, 2019. Meanwhile, HDFC Bank has the largest credit card business in the country with 13.3 million cards issued, while ICICI Bank stood third with 7.9 million credit cards, as of September 30, 2019, according to data from the Reserve Bank of India.

The share sale is poised to become the fifth-largest IPO in the country after Coal India, Reliance Power, GIC Re, and Oil and Natural Gas Corp and will help the parent, SBI, raise funds to boost credit growth. For FY19-20, it will be the largest IPO.

SBI Cards IPO Dates & Price Band: (Tentative)

IPO Open:	20-January-2020
IPO Close:	22-January-2020
IPO Size:	Approx ₹9500 Crore (Approx)
Face Value:	₹10 Per Equity Share
Price Band:	₹615 - ₹618 Per Share
Listing on:	BSE & NSE
Retail Portion:	35%
Equity:	130,526,798 Shares
Discount:	₹18 Per Shares

SBI Cards IPO Market Lot:(Tentative)

Lot Size:	Minimum 24 Shares & Maximum 312 Shares
Minimum Amount:	₹14832
Maximum Amount:	₹192816

SBI Cards IPO Allotment & Listing:(Tentative)

Basis of Allotment: 27-January-2020

Refunds: 28-January-2020

Credit to Demat Account: 29-January-2020

Listing Date: 30-January-2020

Thomas Cook India is it a hidden gem ?

Thomas Cook India: Is it an hidden gem ?

2019-12-07T03:56:00.002-08:00

After demerger of Quess Corp, the standalone business of Thomas Cook India looks interesting with a reasonable valuation

What exactly is happening with Thomas Cook India?

Thomas Cook India holds about 50% stake in Quess Corp. In order to simplify the corporate structure, the management decided to demerge the company’s holding in Quess Corp.
Essentially, shareholders of Thomas Cook will receive shares of Quess after about 2 weeks. The ratio, which was announced about a year ago, stands such that for every 100 shares of Thomas Cook, shareholders will receive 18.89 shares of Quess Corp.

Since Quess trades at ~Rs.500/share, it accounts for ~Rs.100 of the price of Thomas Cook India’s shares (current price is Rs. 150). Thus, one can expect the price of Thomas Cook to correct by ~Rs.100 ex-date (today), or down by ~66% from closing price on December 4^th. Thus the effective price of Thomas Cook after listing should be Rs. 50.

What is Thomas Cook India’s standalone business?

The company has two major revenue streams, namely, travel packages and prepaid forex cards. Both these businesses are essentially cash cows. Travel packages including fees for booking a person’s tour/itinerary and kickbacks/commissions from airlines and hotels.
In the forex business, the borderless pre-paid cards generates float. Float is the amount of money that the company has collected on the cards, but that has not yet been utilised by the customer. The company earns a small interest on the float, and a small spread on the currency conversion.

What is opportunity in travel industry?

Centre for Asia Pacific Aviation India (CAPA India) estimates that only around 4-5 million unique individuals in India travel overseas for leisure in any given year, a miniscule 0.4% of India’s population.
The room for growth is immense as India’s young millennial population spending on overseas travel increases. Foreign tourist arrivals (FTAs) in 2018 stood at 10.56 million compared to 10.04 million in 2017, and approximately 6.5 million in 2012, showing the spectacular growth in inbound tourism.

What are the triggers for Thomas Cook India?

Management claims to have 50% market share in the organized tours market (5% of the total) prior to Cox and Kings shutting down. As discretionary income of Indians increases, people are likely to spend more on overseas travel. An organized player like Thomas Cook, with a recognizable brand name should get a meaningful chunk of this business.

What are risks for the business?

1. Competition from digital platforms like MakeMyTrip: Digital platforms have been growing their airline bookings at a blistering pace, thereby growing the market share in the overall airline bookings space
2. Short-term/Transitory: The Cox and Kings saga has damaged the reputation of tour providers. Company will probably have to increase discounts to attract customers. Also the company’s parent, Thomas Cook PLC, filed for bankruptcy in the UK. These events have caused a near term hindrance to the company’s business.

Where does Thomas Cook stand in all of this?

Looking at the standalone numbers, the company has generated more operating cash flow than EBITDA. The cash flow from operations/EBITDA ratio is 2x on average over the past 5 years, shows the strong cash generation ability of the company.
Based on closing price on December 4^th, after demerger with Quess Thomas Cook should be available at a market cap of ~Rs.1850 cr. The company has net cash + deposits of about Rs. 700 crores. If we take this into account, we get an adjusted market cap of Rs. 1100 crores.
The company is expected to generate Rs.200 crores of free cash flow for calendar year 2019 (one of the most challenging years in its recent history with Jet crisis + Thomas Cook PLC + Cox and Kings).
Thus, the company is available for less than 6x FCF, a rather reasonable valuation for a leader in a burgeoning industry.

Next Story : How to pick a company strong on ethics and corporate governance

IRCON International - IPO - Healthy Prospects & Attractive Valuation

2018-09-16T01:36:00.001-07:00

Ircon International Limited, formerly Indian Railway Construction Company Limited (IRCON), is an engineering and construction, specialized in transport infrastructure. Incorporated in 1976, IRCON International Limited (IRCON) is four-decade old government company (under the ministry of railways). It is engaged in the business of engineering and construction mainly specializing in major projects including railways, highways, bridges, flyovers, tunnels, aircraft maintenance hangars, runways, EHV substations, electrical and mechanical works, commercial and residential properties, development of industrial areas and other infrastructure activities. IRCON provides EPC services on a fixed-sum turnkey basis as well as on an item-rate basis for various infrastructure projects. In 2016, IRCON was ranked 248 in the list of the top 250 international contractors by Engineering News Record (ENR) of the United States. Presently it has 26 project offices and five regional offices to support and manage its business operations throughout India and five overseas project offices in Sri Lanka, Bangladesh, Malaysia, South Africa, and Algeria to provide onsite support overseas.

IRCON International (IRCON) â€“ a Mini Ratna company incorporated by the Ministry of Railways â€“ operates in the entire spectrum of infra services including railways, highways, electrical, metro and buildings etc. It provides EPC services on a fixed-sum turnkey basis as well as on an item-rate basis for various infrastructure projects and also undertakes projects on BOT model. It has been demonstrating superb execution over last four decades and current order book at Rs224bn provides healthy visibility, going forward.

As per the Govts divestment target of Rs800bn in FY19, IRCON is divesting ~10% stake by offering 9.9mn shares via Offer for Sale (OFS) at a price band of Rs470-475 to raise Rs44.7bn at the upper end of the band. Consolidated PAT of Rs4.1bn for FY18 translates into an attractive PE of 10.9x.
There has been a steep price correction in listed infrastructure companies over last 3-4 months on the back of prevailing concerns over the reversal of interest rates, persistent delay in land acquisition despite higher compensation and funding constraints. We believe price offering by IRCON factors in all. Further, IRCON appears to be insulated with a higher interest rate scenario with no leverage.

Key Investment Arguments

Superior Execution & Diversification Advantage
Healthy Growth Visibility on Robust Order Book
Light Working Capital Entails Healthy Cash Generation
Likely Expansion in RoE

Key Risks

Adverse Change in Policies relating to Railways Investment
Execution Delay
Substantial Rise in Input Cost & Other Overheads

Outlook & Valuation
IRCON's earnings (Rs4.1bn PAT in FY18 vs. Rs5.6bn in FY15) have not witnessed any growth in last 3 years despite witnessing consistent growth in order book mainly led by margin contraction and shrinkage in overseas revenue.

However, it has maintained a healthy dividend payout ratio (>45%) over the years, as it pays out either 30% of PAT or 5% of Net Worth (whichever is higher) as dividend.

Further, considering healthy returns generated by NBCC and RITES (which are broadly infrastructure space being government companies), we feel IRCON's valuation at 10.9x FY18 earnings looks attractive and may not disappoint the investors.

Hence, we recommend SUBSCRIBE to the Issue.

Next read : If HPCL Is A Good Stock To Bet On?

If HPCL Is A Good Stock To Bet On?

2018-09-09T03:13:00.003-07:00

It's never a good idea to recommend an oil marketing stock, when crude prices are climbing. However, diesel and petrol prices are now aligned to market rates, which does not impact stocks like HPCL too much. Of course, if the government asks oil marketing companies like HPCL, BPCL or Indian Oil to absorb the crude hike, our recommendation could go haywire. Assuming that it does not, the shares of Hindustan Petroleum are an excellent bet at the current prices. The shares are now at a 52-week low of Rs 252.20, which makes the shares attractive.

Solid growth

The company over the last five years has seen its net profits surge from Rs 1,100 crores in FY 2014 to Rs 7,128 crores in FY 2018. Last year the company rewarded shareholders with a solid bonus of 1:2 and dividends, which takes the dividend yield to as high as 8 per cent. HPCL has the second largest pipleline in the country and is the largest lube manufacturer. There are reports that HPCL may takeover MRPL, which if it happens, will make the company the second largest refiner after IOC.

Solid expansion plans

HPCL has lined-up some massive expansion plans to spend around Rs 75,000 crores over the next 5 years. This would include capacity addition at Mumbai and Vizag, expansion of gas pipeline network and a 5 mmtpa liquified natural gas regasification terminal coming up at the Chhara port in Gujarat. The company has also been rewarding shareholders with solid dividends and bonus issue in the past few years and there is reason to believe that the same would continue.

Concerns

There are concerns, that rising crude prices, pose a threat. At the moment, petrol and diesel prices are de-regulated, which deflects any concern, but, if the government intervenes, than it could pose a problem. There are also worries that electric vehicles, may lower the demand for petrol and diesel vehicles. At least for the next 5-10 years, we see little room for worry, with petrol and diesel vehicles likely to continue to grow at a franctic pace, given how expensive electric vehicles are.

Valuations

HPCL is also very cheap on valuations. The stock at Rs 255, is trading at just 5.4 times, the 2018 EPS of 47.2. This is really low for a company that has a solid retail network. The HPCL stock is a good bet at the current market price of Rs 255. Investors may buy and hold the shares for the long term.

Next Read : How to pick a company strong on ethics and corporate governance
Previous Read : IRCON International - IPO

How to pick a company strong on ethics and corporate governance

2018-09-09T01:58:00.001-07:00

Veteran investment adviser and writer R Balakrishnan shares some interesting pointers in a concise format.

Management quality is a function of ethics and governance. Someone asked me how important are these two attributes?

If we go by ‘equity research’ reports, it has absolutely no importance. No report comments on the quality of the management, preferring to be diplomatic or practical, since most sell side firms need some business in banking or equities to come their way.

Equity research as a function has never made money on its own. It is like the appendix in the human body. Of course, it comes in to play when we want to acquire a company or take a significant stake in a company. Then we will all perhaps spend a lot of time figuring out who the owner is and what are his strengths and weaknesses.

Sometimes, I see large institutional investors taking significant stakes in companies where the management quality is known to be suspect. I can only infer that it is perhaps a reflection on the quality of the investor also. Institutional investors are managed by people who get salaries and bonuses and they are not investing their own money.

Most of us seem to think that it will not impact the investment. We think that by the time the bad qualities come to the fore, we would have cashed out our gains. Or we think that with so many other investors, we are not alone. We always seek for this comfort that we are not alone.

Governance and ethics of the highest standards are something that exist only in seminars and books. When it comes to money, there are shades of grey everywhere. The one thing working in favour of the investors is that most often, the businessman is also interested in maintaining a perennially north bound share price and hence our interests are aligned.

In the old days, when salaries of directors were restricted to a few thousands, there we no ESOPs or ‘preferential allotments’ or ‘warrants’, the story was different.

Also, the interest rates used to be high and our markets were small. Stocks never got such fancy valuations as what exist today. So, the promoter found it useful to take money away and leave just enough for the shareholders.

Today, with the fancy valuations the stock markets give, the promoter finds that keeping a rupee inside the company adds substantially to his wealth. And the promoter can take his multi-crore salaries, dilute when the price is right, issue warrants to himself when the timing is good etc.
There are so many indulgences that have become legal now.

Thus, the promoter has less reasons to skim off. A higher EPS translates in to significant wealth, given the benevolent secondary markets. Of course, no one is immune to a structured fraud. That can happen to catch the best of investors unaware.

Satyam Computers was one. Of course, the investors got lucky there since there was a motivated attempt to rescue the company in order to bail out a select few. However, I do not see the same things happening in a Gitanjali Gems.

However, there are ways to stay safe: Avoid companies with high debt, unusual amounts of cash in hand combined with low dividend payouts, continuous raising of capital, constant mergers and acquisitions, having hundreds of subsidiaries, having too many ‘associate companies’ (associate companies are where there is no disclosure, since there are external persons who are co-owners) etc.

Avoid in general companies where ‘revenues’ are based on some funny accounting or on ‘certification’ by management rather than plainly visible ones. Have a look at the schedule of Fixed Assets (nowadays referred to as ‘non-current assets) and look at what is happening there.

Is there too much of fictitious assets like Goodwill? Is too much invested in real estate? Too much goodwill? All of these are just warning signs and call for deeper probe rather than just ignoring or accepting.

Many edifices are built of papier-mâché. Kicking the tyres by going through the schedules of accounts for a few years will be a good habit to keep. Other thing that has helped me is to have a binary classification for valuation- companies that have brands or consumer products to be valued on basis of revenue. Companies that deal in commodities etc to be valued by Balance Sheet.

In essence, I find out what the company can make and how much of assets are needed. Then compare it with the “ENTERPRISE VALUE” (enterprise value is the sum of market capitalization PLUS debt). That helps me to buy when the industry is doing badly and sell when it is doing well.
Of course, the approach is simplistic, but a great starting point. Management integrity always pays off handsomely over time.

If you are taking chances, taking it knowingly. And be prepared for surprises. There is no early warning signal as to when a fraud will be exposed.

P.S: A good analyst can always smell the cockroaches. No investor has the patience to listen to someone ranting about it.

This post initially appeared in Bala's blog

Next Read : IIFL Holdings to demerge Capital Wealth business

IIFL Holdings to demerge capital, wealth, finance business

2018-09-08T09:54:00.000-07:00

Financial services firm IIFL Holdings will demerge its finance, wealth and capital business into three separate entities and list them on bourses in a year, a top official of the company, backed by Canada-based Fairfax Financial Holdings, said.

This is part of the company's strategy to reorganise the corporate structure in a changing business environment as organisation now sharply focus on their expertise in niche verticals, IIFL Holdings Founder and Chairman Nirmal Jain said.

The demerger, followed by listing will involve three units -- IIFL Finance (loans and mortgages); IIFL Wealth (wealth and asset management) and IIFL Securities (capital markets).

"World over, investors and regulators are favouring corporate structures to change from control-oriented close- knit conglomerates to innovation and idea-driven independent enterprises. Incumbent players are being challenged by new entrants like never before.

"The reorganisation will prepare IIFL group companies for the growth opportunities amidst intensifying competition in coming decade," Jain told PTI.

Each company, when listed separately can attract and motivate its key people with stock options, Jain said, adding a clean corporate structure with no cross holdings will ensure transparency, highest governance standards and compliance.

"By separating them, we will allow them to grow to their full potential," he added.

Fairfax will be the "most significant" non-promoter shareholder in all the three companies, he said.

"The reorganisation process requires multiple approvals and can take 10-12 months. However, the scheme will be effective from the appointed date," Jain said further.
As per the existing shareholding structure, promoters have 28.9 per cent stake in IIFL Holdings, Fairfax holds 35.3 per cent, company's employees 4.4 per cent while others have the remaining 31.4 per cent.

Post demerger, the proposed shareholding of IIFL Finance will result into 23.4 per cent stake by promoters, employees 7.7 per cent, others 25.5 per cent, Fairfax 28.6 per cent and CDC Group 14.8 per cent.
IIFL Wealth will have promoters' stake of 15.7 per cent; employees 26.7 per cent; others 17 per cent, Fairfax 19.2 per cent and General Atlantic 21.4 per cent.

In IIFL Securities, promoters will hold 28.9 per cent; Fairfax 35.3 per cent; employees 4.4 per cent and others 31.4 per cent.

Currently, IIFL Holdings' loans and mortgages business has an asset under management of Rs 27,288 crore; wealth and asset management unit manages over Rs 1.28 lakh crore from over 10,000 high networth families and while the capital market business has 40 lakh customers serviced from more than 1,200 locations.

The reorganisation will result in an equity shareholding mix where the owner of seven shares of IIFL Holdings will get seven shares of IIFL Finance, seven shares of IIFL Securities and one share of IIFL Wealth.

IIFL Holdings has registered an increase of 32 per cent in its consolidated net profit at Rs 235.76 crore in third quarter ended December of this fiscal, against Rs 179.07 crore in the same period a year earlier.

10 mistakes to avoid while Hunting for multibaggers

2018-06-22T07:24:00.000-07:00

The return-hungry investors who are always looking for stocks which could give multibagger returns normally end up picking up stocks which either don’t perform or even if they perform they would give returns less or equal to benchmark returns.

Being able to spot a potential multi-bagger stock early definitely requires some research, along with that, patience plays a key role. Such stocks do exist, and if you have already done your research then the ideal time to pick them is on every decline.

Here are a few parameters that can help you spot a potential multibagger stock early – focus on the growth rate of the industry including future growth potential, which would benefit the stock under consideration.

Apart from that if there are entry barrier that would prevent competition. High-quality management is an added advantage and is like a precondition for the creation of long-term wealth for investors, suggest experts.

The other measure to look at is financial ratios. “Although not strictly defined, but a consistent low debt-to-equity ratio, high returns ratio, and free cash flows are some of the key indicators we have seen in the multibaggers in the last decade,” said, Nidhi Agrawal, an analyst at Angel Broking

Here are 10 mistakes as highlighted by different experts which one should avoid making when hunting for stocks which could potentially give multibagger returns:

1.Herd mentality:
Many investors fall victim to following stock tips by friends, neighbours and so-called experts. These picks rarely work out. In order to make money in equities, the conviction is necessary in an investment, which leads to the ability to hold on to a stock holding through volatile times and sell-offs.
If an investor does not understand a business, he should not invest in the company. If an investor is unwilling to put in the time to research equities, then they are better off letting professionals manage their portfolios.

2.Investing in stocks based on low price:
Just because a stock price is low does not mean that the stock is an attractive investment. I have surprisingly met clients that make the mistake of equating low price to cheap.
I once met a client that would only purchase stocks selling less than a certain price. However, even a stock selling at Rs 15 can be incredibly expensive while a stock selling at Rs 1,500 can often be cheap. Low price does not mean an attractive investment.

3.Holding on to losers:
If a stock is down, there is a reason it is trading lower. It is best to regain losses by moving the money to an attractive investment.
Investors often make the mistake of being unwilling to take a loss on a position. However, if you think about investing logically, it is clear that if a stock has sold off, there is a reason it has done so, and it may never reach back the same levels or may take a long time to do so.
In many scenarios, the investor would be much better off putting money in an attractive alternative investment that would give them a better chance of recouping the loss.
Most importantly, avoiding and minimizing crippling losses is a discipline many investors don’t follow.

4.Investing at high P/E multiples:
An investment return is often determined by the price paid. At 100 times P/E, for instance, an investor is paying 100 times the trailing earnings over the past 12 months of the company. That is an awfully expensive price.
It means it will take the investor 100 years to make back his investment. Very few stocks are able to deliver the growth that justifies this sort of a premium. Therefore, the valuation paid is crucial in determining future returns.

5.Investing in risky bets:
Investors want to make money quickly and take larger speculative bets. These bets often lead to large losses. I have come across many investors that have bet on so-called sure shots, home runs, multibaggers.
In my experience, the vast majority of these investors end up taking losses. These companies often have been hyped up by people on the street that are looking for suckers to pile in.
There are many ways that investors are taken advantage of, and it is up to the investor to recognize the dangers and work with an experienced advisor.

6.Focusing more on macro data than on stock fundamentals:
Blind investment in equity without looking much into the stock specific fundamentals should be avoided.

7. Just going with the hot picks or flavor of the season:
They both need to be analyzed before investing for the earning potential of the company/industry dynamics.

8.Overlooking corporate governance issues:
With the number of scams and frauds coming up, one needs to do best possible due diligence for the corporate governance of the company.

9.Over-allocation/under allocation to particular stock:
While asset allocation is highly subjective and varies from person to person, a prudent investment strategy says that the allocation should be in line with the conviction and risk appetite of the investor.

10.Discontinuing monitoring of stock/key variables:
Once an investor has taken a position in the stock, he/ she needs to regularly monitor the investment thesis, changing variables etc. to understand whether it is on the right track.

Next Read :Fine Organic Industries IPO Review

Fine Organic Industries IPO Review

2018-06-16T06:09:00.000-07:00

Fine Organics is coming up with an IPO. The company is based in Mumbai and incorporated in 2002. Fine Organics is a manufacturer of oleochemical-based additives. They are leading producers of specialty additives for foods, plastics, rubbers, paints, inks, cosmetics, coatings, textile auxiliaries, lubes and several other specialty applications. They have products facilities at Ambernath, Badlapur and Dombivli in Maharashtra. They are 64300 tonnes production capacity as per 2017 reports. They have over 500 full time employees on payroll. They have strong R&D capability and developed over 46 new products since 2014.

Fine Organic Industries, a chemicals firm has fixed a price band of Rs 780 to Rs 783 per equity share to raise around Rs 600 crore through an initial public offering (IPO). The offer for sale will see divestment of 25 per cent of stake of 76,64,994 equity shares by the existing shareholders. The issue will open on June 20 and closes on June 22. The 48-year old company held entirely by the promoters family had filed draft papers with markets regulator Sebi to float the IPO in February.

It has three manufacturing facilities in the suburbs of the megapolis, including Ambernath, Dombivli and Badlapur, with a total installed capacity of about 64,300 tonnes per annum (tpa). "The company has drawn up capital expenditure of Rs 270 crore to expand capacities over the next 2 years and has already invested Rs 70 crore towards equity portion," Fine Organics CFO and director Tushar Shah told reporters at the IPO roadshow here.

The company is expanding its Ambernath facility by adding a capacity of 32,000 tpa at a cost of Rs 130 crore, and it plans to fund 30 per cent from equity and 70 per cent from debt, he said. It is also looking at investing Rs 55 crore in setting up Fine Zeelandia facility in Mumbai in association with Dutch family-owned Zeelandia International, a part of the Royal Zeelandia group, he said.

The company clocked net revenue of Rs 581 crore for the nine-months period ended December 2018. It has launched 387 products and exports accounts for 65 per cent of the total revenue, Shah added. Meanwhile, as part of the global expansion plans, it is also setting up a joint venture firm named FineAdd with the German partner Adcotec, to own and operate a 10,000 tpa facility in in Leipzig, Germany, which will be operational by Q3 FY20, according to the offer document. Fine Organic will own 50 per cent and Adcotec will own the other 50 per cent, it added.

Highlights of the Company:

a. Consistent market leadership position in the Indian mutual fund industry;
b. Trusted brand and strong parentage;
c. Strong investment performance supported by comprehensive investment philosophy and risk management;
d. Superior and diversified product mix distributed through a multi-channel distribution network;
e. Focus on individual customers and customer centric approach;
f. Consistent profitable growth; and
g. Experienced and stable management and investment teams.

Main object of the issue is:
The objects of the Offer for the Company are to achieve the benefit of listing the Equity Shares on the Stock Exchanges and for the sale of Equity Shares by the Promoter Selling Shareholder. Further, the Company expects that the listing of Equity Shares will enhance its visibility and brand image and provide liquidity to its existing shareholders.

Positives For the Company:

Largest Producer of Oleochemical-based Additives in India.

Company is the largest manufacturer of oleochemical-based additives in India and one of the few large players in global oleochemical-based additives industry.They are one of six global players in the food additives industry and one of five global players in the plastic additives industry.Company has a huge first-mover advantage in India, alongside various other competitive advantages over other global players. This gives Company an advantage in pricing products competitively and allows them to provide stiff competition to new players. Hence, no major domestic or global player has set up a manufacturing facility in India.

Specialised Business Model with High Entry Barriers.

There are multiple entry barriers for a new entrant in the global oleochemical-based additives industry, such as product formulations, process technology and customer stickiness to established players. As a result, they are one of the few large global players in this industry.Because of high Entry barriers, Company is able to obtain higher EBITDA and profit margins for their products compared to other manufacturing industries where barriers to entry are lower.Company’s EBITDA margins were 18.54%, 22.11%, 18.43% and 17.78% for Fiscals 2015, 2016, 2017 and the nine months ended December 31, 2017, respectively.

Diversified Customer Base with Long Term Relationships with Marquee Customers.

Company has 603 direct customers and 127 distributors (who sold than more than 5,000 customers). Company’s direct customers are multinational, regional and local players manufacturing consumer products, such as Hindustan Unilever and Parle Products, and petrochemical companies and polymer producers globally.Company has an extensive distribution network in India and worldwide, enabling their products to be sold in 67 countries.

Diversified Product Portfolio Catering to a Variety of High Growth Industries.

As at December 31, 2017, they had a range of 387 products sold under the ‘Fine Organics’ brand, used in the (a) plastic industry and (b) food industry and others (cosmetics, printing inks, coated papers, lube additives, wires and cables, coatings and other specialty applications) industries.

IPO Particulars:

IPO Opens on : 20 June 2018
IPO Closes on : 22 June 2018
Issue Type: Book Built Issue IPO
Issue Size: 7,664,994 Equity Shares of Rs 5 aggregating up to Rs [.] Cr
Face Value: INR 5 per share
Price Band: INR 780-783 Per Equity Share
Minimum Order Quantity: 19 shares
Listing will at: BSE,NSE
Shares offered to
Anchor – 22,99,497 Shares = 180.05Crore
QIB – 15,32,999 Shares = 120.03Crore
NII – 11,49,750 Shares = 90.03 Crore
RII – 26,82,748 Shares = 210.06Crore (Lot size: 19 = 1,41,197 Forms)
Total Issue – 76,64,994 Equity Shares = 600.17 Crore

Financials: Consolidated Figures

EPS for 2016-17 : INR25.56
EPS for 9M of 2017-18 INR 26.38
PE Ratio on EPS of 2016-17 : 30.63
RONW for 2016-17 : 24.65%
RONW for 2017-18 9M : 17.34 %
NAV as on 31.12.2017 :INR 114.65
Upper PBV : 6.83

Fine Organics Financial:

Rs. in Crore
	Revenue	Expense	PAT
2013	497.5	466.6	20.9
2014	574.2	479.6	61.7
2015	616.5	530.9	57.1
2016	667.7	550.8	76.2
2017	792.7	671.8	77.7
2018 (9M)	594.7	500.2	58.5

Company Promoters:

Prakash Damodar Kamat
Mukesh Maganlal Shah
Jyotsna Ramesh Shah
Jayen Ramesh Shah
Tushar Ramesh Shah
Bimal Mukesh Shah

Peer Company Comparison :Galaxy Surfactants :
Face Value : INR 10
Price : Rs. 1299 on 13 June 18
Total Income : INR 2171.70 Crore
PE : 34.7x
NAV :INR 161.51
P/NAV: 8.05

Main Global Competitors for the Company:

Quick Links:DRHP Draft Prospectus

Fine Organics IPO Market Lot:

Shares: Apply for 19 Shares (Minimum Lot Size)
Amount: Rs.14,877

Fine Organics IPO Allotment & Listing:

Basis of Allotment: 28-June-2018
Refunds: 29-June-2018
Credit to demat accounts: 02-July-2018
Listing: 03-July-2018

Tentative timeTable:
13 June 18– Price Band announced
19 June 18 – Anchor List
27 June 18– Finalisation of Basis of Allotment
28 June 18– Unblocking of ASBA
29 June 18– Credit to Demat Accounts
2 July 18– Listing on NSE & BSE

Fine Organics IPO Lead Managers:

Edelweiss Capital Limited
JM Financial Consultants Private Limited

Company Address:Fine Organic Industries Limited
Fine House,
Anandji Lane
Ghatkopar (East), Mumbai 400 077
Phone: (91 22) 2102 5000
Fax: (91 22) 2102 8899
Email: investors@fineorganics.com

Website: http://www.fineorganics.com

Fine Organics IPO Review:

Apply for Short Term and Long Term.

Next Read :The Capital Asset Pricing Model: An Overview
Previous Read :10 mistakes to avoid while Hunting for multibaggers

RITES IPO Review

2018-06-16T04:47:00.001-07:00

In the first divestment of the current fiscal, the government is selling 12% stake in railway consultancy firm RITES to mobilise about Rs 460 crore, with the price band fixed at Rs 180-185 per share. All retail investors and employees of the company will get a Rs 6-per-share discount on the final IPO price. The IPO will open on June 20 and close on June 22, the company said on Tuesday.

In February last year, finance minister Arun Jaitley had announced in the Budget that the government would divest stakes in at least three railway assets which included IRCTC, IRFC, IRCON. RITES was added to the list of divestment target later on. Even Rail Vikas Nigam, another PSU under the railways may soon launch its IPO, having obtained the regulatory nod last month, merchant bankers said.

Through the RITES IPO, the government is selling 2.52 crore equity shares, including 12 lakh shares reversed for its employees.
For fiscal 2019, the government has set a divestment target of Rs 80,000 crore. In fiscal 2018, the government had mobilised a little over Rs 1 lakh crore through PSU sell-offs.

RITES Limited is promoted by President of India. The company is a Gov. of India Enterprise.
They work under Indian Railways. RITES Ltd is a 9001:2008 company and work a multi-disciplinary consultancy organization in transport, infra and related technologies field.

They work a links with local consultants for overseas projects. They are expertise in quality assurance and transport infrastructure consultancy provider.

They have clients which includes Indian Railways, NTPC, SAIL, Rashtriya Ispat Nitam Limited, HPCL, Bharat Coking Coal Limited, Metro Link Express for Gandhinagar and Ahmedabad Company Limited (MEGA), Airports Authority of India, Titagrah Wagons, Cimco Ltd, Rajdeep Buildcon Pvt Ltd, Geokno India Pvt Ltd, ARK Services and more.

The company looks good and it will be good to see how it will perform as other government companies not able to perform well except Midhani Ltd.

RITES Ltd IPO Review:

Apply with Short Term & Long Term Gain

RITES Ltd IPO Dates & Price Band: (Approx)

IPO Open: 20-June-2018
IPO Close: 22-June-2018
IPO Size: Approx Rs.466 Crore (Approx)
Face Value: Rs.10 Per Equity Share
Price Band: Rs.180 to 185 Per Share
Listing on: BSE & NSE
Retail Portion: 35%
Equity: 2,52,00,000 Shares
Discount: Rs.6 (Retail & Employees)

RITES Ltd IPO Market Lot:

Shares: Apply for 80 Shares (Minimum Lot Size)
Amount: Rs.14,800 (For HNI & QIB)
Amount: Rs.14,320 (For RII & EMP)

RITES Ltd IPO Allotment & Listing:

Basis of Allotment: 28-June-2018
Refunds: 29-June-2018
Credit to demat accounts: 02-July-2018
Listing: 03-July-2018

Next Read : 10 Traits to look for in multibaggers
Previous Read :Fine Organic Industries IPO Review

10 Traits to look for in multibaggers

2018-06-09T05:47:00.000-07:00

Most of us are aware of the conventional stock picking metrics; visionary promoters, good management, scalable business and rich ratios.

Stock investor Soumya Malani suggests that investors get more specific in their hunt for alpha. The CEO of ShareBazaar App, he tweets at @insharebazaar.

Here, We narrow down on some patterns that investors could keep an eye on.

Look at the negative working capital pattern.

At first blush that sounds a bit off since negative working capital would signify a company’s liabilities outweighing its assets. This puts the company in a feeble light. But that’s not what I am focusing on. Negative working capital also means the business which operates on Other People's Money, or OPM, or the suppliers money. Advances from customers is a good hint to go by.

Companies which are leaders in a niche area and have a tiny market cap.

If you have the patience to wait for the business to grow and the market to subsequently realise its potential, you are sitting on a huge multi-bagger. This reminds me of the domestic consumption story. If one looks back at the market-cap of Cera Sanitaryware, Symphony or La Opala, it’s clear they were just too miniscule when compared to the scale they catered to, with an efficient supply chain and distribution network in place. Eventually, tailwinds prevailed, and the market catapulted them into a different orbit.

Keep an eye on acquisitions and takeovers.

Uniply and Kingfa are cases in point, each over-30 baggers in the last 3-4 years.

In retrospect, Kingfa was a common-sense choice. This Chinese giant grew from nothing to be Asia’s largest compounder and boasted a track record of 65% CAGR for 22 long years in China. When it saw its market getting saturated in China, it acquired an Indian company (then known as Hydro S&S) by paying 3x premium to its prevailing market price. This increased the efficiency and the stock became a huge multibagger.

Eradication of non-core diworsification.

A company could sport a sturdy and profitable core business, but owing to loss making non-core units, the overall Balance Sheet and Profit and Loss statement would be a farrago of misrepresentation. A shrewd move would be to sell those units and plough back the funds into its core business which would further accelerate growth. The market loves such stories.

Companies that outperform during huge headwinds.

TV Today is a classic example. Barring the Aaj Tak parent, every single company in the media sector was bleeding profusely. Digitisation was a game changer with the stock becoming a 12 bagger in last 4-5 years. Find companies which are making money when others from the same sector are unable to find their feet.

Demerger in a sizeable company.

A billion-dollar market-cap company can demerge a unit with a ratio of 20:1 share. The demerged entity, as per the ratio would quote at say $100 million which would make no sense for foreign investors. Foreign institutional investors, or FIIs, have got a market-cap stipulation and hence they tend to sell out in haste without even caring about the intrinsic value. Arvind Infra and Marico Kaya are examples of huge value creation.

Companies eating market share of market leaders.

Amara Raja and Havells ruthlessly cannibalized on the market share of leaders such as Exide and Crompton Greaves, respectively. Fifteen years ago, they were known to none with very thinly traded volumes. The upstarts are now the numero uno players in their own space.

Second-run companies in sectors where the leader has been a multibagger.

This is a very interesting pattern which often gets played out in different sectors. At some time, the valuation of the significant player gets so stretched that investors start to look for the trivial peer where the valuation gap is much narrower. Think Avanti-Waterbase, Relaxo-Mirza and KRBL-Chaman Lal.

Strong leverage but very efficient in working capital management.

Often, quality niche players backed by visionary pedigrees, to conquer more ground and stay undisputed would resort to capital expenditure through long-term debt. At some time, the capex would be covered for the next 3-4 years and just the maintenance capex remains. So, all operating cash flow goes in debt repayment and net profit vaults.

Legacy companies witnessing the induction of a new generation.

The predecessors were habituated in siphoning off aka black money but the new players at the helm, who in all probability would be freshly groomed from renowned business schools, would be inclined to look at the market cap which is pure white stuff.

It's simple math. A small-cap promoter may siphon off Rs 5 crores via unscrupulous means. On the flip side, the next generation would consider showing the same through books of accounts. That same amount would mean an extra Rs 100 crores in market cap considering a PE of 20. On even a 50% ownership they get richer by Rs 50 crores. No prizes for guessing which is a better route. Presently, I believe that this area offers serious money-making opportunities and moves likes demonetization further reinforces my stand.
Next Read : The Capital Asset Pricing Model: an Overview

The Capital Asset Pricing Model: an Overview

2018-06-09T01:23:00.000-07:00

No matter how much we diversify our investments, it's impossible to get rid of all the risk. As investors, we deserve a rate of return that compensates us for taking on risk. The capital asset pricing model (CAPM) helps us to calculate investment risk and what return on investment we should expect. Here we take a closer look at how it works.

Birth of a Model

The capital asset pricing model was the work of financial economist (and later, Nobel laureate in economics) William Sharpe, set out in his 1970 book "Portfolio Theory and Capital Markets." His model starts with the idea that individual investment contains two types of risk:

Systematic Risk – These are market risks that cannot be diversified away. Interest rates, recessions and wars are examples of systematic risks.
Unsystematic Risk – Also known as "specific risk," this risk is specific to individual stocks and can be diversified away as the investor increases the number of stocks in his or her portfolio. In more technical terms, it represents the component of a stock's return that is not correlated with general market moves.

Modern portfolio theory shows that specific risk can be removed through diversification. The trouble is that diversification still doesn't solve the problem of systematic risk; even a portfolio of all the shares in the stock market can't eliminate that risk. Therefore, when calculating a deserved return, systematic risk is what plagues investors most. CAPM, therefore, evolved as a way to measure this systematic risk.

The Formula

Sharpe found that the return on an individual stock, or a portfolio of stocks, should equal its cost of capital. The standard formula remains the CAPM, which describes the relationship between risk and expected return.
Here is the formula:

CAPM's starting point is the risk-free rate – typically a 10-year government bond yield. To this is added a premium that equity investors demand to compensate them for the extra risk they accept. This equity market premium consists of the expected return from the market as a whole less the risk-free rate of return. The equity risk premium is multiplied by a coefficient that Sharpe called "beta."

Beta

According to CAPM, beta is the only relevant measure of a stock's risk. It measures a stock's relative volatility – that is, it shows how much the price of a particular stock jumps up and down compared with how much the stock market as whole jumps up and down. If a share price moves exactly in line with the market, then the stock's beta is 1. A stock with a beta of 1.5 would rise by 15% if the market rose by 10% and fall by 15% if the market fell by 10%.
Beta is found by statistical analysis of individual, daily share price returns, in comparison with the market's daily returns over precisely the same period. In their classic 1972 study "The Capital Asset Pricing Model: Some Empirical Tests," financial economists Fischer Black, Michael C. Jensen and Myron Scholes confirmed a linear relationship between the financial returns of stock portfolios and their betas. They studied the price movements of the stocks on the New York Stock Exchange between 1931 and 1965.

Beta, compared with the equity risk premium, shows the amount of compensation equity investors need for taking on additional risk. If the stock's beta is 2.0, the risk-free rate is 3%, and the market rate of return is 7%, the market's excess return is 4% (7% - 3%). Accordingly, the stock's excess return is 8% (2 X 4%, multiplying market return by the beta), and the stock's total required return is 11% (8% + 3%, the stock's excess return plus the risk-free rate).
What this shows is that a riskier investment should earn a premium over the risk-free rate – the amount over the risk-free rate is calculated by the equity market premium multiplied by its beta. In other words, it's possible, by knowing the individual parts of the CAPM, to gauge whether or not the current price of a stock is consistent with its likely return – that is, whether or not the investment is a bargain or too expensive.

What CAPM Means for You

This model presents a very simple theory that delivers a simple result. The theory says that the only reason an investor should earn more, on average, by investing in one stock rather than another is that one stock is riskier. Not surprisingly, the model has come to dominate modern financial theory. But does it really work?
It's not entirely clear. The big sticking point is beta. When professors Eugene Fama and Kenneth French looked at share returns on the New York Stock Exchange, the American Stock Exchange and Nasdaq between 1963 and 1990, they found that differences in betas over that lengthy period did not explain the performance of different stocks. The linear relationship between beta and individual stock returns also breaks down over shorter periods of time. These findings seem to suggest that CAPM may be wrong.

While some studies raise doubts about CAPM's validity, the model is still widely used in the investment community. Although it is difficult to predict from beta how individual stocks might react to particular movements, investors can probably safely deduce that a portfolio of high-beta stocks will move more than the market in either direction, and a portfolio of low-beta stocks will move less than the market.
This is important for investors – especially fund managers – because they may be unwilling to or prevented from holding cash if they feel that the market is likely to fall. If so, they can hold low-beta stocks instead. Investors can tailor a portfolio to their specific risk-return requirements, aiming to hold securities with betas in excess of 1 while the market is rising, and securities with betas of less than 1 when the market is falling.
Not surprisingly, CAPM contributed to the rise in use of indexing – assembling a portfolio of shares to mimic a particular market – by risk-averse investors. This is largely due to CAPM's message that it is only possible to earn higher returns than those of the market as a whole by taking on higher risk (beta).

The Bottom Line

The capital asset pricing model is by no means a perfect theory. But the spirit of CAPM is correct. It provides a usable measure of risk that helps investors determine what return they deserve for putting their money at risk.

Next Read : DCB Bank - Q4FY18 Results - Another Quarter of Robust Performance
Previous Read: 10 Traits to look for in multibaggers

DCB Bank - Q4FY18 Results - Another Quarter of Robust Performance

2018-04-29T04:54:00.003-07:00

DCB Bank continued to deliver healthy performance on all major metrics in 4QFY18 as well led by (a) strong growth in loan book (+28.6% YoY & 9.4% QoQ); (b) all-time high NIMs of 4.16% in FY18 vs. 4.04% in FY17; (c) strong growth in other income (+33.4% YoY & 13.2% QoQ); (d) continued sequential improvement in C/I ratio to 59.4% vs. 62.3% in 3QFY18; and (e) lower fresh slippages of Rs805mn vs. Rs1,031mn in 3QFY18. Led by 70% YoY and 16% QoQ improvement in upgrades and recovery from gross NPA to Rs667mn, its headline gross and net NPA ratio came in at 1.79% and 0.72%, respectively compared to 1.89% and 0.87% in 3QFY18. The Bank’s overall stressed loan portfolio, which improved sequentially, remains within the Management’s comfort zone.

Management Commentary & Guidance

Loan book grew by 28.6% YoY and 9.4% QoQ to Rs203.4bn aided by CV, AIB, Corporate Banking and SME segments. Expecting 22-25% growth in loan book in FY19E, the Bank looks forward to double its loan book over the next 3-3½ years.

All-time high NIMs is attributable to some attractive refinancing options used by the Bank. The Management expects NIMs to remain in 3.7-3.8% range on sustainable basis. The Bank expects cost of fund to stabilise at around current level.

The Bank opened 56 new branches in FY18 and has completed physical expansion drive started in 2QFY16. Going forward, the Bank will expand branch network in a suitable manner without affecting its overall cost to income ratio as well as profitability.

The Bank expects C/I income to improve owing to likely improvement in operational efficiency of existing branches and other distribution channels. It expects to reach C/I ratio of 55% by FY19-end from 59.4% in 4QFY18.

The Management is quite comfortable till the gross NPAs remain below 2% and net NPA below 1%, as the Bank’s customers are predominately SME and mid-size business houses.

Its core fee income is likely to grow at healthy pace in next few quarters led by strong growth in income from sale of Priority Sector Lending Certificate and 3rd party product distribution.

DCB-Bank-Price trend

Outlook & Valuation

Continuing to focus on increasing loan book in low-ticket Retail, SME and AIB segments, the Bank is augmenting its footprint both on physical and digital front. Though this aggressive expansion strategy might impact its return ratios in the near-term, we believe it is beneficial from long-term perspective. Further, the Management focuses on increasing efficiency of existing network to improve cost to income ratio in the long-term, which will lead to sustained earnings growth. As creditworthiness of its core client group from SME/MSME segment is steadily improving post GST roll-out, we expect further improvement in Bank’s operating performance. Rolling over our valuation to FY20E, we reiterate our BUY recommendation on the stock with a Target Price of Rs247 based on 2.4x FY20E Adjusted book value.

Next Read : Mindtree - Q4FY18 Results Update - Excellent Operating Performance Continues

Previous Read : The Capital Asset Pricing Model: An Overview

Basis of Allotment:	27-January-2020
Refunds:	28-January-2020
Credit to Demat Account:	29-January-2020
Listing Date:	30-January-2020

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DCB Bank - Q4FY18 Results - Another Quarter of Robust Performance

Basis of Allotment: 27-January-2020

Refunds: 28-January-2020

Credit to Demat Account: 29-January-2020

Listing Date: 30-January-2020