Friday, July 22, 2016

JSW Energy Ltd: Buy
CMP: Rs.79.50
JSW Energy  Ltd came out with decent set of numbers for the Q1FY17, with with the profit rising 28.6% sequentially to Rs.366.5 crore on lower revenue growth. After adjusting numbers due to new accounting standards, profit in Q4FY16 stood at Rs 285 crore against Rs 305.43 crore (before the adjustment). 

Revenue during the quarter fell marginally by 6.9% to Rs.2,450 crore compared with Rs.2,630.7 crore in preceding period. Operating profit (EBITDA - earnings before interest, tax, depreciation and amortisation) increased 3.7% quarter-on-quarter to Rs.1,117 crore and margin expanded by a whooping 470 basis points to 45.6% in Q1FY17.

The company has highest net power generation of 6,648 million units in Q1FY17 against 4,480 million units in same period last fiscal, primarily due to generation from hydro power plants acquired during FY16 and improved performance of Ratnagiri plant (Maharashtra). 

It was partly offset by shut downs at Vijaynagar and Barmer plants due to maintenance and low scheduling of power since June. 

Meanwhile, JSW Energy said it has withdrawn from the acquisition process of Monnet Power, which is positive from the shareholders' point of view. 

Moreover, JSW Energy Ltd which reported 18.7% increase in consolidated net income at Rs.366.53 crore for the June, 2016 quarter, is planning to acquire around Rs.5,000 crore worth of stressed assets. "The company has acquired assets worth Rs 12,000-13,000 crore in the last 2-3 years and it is currently evaluating 8-9 projects. Currently, our focus will be on growing our hydel portfolio. We will also consider opportunities in the wind and solar sector, but that will be at a later stage ", JSW Energy Ltd's Chairman Sajjan Jindal told reporters on the sidelines of the company's AGM. The forecast of good monsoon has already raised the prospects of hydel power plants in India. 

JSW Energy, which has bought two hydel power projects of the debt-ridden Jaiprakash Power Ventures in Himachal Pradesh, including the 300-mw Baspa-II and 1,091-mw Karcham Wangtoo, for Rs 9,700 crore, is looking at expanding its hydel portfolio through acquisitions. 

The investors can buy the stock at the CMP of Rs.79.50, for a short term target of Rs.86 - 87. In case of short term trade, please do keep a SL of Rs.76.
Photo: Business Standard
The three-way merger between Reliance Communications (RCom), Aircel and MTS (brand of Sistema Shyam) is on course to create a formidable company, with best-in-class spectrum and reasonably strong financials.

Both RCom and Aircel are working on lowering their debt, which they have agreed to cap in the new entity at Rs.20,000 crore. Sistema Shyam has agreed to settle its liabilities ahead of the merger with RCom.

After the sale of its tower and fibre assets, RCom's debt is expected to come down to ~Rs.10,000 crore, which will be transferred to the merged entity. Aircel, too, is planning to bring down its debt to Rs.10,000 crore from the present Rs.26,000 crore. Sistema Shyam is also expected to pay off its Rs.4,153 crore debt ahead of the merger. 

Moreover, Investment Bankers said at Rs.20,000 crore, the debt to EBIDTA (earnings before interest, taxes, depreciation and amortisation) ratio of the new company would be 2.5 because the operating income of the new entity could be Rs.7,800 crore. RCom's current EBIDTA is Rs.7,000 crore, which includes income from tower assets and the wireless business. The wireless EBIDTA is Rs.4,000 crore, which will come to the new entity along with that of MTS.

If the new entity generates the Ebidta it estimates, then its net debt/Ebidta ratio will be better than the incumbents.

Currently, Bharti's debt/EBIDTA ratio stands at 2.8, while that of Idea is 3. RCom's debt to EBIDTA ratio is 5.3.

This three-way merger is expected to be a win-win for all players as it will provide the new entity a pan-India footprint, say analysts. The new entity will have 19.3% of the industry's spectrum holdings and will be the second largest player in terms of subscribers (200 million).

According to Navin Kulkarni of PhillipCapital, "The deal is a win-win for all players and will create a strong telecom player. However, with a revenue market share of 15%, the new company will still be behind Idea, which has a revenue market share of 19%".

According to experts, this merger will enable RCom to prevent loss of GSM subscribers in markets where it could not renew its 900 MHz licence (Assam, Bihar, Northeast and West Bengal). In markets like Himachal Pradesh and Odisha, RCom will be able to use its newly acquired 5 MHz spectrum in the 1800 MHz and 900 MHz bands for 3G/4G by moving its GSM subscribers into Aircel's 1800 MHz spectrum. 

The merged entity will be able to have 10 MHz of continous spectrum in four markets for improved 3G download speeds (Bihar, Jammu and Kashmir, Kolkata and Odisha). The merged entity will also have a pan-India 3G footprint in the 2100 MHz band except four markets (Gujarat, Haryana, Maharashtra, Uttar Pradesh West) and 4G footprint in 10 of the 22 markets.

The merger will also derisk RCom from imminent licence expiry. Most of RCom's 800/1800 MHz licences are expiring in the next five years, and Aircel's licences have another 9-10 years, except Tamil Nadu which is expiring in three years.

The Moody's Investor Service said April, 2016: 

"Growth in data revenues, particularly 4G services, will drive much of the improvement in RCom's operating metrics. But RCom has to wait until RJio commercially launches its 4G services before RCom can start to offer its own 4G services to new customers on the network and spectrum that it shares with RJio". 

Now, in all probably Reliance Jio is expected to launch their services from 15th August, 2016. Hence, we can expect a spike in the share price of Reliance Communications Ltd (Rs.50.15) from the end of this month.

RCom has been making attempts to sell its various assets, including DTH, submarine cables and the mobile tower business, but has not able to finalise any of the deal.

The company in December said it has been able to sell 150 residential flats in Navi Mumbai for Rs 330 crore. The rating firm believes that RCom is currently not pursuing the sale of GCX (Global Cloud Xchange) and DTH businesses as its deleveraging strategy now hinges on tower disposal and the merger of the wireless businesses.

The company signed an exclusive agreement with Tillman and TPG for the sale of its tower assets.

However, there is a negative news: The Department of Telecommunications (DoT) is considering barring all trading and sharing of airwaves and of mergers and acquisitions (M&A) in the telecom sector till the auctions end so that spectrum caps can clearly be defined while setting out the rules for the sale. The Aircel-Reliance Communications merger deal or any M&A by Telenor, which is in talks with Vodafone, might not get requisite clearances till the spectrum auctions are over. 

Therefore, a strong BUY is recommended in the share of Reliance Communications Ltd at the CMP of Rs,.50.15, for a short term target of Rs72.

Courtesy: With inputs from the Business Standard, NDTV Profit and other publications. 

Thursday, July 21, 2016

Only 15 out of India’s top 50 conglomerates today were part of the same list in the pre-reform year of 1990.
Photo: Indian Express

Reforms: Narendra Modi govt moves swiftly from GST, kerosene to disinvestment
July 21, 2016: Given the finance ministry’s inability to meet its disinvestment targets for the past few years, it is natural to be sceptical about this year’s R56,500 crore target—of this, R20,500 crore is for strategic divestment—being met. What could be different this time around, though, is that the government seems to be taking action on different reform fronts as well—the textiles packages is one such, there has been a lot more progress on direct cash transfers, and the latest is the 25 paise monthly hike that has been allowed in kerosene prices. As part of this process, the government has, in a sense, converted part of the NITI Aayog into the previous government’s Disinvestment Commission whose job was to make recommendations on what to do with various PSUs.

NITI Aayog is looking at a combination of outright closure, revival schemes, strategic sales in one go and lowering the government equity in a PSU to below 51%—and later doing a strategic sale. One report has already been given to the government with recommendations on closure, strategic sales and reduction in equity to below 51%—unlike in the case of the Disinvestment Commission, the reports are not public, so the names are not known, but at least 10-15 PSUs form part of this list on which action will be concluded by the end of this fiscal.

None of the obvious suspects, such as Air India, MTNL or BSNL are on this list so far, but sooner rather than later they will be—a committee has been asked to look at PSUs such as Air India where a revival plan is under way since, in many cases, the revival plans are also shaky.

Telecom PSUs, in fact, should be looked at quickly since they have valuable assets—spectrum, towers, optic fibre and, in the case of BSNL, even customers—which can be sold for a good price. As the competition intensifies, and these PSUs lose even more market share, naturally, their value goes down—this is why cynics call it privatisation by stealth! In any case, a BSNL with wages eating up 45% of revenues can never be profitable without the kind of drastic surgery that only the private sector is capable of—the same applies to MTNL which has an even higher wage-share.

In fact, as the CAG has just pointed out in its performance audit, 11 of the 34 listed PSUs have an interest cover of less than 1—67 of the 124 unlisted central PSUs have this dubious distinction—and can never be revived in a business-as-usual scenario. According to the CAG report, 135 PSUs made losses during FY15, and these rose to R30,341 crore from R22,783 crore in FY14.

Apart from what financing such losses does to the exchequer, this has to be looked at in the context of the dramatic turnaround of PSUs which were privatised, from Maruti Udyog to Hindustan Zinc—the rapid fall in the market share of PSUs also needs to be kept in mind since each day of delay means that much more of a loss for the government.

Adani Enterprise Ltd: On Solid Ground Powered by the Mozambique Deal
CMP: Rs.82.95
Target: Rs.88-99

Last year, Adani Enterprises Ltd, the flagship company of the Adani Group, de-merged its power, ports and electricity transmission businesses into separate companies, making the holding structure clearer for investors. Adani Enterprises shareholders will benefit from the merger of Adani Mining Pvt Ltd.

Adani Enterprises has a net debt of Rs.19,298 crore, representing 1.3 times the book value of shareholders equity. The group is part way into a new $5-10 billion solar investment programme.

Ameet Desai, executive director and chief financial officer of Adani Enterprises, said the company's long-term debt was about Rs.8,300 crore and net of cash this figure went down to Rs.6,280 crore. The balance Rs.12,000 crore was working capital and the net long-term debt to equity ratio was 0.5%, he said.

The company earlier said it is ramping up coal production and is well placed to tap the growth opportunities in domestic coal mining space. Adani Enterprises Ltd is now more or less, a trading company with the mining business being merged into it. Post completion of coal mine auctions, the opportunity is in the domestic coal MDO (mine developer operator) business where the company enjoys an early-mover advantage.

After the demerger Adani Enterprises is largely focused on coal. The company management, is confident of scaling up the MDO (mine developer operator) business manifold over the next five years (in FY15 it clocked around 3 mn tonne output under MDO for Rajasthan utilities) given the large opportunity that has come up after coal auctions. Despite domestic coal output slated to rise, the management remains upbeat on coal demand trickling into sustained trading volumes going ahead.

Gujarat-based food and edible oils firm Adani Wilmer and Madhya Pradesh-headquartered Ruchi Soya Industries have tied up to form a joint venture company for procurement, marketing, sales, and distribution of products such as soya food, oil seeds, and biodiesel.

The new joint venture (JV) company will cater to domestic food demand and both Adani Wilmer and Ruchi Soya will provide manufacturing support to this JV. Through their joint venture, Adani Wilmer, Adani Enterprises, and Wilmer International will hold a stake of 66.66% in the JV company, while Ruchi Soya will hold the rest — 33.34%. 

Adani Enterprises, earlier incorporated subsidiary Korba Clean Coal Pvt Ltd for carrying on the business of coal washing.

Coal prices in the US remain weak, but overseas, coal, particularly thermal coal, is having an impressive run. There, the commodity is getting a boost from robust Chinese demand and weather related shipping delays, which have impacted the commodity’s availability.

The way, which China is supporting coal, is somewhat interesting. While the country appears to be standing by its word to cut coal emissions, it is first doing this by cracking down on domestic coal miners and trying to curtail industrial overcapacity and this in turn is reducing the domestic supply of coal and necessitating an increase in coal imports.

The nation’s coal output will fall by 280 million tons this year as the government seeks to curtail industrial overcapacity, according to officials with the National Development and Reform Commission. In terms of imports, Deng Shun, an analyst with ICIS China, thinks coal imports will be sustained at more than 20 million tons a month in the second half of the year.

Earlier this month, seaborne thermal coal rose to its highest price in more than 10 months as Chinese buyers worked to scoop up coal supplies amid the government’s clampdown on overcapacity. In addition, demand for coal has improved amid the rebound of natural gas and oil prices.

Meanwhile, Adani Enterprises Ltd has secured approval from the Gujarat government to begin work on building a solar power equipment plant on its own after earlier unsuccessful attempts to build the plant in partnership with technology providers such as clean-power developer SunEdison.

Work on the first phase of the project has started and is expected to be commissioned this year, said two government officials familiar with the plan. The Adani Group plans to invest $2 billion in the project to make solar panels and solar photo-voltaic cells.

Wednesday, July 20, 2016

Loot of Indian Telecom Companies by the Narendra Modi government continues....
The Cabinet had recently cleared a mega-spectrum auction plan for seven bands, including that of 700 MHz. However, analysts had expressed concern over the high base price for the premium 700 MHz. A company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs.57,425 crore for a block of 5 Mhz on pan-India basis. This band alone has the potential to fetch bids worth over Rs.4 lakh crore. 

Aggressive bidding for 700 MHz band will hurt the financials of telecom companies which are already reeling under very high level of debt. From where such large sums of money will come? Has the Narendra Modi government ever thought of it, before placing astronomical rates for spectrum? Now what will happen is that after sometime, the telecos will definitely start raising the tariff rates; hurting the common man. What to say ....!! 

Idea management told analysts that it does not see a spectrum supply constraint anymore. Idea sees competition to intensity over two years but expects gains in revenue from increased market share. Another telecom company, Telenor has also decided against participating in the upcoming spectrum sale in India, signalling the Norwegian mobile phone operator's clear intent of exiting a market where it has been making losses and has struggled to expand operations. 

Moreover, The Narendra Modi government has already created a mess of the telecom sector, by putting Ravi Shankar Prasad in charge; who is inefficient in dealing such complex matters as telecom.....But then what is new, Narendra Modi's ministry is all full of stooges; though one of them have been shifted from the Human Resources (Read Education) to Textiles...and Minister of State for Railways Manoj Sinha is being given Telecom portfolio, that's split from Information Technology, a department that will stay with Ravi Shankar Prasad, who is also the country's new law minister after Prime Minister Narendra Modi's massive reshuffle of his cabinet's portfolios.
Even after 14 years, when the dispute first arose, there is still no clarity on what should be included/excluded from telecom ‘revenues’ – and since there is no clarity, whichever way the case is finally decided, where is the question of paying a penalty?
Should a foreign exchange gain/loss a Bharti Airtel makes on its African operations be included in this or not? In the initial years, Vodafone operated in India through eight companies which, on occasion, lent money to one another – is this to be included in telecom ‘revenue’ and should the government be given a share of this? Clearly not, you’d think, but that is what the case is all about.
While the new telecom minister can take a call on the CAG report once a decision is taken on what ‘revenue’ is, the decision has larger ramifications. Not including foreign exchange losses, capital gains, or interest earnings on company deposits in ‘revenue’ is an easy decision. But if payments made to other telcos are included in revenue and the government gets license/spectrum fees on this, this will discourage infrastructure sharing; it will also ensure MVNOs never take off.  In the rush to apportion blame, no one is talking about the real issue.

Winning Strokes: Think Different
Today JSW Energy Ltd gave good returns to the investors on intra-day basis. The stock touched Rs.84.20 in the BSE before closing near Rs.84, up 3.32%. The company is coming up with Q1FY17 results on 21st July, 2016. 

Adani Enterpises Ltd which is likely to get benefited due to the recent treaty with the Mozambique government today rose to Rs.83.60, intra-day before closing at Rs.82.80 in the BSE. The stock which has started to move up after consolidating around Rs.80-81, ranges should see its next target of Rs.91, very soon. I feel it would not be an exaggeration to mention here that Adani Group bought land in the African Continent some year back with the primary objective of growing pulses and oilseeds to meet the increasing demand - supply deficit in India. Though the efforts received lot of set backs earlier, but it seems with the patronage of the NDA government, this time, their project might see the light at the end of the tunnel.

The stock of Reliance Communications Ltd today rose to Rs.50.90 before closing at Rs.50.30 in the BSE. Reliance Communications Ltd today informed that it has incorporated an investment firm in the Netherlands in the name of Aircom Holdco BV.  Now, this comes before the official announcement of the merger deal with Aircel, hence we need to read between the lines. My estimation is that: the scrip is likely to see Rs.56-57-60, within a short time. 

Today, the stock of micro-cap pharma company, Syncom Formulations (India) Ltd was recommended to the Paid Group members at Rs.2.46 for short term targets of Rs.5.20-9. 

Syncom Formulations (India) Ltd is engaged in the business of pharmaceutical formulations. It manufactures range of products in various dosage forms and markets them in various countries. 

The company purchased a property situated in Mumbai worth Rs.11.00 crore on March 15, 2016.  

The rupee seems to be favouring the pharma sector and one is still going to see a net-net good growth for some of these companies, like Syncom Formulations Ltd, which has a market cap of only Rs.190.48 Cr at the CMP of Rs.2.44. In FY16, the company came out with a net profit of Rs.10.36 Cr on an equity of only Rs.78.07 Cr. The reserves of the company is Rs.30.63 crores.

Syncom Formulations (India) Ltd (Syncom) is a generic pharmaceutical company, since last two decades. It undertakes the discovery, development, manufacturing and marketing of pharmaceutical formulations. The company’s product portfolio includes alpha adrenoceptor agonist, analgesic, antipyretic, anti-inflammatory, anti-ulcer agents, antibiotics and stimulants, among others. 

It has been serving the demands of more than 20 countries globally with WHO GMP certified manufacturing unit, ISO: 9001-2008 certification and experienced team. It is a prime Exporter, Manufacturer and Supplier of a wide range of  Dry Injections, Dry Powder Injections, Dry Vial Injections, Tablets, Capsules, Liquids Orals, Liquid Vials And Ampoule Injections, Dry Syrups, Ointments, Inhalers, Herbals, etc. 

The company markets products worldwide, under brand names such as Ostocrat, Oxycrat, Raftus and Amoxytop. It has its operational presence in Canada, Peru, Panama, Mali, Ghana, Hong Kong, Cambodia, the Philippians, Malaysia, Sri Lanka, Congo, Yemen, China, Nepal, and Chutan, among others. Syncom is headquartered in Indore, Madhya Pradesh, India. It has more than 400 products registered. 

In addition, it has also ventured into the business of exporting of Surgical products, Agro & Confectionery products like Rice, Wheat Flour, Chickpeas, Soy DOC, Biscuits & Candies, Industrial products like Fasteners, Steel Bars, Roofing Sheets & Jute Bags, Metal Scrap, etc. 

Syncom Formulations India Ltd earlier informed the BSE that the Board of Directors of the Company at its meeting held on May 30, 2016, inter alia, has recommended a dividend of Re.0.02 (2%) per equity share of Re. 1 each for the year 2015-16; which will be paid to all the members/beneficiaries of the Company, subject to approval of member at the forth coming Annual General Meeting of the Company.

Today a buy call was initiated on Idea Cellular Ltd at Rs.105.30 for a short term target of Rs.111 -116. Recently, Idea Cellular Ltd announced up to 67% reduction in 4G and 3G mobile Internet rates to compete with rival Bharti Airtel and ward off threat from Reliance Jio. This is a right move at the right juncture.

The promoters holding in the company stood at 42.23%, while Institutions and Non-Institutions held 32.14% and 25.63% respectively.

Idea Cellular, one of the biggest cellular carrier of the country, has added 6.89 lakh new mobile subscribers in June, 2016. Following the addition, the company’s total subscriber count stood at 17.62 crore with a market share of 22.68%. Idea Cellular, an AV Birla group company, provides Global System for Mobile communications (GSM)-based wireless service at the pan-India level, it is present in all 22 telecom circles.

Idea Cellular's management recently told analysts that it is not looking to bid for 700 MHz spectrum auction.  Idea management told analysts that it does not see a spectrum supply constraint anymore. Idea sees competition to intensity over two years but expects gains in revenue from increased market share

Some of my earlier recommended counter, which did well today are BHEL (CMP: Rs.144.25), Vedanta Ltd (Rs.161.75), Jaiprakash Associates Ltd (Rs.11.99), Unitech Ltd (Rs.8.34), Lanco Infratech Ltd (Rs.5.35), etc. 
Syncom Formulations (India) Ltd: Buy
CMP: Rs.2.46

Syncom Formulations (India) is engaged in the business of pharmaceutical formulations. It manufactures range of products in various dosage forms and markets them in various countries. The company purchased a property situated in Mumbai worth Rs.11.00 crore on March 15, 2016. 

When most of the Pharma Companies today are moving  up, there is chance that this battered down counter should also show some upward movements. 

Monday, July 18, 2016

JSW Energy Ltd: Buy
CMP: Rs.80.35
A meeting of the Board of Directors of JSW Energy Ltd will be held on July 21, 2016, interalia, to consider the Unaudited Standalone & Consolidated Financial results of the Company for the quarter ended June 30, 2016.

Recently, there were media reports that, JSW Energy Ltd has got fair trade regulator CCI's approval to acquire 1,000 MW power plant in Chhattisgarh from Jindal SteelBSE -0.62 % and Power Ltd (JSPL).
Meanwhile, ICICI Securities has come out with its first quarter (April-June) earnings estimates for the Power and coal sector. The brokerage house expects JSW Energy   to report a 33.1% growth quarter-on-quarter (up of 46.5% year-on-year) in net profit at Rs.406.4 crore. 

Sales are expected to decrease marginally by 3.1% Q-o-Q (up 23.3% Y-o-Y) to Rs.2598.7 crore, according to ICICI Securities. Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 5.0% Q-o-Q (up 46.2% Y-o-Y) to Rs 1194.5 crore.

The Economic Times wrote on 24 June, 2016:
Months after initial discussions fell through, Sajjan Jindal-controlled JSW EnergyBSE 0.00 % is said to have reopened talks with the Jaypee Group on acquiring three power assets. The two sides are in advanced negotiations for a deal involving two power generation units and a majority stake in a transmission joint venture for an enterprise value of about Rs 5,500 crore, two people aware of the development told ET. 
The two utilities are Bina Thermal Power in Madhya Pradesh with an installed capacity of 500 MW and the 400 MW Vishnuprayag Hydro Power in Uttarakhand. Bina can be ramped up further and its capacity trebled. The third asset is a 74 per cent stake in Jaypee Powergrid, a 74:26 joint venture with Power Grid Corporation of IndiaBSE -0.43 % Ltd (PGCIL). All three assets are held by Jaiprakash Power Venture Ltd (JPVL), a majority owned subsidiary of Jaiprakash Associates, and an acquisition agreement could be reached shortly, said the people cited above. 
Therefore, buy the shares of JSW Energy Ltd at Rs.80.35, for short term targets of Rs.88-91. Please keep a SL of Rs.79, for any short term trade.  

Saturday, July 16, 2016

Lanco Infratech Ltd: Buy
CMP: Rs.5
Photo: The Economic Times
Lanco Infratech Ltd's Kondapalli expansion, the gas-based plant, which was being developed in a phased manner, is located near Vijayawada in Andhra Pradesh. The company. informed in January, 2016, that its subsidiary, Lanco Kondapalli Power Ltd, has successfully declared the Commercial Operations Date (COD) for its expansion capacity of 371 MW (Phase III B Project) with effect from January 9. It is at present operating at ~30% PLF, because of gas allocation under present gas pooling mechanism.

Besides, the company said its Amarkantak Unit 2 (300 mw) restarted power supply to Chhattisgarh from April 17, 2016. 

Its EPC order book consisting of power, solar and others stood at Rs.27,079 crore, 80% of which is internal projects. Lanco Infratech Ltd, is present in EPC, conventional and solar power generation, coal mining and infrastructure and property development  

The EPC sector and the power sector together contributed to 87% of the gross revenues. EPC and construction sector contributed to 37% of the gross revenue.

The company has a total outstanding receivables of Rs.17,81.6 crore from various state electric utilities as of March 2016. “Based on internal assessment and various discussions with the customers, the management is confident of recovery of receivables,” the company said.

Better performance by operational assets helped Lanco Infratech recover from losses in the earlier quarters. The Gurgaon-based company had recorded a consolidated profit of Rs.137 crore during the quarter ending December 31, 2015 bringing down its cumulative loss for the first nine months by 95% to Rs.65 crore against Rs.1,412 crore in 2014-15.

The company posted a consolidated net profit of Rs 98.98 crore in the Q2FY16 after a gap of three years. In a statement accompanying the results, the group said approved CDR scheme and additional funding to the company and the lenders approvals of the cost overrun proposals for the projects under construction and the effort to bring strategic investors, disposal of assets, would also bring in the additional cash flows into the system.

Moreover, resolution of pending issues at both Anpara and Amarkantak is expected to improve cash flows and recovery in financials is expected to be gradual, due to the inherent asset value.

Lanco Infratech's promoter L Madhusudhan Rao has found a white knight in fellow utility operator OP Gupta to bail him out of the Rs..41,000-crore loan mess even as bankers want to split the business into three — power, EPC and other businesses such as road and gas — which would also involve conversion of a majority of loans into deep discounted bond. 
The engineering procurement and construction, or EPC vertical, would have a loan of Rs.2,300 crore on its book but the debt burden would be reduced as the company has proposed to convert 90% debt into equity. Interestingly, the new promoter Gupta, who is brought on board by the company, will get majority stake by investing Rs.150 crore.
A further 90% of Rs 5300-crore debt will be converted into deep discount bonds, known as Optionally Convertible Redeemable Preference Shares (OCRPS), with a five-year tenure offering 9.75% interest rate. The company management informed lenders that Gupta has two power plants — a 313 mw plant in Tamil Nadu and another 400 mw plant in Gujarat.
As per the proposal, Lanco Infratech will be the holding company for all three verticals in which Rao's stake will be reduced to 26% from 70% at present, while lenders would have 57% equity stake. The company has also sought an additional loan of Rs 4,000 crore from banks to complete some of its existing projects. Speaking to ET, two senior bank officials said that they are disappointed that the new promoter will own majority stake in the company by infusing "just about Rs 150 crore". 
Meanwhile, after recording profit for two consecutive quarters, due to the improvement in performance of some of the subsidiaries (providing better business outlook) Lanco Infratech a reported loss of Rs.200.7 crore for the quarter ending March 31, 2016 as against a loss of Rs.563.2 crore in January-March 2015. 

The company managed to reduce its yearly loss too due to better performance of its EPC and construction business. It reported loss of Rs.265.6 crore last financial year as against loss of Rs.1,975.3 crore for 2014-15. The company said it would continue to look at sale of assets and getting strategic investors for some of its businesses.

There were media reports in April, 2016 that lenders to Lanco Infratech were looking to rope in a strategic investor for the company’s 8,000 MW power portfolio. At the end of December, the company had 3,460 MW operational of power projects and 4,636 MW of projects under construction. 

Its 500 MW Teesta Hydro Power in Sikkim, the majority of which is now owned by a consortium of lenders (The consortium is led by IDBI Bank and members include Allahabad Bank, Andhra Bank, Axis Bank, Oriental Bank of Commerce, Punjab National Bank, ICICI Bank and State Bank of India (SBI) and its subsidiaries, among others), attracted three potential buyers that include at least one foreign company.

The hydro project, with an estimated cost of over Rs.3,000 crore, has suffered several delays leading to an interest payment default by the promoter. The consortium of banks converted part of its debt into equity to hold 51% in the project under the strategic debt restructuring (SDR) scheme approved by Reserve Bank of India earlier last year. The total debt for the project stood at nearly Rs.2,200 crore while Lanco’s equity stood at about Rs.700 crore. Lanco had divested its 1,200 MW coal-based power plant in Udupi to Adani Power earlier last year.

Lanco’s loans were restructured by the CDR cell in December 2013 with a moratorium of two years from the cut-off date of April 1, 2013, and repayable in 30 quarterly installments starting from June 30, 2015.

Recently, there were also media reports that Piramal Enterprises, led by billionaire Ajay Piramal, is betting big on the infrastructure sector and the diversified company has entered the race to pick up a stake in debt-ridden Lanco Infra's thermal power portfolio.

Preliminary talks have been initiated between Lanco Infra which is looking at inducting strategic investors to reduce its debt & the structured investment group of Piramal Enterprises which falls under Piramal Capital. A few overseas distressed asset funds are also interested in the portfolio. On completion and on a fully operational basis, the enterprise value of the 6 power plants of Lanco Infra is estimated between Rs.42,000 crs to Rs.45,000 crores. 

As mentioned above, in the third quarter of FY 16, the company had Kondapalli Phase 1, 2 and 3a, Amarkantak Phase 1 and 2, Tanjore and Anpara power plants of capacity 3,025 MW under operation. Thus, its seems from above that the company is on the verge of a turnaround. Therefore, buy the shares of Lanco Infratech Ltd at Rs.5, for a short term target of Rs.9.

Thursday, July 14, 2016

The Shares of debt ridden companies should continue to do well as the new scheme proposed by the RBI will ease debt repayment period and ease the capital structure.

The RBI lifeline states that debt can be classified into ‘sustainable’ and ‘unsustainable’ parts. The former will be serviced by existing cash flows, while the unsustainable debt will be converted into equity or convertible debt. Accounts that are worth more than Rs.500 crore would be eligible for the new scheme.

Photo: Business Standard
Also, the rates at which the Gautam Adani-promoted Adani Group bagged land from the Narendra Modi-led Gujarat government for its port and special economic zone (SEZ) project — between Re 1 and Rs 32 per square metre — were much lower than other companies that set up units in the state. Concessional pricing apart, the group did not face land acquisition hurdles, as the state allotted non-agricultural government land for Adani Port and Special Economic Zone (APSEZ), the country’s largest multi-product SEZ spread across 15,946.32 acres (6,456 hectares) in Kutch district’s Mundra block.

Photo: Business Standard
Meanwhile, while the shares of JP Group companies and Unitech Ltd (Rs.8.10) gave huge returns in the short term, the Adani Group is yet to pick up steam. Besides, you can see from figure on the left, that Adani Enterprise Ltd has better D/E ratio, than the J P Associates Ltd.

Earlier there were even media reports that Mr.Prakash Javadekar, has waived a fine of Rs 200 crore fine for environmental fine to Adani Enterprises.

Therefore, buy the shares of Adani Enterprises Ltd at Rs.82 82.30, T: Rs.88-91-99, SL: Rs.78.

Once the shares of this group starts moving with full steam, Adani Enterprise Ltd could even cross Rs.100. Adani Ports and SEZ Ltd recommended earlier already gave good returns to the investors, over a short term.

Moreover, Adani Enterprises Ltd is being recommended in this blog, since a long time. And those who have already purchased it on my earlier recommendations, are by now sitting with healthy profits.
The Shares of debt ridden companies should continue to do well as the new scheme proposed by the RBI will ease debt repayment period and ease the capital structure.

The RBI lifeline states that debt can be classified into ‘sustainable’ and ‘unsustainable’ parts. The former will be serviced by existing cash flows, while the unsustainable debt will be converted into equity or convertible debt. Accounts that are worth more than Rs.500 crore would be eligible for the new scheme.

Meanwhile, while the shares of JP Group companies and Unitech Ltd (Rs.8.10) gave huge returns in the short term, the Adani Group is yet to pick up steam.

Therefore, buy the shares of Adani Enterprises Ltd at Rs.82.30, T: Rs.88-91, SL: Rs.78. Once this group starts moving with full steam, Adani Enterprise Ltd could even cross Rs.100. Adani Ports and SEZ Ltd recommended earlier already gave good returns to the investors, over a short term.

Moreover, Adani Enterprises Ltd is being recommended in this blog, since a long time. And those who have already purchased it on my earlier recommendations, are by now already sitting with healthy profits.

Wednesday, July 13, 2016

Reliance Communications Ltd: Buy
CMP: Rs.50.55
Reliance Communications (RCOM) last month announced that RCOM and Maxis Communications Berhad (MCB) and Sindya Securities and Investments Private Limited (Sindya), the shareholders of Aircel Limited (“Aircel”) expect to sign binding definitive documentation and announce the proposed Transaction for the combination of the Indian wireless business of RCOM and Aircel very shortly.

Reliance Communications Limited, founded by the late Shri Dhirubhai H Ambani, is the flagship company of the Reliance Group.

The Reliance Group currently has a net worth in excess of Rs.91,500 crore (US $15.3 billion), cash flows of Rs 10,200 crore (US $1.7 billion) and net profit of Rs 4,700 crore (US$ 0.8 billion).

Reliance Communications is India's foremost and truly integrated telecommunications service provider. The Company has a customer base of over 118 million, including over 2.6 million individual overseas retail customers. Reliance Communications corporate clientele includes over 39,000 Indian and multinational corporations including small and medium enterprises and over 290 global, regional and domestic carriers.

Reliance Communications has established a pan-India, Next-Generation, integrated (wireless and wireline), convergent (voice, data and video) digital network that is capable of supporting best-in-class services spanning the entire communications value chain, covering over 21,000 cities and towns and over 400,000 villages. 

Reliance Communications owns and operates the world's largest next generation IP enabled connectivity infrastructure, comprising over 280,000 kilometers of fiber optic cable systems in India, USA, Europe, the Middle-East and the Asia-Pacific region.

Friday, July 08, 2016

Letters from Blog Readers
Hello SUMAN Sir,
                          I am PRASHANT from MUMBAI.I work for BHARAT PETROLEUM CORPORATION LTD MUMBAI REFINERY. I am your regular follower of your blog. Because of you I have gained good profit in UNITECH LTD. 

I am your sincere and religious follower. I had bought RASOYA PROTEIN 1 year before. Please guide me about RASOYA PROTEIN. I can hold for more period just need your valuable guidance. Waiting for your reply. My mobile numbers are 99**079949 (Whatsapp number) / 809**79949.
Dear Investors, 
                         Thanks for following my blog posts and congratulations for your winning stroke in Unitech Ltd. For Unitech Ltd, the short term targets are still Rs.12-15. Yesterday, I spoke with the head of research of a Delhi-based brokerage house, for their view on Unitech Ltd and they are also positive on the scrip, because of the improved fundamentals of the real estate/construction sectors. 

Meanwhile, there is still NO positive news in Rasoya Proteins Ltd, as of n ow; however, since this year monsoon has been predicted to be good, we can look forward for a reasonably good soybean prices. As you must remember, high soybean prices is deterring the company to start operations in the new plant. The company's main plant is still closed, unless that is put in use, nothing much will happen in the counter. One positive is that GDR issue has been more or less solved. 

Tthe company is in contact with various financial institutions, to restructure its loan portfolio. So, at this stage, I would not ask you, NOT to put fresh funds in the scrip, unless some clarity comes. I am expecting some positives post, September, 2016. 

2ndly, since you are already trading through some broker and my well-wisher, I shall be obliged, if you join my brokerage company (, so that I make a little from your trading/s; this will help me cover up a part of the research cost. This is an appeal to all my ardent blog readers. 

Thanks and regards...