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Saturday, October 25, 2008

Rendezvous with Short Selling:
Let's recap what Short Selling is:
  • In a short sale an investor borrows shares, sells them, and must eventually reutrn the same shares (cover). Profit (or loss) is made on the difference between the price when the shares are borrowed compared to when they are returned.
  • An investor makes money only when a shorted security falls in value.
  • Short selling is done on margin, and so is subject to the rules of margin trading.
  • The shorter must pay the lender any dividends or rights declared during the course of the loan.
  • The two reasons for shorting are to speculate and to hedge.
  • There are restrictions as to what stocks can be shorted and when a short can be carried out.
  • Short interest tells us the number of shares that have already been sold short in a security.
  • Short selling is very risky. You can lose more money than you invest but are limited on the upside.
  • A short squeeze is when a large number of short sellers try to cover their positions at the same time and thus, drive up the price of a stock.
  • Even though a company is overvalued, it may take a long time for it to come back down. Fighting the trend almost always ends up with trouble.
  • There are some that see short selling as unethical and bad for the market.
  • Short selling contributes to the market by providing liquidity, efficiency and acting as a voice of reason in bull markets.
  • Some unethical traders spread false information in an attempt to drive the price of a stock down and make a profit by selling short.

Ethics and the Role of Short Selling: It's safe to say that short sellers aren't the most popular people on Wall Street. Many investors see short selling as "un-American" and "betting against the home team." Some hold short sales as a major cause of market downturns, such as the crash in 1987. There isn't a whole lot of evidence to support this, as other factors such as derivatives and program trading also played a massive role. Still, regulators have introduced rules that make it more difficult for short sales to push a market downward.

On the other hand, it's tough to deny that short selling makes an important contribution to the market. It provides liquidity, drives down overpriced securities, and generally increases the efficiency of the markets. Short sellers are often the first line of defense against financial fraud. While the conflicts of interest from investment banking keeps some analysts from giving completely unbiased research, work from short sellers is often regarded as being some of the most detailed and highest quality research in the market. Its been said that short sellers actually prevent crashes because they provide a voice of reason during raging bull markets.

However, short selling has a very a dark side, courtesy of a small number of traders who are not above using unethical tactics to make a profit. Sometimes referred to as the "short and distort," this technique takes place when traders manipulate stock prices in a bear market by taking short positions and then using a smear campaign to drive down the target stocks. This is the mirror version of the pump and dump, where crooks buy stock (take a long position) and issue false information that causes the target stock's price to increase. Short selling abuse like this has grown with the advent of the Internet and the growing trend of small investors and online trading.

How "naked" short selling happens: U.S. securities regulators issued an emergency rule on July, 2008, to limit certain types of short selling in major financial firms, including Fannie Mae and Freddie Mac.

Investors who sell securities "short" profit from betting that a stock is overvalued and its price is likely to fall. Short-sellers borrow shares, then sell them, waiting for the stock to fall so that they can buy the shares at the lower price, return them to the lender and pocket the difference.

The emergency rule, which takes effect on last July in the US lasted for several days, was specifically designed to prevent investors from making "naked" short sales, which occur when an investor sells stock that has not yet been borrowed. If "naked" shorting is done intentionally it is illegal.

The following explains how a "naked" short sale occurs (Considering the US markets): ## When investors call a broker to arrange to borrow stock to short, they are aware that short sales are subject to a standard three-day settlement period. This means the sell-side broker has three days to deliver the shares to the investor.

## The broker is supposed to locate shares available to short prior to executing a short sale and make a determination that the shares will be delivered to the investor within the three- day settlement window. However, there are certain exceptions to that rule.

## Some shares are on an "Easy to Borrow" list. For a stock on that list, investors can execute a short sale and the broker does not specifically have to locate, or contact the source of the shares that are being shorted. The broker has a "blanket" assurance about the borrowing capability for that security.

## There is also a "Hard to Borrow" list for securities that are difficult, or unavailable, to borrow. To short stocks on the "Hard to Borrow" list, brokers have to take additional steps to ensure that the stock is available to be shorted.

## If, for whatever reason, the shares are not delivered within the three-day settlement window, this is called a "fail to deliver."

## That "fail to deliver" essentially leaves the short- seller "naked," meaning he did not actually possess the shares he has sold.

## If shares have not been delivered for 13 days after a transaction has occurred, the broker must buy them back.

## The emergency rule from the U.S. Securities and Exchange Commission would require a short seller to borrow securities before executing a short sale for certain financial institutions. It would also require the investor to deliver the securities by the settlement date.

What is Capitulation??

A military term. Capitulation refers to surrendering or giving up. In the stock market, capitulation is associated with "giving up" any previous gains in stock price as investors sell equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.

After capitulation selling, it is thought that there are great bargains to be had. The belief is that everyone who wants to get out of a stock, for any reason (including forced selling due to margin calls), has sold. The price should then, theoretically, reverse or bounce off the lows. In other words, some investors believe that true capitulation is the sign of a bottom.

Sign of Capitulation and Role of Media:

The mass transfer of funds from stocks to safer investments and increased news stories on investors preferring their mattresses over the market replaced the go-go stories of the late 1990s, when investors poured money into dotcom stocks that had no fundamental strengths. This type of reverse is a good sign of a capitulation.

One fact which is worth mentioning here is that, media full of capitulation talk is a bullish indicator. This bullish sentiment invalidates the primary criteria for a capitulation, which is the total lack of any bullish sentiment for stocks.

Second, in real-time the media is wrong in its calls on market turns. The media is a good "misleading" indicator, one that you should almost always bet against. It was late in calling the 1987 crash, the dotcom bubble, and this kind of mayhem.

This time also a Financial Media Channel openly came in support of FIIs shorting in voilation of the SEBI's dictat.

In last February, the same media channel brought in one of its most pampered analysts from Religare Securities Ltd, who was openly asking all to sell the stocks when the markets was tanking, creating panic among the hapless small investors. Eventually after 2 (two) months the same stocks gave good opportuity to exit......

Should these kind media channels who behave irresponsibly during a market mayhem be banned......and the anchors or the analysts who shamlessly support these misdeeds, be pulled up??!!

Posted by SumanSpeaks at 4:39 AM

ICSA India Ltd (BSE Code-->531524)

Buy ICSA India Ltd at the CMP of Rs.90--Rs.92 for a target of Rs.150, in the next 45 days time frame. The company is into making of innovative products suitable for Power Utilities, in the field of Energy Management, Energy Audit, and Control Applications and provides versatile Data Acquisition System using several communication media such as GSM, CDMA, Satellite, Optical Fibre and RF.

Company has allotted 105000 Equity Shares on conversion of 35% of Stock Options granted under ESOP Scheme 2005 and 26,50,000 Equity Shares on conversion of Fully Convertible Warrants. Out of USD 46mn FCCB raised by the company, USD 25mn FCCBs were converted in the last financial year and an amount of USD 21mn are outstanding as on December 31, 2008.

Company has taken up the commissioning of Wind Forms aggregating to 9.6 MW.The company came out with superb set of numbers for the December, 2008 quarter, inspite of the downturn.

More coming..............

Oil rises towards $38 on surprise crude stocks drop

PERTH: Oil climbed towards $38 a barrel on Wednesday, paring some of overnight's 5 percent losses, after the industry group American Petroleum Institute's weekly inventory data showed crude stockpiles had fallen unexpectedly.

But a downward revision by the U.S. government on its oil demand forecasts and doubts over the effectiveness of the U.S. government's bank rescue plan capped oil's gains.

U.S. crude for March delivery rose 38 cents to $37.93 a barrel by 0225 GMT, after settling down $2.01, or 5 percent, at $37.55 a barrel on Tuesday.

London Brent crude rose 50 cents to $45.11, stretching its unusual premium over U.S. oil prices to more than $7 a barrel, nearing the record above $9 hit last month as storage tanks in the Cushing delivery point neared their peaks.

"The API data is helping prices to rebound after last night's sell-off. Oil prices were perhaps a little oversold amid the panic across the equities and commodities markets," said Toby Hassall, chief analyst at Commodities Warrants Australia.

"The macroeconomic data from the U.S. is not painting a picture of swift recovery but the API numbers could be an indication that supply and demand in the spot market is beginning to get a little more balanced."

U.S. crude oil stockpiles unexpectedly fell 1.996 million barrels last week despite an increase in import levels and a decline from refineries, data from the American Petroleum Institute on Tuesday, bucking expectations that crude stocks would increase by 3.1 million barrels.

Analysts said investors were cautiously optimistic as the API report comes one day ahead of the U.S. Energy Information Administration's (EIA) weekly report on petroleum supply and demand, which is considered to be accurate.

U.S. crude oil inventories rose for the seventh consecutive time last week, analysts forecast in a Reuters poll on Tuesday, citing a drop in refinery utilisation and higher imports.

In yet another sign that OPEC would cut production targets at its next meeting in March, Saudi Arabia's oil minister said low oil prices were as unjustified and unsustainable as the record peak above $147 a barrel last summer.

But expectations that the International Energy Agency will cut its forecasts for 2009 world energy demand yet again this week due to a worsening economic outlook continued to weigh on oil markets.

Oil's sharp losses on Tuesday, which dragged it back below the psychologically important $40 mark, came after the U.S. government revised its oil demand forecasts lower and on concerns the American banks bailout plan unveiled by the Obama administration will do little to revive the ailing economy.

The EIA revised down its 2009 global oil demand forecast by 400,000 barrels per day from the previous outlook, predicting demand will fall by 1.17 million bpd this year from 2008 levels.

Analysts said investors would be closely eyeing Chinese import and export data as well as U.S. international trade figures to gauge the health of the economy

 
 

Some Positives about Pyramid Saimira Theatres Ltd

  • PSTIL is taking strong measures to improve both its top and bottolines according to Mr.Swaminathan, the CMD of the company. There is also strong source based news, that the company could come up with a "Buy Back" of the shares at a higher price or at a Premium to the market price.

  •  It is to be understood that Pyramid Saimira (PSTL) , a holistic Indian multinational entertainment company, operating in 6 countries is one of the World's fastest growing entertainment group. Its diversified businesses include Exhibition (Theatre), Film and Television Content Production, Distribution, Hospitality, Food & Beverage, Animation and Gaming, Cine Advertising, etc., which has propelled it to take the entertainment industry to the next level.

  • Due to downturn the company has reduced the number of screen at present to 250 since the company observed that average capitalization of screens were falling across the industry and average spend per person is not increasing proportionately.

  • Now the company has started to take special measures to increase the profitability of the venture and some of these measures have already started to show  positive effect on the company's fundamentals.

For example: 

Serial No.

Particulars

Q3FY09

Q2FY09

% Change

  1.  

No. of screens

252

745

 

  1.  

Sq.ft under control

10.04 lakhs

31.91 lakhs

 

  1.  

Average Capacity Utilization

38%

36%

5.5%

  1.  

Average revenue per footfall

Rs.41.93

40.11

4.5%

  1.  

Average Revenue per Screen for the quarter

34.24 lakhs

32.63 Lakhs

4.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Some more positives about PSTL:

1. The company realigned the screens and also re-negotiated and revised the terms. In addition, withdrew from the Northern and Western India completely where the company was making losses. Towards the same the company has treated those losses as operational loss.

2. Due to realignment of terms and transfer of control of certain screens to the distribution verticals, the company is expected to receive substantial amounts of Security Deposits from the theatre owners for fully de-hired theatres and some of the advances has been transferred in favour of subsidiary company, handling, distribution. The recovery of advances from theatre owners is on---this is great news for the shareholders. Since the deposits are recoverable and hence it has not placed any provision for bad debts.

3. The company is adding another 150 screens the funding of which will be done by the amounts received from de-hired theatre owners. This is expected to optimize operational efficiency.

4. This will also enable better tax compliance and planning. This method will avoid unnecessary transfer pricing complications.

5. In the Q3FY09, the amount of Rs.76.32 Cr has been provided for as an external loss towards foreign exchange. It is to be understood that the Net Loss for Q3FY09 is Rs.74.74 Crs. Hence if we remove that virtual loss of Rs.76.32 Cr, do we not get a BETTER picture of the company's results?? In fact the company came out with a net profit of Rs.1.6 Cr in Q3FY09.

6. Taking cues from the above it is found that company's EPS for the year ending 31st March, 2008 on a standalone basis is Rs.2.47.

For Q1FY09, EPS-->Rs.4.77,

For Q2FY09, EPS-->Rs.3.08, and

For Q3FY09, EPS--->Re.0.56.

So Annualised EPS for the current year is expected to be a whooping Rs.9.53. This is exclusive of the EPS of the group/subsidiary companies.

 

This massive EPS is against the current price of the scrip at Rs.20.55; which looks absurd and hence the scrip shoud go for an immediate re-rating. All these has been done on a conservative basis; however if there is a further improvement in the fundamentals due to steps taken by the management of Pyramid Saimira Theatres Ltd, the EPS for FY09, could exceed Rs.10.

 

Hence the scrip of Pyramid Saimira (PSTL) is dirt cheap, considering the potential of the company.


Moreover, any film launch in next week or at the end of this month or news of any buy back of shares will have positive effects on the share price and could rocket the scrip of the company up---a characteristic of the PSTL.

 

I think you remember how most of the shareholders got benefited from my similar move in case of Garnet Construction Ltd in 2007, when the stock was moving down from Rs.53, hitting continuous lower circuits. Moreover, those who have purchased Satyam Computer Services Ltd along with me from Rs.18.5 must have  been benefited by now---this is called reading between the lines, which is an essential part of the stock market. The art of making money in the stock markets is to see or visualise what others are not able to do, normally.

 

THE ABOVE INPUTS WERE SENT TO THE PAID GROUPS, LAST WEEK...

WINNING STROKES: THINK DIFFERENT

Pyramid Saimira Theatres Ltd hit the buyer freeze, as the company is working hard to improve its fundamentals. Already the steps taken are showing positive effect. This might be a repeat of the Satyam Computer Services Ltd episode, where most of the investors who bought with me from Rs.18.5,onwards, made huge money, when the share price suddenly spurted to more than Rs.60 in less than 2 months time frame. Please stop hearing all those experts on television channels if you want to make genuine money from the markets!! Those who have heard the great voice of Shankar Sharma and shorted the market must have lost their shirts in the last few days. Moreover, it is good to see Dr.Pranab Mukherjee, endorsing my thoughts of massive tax cuts instead of going for mindless infusion of capital in the system (What Mr.Barrack Obama is doing in the US), increasing the chance of HYPER INFLATION AND REDUCING THE VALUE OF INDIAN RUPEE OR FURTHER DEPRECIATING INDIAN RUPEE; going forward. The government should come out wtih massive tax cuts and other proposals which would boost the spending and in turn increase growth. In my list Dr.Pranab Mukherjee still holds number one position in the UPA Government followed by Mr.P Chidambaram, Mr.A K Antony and Mr.Murli Deora. Mr.Chidambaram as India's Home Minister, should be a little more strict in his approach while dealing with the "Rogue Government" in Pakistan. At the bottom of my list is the "Humongous Drama Queen", Ms.Renuka Choudhury, [When Dr.Jaipal Reddy known for his penchant for using, unusual English words in his speeches, suddenly used this word "humongous" in one of utterances in the Parliament, most of the media persons and fellow politicians present in that august hall were surprised. Ms.Renuka Choudhury at that time is reported to have said to the bewildered masses, "Look at me to understand the meaning of Humongous"], the "Garbage of Indian Politics".

My "Quickie Call" Opto Circuits India Ltd given to the Paid Group Members (Quickie Group only) on last Sunday, moved up by  more than 4%. The stock is still looking excellent on the daily charts. Even in this downturn the company came out with superb set of numbers for the Q3FY09. The company last month announced that Maxcor Lifesience, Inc, the newly incorporated subsidiary of the Company (OCI), entered into a strategic cooperation agreement with Micell Technologies, Inc., based in Raleigh, North Carolina, U.S.A. Maxcor and Micell will co-operate in developing and commercializing leading edge Rapamycin (Sirolimus) - based Drug Eluting Stents (DES) and Drug Eluting Balloons (DEB) which will complement OCI's present range of successful paclitaxel-based drug-device combination products. Offering products with both compounds will enable OCI to maximize its market by addressing additional clinical scenarios. The jointly-developed offerings will have cardio-vascular applications that will advance the treatment of many clinical conditions while also minimizing their potential risks or side-effects. Moreover, it also informed that, 5,40,000 convertible share warrants were allotted to Mr. Vinod Ramnani Promoter Director in 2007 at Rs.360 per warrant. The Company has converted these warrants in to 5,40,000 equity shares and allotted the same to Mr. Vinod Ramnani on January 12, 2009.

Kohinoor Broadcasting Corporation Ltd which which was asked to be accumulated by the Paid Groups since last 20 days hit the buyer freeze yesterday, with almost 1 million (10 lakhs) pending shares---but why??!!

My Sunday Report recommended scrip to the Paid Groups, Deccan Chronicle Holdings Ltd at Rs.37.85 moved to Rs.39.45 in yesterday's early trade. A research report on the company is placed at: www.sumanspeaksplus.blogspot.com (SumanSpeaksPlus).

Kalindee Rail Nirman Engineers Ltd and Kernex Mircro Systems Ltd which were recommended to the Paid Groups last week, already gave more than 25% return in less than 10 days. Now what to do with these scrips??

VBC Ferro Alloys Ltd hit 8th consecutive buyer freeze after it was recommended around Rs.121--Rs.122 ranges. But why is it rising??

Vikash Metal & Power Ltd moved up by 4.11% yesterday, after it was recommended to the Free Groups for aggressive buy on last Sunday. The Commercial production of Ferro Silico Managenese & Ferro Managanese by the company's new venture, has started from October 18, 2008.

The company it seems presented a sham balance sheet in order to show less profit (and to get  huge Tax benefits in return). "Bah Ustad Bah", your employees cost increased by more than 30% in one year---who will  believe this story?? The company though came out with a robust topline, but the scheming management thought of showing every expenditure on the  higher side, due to obvious reasons. Eg. Consumption of raw materials surprisingly came at Rs.31.34 Cr in Q3FY09 (Rs.19.01 Cr), which almost surprisingly doubled (and which looked somewhat absurd considering Q-o-Q, when the price of most of the commodities fell). The company showed almost double depreciation in Q3FY09 at Rs.2.05 Cr, as compared to the corresponding figures in Q3FY08, without any apparent reasons. Other expenditure suddenly jumped to  Rs.8.9 Cr in Q3FY09, as against Rs.6.2 Cr, when most of the companies were going for cutting down on expenditure. Therefore we can safely conclude that the company will show huge net profit as soon as the market condition improves to give a momentum to its share price. Inference: Buy in BULK BEFORE THE PROMOTERS FINISHES BUYING FROM THE OPEN MARKET AND DECLARES SUPERB (read actual) RESULTS TO JACK UP THE SHARE PRICE. Please learn to read between the lines, in order to make killings in the market.

My recommended Punj Lloyd Ltd moved up by more than 7% before cooling down a bit. Accumulate as much as  you can keeping a SL of Rs.82. Moreover, the fact that it is above Rs.89, is a great solace for the bulls. It is one of the finest companies in the construction space, along with IVRCL Infrastructure Ltd, Nagarjuna Construction Ltd, etc. In this space Pratibha Industries Ltd recommended very recently hit the buyer freeze yesterday.

My recommended XL Telecom & Energy Ltd hit the buyer freezed. Recently when the scrip was hitting the lower circuits, a worried paid member, Nitin Galia asked what to do.....I said simply keep holding and buy when the price stabilises, as one is getting milk at the price of water, at the CMP. During the December, 2008, quarter, Saptashva Solar SL, a wholly owned subsidiary of the Company, has commenced commercial production and earned, initial revenue of Rs.30.53 lacs through generation of solar power in Spain. This is wonderful news for the shareholders.

My earlier recommended Educomp Solutions Ltd moved up by a whooping 13.96%. What were paid groups asked to do with the Scrip??

My Intra-day calls on Chambal Fertiliser and Chemicals Ltd and Noida Toll Bridge Ltd gave good returns to the Paid Groups.
My recently recommened Indowind Energy Ltd and Marg Ltd gave good returns to the members of the Paid Groups. Moreover, most of the steel counters did well yesterday---but why?? What was mentioned in the Sunday Report on the general outlook of the Steel Sector??

My earlier recommended Sarda Energy and Power Ltd, Vijay Shanti Builders Ltd, Phoenix International Ltd, etc. did well yesterday.

Keep accumulating Reliance Industrial Infrastructure Ltd, BGR Energy Systems Ltd, KEC International Ltd, CESC Ltd, Phoenix International Ltd, Selan Exploration Technology Ltd, English India Clays Ltd, etc, for some superb gains in the days to come.

Now how will the markets behave tomorrow and for the week ahead or which stocks to invest in the short term.....Is there a story brewing in one of my earlier recommended counters?? What the name of that scrip......All these are for the Paid Groups only.

Govt to provide more stimulus to push demand: Kamal Nath

Already two stimulus packages have been rolled out by the Centre to neutralize the impact of the global financial meltdown on the country

New Delhi: Worried over the slowdown in industrial production and declining exports, the government on Monday said it will continue to provide stimulus to the domestic industry.
“The government will continue to inject adequate funds into the economy and will continuously provide stimulus to the domestic demand-driven economy,” Commerce Minister Kamal Nath told reporters on the sidelines of CII’s India-Africa Partnership Summit here.
The government, he added, is “putting in money in long-term developmental projects to ensure that the global economic crisis does not impact India in any serious manner.”
Already two stimulus packages have been rolled out by the Centre to neutralise the impact of the global financial meltdown on the country and the Reserve Bank of India, through a series of monetary steps, released about Rs3,20,000 crore in the system.
Nath said that India is likely to receive Foreign Direct Investment (FDI) of about $30 billion during 2008-09. The government had set a FDI target of $35 billion for the fiscal.
“I hope we will exceed $30 billion. I do believe that momentum will continue. This year there will be growth...but may not be huge,” he said.
Total FDI during April-December 2008 worked out to be $18.7 billion, he said, adding it was double compared with the same period last year.
When asked about his expectations from the RBI in its quarterly review of the credit policy scheduled later this month, Nath said, “There is room for greater liquidity. RBI will certainly consider this and devise commensurate policy for injection of liquidity into the economy”.
Asked whether declining inflation will have an impact on interest rate, he said “falling inflation obviously leads to that.”
Noting that the RBI policy in the past few months had led to greater injection of liquidity, he said “it is now being reflected in greater comfort level of industry...some of the sectors have started showing upturn.”
Inflation has come down to 5.24% in January from the peak of 12.91% in August last, raising hopes for further cut in the key policy ratios and rates in the forthcoming review of the credit policy.

Dish TV eyeing 9 mn subscribers by 2010

Chennai: Direct-To-Home service provider and part of the Essel Group, Dish TV on Monday, said it was aiming at nearly doubling its subscriber base to nine million by next year.

"Currently we have around 4.8 million subscribers (in the country) and in the last three months alone we have added one million subscribers... by this financial year we are expecting to add another two million subscribers and achieve a target of nine million subscribers by 2010," Dish TV chief operating officer VK Gupta told reporters here.

He said the company would also be able to achieve a target revenue of Rs 800 crore. However, he declined to divulge details of last year's revenue.

The revenue generated from Value Added Services was only less than two per cent of the total revenue and Dish TV had set a target of increasing it to five per cent in this fiscal.

"As for as VAS is concerned it has got a slower penetration (in country) and once the DTH services pickup, it would also increase," he said.

The company has also planned to introduce a new VAS in tourism category shortly, Gupta said declining to elaborate.

Currently under VAS, the company offers Movie-on-Demand (MOD), Bhakti services, matrimony, banking and games, he said.

Replying to a question, Gupta said Dish TV currently had a market share of 48 per cent and the South zone contributed around 30 per cent of this.

As part of its expansion plans, the company had planned to increase its dealership network from the present 45,000 to two lakh by 2010. "I want to reach two lakh dealerships network by next year" he said.

In a bid to woo subscribers in Tamil Nadu, the company would introduce new Tamil channels. "We are holding discussions on this and very soon new channels will be added to the Tamil bouquet," he said.

The company currently offers 220 channels for its subscribers and hoped to increase it to 400 in near future.

Gupta was here to officially launch the Free Recharge coupon which enables a subscriber to get "Free A-La-Carte" packs and Movie-on-Demand (MOD) worth the same amount of recharge value.

If a subscriber buys a Rs 200 denomination recharge pack, he would be able to get free value worth of same amount where 20 per cent of the value would go for A-La-Carte packs and the remaining 80 per cent to MOD category, he said.

He said for all the denominations which range between Rs 200 to Rs 1800, the recharge free benefits apply and 100 per cent value would be returned back to the subscriber.

Rolta India Ltd
Industry : Software - Medium / Small BSE Code : 500366
House     : Indian Private NSE Code : ROLTA

Quarterly Results

Quarters:      
Particulars Dec 2008 Sep 2008 Jun 2008 Mar 2008 Dec 2007 Sep 2007
Gross Sales 224.77 251.52 219.45 225.83 212.29 193.35
Other Income 10.13 14.52 -19.93 10.20 9.93 10.29
Total Income 234.90 266.04 199.52 236.03 222.22 203.64
Total Expenditure 123.76 174.42 91.23 113.82 111.98 103.09
PBIDT 111.14 91.62 108.29 122.21 110.24 100.55
Interest 1.14 0.00 0.00 0.00 0.00 0.00
PBDT 110.00 91.62 108.29 122.21 110.24 100.55
Depreciation 40.13 36.98 37.55 33.46 33.22 31.16
Tax 9.80 10.00 15.96 10.00 9.00 8.00
Deferred Tax 0.00 0.00 0.00 0.00 0.00 0.00
Reported Profit After Tax 60.07 44.64 54.78 78.75 68.02 61.39

Net profit of Rolta India Ltd declined 11.69% to Rs.60.07 Cr in the quarter ended December 2008 as against Rs.68.02 Cr during the previous quarter ended December 2007; which is better than the market expectation. Sales however rose 5.88% to Rs.224.77 Cr in the quarter ended December 2008 as against Rs.212.29 Cr during the previous quarter ended December 2007. The Infact, the consolidated results are much better than the standalone and which are given below: The consolidated results for the Quarter ended December 31, 2008: The Group has posted a Net Profit after tax, minority interest & exceptional items of Rs 60.56 Cr for the quarter ended December 31, 2008 as compared to Rs 60.22 Cr for the quarter ended December 31, 2007. Total Income has increased from Rs 251.94 Cr for the quarter ended December 31, 2007 to Rs 371.45 Cr for the quarter ended December 31, 2008 It is to be noted that Rolta Ltd derives 60% of its revenues from the domestic market and hence is better placed than most of the peer group companies like Infosys Technologies Ltd, Wipro Ltd, etc. which derives majority of its revenues from the overseas. The Indian Economy is doing much better than the US or the European economies and hence this gives additional advantage to Rolta Ltd. Moreover, Indo-US Civil and Nuclear Co-operation is favorable to the company.

The results of Rolta Ltd are above expectations, as can be seen from above. Good point is that PBIDT of the Company for Q3FY09 is higher at Rs.111.14 Cr as compared to the same quarter previous year. This means even in this downturn the company came out with higher profit.

The Profit after Tax or Net Profit is almost flat in Q3FY09 as compared to the same period previous year--Remember this is when the software sector is under turmoil and when the company had higher tax, higher depreciation, higher expenditure and higher interest outgo.

The company announced the acquisition of Piocon Technologies Inc, a specialist information technology (IT) firm and a solution provider for oil and gas refineries; after trading hours on Monday, 29 December 2008. The company provides IT-based solutions and services to the geospatial and engineering segments. Unlike most Indian IT firms, Rolta derives 60% of its revenues from the domestic market. This enables it to mitigate currency risks.

Rolta Ltd's acquisition of the Piocon Technologies, Inc. of Chicago II, USA could be a turning point. Through this strategic move, Rolta has acquired the unique template-based solution that addresses critical operational needs of refineries in the Oil & Gas sector. This solution is field proven, and has been deployed successfully in multiple refining facilities of one of the world's largest oil companies. The solution was recognized by Oracle with the Titan award for Piocon's innovative approach to integrating business intelligence tools with enterprise-level engineering databases and applications to provide operational excellence, reliability metrics and reporting for more than 100,000 pieces of equipment and hundreds of operations throughout the large refinery.

The Piocon acquisition is a part of Rolta's systematic growth plans to provide configurable solutions that address the real challenges faced by industry today. With Piocon, Rolta has acquired its impressive track record of over 15 years, a significant customer base including Fortune 100 companies, highly experienced consultants, unique methodologies and technologies ongoing customer contracts and profitable revenue stream in a fast growing market.

The stock of Rolta Ltd after such results is expected move above Rs.100 in the next few days. Software companies generally have good fourth quarter, as most of the revenues come in this period. The market was expecting a much worst results which caused a heavy unwinding in the scrip some days back.

Today my latest Sunday Report (18th January, 2008) recommended Nava Bharat Ventures Ltd (BSE Code->513023) moved up by more than 3%. The research report on the company would soon be placed here in this blog.

Moreover, today, my earlier recommended English Indian Clays Ltd, Accurate Transformers Ltd, Deccan Chronicle Ltd, Mid-day Multimedia Ltd, TV Today Ltd, SAIL, Electrotherm Ltd, etc. did well....