An Appeal: Please don't vote this Gujarat Parivartan Party (GPP)- Please don't allow nonsense to happen in Gujarat again.
|Mr. N. Satish Kumar, the promoter & director of SBTL|
Introduction: The activities of the Company can be broadly classified into two segments, viz., Internet Service Provider (ISP) , Manufacturing of Bio Diesel, Used Cooking Oil trading and Contract. The ISP division provides Internet Bandwidth to the Corporate Clients, Educational Institutions, Cyber Cafes, & Individual etc.., The Bio Diesel division manufactures the Bio Diesel.
(1) Let us begin with the financial part. The net loss of the company decreased from Rs.15. 57 Cr to Rs. 5.44 Cr. This has been made possible by cutting down the expenditure drastically (from Rs.39.62 Cr in Q2FY12 to Rs.26.66 Cr). Now if we look at the total income of the company in Q2FY12, it comes to Rs.27.74 Cr. Against it, the total expenditure, was Rs.26.66 Cr. There PBIDT is a profit of Rs.1.08 Cr. We saw the net loss of Rs.5.44 Cr in Q2FY13 because of the interest outgo and the depreciation. Hence, we can say that the company is still profitable, except some conditions, like work in progress, due to which the company has to pay interests. Not only that we have a positive operating margin (OM) of 3.90% in Q2FY13 as against a negative OM of 34.74 %in Q2FY12. There has also been substantial improvement in the Net Profit margins in Q2FY13 as against Q2FY12. Hence, we can say, that probably the bad days are almost over for the company, along with this quarter or Q3FY13 (December, Quarter) and from next quarter (Q4FY13) we could see a general turnaround.
(2) The company will issue and allot 62, 50, 000 shares to Promoters and others on Preferential basis, pursuant to the provisions of Section 81 (1A) of the Companies Act, 19 56 and Chapter, VII of the SEBI (ICDR) Regulations, 2009. This is expected to garner, an amount Rs.6.25 Crores by way of preferential issue of 62.50 lakh Equity shares to promoters and others at face value of Rs.10 per share. The current market price of Rs.2.29, is less than one fourth the price, the promoters are willing to pay. This is a Great Positive News for the shareholders of the company.
(3) While, the promoters' holding in the company has remained constant at 17.48% since the last one year, the FIIs' holding has increased from 14.46% in Q2FY12 to 17.26% in Q2FY13--a jump of 2.8% speaking Q-o-Q basis. Now the question is why will the promoters increase their stake through preference issue and why would FIIs increase their stake in the company, unless the company has great prospects ahead. Isn't it?
Now let us see who are holding more than 1% of the shares of the company:
(i) National Westminster Bank PLC As Trustee Of the-- 5.78 %.
(ii) Mavi Investment Fund Ltd-- 5.46 %. Do you remember the recent rally in Cinemax India Ltd?
(iii) Sudha Commercial Company Ltd--3.90 %
(iv) The Indiaman Fund (Mauritius) Ltd--3.67 %
(v) PNV Enterprises Pvt Ltd--3.47 %
(vi) Dikson Trading & Finance Company Ltd--4.30 %
(vii) Jupiter South Asia Investment Company Ltd A/c Jupiter Sou--2.27 %
(viii) Ideal Stock Broking Pvt Ltd--1.68 %
(ix) Square Four Assets Management & Reconstruction Company P--1.60 %
(x) Ganesh Kumar Singhania--1.53 %
(xi) Smifs Capital Markets Ltd--1.44 %
(xii) Dev Raman--1.24%
(4) The total revenue of the Company for the financial year ended 31st March, 2012 is Rs.91.51 Cr as compared to the previous year’s total revenue of Rs.60.88. During FY12 the Company has incurred a net loss of Rs.35.91 Cr as against the previous year’s net loss of Rs 10.69 Cr (after deferred tax assets provision). The net loss incurred is due to very Low average capacity utilization in FY 2011-12 mainly due to initial teething problems and bottle neck in handling
high FFA oils resulting in delay of stabilization of the Vizag plant. Net working Capital (NWC) was eroded towards repayment of Term loans, Interest and operating expenses and hence there was shortfall of NWC to run the plant continuously, even at break even capacity. However, within the next 3 months the TRAIL RUN of the company is expected to be over, and we could see higher capacity utilization of the Vizag plant. Since, the shares in stock market acts in advance, and hence I think we could soon see an upward movement in the shares of the company. We will again come to Vigaz plant later in the same page.......
(5) The Company has been providing a wide spectrum of services, which includes basic services like Internet access, E-mail etc. and value added services such as Add on hours. The Company presently provides Internet Services as a Licensed ISP. The Company’s services include the following:
Server Co-Location • VOIP Services
• Leased Line services (Terrestrial and RF links)
• Dedicated Servers
• Networking Solutions
• Web Hosting
Biodiesel Units: The Company has two Biodiesel Units:
(i) One is at Samsthan Narayanpur Village & Mandal, Nalgonda District with 30,000 Liters per day capacity.
(ii) The other unit is at APIIC-SEZ, Atchutapuram, Rambilli Mandal, Visakhapatnam with 2,50,000 Liters per day capacity.
The Company has been supplying biodiesel to various well reputed customers like Kirloskar Oil Engines, Panama Petro Chem, Ipsa Texchem, Sovino foods Pvt Ltd, Real Bakers Pvt Ltd, Anand foods Pvt Ltd, Parle group, Evergreen Energy Inc., Witmans Industries, Biking Foods Pvt Ltd and other traders etc
Plant at Vizag:
All modifications have taken place and Raw Material supply & finished product contracts are signed and are in place. The unit is ready for production and the trial run is going on.
(iii) Having experience in setting up two Biodiesel units, the company has got an order from Indian Railways Organization for Alternate Fuels (IROAF), Ministry of Railways to set up/ construct, maintenance and operation of 30 tons per day capacity biodiesel unit at
Tondiarpet, Chennai. The Company has started implementing the Biodiesel project for IROAF. The progress of execution of the project is satisfactory and is expected to complete in FY14.
(6) Enhancement of Credit Facilities from Consortium Banks:
During the fiscal year, FY12 the company has got additional sanction of Rs.24.52 crores towards the pending Capex creditors and addition of new equipment
for the Capacity enhancement and operational flexibility. Also Additional Funded Interest Term Loan (FITL) of Rs.10.71 crores was sanctioned to provide Interest moratorium for the existing Term loan. Originally Rs.44.65 crores of working capital was sanctioned for both units Viz Nalgonda and Vizag units
together and the same was eroded due to delay in stabilization of the Vizag Unit. As such eroded NWC of Rs.22.00 crores is converted to working capital Term loan (WCTL) based on the September 2011 current assets and the balance of Rs.22.65 Crores was only available as working capital limits for both the units, which was not sufficient to run the Vizag Plant.
Above additional facilities were sanctioned and joint documentation was executed by all the banks in the month of March 2012 without funding the eroded additional working capital limits.
However in the recent consortium meeting held on 13th June 2012, all consortium banks have in-principally agreed to fund the required additional working capital for Vizag Unit as per the TEV study done by the lead Banker, Bank of India. Accordingly proposal was sent to their respective consortium banks Head offices for
approval of additional working capital and a positive response is awaited.
(7) Conservation of Energy: Company’s ISP operations and administration require electrical energy for computer systems, air conditioning and lighting, which are not energy intensive. Whereas the Biodiesel plant
requires huge electrical energy for operations of the Biodiesel production unit. During the current financial year the Company has undertaken significant measures to reduce the energy consumption by using energy-efficient machines and equipment. The Company also undertakes evaluation of latest technology and invests in making its infrastructure more energy efficient. This has substantially reduced the Power & Fuel from Rs.1.68 Cr in Q2FY12 to only 54.8 lakhs in Q2FY13. Isn't it a substantial positive change?
(7) Internet is emerging at a rapid pace and it’s already been a part in the field of business, economy, entertainment, social groups all over the globe. The rise of Internet usage all over the world unlocked various new business, products, services. Internet is constantly changing the way consumers shop and business sell their products. Every business related to
any niche knows the importance of internet and creating a website to show their products to potential consumers. Now majority of the future growth of the telecom industry depends on the wireless business as subscribers are discontinuing landlines and moving quickly to wireless connections. The present wireless market is ready for the ongoing boom in the wireless data space with the growing broadband services. Rising demand for data traffic, which has more than doubled
over the last three years, is creating new growth opportunities for these carriers including IPTV offerings, cloud computing, videoconferencing, online video streaming and managed tele presence. Changes in technology and the industry give the communications sector an opportunity to produce high quality content and develop next generation infrastructure. The Company provides Internet services to individuals, Corporate clients and cyber cafes.
(8) The global market for Biodiesel is entering a period of rapid transitional growth, creating both uncertainty and opportunity. A fundamental transition in global fuel
production is now happening. India is an energy deficient nation by global standards, with global demand and global energy prices likely to increase in the medium to long term, the macro economic impacts, especially in terms of balance of payments, could adversely effect the country’s future development. This grim energy prospect for India has forced policy makers to intensify their efforts to search for alternative fuel options. In this context, biofuels may offer options for meeting part of India’s energy needs.
India’s total biodiesel requirement is projected to grow to 3.6 Million Metric Tons in 2011-12, with the positive performance of the domestic automobile industry. Analysis from Forst & Sullivan, Strategic Analysis of the Indian Biofuels Industry, reveals that the market is an emerging one and has a long way to go before it catches up with global competitors.
The Government is currently implementing an ethanol-blending program and considering initiatives in the form of mandates for biodiesel. Due to these strategies, the rising population and the growing energy demand from the transport sector, biofuels can be assured if a significant market in India. Jatropha incentives in India is a part if India’s goal to achieve energy independence by the year 2012.
The Indian Railways has started using the oil (blended with diesel fuel in various ratios) from the Jatropha plant to power its diesel engines which was great success. Currently the diesel locomotives that run from Thankavur to Nagore section and Tiruchirapalli to Lalgudi, Dindigul and Karur sections are using Biodiesel
(petro blend of jatropah oil). In one of the biggest initiatives for bio-fuels production in the country, India Railways is poised to setup four bio-diesel plants costing around Rs.120 crores. While two bio-diesel esterification plants are going to be commissioned at Raipur and Chennai by 2013 the other units will be set up subsequently. Moreover, the life of diesel engine is extended with the use of Biodiesel because it is more
lubricating and additionally power output is comparatively unaltered by biodiesel.
Also, the recent increase in prices of edible oils which are used as raw material for Bio Diesel in western countries presents cutting edge to the company which has designed its plant for non edible oils and animal fat.
(9) Southern Online Bio Technologies Ltd, is an ideal candidate for Carbon Credits under the CDM schemes.
Moreover, the company is expected to demerger its ISP division once the second unit is completely stabilized. This is a very big unit for SBTL. Hence, the current focus still rests on completely stabilizing this unit. Once this unit is completely stabilized and the company touches the year mark of achieving 90% plant capacity, then immediately, the company will be working on this demerger activity. Hence, this is further expected to add value to the shareholders.
(10) Today, there were media reports that, the Federal Reserve will spend $45 billion a month to sustain an aggressive drive to keep long-term interest rates low. And it says it plans to keep a key short-term rate near zero until unemployment drops below 6.5 %. The policies are intended to help an economy that the Fed says is growing only modestly with 7.7 percent unemployment in November. This is expected to drive up the prices of Crude Oil in view of the economies of both India and China are improving, apart from the US.
Conclusion: Looking from all angles, I find the scrip to be highly attractive at the CMP of Rs.2.26 and initiate buy with a 100% appreciation within the next 1 year time frame.
Jai Corporation Ltd reched my frist target of Rs.71 today. It is one of the fineset companies in the sector and should give returns going forward.