Hinduja Ventures Ltd: A Screaming Buy

CMP: Rs.262.85

Introduction: HVL (Hinduja Ventures Ltd) was incorporated in the year 1985 as Mitesh Mercantile & Financing Ltd. In the year 1994, the company commenced operations and in 1995, Hinduja Finance Ltd was amalgamated with the company and subsequently the name was changed to Hinduja Finance Corporation Ltd with effect from February 9, 1995. The Company had been renamed 'Hinduja Ventures Limited' effective from October 23, 2007. The new name reflects both the commitment of promoter group and the value and wealth creation proposition that the company offers by identifying and investing in growth opportunities.

HVL is a part of Hinduja Group based in Mumbai. The company operates in the business of media & entertainment, real estate and treasury operations. The real estate activities encompass property development. Currently the company has properties located in Bangalore and Hyderabad, which could be developed in the near future. The treasury segment consists of activities relating to deployment of surplus funds in trade/ investments in shares and securities, other than subsidiaries. In March 2007, In Network Entertainment and In2Cable India, both wholly owned subsidiaries of the company were merged into IndusInd Media and Communications (IMCL), a 60% subsidiary of HVL.

HVL is the holding company of one of India’s largest integrated media companies IMCL, which is one of the largest multisystem operators (MSO) in the country. HVL with 8.5 million subscribers across 28 major cities offers over 301 channels in the digital mode (it also offers about 90 channels in the analog mode, which are a part of the digital package). It has a backbone of over 10,000 kms of hybrid fibre optic network through which it also offers broadband services with national ISP license. Over and above Digital cable distribution, HVL is also into content creation, acquisition & aggregation for TV services. IMCL has successfully deployed over 400,000 set top boxes for converting analogue home to digital homes. The Company is fully geared up to meet the subsequent addressable digital cable roll out as per Government policy & regulations.
The performance of its investments:
Media – IndusInd Media & Communications Limited (IMCL):
During the year FY13, the Company’s principal subsidiary - IMCL - successfully managed the first phase of digitalization, converting all analogue homes into digital homes in Mumbai, Delhi and Kolkata. Having received an All India Digital Addressable Cable license, IMCL converted around 2.5 million homes to digital in Phase I and Phase II cities as mandated by Government. IMCL continues to be one of the leading Multi-System Operators having a pan-India presence with a reach of around 8.5 million subscribers in 36 locations.
IMCL infrastructure is adequately geared up to meet the opportunity presented by mandatory Digital Addressable System (DAS) and is currently supported by 10,000 km of hybrid fibre optic cable network, which includes 2,000 km of underground fi bre. There are plans to introduce Value Added Services (VAS) in digital cable.
During the year FY13,  the Company applied for a HITS (Head-end in the sky) license, through its wholly owned subsidiary, with the Ministry of Information & Broadcasting. HITS is expected to provide white label services to millions of customer in phase III and phase IV. This will results in substantial revenue to the company and handsome rewards to its shareholders by way of dividend.
Power – Hinduja Energy (India) Limited (HEIL):
The Company remains invested in the Power Sector through its stake of 15.74% for Rs.187 crores (fully invested) in HEIL – holding company of Power Assets of Hinduja Group. This translates into a 10% effective holding in the SPV – Hinduja National Power Corporation Ltd. The project of 1040 MW under the SPV is progressing well and will be commissioned soon. 
Non-Banking Finance Company - Hinduja Leyland Finance Limited (HLFL):
The Company purchased 2,00,00,000 shares i.e. a stake of 8.9% in HLFL – an Asset Financing Company (mainly Vehicles and Construction Equipments) - at par in early 2011. It further acquired 88,88,890 shares at par under the Rights issuance of the Company. As at the end of the fi nancial year 2013, it retained a stake of around 6.7%, after having divested a small portion (2.15%) to an overseas investor. The sale took place at Rs.40 per share, clocking a
return of 4 times in about two years’.
The prospects of HLFL look positive; the Company registered a Profit after Tax (PAT) of Rs.91.38 crores at the end of financial year 2013 vis-a-vis Rs.83.69 crores in the previous year. This was despite the tough business environment that the Automobile industry faced during FY13.
NBFCs, especially vehicle financing, has seen a lot of investor appetite in FY13. The possibility of listing HLFL in future remains high.
Banking – IndusInd Bank Limited (IBL):
The Company, directly and indirectly through its subsidiaries, holds 1,82,37,383 shares, a stake of 3.49% in IBL as of March 31, 2013 as against 1,51,32,383 shares, a stake of 3.01% as of March 31, 2012.
Post the management change in 2008, IBL has smoothly turned around the business with an improvement across various business parameters viz. efficiency, productivity and profitability. Its superior franchise, well experienced employee base, operational expertise and an understanding of the market environment has catapulted the Bank in the Top 3 league of new generation Private Sector Banks in India. The confidence of the investor community in the stock was evident from the response IBL received on its Qualified Institutional Placement (QIP) from high quality FIIs as well as domestic investors. The subscription happened at a premium to the market price wherein the Bank raised around Rs.2,000 crores. This capital increase will meet the growth plans that Bank has set for itself for the next planning cycle where it will focus on building ‘Scale with Profi tability’.
Real Estate:
The Company continues to pursue its efforts in seeking clearance for the development of its real estate in Bengaluru (Bangalore) including attending the legal suits related to title in respect of 47.2 acres land. The land was purchased at r 0.14 crores
per acre and today the reckoner rate of land stands at r 3.08 crores per acre. Post clearance of all the issues, the Company will take up development of the property.
The Company through its wholly owned subsidiary had acquired 4.75 acres of land in Hyderabad at a price of  Rs.5 crores per acre. As of March 31, 2013, the reckoner rate of land stands as Rs.12.1 crores per acre, registering an unrealised gain of 142%. By April, 2014, it should have already shot by Rs.13.5 Crores per acres, considering around 12% Y-o-Y rise. 
Financials: 
The Book Value of the shares of your Company stood at Rs.398 per share as at the end of the financial year FY13. The Net Worth in FY13 grew from Rs.734.39 crores in the previous year to Rs.818.84 crores in the year under review. The investments clocked a steady growth from Rs.225.96 crores in the previous year to Rs.320.19 crores in financial year 2013.
For Q3FY14, the total income of the company came out to be Rs.28.59 Cr as against Rs.28.31 Cr in the same period previous year. The net profit of the company for Q3FY14 came out as Rs.23.54 Cr as against Rs.23.83 Cr in the same period previous year, this is on a very small equity base of Rs.20.56  Cr. The 9MEPS of the company came out to be Rs.30.15. This should naturally give a target of Rs.400 plus for such reputed companies.  
Conclusion: 
Buy the Scrip of this  at the CMP of Rs.262.85 for a price target of Rs.400 plus in the next few weeks. The stock looks good both chartically and fundamentally, though there are still a bit of negative divergence, which I feel will ease out in the coming days.