Friday, April 11, 2014

PVP  Ventures Ltd: A Screaming Buy
CMP: Rs.5.78
Introduction: PVP Ventures Limited (formerly SSI Ltd) was acquired in the year 2007 (incorporated in the year 1991) and listed since 1995. It has majority ownership in subsidiary companies and as a result, it is a business entity in its own right and a holding company as well. The businesses of the parent company and subsidiaries are managed by separate teams of professionals.
Business: PVP Ventures Ltd operates in three segments – Urban Infrastructure, Media & Entertainment and Special Situations. 
  • In the real estate/urban infrastructure segment, it signed a joint development agreement with Unitech and Arihant Housing to build an integrated 70-acre township called North Town in Chennai. 
  • In the sports consumption space, the company acquired the Hyderabad Franchisee of the Indian Badminton League (IBL) and christened it as the Hyderabad Hot Shots. 
  • In the special situations vertical, it is continuously evaluating opportunities to build a portfolio of scalable and stable businesses driven by the burgeoning Indian Consumption Story.
Presence: The acquired company possessed a 70-acre land parcel - popularly known as Binny Mills - in the heart of Chennai. The company also owns 135 acres of prime land in Shamshabad, Hyderabad, through its subsidiary and affiliate companies.

Subsidiary Companies: 
  • PVP Energy Private Limited (PEL)
  • New Cyberabad City Projects Private Limited (NCCPPL)
  • PVP Corporate Parks Private Limited (PCPL)
  • AGS Hotels and Resorts Private Limited (AGR)
  • Maven Infraprojects Private Limited (MIL)
  • PVP Business Towers Private Limited (PVPBT)
  • PVP Business Ventures Private Limited (PVPBV)
  • Cuboid Real Estates Private Limited (CRE)
Shareholding Pattern: The promoters  hold 57.53%, the controlling stake in the company, while the general public holds 42.43% of the shares of the company. Among the general public FIIs hold 1.07%, DIIs hold 0.18% and Corporate Bodies  hold 5.99%.

Financials: In FY13, the total income of the company was Rs.54.50 Cr against Rs.3.34 Cr in FY12. The net profit of the company for FY13 came out to be Rs.36.29 Cr as against only Rs.19 lakhs in FY12. The EPS of the company for FY13 came out to be Rs.1.48, as against Re.0.01 in FY12. 
In Q3FY14, the total income of the company came out to be Rs.30.73 Cr as against Rs.25.4 Cr in Q3FY13. However, due to higher expenditure, higher interest cost and large tax component the net profit of the company came down to Rs.10.76 Cr as against Rs.16.12 Cr. For the FY14E, the company could end up with a total income of Rs.80 Cr and Rs.25 Crore and EPS of Re.1. However, this is a holding company too and hence we cannot value it only looking at the total income and net profit.
(i) Aggregate amount of quoted investments (as of 31st March, 2013):  Rs.5.33 Cr
(ii) Aggregate amount of unquoted investments (as of 31st March, 2013): Rs.549.19 Cr
(iii) Aggregate amount of debentures (as of 31st March, 2013): Rs.248.32 Cr. The NCDs were redeemable at par at any time on or before March 31, 2014.
(iv) PVP Corporate Parks Private Limited (PCPPL) had invested a sum of Rs.16.48 Cr in 0% Optionally Convertible Debentures (OCDs) of certain companies, which are engaged in developing real estate projects. These OCDs are convertible at any time with in 10 years into fully paid equity shares of Rs.10 each at price to be determined by Board of Directors of PCPPL at the time of conversion. The Management has decided to carry these investments as long term and the fact that the investments have potential to generate returns only in the long run.

This is against a market cap of only Rs.142.13 Cr and Book Value of Rs.27.28 Cr. Generally Going-Concern Value of a company differs from the value of a liquidated company's assets, because an ongoing operation has the ability to continue to earn profit, while a liquidated company does not. This value includes the liquidation value of a company's tangible assets as well as the present value of its intangible assets (such as goodwill). The going-concern value is worked into the purchase price of a company, and is the main reason why the purchase price of a company tends to be higher than the current value of the assets of the company.

PVP Ventures is the forefront of diverse spheres and has carved a niche for itself by emerging as the leader in south India in the world of Entertainment. Having forayed into sports, it hopes to replicate its business successes to equally praiseworthy levels.

For PVP, media and entertainment is one of its key and largest vertical. PVP is the Promoter and holds substantial investments in Picturehouse Media Limited, an organisation at the forefront of providing capital for the Indian entertainment industry.

PVP owns this 70-acre land parcel situated in the heart of the Chennai and about 4 kms from Chennai central railway station, as mentioned earlier. This land is under joint development with Unitech Limited and Arihant Housing & Foundation Limited. Going by the response to the first few phases of this project, it is all set to be one of the largest realty projects in South India. Over the next 7 years, this project is expected to yield approximately Rs.1500 crores to PVP Ventures.
Conclusion: Buy the share at the CMP of Rs.5.78, for an immediate short term target of Rs.8.2. Please keep a SL of Rs.4.4 in case of any mishap. The scrip fell from its all time high of around Rs.85, made in 2008-2009 period.