Winning Strokes

Source: The Business Standard

Yesterday, was the day of Anil Ambani as most of the stocks from this group performed excellently.  Reliance Anil Dhirubhai Ambani (ADA) Group shares surged after witnessing recent volatility in stocks. Reliance Communications (RCom) (up 30.78%), Reliance Infrastructure (up 2.41%), Reliance Nippon Life Asset Management (up 1.16%), Reliance Capital (up 7.02%), Reliance Home Finance (up 0.45%), Reliance Naval and Engineering (up 5.63%) and Reliance Power (up 3.85%) gained.
Yesterday, the internet got inundated with the news that RCom plans to settle on buyers for assets including its spectrum, telecom towers, optical fibre and real estate, with all transactions to close between January and March. Reliance Communications Ltd’s planned sale of its wireless business assets by the end of March would be the latest instance of upheaval that has swept through the telecom industry since the entry of Reliance Jio Infocomm Ltd. According to media reports, Mukesh Ambani’s Reliance Jio Infocomm has emerged the front-runner to acquire the assets of debt-ridden RCom.

If you remember, I and some of my clients had entered RCom a couple of weeks back at around Rs.12, but we booked profit in between when the share price touched Rs.17-18. However, when I saw a rise in the share price yesterday, some of us again entered the counter. Now it is time to see whether the shares of Reliance Communication can close above Rs.22.50 or not. CMP (NSE): Rs.21.50, up 31.90% (Intraday high: Rs.23.20 in the NSE)

Another share from the ADA Group, which is looking superb both in terms of charts and fundamental play is Reliance Infrastructure Ltd (Rs.539.85).  

Reliance Infrastructure Limited (RInfra) is a part of the Reliance Group, India's third largest business house. The company is one of India's fastest growing companies in the infrastructure sector. It ranks among India's top listed private companies on all major financial parameters, including assets, sales, profits and market capitalization. Their presence spans across three verticals, namely Engineering, Procurement and Construction, Energy and Infrastructure.

The company is India's leading utility company having presence in across the value chain of power business i.e. Generation, Transmission, Distribution, EPC and Trading and the largest infrastructure company by developing projects in all high growth areas in infrastructure sector i.e. Roads, Highways, Metro Rails, Airports and Speciality Real Estate. 

Reliance Infrastructure Ltd has a market cap of only Rs.14,215 crore as against the FY17 turnover of Rs.11,004.34 Cr and H1FY18 earning of Rs.5922.05 crore. While its nearest competitors:

#CESC Ltd (Rs.1054.30) has a Book Value of Rs.892.60 and market cap of Rs.13,958.26 Cr against the FY17 income of Rs.7,367.00 Crore. 

#NTPC Ltd (Rs.178.45) has a Book Value of Rs.119.63 and Market Cap of Rs.146,563.1 Cr against FY17 income of Rs.79,342.30 Cr.

If we go by this logic then the share price of Reliance Infrastructure Ltd should trade above Rs.1000 in the short term. 

Moreover, around couple of months back, Anil Ambani told that Reliance Infrastructure defence arm Reliance Naval and Engineering will soon announce a rights issue for shares to increase the shareholding of the parent. The Reliance Group’s flagship infrastructure company has decided to focus on defence and engineering, procurement and construction business. It plans bids for six submarines worth Rs.50,000 crore, Ambani said. He also said that Reliance Infrastructure is engaging with Japanese companies with the intention of participating in India’s ambitious Rs 1 lakh crore-bullet train project. So, a rise in the share price of Reliance Naval and Engineering Ltd (Rs.45.60) will give a corresponding rise in the shares of Reliance Infrastructure Ltd. 

In fresh developments:

#NPCI had opened bids for EPC tenders related to the third and fourth units of the Kudankulam nuclear power project (1,000 MW each). RInfra emerged as the lowest bidder beating Tata Projects and Larsen & Toubro. The project duration is estimated at 56 months. This move is part of the government’s push into increasing the generation of nuclear power. The government has already approved 10 new nuclear reactors this year. The pressurized heavy-water reactors (PHWRs) have an aggregated capacity of about 700 MW. India plans to have a nuclear power generation capacity of 63,000 MW by 2030, from its existing levels of 6,780 MW.

#On December 6, 2017, Anil Ambani-led Reliance Infrastructure Ltd said it has bagged contracts worth Rs.5,000 crore in Bangladesh which includes setting up of the entire infrastructure for a 750 MW LNG-based combined cycle power plant. The award comes after bagging Rs.3,675 crore EPC order from NLC India for setting up two lignite-based CFBC thermal power projects.

#RInfra recently said its EPC division has also been shortlisted for projects like the Bandra-Versova sea link, Mumbai coastal road, and the Mumbai-Nagpur expressway. 

#On December 21, 2017, RInfra announced the sale of its Mumbai power business to Adani Transmission for Rs 13,251 crore. The company will sell 100% stake, valuing the business at Rs.12,101 crore and regulatory assets at Rs.1,150 crore, it said in an exchange filing. The transaction could fetch another Rs.5,000 crore through regulatory assets under approval and Rs.550 crore from net working capital. That would take the total consideration to Rs.18,800 crore. It will also be looking to monetise its cement, road and telecom tower assets to reduce overall debt, which stood at Rs.25,800 crore as of March 2017. The entire deal is a cash transaction and is expected to be complete by March 31, 2018. After the entire deal is gone through (Rs.18,800 crore), the company is expected to be debt free and would remain with a surplus of Rs.3,000 crore. The company going forward is expected to focus on its road construction and defense business.  

“RInfra will utilise the proceeds of the sell of  entirely to reduce its debt, becoming debt-free, and up to Rs.3,000 crore cash surplus,” the company statement added. Besides, in April this year, the company said over Rs.14,000 crore order is under advanced stage of arbitration. The company’s board has recommended a dividend of Rs.9 per share

#On September 14, 2016, the Financial Express carried out a report that Reliance Infrastructure will look to grow its EPC (engineering, procurement and construction) order book to Rs.30,000 crore in the next 9 months, on the back of government orders across infrastructure sectors.
The Global research firm JPMorgan maintained its overweight stance on the stock with a target of Rs.630. It said that the implied equity value of the deal is Rs.6,250 crore i.e. two times regulated equity base. It expects the transaction to conclude in a couple of quarters.

Meanwhile, Bazaar Trend and stock advisory firm has given a LONG-TERM Buy with Stoploss of Rs.513.26 & Strong Buy for SHORT-TERM with Stoploss of Rs.465.10, with immediate upside targets of Rs.553.04 and Rs.599.65. 

I feel if the stock is able to give a closing above Rs.610, then it has the potential to cross Rs.1300 in the medium term and Rs.3000 in the next 2-3 years time frame, especially if it manages to rope in Bullet Train contracts. The stock is trading above its 50D, 100D, 150D and 200D EMAs.  The investors are getting the shares of a company which is on the verge of becoming DEBT FREE.  

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Yesterday, the shares of Energy Development Ltd which was recommended in this blog around Rs.18, touched Rs.37.60 intraday in line with the current optimism in the power sector stocks. The scrip closed at Rs.37.10, up 16.12% in the NSE. I would suggest all  to book at least 80% of profits and hold the rest with a SL at Rs.32.

Jai Balaji Industries Ltd which was recommended several times in this blog around Rs.12-14, hit the upper circuits at around Rs.26.05 in the NSE. The investors can hold the scrip with a stop loss at Rs.21.40.

Yesterday, the shares of the infrastructure company, MBL Infrastructure Ltd, one of the future multi-bagger stock due to its strong order pipeline, corrected a bit to Rs.26.60 in the NSE, after Punjab National Bank (PNB), one of the creditors to MBL Infrastructure, had appealed against the NCLT order. The bank contended that even though the corporate guarantee had not been invoked, Lakhotia was the promoter of MBL Infrastructure. Lakhotia’s resolution plan for MBL Infrastructure was found to be in compliance with the rules under the IBC by the resolution professional. However, the government had by then amended the IBC through an Ordinance barring promoters of companies with non-performing assets of more than one year, wilful and dubious defaulters or those associated with them from bidding for the insolvent companies. After the Ordinance, the committee of creditors found that Lakhotia was not eligible to bid for MBL Infrastructure. 

In my opinion, Mr.A K Lakhotia, who has built the company from a scratch does not in any case fall under the list of willful defaulters and soon we will see this reflecting in the final judgement of NCLT. Till then we need to have patience and at the same time have faith on the management of MBL Infrastructure Ltd, which has a huge order book and debt of around Rs.1700 crore.

According to a news in ET on Jun 21, 2017:  After regulatory whiplash, bankers have buried the hopes of business as usual. While they are working out strategies to emerge from the unprecedented shock, the bankers find themselves walking alongside insolvency professionals in an unknown territory with little clue on how to go about resolving the problem. But a positive outcome of this purgatorial step will be that for the first time in decades, there would be a level-playing field at the negotiating table between bankers and borrowers.. In this case either the PM minister Narendra Modi or the FMO should come up with a clarification on the newly introduced clauses in the Insolvency and Bankruptcy Code, 2016 (IBC) so that the genuine shareholders do not suffer due to wrong interpretation of the sections of the act. I would therefore, suggest you to buy the stock in every decline and look for targets of Rs.110-plus in the coming days.

Suzlon Energy Ltd recommended in this blog around Rs.13.60, yesterday made a high of Rs.15.10 in the NSE before closing at Rs.15. The investors would do well to hold the scrip for targets of Rs.17-19, which it is expected to achieve by the 1st week of January, 2017.

Today, I shall be recommending another small cap to my BMA Wealth Creator Ltd's clients. If anyone is interested to know the name shall have to either join my Premium Service or trade through my Recommended brokerage house, with a minimum portfolio size of Rs.1.5 lakhs. 
Moreover, if anyone has a fund of around Rs.3-5 lakhs we earn jointly through profit sharing (no margin trading please). With the current bullish condition of the market, I feel it will not be too difficult to generate around 10-15% per month (However nothing can be guaranteed, as this is stock market and anything can happen), as many of my recommended scrips have almost doubled during the last 2-3 months.