Buy Pritish Nandy Communications Ltd.

Dear Friends, I have received a letter, which called for, my suggestions about the following companies. Pritish Nandy Communications Ltd (BSE Code---532387): It is one of the blue chips in the small cap space. The profit of the company has increased in the last fiscal, though by modest amount. The most striking part of the company is that, it operates in the Niche segment. Too much should not be read into the acquisition of the shares of Pritish Nandy Communications Ltd by Goldman Sachs Investments (Mauritius) Ltd.It is to be noted that it has acquired the shares(5.16% of the total share capital ) which were sold by Lloyd George Investment Management (Bermuda) Ltd., indicating just change of hands. The plus point in this media company, is that the management of the company is very strong and is on the hands of a person, who has years of experience in the in this business. Recently its film Ankahee, directed by Vikram Bhatt, did compartively well.It has completed the next film, a romantic comedy called Pyar Ke Side Effects, directed by Saket Chowdhury; starring Mallika Sherawat and Rahul Bose. The films was to be released on the second week of July( I do not know if it has been released or not). The Star TV Network has already acquired the world satellite rights of the film and T Series, its music and India home theatre rights. The Company also is also on the verge of completion of of its films made in Kolkata. Anjan Datta's Bow Barracks Forever, which is scheduled to be released this summer and features a powerful ensemble cast comprising of Neha and Lilette Dubey, Victor Banerjee, Moon Moon Sen. The Star Network has already acquired the world satellite rights of the film. The principal photography of Rituporno Ghosh's Khela has also been completed. Khela stars Manisha Koirala, Prasenjit Chatterjee and Rupa Ganguly. Khela will be released immediately after Bow Barracks Forever. Looking from CAS angle also the company is expected to do well. The Company is in the process of transferring its wellness segment to its wholly owned subsidiary PNC wellness Pvt Ltd. Shareholders approval under section 293(1)(a) of the Company’s Act 1956 for this was earlier obtained through postal ballot. Arbitration proceeding initiated by the Company against Prasar Bharati, in respect of bank guarantees encashed in the year 2000-01 for the marketing of Olympic Games 2000 are ongoing. Acquisitions of shares(Positive push?): Lot of promoters' accusition of the company's share has taken place in it, in the recent months: 1. Ms. Rangita Pritish Nandy had acquired 10,000 shares of the total paid up capital of Pritish Nandy Communication Ltd. Ltd on May 09, 2006. 2. Artinvest India Private Ltd, a body corporate acting in concert with the promoters, had acquired 17939 shares of Pritish Nandy Communications Ltd. on May 19, 2006. 3.Ms. Ishita Pritish Nandy had acquired 10,000 shares of Pritish Nandy Communication Ltd. Ltd on June 08, 2006. 4.Artinvest India Private Ltd, body corporate acting in concert with the promoters, had again acquired 24,088 shares of the total paid capital of Pritish Nandy Communications Ltd. on June 08, 2006. The mode of acquisition is Market and the shareholding of Artinvest India Private Limited after the said acquisition is 1,04,315 shares aggregating to 1.00% of the total paid up capital of Pritish Nandy Communications Ltd. 5. Ideas.com India Private Ltd., a corporate acting in concert with the promoters of the Company, that it acquired from market 3,480 equity shares of the Company on March 02, 2006 respectively. With this acquisition, its shareholding in the Company stands at 2,42,899 equity shares (2.32%). Earlier, Ideas.com India Pvt Ltd, a person acting in concert with the promoters of the Company, acquired 27,999 equity shares of the Company on February 23, 2006 from the open market. At that time its shareholding in the Company was at 2,14,919 equity shares (2.05%). The concerns are: 1. It is contemplating an increase in the Authorised Share Capital of the Company from Rs 110/- million divided into 1,10,00,000 equity shares of Rs 10/- each to Rs 150. 2. Only "God" will be able to tell when the govt. will implement CAS. 3.Though multi-plexes are major hit, but the viewship in the small screen halls which outnumber those high tech viewing by miles, are decreasing. Some of those single screen halls have either been closed or is running into huge losses. 4. High entertainment tax has been a major constraints in the media space. Specially in Maharastra, this is a great concern for Hindi movies specially. 5. There was Capital loss on the winding up of its wholly owned subsidiary PNC international FZ-LLC at Dubai Media City UAE.This has been accounted for in the last fiscal.The EPS of the company is Rs.4.54, which gives the fair value of the shares at around Rs.60 to Rs.75, considering the Sector P/E. The non-promoter's & FIIs holdings have decreased. FIIs holding has decreased slightly from 12.29 % in the December, 2006, quarter to 10.80% in the March , 2006 quarter. The prmoter's holding has increased slightly. While FIIs holding has been decreasing the Promoters' holding has been steadily increasing. This looks interesting from the investment point of view. Hence, weighing all the options, I recommend a buy of the counter, at the current price of Rs.35.65 for medium to long term. Do not trade in this counter. Andhra Petrochemicals Ltd: This is an South Based petrochemical company. The company's showing in the last one or two years is not impressive. Steep increase in Propylene and Naphtha prices affected profitability for the company in the last quarter and also for the Fiscal 2005-06. Though there are some rumours about take-over I think, without knowing the swap ratio it is useless to talk of M & A. Takeovers sometime never work---take the case of Global Trust Bank take-over by Corporation Bank( shareholders of GTB lost all their money), Recron Synthetic Ltd( even after taking over by Reliance see its condition), MRPL( it is hovering at the same price for more than 18 months),..Moreover, high crude prices and India's vote bank politics will not let the company make profit, at least in the near term..The Input Tax credit on Naphtha, one of the raw-materials, which was earlier available to the Company was withdrawn retrospectively by the Government of Andhra Pradesh with effect from April 01, 2005. As Naphtha is used as a raw material and not as fuel, the Company has been advised that it has a good case for relief and has accordingly filed with petition in the A P high Court. A Credit of Rs 13.581 million has therefore been taken for the quarter ended March 31, 2006 and Rs 5.00 Cr for the year 2005-06. This looks interesting for the company...But, I for myself will not enter this counter at this price except for pure speculation . Maikaal Fibres Ltd: It is also on the same league as Andhra Petrochemicals Ltd, though slightly better.... A CDR package is being implemented there. And to get some good and noticeable effect from CDR packages, one needs to have a time frame of at least 18 to 36 months. So if one is long and okay with the uncertainty looming large....one can gulp some of the shares of this company. The most striking part in this company is: a) its CDR is going on in full swing, with all the departments co-operating with one another. Even the banks are keen on helping the company. b) it has 100% EOU, which is demanding, as Chinese cheap exports are facing the wrath of both the US and the EU. c) It has restructured the principal debt of Rs 45.45 Cr to a total sum of Rs 26.53 Cr and the over due interest of approximately Rs 20Cr has been waived off. As per the approved scheme, the Company would have to repay the outstanding dues partly by way of conversion of equity and balance by way of repayment of debt by March 31, 2010. d) The Company has started the procedure to raise Rs 8.00 Cr by way of TUF loan for its expansion plan for setting up an Open End Yarn Project and yarn dyeing facilities. e) Yarn market is much more stable than the Finished goods sector, though here the margins are a bit less. f) Good cotton harverst[or bumper crop] will bring down the cotton prices throughout India. The disturbing part is that the debt of Rs 3 Cr would be converted into equity and debt of Rs 6.00 Cr would be converted into 6,00,000, 0% non-cumulative non-convertible preference shares of Rs 100 each. The preference shares are redeemable in two equal installment of Rs 3. Cr each in March 2009 and March 2010. The balance amount of Rs 17.53 Cr would be repayable over the period of 4 years and 3 months as per the approved scheme. This will increase the paid up equity capital of the company and decrease the EPS. This is a cause of genuine concern. SO IF U ARE LONG ON THIS COMPANY U CAN TAKE SOME GAMBLE....BUT I FOR THE ONE WILL NOT INVEST IN THIS COMPANY. The companies which are in the BIFR list gives good return but one has to keep the time frame large[as mentioned earlier], and management has to be strong and effective. Here the management has not performed in the past and hence it remains to be seen how the management will deliver in future. Best wishes, Suman Mukherjee India. http://finance.groups.yahoo.com/group/SumanSpeaks/ www.bcozindia.com suman2005s@rediffmail.com