Karuturi Global Ltd: Buy

CMP: Rs.1.87

Face Value: Re.1

Book Value: Rs.16.61

Introduction: Banglore-based Karuturi Globa Ltd (KGL) is the largest producer of cut roses in the world, with are area of over 292 hectares under Greenhouse cultivation and an annual production capacity of around 555 million stems. Headquartered in India, the company has international offices located in Ethiopia, Kenya, Dubai and Holland. It exports products to countries namely Holland, Germany, United Kingdom, Italy, Singapore, Hong Kong, Taiwan, Bahrain, Muscat, Dubai, Australia, Japan, New Zealand, Brunei and North America. 

Original Photo: Mereja.com

Shareholding Pattern: The promoters hold 5.52% while the general public holds 93.19%. In the general category, Elara India Opportunities Fund Ltd, Emerging India Focus Funds, Rays Global Corporation, Maxworth Investment Ltd, India Focus Cardinal Fund, Tara India Holdings A Ltd, and SRY Crust Ltd holds 7.54%, 4.56%, 5.06%, 5.06%, 3.51%, 3.36%, and 2.89% respectively. In fact these large shareholders hold 34.34% shares of the company. Therefore, low promoters' holding is  not an issue for the scrip. 

Financials: On a standalone basis, Karuturi Global reported a net loss of Rs.1.12 crore in the quarter ended December 2014 as against net profit of Rs.9.36 crore during the previous quarter ended December 2013. Sales rose 5.03% to Rs.3.34 crore in the quarter ended December 2014 as against Rs.3.18 crore during the previous quarter ended December 2013.

On the consolidated basis however in the December, 2014 quarter KGL posted a net profit of Rs.10.31 crore, an increase of 31.34%, as against Rs.7.85 crore during the previous quarter ended December 2013. Sales of the company, however, declined 61.3% to Rs.56.98 crore in the quarter from Rs.147.31 crore during the year-ago period. In the September, 2014 quarter, the company came out with a revenue of Rs.62.14 Cr and a net loss of Rs.8.51 lakhs, this is after adding exceptional item of Rs.154. Or else the loss would have been Rs.15.7 Cr in the Q2FY15. Hence, this is a turnaround case. 

Triggers: 

(i) Karuturi Globa Ltd is the largest producer of cut roses in the world, with are area of over 292 hectares under Greenhouse cultivation and an annual production capacity of around 555 million stems and hence it has the necessary size to withstand any slowdown in the sector. 

(ii) All of you are aware of the unfortunate developments in Kenya last year. Due to continued non-cooperation of various stake holders, Company was unable to complete consolidation of financials beyond 31.12.2013. The Company experienced extremely hostile situation and despite great efforts, found resistance in debt raising.
Now, the Company has found a sudden change of fortune with the Government of Ethiopia offering debt and christening the Company’s project as National Project. Also, the Company has generated significant liquidity with sale of surplus assets. Moreover, with the lower Oil price the Company expects a huge sustained saving in its freight cost. This, it is hoped, these development will more than compensate for the weaker Euro.

(iii) During the financial year 2013 -14, the Company was able to maintain its position in the Floriculture Industry during continued European Crisis which is its key market. The Company continued to make steady progress in its Agricultural foray developing Land in Ethiopia.

(iv) The book value of the shares of the company is Rs.16.61, while its P/E is only 3.74, as against the industry P/E of 42.88. It has a market cap of only Rs.151.42 Cr at Rs.1.87. A decent P/E re-rating of 15 can take the scrip to around Rs.5, after suitable discounting.

(v) The Company continued its efforts to develop the agriculture farm. Major crops expected are corn, pulses, sugarcane, oil seeds and paddy. Company has been focusing on wet cultivation during the monsoons. Agriculture during the dry seasons will be driven by construction of canals and implementation of over 90-high-performance pumps to draw water from the river Baro. Water supply will be further augmented by bore wells.

The Company works with expert farming companies from South America, USA, South Africa and India who have been contributing immensely to the farming operations in Gambella. Karuturi is synonymous with responsible and good business in Ethiopia.

(vi) The cut flower business had a stable beginning in CY15 with the Euro remaining more or less stable against the USD. This has added more visibility towards margins of the company. The weather conditions till now also remained helpful to the flower business.

The Company continued its efforts for sustainable initiatives like cutting edge biological controls like Phytoselius (Predatory Mites). It has eliminated spraying for two spotted red spider mites by 95%. Moving to Hydroponics resulted in 10% improvement in production with 30% reduction in consumption of water & fertilizers. 

(vii) The Company has established an earth worm project on an area of 2000 square meters and is consulting organic scientists from the University of Nairobi for further refining the leachate. This project has already reduced the fertilizer cost by 10-12%.The above efforts have considerably reduced the operational costs and are making floriculture business sustainable for a longer period. This has been seen in the Q3FY15 consolidated results of the company. 

(viii) Karuturi Foods Private Limited (KFPL) continued its efforts to maintain its top line in food processing. The Company continued its reach to Africa,Greece, South America and East European countries besides its main markets in Russia & Ukraine Regions. In FY16, the Company would continue its efforts to spread its market across various countries to reduce its dependency on Russia which is a very price sensitive and volatile market.

(ix) To strengthen the Agri Operations, the Company had gone to nontraditional Gherkin growing areas to improve the yield as well as to source higher volumes to avoid field competition.

The Company’s factory has been certified by BRC (British Retail Consortium) besides HACCP, FDA & KOSHER, as all customers expect these Certifications as a pre-requisite for placing the Orders with KFPL. 

Conclusion: Th Company has a strategic goal to bring a larger area under Agricultural Production and simultaneously continue to create new opportunities in its Floriculture and Food Processing businesses. Moreover, Karuturi Global Ltd (KGL) has received an approval from the board of directors to offload its 53% stake in Mumbai-based Florista India Pvt Ltd, which operates a chain of floral designing boutiques across India. Florista India was an unlisted subsidiary of KGL and disinvestment was a business strategy to bring in some working capital, though the net worth and annual turnover of this subsidiary was less than 1% of its (KGL's) net worth or annual turnover.

According to some web-portals KGL has signed a 50-year renewable lease on 300,000 hectares in Ethiopia where its rentals are $1 per hectare per year. The Company is in dialogue with World Bank to insure against political risk in Africa.

Looking at the above points it can be safely concluded that the shares of the company are trading at a discount to its intrinsic worth. The risk-taking investors are therefore suggested to buy the scrip at the CMP of Rs.1.87 and keep holding for a target of Rs.5+.

Note: This recommendation was sent to the Premium (Paid) Group Members on 5th March, 2015.

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"Make in India" vision of Prime Minister Narendra Modi has literally been put to rest by the Finance Minister, in this budget proposals for FY16 as far as textile sector is concerned; when he increased the  service tax to 14% in one stroke. According to experts this will have an adverse impact on the textile industry. 

Meanwhile, the continued fall in crude oil prices over recent months has led to domestic synthetic yarn makers incurring stock and margin losses. Moreover, the fall in prices of petrochemicals, including key polyester yarn raw material such as monoethylene glycol (MEG) and purified terephthalic acid (PTA), has forced yarn makers to reduce prices.  

Adding to the problem for synthetic yarn makers is the sluggish demand from mills. Yarn prices have fallen by ~25% in two last few months.

In midst of all these unfortunate events, the hike in effective rate of excise duty on manmade fibres from 12.36% to 12.5% under the current Budget came as a bolt from blue and will definitely hit the Textile sector hard. 

Moreover, fresh investments will be difficult under the Technology Upgradation Fund Scheme (TUFS) during 2015-16, owing to reduction in allocation for the scheme from Rs.1864 crore in 2015-15 to Rs.1520 crore for 2015-16. 

Only silver lining seems to be: extending the optional Cenvat route for cotton textiles and announcement of implementing GST with effect from 1 April, 2016.

Coal auction: Jaypee Group wins MP mine on day 4 

The mine was earlier allotted to the MP Cement Mining Corporation

Mumbai, March 8, 2015: On the fourth day of coal auctions for schedule III category mines, Jaiprakash Cement Corp. Ltd emerged as the successful bidder for the Mandla South coal field. Bidding for Ganeshpur and Gare Palma sector IV/8 is still underway. 

Jaypee Cement Corp. submitted a closing bid of Rs.1,852 per tonne for Mandla South, according to state-owned MSTC Ltd, which is the nodal agency to monitor the coal auctions. 

Mandla South has a total extractable reserve of 13.4 million tonnes. Madhya Pradesh State Mining Corp. Ltd was the prior allottee for the coal field.

Courtesy: Live Mint

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On the face of it, the corporatisation of government-run ports might seem an attempt to professionalize the entities to be better equipped to handle the rising cargo. However, the Budget fine print shows a complete makeover for some of these ports, which have so far been looked at as mere trading centres for India.

Once under the Companies Act, Mumbai Port for instance, will have its assets valued, making it a company holding one of the costliest real estate assets in the country.

With around 1,800 acres of land stretching from Chhatrapati Shivaji Terminus to Wadala, Mumbai Port will have the potential to be valued in line with some of India's top real estate companies such as DLF Ltd (Rs.153.60), Jaypee Infratech Ltd (Rs.20.10), and Oberoi Realty Ltd (Rs.308.90), among others.

Source: Business Standard (Edited). 

Rose exports up 800% for Valentine's

Photo: Wikimedia Common

Bengaluru accounts for 70% of all rose exports from India.  The cool climate and the soil makes it a great location for floriculture. Roses are grown on nearly 250 hectares in and around the city, with the daily production being around 15 lakh stems. 

While Europe is the major export destination, a significant amount of roses during the Valentine's season also goes to countries such as Malaysia, Lebanon, Singapore, and Australia. 

During most of the year, the average daily flower exports is about 4 tonnes a day. But that figure rose to 25 tonnes between February 1 and 12 this year, according to data provided by Bangalore International Airport Ltd ( BIAL). This year, the numbers peaked between February 8 and 10, when the daily export figure touched 37-38 tonnes. 

Daily rose exports out of Bengaluru rises dramatically in the week running upto Valentine's Day. And more than a third of the flowers exported goes to the United Kingdom. 

Source: The Times of India (Edited).

Gold Monetisation Scheme Should Be Investor Friendly: Gitanjali Exports

March 07, 2015: After the announcement of a gold monetisation scheme in the Budget, the details of the scheme are keenly awaited. The scheme has the potential to attract Rs. 1 lakh crore worth of gold deposits, says Sanjeev Agarwal, CEO of Gitanjali Exports Corporation. 

In Budget 2015-16, Finance Minister Arun Jaitley said a gold monetisation scheme will be introduced to allow depositors of gold to earn interest. Banks and other agencies can also monetise this gold. The scheme is aimed at tapping the precious metal for productive purposes as well as to bring down India's gold imports.

But the operational aspect of the gold monetisation scheme needs to be investor friendly to become successful, says Mr Agarwal, who is also a member of industry body FICCI's Gems & Jewellery group. "Not too many questions should be raised when the person deposits gold into the scheme. If bars and coins are also accepted under the gold monetisation scheme and no questions are raised about source of these bars and coins - it could be gift at wedding or inherited by the family over generations and the source of that is not possible - at least 200-300 tonnes can come under the gold monetisation scheme," he says.

World Gold Council estimates that Indian households own 22,000 tonnes of gold with at least 20-30 per cent of it in form of bars and coins, Mr Agarwal says.

The jewellery manufacturing sector can utilize the 200 tonnes of gold under the scheme and this could bring down India's gold imports significantly, he added. India imports about 800-1000 tonnes of gold each year.

Brokerage firm Nomura in a note also raised questions about the implementation aspects of the gold scheme. "The gold monetisation measures announced by the India Budget on 28 February 2015 are a step closer in the right direction to improve India's overall economy and Turkey is an example of successful gold monetisation. However, we are concerned by the implementation uncertainties."

Mr Agarwal also said that the gold monetisation scheme should be open for a longer period to make it a success. This will incentivise financial intermediaries and jewellers to make more customers look at the scheme more carefully, he added.

The earlier gold monetisation scheme announced in 1998 and was open for only 3 months, leading to mobilsation of just 41 tonnes, Mr Agarwal added.

Courtesy: NDTV Profit

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The shares of Western India Shipyard Ltd, which was recommended repeatedly in this blog, has made a new 52-week high on last Thursday (05/03/2015), at Rs.4.35.

The stock has more than doubled in the last 30 days, giving the investor an opportunity to cover much of their losses. The shareholders of Western India Shipyard Ltd,  are suggested to book at least 50 per cent of profits and hold the rest with a SL of Rs.3.70.

Good time to buy infra-related stocks for the long term: Analysts

New Delhi / Mumbai Mar 02, 2015:  Shares of infrastructure companies, including cement, have rallied by up to 17 per cent on the bourses following the announcement of increased spending in the sector in the Budget. In contrast, benchmark indices the BSE Sensex and the National Stock Exchange’s Nifty moved up only by about one per cent.

Among individual stocks, NCC, Ahluwalia Contracts, JK Lakshmi Cement, Mangalam Cement, J Kumar Infraprojects, KNR Constructions, Simplex Infrastructures, Larsen & Toubro (L&T), Bharat Heavy Electricals (BHEL), Siemens, Voltas, UltraTech Cement, Ambuja Cements, ACC and Shree Cement were among the top infrastructure and cement stocks that gained ground.

A significant increase in planned public-sector capital expenditure, coupled with measures to increase investment and financing in the private sector, will be credit-positive for infrastructure companies, say analysts.

Taher Badshah, senior fund manager and co-head of equities at Motilal Oswal AMC, says: “The rally in these stocks comes on the back of Budget proposals. The measures proposed are good; now one needs to see on-ground implementation. The initiative for the infrastructure-related sector has to come from the government, instead of the private sector. It is the public sector that has to drive this initially. The increased allocation in infrastructure and related sector, and the proposal for creating NIIF (National Investment and Infrastructure Fund), are good moves to kick-start activity in this sector. Once the on-ground activity starts, even the private sector will start participating in a couple of years.”

Stock strategy

Despite these stocks running up against the backdrop of Budget proposals, analysts remain positive on the road ahead for the companies in the infrastructure-related sector. However, they suggest buying from a long-term perspective.

“For investors who wish to invest now and participate through the infrastructure sector stocks over the next one or two years, it is a good time to bite the bullet and jump in. There are opportunities in this sector and stocks can move up 30-50 per cent over the next two years. However, one needs to be selective,” says Badshah.

Analysts at Morgan Stanley believe the Budget was focused on both a revival of public-private partnerships and the overall capital expenditure. “We would look to play it through a combination of executors with good track record, such as L&T (beneficiary of the potential increase in capital expenditure and infra allocation), and developers with strong cash flows, such as IRB Infrastructure Developers (beneficiary of the massive increase in road spending allocation),” they said in a post-Budget note.

Deven Choksey, managing director and CEO of K R Choksey Securities, also remains positive on the infrastructure theme and prefers to play this through stocks in ports and power-generating companies. “We also like large-cap capital goods stocks and suggest buying those on a decline. Real estate, however, is one theme we are still not comfortable with,” he says.

According to analysts at CLSA, the increase in National Highways Authority of India’s capex is positive for all engineering and construction companies in their coverage universe.

Courtesy: Business Standard

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Source: Guru Focus

The enterprise value is the theoretical takeover price of a company or a factory. It is more comprehensive than market capitalization (market cap), which only includes common equity. Enterprise Value is calculated as the market cap plus debt and minority interest and preferred shares, minus total cash and cash equivalents.

As of today, Jai Balaji Industries Ltd's (CMP: Rs.13.82; Book Value: Rs.26.33) enterprise value is Rs.25,020 Mil (Rs.2502 Cr). The market cap of the company is only Rs.101.97 Cr, leaving scope for huge appreciation in future. 

STEEL CONTINUES TO FEEL THE HEAT

Photo: Live Mint

5 March, 2015: Steel companies expecting protection against the onslaught of cheaper imports were disappointed. Though the Government has made a provision to increase the peak customs duty on steel imports to 15 per cent from 10 per cent, it retained the current rate at 10 per cent.

Rajiv Rajvanshi, Senior Vice-President (Corporate Strategy), Jindal Stainless said the proposed hike in peak rate of custom duty on iron and steel would allow the government to increase custom duty, but will not provide immediate relief to the sector which is reeling under huge surge in imports mainly from China.

Steel imports into the country had surged 17.5 per cent to 6.57 million tonne in the first 10 months of this fiscal. China, ranked among the largest exporters, shipped 1.49 million tonnes, accounting for 23 per cent of the total imports into India.

With the rising cost and falling demand, steel companies have to overcome the onslaught of cheap imports into the country and sought anti-dumping duty.

In a bid to ease the pressure on raw material sourcing, the special additional duty on melting scrap of iron and steel including scrap of stainless steel, copper, brass and aluminium to two per cent from four per cent.

The reduction of basic customs duty on bituminous coal to 10 per cent to 55 per cent comes as major relief for the metal companies which are fighting a pitched battle for coal blocks that are being auctioned.

However, customs duty on metallurgical coke was doubled to five per cent. This should have an impact on the operational cost of steel company as they are dependent on imports completely.

Courtesy: NewsHub

GJF seeks Centre’s support to promote gems and jewellery industry

Photo: The Economic Times

LUCKNOW, Mar 5, 2015: The All India Gems and Jewellery Trade Federation (GJF), the national trade federation for the promotion and growth of trade in Gems and Jewellery (G&J) industry across India has hailed the Union Budget FY2016 as growth oriented long term economic blueprint. 

GJF praised the 'change in attitude' of the new government which has stimulated several positive changes in policy such as abolition of 80:20 Rule, inclusion of the gems and jewellery sector in Make in India programme and opening of gold loans to the trade. GJF said it is hopeful that customs duty reduction on gold imports will happen soon as the government is well aware that higher duties will lead to smuggling which the trade wants to get rid of. 

Haresh Soni, Chairman, GJF said, "As part of Government's 'Sabka Saath Sabka Vikas' mantra, we welcome proactive government measures of introducing the gold monetising scheme and indigenous manufacturing of gold coins with symbol of Ashoka Chakra. Gold monetisation scheme should offer opportunity for inclusive growth of sector which includes banks, jewellers, refiners and traders but we await the fine print." 

Also, the proposed gradual cut in corporate taxes is expected to benefit listed jewellery companies "We hope the National Skilling Mission will take up the challenge of enhancing skills of over 2 crore people in the gems and jewellery sector as well as encourage youth entrepreneurs to enter the business", he added. 

With respect to 'Make in India' initiatives, GJF has urged the government to make the country a global hub by creating many domestic jewellery manufacturing parks where shared infrastructure facilities can reduce overheads and reduce costs to final customers. "If the gems and jewellery sector which contributes around 6% to the GDP and 14% of exports (and employs the 2nd largest number of people after the software industry) gets industry statues, then getting land for factory units in Government owned sites such as SEZs/ MIDC areas, etc. will become easier", said the federation. 

GJF has been pursuing with the Government to focus its policy measures on development of the Gems and Jewellery industry and formulate a comprehensive gold policy for India and make India a global jewellery hub. GJF has urged the Government to develop infrastructure to improve skill sets through upgradation and skill development by promoting and standardizing professional vocational courses, introducing fee subsidies, offering scholarship programs, reviving dying arts and crafts, more training. 

It has sought an increase in investment in technology to improve health and working conditions as well as labour productivity. It has asked the Government to provide adequate thrust for skill and infrastructure development through easy financing, incentives, subsidies, facilitation of land allocation, and supply of utilities. The intent is to train 4 million (40 lakh) people in the sector till 2022 as the sector is facing shortage of skilled manpower. The industry lost nearly 400,000 skilled manpower post economic recession in 2008, out of which, an estimated half returned while the remaining half migrated to other industries including textile and agriculture farming.

GJF represents over 6,00,000 players comprising manufacturers, wholesalers, retailers, distributors, laboratories, gemologists, designers and allied services to the domestic Gems & Jewellery industry. The Gems and Jewellery industry is a hand crafted and labour intensive with over 1 crore strong labour force engaged in the manufacturing of jewellery industry in the domestic sector.

Courtesy: The Times of India

Gem and jewellery sector can get ‘Make in India’ boost

February 6, 2015: In what could be a significant boost for the ‘Make in India’ campaign, the gem and jewellery sector could see participation from the U.S., the world’s largest market for jewellery, to set up manufacturing hubs in India.

In this direction, the Federation of Indian Chambers of Commerce and Industry’s (FICCI) Gems & Jewellery, Luxury and Lifestyle Forum (FGJLLF) and the Indo-American Chamber of Commerce (IACC) announced a strategic alliance to promote setting up of regional jewellery manufacturing hubs in the country.

“As a part of this alliance, both bodies will work towards development roles for the G&J sector,” FGJLLF Chairman Mehul Choksi told The Hindu. “It is proposed that the Indian G&J sector will move upstream, and the U.S. players will move downstream.”

At the downstream end, large U.S. retailers will work with Indian manufacturers to identify, invest and support the development of large ‘Shared’ jewellery manufacturing hubs (SJMH) in the country.

Simultaneously, for upstream enablement, Indian marketers and brands with the support of the IACC can market their products in the $60-billion jewellery market in the U.S.

The IACC is to set up a joint committee to explore the setting up of hubs in various parts of the country, and talks are already on with top U.S. retailers Signet and Helzberg. The aim is to set up 3-5 hubs over 3-5 years. “We are examining clusters such as Bhavnagar and Surat in Gujarat, Kolkata and Mumbai,” Mr. Choksi said.

“The American gem and jewellery industry too wants to be part of the ‘Make in India’ movement,” IACC Secretary-General Ranjana Khanna said in a statement. “While India has the largest work-pool of highly skilled artisans, the finish quality is still a challenge, as is the availability of new technologies and machinery.”

“The strategic alliance with the IACC is another step towards making India the hottest and largest jewellery hub of the world,” Mr. Choksi said, adding, “there is a huge opportunity to capture a part of the U.S. jewellery manufacturing industry, which is estimated to be $125 billion. If we can improve the manufacturing skills of the artisans and provide the right infrastructure in the form of SJMH to the manufacturers, we can easily triple exports of value added jewellery.”

Courtesy: The Hindu

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There is a listed company which is the largest producer of cut roses in the world and the cultivation is done in an area of over 292 hectares. It has an annual production capacity of around 555 million stems. The company has good presence in Africa and has offices in Dubai and Holland. 

It exports products to countries namely Holland, Germany, United Kingdom, Italy, Singapore, Hong Kong, Taiwan, Bahrain, Muscat, Dubai, Australia, Japan, New Zealand, Brunei and North America. The shares of the company are trading at only Rs.1.87 in the BSE and Rs.1.85 in the NSE.

The name of the company will be disclosed on Monday in this blog. I have taken positions for some of those persons, whose accounts I manage. 

ROHIT FERRO TECH LTD: BUY

CMP: Rs.8.05

Rohit Ferro-Tech, which is into ferro alloy manufacturing, has units located at Bishnupur and Haldia in West Bengal, apart from the Jajpur plant in Odisha (Orissa).

The company has been facing several problems like non-availability of adequate quantities of raw materials, lower capacity utilisation and low absorption of overheads, since a long time. Also, its Jajpur unit has been under severe financial stress owing to its high debt exposure. Considering the prevalent unfavorable business environment and no sign of improvement in short term, the company decided to dispose of the Jajpur unit; so as to ease its financial burden and improve its cash flow requirement.

Balasore Alloys Ltd (formerly Ispat Alloys Limited), which is part of the Ispat Group, inked the deal to acquire Rohit Ferro-Tech's Jajpur-based manufacturing unit for an enterprise value of $164.5 million (approximately Rs.1,025 crore). This will substantially reduce the debt on the books. 

The company last month announced to offer and allot, subject to the approval of the shareholders, 7,12,05,000 (Seven Crores Twelve Lacs Five Thousand) Convertible Warrants of nominal value of Rs.10 each at a price of Rs.20 per Warrant (including a premium of Rs.10 per Warrant) in accordance with SEBI (ICDR) Regulations, 2009, to the entities belonging to the promoter group and strategic investors belonging to non-promoter group on preferential basis.

The investors are suggested to buy the shares of Rohit Ferro Tech Ltd at around Rs.8.05, for a medium term target of Rs.14-17. Kindly, consider this as your Fixed Deposit and keep holding.

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Jaypee Infratech Ltd (Rs.19.90), one of India’s leading Infrastructure companies, was recently given a relief by the Income Tax Appellate Tribunal in a case related to tax holiday granted by Government of Uttar Pradesh to the company for the Yamuna Expressway Project. ITAT decided against an earlier order by Higher Income Tax Authorities which had observed arrears in adjudication of a tax holiday of 10-years awarded to the Company.

Jaypee Infratech developed the Yamuna Expressway under the tools system through a concession agreement granted by the Government of Uttar Pradesh, under Section 80 I.A. of the Income Tax Act 1961, wherein a tax holiday is available for such infrastructure projects for 10 consecutive Assessment Years.

The investors should therefore buy the shares of Jaypee Infratech Ltd for a short term target of Rs.24-25. I again reiterate, you should buy all the Jaiprakash Group (J P Group) shares, in BULK before they shoots up. 

Clean coal power capacity may rise 103 GW by 2025

NEW DELHI, MARCH 4:  India’s power generation capacity from cleaner coal is expected to increase by 103 gigawatts (GW) between 2016 and 2025, according to research and consulting firm, GlobalData.

“While India’s clean coal installations are in a nascent stage, many ultra mega power projects have adopted the supercritical technology and future supercritical and ultra-supercritical installations will drive capacity additions over the forecast period,” the firm said in a report.

New installations

Supercritical and ultra-supercritical power plants operate at temperatures and pressures above the temperature and pressure at which the liquid and gas phases of water coexist.

“India’s increasing population and industrialisation, improved standard of living, and robust economic growth are all pushing up its demand for electricity. Between 2013 and 2014, India experienced a deficit of 4.5 per cent in terms of the electricity supply available to fulfill peak demand. India urgently requires many new installations, with coal a significant contributor,” said Sowmyavadhana Srinivasan, Senior Analyst at GlobalData.

India policy

However, Srinivasan warns that growth in India’s clean coal market could be limited by fluctuations in the international coal market and the Government’s increased emphasis on the use of cleaner fuels for power generation.

“India has a policy that most mega power plants have to secure coal imports internationally. This means that if there is a shift in the international coal community, it will affect the coal power plants in India, which adds to the risks involved with setting them up,” Srinivasan added.

Courtesy: The Hindu Business Line

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Infrastructure development company, GMR Infrastructure Ltd has a total asset base of Rs.12,394.72 Cr.  GMR Infrastructure Ltd aims to raise a little over Rs.1,400 crore through a Rights Issue. The Bangalore-based company will offer 3 (three) shares for every 14 (fourteen) shares held by investors, and has set March 12 as record date. The company has been on a fund-raising spree to reduce its debt-burden. In April 2014, the company raised Rs.1,740 crore by selling stake in Istanbul Airport.

According to latest numbers available on Bloomberg, GMR Infra’s consolidated net debt stood at Rs.35,576 crore as on quarter ending September 2014, as against Rs.42,492 crore for three months ending March 2014. 

In an analyst conference call, the company had reported consolidated net debt at Rs.37,600 crore as on quarter ending June 2014. It looks to cut by ~Rs.1400 crore post the Rights Issue.

Now, what is the miracle that is going to happen post Rights Issue? Actually, if you look at its balance sheet as on March 31, you would find that the debt to equity was 1: 3.7. Post qualified institutional placement (QIP) it fell down to 1: 3.3 and now after the successful completion of the rights issue, this is likely to fall down to as low as 2.70. 

So in a span of around eight months, the debt to equity will be falling down from 1:3.7 to 1:2.70. Therefore, this will be the real benefit that both the Rights Issue and the QIP will give to the company.

WINNING STROKES: THINK DIFFERENT

Western India Shipyard Ltd hit another buyer freeze at Rs.3.96, as the scrip made a new 52-week high today. Recently there were some media reports that the $17-billion Mahindra Group, is said to have initiated talks with ABG Shipyard to acquire a large strategic stake in the maker of naval ships and vessels. ABG Shipyard Ltd holds 53.14% shares of Western India Shipyard Ltd. If you remember, the stock was repeatedly recommended in this blog and was asked to average in all declines. 

My recommended UCO Bank Ltd recommended around Rs.69-70 today touched Rs.77, before falling to Rs.71.35 at the end of the day. With the interest rate trajectory set to reverse, the stocks in the banking space are expected to do well. 

My recommended Rasoya Proteins Ltd hit another buyer freeze in the BSE at Re.0.49. This stock however, if for the high risk traders and investors. 

GMR Infrastructure Ltd today touched Rs.18, before going for  a late sale to settle at Rs.17.20. The company has come up with Rights Issue at Rs.15. Moreover, one the group companies has already bagged a coal block. Moreover, Mandakini mine (for power sector) in Odisha and Meral mine (for non-power sector) in Jharkhand are on auction on Thursday. The companies in the race for Mandakini mine are Adani Power Ltd, Adani Power Maharashtra Ltd, GMR Mining and Energy Pvt Ltd, Jindal Power Ltd, Mandakini Exploration and Mining Ltd and Wigeon Commotrade Pvt Ltd.

Genera Agri Crop Ltd, which is a Corporate Farming company in India with farm business (The farms are spread across Andhra Pradesh, Tamilnadu and Maharastra.) model that entails enrolling the farm lands on lease basis and support the farmers with technical and managerial inputs for successfully running farming as a business enterprise, has a book value of Rs.76.45 and asset base of Rs.75.35 Cr, but has a market cap of only Rs.3.79 Cr hit the Upper Circuits today at Rs.4.23 before closing at Rs.4.17.  The stock generated a volume of around 16, 000 in the BSE and the percentage of Deliverable Quantity to Traded Quantity was 100%. The scrip is expected to double from here--stay invested.

Jaiprakash Associates Ltd today touched Rs.28.90 (Upper Circuits) before closing at Rs.27.95 in the BSE. The scrip if you remember was recommended around Rs.25-25.50 only some days back. The investors can also look for Jaypee Infrastructure Ltd at Rs.20.20. Jaypee Infratech Ltd is the "Cash Cow" of the Jaypee Group. Jaiprakash Power Ventures Ltd also today moved to Rs.15.95, before settling at Rs.12.31. The Jaiprakash Group is likely to complete the sale proceeds of its plants within a couple of months. 

Bharti Airtel, Idea, JSPL in Focus Today

[Editor: If you buy the shares of GMR Infrastructure Ltd now at around Rs.17.70, you will be entitled to the Rights Issue at Rs.15 per share. The shares of GMR Infrastructure Ltd will definitely go up, in the near future, due to NDA government's focus in the infrastructure space. When the RBI cuts the Repo rate, how do you expect the infrastructure stocks to behave, considering that most of these companies have high debt in the books? I am therefore expecting, the stock to move towards Rs.29-32, in the coming days; as with fresh funds, the company would be able to cut its debt further bringing down the finance costs to more manageable levels. In that case you will get profit from your original holdings which can be sold to buy the Rights issue share at a lower price. 
Meanwhile, GMR Infrastructure Ltd reported a consolidated net loss of Rs.638.33 crore for the third quarter ended on 31 December due to higher finance cost. The company posted a net loss of Rs.441.09 crore in the year ago period. However, GMR Infrastructure Ltd came out with a net loss of Rs.708.15 Cr for September, 2015 quarter. In that sense there is an improvement in its bottomline, speaking sequentially. Or this can be considered as a turnaround case. Income from operations during October-December quarter of the current financial year rose to Rs.2,761.39 crore from Rs.2,638.35 crore in the corresponding period of the last fiscal. Finance cost jumped to Rs.927.56 crore in the third quarter of current financial year from Rs.759.93 crore in the year ago period. During Q3FY15, the GMR Male International Airport Ltd (GMIAL) submitted claims of $803 million for the loss caused due to wrongful repudiation of the concession agreement for Male International Airport. GRM Infrastructure Ltd has interests in airports, energy, highways and urban infrastructure sectors. It has 15 power generation plants of which 8 are operational and 7 are under various stages of development. Very recently, GMR Chhattisgarh Energy, a group company of  GRM Infrastructure Ltd, won the Talabira-1 coal block in Odisha at a negative bid of Rs 478 a tonne after nine hours of bidding. Incumbent holder Hindalco of the AV Birla group lost the block in the process and has the option to sell the infrastructure developed by it to GMR.. The Odisha mine, earmarked for the power sector, has extractable reserves of 28.77 million tonnes. 
Moreover, the second phase of auction of coal blocks is expected to start with aggressive bidding. However, the bidding in the second phase is not likely to be as aggressive as in the first phase, when the government invited bids for 19 operational mines. The government is offering non-operational but soon-to-be producing coal blocks in the second phase. Companies offered aggressive bids in the first tranche as those were ready-to-operate mines.
The bidding will go on till March 8 for 11 coal mines, for which about 45 firms including Jindal Steel & Power, Adani Power, JSW Energy, GMR Energy, Hindalco Industries, Reliance Cement and Jaiprakash Associates have technically qualified. During the e-auction starting Wednesday, the bidder companies will have to quote lower than the ceiling price to bag the mine reserved for power sector]

March 04, 2015: The Nifty opened higher on Wednesday as RBI cut lending rates by 25 basis points. Foreign investors continue to buy shares in cash market; on Tuesday they were net buyers to the tune of Rs 773 crore. Domestic investors were net sellers to the tune of Rs 304 crore. Market volume declined on Tuesday; in cash segment the volume was Rs 25,536 crore (11 per cent lower than Monday' volume) and in derivative segment volume was Rs 1.99 lakh crore (20 per cent lower than Monday's volume).

(i) Bharti Airtel, Idea, Reliance Communication: Telecom spectrum auction starts today. Auction will be done in 800, 900, 1800 and 2100 MHz band. Spectrum for 900 MHz band is most important for telecom operators. Idea and RCom have 92 per cent and 100 per cent of 900 MHz spectrum due for renewal respectively. 

(ii) GMR Infra, Monnet Ispat and Energy, Jindal Steel & Power, Sesa Sterlite: Phase two of coal auction is scheduled to start today. 11 mines with total capacity of 29.3 MT are on auction. Out of the 11 mines 6 are non-regulated and 5 are reserved for power sector. 

(iii) Tata Motors: Jaguar Land Rover US sales increased 14 per cent annually in February to 6,327 units.

(iv) Power Grid Corporation of India: As per reports the company will consider payment of interim dividend today. 

(v) McNally Bharat Engineering Company has allotted 25 lakh shares to billionaire investor Rakesh Jhunjhunwala at Rs 100 per share against Tuesday's closing price of Rs 91.10 per share. 

(vi) Gail India has cancelled its plan to set up Rs 3,108 crore LNG import terminal at Paradip, Odisha. 

(vii) Tata Power has commissioned its first 63 MW unit of Bhutan hydro plant. Power Finance Corporation shares go ex-dividend today. The company had declared an interim dividend of Rs 8.5 per share.

(viii) Power Finance Corporation shares go ex-dividend today. The company had declared an interim dividend of Rs 8.5 per share.

Courtesy: NDTV Ltd

Will infrastructure push boost fortunes of steel stocks?

Marginal rise in import duty provides a respite but lower demand and realisation points to dull outlook; yet, analysts positive on JSW & Tata Steel

Photo: Top News

March 2, 2015: The infrastructure push provided by the finance minister in the Union Budget could prove beneficial for steel sector companies, under pressure due to muted demand, weak realisation and a sharp increase in imports from Chinese counterparts.

The construction of another 100,000 km of roads and six million houses (by 2022) would definitely boost steel requirement. Still, this remains a longer-term story and will entirely depend at the speed of project implementation. In the near term, however, the outlook remains weak.

HSBC data suggest India’s steel consumption growth for the financial year-to-date has been only up by around two per cent, lower than the average of around eight per cent annually in the past 10 years. And, in the past year, steel imports from China have increased about 200 per cent and overall imports by 60 per cent. Some relief was provided in the Budget through a basic customs duty increase. The tariff on iron and steel was increased from 10 per cent to 15 per cent.

On the flip side, the cost of coal has also been raised. The clean energy cess on coal has increased from Rs 100/tonne to Rs 200/tonne and customs duty for metcoke from 2.5 per cent to five per cent. This has neutralised the benefits for steel producing companies. Analysts at India Infoline, however, believe the government has increased the room to increase customs duty and it would benefit steel manufacturers. Special additional duty on scrap has been reduced from four per cent to two per cent. Rahul Dholam at Angel Broking says this is marginally positive for entities such as Tata Steel and JSW Steel.

The iron ore price cuts, the latest being on Monday, are good news for manufacturers such as JSW, which source the input from the domestic market. NMDC, after cutting prices by Rs 200/300 a tonne for lumps/fines for February, has again reduced prices by Rs 300/500 a tonne for March. Thus, some respite to margins should be provided.

Overall, looking at slow steel demand growth and realisations, analysts believe the near-term outlook remains weak but once infrastructure-related activities pick up and the government takes more steps to curb cheaper imports, companies with a domestic focus as JSW will do well and, thus, remain their best picks.

Tata Steel, too, is seen as a good pick, seeing the benefits it will derive from captive raw materials and expansions in progress. Its international exposure could add to the overall gains. For instance, Tata Steel Europe is doing satisfactorily, after a large number of efficiency initiatives. A weaker euro can help. After the Budget, a majority of analysts have 'Buy' ratings on JSW Steel and Tata Steel.

Courtesy: Business Standard