Adani Enterprise Ltd: On Solid Ground Powered by the Mozambique Deal

CMP: Rs.82.95

Target: Rs.88-99

Last year, Adani Enterprises Ltd, the flagship company of the Adani Group, de-merged its power, ports and electricity transmission businesses into separate companies, making the holding structure clearer for investors. Adani Enterprises shareholders will benefit from the merger of Adani Mining Pvt Ltd.

Adani Enterprises has a net debt of Rs.19,298 crore, representing 1.3 times the book value of shareholders equity. The group is part way into a new $5-10 billion solar investment programme.

Ameet Desai, executive director and chief financial officer of Adani Enterprises, said the company's long-term debt was about Rs.8,300 crore and net of cash this figure went down to Rs.6,280 crore. The balance Rs.12,000 crore was working capital and the net long-term debt to equity ratio was 0.5%, he said.

The company earlier said it is ramping up coal production and is well placed to tap the growth opportunities in domestic coal mining space. Adani Enterprises Ltd is now more or less, a trading company with the mining business being merged into it. Post completion of coal mine auctions, the opportunity is in the domestic coal MDO (mine developer operator) business where the company enjoys an early-mover advantage.

After the demerger Adani Enterprises is largely focused on coal. The company management, is confident of scaling up the MDO (mine developer operator) business manifold over the next five years (in FY15 it clocked around 3 mn tonne output under MDO for Rajasthan utilities) given the large opportunity that has come up after coal auctions. Despite domestic coal output slated to rise, the management remains upbeat on coal demand trickling into sustained trading volumes going ahead.

Gujarat-based food and edible oils firm Adani Wilmer and Madhya Pradesh-headquartered Ruchi Soya Industries have tied up to form a joint venture company for procurement, marketing, sales, and distribution of products such as soya food, oil seeds, and biodiesel.

The new joint venture (JV) company will cater to domestic food demand and both Adani Wilmer and Ruchi Soya will provide manufacturing support to this JV. Through their joint venture, Adani Wilmer, Adani Enterprises, and Wilmer International will hold a stake of 66.66% in the JV company, while Ruchi Soya will hold the rest — 33.34%. 

Adani Enterprises, earlier incorporated subsidiary Korba Clean Coal Pvt Ltd for carrying on the business of coal washing.

Coal prices in the US remain weak, but overseas, coal, particularly thermal coal, is having an impressive run. There, the commodity is getting a boost from robust Chinese demand and weather related shipping delays, which have impacted the commodity’s availability.

The way, which China is supporting coal, is somewhat interesting. While the country appears to be standing by its word to cut coal emissions, it is first doing this by cracking down on domestic coal miners and trying to curtail industrial overcapacity and this in turn is reducing the domestic supply of coal and necessitating an increase in coal imports.

The nation’s coal output will fall by 280 million tons this year as the government seeks to curtail industrial overcapacity, according to officials with the National Development and Reform Commission. In terms of imports, Deng Shun, an analyst with ICIS China, thinks coal imports will be sustained at more than 20 million tons a month in the second half of the year.

Earlier this month, seaborne thermal coal rose to its highest price in more than 10 months as Chinese buyers worked to scoop up coal supplies amid the government’s clampdown on overcapacity. In addition, demand for coal has improved amid the rebound of natural gas and oil prices.

Meanwhile, Adani Enterprises Ltd has secured approval from the Gujarat government to begin work on building a solar power equipment plant on its own after earlier unsuccessful attempts to build the plant in partnership with technology providers such as clean-power developer SunEdison.

Work on the first phase of the project has started and is expected to be commissioned this year, said two government officials familiar with the plan. The Adani Group plans to invest $2 billion in the project to make solar panels and solar photo-voltaic cells.

Loot of Indian Telecom Companies by the Narendra Modi government continues....

The Cabinet had recently cleared a mega-spectrum auction plan for seven bands, including that of 700 MHz. However, analysts had expressed concern over the high base price for the premium 700 MHz. A company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs.57,425 crore for a block of 5 Mhz on pan-India basis. This band alone has the potential to fetch bids worth over Rs.4 lakh crore. 

Aggressive bidding for 700 MHz band will hurt the financials of telecom companies which are already reeling under very high level of debt. From where such large sums of money will come? Has the Narendra Modi government ever thought of it, before placing astronomical rates for spectrum? Now what will happen is that after sometime, the telecos will definitely start raising the tariff rates; hurting the common man. What to say ....!! 

Idea management told analysts that it does not see a spectrum supply constraint anymore. Idea sees competition to intensity over two years but expects gains in revenue from increased market share. Another telecom company, Telenor has also decided against participating in the upcoming spectrum sale in India, signalling the Norwegian mobile phone operator's clear intent of exiting a market where it has been making losses and has struggled to expand operations. 

Moreover, The Narendra Modi government has already created a mess of the telecom sector, by putting Ravi Shankar Prasad in charge; who is inefficient in dealing such complex matters as telecom.....But then what is new, Narendra Modi's ministry is all full of stooges; though one of them have been shifted from the Human Resources (Read Education) to Textiles...and Minister of State for Railways Manoj Sinha is being given Telecom portfolio, that's split from Information Technology, a department that will stay with Ravi Shankar Prasad, who is also the country's new law minister after Prime Minister Narendra Modi's massive reshuffle of his cabinet's portfolios.

Even after 14 years, when the dispute first arose, there is still no clarity on what should be included/excluded from telecom ‘revenues’ – and since there is no clarity, whichever way the case is finally decided, where is the question of paying a penalty?

Should a foreign exchange gain/loss a Bharti Airtel makes on its African operations be included in this or not? In the initial years, Vodafone operated in India through eight companies which, on occasion, lent money to one another – is this to be included in telecom ‘revenue’ and should the government be given a share of this? Clearly not, you’d think, but that is what the case is all about.

While the new telecom minister can take a call on the CAG report once a decision is taken on what ‘revenue’ is, the decision has larger ramifications. Not including foreign exchange losses, capital gains, or interest earnings on company deposits in ‘revenue’ is an easy decision. But if payments made to other telcos are included in revenue and the government gets license/spectrum fees on this, this will discourage infrastructure sharing; it will also ensure MVNOs never take off.  In the rush to apportion blame, no one is talking about the real issue.

A bigger monthly phone bill could be around the corner. India’s telecom majors are expected to bid upto Rs. 100,000 crore buying spectrum which in turn could help provide better quality mobile phone coverage.

The auctions for the spectrum are expected to happen in 2-3 months and upto 75% of the bids are expected from private telecom companies, a just released report from rating agency CRISIL says.

The top three telecom players are expected to account for close to 2/3rds of the bids at the auctions. Interestingly, Indian telecom companies already owe close to Rs. 380,000 crore to banks for loans raised earlier, mostly to buy the same thing – spectrum.

CRISIL Research Director Ajay Srinivasan says telecom companies (as we all know) are already facing increased network congestion in circles with high data consumption, mostly metros and category A circles, which account for 60% of India’s data traffic. “Augmenting network capacity and spectrum holdings will be critical for maintaining their competitive position,” he said.

It’s a race to the top, or bottom, depending on which way you see it.

The big driver for the race is Reliance Jio which is expected to put profitability and operational cash flows of all the companies under pressure. Reliance Jio is expected to launch in full flow this year-end, though the project has suffered delays.

The Telecom Regulatory Authority of India (TRAI) had proposed the auctioning of 35 MHz (mega Hertz) spectrum in the 700 MHz band at a reserve price of Rs. 11,485 crore per MHz in March this year.

The 700 MHz band is used worldwide for deployment of 4G as it is more efficient than other bands allowing it higher penetration capability inside buildings. Due to lower frequency it is also possible for the band to provide wider coverage, which reduces number of towers required for setting up LTE network.

The tender is expected to garner revenues of INR 5.6 trillion (USD82.68 billion) and will see the government auctioning off more than 2,000MHz of spectrum across seven frequencies – including the 700MHz band which will be made available for the first time.

Indian government wants to auction off the 700Mhz spectrum as this band is already in use across the world – in about 40 developed and developing countries.

In the current fiscal, the outgo towards spectrum acquisition would be Rs.370 billion, which is lower than the budgetary estimates of around Rs.560 billion. It will still be a significant outgo for an industry reeling under Rs.4 trillion of debt as of March 2016.

During the hearing against the levying of fine for call drops, senior advocate Kapil Sibal, appearing for telecom operators, told a Supreme Court bench that Indian telecom companies have to pay over Rs 3.8 lakh crores as debt. “We are not gaining anything and our rate of return is less than one percent at the end of a year.”

Crisil’s analysis shows that the large telcos would need external funding of around Rs. 50,000 crore to meet their spectrum and network investments over the next 2 years.

Winning Strokes: Think Different

Today JSW Energy Ltd gave good returns to the investors on intra-day basis. The stock touched Rs.84.20 in the BSE before closing near Rs.84, up 3.32%. The company is coming up with Q1FY17 results on 21st July, 2016. 

Adani Enterpises Ltd which is likely to get benefited due to the recent treaty with the Mozambique government today rose to Rs.83.60, intra-day before closing at Rs.82.80 in the BSE. The stock which has started to move up after consolidating around Rs.80-81, ranges should see its next target of Rs.91, very soon. I feel it would not be an exaggeration to mention here that Adani Group bought land in the African Continent some year back with the primary objective of growing pulses and oilseeds to meet the increasing demand - supply deficit in India. Though the efforts received lot of set backs earlier, but it seems with the patronage of the NDA government, this time, their project might see the light at the end of the tunnel.

The stock of Reliance Communications Ltd today rose to Rs.50.90 before closing at Rs.50.30 in the BSE. Reliance Communications Ltd today informed that it has incorporated an investment firm in the Netherlands in the name of Aircom Holdco BV.  Now, this comes before the official announcement of the merger deal with Aircel, hence we need to read between the lines. My estimation is that: the scrip is likely to see Rs.56-57-60, within a short time. 

Today, the stock of micro-cap pharma company, Syncom Formulations (India) Ltd was recommended to the Paid Group members at Rs.2.46 for short term targets of Rs.5.20-9. 

Syncom Formulations (India) Ltd is engaged in the business of pharmaceutical formulations. It manufactures range of products in various dosage forms and markets them in various countries. 

The company purchased a property situated in Mumbai worth Rs.11.00 crore on March 15, 2016.  

The rupee seems to be favouring the pharma sector and one is still going to see a net-net good growth for some of these companies, like Syncom Formulations Ltd, which has a market cap of only Rs.190.48 Cr at the CMP of Rs.2.44. In FY16, the company came out with a net profit of Rs.10.36 Cr on an equity of only Rs.78.07 Cr. The reserves of the company is Rs.30.63 crores.

Syncom Formulations (India) Ltd (Syncom) is a generic pharmaceutical company, since last two decades. It undertakes the discovery, development, manufacturing and marketing of pharmaceutical formulations. The company’s product portfolio includes alpha adrenoceptor agonist, analgesic, antipyretic, anti-inflammatory, anti-ulcer agents, antibiotics and stimulants, among others. 

It has been serving the demands of more than 20 countries globally with WHO GMP certified manufacturing unit, ISO: 9001-2008 certification and experienced team. It is a prime Exporter, Manufacturer and Supplier of a wide range of  Dry Injections, Dry Powder Injections, Dry Vial Injections, Tablets, Capsules, Liquids Orals, Liquid Vials And Ampoule Injections, Dry Syrups, Ointments, Inhalers, Herbals, etc. 

The company markets products worldwide, under brand names such as Ostocrat, Oxycrat, Raftus and Amoxytop. It has its operational presence in Canada, Peru, Panama, Mali, Ghana, Hong Kong, Cambodia, the Philippians, Malaysia, Sri Lanka, Congo, Yemen, China, Nepal, and Chutan, among others. Syncom is headquartered in Indore, Madhya Pradesh, India. It has more than 400 products registered. 

In addition, it has also ventured into the business of exporting of Surgical products, Agro & Confectionery products like Rice, Wheat Flour, Chickpeas, Soy DOC, Biscuits & Candies, Industrial products like Fasteners, Steel Bars, Roofing Sheets & Jute Bags, Metal Scrap, etc. 

Syncom Formulations India Ltd earlier informed the BSE that the Board of Directors of the Company at its meeting held on May 30, 2016, inter alia, has recommended a dividend of Re.0.02 (2%) per equity share of Re. 1 each for the year 2015-16; which will be paid to all the members/beneficiaries of the Company, subject to approval of member at the forth coming Annual General Meeting of the Company.

Today a buy call was initiated on Idea Cellular Ltd at Rs.105.30 for a short term target of Rs.111 -116. Recently, Idea Cellular Ltd announced up to 67% reduction in 4G and 3G mobile Internet rates to compete with rival Bharti Airtel and ward off threat from Reliance Jio. This is a right move at the right juncture.

The promoters holding in the company stood at 42.23%, while Institutions and Non-Institutions held 32.14% and 25.63% respectively.

Idea Cellular, one of the biggest cellular carrier of the country, has added 6.89 lakh new mobile subscribers in June, 2016. Following the addition, the company’s total subscriber count stood at 17.62 crore with a market share of 22.68%. Idea Cellular, an AV Birla group company, provides Global System for Mobile communications (GSM)-based wireless service at the pan-India level, it is present in all 22 telecom circles.

Idea Cellular's management recently told analysts that it is not looking to bid for 700 MHz spectrum auction.  Idea management told analysts that it does not see a spectrum supply constraint anymore. Idea sees competition to intensity over two years but expects gains in revenue from increased market share. 

Some of my earlier recommended counter, which did well today are BHEL (CMP: Rs.144.25), Vedanta Ltd (Rs.161.75), Jaiprakash Associates Ltd (Rs.11.99), Unitech Ltd (Rs.8.34), Lanco Infratech Ltd (Rs.5.35), etc. 

Syncom Formulations (India) Ltd: Buy

CMP: Rs.2.46

Syncom Formulations (India) is engaged in the business of pharmaceutical formulations. It manufactures range of products in various dosage forms and markets them in various countries. The company purchased a property situated in Mumbai worth Rs.11.00 crore on March 15, 2016. 

When most of the Pharma Companies today are moving  up, there is chance that this battered down counter should also show some upward movements. 

JSW Energy Ltd: Buy

CMP: Rs.80.35

A meeting of the Board of Directors of JSW Energy Ltd will be held on July 21, 2016, interalia, to consider the Unaudited Standalone & Consolidated Financial results of the Company for the quarter ended June 30, 2016.

Recently, there were media reports that, JSW Energy Ltd has got fair trade regulator CCI's approval to acquire 1,000 MW power plant in Chhattisgarh from Jindal SteelBSE -0.62 % and Power Ltd (JSPL).

Meanwhile, ICICI Securities has come out with its first quarter (April-June) earnings estimates for the Power and coal sector. The brokerage house expects JSW Energy   to report a 33.1% growth quarter-on-quarter (up of 46.5% year-on-year) in net profit at Rs.406.4 crore. 

Sales are expected to decrease marginally by 3.1% Q-o-Q (up 23.3% Y-o-Y) to Rs.2598.7 crore, according to ICICI Securities. Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 5.0% Q-o-Q (up 46.2% Y-o-Y) to Rs 1194.5 crore.

The Economic Times wrote on 24 June, 2016:

Months after initial discussions fell through, Sajjan Jindal-controlled JSW EnergyBSE 0.00 % is said to have reopened talks with the Jaypee Group on acquiring three power assets. The two sides are in advanced negotiations for a deal involving two power generation units and a majority stake in a transmission joint venture for an enterprise value of about Rs 5,500 crore, two people aware of the development told ET. 

The two utilities are Bina Thermal Power in Madhya Pradesh with an installed capacity of 500 MW and the 400 MW Vishnuprayag Hydro Power in Uttarakhand. Bina can be ramped up further and its capacity trebled. The third asset is a 74 per cent stake in Jaypee Powergrid, a 74:26 joint venture with Power Grid Corporation of IndiaBSE -0.43 % Ltd (PGCIL). All three assets are held by Jaiprakash Power Venture Ltd (JPVL), a majority owned subsidiary of Jaiprakash Associates, and an acquisition agreement could be reached shortly, said the people cited above. 

Therefore, buy the shares of JSW Energy Ltd at Rs.80.35, for short term targets of Rs.88-91. Please keep a SL of Rs.79, for any short term trade.  

Lanco Infratech Ltd: Buy

CMP: Rs.5

Photo: The Economic Times

Lanco Infratech Ltd's Kondapalli expansion, the gas-based plant, which was being developed in a phased manner, is located near Vijayawada in Andhra Pradesh. The company. informed in January, 2016, that its subsidiary, Lanco Kondapalli Power Ltd, has successfully declared the Commercial Operations Date (COD) for its expansion capacity of 371 MW (Phase III B Project) with effect from January 9. It is at present operating at ~30% PLF, because of gas allocation under present gas pooling mechanism.

Besides, the company said its Amarkantak Unit 2 (300 mw) restarted power supply to Chhattisgarh from April 17, 2016. 

Its EPC order book consisting of power, solar and others stood at Rs.27,079 crore, 80% of which is internal projects. Lanco Infratech Ltd, is present in EPC, conventional and solar power generation, coal mining and infrastructure and property development  

The EPC sector and the power sector together contributed to 87% of the gross revenues. EPC and construction sector contributed to 37% of the gross revenue.

The company has a total outstanding receivables of Rs.17,81.6 crore from various state electric utilities as of March 2016. “Based on internal assessment and various discussions with the customers, the management is confident of recovery of receivables,” the company said.

Better performance by operational assets helped Lanco Infratech recover from losses in the earlier quarters. The Gurgaon-based company had recorded a consolidated profit of Rs.137 crore during the quarter ending December 31, 2015 bringing down its cumulative loss for the first nine months by 95% to Rs.65 crore against Rs.1,412 crore in 2014-15.

The company posted a consolidated net profit of Rs 98.98 crore in the Q2FY16 after a gap of three years. In a statement accompanying the results, the group said approved CDR scheme and additional funding to the company and the lenders approvals of the cost overrun proposals for the projects under construction and the effort to bring strategic investors, disposal of assets, would also bring in the additional cash flows into the system.

Moreover, resolution of pending issues at both Anpara and Amarkantak is expected to improve cash flows and recovery in financials is expected to be gradual, due to the inherent asset value.

The Economic Times wrote on 12 July, 2016: 

Lanco Infratech's promoter L Madhusudhan Rao has found a white knight in fellow utility operator OP Gupta to bail him out of the Rs..41,000-crore loan mess even as bankers want to split the business into three — power, EPC and other businesses such as road and gas — which would also involve conversion of a majority of loans into deep discounted bond. 

The engineering procurement and construction, or EPC vertical, would have a loan of Rs.2,300 crore on its book but the debt burden would be reduced as the company has proposed to convert 90% debt into equity. Interestingly, the new promoter Gupta, who is brought on board by the company, will get majority stake by investing Rs.150 crore.

A further 90% of Rs 5300-crore debt will be converted into deep discount bonds, known as Optionally Convertible Redeemable Preference Shares (OCRPS), with a five-year tenure offering 9.75% interest rate. The company management informed lenders that Gupta has two power plants — a 313 mw plant in Tamil Nadu and another 400 mw plant in Gujarat.

As per the proposal, Lanco Infratech will be the holding company for all three verticals in which Rao's stake will be reduced to 26% from 70% at present, while lenders would have 57% equity stake. The company has also sought an additional loan of Rs 4,000 crore from banks to complete some of its existing projects. Speaking to ET, two senior bank officials said that they are disappointed that the new promoter will own majority stake in the company by infusing "just about Rs 150 crore". 

Meanwhile, after recording profit for two consecutive quarters, due to the improvement in performance of some of the subsidiaries (providing better business outlook) Lanco Infratech a reported loss of Rs.200.7 crore for the quarter ending March 31, 2016 as against a loss of Rs.563.2 crore in January-March 2015. 

The company managed to reduce its yearly loss too due to better performance of its EPC and construction business. It reported loss of Rs.265.6 crore last financial year as against loss of Rs.1,975.3 crore for 2014-15. The company said it would continue to look at sale of assets and getting strategic investors for some of its businesses.

There were media reports in April, 2016 that lenders to Lanco Infratech were looking to rope in a strategic investor for the company’s 8,000 MW power portfolio. At the end of December, the company had 3,460 MW operational of power projects and 4,636 MW of projects under construction. 

Its 500 MW Teesta Hydro Power in Sikkim, the majority of which is now owned by a consortium of lenders (The consortium is led by IDBI Bank and members include Allahabad Bank, Andhra Bank, Axis Bank, Oriental Bank of Commerce, Punjab National Bank, ICICI Bank and State Bank of India (SBI) and its subsidiaries, among others), attracted three potential buyers that include at least one foreign company.

The hydro project, with an estimated cost of over Rs.3,000 crore, has suffered several delays leading to an interest payment default by the promoter. The consortium of banks converted part of its debt into equity to hold 51% in the project under the strategic debt restructuring (SDR) scheme approved by Reserve Bank of India earlier last year. The total debt for the project stood at nearly Rs.2,200 crore while Lanco’s equity stood at about Rs.700 crore. Lanco had divested its 1,200 MW coal-based power plant in Udupi to Adani Power earlier last year.

Lanco’s loans were restructured by the CDR cell in December 2013 with a moratorium of two years from the cut-off date of April 1, 2013, and repayable in 30 quarterly installments starting from June 30, 2015.

Recently, there were also media reports that Piramal Enterprises, led by billionaire Ajay Piramal, is betting big on the infrastructure sector and the diversified company has entered the race to pick up a stake in debt-ridden Lanco Infra's thermal power portfolio.

Preliminary talks have been initiated between Lanco Infra which is looking at inducting strategic investors to reduce its debt & the structured investment group of Piramal Enterprises which falls under Piramal Capital. A few overseas distressed asset funds are also interested in the portfolio. On completion and on a fully operational basis, the enterprise value of the 6 power plants of Lanco Infra is estimated between Rs.42,000 crs to Rs.45,000 crores. 

As mentioned above, in the third quarter of FY 16, the company had Kondapalli Phase 1, 2 and 3a, Amarkantak Phase 1 and 2, Tanjore and Anpara power plants of capacity 3,025 MW under operation. Thus, its seems from above that the company is on the verge of a turnaround. Therefore, buy the shares of Lanco Infratech Ltd at Rs.5, for a short term target of Rs.9.

DO YOU KNOW?

The Shares of debt ridden companies should continue to do well as the new scheme proposed by the RBI will ease debt repayment period and ease the capital structure.

The RBI lifeline states that debt can be classified into ‘sustainable’ and ‘unsustainable’ parts. The former will be serviced by existing cash flows, while the unsustainable debt will be converted into equity or convertible debt. Accounts that are worth more than Rs.500 crore would be eligible for the new scheme.

Photo: Business Standard

Also, the rates at which the Gautam Adani-promoted Adani Group bagged land from the Narendra Modi-led Gujarat government for its port and special economic zone (SEZ) project — between Re 1 and Rs 32 per square metre — were much lower than other companies that set up units in the state. Concessional pricing apart, the group did not face land acquisition hurdles, as the state allotted non-agricultural government land for Adani Port and Special Economic Zone (APSEZ), the country’s largest multi-product SEZ spread across 15,946.32 acres (6,456 hectares) in Kutch district’s Mundra block.

Photo: Business Standard

Meanwhile, while the shares of JP Group companies and Unitech Ltd (Rs.8.10) gave huge returns in the short term, the Adani Group is yet to pick up steam. Besides, you can see from figure on the left, that Adani Enterprise Ltd has better D/E ratio, than the J P Associates Ltd.

Earlier there were even media reports that Mr.Prakash Javadekar, has waived a fine of Rs 200 crore fine for environmental fine to Adani Enterprises.

Therefore, buy the shares of Adani Enterprises Ltd at Rs.82 82.30, T: Rs.88-91-99, SL: Rs.78.

Once the shares of this group starts moving with full steam, Adani Enterprise Ltd could even cross Rs.100. Adani Ports and SEZ Ltd recommended earlier already gave good returns to the investors, over a short term.

Moreover, Adani Enterprises Ltd is being recommended in this blog, since a long time. And those who have already purchased it on my earlier recommendations, are by now sitting with healthy profits.

DO YOU KNOW?

The Shares of debt ridden companies should continue to do well as the new scheme proposed by the RBI will ease debt repayment period and ease the capital structure.

The RBI lifeline states that debt can be classified into ‘sustainable’ and ‘unsustainable’ parts. The former will be serviced by existing cash flows, while the unsustainable debt will be converted into equity or convertible debt. Accounts that are worth more than Rs.500 crore would be eligible for the new scheme.

Meanwhile, while the shares of JP Group companies and Unitech Ltd (Rs.8.10) gave huge returns in the short term, the Adani Group is yet to pick up steam.

Therefore, buy the shares of Adani Enterprises Ltd at Rs.82.30, T: Rs.88-91, SL: Rs.78. Once this group starts moving with full steam, Adani Enterprise Ltd could even cross Rs.100. Adani Ports and SEZ Ltd recommended earlier already gave good returns to the investors, over a short term.

Moreover, Adani Enterprises Ltd is being recommended in this blog, since a long time. And those who have already purchased it on my earlier recommendations, are by now already sitting with healthy profits.

Reliance Communications Ltd: Buy

CMP: Rs.50.55

Reliance Communications (RCOM) last month announced that RCOM and Maxis Communications Berhad (MCB) and Sindya Securities and Investments Private Limited (Sindya), the shareholders of Aircel Limited (“Aircel”) expect to sign binding definitive documentation and announce the proposed Transaction for the combination of the Indian wireless business of RCOM and Aircel very shortly.

Reliance Communications Limited, founded by the late Shri Dhirubhai H Ambani, is the flagship company of the Reliance Group.

The Reliance Group currently has a net worth in excess of Rs.91,500 crore (US $15.3 billion), cash flows of Rs 10,200 crore (US $1.7 billion) and net profit of Rs 4,700 crore (US$ 0.8 billion).

Reliance Communications is India's foremost and truly integrated telecommunications service provider. The Company has a customer base of over 118 million, including over 2.6 million individual overseas retail customers. Reliance Communications corporate clientele includes over 39,000 Indian and multinational corporations including small and medium enterprises and over 290 global, regional and domestic carriers.

Reliance Communications has established a pan-India, Next-Generation, integrated (wireless and wireline), convergent (voice, data and video) digital network that is capable of supporting best-in-class services spanning the entire communications value chain, covering over 21,000 cities and towns and over 400,000 villages. 

Reliance Communications owns and operates the world's largest next generation IP enabled connectivity infrastructure, comprising over 280,000 kilometers of fiber optic cable systems in India, USA, Europe, the Middle-East and the Asia-Pacific region.

Letters from Blog Readers

Hello SUMAN Sir,

                          I am PRASHANT from MUMBAI.I work for BHARAT PETROLEUM CORPORATION LTD MUMBAI REFINERY. I am your regular follower of your blog. Because of you I have gained good profit in UNITECH LTD. 

I am your sincere and religious follower. I had bought RASOYA PROTEIN 1 year before. Please guide me about RASOYA PROTEIN. I can hold for more period just need your valuable guidance. Waiting for your reply. My mobile numbers are 99**079949 (Whatsapp number) / 809**79949.

                                                           -----X----

Dear Investors, 

                         Thanks for following my blog posts and congratulations for your winning stroke in Unitech Ltd. For Unitech Ltd, the short term targets are still Rs.12-15. Yesterday, I spoke with the head of research of a Delhi-based brokerage house, for their view on Unitech Ltd and they are also positive on the scrip, because of the improved fundamentals of the real estate/construction sectors. 

Meanwhile, there is still NO positive news in Rasoya Proteins Ltd, as of n ow; however, since this year monsoon has been predicted to be good, we can look forward for a reasonably good soybean prices. As you must remember, high soybean prices is deterring the company to start operations in the new plant. The company's main plant is still closed, unless that is put in use, nothing much will happen in the counter. One positive is that GDR issue has been more or less solved. 

Tthe company is in contact with various financial institutions, to restructure its loan portfolio. So, at this stage, I would not ask you, NOT to put fresh funds in the scrip, unless some clarity comes. I am expecting some positives post, September, 2016. 

2ndly, since you are already trading through some broker and my well-wisher, I shall be obliged, if you join my brokerage company (www.bmawc.com), so that I make a little from your trading/s; this will help me cover up a part of the research cost. This is an appeal to all my ardent blog readers. 

Thanks and regards... 

Today's Recommendations

(i) The investors can take fresh positions in Reliance Communications Ltd at Rs.53 for short term targets of Rs.57-60-71. Its merger with Aircel is only a done only it is time that you need to wait for some wonderful gain from the CMP of around Rs.53. 

(ii) Fresh position can be taken in Adani Ports and SEZ Ltd at Rs.210, T: Rs.225, SL: Rs.207

PE investment in retail real estate at Rs 1,000 crore in Jan-May 

[Editor: Since the end of last year  (2015), the real-estate developer Unitech Ltd (Rs.6.95) has adopted a new strategy in its shopping malls: first lease to tenants before building the structure. The stock of Unitech Ltd is all set to cross Rs.10-12, in the coming days, due to improving fundamentals of the company and also at the same time a (positive) change in sector outlook. The interest cost  of Unitech Ltd, is likely to come down in the near future due to some drastic measures taken by it during the last few quarters. Meanwhile, my recommended J P Associates Ltd (Rs.12.20) has given wonderful returns to the share holders in the short term]
NEW DELHI: Indian retail real estate has become attractive again for global investor as private equity (PE) investment in this segment has reached $149 million in the first five months of this year and likely to break previous record of 2008, according to property consultant JLL. 

During the entire 2008 calendar year, PE investment in retail real estate stood at $267 million. 

"As of May 2016, the total PE investment into Indian retail real estate stood at $149 million or Rs 10 billion. This has beaten most industry experts' expectations," JLL India Managing Director - Capital Markets & International Director Shobhit Agarwal said in a report. 

The figure has exceeded investment attracted by the Indian retail real estate industry in the year 2007 and could very well cross the previous high seen in 2008, he added. 

"PE investment into retail almost dried out after 2008 until the year 2015, with 2012 being the only exception," Agarwal said. 

Stating that retail real estate has become attractive again for PE investment, he said investment by PE biggies into retail properties would continue in the next six months.

Courtesy: The Economic Times

PE investment in retail real estate at Rs 1,000 crore in Jan-May 

[Editor: Since the end of last year  (2015), the real-estate developer Unitech Ltd (Rs.7.95) has adopted a new strategy in its shopping malls: first lease to tenants before building the structure. The stock of Unitech Ltd is all set to cross Rs.10-12, in the coming days, due to improving fundamentals of the company and also at the same time a (positive) change in sector outlook. The interest cost  of Unitech Ltd, is likely to come down in the near future due to some drastic measures taken by it during the last few quarters]
NEW DELHI: Indian retail real estate has become attractive again for global investor as private equity (PE) investment in this segment has reached $149 million in the first five months of this year and likely to break previous record of 2008, according to property consultant JLL. 

During the entire 2008 calendar year, PE investment in retail real estate stood at $267 million. 

"As of May 2016, the total PE investment into Indian retail real estate stood at $149 million or Rs 10 billion. This has beaten most industry experts' expectations," JLL India Managing Director - Capital Markets & International Director Shobhit Agarwal said in a report. 

The figure has exceeded investment attracted by the Indian retail real estate industry in the year 2007 and could very well cross the previous high seen in 2008, he added. 

"PE investment into retail almost dried out after 2008 until the year 2015, with 2012 being the only exception," Agarwal said. 

Stating that retail real estate has become attractive again for PE investment, he said investment by PE biggies into retail properties would continue in the next six months.

Courtesy: The Economic Times

Reliance Communications Ltd: Buy

CMP: Rs.52.20

Reliance Communications is expected to complete the migration of CDMA to 4G LTE service by mid-August, as most of its customers have already opted for the offered upgrade to 4G LTE services.

Reliance Communications now has liberalized 850MHz spectrum on a pan-India basis and the 4G LTE upgrade will be done on a national basis. It has paid around Rs.6,600 crore for liberalizing its spectrum in 20 out of 22 circles.

In the other two circles (Assam and North-East), Reliance Communications already had liberalized spectrum (which allows telecom operators to use any technology to deliver mobile services such as 3G and 4G) in the 850MHz band, bought in the last auctions in March 2015.

Reliance Communications (RCom) and the promoters of Aircel are set to ink a "binding definitive" pact in around two weeks to merge their wireless businesses, which would create a strong No. 4 telco through India's first such pan-India deal. 

"RCOM and Maxis Communications Berhad (MCB) and Sindya Securities and Investments Private Limited (Sindya), the shareholders of Aircel the proposed transaction for the combination of the Indian wireless business of RCOM and Aircel very shortly," the Anil Ambani-owned carrier said. 

Meanwhile, RCom's customers of its erstwhile CDMA services will be able to start using 4G services starting with users in Mumbai from July 1 under the company's spectrum sharing agreement with Reliance Jio Infocomm. Customers in Delhi, Kolkata, Gujarat and Andhra Pradesh will gradually follow in the first phase. 

"It's a done deal. Just formal approvals are left to be tied up," said a person familiar with the discussions. "The deal should close in the next six to seven months." 

RCom will demerge its wireless business and merge it with the existing unlisted Aircel, with promoters of both sides owning 50% each in the new entity. 

Therefore, the investors can take position in the shares of Reliance Commuications Ltd at the CMP of Rs.52.20, for short term targets of Rs.57-60-66-71.

Adani Ports and  SEZ Ltd: Buy

CMP: Rs.215

The company in its meeting held on July 2, 2016 has accorded in-principle approval for exploring the acquisition of TM Harbour Services. 

TM Harbour Services is engaged solely in providing tug services to The Dhamra Port Company (DPCL), a wholly-owned subsidiary of the company. 

This acquisition will help the company provide effective and efficient marine services to DPCL. The acquisition is subject to due diligence, final negotiations between the parties and obtaining of requisite regulatory approvals.

The Union government has reversed a Rs.200 crore penalty along with several strict measures issued against Adani Ports & SEZ in 2012 for allegedly damaging the environment and violating green laws in connection with the construction of a port project in Mundra in Gujarat, the Business Standard reported.

In a statement, however, the Environment Ministry has said the Adani Port and SEZ Ltd may have to pay a larger fine than the one issued by the UPA government, and said the Rs.200 crore fine “was not backed by any law under the Environment Protection Act and not legally correct.”

If Rs.200 crore fine was not backed by any law, that means the Rs.200 crore penalty ceases to exist at this point of time. Meanwhile, Adani Ports & SEZ has denied all claims of wrongdoing while maintaining that the state government had supported the company.

Therefore, buy the shares of Adani Ports and SEZ Ltd at the CMP of Rs.215, for a short term target of Rs.229.

Real estate market may be on revival path, says report

In the first half of the year, home sales in top eight cities rose 6.6% from a year ago, unsold inventories declined 7%

Mumbai/New Delhi: 05 July 2016: The Indian real estate market, which has been in a slump for the past three years, could be on the path to recovery, property consultant Knight Frank India suggested, citing better home sales and lower unsold inventories in the first six months of 2016.

In the first half of the year, home sales in the top eight cities, including Mumbai, the National Capital Region (NCR) and Bengaluru, rose 6.6% from a year ago, while unsold inventories fell 7%, according to a Knight Frank report released on Monday.

During the period, 135,000 homes were sold, while unsold inventory fell to 660,000 units from 710,000 units recorded in the first half of last year.

Mumbai and Bengaluru registered the maximum growth of 23% and 18%, respectively.

The report also pointed out that new launches fell 9% in the six months to 107,000 units as developers focused on selling stock before bringing new inventory into the market.

“For the first time, after two successive H1s (first halves), we are seeing a point of inflection in the residential market. After two consecutive falls in H1, for the first time, in the all-India aggregate market, we are seeing an actual uptick happening. So the point here in question is: are we seeing the worst behind us and are we now on the path of sustained growth?” said Shishir Baijal, chairman and managing director, Knight Frank India.

Measures such as the Real Estate Regulatory Act (RERA), the recent amendments to real estate investment trust (REIT) norms, a correction in prices in most markets and a lowering of interest rates in the past six months have helped in improving the overall sentiment of both investors and homebuyers in the country.

However, NCR, India’s largest real estate market, continued to struggle.

During the period, home sales in NCR declined 3% while new launches fell a record 41% from the year-ago period.

According to the report, NCR home prices fell by 4% in the first half of 2016, the first time in three years.

The report attributed the price correction to cash-strapped developers, high inventories and a trust deficit among customers.

“NCR is an investor-driven market and investors are out of real estate because prices are not rising,” Omaxe Ltd’s chief executive Mohit Goel said, adding that in the next four years, real estate will be a clean sector.

Commercial real estate continued to show positive momentum during the January-June period, with transactions rising 12% to 20 million sq. ft, while average rental values across the top six cities rose 8% from a year ago.

The report also forecast that total absorption of office space is expected to touch 42.7 million sq. ft, up from 41 million sq. ft by the end of this year, led by manufacturing and information technology(IT)/IT-enabled services.

However, e-commerce companies which have lapped up office space in the last two years have lost steam, with transactions in the segment falling around 78% during the period.

Baijal said commercial real estate has grown from “strength to strength” and if the same positive momentum continues, “2016 is poised to become the best year after the global financial crisis in 2008”.

In the residential segment, while new launches in the Mumbai metropolitan Region (MMR) grew by 29%, sales saw a jump by 23% during the January-to-June period.

Unsold inventory in the city was also down by 20% in the last two years, with a few micro markets in the suburbs of the city like Thane and Navi Mumbai continuing to show significant improvement in sales, particularly in the mid-income and budget segments.

“The new draft development plan that was released recently has brought a lot of clarity for city-based builders. Plus, robust office space demand and enhanced infrastructure are boosting demand for residential real estate in Mumbai. We forecast a 16% growth sales in Mumbai in 2016 over 2015,” said Samantak Das, chief economist and national director at Knight Frank India.

Most developers remain hopeful of the real estate market picking up further with a good monsoon and more policy reforms kicking in over the coming months.

“We are very hopeful that with the monsoon and GST (goods and services tax) coming in, the real estate market is going to do better and, by Diwali, we should see a stable market. Homebuyers have also realized that this is as low as home prices can go. They are actually going forward and closing deals. The only thing is that they are choosy about the developers and the budget but the bottom line is that transactions have started happening,” said Getamber Anand, president, Confederation of Real Estate Developers’ Associations of India, a real estate lobby.

Courtesy: Live Mint

7th Pay Commission bonanza; 5-fold increase in equity investment cap to 75 per cent under NPS likely

Photo: India.gov.in

4 July 2016: Close on the heels of the 7th Pay Commission recommendations being approved by the Union Cabinet, Government employees could soon have the option to invest up to 75 per cent of their contributions to the National Pension System (NPS) in equities.

This would be a five-fold jump in the maximum equity exposure allowed for government NPS. Existing investment guidelines for government employees mandate investment in equity to a maximum of 15 per cent with the floor level set at 5 per cent. The rest has to be invested in fixed-income securities including government securities and corporate bonds.

“We have submitted our proposal to the for the government for approval of two new life-cycle funds under NPS. We want these additional choices available to the government sector NPS also. The proposal is under very serious discussion in the government. We expect some clarity soon,” Chairman, Pension Fund Regulator and Development Authority (PFRDA), Hemant Contractor, told FeMoney.

The two new life-cycle fund proposed by PFRDA has been called the 'Aggressive life cycle fund' with equity allocation of 75 per cent at age 35 and 'Conservative life cycle fund' with equity allocation of 25 per cent at age 35. The only life cycle fund that PFRDA offers at present provides equity allocation of 50 per cent at age 35. The equity component in all these funds reduce with age with a proportionate increase in fixed income investment to ensure safety of retirement funds.

The 7th Pay Commission had recommended that the government, in consultation with the PFRDA, provide different life cycle investment options with different investment mix under NPS. “The Commission recommends that the investment choices under NPS be calibrated on a life-cycle approach and the choices be offered in a simple manner to that any lay person can understand and act accordingly,” the Commission had said.

All central government employees who have joined on or after April 1, 2004, have to mandatorily invest 10 per cent of their salary and dearness allowance to NPS to create a pension corpus.

The PFRDA constitued G N Bajpai Committee on NPS investment issues too had proposed giving wider options. The Bajpai Committee had said that new life cycle funds should be considered “keeping the core principle of 'decreasing risk appetite with increasing age” intact with lower and higher ceiling in equity to cater to both conservative subscriber and subscriber with a higher risk appetite.”

Justifying higher equity allocation, the Bajpai Committee had said, “ The design of the mandated investment norms in vogue today with predominance of low-risk fixed-income securities, that too mainly Government securities, has lower tolerance for risk, but a high tolerance level for lower returns especially in case of the Government Sector employees. This is unfair for investors who may need a combination of low risk with moderate returns or even higher returns with higher risks. This is especially true for those in the early stages of their saving curve. There can be no denying that in the pursuit of risk-free investment, investors are getting the short shrift and are therefore revealing a preference for physical assets.”

The panel had also suggested harmonisation of investment guidelines between private and Government sector NPS to bring about a more unified pension regime in the country.

Courtesy: Yahoo.com

WINNING STROKES: THINK DIFFERENT

Rolta India Ltd recommended at around Rs.63.50, last week today closed at Rs.67.50, after making a high of Rs.68.65 in the BSE. The next target for the stock is Rs.71, which will be achieved in this week. The first target of the scrip has been reached. 

Allahabad Bank Ltd recommended at Rs.54 and Rs.57, today made an intra-day high of Rs.75.85 before closing at Rs.75.35. The investors should do well to book some profits in the counter and hold the rest with a SL of Rs.71.60. 

Union Bank Ltd, which was recommended around Rs.123 and Rs.117.50, today made an intra-day high of Rs.137.45, before closing at Rs.134.90. The investors should book some profits as the both the short term targets of Rs.129 and Rs.132, has been achieved. 

Unitech Ltd today closed at Rs.6.40, after some corrections, during the last trading session. The next targets are Rs.7.5 and Rs.8.30, which will be reached by next week, as the momentum in the counter is very strong. Today the percentage of Deliverable Quantity to Traded Quantity was 29.90% which was quite good. 

There is no stopping of Vedanta Ltd, as the scrip closed at Rs.138.65, which making an intra-day high of Rs.139.55. 

My recently recommended J P Associates Ltd today touched Rs.9.27, in the BSE before closing at Rs.9.08. The investors should wait for the scrip to close above Rs.9.20, before taking fresh positions. However, it will reach Rs.12-13, within a short time. 

Millions of voters didn’t want Brexit. Why should they lose EU citizenship?

Anti-Brexit campaigners gather outside
the Houses of Parliament 

Friday 1 July 2016: The EU Council has spoken on Brexit, but what did it decide? Nothing. No compromise, no pick and choose for the UK, and no need to reform. The EU stays as it is and anyone who does not accept this is wrong and thrown out. It’s a huge blow for Nicola Sturgeon and the SNP, who seem to be the only ones passionately defending the European project.

The downgrading of Sturgeon’s attempt to engage negotiations with the EU to an internal “British issue” – Donald Tusk and most heads of states refused to talk to her – is the best example of how deeply the EU’s representatives overlooked the key message of the Brexit vote: that the citizens, and not nation states, are sovereign. The framing of Brexit as a British problem is misleading. The idea of the European Union’s founding fathers was to build a democracy beyond nations.

The Scottish case proves what the French sociologist Pierre Rosanvallon last April dubbed “the lie on which the European Union was built”. Speaking in Warsaw, he argued that we are all paying a high price for that founding lie, anchored in the treaty of Maastricht, that the EU is a union of states and of citizens. Citizens do not have much say in the EU, despite the fact that – no matter how often states claim otherwise – citizens are sovereign. There is no state-independent citizenship of the EU – not for Englanders, not for Scots, not for anybody: the union of citizens is a fallacy. As a result, British voters were hostages of the British government and the Tories’ Eurosceptic wing. Now that the UK is leaving, Brits will lose their citizenship of the EU. The result is not national pride, but a rush for Irish passports.

Brexit is just another example of today’s Animal Farm EU, where some citizens are more equal than others, above all the Germans, who have benefited most from the single market and the euro without sharing. Or even the Dutch, who believe they alone have the right to vote over the EU’s Ukraine policy. A political project can never function like this and politics is what Europe lacks most.

The treaties of the Levellers and the Putney Debates of 1647 elaborated on this concept of equal liberty, insisting that, within a political entity, all citizens must be treated equally in front of the law. The EU does not offer this.

The next European project must make a compelling offer to all European citizens, one that goes beyond nation-state affiliation. It must be based on the principle that all European citizens have political equality: in elections, before the law and in taxes. Cicero called this ius aequum. A government for the people and by the people. A nation state is not the only frame for a democracy.

It is what the EU’s founding fathers had in mind in postwar Europe: a real post-national democracy, with the autochthon, or tribal, European regions – Catalonia, Scotland, Moravia, Bavaria, Auvergne, Silesia or Brabant – as constitutional holders, to prevent the big nation states dominating the others, as Walter Hallstein, the first European president of the European commission, said in his inaugural speech in Rome in 1964.

The challenge is to define this European democracy and its parliamentary institutions, which, in contrast to the current trilogy of European council, commission and parliament, must be built on a real division of power: a legislative body that controls an executive body.

That such ideas sound like heresy in Brussels indicates just how far the EU has strayed from English political thinkers such as John Locke, Edmund Burke or Adam Smith. All were masterminds of modern parliamentary liberalism, and none could have imagined what appears self-evident in today’s EU: that a people can be governed by a single market, that deregulation is the goal and that anyone who proposes social controls of markets is a dangerous Marxist radical.

The question now is how to organise a Schumpeterian “constructive destruction” of the EU. Whenever in history sovereign citizens have embarked together on a political project, they have founded a republic based on that principle of political equality. This should be the vision and mission for Europe in the 21st century.

Courtesy: The Guardian

Buy Coal India Ltd at Rs.311

T: Rs.325 

SL: Rs.306

Triggers:

• After sluggish demand in April and May, June brought some good news for Coal India Ltd, as power plants started stocking fuel once again increasing coal off-take by 7-8%. According to sources, off-take for April-June period grew by 3% compared to the same period last year.
• The company recently announced signing two agreements with Solar Energy Corporation of India for implementation of solar power project in Madhya Pradesh. Coal India and Solar Energy Corporation of India (SECI) signed two agreements on 28 June 2016, for implementation of 200 megawatts (MW) solar power projects in Madhya Pradesh for the beneficial utilisation of solar power by Northern Coalfields (NCL) and South Eastern Coalfields (SECL) at an estimated cost of Rs.650 crore. NCL and SECL are subsidiaries of Coal India.
• There was a block deal of 500000 shares in Coal India at Rs.311.00 per share, valued at Rs.15.55 crore on BSE today. 
• Citigroup maintains a buy rating on Coal India with a 12-month target price of Rs.380. Round I of linkage auction concluded recently, and Round II to commence soon. Round I for sponge iron saw muted response while Round II for cement is likely to commence in a week.
• Coal India's consolidated net profit rose 0.2% to Rs 4247.93 crore on 0.1% fall in net sales to Rs 20759.45 crore. Coal India is an organized state-owned coal mining corporate. The Government of India holds 79.65% stake in Coal India (as per the shareholding pattern as on 31 March 2016).