Thursday, March 05, 2015

Jaypee Infratech Ltd (Rs.19.90), one of India’s leading Infrastructure companies, was recently granted 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.

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 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.

Wednesday, March 04, 2015

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.

Balasore Alloys buying Rohit Ferro-Tech's Jajpur unit for $164.5M
February 25, 2015: Balasore Alloys is one of the largest ferro alloys producers and suppliers in India.

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

The company has finalised a business transfer agreement with Rohit Ferro for acquisition of its alloys plant at Jajpur district in Odisha as a going concern on a slump sale basis.

Although the deal value was not disclosed as per a deal term sheet prepared by the legal advisors it is worth $164.5 million. However, a large part of this involves debt on the books of the unit. The quantum of equity component and actual cash payout to Rohit Ferro-Tech could not be ascertained.

Shares of Rohit Ferro closed the day at Rs 8.56 a piece, down 0.93 per cent on the BSE in flat Mumbai market. At this price it has a market cap of just under Rs 100 crore.

Balasore Alloys is one of the largest ferro alloys producers and suppliers in India. The company has captive mines in different locations like chromite ore mines in Sukinda Valley at Jajpur Road (Odisha), manganese ore nines in Hathoda (Madhya Pradesh).

Rohit Ferro-Tech, which is into ferro alloy manufacturing, has been facing several problems like non-availability of adequate quantities of raw materials, lower capacity utilisation and low absorption of overheads. Also, its Jajpur unit has been under severe financial stress owing to its high debt exposure.

Considering the prevalent unfavourable 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.

It also has units located at Bishnupur and Haldia in West Bengal.

Law firm Khaitan & Co advised Rohit Ferro-Tech on the sale of the Jajpur undertaking.

Courtesy: VCCircle

Tuesday, March 03, 2015

The BSE listed Geenera Agri Crop Ltd (BSE Code: 590133, T-group), which has a book value of Rs.76.45 and asset base of Rs.75.35 Cr, has a market cap of only Rs.3.79 Cr as the CMP of Rs.4.21. 

The Company is planning Agri & allied exports, agri related software Developments and Commodity trading to improve its revenues. Genera Agri Crop Ltd also concentrates on post –harvesting development.
Steel (Ferro-alloys, Sponge Iron, etc) and Arun Jaitley
Photo: Business Standard
The Indian steel sector is of top-class which is reflected by the ranking of six of Indian steel companies among the top 34 world-class steel companies as per the ranking of world steel dynamics. Unfortunately, this competitiveness is threatened by unrestrained dumping of steel into India, as the NDA Government looks at the other side, due to some strange reasons. 

Hike in the peak rate will not serve any purpose if the dumping of steel is not arrested. It is also surprising that the input cost duty on metallurgical coke is increased, carbon cess on coal is doubled, railway freight is increased, without any relief to the steel sector. Narendra Modi, government wants to kill the iron or steel sector or what? If they are bent on pursuing the policies of the UPA, what was the use of electing them? However, the Finance portal, wrote on 28 February, 2015 whose authenticity is yet to be ascertained  by this blog:
India will raise the import duty on steel by 5 percentage points from April 1, Finance Minister Arun Jaitley said on Saturday, to stem a flow of cheap supplies from China and Russia.
The Economic Times, 28 February, 2015 wrote:
A major thrust to housing construction in the budget this year, and to rural housing in particular will boost steel consumption at a time when domestic demand is low. In his budget speech the finance minister Arun Jaitley proposed a roof for each family. To fulfill the promise, some four crore houses have to be built in urban areas and another two crore houses have to come up in rural areas by 2022.
It is really strange to see, the analyst who are chanting growth mantra in this budget, is overlooking these factors. Also, it was not the big bang Budget that many players were expecting or are shouting now from their roof-tops. 

That Narendra Modi is just a bundle of media created hypes, has been proved once, again by the presentation of this low-profile-plain-vanilla Budget-2016; which has nothing much to offer except infrastructure push and some long term promises. It cannot be denied that the Budget-2016 lays significant emphasis on infrastructure — roads, power, ports, rail, airports and housing; which aims to kick-start the investment cycle in the medium term. On the flip side it will create more problems for the self-employed individuals, as the service tax shoots up.
FIIs and DIIs were net buyers
Yesterday (1 March, 2015), both the FIIs and DIIs turned out to be net buyers. After the huge volatility on Budget day, it was good to see Nifty closing above 8900, which was the highest close in last one month. 

This action has again kick-started the uptrend after corrective phase. The Premium (Paid) Members were therefore, asked to take long positions with a SL at 8700, in the report sent to them yesterday. The Nifty yesterday closed at 8956.75 up 54.90. 
GMR Infra drops after setting rights issue price at a discount
GMR Chhattisgarh Energy Limited
(“The Chhattisgarh Power Project”)
[Editor: The shares of GMR Infrastructure Ltd did not fall only because of keeping the Rights issue price at Rs.15, but also because from FY16, all services provided by government to business entities will be taxable, unless specifically exempted. Companies bidding for telecom spectrum and coal blocks might be in for a shock, as the Budget has proposed an enabling provision to allow service tax at 14% on “all services” provided by the government to business entities. “As of today, this will practically mean any service, including allocation of spectrum or mines, will attract service tax on the fee or royalty to be paid by companies,” says Sachin Menon, chief operating officer (tax), KPMG.
Meanwhile, you must have read the media reports that GMR Chhattisgarh Energy won the Talabira-1 coal block in Odisha for an estimated Rs.1,375 crore. The Odisha mine, earmarked for the power sector, has extractable reserves of 28.77 million tonnes. This coal mine, could be used for Kamalanga Energy Ltd (GKEL), too. Moreover, in addition to the FSA with Coal India, GKEL also has a Firm linkage of Coal Supplies for 500 MW, assuring fuel linkage to Kamalanga Thermal Power Plant to its full capacity. Total plant capacity is 1,400 MW, and currently, 1,050 MW is operational. Also, GMR Chhattisgarh Energy Limited (“The Chhattisgarh Power Project”) is developing 1370 MW Coal based, thermal Power Plant in the state of Chhattisgarh. Besides, a state of the art Rural BPO center created by Kakinada SEZ Pvt. Ltd. (KSEZ), a GMR Group Company, was inaugurated in January, 2015. The center has been conceived and built in collaboration with TATA Business Support Services Ltd. (TBSSL), one of the largest Domestic BPO Services companies in India.
It is to be  noted that dragged by higher finance cost, the company's net loss increased in December quarter to Rs.638.33 crore. Finance cost surged to Rs. 927.56 crore in the third quarter. Therefore, this Rights issue will provide the necessary cushion to the company. GMR Infrastructure Ltd has fixed Record Date as March 12, 2015 for the purpose of Rights Issue in the ratio of 3 Equity Share(s) for every 14 Equity Share(s) held as on Record Date. One should therefore, buy the shares of  GMR Infrastructure Ltd, at around Rs.17.70 and keep holding for a short term target of Rs.22. If you buy the shares of GMR Infrastructure Ltd, on or before 10 March, 2015, you are eligible for rights issue] 
March 2, 2015: GMR Infrastructure declined 2.4% to Rs 18.30 at 11:00 IST on BSE after the company has set a rights issue price of Rs 15 per share, which was at a discount of 18.03% to current ruling price. 

The company made the announcement before market hours today, 2 March 2015.

Meanwhile, the BSE Sensex was up 41.25 points, or 0.14%, to 29,402.75.

On BSE, so far 9.09 lakh shares were traded in the counter, compared with an average volume of 19.33 lakh shares in the past one quarter.

The stock hit a high of Rs 19 and a low of Rs 18.10 so far during the day. The stock hit a 52-week high of Rs 38.30 on 10 June 2014. The stock hit a 52-week low of Rs 15.35 on 16 December 2014.

The stock had outperformed the market over the past one month till 28 February 2015, rising 11.28% compared with 0.67% fall in the Sensex. The scrip had, however, underperformed the market in past one quarter, falling 3.35% as against Sensex's 2.33% rise.

The large-cap infrastructure firm has an equity capital of Rs.436.12 crore. Face value per share is Re.1.

GMR Infrastructure said that the board of directors of the company at its meeting held on 28 February 2015, has finalised the terms and conditions of rights issue. The rights issue size will be of Rs 1401.83 crore, consisting of 93.45 crore shares and will be allotted in the ratio of 3 shares for every 14 shares held, with issue price of Rs 15 per share.

The rights issue price of Rs 15 per share was at a discount of 18.03% to the current ruling price of Rs 18.30 per share.

GMR Infrastructure's consolidated net profit fell 44.7% to Rs 638.33 crore on 2.1% rise in total income to Rs 2842.76 crore in Q3 December 2014 over Q3 December 2013.

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Monday, March 02, 2015

Market Mantra
Western India Shipyard Ltd today hit another buyer freeze at Rs.3.28. There were some speculative news that the reputed Mahindra Group is thinking of taking a stake in its Parent Company, ABG Shipyard Ltd. What should the investors do at this stage? Join the Premium Group or trade through my recommended brokerage house with a minimum portfolio size of Rs.2 lakhs, to get suggestions during the market hours. 
Today's calls
(i) Buy GMR Infrastructure Ltd at Rs.17.50-17.85, for a target of Rs.22. You must have read the media reports that on the first day of auction, GMR Infrastructure Ltd bagged one coal mine along with Reliance Cement. With the government's push on the infrastructure sector, stocks like GMR Infrastructure Ltd are likely to do well. Moreover, The Hindu Businss Line of 1 March, 2015 wrote: 
GMR Infrastructure Ltd plans to raise Rs.1,400 crore through issue of equity shares on a rights basis. The company in a regulatory filing has informed BSE that the board of directors on February 28 had finalised the terms and conditions of the issue of equity shares having face value of Re.1 each on a rights basis to its existing shareholders as on the record date. 
This means those who will buy the shares now will be entitled to Rights Issue at a later date.  
(ii) Buy Jaiprakash Assoiates Ltd at Rs.25.10, for a short term target of Rs.27-32. You must have read the media inputs that Jaiprakash Associates pipped Bharat Aluminium Co Ltd (Balco), Hindalco Industries Ltd, Hindustan Zinc Ltd, Shree Cements Ltd and Ultratech Cement Ltd among others to secure the Mandla North mine. The company can use the material for its cement plant for captive power generation.
(iii) Buy Gtanjali Gems Ltd at Rs.50.50--51 for a target of Rs.62. The Economic Times, 28 February, 2015 wrote: Govt to introduce Indian-made gold coins to reduce demand for foreign coins and proposes to introduce gold monetisation schemes. (stocks like Gitanjali Gems, PC Jwellers would be the major benefiters). World Gold Council managing director-India Somasundaram PR said: "This announcement will have a healthy impact on the gold sector, but this can be realised only if trade is liberalised without artificial curbs through higher duties and other forms". The monetization scheme will drive orderly recycling and enhance transparency, benefiting millions of households and the macro economy, as it has the potential to translate gold savings into economic investments, Mr Somasundaram said.
Yesterday, I recommended IVRCL Ltd in facebook at around Rs.18, today the stock is now trading at Rs.19.80, up more than 9%.
Those who are holding Jaypee Infrastructure Ltd at around Rs.21, can continue to hold the same with a SL of Rs.19.70. I again reiterate, "Jaypee Infrastructure" is the cash cow of the J P Group. 
Rasoya Proteins Ltd is going great today and is now trading  near the the Upper Circuits (UC) in the BSE (at Re.0.44). Therefor, there are chances of its getting Freezed today at the UC. Keep an eye on the counter. 

Sunday, March 01, 2015

Mahindra eyes stake in ABG Shipyard
[EditorABG Shipyard Ltd holds 53.14% shares of Western India Shipyard Ltd (WISL, CMP: Rs.2.99); which means any increase in the share price of the former could have a direct bearing on the WISL. The text says: "Billionaire Anand Mahindra-led group has also been in discussions to acquire Pipavav Defence & Offshore Engineering, where he is pitched against the Munjals of Hero MotoCorp"]
MUMBAI, Feb 25, 2015: India's debt-laden, privately run shipbuilders are becoming M&A targets as big corporate houses seek to expand into red hot defence sector, where the government will spend $250 billion in the next decade to modernize the military.

The $17-billion Mahindra Group, which is eyeing acquisitions in the sector, is said to have initiated talks with ABG Shipyard to acquire a large strategic stake in the maker of naval ships and vessels. Billionaire Anand Mahindra-led group has also been in discussions to acquire Pipavav Defence & Offshore Engineering, where he is pitched against the Munjals of Hero MotoCorp.

Rishi Agarwal-promoted ABG, the country's largest ship builder with facilities in Gujarat and Goa, has a beaten down share price and is in the midst of a Rs.11,000-crore debt restructuring plan. Pune-based Bharat Forge is said to be another contender though its executive director Amit Kalyani denied on phone the reports about company's interest in ABG.

Spokespersons of Bharat Forge and Mahindra said the groups would not comment on market speculation.

An ABG official said the company was in discussions with investment bankers to raise equity and was looking at several options. Its chief financial officer Dhananjay Datar said the company cannot comment on rumours and will "come out with official conformation if any definite transaction takes place".

Agarwal, a member of the Ruia family, hit headlines for attempting to acquire Great Offshore a few years ago. 

He could explore private equity, QIP or follow-on offers among the options to bring fresh equity into the company. But it is unclear how a company with Rs 1,057-crore market capitalization and a huge debt would pull off fund raising on the bourses.

For the successful acquirer, a deal in ABG will boost defence play as the Mumbai-based company has a naval warship building licence. The company is said to be sitting on orders worth Rs 9,000 crore from Indian Navy and the Coast Guard. It usually takes 7-8 years for a new player to procure the licence and build the business.

The defence sector has attracted India Inc's big names from the Tatas to the Ambanis, with Prime Minister Narendra Modi's 'Make in India' pitch adding lustre to it. The impending acquisition of Pipavav could be the first big M&A deal in a sector with growing investor interest.

Saturday, February 28, 2015

Pre-budget expectation
~Mr. Hareesh V, Research Head, Geofin Comtrade Ltd
Photo: Fort Worth
The Union budget 2015-16 will be tabled in Lok Sabha by Honorable Finance Minister Mr. Arun Jaitley on Saturday, 28th February. There is a wide anticipation from various sectors that the government will take suitable steps to fire up the economic growth. Anyhow market participants are expecting a positive action, especially considering the interest of the public and traders and not just economics and policy in the budget. The major anticipation from the commodity sector is as follows.


Expectations are high in the market that the government may announce SEBI and FMC merger in the upcoming budget as recommended by BN Srikrishna, head of Financial Sector Legislative Reforms Commission. Earlier, in 2009, Raghuram Ranjan Committee on financial sector reforms had suggested consolidation of market regulation and supervision under SEBI. The FMC-SEBI merger is likely to bring convergence in regulation of various financial markets like securities, commodity and currency derivatives. It may also facilitate easier tracking of cross linkage of money flow into such markets. Once implemented, this will also pave way for the passage of the long pending FCRA amendment bill. There will be amendments in SCRA as well WRDA Acts too. Meanwhile, substantial savings in transaction costs for the client side are anticipated as brokers will not require separate setups for regulatory compliances.


Abolition or reduction of Commodities Transaction Tax - Introduction of CTT in the budget of 2013-14 had a dampening impact on commodities futures market which was already reeling under NSEL issues. Volumes have been affected severely since its introduction.


India, the world's largest consumer of gold, imports around 800-900 tonnes of gold annually. High imports had widened our current account deficit earlier, which prompted the government to take stringent measures to curb gold import to the country. Increasing customs duty and restricting gold importing agencies by executing various schemes were the major actions initiated by the government to curb consumption. Though consumption declined, it resulted in drying up of official gold imports and raised smuggling. Also, these measures adversely affected the gems and jewelry industry in India. The budget expectation of the gold and gem industry is largely on bringing down the import duty of gold from the present 10 percent to 2 percent, which is anticipated to boost the domestic consumption of the yellow metal. The industry body submitted their recommendation to the Union Finance Ministry requesting to formulate a comprehensive gold policy to make India a global jewellery hub. Excluding all the bilateral or multilateral free trade agreements with other countries is the another recommendation. This is proposed due to severe damages to the indigenous jewellery manufactures on account of cheap imports from Thailand under Free Trade Agreement. Also, re-introduction of the gold loan with interest rates at par with international rates, and setting up of notified zones are the other suggestions which are expected to boost the manufacturing of gold and jewellery, one of the sectors identified in the Make in India programme of Prime Minister Narendra Modi. Report says gold smuggling attempts through land and air have intensified massively during the period. World Gold Council earlier reported that one-third of the annual Indian gold demand is likely to be contributed by smuggled gold. The Council has observed that around 200 tonnes of gold would be supplied through unofficial channels, constituting around 28% of the country's gold demand in 2014. The low duty will reduce illegal gold imports and increase affordability of gold jewellery in the domestic market, enhancing the cost-competitiveness of gold jewelry manufacturing in the export market. The gem and jewellery sector in India accounted for almost 13 percent of exports in 2013-14 and employs about 3.5 million people. So, the government may hike the import duty on gold and silver jewellery to boost local manufacturing. It is anticipated to increase the duty on gold jewelry to 20 percent and silver jewellery to 25 percent from the present 15 percent. This move will protect the interest of small artisans and provide an incentive to the local jewellery manufacturers. Steps for giving support to the domestic diamond trading industry, especially to small diamond polishing units in India is also anticipated in the budget.

In the meantime, since the CAD narrowed significantly, by November 2014 RBI had scrapped the 80:20 scheme of gold import and in February 2015 the central bank had lifted ban on the import of gold coins and medallions and allowed banks to lend gold loan to jewelers.


Warehouse facilitate not only reduces the post harvest losses, but also prevent distress selling by many farmers, especially at the time peak production. Moreover, it can reduce the supply side bottlenecks such as unnecessary speculation and illegal hoarding that are directly threatening the farmers because most of the intermediaries are fetching eighty percent of prices that farmers were produced.


Monsoon vagaries have created havoc to the farmers while looking on to both extreme side of the situation like flood and drought. Hence, the requirement of agriculture insurance is an important concept to support the farmers if any natural disaster occurs.


Increasing the import duty on natural rubber is anticipated. With a view to protest the domestic growers against cheap import, the Finance Ministry is likely to increase the duty on natural rubber from the current 20 percent to 30 percent. Since the international rubber prices dropping, imports to India has been increased several folds which forcing domestic prices to multi year lows.


1. Cut in oilseed import duty
2. Increase in import duty on pulses
3. Increase in Minimum Support Prices of various farm commodities.
4. Exemption of CTT for processed agricultural commodities
5. Exemptions of Service Tax in services relating to agri-sectors like warehouse management services, laboratory testing etc.
6. Re-imposition of customs duty on crude oil
7. Increase in customs duty on copper and reduction in copper concentrates.
8. Imposition of export duty on Alumina and increase in basic customs duty on aluminium products
9. Increase in basic customs duty on zinc and lead ingots, alloys, scraps etc.

Courtesy: Equity Bulls
Gitanjali Gems Ltd: Buy
CMP: Rs.53.35

Till recently, Mehul C Choksi, the promoter & managing director of Gitanjali Gems, was easily India's best known jeweler. He had a host of brands (Nakshatra, Gilli, Asmi and d'Damas, among others), endorsed by a bevy of celebrities, in his portfolio.

While Gitanjali Gem's growth has been remarkable under Choksi, the problems started to arise in May 2013 when the Reserve Bank of India, or RBI, in an attempt to contain the current account deficit, imposed severe restrictions on the gold business. This caused a crash in share prices of jewellers and triggered margin calls. Choksi, who had mortgaged shares to lenders, saw the Gitanjali Gems stock fall ~90 per cent. 

Choksi has since attempted to change the business model of Gitanjali Gems, which does annual business of around Rs.10,000 crore (FY14 revenue is Rs.12,436 Cr), from domestic to greater focus on exports (he has already raised the contribution of exports to total revenues to 60% from 40% earlier), accompanied by a switch from gold to diamond jewellery. Apparel also figures in the plan: jewelry brands like Gilli and Diya have been extended to apparel. In addition, Gitanjali Gems is starting an "affordable jewellery segment and paying more attention to ultra HNIs (high networth individuals)", according to Choksi.

Meanwhile, Choksi started to implement cost cuts methodology. By the middle of last  year he has already reduced the workforce by 1,000 to 3,800 and has replaced expensive brand ambassadors with inexpensive ones. 

The RBI clampdown on gold imports, disallowing of gold loans to jewellers and the rise in import duties completely derailed the working capital cycle last year. In the earlier regime, it was able to 'fix' the purchase price after sale of goods had been effected [gold was available on loan, and its price was fixed after its sale], which meant it had a comfortable working capital cycle financed from within the trade. Post the clampdown, jewellery manufacturers need to pay the cost of gold on purchase and wait three to six months for realisations.

Today, Gitanjali Gems has more than 20 branded jewellery lines and over 1,250 retail outlets. In the last few years, the company has also expanded its reach outside India in the US China, and West Asia. 

(i) The government is expected to reduce the import duty from the current 10% to 2-5% percent in the budget. A cut in gold import duty will increase the gold volume in country, will reduce prices and minimize smuggling. Moreover, in its Budget proposals, the Commerce Ministry has suggested the Finance Minister to consider reduction in import duty on the yellow metal.

(ii) The government is trying to free the gold trade, as they no longer require restrictions on gold. They are flush with dollars and there is declining current account deficit, so captains of this sector expect the removal of gold curbs. 

(iii) In an announcement on February 18, 2015, Reserve Bank of India (RBI) eased the import restriction on gold. There have been great fall in the gold imports in the last few months, especially December 2014 and January 2015. Under the order issued by RBI, nominated banks are now permitted to import gold on consignment basis. All sale of gold domestically will, however, be against upfront payments. Banks are free to grant gold metal loans. Star and Premier Trading Houses (STH/PTH) can import gold on DP basis as per entitlement without any end use restrictions. While the import of gold coins and medallions will no longer be prohibited, pending further review, the restrictions on banks in selling gold coins and medallions are not being removed.  The industry sees positive development from the FM in this front. 

(iv) Nirmala Sitharaman, Minister for Commerce and Industry, had hinted last month that the gems and jewellery sector may get some incentives in the Budget. The sector employs about 3.5 million people and is expected grow to be $80-85 billion by 2018.  

(iv) The government is likely to announce special jewellery parks in line with SEZs in different parts of the country.

(vi) The industry thinks that the government will make a special effort to promote jewellery below 18 carats.

Financials: Gitanjali Gem Ltd.  group revenue jumped 25 percent year on year to $554.3 million (INR 34.5 billion) in the third quarter that ended on December 31. The company's expenses rose 30 percent to $520.4 million (INR 32.3 billion). Profit surged 90 percent to $15.4 million (INR 960 million).

Group diamond revenue contracted 26 percent to $164 million (INR 10.2 billion); however, jewelry segment sales jumped 58 percent to $406.4 million (INR 25.3 billion).  Revenue from other product sales fell  74 percent to $579,000  (INR 36 million). Intersegment revenue, which was deducted from the total, decreased  58 percent to $16.7 million  (INR 1 billion).

Sales  from Gitanjali's operations in India surged 143 percent to $265.6 million (INR  16.5 billion), while operations from outside of the country experienced  a sales decline of  14 percent  to $288.7 million (INR 18 billion).

Standalone revenue, which measured Gitanjali's sole operations without its subsidiaries,  jumped 39 percent year on year to $281.6 million  (INR 17.5 billion) in the third quarter. Profit improved to $6.3 million (INR 394 million) compared with $373,000 (INR  23.2 million) one year earlier.

The group's overdrawn position of working capital totaled $23.6 million (INR 1.5 billion) as of December 31. 

Friday, February 27, 2015

Jaypee Infratech Ltd: Buy
CMP: Rs.20.15
Jaypee Infratech (JPIN) was incorporated on 5 April 2007 as a Special Purpose Vehicle (SPV) for implementation, operation, and maintenance of 165 kilometer long 6-lane Access-Controlled Yamuna Expressway in the state of Uttar Pradesh connecting Noida and Agra. The company is undertaking the ribbon development on 6175 acres at five locations along the expressway for commercial, industrial, institutional, residential and recreational purposes. JPIN is a subsidiary of the Jaypee Group, a diversified infrastructure conglomerate in India with interests in Engineering & Construction, Power, Cement, Real Estate, Hospitality, Expressways, Sports & Education (not-for-profit).

(i) Jaypee Infratech Ltd, offers a unique synergistic business model of infrastructure development (Yamuna Expressway) and real estate value unlocking. Yamuna Expressway of length 165 km is the longest access-controlled six-lane BOT project connecting Agra to Greater Noida. Yamuna Expressway and surrounding land parcels offer value unlocking story with strong synergistic bearings.
(ii) Traffic growth at expressway should be good in the coming years. Expressway commenced operations in August 2012. Moreover, with Capex for Yamuna Expressway (YE) already over, JPIN is set to generate steady free cash flows (FCF) in the near future. 
(iii) Jaypee Infrateh Ltd (JPIN) offers an excellent play on sustainable value unlocking from huge real estate potential. In other words, JPIN offers a play on gradual value unlocking from long-term land assets.  JPIN is the cash cow of the JP Group. 
(iv) The UP government has now authorized Yamuna Expressway Industrial development Authority to sanction the annual increment in toll rates from April 1 every year. The expressway has three toll plazas located at Jewar (38 km), Mathura (94 km) and Agra (150 km). 
(iv) The Book value for JPIN stands at Rs.43.59. At the CMP of Rs.20.15, the stock is trading at significant discount to its book value. The P/E of the shares of the company is 10.31 against the industry average of 29.26. Hence, I maintain "BUY" on the scrip with immediate targets of Rs.25-31.
Market Mantra
Unitech ltd the upper circuits at Rs.21.20 and is now trading at Rs.21.15. The scrip is just below my first target of Rs.22.
Western India Shipyard today touched Rs.3.11 and is now trading at around Rs.3.06 on budget expectations for the shipping sector. The scrip has already given more than 50% returns in just 3 days. 
Today's Call: (i) Buy Jaypee Infrastructure Ltd at Rs.20.15-20.25, for a target of Rs.22-23. Today most of the stocks in the infrastructure space are moving up. Jaypee Infrastructure Ltd though is up around 3.60% but it is much below than its peers like J P Power Ltd (Rs.12.39, up 5.09%) or J P Associates Ltd (Rs.26.35 up 6.46%). Hence buy the scrip for a target above Rs.32. Infact I would suggest all of  you to buy J P Group stocks before the budget. 
(ii) Buy Gitanjali Gems Ltd at Rs.53, for a target of Rs.62. It is expected that the government is coming up with some sops for the gems and jewelry space, including reduction of import duty, which has created a havoc in the sector.
GRM Infrastructure Ltd recommended yesterday at around Rs.18, today touched Rs.19.35, up more than 6%. The infrastructure stocks are in focus before the budget, tomorrow. 
Sudar Industries Ltd recommended yesterday at around Rs.25.50-26, today hit the Upper Circuits at Rs.30.75. The fundamentsl of the company is good but the problem with Sudar Industries Ltd is that: more than 90% of the shares of the promoters are pledged and hence it makes this counter a high-risk-high-gain one. Therefore you should weigh your risk taking options before buying this scrip. The stock already near my first target of Rs.32.
High risk taking investors can buy in bulk Genera Agri Crop Ltd (BSE Code: 590133) at the CMP of Rs.4.59 for a target above Rs.10...........
The government could be coming up with some measures to support the domestic Steel (and Sponge Iron, Ferro-alloys, etc) sector. Hence do not forget to buy the shares of Rohit Ferro Tech Ltd (Rs.8.65) before the budget. In any case it will reach Rs.12. Hence this is a sure shot counter like Jaypee Infratech Ltd (Rs.20.30). 
My recommended Rolta Ltd today made a new 52-week of Rs.177.40 during the intra-day trade. The scrip is expected to cross Rs.200, after they secured such a massive order. It is to be noted that the consortium of the company and Bharat Electronics has secured a Rs.500 bln battlefield management system project from the defence ministry.
Rolta Ltd was recommended around Rs.67-67.50 on January 15, 2013. The scrip made a 52-week high today, i.e. 26 February, 2015 at Rs.161.10. In view of NDA Government's thrust on the defense and IT sectors, Rolta Ltd remains a top bet. 

The investors are suggested to buy the scrip on all declines or at least hold for a long term target of Rs.350-400.

Thursday, February 26, 2015

Western India Shipyard Ltd, an ABG Shipyard group company today hit the 2nd consecutive 20% buyer freeze. The company has a huge open space (sea facing) which can be used for commercial exploitation. Moreover, any positive development on the mining front will be directly proportional for the company. There were earlier media reports that the government of India might lower export duty for low grade iron ore fines. Once the iron ore exports start, the Mormugao port will become very active again. Western India Shipyard Limited (WISL), India's largest composite ship & rig repair facility in the private sector, is one of the world's advanced multi-dimensional and multi-purpose yard offering modern, streamlined, sophisticated ship & rig repair facilities and industrial services.WISL is strategically located at Mormugao Port Goa along the west coast of India. The scrip could touch Rs.4.5-5, in the short to medium term--stay invested. 
Today, two buy calls were initiated to the Premium Group members: (i) GMR Infrastructure Ltd at Rs.18 for a short term target of Rs.22 and (ii) Sudar Industries Ltd (formerly Sudar Garments Ltd; BSE Code:533332) at Rs.25-26 for a short term target of Rs.32. The first one was recommended on the optimism surrounding the infrastructure sector in the coming budget and the 2nd one was selected based on pure fundamentals. Also, there are hopes that the FM will bring in some measures to shore up the companies in the textile space, in the coming budget. In case of Sudar Industries Ltd the percentage of Deliverable Quantity to Traded Quantity was 50.40%. Meanwhile, there were media reports that GMR Ltd is likely to develop India's largest toy Hub in Kakinada. Kakinada SEZ Private Limited, a subsidiary company of GMR Infrastructure Limited provides land on lease including building and other facilities to different businesses in the ordinary course of its business. There were earlier reports in the media, that the finance ministry has sought public comments on far-reaching recommendations, such as tax breaks and lenient regulations for financial firms in the SEZs, made by the National Institute of Public Finance and Policy (NIPFP). The Business Today wrote on February 13, 2015: 
The Commerce Ministry has sought a re-look at the taxation regime for the special economic zones (SEZs) in the forthcoming Budget , scheduled to be presented on February 28, to boost exports and investments.
In its Budget proposal, the Commerce Ministry wants Finance Minister Arun Jaitley to discontinue minimum alternate tax (MAT) and dividend distribution tax (DDT) imposed on SEZ units and developers respectively, a senior official said. Earlier too, the Commerce and Industry had recommended the restoration of original exemption from MAT and DDT to SEZ developers and units, but the Finance Ministry has rejected that
The blue-chip real estate company, which is also into affordable housing, Unitech Ltd closed above the psychological level of Rs.18.40, after touching an intra-day high of Rs.18.75 in the BSE. The scrip would be moving towards Rs.22-24, in the coming days. 
The scrip of Rasoya Proteins Ltd, which though tanked at the end of the day, with good volume but the percentage of Deliverable Quantity to Traded Quantity was just 45.62%. The risk taking traders are therefore, are suggested not to jump to take fresh positions but look at opportunities for re-entry. 

Fundamentally speaking, Rasoya Proteins Ltd is a profit making entity which has embarked on a Rs.400 Cr expansion plan. According to The Times of India, 30th December, 2014, the Nagpur-based Rasoya Proteins' solvent extraction plant set to start production soon.

Rasoya Proteins Ltd posted net profit after taxes, minority interest and share of profit / (loss) of associates of Rs.34.105 mn for the quarter ended December 31, 2014 as compared to net profit of Rs.182.330 million for the quarter ended December 31, 2013.

Total Income has decreased from Rs.6735.609 mn for the quarter ended December 31, 2013 to Rs.1780.321 mn for the quarter ended December 31, 2014.

On standalone basis, the Company has posted a net profit of Rs.29.632 mn for the quarter ended December 31, 2014 as compared to net profit of Rs.125.138 million for the quarter ended December 31, 2013.

Total Income has decreased from Rs.4622.801 mn for the quarter ended December 31, 2013 to Rs.1391.905 million for the quarter ended December 31, 2014. 

However, if the GDR holders continuously press the sell button, then the retail investors could be in trouble; though for the time being it is more likely that the local operators are calling the shots.
Nitin Gadkari: Rs 10 lakh crore investment in highways, shipping by 2019
New Delhi, Feb 22 : Unveiling plans for Rs 10 lakh crore investment in highways and shipping sectors by 2019, Union Minister Nitin Gadkari today said the face of India’s basic infrastructure will be changed in five years. ”My endeavour is to do work worth over Rs 5 lakh crore in highways sector during my present tenure. Another Rs 5 lakh crore will be invested in the shipping sector taking the investments in both the crucial infrastructure ministries to Rs 10 lakh crore,” Road Transport, Highways and Shipping Minister Gadkari told PTI in an interview here today.

“I am sure this will change the face of the basic infrastructure in the five years as projects have already been fast-tracked while concerted efforts are on to remove all bottlenecks,” he added. Known as “flyover man from Maharashtra” for building a network of flyover in the state besides constructing the Mumbai-Pune Expressway during his stint as state’s PWD Minister, Gadkari said he was committed to overhauling the infrastructure of the capital as well as of the country and visible changes will be there.

“It is my commitment to overhaul infrastructure. My first duty is to build 30 km of roads a day and by the March-end this year, we will achieve the target of 15 km a day from 2 km a day in the previous regime. By March 2016, we will touch the target,” he said. He added that the focus was also on rolling out stalled projects, bringing equity, allotment of terminated schemes, streamlining work and fast-tracking clearances.

Exuding confidence that the infrastructure will get good allocation in the upcoming budget, he said: “funds have never been a problem in his Ministry as efforts are on to bring PPP investment, FDI, involve pension funds and attract foreign funds.” ”Our annual toll collection is Rs 10,000 crore and in two to three years it will go up to Rs 13,000 crore. If we securitise it for 15 years, we will get about Rs 1.5 lakh crore. ”Besides we have income from ports and Shipping Corporation in dollar terms. We are trying to get pension fund. NHAI can raise tax exempted bonds worth Rs 50,000 crore,” he said elaborating plans to generate funds.

Despite a plethora of problems in the first year the Ministry has initiated works worth Rs 1 lakh crore and the problems are now getting reduced, he said. On the anvil is converting Delhi-Meerut highways into 16-lanes, besides completing Delhi-Jaipur highways by June this year. ”We have approved ring road project for Delhi entailing Rs 6,000 crore investment. In a month work will begin,” he said.

He said that the Ministry is also conceptualising plans to build a road network on the pattern of those in advanced nations like US where people can drive 1,000 km in six hours. ”Can we create such express highway network? We are trying. It is in our vision,” he said. Apart from highways sector, the Ministry has ambitious plans to convert 101 rivers into waterways.