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Sunday, August 9, 2009

Nalwa Sons Investments Ltd:Its investments and future growth outlook

Scripscan:Nalwa Sons Investments Ltd

Story:A conglomerate of the O.P. Jindal group, NSIL is an attractive investment with some key developments in the offing. Called Jindal Strips till some years ago, NSIL has equity investments spanning a dozen group companies. After transferring the stainless steel assets to Jindal Stainless, NSIL has now become a non-banking finance company.The steel majors in the same group–JSW Steel and Jindal Stainless–are good investments when the steel cycle is bullish. These companies are pure steel producers and were optimum investment opportunities in the past two years when the steel industry was booming. However, with steel prices softening, pipe manufacturers like Jindal Saw, which use steel as a raw material, will gain. Jindal Saw should see a 40-50 per cent growth in profit in fiscal 2010. For an investor, it makes more sense to invest in NSIL, which holds a 20.5 per cent stake in Jindal Saw, as you can then hedge the risks of investing in a cyclical industry like steel.Also, there could be unlocking of shareholder value when group assets, which are spread across about 10 listed companies and several unlisted companies, are restructured. Reports suggest that as Sajjan and Ratan Jindal rationalise their share of the business in the group, it may eliminate the numerous cross-holdings in the group. This realignment of holdings could also lead to shifting of some of investments of NSIL and JSW Holdings, which are the only listed investment companies of the group.NSIL, with a capital of Rs 5.14 crore, has major holdings in two of the largest O.P. Jindal Group companies–2.5 per cent in JSW Steel and over 20 per cent in Jindal Saw. Some private equity analysts say the intrinsic value of NSIL should be Rs 1,500-2,000per share. The share quotes at Rs 585 on the exchange.Can be a hot buy in a raging bull market.

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