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Note: The artciles are not research reports but assimilation of information available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that I might have the dkiscussed companies in my portfolio and hence my point of view can be biased.Readers should consult registered consultants before making any investments

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Saturday, February 28, 2009


Traded in:Nse-bse

Story:Many times, bottom-fishing proves best strategy to outperform the markets when a particular scrip (with sound fundamentals intact) has crashed due to heavy selling.RMCL appears great opportunity to make quick bucks in short term (although it is a sound investment for medium-term as well) as few months ago, its share price had touched Rs 150/. Its share price had come down to 85-90 levels in tune with general fall in the market. However, subsequently, its share price crashed further as CITIGROUP (facing the crunch globally) sold its almost entire stake and recently, India Star of Mauritius (an FII) start selling lakhs of shares daily. Now, share price has almost bottomed out and should provide decent gains in short term as well as medium term.Promoted by Anil Agarwal, RMCL was formed after taking over the operations of three partnership firms. Company primarily manufactures polymer-based diversified packingand printing material and its products include MAP, polyolefin shrink film,three layer cast or blown lamination film, shrink film etc. It caters to FMCG, Pharmaceutical, metal and agro majors. It had come out with IPOin Dec 2005 to raise Rs 20 crs to expand its existing facilities in Daman. It is only manufacturer of MAP films in India which finds applications in a wide variety of food and pharma packaging.


1. Barrier films are used in milk and dairy products, spices, edible oil, induction jellies, lubricants
2. Functional films are used for spices, ready-to-eat food, tea, pharma, bulk drugs
3. MAP Films are for Bulk drugs, vegetables, fruits
4. Laminatetd structures for contraceptives, induction jellies, health supplement

RMCL has incurred capex of Rs 175 crs for venturing into the high margin non-bulk pharma packaging space currently dominated by Bilcare. Its expansion plan is totally dedicated to pharma packaging for various hygiene, drugs and medical products. Company plans to manufacture new products like PVC Coated blisters, aluminium-aluminium collapsible tubes, health supplements laminates and labels for pharma applications.It has set up two units, one in Uttaranchal plant with a capacity of 21,000 tonnes , is one of the largest facilities in the country and is eligible for 100% excise exemption for 10 years and 100% income tax exemption for 5 years. Daman unit is having capacity of 22150 tonnes. R&D facility has already been set up at its current location in Daman in technical collaboration with a European company. Operations from both these units have started recently and company will report very strong growth in topline and expansion in margins now onwards.Company plans to leverage its existing relationship with pharma majorsas it currently manufacturers soft blister films, fold cartons and MAP films used by pharma companies for bulk packaging. New product range is highly synergetic to the existing business of the company and is targetted to service existing customer base of the company. Pharma packaging business will contribute around 60% of total sales and will enjoy OPM of more than 25%.


A. Existing capacity ( 4 units):

Barrier films 13300 tonnes
Paper packaging 5700 tonnes
MAP Films 8200 tonnes
Others 6150 tonnes

B. New units:

PVdC Coated blister 10500 tonnes
Alu-alu 1800 tonnes
Collapsible tubes 3600 tonnes
Laminates 5670 tonnes
Printed shrink sleeves 4000 tonnes
Security films 2500 tonnes

Production at new facilities has already started and hence, now company is in a position to polevault its performance. Due to excise and income tax exemption at new unit, company has huge improvment in profit margins as well.Companies in peer group are enjoying much higher valuations.Several big HNIs, brokers are also stakeholder in the company.At rs 10 its one of the best buy under the present environment.A very safe and sound buy at present levels.

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Ingersoll-Rand (India) Ltd:-Move on to better bets

Scripscan:Ingersoll-Rand (India) Ltd
Traded on:Nse-bse

Story:Suddenly all Capital Goods manufacturers are seeing fresh order inflow dry-up and existing customers either asking for increase in credit period if not an outright postponement of machine deliveries.The latest corporate to join this parade is the local arm of the US compressor manufacturer Ingersoll Rand. The company produced soft than usual Q3 numbers some days back, and is now ready to effect the closure of its only remaining Air Solutions plant in Ahmedabad.Ingersoll-Rand (India) Ltd has informed BSE that to tide over the reduction in customer orders, the Board of Directors of the Company have at its meeting held on January 29, 2009 decided to curtail the production activity at the Ahmedabad factory and authorised the Managing Director to suitably reduce the number of working days in each month as is commensurate to meet the level of reduced orders.It is apparent Ingersoll Rand like all its capital goods peers has no idea when demand will come-back or even revive.Compressor producers like Atlas Copco and Elgi are going to feel the heat going forth, as from Q4 onwards there would be zero visibility on Revenues and Profits.So folks sell Ingersoll-Rand and move on to the bets which I have suggested in these blog.

Read notes to accounts or auditors' qualifications

Read notes to accounts or auditors' qualifications along with the December 2008 quarter results to the know the real health of companies

Following the December 2008 results, even the March 2009 and June 2009 quarterly results of Indian companies are expected to be discouraging. Though this is largely factored in by the market, what is still to be factored in is the quantum of de-growth in overall earning. A lot of uncertainty surrounds Indian companies' financial performance. At this juncture, it is crucial to read between the lines and carefully analyse the quarterly results of companies.

It is necessary to scrutinise statement of accounts for any change in accounting policies, auditor qualification and comments, treatment of exceptional items of expense and income, and contingent liabilities. For instance, losses arising from foreign exchange exposure due on volatility in exchange rates (rupee compared with the dollar). Ironically, the treatment given by different companies varies. A few companies have taken shelter under the Companies Act, 1956, while a few have applied different accounting standards (AS). Interestingly, a company has completely ignored the impact of foreign exchange exposure, saying the loss is not crystallised and, hence, not accounted for at this stage.

It is important to invest in companies with consistent accounting policies. Assign higher significance to companies that follow conservative accounting principles and believe in showing the real financial picture. Indeed, there are companies which are upfront about booking losses and give a straightforward treatment to such items in the books of accounts without any "ifs" and "buts". For instance, Balkrishna Industries, has booked any foreign exchange gain or loss due to foreign exchange difference between two reporting dates on various foreign currency accounts as per the AS-11 under, ‘The Effects of Changes in Foreign Exchange Rates'. As a matter of prudence, this has been shown after profit from core operational activities to show a true performance of its business operations.

Capital Market reviewed the December 2008 quarter results and attempted to spot instances that required special attention of investors. For this, quarterly results of over 500 companies published in newspapers were analysed and so also the notes to accounts that formed part of the quarterly results. Further, quarterly results filed with the stock exchanges (Bombay Stock Exchange and National Stock Exchange) were also checked. This was necessary as a few companies have published consolidated results as per the provision of Clause 41 of the amended listing agreement. Auditors have qualified quarterly results of some companies under "limited review" and also annual accounts. Thus, an exmination at the annual reports of such companies was necessary to depict a complete picture.

Auditor qualification in certain companies due to change in accounting policies is really significant. These companies could collapse due to weak financials. For some companies, the amount is a fraction of the profit or sales. However, in the present scenario of fragile market sentiments and bear rampage, misadventure of any magnitude could put the company in trouble.

Ashok Leyland:-Ashok Leyland (ALL) (Automobiles-LCVs/HCVs) reported a net profit of Rs 18.8 crore in the quarter ended December 2008, while its peer Tata Motors reported a record loss. Consider the notes to accounts published along with the results of ALL. The company has just managed to keep its head above the water thanks to change in accounting policies."Due to high volatility in financial markets including foreign exchange market, industry association has represented to the Institute of Chartered Accountants of India (ICAI) and the National Advisory Committee on Accounting Standard (NACAS) that the AS be modified on matching principle and, as a matter of prudence, to amortise unrealised exchange difference over the tenor of such monetary assets and liabilities. The issue is under consideration of the concerned authorities. Pending this, the company has adopted this amortisation principle for long-term monetary assets and liabilities from 01 April 2008," reads the notes to accounts. This has resulted in lower charge of Rs 34.7 crore and Rs 145.5 crore, respectively, for the quarter and nine months ended December 2008. This matter has been dealt with in the limited review report of the statutory auditors.Further, ALL adopted the principles of AS-30 Financial Instruments: Recognition and Measurement, with effect from 01 April 2008. Certain forward contracts have been designated as meeting the necessary criteria of "cash-flow hedges". Thus, gain and loss on effective cash-flow hedges are recognised in the ‘Hedge reserve account' till the underlying forecast transaction occurs. This is different from the earlier year method of reckoning all gains and losses on forward contract to the profit and loss (P&L) account. The profit would have been higher by Rs 14.0 crore and lower by Rs 33.5 crore, respectively, in the quarter and nine months ended December 2008 if the earlier practices had been followed of adjusting gain and profit on all forward contracts to the P&L account.The net impact on the profit would have been a loss of Rs 1.9 crore (Rs 1.8 crore plus Rs 14 crore minus Rs 34.7 crore) instead of the profit reported.

HT Media:-HT Media (Entertainment-Content Providers) changed its accounting policy in the period ended December 2008. The company has adjusted foreign exchange fluctuation on borrowing for acquisition of fixed assets against the cost of fixed assets instead of adjusting the same in the P&L account as followed earlier. This treatment complies with schedule VI to the Companies Act, 1956. This policy has resulted in pushing up the profit after tax by Rs 42 lakh in the quarter ended December 2008. The company reported profit after tax of Rs 7.8 crore in the quarter ended December 2008.

KPIT Cummins Infosystems:-KPIT Cummins Infosystems (Computers-Software-Medium/Small) entered into options contracts amounting to US$ 42.6 million for hedging its US dollar/euro revenue and was linked to the euro-US dollar cross-rate movement for the next four years. As per the investor update posted on its website, two of the three derivative contracts were completely knocked out at the beginning of October 2008. The mark to market (MTM) on the third contract was Rs 21.2 crore at the end of the quarter. This has not been taken to the P&L account in the December 2008 quarter. This MTM valuation of the balance portion of the partially knocked-out contract is provided by a bank. The Pune-based company reported a net profit of Rs 14.6 crore in the quarter ended December 2008 — down from Rs 17.1 crore in the corresponding quarter of the last fiscal."There is material uncertainty arising from future events mentioned in the option contract and rate over the period of 3.5 years. The liability under the option contracts is dependent on the euro/US dollar exchange rate. The company has significant exports in euro and, therefore, is not able to estimate the actual liability on these contracts and, therefore, no provision for the liability and loss on account of option contracts have been made in the books," says the company in its notes to accounts.The statutory auditors of KPIT Cummins Infosystems have qualified the quarterly results but have expressed their inability to quantify the loss. The auditors have qualified the annual accounts for the year ended March 2008 on the same issue. It is an exotic option contract with various terms and conditions. For instance, the rate of US dollar-rupee has been fixed for the entire period of the option. Under the option contract, the company is also liable to pay premium if the euro-US dollar cross-rate moves above the knock-in level on the fixing date (various specified dates on which the option contract would mature in part over a period of four-and-a-half years from the date of the balance sheet). Also, the obligation to pay premium in future would be waived if on any day during the tenure of the option contract, the euro-US dollar crossrate goes below a knock out level.If one strictly goes by the conservative accounting and deducts the loss of Rs 21.2 crore, KPIT Cummins Infosystems would dip in the red.

Punjab Chemicals & Crop Protection:-Punjab Chemicals & Crop Protection (Chemicals-Organic-Large) reported a net profit of Rs 2 crore in quarter ended December 2008 compared with a net profit Rs 7.5 crore in the December 2007 quarter. It has not made provision for loss arising out of its foreign currency exposure. According to the notes to account, the company has entered into a three-year derivative contract for sale of foreign currency starting from January 2008 to December 2010 to hedge its foreign currency exposure. Based on the MTM concept, the approximate loss is Rs 11.4 crore. Besides, the statutory auditors have qualified the quarterly results in their limited review report for the quarter ended December 2008. The management is of the view that in view of the significant uncertainties associated with the outstanding derivative contracts, whose ultimate outcome depends on future events, the exchange gain or loss, if any, can be accounted for in the P&L account only when it crystallises.Not only this, the statutory auditors have qualified the annual accounts for the year ended March 2008 and quarterly results for the period ended December 2008 for not make provision for diminution other than temporary in value of long-term investment amounting to Rs 1.8 crore. According to the board, the long-term investment is a strategic investment and, accordingly, no provision is considered necessary.

Ashapura Minechem:-Ashapura Minechem (Mining/Minerals) contracted structured foreign currency products from banks with maturity up to February 2013 to hedge its foreign currency exposures. The basic notional loss on account of hedging foreign currency exposure as converted to the MTM was Rs 247.8 crore end December 2008. The company has not accounted this notional loss in its books of accounts. ‘Since the foreign currency against the contracts is intended to be delivered on and around the specified dates, the said loss is not crystallised and, hence, not accounted for at this stage," says the extract from the notes to accounts. Ashapura Minechem reported a loss of Rs 77.8 crore in the quarter ended December 2008.

Tamil Nadu Newsprint & Papers:-Tamil Nadu Newsprint & Papers (Paper-Large) reported a net profit of Rs 21.2 crore in the quarter ended December 2008. However, the company has not taken into consideration the impact of changes in exchange rate pertaining to unhedged foreign currency assets and liabilities end December 2008. If the MTM of the unhedged position, based on closing exchange rate end December 2008, is taken into account, Tamil Nadu Newsprint & Papers would suffer a loss of Rs 2.2 crore.

South Asian Petrochem:-South Asian Petrochem (Petrochemicals-Polymers-Large) issued zero per cent unsecured foreign currency convertible bonds (FCCBs) aggregating US$ 20 million. It has not made any adjusted pertaining to realignment of the bond value as prescribed in the AS-11 on ‘The Effects of Changes in Foreign Exchange Rates'. The notes to accounts, published along with December 2008 quarter results, read as follows: "The company is of the view that the subject bonds may not ultimately be redeemed as the same may be convertible into equity shares within the assigned date and, hence, the effect of realignment of the bond value has not been considered and also not provided for premium on redemption of the said bonds." As per the terms and conditions of the FCCB offering, South Asian Petrochem has reset its FCCB conversion price from Rs 22 to Rs 17.01. It reported a loss of Rs 15.7 crore in the quarter ended December 2008.

Piramal Healthcare:-Piramal Healthcare (Pharmaceuticals - Indian - Bulk Drugs & Formln Lrg) follows the depreciation accounting policy to amortise brands acquired from third parties over their estimated economic life not exceeding 10 years. For certain brands acquired subsequent to end March 2008, it changed its accounting policy with effect from 01 April 2008 amortise the brands over their estimated economic life not exceeding 15 years. This is based on the management's view that the estimated economic life of these brands is a minimum 15 years.The amortisation for the quarter ended and nine months ended December 2008 would have been higher by Rs 1 crore and Rs 3 crore, respectively, if Piramal Healthcare had not changed its account policy. Subsequently, net profit would have been lower by Rs 96 lakh and Rs 2.7 crore, respectively, in the quarter and nine months. It posted net profit of Rs 38.6 crore in the quarter ended December 2008.

KLG Systel:-Gurgaon-based KLG Systel (Computers - Software-Medium/Small) has continued with its accounting policy of adjusting foreign exchange fluctuation on loans/liabilities for fixed assets as per the requirement of Schedule VI of the Companies Act, 1956, which is not in sync with AS Rules, 2006. The profit after tax would have been lower by Rs 1.5 crore if AS were applied. The statutory auditors have stated this in its limited review report. The company reported a net profit of Rs 8.3 crore in the quarter ended December 31, 2008.

Punj Lloyd:-The auditors of Punj Lloyd, (Construction-Civil/Turnkey-Large) invited attention to deduction made/amount withheld by some customers aggregating to Rs 47.4 crore and also work-in-progress (WIP) inventory of Rs 6.4 crore in their report for the quarter ended December 2008. As per the notes to accounts, the company management is taking appropriates steps to recover these deductions/withheld amounts and believes that these amounts are fairly stated.Further, one of the clients of Punj Lloyd has terminated its long-term contract with the company's wholly owned subsidiary and the company is in the process of recovering the cost overrun through dispute resolution provision specified in the contract. The client was issued advance payment and performance bonds with total value of Rs 217.6 crore (pound 28.5 million). The client has terminated the contract and called the bonds. The subsidiary has commenced legal proceedings against the client, seeking restitution of bonds, which the management feels is wrong. It is confident of recovery of bond amounts and has shown this amount under recoverable from the client. The company's auditors, without qualifying the accounts, made this a matter of emphasis in their report.Besides, Punj Lloyd has entered into an agreement to sell its Internet service provider (ISP) division (including all assets, liabilities, contract and licenses) to Citycom Networks. The completion of this transaction "awaits regulatory approvals". Despite this, the company has booked profit on sale of division. According to Punj Lloyd, the risks and rewards and operational control of the ISP division has been transferred to Citycom. Standalone net profit of Rs 12.6 crore and consolidated net profit of Rs 14.2 crore in the nine months ended December 2008 includes sale of assets, investment and business of the ISP division.Punj Lloyd reported a consolidated loss of Rs 226.6 crore in the quarter ended December 2008 as against a consolidated profit of Rs 91.6 crore in the quarter ended December 2007.

Kanoria Chemicals & Industries:-Kanoria Chemicals & Industries (Chlor-Alkali) reported a loss of Rs 4.4 crore in the quarter ended December 2008. The quantum of loss would have been substantially higher if it had not changed its accounting policy and wrote back interest and finance charges. It decided to utilise the balance in its securities premium account to make provision for premium payable on redemption of FCCBs net of tax in the quarter in accordance with Section 78 of the Companies Act, 1956. Due to this change, the interest and finance charges are lower by Rs 6.2 crore. This includes Rs 4-crore writeback of the earlier quarters. The end result is that the net loss is lower by Rs 4.1 crore in the December 2008 quarter.

Cosmo Films:-This is a typical case. In its notes to accounts, Cosmo Films (Packaging - BOPP Film) says: "The impact of foreign exchange fluctuation on the amounts outstanding in assets and liabilities end December 2008 has not been considered. This will be considered at the year end." Profit before tax would have been lower by Rs 1.3 crore if it had done the needful. The company reported a net profit of Rs 7.1 crore in the December 2008 quarter.

SPEL Semiconductor:-SPEL Semiconductor (Computers - Peripherals/Accessories) has stated in its notes to accounts: "The impact on restatement of external commercial borrowings pursuant to AS-11 will be provided for in the results for the year ending March 2009." Basically, it has not considered the effect in the quarter ended December 2008.

TVS Motor Company:-TVS Motor Company (Automobiles - Motorcycles / Mopeds) has not considered the impact on restatement of external commercial borrowings. It says this would be considered at the time of finalisation of accounts for the year ending March 2009.

Solectron EMS India:-Solectron EMS India (Miscellaneous-Medium/Small) has given reasons for slowdown in its revenue and also talked about its current quarter (Q4 March 2009). "The significant drop in the Q3 December 2008 revenue compared with Q2 September 2008 revenue is attributable to a major customer deciding to change their strategy from outsourcing the products from the company to manufacture them within their own facilities." Further, the notes to accounts state: "Due to the economic slowdown having affected the company's customers, the company expects a drop in Q4 March 2009 revenue compared with Q3 December 2008." Electron EMS India reported a sharp drop in sales to Rs 38.4 crore in the quarter ended December 2008 from Rs 80 crore in the December 2007 quarter.

Bilcare:-Bilcare (Packaging - Lamination / Processors - Large) has changed its accounting policy on fluctuations in foreign exchange rates related to borrowing in FCCBs for acquisition of fixed assets. The impact is adjusted in carrying cost of fixed assets from 1 April 2008 in compliance with Schedule VI of the Companies Act, 1956. However, the company has not given impact of the change in accounting policy on its profitability.

Navin Fluorine International:-Navin Fluorine International's (Chemicals - Organic - Large) auditors have expressed their inability to comment on the possibility of impairment with regard to its organic chemical plant at Dewas in Madhya Pradesh, which has been operating at a considerably reduced level owing to lack of market demand. The carrying value of the asset is Rs 9.1 crore. The company says "it is in the process of evaluating the possibility and the extent to which these assets can be put to effective use in its other projects currently under implementation. Only after completing this exercise of identification of the usable assets will the company be in a position to ascertain the value of their impairment". Navin Fluorine International reported a net profit of Rs 2.7 crore in the quarter ended December 2008.

Vijay Textiles:-Vijay Textiles' (Textiles - Processing) promoters have pledged 29.9% of the total paid-up equity capital with Axis Bank as collateral security for securing credit facilities enjoyed by the company. The promoters hold 45.01% equity stake in the company.

JCT:-JCT (Textiles - Composite/Cotton/Blended/Fabric-Large) a textile company, has continued to adjust the foreign currency exchange difference on amount borrowed for acquisition of fixed assets to the carrying cost of fixed assets. Though this complies with Schedule VI of Companies Act, 1956, it is in variance with AS-11. This has lowered its loss by Rs 3.2 crore in the quarter ended December 2008 (Rs 20.1 crore in the nine months ended December 2008). The company posted a loss of Rs 12 crore in the quarter ended December 2008.

Ciba India:-The statutory auditors of Ciba India (Chemicals-Speciality-Large) have referred to fixed assets on leased premises with carrying value of Rs 7.5 crore in their limited review of the results for the quarter ended December 2008. The lease of the premises expired in August 2008 and it is in negotiation for the extension of the lease. The company has not considered any asset impairment in the books of accounts. Ciba India reported a net profit of Rs 5.8 crore in the December 2008 quarter.

Aurobindo Pharma:-Aurobindo Pharma (Pharmaceuticals - Indian - Bulk Drugs & Formln Lrg) can be termed as out-of-the box example. The auditors have commented on non-provision of premium of Rs 272.2 crore on redemption of outstanding US$ 255.5 million zero coupon FCCBs. Now read the extract from notes to accounts in the quarter ended December 2008, which is very interesting and self-explanatory: "The management is of the opinion that the determination and crystallisation of the liability is dependent on the outcome of uncertain future events or actions, not wholly within the control of the company, and, therefore, the same has been considered as ‘contingent liability' as on 30 September 2008. Further, the management continues to hold the same view as on 31 December 2008." The conversion price of FCCBs — Rs 522.036 for the FCCB issue of US$ 60 million, Rs 1014.06 for the FCCB issue of US$ 150 million (tranche A) and Rs 665 for the FCCB issue of US$ 50 million (tranche B) — is way above the current market price of Rs 146 (2 February 2009).

Chambal Fertilisers & Chemicals:-The auditors of Chambal Fertilisers & Chemicals (Fertilizers-Nitrogenous/Phosphatic) have referred to the treatment of foreign exchange variation. According to the auditors it should be as per AS, while the company has opted for Schedule VI of the Companies Act, 1956. It has adjusted the foreign exchange fluctuation on borrowings towards acquisition of fixed assets to the cost of fixed assets instead of adjusting it to the P&L account. This has resulted in higher profit after tax by Rs 184.7 crore in the nine months ended December 2008 and Rs 53.4 crore in the quarter ended December 2008.

Aro Granite Industries:-Aro Granite Industries (Granite & Marble - Large) has not given effect to foreign exchange fluctuation. It mentions in its notes to account for the quarter ended December 31, 2008 that adjustment as required under AS-11 issued by the ICAI will be made at the end of the financial year.

Himatsingka Seide:-Himatsingka Seide (Textiles-Silk) has not provided for loss arising out of foreign exchange derivative contract with a bank. As per the company, "the determination of the liability is dependent on the occurrence of a future uncertain event and in view of this significant uncertainity no provision has been made in the accounts. The MTM loss indicated by the bank amounted to Rs 20.9 crore end December 2008". The company posted a loss of Rs 20.9 crore in the quarter ended December 2008.

Varun Shipping Company:-With effect from 01 April 2008, Varun Shipping Company (Shipping - Large) adopted the principles of AS-30 for accounting of derivatives, although not mandatory. As per the notes to the quarterly results, "during the current quarter, in respect of financial instruments that qualify for hedge accounting, an amount of Rs 52.3 crore has been accounted for as ‘Hedging reserve', which along with Rs 299.2 crore, amounts to Rs 351.6 crore for the six months ended September 2008. This will be ultimately recognised in the P&L account when the underlying hedged transaction occurs as against the earlier practice of recognising the same in the P&L account on revaluation at the end of each period".It is very much evident that Varun Shipping Company has adopted AS-30 just at the right time. As a result of the adoption, profit after tax stood at Rs 51.1 crore in the quarter ended December 2008 and at Rs 116.7 crore in the nine months ended December 2008 instead of a loss of Rs 1.2 crore in the quarter and a loss of Rs 234.9 crore in the nine months ended December 2008.

Hindustan Dorr Oliver:-The auditor's report of Hindustan Dorr Oliver (Engineering - Turnkey Services) for the year ended March 2008 contains a qualification that they are unable to express an opinion on the recoverability of overdue debts and retention money aggregating to Rs 5.8 crore (Rs 4 crore end December 2008). However, no provision has been made in the books of account. Hindustan Dorr Oliver reported a net profit of Rs 7.4 crore in the quarter ended December 2008.

Ramkrishna Forgings:-Foreign exchange loss on loan taken by Ramkrishna Forgings (Forgings-Medium/Small) for acquisition of fixed assets has been adjusted to carrying cost of fixed assets in compliance with Schedule VI of the Companies Act, 1956, which is not in sync with AS-11. The loss would have been higher by Rs 1.9 crore in the December 2008 quarter if the accounting treatment would have been as per AS-11. Ramkrishna Forgings reported a loss of Rs 2 crore in the December 2008 quarter.

Supreme Petrochem:-Supreme Petrochem (Petrochemicals - Polymers-Large) intends to provide MTM losses on outstanding foreign currency exposures considering the high volatility in foreign exchange market at the end of the accounting year. The foreign currency exposure end December 2008 quarter is valued at transaction rate instead of quarter-end rates. Thus, the company has not provided for foreign exchange loss of Rs 13.5 crore, which has resulted in understatement of loss. Supreme Petrochem reported a loss of Rs 46.6 crore in the quarter ended December 2008.

Asahi India Glass:-Due to the extreme volatility of the foreign exchange rates in the current year, Asahi India Glass (Glass-Sheet/Float) has not restated long-term foreign currency borrowings/liabilities at the closing rates end December 2008 in compliance with AS-11. Consequently, loss is understated by Rs 139.6 crore for the nine-month period. It reported a loss of Rs 43.5 crore in the nine months ended December 2008. Asahi India Glass would be taking care of adjustment related to foreign currency borrowings/liabilities at the close of the financial year: March 2009.

Indo Rama Synthetics (India):-Indo Rama Synthetics (India) (Textiles - Manmade - Polypropylene Filament Yarn) has continued to adjust the foreign exchange fluctuations on amounts borrowed for acquisition of imported fixed assets to the carrying cost of fixed assets in compliance with Schedule VI to the Companies Act, 1956, which is at variance to the treatment prescribed in AS-11. If Indo Rama Synthetics provides treatment as per AS–11, its net loss would have been higher by Rs.7.89 crore in the December 2008 quarter.Further as per the notes to the account, "the company has outstanding derivative instruments taken for hedging transaction undertaken for foreign currency related exposure on which the MTM loss stood at Rs 11.3 crore end December 2008. Pending adoption of AS-30, the company has not provided for the losses on MTM basis as per the announcement of the ICAI". Had the treatment as per the above announcement been followed, the net loss after tax would have increased by Rs 7.4 crore end December 2008 on account of the cumulative effect of the above treatment.

Great Eastern Shipping Company:-With effect from 1 April 2008, Great Eastern Shipping Company (Shipping-Large) adopted the principles enunciated in AS-30 for hedge accounting and recognition and measurement of derivatives. Earlier, the revaluation gain or loss on foreign currency loan liabilities was recognised in the P&L account, whereas the gain or loss on currency, interest rate and bunker derivatives was recognised on settlement. Consequent to the designation of foreign currency loan liabilities as hedging instruments, the profit is higher by Rs 62.6 crore and Rs 252.1 crore, respectively, in the quarter and nine months ended December 2008. The shipping major has reported a net profit of Rs 241 crore in the quarter ended December 31, 2008.

JBF Industries :-JBF Industries (Textiles - Manmade - PFY / PSF - From Chips) reported a higher profit after tax of Rs 14.7 crore in the quarter ended December 2008 on change in accounting policy. From 1 April 2008, the company decided to capitalise the foreign currency exchange difference on amount borrowed for acquisition of fixed assets to the carrying cost of fixed assets as stipulated in the Schedule VI to the Companies Act, 1956. The auditors have qualified the account on this count in their limited review report.Further,JBF Industries has entered into derivative contract to hedge exposure to foreign exchange and interest rate. The MTM loss stood at Rs 54.5 crore in the nine months ended December 2008, which has not been provided in the books. As per the company, "the loss is notional in nature and may be payable only if loss conditions are triggered after June 2010". This entitles a hit of Rs 36 lakh on profit after tax. The auditors have qualified the books of account for non-provision for the year ended March 2008 and quarters ended June 2008 and September 2008.

Tata Investment Corporation:-The net asset value of Tata Investment Corporation's (Finance-Investment/Others) equity share, as computed by the management, stood at Rs 550 per share end December 2008 compared with Rs 805 per share end March 2008 on the basis of the market value for quoted investments. The holding company reported net profit of Rs 34.9 crore (Rs 44.7 crore in the December 2007 quarter) and net sales of Rs 48.3 crore (Rs 52.3 crore) in the quarter ended December 2008.

Harrisons Malayalam:-The auditors of Harrisons Malayalam (Tea-Indian-Large) have stated their inability to express an opinion on the carrying amount of investments in unquoted shares of a wholly owned subsidiary company, Harrisons Malayalam Financial Services, whose networth is eroded. Harrisons Malayalam has extended advances to this subsidiary. Now, as per the company, "the unquoted investments in the wholly owned subsidiary are strategic and long-term in nature and there is no permanent diminution in the value of such investments. Further, the advances given to the said subsidiary are for strategic investments to be made by the said subsidiary. Accordingly, no provision is considered necessary in respect of such investments and advances".As per Harrisons Malayalam's annual report, equity investment in Harrisons Malayalam Financial Services stood at Rs 10 crore and loan and advances at Rs 211.5 crore end March 2008.

Looking ahead:-Looking at auditors' comments, changes in accounting policies, and management's reluctance to write off certain assets due to value erosion, the December 2008 quarter numbers do not instill much confidence. Many companies have specified quantum of losses pertaining to foreign exchange exposure, but have not adjusted this in the P&L account. These companies are planning to do this at the end of the current fiscal year. Many have just made a passing reference to this without quantifying the amount.For retail investors, it could be better to wait and watch for results for the financial year ending March 2009, wherever transparency in books of accounts is lacking. A tussle between the company management and auditors is expected while finalising the books for the year end. On the one hand, the company management would try to justify the accounting treatments that would keep the book of accounts in good shape. On the other hand, auditors are already under pressure because of the Satyam Computer Services fiasco. This clash could get reflected in higher number of auditor qualifications. This could also lead to more transparency in annual reports. Be prepared for negative surprises. To avoid shocking disclosures in future, read between the lines.


Thursday, February 26, 2009

Harrisons Malayalam Ltd:-My bet in the tea sector

Scripscan:Harrisons Malayalam Ltd
Traded in:Nse-bse

Story:Harrisons Malayalam Limited belonging from the RPG stable is India's largest producer of rubber, South India's largest cultivator of Tea and its the largest farmer of Pineapple in the region.The company is also a major processor of other agricultural produce from neighboring farmlands.The company also produces smaller quantities of a variety of other exotic horticultural crops like Areca nut, Banana, Cardamom, Cocoa, Coffee, Coconut, Pepper and Vanilla as well as limited quantities of Organic tea and Spices.The company is taking all efforts to carry out infilling in Tea Plantations and replanting in Rubber Plantations which will increase the yield levels in future.The outlook for tea prices looks promising and indications are that the price for Orthodox teas should be better as compared CTC grades.With the expected increase in tea prices and theprevailing high prices for rubber, the company will be able to perform well by increasing the volume through bought operations,in addition to improving crop from own plantations.The company has already corrected sharply from its highs and downside from these level looks minimal.When sugar moves how can tea lag behind?My call on GMR industries,my only bet in the sugar industries at 70rs few days ago at present is locked at 111rs thereby giving a return of nealy 60%.Am quite sure tea sector should give a good run too and thus I suggest Harrisons Malayalam to you guys.It should be prudent to note that these companies performs only when the sector performs,so looking at valuations or making valuation criterias would be of little help here.Buy it to make decent money in the months to come.

I can be reached

Operator"s paradise

Was reading guptaji"s impresive notes on some small counters.Lets share it with you folks.

1)Scripscan:Winsome Textile Industries Ltd

Story:This Chandigarh-based textile company makes synthetic/cotton yarn, an industry which is doing very badly now. On a gross block of Rs219 crore, the company has a debt of Rs180 crore, more than its annual turnover. In the first half of the year, it has already paid Rs7.5 crore as interest charges and has reported a loss of Rs3.75crore for the period. Annual interest liability may touch around Rs16 crore. How, and for how long, will a loss-making company service such a huge debt? However, inexplicable are the ways of operators. The scrip had touched a low of Rs11 on December 2008 but a Mumbai-based operator started mopping up the shares and the price has already trebled at a time when mighty promoters are biting the dust.

2)Scripscan:Aurionpro Solutions Ltd

Story:Despite good financial results, the share price has crashed from a high of Rs520 to Rs78. The reasons are not far to seek. The company has secured loans of Rs48 crore and unsecured loans of Rs5.43 crore. On the other side, there are unsecured loans/advances of Rs22 crore, Rs14 crore of which are supposed to be recovered in cash or kind. Why would a company have a secured borrowing for unsecured lending? Further, it has invested Rs68 crore in an international subsidiary which is supposed to do some analytics software business. Only time will tell how this business does and whether the shareholders gain from this investment.

3)Scripscan:RTS Power Corporation Ltd

Story:This is a small Kolkata-based company making transformers. At a time when well-established, much bigger and much older companies in this industry are going abegging at a PE ratio of 5-8, RTS is trading at 54x its FY08 EPS of Rs3. In the past, the Company had made big announcements about setting up a new transformer factory and also foray into the business of producing cables and conductors, although its turnover has not gone up significantly. A Mumbai (Borivali)-based operator is involved in ramping up the scrip; this operator is believed to be an expert in selling promoters holdings at a high price. He normally borrows a few lakh shares from the promoter and does circular trading on 15-20 terminals spread over different locations. Investors get tempted by huge volumes. They assume that some big news is on the way. However, investors do not look at the delivery ratio. Daily traded volumes in RTS have zoomed to two lakh shares but delivery ratios are abysmally low at 3%-5% which clearly indicates that scrip is being ramped up. Surprisingly, BSE has so far not put this scrip in T Category, while many scrips are transferred to T even when volumes may be 30,000-40,000 to shares. As on 31 March 2008, promoters stake came down 5%. Investors are advised not to believe any rumours and refrain from buying this scrip.

4)Scripscan:Maharashtra Polybutenes Ltd

Story:This company is a classic case of how promoters can misuse provisions of rehabilitation package. MPL makes polybutenes supplied to oil companies like BPCL and HPCL. This industry has not done too well so far and is unlikely to do any better in future. This is because polybutene manufacturers hands are tied. The customers are so big that they dictate the price and other terms. Similarly, the few suppliers of raw material are so big that they dictate terms of supply to polybutene manufacturers. MPL has a terrible track record partly due to its inefficiencies and partly due to poor management quality. No wonder, in the last six quarters, its aggregate performance led to losses. Its equity capital was Rs15.59 crore and when the Board for Industrial and Financial Reconstruction approved a 95% reduction in equity capital, it provided an opportunity to rig up the share price as most minority shareholders would be left with tiny quantities or fractions that cannot be sold. Its share price was Rs3 in March 2008. In a year when share prices have been crashing, MPL share price is nearly 1,600% up. Stories are circulating in the market that the companys land is worth a lot, although it does not have any surplus land. Operators are also spreading the word that giant oil companies are its customers. True, but then the full year of sales of MPL is less than one days sales of companies like BPCL and HPCL. Well, soon a toilet-paper supplier can claim that Vodafone is his client. Incredible, that the Mumbai-based operator is even trying to convince some portfolio managers about the investment-worthiness of MPL. Some of them may even fall for it.

Wednesday, February 25, 2009

Jyothy Laboratories Ltd:-Recession proof business and a fmcg play

Scripscan:Jyothy Laboratories Ltd
Traded in:Nse-bse

Story:Jyothy Laboratories manufactures and markets household products under segments like fabric care, insecticide and dishwash detergent. Some of its leading brands include Ujala, Maxo, Exo, Jeeva and Maya. A strong brand equity, wide distribution network and focus on rural markets have been the companys strengths.It has a strong sales force of 1,500 people servicing 2,500 distributors across India. Its flagship brand Ujala, a liquid fabric whitener, enjoys 69% market share in its category. Its insecticide brand Maxo has grown to command a 22.3% market share by value. The Ujala range of products in the fabric care segment comprises around half of the companys revenues; Maxo contributes another 34%, while Exo makes up 11%.The company also has joint ventures with CCL Products and Balajee Telebrands to market and distribute their respective products, viz coffee and dhoop (incense). Recently, the company acquired trademarks rights of More Light and Ruby in the fabric whitener category. More Light is being targeted at the lower end of the fabric whitener category, while Ujala will be positioned as a premium brand.The company is foraying into laundry services through its subsidiary, Jyothy Fabricare Services (JFSL). With an initial capex of Rs 40 crore, it is conducting a pilot launch of this service in the IT-BPO hub of Bangalore. While the service is not the first of its kind in India, the timing seems to be right, given rising urban prosperity and increasing incidence of double-income households.To increase profitability, the company is also shifting to in-house manufacturing against outsourcing.Jyothy Labs is a cash-rich zero-debt company with sound financials. Its gross sales have grown at compounded annual rate (CAGR) of 8% since 03 to reach Rs 465.5 crore in FY08. The net profit during the same period jumped over 39% to Rs 50 crore.With a lower tax burden, new product launches and increasing market share, the company aims to grow by 20% year-on-year to achieve a turnover of Rs 675 crore by 2010.Investors are hunting for recession proof solid stable businesses and jyothy labs being one of the very few may just satiate desires of investors fraternity.So folks buy it to get decent returns in the days and months to come.

I can be reached at:arunanalyst@rediffmail.

GMR Industries Ltd:-My bet in the sugar sector

Scripscan:GMR Industries Ltd
Traded in:Nse-bse

Story:GMR industries belonging from the GMR group owns and operates state-of-the-art integrated sugar complexes.The company also has a presence in the aviation segment where it leases its private aircrafts.Gmr is in is in the process of redefining itself as a sugarcane processor as against being a sugar manufacturer.This metamorphism will enable the company to look beyond sugar and will give the flexibility to adapt the changing market conditions.Sugar industry suffered severely with the impose of export ban when global prices were at high levels. By the time the ban was removed and its exports picked up,Global prices saw a down turn and crumbled by US$ 150 per tonne.But now sugar production is likely to fall by over 30% to 18 million tonnes in the current season from 26.4 million tonnes recorded during the corresponding period last year.Govt too has allowed import of raw sugar which speaks about the shortage.The Company also plans to increase the capacity of its Distillery at Sankili from the current 40 KLPD to 100 KLPD over a span of 2 to 3 years.The demand for sugar is expected to pick up and slowly scrips from the sectors have started outperforming the markets.Gmr havent had a great run in comparision to its peers as the scrip hasnt been noticed yet.With a pedigree like GMR and with sugar sector on an uptrend GMR may just move up a lot from the present prices.Buy it to mint money in the medium term.

Tuesday, February 24, 2009

Hindustan Dorr Oliver-Undervalued Infra Play

Scripscan:Hindustan Dorr Oliver
CMP Rs:26
Dividend:25 per cent

Story:Hindustan Dorr Oliver Limited (HDO) is an Indian EPC company having its core business activities in providing Engineered Solutions, technologies and EPC installations in Liquid-Solid Separation applications.Hindustan Dorr-Oliver Limited has a new face. HDO is now a wholly owned subsidiary of M/s. IVRCL Infrastructures and Projects Ltd., who are one of the leaders in Indian infrastructure industry, having core business focus on total Water Management including pumping, conveyance, treatment and distribution, national highways, roads, buildings, hydro-electric projects, power distribution, desalination, etc. IVRCL is also executing many projects on BOOT basis for various Government Departments of India.HDO has over decades established a unique track record and position as an extremely dynamic, totally reliable and component-engineering company, having a cutting edge of superior technologies to emerge among leading process equipment and plant engineering companies in India.Today, with every conceivable engineering skill at its disposal, HDO is engaged in an endless endeavor to upgrade, modify, adapt and invent products, processes and technologies to design, construct, install, erect and commission systems on complete EPC basis.At current price of 26 the stock is trading at just 3 times its forward earnings.Considering the pedigree quality and business outlook its a stock to own at every levels.

I can be reached at:arunanalyst@rediffmail.

Mold-Tek Technologies-Another misunderstood gem

Scripscan:Mold-Tek Technologies Ltd

Story:Mold-Tek Technologies is a KPO company mainly providing Structural Engineering services to clients in US.The company caters to the demand of topline clientele namely Steelway, Sunward, Schuff Steel, Etc.Now lets mean business,Imagine you buy a company for a marketcap of 7crs which gonna deliver a profit of 20crs in 2010-11.Thats enough for me to suggest the same since both pedigree quality as well as business model looks rock solid and robust.Now one reason which can be attributeed to the overlooking of the counter by investor fraternity can be the ongoing recession is U.S.But it would be prudent to note that mold tek caters cater to less than 0.01 % of the total demand.With the company entering into Europe, Australia and diversifying into RCC Design/Detailing,it further entails more confidence as the business model ultimately gets derisked and expands geographies.Its such an aggresive company adding employees,acquiring companies and clients at a rapid pace.Kpo is the next big thing and mold tek being one of the very few listed entrants is bound to get noticed very soon.Valuation wise at present rate of 23 its quoting at less than .4 times its fy10-11 eps of 55.A bear market certainly induces aversion to equities and investors only buy these stories after they have become multibaggers.So members here"s your chance to capitalise by opting for a company which posses the ability to make your money grow multifold in a couple of years time.

Cheviot Company Ltd:-Buy these gold digger

Scripscan:Cheviot Company Ltd

Story:Cheviot Company is one of the prime examples of a corporate that makes a lot of money from green fibre and sound investments.Harsh Vardhan Kanoria has created Gold out of an Industry, on which the Sun had literally set with the departure of the British in 1947. Today, with three processing units and a turnover exceeding Rs 179 crore, Cheviot Company makes more money out of Jute and its Corporate Investments, in a year, than most companies would ever make in their lifetime.While Kolkata may hold a different meaning for different people, for the current owners of Cheviot-the Kanoria family, the "Sun Never Set On Jute" even with the collapse of the British empire.The company sits upon a huge pile of reserves, which were placed at Rs 223 crores as of March 2008.The market capitalisation of Cheviot Company works out to just rs 55 crores based upon yesterdays closing price.This is an under-valuation as Cheviot carries Investments on its books which carry a market value of roughly Rs 60 crore. Half of these funds are deployed in prime blue chip stocks and the balance into liquid mutual funds.The Rs 180 crore Jute business that earns close to Rs 22 crore after tax is valued virtually free alongside the investments.Cheviot has a small Equity of Rs 4.5 crore (or 45 lakh shares out of which nearly 73 per cent is held by the promoters), leaving about 11.7 lakh shares spread amongst a huge number of shareholders.The Cheviot management because of high promoter stake has been very liberal on the dividend front over the past few years and the same trend should continue going forward too.Also with large reserves cheviot remains a prime bonus candidate and a bonus seems inevitable.The company is probably the most profitable producer, exporter of Jute sacking cloth and hessian, and blended jute fibre and textiles which are Exported to Western Nations and the Middle East that are once again getting rid of plastic and turning towards Green and Natural Fibres.Considering all the mentioned points buy these gold digger to make your future better and secure.

Some picks which are logic driven

Legendary investor Peter Lynch believes retail investors, through their hands-on experience, can make fairly smart investment decisions — at times smarter than those made by analysts and fund managers. An oft-quoted instance is that of Mr Lynch buying a company that makes lingerie, after his wife mentioned how popular the brand was with women. Stretch that logic, and retail investors at this point may want to own the stocks of some companies that supply goods for home interiors. With a booming real estate market and rising wealth levels, the increasing popularity of home interior products (either for new homes or for renovations) is likely to continue for a long time.The boom in real estate is there for everybody to see. The obvious winners are the builders and developers. But step inside a house and view it a la´ superman with his X-ray vision and you’ll see the things which go into converting that 500 or 1,000 square feet of carpet area into a full-fledged home.To start with, there are those switches and miniature circuit boards (MCB). Copper wires run like the nerves of human systems carrying power through your homes. Remove the carpets, and there are the floor tiles.

Every 1,000 square feet carpet area of space roughly requires 1,000 tiles. The house needs a fresh coat of paint once every four years. What is a house or an office without furniture — either wood or its substitute particle board?And all the woodwork requires adhesives. Home improvement is another big segment, which involves decorative bed sets among other textile items. Lights, fans, sanitary-ware items like commodes, kitchen sinks, granite slabs are the other inputs that go into transforming that 1,000 square or more feet of space into what we call ‘home’.

I looked at a preliminary list of around 104 stocks that were in the related business of home interiors. Of the lot, Havell’s India, Finolex Cables, Orient Ceramics, Pidilite and ICI seemed reasonably priced at current market prices.

1)Havell’s India is the number one maker of MCBs; the industry is growing at the rate of 20-30% per annum. The company doubled profits in last few years and witnessed a more than 20% growth in sales and profits in the first half of FY09.The company has ventured into new products in the past three years and is present in nine verticals including switches, wires, cables, fans, compact fluorescent lamps (CFLs) and bathroom fittings. It is the second-largest player in the wires and cables business operating in the low-tension space. At a forward P/E of 6-7, it is reasonably priced.

2)Finolex Cables, which is mainly in the business of electrical cables connecting the power transformers to your homes, is another company to look at.With increasing usage of white goods, the company is also getting into manufacturing high-voltage power cables.It has also got into making switches and expects revenues of Rs 200 crore over the next two years from the segment.It has close to Rs 150 crore of capital expenditure plans, including a greenfield facility of light-duty cables in Uttaranchal.

The wall and floor tiles business is roaring. It has shown a 15-20% growth over the past 2-3 years, thanks to the boom in construction/real estate sector. All the major players, including Kajaria Ceramics, Nitco Tiles, Orient Ceramics and Murudeshwar Ceramics, have managed a high growth.However, most of the players in the floor tiles segment are facing tough competition with growing popularity of vitrified tiles, imported marbles and wooden floors. None of the tile companies inspire much confidence as long-term holdings. Nitco Tiles has tried to match up with tastes of the market so far, and it imports vitrified tiles from China.Kajaria continues to bank on its market leadership in wall tiles. Orient Ceramics is growing at a much faster pace than in the past. Apparently, the company’s products have made inroads into many hotels coming up in the National Capital Region (NCR), which is sprucing up ahead of the forthcoming Commonwealth Games 2010.

3)ICI looks like an interesting study in paints. Over the years, it has been steadily shedding businesses like chemicals, fertilisers and explosives, in line with its parent’s restructuring efforts. It has accumulated around Rs 700 crore in cash on its books.The company has not made up its mind on what to do with the cash.But the stock does give the shareholder a downside protection level.What ICI does with its cash is key. ICI’s mainstay is now the paints business, which is doing quite well, aided by its own focus on driving growth and rising demand from the automotive and housing sectors.With downside protection and a growing paints business, the scrip can give positive returns from here onwards.

Then there is Welspun which focuses on home textiles such as bed linen, bath, kitchen and furnishing material. Pidilite Industries has been growing its business and profits in the past five years. But at current valuations, its stock looks decently priced. In short, there are more than obvious winners from the realty boom. With existing housing shortages and growing income levels, these companies are expected to grow at strong rates and in line with the real estate sector. The only party-pooper that one should worry about is high interest rates,which could affect affordability and ultimately slow down real estate growth

Innovative Foods:-Another hidden small cap gem

Scripscan:Innovative Foods

Story:Kochi based Innovative Foods is now a part of the Tata owned food chain, that includes Tata Tea, Tata Coffee and Tata Chemicals(Edible Salt), and represents a growing feeling that Ready To Eat (RTE) and Ready To Cook (RTC) foods will turn into big growth ideas over the next decade.Innovative Foods produces RTE and RTC foods under the "Sumeru" brand name which are being distributed through the Reliance Fresh Retail Distribution network through most of India. The Ready To Eat food includes flavours and products that suit regional demand, for instance "Sumeru" is selling North Indian Style Zeera, Aloo, Onion, Methi and Laccha paranthas in North India. It's Ready To Cook range includes "Sumeru" Vegetarian Spring Rolls, Samosa, Cutlets and other North Indian delicacies like Potato Wings. The response so far has been good, though this is likely to remain an Urban phenomena where change in lifestyle, double income earning adult households are common and apparent.Investment into Innovative Foods has been made through the Indian Hotels subsidiary Residency Foods and Beverages limited, which owns a 68 per cent stake. The erstwhile owners the Kochi based Amalgam group continue to hold another 25 per cent of the Equity taking the promoter stake to in excess of 93 per cent.Residency Foods and Beverages, has deeper pockets and a dug up interest in the foods segment, and consequently not only are the new promoters investing more into Innovative Foods they are upgrading the plant to World-Class and adding distribution, logistics, a broadened product range and brand building by leveraging the skills of the new management team. The distribution at some stage may also include "Sumeru" shelf space in the Food shops of the Indian Hotels chain, globally.The current market cap of Innovative Foods is a mere Rs 19 crores, the turnover for FY08 was at Rs 22 crore, but the scaling up possibilities and management skills of the Taj Group are unchallenged and limitless.This stock may turn out to be a multi-bagger in 2-3 years from now.Altogether a hidden gem for you guys to buy.

I can be reached

Glory Polyfilms Ltd:-No glory in these company

Scripscan:Glory Polyfilms Ltd
Traded in:Nse-bse

Story:Operator activities are still to be seen no matter how bad the environment be,Consider glory polyfilms a small manufacturer of packaging materials such as multi-layer films and flexible laminates.Couple of delhi based operators were busy pushing the counter hard even some days ago.The fall in present prices suggests that their accumulation has fizzled out and they have become active to exit the company in no time.The company has been outperforming the market for last several months since its ipo price of 54rs.To me the larger player should get the premium valuations and medium or small sized players should follow path with average valuations but here the case is entirely different.When experienced and bigger player like jindal poly,polyplex and cosmo flims are being hammered these glory ploy has been buzzing bigtime.The sector which the company operates are of commodity type and there are several established players giving stiff competition to these mentioned company.I would suggest investors to exit the counter and move on to the bigger players where there is lot of safety and which are runned by great pedigrees.A marketcap of over 200crs is no way justified for these company.Avoid buying craps and opt for better growth oriented mine suggested small caps to make a pot of money in the long run.

Barak Valley Cements Ltd:-A great buy in the cement sector

Scripscan:Barak Valley Cements Ltd
Traded in:Bse-nse

Story:Barak Valley Cements manufactures various grades of ordinary portland cement and portland pozzolana cement, and its main market is the north-eastern region of India.The Company has successfully completed the expansion of its Cement Capacity from 460 TPD to 750 TPD and Clinkerisation Capacity from 420 TPD to 600 TPD and the plant is presently running at its expanded capacity. This would certainly increase in future the quantum of production,turnover and profitability of the Company.With the present scenario of fast growing mass housing together with commercial and infrastructure activities in big cities and strong increasing demand of cement in small towns,the demand as well as consumption of quality cement in India is likely to record sustained and regular growth in the coming near future.The Indian Cement Industry, presently the 2nd largest producer of Cement in the world, is passing through a period of buoyant demand. The drivers of cement namely housing, infrastructure and industrial projects are poised to continue their growth trends and this augurs well for the cement industry. The Industry dynamics and regional structure indicates Eastern India as favorable destination for cement manufacturers. BVCL is a unique and an attractive player in the Cement Space in the Northeast region.The Company has been deriving significant benefits from its presence in North EastIndia, mainly Demand-supply scenario and several sops,being the only manufacturer of cement in Barak Valley, Aizwal and Agartala Region.The company at present level of 12 is giving a dividend yield of nearly 17%(last year it paid dividend of 2rs).So already you are getting double the interest of Fixed deposits if you have kept the same money in bank.The company should deliver earnings of 6rs in 2010 which discounts the present price of 12 by just 2 times 1 year forward earnings.Thus Buy Barak Valley Cements to reap rich benefits going forward.

Monday, February 23, 2009

Avantel Ltd:-A small cap gem

Scripscan: Avantel Ltd

Story:Established in 1990, Avantel Softech Limited (ASL) commenced activities like designing, developing and manufacturing components needed by the wireless industry. This was soon added to, with RF and Microwave sub-systems for Defence labs and leading PSUs. This was followed by a venture into Multi Access Rural Radio (MARR) systems for DoT. ASL also posses software development centre near Hyderabad and is expanding its infrastructure facilities including R&D test equipment for communication products, computing equipments and software. The company is also imprving its communicative facilities to undertake major projects on a round the clock development basis for its overseas clients and to enhance the number of its software personnel so as to be able to undertake more number of projects.Avantel has been working closely with Defence labs, Defence public sector undertakings, ISRO and Defence services since its inception and could establish a technology base to develop critical subsystems and systems. Avantel's focus areas are Electronic Warfare equipments in low intensity conflict like Jammers and Pre-initiators and satellite communication systems for Defence services. Avantel could successfully integrate multiple technologies in the areas of microwave products, digital signal processing and application software to offer customised solutions to Defence services.Avantel has developed new products for the mobile communications market and major orders are expected to flow during the coming years. It is also expecting prestigious orders from Defence establishments during the current year, which are likely to be continued for the next two years in the field of Electronic Warfare, RF / Microwave products and satellite communication.Avantel is also offering Satellite based services to meet the requirements of Defence services.The company is also expecting increase in the volume of exports during the current fiscal. Though the present numbers doesnt look exciting now but its set to change dramatically in the coming yrs.The orders are expected to flow steadily too thus a sharp increase in topline and bottomline in the coming yrs.Also with defense sector getting top priority from the govt its of one easy assume that these kinda companies would benefit the most.A good buy at present levels of 32rs.

IMP Powers Ltd-Very powerful

Scripscan-IMP Powers Ltd
Traded on-Bse-NSE

About the company:IMP Powers Limited was established in 1961 by Shri Ramniwas Dhoot and is now more than 45 years old Company having two very well established Manufacturing Units at MUMBAI & Silvassa manufacturing entire range of Electrical Measuring Instruments, Testing Equipments, distribution & Power Transformers and has got wide experience in this field.IMP is the only Company having this product conglomerate to give meters, testing equipments, Distribution & Power Transformers and OLTCs all under one Brand name.

Major Strenghts&Weekness:-


The Company is having vendor approval from almost all the State Electricity Boards, Major Turnkey contractor,consultants and it is the only transformer company in India to be in Zero Sales Tax Zone enjoying 15 year sales tax holiday.

The company topline clientele includes majors such as SIEMENS, L&T, IVRCL, Tata Power, Nagarjuna, Kalptaru, SPIC-SMO, Jyoti Structures and Reliance etc.

The company posses an impresive record of successfully conducting more than 100 Impulse tests & 50 short circuit tests on various rating transformers from 10KVAto 100MVA.

One of the major advantage of the company is manufacturing OLTC & RTCC itself, therefore, only the cost of price of the same is added to the transformer price and thus its prices are most competitive than any other manufacturer who has to add the purchase price of OLTC from other OLTC manufacturer.


Raw Materials -The main raw materials for manufacture of transformers are copper; CRGO, transformer oil and steel stampings are all commodities and hence are subject to fluctuations in prices.,which may affect margins.

Liquidity - Liquidity is always an issue because of delay in payments by SEBs.

High debt equity ratios.

With the manufacturing sector growing at a phenomenal rate the demand for Electronic digital measuring & indicating instruments has already crossed over 250 Crores,the Company has just kept its footsteps to this market aiming at a major market share.

Outlook-The opportunity provided by the power transmission and distribution Industry in India is immense.The scenario for the transformer industry is very promising; given the ongoing Government Power Program till 2012.Imp power being one of the oldest player in the power equipments segment with a product portfolio of various types of transformers, industrial meters and testing equipments in the sector will definitely benefit from the huge growth potential in the segment.Moreover, it's buoyant order book position gives the company an excellent platform for growth.

ProspectsThe transformer industry has been growing at approximately 25% CAGR for last two-three years and is expected to maintain this momentum for next 2-3 years. This growth will be driven predominantly by domestic market requirements and partly by exports to the outside world.

Conclusion:At the current market price of Rs 37, the stock is available at 3.1x FY10E earnings of Rs 13, which I feel is very attractive.I expect the stock to get re-rated as it starts delivering strong growth numbers over the next few quarters.There can be further scope for an upward revision in these estimates given the company's ability to win large projects.A great buy at present levels

I can be reached

Sunday, February 22, 2009

Eveready Industries:-A good bet

Scripscan:Eveready Industries
Traded in:Nse-bse

Introduction:Eveready Industries, a market leader in dry cell batteries and flashlights, is a good pick in the relatively defensive FMCG segment.its distribution network, the company has diversified into products like packed tea, insect repellents and compact fluorescent lamps (CFL).FMCG companies usually trade at a substantial premium to their book value. However, Eveready is currently valued at onefourth of its book value. The stock is thus attrac tive in view of its turnaround story.

Business:Incorporated in 1934, the company has traditionally been the manufacturer and marketer of carbon zinc batteries, rechargeable batteries, alkaline batteries and flashlights under the Eveready brand. Over the years, the company has emerged as the largest dry cell battery player with a market share of more than 50%, with the largest distribution networks across the country.The company witnessed a period of stagnation in growth since FY02 posting losses in the four intermittent years. Higher debt on the company’s books resulted in larger interest costs. The company currently has plans to leverage its national distribution network to market other FMCGs like packaged tea, insect repellents and CFL.In the case of its tea business, the company has not really aggressively advertised its four brands such as Tez, Jaago, Premium Gold and Classic, which are positioned for different consumer segments. The company’s insect repellent business is still relatively new. It has launched mosquito coils over the target markets across the country. The market share is varying between 1% and 4% in various states.

Growth strategy:Eveready has charted out an aggressive growth strategy by entering into new categories in the power source and lighting space. It is launching products in the alternative lighting space based on the energy-efficient LED (light emitting diode) technology. It is bullish on increasing its presence in the rural markets.The company expects the newly diversified product businesses to mature within a period of 2-3 years. It is also looking at doubling its turnover to Rs 1,600 crore by FY10 helped by its recently-launched ‘Ultima’ alkaline battery and ‘HomeLight’ LED cells. Eveready also has plans to enter into GLS (general lighting solutions) bulbs category.

Financials:The company’s consolidated net sales have stagnated in the last five years at an average of around Rs 777 crore. It has reported loss in three of the last five years with last two consecutive years posting negative growth. The company’s operations suffered due to high zinc costs in the last two years.Falling input prices has augured well for the company’s operations. However, a weak rupee has had an adverse impact on its margins. Lower demand in the battery business is likely to be a shortterm concern.Liquidation of its real-estate has also helped the company raise funds to pay off its debts. Consequently, the company has been able to generate profits in the last three consecutive quarters, an unprecedented feat since 2006.The company has a debt of Rs 320 crore on its books. It is yet to receive Rs 110 crore as balance amount on the sale of its real estate. These funds are likely to help the company tide over the debts that it has on its books.

Valuations:While Eveready’s new businesses are generating profits, they are likely to mature over the next couple of years. Their contribution to profits has become visible from the recent quarterly results. Besides, the new product launches are likely to increase volumes and profitability. The company’s stock has underperformed the Sensex, registering a fall of 70% over the last one year. At current valuations, it is good time to invest in the company, which is emerging from a bad phase, but is showing signs of a recovery.


Saturday, February 21, 2009

Sucess stories of entrepreneurs

I give a lot to individial management guys and even if a company has got nothing but is runned by aggresive visionary guys I tend to buy those stocks.I read a lot about entrepreneurs and their sucess stories.Presenting you some of stories which posses the potential to influence you folks.The companies are listed too so you can always buy them.

1)Company:Karuturi Global Ltd
Entrepreneur:Ramakrishna Karuturi

Story:Ramakrishna Karuturi, a mechanical engineer with MBA from the US, founded the company in 1995 as a 100% export-oriented unit in Bangalore.In 1999, he set up an internet auction portal by the name Rose to derive benefits of weeding out intermediaries through the use of the Internet. The same year, he set up a second production facility for roses near Bangalore taking the total size of his rose farms to 10 hectares.Roses for Valentines Day in 1998 earned him his first million. There was an order to supply 22 tons of roses to Europe, and the Air France flight that was to ship it, got cancelled. There was no flight to the destination after that. The buyers were not ready to wait, they would have switched to another supplier.I was the president of the flower association and bought up the entire stock that was lying there on the tarmac at a a throwaway price as the sellers were desperate to get rid of it. I drove a truck all the way to Chennai, and finally after some haggling, got all the stuff in a Lufthansa flight. That consignment alone netted me my first million, says Karuturi reminiscing in his Embassy Centre office in Bangalore. By 2003, the company was the countrys biggest producer of roses through efficient farming techniques.Producing in India was getting costlier and the customs regulations did not make matters any easier. So in 2003, he took a call. To be, or not to be in India, as he puts it. Finally, he decided to kickstart the next acres of farms in Ethiopia, a country which has been wooing investors and giving out lands at much cheaper rates. The wholly-owned subsidiary, Ethiopian Meadows Plc is now the epicentre of the groups activities.In 2006, he got his largest order from Tesco and that has been a terrific partnership. All the partnerships that we have had with the retail chains have endured, says Karuturi. He made the leap from just another producer to the worlds largest producer of roses last year when he acquired Dutch firm Sher Agencies for $69 million. That acquisition boosted the revenue of Karuturi, which is also into food processing and software services, to Rs 4 billion from a billion rupees. The capacity now grew to 650 million rose stems from 150 million with this single deal. That changed everything, says Karuturi.Growing at over 30% annually, the company acquired one lakh acres of land in May this year, and will soon add 6.5 lakh acres on long lease in Ethiopia for which he has garnered $250 million through debt and equity. This addition will put Karuturi on the fast track as a horticulture major.Here he plans to grow paddy, palm and sugarcane for both sugar and ethanol, while other crops such as sorghum and vegetables would be rotated to take advantage of the growing global demand for these commodities. We are going to process crude palm oil for trading in ethanol. With the global energy crisis getting serious, there are plans for tapping the big oil companies selling ethanol for blending with petrol, he says.When he is not dabbling in shipping roses to almost all of the worlds big chains, horticulture and his Bangalore-based internet connectivity business, he likes to go on long drives with his family. Through his business he has come across some interesting clients like a UK customer who wanted a heart-shaped bouquet made with 2,000 roses. Now that must have blown away his fianc, says Karuturi with a guffaw. Much in the same way as he has ridden over competition from around the world and come up trumps.I got my largest order in 2006 from Tesco. Since then, all the partnerships with the retail chains have endured.

2)Company:OK Play India Ltd
Entrepreneur:Rajan Handa

Story:The story of Rajan Handa, 48, is cast in plastic. From Aquapure Containers, a company he founded two decades ago to manufacture water tanks, to OK Play in 1993, Handa's been a visionary in the plastic utilities space. Be it the high-capacity bus seats in Delhi, signage or the ubiquitous phone booth, Handa is fantastic with plastic.So when Handa acquired UK-based OK Play in 1992, he had his task cut out-replace wood and metal with plastic. Today, with clients like Reliance, Airtel, Sony Ericsson and JCB in his kitty, the Rs 50-crore OK Play is poised to double its turnover next year.Handa's first venture, Aquapure Containers Ltd., was into plain-vanilla water tanks. At 22, with Rs 2 lakh from his father, he dove right in to a business where rotational moulding (of plastic) was the key. However, overhead water storage tanks, and that too made of plastic, were a low-margin game, and his business turned topsy-turvy."The market was not right for the product that we were manufacturing then and there was no awareness. I was in a Catch-22 situation-whether to earn money and invest in marketing and promotion, or to promote the company and get publicity for more orders," elaborates Handa.The entrepreneur's experience in rotomoulding saw him through the patchy phase when he acquired the OK Play and decided to play on in India the subsequent year. But the range of existing OK Play products were definitely ahead of their time. Things like plastic signages and plastic phone booths were akin to Tofflerian futurology in the-still-coming-to-terms-with-IT India.So Handa's vision was met with a dampener in 1999 when his company went into the notorious Bureau of Industrial and Financial Reconstruction (BIFR) list of the country's several red herrings.A strife-torn career and with little to lose, like many more discerning first-generation businessmen, Handa looked homeward for succour."My family members, friends, employees and other institutions with whom we had tied up, supported me. I think my ideas didn't work then because they were ahead of the times," confesses Handa. But then, India too was changing. With a bursting population and burgeoning GDP, demand was peaking. Plastic substitutes were a need of the hour and it was eventually time for OK Play to play.With over 16 years of experience in rotational plastic moulding, Handa struck back with variations on his plastic theme-moulded plastic signage, plastic telephone booths, roto-moulded bus seats and roto-moulded fuel tanks, for instance.The going, however, was not easy. finally, in 2001, the market took OK Play seriously for the first time. The company's foray into newer product lines paid off. Today, it is the largest manufacturer of moulded plastic products in the country with an extensive distribution network. "One thing that we always followed was not to compromise on quality. Today, the market abounds in cheap copies of the original," rues Handa.The company also has a role to play in social uplift. It bagged an order from the Haryana government last year to manufacture and distribute 150 tanks a day to people below the poverty line. Then, it has also chipped in for UNICEF during the 2004 tsunami by providing moulded plastic school tables and chairs to the affected areas.Today, the company offers a range of over 150 moulded plastic products catering to toys, playground equipment, children furniture, automobile parts, points of purchase materials, signage and water storage tank, among others. OK Play has recently formed an alliance with the US-based Solar Plastics Inc. to augment technical capabilities and offer high-quality products in the automotive sector.Considering the significant demand, Handa is now on expansion mode and is planning an investment of Rs 70 crore by setting up manufacturing facilities in Bawal, Haryana, for which the Haryana State Industrial Development Corporation (HSIDC) has allotted 15 acres of industrial land. The company has also been allotted five acres of industrial land by SIPCOT in Ranipet, Tamil Nadu, for setting up a manufacturing unit.

Tudor india:-Whats going on here?

Scripscan:Tudor India Ltd

Story:Tudor india, a battery manufacturer offlate has been buzzing on the bourses bigtime with its price quoting at its 52 week high.Some analyst group from mumbai are beleived to be busy in recomending the counter to their clients assigning fat targets of three figures.(Often analysts are hired by promoters to recomend their counter so that they themselves can exit the company)I called up the management only to get aware that there hasnt been anything happening which can bolster the scrip price.There are talks of the company getting delisted too but thats been there for the past several months and nothing has materilized yet.At present prices the company is atracting a marketcap of nearly 170crs which is horrendously high for the company which has been delivering pathetic numbers constitently.At best it can report an EPS of 2rs for the present fiscal which at present prices discounts it by a figure of as high as 34 times forward earnings.Its a pure operator game going on and investors having a penchant for these one are sure to burn their fingers later.It may well ouperform the markets and quote at new highs but once the game gets over the fall is there for you.Who knows maybe the game just got played in the gallery.So suggestion would be to avoid these sort of craps and concentarte on business which are available at great bargains.

Wednesday, February 18, 2009

5 companies that am researching on:-

I research about stocks 10-12 hours a day.Thought of sharing few ideas which on the face of it looks good.In near future I may suggest them with proper notes but for the moment contempt yourself with the prima facie.

1)Acrysil Ltd:A kitchen accesories and an export play.A recession proof business model having a mere equity of just 2 odd crores.Increased its topline and bottomline by several times in the last few years.Delivering gr8 numbers quarter after quarter,may just continue to outperform markets going forward.At present its quoting around 60 levels.

2)Solix technogies:A company managed by my gr8 guru MR "Sai gundavelli".His story is enough for one to opt for the penny stock quoting at 9 bucks.Now heres a real shocker for you folks,Biggies like wipro,oracle sells the product of these company having a market cap of just 5crs.Do I need to say more?

3)Castrol:The biggest beneficary of the sharp fall in crude prices which would help its margins to grow a hell lot from what it was earlier.The company has got 270 odd distributors servicing over 71,000 retail outlets.An aggresive leader with a great pedigree team waiting for you to make it a part of your core portfolio.

4)Riddhi Siddhi Gluco Biols Ltd:The company is countrys largest starch manufacturer and fastest growing starch company.The companys Uttaranchal plant has gone operational to give a huge releif to its margins.Riddhi is so aggresive and confident that it went on to buy a loss making unit of Hindusthan lever only to make it profitable in a matter of some months.Expanding capacities,super management,great business....what more do you want?

5)Elpro International Ltd:What interested me in elpro is its investments of about Rs 12.5 crore in Metlife India Insurance.Today the market price of the investment is estimated at Rs 350 crs if they were to sell their investments.Forget the business model or the rich lands that elpro posses,Insurance itself being an annuity business can rake in huge bounty of cash for the counter in the long run.Management has been adopting several ways to increase their stake in the company which entails more confidence.Its available at a marketcap of less than 100crs of yesterday"s closing price.

Tuesday, February 17, 2009

Several way of picking stocks

When one thinks of personal finance and investments,stock is the first thing which strikes the mind for quick accumulation of wealth.Its quite explicable the first love for stocks as stock market is the most exilerating place to delve in.If any one stands at the Flore of the stock markets and observe the scrolling up and down of stocks,he may feel of the anxiety surrounding in its environment.But on the financial merry-go-round rise,we all want to experience the ups without the downs.

Though,the world of stocks sounds interesting and pleasing,yet,it would be unwise to jump into these without any knowledge or understanding of the subject.Here i will explore the stock picking techniques based on the tested and pr oven theories of investments.The criteria for the selection of stocks are based on so many factors that it is nearly impossible to construct a formula that will predict success.There is no watertight system,which assure you arriving at a rate of interest that is greater than the markets overall average.

At this point,you may ask yourself why stock picking is so important.Why worry so much about it?Why spend hours doing it?The answer is simple-Wealth.A good stock picker can increase his personal wealth exemplarily.Mind you even your"s truly of 20 years has struggled a lot over the years in applying theories in stock picking.

Any stock is picked on the basis of company's creditability over a period of time.The quantitative aspects of a company,such as profits,balance sheets and report on its agm are easy enough to find.However one can never guess on the qualitative aspects of any company such as company's staffs,its competitive advantages,its reputation and so on?One ma find such sort of in formations highly intangible that cannot be measured.The divergence between tangible and intangible aspects of any company makes the task of stock picking highly off-centered and instinctive process.

Human element is considered to be highly irrational and when this human element gets involved into the volatile stock markets,it can turn out to be a highly dangerous place to play on the bourses.Emotions are an integral part of human element,which are highly unpredictable just like the bourses on the bourd.And when emotions becomes overbearing it can turn the confidence into fear.During such time,it is the emotions only which can either make one flourish or devastate depending upon his state of mind.

The credential of any company is known by its management and the way it functions.Ultimately,it is the people at the strategic decision making positions determines the fate of any company.A strong management plays a crucial factor in the success or failure of any company.To assessthe strength of management and company,investors can simply ask the standard five stuffs-Who,where,what,when and why.

Who is managing the company?
You must know about the management structure of the company and also must keep a close eye on the persons positioned in that structured.If you opt for a company which has got college dropout aspirants like me decent trouble awaits you for sure.Lolz,jokes apart.Do a proper research work about who is the companys ceo,cfo etc.The educational qualification and professional experiences of the people appointed at the highest position in the company must also be verified.The purpose behind is to see whether they are competent enough for the post held by them.

What the company does and how it makes money?
Another important factor to consider about while analyzing a company"s qualitative factors is it products and services.Whats the actually activity of a company?In other words,the company earns its profits from which source?Knowing how a company's activities will be profitable is fundamental to determining the worth of an investment.Try to explore the growth potential of the company.Any customary company in a great industry can provide a solid return,while in a poor industry it is likely to shrink your portfolio.Market share is another important factor.Assessing a company from a qualitative standpoint and determining whether you should invest in it are as important as looking at its sales and earnings.

Where the company stands?
An important factor to look upon-where the company is standing within the industry.Whether the company have any positive points that provides an edge to the company over its competitors.A company's fundamental helps one to pick up a good stock as it enables to find out the "intrinsic value of any company.If the intrinsic value is more than the current share price,your analysis is showing that the stock is worth more than its price and that makes sense to buy the stock.

When does the management take decision?
Now what is the philosophy of management?It is the style in which management intend to manage the company.You can get a glimpse of the style of management by looking at its past performances or going through the annual report"s MD&A section.If a company is showing negative results,one of the actions taken is management restructuring.Which is often termed as "change in management structure" due to poor results.But if a company performs continuously poor then its a warning sign to switch over to other investment options.Altough restructuring may be due to the poor performance of the management,it does not necessarily mean that the company is going through a downfall.Management restructuring might be a positive sign,which shows that the company is endeavouring hard to change its outlook for good cause.

Finally,an investor must investigate over the capabilities of managers appointed t decision making levels.Never hesitate to ask questions like does this person's the qualities you believe are needed to make someone a good manager for this company?Has he or she has been hired because of past successes and achievements or has he or she acquired the position through questionable means,such as self appointment after inheriting the company?

Merely knowing the strength of company and its management is not enough to guarantee a success in investing.There are certain theories to be looked upon before taking any final decision.If any decision is taken without considering these theories and principles,the investor may end up with losses.

Greater fool"s theory
A company is worth the sum of its discounted cash flows.This means that a company is worth all of its future profits added together.Though several analysts evaluate it by their own means but to me its just what got defined now.Now its up to you to go with me-the cool kid or not.Anyways the continuation of DCF-These future profits must be discounted to account for the time value of the money.One of the assumption of the DCF theory is that people are rational,nobody would buy a business for more than its future DCF.Since a stock represent ownership in a company,this assumption applies to the stock markets.Now you may ask,why do then stocks exhibit volatile movements as it doesn't make sense for stock price to fluctuate so much when the intrinsic value is not changing every minute?Well the the fact is that many people do not view stocks as represention of DCFs,but as trading vehicles.Misanthropists have labelled it as the "Greater fool"s theory".Since the profit on a trade is not determined by a company's value but about speculating whether you can sell it to some other investor(the fool.On the other hand,the trader would say that investors relying solely on fundamentals are leaving themselves on the mercy of the market instead of observing the trend and the tendencies.

Value investing:-
Stocks carrying strong fundamentals attract value investors the most.A strong fundamental may include earnings,dividends,book value and cash flow-that are selling at a bargain price,given their quality.Value investing doesn't mean just buying any stock that fall off and therefore seems"bargain basement priced".Vale investors have to do their homework and be confident that they are picking a company that is cheap given its high quality.A value investors considers the supremacy of a company to double up his profits.He believes in forseeing the company's potential rather making profit through trading.He does not care much about the external factors affecting the company but determines the worth of the underlying value of its assets.The factors like market volatility or day to day price fluctuations are not coherent to the company and therefore are not seen to have any effect on the value of the business in the long run.

While the efficient market hypothesis claims that prices are always reflecting all relevant information therefore are already showing the intrinsic worth of the companies,value investing relies on a premise that opposes that theory.Value investors also disagree with the principle that high beta necessarily translates into a dicey investment.A high beta does not scare off value investors.As long as they are confident in their intrinsic valuation,an increase in downside volatility may be a good thing.

Growth investing:-
Growth investing could be defined By contrasting it to value investing.Value investors look for stocks that are trading for less than their apparent worth.Growth investors focus on the future potential of a company,with much less emphasis on its present price.Unlike value investors,growth investors opt for companies which are trading higher than their intrinsic worth-but this is done with the belief that the company's intrinsic worth will grow and therefore will exceed their current valuations.Growth investors are concerned with a company's future growth potential,but there is no absolute formula for evaluating this potential.Growth investors use certain methods or criteria as a framework for their analysis,but these methods must be applied with a company's particular situation in mind.

The first question a growth investor should ask is whether the company,based on annual revenue,has been growing in the past.Projected 5 year growth rate of at least 15-20%,although 25% or more is ideal for investors like me.These projections are made by analysts,the company or other credible sources.When a growth investor sees an ideal growth projection,he or she before trusting this projection,must evaluate its creditability.This requires knowledge of the typical growth rates for different sizes of companies.There are many examples of companies with staggering growth in sales but less than stupendous gains in profits.High annual revenue growth is good,but if EPS has not increased proporitinately,its likely due to a decrease in profit margin.By putting side by side a company's present profit margins to its past profit margins and its competitor profit margins,a growth investor is able to gauge quite accurately whether or not management is controlling costs and revenues and maintaining margins.A good rule of thumb is that if a company surpasses its previous five year average of pre-tax profit margins as well as those of its industry,the company may be a good growth candidate.

Screening for value stocks
Altough value stocks can be located anywhere,they are often located in industries that have recently fallen on hard times or are currently facing market overreaction to a piece of news affecting the industry in the short term.Keep in mind that these are the guidelines used by value investors and these are not hard and fast rules.

Share price should be no more than 2/3 of intrinsic worth.
Look at companies with PE ratios at the lowest 10% of all equity securities.
PEG should be less than 1
Stock price should be no more than tangible book value
There should be no more debt than equity(D/E Ratio<1)
Current assets should be 2 times current liabilities
Dividend yield should be at least 2/3 of the long term AAA bond yield.
Earnings growth should be at least 8% per annum compounded over the last 8-10 years

The PE and PEG ratios
Value investing is not simply about investing in low PE stocks.Its just that stocks that are underrated will often reflect through a low PE ratio,which should simply provide a way to draw a distinction between companies within the same industry.Another popular gauge for valuing a company's intrinsic worth is the PEG ratio.It is calculated as stocks PE ratio divided by its projected year-over-year earnings growth rate.In other words,the ratio measures how cheap the stock is while taking into account its earnings growth.If the company's PEG ratio is less than 1,it is considered to be undervalued and is a growth pick for value investor.

An investor should also use margin of safety concept which is simply the practice of leaving room for error in the calculations of intrinsic worth.If the stocks intrinsic value were lower than that of what the investor estimates,the margin of safety should avert investor from paying too much of the stock.

In the nutshell,an investor should try to look at basic principles of investment and should not be carried away by biases like windfall gain but rather concentrate on the company's fundamentals,its management and other theories guiding towards right investment.

Remember that’s its your money at stake-so pick stocks wisely

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This blog does not share personal information with third parties nor do we store any information about your visit to this blog other than to analyze and optimize your content and reading experience through the use of cookies.You can turn off the use of cookies at anytime by changing your specific browser settings.This privacy policy is subject to change without notice and was last updated on 20.3.2013. If you have any questions, feel free to contact me directly here: Investment in equity shares has its own risks.Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that I consider reliable. I,however,do not vouch for the accuracy or the completeness thereof.This material is for personal information and am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.The stock price projections shown are not necessarily indicative of future price performance.The information herein, together with all estimates and forecasts, can change without notice.

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