Stocks And Dreams

'Biocides to reduce pesticide residual problems in agri commodities': Dhirendra Kumar

2012-01-15T12:54:00.000+05:30

[Business Standard, 15 Jan 2012]

Inspired by frequent bans on agri commodity exports to European countries due to their stringent pesticides residual norms, Delhi-based Camson Bio Technologies is developing Intragenic technology to help farmers sow one seed with many traits. The first of its kind of technology will help farmers reduce use of fertilizers and pesticides in addition to raise output, said Dhirendra Kumar, manaing director of Camson Bio Technologies, in an interview with Dilip Kumar Jha. Excerpts:

How will the intragenic technology benefit Indiam agriculture sector?
The issue of chemical pesticides spreading poison in the ground water has been attracting a lot of attention globally. We offer a solution with their biocides. We recently tied-up with Holland-based Wageningen University & Research Centre (WUR), the pioneer in cisgenic technology, which offers transfer of genes between two varieties. We are also studying this technology transfer at our research and development.

We have gone a step beyond and pioneered Intragenic Technology in India which enables transfer of genes between two related species. For example: From tomato to chilli. We are confident that we would be able to offer a superior variety of seed which is tolerant to adverse climatic conditions, pests, diseases and yet delivers bountiful yields in harmony with nature. Camson attracts the attention of many reputed research institutions for its pioneering work in cutting edge technology. The result of our unique research is visible in our product range and efficacy.

What makes Camson different from other players in agri technology market?
We are unique, being the only company that manufactures biocides from secondary metabolites obtained from microbes. These are eco-friendly and safe alternatives compared to the poisonous pesticides which drain the soil of beneficial microbes and pollute the land and water table. Our scientists have invented these products after nearly two decades of hard work.

We have initiated the process to patent these products and are all set to provide a safer option for a $45-billion global agro-chemical market. Scientists at Camson are working on path breaking research like intragenic, cisgenic, metagenomics, bioinformatics, marker assisted breeding, creating male sterile line, etc.,

Why biocides?
Deteriorating quality of land due to frequent use of fertiliser and chemicals has kept the yield of many agri commodities including oilseeds and pulses stagnant for the last several years. Shrinking of land bank has also been noticed due to rapid urbanisation resulting into rampant shift in sowing pattern depending upon the price. Many companies involved in seed business have developed technology within the commodity. But, we require to develop seeds to transfer technology in other commodities also for sustainable development in agri output.

However, in India the agro chemical market continues to grow at a modest pace as we are late to react on most of these issues. The government recently banned the sale of endosulfan after it had already been banned by over 80 countries in the past few years.

Nevertheless, a ban on such harmful poisonous products sends across encouraging signals to the agri-biotech industry, especially to companies offering bio-solutions. Camson is well placed with its biocides to replace such harmful pesticides and provide residue-free vegetables/fruits to the market.

Is awareness a major challenge of these biocides?
Alongwith the government, farmers are also looking for an alternative to use of fertiliser and pesticides. Today farmers have better awareness of the environment and health degradation caused by pesticides as they are the first to be impacted.

Farmers have begun to supplement their agro-needs with bio-options and in some cases completely replaced the use of chemical pesticides with biocides. Almost all farmers put some bio-product or the other to give strength to the growth of plants along with chemical inputs. They are always looking to reduce chemical input with bio solutions.

Today, atleast the cash crop farmers have become smart entrepreneurs through deploying modern methods of farming, expensive agri-inputs like hybrid seeds and capital intensive water management solutions like drip irrigation to harvest a better crop. He is willing to invest and experiment with new technology as he understands the need to safeguard the quality of soil and quality of life.

How has been the response of biocides in India ?
We have seen a great response for our products from farmers. Once a farmer experiments with our products and sees the benefits, he is hooked for life. There have been many instances when our products have worked even where chemical pesticides have been ineffective.

Insects develop faster resistance against chemical pesticides compared to our products where no resistance is developed. This is due to the fact that it is bio and with no residue remaining, new generation insects do not develop resistance. Farmer acceptability increases when they see product performing at their own farms, which is what our sales force does with numerous demonstrations.

Value investing wisdom with a margin of safety

2011-12-05T10:30:00.000+05:30

From www.fool.com By Dean Morel

Seth Klarman is one of the greatest value investors of all time. He has produced annual returns of 20% for Baupost Group since 1982; incredibly, with just one down year. Klarman makes investments with large “margins of safety” and is comfortable holding cash if opportunities are absent. His book Margin of Safety is rumoured to sit on Warren Buffett’s desk and in Karman’s words is the “intellectual successor to Intelligent Investor.”

Margin of Safety is the best and most accessible book on value investing I have read. Not long after reading it I was fortunate to ride on Klarman’s coat-tails in a multibagger investment in the PDL ‘BioPharma’ spin-off ‘Facet Biotech’. I hope you have the fortune to do both.

In this rough transcript of An Interview with Seth Klarman by Charlie Rose I try to present some of Klarman’s key insights into value investing. These are rough notes, that I hope encourage you to watch the whole interview. If you do, and are not interested in Klarman’s philanthropy, skip to the 20 minute mark.

Why was Benjamin Graham’s Security Analysis so profound?

Warren Buffett’s captured the idea in his 1984 article the Superinvestors of Graham-and-Doodsville. In that article he says value investing is like an inoculation, you either get it right away or not. It’s a gene, you have it or not. [This is why it is so important to know yourself and find the right investing path for you. There are many path to investing success and there is no point travelling down the value path if it is not in your genes.]

Everyone appreciates a bargain, but when markets are going down, most people over react and get scared. “My stock is going down, what am I going to do?” People are happy to get a bargain when they go shopping, but get scared when the sharemarket puts companies on sale.

For me it is natural, for others it is fighting human nature. When you find out about value investing, it’s like being let in on a little secret. A key insight is that stocks are fractional interests in businesses, not just prices of paper or ticks on a screen. So what does it matter if the price goes down a little or gyrates?

Analysis is the easy part

Investing is the intersection of economics and psychology. Economics, the valuation is not hard. The psychology takes experience and a long time to learn, it is the harder part.

What is the right psychological make-up.

· Be patient and disciplined.

· Don’t be greedy. Greed and leverage caused financial blow-ups.

· Balance arrogance and humility. Arrogant to buy when others are selling. You’re saying I know

more than everyone else, but you need the humility to understand you might be wrong.

Warren Buffett evolved through three phases (maybe even a fourth).

1. Buying cigar butts and getting the last few puffs for free.

2. Buying good companies at great prices.

3. Buying great companies at so so prices.

4. Buying weird securities from crappy businesses at better than market prices. For example

Buffett’s recent purchase of Bank of America special preferred stock .

Klarman thinks he’s still in phase one, but believes that a great phase to be stuck in.

I think Buffett is a better investor than me, because he has a better eye for great businesses.

Don’t focus on daily price gyrations

I don’t have a Bloomberg on my desk. I spends my time thinking big thoughts.

Liking bad times

We are making medium to long term investments. 3-5 years or longer. We are only interested in the gyrations so we can buy things cheaper. We provide liquidity when people want to sell things in a hurry. Our rhythm is opposite most of the market rhythms. Little guys get pulled in at exactly the wrong time, when the market is going higher and higher.

Be comfortable holding cash.

Is there any philosophy of timing?

Buying is easier, selling is hard. You can never know how bigger bargain you’ll get tomorrow. Try to leave more money to buy more. The dilemma is not figuring out what something is worth today, but finding out that the value is worth less tomorrow. All of a sudden a dollar is no longer worth a dollar; perhaps it is now worth $0.50.

Getting into bed with bad people

A lot of stocks are cheap for a reason. For example, management raping and pillaging a company; overpaying themselves, giving themselves free stock or options and hiring their brother-in-law.

A new value investor might think a stock is cheap fundamentally, but there is usually a reason why it is cheap and that’s often poor management.

Good management adds value.

Look at the management of a company. For example, perhaps the management is looking at their compensation packages, and not looking out for the shareholder.

Investment Industry

Put the clients first. Then you’ll do great. Relative performance and short term thinking is bad for investors. If someone said, “Seth makes me money by the end of the year.” Klarman would tell them to talk to someone else.

Pressures are so short term. Impossible to know where things will trade in a few months or even one year. Look 5-10 years out.

Investment industry adds no value. It matches the market as it is the market.

Agri ministry plans to launch new national seed mission

2011-11-20T11:40:00.001+05:30

By Anindita Dey [ Business Standard, 20 Nov 2011]

The ministry of agriculture has decided to come up with a national seed mission over and above all its existing seed policies. Officials said the seed sector needs a policy initiative which was expected to come with the new Seed Act 2004, replacing the current Seed Act 1966. However, this Bill is still building a consensus on the crucial issues of marketing only certified seeds and compensation to farmers for spurious seeds.

At present, both certified and non-certified seeds are available in the market, while the new Bill makes it mandatory for all seeds to be certified by the government before selling them in the market. Besides improving the production and availability of quality certified seeds in the domestic market, the new policy aims to make bigger dent into the internal market for exports by making Indian a hub. To this effect, the department intends to achieve a10 per cent market share in the total global export of seeds by 2020. For this, the mission has asked for an outlay of `10 crore to support international co-operation in seeds by implementing international treaties and schemes of seed export promotion.

Another significant objective is incentive-based assistance to support private sector seed producing organisations in collaboration with the public sector. For this purpose, a total of `45 crore has been sought as credit linked subsidy.The new National Seed Mission (NSM) has been proposed to the planning commission for a plan outlay of 3,773.4 crore for a period of five years starting 2011-12 of eleventh plan and run through the twelfth five-year plan. The allocation of the sixth year will be decided later. Officials explained that the difference between the existing schemes and the new mission is that it gives a incentive based focus to development of quality seeds which will be later certified and focused incentives to seed sector.

“At present, incentives for seed sector are spread across other agricultural schemes while polices are made by seed department. In the new mission, not only the seed department of the ministry of agriculture will handle the funds, part of the funds will be allocated to the state seed department so that the approach of the seed development will be bottoms up and less bureaucratic,” explained an official source. The other objectives of the mission to increase production of certified quality seeds, upgrade quality of farm saved seeds so as to produce 100 quintals of seed each year through farmers and thus to enhance the seed replacement rate (SRR). Besides, the mission proposes to establish aseed reserve at regional levels to met requirement during natural calamities and upgradation of public sector seed producing agencies.

The various components of the scheme for which funds have been sought include intervention at the seed planning stage, seed production level, increase SRR by promotion of variety replacement, intervention for seed infrastructure, quality control and interest subsidy for working capital for seed producing organisations. Formation of seed bank, transport subsidy on movement of seeds to north eastern states, application of biotechnology etc. are the some other interventions for seed promotion.

My Comment: This shows the shift towards seeds developed through biotechnology. Investing in companies like Camson Bio Technologies will yield good return coming years.

Farmers dump paddy for more profitable vegetables

2011-11-14T13:25:00.000+05:30

[Economic Times, 14 Nov 2011]

NEW DELHI: Sivadasan's five-acre farm used to be a solitary patch in Kerala's Palakkad district, with bitter gourd, cucumber, cow peas and lady's finger growing amid a landscape dotted with paddy fields and plantations of rubber and spices.

Just five years later, more than 1.45 lakh farmers in the southern state have joined Sivadasan and started growing vegetables, reflecting a palpable shift sweeping across the Indian countryside.

"Vegetables are always more profitable than paddy," says Sivadasan, echoing farmers across the country who are rapidly shifting from the safer but less profitable option of foodgrain to vegetables. The central agriculture ministry estimates that fruits and vegetable crops are four to eight times more profitable than other crops.

Improved irrigation, availability of disease-resistant hybrid seeds and new marketing channels are making it easier for farmers to shift to vegetables, which have been traditionally considered a riskier proposition because of shorter shelf life.

Rising incomes have led to a spurt in demand for fresh vegetables and the farmers have responded by increasing area under production more than 40% over the past decade, contributing to output that has more than doubled during this period. As a result, the total production of vegetables and fruits, increasing at 6% annually, now exceeds that of wheat, rice and corn.

"Vegetables are becoming the top choice of Indian farmers, especially those who live closer to metros and big towns," says HP Singh, deputy director general (horticulture) Indian Council of Agricultural Research, apex government-run body for farm research.

Vegetables and fruits already make up a third of the output in Himachal Pradesh, Orissa, West Bengal, Jammu & Kashmir, Bihar and the Northeast. Eastern India has become the largest supplier of green vegetables, contributing 45% of the total output, says DP Singh, deputy director at government-run National Horticulture Board.

With such rapid growth, new competitors are fast emerging to challenge the traditional centres such as Maharashtra for onions and Uttar Pradesh for potatoes. Madhya Pradesh, Rajasthan and Bihar are all challenging Maharashtra, for instance. So much so that, as a big exporter in Maharashtra lamented, this year all the export of onions to Bangladesh was from Bihar, which enjoys a critical locational advantage.

Farmers in Himachal Pradesh have started growing exotic vegetables that cater to more sophisticated palates. "A sizeable area in the state has started cultivation of vegetables that are of European and Oriental origin," says Manish K Sharma, associate professor of vegetable sciences at Dr YS Parmar University of Horticulture and Forestry, Nauni.

Jammu has likewise emerged as a prominent producer of tomatoes during the summer months. Area under vegetable crops has almost doubled in Jammu region during last five years, thanks to the National Horticulture Mission, says Tajinder Singh, president, J & K Kisan Council.

State-run institutions have contributed in a major way in a few other states as well. In Kerala, for instance, the Vegetable and Fruit Promotion Council Keralam, with farmers as majority shareholders, subsidises seeds and takes the produce to its own auction centres where wholesalers buy directly. "Every year we see an addition of 10,000 farmers.

We have farmers who cultivate on a few cents of land to some who cultivate in 5 acres,'' says N Vijayan, CEO of the Council. The organisation made a profit of Rs 157 crore last year and expects it to rise to Rs 180 crore this year. Kerala's state horticulture mission has also started promoting roof-top vegetable farming by 15,000 households in capital Thiruvananthapuram.

Last month, Punjab government announced a 50% subsidy on vegetable farming to boost production in the state. The centre's Rs 300-crore Vegetable Initiative proposes to encourage vegetable cultivation in the peri-urban areas around 29 state capitals and other cities with population of more than one million.

Vegetables are especially attractive to those with small farmland, like Swapan Mondol, who cultivates potatoes and tomatoes on two hectares in West Bengal's Hooghly district. Unlike row crops, vegetables don't need a minimum sized plot for optimum yields and profits. The most popular choices are potatoes, tomatoes, brinjal, lady's finger, cauliflower, peas and cabbage.

Increase in area under irrigation has allowed even tribal farmers to grow vegetables, says Sriram Gadhave, president, All India Vegetable Growers' Association. MG Shember, managing director of Nagpur-based Ankur Seeds, points out that availability of hybrid seeds allow farmers to shorten the crop cycle, grow a vegetable even in its off-season, get higher tonnage from the same field and better utilise crop inputs.

Some seeds even include labour-saving technology such as tomatoes that ripen at the same time to reduce the number of pickings.

By Nidhi Nath Srinivas (With inputs from Madhvi Sally, Sutanuka Ghosal, Jayashree Bhosale, PK Krishna Kumar)

Bangalore Water Summit seeks to stimulate innovation

2011-09-08T10:07:00.015+05:30

BS Reporter Bangalore September 08, 2011

Clean water is emerging as the next great challenge for the world’s corporations, governments and communities. At the same time, it also presents a significant business opportunity.

“Water infrastructure, waste water management and water purification are beginning to drive levels of investment comparable to renewable energy with approximately $22 trillion is expected to be spent on this sector worldwide over the next 20 years,” added A Ravindra, Advisor to Chief Minister & Chairman, Centre for Sustainable Development (CSD).

The CSD, Bangalore Water Supply & Sewerage Board (BWSSB), Karnataka Urban Water Supply and Drainage Board (KUWS&DB) and, Indian Water Works Association (IWWA), on Wednesday announced the first Bangalore World Water Summit 2012 (BWWS). The summit will focus on ‘Urban Water Management’.

This summit has been exclusively designed to create an interactive three-day forum to focus on, exchange thoughts and ideas, and showcase trends and technologies to sustain and improve water resources. It also aims for their efficient and effective management; thereby finding answers towards solving some of the pressing Indian and at large global issues relating to water.

The summit aims to focus on issues the water sector is facing, and focus in water resource and conservation; water quality and health; demand management; ICT for water and; effects of climate change on water.

“The water sector is entering a period of unprecedented change and now is the time to reinvent business models, embrace new technology, and develop the solutions to the world’s water issues,” added Ravindra.

The First Bangalore World Water Summit is being positioned to be important event in the water sector. The central aim is to generate “the Right Ideas for water security”. With one-third of the global population living in India and China by 2025, the region could face imminent water scarcity if adequate and sustainable water management initiatives are not implemented on a war footing.

The summit will be held in Bangalore from February 1-3, 2012.

[My comment: Investing in companies related to water theme will yield good return in the coming decade]

Asia's 200 Best Under A Billion Companies

2011-09-06T10:30:00.001+05:30

With 34 Indian companies making it to the Forbes "Asia's Best Under a Billion" list, up from only 20 last year, India was the biggest gainer as the region grew at "blistering rates" after the global economic crisis.

US Debt Crisis - 2012 is only for America

2011-08-11T10:22:00.002+05:30

Click the above title for the video

Quest for Short-term Returns will Affect Long-term Wealth Creation

2011-06-16T10:34:00.000+05:30

Devendra Nevgi , FOUNDER, PRINCIPAL PARTNER , Delta Global Partners
[Economic Times, 16 June 2011]

The legendary investor, Warren Buffet, was once asked: “What is the holding period of the stocks that you invest in?” His answer was “Forever”. But is the Wall Street following his footsteps? The answer is no. The average holding period of stocks listed on the NYSE (New York Stock Exchange) has plummeted from 100 months in 1960 to just six months in 2010. The average holding period of a high-frequency trader is estimated at 11 seconds.

Andrew Haldane, executive director for financial stability at Bureau of International Settlements (BIS), in an insightful speech on ‘shortermism’ in capital markets said: “Timelines of decision-making appears to have compressed. Pressure to deliver immediate results has intensified. Tenure patterns for some important decisions of our life (marriage, jobs, money) are on secular declines. Some have called this era as quarterly capitalism.”

In this note, we have taken some of the figures and quotes from Andrew's above-referred speech.

How true it is for India, especially in the context of the markets. We enjoy T-20, the instant form of cricket, more than the longer one, the Test cricket. Instant lotteries do brisk business in India. Ponzi schemes promising returns in multiple times in short spans still manage to garner funds in crores from gullible investors. That too after investors having burnt fingers in similar schemes several times in the last few decades. But investors can’t see through them as ‘shortermism’ and greed clouds the rationality of the decision.

In stock markets, speculators and arbitrageurs have investment horizon lasting only a few seconds. So many of the younger generation indulge in intra-day trading to make or lose capital of . 10,000 in stock markets. Money managers have to face the test of daily net asset values (NAV) and “relative” short-term performance, which drives the flows and assets under management. These managers are under the threat of redemptions driven by intermediaries or large investors based on poor daily, monthly or quarterly performance. This also reduces the stock holding span of the money manager drastically and increases the portfolio churn cost as well as risk for investors.

Sales and relationship teams of asset managers are more compensated for quantity of funds raised and less for the quality or time horizon of it. Many retail investors unknowingly commit the mistake of buying a stock or a fund and try to track the price of the stock or the NAV of the fund every time they get the newspaper in the morning from the next day.

A stock that has doubled in a month or tripled in two is the most discussed in meetings next to coffee vending machines or in the by-lanes of Dalal Street. Tips and short-term trading advices are implemented immediately, but the long-term ones are ignored. The fact that an investor holding on to an Infosys stock since its IPO in 1993 would have earned a return (CAGR) of close to 59% is never discussed. It doesn’t matter that the Sensex has returned around 17.6% (CAGR) since its inception in the late 1970s. And we have not even included dividends here.

As Benjamin Graham, who pioneered value investing in the 1930s, put it: “A serious investor is not likely to believe that the day-today or month-to-month fluctuations of the stock markets make him rich or poor.” Thank god, high frequency and ALGO trading was not in existence then. It would have shocked Graham.

Corporate leaders often focus more on quarterly earnings or go overboard (such as being lax on corporate governance or taking higher risks) to meet the quarterly earnings expectations of the analyst community. Short-term wealth creation through maximisation of stock market price seems to be the yardstick of success. Graham, Harvey and Rajagopal (2005) conducted a survey of 401 financial executives in the US. Some of the findings of the survey were startling — managers reject a project based on the fact that in the short-term it may take the quarterly earnings below the consensus expectations or 75% of the managers would give up economic value to smooth the earnings. Empirical evidence and estimates suggest that projects very often get rejected due use of higher discounting rate for future cash flows. For instance, a 10-year project is often discounted at 15 years' rate, making the net present value of the same negative. In a recent survey conducted by Price WaterhouseCoopers of 250 UK-based executives, it was concluded that many chose a sooner low return option rather than a later high return one.

In analyst meets post the quarterly earnings release, there are very few questions on the five or 10-year vision of the company. “How does the next quarter look?” is probably the most common one. Changes in the quarterly and short-term performances of corporates are some of the major inputs behind investment decision-making of asset managers and investors. Forecasting models are often changed based on quarterly earnings and don’t go beyond 2-3 years ahead.

The ‘shortermism’ in jobs and careers is well-known too. An offer which gives an employee a much lower current pay and higher stock options levered to the long-term prospects of the company will often be rejected by many though not all. Though risk appetite and financial commitments remain key issues here, employees switch jobs based on higher short-term compensations but a fuzzy long-term outlook.

A CFA (Chartered Financial Analyst) symposium of financial institutions in 2006 appropriately concluded: “The obsession with short-term results by investors, asset management firms and corporate managers collectively leads to unintended consequences, destroying long-term value, decreasing market efficiency, reducing investment returns and impending efforts to strengthen corporate governance.”

Such myopic approach will disturb the natural balance of saving today for investments tomorrow and result in inefficient allocation of resources within the economy due to mispricing of risk premiums. Long-term wealth creation and welfare will be novel concepts then.

Annual Reports can Help You Take Investment Bets

2011-06-13T10:31:00.002+05:30

By Prasanth Mahesh [Economic Times, 13 June 2011]

They show how strong cos are financially and the direction they are headed, details that can help you make investment decisions

    It is that time of the year when annual reports of companies find their way to investors by e-mail or snail mail, or both. Average investors, however, pay very little attention to the reports, which are the most critical and exhaustive communication from companies to their investors.
In most cases, the fat reports are disposed of with old papers, without being opened, or are consigned to the recycle bin if they are received by email. According to investment experts, this is not the best practice for smart investors.

    An annual report can tell you a lot about the company you have invested in: it will inform you how the company has performed in the year that has gone by and offer some idea about the direction it is headed in the coming year or near future.

    In fact, for an average investor, the annual report is the only financial document they get from the company. Sure, one would have tracked news about the company on television or newspaper. Or read experts’ take on the quarterly results of the company. However, the fact remains that the annual report is the only document the company is obliged to send to its shareholders.

    “It is said the devil is in the details. When one selects stocks, in addition to looking at the business, management and valuation, one needs to take a close look at things in the annual report — balance sheets, income statements and cash flow statements,” says Sudhakar Shanbhag, chief investment officer, Kotak Life Insurance.

DON'T GO BY PHYSICAL APPEARANCE

    Don’t be fooled by the design, look and feel of the annual report. Companies are free to design annual reports in any way they want. There is no rule that specifies the number of pages, the shape or size, or the quality of production and so on of an annual report. While some balance sheets are thick and run into hundreds of pages, some may be lean. Some companies come up with plain vanilla annual reports with simple fonts, and pay little attention to page layouts and displays, while others use high quality paper and lay great emphasis on design to ensure that the annual report is pleasing to their shareholders.

    “Investors should never get carried away by the physical appearance of the annual report. They should rather focus on how much information it contains,” says Daljeet Singh Kohli, head of research, Indianivesh Securities.

MANAGEMENT DISCUSSION AND ANALYSIS

    While you savour those glossy pages, don’t get enamoured by them. What matters are the details in the section where the company shares its views on the direction the company plans to take, how it thinks the year ahead is going to be for the industry and how the company will fare — in short, things that will help you make investment decisions.

    While there are some companies who do have meets and conference calls for analysts regularly, some others are not so forthcoming. For example, some multinational companies share very little with analysts even if they are kind enough to convene an analysts’meet.

    “It is a quick SWOT analysis and gives us everything at a glance,” says Pankaj Pandey, head of research, ICICIdirect.com. “If investors can read the previous year’s discussion together with this year’s, it would give them a better indication of the management's quality,” says Daljeet Kohli.
Also, it would be very difficult to get facts and figures about certain industries as there may be only a few companies operating in the sector. “If a company is into managing e-waste or recycling, one would have to rely even more on management discussions to get an idea about the company,” says Shetty.

FINANCIAL STATEMENTS, BALANCE SHEET

    Spend a few moments on this section, which contains the most crucial numbers concerning a company. It gives you clues about the financial strength of the company. Look at the profit and loss account and income statement, as they will tell you how the company is performing — how much profit the company is making and what its earning are from core operations.

    “In a rising interest rate scenario, I would look at the debt on the company’s books,” says Daljeet Kohli. This is because profitability is bound to come down when interest cost goes up. He also looks at things like international currency loans, as there is a currency risk involved there. Then there are things like inter-group loans, investments.

    “Things like debtor days (which indicates how quickly cash is being collected from debtors) and inventory are not there in the quarterly results. Hence, one needs to look at them carefully in the annual report,” says Sadanand Shetty.

    Another important item is loans and advances to group companies. “If a loan has been given to a subsidiary company without charging any interest, it has to be justified,” adds an analyst at a foreign brokerage house.

    Then there is the crucial auditors’ report. In most cases, it will state that the profit and loss account and balance sheet give a true and fair view. “However, look for cases where they tell you if the management has been up to things that are unacceptable or has used unethical accounting practices,” says Shetty.

    Then, there are notes to accounts. Take the example of BHEL. In its results declared this year, BHEL has modified the accounting policy on employee benefits in respect of leave liability. The impact due to the change in the accounting policy for the year 2010-11 is an increase in profit before tax of . 240.8 crore.

OTHER THINGS

    In the case of manufacturing companies, analysts find it interesting to take a look at the production figures and the installed capacity to get an idea of the efficiency level of the company. There are analysts who look at items like related party transactions, salaries and perks paid to key managerial employees and ESOPs issued during the year. One could look at the number of independent directors in the company, to understand the strength of its board, and check if there are some eminent personalities. Some annual reports also have a summary of the 10-year financial summary, which gives you the growth in income and profits at a glance.

    Lastly, the annual report also has the attendance slip form, which gives you the right to attend the annual general meeting (AGM) — making a trip to the AGM and see the top management in action would give you a first-hand experience of the company.

Indian equities: Tide may turn

2011-06-10T12:56:00.010+05:30

By Malini Bhutpa [Business Standard, 10 June 2011]

    THE last few weeks have seen several foreign brokerages hosting investment conferences in India to brainstorm on market outlook and trends. Global emerging market strategists across the board seem to be bearish on India. But that’s the official line. Off the record, most seem to believe the tide is set to turn for India later this year. So, don’t be surprised to see strategists going overweight on Indian equities over the next quarter or so.

    So far, other emerging markets such as Indonesia, China, Brazil and Russia have scored over India, but with oil expected to hold on to current levels, the tide may well turn for India. The immediate trigger, however, for the Indian markets will come with the peaking of interest rates. If this happens, Indian equities will surely be back in favour.

    While peaking of interest rates may act as an immediate trigger, there are several other factors that global strategists find “comforting”. First, valuations have moderated and now look close to fair value. The 18 per cent underperformance of the MSCI India versus Asia (ex-Japan) since early October has brought absolute and relative valuations close to average levels. In its strategy note, RBS says: “The MSCI India is now trading at 14.5x the 12-month-forward PE (10year average 14.2x), putting it at a 24 per cent premium to the MSCI Asia ex-Japan (down from 36 per cent at the end of 2010).” With headline inflation expected to stay close to 9 per cent till September, the risk of a negative surprise is limited. Also, with GDP growth slowing to 7.8 per cent in the last quarter of FY11 from 9.4 per cent a year earlier, it’s evident RBI’s actions are working. Consequently, RBS believes monetary policy tightening has run its course in India, and only 50 basis points rate rise is expected.

    MSCI India Bloomberg consensus EPS for FY12 has declined 5 per cent since the start of 2011, reflecting above concerns. Strategists believe MSCI India could outperform the region from now on, as the underperformance so far has priced in much of the macro concerns. It is widely perceived that India is probably ahead of the region in dealing with inflation and the resultant growth slowdown. However, if the upside could come in the form of a pick-up in reform momentum and an increase in natural gas production at KG-D6, a key downside could come in the form of a negative surprise from the US. What’s lacking in this market is conviction, not fundamentals.

Consumption story: In top gear

2011-06-09T10:32:00.000+05:30

[Business Standard, 9 June 2011]

THE fourth quarter GDP figures may have shown a marked slowdown across all segments of the economy, but consumption has kept the flag flying high. The Indian consumption story remains intact, despite rising prices and an imminent slowdown. Be it autos, consumer goods or lifestyle products, Indians are consuming a lot more of everything. This is forcing investors to take a relook at consumer companies, even as profits come under pressure.

India

’s consumption story is expected to stay on the growth track, with some adjustments in the short term. Private consumption is expected to grow at 14 per cent for the next three years. Ambit Capital believes this growth will be driven by three factors — inclusiveness, mix changes and specific consumption categories.

    On an overall basis, India’s consumption had a compounded annual growth rate (CAGR) of 14 per cent over FY05-10 and is expected to sustain. In the organised space, the revenue CAGR for food has been 16 per cent, whereas in the non-food staple space, it was about 8per cent.

    However, the non-food discretionary spend has witnessed 18 per cent growth between FY01 and FY10. While the share of staples will fall, discretionary and services segment will continue to outpace the overall growth. Both discretionary and services currently contribute 18 per cent and 42 per cent, respectively, of overall consumption.

    What will drive consumption is the ever-evolving profile of the Indian consumer. Despite the slowdown, categories such as packaged food, consumer durables, home care and lifestyle retailing, will continue to outpace the overall consumption growth, thanks to changes in consumer behaviour.

    Given that India will rank among the top 10 markets for most multinational consumer companies, the sector is nowhere near running out of steam. Focus of MNCs on the Indian markets will remain high, as India’s contribution to overall global consumption markets is expected to exceed 5 per cent by the end of decade and it will rank amongst the top 10 markets in several consumer categories.

    As is currently visible in the auto sector, select multinationals will emerge as challenger brands in key categories.

    Consumer indices have outperformed the broader Indian markets since April 2009 and the relative P/E valuations for consumer stocks are now back to their long-term levels of 1.5x markets.
Analysts believe these relative valuations can be sustained, considering the resilience seen in the Indian consumer market.

IRRIGATION: UNTAPPED POTENTIAL

2011-06-09T10:27:00.000+05:30

[Business Standard, 9 June 2011]

INDICUS ANALYTICS

    Harnessing water resources for farming is critical for increasing agricultural productivity. Undivided India had among the largest irrigated areas in the world, but with Partition a large part of the major canal systems went to Pakistan. Recognising the importance of large-scale development of irrigation facilities, more than half of all public expenditure on agriculture has been spent on irrigation alone. The net irrigated area expanded from 20.85 million hectares in 1950-51 to 62.29 million hectares in 2007-08. And the net sown area increased from 17.5 per cent to 44.2 per cent over the period.

    Expansion in irrigation had been most significant in the sixties, with an increase of about 2.3 per cent a year in net irrigated area. But this growth dropped significantly to 1.3 per cent a year in the nineties. Over the years, the dependence on groundwater for irrigation has increased. With little progress in new large-scale surface irrigation schemes, the increased availability of low-cost electric and diesel pumps and a lopsided power tariff policy, tube wells have been the dominant source of irrigation.

    A comparative analysis of states reveals the striking differences in irrigation facilities across the country. Punjab tops the list with about 98 per cent of its sown area being irrigated, an outcome of the focus on irrigation in the green revolution. Next in importance among the big states is Haryana, with about 84 per cent of its net sown area being irrigated. Uttar Pradesh is not far behind, in fact it holds the largest share of 21 per cent of total net irrigated area in the country. In Bihar, more than 60 per cent of the net area sown is irrigated, while irrigation covers more than half the net area sown in Tamil Nadu and West Bengal.

    At the other end, the proportion of net irrigated area to net area sown is less than 10 per cent in Assam, Jharkhand, Sikkim and Mizoram. Most of the north-eastern states in India are ranked low in terms of net irrigated area as a proportion of net sown area. There are many reasons for this — prevalent subsistence economy, limited population, being one of the wettest regions in the world and so on. However, with the growth of commercial agriculture and horticulture in this region, the need for irrigation facilities is being increasingly felt. Maharashtra stands out as a large state with less than 20 per cent of its net sown area under irrigation; there is also a vast intrastate disparity that needs to be corrected urgently, with the Vidarbha region far behind western Maharashtra. Karnataka and Chhattisgarh are the other two large states where the net irrigated area is less than onethird of the net area sown.

    Added to the problem of inadequate irrigation is the fact that the utilisation of irrigation potential has been dropping steadily in India with numerous problems afflicting the existing irrigation sources: poor maintenance to deal with wear and tear, depleting water table, inadequate power for lifting device, nonavailability of water, diversion of water for non-agricultural purposes and so on. It goes without saying that an integrated approach to water management is crucial in ensuring optimal use of water for agricultural output.

India will Grow Faster than China in Next 20 yrs

2011-05-26T15:37:00.001+05:30

[Economic Times, 26 May 2011]

India is likely to emerge as the world’s third-largest economy by 2030 and grow faster, on an average, than China over the next two decades, says the Standard Chartered report India in the Super Cycle. However, regulatory burden, infrastructure bottlenecks, high oil prices and slowdown in foreign direct investment could affect growth.

“We factor in a trend rate of growth of 6.9% for China, allowing for setbacks along the way, and 9.3% for India, again taking into account the business cycle,” said Gerard Lyons, chief economist and group head, global research, Standard Chartered Bank.

The world may be experiencing its third ‘super-cycle’, which is defined as “a period of historically high global growth, lasting a generation or more, driven by increasing trade, high rates of investment, urbanisation and technological innovation, characterised by the emergence of large, new economies, first seen in high catch-up growth rates across the emerging world,” Standard Chartered said.

The third supercycle, the report says, is led by India and China and other emerging economies, shifting the balance of economic and financial power from the West to the East. The winners of the supercycle would be those countries which have abundance of cash or commodities.
Currently, the Indian economy is expected to grow at about 9%, however, the rising inflation poses a risk to growth. In 2010-11, the central bank has raised key policy rates eight times. The wholesale price based inflation was at 8.66% in April, compared with 9.04% in March.

“India’s growth is particularly vulnerable if infrastructure investment is not rapid enough. India needs to attract foreign capital to fill the funding gap,” the report said. Net FDI inflows as a proportion of net FII inflows averaged around 40% between 2003 and 2007, but this dropped to just 28% in 2010.
“The government’s inability to push ahead with the relaxation of FDI caps in sectors such as multibrand retail and insurance has also dampened FDI inflows. Further, opening of the corporate bond market would also be needed,” said the report. “Indian bureaucracy and the corruption that often accompanies it need to be overhauled to make decision making more efficient,” it added.

The rising oil prices could also be a potential risk to growth. “The regulatory environment in India has been inherited from the British. There needs to be right regulations and investment opportunities for investors,” added Mr Lyons.

“The regulators need to broaden regulation and make regulatory framework conducive for foreign investors and foreign banks to participate in the local market,” he added.

However, he is of the view that international banks need to avoid subsidarisation as it can work against international banks. “Banks that facilitate international trade need to operate as a single unit. International Banks need to operate as one entity so that they can move capital freely,” said Mr Lyons.

Sensex at 30,000 in 18 months: Morgan Stanley

2011-05-20T16:27:00.001+05:30

[Business Standard, 20th May 2011]

GLOBAL financial major Morgan Stanley says the Sensex will see a further downside in the near future, before touching record highs over the next year and a half. It has, however, pegged its annual returns in single digits over the next three years.

“It suggests there is a downside to the Sensex in the next three months... but, over the next 18 months, the market is heading for a substantially higher level, with the Sensex potentially breaking 30,000,” says the report released on Wednesday. Over the next three years, the Sensex returns could disappoint, with acompound annual outcome of 8.3 per cent, it adds.

The Sensex today snapped its three-day fall, gaining 55 points to close at 18,141.40. In the current calendar year, the Indian index has been the worst performer among most of the leading world equity indices, shedding more than 11 per cent. Meanwhile, the Dow Jones gained nearly 9 per cent in 2011 and the S&P 500 moved up nearly 6 per cent. Sri Lanka’s benchmark index, incidentally, has gained nearly 11 per cent since the start of the current calendar year.

Morgan Stanley, however, has added a caveat. It has used the modified earnings yield gap approach to predict the Sensex returns, which historically is known to be more accurate while making predictions over athree-year forward term.

“This is where the model has the best predictive power and essentially the message is that, for medium-term investors, equity valuations are middling at the current level of short rates,” notes the report while explaining the subdued 8.3 per cent annual returns on the 30-share Sensex over the next three years. It also adds the model has “low accuracy for short-term forecasts”.

“We have modified the traditional earnings yield gap model, using short instead of long rates. The resulting earnings yield gap appears to have strong predictive power on mediumterm (three-year forward) market returns,” adds the report.

Camson Bio Technologies

2011-05-04T21:03:00.006+05:30

(Click on image to enlarge)

Camson Bio Technologies Limited is a leading agricultural biotechnology company. Camson delivers innovative products to maximize agricultural productivity and sustainability while reducing the environmental impact.

Founded in 1993, Camson combines traditional knowledge in agriculture with latest advances in safety and protection to market a wide range of products. These include hybrid seeds, bio-fertilizers and biocides that are non-poisonous, eco-friendly and residue-free. Camson is a debt free company with good top and bottom line growth.

Last year is seen as a year of progress in biotech crop adoption. Total area of farmland used to grow genetically modified (GM) crops across the world is 1 billion hectares. That is an area larger than China or the US, but it is still just 10% of the world's arable land area. 17% is the increase in area of farmland used to grow biotech crops in developing countries in 2010.

Camson's Sales increased from 4 Crores in 2006 to 80 Crores in 2010 and Net Profit from 55 lakhs (2006) to 13.66 Crores (2010). Dhirendra Kumar, Managing Director of Camson Biotechnologies Ltd, is confident about the growth prospects of his company. Check out his recent interview HERE.
Camson in MEDIA.

Technically, the stock has got short-term support at Rs. 114 and long-term supports at Rs. 107 and Rs. 97. One can start accumulating this stock in stages once it comes below Rs. 115 and hold this stock with a minimum time span of 1 to 3 years.

CMP-BSE (4th May 2011) : Rs: 117.70

Wait for a correction

2011-05-02T09:32:00.000+05:30

[Business Standard, 1st May 2011]
MARKET INSIGHT by Devangshu Datta

Provisional March WPI data suggests wholesale inflation is up 9 per cent year-on-year. This is about 100 basis points above RBI projections. An analysis of WPI numbers suggests it is very likely an under-estimate; WPI may be well above 10 per cent.

In the past 12 months, provisional WPI numbers have been revised upwards, an average of 0.6 per cent per month. Right now, official data claims that fuel costs (crude and coal) have been unchanged for the past three months. In reality, both are up 15-20 per cent. So, there will be a jump in WPI when thats factored in.

There is a good chance that RBI will hike policy rates on Tuesday. But, that may not have much positive effect on the current inflationary spiral, given root causes. Apart from rising energy costs, food inflation is the major problem area. There is no band-aid fix. Given Indias energy-deficit scenario, big hikes are likely after the current set of assembly elections. Food prices will reduce if theres a decent monsoon. Otherwise, in the long-term, more food production, better distribution and delivery, better storage infrastructure and so on, is required to control food prices. None of these can be implemented in a hurry.

Scenarios that combine higher interest rates, higher fuel costs and generally high inflation will always hit growth. At the same time, global growth projections are being pared down. So, exports may not maintain the breakneck growth trend of the last year.

The Q4 2010-11, and fullyear results, and advisories are not very exciting. Demand, especially consumer demand, remains good and toplines have expanded. But margin pressure is evident – profits have dropped, interest costs have risen and its difficult for corporates to pass on rising input costs.

The market has ignored the bad news. The Nifty has been range-trading, between 5750 and 5950 for two months. This cannot last. As and when the penny drops, panic selling may force prices down dramatically. There is no apparent factor that could cause widespread earnings surprises. You’ll certainly know if fuel and food costs reduce. But these would have a lagged effect.

By now, regular readers must be tired of my bearish prognosis, especially after the market bounced from its 2011 lows of Nifty 5177 to over 5900. I would be very pleased to be proved wrong by a market that powers to new highs in what remains of this calendar year. But I don’t see it happening - the long-term variables are against it.

Current valuations seem very optimistic. The Nifty is at atrailing PE of 21.8 with a PB of 3.7 and a dividend yield of one per cent. These are historically dangerous levels. They are difficult to justify by any normal investing logic.

Of course, there is always a subjective element to projections. Ask yourself the following questions. Do you think earnings growth will exceed 22 per cent in 2011-12? Are interest rates likely to fall to an average of 5 per cent or lower in 2011-12? Most analysts would answer “no” to both questions. If your answer is “no” to either, you should not be increasing equity exposure at 22 PE.

Markets can stay out of sync with fundamentals for long periods, But eventually they correct. It is also unhealthy for along-term investor to bank on inflated valuations persisting indefinitely. My instinctive response to any further rallies would be to suggest lightening up on equity holdings by selling at higher levels. But there aren’t too many alternative avenues and a lot of long-term investors are uncomfortable selling, whatever the situation.

Among alternatives, commodities such as industrial metals, sugar, fuels and so on could provide some cover in a bearmarket because some of these are non-correlated to equity market movements. Precious metals have soared to record levels and there is significant risk in buying gold or silver. Real estate is under stress with two years worth of inventories in NCR and Mumbai. There could be a collapse if the stock market falls and interest rates rise.

If you are prepared to short selectively, you may make a lot of money, as and when the market breaks. If you aren’t prepared to short, perhaps you should park spare cash in short-term deposits until such time as there’s a cooling off. Short-term deposits lose less value in a rising rate regime and at least, capital is preserved.

This is not an imaginative or ambitious way to handle your investments but it is common-sense. Preserve your ammunition and wait for a correction. Average down when it comes.

Agriculture is Gaining Corporate Currency

2011-04-29T15:40:00.000+05:30

[Economic Times, 29 April 2011]

Traditionally seen as unroganised and fragmented, agri-business has now become a hot sector, finds Radhika P Nair

Across the country, the business of growing, harvesting, transporting and packaging food is emerging as a hot entrepreneurial opportunity as the market for processed foods with better quality expands rapidly.

Agri-businesses in areas ranging from farm inputs, logistics and warehousing, processing and marketing dairy and food produce are scaling operations and raising cash from a plethora of risk capital investors keen to get a share of this fast growing pie.

By 2015, the Indian food industry is estimated to grow to $258 billion, up from the current level of $181 billion, according to a report by Ernst & Young India and FICCI. While the sector’s low productivity and shortages in supply were earlier seen as problems, investors are now sensing an opportunity for high growth.

Earlier this month, Standard Chartered PE (SCPE) announced a $25-million investment in basmati processing and marketing company Bush Foods. Shortly before that, came the report that World Bank’s investment arm, IFC, was planning to invest $30 million in another basmati rice company, Dunar Foods. Traditionally seen as an unorganised and fragmented segment, agri-business has become a hot sector with a slew of big-ticket private equity investments in the past few months.

“Supply will never catch up with demand. Landmass is limited and there is a limit on what can be done to increase productivity,” says Rajesh Srivastava, chairman and managing director, Rabo Equity Advisors, the investment advisor of the

$120-million India Agribusiness Fund (IAF). Srivastava says companies in all the sub-sectors of agri-business will witness tremendous growth.

“There will be a rise in values of companies that have a good and sound supply chain in the agri space,” says Pinakiranjan Mishra, partner & national leader (retail & consumer products), E&Y India.

BRANDED PRODUCTS

Firms in the branded commodities segment, like basmati rice, have seen a surge in investments in the recent past. In 2009, IAF had made an investment of $10 million in LT Foods, one of India’s largest basmati rice exporters. In 2010, international PE major Blackstone had invested $63 million in another basmati rice exporter, REI Agro. Bush Foods, a basmati rice procurement, processing and marketing company, was founded in 1992 in Sonepat in Haryana and has a presence in both the domestic and export markets. They raised funds to expand their manufacturing and processing facility. Recently, the firm also launched a ready-toeat line of products. “Basmati rice is seeing a significant growth in the domestic and export market,” says Rahul Raisurana, managing director of SCPE.

Companies are also expecting more than just funds from investors. “The money is not the only factor. Entrepreneurs expect investors to bring market linkages and information, especially about the international market,” says Hemendra Mathur, managing director of SEAF India Investment Advisors, who have set up an agrifocused fund. Bush Foods’ chairman and managing director Virkaran Awasty agrees with this assessment.

He says they had a lot of funding options, but went with Standard Chartered because they are a wellknown international brand. “Through them, we can access bonafide information about markets across the globe that we would never have got on our own,” he adds.

ANCILLARY SECTORS

Ancillary sectors have also seen investments in the past few months. In 2010, Rabo Equity Advisors invested $11 million in Vacmet India, a company that manufactures packaging materials for the food sector. In March this year, a warehousing management company, Sonhanlal Commodities (SLCM), raised . 35.5 crore in its second round of funding from Mayfield India and Nexus Venture Partners. In May 2010, they had raised . 10 crore from Nexus. Sandeep Sabharwal, CEO of SLCM, says warehouses were reporting storage losses of over 8% annually. “We realised that with the introduction of processes and procedures, we could bring this down to less than 1%,” he adds .

The company, which was established in 1993, is today present in over 85 locations across the country and plans to expand this number to 500 in the next two years. “The funding proved that agriculture is not a dirty word for investors. The first round brought in governance processes and enhanced brand valuation,” says Sabharwal. “The second round of funding was a validation. It showed the first round was not a fluke and that this company is good.”

FARM PRODUCE

While investments have mostly been in processing, marketing and ancillary sectors, companies focusing on farm production have also received investments.

Bottom-of-the-pyramid equity fund, Aavishkaar, which has always focused on the agri-business sector, made an investment in InI Farms earlier this year. The startup, established by Pankaj Khandelwal and Purnima Khandelwal in September 2009, claims to be a farm-to-fork company and is concentrating on pomegranate cultivation. InI is setting up farms under the contract farming, leased and owned models. Since receiving the funding, they have been reaching out to farmers, mostly in Maharashtra and Madhya Pradesh.

The start-up has set up 100 acres of farms in Maharashtra (under all three models) and will acquire an additional 400 acres by July. “There is scope for improvements in productivity and quality in the agrisector. We felt we can add value at the farm-end of the agri value chain,” says Pankaj Khandelwal.

DAIRY INDUSTRY

The dairy sector is another area that has plenty of opportunities for increasing yields and also for improvements in supply chain. Not surprisingly, there have been quite a few investments in this segment as well. Carlyle made an investment of $22 million in Andhra Pradesh based Tirumala Milk Products in 2010 and in 2008 Motilal Oswal had taken a stake in Parag Milk Foods for . 60 crore.

In January this year, Aavishkaar had invested in an Orissa-based start-up, Milk Mantra. The company will focus on retailing of fresh milk and fresh milk products, like yoghurt, and hopes to start distribution in Bhubaneswar within this calendar year. “With the right management and by implementing best practices it is possible to improve productivity in dairy and get good returns,” says Srikumar Misra, founder, Milk Mantra.

NEW AGRI FUNDS

Apart from the rise in investments, new sector-focused agri funds are also being launched. Three agri-related funds were launched in 2010. In September 2010, Small Enterprise Assistance Funds (SEAF) set up the SEAF India Agribusiness International Fund with a target corpus of $75 million.

The same month saw the launch of Godrej Group-backed Omnivore Capital with a focus on start-ups in the agri-tech space and a target fund size of $50 million. I-Farms was launched in December 2010 by Sanjeev Asthana, former president of Reliance Retail. With a target fund size of $100 million, IFarms is also looking at investments in all the sub-sectors of the agri-business and food sector.

Experts expect investor sentiment to improve further, with the recent announcement of 100% FDI in many areas of agri-business. SEAF’s Mathur says there will be a higher interest from international companies who have hitherto been unable to enter the lucrative Indian market. “It is a challenge for international companies to start from scratch in a market like India,” says Mathur. “They will prefer an Indian partner.”

I-Farms’ Sanjeev Asthana says he expects international companies buying out Indian ventures as well. PE Funds have realised the agribusiness space offers all the right ingredients: investable companies, scope for growth and, with international companies waiting in the wings, good exit options as well.

Never ignore unpopular stocks, advises Jhunjhunwala

2011-01-30T15:33:00.002+05:30

Click on the above Title to go to the link.

Sumeet Industries - Update

2010-10-26T19:59:00.004+05:30

http://www.moneycontrol.com/news/business/see-fy12-revenues-exceeding-rs-800cr-sumeet-industries_492060.html

http://www.moneycontrol.com/news/business/sumeet-industries-eyes-rs-32-crore-pat-for-fy11_494141.html

Sumeet Industries to invest Rs 530 cr

2010-09-20T19:45:00.005+05:30

Surat-based Sumeet Industries has chalked out plans to invest Rs 530 crore over the next two years to increase its yarn production capacities. The company is eyeing a turnover of Rs 2500 once the increased capacities go on stream.

Officials said that the company has approved backward integration and expansion projects that will take place in two phases.

In the first phase, Sumeet Industries will invest Rs 130 crore to increase its partially oriented yarn and fully drawn yarn production capacity from 53,000 tonnes per annum to 1 lakh tpa, and for setting up a six mw gas-based captive power plant.

The company will invest Rs 400 crore in the second phase of expansion to set up a new greenfield project of 2 lakh tpa continuous polycondensation plant to manufacture bright fully-drawn yarn, partially-oriented yarn, yarn grade and bottle grade pet chips. It will also set up another gas-based power plant of 20 mw.

"Sumeet Industries will achieve a turnover of Rs 2500 crore once the expansion projects are completed," a company official said.

According to officials, the expansion will be funded through a mix of debt and equity. The company's turnover in the last financial year was Rs 376 crore, and it is eyeing turnover of Rs 700 crore this year.

CMP (BSE) : Rs 27.95

Subhash Projects and Marketing Limited

2010-01-14T11:12:00.003+05:30

(Click on image to enlarge)

Subhash Projects and Marketing Ltd (SPML) is a leading infrastructure development group with more than two and a half decades experience in Water, Power, Environment and Infrastructure . Having established its leadership in the contracting business, SPML has proven business capabilities in the Water, Energy, Environment and Infrastructure domain, on a Public Private Partnership (PPP) and Build-Own-Operate-Transfer (BOOT) basis.

One of the key areas of business for Subhash Projects is Water Management. Subhash Projects is already involved in several water related projects in India. SPML provides turnkey water management solutions - Headworks to distribution system - comprising aspects such as canals, irrigation network, hydrology, reservoirs - storage facilities and distribution; components such as intake water, weirs, pumping mechinery, pipeline works, pipeline distribution networks and associated civil works.

For people looking to invest in water related business in India, Subhash Projects and Marketing Ltd. provides a good opportunity. The stock price is consolidating in a narrow range for the past 7 months. A breakout from this range can take this stock to Rs 300 level.

CMP as on 13/01/2010 is Rs 146.45

Regards,
Minab

Vinati Organics Ltd

2009-11-13T11:34:00.013+05:30

Vinati Organics Ltd (VOL) is a specialty chemical company producing organic intermediates, monomers and polymers. VOL is the world's largest manufacturer of Isobutylbenzene(IBB), the basic raw material in manufacture of Ibuprofen, with a capacity of 14000 TPA. It is also the world's second largest manufacturer of 2-Acrylamido-2-Methyl Propane Sulfonic Acid (ATBS), with a capacity of 12000 TPA.

Products and Applications

Isobutylbenzene (IBB)

- Main raw material of Ibuprofen Bulk Drug

- Perfumery

Normal Butylbenzene (NBB)

- Speciality Solvent

- Synthesis of intermediate

- Liquid Crystal Display

2-Acrylamido 2-Methylpropanesulfonic Acid (ATBS)

- Acrylic Fibre

- Water Treatment Chemicals

- Emulsions for Paints and Paper Coatings

- Adhesives

- Hydrogels and Super Absorbents

- Textile Auxiliaries

- Detergents and Chemicals

- Oilfield and Mining Chemicals

- Construction Chemicals / Super Plasticizers

With oil prices Prevailing well over $40 a barrel, deep water exploration has accelerated worldwide, giving a fillip to the company's ATBS sales. VOL is aiming to achieve Rs250 crore sales in the current financial year. But, with various projects slated to come into production soon, its sales and profit growth should hasten, going forward.

CMP as on 12 November 2009 is : Rs 55.40

Regards,
Minab

A Trillion - Dollar Opportunity

2009-09-22T16:04:00.005+05:30

Why does India sell one million motorcycles in a month? Why does the demand for cars in the country grow by 30 per cent and the same for maggie noodles rise by 25 per cent annually? and, why has India become the fastest-growing cellphone market in the world? This is because India is moving from being a trillion-dollar economy to a two trillion-dollar one in the next six years.

In 1950-51, India's GDP stood at Rs 10,000 crore, which translated into per capita income of Rs 285 when distributed among a population of 350 million. For 2008-09, the country's GDP stood at Rs 54 lakh crore, translating into a per capita income of Rs 48,450, thus resulting in a compounded annual per capita income growth rate of 9.25 per cent during 1951-2009.

India achieved its first trillion-dollar GDP in 2007. It took India 60 long years after Independence to move up to a Rs 42-lakh crore GDP. As per current estimates, we should touch a nominal GDP of Rs 100 lakh crore by 2015, and if the rupee-dollar exchange rate remains stable, the next trillion-dollar economy will be born in seven-eight years.

The journey doesn't stop here, rather it picks up further momentum. The next doubler comes in after another seven-eight years, thus elevating India's GDP to $4 trillion (roughly Rs 193 lakh crore) before 2025. The significance of this transition lies in understanding how this linear event will impact businesses.

The structural change that will be witnessed during this journey is that the basic needs of human life will be taken care of by the initial $600-700 of income. At present, with a savings rate of over 35 per cent, the discretionary spending in the economy is $100 per person. However, as India's per capita income rises to $2000 and the country moves from the category of 'low-income' to 'middle-income' nation, the discretionary expenditure in the economy would experience an exponential growth.

The emergence of the next trillion-dollar economy will dramatically change people's income level, resulting in steep acceleration in demand for many goods and services. We have seen telecom penetration rising from 4 per cent in 2001 to 40 per cent in 2009. This quantum jump could come about due to increased affordability in wireless telephony.

The corporate sector - automobiles, processed food, fashion clothes, advanced communication, healthcare, transport, entertainment and financial services among others - is not there to provide the basic needs of the economy. It is there to provide value-added goods and services to the people at large.

In fact, financial services will be one of the biggest success stories out of India. The savings rate has climbed to 37 per cent of GDP in 2007-2008.

We are likely to witness many changes in government policies over the foreseeable future. These changes may include encouraging consumption in order to hold the savings rate at not higher than 40 per cent. Even at this rate, India is going to emerge as one of the largest saving nations among the developing countries with saving of about $1 trillion per annum before 2020. So, the opportunity for savings deployment is going to be gigantic.

At present, physical infrastructure (roads,ports,housing, etc) deficit is immense. As affordability increases, spends on personal and public infrastructure will boom. Demand for cement, steel, automobiles etc will grow at a pace not seen in the last 20-30 years.

Analysts and economists have been drawing their own conclusions on how consumers and the economy responded when the economy was at half-to-a third of its current GDP size. But how they will respond in the next five-ten years requires a very different kind of thinking by everyone. Politicians should tailor policies keeping this development in mind. And, for investors, it is probably one of the biggest macro-opportunity. A perfect setup for long-term investing.

I've shortlisted some small/mid cap stocks that will benefit from this economic boom and turn out to be multibaggers. ( CMP as on 18th Sep 2009 )

1) Kavveri Telecom - 56.35
2) Geodesic - 136.70
3) Omnitech Infosolutions - 114.65
4) Man industries - 52.95
5) Gremach Infrastructure Equipments & Projects - 35.20
6) Epic Energy - 40.25
7) Arshiya International - 151.20
8) Hind Dorr-Oliver - 139.40
9) Core Projects & Technologies - 178.55
10) Pennar Industries - 25.10

Regards,
Minab

Trading is against human nature

2009-08-19T14:08:00.011+05:30

One of the world’s greatest super traders operating in one of the world’s toughest stock markets, Rakesh Jhunjhunwala is as bullish on India today as he has been since 1985. Here he explains his investments approach and the influences which have shaped it.

All risk taking is associated with two human conditions, viz the greed for profits and the fear of losses. The ability to strike the right balance between fear and greed is the most vital determinant of profitable risk-taking. Human nature operates on the chance of a gain rather maximizing gains. There is lack of focus on the magnitude of gains and losses, which is why I maintain that good trading requires you to go against the basic tenets of human nature. In both trading and investing, it's important what you buy, but it's more important at what price you buy.

Even traders who use the latest technology to help them take decisions, or use sophisticated proprietary models developed by big investment institutions such don't really know why they have bought or sold a particular stock. It is a combination of empirical evidence, gut feeling, other people's opinions, or sometimes it's just because he or she is feeling bullish that day. Yet when one takes a big loss; why do we continue to trade? We are programmed to learn, and we learn to avoid pain. But in trading, you have to learn to take a loss.

Good judgment comes from experience, experience comes from bad judgment. You can't teach trading, trading has to be learnt, but to some extent, I think traders are born. It's a knack It is a rule of human nature that it is very difficult to change ourselves. The ability to adapt and change and mitigate prejudice is critical to success for someone who wants to earn a livelihood from the markets. I can be a bull and a bear, and sometimes both at the same time. I've done a 1800 turn when necessary. I used to be a bear during Harshad Mehta's time, I'm very bullish now. In the market you have to be like a chameleon, always changing your colors.

I have a passion for equities. In fact, I love trading and investing, and even if I had to pay for doing it, I would have surely done so.

Just like most children, I first wanted to be a pilot, and then dreamt of being a journalist. As a child, I was introduced to the world of stocks due to my father's hobby of investing and trading in shares. I would listen to conversations about stocks among my father's friends and the fluctuations in stock prices fascinated me. On quizzing my dad, he advised me to link the fluctuation in prices to the news flow. I read newspaper columns on stock prices with absolute fascination, and decided early on in life that stocks and shares were going to be my calling in life.

After graduating from Sydenham College, I completed my chartered accountancy in 1984. The childhood fascination with stocks was compounded with the realization that capitalism is going to prevail in the world, and that the temples of capitalism, the capital markets, are going to be the new temples. This led me to embark upon a career in the capital markets. This was most unorthodox and unacceptable to most people, including my family. But, having a democratic father was a big help. He stressed upon me the fact that he would not support me financially in this endeavor.

At the same time he offered the security of a house in Bombay, where I could always live, and impressed upon me the fact that I was a qualified professional and that I could always make a living even if I failed in my endeavors in the markets. He also wanted me to never forget that, "My word is my bond", and to not attempt any shortcuts. My father, the person from whom I have learnt the most in life, may not have backed me financially, but he always blessed me and my endeavors, whatever they be, from the bottom of his heart. I do not think I could be anywhere near what I am today without the guidance and blessings of my parents. Despite our differences of opinion, I have always lived with my parents, as I do today. They have been my greatest source of succor and support in times good and bad.

I had a capital of just Rs 5,000. With this capital, my skills and dreams, along with the blessings and guidance of my elders, Rakesh Jhunjhunwala arrived in 1985 on the streets of the Bombay Stock Exchange with the firm conviction and belief "Hum honge kaamyah!" One obviously cannot be a trader or investor in capital markets without capital. My brother, a practicing
chartered accountant, had many rich clients; and helped me raise about Rs1.5mn from his clients. With this capital, in a short period of one year I earned nearly Rs1mn and invested the gains in 5,000 shares of Tata Power. Those days will always be etched in my mind. My office was the pavement outside the stock exchange, my cupboard was the brief case I carried and my computer was a calculator.

The markets went through a lean period of about two to three years, during which I had no activity, no income and often wondered whether I had made the right decision. In the meanwhile I got married and it was only the fact that I lived in a joint family that allowed me to see through this trying period.

Initially, I did not trade or speculate but! soon realized that to be an investor you need big capital. And the only way I could get substantial capital was through trading income. The markets recovered and my investments in Tata Power along with the profitable trades in Sesa Goa and Telco soon brought my net worth close to Rs15mn. I now had the capital to risk and to make investments.

I will never forget the budget delivered by the finance minister, Madhu Dandvante, in 1990. All of India was bearish on equities with the lone exception of Rakesh Jhunjhunwala. I think that budget was an inflexion point and quintupled my net worth. It is such pendulum shifts that create the opportunity to trade, to invest or disinvest wisely and profitably. Over the years I have learnt that not only is it critical and extremely difficult to identify such inflexion points, it is even more difficult to deal with such situations. It also gave me confidence in my own abilities for I had held my own against some of the most influential and venerated opinion makers in equity markets. As my trading activity increased, I realized its nature as well as its importance. Trading taught me to see the world as it is rather than as one would like it to be.

Trading also gave me the money required to make investments. In a capitalistic society, superior returns without risk taking is but a flight of fancy. Risk-takers we all are, but I think measured risk-taking in the right dose and manner is the key to performance in markets.

Never forgetting my father's words, "My word is my bond"; I have always been a risk-taker, albeit a responsible and measured one. I have always borrowed money in these markets full of fire, but I am proud and happy to say I have an impeccable financial reputation, and have always lived up to my father's guidance on responsibility and prudence. To most people, it is a paradox that one who deals in risk continuously by trading or speculating or investing, can at the same time consider himself financially responsible and prudent.

In trading, the first and the last principle is that trading is trend and price based, and not opinion based. This requires you to square an unfavorable trade regardless of your opinion. This means that if I buy a stock at Rsl00, and then the price falls to Rs95, I take my loss and square off my trade. This is counterintuitive to most people. This is the one common quality of all successful traders. I have tried to rationalize this many a time, and am always reminded of Churchill's words, ''You have to lose many a battle to win the War". I think anybody who wants to trade should not only remember what Churchill MS said, but also what George Soros says, "It's not important whether you are right or wrong, it more important how much you lose when you are wrong and how much money you make when you are right". This requires you to square unfavorable trades, and to pyramid your profitable ones. In trading, everything else is illusion and hope, the sole reality being price. The great fortunes are made by the occurrence of the unknown, and the first portends of the unknown is price, price and only price.

Good trading requires three qualities:
1. broad idea of direction
2. knowing what and how much to risk
3. knowing when and how to take a loss

I have only traded in Indian equity markets in my life so far. But having learnt the broad principles of trading, I have the confidence that I can trade in any market and or any asset class. Today, with confidence, I am preparing myself and Rare Enterprises (my trading firm) for the day when we can trade and invest internationally. Of course, this is subject to capital account convertibility.

Lot of people quiz me, "Doesn't the volatility inherent in trading, combined with the financial implications of gains and losses impact me mentally and emotionally, or bring about a change in the quality of my life?" I always risk a miniscule portion of my wealth when I trade, and in any case, trading gains and losses do not impact my lifestyle. Sure, I would be lying if I say that it has no effect whatsoever, but then I am also reminded of Churchill's words again. I also believe that the process of earning wealth is far more exciting than actual wealth. And I believe in life that it's only those who can lose a battle with a smile, are the ones who will win the ultimate battle. To my mind, the inhibition of making a mistake or being wrong is the biggest stumbling block to progress and gain in life. I am not afraid to make a mistake in life, but it should be one that I can afford, so that I may live to make another one.

Trading also requires tremendous conviction and independence of thought. Just, as in all walks of life, discipline is the key to success in markets. I wish I had the same discipline in my personal habits as I have in markets.

All trading is trend-following and momentum-playing. And all investing is about perceiving the future and linking it to a value, besides understanding the role of time. I have learnt that trend is my friend and never pre-empt or question trends unless the reversal becomes apparent. In investing, one should always be greedy, but be long term greedy.

To many, leverage is poison. But as they say, one man's poison is another man's food. For me, disciplined and emotionless leverage have been the key to my success. We should also remember that we earn wealth in consonance with the market opportunities and our risk taking abilities, rather than with our desire to earn a measured quantum of wealth every year, regardless of market opportunities and liquidity.

Investing success requires that one does not always react to the apparent. It is not about buying the optimism and selling the pessimism. This was proved magnificently in my purchase of PSU (public sector undertaking) stocks in 2001 when the whole world was buying dud pseudo- technology stocks. Superior investment returns are not gained without pain, time, introspection and doubt. There are a certain people whose views I value, some friends with whom I discuss matters. In the early days, I learnt all great deal from Radhakishnan Damani. But the best decisions in trading and investment are essentially very lonely decisions. I have also learnt in life that regardless of whoever has advised or influenced any decision that I have made, good or bad, I am responsible for it. I take all credit and all blame.

My ten commandments for trading
1. be realistic: Make trading price dependent, not opinion dependent
2. trading is a full time profession, not a part time job. It cannot be half-hearted
3. know the rules and verify them for they many not to what you assume

4. never aspire to be the market’s master. It’s best to be its slave. Leverage your skills, not your capital
5. have a broad idea of direction. Remember, trend is your friend
6. don’t be afraid to make a mistake. Only ensure you make one that you can afford so that you may love to make another
7. play ‘Seen’, not ‘Blind’ for the market offer many an opportunity even after the cards are open

8. know what and how much risk. Assess risk
9. take a loss. The first loss is the best loss. Pyramid your profits
10. good judgment come from experience. Experience comes from bad judgments. Trading can only be learnt it can’t be taught.

I’ve had my fair share of doubts, and have made ,some mistakes, but you have to believe in yourself, whatever you do. Many a time, it takes time for markets to realize value. But my experience in markets have taught me that ultimately markets do what is right, and hence when I am wrong in markets I do not blame markets but blame myself. I think the first important lesson that we must learn to be successful in markets is that markets are supreme. We also have to remember that markets are ruthless and very intelligent. A market participant should always respect markets as being the ultimate arbitrators and deciders. I believe that the markets always decide rightly and correctly over a sufficient period of time.

We should never forget the words of Sir John Templeton, "Markets are like a woman, always commanding, always mysterious, always uncertain." We should hold our conviction with patience. If we do not accept the supremacy of markets, we will end up defying them and will land up being consigned to the poor-house. Believe me, this is the one quality which is most required to be successful in markets.

My ten commandments for investing
1. be an optimist: the necessary quality for investing success
2. expect a realistic return. Balance fear and greed
3. invest on broad parameters and the larger picture. Make it an act of wisdom, not intelligence
4. caveat emptor. Never forget this four letter word R-I-S-K
5. be disciplined. Have a game plan
6. be flexible for investing is always in the realms of possibilities
7. contrarian investing: not a rule, not ruled out
8. it’s important what you buy, it’s more important at what price you buy
9. have conviction, be patient. Your patience may be tested but your conviction will be rewarded

10. make exit an independent decision, not driven by profit or loss

To be successful in investing, many elements have to fall into place. But four things are critical. There has to be an attractive, addressable, external opportunity; a sustainable competitive advantage; scalability and operating leverage; and the management should be of high quality and integrity. All have to be present but they still constitute only 50% of our necessary requirement. It is important what one buys, but its more important at what price one buys. The price at which we buy is the ultimate determinant of our profit or loss. I am happy to say that a loss in investing has been a rare occurrence in my career, and the key to it is that I am an investor who focuses obsessively on value. Therefore, I may have made a mistake in buying
NUT in 2001, but I still made a profit.

I am not easily convinced about an investment, but when I am convinced, I keep my opinion despite the world differing with me even if it persists over a long period of time.

Fundamental analysts are obsessed with predicting profits correctly, forgetting that we are investing in an uncertain future, and in the realms of possibilities. When I make an investment, I try and understand the factors that I drive profits rather than worrying about the absolute quantum of profits. The opportunity should be so compelling that we should not need to interact with anyone before seizing the opportunity. We should invest first, investigate later.

I have also learnt that many opportunities lie in crisis. It is very apt that the Chinese symbol for crisis is the same as that for opportunity. It was the crisis at Titan that offered one of the best investing opportunities of my life.

The determinants of the price of any stock are a simple mathematical formula:
It was apparent that when both the variables determining price viz EPS and PER (P/E Ratio) gain, stock prices explode. I learnt that EPS was specific to each company while the PER was dependent on various factors, both internal and external to the company. I should not look only at the EPS of the company but also the quality of the EPS. The quality depends mainly on three factors:
1 accounting practices
2 cash profile of the profits
3 return on capital

The internal conditions that determine PER include the reward model of the company, predictability of earnings. the risk model, perceived growth opportunity and the perceived integrity of the management. I believe prediction of EPS is mainly science and part art; but prediction of PER is an art with very little science. Apart from being the most difficult aspect of successful investing, it is also the most critical.

I was the most dogmatic person when I first interacted with markets. But, markets and time have humbled me and I have learnt to realize and say, "I can be wrong" whenever I express an opinion. I have also learnt that the quest to learn and perform in markets as in life is a journey and not a destination. I have shared with you some of these learning's and shall further learn and further share with you in future.

I would like to end by sharing with you that the greatest learning i have it is that the key to success is God's Grace and Elder's Blessings. We should never forget that success can be temporary and transient, and should never take it for granted.

Rakesh Jhunjhunwala

2009-08-19T11:52:00.010+05:30

Rakesh Jhunjhunwala is an Indian investors who made a good fortune by investing in valuable midcaps. He is an inspirational figure for many young Indians who want to make money in stock markets. Jhunjhunwala is an active trader and disciplined value investors who believes in long term India story.

Rakesh Jhunjhunwala is a famous Indian trader who is often referred as “Indian Warren Buffett”. He believed in the “India story” made a good fortune from it. He is not only a trader but also a successful investor. He spotted opportunities in good companies like Praj Industries, Pantaloon Retail, Titan, CRISIL, Lupin and Punj Lloyd.etc when no one was interested in them.
Rakesh Jhunjhunwala (RJ) stated investing career in 1983 and used to put in 15-16 working hours in his early days. His company name is “Rare Enterprises”. He was ranked at 1,062 in the Forbes Billionaire list. Like Warren Buffett, he was fond of stocks from his childhood days. He was nicknamed as “Young Tiger” in the early 90’s (Harshad Mehta days).

Profession: Chartered Accountant.
Passion: Stock Markets.
Biggest award: One of India's best five investors by Business India magazine in 1998.

Investment motto: Buy right and hold tight.
His wealth: Around Rs 5,000 crore. He started his investing career with Rs 5,000.
His assets: Passion and confidence.

Success secrets:
1. He rarely invests in index stocks. He is an expert in picking value stocks when no one is noticed them. He invested in stocks like BEML and other PSU Stocks when everyone looked at technology stocks in early 2000.
2. Confine your portfolio to 15-20 stocks. Invest for long term to get good returns.
3. Stay away from cyclical stocks.
4. To get exceptional returns, you need to take risks.
5. He generally stays away from commodity stocks and index stocks. But he recently bought some steel stocks.
6. Like Jack Welch of GE, he believes in extensive reading and learning.

Famous quotes:
1. Markets are like women -- always commanding, mysterious, unpredictable and volatile.
2. Anticipate trend and benefit from it. Traders should go against human nature.
3. Don’t insult the great man (Warren Buffett) by comparing me to him.
4. Successful investors are opportunistic and optimistic ones.
5. Growth comes out of chaos.
6. Market is above individuals. The market is rational. An individual can never be smarter than the market
7. Maximise profits and minimise losses.
8. Invest in a business not a company.
9. Emotional investment is a sure way to make loss in stock markets.
10. I don’t advice anybody. I don’t manage anybody’s money.

15 Stock investment tips from Rakesh Jhunjhunwala:
1. Always go against tide. Buy when others are selling and sell when others are buying.
2. If you believe in the growth prospects of a company, invest in the stock and give it sufficient time.
3. Be an optimist. Pessimistic investors always lose money in stock markets.
4. Greedy investors will never make money in stock markets. Book profits after reaching your target price.
5. Never put your hard earned money without proper research. Never invest according to “Stock tips”.
6. You have to lose many a battle to win the war. This Winston Churchill quote is always quoted by Jhunjhunwala. Balance fear and greed.
7. Never react and change your investment decisions according to daily business news. Panic selling is a bad habit.
8. Hastily taken decisions always result in heavy losses. Take your own time before putting money in any stock.

9. Invest in companies which have strong management and competitive advantage.

10. Stock markets are always right. Never time the markets.
11. Opportunities will come and go. Are you prepared to grab them?
12. Never invest at unreasonable valuations. Never run for companies which are in limelight.
13. Passionate investors always make money in stock markets. You will never fail in any work if you do it with passion.
14. Means are important. Read and analyse the available information with an open mind and look for opportunities.

15. Prepare for losses. Losses are part and parcel of stock market investor life. Learn from mistakes. Learn to take a loss.

Disciplined passionate investors like Rakesh Jhunjhunwala are always inspirational figures for young investors. One can make a good fortune in stock markets if you follow his investment ideas and principles.

ICSA (India) Ltd

2009-06-28T20:01:00.005+05:30

(Click on image to enlarge)

ICSA(India) has rich experience in design and development of customized infrastructure solutions, state-of-art embedded technologies and software applications for the power, oil, gas and water sectors.
ICSA(India) Ltd is one of the leading Indian companies offering turnkey services for Electrical Infrastructure Projects in Power Generation, Transmission and Distribution sectors, besides Industrial Electrification Projects. The company is executing Transmission Projects both in India and abroad on EPC basis and HVDS, Rural Electrification & Industrial Electrification Projects in all parts of India on turnkey basis.

Currently the stock is trading at Rs: 178.20 (26/06/2009). I expect a breakout at Rs: 215. So Investors are recommended to buy at current levels.
Regards,
Minab

Genus Power Infrastructures Ltd

2009-05-07T09:40:00.008+05:30

(Click on image to enlarge)

For Q4FY09, Genus Power Infrastructures Ltd. reported 30% growth in revenue at Rs.246 cr. but PAT fell by 20% to Rs.20 cr. on the back of higher interest cost. However for entire FY09, it managed to clock 6% rise in the bottomline at Rs.51 cr. on 25% higher sales of Rs.586 cr. Thus it posted an annual EPS of Rs.35 on its current equity of Rs.14.80 cr. Importantly, the company has an impressive order book position of over Rs.1000 cr., which is almost double its FY09 revenue. Moreover, it has participated in tenders worth Rs.1683 cr. of which it is already the 'L-1' bidder in tenders worth Rs.262 cr. The company is among the leading integrated metering solutions' providers and the pioneer in implementing AMR (Automatic Meter Reader) technology. It has diversified into engineering construction and currently derives over 50% from EPC, power T&D projects where it provides complete solutions for power transmission & distribution systems. As a step forward, the company has also launched IT enabled distribution transformer metering system, feeder monitoring and management system, smart street light management system with value added software application for providing end to end solutions for energy management. CMP as on 26/06/2009 is Rs: 217.15

Regards,

Minab

Core Projects & Technologies Ltd

2009-04-23T16:32:00.006+05:30

Price of Core Projects & Technologies made a breakout on 15th April 2009 after 5 months of consolidation. Volume figures support the breakout. Normally there will be a pullback (tendency of the share prices to come back towards the trendline after a breakout) after the breakout. So traders can buy the stocks on every dip below Rs 100 for 50 to 100% appreciation in the near term.

CMP as on 23 April 2009 is : Rs 103.80

Regards,

Minab

Opportunities in Infrastructure space

2009-04-12T09:27:00.002+05:30

When it comes to infrastructure, opportunity missed is not opportunity lost but opportunity passed on for future. Infrastructure is the only sector which is not facing any slowdown because of the enormous demand - supply gap. The honey pot is already drawing the bees.
Given that the demand is growing and the supply side is ready to go, infrastructure could provide a robust foundation for building the trajectory for the return to high growth. It's not that the government machinery hasn't realised the importance of tapping the infrastructure deficit to beat the slowdown.
The interim budget presented in February provided a 72 per cent increase in spending (from Rs 6,866 Crore in 2008 - 09 to Rs 11,842 Crore in 2009 -10) under the Jawaharlal Nehru National Urban Renewal Mission. Between August 2008 and January 2009, the government approved 37 infrastructure projects worth Rs 70,000 Crore.
The road sector could be amongst the biggest beneficiaries as the NHAI is expected to put up 19 road projects worth Rs 21,455 Crore for tendering in the next six months.
The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) launched in 2003 to cover 63 cities seeks some Rs 1,20,536 Crore, with almost half for seven mega-cities - Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad and Ahmedabad. So far, it has sanctioned 422 projects adding upto Rs 47,794.30 Crore.
The size of the opportunity is as big as the size of the shortages. Roads, power generation and ports are especially attractive.

My Picks:
1. Hindustan Construction Company (HCC) - (CMP: 49.85)
2. BHEL - (CMP: 1498.65)
3. Alstom Projects India - (CMP: 303.65)
4. Bharat Forge - (CMP: 121.05)
5. Sanghvi Movers - (CMP: 91.45)
6. Arshiya International - (CMP: 62.15)
7. IVRCL Infrastructure - (CMP: 145.50)
8. ICSA India - (CMP: 98.90)

Regards,
Minab

Is this the time to invest?

2009-04-05T18:41:00.006+05:30

Due to strong global markets and taking cues from G20, Indian shares leapt to their highest closing in five months on Thursday. The Sensex and Nifty have made smart recoveries over the past few days. The Sensex managed to touch the 10000 mark again after long time. Similarly, the Nifty touched the 3200 mark.
The question is whether this recovery will sustain? Has the long bear phase ended? Have the bulls again taken over? Is this the time to invest?
Risk-averse individual investors need to stay away from pull-back rallies for the time being. The markets also decline equally sharp.
Lets see the Nifty chart. For the past 5 months, the Nifty was moving in a range from 2500 to 3150.
Click on image to enlarge.

Does the fundamentals of our economy changed for a breakout to happen now? In my opinion, No. The volume figure says that the breakout wont sustain for a longer period. If the market falls from a false breakout, the fall will be sharp and severe.
So I suggest investors/traders to buy at the lower band of consolidation phase. Wait patiently and invest when Nifty comes closer to 2500.
Thanks and Regards,
Minab

Points from Wealth Creation Study by Raamdeo Agarwal of Motilal Oswal securities

2009-04-03T13:31:00.009+05:30

Steeper the Margin of Safety, faster, larger and more consistent will be the wealth Creation. Margin of safety affects size and speed of wealth creation.
Margin of safery emerges from your ability to forecast the company's value five, seven, ten years into the future and compare it to what price you are paying today.
Margin of safety is not on the table. Its in the mind. When looking at margin of safety you are not just looking at the book value; you are also visualising the future expected value. This is both an art and a science.
When you forecast a company's value, you need to take into account the evolving business environment including monopolistic position, favourable regulatory environment, management's ability to seize the opportunity and execute, etc. The value that will emerge in the future has to be accounted when calculating this margin of safety.

The Important Elements in Wealth Creation:

- Find a great business
- Good management
- Find margin of safety
- Throw in a lot of patience

5 step Guide to locating a Wealth Creator

1. Assess the entry barriers created by a company
An entry barrier should not only be strong, but also long lasting. The entry barrier should be more 'intellectual' in character rather than 'physical'.
Buy into such companies at the earliest. Though difficult to practice, think ahead of the crowd.

2. Management should be competent and passionate
Choose companies that are led by a team and are competent and passionate.
The definition of a great company is one that will remain great for many years.

3. Management should have integrity
Integrity is the most crucial quality that a company's management must have. Such companies not only run their business in an honest manner, but are honest to all their stakeholders, whether they are employees, the government or the shareholders.
without management integrity, no margin of safety can be high enough.

4. Buy Low
The price that you pay for a stock determine your rate of return.
Purchase price takes care of a lot of mistakes. Hence, estimate the expected value/intrinsic value of the company and keep an adequate margin of safety in the purchase price.
It is much more important to buy cheap than to sell dear.

5. Have Patience
Investing in equities is often driven by two emotions - greed and fear. And patience is the mantra that helps overcome these emotions. Patience makes the difference between investing and speculation. It's like a fertiliser to investment process.
In reality, patience is crutial, but it is a rare commodity.

Three Forces of Advantage - The Mental Makeup

1. Informational Framework

Information is power. Reading is essential to develop a trained and prepared mind. It is essential to read bussiness newspapers. To get a global understanding, recommended readings are FT, Business Week, Fortune, Forbes and The Economist.
Newspapers and magazines will provide the informational framework. One has to read extensively - You will often find situations where there is disequilibrium. That is where the opportunity lies.

2. Analytical Framework

Next is the analytical framework ie, how to think about competition, complexity, opportunity etc.

3. Behavioural Framework

Behavioural framework is the mental decipline that one needs to apply to the process of investing. Greed and fear are two of the most important elements of investment behaviour. One needs mental descipline to be content and happy with a good deal and not to be greedy for a better one.
Controlling greed is very important. If you have missed an opportunity, let it be. Dont chase stocks. Money is not to be made from just one stock.
Fear arises from the unknown. When the market or a stock is crashing, one is often gripped with fear. At these times, your knowledge of the share and its true value will give you the conviction to hold on and possibly invest more. At such times, strong and robust business are available with very high margin of safety. Its your knowledge of what you are buying or holding that will reduce risk and the consequent fear. One has to capitalise on the underlying value and more importantly remain invested during bad times.
Everyday 'Mr. Market' will keep checking your conviction. The questions to be asked are - Does the current price surpass the margin of safety? Is the expected value in the next 3-5 years at a significant discount to the current price?

Investment Tips

1. Invest in companies which are large yet unpopular, if the fundamentals merit your investment. Available at low prices, these stocks are potential multibagger, promising considerable returns at brisk rates.

2. Look for companies which are sitting on gold mines in the form of real estate. As the study advises, "The real estate sector as a wealth creator in the stock market is the latest phenomenon. The future will see this sector growing bigger and faster than many others".

3. Choose some companies from industries that are not very cyclical in nature. The study points out "The non-cyclicality of business has emerged as a key driver of steady wealth creation".

4. The top companies may come at a price but it pays to be invested in them.

5. Shift some part of your portfolio to new economy stocks, to leverage their earnings growth potential. Watch out for the telecom, real estate and engineering sectors. They are expected to grow big and grow fast.

6. Small companies with ambitious and aggressive plans can be kickers for higher returns in any portfolio.

7. Sunrise companies will continue to do well in the future.

8. Consumer-facing companies have modest earning growth but promise disproportionately high market returns for a reasonably low level of risk.

9. The sure shot formulas for multibaggers are:

a) P/E of less than 10
b) Price/Book of less than 1
c) Price/Sales of 1 or less
d) Payback ratio of 1 or less

10. A caution from the report: "Even blue chips like HUL and HPCL occasionally end up as wealth destroyers. So, it is important to get the earnings direction right, and more importantly, pay the right purchase price".

Thanks & Regards,
Minab

My Investment Philosophy

2009-03-31T19:17:00.020+05:30

The price of a stock is determined by two factors. In the short to medium term, it is the sentiments of traders and technicals which determine the price of a stock. But in the medium to long term, the price should follow the fundamentals of the company. Now the question is, which method should we follow. fundamentals or technicals? The answer is we should follow a mix of both. Understanding a little about the cycle of an economy/industry will help us to decide when we should follow which method. The four main stages involved in a cycle are Recovery, Boom, Recession and Bust. Or in other words, Consolidation, Mark-up, Distribution and fall ( See Fig-1).
Click on the image to enlarge.

In Indian stock market, we had a fall in the year 2000. After that fall, market entered into consolidation phase from around October 2001 to april 2003. In consolidation phase, market moves sideways or moves up and down in a small band. From May 2003 to September 2007, we had Mark-up or Boom phase. In this phase stock market moves upwards with periodic corrections. Then our market entered Distribution phase from October 2008 to early days of January 2008. In this phase the selling starts and market moves in sideways with wide swing. Then the fall comes with panic selling. our market had fall from January 2008 to 27th of October. Again market entered into Consolidation phase (see fig-2). Now this cycle will continue.

A fundamental analyst will accumulate good stocks in consolidation phase and wait patiently till the boom to occur and sell when the valuation becomes expensive. Now we are in a consolidation phase. Does buy and hold strategy will work in the near term? In consolidation phase, when market moves up 200 points, it will fall 200 points. So the net return will be zero. So a little knowledge about Technical analysis will help us to earn in Consolidation phase also. We can Buy when market touches the bottom of band and sell when market touches the higher band. There will be small swings in the market between this journey within bands, which can be analysed by using Oscillators like RSI,Stochastic etc.

So my strategy is to shortlist companies according to Fundamental Analysis and make the entry and exit with the help of Technical Analysis.

Throughout the Consolidation phase (which will last for 12 to 18 months), make use of Technical Analysis and Trade in stocks to make money and use Buy-and-Hold strategy once market makes a breakout from the consolidation phase. The good part of trading using Technical Analysis is that we can make money even in the falling market.

Beginners can learn about Fundamental and Technical Analysis by referring to books: "Intelligent Stock Market Investing" by N.J.Yasaswy and "How to Make Money Trading With Charts" by Ashwani Gujral.

Please post ur Comments.
Thanks and Regards,
Minab

Blog Posts

2009-03-31T14:55:00.001+05:30

Hi Friends, this blog is started on 31st march 2009 to help and share ideas with those who wanted to create wealth in a big way through stock market investing. Initially this blog will be updated on every monday morning for few months and then, on a daily basis.
wishing you all a Happy Investing.
Regards,
Minab