Sanghvi Movers

We recommend a buy in Sanghvi Movers stock from a short-term horizon. It is apparent from the charts of the stock that from its 52-week low of Rs 59.6 recorded in March, it has been on a steady intermediate-term uptrend. Moreover, the stock's medium and short-term trend also is up. In early December it conclusively surpassed its long-term resistance level at Rs 200 accompanied with good volume and is trading way above its 21 and 50-day moving averages. The stock reinforced its uptrend by gaining 4 per cent on December 17. The daily and weekly relative strength indices are featuring in the bullish zone. Both the daily and weekly moving average and convergence indicators are hovering in the positive territory showing signs of bullishness. Considering that the stock's intermediate-term up trendline is intact we are bullish from a short-term perspective. We expect it to move up further until it hits our price target of Rs 248 in the approaching trading session. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 213.
via BL

Low volumes may cause volatility

Low volumes may cause volatility on the bourses as 2009 draws to a close. US and other major overseas markets begin the year-end holiday season next week which means that the activity of foreign institutional investors will be low key. Expectations of good Q3 December 2009 results may cap downside on the bourses.
Many corporates have paid higher advance tax in the third installment of 15 December 2009 which hints at good Q3 December 2009 results from India Inc. As per reports, advance tax revenue from major companies rose 36% to Rs 10700 crore in the third quarter of the current fiscal against Rs 7900 crore in the same period last fiscal. There were about 2,800 companies that paid higher tax in the quarter under review, while about 700 companies paid less.
The total tax payment for the three quarters of the fiscal 2010 increased by 32% to Rs 27200 crore (Rs 20,600 crore). There were 6,500 companies which paid higher tax, while 1,500 reduced the outgo.
Among top firms, energy major Reliance Industries has paid Rs 850 crore for the October-December 2009 quarter, much higher than Rs 450 crore in the corresponding period last year. The second-largest private lender, HDFC Bank, has paid Rs 400 crore compared to Rs 300 crore a year ago.
India's biggest commercial bank in terms of branch network State Bank of India has paid Rs 1,795 crore as advance tax in the third quarter of FY 2010 against Rs 1700 crore paid in the same period last year. Bank of Baroda has paid Rs 355 crore, much higher than Rs Rs 220 crore.
Tata Steel nearly trebled its tax payment to Rs 650 crore from Rs 250 crore. Aditya Birla Group company Grasim Industries, which had hived off its cement business for a merger with the group company UltraTech Cement, has doubled its advance tax payment to Rs 150 crore from Rs 75 crore.
Companies pay advance tax on their estimated earnings every year in four installments. The December 15 installment is crucial since companies pay 30% of their estimated tax outgo by that time, while on a cumulative basis, it amounts to 75% of their annual tax outgo. The remaining 25% is paid by March 15. Among auto companies, Mahindra & Mahindra paid Rs 195 crore, against Rs 4.5 crore in the same quarter last year and Tata Motors paid Rs 100 crore in the third quarter against nil advance tax payment in the same quarter last year.
The surge in advance tax in the third installment is partly due to a low base effect. It may be recalled that the global financial crisis had hit corporate earnings in Q3 December 2008.
Meanwhile, the Reserve Bank of India may tighten the monetary policy to help stem rising prices. This could be by way of a hike in the cash reserve ratio (CRR), which is currently at 5%. CRR is the portion of deposits that banks have to park with the central bank as cash. However, the central bank may refrain from raising key policy rates as the interest rate differential between India and the US and the Euro Zone, could lead to a further rise in capital inflow.
A further surge in capital inflow may send the rupee surging which in turn could hit the labour intensive textiles, gems & jewellery, and small & medium enterprises (SME) segments. Foreign funds have lapped up Indian stocks this year amid signs the economy is recovering from last year's global financial crisis. The economy could grow more than 7.75% in the fiscal year to March 2010, the finance ministry said on Friday, 18 December 2009. The GDP grew 7.9% in the July-September 2009 quarter.
Food prices rose 19.95% in the year to 5 December 2009, picking up from a 19.05 % rise a week earlier, weekly data showed on Thursday, 17 December 2009. The government is under pressure from opposition parties and allies to contain inflation, especially politically sensitive food prices which are hurting poorer sections in the country.

Food inflation flares up at nearly 20%

Last time around, the UPA government managed to emerge largely unscathed despite its inability to reign in spiraling prices. But, this time it appears to be a little different, with most opposition parties closing ranks to pile up the pressure on the Government on the issue of rising food prices. For its part, the Government said that it was also concerned by the sharp jump in food prices and partly blamed the drought and floods. It also assured that it will take steps to contain inflation, including imports. An early hike in interest rates by the Reserve Bank of India (RBI) also seems to be on the cards, especially if prices don't show any sign of easing in the coming days and weeks. This was suggested by C. Rangarajan, the former RBI governor and the chief of the Prime Minister's economic advisory council.
Food prices rose 19.95% in the year to Dec 5, picking up from a 19.05% rise a week earlier, weekly data showed, rising at a time when there is normally a seasonal dip. The data reinforced expectations that the central bank could tighten the monetary policy before its scheduled policy meeting at the end of January. "Food prices are going up, this is an area of concern. We have to take some appropriate measures... but best could be done by augmenting supply through imports," Finance Minister Pranab Mukherjee said. Containing inflation is high on the Government's agenda and it is monitoring the price situation, the Finance Minister said.
Even prices of non-food manufactured products are expected to rise as the Indian economy picks up pace. Supply-side inflation could turn into demand-side inflation. Monthly data for November showed manufacturing prices rising at an annual rate of 4%, a sign that companies have regained the pricing power on the back of the faster than anticipated economic recovery. The annual wholesale price inflation, which stood at 1.34% in October, rose to 4.78% in November, and it could reach 7-8% by the end of the fiscal year in March, above the RBI's forecast of 6.5%. Most economists expect a 50 basis points hike in the CRR, probably before the January policy meeting while policy rates may be revised up in the regular policy meeting.
RBI Governor D. Subbarao has said that monetary policy is not the right tool to fix supply problems, particularly in essential food items. However, he has also noted the risk that if soaring food prices are factored into expectations for other prices it would create inflation pressures through the economy. Even if there is some tightening by the RBI, it is unlikely to make a major dent in the overall economic activity. Hence, we don't expect any tightening to have a serious impact on credit growth or economic growth as policy rates are still far below their long-term averages.

Advance Tax Numbers

 

Company	Q3FY09 (Rs bn)	Q3FY08 (Rs bn)
Reliance Ind	8.5	4.5
Tata Steel	6.5	2.6
ICICI Bank	3.0	6.3
SBI	18.0	17.0
ACC	1.1	1.3
TCS	1.8	1.3
Lupin	0.3	0.2
Yes Bank	0.9	0.4
Ultratech Cem	0.9	0.7
Dena Bank	0.7	0.6
Indusind Bank	0.7	0.2
BOB	3.3	2.2
BOI	1.0	3.7
Central Bank	1.4	1.6
M&M Finance	0.8	0.4
Tata Chemicals	0.4	0.8
Bajaj Auto	3.2	0.5
Tata Power	0.8	0.3
Ambuja Cem	1.4	1.4
IDBI	0.7	0.2
Asian Paints	1.2	0.5
PNB	6.2	5.1
SCI	0.1	0.1

BSE-NSE to extend trading amid protests

Things would not be the same for stock market participants like traders, brokers, banks and others come January 4. A major rivalry between BSE and NSE to garner more volumes and thus boost profits has ensured that trading in the cash as well as derivatives segments will begin at 9 am. The game of one-upmanship was kicked off by BSE when it decided to advance the trading hours by 10 minutes, to 9:45 am, from Dec. 18. Two days later, the NSE decided to go a step ahead by saying that it would open trading from 9 am. The NSE move sparked widespread uproar, mostly among local brokers. Some even accused the exchanges of announcing the move to boost their bottomlines and to appease the foreign shareholders. Others complained about the lack of adequate infrastructure and other systemic problems to support the move. All this forced both the exchanges to defer the plan to advance trading up to January 4. A lot will be said and written about the extended trading time in the coming days. But, that may not prevent BSE and NSE from going ahead with their planned move. Which means that the new year will begin on a different note for all connected with the stock markets.

Exports turnaround in November

After several months of declines, the country's merchandise exports turned positive in November 2009, logging a growth rate of 18% in dollar terms as compared to the year-ago period. Commerce Secretary, Rahul Khullar, said that the country shipped goods worth US$13.2bn in November 2009 against US$11.16bn in the same month a year ago. However, hedging his remarks with circumspection, Khullar said that exports in November have turned positive not due to a great shift in demand but because of base-side effect, as exports were at rock-bottom level last year this time.
Khullar pointed out that the country's exports during April-November 2009 at US$104.25bn are still 22.23% lower than the figure in the corresponding period of 2008 at US$134.2bn. "One should not get carried away by the November number to jump to any conclusion as you may end up making the wrong prognosis," Khullar said. Stating that it is too early to claim that Indian trade is out of the woods, Khullar said that the January-March quarter holds the key to deciding how exports would fare for the whole year. However, he said that the country's merchandise exports would be in the range of US$165bn to US$170bn this fiscal year as compared with US$182.6bn in 2008-09.

Moody's ups outlook on India's local currency rating

Moody's Investors Service changed the outlook on the Indian government's Ba2 local currency rating to positive from stable. At the same time, the ceiling on banks' foreign currency deposits has been raised to Ba1 from Ba2 to better reflect the robust external position of India. The change in the outlook on the local currency government bond rating was prompted by increasing evidence that the Indian economy has demonstrated its resilience to the global crisis and is expected to resume a high growth path with its underlying credit metrics relatively intact. Moody's latest action, however, does not affect the outlook on the government's foreign currency bond ratings, which remains stable at Baa3. Such decision therefore paves the way for a possible narrowing of the gap between the local currency and the foreign currency bond ratings of the government of India. The outcome of the next phase of India's fiscal responsibility act, and the precise nature and extent of the government's fiscal consolidation program will be critical in determining the near-term course of changes in sovereign ratings. A convincing approach whereby the benefits of economic growth better translate into lower debt metrics will be key to our judgment. Moody's last rating action on India was taken on 22 January 2004, at which time it upgraded the foreign currency ratings to Baa3 from Ba1.

GSM operators add 11mn new users in Nov

The GSM-based cellular service providers have reported subscriber additions of 11.08mn during November, as against addition of 10.32mn in October, the Cellular Operators Association of India (COAI) said. With this, the cumulative All India GSM subscriber base has now grown to 366.78mn in November, up from 355.25mn in October, the lobby group for GSM operators said. Among the companies, Vodafone Essar added 2.78mn new users in November, taking its total base to 88.61mn while market leader Bharti Airtel saw its total base rise by 2.8mn to 116.01mn. Idea Cellular added 2.55mn new customers, boosting its subscriber base to 55.91mn, while Aircel increased its base by 1.61mn to 29.35mn. BSNL added 1.22mn new customers, taking its reach to 55.19mn. Loop Mobile added 50,303 new subscribers, taking its total to 2.6mn. MTNL added 73,019 new customers, boosting its total base to 4.51mn. Bharti Airtel continues to be the top GSM operator in the country, with a market share of 31.63% followed by Vodafone Essar at 24.16%, BSNL at 15.05% and Idea at 15.24%.

November air passenger traffic up 30% YoY up

The total domestic passengers carried by the Scheduled Airlines of India in November 2009 was 38.98 lakhs, up nearly 30% compared to the corresponding month last year. The total passengers carried by domestic airlines in the October 2009 was 39.69 lakhs. The total passengers carried by the domestic carriers in September 2009 was 35.05 lakhs. Passengers carried by domestic airlines from January to November 2009 were 399.66 lakhs as against 378.99 lakhs in the corresponding period of 2008, thereby registering a growth of 5.45%. Domestic airlines such as Jet Airways and SpiceJet, among others, clocked over 70% flight occupancy in November. Jet Airways recorded a 33% increase in its domestic passenger traffic and 19% in international traffic for November over the previous year, and flew 7.6 lakh passengers domestically and 3.2 lakh passengers on international routes. In terms of market share, the Naresh Goyal-owned airlines Jet and JetLite maintained their lead with a 27% share in November, even though it was down from 27.7% in October. Kingfisher had 21.1% share as compared to 20.7%. However SpiceJet's market share at 12.2% in November was down from the previous month.

DLF merges arm with holding co of DLF Assets

DLF Ltd., the country’s largest property developer, is indirectly acquiring DLF Assets Ltd. (DAL), a promoter owned entity. Now the deal opens the possibility of DAL going ahead with a real estate investment trust (REIT) listing in Singapore that has been pending for over two years now. The fund raised there would be used to retire debt of DAL. As per the deal, the commercial rental business of DLF - DLF Cyber City Developers Ltd. - is being merged with Caraf Builders & Constructions Pvt. Ltd., the promoters’ holding company of DAL. DLF will own around 60% of the merged entity that would in turn own the assets of DAL. The proposed transaction will bring all commercial assets of DLF under one company giving the parent listed firm a revenue stream of around Rs25bn annually and help it hedge against the uncertainties of the property market. Caraf has four rent yielding properties with leased area of over 3 million sq ft besides 96% economic interest in DAL which, in turn, has four SEZ properties with leased area of over 6 million sq ft. DLF Cyber City has commercial buildings with leased area of close to 7 million sq ft besides two malls in Gurgaon and Delhi.

Bharti Airtel eyes Bangladesh's Warid Telecom

Bharti Airtel is reportedly planning to buy a 70% stake in Bangladesh operator Warid Telecom. The size of the acquisition is estimated around US$900mn, according to reports. India’s leading cellular operator has applied to the Bangladesh Telecommunications Regulatory Commission (BTRC) for permission to buy a 70% stake from the Abu Dhabi group, the owner of Warid, the regulatory body’s chairman Zia Ahmed was quoted as saying. A Warid Telecom executive said that Bangladesh' fourth largest telecom operator and Bharti Airtel were in exclusive discussions on similar lines as the deal between Essar group and the Abu Dhabi group. The Essar group announced last month that it is investing in Warid Telecom’s operations in Uganda and the Republic of Congo, valuing them at a total of US$318mn. Akhil Gupta, deputy CEO of Bharti Enterprises Ltd. had earlier said that the company has always been interested in acquisition opportunities in Bangladesh and other markets in South Asia. The development comes just two months after Bharti Airtel failed in its second attempt to merge with South Africa’s MTN. Warid has under 3 million customers, or about 5.5% of the country’s 52 million cellular subscribers. Reports citing Dhabi group CFO Ali Tahir said that Warid expects to seal a deal by mid-January 2010.

Suzlon repays acquisition loan

Suzlon Energy repaid US$780mn (around Rs37bn) acquisition loan. This has also made the company achieve a net reduction in overall debt by US$350mn (around Rs17bn). The payment was made from proceeds of a partial stake sale in Hansen Transmissions International NV, in addition to a new five-year US dollar denominated loan of US$465mn (around Rs21.9bn) from State Bank of India (SBI). The company did not elaborate on the loans that have been repaid. But the firm had raised finances to acquire Hansen and Germany’s Repower Systems. "This transaction concludes the first phase of our refinancing exercise. We have achieved an overall improvement in our debt profile, with reduction of nearly 15%. We continue to work towards optimising our capital structure," said Sumant Sinha, COO of Suzlon Energy. The company in is filing to the stock exchanges said that the new five-year US$456mn loan provides for a two-year moratorium on repayments of principal as well as two-year holiday on debt covenants.

Hindustan Unilever alters trademark pact with Unilever

Hindustan Unilever announced that its Board of Directors approved amendments to the existing Technical Collaboration Agreement (TCA) with Unilever Plc to include: (i) additional product categories where technical inputs are provided by Unilever and (ii) products of specified categories manufactured by third party manufacturers where technical inputs developed by Unilever are made available to the third party manufacturer. In addition, the company's Board approved a trademark license agreement with Unilever which provides for payment of trademark royalty at the rate of 1% of net sales on specific brands, where Unilever owns the trade mark and HUL is the licensed user. The above amendments are within the Government of India guidelines for payment of royalty. The revised TCA and the trademark license agreement will come into effect from January 1, and will enable the company to continue to leverage Unilever's capabilities to further build and grow the business in India.

Time Warner to acquire NDTV Imagine

Time Warner Inc said that it will acquire NDTV Imagine Ltd. from NDTV Networks Plc, an indirect subsidiary of NDTV Ltd., for US$126.5mn (about Rs5.92bn). "The acquisition will be made by Turner Asia Pacific Ventures, a Time Warner company, and Imagine will become a key part of Turner's operations in the Asia-Pacific region," Time Warner said in a statement. Imagine is one of the leading Hindi general entertainment channels and also owns other entertainment assets in India. Turner Asia Pacific Ventures Inc. will get around 92% stake in Imagine. The remaining 8% stake in Imagine will be held by the current management, participants in its employee stock ownership plan and NDTV Networks Plc. After the deal closes, Imagine will continue to be led by Sameer Nair as CEO. Turner Asia Pacific will invest US$76.5mn for 87.4% stake in Imagine from NDTV Networks Plc and another minority shareholder. However, it did not disclose how it intends to acquire the remaining 5%. Turner Asia Pacific would also put in a further US$50mn as primary capital infusion to fund business. NDTV Chairman Prannoy Roy said, "NDTV Group will be in a position to be cash-surplus and debt -free on a consolidated basis." The sale by NDTV would also mark the conclusion of restructuring of its subsidiary, NDTV Networks Plc, Roy said.

Dubai gets last minute aid from Abu Dhabi

Abu Dhabi gave US$10bn in loan to Dubai for repaying part of the debt held by Dubai World and its property unit Nakheel. Out of this, US$4.1bn will be used to repay Nakheel's Islamic bond, or sukuk, that matures. The remainder of the funds will be used to finance Dubai World's needs up until the end of April 2010. "We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices," Sheikh Ahmed bin Saaed al-Maktoum said in a statement. "Dubai is, and will continue to be, a strong and vibrant global financial center. Our best days are yet to come," Saaed al-Maktoum said. Abu Dhabi is the largest member of the United Arab Emirates federation and a major oil exporter.
Dubai rocked world markets in late November when it requested a freeze on debt payments by Dubai World in order to restructure the conglomerate. Nakheel's bond had been seen by many as a litmus test for Dubai's ability to repay more than US$80bn of government and corporate debt. Media speculation that Nakheel's debt woes could soon be over helped boost shares in Dubai last week. In its statement, Dubai said that it will focus on addressing the concerns of Dubai World's creditors and will start discussions with creditors and contractors shortly. Separately, reports stated that the United Arab Emirates (UAE) central bank will be there to inject liquidity as needed into banks that face exposure to Dubai World

SIPs or Value Averaging

Do you wish to build an equity portfolio in a mutual fund? If so, you can now choose between lump investments and the popular systematic investment plan (SIP).
A recent addition to the menu is the value averaging investment plan (VIP). For investors having a one-time surplus on their hands, their obvious choice will be the lump sum investment. However, for salaried individuals, who are likely to retain some amount of surplus every month, the option to build the wealth is naturally to invest through monthly instalments either by way of the SIP or VIP, where investment is made based on their financial goals or the target they wish to achieve.
Now let us consider a case where an individual plans to build a portfolio. By investing a monthly sum of Rs 10,000, he wishes to invest for 36 months in an index fund to reach a target of Rs 4.5 lakh.
We have assumed index funds to avoid any fund-specific risks. The assumed equity returns we consider here is 15 per cent. Here we take a look at whether SIPs or VIPs would have more beneficial for such an individual, in terms of maturity value and how much money he needs to meet the target.
First an overview of how the two options will work.
Systematic investment plan (SIP): Under this option, one invests the same sum without worrying about market movements. By investing regularly over a period of time, market volatility will be evened out. As units are acquired at different NAVs, more units are bought when markets are down.
At the time of selling, an investor sells all the units at the prevailing NAV and takes out his profits.
Under systematic investment plan, one optimises the returns rather than maximising them.
For instance, if you start an SIP close to the market peak, you will continue to buy units at higher levels all the way down to the bottom.
Value averaging investment plan (VIP): Under the VIP the sum invested (and not the number of units) varies based on market levels. The investor sets a target return from the portfolio at the outset, say 15 per cent per annum. The VIP then ensures that you invest a larger monthly sum when the market falls and a lower sum when the market is high.
Assuming you can spare a minimum monthly amount of Rs 10,000. At the start of the investment assume the NAV of the scheme is quoting at Rs 35. If the NAV shoots up to Rs 39 next month, your portfolio value will be Rs 11,142. The plan will measure this against your target portfolio value. If it falls short, the fund will deduct only the remaining sum from your account and buy a lesser number of units.
How VIP compares to SIP
Let's take an example here. Suppose you have started an SIP in December 2006 and are contributing a monthly sum of Rs 10,000 to be invested in a CNX 500 index fund for the past 36 months. Currently your investment of Rs 3,60,000 stands at Rs 4,40,000.The annualised return on your cash flows works out to 12.7 per cent. Assume you made the same investment in a VIP for 36 months. In VIP, because your monthly instalment will tend to vary, you need to mention both the minimum monthly commitment as well as the maximum that you can set aside. If you have opted for maximum of 10 times of the monthly commitment, calculations show that the actual deduction could have varied very widely from Rs 10,000 to as high as Rs 84,700 a month.
In periods where your portfolio value was higher than you targeted, the fund would have not debited any sum from your account. But in all you have paid Rs 4.8 lakh towards the investment but your current value stands at Rs 6.8 lakh.
That works out to an annual return of about 22.5 per cent (based on a monthly return of 1.87 per cent), much higher than the SIP returns.
Conclusion
The VIP may be a good method to invest for the long term because it ensures that you commit large sums to equity funds when markets are at a low. It also automatically “rebalances” your portfolio when its value rises or falls.
However, the key disadvantage of the VIP is that the sum you invest each much will be highly unpredictable.
A salaried individual whose income is constant may find it difficult to commit to a VIP knowing that the sums debited to his account may vary so widely. This may prompt him to commit to a low monthly investment. Therefore, investors who have the flexibility to overshoot their investment targets significantly can consider the VIP.
The second factor is that investing through a VIP is most effective when the market is not moving in one direction.
If on starting the VIP the market is in a steady decline for many months, investors in a VIP would find themselves committing larger and larger sums to the equity fund, even while the investment loses value. Such a course may be difficult to stick to, as the absolute loss to the investor can be very high.
This suggests that even in a VIP, investors need to set a portfolio target on which they will book profits.
via BL

Eveready Industries

Investors with a medium-to-long time investment horizon can consider buying the stock of Eveready Industries. With power-hungry rural regions and a rising number of battery-powered gadgets, Eveready Industries, which holds a 51 per cent share of the Indian battery market, has strong growth prospects. At Rs 67 the stock is trading at 10 times its trailing one-year earnings.
The valuation is at a premium to Nippo Batteries which is trading at a PE of 8 times. However, the company's size and prospects justify it. The battery industry, which had fallen prey to rising zinc prices, has shown improved growth on Zinc prices receding from their peaks of last year.
Apart from batteries, Eveready also sells torches, tea and mosquito repellents. The sales mix: 70 per cent batteries, 20 per cent torches, 9 per cent tea and less than one per cent contribution from insect repellents.
The battery business
Eveready manufactures ‘AA, ‘AAA', ‘D' and rechargeable batteries used in electrical appliances and gadgets. Replacement demand for batteries tends to be non- cyclical, but a high exposure to rural markets limits pricing power.
For instance, in November 2006, when zinc prices rose to all time highs ($4,580 per tonne on the LME),price increases by the company met with stiff resistance and battery sales fell by 600 lakh units (5 per cent) in 2006-07; overall margins (operating) dipped six percentage points. The company's enduring efforts towards improving product mix have, however, been strengthening the company's margins since then.
Eveready's battery sales picked up in FY08 (volumes up 12 per cent) with higher market penetration. But sales suffered again in the economic downturn of 2008-09; volumes plunged 8 per cent. Even in the June ended quarter there was a slip in turnover. However, renewed recovery signals are evident now. The September-ended quarter has seen battery sales volumes rise 7 per cent.
New initiatives
Eveready's September quarter sales were up 20 per cent and operating profit margins were up 3 percentage points to 13 per cent.
Eveready had, in April, launched a new class of LED (light emitting diode) lanterns. Pegged as an energy saver, this product has taken off well in the rural areas in the North and East and is replacing kerosene lamps in homes. Eveready's total flashlight sales for the September '09 quarter grew 16 per cent with LED lamp sales alone bringing in Rs 21.33 crore (8 per cent of the total sales). The company's extensive distribution network will help it garner a large pie in this market dominated by unorganised players. The company's lighting division is performing very well with the range of the newly launched GLS (General Lighting Service) lamps; the existing CFL lamps are also witnessing higher demand. The lighting division's sales in the September '09 quarter were Rs 25.30 crore (against Rs 9.42 crore in the same quarter, previous year).
Apart from conventional zinc carbon and alkaline batteries, Eveready is also focussing on developing its rechargeable battery business. It had, in May this year, taken controlling stake in the French rechargeable battery maker Uniross for a consideration of Rs 41.10 crore. With roots in Europe, Uniross has presence across the globe. Eveready already sells batteries, flashlights and mosquito coils under the brand ‘LAVA' in the markets of Sudan, Egypt and Sri Lanka.
Eveready's tea business holds a 5 per cent domestic market share. Sales growth has been flat over the last five years. In the September'09 quarter the segment's turnover was Rs 17 crore against the Rs 20.4 crore in the same quarter last year.
Risks to business
After cooling from the highs of FY07 zinc prices have risen again from their lows; from $1,549/tonne in June to $2,300/tonne now. The prospects for zinc largely depend on how steel offtake shapes up this year, with the recovery in the global economy. However, even if prices do rise from current levels, they may not go back to last year's bubble-driven peaks. An appreciating rupee is a positive for the company as it cuts input costs.
Financials
Eveready's sales have been growing at an annualised rate of 7 per cent in the last five years.
After reporting net losses for two years in sequence in FY07 and FY08, the company returned to profits in FY09 on the cooling-off in input prices and higher price realisations. FY10 can be expected to be a good year for the company with the half-year numbers already showing a 13 per cent increase in sales and operating profits almost doubling.
After tax profits were reported at Rs 40.04 crore against the Rs 5.9 crore in the same period last year.
The current year may also see a one-time cash flow equivalent to Rs 115 crore due to the company transferring its leasehold premises at Navi Mumbai to HDIL.
The income will be shown in the books once the company finishes the formalities. Eveready's debt burden too stands reduced from Rs 401.7 crore in FY08 to Rs 296.39 crore by FY09-end.
Lower interest rates may aid better profitability in the quarters ahead.
via BL

Anant Raj Industries

Realty player Anant Raj Industries could be a prime beneficiary of the recovery in the real-estate market in the National Capital Region, including Delhi. This is especially so in view of the Common Wealth Games 2010 to be held there , .
A de-leveraged balance-sheet, comfortable cash position for execution of projects, focussed strategy of leasing assets and de-risked business model in segments such as hotels augur well for the company's earnings growth over the next couple of years.
Investors with a high-risk appetite can consider limited exposure to the stock of Anant Raj Industries with a two-year perspective.
At the current market price of Rs 132, the stock trades at 11 times its likely per share earnings for FY-11. High concentration in Delhi and the NCR areas, as well as in the commercial realty segment , are risk factors, which if handled well, could benefit the company.
Asset-heavy model
Anant Raj Industries follows an asset-heavy model, which means that the company owns a good part of what it builds and chooses to lease most of them.
Lease of prime commercial and retail space in Delhi and the rest of the NCR and other cities adjoining Delhi, occasional offloading of such assets owned through stake sale, apart from sale of residential properties, are the key sources of revenue for the company.
Anant Raj holds 982 acres of fully paid land bank . The land was procured at low cost and as and when the Delhi Development Authority made allocations. Anant Raj has traditionally focused on commercial space lease, with a good 55 per cent of its saleable area coming under this segment.
In its recent venture, it pre-leased 70 per cent of its IT SEZ in Manesar, a fast growing industrial town in Gurgaon . Nevertheless, the NCR region, as demonstrated in 2008, is prone to sharp spells of correction. That said, the region was also among the first to recover.
Besides, studies show that the NCR region stands second in the country in terms of demand for commercial space. While Anant Raj faces risk by concentrating its commercial projects in NCR, the region lends itself well for companies wanting to build a rental-yield revenue model. Going by the company's track record of handling office space leasing, the company may well continue to build on the lease model.
It has nevertheless, realised the need to diversify further and has about 33 per cent of its saleable area in the residential space. While it is developing a few mid-income housing projects in the outskirts, its flagship premium projects in the heart of Delhi, with capital values upwards of Rs 25,000 per sq. ft now, is likely to yield good returns. The company's cash-rich position and in-house construction do not leave much doubt on execution delays.
De-risked hotel segment
Anant Raj has an interesting business model in the hotel segment. In its two properties near the Delhi airport, for instance, it has transferred the occupancy risks to third-parties in return for fixed rental income over six years, with escalation clauses after three years.
Similarly, in its hotel property forming part of the Manesar IT Park, it has tied up with the Hilton group on a per sq. ft, basis (not based on occupancy), with escalation clauses every three years.
Transferring occupancy risks to third parties would provide steady revenue streams, which would otherwise be writ with the volatility faced by the hospitality industry.
Internal Accruals
With a net cash balance of Rs 550 crore, post its negligible debt, Anant Raj is certainly among the cash-rich realty companies, a rare feature in the industry. Apart from lease revenue, it resorts to occasional land/stake sale in projects, thus monetising its assets. This strategy comes in handy, especially during periods of fund crunch.
As a result, revenue flow tends to be lumpy when the company resorts to sale of property. The company's consolidated revenues have grown 56 per cent compounded annually over the last three years to Rs 251 crore in FY-09. Rental income close to doubled in the first half of FY-10 as more properties became operational.
The company's operating profit margin tends to vary as a result of its sale-cum-lease model and is as high as 90 per cent in quarters when expenses on construction are low, even as the steady lease income flows.
via BL

Alok Industries

Investors with a long-term perspective and a high-risk appetite can buy the stock of textile player Alok Industries. At Rs 21, the stock is at 6.1 times its trailing 12-month per share earnings. Investors should limit portfolio exposure to this small-cap stock.
Sustained exports, increased per client revenues and efforts to tap domestic markets, wide-ranged product lines and capacity expansion suggest strong prospects for the company over the medium term. The company's planned exit from its realty arm to refocus on textiles may help trim its massive debt, which has been the key reason for the stock's depressed valuations.
Segment spread
The company's revenues are derived from apparel fabrics (54 per cent), followed by polyester yarn (21 per cent) and home textiles (17 per cent),cotton yarn (4 per cent) and garments (5 per cent). Individual product lines are varied within as well. Fabrics include poplins, lawns, voiles, canvases, satins and so on. Yarns include dyed yarn and organic cotton, among others, while home textiles include bed and bath linen.
Alok supplies fabric and garments for work wear and fashion wear to manufacturers and retailers such as Zodiac, Gap, and so on, in domestic and international markets. Technical and speciality fabrics such as fire-retardant fabrics, wrinkle-free and stain-free fabrics, tarpaulins, and so on, find growth markets in sectors such as Defence, automotives, hotels and hospitals. Alok has set up research and product development facilities to boost sales of technical fabrics.
Such broad-basing gives Alok the ability to capitalise on healthy prospects in some segments even as others may flag. Alok's list includes repeat clients, and some of the bigger names such as Gokaldas, Walmart, JC Penny, and so on, which help mitigate the risk of drying up of orders.
Export markets
Even as textile exports flagged from the September 08 quarter onwards on waning consumer demand overseas, Alok's exports managed a 2 per cent growth. Alok actually added clients during FY-09, as global retailers looked to consolidate suppliers to control costs. Alok's diversified offerings and capacity expansions allowed it to meet client requirements, resulting in increased revenues per client.
For instance, JC Penny, which was sourcing only apparel fabric, began sourcing home textiles as well. Exports hovered at 40-45 per cent of sales over the past three years, with the exception of FY-09, when it dipped to 33 per cent. Alok plans to hold exports at 45 per cent levels. Global retailers and manufacturers are looking to source from India to cut their costs as consumer demand hints at staging a revival.
Domestic markets
With domestic consumer demand on an upswing and retailers seeing healthy sales, the domestic market holds bright prospects too. Alok's distribution channel, its retail arm H&A, will serve to improve supplies to domestic retailers.
Formerly, H&A retailed home textiles, apparel and accessories to the value-for-money consumer market. H&A isnow changed to a wholesale value-for-money, cash-and-carry model, supplying smaller retailers and garment manufacturers. This move could enable foreign investments compliant with FDI norms, help bring in smaller clients, and spread the company's reach over a wider geography.
The current store count is at 152, concentrated in north and west India. Planned count for end-FY-10 is 250 across metros, Tier-I and II cities pan-India, with a target of adding 250 stores per year after that. Though a tad ambitious, especially in the light of troubles faced by like-minded retailers, Alok plans to expand through franchisees. Capital requirement and store expenses such as rent will thus be minimal and risks muted to an extent.
Financials
The company's sales clocked a three-year CAGR of 26.5 per cent, while net profits clocked a growth of 20.5 per cent in the same period. Sales growth has held at 40 per cent for the first half of FY10; net profits have grown 25 per cent.
Acquiring primary raw material cotton during season time as well as forex hedging strategies have helped operating margins improve steadily from 21.5 per cent in 2006-07 to 30.2 per cent in 2008-09. However, 50 per cent-plus growth in interest costs and depreciation have left net margins at a low 6.4 per cent.
Debt and interest
Alok's debt is at Rs 6,910 crore, translating into a post-rights issue debt-equity ratio of 3.2 times, taken on to fund capacity expansion and working capital. Interest costs have wiped out almost half the operating margins of 30 per cent in FY-09 and 28 per cent in the first half of FY-10.
However, Rs 3,000 crore has been taken under the Technology Upgradation Fund Scheme floated by the Textiles Ministry. These loans carry a low 6 per cent interest rate and 10-year repayment frame.
Going forward, Alok's debt requirement will be minimal with expansion complete by the end-FY10, and franchise mode of H&A store ramp-up. As sales step up to match capacity expansion, interest costs and debt load are likely to come down.
Further, Alok's exit from its three commercial and residential realty projects will help trim debt. Exit will be complete, at the latest by end-FY11.
via BL