1.Ranbaxy
2.Marico
3.Century Textile
4.Ador welding
5.DIC India
Tuesday, June 1, 2010
Sunday, June 17, 2007
IFCI-IS IT WORTH BELIEVING
Think IFCI. What comes to mind immediately? A troubled, old and beleaguered financial institution, which is desperately seeking a boost of revival. And like an ugly bride waiting for the suitor, any suitor to come and give a new lease of life, IFCI continues to wait for the right infusion of financial dose, through a strategic partner, to get it onto the path of revival.
One of the oldest financial institution of India, set up in 1948, a year after India gained independence, IFCI is yet to gain freedom from the vicious cycle of its mounting doubtful debts and bad loans.
Bad lending norms and even poorer management practices has turned the FI into what it is today. The Govt has very categorically stated today that no more concessional financing will be given to IFCI, if one may recollect the Govt had doled out Rs.3000 crores under its revival package in 2002. The FI might not have been able to yet get over its bad loans but, with this revival package, the FI has managed to close its books in the black. Yet, it remains saddled with debt of over Rs.1000 crores which it owes to various banks. Some of these banks managed to write off the bad debt while some reset the interest rates from 12% to 6.5%, the differential was borne by the Govt. But with Govt washing its hands off the institution, the banks are now demanding that their deferred liabilities better be cleared.
The financial imprudence can be seen from the fact that it recently sold, in March 2007, its 21% holding along with eight per cent holding of the Specified Undertaking of UTI in rating agency ICRA through the latter's IPO. The IPO was issued at a price of Rs.330 per share on the upper price band and today; ICRA is quoted at more than 175% of its issue price and the rate today is at Rs.908. Similarly, IFCI also sold off its 7% stake in NSE to four institutional investors viz. Goldman Sachs, NYSE, General Atlantic and Soft Bank.
Presently, the only job of the FI is to recover its sticky loan and liquidate its investments.. The company had a brought forward loss of Rs.4,698 crores as on 31-03-05 which rose to Rs.4,772 crores in FY 06. In a bid to clean the balance sheet, IFCI adjusted its Deferred Tax Assets of Rs.3,082 crores in FY 07 against its accumulated losses. The main profit component in FY 07 was profit on sale of shares of Rs.793 crores. Due to this alone, the accumulated losses on 31-03-07 got reduced to Rs.836 crores.
It seems IFCI is desperate to wipe off its brought forward losses and is hence using all the best available options – selling investments, accounting adjustments etc. Afterall, they are on the lookout for a suitable groom!
IFCI had its huge recoverable of about Rs.1,500 crores from power sector, Rs.2,800 crores from Iron & Steel, Rs.1,100 crores from Textiles and about Rs.1,000 crores from Refinery. Despite all these industries faring well, IFCI has not been able to make much of a recovery from these industries.
IFCI has been opting to sell shares of ICRA and NSE without taking a correct and realistic call. Maybe, it was under pressure to liquidate Rupee Loan of over Rs.12,000 crores, Foreign Currency Loan of Rs.1,000 crores and Preference Capital of Rs.430 crores. The total loan granted by the company is above Rs.8,000 crores, post write-off, as also have investments of close to Rs.2,000 crores.
Even the preference shares have a coupon rate of 10.50% to 10.90%. Bonds were issued by IFCI, which are guaranteed by the Govt. of India, carrying coupon rate of 11.50%, 12% and 13%. Due to these debts, annual cost of borrowing to IFCI for FY 07 was Rs.730.94 crores. The net profit of Rs.873.71 for FY 07 was after providing Rs.355.61 crores as Deferred Tax Liability, being a non-cash outflow thus giving improved cash flow for the company.
Probably in FY 08, IFCI would make all possible efforts to wipe off its accumulated losses which were at Rs.836 crores on 31-03-07 and would retire high cost preference shares, debentures and bonds. In view of economy revival, the loans due from various companies would in all probability get realized.
The paid-up equity of IFCI is Rs.639 crores. With share price ruling at Rs.47 the market cap of IFCI works out at Rs.3,000 crores. With liquidation of investments and recovery of loan, clear picture would emerge in FY 08. Once the balance sheet is cleared, some of the residual assets and investments may attract the prospective investors to give a valuation of close to Rs.4,000 crores to this beleaguered institution. In the past, about two years back, IDBI and PNB asked cash payment from govt. to acquire IFCI. But looks like economy revival has really saved IFCI.
Lets take a look at the current shareholding pattern of the institution. 48.69% of the shares are held by institutions in which FIIs have a stake of 21.69%. 51.31% is held by the public of which again 13.69% is held by corporate bodies and 37.62% by individual investors.
Now take a look at the list of individual investors who hold more than 1 lakh shares – LIC holds 8.4%, IDBI 5.01%, Deutsche Securities 4.61%, Goldman Sachs 3.29%, Morgan Stanley 2.51%, Citigroup 2.48%, GIC 2.37%, Lehman Brothers 1.86%, SBI 1.50%, Merrill Lynch 1.38% and Oriental Insurance 1.38%. Really, the list of shareholders of FIIs looks like a veritable who’s who of the Indian financial world and now we have hope that one of these FIIs hikes their stake in the institution.
The troubled financial institution has been in the news over the past few months on hopes of the institution getting either merged or managing to get in a strategic partner, hopefully a foreign investor, by selling a significant chunk of its equity. To have this partner identified, just like there are matchmakers around, IFCI has also appointed a consultant.
One of the oldest financial institution of India, set up in 1948, a year after India gained independence, IFCI is yet to gain freedom from the vicious cycle of its mounting doubtful debts and bad loans.
Bad lending norms and even poorer management practices has turned the FI into what it is today. The Govt has very categorically stated today that no more concessional financing will be given to IFCI, if one may recollect the Govt had doled out Rs.3000 crores under its revival package in 2002. The FI might not have been able to yet get over its bad loans but, with this revival package, the FI has managed to close its books in the black. Yet, it remains saddled with debt of over Rs.1000 crores which it owes to various banks. Some of these banks managed to write off the bad debt while some reset the interest rates from 12% to 6.5%, the differential was borne by the Govt. But with Govt washing its hands off the institution, the banks are now demanding that their deferred liabilities better be cleared.
The financial imprudence can be seen from the fact that it recently sold, in March 2007, its 21% holding along with eight per cent holding of the Specified Undertaking of UTI in rating agency ICRA through the latter's IPO. The IPO was issued at a price of Rs.330 per share on the upper price band and today; ICRA is quoted at more than 175% of its issue price and the rate today is at Rs.908. Similarly, IFCI also sold off its 7% stake in NSE to four institutional investors viz. Goldman Sachs, NYSE, General Atlantic and Soft Bank.
Presently, the only job of the FI is to recover its sticky loan and liquidate its investments.. The company had a brought forward loss of Rs.4,698 crores as on 31-03-05 which rose to Rs.4,772 crores in FY 06. In a bid to clean the balance sheet, IFCI adjusted its Deferred Tax Assets of Rs.3,082 crores in FY 07 against its accumulated losses. The main profit component in FY 07 was profit on sale of shares of Rs.793 crores. Due to this alone, the accumulated losses on 31-03-07 got reduced to Rs.836 crores.
It seems IFCI is desperate to wipe off its brought forward losses and is hence using all the best available options – selling investments, accounting adjustments etc. Afterall, they are on the lookout for a suitable groom!
IFCI had its huge recoverable of about Rs.1,500 crores from power sector, Rs.2,800 crores from Iron & Steel, Rs.1,100 crores from Textiles and about Rs.1,000 crores from Refinery. Despite all these industries faring well, IFCI has not been able to make much of a recovery from these industries.
IFCI has been opting to sell shares of ICRA and NSE without taking a correct and realistic call. Maybe, it was under pressure to liquidate Rupee Loan of over Rs.12,000 crores, Foreign Currency Loan of Rs.1,000 crores and Preference Capital of Rs.430 crores. The total loan granted by the company is above Rs.8,000 crores, post write-off, as also have investments of close to Rs.2,000 crores.
Even the preference shares have a coupon rate of 10.50% to 10.90%. Bonds were issued by IFCI, which are guaranteed by the Govt. of India, carrying coupon rate of 11.50%, 12% and 13%. Due to these debts, annual cost of borrowing to IFCI for FY 07 was Rs.730.94 crores. The net profit of Rs.873.71 for FY 07 was after providing Rs.355.61 crores as Deferred Tax Liability, being a non-cash outflow thus giving improved cash flow for the company.
Probably in FY 08, IFCI would make all possible efforts to wipe off its accumulated losses which were at Rs.836 crores on 31-03-07 and would retire high cost preference shares, debentures and bonds. In view of economy revival, the loans due from various companies would in all probability get realized.
The paid-up equity of IFCI is Rs.639 crores. With share price ruling at Rs.47 the market cap of IFCI works out at Rs.3,000 crores. With liquidation of investments and recovery of loan, clear picture would emerge in FY 08. Once the balance sheet is cleared, some of the residual assets and investments may attract the prospective investors to give a valuation of close to Rs.4,000 crores to this beleaguered institution. In the past, about two years back, IDBI and PNB asked cash payment from govt. to acquire IFCI. But looks like economy revival has really saved IFCI.
Lets take a look at the current shareholding pattern of the institution. 48.69% of the shares are held by institutions in which FIIs have a stake of 21.69%. 51.31% is held by the public of which again 13.69% is held by corporate bodies and 37.62% by individual investors.
Now take a look at the list of individual investors who hold more than 1 lakh shares – LIC holds 8.4%, IDBI 5.01%, Deutsche Securities 4.61%, Goldman Sachs 3.29%, Morgan Stanley 2.51%, Citigroup 2.48%, GIC 2.37%, Lehman Brothers 1.86%, SBI 1.50%, Merrill Lynch 1.38% and Oriental Insurance 1.38%. Really, the list of shareholders of FIIs looks like a veritable who’s who of the Indian financial world and now we have hope that one of these FIIs hikes their stake in the institution.
The troubled financial institution has been in the news over the past few months on hopes of the institution getting either merged or managing to get in a strategic partner, hopefully a foreign investor, by selling a significant chunk of its equity. To have this partner identified, just like there are matchmakers around, IFCI has also appointed a consultant.
Saturday, June 9, 2007
RELIANCE VALUATION---S.P.TULSIAN
By SP Tulsian
The favourite discussion in drawing rooms amongst most of the analysts is – how do you value the shares of Reliance Industries Ltd (RIL)? Lot of debates and discussions then ensue about valuing the shares, which cannot be done on earning method alone. Since the company has presence in upstream, investments in Reliance Petroleum (RPL) as also in Retail and SEZ, sum of parts method has to be adopted to work out its correct valuation.
We will be discussing the other business later on, but our priority would be to focus on the valuation of RPL. There are divided opinions - whether RPL needs to be valued as an inter-corporate investment or on an earning method, in view of the financial performance getting consolidated with RIL.
What is RPL ?
Reliance Petroleum went public on 13th April 2006 with an issue of 135 crore equity shares of Rs.10/- each an issue price of Rs.60 per share. Of this, public was allotted 45 crore share while 67.50 crore shares were subscribed by RIL and 22.50 crore (being 5% of total issued capital of RPL) share were subscribed to by Cheveron.
Cheveron has an option to subscribe further 24% equity of RPL at a mutually agreed price before commencement of commercial production of refinery, which is scheduled for December 08. However this date has now been revised and preponed to June 2008.
RIL is holding 75% stake of RPL comprising of 375 crore equity shares. Of this, 270 crore shares, were subscribed at par while 67.50 crores shares were subscribed at an issue price of Rs.60 per share. The book value of investments of 337.50 crore shares of RPL are Rs.6750 crores to RIL.
Market Price of such shares is Rs.34,400/- crores taking market price of Rs.102 per share of RPL as on 29.05.2007. This translates into value per share of RIL at Rs.225 per share, on fully diluted equity of Rs.1515 crores, post warrant conversion (12 crore warrants issued to Mukesh Ambani at an effective conversion price of Rs.1402 per shares).
However, some fundamental analysts value this part at Rs.200 per share after allowing a 10% discount to the gross value of Rs.225 arrived above.
However, our basis of valuation is purely on earning method. RPL is setting up a refinery to process 5,80,000 barrels of crude oil per day, equivalent to 29 million TPA with an expected complexity of 14.0 as measured using the Nelson Complexity Index. This would result in higher gross refining margin (GRM) for the company, as complex refineries are able to convert heavy crude oils into light products resulting in higher light-heavy spread.
Going by the financial performance of RIL for its Refinery having a Nelson Complexity of 11.3, RIL earned a GRM of US $ 13 for Q4 of FY07. The EBIT of Q4 of Refinery was at Rs.2277 Crores. In view of higher complexity of RPL and rising GRM margin, RPL can always earn 15% higher GRM than that of RIL.
If GRM of RPL is presumed at US$ 14 per barrel, the EBIT of RPL would be –
5.80 lakh barrels x US$14 GRM x 360 days x Rs.40/- US$ x 90% = Rs.10,500 crores
The total debt of the company is likely to be Rs.13,500 crores thus entailing an annual interest burden approximately Rs.1000 crores. Since the company would not be having any tax liability, the PAT would be Rs.9500 Crores in the first full year of commercial production of RPL.
75% of this, equivalent to Rs.7125 crores are likely to get added to the bottom line of RPL in its consolidated accounts. This results into an incremental EPS of Rs.47 for RIL. If a P/E of 8 is applied, it gives a valuation of Rs.376 and Rs.470 with a P/E of 10.
The correct method of valuing RPL investments under sum of part method for RIL would be earning method.
Now lets take a look at the valuation of RIL on various parts: -
1.
RIL had an EPS of Rs.78.50 for FY07 16% growth in bottom line projects EPS for FY08 at Rs.91.Apply PE of 10 to this.
Rs.910 Per Share
2.
Valuation of RPL at an Investment Average of P/E of 8 and 10.
Rs.420 Per Share
3.
Upstream E & P business can yield a bottom line of Rs.10000 Croes per year. Since RIL has 90% interest bottomline of Rs.9000 crore would yield an EPS of Rs.59.50. Apply P/E of 9.
Rs.530 Per Share
4.
Reliance Retail valued at approx Rs.10000 crores. FY08 may result in negative bottom line for the retail division
Rs.65 Per Share
5.
SEZ business is still under infancy though progress is made at Haryana. It can be valued at Rs.15000 Crores
Rs.100 Per Share
Total
Rs.2025 Per Share
Less: 10% discount to the above.
Rs. 200 Per Share
Rs. 1825 Per Share
Hence the shares can be valued at Rs.1825 in the near term (next 3-6 months) with a price target of Rs.2025 by July 08, when E & P and RPL would reach the stage of commercial production.
The favourite discussion in drawing rooms amongst most of the analysts is – how do you value the shares of Reliance Industries Ltd (RIL)? Lot of debates and discussions then ensue about valuing the shares, which cannot be done on earning method alone. Since the company has presence in upstream, investments in Reliance Petroleum (RPL) as also in Retail and SEZ, sum of parts method has to be adopted to work out its correct valuation.
We will be discussing the other business later on, but our priority would be to focus on the valuation of RPL. There are divided opinions - whether RPL needs to be valued as an inter-corporate investment or on an earning method, in view of the financial performance getting consolidated with RIL.
What is RPL ?
Reliance Petroleum went public on 13th April 2006 with an issue of 135 crore equity shares of Rs.10/- each an issue price of Rs.60 per share. Of this, public was allotted 45 crore share while 67.50 crore shares were subscribed by RIL and 22.50 crore (being 5% of total issued capital of RPL) share were subscribed to by Cheveron.
Cheveron has an option to subscribe further 24% equity of RPL at a mutually agreed price before commencement of commercial production of refinery, which is scheduled for December 08. However this date has now been revised and preponed to June 2008.
RIL is holding 75% stake of RPL comprising of 375 crore equity shares. Of this, 270 crore shares, were subscribed at par while 67.50 crores shares were subscribed at an issue price of Rs.60 per share. The book value of investments of 337.50 crore shares of RPL are Rs.6750 crores to RIL.
Market Price of such shares is Rs.34,400/- crores taking market price of Rs.102 per share of RPL as on 29.05.2007. This translates into value per share of RIL at Rs.225 per share, on fully diluted equity of Rs.1515 crores, post warrant conversion (12 crore warrants issued to Mukesh Ambani at an effective conversion price of Rs.1402 per shares).
However, some fundamental analysts value this part at Rs.200 per share after allowing a 10% discount to the gross value of Rs.225 arrived above.
However, our basis of valuation is purely on earning method. RPL is setting up a refinery to process 5,80,000 barrels of crude oil per day, equivalent to 29 million TPA with an expected complexity of 14.0 as measured using the Nelson Complexity Index. This would result in higher gross refining margin (GRM) for the company, as complex refineries are able to convert heavy crude oils into light products resulting in higher light-heavy spread.
Going by the financial performance of RIL for its Refinery having a Nelson Complexity of 11.3, RIL earned a GRM of US $ 13 for Q4 of FY07. The EBIT of Q4 of Refinery was at Rs.2277 Crores. In view of higher complexity of RPL and rising GRM margin, RPL can always earn 15% higher GRM than that of RIL.
If GRM of RPL is presumed at US$ 14 per barrel, the EBIT of RPL would be –
5.80 lakh barrels x US$14 GRM x 360 days x Rs.40/- US$ x 90% = Rs.10,500 crores
The total debt of the company is likely to be Rs.13,500 crores thus entailing an annual interest burden approximately Rs.1000 crores. Since the company would not be having any tax liability, the PAT would be Rs.9500 Crores in the first full year of commercial production of RPL.
75% of this, equivalent to Rs.7125 crores are likely to get added to the bottom line of RPL in its consolidated accounts. This results into an incremental EPS of Rs.47 for RIL. If a P/E of 8 is applied, it gives a valuation of Rs.376 and Rs.470 with a P/E of 10.
The correct method of valuing RPL investments under sum of part method for RIL would be earning method.
Now lets take a look at the valuation of RIL on various parts: -
1.
RIL had an EPS of Rs.78.50 for FY07 16% growth in bottom line projects EPS for FY08 at Rs.91.Apply PE of 10 to this.
Rs.910 Per Share
2.
Valuation of RPL at an Investment Average of P/E of 8 and 10.
Rs.420 Per Share
3.
Upstream E & P business can yield a bottom line of Rs.10000 Croes per year. Since RIL has 90% interest bottomline of Rs.9000 crore would yield an EPS of Rs.59.50. Apply P/E of 9.
Rs.530 Per Share
4.
Reliance Retail valued at approx Rs.10000 crores. FY08 may result in negative bottom line for the retail division
Rs.65 Per Share
5.
SEZ business is still under infancy though progress is made at Haryana. It can be valued at Rs.15000 Crores
Rs.100 Per Share
Total
Rs.2025 Per Share
Less: 10% discount to the above.
Rs. 200 Per Share
Rs. 1825 Per Share
Hence the shares can be valued at Rs.1825 in the near term (next 3-6 months) with a price target of Rs.2025 by July 08, when E & P and RPL would reach the stage of commercial production.
10 STOCKS YOU CAN BET ON..........
1.TECH MAHINDRA
2.GREAT OFFSHORE
3.ADLABS
4.KOTAK BANK
5.HAVELLS
6.ZICOM SECURITY SYSTEMS
7.3I INFOTECH
8.PANTALOONS
9.UTV SOFTWARE
10.VOLTAMP
2.GREAT OFFSHORE
3.ADLABS
4.KOTAK BANK
5.HAVELLS
6.ZICOM SECURITY SYSTEMS
7.3I INFOTECH
8.PANTALOONS
9.UTV SOFTWARE
10.VOLTAMP
STOCK RECOOMANDATION--PARSVNATH DEVELOPERS
Parsvnath Developers is a good stock to enter into amongst the realty sector at Rs.335 with an outlook of 6 to 24 months.
Introduction:
The company went public on 6th November 06 with a public issue of 3.33 crore equity shares of Rs10 each at an issue price of Rs.300 per share and a green shoe option of 30.87 lakh share and raised a sum of Rs.1090 crores from the issue.
The share had a high of Rs.575 and low of Rs.220 and is now ruling at Rs.335.
Financial Results:
The company reported good financial results for the FY 07 wherein topline on consolidated basis was at Rs.1535 crores with EBITDA of Rs.442 crores. After providing Rs.19.32 crores for interest and Rs.14.33 crores for depreciation, profit before tax is placed at Rs.408 crores. After providing for tax liability of Rs.98 crores and minority interest in profit till date of acquisition of Rs.17.64 crores, net profit is placed at Rs.292.21 crores, resulting into an EPS of Rs.18.16 on equity base of Rs.184.70 crores. Promoters stake in the company is at 80.33%. The board has recommended a dividend of 25% for FY 07.
The financial performance of the company for Q4 on standalone basis has been very exciting. Topline for the quarter was at Rs.412 crores while bottomline was at Rs.132 crores.
Land Bank:
The company is operating in 41 cities and 14 states and has a saleable area of 108.64 million sq. ft. when it went public.
The company has 20 integrated township, 27 commercial complexes, 25 residential complexes, 14 hotels, 4 IT Parks and 9 SEZs mainly located at Greater NOIDA, Lucknow, Pune, Agra, Gurgaon and Shirdi.
PROJECTS:
1) The company acquired remaining 50% in Parsvnath Landmark Developer P. Ltd on 7//3/07, thus making it a 100% subsidiary of the company. This company is developing two projects – a shopping mall at Faridabad and a high end residential project at Khyber Pass – Delhi. Mall Manhatan with an area of 1,35,360 has been completed and shall be made operational very soon. La Tropicana – a prime residential area in Civil Lines, North Delhi with an area of 15.42 lakh sq. ft. has begun its work. This land was bought by the company from DMRC.
2) The company is setting up a State-of-the-art Multimedia cum Filmcity Centre at Chandigarh in Parsvnath Filmcity Ltd in which the company owns 98.80%. The total land for this project of 30 acres with an FAR of 13 lakh sq. ft. has been acquired by the company on 99 years lease for Rs.191 crores and shall be completed in 36 months. This project will have a Film Studio (3.47 lakh sq. ft.) Multi Media Park (3.47lakh sq. ft.) Multi Media Entertainment Centre (2.62 lakh sq. ft.) and Multi Media College and Residence Centre of 3.47 lakh sq. ft. The project is valued at Rs.800 crores.
3) The company is constructing a 2 lakh sq. ft. Mall at Rohini, land for which has been acquired from DDA for Rs.231 crore and shall be operational in two years.
4) Developing a 5 lakh sq. ft. BUA 5 Star Hotel and commercial mall at Vejalpur in Ahmedabad the land for which has been acquired from AUDA. The project is valued at Rs.250 crores and shall be completed in 21/2 years.
5) Developing a Group Housing Scheme of 31 lakh sq. ft. at NOIDA on 72 acre plot with cost of Rs.1750 crores which will be completed in next 36 months.
6) Developing a 4.75 lakh sq. ft. 5 Star Hotel, Mall and Multiplex Project at Dwarka City, Sector 14, New Delhi, land for which has been acquired from DDA for Rs.449.91 crores.
7) Developing a retail, commercial and office complex at Twin District Centre, New Delhi land for which has been acquired from DDA for Rs.231 crores.
8) Developing a 3.25 lakh sq. ft. fully air conditioned Commercial Mall in Sonepat to be completed in 30 months.
9) Developing a group housing complex in Jamnagar on plot of 13,200 sq. meters.
10) The company is developing shopping malls on 11 stations of Delhi Metro Rail on BOT basis. Of these 5 have already been executed at Sahara, Pratap Nagar, Inderlok, Seelampur and Tis Hazari. Work on Azadpur Metro Station and Commonwealth Game Village has commenced.
11) Developing 9.5 acre project of 382 residential units at Greater Noida with project cost of Rs.200 crores.
12) Developing 440 apartments residential complex at Panchkula on 7.2 acre with cost of Rs.146 crores.
13) Developing a high end residential township at Dhasunera, Haryana on 114 acres of land for 1000 apartments and 150 villas.
14) Developing IT Parks in Gurgaon (10.13 lakh sq. ft.) Mysore (7.62 lakh sq.ft.) Cochin (13.07 lakh sq. ft.) and at Kancheepuram of 29.27 lakh sq. ft.
15) Developing hotels at Shirdi, Jodhpur, Monali, Haridwar, Bhiwadi, Chandigarh, Hyderabad, Indore, Lucknow, Ujjain and Goa.
Business Model:
The company having mobilized Rs.1100 crores from public issue has deployed Rs.530 crores only upto 31-03-07 and Rs.555 crores has been temporarily invested in fixed and short term deposits. Apart from this, the total debt of finance would not be a constraint for the company.
Over and above all this, the company is developing complexes and selling residential flats and commercial units on ownership basis on which it has EBITDA margin of close to 30 per cent. The company is planning to lease out hotels, malls and multiplexes on rental basis which would give regular flow of annuity income to the company.
Conclusion:
The present market cap of the company is Rs.6100 crores while its land bank and projects can get valued close to Rs12,000 crores. And with the huge land bank in its fold, the business has good potential of more scalability.
At Rs.330, the share has potential to give 50% return over the next 12 months.
Introduction:
The company went public on 6th November 06 with a public issue of 3.33 crore equity shares of Rs10 each at an issue price of Rs.300 per share and a green shoe option of 30.87 lakh share and raised a sum of Rs.1090 crores from the issue.
The share had a high of Rs.575 and low of Rs.220 and is now ruling at Rs.335.
Financial Results:
The company reported good financial results for the FY 07 wherein topline on consolidated basis was at Rs.1535 crores with EBITDA of Rs.442 crores. After providing Rs.19.32 crores for interest and Rs.14.33 crores for depreciation, profit before tax is placed at Rs.408 crores. After providing for tax liability of Rs.98 crores and minority interest in profit till date of acquisition of Rs.17.64 crores, net profit is placed at Rs.292.21 crores, resulting into an EPS of Rs.18.16 on equity base of Rs.184.70 crores. Promoters stake in the company is at 80.33%. The board has recommended a dividend of 25% for FY 07.
The financial performance of the company for Q4 on standalone basis has been very exciting. Topline for the quarter was at Rs.412 crores while bottomline was at Rs.132 crores.
Land Bank:
The company is operating in 41 cities and 14 states and has a saleable area of 108.64 million sq. ft. when it went public.
The company has 20 integrated township, 27 commercial complexes, 25 residential complexes, 14 hotels, 4 IT Parks and 9 SEZs mainly located at Greater NOIDA, Lucknow, Pune, Agra, Gurgaon and Shirdi.
PROJECTS:
1) The company acquired remaining 50% in Parsvnath Landmark Developer P. Ltd on 7//3/07, thus making it a 100% subsidiary of the company. This company is developing two projects – a shopping mall at Faridabad and a high end residential project at Khyber Pass – Delhi. Mall Manhatan with an area of 1,35,360 has been completed and shall be made operational very soon. La Tropicana – a prime residential area in Civil Lines, North Delhi with an area of 15.42 lakh sq. ft. has begun its work. This land was bought by the company from DMRC.
2) The company is setting up a State-of-the-art Multimedia cum Filmcity Centre at Chandigarh in Parsvnath Filmcity Ltd in which the company owns 98.80%. The total land for this project of 30 acres with an FAR of 13 lakh sq. ft. has been acquired by the company on 99 years lease for Rs.191 crores and shall be completed in 36 months. This project will have a Film Studio (3.47 lakh sq. ft.) Multi Media Park (3.47lakh sq. ft.) Multi Media Entertainment Centre (2.62 lakh sq. ft.) and Multi Media College and Residence Centre of 3.47 lakh sq. ft. The project is valued at Rs.800 crores.
3) The company is constructing a 2 lakh sq. ft. Mall at Rohini, land for which has been acquired from DDA for Rs.231 crore and shall be operational in two years.
4) Developing a 5 lakh sq. ft. BUA 5 Star Hotel and commercial mall at Vejalpur in Ahmedabad the land for which has been acquired from AUDA. The project is valued at Rs.250 crores and shall be completed in 21/2 years.
5) Developing a Group Housing Scheme of 31 lakh sq. ft. at NOIDA on 72 acre plot with cost of Rs.1750 crores which will be completed in next 36 months.
6) Developing a 4.75 lakh sq. ft. 5 Star Hotel, Mall and Multiplex Project at Dwarka City, Sector 14, New Delhi, land for which has been acquired from DDA for Rs.449.91 crores.
7) Developing a retail, commercial and office complex at Twin District Centre, New Delhi land for which has been acquired from DDA for Rs.231 crores.
8) Developing a 3.25 lakh sq. ft. fully air conditioned Commercial Mall in Sonepat to be completed in 30 months.
9) Developing a group housing complex in Jamnagar on plot of 13,200 sq. meters.
10) The company is developing shopping malls on 11 stations of Delhi Metro Rail on BOT basis. Of these 5 have already been executed at Sahara, Pratap Nagar, Inderlok, Seelampur and Tis Hazari. Work on Azadpur Metro Station and Commonwealth Game Village has commenced.
11) Developing 9.5 acre project of 382 residential units at Greater Noida with project cost of Rs.200 crores.
12) Developing 440 apartments residential complex at Panchkula on 7.2 acre with cost of Rs.146 crores.
13) Developing a high end residential township at Dhasunera, Haryana on 114 acres of land for 1000 apartments and 150 villas.
14) Developing IT Parks in Gurgaon (10.13 lakh sq. ft.) Mysore (7.62 lakh sq.ft.) Cochin (13.07 lakh sq. ft.) and at Kancheepuram of 29.27 lakh sq. ft.
15) Developing hotels at Shirdi, Jodhpur, Monali, Haridwar, Bhiwadi, Chandigarh, Hyderabad, Indore, Lucknow, Ujjain and Goa.
Business Model:
The company having mobilized Rs.1100 crores from public issue has deployed Rs.530 crores only upto 31-03-07 and Rs.555 crores has been temporarily invested in fixed and short term deposits. Apart from this, the total debt of finance would not be a constraint for the company.
Over and above all this, the company is developing complexes and selling residential flats and commercial units on ownership basis on which it has EBITDA margin of close to 30 per cent. The company is planning to lease out hotels, malls and multiplexes on rental basis which would give regular flow of annuity income to the company.
Conclusion:
The present market cap of the company is Rs.6100 crores while its land bank and projects can get valued close to Rs12,000 crores. And with the huge land bank in its fold, the business has good potential of more scalability.
At Rs.330, the share has potential to give 50% return over the next 12 months.
STOCK RECOOMNDATION--GITANJALI GEMS
Introduction
Gitanjali Gems is an integrated diamond and jewellery manufacturing company and one of the largest manufacturer and retailer of diamonds and jewellery in India. The company has been changing its product mix in favour of jewellery, resulting in better operating margins by tapping customers’ preference for branded jewellery with its strong brand network.
Plants and Networks
The company has two diamond manufacturing facilities at Borivali in Mumbai and at a SEZ in Surat. The jewellery designing and manufacturing facility is located at SEEPZ, Andheri on 80,000 sq. ft. for export market. Apart from this, the company has two modern jewellery manufacturing facilities at Andheri in Mumbai, for retail operations in India.
SEZ development
The company is developing a 200 acre Gem and Jewellery SEZ at Shamshabad, outskirts of Hyderabad, which would result into an area of 10 million sq. ft. The central government approval for the same has been received and 75 acres of land has already been allotted by the government to the company.
The company is also developing another SEZ at Panvel on a 25 acres of land.
Acquisition of Samuels Jewellery Inc.
The company has acquired 97% stake in Samuels Jewellers Inc., the 10th largest jewellery chain in US having 97 stores across 18 states with an annual turnover of Rs.450 crores. The company has issued 15.54 lakh equity shares to B Capital Partners at Rs.290 per share towards part consideration for acquiring this stake.
Brand Acquisition
The company has also acquired majority stake in Tri Star Worldwide LLC which is a BHP Billion direct customer and a Canadmark licensee thus a manufacturer and global distributor of Canadia brand diamonds and diamond jewellery.
The company has been acquiring majority stakes in various companies which have strong brand value and distribution and marketing network. In that direction, the company has raised its stake in Gili India from 40% to 65% D’Dmas Jewellery (India) P. Ltd. has become a 51% subsidiary of the company from a JV earlier. These companies have flagship brands like GILI and D’Dmas respectively, apart from other sub-brands. 100% shares of Desire Lifestyles were also acquired by the company.
The company is focused on marketing branded jewellery in India and abroad and with that view, the company has formed various companies like Gitanjali Lifestyles Ltd., Gitanjali Ventures DMCC, Gitajnjali Infratech Ltd.
The company has also formed a 50:50 JV with Sulieman Al Othaim of Saudi Arabia, a leading retail chain in the Middle East to market branded jewellery in that region. This is after the company got good response to its brands in the Middle East market.
FCCB Issue
The company had completed its FCCB issue of US $ 110 million equivalent to Rs.495 crores with a tenure of 5 years 1 day. The shares in this issue can be converted at Rs.275 per share.
Shareholding Pattern
The present paid-up equity of the company is at Rs.60.55 crores, of which promoters stake is at 61 per cent; MF, Banks and FII’s hold about 19%, while 20% is held by public.
Financial Performance
The company had posted total income of Rs.1,622 crores for FY 06 with EBITDA of Rs.84.90 crores, PBT of Rs.54.32 crores and PAT of Rs.47.80 crores, resulting into an EPS of Rs.11.36.
For 9 months ended 31-12-06 total income was placed at Rs.1,547 crores, EBITDA of Rs.95.32 crores, PBT of Rs.76.58 crores, and PAT of Rs.68.18 crores resulting into an EPS of Rs.11.55 for the period.
It may been seen that 9 months bottomline performance has surpassed FY 06 performance by 42.64% inspite of topline being lower by 4.62%. This has been possible due to the strategy followed by the company to increase its ratio of branded jewellery in its total income. Branded jewellery has operating margin of as high as 22% to 24%. The company hopes to make its diamond and jewellery turnover ratio of 50:50 by 2010.
Conclusion
For FY 08 the company is likely to post a topline of Rs.2,500 crores and bottomline of Rs.120 crores resulting into an EPS of Rs.20. For FY 07 the EPS is likely to be Rs.15.
Post development of SEZ, which is likely to be completed by FY 09, rental income would improve the bottomline of the company further.
Share is presently ruling at Rs.186 which discounts FY 08 earnings by less than 10 times. In view of rapid expansion of the company in branded jewellery segment, the company would like to get re-rated in due course of time. Presently, there is some apprehension about the management, which may also get cleared over a period of time.
Hence buying at Rs.186 can give 50 per cent return in the short to medium term with an investment horizon of 6 to 12 months.
Gitanjali Gems is an integrated diamond and jewellery manufacturing company and one of the largest manufacturer and retailer of diamonds and jewellery in India. The company has been changing its product mix in favour of jewellery, resulting in better operating margins by tapping customers’ preference for branded jewellery with its strong brand network.
Plants and Networks
The company has two diamond manufacturing facilities at Borivali in Mumbai and at a SEZ in Surat. The jewellery designing and manufacturing facility is located at SEEPZ, Andheri on 80,000 sq. ft. for export market. Apart from this, the company has two modern jewellery manufacturing facilities at Andheri in Mumbai, for retail operations in India.
SEZ development
The company is developing a 200 acre Gem and Jewellery SEZ at Shamshabad, outskirts of Hyderabad, which would result into an area of 10 million sq. ft. The central government approval for the same has been received and 75 acres of land has already been allotted by the government to the company.
The company is also developing another SEZ at Panvel on a 25 acres of land.
Acquisition of Samuels Jewellery Inc.
The company has acquired 97% stake in Samuels Jewellers Inc., the 10th largest jewellery chain in US having 97 stores across 18 states with an annual turnover of Rs.450 crores. The company has issued 15.54 lakh equity shares to B Capital Partners at Rs.290 per share towards part consideration for acquiring this stake.
Brand Acquisition
The company has also acquired majority stake in Tri Star Worldwide LLC which is a BHP Billion direct customer and a Canadmark licensee thus a manufacturer and global distributor of Canadia brand diamonds and diamond jewellery.
The company has been acquiring majority stakes in various companies which have strong brand value and distribution and marketing network. In that direction, the company has raised its stake in Gili India from 40% to 65% D’Dmas Jewellery (India) P. Ltd. has become a 51% subsidiary of the company from a JV earlier. These companies have flagship brands like GILI and D’Dmas respectively, apart from other sub-brands. 100% shares of Desire Lifestyles were also acquired by the company.
The company is focused on marketing branded jewellery in India and abroad and with that view, the company has formed various companies like Gitanjali Lifestyles Ltd., Gitanjali Ventures DMCC, Gitajnjali Infratech Ltd.
The company has also formed a 50:50 JV with Sulieman Al Othaim of Saudi Arabia, a leading retail chain in the Middle East to market branded jewellery in that region. This is after the company got good response to its brands in the Middle East market.
FCCB Issue
The company had completed its FCCB issue of US $ 110 million equivalent to Rs.495 crores with a tenure of 5 years 1 day. The shares in this issue can be converted at Rs.275 per share.
Shareholding Pattern
The present paid-up equity of the company is at Rs.60.55 crores, of which promoters stake is at 61 per cent; MF, Banks and FII’s hold about 19%, while 20% is held by public.
Financial Performance
The company had posted total income of Rs.1,622 crores for FY 06 with EBITDA of Rs.84.90 crores, PBT of Rs.54.32 crores and PAT of Rs.47.80 crores, resulting into an EPS of Rs.11.36.
For 9 months ended 31-12-06 total income was placed at Rs.1,547 crores, EBITDA of Rs.95.32 crores, PBT of Rs.76.58 crores, and PAT of Rs.68.18 crores resulting into an EPS of Rs.11.55 for the period.
It may been seen that 9 months bottomline performance has surpassed FY 06 performance by 42.64% inspite of topline being lower by 4.62%. This has been possible due to the strategy followed by the company to increase its ratio of branded jewellery in its total income. Branded jewellery has operating margin of as high as 22% to 24%. The company hopes to make its diamond and jewellery turnover ratio of 50:50 by 2010.
Conclusion
For FY 08 the company is likely to post a topline of Rs.2,500 crores and bottomline of Rs.120 crores resulting into an EPS of Rs.20. For FY 07 the EPS is likely to be Rs.15.
Post development of SEZ, which is likely to be completed by FY 09, rental income would improve the bottomline of the company further.
Share is presently ruling at Rs.186 which discounts FY 08 earnings by less than 10 times. In view of rapid expansion of the company in branded jewellery segment, the company would like to get re-rated in due course of time. Presently, there is some apprehension about the management, which may also get cleared over a period of time.
Hence buying at Rs.186 can give 50 per cent return in the short to medium term with an investment horizon of 6 to 12 months.
Subscribe to:
Posts (Atom)
