NHPC Listing

BY S. P. Tulsian
NHPC Ltd. stock will be listing tomorrow and looking to the grey market premium of Rs. 5.50 to Rs. 6 and issue having made at Rs. 36 per share, it is likely to list, at around Rs. 42 per share. This listing will definitely be a disappointment for the NHPC allottees and for the primary market.
NHPC went public on 7th August 2009 with an issue of 164 crore equity shares of Rs. 10 each, of which, fresh issue was 112 crore shares, while, offer for sale was of 52 crore shares. The allotment has been made by the company in record 14 days.
QIB category subscribed by 29.11 times, HNI category subscribed 55.93 times while Retail category subscribed 3.79 times and Employees category subscribed by about 0.66 times. Retail category has 13.35 lakh allottees while HNI category had just 6,033 shareholders with 381 allottees in QIB category and 5,530 members in employees category. The total shareholders came to the company’s fold, post IPO, is 13.47 lakh.
Most of HNI applicants have applied in the issue, after availing 95% finance, at an average interest rate of 11.50% to 12.50%. If we calculate interest at 11.50% on 95% amount having availed, for 14 days, the interest cost per share comes to Rs. 8.25 per share. This results in a total cost per share to an HNI investor at Rs. 44.25 per share.
In Retail category, minimum of 175 shares and maximum of 2625 shares were allowed and firm allotment has been given to those who have applied for 700 shares and above. In this category, no applicant avails finance, hence interest cost, on notional basis to them, at 12% per annum, work out to 63 paise, per share of the share allotted. In QIB category, it is not material, as 10% of the money is only paid by these allottees. In such a case, interest cost to them is about 48 paise per share.
So HNI, will be at a great disadvantage and likely to see loss on listing day, if share lists below Rs. 44.25 per share, or rules below this level, throughout the day. Generally, such allottees are not in a mood to hold the position, as they mostly go for listing gain. Inspite of the share now remaining with them, without any debt burden or pledge, still higher cost keeps bothering them at all the time.
In such a scenario, it is likely to see selling pressure coming in from HNI and Retail category investors, for first 2 - 3 days, which will keep pressure on the stock price and may not allow it to move past Rs. 42. Also, poor listing of Adani Power, has disappointed this class of investors, as share is still languishing at Rs. 104. In case of NHPC, even in grey market, trades have taken place at a premium of Rs. 9 to Rs. 12 which will also pose a problem in its settlement, as it is causing loss to those who have gone long in this stock.
On fundamental basis, stock has long term prospect to give a steady and annualized return of about 15% to 18% from a level of Rs. 42. However, don’t expect fireworks in the stock in the near term as stock is likely to move gradually on the lines of NTPC and Powergrid, other 2 PSU utility companies.

Source: www.premiuminvestments.in (By S P Tulsian)

Stock Idea: Rolta India Ltd.

Rolta India Ltd.
CMP Rs 178.35
Target Price Rs 255.00
Company Snapshot
Rolta is a market leader in providing specialized technology solutions and services for the Geospatial, Defense and Homeland Security and Engineering sectors. Rolta is a global company and offers a full complement of solutions to companies around the world. Rolta also offers a focused set of services in eSecurity, Enterprise IT Management, ERP Consulting and Deployment as well as a wide range of Database and Business Intelligence solutions in the area of Enterprise IT.

Rolta India Ltd has come up with sustained results for Q1FY10. The total revenue of the company has gone up from Rs.3211.07 million in Q1FY09 to Rs.3326.97 million in Q1FY10 showing an increase of 3.61%. The operating profits almost remained flat at Rs.1124.73 million in Q1FY10 as compared to Rs.1121.87 million in Q1FY09. The net profit of the company increased from Rs.508.27 million in Q1FY09 to a profit of Rs.762.28 million in Q1FY10 showing a rise of 49.98%. Operating profit margin remained at 33.81% down from 34.94% in the same quarter last year and the Net Profit Margin jumped from 15.83% last year to 22.91% in Q1FY10. The EPS of the company stood at Rs.4.73 in Q1FY10 which was Rs.3.16 in Q1FY09.

Business Details
Rolta is an Indian multinational organization that has executed in over 40 countries. In the Geospatial business, Rolta enjoys a market share of over 70% in India for segments such as infrastructure, telecom, electric, airports, urban development, town planning and environmental protection. Rolta now offers its Geospatial offerings to large markets in the developed and developing countries with its innovative solutions after the launch of high-end photogrammetry and comprehensive imaging technologies.
Indian Armed Forces have adopted Rolta’s Geospatial based operations and intelligence solutions resulting in a dominant market share. These solutions cover a range of domains such as Data Security and Service Management, Database Foundation, Enterprise Applications and Business Intelligence. Rolta has made a few strategic acquisitions. They acquired Orion, based in Canada, which provides spatial integration consulting, software and implementation services for global customers. They also acquired WhittmanHart Consulting, based in USA, which provides technology consulting and solutions for Business Intelligence and TUSC which provides integrated functional and technical solutions to customers.
Rolta has two joint ventures. Shaw Rolta Ltd with the Shaw Growp Inc., USA, which provides comprehensive engineering, procurement and construction management services to the power, oil, gas and petrochemical sectors. Rolta Thales Ltd with Thales, France offers leading-edge information systems to the defense, homeland security and intelligence sectors. Sectoral Outlook
While the global IT industry had a difficult year, the Indian IT industry has grown in strength and value and serves a significant portion of the global information technology outsourcing needs by leveraging its large, highly qualified and growing talent base. According to NASSCOM report,
IT Services alone constituted 57% of Indian IT exports in FY2009 and accounted for about $26.9 billion in value. The sector revenues as a proportion of national GDP have grown from 1.2% in FY 1998 to an estimated 5.8% in FY2009. India’s IT growth in the world is primarily dominated by IT software and services such as Custom Application Development Maintenance (CADM), System Integration, IT consulting, Application Management, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services. Indian IT is also playing a key role in global technology IP creation. As per NASSCOM, exports from high-value-added services such as engineering, R&D and offshore product development grew by 15% to reach $7.3 billion in FY2009. The government expects the exports turnover to touch US$80 billion by 2011 growing at an annual rate of 30% per annum.
Investment Rationale
The company saw a lot of orders flowing in the month of June. The company has approximately Rs.1600 crore of firm orders in hand and Rs.5000 crore in the pipeline. The company has taken very strategic orders in the newer solutions that they have booked in the GeoSPatial Fusion, Rolta one view which has been introduced in the engineering space and in Rolta SOA which has been introduced in the IT space. A very large order in GeoSpatial Fusion is MIDE (Ministre de l’Agence de Developpement economique), which is the Canadian agency for economic development. Another large order for GeoSpatial Fusion is from the Road Transport Authority in Dubai. In India, their engineering services are given to the Department of space and ISRO for the design of rocket engines and to KBR in the last quarter. With these various orders in hand, the company is in a good position for the current year.

The management is positive on the company’s future plans. They have given a positive guidance to grow by 10-15% in the topline as well as in the bottomline during the current fiscal year. The company has been able to transform in the last one year by adding a lot of solutions, IPO, making a lot of acquisitions and by being able to transform the business. All this together makes the company very confident in moving forward. Rolta India Ltd reported good results in FY09. The net sales of the company went up from Rs.10722.14 million in FY08 to Rs.13728.13 million in FY09 showing a growth of 28.04%. This led to the increase in the operating profits of the company from Rs.3897.396 million last year to Rs.4635.27 million this year depicting a growth of 18.93%. The operating profit margin stood at 33.76% this fiscal dropping from 36.35% in FY08. The profit before taxes increased by 24.14% to Rs.3332.75 million in FY09 from Rs.2684.60 million in FY08. The net profit of the company stood at Rs.2938.28 million increasing at the rate of 27.42% from previous year’s Rs.2305.94 million. The Net Profit Margin of the company remained flat at 21.40%. The EPS increased from Rs.14.33 to Rs.18.25 in FY09.

Valuation
The company’s future prospects are becoming brighter with the various orders in hand and improving yearly and quarterly performance. Presently, the company is running at a P/B multiple of 2.02x to it’s FY09 book value of Rs.88.42 while the P/E multiple of the company is running at 9.77x to its FY09 EPS of Rs.18.25. However, the industry is running at a P/E multiple of 19.30x which leaves the stock with a significant upside potential. Hence, we recommend BUY on the stock with a medium term price target of Rs.255.00.

Source: Internet (Hem Securities)

Stock Idea: Indraprastha Gas Ltd (IGL)

Company overview—
Incorporated in 1998, a joint venture between Gail & BPCL. Government of national capital territory of Delhi is also a shareholder. Company started its operation with 9 CNG stations & 1000 PNG consumers and Crossed 156 stations as of now. Company Completed 12” steel pipeline laying project in December 2002. Company is sole distributor of CNG in NCTD to the automotive sector & also distributes piped natural gas (PNG) to the commercial & the domestic sector in NCTD. Supreme Court order to public transport vehicles to compulsory shift to clean CNG in NCTD has helped company to grow its sales aggressively.
At starting company was started to lay the network for the distribution of natural gas in the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors. With the backing of strong promoters i.e. GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd., company plans to provide natural gas in the entire capital region. Main business objectives of the company are— to provide safe, convenient and reliable natural gas supply to its customers in the domestic and commercial sectors and provide a cleaner, environment-friendly alternative as auto fuel to Delhi’s residents. This will considerably bring down the alarmingly high levels of pollution. The transport sector uses natural gas as Compressed Natural Gas (CNG), while the domestic and commercial sectors use it as Piped Natural Gas (PNG). IGL now focuses on conversion of private vehicles to CNG. In this connection efforts are being made on the private vehicle front encouraging them to convert to CNG mode. Company is coordinating with CNG kit suppliers, Transport Department, Automotive Research Association of India and Vehicle research and Development Establishment to ease the process for endorsement of the same on Registration certificate of the vehicle.
Products & services—
Company is sole distributor of CNG in NCTD to the automotive sector & also distributes piped natural gas (PNG) to the commercial & the domestic sector in NCTD. CNG contributes almost 95% and PNG contributes around 5% of company’s sales. With over 156 dispensing stations company caters over 1,00,000 vehicles.
1) CNG stands for compressed natural gas. It is gaseous fuel and is a mixture of hydrocarbons mainly Methane. For use in Automobiles as fuel, it is compressed to a pressure of 200-250 Kg/cm2 to enhance the vehicle on-board storage capacity. The advantages of using CNG are various and distinct. The most important benefit of using CNG is that you are using a “green fuel’.
Green fuel - Commonly referred to as the green fuel because of its lead and sulphur free character, CNG reduces harmful emissions. Being non-corrosive, it enhances the longevity of spark plugs. Due to the absence of any lead or benzene content in CNG, the lead fouling of spark plugs, and lead or benzene pollution are eliminated.
Increased life of oils - Another practical advantage observed is the increased life of lubricating oils, as CNG does not contaminate and dilute the crankcase oil.
Mixes evenly in air - Being a gaseous fuel CNG mixes in the air easily and evenly.
Safety - CNG is less likely to auto-ignite on hot surfaces, since it has a high auto-ignition temperature (540 degrees entigrade) and a narrow range (5%-15%) of inflammability. It means that if CNG concentration in the air is below 5% or above 15%, it will not burn. This high ignition temperature and limited flammability range makes accidental ignition or combustion very unlikely.
Low operational cost - The operational cost of vehicles running on CNG, as compared to those running on other fuels, is significantly low. At the prevailing price of fuel in Delhi, operational cost of CNG vehicles is almost 68% lower than petrol and 36% lower than diesel.
2) PNG— Natural gas is mainly methane i.e. CH4 with a small percentage of other higher hydrocarbons. The ratio of carbon to hydrogen is least in methane and hence it burns almost completely making it the cleanest fuel. It is procured from the oil / gas wells and transported through a network of pipelines across the country. PNG has several distinctions to its credit of being a pollution free fuel, easily accessible minus storage troubles and being available at very competitive rates.
Uninterrupted supply--The source of PNG supply in Delhi is the famous Hazira-Bijaipur-Jagdishpur (HBJ) pipeline of GAIL (India) Limited. PNG offers the convenience of ensuring continuous and adequate supply of PNG at all times, without any problems of storing gas in cylinders.
Unmatched convenience--PNG eliminates the tedious routine of checking LPG refill cylinder for any suspected leakage, or it being underweight, at the time of delivery. Moreover, the user is spared the inconvenience of connecting and disconnecting the LPG cylinder when out of gas. Precious space, occupied by LPG cylinders is also saved.
Safety --The combustible mixture of natural gas and air does not ignite if the mixture is leaner than 5% and richer than 15% of the air-fuel ratio required for ignition. This narrow inflammability range makes PNG one of the safest fuels in the world.
Economy with PNG --PNG has been positioned to be cheaper than alternative fuels being used viz domestic LPG in case of House Hold, commercial LPG in case of Small Commercial and LPG Bulk & LDO in case of Large Commercial.
A versatile fuel --Natural gas is being used predominantly as a versatile fuel in many major cities catering to domestic and commercial applications, as a cooking fuel, for water heating, space heating, air conditioning, etc.
Environment friendly –Natural gas is one of the cleanest burning fossil fuels, and helps improve the quality of air, especially when used in place of other more polluting energy sources. Its combustion results in virtually no atmospheric emissions of sulphur dioxide, and far lower emissions of carbon monoxide, reactive hydrocarbons and carbon dioxide, than combustion of other fossil fuels. When natural gas burns completely, it gives out carbon dioxide and water vapour only.
No storage problems and stock accounting--PNG does not require any storage tank or storage space since it is supplied to you through pipelines. Also, the manpower and time that was earlier being used for ensuring minimum stock levels of LPG, HSD and LDO, can be used elsewhere. The other functions that accompany storing these fuels – monitoring stock levels, checking the quality and quantity of fuels received have also been rendered unnecessary.
Economy with PNG--PNG has been presently positioned to be cheaper than alternative fuels. For small commercials the pricing is indexed to 19 Kg LPG cylinders after adjusting for heat values. For Large Commercials, pricing is indexed to 90% LDO and 10% Bulk LPG again after adjusting for heat values.
No daily contact--The consumer is spared the task of contact with oil companies and co-ordinating with them for ensuring the daily supply of fuel, because PNG is supplied directly through pipes.
No spillage and pilferage--In case of spillage of fuels like HSD and LDO, there are liable to be immense product losses.
Lower maintenance cost --With PNG, soot or ash accumulation and greasy spillages are absent from your appliance. Maintenance costs are, thus, driven down.

Valuation---
At current market price, stock is trading at 11.2 X multiple of its FY2010 estimate earnings. We recommend investors “BUY” “Indraprastha Gas Limited” for medium to long-term investment horizon.

Source: Internet (By Abhishek Jain)

Stock Idea: BASF India

Given the cyclical nature of its business, the first two quarters of the fiscal, Q1 and Q2 are always good, with Q2 being the best in the year and the worst is Q4. BASF India has posted an ‘Ok’ performance for Q1FY10. It reported a rise of 12% in its net profit for Q1FY10 though total income fell marginally to Rs384.15 crore from Rs385.87 crore in Q1FY09.

The company plans to stop production of agrochemicals at its Dadra site under the company’s rationalisation measures. The company has stated that this will not affect the earnings of the company in any way. Further, to rationalise the company’s manpower needs and to build efficiency, the board has also approved the introduction of voluntary retirement scheme for employees. As a part of its rationalization, the company has removed low margin generic products and has also shifted its resources from cotton to soyabeans, fruits and vegetables which would help boost the margins.

The company is planning to set up a 9000 tpa compounding plant at Thane for the engineering plastics business, costing Rs.17.20 crore which is to be funded mainly via internal accruals.

On consolidated basis, BASF Polyurethanes a wholly owned subsidiary is incurring losses, and BASF SE have expressed their intention to acquire this subsidiary, which if happens, would re-rate the company as also would increase its bottomline even on consolidated basis.
In July 08, Promoters of the company raised their stake from 52.69% to 71.18% by acquiring shares under open offer at Rs.300 per share. Open offer at the time did not evoke full response as insurance companies and financial institutions did not tender shares in open offer and continue to hold about 18% in the company. News has been floating around for some time now that the company might soon get delisted.

And even if that does not happen, with all these rationalization moves, the company is sure to improve its margins substantially in the coming months. Q2 will be robust. One can acquire this share at current market price for good returns over 12 months.

Source: www.premiuminvestments.in (By S P Tulsian)

Intraday Trading Calls for 31st August

Indian Stock Market may open negative and negative with very high volatility.

Today's Intraday Stock Tips / Trading Calls (Keep strict Stop Loss for Each Trade):

SCRIP NAME	TRIGGER	PRICE	TARGET 1	TARGET 2
PSL LTD.	Buy Above	158.70	164.20	170.00
	Sell Below	156.35	151.10	146.00
ICSA	Buy Above	198.60	205.05	211.00
	Sell Below	196.10	191.35	186.00
IDFC	Buy Above	132.75	136.15	140.00
	Sell Below	130.45	127.15	124.00
STC INDIA	Buy Above	377.25	384.45	392.00
	Sell Below	372.35	364.10	356.00
REL POWER	Buy Above	162.25	166.50	171.00
	Sell Below	159.70	155.75	151.00
GMR INFRA	Buy Above	143.25	147.25	152.00
	Sell Below	141.05	137.10	134.00
ASTRA MICROWAVE	Buy Above	84.25	87.65	92.00
	Sell Below	82.40	79.35	75.00

GOOD LUCK

Stock Idea: Redington India Ltd

Redington India Ltd (Rs 226)
(BSE Code- 532805 NSE Code- REDINGTON)
(P/E- 10, FY09 Revenues - Rs 12,668 cr, Market Cap - Rs 1,760 cr)
Redington is the distributor for a range of IT products such as personal computers, laptops, servers, networking products and packaged software. It has vendor relationships with all the major names in this segment such as HP, HCL Infosystems, Acer, IBM, Intel and Cisco. This segment contributes over 85 per cent of its revenues. The company has also started distributing products such as mobile handsets of Nokia, Microsoft X-Box, Apple iPods, Mac and consumer electronic products. Redington's revenues have grown at a compounded annual rate of 39% over the three years to Rs 10,883 cr. in 2007-08, while net profits grew at a CAGR of 47.5% to Rs 136 cr.. For the year ended March 2009, net sales grew 16.4% to Rs 12,668 cr., whereas net profit grew 17% to Rs 159.6 cr. The EPS on a equity of Rs 77.87 cr.(Promoters'stake-44%) stood at Rs 20.5 and the dividend declared was 40%. The business is reliant on volumes and offers wafer-thin margins. Though they remain narrow, Redington's net profit margins have improved (from 0.69% to 1.25% in the last five years) due to the reselling of better margin products such as networking products, lifestyle gadgets and contributions from improved after-sales and post-warranty service. Redington generates 53% of its revenues domestically, and the rest from South East Asia, West Asia and Africa. The company's customer base is now at 14,458 corporate clients, spread across as many as 44 brands and caters to a wide range of sectors. Players such as HP and HCL Infosystems, and Wipro that dominate the domestic PC market, have continued to have strong relationship with Redington, thus assuring it of sustained volume growth.
According to a recent IDC report, the domestic IT hardware market is set to grow at an annual rate of 14.6% to Rs 96,558 cr. by 2012, while the packaged software segment is set to grow at a rate of 20.9% to Rs 21,129 cr., representing a huge opportunity for players such as Redington. Increased Governmental spending on IT-enablement across the country is another important growth driver for the company. The prospects are especially good for the better margin laptops, which have outpaced desktops in terms of sales growth in India and West Asia. The growth prospects for West Asia and the African region are equally impressive for IT hardware and software. Redington, with its relationship with all the big names in the IT business, would be well placed to tap this opportunity.
In addition to hardware, the company has begun to resell packaged software as well and has tied up with players such as Adobe to distribute their products in India. This could usher in better margins, as does the expansion into networking and data storage products. The company has also diversified into distribution of non-IT products such as mobile handsets of Nokia in Africa and other digital and consumer electronic products across India and West Asia. This segment contributes less than 10% of the current revenues and may serve as a good diversification strategy over the long run. Redington has also added to its offerings, high-end repair, warranty and post-warranty services. These are aimed at capturing annuity-based revenues, in addition to hardware sales. This apart, Redington has leveraged on its existing distribution network to venture into third-party logistics and has acquired spaces in Chennai, Delhi and Kolkata and Dubai.
For the Q1 ended June Dec. 2009, Redington has reported net profit of Rs 37.35 cr.(up 10%) on net sales of Rs 2,922 cr (flat) on consolidated basis. At current valuations, the stock trades at 11 times its FY 2009 earnings (Rs 20.5) and 9.4 times its estimated FY 2010 earnings (Rs 24). Redington's strong positioning in the domestic IT market and the absence of listed peers make the stock attractive. Accumulate on declines for decent returns in the medium-long term.

Source: Internet (Valuenotes By Sanjay Chhabria)

Stock Idea: Cosmo Films Ltd.

Cosmo Films Ltd(Rs 103)
(BSE Code- 508814 NSE Code- COSMOFILMS)
(P/E- 4, Market Cap- 200 cr, FY09 Sales- Rs 655 cr)
Cosmo Films(CFL) is one of the leading players in production of biaxially oriented polypropylene (BOPP) films. The product is used mainly by FMCG players like Parle, Britannia, Hindustan Unilever, Nestle and Dabur, which use tetrapacks and BOPP films for packing their products. Cosmo currently has an aggregate capacity to manufacture up to 96,000 tpa of BOPP films, which will be enhanced to 105,000 tpa by the first quarter of '10. The company not only supplies to FMCG multinationals operating in India and local players, but has also established its presence in overseas markets like the US and Europe. At present, close to 55% of the company's net sales are accounted for by exports. In India, the company faces competition from Uflex and Jindal Polyfilms. Apart from BOPP films, the company manufactures thermal films with annual production capacity of 21,000 tpa. This is a value-added product, made out of BOPP films, which carries a higher realisation.
The Indian BOPP market is estimated at 1.70 lakh tonnes and growing at 20% a year, with Jindals being the biggest producer of this product. Cosmo, promoted by Mr Ashok Jaipuria, operates two plants with six lines of production in Aurangabad and Vadodara. The demand for BOPP packaging material is increasing in India due to the retail boom. The major end-users of this product are food, confectionery, cosmetic, toiletries, label films, and cigarettes makers. CFL is now also looking at new geographies, with focus on parts of Africa and Eastern Europe. The global demand for BOPP products is estimated at 4.7 million tonnes and growing at 4-5% annually.
For the Q1 ended June 2009, Cosmo's domestic sales volume increased by 39% whereas export volume declined by 9% resulting in 5% drop in net sales to Rs 176.06 cr.. Higher interest/Depreciation due to commissioning of new BOPP line in March 2009 lead to 14% lower PAT at Rs 12.41 cr.. The EPS for Q1 stood at Rs 6.4. During FY09, Cosmo's net sales grew to Rs 655 cr from Rs 585 cr. in FY08. The slow growth was on account of the company's conscious decision to go slow on production in anticipation of a possible downturn in the BOPP cycle. The PAT was marginally down to Rs 42.74 cr. from Rs 44.5 cr. in FY08. PAT after extraordinary item (due to change in method of depreciation, there was surplus of Rs 44.72 cr.) was Rs 87.46 cr. On a equity of 19.44 cr.(Promoter's stake- 44%), the EPS before extraordinary item stood at Rs 22 and dividend of 50% was declared. CFL also completed the acquisition of GBC Commercial Print Finishing with global revenues of approx. $100 mn. Post this acquisition, CFL is expected to successfully establish itself as the global leader in thermal lamination segment. At the current market price of Rs 103, the scrip trades at 4.7 times its FY 2009 earnings (Rs 22) and 4 times its estimated FY 2010 earnings (Rs 26). Cosmo has one of the highest dividend yields among its peers at 4.85%. The stock holds good potential for appreciation in the next six months. Accumulate.

Source: Internet (Valuenotes By Sanjay Chhabria)