Stock Idea

ABG Shipyard, the largest private sector shipbuilding yard in India has posted good results for third quarter ended 31st December 2007.

On a sequential basis, on a Q-on-Q basis, the net sales increased 29.79% at Rs.274.96 crore, EBIDTA was up 29.49% at Rs.83.56 crore, PBT was up 37.96% at Rs.71.67 crore and PAT was up 38.14% at Rs.47.12 crore. On an equity of Rs.50.92 crore, the EPS stands at Rs.9.25.

The company currently has an order book of Rs 8,277 crore. The company has been constantly upgrading its facilities and that is precisely one of its biggest strengths. It has expanded its existing facility in Surat and also acquired a strategic stake in Vipul Shipyard located near the existing Surat unit. ABG is also setting up a new facility in Dahej, which is expected to commence operations from April 2008. Once this facility is fully operational, the company would be able to manufacture ships up to 1,20,000 DWT (dead weight tonnage).

The company is well entrenched in the shipping sector and poised well to take advantage of the currently booming industry. Given its reputation and expertise, the company gets repeat orders which in turn help giving it better economies of scale. Though the OPM of the company has slipped marginally to 30.39% from 30.46% in the previous quarter, it is expected that given the improvements in the fortunes and margins of the shipping industry, the coming quarter will reflect a better and improved OPM.
Currently quoted at Rs.686, investors could well stay invested.

Source: sptulsian.com

Intraday Calls for 28th March

Markets may open flat to positive and ramians volatile with positive bias. A positive closing expected today in Indian Stock Markets.

Today's Intraday Picks:
UNITECH
CAIRN INDIA
HDIL
Parsvnath Developoers
Aurobindo Pharma
For Levels and Targets download the file by CLICK HERE

Others: GTL Infra, Bag Films, Dish TV.

Good Luck

Tata Motors - JLR Deal

Next time you go to USA or Europe and see someone driving a swanky Jaguar or a Land Rover (JLR), surely you can walk a little taller with the collar raised up, after all it is an Indian company, which now owns these luxury cars! Indeed, we have come a long, long way from the taboo that the “Made in India” tags had! Ex-Prime Minister of UK, Tony Blair owns a Jaguar and it is one of the few trademarks to hold Royal Warrants of Appointment from both Queen Elizabeth and Prince Charles. The Queen of England loves to ride in her Land Rover when in Scotland. India buying the most loved British brands, surely a moment of celebration!

Tata Motors clinching the deal for Jaguar and Land Rover for a whopping $2.3 billion would have surely made the world sit up and take notice. If the world had missed out looking at what India is all about when Tata Steel bought Corus, surely now, Tata Motors would have got the attention of one and all.

After the entire halo over the pride of being an Indian clears, comes the moot question – how will this affect the balance sheet of Tata Motors? The shareholders of Tata Motors are a worried lot today as they do not know whether they should cry in joy over the acquisition or shed tears of impending doom.

Tata Motors has acquired Jaguar and Land Rover (JLR) for $2.3 billion, which is actually a bargain considering that Ford had acquired these two brands for $5.23 billion in the early 2000s. Tata Motors Ltd, has signed a deal to receive a $3 billion (Rs12,180 crore) one-year bridge loan from Citigroup Inc. and JPMorgan Chase and Co. Of this $3 billion, the JLR acquisition will take away $2.3 billion and the rest is to be used to meet working capital needs and few other expenses, like maybe the cost of getting the Nano on the Indian roads.

A consortium of eight banks — State Bank of India, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, ING, Mizuho and Standard Chartered, is underwriting the bridge loan. The bridge loan has been structured in the form of step-up financing: for the first six months, the interest charge would be Libor (London Inter-Bank Offered Rate) plus 70 basis points and for the next six months, it would be 140 basis point over the benchmark rate. A special purpose vehicle is raising the bridge loan, which is 100% owned by Tata Motors.

A year later, the short-term borrowings are to be refinanced through a combination of long-term debt and equity. The company is looking at a debt equity ratio of 1:1. So this means that of the Rs.12,180 crore being raised, Rs.6090 crore is to come via debt and another Rs.6090 crore via liquidation of investments and issue of fresh shares.

First the debt part. On the Rs.6090 crore, assuming an interest rate of 6%, we are looking at an interest burden of Rs.365 crore per annum. So we now have to realize that about over Rs.400 crore of the bottomline will be additionally eaten away by the interest burden.

Now for the equity part. The company is also contemplating selling a slice of its holdings in its group companies to raise the amount. A look at the balance sheet of Tata Motors was a real eye opener. Instead of finding a string of investments, the company has only two major investments to talk about which on liquidation will give it money. One is the holding in Tata Steel. It holds 2.58 crore shares of Tata Steel. Currently quoted at Rs.655, if Tata Motors decides to sell off its entire holding in Tata Steel, it will be able to raise Rs.1690 crore, as of today. In unquoted, the company has 66.67 lakh shares of Tata Industries, which promotes the Group's entry into new and high-tech areas. If Tata Motors decides to sell its stake in this company which has face value of Rs.100 per share, at Rs.1000 per share, then it will be able to raise Rs.660 crore. So these two companies together, will be able to raise around Rs.2500 crore, which is over 40% of the total money to be raised via equity route. For the rest, the company will be able to raise another Rs.1500 crore via preferential allotment to Tata Sons and for the balance, it might come out with a rights issue. Now these are the plausible methods of raising the equity and might also prove to be the best.

It may be recalled that Tata Steel had sold 85 lakh shares in TCS at an average rate of Rs.1,082 per share, managing to raise Rs.920 crore to refinance a part of the Corus deal.

There is no doubt that Tata Motors has a huge responsibility now. It has taken over two of the biggest luxury brands of the world but both of them have had dwindling sales and a red balance sheet. It is now upto Tata Motors to turn it around. The balance sheet of Tata Motors of next fiscal will reflect the consolidated figures of JLR and their losses if they keep mounting, might be meager in the developed country parlance but would be enough to drown the company in a quagmire of losses.

Tata Motors also has the responsibility of ensuring that it is able to show profits on its Nano project and this too will require some more amount of investment.

Till now the shareholders of Tata Motors had to worry only about the Nano but now, they have to worry about the performance of Jaguar and Land Rover. It should not happen that this current moment of pride turns into a sore wound. The next two years will undoubtedly be painful, years of integration. Till then, the shareholders can take pride of being owners of the company, which owns JLR, so what if they don’t actually drive a Jaguar to home!

By Ruma Dubey
Source: sptulsian.com

Investment Idea: Welspun Gujarat

Promoted by the Welspun group, one of the largest SAW pipe manufacturers of India, the company has posted good Q3 results.

On a y-on-y basis, the financial performance of the company for the third quarter ended 31st December 2007 has been phenomenal. It clocked a 136% jump in net profit and its topline grew 39%. The biggest contributor to the sales was exports which accounted for over 68% of overall sales.

Compared on a q-on-q basis, the increase in the performance has been more or less as expected. Net sales was up 11.73% at Rs.1036.40 crore, EBIDTA was up 13.38% at Rs.176.30 crore, PBT was up 17.44% at Rs.147.50 crore and PAT was up 18.06% at Rs.97.40 crore. Its OPM improved from 16.76% to 17.01% and NPM improved from 8.89% to 9.40%.

The company provides complete solutions for all line pipe requirements. It manufactures pipes in varying sizes and diameters, ranging from as small as ½ inch to as large as 100 inches of higher grades, up to X 80. It also offers complete coating, as well as bending solution. Welspun has supplied pipes to the deep offshore gas pipeline project in the Gulf of Mexico, the United States. The company’s customers include TOTAL, Shell, Saudi Aramco, Chevron, Clough Engineering, PGN, MITCO, Exxon Mobil and Enterprise

The company recently bagged a prestigious pipeline order worth Rs.1075 crore for the supply of spiral pipes in Northern Africa. The new order has taken Welspun’s order book position to above Rs.5900 crore.

The stock is currently quoted at Rs.364. Stay invested.

Market Whispers

KLG Systel qualifies a good buy at Rs.535 for short to medium term as share price has potential to cross Rs.600 mark soon.

Kernex Micro seems to have settled at Rs.140 levels and one could buy it with 6 months view, where share has potential to cross Rs.200 mark.

SAIL is viewed a good short to medium term bet at Rs.204 in view of good Q4 results expected from the company.

Essar Shipping have corrected sharply and now ruling at Rs.140 is viewed a good buy in view of merger of closely held companies of the group. On NAV basis, share value works out to Rs.400 by analysts. Good for medium term.

Axis Bank is recommended a good short term buy at Rs.800 for a Rs.50 gain.
Adani Enterprises is likely to witness informed buying and share may show a rise of about Rs.40 from its present levels of Rs.530.

Profit booking is advised in Pantaloon Retail and one may exit from the stock at Rs.425 levels as Q4 working is likely to be below market expectations, which may pull down price below Rs.400.

HUL is a good buy at the current rate of Rs.239 for short to medium term. One can accumulate this stock at every decline.

A well known broking house is recommending NTPC to its client at the current rate of Rs.197.

With Morgan Stanley predicting that the Indian rupee could reach a decade high of Rs.38.61 per dollar by June 30th 08'; FIIs are expected to pump in more money to take advantage of the currency arbitrage.

Intraday Calls for 27th March

Market may open nagetive but it can recover from lower levels and remains in range of 1-2% +/-. Small cap and Midcap may continue moving up but at higher levels some profit booking expected.

Today's Intraday Picks:

Praj Industries
Jindal Stainless
Bajaj Hindustan
Renuka Sugar
KPIT
For levels and Targets download the file by CLICK HERE
Keep an eye on Tata Motors and Tata group companies.
Good Luck

Markets Today

The key benchmark indices ended the volatile session with a loss of nearly one percent. Mixed global cues and imminent expiry of March 2008 derivative contracts kept the market volatile throughout the day.

Investors turned cautious after the previous day's 6.1% jump. Majority of the sectoral indices on BSE slipped into red. ICICI Bank was the top loser from the Sensex pack. The market breadth was positive.
As per provisional closing, the 30-share BSE Sensex was down 156.96 points or 0.97% at 16,060.53. The index lost 207.62 points at sessions low of 16,009.87 hit in afternoon trade. The index gained 92.39 points at the sessions high of 16,309.88, hit at the onset of the trading session.
The broader CNX S&P Nifty was down 58.3 points or 1.20% at 4819.20.
The March 2008 derivative contracts will expire on Thursday, 27 March 2008. As per reports, the marketwide rollover of derivative positions from March 2008 series to April 2008 series stood at 38%, while that of Nifty was 41% by Tuesday, 25 March 2008.
The BSE Mid-cap index was up 1.42% at 6,262.04. The BSE small-cap index was up 2.15% at 7,441.01.
The market breadth was positive. On BSE, 1710 stocks advanced, 1003 declined and 47 stocks were unchanged.
The BSE clocked a turnover of Rs 6100 crore as against Rs 6,880.05 crore on Tuesday, 25 March 2008.
Indias largest private sector bank by assets ICICI Bank fell 4.54% at Rs 840.
Indias largest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) fell 0.62% to Rs 2300.
Indias top commercial vehicle maker by sales Tata Motors lost 0.71% to Rs 675.10. As per reports, US automaker Ford has agreed to sell its luxury brands Jaguar and Land Rover to India's Tata Motors for more than $2 billion. Ford, which signed the deal on Tuesday, 25 March 2008, plans to publicly announce the transaction in New York today, reports suggest.
Top Sensex gainers were, Tata Steel (up 3.99% at Rs 659.10), Housing Development Finance Corporation (up 3.18% at Rs 2672), ITC (up 2.30% at Rs 195.50), and Grasim Industries (up 0.53% at Rs 2701).
Top Sensex losers were, Hindustan Unilever (down 4.37% at Rs 234.25), Bharti Airtel (down 4.24% at Rs 799), Bharat heavy Electricals (down 3.51% at Rs 1942), Jaiprakash Associates (down 3.47% at Rs 225) and DLF (down 3.32% at Rs 656.10).
Shipping firm Mercator Lines rose 6.80% to Rs 76.15 after the company said its subsidiary Mercator Lines, Singapore has entered into negotiation with Refined Success for the time charter-out of Geastiniono TBN, a gearless panamax vessel.
Avantel Softech surged 9.41% to Rs 59 after the company said it has bagged an order worth Rs 8.25 crore from the Government of India for supply of satellite communication receiver terminals for Indian Navy
Engineering firm GEI Industrial Systems soared 10.85% to Rs 71.50 after the company said it has bagged an order worth Rs 30 crore from Essar Construction for supply of air cooled heat exchangers for a project in Gujarat.
Private sector lender Axis Bank vaulted 4.34% to Rs 826.50 after a two block deals totaling 45.46 lakh shares were struck on the counter at average price of Rs 799.89 per share on BSE.
Garment manufacturer SEL Manufacturing Company rose 5% to Rs 276.05 after the company said its board has approved raising upto $250 million through issue of foreign currency convertible bonds and global depository receipts.
Diesel engines maker Kirloskar Oil Engines jumped 5.95% to Rs 106 after three block deals aggregating 30.99 lakh shares were executed on the counter at an average price of Rs 100.03 per share in opening trade on BSE.
Edible oils maker K S Oils gained 0.39% to Rs 64.60 after the company said it has acquired a single palm plantation over a vast area spread across 50,000 acres of green land in Indonesia.
US markets ended on mixed note yesterday, 25 March 2008 after the consumer confidence fell sharply in March 2008 with the Consumer Confidence Index (CCI) slumping to a five-year low of 64.5. The Dow Jones industrial average declined 16.04 points, or 0.13%, to 12,532.60. The S&P added 3.11 points, or 0.23%, to 1,352.99 and the Nasdaq gained 14.30 points, or 0.61%, to 2,341.05.
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