Archive for January, 2008

Gujarat NRE – 3rd Quarter Results update

Posted on January 31, 2008. Filed under: Stock Ideas - Long term |

Gujarat NRE Coke has come out with sterling results for the third quarter. The topline has grown to Rs248 crores in Q3 2007 from Rs102 crores in Q2 2007. The net profit for the quarter is Rs49.90 crores which translates to an EPS of Rs1.45 (diluted) on a quarterly basis. The net profit margin has improved to 20.58% compared to 12.30% during the previous quarter.

There are very many fundamental changes happening in the company which I have earlier mentioned here. I am quoting below a snippet posted in Deepak Singh’s blog “State of the market” on Gujarat NRE:
“Gujarat NRE Coke – A batch of foreign investors led by an Australian fund were seen buying shares of Gujarat NRE Coke in good numbers. According to these investors, floods in Australia, freezing weather in China and transport bottlenecks in Indonesia will stoke a sharp rise in the price of coal in other parts of Asia. JP Morgan recently raised its forecast for 2008 coking coal prices to $140 a tonne, a 42% jump from last year’s agreed price of $98.38. Its previous estimate was $120 a tonne. It is in this light that foreign investors are accumulating shares of mining major Gujarat NRE Coke in good numbers…Economic Times”

With the projected rise in the coal prices and Gujarat NRE owning huge coal mines would stand to benefit. I continue to remain bullish on the stock.

Disclaimer: This is not an invitation to buy or sell shares. The views expressed are my personal opinion and please consult your financial planner before taking your decision. I own the shares of Gujarat NRE Coke.

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Third quarter results update on my portfolio of stocks

Posted on January 30, 2008. Filed under: Stock Ideas - Long term |

I have written about Surya Pharmaceuticals before. You can read that here and here. The third quarter results for Surya Pharma has been declared and it is on track.

The topline is flat and the quarterly EPS is maintained around Rs8.27. There is an improvement on the operating margins by more than 120 basis points and by 50 basis points on the net profit level. The net profit is not reflected the higher operating margins because of higher depreciation and interest cost. The company has gone for expansion and I think it has not started generating revenues. We also need to look if there has been pricing pressures as well.

The trailing twelve months EPS is Rs29.10 and today it has closed at Rs115. The stock is currently quoting at PE of 3.95 and looks very attractive. I continue to hold the stock and I am planning to buy more around Rs100.

Disclaimer: Pls check independently before you buy or sell stocks. This is not an invitation to buy or sell stocks.

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"In Xanadu, A Quest" by William Dalrymple

Posted on January 28, 2008. Filed under: Books |

In Xanadu, A Quest is a travelogue written by William Dalrymple of his travel from Jerusalem to Xanadu in China. This is exactly the same route taken by Marco Polo some 1200 years ago when he travelled from Europe to Asia. William and his two lady companions (lucky guy!!) did this travel during their college days in Cambridge in 1986. I read this book only now!! His latest popular book on the Indian History is The Last Mughal.

Imagine travelling from Jerusalem to Xanadu, which is 12000 miles, and travelling through very diverse climatic conditions, with language barriers and cultural differences. It is not one of the most interesting of journeys for me but I admire the grit and determination shown by these young college students. They have to travel through various countries sometimes with valid visa and sometimes without. They travelled in all forms of transport from airplanes to motor cars to public buses to hitch-hiking in transport carriers.

Language barrier was one of the greatest difficulties these guys faced. William could not talk Urdu, Arabic or Chinese other than English and some smattering of these languages. Using very minimal knowledge of the local language, they have to fend for their food, accomodation, travel etc., and manages to well fed throughout the journey going by what he has written in the book!

The objective of this epic travel is not to start from point A and go to point B. Enroute he wants to see most of those places and buildings which has been mentioned in the original travelogue written by Marco Polo. William did manages to see many places and gives a very detailed account of the places he visited. These travellers I guess spend lot of time updating their log book at the end of the day inorder to write a travelogue latter!

Many a times in their entire journey, I recalls how he used his minimal local language skills to talk to the natives and convey the messages with regard to places, buildings, food and accomodation. By reading through the book, you will understand that most of the places in Afghanistan, Pakistan and China has not seen any visible signs of development for hundreds of years. The people still continue to do things the same way they have been doing for hundreds of years and ignorant of happenings across the world.

He undergoes very many hardships before he lands himself in Xanadu, his final destination in China. It turns out in the end that the Palace of Kubla Khan which he wanted to visit in Xanadu is non-existent and only the remnants could be seen.

After reading the book, I think:

1. Inspite of many hardships, the determination to proceed further is paramount to success. It applies to all activities in our life.
2. Sign language works as well as any other language. He manages to get whatever he wants enroute.
3. Keeping cool (atleast thats what I understand from the book) in face of adversity is very important.

One thing which I cant stop asking myself is : can this kind of journey would have been possible for a brown skinned person. He manages to travel through prohibited areas in China (closer to their nuclear testing facility) without valid permit, gets caught and manages to go scot-free!!

Can you imagine how much he would have used to complete the entire travel? William and his accomplices completed this journey through with GBP700 in hand. Believe me that is the amount he got from University of Cambridge as a grant!!

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Fraud in Societe Generale Equity linked Index futures!

Posted on January 25, 2008. Filed under: Banking |

Societe Generale (SG) has reported yesterday one of the biggest dealer frauds in the history of Banking. The fraud, as reported, is committed by a trader in European Equity Index Futures based out of Paris. The amount of loss estimated is USD7.2 billions. When compared to other reported frauds by traders, this stands apart on account of losses reported by SG. SG has reported that the trader has been suspended and his managers’ have also been sacked. You can read the press report here.

This fraud exposes the need and importance of risk management and control in the banking industry. Over the last 3 years all banks and FI’s are reported record profits and probably it has induced the banks to be lethargic on their risk management. One wonders how such a big loss has been allowed to happen in an established global bank and how the trader has managed to hide losses for quite sometime.

It is also been reported that the trader has moved from the Middle Office to the trading floor and he is aware of the various checks and controls in the middle office and the back office and has devised ingenious ways to circumvent them and not get noticed. I expect that the worst thing to happen is to have some banking regulation which prohibits people moving from back/middle office to the trading desk. This would be a significant thing considering the fact that many aspiring youngsters take up roles within the operations and support group as they try to enter the lucrative trading world. Under normal circumstances, persons with experience in the operations or support role are considered favourably but with the present situation, it may become difficult.

In addition to the loss of USD7.2 billions on account of fraud, SG has also reported a write off of Euro2.1 billion on account of derivative transacations on Collateralised Debt Obligations.
The sub-prime meltdown has so far resulted in a write off of USD133 billion dollars by various banks and financial institutions and on its way it has dethroned four Chief Executive Officers of various banks and Financial Institutions. We still need to wait and watch for more write-offs in the coming quarters.

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Tumultuous Indian stock markets!!

Posted on January 22, 2008. Filed under: Markets |

The last two days has seen record falls in the major Indian stock indices across the board. The NIFTY which was trading around 6000 levels on Thursday (Jan 17) went down and touched 4455 on Jan 22 (Tuesday), a fall of more than 1600 points on the NIFTY. The NIFTY has fallen around 29% from the record high of 6300 it touched sometime back.

The fall of the markets was justified on account of the poor economic condition in US, continuous fall in other major stock indices across the world, the higher crude oil price and huge write-down by financial institutions on account of sub-prime meltdown. But if you ask me did I expect this steep correction, honestly I have to admit, I didnt. All along whenever the world markets corrected, we were insulated and it was always claimed that Indian markets were de-coupled from the world markets. I was expecting a minor correction of 300-400 points on the NIFTY but the markets corrected four times more than that. A good lesson learnt!

When the markets opened on Tuesday, it was widely expected to fall following the weak Asian markets which opened before the Indian markets. The markets opened and got closed within few minutes following the 10% lower circuit for the index. Markets re-opened after 1 hour after the cooling off period and showed some signs of reversal but not could not sustain the momentum. The real recovery in the indices happened towards the close today more due to the short covering in the market rather than due to fresh buying, I guess. The sector which has got hit badly is Power and Real Estate from the data I collected. DLF, Parsvnath, Omaxe, Patel Engg, Peninsula Land, Ansal Housing are few of the Real Estate stocks which has corrected heavily.

There is absolute liquidity crunch for the retail investors in the market due to two major IPO’s of Reliance Power and Future Capital Holdings. Both have collected huge chunks of money from the investing public and they are not due to be returned atleast for the next 15 days. Margin calls were triggered in the morning and investors were forced to sell their long term holdings to meet the margin requirements. Most the brokerage houses could not execute the orders because of the poor margin arrangements for individual broking houses with the exchange. I personally felt that with Geojit and Sharekhan broking houses. I called Geojit Securities to place an order but was turned down by the dealer to place the order citing the reason that there is no margin available. I explained to him that I want to place a cash market order and not in futures and options segment. But I was informed that they are only taking orders for squaring off existing positions and not for initiating fresh positions even in the cash market. Most of the investors would have faced a similar situation. Sorry state of affairs even for people who wanted to pick up shares in the discount sale!!

The volatility during the last two days were phenomenal and the prices moved very violently. The intraday movements were so huge it is highly unimaginable. For instance, the intraday movements in Bajaj Auto was Rs500, Patel Engg Rs100+, M&M Rs100+ just to name a few. The other thing is the difference between the bid and ask price was also very wide. This may be due to lack of volume as most of the investors could not enter because of the severe margin pressure on the brokerages.

I have listed few shares which have corrected by more than 40% in the last one week or so. These shares may correct further and nobody knows what is the real bottom at this stage. If you like a company and convinced about the fundamentals, this crash has really proved a boon for the investors to pick up these stocks at attractive prices compared to what they were 1 week ago.

RPL – 147
M&M – 600
ITC – 183
JK Lakshmi – 109
Microtech – 207
Petronet – 63
GHCL – 97
MTNL – 116
IDBI – 99
Guj Alkali – 152
Bata – 175
Guj NRE – 105
Surya Pharma – 88
Varun ship – 67
Power Grid – 99
Patel Eng – 725
Ind Hotels – 111
Hotel Leela – 41
Bongaigaon – 51

A word of caution, please check the fundamentals before you buy the scrip and be informed that I may already own some of the shares listed above.

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Billion Beats – the new e-paper!!

Posted on January 21, 2008. Filed under: General |

Billion Beats is a new e-paper launched by none other than our former President Dr APJ Adbul Kalam. This is an English fortnightly and published and made available in his website http://www.abdulkalam.com. My friend, Krishna Srinivas referred me to this and immediately I browsed through the site.

Billion Beats has been started with the objective of bringing to light stories of India ‘s ”islands of success” and to establish knowledge connectivity. It has various columns including a editorial by Dr APJ Abdul Kalam himself, Moon walk by Srinivas Laxman, . It also features a column titled “India of my dreams” by a school student every fortnight.

As of now it is a small e-paper of 3 pages and may become a bigger e-paper over a period of time. Three issues have been published so far and you can subscribe to the e-paper on the website www.abdulkalam.com.

Read the e-papers and post your comments!!

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Kancheepuram plots – moving closer to a decision!!

Posted on January 16, 2008. Filed under: Real Estate |

I earlier wrote about the fact that I was looking for plots in and around Kancheepuram. I briefly talked about my interest in buying a piece of land in Kancheepuram here and also listed couple of reasons for the same.

I have visited Kancheepuram for atleast 3 times in the last one month to look at various options. I normally go along with my friends who are also interested in buying land in Kancheepuram. It also brings in different views/perspective to the whole exercise, which is very important.

When we checked about the plots available for sale, we found out that there are not many established players in the market. Only of couple of established players like BLB Real Estate and The Lands have their layouts. For instance, BLB’s property is in Vaiyavoor (4 kms from Kanchipuram town) and the lay-out of The Lands is 5 kms away from the town very close to the national highway.

Our key understandings of the Kanchipuram real estate market are:

  • Major developments with regard to Kanchipuram happens on the National Higway and I consider it is better to have direct road access to NH from the lay-out.
  • The real estate in Kancheepuram is still virgin and the big players have not come out with lay-outs. The market is dominated by local real estate agents and housing societies.
  • There are no or very minimum lay-outs with DTCP approvals. Majority of the plots are panchayat approved plots.
  • High number of plots are coming for re-sale after the recent price surge on the Kanchipuram stretch.
  • The Kanchipuram town bus stand is going to be moved to the National Highway thereby easing the traffic congestion within the town. The proposed new bus-stand is on the National Highway near the Kanchipuram arch.

I would divide the residential plots available in and around Kanchipuram into 4 broad localities:

1. Enathur – Kanchipuram stretch – This is where the Sankara Deemed University is situated. There are 4 or 5 layouts which are bang opposite the university. The prices quoted for them is around Rs400 – Rs500/- per sq.ft and most of them are DTCP approved. The lay-outs are 1.5 – 2.00 Kms from the NH and 2.5 – 3.00 Kms from the Kancheepuram town.

2. Enathur – Vaiyavoor stretch- This is again a big property market with hundreds of plots available for sale. Almost all of them are panchayat approved plots with the price range between Rs100 – Rs200 per sq.ft. There is not much habitation around and also it is further away from NH, say almost 6 kms from NH. BLB has a DTCP approved layout in Vaiyavoor which is 4 kms from Kanchipuram town. Please be aware that Vaiyavoor is the earmarked place for garbage dumping of Kanchipuram municipality!!

3. Vellai Gate area – This is a popular landmark on the NH near Kanchipuram and it is good 2 kms away from the town’s entry point. There are plots in this area as well selling between Rs100 – Rs300 per sq.ft.

4. Parandur – Karai stretch – All the above are on the left hand side of the NH if you go from Chennai to Kanchipuram and this Parandur – Karai villages are situated on the right hand side of the NH. Karai is the bigger village among the two, I guess and it is very closer to the NH. There is a big lake near Karai and there are plots available abutting the lake at a lower price.

The property I am interested to purchase is on the Parandur road on the opposite side to the Kanchipuram entry arch. The property is exactly 3 kms from the National Highway, panchayat approved and on a 30 ft tar road. The property is fully compounded and it was earlier a coconut farm which is being converted into residential plots. The project is marketed by Employee Welfare Society (Regd No.52). The size of the plot is 1320 sq. ft (22 ft X 60 ft). If you are interested you can contact Mr Gopi on 9381441442.

Why I have chosen this property compared to other sites I have seen?

1. The property is on a 30 ft metal road with bus service (though not very frequent).

2. The property is fully compounded which reduces considerably the risk of enroachment.

3. With the Kanchipuram town bus terminus moving to the NH, the distance to the bus terminus is only 3 kms, which I think is very positive.

4. It is near a water body (Lake) which will help sustain the ground water level.

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Reliance Power IPO – What I have learnt?

Posted on January 16, 2008. Filed under: Stocks |

Reliance Power IPO is the hot topic doing the rounds in the capital markets for variety of reasons. I have read many articles on the Reliance Power IPO both for and against it.
Reliance Power would be setting up Ultra Mega Power Plants and the first revenue flow would start from Mar 2010 only. Till then the company would be in the investment mode with no tangible revenues accruing to it.

Already the IPO has been over-subscribed by more than 10 times. That is, Reliance Power has garnered bids to the extent of more than 100,000 crores. Really staggering!! Probably, that is one of the reasons why we are seeing a sell-off in the Indian markets particularly, by the retail investors to apply to the Reliance IPO. NDTV Profit carried out an analysis of how much money the company would earn by parking the application money collected during the IPO. At 3.5% savings bank rate of interest, the Reliance Power is expected to earn anywhere between Rs1000 crores to Rs1500 crores as interest on the application money!! The grey market premium for Reliance Power is already around Rs400/- per share, which means that the listing can be expected around Rs850-900/-.

What is creating euphoria about the Reliance Power IPO?

  • Ambani’s project execution capability is one of the corner-stones on which the entire IPO has been built. They have executed projects in record time and this time as well they may be able to do it. Real test for Anil Ambani as all the previous projects were driven by Reliance group and not by Anil Ambani alone.
  • I guess there is going to be a slew of announcements to follow post the Reliance Power listing or very close to the listing date. He may come up with stake sale announcements, acquisition of captive mines for Reliance Power fuel requirement, set up of equipment manufacturing company for power sector, merger of RNRL with Reliance Power and so on. Anil Ambani would like to keep the momentum going in the share markets for his company, as he may have plans of off-loading substantial stakes to bigger power manufacturers across the world. Already Anil Ambani has talked about setting up a power equipment manufacturing company.

Ambani’s have been very popular with the shareholders because of their investor friendly activities. They have the capability of selling ideas in a big way and this time as well he has done it successfully.

Thanks to Reliance Power IPO, more and more analysis is being done on power sector and one stock which has come up for comparison is NTPC. If you take the comparison between the production capacities in 2010, Reliance Power would have 600 MW compared to 34,000 MW for NTPC. By the time, Reliance Power goes full stream in 2016, NTPC would have a generation capacity of close to 50,000 MW more than 100% of what Reliance Power would have.

By any standards, NTPC is a superior stock at current prices and valuations even after discounting for Reliance Power’s management capability and vision. NTPC is one stock which I am going to buy at all possible opportunities.

Disclosure: I am not going to apply for Reliance Power IPO.

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Nano – the latest sensation from Tata Motors!!

Posted on January 14, 2008. Filed under: New Products |

Tata Motors’ “Nano” the latest sensation in the recent Auto Expo has made everybody turn and have a closer look at the car. Nano, as we all know is the cheapest car in the world and it satisfies all the latest safety and emission norms. All for less than USD3000. Too good to be true, but its true!! It is truly a great achievement for Tata Motors and makes us even more proud because the complete design and engineering is done by Indians, led by 37 year old Mr Girish Wagh and his 500 member technical team. To read more about him and the team which created Nano, click this link.

The car has been beautifully designed and very pleasant on the eyes. It closely resembles the new version of Zen Estilo but the comparison stops there. There have been radical changes to the way a car has been designed. The engine is on the rear side and the boot space is at the front. For your information, Tata Nano has a boot space to accomodate only one suitcase!! All possible measures have been adapted to cut the cost to the minimum. The car is 8% smaller than Maruti 800 but Tata claims it has 21% more space compared to M 800. I am not able to understand how it could have 21% more space. I leave it to the mathematical wizards and the engineering brains. Tata Nano is set to change the landscape of Indian Automobile industry in a big way as well it would change the Indian roads. Tata claims that the car would give you a mileage of 20 kms per litre of petrol. The car would be priced at Rs1.40 lakhs (on road) and would definitely be very attractive to the burgeoning Indian Middle-class to satisfy their dreams of having a car.

Okay, after all the good things about Nano lets look at the controversies surrounding it as well. Mamta Banerjee has made a political statement saying that Tatas should give 10 lakh Nano cars free because of the freebies they have got for the Singur plant. She claims that Tata’s have been given land worth 1000 crores free of cost and as well as innumerable tax concessions from the Government. Turning little serious, lets look at the important questions:

  • Do we require a car like Nano considering the environmental impact?
  • Does our cities have the infrastructure to support these kind of smaller and cheaper cars?
  • How popular this car would be? Who are possible owners of this car?

Already our Indian city roads are completely choked and no way we will be able to find space for these kind of cars. There is already a big hue and cry about the increased pollution in cities which would result due to the large number of Nano cars expected on the roads. Dr Pachouri, the nobel laureate was very vocal in opposing these kind of experiments as it directly leads to higher pollution levels and global warming.

Though the car is highly efficient in terms of mileage, but just compare it to the motorcycles. An average motorcycle gives you a mileage of 45 kms per litre of petrol whereas Nano offers 20 kms under standard testing conditions. Tata is expecting the motorcycle wallahs to upgrade to Nano. They definitely need to spend a lot more on fuel. Rajiv Bajaj of Bajaj Auto, who incidentally showcased his compact car in the Auto expo, believes that the running costs plays a very crucial role in the purchase decisions of a car. Will the motorcycle wallahs be ready to spend that extra amount of money. I doubt it!

One way of answering all the questions related to pollution, environmental impact, traffic congestion is to market the cars exclusively in the rural, non-urban centres and export it to countries where there is a need for fuel efficient cars. It will be definitely be a popular choice in rural areas and also help to provide our rural population the advantages of urban India. It would also be a huge hit with the western countries where there is a demand for cars with high fuel efficiency.

Do you agree with my suggestion? Please post your comments on my novel idea.

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Poll Results – FM Radio Chennai

Posted on January 13, 2008. Filed under: Poll |

In the recently concluded poll on FM Radio, Radio Mirchi was the clear winner with 66% of the votes polled. Radio One and Suriyan FM each got 16% of the votes polled.

Hats off to Radio Mirchi!! Keep going!!

More polls to come.

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