Friday, August 26, 2016

IVRCL Ltd: Buy
CMP: Rs.4.93 (BSE) and Rs.4.90 (NSE)
Founded over 25 years ago, the company has been involved in various projects related to water and environment, transportation, buildings and industrial structures, power transmission projects and mining. It is listed on the BSE and NSE and employs more than 3,000 engineers, managers and professional technocrats.

IVRCL Ltd’s operations cut across geographical frontiers of the sub-continent, with headquarters in Hyderabad and administrative offices in Chennai, Cochin, Bangalore, Pune, Kolkata, Jodhpur, Raipur (Chattisgarh), Ahmedabad, Margao (Goa), Jind (Haryana), Udhampur (J&K), Billaspur (MP), Kotdwara (Uttaranchal) & New Delhi besides liaision offices setup near project sites.

The company is known, among other things, for construction of the first desalination plant at Minjur (near Chennai) with a capacity of 100 million litres per day (MLD). IVRCL Ltd has undertaken construction of several flyovers and bridges in cities like Chennai, Kondalampatti, Amritsar, Chengapalli, Bagalkote and Palasa.

Some of these include:
  • Rail over bridge at Perambur in Chennai. Their client for this project is the Corporation of Chennai, Bridges department.
  • Design, construction, development, finance, operation and maintenance of major interchange at Kondalampatti on NH-47 as part of four-laning of Salem to Kumarapalayam Section in Tamil Nadu. Their client for this project is National Highways Authority of India.
  • The construction of a major bridge across the river Baes on NH-1 as part of the laning of the Jalandhar-Amritsar section. The client for the project is the National Highways Authority of India.
  • Major bridge across the river Cauvery on NH-47 as part of laning of Kumarapalayam to Chengapalli section in Tamil Nadu, for which the client is National Highways Authority of India.
  • Construction of a road over bridge at Palasa in lieu of existing Visakhapatnam-Bhuveaneshwar road in Srikulam District, the client for which is the Superintending Engineer (R&B) Circle, Srikakulam.
  • Construction of a bridge across the river Krishna of Jamkhandi Savalgi road near Jambagi village in Jamkhandi Taluk, Bagalkote District, client for which is the Karnataka Road Development Corporation Limited.
The construction firm, which is helmed by Chairman and Managing Director E Sudhir Reddy, registered more than 12 quarters of losses due to mounting debts, payment obligations and project delays. The story of IVRCL Ltd, once aggressive developer, has been one of momentous rise and then a steep fall.

At the height of its success, the company bagged projects in several key sectors, including irrigation, roads, power and real estate, but the jewel in the IVRCL Ltd's crown remained the construction of the integrated sports village during the national games in Hyderabad in 2002.

However, in an complete reversal of fortunes, by the 2015 end, it was sitting on a debt of about Rs.10,000 crore and a net loss of close to Rs.2,000 crore. In an indication of its dire situation, the company availed the Strategic Debt Restructuring (SDR) scheme launched by the RBI. Post SDR, the shareholding of the promoter group plummeted to less than 8 per cent, while that of the banks, other financial institutions and foreign institutional investors crossed 51%.

It closed the last financial year FY16, with a turnover of Rs.3,117 crore and a loss of Rs.672 crore. In the third quarter ended December 31, 2015, it registered a turnover of Rs.448 crore and a loss of Rs.304 crore. IVRCL Ltd’s troubles started about three years ago when the infrastructure business slowed down. However, the things are looking a little better now. 

As of 31st March, 2016, the small-cap company has equity capital of Rs 145.74 crore. Face value per share is Rs.2.

Shareholding Pattern: The Promoters hold only 5.37% but this makes little sense as the company has been taken over by the lenders, whose names are mentioned below along with their holding percentage. 
The FI / Banks hold 56.62% or the controlling stake in the company. As of now the public shareholding in the company is 94.63% which includes the following entities. 
  • DBS Bank Ltd: 4.05%
  • IDBI Bank Ltd: 6.75%
  • Andhra Bank Ltd: 4.75%
  • Tamilnad Mercantile Bank Ltd: 3.09%
  • State Bank of India Ltd: 6.31%
  • Indusind Bank Ltd Treasury Department: 1.55%
  • Indian Overseas Bank Ltd: 7.99%
  • ICICI Bank Ltd: 8.09%
  • Corporation Bank Ltd: 4.25%
  • Canara Bank-Mumbai: 7.09%
  • SREI Equipment Finance Pvt Ltd: 1.76% 
  • Unit Trust of India Investment Advisory Services Ltd A/C Ascent India Fund III: 1.24% 
  • International Asset Reconstruction Co Pvt Ltd: 2.64%
  • Bodies Corporate: 11.07%
Last year, the company was forced to take up strategic debt restructuring because debts spiralled quarter after quarter and revenues dwindled due to poor execution of contracts — both due to delays in securing clearances and because of the working capital crunch.

The Joint Lenders Forum headed by SBI invoked the provisions of a Strategic Debt Restructuring programme in November 2015.

IVRCL Ltd said that State Bank of India, monitoring Institution acting on behalf of the lenders informed the company that joint lenders' forum (JLF) at the meeting held on 23 February 2016, has approved the special drawing rights (SDR) conversion package and that the lenders will convert part of the debt of the company into equity, in one or more tranches, at the price of Rs.8.765 per equity share of face value of Rs.2 each, enabling the lenders to collectively hold 51% or more of the total share capital of the company. 

Last year, the company announced that it has has made an allotment of 2,42,26,656 equity shares of Rs.2 each, at issue price of Rs.24.39 per share, on 27 November 2015 to CDR Lenders who have signed the Master Restructuring Agreement. This allotment is towards conversion of Funded Interest Term Loan (FITL ) into equity, for the period of 01 July 2015 to 30 September 2015.

This price of Rs.8.765 per equity share, which now forms a base price for any future takeover and also Rs.24.39 per equity share, allotted to CDR lenders are much higher than yesterday's closing price in the BSE/NSE.

It is pertinent to mention here that Strategic Debt Conversion (SDR) option gives lenders the right to convert their outstanding loans into a majority equity stake if the borrower fails to meet conditions stipulated under the restructuring package and in the process take control of the operations of a company. Or in other words, under the RBI norms, when such a move is initiated, the banks join the Board and decide how to put the business back on track. It provides for 18 months to recoup.

The lenders now scouting for a new owner for the beleaguered company; but before they do that, the company's individual assets may be sold to improve its operational performance. The company is also looking to sell its subsidiaries and reduce the debt on their books. Lenders and consultants are now working along with them to identify ways to maximize the value of its subsidiaries. This is positive for the shareholders. 

With the government spending liberally on overcoming the water crisis, companies offering water solutions are set to flourish in future, according to a report by Business Today. 





In January, 2016, the company informed the exchanges that it has bagged orders worth Rs.350.96 crore under its Irrigation Division and Water Division. The company bagged orders worth R.324.67 crore under Building Division from Cauvery Neeravari Nigama. Under Water Division, the company bagged orders worth Rs.26.29 crore from Karnataka Urban Water Supply & Drainage Board.

Conclusion:  The company in June, 2016 said it has allotted 6.46 lakh shares to Bank of Nova Scotia as part of Strategic Debt Restructuring (SDR).

"Pursuant to provisions of Companies Act, 2013 and Sebi (Issue of Capital Disclosure Requirement) Regulations, 2009 and implementation of SDR, the company has made an allotment of 6,46,810 equity shares at a price of Rs 8.765 each, to Bank of Nova Scotia," it said in a regulatory filing.

Moreover, since, it conducts operations in 5 sectors namely Water and Environment, Transportation, Buildings, Power and Industrial Structures hence once the finance problem gets sorted out, its order book could soar, due to large field of operations.

On the chart we find that the stock has probably made a botton around Rs.4.60 and is steadily moving up. The scrip is above its 100D SMA and 21D EMA. Moreover, MACD and Stochastics are in buy mode. 

The investors should buy the stock with immediate target of Rs.5.20, followed by Rs.6.10 - Rs.6.70 - Rs.7.5 -  Rs.8.4. In case of short term play, they can keep a SL of Rs.3.70. 

Thursday, August 25, 2016

Important
(i) Those who have entered Shrenuj & Co Ltd can continue to hold with a SL of Rs.1.95 (which is not likely to break). The company is having an office in a posh location in Bandra, Bombay. Most of the directors are overseas scouting for funds. The consortium of lenders are co-operating and soon a debt restructuring news might come in the media. The next target is Rs.3.05.


(ii) Those who are holding the shares of JSW Energy Ltd (Rs.78.50) can continue to add on declines. With its latest 500 megawatt power plant purchase, JSW Energy’s capacities have almost doubled from three years ago. JSW Energy Ltd comes under infrastructure space. 

(iii) The investors can continue to add the shares of Unitech Ltd (Rs.5.30) on all declines, as the ensuring festive season, is likely to give the required buoyancy to the real estate sector. Moreover, the company's annual report would probably be ready by 12 September, 2016.

(iv) Today, most of the shares in the infrastructure space (especially those who are into Railways) are up, after the Committee on Economic Affairs at the Indian Government approved nine projects estimated at Rs.24,374.86 crore, envisaging expanding the railway network in 9 states of India, Zbusiness reported. As a result of this IVRCL Ltd (Rs.4.95), Reliance Infrastructure Ltd (Rs.610), Lanco Infra (Rs.4.50), Reliance Defence Ltd (Rs.65.50), etc are all up today.  Anil Ambani-led Reliance Defence and Engineering Ltd (RDEL), formerly Pipavav Defence and Engineering Ltd, is focusing on providing integrated solutions for naval ships. It has also diversified into design and development of naval weapons and sensors to provide combat suite which costs about 50 to 60% of the platform costs.

(vi) The shares of Bharat Heavy Electricals Ltd (Rs.138) are now trading above Rs.137 and hence can be accumulated before the results.

(vii) Adani Enterprises Ltd (Rs.74.70) is finding difficulty to cross the resistance zone of Rs.75-77. Therefore, for the time being avoid the counter.

(vii) The investors can accumulate the shares of Gitanjali Gems Ltd (Rs.46), for short term targets of Rs.55-61.

Wednesday, August 24, 2016

Important
(i) The short term traders can exit Bharat Heavy Electricals Ltd at Rs.136, as it has broken Rs.137. If it
Photo: CanStock Photo
gets support around Rs.132, then buy or else wait for the price to stabilize. For the long term you can hold with a SL of Rs.107.

(ii) The short term traders can exit Adani Enterprise Ltd as it has broken Rs.75. You can again accumulate around Rs.67-68, where it might get some support. If it goes below Rs.67, then long term traders can forget the counter.

(iii) Accumulate Unitech Ltd (Rs.5.05) and IVRCL Ltd (Rs.4.80), because the construction activities are about to start post monsoons. 

(iv) Reliance Communications Ltd (Rs.51.80) is moving on the hope of any merger news. But unless it closes above Rs.53.50, there is no hope. In such circumstances, the short term traders can book profits as it moves up, till it closes above Rs.53.50, where you can again start accumulating.

(v) Those who have entered Syncom Formulations Ltd (Rs.2.88) again at around Rs.2.70, should continue to hold the counter with a SL of Rs.2.40. 
Shrenuj & Co Ltd: Updates
Rs.2.27 (BSE) and Rs.2.25 (NSE)
The 100-year-old diamond house and one of the largest in the trade, Shrenuj & Co has survived across four generations. In 1989, Shrenuj & Co was one of the first gems and jewellery companies to be listed on the BSE and had introduced laser technology to diamond manufacturing in the '80s.  The company has cutting and polishing diamond facilities in Botswana and Johannesburg, in addition to existing ones in Mumbai and Patna. The company procures rough diamonds from overseas, cuts and polishes them and makes diamond jewellery. 

There was news that in the ET,. 29 June, 2016: 
Banks, with a combined exposure of around $450 million, has obtained court order to repossess the inventory - stock of diamond lying with the company - and restrict travel of the promoters.....Trade circles attribute the problems faced by the group to aggressive expansion overseas even as rough diamond prices kept soaring and polished diamond prices remained relatively muted after the financial meltdown of 2008-09..The slowdown in the diamond industry along with some of the company's business bets such as diversification in Africa backfired. 
But then this is half truth and is a case of Yellow Journalism. It is true that Shrenuj Far East Limited, based in Hong Kong, which has a credit line of US$15 million with ICICI Bank Limited, has been placed in Receivership, with the ICICI Bank's Hong Kong branch as Receiver. Shrenuj Far East Limited forfeited all its assets to the Receiver and shared all the information with the Receiver on best effort basis. ICICI Bank approached the Debt Recovery Tribunal (DRT) in India and sought an ex-parte order to attach all the company's inventories in India and place restrictions on the international travel of the company's top management.

While the Economic Times article ambiguously links the DRT decision to the lending consortium - Bank of India, ICICI Bank, Punjab National Bank, State Bank of Patiala, Standard Chartered bank and Andhra Bank, and a number of others, Mr. Shreyas Doshi, company's Chairman Doshi says the action was undertaken unilaterally by ICICI Bank.


According to my close sources, the matter should be over within a couple of months as the company is bringing Rs.300 Crore, to refinance its debt and at the same time is taking measures to boost its EBIDTA. Also, the problem started when the rough diamond prices, started coming down or remained stagnant and in the process its inventory got devalued.  According to the sources, it is also not true that, because the of the problems in its African diversification, the company accumulated debts. The company's debt problems started due to over-all slowdown in this space and the NDA government's step-motherly attitude towards gems and jewelry sector.

However, many of the top officials of the company are abroad, to solve this issue and the sources are hopeful that a favourable solution will be found very soon. The stock has hit the lower circuits, after the company's website, viz.ho.shrenuj.com, was taken off due to some technical issues. 

The company has undertaken an exercise to rationalize its manpower across all levels,” Shrenuj said in a statement to the Bombay Stock Exchange.  The management is of the opinion the realizable value of the firm’s inventory and other assets are sufficient to repay all outstanding liabilities, the report said. 

In such circumstances, I would suggest all to add the scrip slowly in declines so that your acquisition prices becomes further less. As of now there is no danger, as this issue relates to only one of the overseas subsidiaries of the company. 

Tuesday, August 23, 2016

Bharat Heavy Electricals Ltd
CMP: Rs.139
Photo: The Economic Times
State-run Bharat Heavy Electricals (Bhel) is an integrated power plant equipment manufacturer. It is one of the largest engineering and manufacturing companies in India engaged in the design, engineering, manufacture, construction, testing, commissioning and servicing of a wide range of products and services for core sectors of the economy, viz. power, transmission, industry, railways, renewable energy, oil & gas, water and defence. The Government of India currently holds 63.06% stake in the company as per the shareholding pattern as on 30 June 2016.

Bharat Heavy Electricals (Bhel) last month, successfully commissioned the third unit of the 160 megawatts (MW) Teesta Low Dam Hydro Electric Project (HEP) Stage-IV in West Bengal. The greenfield project located in Darjeeling district of West Bengal, Teesta HEP is being set up by National Hydroelectric Power Corporation (NHPC), on the River Teesta. The fourth and final unit of the project is also in advanced stages of execution. The order for electrical & mechanical (E&M) works for four units of 40 MW each was placed on Bhel by NHPC.

BHEL is presently executing hydro electric projects of around 3,300 MW in the country which are under various stage of implementation. Other projects of NHPC currently under execution by BHEL are the 800 MW Parbati HEP Stage – II and 330 MW Kishanganga HEP. In West Bengal, Bhel is also executing the 120 MW Rammam Stage-III hydro-electric project of NTPC. Significantly, more than 500 hydro generating sets with a cumulative capacity of more than 29,000 MW of various ratings have been contracted on Bhel in India and abroad. Of this, equipment for about 5,700 MW generating capacity has been contracted outside India.

Key Statistics:
(i) Face Value of the shares: Rs.2
(ii) Book Value of the shares: Rs.136.10
(iii) Enterprise Value/Revenue (ttm): 0.94
(iv) Total Debt (mrq): Rs.1.67 billion (Rs.167 Cr)
(v) Total Cash Per Share (mrq): Rs.42.20
(vi) Total Cash (mrq): 103.29 billion (Rs.10329 Cr)

BHEL shares slumped nearly 4% on Tuesday amid speculation that the state-run power equipment manufacturer may lose a major power plant order from state-run utility NTPC. According to Macquarie, NTPC is re-visiting its tender for four power plants of 1000MW capacity each for its Pudimadaka ultra mega power project. The tender was earlier awarded to BHEL. However, what is interesting to note is that the the order accounts for ONLY around 4% of BHEL's total order book, said Macquarie - - therefore, if at all such event takes place, its effect will be minimal.

The R&D department of BHEL-HPVP is currently engaged in indigenous development of four new types of compact heat exchangers for the Mk2 version of the Tejas aircraft. Indian Navy is also planning to order another 40 sets of Tejas heat exchangers in the coming years.

The country’s nuclear power programmes and the revised emission norms for coal-based thermal power plants offered considerable business opportunity for Bharat Heavy Electricals Limited. BHEL Corporation had achieved a record project execution during the previous fiscal despite the slowdown in the power sector and maintained its leadership with 74% market share.

The Welding Research Institute has won Skoch BSE award for technology development and has also won National Safety Award along with Seamless Steel Tube Plant and Fossil Fuel Development Complex. Buy the shares of BHEL at the CMP of Rs.139, for short term targets of Rs.143 - 147. 

Do you know?
Rolta Power Pvt. Ltd. is part of the more-than-three-decades-old Rolta Group business interests in Real estate, investments and IT. Rolta Power is headquartered in Mumbai and is a new entrant in the Rolta Group fully owned by Rolta Pvt. Ltd.

Recently, Rolta Power Pvt. Ltd. and China-based Zhenfa New Energy Science and Technology Co. Ltd. has signed an agreement to build solar parks in India, targeting a capacity of 2 GigaWatt by 2020.


Reliance Defence and Engineering Ltd
CMP: Rs.66.10

Reliance Defence & Engineering formerly Pipavav Defence and Offshore Engineering Company is into building defence warships and is an integrated defence, heavy engineering and offshore oil & gas assets' construction company. Reliance Infrastructure together with its wholly owned subsidiary Reliance Defence Systems ealier completed the acquisition of erstwhile Pipavav Defence. The mandatory open offer to acquire up to 26% shares from the public shareholders of Pipavav Defence was at a price of Rs 66 per share, which is close to the CMP of Rs.66.10.  

The erstwhile, Pipavav Shipyard was the first corporate shipyard to be granted clearance to build warships and other vessels for the Indian Navy, though the initial licence limits this to up to 5 ships per year. 

On March 26, 2015, the Company successfully implemented one of the biggest debt restructurings in India. Pipavav raised additional debt of INR 5,500 crore resulting in total debt line in excess of INR 12,000 crore (about USD 2 billion). The Company has a total enterprise value of USD 2.7 to 2.9 billion (Rs.19461.9 crores).

Pipavav Shipyard is one of the largest and leading shipbuilding company in India, spread over 500 acres (2.0 km2). It has access to over 720 meters of exclusive waterfront.

Key Statistics: 
(i) Face Value of the shares: Rs.10.
(ii) The Book Value of the shares: Rs.27.50
(iii) 50-Day Moving Average: Rs.64.93
(iv) 200-Day Moving Average: Rs. 64.27
(v) Market Cap: Rs.4,855.28 at the CMP of Rs.66.10
(vi) Industry P/E: 34.37
(vii) 52 Week High/ Low: Rs.72.85/ Rs.54.30
(viii) Industry P/E: 34.37, indicating the high growth of the sector. 

Buy the shares of the Reliance Defence and Engineering Ltd at the CMP of Rs.66.10, for a short term target of Rs.72-75.

Some Encouraging Points Concerning the NDA government
(i) Foreign direct investment during October 2014 and May this year grew 46 per cent to USD 61.58 billion after the launch of Make in India programme. To further boost investment environment and bring in foreign capital, the NDA government is taking various measures like opening up FDI in many sectors, carrying out FDI related reforms and improving ease of doing business.

(ii) Sectors that attracted maximum FDI include services, trading, automobile and power. 

(iii) The NDA government has approved as many as 259 proposals for setting up of special economic zones relating to IT/ITeS and electronic hardware sector in many parts of the country. During the last four years and the current financial year (up to July 15), the Board of Approval, under the ministry, gave more time to as many as 139 developers of SEZs, including the IT/ITeS sector, to complete their projects. 


Monday, August 22, 2016

Adani Enterprises Ltd
CMP: Rs.75.50
The Adani Group has grown to become a global integrated infrastructure player with businesses in key industry verticals - resources, logistics and energy. The integrated model is well adapted to the infrastructure challenges of the emerging economies.

The company said that its coal business, ports and power businesses continue to scale up steadily. Further, improved utilization of operational capacity has resulted in robust overall performance.

Key Statistics: 
Face Value of the shares: Re.1
Book Value of the shares: Rs.121.98
Enterprise Value (22-Aug-2016): Rs.269.37 billion (Rs.26,937 Cr) as against a market cap of only Rs.8309.07 Cr
P/E: 8.11 against the industry P/E of 18.96
EPS: Rs.9.32
Dividend: 40%
52-week low/high: Rs.58.45/Rs.101.90

Adani Enterprises Ltd, the flagship company of Adani group, reported a flat consolidated net profit of Rs.363.71 crore for the quarter ended June 30, 2016.

The company had posted a consolidated net profit after taxes, minority interest and share of profit of joint ventures and associates of Rs.363.57 crore in the year-ago period.

Net sales in April-June quarter were also almost flat at Rs 8,884.74 crore as against Rs 8,828.81 crore in corresponding period of FY16. The total expenses during the quarter was at Rs 8,468.68 crore, over Rs 8,393.11 crore in the year-ago period.

"Adani Enterprises continue to focus on the sectors of national interest through presence in critical and often under penetrated spaces. The investment climate in the country is building up and the intent of Government to pursue economic reforms is clearly visible. We remain committed to our investment plans in Renewables and domestic Mining sectors as they align with national priorities," Adani Group Chairman Gautam Adani said. Ameet Desai, CFO Adani Group and Executive Director, Adani Enterprises, said, "We maintained our earnings growth trajectory during this quarter. This is testimony of intrinsic strength of our business portfolio."

The government spending on infrastructure and other development projects, well progressing monsoon and pay revisions shall drive an uptick in the investment cycle and energy demand leading to our improved performance, Desai said.

"In Q1FY17, Coal Mining volume grew by 122 percent to 2.1 MMT (Million Metric Tonnes) and in Q1FY17, City Gas Distribution volume is 97 MMSCM," the statement said. Adani group is one of India's leading business houses with revenue of over USD 10 billion.

Adani Enterprises Ltd, recently incorporated a subsidiary, Korba Clean Coal Pvt Ltd for carrying on the business of coal washing. 

There were also news reports that the Queensland Federal Court said there were no grounds for a judicial review of the decision to grant the mining lease to the MNC.

Buy the shares of the company at Rs.75.50 for a short term target of Rs.83-85. The stock is above its 150D SMA. If it is able to clear the resistance around Rs.79-80, then we can look for ward for targets of Rs.87-91.

Moreover, at present the major indices are going to remain flat, but action will be seen in the beaten down counters. Therefore, don't look at the indices for your buy and sell decision. 
Adani Enterprises Ltd
CMP: Rs.75.50
The Adani Group has grown to become a global integrated infrastructure player with businesses in key industry verticals - resources, logistics and energy. The integrated model is well adapted to the infrastructure challenges of the emerging economies.

The company said that its coal business, ports and power businesses continue to scale up steadily. Further, improved utilization of operational capacity has resulted in robust overall performance.

Key Statistics: 
Face Value of the shares: Re.1
Book Value of the shares: Rs.121.98
Enterprise Value (22-Aug-2016): Rs.269.37 billion (Rs.26,937 Cr) as against a market cap of only Rs.8309.07 Cr
P/E: 8.11 against the industry P/E of 18.96
EPS: Rs.9.32
Dividend: 40%
52-week low/high: Rs.58.45/Rs.101.90

Adani Enterprises Ltd, the flagship company of Adani group, reported a flat consolidated net profit of Rs.363.71 crore for the quarter ended June 30, 2016.

The company had posted a consolidated net profit after taxes, minority interest and share of profit of joint ventures and associates of Rs.363.57 crore in the year-ago period.

Net sales in April-June quarter were also almost flat at Rs 8,884.74 crore as against Rs 8,828.81 crore in corresponding period of FY16. The total expenses during the quarter was at Rs 8,468.68 crore, over Rs 8,393.11 crore in the year-ago period.

"Adani Enterprises continue to focus on the sectors of national interest through presence in critical and often under penetrated spaces. The investment climate in the country is building up and the intent of Government to pursue economic reforms is clearly visible. We remain committed to our investment plans in Renewables and domestic Mining sectors as they align with national priorities," Adani Group Chairman Gautam Adani said. Ameet Desai, CFO Adani Group and Executive Director, Adani Enterprises, said, "We maintained our earnings growth trajectory during this quarter. This is testimony of intrinsic strength of our business portfolio."

The government spending on infrastructure and other development projects, well progressing monsoon and pay revisions shall drive an uptick in the investment cycle and energy demand leading to our improved performance, Desai said.

"In Q1FY17, Coal Mining volume grew by 122 percent to 2.1 MMT (Million Metric Tonnes) and in Q1FY17, City Gas Distribution volume is 97 MMSCM," the statement said. Adani group is one of India's leading business houses with revenue of over USD 10 billion.

Buy the shares of the company at Rs.75.50 for a short term target of Rs.83-85. The stock is above its 150D SMA. If it is able to clear the resistance around Rs.79-80, then we can look for ward for targets of Rs.87-91.

Moreover, at present the major indices are going to remain flat, but action will be seen in the beaten down counters. Therefore, don't look at the indices for your buy and sell decision. 

Saturday, August 20, 2016

Shrenuj & Co Ltd
CMP: Rs.2.17 (BSE)
PhotoIndia Today
Shrenuj & Company Ltd manufactures and markets high quality polished diamonds and diamond jewellery products. The company in June, 2016 said that as a part of strategy, it has undertaken an exercise to rationalise its manpower across all levels. As a result, some of employees have started tendering their resignations, it said. Shrenuj said it is putting its every effort to retain the best talent in the organisation. Alternative strategies are being considered to overcome the current challenges, the company said.

Shrenuj & Company reported net loss of Rs.38.32 crore in Q4 March 2016, compared with net profit of Rs.2.50 crore in Q4 March 2015. Net sales declined 62.9% to Rs.304.16 crore in Q4 March 2016 over Q4 March 2015. 

Some key statistics: 
(i) The Book Value of the shares of the company is Rs.47.38
(ii) The dividend yield per share at the CMP of Rs.2.17 is 9.22%.
(iii) Face value per share is Rs 2. 
(iv) 52-week Change or by how much the scrip fell: -96.32% (considering the 52-week low in NSE, of Rs.2.10)
(v) 50-Day Moving Average: Rs.3.15
(vi) 200-Day Moving Average: Rs.6.41
(vii) Float: 79.41 million
(ix) The Enterprise Value of Shrenuj & Co as of 20-Aug-2016 is Rs.34.79 billion (Rs.3479 Cr). This is against a market cap of only Rs.41.86 Cr.
(x) The small-cap company has equity capital of Rs 38.58 crore. 


The target for the shares of Shrenuj & Co Ltd (BSE: Rs.2.17; NSE: Rs.2.25) in the medium term is Rs.15-17. However, if the diamond market improves or NDA government takes more pro-active measures, prices of Rs.22-27 cannot be ruled out.
DO YOU KNOW?
Photo: Dun & Bradstreet
The real estate regulatory law seeks to establish the Real Estate Regulatory Authority for regulation and promotion of the sector. It will ensure sale of plot, flats or building or project in an efficient and transparent manner as well as protect the interest of consumers.

Though the real estate sector is beset with many perennial problems, like sluggish demand, liquidity crunch, regulatory pressure and customer activism, the big players like DLF Ltd (Rs.167.70), Unitech Ltd (Rs.5.17), Oberoi Realty Ltd (Rs.297.80) etc are adopting bold and innovative strategies to tide over such issues; during the lean season.

The effective implementation of innovative initiatives such as Make in India, Start Up India, Housing for All, Smart Cities, Digital India and REITs will have a powerful positive impact on the growth of the real estate sector in the coming months. 

Recently, there were media reports that the real estate and construction sector in India is likely to be the third largest globally by 2030, contributing over 15% to Indian GDP and emerging as the largest employer in India providing employment opportunities to over 75 million people.

A background paper by KPMG in India and the National Real Estate Development Council (NAREDCO) highlights that India's urban population is forecast to increase by about 40% from 420 million in 2015 to over 580 million by 2030. The government has launched several large programmes (such as Smart Cities, Housing for All, AMRUT, HRIDAY etc.) along with policy support (Real Estate Act, REITs, GST etc.) to accommodate such a vast population. According to the paper, nearly 110 million houses would be required by 2022 alone in urban as well as rural India to provide housing to all citizens. This includes the current shortage of over 60 million houses, out of which around 20 million exist in urban areas. As per the paper, there are a number of solid infrastructure projects in the pipeline. These include 432 projects worth Rs 6.5 trillion for roads, more than 400 projects worth Rs 6 trillion in railways, 70 projects worth Rs 670 billion for the development of airports and 75 projects worth Rs 551 billion for ports.

Most analysts believe that Real Estate (Regulation & Development) Act, 2016, will ensure transparency, complete disclosures and clarity to buyers of real estate products. This is expected to weed out smaller, me-too players of the sector, bringing down the competition. 

Moreover, the rental business is expected to continue strengthening in prime cities; for quality office spaces, group housing residential complexes and IT/SEZs. In this context it is pertinent to mention here that DLF Ltd, Unitech Ltd, Oberoi Realty Ltd, Ahluwalia Contracts Ltd (Rs.301.65), etc are coming  up with some world-class housing as well as innovative and technologically advanced urban infrastructure; in future.

Reliance Securities has given a Buy Call on Ahluwalia Contracts (India) Ltd. with a target price of Rs.345. Time period given by the analyst is Medium Term.

With improvement in the economic scenario in FY16, the construction sector is seeing huge investments from GoI and private players. Overall, the domestic real estate/construction industry is poised to grow exponentially, backed by massive infrastructure building programmes initiated by GoI. Increased GoI focus on infrastructural development such as construction of roads and bridges and power projects is a major growth driver for this industry. In addition, mounting demand from increase in population will drive the need for increased capacity in housing, transport and utilities sectors.

The analysts feel that the real impact of latest FDI liberalisation measures on foreign investments in Indian real estate will be reflected over a period of time.  100% FDI under automatic route in completed projects for operation and management of townships, malls/shopping complexes and business centres is a significant step taken by the Government. Also, Quick implementation of the Real Estate Regulatory Bill (RERA) will support the realty market to attract FDI. Sources say, that the Government of India is considering a reduced lock-in-period applicable for FDI investments from 3 years currently to 1-2 years to further enhance investor interests. 

Unitech Ltd is passing through a bad phase due to wrong approach towards certain crucial matters, since the time they decided to venture into an unrelated business segment, wireless. Besides, this their employment of two lawyers having Congress (INC) Background, is also foolhardy. Not only that, the arguments of the two reputed layers, having strong political connections was pedestrian (as was reported in the media) during the last two Supreme Court hearings. The company needs to employ layers, who are close to the ruling dispensation and at same time not too costly - - because this will add up to the legal expenses of the company depleting shareholders' wealth. Also, their habit of going to court at the fall of a hat is not proper, when issues such as consumer activism is concerned. 

Having said, this I am expecting the share price of Unitech Ltd (Rs.5.17) to touch Rs.9-10, within the next 60 days, as the construction work commences, post monsoon and festival season kicks in from next month....
Winning Strokes: Think Different
Shrenuj & Co Ltd hit the UC at the late trade in the BSE. According to some  unconfirmed sources, the company having a debt of around Rs.3000 Cr is looking for OTS with the lenders. Forbes India writes on 18 August, 2016:
Since before recorded human history, the people of India have had an insatiable appetite for gold, treasuring it not only for its flawless natural beauty and religious significance, but also as a superb store of value.This tradition carries on today, with India’s demand for gold jewelry in 2015 reaching more than 668 tonnes, nearly a third of total global demand and second in size only to China. Demand fluctuates year-to-year depending on several factors, the two most significant being the number of Indian weddings held in the fourth quarter and the amount of crop revenue that’s generated as a result of the summer monsoon season. The wedding season is still three months away, but the June to September monsoon season is currently in full swing.
During an average monsoon season, the Indian subcontinent can receive close to 80 percent of its total annual precipitation. Most reports so far this year indicate surplus rainfall, with 12 inches being dumped nationwide last month alone, the fifth best month since the 1990s. This should come as welcome relief to Indian farmers, whose incomes have been squeezed by two long years of drought. It’s also good news for gold consumption. 
Moreover, if the WPI and CPI are rising, then this gives further ammunition for the gold bulls to be optimistic.  The manufacturers and diamond dealers in India's diamond industry are hoping business picks up from September, as the festive season kicks in. They are also placing added importance on holiday season this year, as the industry is expected to ramp up marketing for diamond jewellery. Shrenuj & Co Ltd is in the Jewelry business -- cutting and polishing of diamonds; trading in gold and platinum jewelry. Moreover, there were media reports some months back that Shrenuj & Co Ltd has taken a decision to “rationalize” its workforce after annual revenue slumped 34% and the company swung to a loss. The medium term target comes around Rs.15-17. Therefore, keep holding the shares as a series of UCs starts. 

The shares of Reliance Communications Ltd (Rs.50.20) is not going anywhere since the last few months, due to uncertainly prevailing regarding merger issue. There were reports in a section of the press that the potential merger of one of India’s 4th biggest telecom operators Reliance Communications (RCom) and Sistema Shyam TeleServices (SSTL) owned by Russian diversified holding AFK Sistema may be stalled with the transaction terms deteriorating, documents released by AFK revealed. In such a condition, I would suggest (.......for the Paid Members and for those who are trading through my associate brokerage house only).......

Reliance Defence and Engineering Ltd rose to Rs.67.40 intra-day before closing at Rs.66.65 in the BSE. The candle stick chart pattern and moving average crossover, indicates, that the stock could touch Rs.71-72, in the short term and in the medium term Rs.84-91. The company is scheduled to have AGM on  August 20, 2016. Turning profitable, Reliance Defence and Engineering today posted a net profit of Rs.102.4 crore for the quarter ended on March 31, 2016, largely on account of increase in deferred tax credit. The company had reported a net loss of Rs.158.28 crore in the same quarter of 2014-15. 

Those who are holding Manappuram Finance Ltd (Rs.87.40) since 27-28 levels are suggesting to book complete profits and then again wait for the dips to enter. Also, through who have almost tripled their wealth, by investing in the shares of Vedanta Ltd (Rs.179.05) can continue to hold the scrip with a SL of Rs.172.

Those who are holding Adani Enterprises Ltd (Rs.77.05) can continue to add the scrip on declines. The next targets are Rs.81-82.

The real estate giant Unitech Ltd (Rs.5.17) is expected to show better fundamentals post monsoon. The share price of the company is trading dirt cheap at the CMP, considering the intrinsic worth. The scrip should be added on all declines. The real estate and construction sector in India is expected to be the third largest globally by 2030, contributing over 15% to Indian GDP and emerging as the largest employer in India providing employment opportunities to over 75 million people.A recent background paper by KPMG in India and the National Real Estate Development Council (NAREDCO) provides an overview of the key programmes launched by the central government in the recent past to address the key challenges in urbanisation and the real estate sector, and throws light on the policy reforms undertaken by government to address these concerns.

Join either my Premium Services or my brokerage firm, to make up for all the losses, you made in the markets. Those who are having a portfolio size of only Rs.1-2 lakhs (especial offer till Deepawali/Kali Pooja) will get my Premium Service, free of charge, till they trade through my recommended brokerage house.  You are already trading through a brokerage house, then what is the harm to shift to my associate broker, if you are really my well-wisher? Your actions should define you, rather than sweet words. 

Moreover, those who have applied for the demat/trading account in my associate brokerage house/s, kindly give me a couple of days to streamline the operations. Meanwhile, those investors, whose accounts have become active are requested to deposit the amount for trading in the company's account, so that we can start from next week. 

Those who are NOT registered with me, kindly DON'T send me any mail or call me in future, as I am too BUSY to keep replying to FREE MEMBERS, through e-mails or mobile, for eternity. This affects my service to the Premium Members.....since my 1st priority is to serve them...The point is that, there cannot be a one-sided traffic - - the gestures should be reciprocal. 

Thursday, August 18, 2016

Important
Photo: Economic Times
(i) Adani Enterprises Ltd could be bought at Rs.75, for a short term target of Rs.81. A healthy rise in its coal mining volumes in the first quarter of current fiscal 2016-17 pushed Adani Enterprises Ltd (AEL)'s standalone net profit up by 155.99%. Moreover, a rise in the price of crude oil is positive for all the energy trading companies. Adani Enterprises is a diversified company. The company is engaged in the business of coal trading, coal mining, renewable energy among others.
Less than a year after the coal industry was declared to be in terminal decline, the fossil fuel has staged its steepest price rally in over half a decade, making it one of the hottest major commodities. Cargo prices for Australian thermal coal from its Newcastle terminal, seen as the Asian benchmark, have soared over 35 percent since mid-June to more than one-year highs of almost $70 a tonne, pushed by surprise increases in Chinese imports.
(ii) Shrenuj & Co Ltd (Rs..208) could be accumulated only by high risk taking investors. The stock could give stupendous returns over a period. “In its apparent over-enthusiasm, ICICI Bank Limited approached the DRT-III [debt recovery tribunal] in India and sought an ‘ex-parte’ order for attaching all the inventories in India and placing restrictions on the international movement of the promoters,” Shreyas Doshi, chairman of Shrenuj, said. “This order was sought on frivolous grounds, far from the factual situation.” He stressed the bank’s action will not impact the company’s current operations but it does jeopardize the rights of the other 18 banks who form the lending consortium in India. “The company is in the process of seeking a legal opinion to challenge this ex-parte decision of DRT-III and take remedial measures,” Doshi said. The news followed Shrenuj’s decision to “rationalize” its workforce after annual revenue slumped 34 percent and the company swung to a loss. Shrenuj & Co Ltd is in the Jewelry business -- cutting and polishing of diamonds; trading in gold and platinum jewelry. 
(iii) This is August month and hence we could expect some positive news from the management of Reliance Communications Ltd (Rs.50.20). Stay put.
(iv) Reliance Defence and Engineers Ltd (Pipavav Defence) is slowly towards Rs.67. Once this mark is crossed we can look for targets of Rs.73. 
(v) Idea Cellular Ltd can be accumulated at Rs.94, with a SL of Rs.92, for a short term target of Rs.97. The telecom stocks will do well in future, as the number of major players gets reduced and indian mobile density increases. 

Tuesday, August 16, 2016

Unitech Ltd: Media Enacted Fiasco
CMP: Rs.5.10
Today morning most of the mainstream media came out with this kind of news bulletins:
  • Unitech tells SC it doesn't have money to refund buyers. Court seeks list of buyers who want refund, during next hearing scheduled on Aug 17 - ANI.
  • No money to refund buyers, would have finished project if we had: Unitech in SC, writes the Hindustan Times.
  • Unitech tells the Supreme Court that it doesn’t have funds to pay back the buyers of its two projects in Noida and Gurgaon - - Live Mint.
  • Supreme Court directs Unitech to refund home buyers of Noida project, housing firm expresses inability - - Zee News.
  • Real estate giant Unitech Ltd told the Supreme Court on Friday that it was not in a position to refund money to home buyers who had invested in its projects in Noida and Gurgaon but not got possession of their flats because of delays in construction -- The Times of India.  
These kinds of one / two liners, created a havoc in the share price, the moment the market opened today after a long holiday - - one time hitting the Lower Circuits at Rs.4.92, in the BSE. However, continuous follow up buying by prudent - long - term - investors, lifted the share price a bit during the day,  eventually closing at Rs.5.11, down 16.91% in the BSE. The point to be noted here that, the percentage of Deliverable Quantity to Traded Quantity was whooping at 64.88%;

The company came out with a superb clarification which almost nullified all the above claims, soothing the ruffled hearts of the battered investors. It said: 
Unitech's Counsels statement before Honourable Supreme Court has been misquoted and is not correct. His contention was that the money received from customers has already been invested in land cost and building structures constructed at project site, and therefore, it is not feasible to refund money to the customers.
In fact, in the larger interest, the refund amounts being claimed by the customers can be better utilized for construction and completion of pending projects. The journalists has not appreciated this difference in the argument.
Due to declining real estate prices, some customers are seeking refund of money with interest even if property is ready for possession.
In this case also, the customers had agreed before the Honourable Consumers Forum to take possession of property with 12% interest for delayed period, but now seeking refund of their money with interest before Honourable Supreme Court.
Now, you tell me who will be responsible for such mis-reporting (or should we say motivated reporting?), which led to the destruction of shareholders' wealth in matter of few hours? The Regulators should take note of the same and warn such media houses, which presents simple news in fabricated forms. 

Anyway, if tomorrow (17 August, 2016) , the two-judge bench gives an adverse judgement against the company, I feel Unitech Ltd might go for higher Supreme Court benches (Special Leave petition or SLP); as the current demand from the consumers (buyers) seems to unjustified, in view of the fact that the customers had earlier agreed before the Honourable Consumers Forum to take possession of property with 12% interest for delayed period. 

Unitech Ltd has 300 million (30 crore) sq.ft of land, spread out across India. Now, we can easily find out the valuation of the land parcels if we only take around Rs.2000 per sq.ft. Its debt is around Rs.7200 Cr, which is nothing as compared to its assets. 

I am therefore, expecting the share price of Unitech Ltd (Rs.5.11) to again head towards Rs.7-9, in the August-October rally - - stay put.  
Important
(i) Speculative call Buy Shrenuj & Co Ltd at Rs.2.50, in the NSE.....The short term target could be Rs.6-7.

(ii) Unitech Ltd (Rs.5.15) has over-reacted to a series of negative news; so wait for a couple of days for the things to become normal once again. Meanwhile, home sales in India's top eight cities grew 9% in the quarter to June compared to that a year ago, marking the third straight quarter of expansion and indicating green shoots in a market emerging from a prolonged downturn, according to property research firm Liases Foras. 

The growth was led by cities including Ahmedabad, Hyderabad and Kolkata, where Home sales went up 20%. The national capital region, which includes the large markets of Gurgaon and Noida, saw a 12% increase in home sales while Mumbai recorded a modest 2% growth. The scrip should give a good return from the CMP of Rs.5.15 (but then you have to wait).

(iii) Reliance Communications Ltd (Rs.48) and Reliance Defence and Engineering Ltd (Rs.63.30), should be accumulated for the long term. There is no need to place Stop Losses in these two A-grade scrip.

(iv) Karuturi Global Ltd has broken an important support at Rs.1.50. If it breaks Rs.1.40, then exit the counter.

(v) Adani Ports and SEZ Ltd (Rs.272.50) reached all my short term targets today. So book at least some profits in the counter.

(vi) Gitanjali Gems Ltd (Rs.46) is up even today. It seems the stock would continue to make new 52-week highs in the coming days. Stay invested.

(vi) The scrip of Syncom Formulations Ltd (Rs.2.51) has broken a major support. Hence exit the counter and enter again when it closes above Rs.2.60. 

Adani Enterprise Ltd: Buy
CMP: Rs.75
Adani Ports and SEZ Ltd (Rs.268.90) is moving up, after the African deal. The call on Adami Ports Ltd was given at around Rs.217, the stock has today made a high of Rs.270, to reach my 2nd target. 

Now, this effect is soon to spread to other Adani Group companies like Adani Enterprises Ltd (Rs75) and Adani Power Ltd (Rs.26.90).

Moreover, the crude oil prices have started to move up in the international markets - - this is going have a positive effect on coal prices. Adani's coal mining volume grew by 122% to 2.1 million metric tonnes (MMT) in Q1FY17. 

Ameet Desai, CFO Adani Group and Executive Director of Adani Enterprises said, "We maintained our earnings growth trajectory during this quarter. This is testimony of intrinsic strength of our business portfolio. The government spending on infrastructure and other development projects, well progressing monsoon and pay revisions shall drive an uptick in the investment cycle and energy demand leading to our improved performance.”

A healthy rise in its coal mining volumes in the first quarter of current fiscal 2016-17 pushed Adani Enterprises Ltd (AEL)'s standalone net profit up by 155.99 per cent, as per its BSE filing. However, the flagship company of the over $10 billion conglomerate Adani Group registered an eight per cent decline in its standalone total income for the quarter.

The company posted a standalone net profit of Rs 196.91 crore for the quarter ended June 30, 2016 as compared to Rs 76.92 crore for the quarter ended June 30, 2015. However, total standalone income of the company decreased to Rs 2,371.55 crore for the quarter ended June 30, 2016 from Rs 2,577.97 crore for the quarter ended June 30, 2015.

On the consolidated basis, AEL saw an almost muted growth of 0.03 per cent in its net profit after taxes, minority interest and share of profit of associates for Q1 of FY17 at Rs 363.71 crore. As against this, the company had seen a consolidated net profit of Rs 363.57 crore for the corresponding period last year. Consolidated total income too grew marginally by 0.38 per cent, up from Rs 9144.25 crore for the quarter ended June 30, 2015 to Rs 9179.85 crore in the said quarter this year.


The first quarter of FY17 saw AEL extracting and supplying washed coal of 2.13 million metric tonnes (MMT) to RRVUNL, up from 0.96 MMT in Q1 of FY'16, a rise of 122 per cent. At Parsa Kente coal block in Mine Development and Operations (MDO) business, the company is ramping up its extractive capacity. On the other hand, in terms of overseas mining, AEL extracted 1.22 MMT of coal in Q1 FY17 while it expects to extract about 5.5 MMT of coal in the current fiscal year.

According to Gautam Adani, Chairman Adani Group, the group company remains committed to its investment plans in renewables and domestic mining sectors. "Adani Enterprises continue to focus on the sectors of national interest through presence in critical and often under penetrated spaces. The investment climate in the country is building up and the intent of government to pursue economic reforms is clearly visible," Adani said.

Going forward, the company is hoping for improved performance on the back of an uptick in investment cycle and energy demand, said Ameet Desaid, chief financial officer, Adani Group and executive director, AEL. "We maintained our earnings growth trajectory during this quarter. This is testimony of intrinsic strength of our business portfolio. The government spending on infrastructure and other development projects, well progressing monsoon and pay revisions shall drive an uptick in the investment cycle and energy demand leading to our improved performance," he said.

The company registered city gas distribution volume of 97 mmscm in the first quarter of the current fiscal.

Meanwhile, under its renewable business, the company has a constructed solar power generation capacity of 648 Mw in Tamil Nadu, while it has also forayed into wind power with the commissioning of a 12 Mw project in Madhya Pradesh. Moreover, an additional pipeline of 1468 Mw of wind and solar power projects are under various stages of implementation across the country.