Thursday, August 11, 2016

Unitech Ltd: Buy
CMP: Rs.6.20
The Goods and Services Tax (GST), cleared by the Rajya Sabha, is a comprehensive indirect tax reform, which will be implemented throughout India and has broad implications on all sectors; including the real estate.

The implementation of GST can bring transparency in the construction and real estate industry, as per some property consultants.

Thus, GST is likely to bring about a major change in real estate sector at certain layers, but it all depends on the nature of transaction and rate of tax. 

The GST bill would benefit the real estate sector by creating a uniform tax structure. This would lead to better tax compliance by the builders and developers. Under GST regime, realtors see lesser tax burden on raw materials such as cement and steel. This will result in lower construction costs for developers.

The stakeholders are hoping for a positive impact of GST with no high fixed percentage tax which could boost the real estate market.

One thing is now almost certain: if the GST Act is implemented in the present form, it would increase the cost of real estate; which means those properties, which have already been constructed could see a positive domino effect on their prices - - helping companies like Unitech Ltd.

However, having said this, it is pertinent to mention here that the direct impact of GST on real estate will depend on whether the final GST rate is more or less than the taxes paid currently. Also, the roll out of the GST will take some more time and it is expected that the NDA governments will take due care of of any problem arising out of its implementation in the initial period; probably till one year. 

Buy Unitech Ltd at Rs.6.20, for a short term target of Rs.7.20. The Q1FY17, results of the company would be along the expected lines and the implementation of the GST (whether in its present form or a modified version) is a future event, so not much worry. 

Friday, August 05, 2016

Important
1. Buy Adani Enterprise Ltd at Rs.76.50, for a short term target of Rs.81. If Adani Port and Sez Ltd (Rs.231) is a beneficiary of GST, then  its effects should also come to Adani Enterprise Ltd (Rs.76.50). The scrip seems to have formed a bottom. 

2. Those who are holding Reliance Communications Ltd (Rs.50.35), can continue to hold the same with a SL of Rs.46. The company should gain from the launch of Reliance Jio, but the problem is that there is no fresh news regarding its merger with Aircel, which is actually spooking the shareholders. 

3. The share of Reliance Infrastructure Ltd (Rs.593) have made Rs.596.25, intra-day. As long as Rs.572, is not broken on the downside, the traders can continue to hold the shares with a short term target of Rs.605. 

4. Reliance Defence and Engineering Ltd should should gain due to lower logistic costs and lower cost of building materials like Steel and Cement, due to GST effect. One should add the scrip on all declines for a short term target of Rs.73.

Tuesday, August 02, 2016

Idea Cellular Ltd: Buy
CMP: Rs.103.50
Target: Rs.111
SL: Rs.99
One of the major drawbacks of the GST regime could be the direct spike in the service tax rate from 14% to 20-25%. 

Being a regressive taxation system that India follows, the burn of increased tax rates will directly be faced by the end consumers unless the credit is passed on to the next in the business chain. 

Now given the importance of communication services in our lives, they could easily qualify as "Necesary Services". Thus it is expected that the government of India will consider allotting telecom services under the lower rates category and in turn, charged a reduced GST rate reserved only for Necessity Goods.

Moreover, Deutsche Bank has given a buy on  July 4, 2016 on Idea Cellular, with a target price of Rs.137. The report says: Idea expects the data market to be driven by subscriber growth rather than ARPU (average revenue per user), similar to the trajectory of the voice market. There is space for Reliance Jio without affecting the revenue shares of the incumbents if sector growth remains at the current level of 8-9%. Idea expects significant availability of spectrum in the 1800Mhz band in the medium term and intends to buy spectrum largely on a ‘just-in-time’ basis.

Now I feel the rally will be more broad based, as the passage of the GST bill, is almost certain in this monsoon session. Or in other words, the rally in the large caps, will be accompanied by SHARP RALLIES in the SMALL and MID CAP space. 
Suzlon Energy Ltd: Buy
CMP: Rs.17.15
Introduction: The Suzlon Group is one of the leading renewable energy solutions providers in the world with an international presence across 19 countries. The company has recently forayed into the solar space. Suzlon Ltd remains involved with the engineering, procurement and construction (EPC) work

Triggers:
(i) Suzlon Energy Ltd's consolidated net loss narrowed down to Rs.270.55 crore for the quarter ended March 31, on higher sales and lower expenses. The company had posted a consolidated net loss after share in minority interest of Rs.1,212.06 crore in the year-ago period. For the entire 2015-16 fiscal, the company posted a net profit of Rs.482.59 crore, against a net loss of Rs.9,157.69 crore in the previous financial year. Its FY16 revenue moved up by 69 per cent to Rs 8,259 crore. The company's annual sales volume was of 1,131 MW, had Y-o-Y growth of 149% and its FY16 order book stood at 1,243 MW valued at Rs.7,989 crore. The Consolidated Net Debt (excluding FCCB) during FY16 was at Rs.8,452 crore, down from Rs 14,570 crores in FY'15.

Tulsi R Tanti, Chairman and Managing Director, Suzlon, said, "We are back to profit, our commissioning increased by more than 100% and we are confident of maintaining the growth with strong focus on execution. The Indian market is expected to increase by 30% in FY17, and Suzlon will continue to outpace the industry."

"Globally, the demand for renewables is growing with a record 64 GW installation and an investment of USD 329 billion during calendar year 2015. The demand for clean, sustainable and affordable power will continue especially in emerging markets," Tanti said.

(ii) Suzlon has its research and development centres in Germany, Denmark, the Netherlands and India and has recently opened a Blade Science Center in Vejle in Denmark. The Pune-headquartered group has installations of around 15.5 giga watt (GW) spread across 17 countries, of which India accounts for the lion’s share of about 9.5 GW.

(iii) Renewable sector, currently a beneficiary of several indirect tax exemptions, may be a big loser if goods and service tax (GST) is implemented since the bill proposes to revoke most of these exemptions, according to Bridge to India. Bridge to India, a renewable analyst house, feels if GST is implemented, input cost or tariff will rise by anything between 12-20% in the sector and this would wipe out the pricing gains of the past two years. Costs would rise because at present there is no import duty or indirect tax is applicable on solar modules but under the new regime, GST of 17-20% would be payable thus increasing costs.

However, the Ministry of New and Renewable Energy (MNRE) is in dialogue with the Department of Revenue to ensure that renewable power equipment is exempted from GST. MNRE is believed to be pushing for a waiver from GST arguing that a sudden increase in cost would lead to disruption in the sector and delay implementation of policy targets.

Bridge to India is of the opinion that the solar sector has a strong case for an exemption. The government has put strong focus on the sector to achieve a diversified set of policy goals including energy access, energy security and climate change mitigation.

(iv) On July 26, 2016, the World Bank forecasted that Brent and WTI will average $43 per barrel in 2016, up from the previous estimates of $41 per barrel for the same period. Crude oil prices will trade higher due to crude oil supply outages and higher crude oil demand in 2Q16. Crude Oil prices is directly proportional to the Wind Energy.

(v) Hong Kong based CLP Group (formerly China Light & Power),the largest overseas investor in power in India, has forayed into the Indian solar energy market by acquiring 49% stake in Suzlon Energy 100 mw project in Telangana (enterprise value at around Rs.760 crore.) the two companies said in a joint statement, couple of months back.

While the two companies will develop the project at Veltoor in Telangana in a joint venture, under special purpose vehicle namely SE Solar, CLP India will have the option to acquire the balance 51% stake later.

This news has already given a big boost to the domestic solar power industry, underscoring global interest even in secondary market brownfield or even greenfield growth opportunities. An estimated 10,000 MW of solar and wind projects are believed to be on the block, seeking equity investments to the tune of Rs 20,000 crore, according to sector experts.

The project already has power-purchase agreements signed at Rs.5 and 59 paise per unit -- a significant advantage, considering tariff costs in renewable energy have been going southwards in the last few months. Experts say such deals are just the beginning and more will follow, as consolidation in the renewable energy space gathers steam.

But Investors have been rather nonchalant about Suzlon Energy Ltd’s announcement that it has divested 49% stake in a venture for Rs.73.5 crore. According to Pawan Parakh, an analyst at HDFC Securities Ltd, the sale amount indicates a project cost of Rs.750 crore, implying a per MW value of Rs.7.5 crore, a premium to the estimated cost of Rs.6 crore per MW.

It is Suzlon’s first project in the solar energy space. The transaction can set a benchmark for the rest of the solar power projects the firm won and plans to dispose of after execution. The entry into solar by Suzlon is partly to convince the market that it is spreading the risks.

(vi) Nomura maintains a buy rating on Suzlon Energy with a 12-month target price of Rs.24. The global brokerage firm remains positive on the stock especially from a long-term perspective.

(vii) Suzlon Energy has very recently acquired five small solar companies for an undisclosed sum to implement various renewable energy projects across the country.

(viii) Tushar Pendharkar, head of research at Right Investment Advisory Services, says Suzlon is on the right path. "In my view, company is on track and could get the maximum benefit out of the government’s ambitious plans for renewable energy. There is still enough room for business growth and we believe that the demand for wind turbines is still at a very nascent stage in India,” said Pendharkar.

“For diversification, the company has also entered into solar EPC (engineering, procurement and construction), which I believe could be a good move, considering the government is focusing more on solar rather than wind.”

(viii) According to a report published by the Morgan Stanley analysts, the industrial manufacturing is likely experience a positive impact due to the implementation of the GST. In this context, the shares of Suzlon Energy Ltd' looks attractive.

Conclusion: Analysts expect the recovery in service revenue and further reduction in interest costs to drive Suzlon back into profit in the current fiscal year. Struggling to repay Rs.9,500 crore of loans, Suzlon was given a two-year moratorium on principal and interest payments and additional working capital as part of a debt recast in 2013. The company is using its engineering and project execution skills to duplicate its wind energy business model, where it developed projects and took over all execution risks and then sold stakes to investors.

Therefore, buy the shares of Suzlon Energy Ltd at Rs.17.15, for a target of Rs.21, with a SL of Rs.14. If GST gets passed, with a surprise positive incentives from the GOI, the stock could even touch Rs.24 in the short term.

Monday, August 01, 2016

JSW Energy Ltd: Buy
CMP: Rs.81
Recently Jaiprakash Power Ventures announced to sell 500 megawatt thermal power plant in central India to JSW Energy Ltd for Rs.27 bln ($401.8 mln) including debt. The analysts at Ambit Capital expect the deal to be value-accretive for JSW's shareholders, if it fructifies. Analysts say JSW Energy may put its plans to buy Monnet Ispat And Energy Ltd's 1,050 MW power plant on the back burner given rise in leverage - - which is again positive development for the share holders.

Meanwhile,  JSW Energy Ltd got fair trade regulator CCI's approval to acquire 1,000 MW power plant in Chhattisgarh from Jindal Steel and Power Ltd (JSPL). Under the deal announced in May, the Sajjan Jindal-led firm was to purchase the power plant in Raigarh for Rs 6,500 crore with certain conditions.

The enterprise value of the deal is Rs.4,000 crore plus net current assets and "which will be increased to Rs.6,500 crore plus net current assets, if certain pre-arranged conditions regarding fuel security and power off take are satisfied", JSW Energy had said in May.

JSW Energy Ltd is engaged in the business of power generation, power trading and transmission, and mining and equipment manufacturing. 

Therefore, buy the shares of JSW Energy Ltd at Rs.81, for short term targets of Rs.92-95. Please keep a SL of Rs.76, for any short term trade. 

Sunday, July 31, 2016

Reliance Communications Ltd: Powered by the Launch of Reliance Jio...
CMP: Rs.52.60

The daily candle stick chart of Reliance Communications Ltd looks attractive. The recent buoyancy in the share price movement is primarily pivoted on two major events:

1. The integration of Reliance Communications Ltd with MTS, the merger with Aircel and towers sale would help reduce debt by 75%. A potential three-way merger between Reliance Communications Ltd (RCom) Sistema Shyam Teleservices and Aircel will make the combined entity the second-largest in terms of subscriber base and fourth-largest in terms of revenue, according to a report by the ICRA.. 

This merger deal will also help RCom, the country's fourth-largest mobile carrier, to expand its GSM services in West Bengal, Bihar and Assam, where it could not win back its 900 Mhz airwaves in the March 2015 auction. 

ICRA had also said that the data services had remained a major thrust area for telecom companies as the number of data subscribers and the average data usage per subscriber per month is growing rapidly, which it feels has triggered a string of spectrum trading deals in recent weeks, including back-to-back 4G spectrum acquisitions by Bharti Airtel from Videocon Telecom and Aircel. 

RCOM and Maxis Communications Berhad (MCB) and Sindya Securities and Investments Private Limited (Sindya), the shareholders of Aircel Limited ("Aircel"), expect to sign binding definitive documentation and announce the proposed transaction for the combination of the Indian wireless business of RCOM and Aircel very shortly. RCom will demerge its wireless business and merge it with the existing unlisted Aircel, with promoters of both sides owning 50% each in the new entity. 

RCom and Aircel will each transfer Rs.14,000 crore of their debt into it. RCom has a gross debt of Rs.42,651 crore while it is Rs.23,436 crore for Aircel. Russia's Sistema will hold 10% in the listed RCom as per a parallel ongoing process but the Russian company, which operates under the MTS brand in India, won't have any board representation in the new entity. 

The RCom-Aircel deal would create an entity with revenue of about Rs.25,000 crore annually, earnings before interest, taxes, depreciation and amortisation of about Rs.6,000-Rs6,500 crore and an Ebitda margin of 25%, with cash flows of around Rs.3,000 crore a year to start with. 

RCom-Aircel-MTS combined will hold around 19% of the total spectrum in the country across of the 4G bands of 800 Mhz and 1800 Mhz and 3G bands of 2100 Mhz and 900 Mhz. It will have around a 180 million subscribers. This compares with nearly 175 million for Idea, over 252 million for market leader Bharti Airtel and nearly 198 million for Vodafone India, as per sector regulator data at April end. 

The new entity will be rebranded and remain unlisted initially. Promoters of both companies will have equal board representation. 

(ii) Earlier in January this year, RCom announced entering into strategic partnership with RJIL covering 4G Lte services. Reliance Jio and RCom signed a multi-circle airwaves sharing and trading pacts in the 850 Mhz band to jointly offer 4G services across India.

A merger with MTS and a spectrum sharing/trading deal with Reliance Jio will allow RCom to be aggressive in offering fourth-generation technology (4G) services. The company has already migrated a large portion of its subscribers from its CDMA base to 4G, with the rest likely to follow over the next couple of months.

Reliance Communications (RCom) earlier said that the Department of Telecommunications (DoT) has taken on record 800 megahertz (MHz) spectrum sharing in 7 circles of RCom and 2 circles of Reliance Telecom (RTL), a wholly-owned subsidiary with Reliance Jio Infocomm (RJIL). 

The spectrum arrangements between RJIL and RCOM will result in network synergies, enhanced network capacity and will optimise spectrum utilisation and capex efficiencies. Both operators anticipate considerable savings in operating costs and future investment in networks. RCom's customers will benefit from access to RJIL's nationwide 4G LTE network under the reciprocal sharing and ICR agreements. 

Thus, Reliance Communications Ltd is fast emerging as the biggest beneficiary of the approval of spectrum sharing guidelines, though Vodafone and Bharti Airtel — which obtained 3G spectrum earlier — could also benefit big time.

According to a report in the Economic Times, Reliance Jio and Reliance Communications will take advantage of the new rules to pool their spectrum in the highly penetrative 800 MHz band for a joint 4G play. The combined network will be jointly owned and operated by both companies.

The main advantage for RCom in all this is that since Reliance Jio has already set up a network or is in the process of setting up a 4G network, RCom does not have to set one up itself. Instead, it can just share its spectrum with Jio, and Jio can include the spectrum in its network.

Including an extra carrier (spectrum) will not require Jio to double its towers or base stations. As a result, RCom practically gets a free 4G network thanks to this arrangement.

This will save RCom thousands of crores in network deployment costs. Jio is estimated to be spending around Rs.1 (one) lakh crore to set up a network of around 75,000-80,000 4G towers, out of which most of the money is for the physical infrastructure.

However, this is not the only opportunity for RCom in 4G space. Once the MTS deal goes through (or even without it), RCom can have a combined 4G network using MTS’ spectrum in another nine circles – taking its total coverage to 19 circles.

These nine circles are Delhi, Gujarat, Karnataka, Kerala, Kolkata, Rajasthan, Tamil Nadu, UP West and West Bengal.

Once that is done, RCom-MTS would easily be the player with the most extensive 800 MHz 4G network in India. In comparison, the coverage of Reliance Jio in the 800 band would be restricted to the less lucrative markets mentioned in the beginning of this article.

The advantage for RCom is that the deals with Reliance Jio and MTS can also be done even without a merger with MTS with the help of intra-circle roaming arrangements and spectrum sharing. However, spectrum sharing would require RCom and MTS to have their spectrum in a contiguous block.

The tentative date of launch of Reliance Jio Infocom Ltd's service is 15th August, 2016. The share price should reach Rs.60, by the time Reliance Jio actually launches its operations. Therefore, the investors are suggested to keep holding the stock of Reliance Communications Ltd (BSE: Rs.52.55; NSE: Rs.52.60) for another 20-30 days, to get some superb appreciation in their investments Ltd. 

Thursday, July 28, 2016

Reliance Defence and Engineering Ltd: Buy
CMP: Rs.67.10
Reliance Defence and Engineering Ltd (RDEL) is engaged in defence, offshore, marine and engineering sectors. The company has two units, one special economic zone (SEZ) unit and another export oriented unit (EOU). The Erstwhile, Pipavav Defence and Offshore Engineering Company Ltd was rechristened as Reliance Defence and Engineering Ltd (RDEL), in March, 2016.

RDEL is the first private sector company in India to obtain the licence and contract to build warships. The facility houses the only modular shipbuilding facility with a capacity to build fully fabricated and outfitted blocks

Reliance Defence and Engineering Ltd last week signed Sub-Concession Agreement (SCA) with Gujarat Maritime Board and Gujarat Pipavav Port at Gandhinagar, Gujarat. The SCA is for a period of 30 years expiring in June 2046 and the said term of SCA may be further extended.

Land Banks of some of the Prominent Indian Builders
The SCA inter alia grants sub-concession, right and authority to Reliance Defence and Engineering to build, operate and manage Defence / Commercial Shipyard Activities on the terms and conditions mentioned therein.

Earlier there were media reports that Reliance Defence and Engineering Ltd had received the Reserve Bank of India’s (RBI) approval to exit the corporate debt restructuring (CDR) package.

Anil Ambani-led Reliance Infrastructure Ltd, acquired nearly 35% in Pipavav Defence and Offshore Engineering Co, which has been renamed as Reliance Defence and Engineering. The company’s debt to the tune of Rs.6,000 crore will be refinanced with maturity of 20 years while interest cost on the debt would be reduced to 11%, according to the report.
Please Click on the Photo to Expand

The exit from CDR is expected to lead to greater financial flexibility and business opportunities for Pipavav Defence, enabling the company to contribute to the security of the country and pursue the Make in India and Skill India programmes in an even more significant manner, Reliance Infrastructure said in November, 2015.

The stock seems to be on an uptrend. Buy the shares of the company at the CMP of Rs.67.10, for a short term target of Rs.78. 

Moreover, those who are holding the shares of Syncom Formulations Ltd (Rs.3.17), from below Rs.2.50 (where it was recommended) and have short term view can book some profits and enter RDEL and/or Unitech Ltd (Rs.7.10). In case of Unitech Ltd, buy in the CASH segment only (not in Futures) for a target of Rs.12-plus in the short term. 

Wednesday, July 27, 2016

WINNING STROKES: THINK DIFFERENT
Unitech Ltd as expected bounced today from Rs.6.93 to close at Rs.7.24 in the BSE. The scrip made an intra-day high of Rs.7.35, but could not sustain that levels. The stock should make new 52-week highs in the coming days. This optimism stems from the fact that there were recent media reports which said: Residential real estate sales rose 8% in the April-June quarter, compared to a 3% decline in January-March, suggesting that the market which has seen sluggish growth over the last 2-3 years, is finally seeing some revival signs. Sales across nine key Indian cities - Mumbai, Pune, Noida, Gurgaon, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad – rose to 55,550 units in first quarter of this fiscal from 51,500 units in fourth quarter of 2015-16, according to a report by real estate portal PropTiger. The revival in sales was primarily driven by an uptick in demand in Bengaluru, Pune and Mumbai, which together accounted for 61% of total sales across the 9 cities in the first quarter of fiscal 2017, the report added  The investors should add the scrip on all declines and wait for it to close above Rs.7.30, with good volumes. 

The Share of Reliance Communications Ltd today rose to Rs.52.30 in the BSE before closing at Rs.51.55. Yesterday, the stock was reiterated a buy, with short term targets of Rs.60-61. As mentioned a number of times earlier, the launch of Reliance Jio is positive for the shareholders of Reliance Communications Ltd. Meanwhile the ET, reported on 8 July, 2016 that the  US private equity firm Brookfield Asset Management has emerged, a serious bidder to buy Reliance Communications' stake in its tower unit. RCom and Aircel have been in exclusive talks since December on a much-anticipated amalgamation in what would be the first in-market telecom merger of national scale in the country. 

As per terms of the pact, RCom will hive off its wireless business into a separate arm, which will be combined with Maxis-owned Aircel, with both companies having equal ownership. The new $6 billion entity proposed will remain unlisted in the initial years and operate under a new brand name. 

RCom is now unofficially the 3rd largest Telecom player in India, and we would soon see its reflection in the share price. Therefore, add the scrip on all declines.

The stock of JSW Energy Ltd as expected corrected to Rs.77.50 intra-day before closing at Rs.78.55. Yesterday, it was suggested to exit the counter, either with minimum profits or with no profit no gains. You should leave this stock for the time being, unless it finds its levels. 

The stock of Syncom Formulations Ltd today rose to Rs.3.49 in the BSE before cooling down to Rs.2.86, intra-day and then closing at Rs.3.20. The scrip should be slowly moving towards my next target of Rs.4.20, provided it closes above the strong resistance zone of Rs.3.40-3.50. 

The stock of Karuturi Global Ltd, whose fundamentals are looking great even after their misadventure in Africa, could give multi-bagger returns going forward. The stock made an intra-day high of Rs.1.67, before closing flat at Rs.1.60 in the BSE. The company is fighting a tough battle in the African continent and the recent visit by Narendra Modi, could end their owes. However, this stock is only for risk taking trader - others should stay away from this counter. This is infact high-risk-high-gain counter. Meanwhile, the Karuturi Flower Farm owner reportedly said last month that he will clear his debts and reopen the farm, which has 2,600 workers.

Businessman Ram Karuturi said the farm will be up and running in a couple of months, once court cases are closed. It was put under receivership last year.

It is to be noted that in early 2014, CFC Stanbic Bank had placed Karuturi Global Ltd under receivership after it failed to service a Sh340 million (Sh34 Cr) loan. However, the flower firm’s management protested vehemently against the move, saying the land, valued at Sh8.2 billion, is worth much more than the loan amount. Now let us do some simple calculations:
Sh8.2 billion = Sh820 crores.

Therefore, the price of the farm's land is ~24.11 times the value of the loans, taken by Kenya’s biggest flower firm, Karuturi Global Ltd. Can you imagine? In September 2014, one of its parent flower trading subsidiary in the Netherlands was declared bankrupt. 

Nazret.com writes: 

“Touch me, then you will see the power of India”, declared.....Sai Ramakrishna Karuturi in a recent interview in direct challenge to the Thugtatorship of the Tigrean People’s Liberation Front (T-TPLF).

However, an interesting part of this episode is that the said farm land is registered under the ownership of Rhea Holdings Ltd/ Surya Holdings Ltd/ Yeshoda Investments Ltd used for flower farming in Naivasha, Kenya. “I am hoping they [liquidators] can find someone to buy air,” Mr Karuturi told The Standard, adding, “there is nothing in there to be sold.” Or in other words, Karuturi and T-TPLF have weaved a convoluted and tangled legal web for themselves in their Gambella Gambit. Did you get me?

Karuturi Global Ltd once boasted of 126 hectares of flowers under greenhouses and a further eight hectares of open air rose cultivation comprising more than 20 popular rose varieties. The firm also prided itself in having significant recognition in key European export markets and comprehensive contracts of sale in 2015 with customers in the main market segments. Karuturi produced 580 million roses per year from its operations in Kenya, Ethiopia and India with estimates showing that one out of nine roses bought in Europe came from the Karuturi farm. The company, few years back acquired more than 300,000 hectares in Ethiopia to produce food for foreign markets. Last year on on August 17, 2015, ICICI Bank acquired 8.89% shares of Karuturi Global Ltd, at a deal is valued at over Rs.24.69 crore.

Jindal Steel and Power Ltd which was recommended around Rs.58-60, today touched my final target of Rs.90 (intra-day- Rs.90.35). The investors should keep holding the scrip till Rs.67, is broken on the downside.

Those who are holding the shares of Lanco Infratech Ltd (Rs.5.05) should exit the scrip on intra-day highs, as it is not performing as per expectations. They could enter Reliance Communications Ltd, after exiting from this scrip.

Those who are holding the shares of BHEL(Rs.148.50), can look for further appreciations of their holdings, as the stock is likely to kiss Rs.163, once Rs.152 is taken on the upside.

Those who are still holding my old recommendation Vedanta Ltd (Rs.168.45) from around Rs.60, should look for targets of around Rs.186-187, once Rs.172-173 is crossed with good volumes.

Those who have a portfolio size of around Rs.4-5 lakhs-plus and is looking for good appreciation over their investments can contact my firm. This is the time to make good money from the share market, when the trends can be identified and exploited. Though 30% appreciation on the capital invested is considered as very good return from any share market, you will get more than that, sitting in the comforts of your home. This market is for the experts and not for amateurs. Also, those who will trade through my associated brokerage house, with a minimum portfolio size of Rs. 1.5 lakhs will get my Premium Service worth Rs.15, 000 per year, FREE OF CHARGE. Therefore, without delay, mail me at: suman2005s@rediffmail.com or sumanm2007s@gmail.com, if you are really interested in making some quick bucks from the Indian Stock Markets, which are in a roll right now. 

Tuesday, July 26, 2016

Important
(i) Accumulate Reliance Communications Ltd (Rs.50.70) in all declines till the middle of next month,
when Reliance Jio Ltd is tentative to be launched. Reliance Communications last year tied up with the Silicon Valley-based Jasper to provide Internet of Things (IoT) solutions, starting with the companies belonging to the Indian conglomerate.

The tie-up will provide solutions to the upcoming smart cities, making electricity distribution grids smarter for public safety and on the healthcare front.

The return on investment through the implementation of IoT solutions, which can be loosely described as a network of inter-connected devices that can be accessed through the Internet, is "HUGE".

For instance, with IoT, street lights will automatically go off when they sense no traffic on the roads and consequently save power.

Another application could be a smart band that will automatically alert physician when body vitals go to abnormal levels.

The deployment of the solutions will not always be "captive", that is within the group companies, and will also be rolled out commercially.

The system works on a revenue share between the two partners, with the partnership, all the five critical components needed for IoT, including data centres, connectivity, local networks connecting sensors, analytics and sensors are now in place.

(ii) The correction in Unitech Ltd (Rs.7) seems to be over. The investors, can take fresh entry in the counter, for a revised target of Rs.12. 

(iii) Karuturi Global Ltd (Rs.1.60) could give good returns to the investors over a period. The investors should buy the scrip in intra-day declines.

(iv) The shares of JSW Energy Ltd is not performing as expected and hence you can either book small profits or exit with no loss no gain and enter Karuturi Global Ltd at Rs.1.60.

(v) The shares of Syncom Formulations Ltd (Rs.3.16) has a long way to go. Keep holding till the targets of Rs.5-7, is reached. 

Monday, July 25, 2016

Karuturi Global Ltd: Buy
CMP: Rs.1.63
Land is one of the most pricey things in India. In Africa, it is cheaper. This has prompted many Indian companies and individuals to migrate to African countries for farming. Karuturi Global is one Indian company with huge tracts of land in Ethiopia.

However, according to recent and past media reports, their experience has not been good. There is strong local resistance and also lack of a viable market for their produce. The local resistance is mainly because of allegations that Indians are engaged in land grab there.

After Narendra Modi's visit, the Indian government might take measures to address this burning issue. This can help build the trust of the Africans and land can be a point where both India and Africa have a common interest.

Anyway, the Book Value of the shares of Karuturi Global Ltd is Rs.18.67  and it has an EPS of Rs.1.46. The P/E of the shares of the company is 1.10 against the Industry P/E of 20.91. A decent P/E re-rating of 10 can take the scrip above Rs.15; after giving suitable discounting. 

If you do not have free cash, then you can exit out (or book out small profits) of JSW Energy Ltd (Rs.80.20), as the stock is not performing as per expectations and enter Karuturi Global Ltd at Rs.1.63, for a short term target of Rs.5. 

Friday, July 22, 2016

JSW Energy Ltd: Buy
CMP: Rs.79.50
JSW Energy  Ltd came out with decent set of numbers for the Q1FY17, with with the profit rising 28.6% sequentially to Rs.366.5 crore on lower revenue growth. After adjusting numbers due to new accounting standards, profit in Q4FY16 stood at Rs 285 crore against Rs 305.43 crore (before the adjustment). 

Revenue during the quarter fell marginally by 6.9% to Rs.2,450 crore compared with Rs.2,630.7 crore in preceding period. Operating profit (EBITDA - earnings before interest, tax, depreciation and amortisation) increased 3.7% quarter-on-quarter to Rs.1,117 crore and margin expanded by a whooping 470 basis points to 45.6% in Q1FY17.

The company has highest net power generation of 6,648 million units in Q1FY17 against 4,480 million units in same period last fiscal, primarily due to generation from hydro power plants acquired during FY16 and improved performance of Ratnagiri plant (Maharashtra). 

It was partly offset by shut downs at Vijaynagar and Barmer plants due to maintenance and low scheduling of power since June. 

Meanwhile, JSW Energy said it has withdrawn from the acquisition process of Monnet Power, which is positive from the shareholders' point of view. 

Moreover, JSW Energy Ltd which reported 18.7% increase in consolidated net income at Rs.366.53 crore for the June, 2016 quarter, is planning to acquire around Rs.5,000 crore worth of stressed assets. "The company has acquired assets worth Rs 12,000-13,000 crore in the last 2-3 years and it is currently evaluating 8-9 projects. Currently, our focus will be on growing our hydel portfolio. We will also consider opportunities in the wind and solar sector, but that will be at a later stage ", JSW Energy Ltd's Chairman Sajjan Jindal told reporters on the sidelines of the company's AGM. The forecast of good monsoon has already raised the prospects of hydel power plants in India. 

JSW Energy, which has bought two hydel power projects of the debt-ridden Jaiprakash Power Ventures in Himachal Pradesh, including the 300-mw Baspa-II and 1,091-mw Karcham Wangtoo, for Rs 9,700 crore, is looking at expanding its hydel portfolio through acquisitions. 

The investors can buy the stock at the CMP of Rs.79.50, for a short term target of Rs.86 - 87. In case of short term trade, please do keep a SL of Rs.76.
DO YOU KNOW?
Photo: Business Standard
The three-way merger between Reliance Communications (RCom), Aircel and MTS (brand of Sistema Shyam) is on course to create a formidable company, with best-in-class spectrum and reasonably strong financials.

Both RCom and Aircel are working on lowering their debt, which they have agreed to cap in the new entity at Rs.20,000 crore. Sistema Shyam has agreed to settle its liabilities ahead of the merger with RCom.

After the sale of its tower and fibre assets, RCom's debt is expected to come down to ~Rs.10,000 crore, which will be transferred to the merged entity. Aircel, too, is planning to bring down its debt to Rs.10,000 crore from the present Rs.26,000 crore. Sistema Shyam is also expected to pay off its Rs.4,153 crore debt ahead of the merger. 

Moreover, Investment Bankers said at Rs.20,000 crore, the debt to EBIDTA (earnings before interest, taxes, depreciation and amortisation) ratio of the new company would be 2.5 because the operating income of the new entity could be Rs.7,800 crore. RCom's current EBIDTA is Rs.7,000 crore, which includes income from tower assets and the wireless business. The wireless EBIDTA is Rs.4,000 crore, which will come to the new entity along with that of MTS.

If the new entity generates the Ebidta it estimates, then its net debt/Ebidta ratio will be better than the incumbents.

Currently, Bharti's debt/EBIDTA ratio stands at 2.8, while that of Idea is 3. RCom's debt to EBIDTA ratio is 5.3.

This three-way merger is expected to be a win-win for all players as it will provide the new entity a pan-India footprint, say analysts. The new entity will have 19.3% of the industry's spectrum holdings and will be the second largest player in terms of subscribers (200 million).

According to Navin Kulkarni of PhillipCapital, "The deal is a win-win for all players and will create a strong telecom player. However, with a revenue market share of 15%, the new company will still be behind Idea, which has a revenue market share of 19%".

According to experts, this merger will enable RCom to prevent loss of GSM subscribers in markets where it could not renew its 900 MHz licence (Assam, Bihar, Northeast and West Bengal). In markets like Himachal Pradesh and Odisha, RCom will be able to use its newly acquired 5 MHz spectrum in the 1800 MHz and 900 MHz bands for 3G/4G by moving its GSM subscribers into Aircel's 1800 MHz spectrum. 

The merged entity will be able to have 10 MHz of continous spectrum in four markets for improved 3G download speeds (Bihar, Jammu and Kashmir, Kolkata and Odisha). The merged entity will also have a pan-India 3G footprint in the 2100 MHz band except four markets (Gujarat, Haryana, Maharashtra, Uttar Pradesh West) and 4G footprint in 10 of the 22 markets.

The merger will also derisk RCom from imminent licence expiry. Most of RCom's 800/1800 MHz licences are expiring in the next five years, and Aircel's licences have another 9-10 years, except Tamil Nadu which is expiring in three years.

The Moody's Investor Service said April, 2016: 

"Growth in data revenues, particularly 4G services, will drive much of the improvement in RCom's operating metrics. But RCom has to wait until RJio commercially launches its 4G services before RCom can start to offer its own 4G services to new customers on the network and spectrum that it shares with RJio". 

Now, in all probably Reliance Jio is expected to launch their services from 15th August, 2016. Hence, we can expect a spike in the share price of Reliance Communications Ltd (Rs.50.15) from the end of this month.

RCom has been making attempts to sell its various assets, including DTH, submarine cables and the mobile tower business, but has not able to finalise any of the deal.

The company in December said it has been able to sell 150 residential flats in Navi Mumbai for Rs 330 crore. The rating firm believes that RCom is currently not pursuing the sale of GCX (Global Cloud Xchange) and DTH businesses as its deleveraging strategy now hinges on tower disposal and the merger of the wireless businesses.

The company signed an exclusive agreement with Tillman and TPG for the sale of its tower assets.

However, there is a negative news: The Department of Telecommunications (DoT) is considering barring all trading and sharing of airwaves and of mergers and acquisitions (M&A) in the telecom sector till the auctions end so that spectrum caps can clearly be defined while setting out the rules for the sale. The Aircel-Reliance Communications merger deal or any M&A by Telenor, which is in talks with Vodafone, might not get requisite clearances till the spectrum auctions are over. 


Therefore, a strong BUY is recommended in the share of Reliance Communications Ltd at the CMP of Rs,.50.15, for a short term target of Rs72.

Courtesy: With inputs from the Business Standard, NDTV Profit and other publications. 

Thursday, July 21, 2016

Only 15 out of India’s top 50 conglomerates today were part of the same list in the pre-reform year of 1990.
Photo: Indian Express

Reforms: Narendra Modi govt moves swiftly from GST, kerosene to disinvestment
July 21, 2016: Given the finance ministry’s inability to meet its disinvestment targets for the past few years, it is natural to be sceptical about this year’s R56,500 crore target—of this, R20,500 crore is for strategic divestment—being met. What could be different this time around, though, is that the government seems to be taking action on different reform fronts as well—the textiles packages is one such, there has been a lot more progress on direct cash transfers, and the latest is the 25 paise monthly hike that has been allowed in kerosene prices. As part of this process, the government has, in a sense, converted part of the NITI Aayog into the previous government’s Disinvestment Commission whose job was to make recommendations on what to do with various PSUs.

NITI Aayog is looking at a combination of outright closure, revival schemes, strategic sales in one go and lowering the government equity in a PSU to below 51%—and later doing a strategic sale. One report has already been given to the government with recommendations on closure, strategic sales and reduction in equity to below 51%—unlike in the case of the Disinvestment Commission, the reports are not public, so the names are not known, but at least 10-15 PSUs form part of this list on which action will be concluded by the end of this fiscal.

None of the obvious suspects, such as Air India, MTNL or BSNL are on this list so far, but sooner rather than later they will be—a committee has been asked to look at PSUs such as Air India where a revival plan is under way since, in many cases, the revival plans are also shaky.

Telecom PSUs, in fact, should be looked at quickly since they have valuable assets—spectrum, towers, optic fibre and, in the case of BSNL, even customers—which can be sold for a good price. As the competition intensifies, and these PSUs lose even more market share, naturally, their value goes down—this is why cynics call it privatisation by stealth! In any case, a BSNL with wages eating up 45% of revenues can never be profitable without the kind of drastic surgery that only the private sector is capable of—the same applies to MTNL which has an even higher wage-share.

In fact, as the CAG has just pointed out in its performance audit, 11 of the 34 listed PSUs have an interest cover of less than 1—67 of the 124 unlisted central PSUs have this dubious distinction—and can never be revived in a business-as-usual scenario. According to the CAG report, 135 PSUs made losses during FY15, and these rose to R30,341 crore from R22,783 crore in FY14.

Apart from what financing such losses does to the exchequer, this has to be looked at in the context of the dramatic turnaround of PSUs which were privatised, from Maruti Udyog to Hindustan Zinc—the rapid fall in the market share of PSUs also needs to be kept in mind since each day of delay means that much more of a loss for the government.

Adani Enterprise Ltd: On Solid Ground Powered by the Mozambique Deal
CMP: Rs.82.95
Target: Rs.88-99

Last year, Adani Enterprises Ltd, the flagship company of the Adani Group, de-merged its power, ports and electricity transmission businesses into separate companies, making the holding structure clearer for investors. Adani Enterprises shareholders will benefit from the merger of Adani Mining Pvt Ltd.

Adani Enterprises has a net debt of Rs.19,298 crore, representing 1.3 times the book value of shareholders equity. The group is part way into a new $5-10 billion solar investment programme.

Ameet Desai, executive director and chief financial officer of Adani Enterprises, said the company's long-term debt was about Rs.8,300 crore and net of cash this figure went down to Rs.6,280 crore. The balance Rs.12,000 crore was working capital and the net long-term debt to equity ratio was 0.5%, he said.

The company earlier said it is ramping up coal production and is well placed to tap the growth opportunities in domestic coal mining space. Adani Enterprises Ltd is now more or less, a trading company with the mining business being merged into it. Post completion of coal mine auctions, the opportunity is in the domestic coal MDO (mine developer operator) business where the company enjoys an early-mover advantage.

After the demerger Adani Enterprises is largely focused on coal. The company management, is confident of scaling up the MDO (mine developer operator) business manifold over the next five years (in FY15 it clocked around 3 mn tonne output under MDO for Rajasthan utilities) given the large opportunity that has come up after coal auctions. Despite domestic coal output slated to rise, the management remains upbeat on coal demand trickling into sustained trading volumes going ahead.

Gujarat-based food and edible oils firm Adani Wilmer and Madhya Pradesh-headquartered Ruchi Soya Industries have tied up to form a joint venture company for procurement, marketing, sales, and distribution of products such as soya food, oil seeds, and biodiesel.

The new joint venture (JV) company will cater to domestic food demand and both Adani Wilmer and Ruchi Soya will provide manufacturing support to this JV. Through their joint venture, Adani Wilmer, Adani Enterprises, and Wilmer International will hold a stake of 66.66% in the JV company, while Ruchi Soya will hold the rest — 33.34%. 

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

Coal prices in the US remain weak, but overseas, coal, particularly thermal coal, is having an impressive run. There, the commodity is getting a boost from robust Chinese demand and weather related shipping delays, which have impacted the commodity’s availability.

The way, which China is supporting coal, is somewhat interesting. While the country appears to be standing by its word to cut coal emissions, it is first doing this by cracking down on domestic coal miners and trying to curtail industrial overcapacity and this in turn is reducing the domestic supply of coal and necessitating an increase in coal imports.

The nation’s coal output will fall by 280 million tons this year as the government seeks to curtail industrial overcapacity, according to officials with the National Development and Reform Commission. In terms of imports, Deng Shun, an analyst with ICIS China, thinks coal imports will be sustained at more than 20 million tons a month in the second half of the year.

Earlier this month, seaborne thermal coal rose to its highest price in more than 10 months as Chinese buyers worked to scoop up coal supplies amid the government’s clampdown on overcapacity. In addition, demand for coal has improved amid the rebound of natural gas and oil prices.

Meanwhile, Adani Enterprises Ltd has secured approval from the Gujarat government to begin work on building a solar power equipment plant on its own after earlier unsuccessful attempts to build the plant in partnership with technology providers such as clean-power developer SunEdison.

Work on the first phase of the project has started and is expected to be commissioned this year, said two government officials familiar with the plan. The Adani Group plans to invest $2 billion in the project to make solar panels and solar photo-voltaic cells.

Wednesday, July 20, 2016

Loot of Indian Telecom Companies by the Narendra Modi government continues....
The Cabinet had recently cleared a mega-spectrum auction plan for seven bands, including that of 700 MHz. However, analysts had expressed concern over the high base price for the premium 700 MHz. A company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs.57,425 crore for a block of 5 Mhz on pan-India basis. This band alone has the potential to fetch bids worth over Rs.4 lakh crore. 

Aggressive bidding for 700 MHz band will hurt the financials of telecom companies which are already reeling under very high level of debt. From where such large sums of money will come? Has the Narendra Modi government ever thought of it, before placing astronomical rates for spectrum? Now what will happen is that after sometime, the telecos will definitely start raising the tariff rates; hurting the common man. What to say ....!! 

Idea management told analysts that it does not see a spectrum supply constraint anymore. Idea sees competition to intensity over two years but expects gains in revenue from increased market share. Another telecom company, Telenor has also decided against participating in the upcoming spectrum sale in India, signalling the Norwegian mobile phone operator's clear intent of exiting a market where it has been making losses and has struggled to expand operations. 

Moreover, The Narendra Modi government has already created a mess of the telecom sector, by putting Ravi Shankar Prasad in charge; who is inefficient in dealing such complex matters as telecom.....But then what is new, Narendra Modi's ministry is all full of stooges; though one of them have been shifted from the Human Resources (Read Education) to Textiles...and Minister of State for Railways Manoj Sinha is being given Telecom portfolio, that's split from Information Technology, a department that will stay with Ravi Shankar Prasad, who is also the country's new law minister after Prime Minister Narendra Modi's massive reshuffle of his cabinet's portfolios.
Even after 14 years, when the dispute first arose, there is still no clarity on what should be included/excluded from telecom ‘revenues’ – and since there is no clarity, whichever way the case is finally decided, where is the question of paying a penalty?
Should a foreign exchange gain/loss a Bharti Airtel makes on its African operations be included in this or not? In the initial years, Vodafone operated in India through eight companies which, on occasion, lent money to one another – is this to be included in telecom ‘revenue’ and should the government be given a share of this? Clearly not, you’d think, but that is what the case is all about.
While the new telecom minister can take a call on the CAG report once a decision is taken on what ‘revenue’ is, the decision has larger ramifications. Not including foreign exchange losses, capital gains, or interest earnings on company deposits in ‘revenue’ is an easy decision. But if payments made to other telcos are included in revenue and the government gets license/spectrum fees on this, this will discourage infrastructure sharing; it will also ensure MVNOs never take off.  In the rush to apportion blame, no one is talking about the real issue.












Winning Strokes: Think Different
Today JSW Energy Ltd gave good returns to the investors on intra-day basis. The stock touched Rs.84.20 in the BSE before closing near Rs.84, up 3.32%. The company is coming up with Q1FY17 results on 21st July, 2016. 

Adani Enterpises Ltd which is likely to get benefited due to the recent treaty with the Mozambique government today rose to Rs.83.60, intra-day before closing at Rs.82.80 in the BSE. The stock which has started to move up after consolidating around Rs.80-81, ranges should see its next target of Rs.91, very soon. I feel it would not be an exaggeration to mention here that Adani Group bought land in the African Continent some year back with the primary objective of growing pulses and oilseeds to meet the increasing demand - supply deficit in India. Though the efforts received lot of set backs earlier, but it seems with the patronage of the NDA government, this time, their project might see the light at the end of the tunnel.

The stock of Reliance Communications Ltd today rose to Rs.50.90 before closing at Rs.50.30 in the BSE. Reliance Communications Ltd today informed that it has incorporated an investment firm in the Netherlands in the name of Aircom Holdco BV.  Now, this comes before the official announcement of the merger deal with Aircel, hence we need to read between the lines. My estimation is that: the scrip is likely to see Rs.56-57-60, within a short time. 

Today, the stock of micro-cap pharma company, Syncom Formulations (India) Ltd was recommended to the Paid Group members at Rs.2.46 for short term targets of Rs.5.20-9. 

Syncom Formulations (India) Ltd is engaged in the business of pharmaceutical formulations. It manufactures range of products in various dosage forms and markets them in various countries. 

The company purchased a property situated in Mumbai worth Rs.11.00 crore on March 15, 2016.  

The rupee seems to be favouring the pharma sector and one is still going to see a net-net good growth for some of these companies, like Syncom Formulations Ltd, which has a market cap of only Rs.190.48 Cr at the CMP of Rs.2.44. In FY16, the company came out with a net profit of Rs.10.36 Cr on an equity of only Rs.78.07 Cr. The reserves of the company is Rs.30.63 crores.

Syncom Formulations (India) Ltd (Syncom) is a generic pharmaceutical company, since last two decades. It undertakes the discovery, development, manufacturing and marketing of pharmaceutical formulations. The company’s product portfolio includes alpha adrenoceptor agonist, analgesic, antipyretic, anti-inflammatory, anti-ulcer agents, antibiotics and stimulants, among others. 

It has been serving the demands of more than 20 countries globally with WHO GMP certified manufacturing unit, ISO: 9001-2008 certification and experienced team. It is a prime Exporter, Manufacturer and Supplier of a wide range of  Dry Injections, Dry Powder Injections, Dry Vial Injections, Tablets, Capsules, Liquids Orals, Liquid Vials And Ampoule Injections, Dry Syrups, Ointments, Inhalers, Herbals, etc. 

The company markets products worldwide, under brand names such as Ostocrat, Oxycrat, Raftus and Amoxytop. It has its operational presence in Canada, Peru, Panama, Mali, Ghana, Hong Kong, Cambodia, the Philippians, Malaysia, Sri Lanka, Congo, Yemen, China, Nepal, and Chutan, among others. Syncom is headquartered in Indore, Madhya Pradesh, India. It has more than 400 products registered. 

In addition, it has also ventured into the business of exporting of Surgical products, Agro & Confectionery products like Rice, Wheat Flour, Chickpeas, Soy DOC, Biscuits & Candies, Industrial products like Fasteners, Steel Bars, Roofing Sheets & Jute Bags, Metal Scrap, etc. 

Syncom Formulations India Ltd earlier informed the BSE that the Board of Directors of the Company at its meeting held on May 30, 2016, inter alia, has recommended a dividend of Re.0.02 (2%) per equity share of Re. 1 each for the year 2015-16; which will be paid to all the members/beneficiaries of the Company, subject to approval of member at the forth coming Annual General Meeting of the Company.

Today a buy call was initiated on Idea Cellular Ltd at Rs.105.30 for a short term target of Rs.111 -116. Recently, Idea Cellular Ltd announced up to 67% reduction in 4G and 3G mobile Internet rates to compete with rival Bharti Airtel and ward off threat from Reliance Jio. This is a right move at the right juncture.

The promoters holding in the company stood at 42.23%, while Institutions and Non-Institutions held 32.14% and 25.63% respectively.

Idea Cellular, one of the biggest cellular carrier of the country, has added 6.89 lakh new mobile subscribers in June, 2016. Following the addition, the company’s total subscriber count stood at 17.62 crore with a market share of 22.68%. Idea Cellular, an AV Birla group company, provides Global System for Mobile communications (GSM)-based wireless service at the pan-India level, it is present in all 22 telecom circles.

Idea Cellular's management recently told analysts that it is not looking to bid for 700 MHz spectrum auction.  Idea management told analysts that it does not see a spectrum supply constraint anymore. Idea sees competition to intensity over two years but expects gains in revenue from increased market share

Some of my earlier recommended counter, which did well today are BHEL (CMP: Rs.144.25), Vedanta Ltd (Rs.161.75), Jaiprakash Associates Ltd (Rs.11.99), Unitech Ltd (Rs.8.34), Lanco Infratech Ltd (Rs.5.35), etc.