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Saturday, February 21, 2015

IL&FS ENGINEERING AND CONSTRUCTION COMPANY LTD. - A RISING STAR IN INDIAN INFRASTURUCTURE SECTOR ..


 


 

Infrastructure is one sector where majority of investors are bullish, especially after the formation of new government in Centre . It is true that,  in a developing country like India ,  growth potential of companies operating in this sector is immense. But when we look through an investor’s point of view , potential of sector alone is not enough to make an easy choice.  
Strength of  balance sheet is equally important .  During last few years  , projects of many companies stuck at various stages not only due to economic recession but also on account of slowness in  decision making process of government authorities. Because of such delays , funds of even large companies operating in this sector stuck at different projects and they forced to borrow more and more to keep afloat and working capital requirements. Such a situation deteriorated the health of almost all companies - except few biggies- and make a choice from small caps space more difficult. 

                                        In this situation ,While selecting an infrastructure developer for investment , the main points we need to pay maximum attention are  their order book position , ability for execution and the strength of  promoters/investors financial muscle . Based on all these parameters , I have only one choice  from the universe of small caps space – IL&FS Engineering and Construction .This is the same infamous Maytas Infra , the company  owned by the same promoters of Satyam Computer . After the Satyam fiasco , Satyam  went into the hands of Mahindra and this one goes to Infrastructure Leasing & Financial Services Limited (IL&FS). Later this company renamed as IL&FS ENGINEERING AND CONSTRUCTION COMPANY LTD.The promoters , IL&FS is jointly owned by Housing Development Finance Corporation Limited (HDFC) ,Central Bank of India (CBI), Unit Trust of India (UTI),  State Bank of India, Life Insurance Corporation of India, ORIX Corporation - Japan and Abu Dhabi Investment Authority etc... .Pedigree of these firms and their ability to raise funds (if necessary) is  known to all of us  . I believe,  promoters of this company is in a better position in case of financial muscle in comparison with the other private promoters of similar infrastructure companies.On the execution side also IL&FS is well experienced and having capability to handle large projects from concept to execution stage.

The Real Attraction

The major factor distinguishing this company from other infrastructure developers  is the the interest of world’s largest construction firm - Saudi Binladin Group ( SBG)  – in it. I am not sure , how many of you are aware about the sheer size of  Saudi Binladin Group. Its turnover is almost  three times of the turnover of our construction conglomerate Larsen and Toubro. ( For more information about SBG , click HERE ) . After the take over of IL&FS Engineering by IL&FS from the old promoters( Raju Family) , Saudi Binladin Group ‘s  investment arm SBG Projects Investments Ltd took 20 % stake in this company . Later raised their stake to the current level of 27.89. Now in a recent development , they are  again going to subscribe additional shares to take their stake to 32.88 % . Some shares are also allotting  to IL&FS ,and post allotment both  IL&FS and SBG will hold equal stake in this company . ( Currently IL&FS is the largest share holder with 29.76 % stake and two directors representing SBG in IL&FS board)). SBG ‘s increasing interest in this company is an extremely positive point . The amount raising through this preferential issue is mainly meant for the redemption of 5300000 redeemable preference shares due for redemption on 25 March 2015 ( extended from September 2014). Both of these partners taking their interest beyond India and formed a subsidiary in the name of Maytas Infra Saudi Arabia ( MISA) last  year( 55 % stake held by IL&FS Engg and remaining with SBG)  and now they are  getting new orders from abroad too. 
 About Order Book Position and Financial Numbers
 Among the listed companies from  infrastructure space ,IL &FS Engineering is the one  received large number of orders in recent times . Its current order book position is close to 10000 Cr ( Ten Thousand Crore)  , which is more than  three times of company's last year turnover and it giving enough visibility for next few years .( Some Details HERE)  .We must realize that these orders are secured by the company even when the entire infrastructure sector is going through tough times. In addition to this , Saudi Bin Ladin Group’s influence and reputation in Middle East countries also helping company's subsidiary Maytas Infra Saudi Arabia ( MISA) to secure more orders in recent times .In latest December quarter Company reported a turnover of Rs.676 Cr ( Last year same period Rs.466 Cr) and a net profit of Rs.76 Cr (Last year same period Rs.58 Cr loss) . - Link to latest result HERE-  .But out of this Rs.76 Cr NP , an amount of Rs.53 Cr ( Rs.16 Cr) is one time income . After deducting this amount , still company turned to profit from loss .I am not claiming this company will dramatically turn into huge profit within next few quarters but I feel , with the strong and increasing support of word’s largest construction firm and well experienced and reputed Indian promoters , IL & FS Engineering to  emerge as a star in Indian Infrastructure space within few years is a good possibility. 
 Conclusion

IL&FS’s  familiarity  and project execution experience in India and Saudi Bin Ladin group’s financial muscle ,technical perfection and ability to handle projects with large size makes this company as the first preference from small cap infra space. On one side , this company’s total debt is less than Rs.2000 Cr where some of well known listed  infra companies holding a debt of more than 25000 Cr in their balance sheet. On the other side , ability of  promoters of other companies to raise further funds are very pathetic compared with this company which is backed by India’s major banks and world’s largest construction firm.  Company extended an amount of Rs.323 Cr as inter corporate deposit to Satyam Computer during the time of old promoters( Raju Family) . Fate of this amount  is still pending and the new promoters( IL&FS)  expecting fair chance to recover the same . As a note to December quarter result , company  indicated that this amount shown as “ Amounts Pending Investigation Suspense Account “ in the books of Tech Mahindra . If IL&FS can recover this amount plus interest  , it will be an additional relief for the company .For the nine months ended December ,company paid an amount of Rs.198 Cr as interest alone . I believe , in future , management will take prompt action to reduce this debt burden either through a rights issue or further preferential issue . Such an issue may expand its equity but I feel it can  be justified by the cost saving as reduction in interest payment.
Recent Price Movement and my opinion.

Ever since this company reported its turnaround performance in December quarter , its stock price is in an upswing  and  appreciated decently in recent times  .Because of this reason , low risk investors may wait and test your luck for a correction ( Though I am not sure whether any meaningful correction is possible in it at this moment,  especially at a time some positive announcements are expected in upcoming budget by next week and company planning to redeem part of OCCRPS in near future ) . Others can consider this stock which is still available a rate almost   50 % discount to the first open offer price of Saudi Bin Ladin Group and IL&FS  which happened at a price of Rs.195.72 . Investing in potential turnaround companies and make multi bagger returns is an art of testing patience too . Those who are in a hurry and need updates on a weekly basis can also skip this stock.I believe risk reward ratio is still favorable  for genuine long term investors .This is my preferred pick from Infrastructure space due to more than one reasons. Stock listed in both exchanges and trading around Rs.98
 Link to the website of Company HERE  
Link to the website of Saudi bin Ladin Group HERE
 Disc: Holding shares in IL&FS  Engg
 

Wednesday, February 18, 2015

SUZLON ENERGY LTD - UPDATE

Suzlon energy is one stock I suggested to book loss @ Rs. 17 when they divested Senvion recently .In  recent days receiving lot of queries from my readers asking whether my sell recommendation is still valid .As you are aware , in an unexpected development ,  Dilip Sanghvi the second richest Indian and founder of Sun Pharmaceutical Industries picking 23 % stake in Suzlon. This is  tad below the 24% stake held by the original promoters of Suzlon. Even if the existing management will run the company , I believe it is an important positive development for the company  .Considering Sanghvi's and his  team's good track record in spotting opportunities and turning around ailing companies, withdrawing my earlier sell recommendation

Saturday, February 14, 2015

CAPLIN POINT LABORATORIES LTD - UPDATE




CAPLIN POINT LABORATORIES LTD is a stock recommended exactly one year back @ Rs.86. Yesterday stock hits life time high @ Rs.707 and closed in upper circuit. Stock already  turned as a multi bagger and returned a whopping 800 % in one year. Those who are not interested to take bit higher level of risk may sell part of holding  to recover your cost  plus a decent profit and HOLD the remaining as cost free. 

Recommendation Link HERE

Friday, February 13, 2015

POLYPLEX CORPORATION - RESULT UPDATE

Polyplex Corporation  recommended @ Rs.216 currently trading around Rs.210 . For the December quarter , On a consolidated basis company reported a Sales of Rs.775 Cr which is lower than Rs.815 Cr of same period last year . On an EBIT level company reported profit v/s loss .Before exceptional item , company reported a profit  of Rs.1.5 Cr against a loss of Rs.73 Cr . During this quarter,  an amount of Rs.35 Cr accounted as one time exceptional loss and hence its bottom line ended in red. 
                                                                       Due to uneven recovery in world economies ( especially below expected recovery in the economies of European countries )  , product price of company not increased as expected .Company's debt burden may  come down on successful divestment of  one unit which is expected to complete in near future .( Company paid an interest of Rs.42 Cr for the 9 month period) . Considering all these factors , I feel ,  improvement in the performance of company is possible in future but it may take bit longer time than expected earlier . Investors with enough patience may Hold and others may shift if you find a better opportunity.

Thursday, February 12, 2015

RESULT UPDATES

MOLD TEK PACKAGING

Company reported December quarter result as follows :






Company planning to start two new plants as part of expansion. Mold Tek revolutionized the IML packaging technology in India and established as a major player in paint industry . Now it is planning to tap the opportunities in edible oil packaging segment and going to introduce a new product for this segment. Few days back SBI Mutual Fund , Canara Robaco and DSP Blackrock subscribed 24 lakhs shareas of Mold Tek @ Rs.220 and company is planning to utilise this for capacity expansion . Expecting better days and still suggesting to HOLD



SUNIL HITECH ENGINEERS LTD

Company reported December quarter result as follows :


 Considering the not so good situation in the industry in which company is operating , this result is commendable . Suggesting to HOLD it .


  

AMINES & PLASTICIZERS LTD

Company reported December quarter result as follows :




Company reported good numbers and its nine month EPS is ( Rs. Rs.12 ) surpassed  last full year EPS ( Rs.9) .Suggesting to HOLD

Other two companies declared results today are

Aimco Pesticides  ( Link) and Salzer Electronics ( Link)




Wednesday, February 11, 2015

HINDUSTAN TIN WORKS LTD / GODAVARI DRUGS LTD - RESULT UPDATES

HINDUSTAN TIN WORKS LTD - recommended @ Rs.70 , currently trading around Rs.74 . Company declared its December quarter result today . In this quarter , Company reported a top line of Rs.70  Cr ( v/s Rs.80 Cr  for same period in last year ) and a net profit of Rs.1.83 Cr ( V/s Rs.1.53 Cr) . For the nine months ended December , Company reported a turnover of Rs.244 Cr ( V/s Rs.242 Cr ) and a net profit of Rs.7.24 Cr  against Rs. 6.22 Cr .Company reported an EPS of Rs.7 in this 9 month period    v/s Rs.6  reported same period of last year. Stock is not expensive at this valuation , expecting sideways movement in near term.


GODAVARI DRUGS LTD -   Suggested to keep this stock in your radar ( through my FB page)  . Today company reported its December quarter numbers . In continuation of its robust performance in September quarter , company reported excellent numbers in December quarter too . Turnover jumped from Rs.2 Cr to Rs.18 Cr and net profit jumped from Rs.15 lakhs to Rs.1.03 Cr .For nine months, company reported an EPS of Rs.3.77 against just 20 Paise  reported for same period of last year. Those entered earlier can hold it for long term . Expecting reasonable upside even from current level .

Result Link HERE

Saturday, February 7, 2015

NO NEW STOCK SUGGESTION TODAY




Dear Friends.

One more week left for the completion of December quarter result season.So far ,  quarterly results published by majority of small /mid cap stocks were not encouraging .Only very few companies published outstanding results and we already discussed many of such stocks here.Because of this reason , companies having potential in future is in the  process of correction after a sharp run up which happened in past few weeks on the basis of anticipated good result.Some other stocks in my tracking list are yet to publish their December results. I believe  , it is better to recommend such stocks only after their results are available .On this back ground , in order to avoid taking unnecessary risk ,I prefer to skip  suggesting a new one this week.Let the remaining companies declare their results and already declared companies consolidate at some price level. Let us look into them  thereafter.

Thursday, February 5, 2015

V2 RETAIL LTD - RESULT UPDATE




                                Mr. Ram Chandra Agarwal ,MD of the Company


V2 RETAIL LTD  recommended @ Rs.14 is currently trading @ Rs.43 .Company  declared its December quarter numbers as follows : 



Still recommending to HOLD it for long term . There is nothing to loose for those entered at recommended price. Even if ,still there is some uncertainties connected with  accumulated losses and tax disputes , I believe management is reasonably confident about a favorable settlement in tax disputes. As a note to the December quarter result , management indicated , recently one such dispute of Rs.11 Cr awarded in favor of company by Delhi High Court  . Those who are ready to take higher level of risk may even consider taking limited exposure  at this price.  Similar to SKM ,let us hope and pray for a come back story in this one too :))

For full report , Click HERE

Tuesday, February 3, 2015

SKM EGG PRODUCTS EXPORTS - UPDATE

 





SKM Egg Products Exports today informed the Stock exchanges that the Company has foreclosed all the term loans availed from State Bank of India ( Link HERE) . I believe, it is a remarkable achievement for the company and its promoters who struggled to repay its loan till few years back which even  resulted in pledge invocation and selling of the shares by banks in open market earlier . More than reduction in interest rate , this clearly indicating promoters integrity and hard work to keep the promises they  given to minority share holders .I hope, the entire  shares will be pledge free in near future by this repayment .In addition to this , company may get better valuation in future considering the increasing strength of its balance sheet .Let us hope , the management will deliver  similar promptness in other plans  including revocation of suspension from BSE , achieving Rs.500 Cr turnover in another 2-3 years..etc 

At least some of you may ask why there is frequent update on this company .I believe , beyond any monetary benefit as a share holder ( I am holding shares in this company which already disclosed in my initial posting itself) , it is our - retail share holders- duty to extent our moral support to a management who are trying hard to keep promises in a most transparent manner .If the great come back story of this company act as an inspiration for the  promoter of another ailing company to fight and come back , that may bring cheers to another set of minority share holders . Above all , I always prefer to salute anyone who come back from the brink of collapse with their sheer hard work  and succeed without compromising ethics and values in life .

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