Saturday, September 29, 2012

BASANT AGROTECH - A PENNY STOCK WITH HUGE POTENTIAL




 
 









In general ,I am not a fan of penny stock investing  and only very rarely spending time to study such stocks. In our stock exchanges 99 out of 100 penny stocks are worthless and punters are playing with it.This is where innocent retail investors are loosing heavily and ends with holding stocks of companies which are existing only in paper .But this time it is an exceptional case and I am recommending this  stock because of the potential of the industry in which it is operating and run by a decent management.This company is known as a fertiliser manufacturer and it is getting the valuation of a fertiliser company in stock market .But it is more than that , and only very few investors are aware about its other business .This company having sizable operations in hybrid seeds and it is one of the very few listed stocks from this sector .All of us  are aware about the potential of agriculture/farming  ,and the sharp run up of stocks like Kaveri Seed Company and Advanta  is a testimony of investors expectation about this sector.Diminishing area of farming and increasing demand for food is the possible scenario and it can be tackled only through scientific farming techniques.Hybrid seeds is a vital part of this revolution and the major tool for all efforts to increase productivity.Since we have discussed this subject more than once in the past I am not elaborating .








Basant Agrotech is a company based at Akola (Maharastra) and a member of 130 years old Bhartia Group.Company having three divisions – Fertiliser,Seeds and power generation.company having five fertiser manufacturing plants located at Kaulkhed , Kanheri , Sangli, Hospet and  Neemuch.In seeds division company’s processing plants are located at Nagpur  and Kanheri  and its R&D and Biotechnology lab located at Kaulkhed.Basant manufacturing NPK and SSP fertilisers .Even this sector having potential ,due to government control and all other uncertainties surrounding in this sector  let us leave this part and concentrate more on the other business – seeds-which is showing a robust growth rate in past few years .In 2011-12 financial year  this division shows a growth over  30 %  and touched a turnover of Rs.61 Cr (seeds division alone). Company’s product list includes 15 vegetable seeds (Bitter Gourd,Brinjal ,Okra,Tomato,water melon..etc) more than 10 field crops (Corn,Green gram,Mustard,Paddy,Wheat,Sorghum,Gram..etc) and oil seeds like Groundnut, Soyabean,Sunflower ,cotton..etc). Now company is paying all efforts to develop its seed business which ensures better margin compared with fertiliser.Cash flow is expected to increase in proportion of the growth of seed business .Company is  now planning to expand its marketing reach for seed division beyond its traditional markets.30% increase of seeds  sales in last year is an  indication of its sincere efforts to develop this business.Recently company also started selling seeds through online in association with e-bay  to meet retail demand.






Financials and Valuation
Company posted a sale of Rs.276 cr and a net profit of Rs.7.6 Cr in FY 2011-12 .It is an interesting point to note that in last five years Basant increased its turnover and profit continuously in every year without any interruption.Its sales moved from Rs.110 Cr in 2008 to Rs.276 Cr in 2012.This stock is currently valued at a market capitalization  of  just Rs.36 Cr where its last year turnover is above Rs.276 Cr .Even If we exclude its entire fertiliser business  and consider only seed business it is trading  at a market cap of just  half of the turnover of this division alone.


Icing on the cake
Whenever we think about  a penny stock we never look at the dividend part.But here the case is totally different .This company having an uninterrupted dividend history for the past five years and it increased the dividend pay out in every year in last three years.Current year it paid 8 % .Even this this not a big amount it is an indication of promoters attitude towards minority share holders.In many cases promoters are splitting the FV of a stock just to create volume for their  easy exit . Here too it is an exception ,in last four quarters they hiked their stake by about  5%  which is now stands at 55% and out of this not a single share is pledged.Even in non promoter category , a corporate entity named Basant Capital Tech Ltd acquired 1.17 % stake in latest June quarter .Even if this firm is categorized as non promoters , a detailed study revealing that the directors of this entity is same as the promoters of Basant Agro.

 
Conclusion

Many retail investors are throwing money in stock market  by investing in penny stocks even without considering  whether the company is existing  or not.I request all of you (if you have such a tendency) to invest in stock like this one and not in stocks like  C*** Re******** .Here, it is operating in a sector with huge potential (seeds) which is showing very good growth,dividend paying,promoter hiking stake ..etc.Even in the case of fertiliser sector (which is now  its main business) I believe we will get a clear picture about subsidy policy  in near future which will end the uncertainty and help  the company to take informed decisions.In short , buy it and forget it ,you will get dividend  every year  and either the market identify its seed business or the management decides to unlock value by de-merging  its seed business into a separate company  ,you may blessed with unexpected gains.Considering managements efforts to grow the seed business we can’t  write off such a chance when the seed division reaches a critical size.Current market price of Basant Agro is just Rs.3.85 which is close to its life time low. Even in this year  70,00,000 equity shares of Rs. 1/- each at a price  of Rs. 7.75 per shares  allotted to the promoters on conversion of  warrants. Current market price is only half of it and at  this price nothing to loose considering the potential gain.But as a thumb rule, invest only  what you can forget , in penny stocks.

Link to the company's new  website HERE




63 comments :

  1. Dear VP,

    Thanks for the new stock, it really looks good as agriculture sector will boom in the near future. Can you plz shed some light on RPP Infra project.

    ReplyDelete
  2. wonderful pick thanks you value Ji.I am accumulating Aries agro and Granules. please let me know if its ok?

    ReplyDelete
  3. Strange that you are recommending stocks with an increasing DE ratio (now it stands 1.32), and average ROE,ROCE 12-13, and a stagnant EPS for last 5 quarters, a company unlikely to have any business moat, or pricing power.

    ReplyDelete
    Replies
    1. In stock market I am giving priority for future rather than past or present.Company recently raised debt to start a new manufacturing unit at Jalgaon in Maharashtra . Commencement of production from this unit is expected only from the second half of this FY .And about the pricing power , it is not the problem of this company alone but all fertilizer makers are on the same boat and which is one reason now they are aggressively promoting seed business.I don't think a company with all mentioned ratios are favorable and a size of this will be available at a market cap of just 34 Cr.

      Delete
  4. Dear VP,
    If you happen to track Genus power, please let us know if we can accumulate it at cmp with a 5 year holding period in mind.

    Thanks,

    ReplyDelete
    Replies
    1. Their operations are coming back to normal after the fire accident

      Delete
  5. again a good research, but it is not a penny stock, becos its face value is 1 rs only...

    kalyani

    ReplyDelete
    Replies
    1. As far as my understanding a " Penny " stock means a stock trades for a penny and this term derived from there .In Indian context we can take it as a stock trades at a small denomination of currency.I don't know whether there is a Face Value element attached to it and I never heard like that .My knowledge is limited in this subject and if I am wrong please excuse..

      Delete
  6. Hi VP,

    Thank u for share ur valueable picks i really appriciate....Actually my hometown is Akola so i shall buy on monday at current price for long long term...

    Thanks,
    SAM

    ReplyDelete
  7. Dear VP,
    Thanks for your advice,kindly share your views on Excel Crop from the same Agri segment.

    ReplyDelete
  8. Dear VP,

    Thanks for finding a gem from the dust.

    Looking forward for more gems.

    Regards,
    Raj.

    ReplyDelete
  9. Anil - your followerSeptember 29, 2012 at 8:29 PM

    VP,
    You always give excellent picks but why such penny stocks?
    Being your adherent follower and reader, I would like to request you to not recommend penny stocks.

    Lets keep the bar high and maintain it as always. May be I am too much focused on your company so may have that feeling as we follow you and hold you in high esteem. Sorry for my lack of understanding as we like you a lot sir.

    Your views on Auto ancillary company UCAL FUELS would be appreciated if you tracking.

    ReplyDelete
    Replies
    1. UCAL - Company is not changing with the time

      Delete
  10. You had advised Blue star one month back. This share has not moved in this market rally. What is ur current view about this stock? Can u give update on the same? Thanks

    ReplyDelete
    Replies
    1. No change in my views and not possible to change only because it is not moving .Let us review if there is any change in the fundamentals of the company.

      Delete
  11. Dear VP Sir,
    Whats your view on Dishman Pharma & FDC for long term investing ???

    ReplyDelete
  12. Hi VP,

    What is your view on Tata global beverage....it is at all time high..But looking at the potential in India ( particularly metros) seems bright future. Looks like stock will go LONG way..can u pl. comment ?

    Raj

    ReplyDelete
  13. Hi VP,
    One of the main concerns with this company is the vast difference in CFO compared to net income. This is mainly due to increase in receivables/decrease in payables. Do you think or have any info what is causing this trend. Will it able to reverse in future to register CFO.
    Thanks,
    Rakesh

    ReplyDelete
    Replies
    1. This problem is common for all business depends on government subsidy. I think some clarity in policy and some bold moves by government will bring down this issue.Moreover if the company de-merge its seed business into a separate company as I mentioned above it will be at a comfortable level for the seed business entity.

      Delete
  14. Dear Valuepick,
    Regular reader of ur blog and benefited a lot. But really sad to come to know that ppl are running business and churning money out of your free recommendations. Shame on those nonsensical & unethical jokers. Please read below -
    ---------------------------------------------------------

    Saral Gyan: Grab Hidden Gem Stock of Sept'12 - Releasing Today!

    Grab Hidden Gem Stock of Sept'12 - Releasing Today!

    Posted: 29 Sep 2012 10:43 PM PDT
    Dear Reader,

    Hidden Gem - Sept 2012 research report will be released in next 12 hours. Hidden Gem stock selected for the month is a low price scrip which is currently trading at single digit price below Rs. 10 but it is not a penny stock. Company is having good fundamentals and rewarded share holders by paying consistent dividend in last 5 years.

    Company is into fertilizer business, also operates in agro business and is delivering decent growth in top line and bottom line. Surprisingly, company seems to be overlooked by investors fraternity as a penny stock and offer huge potential for price appreciation in future.

    Here is a brief about company's business:

    Its a leading agri business company committed to sustainable agriculture through innovative research and technology. Company believes in delivering better food for a better world through outstanding crop solutions, and has been working relentlessly to improve the farmers' plight through extensive R & D and rendering quality seeds, fertilizers and services to meet the changing requirements of a farming community.

    Company is engaged in manufacturing, marketing & distribution of fertilizers and agro products and is also engaged in the business of green power generation, through its wind mills.


    Across the country, company enjoys leadership position for some of its products. Many of the products developed by the company are being instant hit and enjoys good brand value. Skilled entrepreneurship and advance manufacturing techniques ensured the company growth exponentially. The company has constantly been giving dividend to its shareholders.

    Presently, company has a multi-product portfolio which includes various grades of fertilizer, seeds and agriculture inputs. Company research and development centre is recognized by Govt. of India.

    Few facts which make this stock an excellent investment candidate for long term:

    1. Stock price is below Rs. 10 with share face value of Rs. 1 and might be overlooked by investors as a penny stock.

    2. Market cap of the company is almost 1/8th of total annual sales turnover of the company. Market cap to annual sales is merely 0.12.

    3. Topline is doubled in last 5 years and bottom line is increased by 50% whereas stock is trading near to its 52 week low offering attractive opportunity for long term investment with limited downside risk.

    4. Dividend payouts are consistent since last 5 years and dividend yield at current market price is 2.

    5. Promoters are continuously increasing their stake and currently hold more than 50% of equity in the company which is good by all means for such a micro cap company.

    6. Company has allotted equity shares to promoters on conversion of warrants for the purpose of acquisition and construction of manufacturing plants and long term capital requirement, current market price is almost half of the price at which company has allotted equity shares to promoters, hence offer potential upside in future.

    7. Last but not the least, in terms of valuation company has PE ratio of 4 and average ROE / ROCE of 12-13 which is expected to improve in coming quarters considering commencement of new manufacturing unit. We expect significant increase in top line & bottom line in agro business with healthy operating margins.

    Grab this Hidden Gem and invest small portion of your savings in it for long term. Subscribe to Hidden Gems annual subscription (12 monthly research reports) under our ongoing offer @ Rs. 7500 5000 [$ 155 105] and SAVE 33% on subscription cost. You will also receive 3 Freebies at no additional cost.

    ReplyDelete
  15. Dear Value Pick sir,

    Thank you very much fo your recommendations. I made 15k profit in Hikal & 6k profit in Denora. I'm holding the below stocks also, I need your advise on them..
    Omax Autos
    Archies
    Kernex
    Swelect energy
    Moldtek packaging
    MRO-TEK

    Thanks again for your valuable inputs.

    Regards,
    Jaychand

    ReplyDelete
  16. Dear VP,

    why does Heritage foods have very low profit margin . Q1 sales is 415 crores and expenses is 399 crores and PAT is only 9 crores. Thanks for all your help.

    Best Regards,
    Shankar.



    ReplyDelete
    Replies
    1. Company's retail division is posting loss for past many years.See my posting on heritage in the below link for details about this company

      http://value-picks.blogspot.in/2011/04/heritage-foods-india-ltd-star-in-making.html

      Delete
  17. Thank you sir for such a detailed analysis again :)
    But I have just one concern, it is under debt of 90 crores...and debt to equity ratio is 1.5 ... so is this stock still good...please clarify on how to look on any companies debt as negative or ignore sometimes?

    Like kingfisher is under debt of 4000 crores, so it is a v.v. bad stock but there are some stocks in pharma which are under debt , with debt to equity ration > 1, but still considered good, so sir please help me in doing analysis

    ReplyDelete
    Replies
    1. Dear

      Don't expect the quality of a 3000 cr market cap company in this 30 Cr market cap company.

      Delete
    2. Kingfisher airlines is posting losses. In-fact kingfisher has never posted a single profit in its entire operating tenure. Mallaya is considering selling his stake in the profit making UB to keep kingfisher airlines afloat.
      Whereas this company has continuously posted profits (increasing it YOY). This company is also giving dividends continuously.
      There is a difference between a profitable company getting loans to increase its capacity and a loss making company getting loan just to stay afloat.

      Delete
  18. Some more facts on basant Agro tech:

    Few facts which make this stock an excellent investment candidate for long term:

    1. Stock price is below Rs. 10 with share face value of Rs. 1 and might be overlooked by investors as a penny stock.

    2. Market cap of the company is almost 1/8th of total annual sales turnover of the company. Market cap to annual sales is merely 0.12.

    3. Topline is doubled in last 5 years and bottom line is increased by 50% whereas stock is trading near to its 52 week low offering attractive opportunity for long term investment with limited downside risk.

    4. Dividend payouts are consistent since last 5 years and dividend yield at current market price is 2.

    5. Promoters are continuously increasing their stake and currently hold more than 50% of equity in the company which is good by all means for such a micro cap company.

    6. Company has allotted equity shares to promoters on conversion of warrants for the purpose of acquisition and construction of manufacturing plants and long term capital requirement, current market price is almost half of the price at which company has allotted equity shares to promoters, hence offer potential upside in future.

    7. Last but not the least, in terms of valuation company has PE ratio of 4 and average ROE / ROCE of 12-13 which is expected to improve in coming quarters considering commencement of new manufacturing unit. We expect significant increase in top line & bottom line in agro business with healthy operating margins.

    ReplyDelete
  19. Hi VP,
    please can I know the future prospectus of allsec technologies?

    ReplyDelete
    Replies
    1. I think better stocks are available from this sector.But it may move reasons beyond fundamentals .Don't take it as a buy recommendations.

      Delete
  20. Strange that Saral Gyan has given this as their september recommendation on sunday @ 11:50A.M.

    During the last one month,its full day trading volumes never exceeded 65k,while most of the times,volumes were much below 20k.But today,after VP's and SaralGyan's recommendation,the no of shares traded in the first 5 minutes @ 9:20 a.m this morning is 80k.Where is the supply coming from?No one can answer,I believe.Definetely not from the retail investors since the tendency of small investors is to wait for another circuit on the next day.

    ReplyDelete
  21. Dear Friend
    Both of this issues are beyond my control .
    Regarding the second matter , there was total 7 shareholders in the public category holding more than 1 % stake in March quarter and the total was 14.65 % in this category .But in the latest June quarter no of share holders increased to 8 and holding also increased to 15.45 % .But here one share holder sold some shares but others bought more than that (in > 1% category).So selling and buying happening and I don't know what others can do in this matter ?

    ReplyDelete
  22. Sir,

    Any news on Aries agro ...It was 20% up today

    ReplyDelete
    Replies
    1. No idea Deepak . If a business continuously growing stock market can't ignore it all the time - that is my belief .Once , today ,tomorrow or thereafter it will get the desired valuation - if it still maintains business growth.

      Delete
  23. dear valuepick ji,

    the share price of basant agro is 20% circuit. i think tmrw also it will be circuit. what should we do. many times this happens on of ur recommendation. do u have any paid clients. many of them are recommending the stocks first to thier paid clients later to free groups. plz clarify me sir.

    ReplyDelete
    Replies
    1. Dear Balaji

      I have no paid service. If there is one, do you think this same stock close in negative territory on the day before posting it openly ? .More over Why I need to hide it from my readers and avoid the publicity ?. Some people complaining some shares are not moving after recommendation and some others complaining they are not getting a chance to buy !!!

      Delete
  24. Dear VP,

    My point is,how does any big shareholder know that such a huge buying spree is going to come in the first 5 minutes of the trade and himself waiting to offload heavily.Atleast,if the volumes picked up later in the day,that would have given some sense.


    Regards

    ReplyDelete
    Replies
    1. The entity which reduced their stake in the previous quarter is not an individual but a stock broker itself ( I believe so ,on the basis of the share holding patterns filed to BSE for March and June quarter) They may have facilities to get alerts or some other arrangements ..

      Delete
    2. Are Bhai

      No doubt it is Sharegyan .They recommend this stock to their paid subscribers on Sunday evening.Probably they bought it before and sold on Monday that is their practice.

      Delete
    3. Not sharegyan but Saral Gyan

      Delete
    4. The full name is Saral Share Gyan :)

      Delete
  25. Valuepick,

    You are favoring operators not retail investors, we did not get any chance to buy basant, I think you are also an operator and you have good contacts with few others. I will surely put a grievance letter to sebi in this regard.

    ReplyDelete
    Replies
    1. Are you trying to frighten me for not getting chance to buy shares from stock market ? .Do it now itself ,let SEBI come and inquire.

      Delete
    2. Complaining to Sebi for hitting a stock upper circuit ? Are you joking or serious ?

      Delete
    3. this guy is talking like - SEBI is there only to look after his complains. Bhai unko aur kaam bhi he.

      Delete
    4. Mr.Anonymous
      Getting valuable analysis stocks from good people are very rare now a days and u will not get anything free without subscribing & that too also not 100% success.I burnt my finger by paying saying as tips but i can't blame them.
      Please humble request don't irritate others & that too as ANONYMOUS. i am watching this site only for the past 1 week, and read all his stock analysis really amazing.I am too late to see this site.
      Just read, analyse and then act.we can't blame anybody in the stock market.

      Delete
    5. Mr. Anonymous,
      I am following this blog since 4-5 months and checked Mr. Value picks earlier recommendation also. Based upon that, it seems that he is very honest in giving stock idea based upon fundamentals and future prospectus of company. His replies to their readers also reflect the same thing.
      Your allegation are BASELESS.
      Let someone do their job honestly for the benefit of lot of small investors...
      I also could not bought this share due to upper circuit...

      Delete
    6. Pls Anonymous ..dont talk stupid..
      You are getting really great advice here...
      Dont try to scare anyone! Thanks VPji..

      Delete
  26. SEEMS TO BE A CLASSIC CASE OF "SOUR GRAPES"

    ReplyDelete
  27. Hi Anonymous and All,

    I have been following this blog more than 2 years.
    I can suggest you all Why to simply trust Value pick.. do your own home work and find the stocks. Why you are unnecessarily irritating VP sir. He is doing a great job.. after all its your decision to buy or not....
    Why don't you think that the users who is following the blog itself wants to buy Basant and it has hit UC. If he is a operator.. track all his recommendations and see after his recommendation how many have gone down after his recommendation :)

    You people wont allow the great people to do the service to small retail investors.

    My sincere advice is either you trust him or don't trust him..... who is forcing you to trust him .....

    Be a matured person..... other wise you are unfit to investing....


    ReplyDelete
  28. thanks a lot again,invested in basant agro
    and for other critics do your own homework before investing and measure your own risk appetite,
    i have being following him since last 3 months and have only invested in kale prior to this, was tempted for premier explosives...

    ReplyDelete
  29. Hi VP,
    I came to know about your blog very late. But still after reading your blog for basant agro entered it at around Rs 5.2 . Am i too late?
    thnx.

    ReplyDelete
    Replies
    1. Never buy any stock only because of my recommendation.Before acting on study it in detail and decide whether it is suitable for your own risk profile.

      Delete
    2. Hi,Basant Agro is trading at 4Rs currently. Is it still a good buy? Kindly let me know.

      Delete
  30. Thank you sir. Its useful tips

    ReplyDelete
  31. i have bharat seats & dcw...can i hold them both for long term Sir

    ReplyDelete

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