Friday, November 14, 2008
We got the first victim today
Just after two days of posting the names of companies which may have trouble paying their debt, we have got the first in Slowdown-hit Ispat defaults on loan repayment to UTI.
Wednesday, November 12, 2008
Indian Banks are in for a tough time - Part 2
Extending the article Indian Banks are in for a tough time, I am giving here the list of companies in BSE 500 which may face severe pressure going forward paying their debt:
Let's see who defaults first. The list only includes companies with debt more than 1K Crore. Asahi India, Alok Industries, Era and Strides are repeated from BSE SMALL CAP.
| Company | Sector | Debt |
|---|---|---|
| Alok Industries | Textiles | 5767 |
| Asahi India | Infrastructure | 1391 |
| Bhushan Steel | Steel | 5718 |
| Era Constructions | Infrastructure | 1447 |
| Essar Oil | Refinery | 10015 |
| GTL Infrastructure | Infrastructure | 2475 |
| Hotel Leela | Hotels | 2035 |
| Ispat Industries | Steel | 7225 |
| Jaiprakash Associates | Infrastructure | 8234 |
| Jet Airways | Airline | 12015 |
| Jindal Stainless | Steel | 4290 |
| Orchid Chemicals | Chemicals | 1953 |
| Strides Arcolab | Pharmaceuticals | 1063 |
| Unitech | Real Estate | 8117 |
| Varun Shipping | Shipping | 2200 |
Let's see who defaults first. The list only includes companies with debt more than 1K Crore. Asahi India, Alok Industries, Era and Strides are repeated from BSE SMALL CAP.
Thursday, November 6, 2008
Will blindly following Buffett help?
I would like to point out the difference of investing in US and India. Buffett's investment in two sectors - namely Publishing and Retail have been the most profitable. Buffett even remembers a missed opportunity - WalMart - in 1996 which caused a loss of profit of more than $10 Billion to Berkshire Hathaway. The Washington Post Company has been the investment of Buffett's life.
When I compared the performances of Indian publishing and retail companies, I feel the companies are not investment grade except few. Taking the retail first, Indiabulls Retails Services, Shopper's Stop made losses last quarter (Indiabulls Retails previously known as Pyramid Retail has never made profits) and Pantaloon Retail had an interest payment of 68 Cr compared to net profit of 36 Cr. Only Titan, Trent and Provogue are spared (of which Titan and Provogue are part of the famous R's portfolio). This may be due to high cost of Real Estate and high interest rates. In publishing ROCE's of Jagran Prakashan, Deccan Chronicle Holdings, HT Media and Infomedia are nothing to write home about. So if Buffett had been an Indian, he would have stayed away from these businesses.
The lesson is "Do Your Homework".
When I compared the performances of Indian publishing and retail companies, I feel the companies are not investment grade except few. Taking the retail first, Indiabulls Retails Services, Shopper's Stop made losses last quarter (Indiabulls Retails previously known as Pyramid Retail has never made profits) and Pantaloon Retail had an interest payment of 68 Cr compared to net profit of 36 Cr. Only Titan, Trent and Provogue are spared (of which Titan and Provogue are part of the famous R's portfolio). This may be due to high cost of Real Estate and high interest rates. In publishing ROCE's of Jagran Prakashan, Deccan Chronicle Holdings, HT Media and Infomedia are nothing to write home about. So if Buffett had been an Indian, he would have stayed away from these businesses.
The lesson is "Do Your Homework".
Sunday, November 2, 2008
Indian Banks are in for a tough time
After the slowdown comes default. I am talking about lending of banks to corporates. I went through BSE SMALL CAP index companies to find out which of the companies are vulnerable and can default on their debts. Following is the list:
I have included only those with debt more than 500 Cr. There are many with debts between 250 and 500 Cr. And also notice that these are small companies in BSE SMALL CAP and not in BSE 500. Similar examples will be found in BSE 500 too but might be lesser. The banks which would have lent to these companies will see their NPAs rise in the next one year. Most of them are from beaten down sectors like textiles, sugar and Infrastructure. I will keep track of these companies.
| Company | Sector | Debt |
|---|---|---|
| Abhishek Industries | Textiles | 1285.59 |
| Alok Industries | Textiles | 5767.31 |
| Ankur Drugs | Phramaceuticals | 618.14 |
| Asahi India | Glass | 1391.43 |
| Bajaj Hindustan Sugar | Sugar | 919.42 |
| Era Infra | Infrastructure | 1447.09 |
| Piramal Glass | Glass | 732.3 |
| Rajasthan Spinning & Weaving Mills | Textiles | 1064.41 |
| Stride Arcolab | Pharmaceuticals | 1062.77 |
I have included only those with debt more than 500 Cr. There are many with debts between 250 and 500 Cr. And also notice that these are small companies in BSE SMALL CAP and not in BSE 500. Similar examples will be found in BSE 500 too but might be lesser. The banks which would have lent to these companies will see their NPAs rise in the next one year. Most of them are from beaten down sectors like textiles, sugar and Infrastructure. I will keep track of these companies.
Graham would love this market
One of the criterion for choosing a company to invest in for Graham was that the price is below 2/3rd of the net working capital (cash or net worth + inventory - debt). I wasn't able to collect the inventory but just by looking at cash - debt, I found that out of 557 companies in BSE SMALL CAP index, 54 was meeting Graham criterion. Some of them are,
Some of these names like Aftek, Silverline, Teledata, are untouchables since they do not have a good history. But Lloyd Electric, Sasken, Vimta Labs, Vaibhav Gems, Micro Inks, Hexaware, Avaya Global, D-Link India were renowned names once. I haven't looked at these companies' P&L account to know whether the intrinsic value of the company is increasing or decreasing, but the running business of these companies is available for free.
| Company Name |
|---|
| Aftek |
| Ahmednagar Forgings |
| Andhra Petro |
| Avaya Global |
| Balasore Allyos |
| BLB |
| BSEL Infra |
| Carol Info |
| Consolidated Finvest |
| D-Link India |
| Dhanus Tech |
| G V Films |
| Ganesh Housing |
| Hexaware |
| Hinduja Ventures |
| HTMT Global |
| ITD Cementation |
| Jindal Photo |
| Jindal Polyfilm |
| Jindal Southwest Holdings |
| Jupitor Bioscience |
| Kernex Micro |
| Kolte Patil |
| Kothari Products |
| Krishna Lifestyle |
| Llyod Electric & Eng |
| Logix Micro |
| Lok Housing |
| Maharastra Scooters |
| Manaksia |
| Mascon Global |
| Megasoft |
| Micro Inks |
| Midday Multimedia |
| Nitco Tiles |
| Om Metal Infra |
| House of Pearl Fashion |
| Prajay Engineers |
| Prime Securities |
| Prithvi Info |
| Saregama India |
| Sasken Communication |
| SEAMAC |
| Silverline |
| Suraj Diamonds |
| Sujana Tower |
| Technocraft |
| Teledata |
| Triton Corp |
| Vaibhav Gems |
| Vakrangee Software |
| Vikas WSP |
| Vimta Labs |
| Zylog System |
Some of these names like Aftek, Silverline, Teledata, are untouchables since they do not have a good history. But Lloyd Electric, Sasken, Vimta Labs, Vaibhav Gems, Micro Inks, Hexaware, Avaya Global, D-Link India were renowned names once. I haven't looked at these companies' P&L account to know whether the intrinsic value of the company is increasing or decreasing, but the running business of these companies is available for free.
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