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.
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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:

Alok IndustriesTextiles5767
Asahi IndiaInfrastructure1391
Bhushan SteelSteel5718
Era ConstructionsInfrastructure1447
Essar OilRefinery10015
GTL InfrastructureInfrastructure2475
Hotel LeelaHotels2035
Ispat IndustriesSteel7225
Jaiprakash AssociatesInfrastructure8234
Jet AirwaysAirline12015
Jindal StainlessSteel4290
Orchid ChemicalsChemicals1953
Strides ArcolabPharmaceuticals1063
UnitechReal Estate8117
Varun ShippingShipping2200

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.
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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".
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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:

Abhishek IndustriesTextiles1285.59
Alok IndustriesTextiles5767.31
Ankur DrugsPhramaceuticals618.14
Asahi IndiaGlass1391.43
Bajaj Hindustan SugarSugar919.42
Era InfraInfrastructure1447.09
Piramal GlassGlass732.3
Rajasthan Spinning & Weaving MillsTextiles1064.41
Stride ArcolabPharmaceuticals1062.77

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.
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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,

Company Name
Ahmednagar Forgings
Andhra Petro
Avaya Global
Balasore Allyos
BSEL Infra
Carol Info
Consolidated Finvest
D-Link India
Dhanus Tech
G V Films
Ganesh Housing
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
Mascon Global
Micro Inks
Midday Multimedia
Nitco Tiles
Om Metal Infra
House of Pearl Fashion
Prajay Engineers
Prime Securities
Prithvi Info
Saregama India
Sasken Communication
Suraj Diamonds
Sujana Tower
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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