Wednesday, December 11, 2013

Plastiblends India - Value Buy

Plastiblends is India's largest manufacturer and exporter of colour and additive masterbatches and thermoplastic compounds for the plastic processing industry. It is part of Kolsite group which also has another listed company Kabra ExtrusionTechnik.

Financials
The average ROCE of the company over the last ten years is more than 20%. The number has been lower in recent years near 17% while it was much higher near 30% in the years between 2000-2003. The tide seem to have turned in the last two quarters and it looks like the good days are going to be back from this year.

Promoters
The promoters hold 59.91% in the company at the end of September 2013. The promoters are buying shares from the open market since last one year and increased their stake by more than 2% since last September when they held 56.84%.

Mutual Fund Holding
Some mutual funds were holding shares till last quarter but nobody holds it right now.

Valuations
The company's book value at the end of FY2013 was INR 90 so at the current market price of INR 88, it is trading below book value. Company has net current assets - debt worth INR 50 Crore while the market cap of the company is INR 115 Crore. The promoters are buying shares heavily from the market and so do I. I would recommend a buy on the company at this price.

Image courtesy of FreeDigitalPhotos.net
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Tuesday, September 3, 2013

I was way early

On May 7, 2010; I had made a macro call on financial sector in India. Let's compare the results today after three years and four months. BSE BANKEX was trading at 10505.86 at that time while SENSEX was at 16769.11. Today SENSEX ended at 18234.66 while BSE BANKEX ended at 9871.35. That means during the last three years and four months SENSEX gained 8.74% while BSE BANKEX lost 6.04%, an underperformance of around 14.78%.

It is still too early and biased to consider myself vindicated since BSE BANKEX has crashed just recently. I had also warned about an impending banking crisis in India in September 2010 although it was too early. Being early is sometimes no different than being wrong.
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Saturday, August 31, 2013

Jindal Drilling and Industries: Update

On June 16, 2013, I had written about Jindal Drilling and Industries. I myself trusted the promoters and went ahead and invested in the company at a share price of INR 187 as you can see in my recent investment activity.

Unfortunately, the promoters are becoming more and more non-transparent. The promoters secretly announced another round of preferential allotment, bigger than last year and probably at a much lower price, which unfortunately hasn't been disclosed yet. Last year, the company called for an EGM and then at a price disclosed to shareholders, made allotment of 27,50,000 shares which diluted the company's equity by 12% and increased promoter holding from 53.83% to 58.78%. Now allotting 33,00,000 shares would dilute the equity more by 12.85% and after the allotment, promoter holding again would go up to 63.63%. The amount of money the company is getting for this dilution may be just 130 crore. And remember, the promoters sold their 10.47% stake to one of the citigroup company in 2008 at exorbitant price of INR 1000+ which got them around INR 150 crore. So they are again bying the stake in the company by shelling out lesser amount to get higher stake.

The minority shareholder is not even being thought about. Since the price of the share is depressed, it would be a good idea to go for rights issue the way Tata Motors did in 2009. And when a minority shareholder does not subscribe to rights shares, promoter can replace it and increase his stake in the company. But this is not TATA. This is JINDAL.

I would recommend to stay away from people who has got sudden wealth leading to corruption. I myself is rethinking my own purchase of this company. Happy investing!!!!
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Sunday, June 16, 2013

Jindal Drilling and Industries : Ben Graham Value Play?

Jindal Drilling and Industries was incorporated in the year 1983 with a focus on providing quality Offshore Drilling, Horizontal and Directional Drilling and allied services.

Financials
The company's average ROCE over the last ten years has been around 21%. The number fell to 16% last year. The company at the end of FY13 did not have any long term debt and the net current assets amounted to INR 262.34 crore. The company also has investements in joint ventures to the tune of INR 114.2 crore and has given loans to the tune of INR 207.03 crore.

Promoters
Promoters held very high stake to the tune of 83.48% in the company till December 2007. One of the citigroup company then acquired 10.47% stake at a price of 1000+ on 25 Jan 2008 when the share price touched all time high of 1088 (split adjusted) that brought the promoter holding down to 74.74%. The promotors held near 75% stake till March 2011. Then some holders were moved out of promoters to public (Bhagyalaxmi Finlease & Investment Pvt Ltd, Satellite Merchants Pvt Ltd, Babul Holding Pvt Ltd) so the promoter holding came down to 53.03% in June 2011. The promoters since are increasing stake in the company when their holding increased to 53.83% in Sept 2012 at a price anywhere between 250-350. Something really strange happened. Even though the company had good cash at the end of FY12 on its balance sheet, the promoters did a preferential allotment to themselves at a price of INR 280 in October 2012 raising around INR 77 crore. This has brought promoter holding to 58.78% in the latest quarter. The citigroup company that acquired shares at the peak had to sell them at loss in November-December 2010 at half the price (Who says FIIs are intelligent?).

Mutual Fund Holdings
Not a single mutual fund holds the shares right now.

Valuations
The book value of the company is INR 216 so the share at the current market price of INR 190 is trading below book value. Everything else looks good except for the fishy transaction of the promoters doing preferential allotment. The company also pays very negligible dividend. The shares of the company can be bought if you feel promoters are not cheating on you.

Image courtesy of domdeen / FreeDigitalPhotos.net
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Sunday, April 21, 2013

Voltamp Transformer - A value play?

Voltamp Transformers was incorporated in the year 1967 in Vadodara. The company is in the business of manufacturing power and distribution transformers.
Financials
The average ROCE over the last ten years is over 40%. The number has fallen lately to 12%. The company at the end of FY12 did not have any long term debt and the net current assets amounted to 230.43 crore. The company also has investments worth INR 109.85 crore. So the total net current assets + investments amounted to INR 340.28 crore compared to its current market capitalization of INR 379.34 crore. That means the running business is being sold for INR 40 crore which has generated cash flow of INR 238 crore over the last seven years. But the cash flow from operations has turned negative in the last year and was negative in the year 2006 too when the company got listed. The company came out with its IPO in 2006 with a price band of INR 295-345, while the current market price of INR 375 is just 10% higher than the IPO price in 2006.

Promoters
Promoter shareholding has increased from 46.05% in the last quarter to 46.87% in the March 2013 quarter. The promoters have bought shares at prices higher than the current market price which gives confidence to buy at the current price but remember that only 0.82% in the last quarter was bought at price higher than the current. The rest of the 46% is at a very low price.

Mutual Fund Holding
Many mutual funds bought the shares during the boom of power sector as can be seen in the bulk deals at moneycontrol. Reliance bought the shares at INR 618 in 2006 and sold in 2011 at price between 490-530, 10% loss in five years.

Valuations
The book value of the company is INR 390 so the share at the current market price of INR 375 is trading below book value and almost near to its net current assets. The company itself admits in its annual report that the whole industry is having a problem of over-capacity and the same is reflected in rise in the company's receivables and inventory. Unless there is a blood-bath in prices which leads to losses, the shares can be bought at the current price.

Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net
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