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.

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 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.

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 /
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Govi said...

why didn't you mention SJVN in your list of portfolio? Can you please update your portfolio to reflect your current holdings?

Chinmay said...

Sorry Govi. I had put it in recent investment activity. But forgot to include in current investments.

Govi said...

Thanks Chinmay. I guess Ador welding is also missed :)

Chinmay said...

I have added that too. You seem to be keeping track of my portfolio more than myself.

Actually I buy for both myself and my wife. So sometimes some scrips get missed.

Hope you do benefit by my blog.

Govi said...

No Chinmay. Some stocks like BL,FDC and Oil India are also held by me for long time. Actually yours in one of the blogs which actually follow value investing principles. So I like it as you dont chase growth stocks.One query - how much return one could expect with such value picks on a longer term say 10 years. I just wanted a real life example.

Chinmay said...

@Govi - Difficult to predict any returns. Sometimes decisions carried out by others impact the returns you get (e.g. OIL is going to buy Videocon oil assets at heavy price to utilize its cash, can't say it is a right decision right now). But it turns out that value investing reduces your risk. Many people were suggesting me to buy Opto Circuits at INR 80 in 2008-09. I chose not to due to debt burden and we can see what happened to it. On my blog itself I had wrote about Mcnally Bharat Engineering, Varun shipping etc... and today investors in those companies have lost their money.

Even I am in losses in some companies (Nippo batteries). It might turn out to be a value trap in long term but the losses are limited (20-30%) unlike above companies which lost 70-80%.


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