Sector in Decline - Newspaper Publishing and Media

Lately, you all might have seen that I am buying some publishing businesses such as Jagran Prakashan, Just Dial while I was already holding Hindustan Media Ventures. The valuation of these companies are given below in the table

Company	Market Cap	Operating Cash Flow(3 year average)	P/E	Net Current Assets
Jagran Prakashan	3800	445	12.25	575
DB Corp	4329	370	13.9	675
Hindustan Media Ventures	1246	150	9.15	1330
Just Dial	3765	155	26.23	1000

If you check the history of many of the companies, Jagran Prakashan (who owns Dainik Jagran) did a buyback at INR 195 for 292.5 Crore and share price is now at INR 125. On the day of buyback validity, the share price was at INR 160. Jagran also owns another listed company Music Broadcast which owns 91.1 FM - Radio City. Surprisingly, Music Broadcast is also doing buyback. DB Corp (who owns Dainik Bhaskar) announced a buyback at INR 340 for 312.5 Crore while the current price is INR 237. Just Dial is an internet based business for finding local businesses (Yelp of India). It also has approved buy-back at INR 800 for 220 Crore. I am not sure why at one side market is evaluating cash-rich companies like these generating decent cash flow at ridiculously low valuations while some others are trading at 75-100 times cash flow such as Dabur, Honeywell, Berger Paints, Page Industries, Jubilant Food and many others. Time will tell whether I am right or the market.

Recently Listed Good Quality Companies

Since the last 5 years, a lot of IPOs have come out and when I recently looked at the list, it seemed many good quality companies have got listed and I missed catching them. Here are a few:

Name	Brand/Use	IPO Price	Current Price
Sheela Foam	Sleepwell	680	1500
Music Broadcast	RadioCity	333	312
CDSL	Demat	149	267
Matrimony.com	Bharat Matrimony	985	745
Quick Heal	Antivirus	321	275
Mahanagar Gas	Piped Gas	421	809
Just Dial	Local Business	483	570
Thyrocare	Pathology Lab	446	570

Many of these companies are having a great brand and use and all of them are from different sectors of the economy. Even the business is generating pretty good ROCE and having a reasonable valuation. Make sure you keep an eye.

Tale of two IPOs

I typically avoid looking at IPOs but I do visit the companies which come out with IPOs after few years to see what they have done and how the stock prices have reacted. In this post, I will analyze Precision Camshaft and GNA Axles. Precision Camshafts came out with IPO in January 2016 while GNA Axles came out with IPO in September 2016. Following table summarizes the IPO details:

	GNA Axles	Precision Camshafts
Issue Price	207	186
P/E @Listing	17.1	22.3
Current Price	550	103
P/E Now	29.1	24
Gain/Loss	165%	-45%
Average Operating Cash Flow in 3 Years	37 Crore	83 Crore
Enterprise Value (Market Cap + Debt)	1297 (1180 + 117)	1090 (980 + 110)
P/B Now	3.57	1.75

The above table shows that in one company, investors have gained 165% in around 1.5 years and in the other, investors have lost 45% in around 2.25 years. The reason for more enthusiasm in GNA Axles is growth in recent times while flat revenue growth for Precision Camshafts since last two years. In 4 years between 2012 and 2016, Precision Camshafts average revenue (average of 3 years) grew from 260 Crore to 471.5 Crore while that of GNA Axles revenue grew from 349 Crore to 482.6 Crore. The only problem is that GNA this year has increased revenue as well as profits while Precision's revenue topped in 2015 and is decreasing since last 3 years now.

I personally feel that some premium for GNA Axles is justified but such large variation of valuation just due to growth in recent years seems far fetched. If you have to invest right now, I would go with Precision Camshafts.

Two out of favour sectors - Pharmaceuticals and Banks

People reading this blog must be able to see my recent investment activities and find that I have been selectively investing in two out of favour sectors in the last few months or more than a year I would say. The sectors are

• Pharmaceuticals
• Banks

In Pharmaceuticals, there is a clear harakiri where many company saw their share price going down by more than half including Lupin (2100 in Oct 2015 to 800 now), Sun Pharmaceuticals (1150 in April 2015 to 570 now), Dr Reddy's (4250 in August 2015 to 2170 now), Glenmark (1200 in August 2015 to 535 now).

I myself started investing in some of the well run companies such as Divi's Laboratories at 1000+ in 2015 and saw its price going down to 550. Luckily, I had some courage to keep buying at lower prices and average down so my average buying price kept getting lower and settling at 670 when I last bought some shares at 550. Today since the price is again at 1050+, I am having a decent profit.

Recently, I am still investing in some of the well known names such as Abbott, Sanofi, Suven Life Sciences etc... I am not buying them at bargain prices but they are fairly valued or sometimes 20-30% more than fairly valued but I don't think they are as bublicious as their counterparts in consumer space such as Hindustan Unilever or Britannia or Pidilite or Asian Paints.

In Banks, I did buy J&K Bank at 100 and had to sell at 80 to book losses. Today it is trading at 66. But I think I was early and now with NPA numbers of all the banks clearly available, the separation of wheat from the chaff has happened. The clear winners are only few such as HDFC Bank, Kotak Mahindra and Indusind Bank but there are second tier private banks which have got my attention including Karur Vysya Bank, Karnataka Bank, Federal Bank and South Indian Bank. NPAs of these banks are not as high as 10-20% similar to public sector banks but they are not as low as 1-3% which is the case for top run private banks that I mentioned above. There is some valuation measure available from the deal that happened in 2015 when Kotak acquired ING Vysya Bank at around 15K crore. After three years, similarly sized banks like Karur Vysya available at 8K crore, Karnataka available at 4K Crore and Federal Bank at twice the size available at 18K crore does look promising. These are all long term plays on the Indian economy. I hope they turn out to be good bets.

IST Ltd - Value Buy?

IST Ltd is an automotive parts supplier started in 1977. It supplies parts to many companies in and outside of India. Company also has a subsidiary Gurgaon Infospace which has set up an IT SEZ and most of the revenue of the company comes from the subsidiary.

Financials
The average ROCE of the company over the last 10 years is 23% while it is at 31% for the last 3 years. The company's main business of auto parts is not making any money. The biggest income is rent received from IT companies in their SEZ. Based on the latest financial results, the company has non-current assets worth INR 354 Crore, the net current assets are around INR 33 Crore and fixed assets are worth INR 139 Crore. So the company can be easily liquidated for INR 500 Crore+.

Business
The biggest revenue source of the company is rent(lease) from SEZ to the tune of INR 75 Crore while the expenses are nil so all of this goes to the bottom line of the company. The company is getting some tax benefits so not paying full 35%+ taxes.

Shareholding
The promoters hold 74.99% in the company but not paying any dividends.

Valuations
At the current market price of INR 1105, the company's total valuation is INR 650 Crore. The book value of the company is around INR 762 and the EPS is INR 140 so P/E is less than 8. Except for the lack of dividend, the company doesn't look very expensive.

KSE - Value buy?

The company Kerala Solvent Extraction (now KSE) was established in the year 1963 and entered into cattle feed industry in the year 1976. The company later also entered into the business of milk procurement, processing and creating dairy products like ice-cream, ghee and packaged milk.

Financials
The average ROCE of the company over the last ten years is 30% while it is higher at 45% in the last three years. The company's net current assets at the end of FY2016 was 45 Cr. The operating cash flow of the company over the last ten years was average 12.11 Cr while higher at 15.78 Cr in last five years.

Shareholding
The promoter shareholding came down from more than 32% in FY2013 to less than 27% now. But that might be due to sharp increase in share price of the company. The same promoters increased their holding between FY2010 - FY2013.

Valuations
At the current market price of INR 550, the company has a market cap of INR 180 Cr. The share price was trading around INR 250 between 2005-2013. During this time the book value of the company increased from INR 80 to INR 240 now. The company is not very cheap but not very expensive either. It might become attractive if price corrects by half.

Sumedha Fiscal Services - Value Buy?

The company was established in the year 1989. It provides a wide array of services including Investment Banking, Wealth Management and Broking Services.

Financials
The average ROCE of the company over the last 10 years is 28.29% and is lower at 20.31% in the last 3 years. The company has current assets to the tune of INR 20.13 Crore. The average operating cash flow of the company over the last five years is around INR 1 Crore. The company has remained profitable and paid dividends over the last 11 years.

Shareholding
The promoters hold 49.57% of the company on March 2016. It has increased from 46.86% in December 2015.

Valuations
At the current market price of INR 14.7, the market cap of the company is INR 11.73 Crore. The stock price is barely trading higher than its price in year 2005 when it was trading between INR 8 and 9. The book value of the company has increased from INR 12 to INR 39 during these ten years, the EPS has gone up from INR 0.57 to INR 2. The company's valuation is below its net current assets. The company doesn't seem to be very expensive at this price.

International Travel House - Value buy?

The company was established in the year 1981. The company is an associate company of ITC. It offers a bouquet of travel services including car rental, Indian and International holidays, business travel, etc... While looking at the company I found that it is based in Pune, the city where I live.

Financials
The average ROCE of the company over the last 10 years is 28.38% and is lower at 27.45% in the last 3 years. The company has current assets to the tune of INR 98 Crore. The average operating cash flow of the company over the last five years is around INR 18.4 Crore. The company has remained profitable and paid dividends over the last 15 years.

Shareholding
The promoters hold 61.69% of the company.

Valuations
At the current market price of INR 195, the market cap of the company is INR 156 Crore. The stock price is barely trading higher than its price in year 2006 when it was trading between INR 140 and 240. This is about 10 years of no capital gain. The book value of the company has increased from INR 58 to INR 182 during these ten years, the EPS has gone up from INR 8.75 to INR 23. If we remove the net current assets from the market cap, the rest of the company is available at INR 58 Crore which is less than 4 times operating cash flow. The company doesn't seem to be very expensive at this price.

NMDC - value buy?

The company was established in the year 1958.

Financials
The average ROCE of the company over the last ten years is 40.79% but is lower at 31.98% in the last three years. The company has net current assets to the tune of INR 21,000 Crore. The company has projects worth INR 7800 Crore in progress (CWIP - Capital Work In Progress). The operating cash flow of the company last year was around INR 4000 Crore. The company has always remained profitable in the last 15 years and paid dividends regularly.

Shareholding
The Indian government owns 80% of the company.

Valuations
At the current market price of INR 90.3, the market cap of the company is INR 35,800 Crore. The stock price has touched the low it saw in May 2007. So this is eight and a half year low price for its share. The price earnings ratio is less than 8 and dividend yield is 9% (I doubt it would sustain though). The share price had touched an all time high of INR 550+ in May 2007 as well as Feb 2010. I think the company is not very expensive at the current valuations.

Narmada Gelatine - Value buy?

The company was established in year 1961 and earlier it was known as Shaw Wallace Gelatines Ltd.

Financials
The average ROCE of the company over the last ten years is 24.71% and is higher at 30.77% in the last three years. The company has consistently paid dividends since 2006. The company has net current assets to the tune of INR 55 Crore and has investments to the tune of INR 27 Crore. So the company can be liquidated immediately for INR 82 Crore. The operating cash flow of the company was INR 6 Crore last year. The company did undergo financial stress during 2002-2005 and suspended dividend during the time.

Promoters
75% of the company is owned by a promoter entity. 

Valuations
At the current market price of INR 140, the company's market cap is INR 86 Crore which is just INR 4 Crore more than the liquidation value. The price earnings ratio is less than 7 at reasonable profit margin. Dividend yield is 2.46%. The company was also going to be acquired by Sterling Biotech in 2004 as given in article. A company trading below book value at net current assets cannot be a bad bargain.

MOIL - Value buy?

The company Manganese Ore India Limited was established in year 1896 in UK but it became an Indian company in year 1962.

Financials
The average ROCE of the company over the last ten years is 28.77% but is lower at 13.82% in the last three years. The company has consistently paid dividends over the last ten years. The company has net current assets to the tune of INR 3030 Crore.

Promoters
It is a government owned company and 80% is owned by government.

Valuations
At the current market price of INR 200, the company's market cap is INR 3370 Crore which is just 10% above its net current assets. The price earnings ratio is less than 10 at severely depressed commodity prices. Dividend is almost 4.2% if it continues at the current rate. The IPO of the company concluded in year 2010 with a share price of INR 375 and the listing happened at INR 551. The current price of 200 is almost half of IPO price and 60% lower than all time high in year 2010. Need to see if it turns out to be a value buy or value trap.

Jullundur Motor Agency (Delhi)

JMA is one of the biggest auto parts dealer founded in year 1949.

Financials
The average ROCE of the company over the last 10 years is around 27.63% and is higher at 28.97% over the last three years. The company has consistently paid dividends over the last 10 years. The company has net current assets to the tune of around 90 Crore. The company had an operating cash flow of around 6 Crore last year.

Promoters
Promoters hold around 38.2% of the shareholding which has increased slightly compared to last year.

Valuations
Current market price of the company is INR 184 which is very near to its book value of INR 183. The valuations of 110 Crore is just tad above its net current assets. The P/E comes to around 7.78. Its competitor "India Motor Parts and Accessories" is trading at around 18.63 times earnings with 2.5 times book. The only thing in favour of IMPAL is that its operating profit margin at 8.9% is higher compared to 5.8% of JMA.

Mazda Ltd - Value Buy

Mazda is an engineering company established in the year 1990. The company mainly manufactures vacuum systems and evaporators.

Financials
The average ROCE of the company over the last ten years is around 30% but it was lesser at 25% last year. The company has consistently paid dividend over the last 14 years. The company sold its valve division in FY11 for around 13 Crore which resulted in exceptional after tax income of 10.824 Crore. The company had investments to the tune of INR 18.8 Crore in mutual funds and short term investments at the end of FY13. Beyond this, the company had net current assets to the tune of INR 39.12 Crore in FY13. The company had negligible debt of INR 2.41 Crore at the end of FY13. So the current enterprise value of INR 45 Crore is way lower than the amount of 58 Crore at which the company can be liquidated.

Special Food Division
Company has started a food division which had a turnover of INR 8.52 Crore with an operating profit of INR 1.07 Crore in FY13. They are selling instant drink powder, fruit jam, ketchup and custard powder under the brand bcool.

Promoters
Promoters are very shareholder friendly and their stake in the company over the last one year has increased by more than 5% and most of the shares were acquired from open market between the price of INR 80 and 100.

Mutual Fund Holding
Very few mutual funds are holding the company.

Valuations
The company at the current market price of INR 102 is trading at much lower than its book value of INR 194. With a healthy cash flow of INR 10 Crore, the company is damn cheap at INR 45 Crore valuation given its investments and net current assets.

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

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!!!!

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

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

Panama Petrochem : A value buy or value trap?

Panama Petrochem was incorporated in the year 1975. The company is in the business of manufacturing and exporting petroleum specialty products.

Financials
The company's average ROCE over the last ten years is 28.65%. The number had fallen to as low as 9% in FY03 and is hovering higher than 30% for the last three years. The company at the end of FY12 did not have any long term debt while net current assets amounted to INR 152.63 Crore most of which is held as cash. Out of this $13.99 million (around INR 62 Crore at exchange rate of INR 44/$) came from GDR issue in July 2011, when company issued 4,91,469 GDR at a price of $28.486 and each GDR amounted to 5 equity shares, i.e. at a share price of INR 253.68. The operating cash flow of the company over the last five years has increased sharply compared to the years 2003-2007 but has remained below the net profit of the company for most of the years and was even negative in FY08. The company's total income has risen from INR 31.66 Crore in FY02 to INR 583.65 Crore in FY12. The net profit of the company has risen from INR 1.33 Crore in FY02 to INR 30.63 Crore in FY12. The company's total income declined by 12.8% in FY10 and the net profit declined in FY03 by 68.5%, in FY09 BY 21.1% and in FY12 by 16.78%.

Promoters
The promoters hold 43.9% in the company. The company was not paying any dividends till FY03. In the last ten years, the company has diluted its equity from INR 3.76 Crore to INR 8.6 Crore, i.e. by more than 128%, which is a big negative for me since a company generating good cash flow doesn't need to dilute any equity or take much debt.

Mutual Fund Holding
There is not a single mutual fund holding this share. This can be considered contrarion positive.

Valuations
The book value of the company at the end of FY12 is INR 260.2. At the current market price of INR 148, the company is trading at just 57% of its book value. The latest results show that the company hasn't utilized anything from its GDR issue. The current market capitalization is INR 122 Crore and the cash and bank balance at the end of FY12 was INR 152.63 Crore. So if the company is liquidated today, you get more money per share than its stock price. This is compelling valuation except for the promoters.


Image courtesy of FreeDigitalPhotos.net

Sun TV Network

Sun TV Network was incorporated in 1985. It started with publishing magazines and then diversified in to television broadcasting.

Financials
The average ROCE of the company over the last ten years has been 38.35% as per the balance sheet of the company and has risen to 48% in the last year. The company is debt-free. The company at the end of FY2011 has net current assets of INR 921.24 Crore and investments of INR 271.67 Crore. The operating cash-flow of the company over the last ten years has been positive. The total income of the company over the last ten years has increased from INR 147.52 Crore in FY01 to INR 2062.16 Crore in FY11. The profit after tax has increased from INR 40.86 Crore in FY01 to INR 769.76 Crore in FY11.

Business
Even though the company has a single business of broadcasting, its revenue source is diversified. The revenue break-up over the last four years is as below:

Source	FY08	FY09	FY10	FY11
Advertising	475.46	605.74	844.96	1053.18
Subscription	229.33	215.14	343.13	515.74
Broadcast Fees	125.63	130.36	134.28	153.78
Movie Distribution	-	28.28	67.49	221.32

This shows that advertising is around 50-60% of the company's revenue, subscription around 25% and 15% comes from broadcast fees and movie distribution. The first two are actually linked together since higher viewership will increase both advertising as well as subscription income.

Promoters
Promoters hold around 77% in the company at the end of FY12. The promoters seem minority shareholder friendly as can been in the dividend distribution of INR 8.5 per share as interim dividend in FY12. The management's fixed salary is 3% (1.5% each to Chairman and Managing Director and Joint Managing Director) of net profit which is a bit on the higher side.

Mutual Fund Holding
Mutual fund holding was pretty dismal till december 2011 quarter. But in the first quarter of 2012, a large number of schemes have bought shares of this company.

Valuations
The book value of the company at the end of FY11 was near INR 60 and may end up being INR 70 after this year's results on Friday, 25 May. At the current market price of INR 250, the share is trading at more than 3.5 times book value. At the current market capitalization of INR 9866 Crore, the share is trading at almost 18 times last five years average profit of INR 540 Crore and 13 times trailing twelve months net profit. The company's IPO came in 2006 when shares were issued at INR 875 which for split/bonus adjustment result in price of INR 218.75 today. So the current price is just 15% higher than the IPO issue price in 2006. The company does not look a compelling buy at this price but can be bought after some decline.

Image(s): FreeDigitalPhotos.net

Hydro Power Sector

Following listed companies are in the hydro power sector in India:

• Jaiprakash Power Ventures
• NHPC (National Hydroelectric Power Corporation)
• SJVN (Satlaj Jal Vidhyut Nigam) 

This sector is utility so returns on capital are controlled by government and the companies cannot charge the amount they wish from their end-users/customers. The following table summarizes their financial conditions:

Financial Ratio	Jaiprakash Power Ventures	SJVN	NHPC
Market Cap (Crore)	9777	7880	22141
Net Worth (Crore)	5170	7205	24584
Debt (Crore)	12381	1753	14569
Debt/Equity	2.4	0.24	0.59
Average ROCE (five years)	10.15	15.20	6.41
Average Interest Cover (five years)	2.5	5.48	4.76
Interest Cover (last year)	1.62	8.12	5.68
Price/Book	1.89	1.09	0.9
Mutual Fund Holding	HDFC, etc...	ICICI, Tata, etc...	UTI, ICICI, Tata, etc...
Dividend Yield		4.2	3.33

On most of the parameters, except price/book ratio, SJVN is better than the other two. JP power ventures is highly indebted and most probably will not be able to meet its financial obligations sometime or the other in the next few years. How can a value investor like me suggest you to buy the shares of a company whose bonds are not investment grade? So the best investment looks like SJVN at this point of time.
Image: markuso / FreeDigitalPhotos.net