Indian Telecom at Cross-Roads

Feb 03, 2012 – The SC judgement striking down 122 telecom licenses from 2008 is a sharp indictment on governance in Indian Telecom. First Come First Served is a poor way to award licenses. The maximum damage may be to the new Telecom operators, and to business confidence of foreign investors. The justice process has just started with this judgement. Indian retail investors need to stay with Bharti Airtel (see report)

The headlines in all the newspapers today is about the Telecom judgement by the Supreme Court. A complex case that has been 3 years in the making. Yet most of the points do not get to the root of the issue at hand, and it is:

First Come First Serve is for Bus Stops !!

Any experienced professional will be able to tell you that any proposal for a business initiative consists of two parts – Technical ability and Financial proposal. This is true in Private sector and government; for purchases of goods,  services and projects.

The defense of Mr Raja for his deeds was a desire to introduce higher competition in the Indian Telecom market.  This itself is a bit debatable. There were 8 players in the industry in 2007. By introducing hyper-competition, he has changed the business rules for all the operators (in 2007)  overnight.

Lets ignore this aspect, and move on to the process of introduction of new players. Can a First Come First Served process give results here? Are moneybags and speed the only requirements for the new licenses? This is the work of novices. The right way is to invite technical and financial bids from corporates (and joint venture partners) who wish to enter this business. Here if you want to favour Indian firms, the right way is to set the conditions that the primary partner is Indian, and the JV must commit to have a certain 76:24 (for example) maximum partnership, and invite bids in a proper timeframe.

This aspect has been messed up and not understood by government authorities. When the subject of ‘opening up Indian skies’ came up, the government in its wisdom actually disqualified applicant firms that had foreign airlines as partners. A case of shooting yourself in the foot. All this when the biggest mess is at the government’s Air India itself. But I digress from the telecom sector.

Once the FCFS rule was in place, and the cost of licenses is so low, how do you control the number of applicants? The whole SC pronouncement is based around the arbitrary method and cut off dates chosen by Raja.

The right way to decide is a transparent evaluation of Technical & Financial bids. By experts. So that the bid winners are chosen on the basis of some merit and a better financial offer.

There are multiple parties to this SC judgement. The government (Ministers + telecom department), the TRAI and Telecom commission, the mobile operators, and consumers. How will justice prevail across all these parties? Consumers may not be much affected. They can stay if their operator survives, or use MNP to switch.

The biggest losers are the operators, and their MNC partners. Some of these took advantage of the licenses and sold it/ brought in MNC partners at huge valuations/ profits to themselves. There were no restrictions on this. Thereafter the firms may have made large investments to roll out the networks.  In the interest of business stability, these different entities need to be dealt with separately. Current players who have made investments must be given priority for new licenses.

The Ministers/ government/ TRAI and DOT have egg on their faces for creating this problem.  The New Telecom Policy should be able to provide a stable governance for this vitally important sector. By not staying on top of a rapidly evolving and important sector, the government has displayed incompetence, arbitrariness, partiality, opaque decisions and at best naivete in governance. At worst outright corruption. And First Come First Serve is for bus stops and restaurants. Not industry !!

The second largest telecom market in the world might just have the most incompetent administrators. Time for a big correction here.

In terms of the stock market effect of this scam, the only listed firms are Bharti Airtel, Idea, Reliance Comm, Tata Comm and MTNL.

The sector has underperformed in the last one year, see Figure 1.

JainMatrix Investing

Fig 1 - Telecom Sector Price Performance

The dust will take months to settle now. There will be exits (likely Telenor), counter litigation (likely older operators of Idea and Tata) and withdrawal of additional FDI.

As an Investor, I had predicted that Bharti Airtel will be least affected by the regulatory uncertainty. LINK. Investors are advised to stay with this stock.


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These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at

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L&T Finance Holdings – IPO – Invest

Price band 51-59 ; Issue period Retail – July 27 – 29, 2011.        

(For a detailed note on L&T Finance Holdings IPO with analysis, business charts and IPO risks, subscribe for free to this blog, on the right panel)

Update on July 28th

  • On the second last day, the IPO has already been subscribed 1.21 times, with breakup of QIB (0.72), HNI (0.5), Retail (2.21), Employees (0.51) and Shareholders (0.96).
  • Retail has the highest oversubscription till now !! This is a new phenomenon. Looks like QIB’s are worried about USA’s debt problems, and a dull Sensex with an Interest Rate increase over last 2 days has affected overall demand.
  • The investment limit for Retail is Rs 2,00,000. If you want to maximise your subscription, bid for 3300 (33X100 lot size) shares at Cut Off for an investment of Rs 1,94,700.
  • Good luck !!

Report on July 25th

L&T Finance Holdings is a high quality NBFC offering. Buy with a 2-3 year investment perspective.

L&T Finance Holdings – Description and Profile

  • This is the first public issue from the house of L&T since the parent’s listing way back in 1950
  • L&T FH is the holding company for the financial services business of the L&T Group. L&T FH has four arms that manage the mutual fund, asset financing, infrastructure financing and working capital funding businesses. This includes firms like L&T Infrastructure Finance, L&T Finance, India Infrastructure Developers, L&T Investment Management and L&T Mutual Fund Trustees.
  • L&T FH plans to mobilize Rs 1,245 crore, for a 14.2% dilution (17% total dilution including pre – IPO placement), valuing the firm at Rs 8,700 – 9900 crores.

L&T – Snapshot

  • L&T is a proxy for infrastructure, machinery and construction in India. The recent aggression and focus on core competence by management in the last decade has yielded results – of excellent growth and profits.
  • Over the last 10 years, L&T share has shown results:

–          Share price increased 48% CAGR

–          EPS has increased 31% CAGR

My conclusion is that L&T has rewarded shareholders over the years,  grown consistently and transparently, and built a good reputation. And this rubs off very positively on L&T FH.

L&T FH Financials

  • At Rs 59 (upper end of the price band), the L&T FH valuations are at 2.2 times the consolidated FY-11 book
  • The capital adequacy of L&T Finance and L&T Infrastructure Finance is 16.5 per cent.
  • Business Assets of L&T F and L&T IF combined are 11,491 crores as of Mar 2010; Assets have grown at 77% CAGR over the last 5 years
  • Combined PAT is 267 crores in Mar 2010; PAT has grown 62% in last 5 years
  • These high growth rates are expected to continue for many years, as Infrastructure spending in India is on the upswing.
  • Another attractive investment in this space is Yes Bank, see the report

IPO Offer:

  • The IPO price band is 51-59 per share; Issue period for Retail is July 27-29, 2011.
  • Investor categories includes – interestingly – Shareholders, in addition to the usual QIB, NII (HNI), Retail and Employees. Shareholders can decide if they wish to bid for shares under shareholder quota or Retail/HNI, as multiple bids may be rejected.
  • The purpose of the IPO is:
  • Retire Rs 345 crore of inter-corporate deposits. The inter-corporate deposit was taken from L&T to support the capital needs of its subsidiaries last fiscal.
  • To support capital adequacy ratio of its subsidiaries. Around Rs 570 crore would go to L&T Finance,and Rs 535 crore would be used for augmenting capital of L&T Infrastructure Finance.
  • P/E at upper end may be around 21 times.  The IPO has been rated – IPO GRADE 5 by the Agencies – CARE and ICRA, indicating superior fundamentals

Opinion, Outlook and Recommendation

  • All the large Capital Goods and Infrastructure firms worldwide have created finance arms/ tie-ups to bundle their product with financing. This provides a good synergy as the product is capital intensive e.g. GE Capital, Airbus and Boeing financial arms, etc.
  • The L&T Finance business will be better valued as an independent company, rather than as a mere subsidiary
  • L&T FH is well diversified as a firm, and is present in the high growth areas of Infrastructure financing and Rural development
  • The prospects for L&T are good over the next decade. L&T FH has strong synergies with the parent firm, and by independent listing, will be able to manage it’s capital needs and growth better
  • Invest with a 2-3 year horizon.
  • Check back on this website for updates

Do you find this report useful? Please comment below. For a detailed note on L&T Finance Holdings IPO with analysis, business charts and IPO risks, subscribe for free to this blog, on the top of the right panel


These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at

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Sparkling Power Finance Corp FPO – May 10-13

Update on late May 12th!

  • PFC FPO got over subscribed 3.6 times on Thursday.
  • While the FII portion was subscribed a healthy 6.9 times, the HNI (0.01 times) and Retail (0.34 times) subscribers are waiting for the last day. This indicates a likely surge tomorrow in the latter two categories.
  • The maximum subscription amount for Retail is Rs 2,00,000. For Retail, if you want to maximise your subscription, bid for 1064 (28X38) shares at Cut Off (could be as low as 183.35) for an investment of Rs 1,95,084
  • Good luck !!

FPO Note – May 10th

Power Finance Corp is a power sector PSU available at attractive valuations. Demand in the sector remains robust. Subscribe to the FPO.

Power Demand:

  • The Indian power generation sector faces huge demand growth. See graph (we are in 11th Plan now)
  • Plan vs Achievement has been as low as 51.5% in the 10th Plan
  • The shortfall of peak power has been 8-12% in the last decade.
  • Over 40% of Indian population still don’t have access to electricity
Power Finance Corp - FPO

Capacity addition – Power

Power Finance Corp  – Description and Profile

  • PFC is a firm that funds and stimulates power generation capacity in India. It is a Navaratna PSU registered as a NBFC with ‘Infrastructure Finance Company’ status.
  • PFC has a market share of about 20% in the Indian power lending industry, across all entities, NBFCs/ Banks, private/ public, and Indian/ MNCs.
  • PFC lends to a number of power generation firms, and is a nodal agency for Ultra Mega Power Projects (UMPPs), and the R-APDRP program (Restructured Accelerated Power Development and Reform Program), and for  other government driven power initiatives
  • It also lends to related sectors like Transmission Projects and Distribution, and runs the DRUM program (Distribution Reforms, Upgrades & Management).

PFC Stock evaluation, performance and returns

  • PFC first got listed in a Jan 2007 IPO, and got oversubscribed by 75 times; and the IPO price was set at Rs 85.
  • Investors in the Jan 2007 IPO of PFC have earned a 22% CAGR return to date
Power Finance Corp - FPO

PFC investor Returns

  • PFC has certainly outperformed the NIFTY since it’s IPO.
Power finance Corp - FPO

PFC has outperformed the Nifty

  • Key financial metrics of PFC are showing a steady uptrend
Power Finance Corp - FPO

PFC – financial snapshot

  • Quarterly profits are showing steady growth (except the last quarter)
Power Finance Corp - FPO

PFC – Income and Profits

Lending to Power sector

  • PFC is a nodal agency to facilitate implementation of Ultra Mega Power Projects; these have a capacity of 4,000 MW. PFC charges consultation fee of Rs 15 crores for accomplishing the legal approvals and consultation for a UMPP, thus acting as a one-stop solution provider.
  • The Ministry of Power, Govt. of India has launched the Restructured Accelerated Power Development and Reform Program (RAPDRP) in July 2008 with focus on establishment of base line data and fixation of accountability, and reduction of AT&C losses through strengthening and up-gradation of transmission and distribution network and adoption of information technology during XI plan.
Power Finance Corp - FPO

PFC – Asset and Borrower profiles

  • On the Assets side, PFC is primarily into Generation; the borrowers are mostly State Government bodies
  • PFC is allowed to raise tax-free retail bonds; this has allowed it access to lower cost capital.
  • PFC’s loan book grew at an annualized rate of 22.8 per cent over the period FY06 – FY11
  • PFC is also analyzing entry into funding for Nuclear Power plants.

FPO Offer:

  • The price band is fixed between Rs 193 – 203 per equity share. The offer will be open from May 10-13.
  • Retail investors are offered a discount of 5 per cent in the issue price
  • The IPO will raise funds of Rs 4400 – 4,700 crores at the lower and upper ends of the price band.
  • The follow-on public offer (FPO) comprises a fresh issue of 17.21 crore equity shares by the company and an offer for sale of 5.73 crore equity shares by the Government of India. Currently Government holds 89%. The FPO would result into equity dilution of 14.99%.
  • The purpose of the IPO is to
  • Help PFC keep capital adequacy ratio at 15% over the next few years – it has fallen to 16% now after the lending operations of this year.
  • Strengthen the Balance sheet
  • At the upper end of FPO pricing, of Rs 203,
  • P/E will be 8.9 times (Industry average is 12.2)
  • P/B will be 1.88 times
  • Dividend rate will be 2.2% – fair returns, and note that dividend payout will continue to increase
  • Note that Retail may be allotted at 5% below 193 – that makes it quite attractive.


  • Power generation project execution: This was the primary risk a few years ago, with delays and technology challenges. But of late with the opening up to the Private sector, the execution capabilities are improving
  • Power generation operations – Electricity payments from SEBs. The State Electricity Boards – SEBs cash losses have risen from Rs 6,500 crores in 2006-07 to Rs 28,400 crores in 2008-09. This may affect the payments to electricity plants, which in turn can affect PFC. However SEBs are undergoing restructuring in the States, and these should emerge stronger over the next few years
  • Power generation operations – Fuel supply linkages
  • Most power generation projects have Coal as fuel. Coal is generally supplied by Coal India Ltd. – which has not been able to meet production targets in recent quarters.
  • There have also been supply chain issues with coal – such as inability of Indian Railways to handle transportation.
  • Coal is also being supplied from Australia. This supply got affected recently due to floods there.
  • The fuel supply risks are being addressed in new projects by long term commitments from suppliers for new power generation projects.
  • While PFC’s gross and net NPAs have remained negligible in the last five years, defaults – it does not make provisions for loans turning bad – and higher credit costs could impact its balance sheet and earnings.

Opinion, Outlook and Recommendation

  •  India is a power deficit country and the current growth path will require continued capacity additions and efficiency improvements for foreseeable future.
  • PFC will see it’s role expanding for facilitating and funding power sector projects
  • PFC is another monopoly PSU and will execute on government objectives, in an assured returns environment.
  • The Indian government continues to offer PSUs at attractive valuations in public offerings
  • PFC can be a Core holding in the Core – Satellite portfolio for investors.
  • The current FPO offer is at 52 week low of market price. The fall in share price by 45% from the Oct 2010 peak has made current valuations attractive. This reduces the risk of the asset at this price.
  • Watch for subscription data till May 12th to get a better idea of allotments – or even better, check back on this website for updates :-)
  • Do you find this report useful? Please comment below. You can also subscribe for my posts by filling the ‘Sign me up’ box on top right of this page.


These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at

Also see:
Performancing Metrics

Future Ventures IPO note – April 2011

Update on April 29th

  • Future Ventures has got a dull response till today. The overall subscription is 1.52 times the offer.
  • QIB section is oversubscribed 0.26 times, HNI is (strangely) 7.8 times and Retail 0.6 times.
  • Poor response may be not just because of poor reviews (see my IPO note below) but also concurrent investments in Muthoot Finance IPO as well as the falling Sensex over the last few days.
  • Good luck with your investments !!

IPO Note – Published on: Apr 23, 2011

Future Group – Promoter

  • Future Ventures is a part of Future Group, which owns companies like Pantaloon Retail India (Big Bazaar, Food Bazaar), Future Value Retail and NBFC Future Capital Holdings, Future Generali Insurance, Futurebazaar India, etc.
  • The core business of the Future Group is Retail, but subsidiaries are present in consumer finance, capital, insurance, leisure and entertainment, consumer brands, retail real estate development and retail media and logistics. The key promoter is the well-known Mr. Kishore Biyani.
  • Two of these group companies are listed entities, Pantaloon Retail India and Future Capital Holdings.
  • These two have not exactly outperformed in the last few years in the market.

Pantaloon Retail – Financial snapshot

A 5-year view of the share price of Pantaloon Retail. (click on graphic to enlarge)

Future Ventures IPO

Chart 1: Pantaloon Retail Share Price

A view of financials of Pantaloon Retail. (click on graphic to enlarge)

Future Ventures IPO

Chart 2: Pantaloon Retail financials

  • While revenues are high/have grown fast, there have not been corresponding EPS growth (due to dilutions), and the P/E still remains very high
  • Current market cap – 6000 crores

Future Capital Holdings

  • Had IPO in Feb 2008
  • The stock has suffered an average 40% fall in share price annually in the last 3 years
Future Ventures IPO

Chart 3: Future Cap Shares

A view of financials of Future Capital. (click on graphic to enlarge)

Future Ventures IPO

Chart 4: Future Cap Financials

  • Sales have not increased steadily; Profits have increased, but P/E still remains very high
  • Current Market cap – 1060 crores

The short profiles of group companies show that while the ‘BigBazaar’ brand is very good, and revenue growth high, the group has not been able to translate it’s ambitious plans into profitable businesses, and benefit shareholders.

Future Ventures – Business Profile

  • Future Ventures is like a holding company, that invest in and operates businesses in ‘consumption-led’ sectors in India, sectors which will grow as the purchasing power of Indian consumers increases, and caters to their changing tastes, lifestyle and spending habits.
  • Future Ventures has so far invested around Rs 450 crore in apparel makers, and Rs 250 crore in processed foods and consumer goods space.
  • The Company has 14 companies in its portfolio, and owns brands in fashion, FMCG, food processing and home products.
Category Company Products/ Market Remarks
Retail distribution 1.   Aadhaar Retailing Limited Rural and semi-urban retail distribution of agricultural and consumer products Majority stake
FMCG 2.   Future Consumer Enterprise Ltd. Brands such as Tasty Treat, Clean Mate, Care Mate, Premium Harvest and Fresh and Pure, being marketed through Big Bazaar and Food Bazaar. Majority stake
FMCG 3.   Future Consumer Products Ltd Brand ―Sach. Majority stake
Fashion 4.   Indus League Clothing Limited Ready-made garments under brands like Indigo Nation, John Miller, Scullers and Urban Yoga Majority stake
Home Products 5.   Indus Tree Crafts Private Limited Domestic retailing and distribution of a wide range of environmentally and socially sustainable products. Majority stake
Fashion 6.   Lee Cooper India Limited A manufacturer and retailer of denims, trousers, jackets, shirts and shoes under the Lee Cooper brand. Majority stake
Fashion 7.   Biba Apparel, Holds 17.3% stake in Biba, which will be upped to 28% soon
Food Processing 8.   Capital Foods A food processing company with brands like Chings Secret, Smith & Jones, Raji, Mama Marie and Kaeng Thai.
Consumer 9.    Amar Chitra Katha Stake to increase to 26% from 13.7% presently
Fashion 10.     AND Designs India Ltd; Global Desi Luxury clothing brands
Fashion 11.     Holii Accessories Private Ltd A joint venture with Hidesign India Private Limited for leather handbags and wallets
Fashion 12.     Celio Future Fashions Ltd A JV with a French brand of men‘s apparel and accessories
Fashion 13.     Turtle Limited Manufacturer, distributor, exporter and retailer of men‘s wear products.
Retail 14.     SSIPL Retail Ltd A retailer of Nike branded products, wholesaler of footwear, sportswear and apparel, and a manufacturer and distributor of footwear.


  • Future Ventures tries to exercise operational control or influence in the business ventures in which it invests
  • They pursue appropriate longer-term value creation strategies, which may include unlocking value in their business ventures through public market or private sales.
  • Future Ventures is also looking to invest in more ‘mature opportunities’ in companies which, it believes, have unrecognized growth potentials or are undervalued or in which it can identify hidden assets or recovery potential.


  • The company had consolidated net worth of Rs 738 crore as of December 31, 2010, with the value of investments pegged at Rs 112 crore.
  • For the nine-month period ended in Dec 2010, it had a total income of Rs 399 crore (primarily through retail sales of merchandise from its subsidiaries) with a net loss of Rs 14.67 crore.
  • Company officials claim that most of the companies that Future Ventures has invested in are breaking even at the EBITDA level and the results will improve going ahead. /This does seem like a tall claim :-).
  • The company is not expensive at around 1.1x post IPO book value (at upper band).
  • Market cap after successful listing would be about Rs 1800 crores

Negatives/ Challenges/ Concerns

  • For many portfolio companies, this is very early in the investment cycle. It is actually Private Equity companies that invest in such early stage, high risk businesses.
  • Most businesses are small and are many years and crores of rupees away from break-even volumes, a national recognized brand and profitability. Even with Pantaloon’s clout in distribution, it will take many years of investment to start making profits.
  • Intellectual Property – royalty payments to be made to Future Group for ‘Future’ trademark.
  • While there is a common ‘consumption‘ theme in the Portfolio companies, there are few synergies among them. Eg. A high-end fashion label from a well-known designer has little rub off on Amar Chitra Katha comics for kids or Chinese food sauces.
  • It’s possible that Pantaloon Retail may soon launch a number of Retail formats, but Future Ventures is a shaky ‘backward integration’ for Pantaloon Retail.
  • Maze of portfolio companies, difficult to value and project financials.


  • The IPO has been priced at Rs 10-11 a share. It is open for subscription from April 25-28 for Institutional investors and till April 29 for Retail.
  • The company will raise Rs 750 crore rupees through its initial public offering of shares, of which Rs 120-150 crore will be invested in existing businesses, while the remaining amount will be used for new acquisitions
  • Besides various privately held group firms of Kishore Biyani, Pantaloon Retail is the largest shareholder of Future Ventures with 18 per cent stake that will fall to 9.5-10 per cent post issue. Promoters’ combined holding will drop down to around 31-32 per cent post IPO while that of  Bennett Coleman & Co Ltd (Times of India Group) will see its 12 per cent stake drop to around 6.5 per cent, according to industry estimates.
  • This is the second attempt by the company to raise money via an IPO. It had earlier filed for an IPO just when the financial crisis began, then cancelled it.

Investment Advice

  • Avoid the issue for the following reasons:
  1. This is an investment vehicle in a clutch of firms that need heavy investments to grow in terms of brand and scale of business
  2. There is a bad record of profitability in the current business
  3. Poor track record of the promoter, of shareholder value creation in previously listed firms.
  • Watch subscription figures of IPO till April 28 to set expectations
  • Check back on the website for updates.
  • Do you find this site useful? Please comment below. You can also subscribe for my posts by filling the ‘Sign me up’ box on top right of this page.


These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at

Also see:

Performancing Metrics

This is a good time to add Small Caps

This may be a very good time to add Small Cap stocks to your portfolio.

Let me substantiate the logic and reasoning for this.

If we list out equity-oriented investments in order of Safer to Riskier (and generally Lower to Higher return), they are:

  1. Sensex/ Nifty / ETFs /Large cap Mutual Funds
  2. Mid Cap and Mid cap oriented MFs
  3. Small Cap and Small Cap MFs

Taking this further, there is a pattern to valuations of Large, Mid and Small caps.

  1. Generally, Large Caps will have higher valuations than Mid Caps, whose valuation again is higher than Small Caps. This is because Large Caps are stable, have higher liquidity, and fall lesser in bad times. Large investors (FIIs/ DIIs) prefer this safer characteristic. However, Large Caps also rise lesser in good times.
  2. In bullish times, the Large Caps tend to rise to higher valuations first. Once this happens, the Institutional investors stop investing in them, and the action moves to mid and  small caps.
  3. Typically Mid and Small caps ‘catch up’ with large caps with a time lag.

This can be observed in the graph below, which captures NIFTY and NIFTY MIDCAP valuations over a 6 year period. (The period of 2005 to 2007 seems to be an exception as Midcap PE is higher than Large Cap PE).

Indices patternTable 1 – NIFTY and NIFTY MIDCAP

  • Further, this cycle has repeated in the last 6 months, where the Sensex/ Nifty fell about 15%, but small and mid caps fell further.
  • Now the cycle is reversing. I expect that as the larger indices recover their levels, the beaten down mid and small caps will rapidly recover.

In particular, there are some solid stocks in these categories, available at low valuations

Hanung Toys and Textiles

  • Export oriented Manufacturer of Toys and Textiles
  • Excellent client roster
  • EPS growth has been 57% CAGR, but recent fall has resulted in P/E of 4.0
  • See price Trend chart

Hanung Toys and TextilesTable 2: Hanung Toys and Textiles

Mundra Port and SEZ

  • Largest private port in India. Recently crossed 50MT of cargo handling
  • Significant business from Coal, Petroleum and passenger cars.
  • SEZ includes 14000 + acres land, under development, for an extended port complex industrial area. This will fuel future port operations growth
  • Growth data: Revenues 28% pa; Cash from Operations 51% pa; EPS 48% pa
  • Debt equity is at 0.91, reducing every year
  • Share recently crossed its 200 DMA, at 150 levels. Positive for investors
  • See Price Trend Chart

Mundra Port and SEZTable 3: Mundra Port and SEZ

IRB Infrastructure

  • Largest domestic Roads and Highways portfolio – as a builder and operator
  • Is experienced in this since 12+ years. Operates 9.3% of Golden Quadrilateral
  • Has over 8000 crores of orders on hand. Debt equity is 1.59, not high for an infra focused firm. Good cash flow from Road Tolls.
  • See price Trend chart

IRB InfrastructureTable 4: IRB Infrastructure

KEC International

  • A top player in the Power Transmission Engineering Procurement Construction (EPC) space in India. Also executes in 20 other countries.
  • Of late, has extended offerings to Cables, Railways, Telecom, etc in related spaces.
  • Order book of 8000 crores ties up 18-24 months of revenues visibility
  • Recently acquired a US based firm. Debt equity is at 1.6, but has good cash flow from operations
  • See Price Trend chart

KEC InternationalTable 5: KEC International

Yes Bank – see report (click on link)

Binani Industries

  • Holding company (with 95%) of Binani Cements, which is getting delisted.
  • Binani Cement is a 1800 crore turnover (2010) cement firm with a market Cap of 1650 crores.
  • It has over 8 MT cement capacity, with ongoing expansion to 15 MT in  3 years. Excellent growth and profit prospects. DE is 1.46 times, and falling
  • Binani Industries itself is other than cement, into Zinc, Glass Fiber, composites, etc. Market cap currently of this firm is Rs 620 crores.
  • Once the demerger of Binani Cement into Binani Industries is complete, the latter’s valuation should reflect the cement business, and the market price should appreciate considerably.
  • No Price Trend here, but I believe the stock is seriously underpriced

Diamond Power Infrastructure

  • The company is an 848 crores turnover firm (2010 revenues).
  • In the business of: manufacture of Power Transmission equipment (cables, conductors, wires and distribution transformers) and turnkey services provider (EPC).
  • As an EPC player, has the advantage of in house manufacture of high proportion of equipments
  • Has seen growth of 86% pa of revenues, and 65% pa of profits over the last 4 years. This may may slow going forward, but even so this is a very attractive growth phase for the firm.
  • Recent equity dilution has allowed capital infusion, so DE ratio has dropped to 0.7, and cash is available for funding growth plans.
  • See Price Trend chart

diamond power infrastructureTable 6: Diamond Power Infrastructure

BGR Energy

  • An EPC and power plant services company that specialized in balance of Plant (BOP) services, for Power, Oil and Gas industries.
  • It has strengthened it’s portfolio with recent JVs and strategic alliances
  • At 3000 crores of 2010 revenues, it is not really a small company
  • Over the last 4 years, it has seen growth of 58% in revenues and 72% in profits
  • The recent bad media reports on BGR energy were overplayed, and this is an opportunity for investors to enter into the stock
  • See Price Trend chart

bgr energy systemsTable 7: BGR Energy Systems


  • Investors must note that small caps in general display high volatility compared to the overall market.
  • High growth rates of small firms typically slow down as they become  mid-sized
  • Economic slow down can affect such stocks more seriously than large caps
  • Investors are advised to establish targets and exit criteria for investments in Small Caps


These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at

Also see:
Performancing Metrics
Performancing Metrics

P&S Bank IPO – Post review on 20th Dec

  • Punjab & Sind Bank IPO closed on Dec 16th with amazing strength – overall over-subscription 51 times with QIB 50 times, HNI 86 times and Retail 44 times !!
  • It exceeded all my expectations – looks like everyone has bet on the winning horse :-)
  • It will be a bit of a lottery if you get any shares. Also with minimum lot size at 50, retail cannot expect any more than this.
  • If they stick to the usual processing times, allotment may be around 26th and listing around 30th.
  • I feel the listing pop thereafter could beat CIL and MOIL as in banking stocks we are in familiar territory. Barring market abnormalities, it could be 60-80%.
  • Good luck with your investments !!

Also see IPO note – click link

SCI FPO analysis – closing 3rd Dec

Key points

Business aspects

  • SCI commands 35% of the Indian flagged tonnage, which again is about 10-11% of India’s ports based import export. Foreign carriers dominate, but this may change soon.
  • Exports and imports are growing by 21.4 per cent and 23.2 per cent this year, which are largely executed through shipping. This indicates a robust demand. Coal & crude imports are expected to accelerate.
  • Key indicators of pricing are Baltic Dry Index and the Baltic Tanker Indices. These peaked in early 2008, fell to lows in 2009, are stabilizing in 2010, and are expected to recover in 2011 along with rebound in global economies and trade.
  • SCI profits also have shown a recovery trend in 2010.
  • SCI is seeing the need to invest in new assets to – replace an ageing fleet and – meet growing demand. This FPO will be followed by large order placements, both deploying FPO funds, cash from operations and raising debt.

Unique strengths of SCI:

  • A diversified fleet (bulk carriers, crude/oil products tankers, container vessels, etc.) that caters to all types of cargo for domestic and international markets
  • Relationships with PSUs like Coal India and SAIL – bhaichara – that can grow a lot
  • Cash on hand is Rs 49 per share (post FPO). This is a good statistic. It means you are paying only Rs 84 per share for the running business of SCI.

Pricing and key ratios

  • At today’s CMP, SCI is close to it’s 52 week low. Peak this year was Rs 192, on Oct 2. A fall of 30% in one month, perhaps on news of FPO pricing. Also dilution of equity in this issue by 10% only explains part of this fall.
  • SCI FPO pricing at Rs. 133 (for Retail with upper end of Rs 140 less 5%) is P/E of 8.5 times, which is favourable compared to current Industry P/E of 16.71 (all are ttm figures)
  • Dividend yield at 3.4% of CMP is attractive.
  • FPO offer is at P/B of 0.9 – which is attractive.
  • CMP today (2nd Dec) is 146.8, so FPO (at 133) is at a discount of 10.3%
  • Current D/E ratio of 0.43 is comfortable and will fall further post FPO. Then gain due to the expected investments in assets.

Conclusion and FPO investment expectations

  • The issue is attractive, and the CMP has dipped over the last month on FPO pricing considerations.
  • My feel is the stock should retrace to 165 range post FPO (25% up from 133), then move thereafter based on business performance and overall Sensex directions . (Which both look positive)
  • Overall it is a liquid, steady PSU stock with a good brand name. Good long term holding stock.

Subscription details and allotment possibilities

  • Subscription position as of 02 December 2010: QIB – closed at 4.2 times over subscribed; HNI at 0.28 times and Retail at 0.56 times – closing on Dec 2rd.  Looks like post CIL IPO, HNI has shifted to Retail .. :-)
  • My feel is given some Retail interest in MOIL (this being an overlap period – why cant these guys schedule their offerings better) the Retail should be in 2 – 3 times subscription range tomorrow.
  • This should give allotment of max Rs 80,000 worth shares on subscription of 2L.
  • To get firm allotment, invest in 1400 shares at cut off (140) for total investment Rs 196000.

(2nd Dec 2010)

Also see a post closure report – click link