BUILDING INDIA – Larsen & Toubro

If you want to reap benefits of India Growth Story, buy L&T stocks at every decline or whenever you have money to invest.

L&T is a front runner company in India Growth story & it will help you grow your money manifolds.

Why is this so? Read….

In 1938, the two friends (School Mates), Henning Holck-Larsen & Soren Kristian Toubro decided to forgo the comforts of working in Europe, and started their own operation in India. All they had was a dream. And the courage to dare. In December 1950, L&T became a Public Company with a paid-up capital of Rs.2 million. The sales turnover in that year was Rs.10.9 million.

L&T is a giant Indian multinational conglomerate having various divisions such as –

Engineering, Procurement & Construction (EPC) – Hydrocarbon, Power, Water, Cement, Engineering Services & Railway Projects.
Heavy Engineering - Refinery, Oil & Gas, Petrochem, Fertilisers, Coal Gasification, Aerospace, Ship Building, Thermal & Nuclear Power Plants, Defence.
Engineering Construction & Contracts
Electrical & Electronic – Electrical & metering systems, Medical equipments & systems etc
Machinery & Industrial products
IT & Engineering Services
Financial Services

No. of shares – 58,54,15,491
Face Value - 2.00
EPS (TTM) – Rs. 59.48
P/E - 25.68
Book Value – Rs. 162.80
Price/Book - 9.38
Book value of unquoted investments – Rs. 6,643 Cr
Market value of quoted investments – Rs. 1,404 Cr
Bonuses – 1:1 (Sep-06 & Oct-08)

Despite severe economic slowdown, Total income rose 24% to Rs 10835.79 crore in Q4 March 2009 over Q4 March 2008 & Net profit grew to Rs. 998 Cr (from Rs. 966 Cr).

For FY 08-09. Sales grew by almost 36% to Rs. 34,666 Cr (from Rs. 24,854 Cr) & Net Profit jumped by 60% to Rs. 3,481 Cr (from Rs. 2,173 Cr.). Company has rewarded its shareholders with dividend of Rs. 10.50 per share for FY 08-09.

At current price of Rs. 1611, its quoting around PE of 26 which looks somewhat expensive, its market cap is around Rs. 93, 666 Cr.

L&T's order intake rose 23% to Rs 51621 crore in the year ended March 2009 (FY 2009). The order book stood at Rs 70319 crore as on 31 March 2009, which is twice its revenue of Rs 34045 crore in FY 2009, giving a strong revenue visibility.

The company’s market value in listed companies is around Rs. 1400 Cr & if you look at the book value of unquoted investments, it is around Rs. 6650 Cr. The concern was about its investment in Satyam, which they have at an average price of Rs. 80. However now the picture is clear for Satyam, and it might give good returns to the company.

So looking at all the factors, L&T looks to be a promising growth story. The strong management has capacity to deliver the projects in time & with high efficiency.

Recent Developments:
The new foreign direct investment (FDI) norms will be shortly tested for the first time by the defence sector. Larsen & Toubro and global giant EADS will shortly be approaching the Foreign Investment Promotion Board (FIPB) for setting up a joint venture. This joint venture will be in the business of defence R&D and defence engineering & equipment manufacturing, the ownership and control will remain with L&T.

L&T on Thursday sold 14.3 million UltraTech shares, representing 11.49 per cent stake, at an average price of Rs 725 each for Rs 1,037 crore.

Larsen & Toubro has signed an MoU with Canada's AECL for ACR 1,000 reactors.

Power equipment major Larsen & Toubro has entered into a partnership with US nuclear power equipment manufacturer, Westinghouse. This will give L&T access to technology necessary to build these light water reactors. The company is targeting Rs 3,000 crore as revenue from this business.

India - Gold Rich Country - El dorado

India remains the largest consumer of gold in the world with demand running at about 800 tons (worht $6-7 billion) a year or approximately a quarter of the total world gold demand. In July 2007, the council of ministers of the Indian government approved a global tender process toevaluate the assets of state-owned Bharat Gold Mines (BGML) in order to estimate its fair price andrevive mining activities in its 125-year old gold mines. The gold reserves in the BGML projects are estimated to last about 50 years.

Even though India has a geology and metallogeny very similar to Western Australia and Africa and India’s pre-cambrain auriferous greenstone belts are geologically comparable with those of Western Australia and Southern African gold bearing greenstone belts, the country’s share in Gold production is minuscule compared to countries like Australia and Africa. With very few private players, there is a Huge Unexplored potential.

India produces only about 3 tons of gold a year from gold ore and about 6 tons a year as a by product of copper mining. In comparison, Australia produces about 280 tons of gold a year, from 116 mines.

The Indian geological literature refers to hundreds of localities with known gold mineralization, often marked by old gold workings, or where local inhabitants pan for gold. India is estimated to have 20,000 tonnes of gold and diamond reserves spread over several states. These localities mostly occur in the Southern Indian Dharwar Craton in Karnataka, Andhra Pradesh, Tamil Nadu, and in the Proterozoic provinces of Uttar Pradesh, Madhya Pradesh, Maharashtra and Bihar.

Hutti Greenstone Belt is a Host to a world class gold deposit

Gold is being mined by The Hutti Gold Mines Ltd (HGML), a Government of Karnataka undertaking, near Hutti village in northern Karnataka. The mine is developed on a classic Archaean lode gold deposit, similar to those in Australia, Canada and South Africa.

Gold mining activity in the belt has been known since pre-Ashokan time, about 3000 years ago. Modern gold mining commenced in the Hutti area around 1947.

The Hutti Mine has so far produced about 2 million ounces while remaining ore reserves (proven and probable) are believed to be 6,400,000 tonnes of ore grading 6.48g/t upto 750 metres depth (i.e. 1.33 million ounces). The average recovered grade from modern operations is approximately 6.8 g/t..

Hutti Mine North prospect block is located immediately north of the currently operating Hutti Gold Mine. Eight parallel gold bearing quartz-sulphide veins known as Reefs or lodes are known to exist in the currently operating Hutti Mines.

Hirenaganur prospect is a structurally controlled mineralization. Therefore, the continuity of gold bearing structures is expected up to several hundred metres.

The Uti Mine is owned and operated, as an open pit mine, by the Hutti Gold Mines Ltd.

Chinchergi prospect located some 15 km east of Hutti Gold Mine is an area of extensive ancient mining.

Bullapur Prospect is one of the recently discovered prospects in the Hutti belt located outside of the GSI-explored area of ancient gold workings.

Yatkal Prospect is situated along the southern margin of the North Huttti R.P. Block and gold is found in the granites intruding the Hutti volcanic belt.

Ancient gold workings dating back to Ashokan time dot a 20 km long tract in the South Hutti belt which is marked by a major N-S trending shear zone designated as the "Central Shear Zone (CSZ)".

Maski Prospect has all the signs of an important gold field. Thirteen old workings were reported in this prospect in the early 1900s by the Hyderabad Geological Survey.

The Indian government is taking all initiatives to channelise efforts in unearthing high value minerals like gold and diamonds. India imports Rs 65000 crore worth gold per annum as against Rs 75000 crore of diamond imports.

The government has also accorded the public sector company Hindustan Copper Ltd to diversify into gold and diamond mining in collaboration with leading foreign companies through setting up of joint ventures. Even private company Deccan Gold Mines Limited has interests in the activities of Gold exploration & production. It has acquired around 27 Reconnaissance Permits in the Southern regions through its other group companies.

The overseas firms that are in talks with the government for gold and mining exploration include Indogold, Anglo-American Gold Mining, Monarach Gold Mining, De Beers India Ltd, ACC Rio Tinto Exploration Ltd and BHP Minerals.

Alchemist Realty - Hidden Gem Story

No. of Equity shares – 7,41,01,000;
Face Value - Rs. 2.00
Market Cap – Rs. 140.79 Crore
EPS - 0.15
Book Value – Rs. 17
52 Week High – Rs. 104
52 Week Low – Rs. 11
Bonus – 1:1 Feb-08
Promoter Holding – 42.30%
More than 1% holding – 54.17 13 entities
No. of shareholders – 506
Reserves – Rs. 10 Cr
Total Debt/Equity - 3

Alchemist Realty Ltd is a subsidiary of Rs 7,000-crore Alchemist group based out of Chandigarh , has interests in real estate, food processing, healthcare, pharma and aviation.

Recently, CLSA (Mauritius) has bought 700,000 shares at Rs 18.70 a share and Sunil Talwar sold 675,315 shares at Rs 18.70 a share of Alchemist Realty.

On July 04, 2008, board has approved the allotment of 38,00,000 Equity Preferential Convertible Warrants to the Promoter M/s. KDS Corporation Pvt Ltd at a premium of Rs. 115 for the face value of Rs. 2, consequent upon receipt of 10% upfront amount in advance.

Future Prospects:
The company claims to have land bank of 10,600 Acres. It has plans to invest over Rs 5,000 crore in the next 7-10 years for its development. The company plans to develop integrated townships, resorts, chain of hospitals, hotels and restaurants and health spa on its land bank.

They are planning to spend Rs 1,000 crore for setting up a chain of hospitals and intend to set up at least 20 hospitals in the country. Also they are looking at inorganic expansion, besides the Greenfield project. In Punjab alone, the group is planning to have 2-3 hospitals in near future. The company also plans to set up research centre and educational institutes.
Currently the company has one hospital in Panchkula (Haryana). Further, it has appointed Dr P Venugopal, former director, All India Institute of Medical Sciences (AIIMS), New Delhi, as chairman-medical division of Alchemist Group.

Company plans to open 20 restaurants in two years in northern states under the brand “Red Cap’. Excluding land and lease amount, company has earmarked an investment of about Rs 15 Crores for setting up the outlets. The eating joints would operate under franchisees as well as stand-alone basis. The size of the outlets would vary from 3,200 sq ft to 6,500 sq ft. The group will open 100 restaurants under these brands in Indian cities and overseas markets like Geneva, Dubai, Los Angeles, New York and Chicago. As a part of its debut in food & beverage (F&B) retail, company is also setting up 1,000 quick service restaurants (QSRs)-Republic of Chicken (ROC)-across the country at an investment of Rs 800 crore. The group claims to be a quality supplier of safe poultry products and wants to carry the same marketing plank for ROC launch.

The Company plans to develop over 1,000 high-end housing units by 2010 and would also construct luxury villas on 9 acres of land in Shimla and an IT park at Chandigarh.

Concerns:
Economic slowdown could reduce the pace of implementation of plans. All these plans are highly capital intensive so one should watch out how the company raises funds, if major portion comes through debt, then the company will have to bear high interest cost. The deliverability of projects is also crucial, in that, whether the projects will be transferred to this single company.

However, Indian economy is showing signs of bottoming out, and the major event, Commonwealth Games is held in India in 2010 due to which the industry will be will be benefited & could be re-rated. This could prove advantageous for the company.

For FY08-09, Sales has grown to Rs. 102 Cr (Rs. 83 Cr) but net profit has declined to Rs. 1.02 Cr (Rs. 4.54 Cr).

So, if company is able to deliver its projects in time and as per planning, from the current price of Rs. 19 or so, we can see great upside in the longer term.

Tech Mahindra to be benefitted from Satyam acquisition

Tech Mahindra will benefit from the acquisition of Satyam Computers. The reason is that, earlier Tech Mahindra was highly dependent upon British Telecom for its business. Now, after the acquisition, TM will get a chance to enter BFSI segment by acquiring Satyam's clients, giving brighter outlook to it's business.

Also, for FY 08 - 09, TM's EPS was Rs. 81. Satyam's EPS for FY 10 is estimated to be Rs. 4. So even if we do conservative calculation, TM's EPS for FY 10 can come to around Rs. 85 or so.

Till now, TM was considered Midcap IT stock & has got PE of around 6-7. However, now TM has joined top 5 club, becoming large cap IT company, it's PE could expand to around 20 as that of Infosys, TCS etc.

At current price of Rs. 722, it is trading at a forward PE of 8.5.

So given all these factors, one can buy TM on dips for the period of 2-3 years for excellent returns.

Sesa Goa - Good EPS Accretive Acquisition

We have seen good upmove in Sesa Goa Ltd. last few days & it has closed above Rs. 200 making a year high which shows outperformance compared to main indices.

Sesa Goa Ltd. has acquired, Goa’s largest industrial group, Dempo’s mining assets in Goa for nearly USD 350 million in cash through internal accruals. Dempo has nearly 65-75 million tonnes of minable iron ore reserves in Goa spread over 1,800 hectares and 19 mining leases licenses there.

Sesa Goa will benefit from this transaction because it has reserves of nearly 240 million tonnes that will increase by nearly 65-75 million tonnes which is 30% accretion to its reserves. Hence, this deal is EPS accretive and could expand by about Rs 2-3 in FY10 itself from Rs 15 now to Rs. 18.

In addition, Dempo also has long-term contracts with Nippon Steel for over 1 million tonne and Sesa Goa intends to continue this relationship with them.

Sesa Goa for this acquisition has paid about four times its EV/EBIDTA on an FY09 basis. . The enterprise value per tonne for the acquisition is USD 5. The cost of production for Dempo assets is about USD 20 per tonne. So, this is higher than Sesa Goa’s cost of production. The company sees huge scope of cost reduction over there. The average realization for Dempo is about USD 45 per tonne.

Equities - Great wealth creator

Investment in equities can create an immense wealth you would never have imagined. It can help create mammoth assets you would never have dreamt of. If you don’t believe, refer the below given data.

And think, had you invested Rs. 10000, 10 years back, how much that investment would have grown to? And if you don’t invest today, what would you lose after 10 years.

Below is the list of 12 stocks over the past 10 years showing -

Price in Jun-1999; Price in Jun-2009; % Gain; Life High - in that sequence (Prices are in Indian Rs.)

NMDC Ltd. - 0.83 (Nov 01); 417; 50141%; 537

Unitech Ltd - 0.3; 93; 30900%; 544

Kotak Mahindra Bank Ltd - 3.1; 660; 21200%; 1436

Matrix Laboratories Ltd - 0.9; 209; 23128%; 312

Gujarat NRE Coke Ltd. - 0.2; 54; 26975%; 119

Mercator Lines Ltd - 0.4; 73; 20206%; 184

Praj Industries Ltd - 0.6; 115; 18225%; 273

Anant Raj Inds. Ltd. - 0.8; 133; 17009%; 394

Aban Offshore Ltd - 6.0; 956; 15833%; 5393

K S Oils Ltd. - 0.5; 62; 12220%; 142

Era Infra Engg. Ltd. - 1.01; 119; 11682%; 191

Sesa Goa Ltd. - 2.30; 156; 6683%; 219

The List of companies that have given phenomenal returns to the investors is very long - FT, BHEL, L&T, Siemens, ABB, Phoenix mills, Reliance Ind., Indiabulls, Adani Enterprise & many more.
And It's unstoppable. There are many such stories evolving every day which can help you achieve unimaginable wealth through equity investments.

The values given here are calculated after adjusting splits / bonuses / rights issue (if any) or any such move that has caused price adjustment announced by the companies. The values are rounded off. We do not guarantee you of such huge returns from your investments.

High Beta stocks - Flavour of Bull market

It has been found that high Beta stocks do much better than main indices during the bull run. High beta stocks means the stocks showing greater volatility vis-a-vis main indices. i. e. they rise more (in % terms) than that of main indices & fall faster than main indices. I. e. Stocks showing greater momentum compared to main indices (in its direction), are called High Beta stocks. So High Beta stocks give more returns in the bull market. However, in bear market, they tend to fall with a greater degree than main indices.
On the contrary, Low Beta stocks, underperform the main indices in the bull market & show resilience in bear market.

So now we can infer that High Beta stocks are better bet than Low Beta stocks when the markets are rising. And its reverse when the markets are falling.