Birla Corp - Dark Horse

Equity Share Capital - 77 Cr
No. of equity shares – 7,70,05,347
Promoter holding – 62.90%
Institutions – 27.85%
General Public – 9.03%

Market Cap – Rs.2309 Cr
Book Value – Rs.166
Free Reserves per share – Rs.155
Reserves – Rs.1202 Cr
EPS (Rs) – Rs.42.01

52 week high/low – Rs.330/Rs.73.05
CMP – Rs.299

Birla Corporation Ltd (BCL), a part of M P Birla Group Company having an installed capacity of 5.8MNTPA of cement which is witnessing strong demand from the Northern and Western region. Birla Corp has 4 plants across India located in Madhya Pradesh, Rajasthan, West Bengal & Maharshtra.

Capacity Expansion:
Birla Corp has recently enhanced its clinker capacity in Rajasthan and Madhya Pradesh taking up the total capacity to 7.5MNTPA. Birla Corp has also lined up a capex of Rs.8 bn to be completed in next 2 years to build 1.2 MNTPA brown-field plant at Chanderia, Rajasthan along with 30 MW captive thermal power plants. The funding for the said capex is to be met through internal accruals and debt.

Revenue Growth led by both Price & Volume expansion:
Birla Corp has been witnessing more than 90% capacity utilization on the back of buoyant demand from ongoing construction activity for Commonwealth Games 2010 in the Northern region.

In Q1FY10 its top line jumped by 24% on Y-o-Y basis led by both higher realization along with volume growth. I expect the surge in the Infrastructure & real estate activity, which would further boost the revenue growth in the coming period in the run-up to Commonwealth games. Due to this, it is estimated that the EPS will grow from Rs.42 for FY09 to Rs.62 for FY10 which is almost 50% hike. The price could move in tandem with this EPS as well.

Huge Hidden Margin of Safety in Liquid Investments:
Birla Corp carries Rs.770 Cr (comes to around Rs.100/ per share) in its books in the form of Cash & Cash equivalent. Birla Corp has an investment portfolio valued at Rs.820 Cr of which nearly Rs.450 Cr are parked in Liquid MF investments & Bank deposits of Rs.320 Cr were as debt stands at just Rs.270Cr.
Further, as per consensus estimates, Birla Corp is estimated to record PAT of Rs.4780 Cr in FY10E earnings, translating into Rs.62/ per share. Thus, net cash to the tune of Rs.162 / per share provides huge margin of safety to the tune of 50% of Market Price.

Valuation:
At the CMP of Rs.300, Birla Corp is trading with an EPS of Rs.62 and Rs.57 with PE Multiple of 4.8x and 5.2x on FY10E and FY11E earnings consensus respectively.
On a Valuation methodology of EV / EBIDTA, Birla Corp is fairly undervalued at 5x and 3x on FY10E and FY11E earnings respectively.
On EV/Ton basis, Birla Corp is trading at US $ 45/ ton which is significantly lower than replacement cost of US $ 100 / ton.

Financials Snapshot:
For Q2FY09-10, its sales is Rs.560.67 Cr (433.81 Cr yoy) & Net profit of Rs.152.05 Cr (Rs.59.7Cr), giving an EPS of Rs.19.74.

FY10E:
Net Sales - Rs20,10Cr (+12.25% 0ver FY09)
EBIDTA - Rs5,82.9Cr (+29.0% over FY09)
PAT – Rs478.3Cr (+23.8% over FY09)
EPS – Rs.62.1; PE(x) - 4.83
EV/EBITDA(x) - 3.8
ROCE(%) - 28.2
ROE(%) - 32.4

FY11E:
Net Sales - Rs20,75Cr (+3.23% over FY10)
EBIDTA - Rs5,60Cr (+27%)
PAT – Rs442Cr (+21.3%)
EPS – Rs57.4; PE(x) - 5.23
EV/EBITDA(x) - 4.2
ROCE(%) - 21.5
ROE(%) - 22.7

The industry P/E is around 11, whereas Birla Corp is available at P/E of 4.83 for FY10E earnings. So at the P/E of 11, its market price should be around Rs.680. However, on the conservative basis, we can have a target of around Rs.490 with P/E of 8. Looking at the strong pedigree of promoters (Birlas) & the cash of Rs.162 / per share on its books makes it potential multi-bagger for the medium to long term. Hence, I recommend a “BUY” with a medium-long term view.

IIP Data for Sep-09

India's key infrastructure industries rose by 4%in September on the back of improved performance of coal, electricity and cement sectors.
The six infrastructure industries, which account for a quarter of the nation's industrial production, had grown at the same rate a year ago, according to the data released by the government today.

While coal, electricity and cement sectors showed impressive growth, crude oil output continued to be a dampener falling for the ninth time in past 10 months.
Crude oil production at 2.77 million tonnes was down 0.5% in September, refineries produced 3.4% more fuel at 12.59 million tonnes.
Electricity generation soared 7.5% and coal and cement production were up 6.5% each, while finished steel was down 0.4%.
The index for the six key industries rose to 246.7 in September from 237.2 a year earlier, the data said.

During April-September period, the six infrastructure sectors rose 5%, better than 3.4%in the year ago period.
Crude oil and refinery production logged negative growths at 1.2 and 3.6%, respectively, Coal output was up 11.6%and cement soared by 12.3%. Electricity generation was up 6.8%.

High Oil Prices

Crude oil prices have more than doubled from $32 per barrel (their 52-week low levels) to almost $80 per barrel.

• If the price of crude oil continues to increase and if the government decides to pass on the additional cost to consumers, it is expected to lead to an increase in inflation at a much faster pace compared to the anticipated level of 6% by March 2010.
• If the price increase is not passed on and the government bears the hike in the price of crude oil, then the fiscal deficit situation is expected to worsen further from the budgeted 6.8%. If the fiscal deficit figure, which is closely monitored by investors, rises beyond an extent then it can negatively impact the broader markets.

This could reduce the pace of growth of Indian economy. The silverlining will be high government spending & domestic demand.This can impact on the margins of companies in various sectors.

The worst hit would be companies that rely on petro products either as feedstock or for meeting their energy needs. The list includes companies in sectors as diverse as tyres, cement, fertilisers & chemicals, synthetic textile etc.

• Some of the leading firms that will be affected in the tyre industry include Apollo Tyres, MRF, Ceat and JK Tyre, among others.
• Among fertiliser companies, Chambal Fertilisers, Zuari, RCF and Nagarjuna Fertilisers will take the maximum hit.
• In the textile sector, the impact would be felt by companies like Century Enka, Vardhman Textile, Garware Wall-ropes and RSWM, among others.
• With its fortunes directly linked to international prices of aviation turbine fuel (ATF), stocks of Deccan Aviation, Jet Airways and Spice Jet could be another casualty of rising oil prices.

But some sectors & companies will benefit from high oil prices.

• The companies involved in productions of oil like ONGC, Reliance Industries and Cairn India, OIL will be benefitted.
• Some other sectors that would be positively impacted because of high crude prices are offshore services providers Great Offshore, Aban Offshore, Garware Offshore and ancillaries like Selan Exploration and Shiv Vani Oil.
• Shipping companies Varun Shipping, Shipping Corporation of India, GE Shipping and Essar Shipping, which carry crude, are also likely to benefit as demand will be higher.

Mahindra-Satyam Merger News

The Mahindra group, the new owner of Satyam Computers and the largest shareholder in Tech Mahindra, is set to merge the two companies after June 2010. This will transform the combined entity into an Indian Information and Communication technology powerhouse.

The merger of Satyam and Tech Mahindra can happen after Satyam’s accounts are re-stated. The Company Law Board (CLB) has given time till June 30 2010 to complete the restatement of accounts. Global audit firm KPMG is re-stating Satyam’s past accounts to reflect the true financial health of the firm. Both companies have a lot of synergy and the combined entity will fuel business growth.

As per the estimates, together, both entities could have revenues of around $2.2 billion i.e. around Rs.10,500 Cr which is more than double the FY09 revenues of Techmahindra, Rs.4357 Cr. This will push up the Techmahindra’s share price from current levels of Rs.940 or so. I would recommend accumulating the stock. Also read Tech Mahindra to be benefitted from Satyam acquisition & other postings.

Mahindra Satyam’s operating margins are on the rise as cost-cutting measures are starting to bear fruit. They have cut costs by rationalizing workforce and saving on-lease rentals on commercial space.

Satyam Computers was ranked the country’s fourth-largest IT exporter before the scam broke out and TechM is the country’s sixth-largest IT exporter. With most of their services being in complimentary areas, While TechM is focused on offering services to the telecom industry and Mahindra Satyam has broad capabilities across a number of industries, including financial services and manufacturing. Thus, Tech Mahindra will benefit from the merger as the single dimensional telecom company will be able to expand its client base. Once Tech Mahindra has access to Satyam’s clients, the companies can provide a range of services in various verticals.

Under the Mahindra umbrella, regaining lost clients will not be a mammoth task. Satyam’s revenue could be around $1.2 billion, going forward. Also Satyam was in advanced stages of talks with the UK mobile payments services provider Upaid for a settlement. The overall market signals for the IT services sector is positive now and the company is seeing more traction in the BPO segment.

RBI Monetary Policy:

RBI Monetary Policy:
RBI has kept key rates like repo or reverse repo unchanged. Repo and reverse repo are rates at which the RBI lends to banks and vice versa.

It has hiked the statutory liquidity ratio (SLR) to 25% from 24%.
SLR is the minimum amount of cash, gold or bonds banks need to maintain with themselves. By hiking the SLR, the RBI may be signalling its leaning towards tightening the accommodative monetary policy.

The cash reserve ratio (CRR) is kept unchanged. CRR is the minimum amount banks need to park with the RBI, was also left unchanged.

Banking sector would not be affected directly.

Inflation target upped:
While the excess liquidity in the system may have succeeded in turning the economy back on the recovery track, it could be met with its first after-effect in the form of rising inflation soon. In fact, in the mid-term review, the RBI increased its March-end wholesale price index (WPI) inflation estimate to 6.5% with an upward bias, revised from its earlier target of 5%.
The estimate for FY10 gross domestic product (GDP) growth was left unchanged at 6.0% with an upward bias.
Also, the central bank cut its FY10 credit growth target to 18% from 20% that it had set in the July monetary policy review.

Realty loans tougher:
RBI has increased the provisioning requirement for advances to the commercial real estate sector classified as ‘standard assets’ from the present level of 0.40% to 1%, a move that makes lending to the sector tougher.

The RBI upping the provision for lending to real estate will affect affordable housing, realty projects, HDIL said. “We will have to up prices to nullify the RBI hike”.
Realty sector might see correction.

RBI view:
“There has been a discernible improvement in the global economic outlook since the First Quarter Review in July 2009,” RBI Governor Duvvuri Subbarao said, in his review statement. “In India too, there are definitive indications of the economy reverting to the growth track. Accordingly, attention around the world, as also in India, has shifted from managing the crisis to managing the recovery.”
Subbarao admitted that India faced a unique dilemma that developed nations did not face — that of inflation: “First, most of these countries do not face an immediate risk of inflation. Indeed, in several advanced economies, the concerns were about a possible deflation, which are just about waning. On the other hand, India is actively confronted with an upturn in inflation.”

He added that around the world, timing an exit from the stimulus packages was a central issue in our policy matrix. As the RBI has indicated in several public statements, our current monetary stance is not the steady state and we need to reverse the expansionary stance. This could mean that RBI may hike CRR in Dec09.
Also the hike in SLR would support the large borrowing programme of the Centre and states. This could augur well for infrastructure projects (companies).

Picks for the Samvat 2066 - Potential Multibaggers

My picks for the Samvat 2066 are as below.

1) Bartronics India Ltd (BIL)
2) Birla Corporation Ltd (BCL)
3) Arvind Mills
4) Core Projects & Technologies
5) LIC HFL
6) Unitech Ltd.
7) Cairn India Ltd.
8) Biocon
9) Axis Bank
10) Godrej Industries

I have already written about some companies. In near time I will write about the remaining ones. These are the potential multibagger. Also there are lot of companies which have great plans & prospects going forward. I have not considered any index scrip (Sensex or Nifty) as they are always good ones & you get all the news about them all the time.

Excellent performance from TCS

Tata Consultancy Services (TCS) has come out with good numbers for Q2FY10. Revenue was up 3.16% Q-o-Q to Rs.7435Cr & reported a 28.7% rise in net profit to Rs.1,624Cr ($351 million) from Rs.1,262Cr reported a year ago under US accounting rules. Profit under the Indian accounting standards was Rs.1,642 Cr, beating estimates, as it won more outsourcing deals, cut costs and pressure on fees eased.

TCS has declared an interim dividend of Rs.2 per share.

TCS plans to add 8,000 employees next quarter. The gross employee addition in Q2 was 5,530 with net additions of 320 and the employee attrition for Q2 stands at 11.4%.

What analysts say about Samvat 2065?

Investment Guru Rakesh Jhunjhunwala sees the Nifty trading in a 4,200-4,000 to 5,800-6,200 range next year andthat breaking 6,100-6,200 on the Nifty and holding on to it is not going to be an easy task. If you price in 2011-12 index earnings, which you would do by December 2010, then it could break 6100. He sees the markets trending upwards correction won’t come easily.

Samir Arora, Fund Manager, Helios Capital, says the new highs, if reached, will not be sustained in the next 5-6 months.

Ramesh Damani, Member, BSE, says the Bull Run in markets is still on. From October to March or earlier was just a break in a bull market.
The theory working in America now is that the falling dollar equals to a higher Dow. At some point it will stop, one cannot debase a currency and expect the market to keep going up.
He advises investors to buy gold as it provides a safe haven if there is a global turmoil. The long-term trend lines are still intact, but global turmoil will hit the Indian market.

A number of market experts have been saying that the markets are currently overvalued and ripe for a correction.

Equities gave better returns than Bullions

During Samvat 2065, equities gave returns of almost 100%, Silver 73% & Gold 34%. During Samvat 2064, Sensex gave negative returns of 55%, silver too remained in the negative territory with minus 20% returns but Gold yielded positive returns of 20%.

despite stock market experiencing high volatility during the year, Sensex was able to give maximum returns on investments. The Samvat 2065 opened with a positive note with markets rising by 5% on Muhurat Trading last year. Thereafter, markets showed a positive recovery from November 2008 to the start of January 2009. However, the markets dipped from January to March. It was after a gap of eight months that FIIs registered a positive inflow of Rs.1,600Cr in December 2008. But during January-March 2009, the markets witnessed a negative inflow and made its bottom. Since then, the markets have seen a sharp recovery and yielded almost 100% returns as per Monday’s closing level. FIIs have pumped in more then $13 billion in the Indian equities since then.

The next 2 years will be even better than what we have seen upto now. I would suggest that atleast 60% of savings should go to equities. However, follow some golden rules of stock markets. Also Read - Why is the Equity Investment best option for wealth creation?

Snapshot - Deccan Gold Mines Ltd.

I have already written about this stock sometime in Dec-08, you can get more details about the companies from that posting. (Also read Stock that can prove to be El Dorado ; India - Gold Rich Country - El dorado )

Snapshot:

Deccan Gold Mines Limited is the first private sector gold mining company and rather the only gold mining company listed on the Indian stock exchanges. The company has got blocks spread across four states. The total area of the blocks is more than 10,000 sq kilometers. Gold mining company has to pass through three stages before they can commercially start mining gold.

*The first stage is called reconnaissance permit where they seek the approval of the authorities to do exploratory activities on say 200-300 sq kilometer of the block.
*Second stage is prospecting license wherein they short list about 25 sq kilometer or 30 sq kilometer out of the total area where they would like to do the further exploratory studies.
*The third stage is called mining lease where in they short list about half a sq kilometer or one sq kilometer where they would actually like to drill and take gold out or rather rock out and then refine it and produce gold.

The company has filed application for about six blocks for mining license. As per the management the actual mining of the company is expected to start in the last quarter of FY10-11 which is January to March of FY11 and if you look at the valuations of this company as of now the company has got zero revenues.

The management has been saying that they are able to derive about 4 tonne of gold per annum, even assuming on a conservative basis that they are able to derive only 2 tonne and taking a price of about Rs.15,000 per ten grams, this would translate into revenues of about Rs.300Cr.

Typically internationally, the gold exploration cost is about USD 350-400 per ounce which in this case will translate into Rs.5000-5500 per ten grams (1/3 of the sale price). Assuming initial expenses to be high we still believe that on a conservative basis the operating profit of the company could be in the region of 40-50%. This means, on a revenue of about Rs.300Cr, the company can generate operating profit of Rs.120-150Cr, whereas the market-cap is only Rs.200Cr.

The valuation is low mainly because of two reasons.

One is the uncertainties involved in the business and also the uncertainties with regard to the regulatory clearances for this company.

The second relates to the psychology of the investor. Most people do not want to buy these companies now when the production is still one, one and a half years away. Everybody thinks that they are going to buy the company as soon as the company is going to start production but people will realize that smart money would already have accumulated the stock at lower levels.

I would advise to start accumulating this stock at this point of time. But I would like to say that this stock is for a very high risk investor because of the uncertainties involved in the business and also somebody with a time frame of about 3-5 years.

Excellent results from HDFC Bank

HDFC Bank has posted excellent numbers, which are also above expectations, for Q2FY10. Its Q2 net profit surged 30.21% to Rs.687.5 Cr from Rs.528 Cr on year-on-year basis.

NII (net interest income) was up 4.8% at Rs.1,955.8Cr versus Rs.1,866.4 Cr (YoY). Other income rose 56.65% to Rs.1,007.4 Cr from Rs.643.1 Cr.

Closing at 17-month high

The market maintained its uptrend for the second consecutive day and closed at 17-month high.

The Nifty closed above the 5,100 mark and the Sensex ended above the 17,200 level, for the first time since May 21, 2008. Today's rally was mainly led by metal, auto, infrastructure, realty and banking stocks. However, huge selling was seen in telecom, oil marketing and airline companies' shares.

Global cues remained supportive throughout the session. European markets went up nearly 2% and the US index futures gained over 1% each, at the time of writing this report. Asian markets also ended higher; Hang-Sang rose nearly 2%. Shanghai, Straits Times, Kospi, Taiwan Weighted and Jakarta Composite moved up 1.2-1.6%. Nikkei was flat.

2 Reasons for gains in the market

Today our markets ended up with handsome gains amidst volitility. The sensex rose by 384 points 2.31%) & Nifty rose by 110 points (2.21%). Sensex has closed above 17k & Nifty above 5k. This was mainly due to the two reasons: news of Truce between Ambani Brothers & positive IIP data.

India's industrial output grew at its fastest pace in 22 months in August as factories cranked out more big-ticket household goods and cars as stimulus spending drove demand, but economists said the Reserve Bank was unlikely to lift interest rates at its review later this month.

Industry production grew by 10.4% in August against just 1.7% in the same month a year ago, as manufacturing, mining and electricity sectors recorded double digit growth. The industrial upsurge may make up for likely decline in farm production, hit by weak monsoon. These data has beaten the median forecast in a Reuters poll. Also July's annual growth was revised up to 7.2 percent from 6.8% earlier.

From the IIP data declared today for Aug-09, it seems that the recovery is around the corner. This clearly shows that the Q3 & Q4 earnings will be better than expected and we might see the upsurge in the buying from DIIs & FIIs both. Also the retail participation will increase to an extent.

But still many analysts are cautious about the exuberance showed by Indian bourses.

Infy Beats Expectations - Announces RS.10 as dividend

Infosys Technologies has announced its Q2FY10 numbers. Its bottom-line was above the street expectations while revenues were in line with estimates.

Its net profit went up 0.85% to Rs1,540Cr versus Rs1,527Cr in previous quarter.
Its revenues were up 2.06% to Rs5,585Cr from Rs5,472Cr on quarter-on-quarter (Q-o-Q) basis. CNBC-TV18 had estimated net profit at Rs1,509.4Cr and revenues at Rs5,604.3Cr.

It reported operating profit was at Rs1,933Cr and its operating margins improved a bit to 34.6% versus 34.1%.

*BFSI (Banking, Financial Services and Insurance) revenues inched up 3.5% to Rs 1,871Cr versus Rs1,807Cr on QoQ basis.
*Telecom Segment revenues went up 7.6% to Rs992Cr versus Rs 922Cr (Q-o-Q).
*Manufacturing revenues went down at Rs 1,080Cr versus Rs1,090Cr.

The company declared a dividend of Rs 10 per share.

Mangement said:

• that 35 new clients are added this quarter & revenues from the top-10 clients was up 6%.
• it added one new $100 million plus client, 2 new $50 million plus clients and two 2 new $40 million clients.
• the salary hikes would impact the margins by 2%. According to them, the customers have started spending money.
• they are cautious on business due to Rupee volatility & weak dollar.
• that prices have become stable & that the clients are not asking for the renegotiation; however the upside in the prices will take some more time.

Guidance:
For Q3, it is expecting revenues of Rs5,429-5,476Cr and EPS (earning per share of Rs 23.35-23.56.

For FY10, in dollar term, Infosys expects to report EPS of $ 2.09-2.10 per share versus previous guidance of $ 1.97-2 and revenues of $ 4.60-4.62 billion versus previous guidance of $ 4.45-4.52 billion. Infosys raised FY10 dollar EPS guidance by 5-6%. The company said FY10 guidance was based on forex rate of Rs 47/$.

In rupee term, it is expecting revenues of Rs 21,961-22,055 Cr and EPS of Rs 99.60-100.

Growth by Geography (for Q2 over Q1 in %)

North America - 65.9 (64.7)
Europe - 23.2 (24.7)
India - 1.2 (0.9)
Rest of World - 9.7 (9.7)

Growth by Industry (for Q2 over Q1 in %)

BFSI - 33.5 (33); Manufacturing - 19.3 (20.5); Retail - 14.1 (13.2); Telecom - 16.2 (16.9);

Short Term Buy Calls

Buy Vishal Info at current levels of Rs.17-18 with the targets of Rs.23-25. It is expected to post better Q2FY10 numbers compared to Q2FY09. It is currently trading at PE of 18.

Buy NIIT Ltd. at current levels for the target of Rs.85 for this month. Keep a stoploss of Rs. 69.

Will RIL bonus announcement take the markets higher?

The results for the Year ended March 31, 2009:

The Company has posted a net profit for the period from ordinary activities of Rs.15,637Cr for the year ended March 31, 2009 as compared to Rs.15,261Cr for the year ended March 31, 2008.

Total Income has increased from Rs.1,34,338Cr for the year ended March 31, 2008 to Rs.1,43,907Cr for the year ended March 31, 2009.

The Audited consolidated results for the Year ended March 31, 2009:

The Group has posted a net profit for the period from ordinary activities of Rs.15,296Cr for the year ended March 31, 2009 as compared to Rs15,324Cr for the year ended March 31, 2008.

Total Income has increased from Rs.1,38,371Cr for the year ended March 31, 2008 to Rs1,53,138Cr for the year ended March 31, 2009.

RIL board has recommended bonus in the ratio of 1:1, subject to the approval of the shareholders. Also RIL has announced dividend of Rs.13 per share.

Earlier, RIL has rewarded its shareholders 3 times with bonus issues.
1997 – 1:1
1983 – 3:5
1980 – 3:5

So market may react positively to this news & we can see buying interest in Oil & Gas sector and other RIL associated companies.

CHI Investments - Multibagger

CHI Investments, one of the investment companies of RPG Group, might offer multiple returns in the future. CHI is a debt free company with huge investments in other RPG Group companies from which it derives income in the form of dividend. Unlocking of the investments will create huge value for CHI shareholders.

Equity Share Capital - 11.46 Cr
No. of equity shares – 1,14,64,508
Promoter holding – 43.51%
Institutions/Corporates – 23.84%
General Public – 32.63%

Market Cap – Rs. 63.02 Cr
Book Value – Rs. 115
Reserves – Rs. 122.96 Cr
EPS (Rs) – Rs. 2.7

52 week high/low – Rs. 68 /Rs. 8.81
CMP – Rs. 54.80

For FY-09, total revenue was Rs 5.21 Cr & Net Profit Rs. 3.1 Cr, thus posting an EPS of Rs.2.7. CHI has posted good results for Q1FY10 with total revenue of Rs.2.86 Cr (2.11 Cr) & Net Profit Rs.2.59 Cr (Rs. 1.98 Cr) which brings EPS to 2.26.

Investments in quoted equity shares – Rs. 388 Cr
Total Debt – Nil
Investment Value per share – Rs. 340

Investment Rationale:
*CHI holds investments worth Rs.388.00 Cr in listed group companies as on 30th June, 2009 while its own market cap is just Rs. 63 Cr. The company is debt free.

*Apart from this, CHI also has investments in other non-listed group companies.

*Compared to other investment/holding companies, CHI is available at just 1/4th of the value of investments it holds i.e. around 67% discount to its investment values. Other investment companies trade at about 1/4th of the value of investments they hold.

*The company majority holds shares of CESC & KEC International, which being in power sector and leaders in their business areas are expected to do well. This will create value for the company.

*CHI Investment receives almost Rs.4-5 Cr as dividend/interest income annually.

Below is given the investment details of CHI.

No. of shares held x CMP = Value of investment

1) CESC: 20,56,948 x Rs.380 = Rs.78,16,40,240
Div. income: Rs.4 around Rs.82 lacs

2) KEC International: 41,42,519 x Rs.558 = Rs.231,15,25,602
Div. income: Rs.5 around Rs.2.73 Cr

3) RPG Cables: 22,00,280 x Rs.23.10 = Rs.5,08,26,468
Div. income: Nil

4) Zensar Technologies: 22,22,138 x Rs.232 = Rs.51,55,36,016
Div. income: Rs.4.50 around Rs.1 Cr

5) Saregama: 2,53,444 x Rs.80 = Rs.2,02,75,520
Div. income: Nil

6) RPG Life sciences: 10,64,560 x Rs.48 = Rs.5,10,98,880
Div. income: Rs.1.20 around Rs.12 lacs

7) Harrison Malayalam: 7,28,150 x Rs.124 = Rs.9,02,90,600
Div. income: Rs.1.50 around Rs.11 lac

8) CFL Capital: 38,37,500 x Rs. 4.10 = Rs.1,57,33,750
Div. income: Nil

9) Summit Securities: 31,28,298 x Rs.16 = Rs.5,00,52,768
Div. income: Nil

Total investment value: Rs.388 Cr
Total Div. income: Rs.4.75 Cr for FY08-09

Apart from this, CHI also has investments in many other unlisted companies.

Risk:

Being just a holding company, one has to remember that the investments might not be liquidated for lifetime. Hence it is not right to think that the holding company can be valued equal to the value of investment it holds until and less value unlocking is possible. Having stated this risk, I feel 90% discount is on the much higher side.