There is one key difference between us and Warren Buffett.......

There is one key difference between you and Warren Buffett. Mr Buffett does a thorough analysis of the businesses he buys into. He makes sure that he buys them at very reasonable valuations. He meets the management to figure out whether it is honest and capable. You too may try to do all of these.

But there is one thing you cannot even try to replicate. Unlike Mr. Buffett you cannot buy large stakes in the companies. Retail investors are referred to as 'minority shareholders' in a company. It hardly matters to the management if they disapprove of an M&A activity that the company is pursuing. Or if it is keeping too much cash with itself! Or if it is venturing into unrelated businesses. For the retail investors' voices are those of the minority.

There are only a handful listed entities in India where the non-promoter holding (free float) is more than 50%. However, their number is set to increase. As per a recent listing guideline from SEBI, public shareholding in all companies will have to be brought up to 25% in three years. This will serve investors' interests in two ways. One it will lead to promoters (including the government) diluting their stakes through follow on offers. Two, it will offer minority shareholders more collective voice.

Private Sector Banks' Stance

The annual results of the top private sector banks in the country, ICICI Bank and HDFC Bank show that the entities have been proactive in terms of pricing their loans higher. This is keeping in mind the RBI's tendency to choke liquidity to rising inflation.

What is also clear from these banks' performance is that they are keen to ensure profitability even at the cost of growth. While the high margins may not be sustainable for long, they definitely come handy in terms of keeping the banks afloat in difficult times.

Infy FY10 Results

Infosys Technologies, India's second largest IT exporter, has announced its fourth quarter results of FY10.

It has reported a 1.14% jump in its net profit to Rs 1,600 Cr as against Rs 1,582 Cr, on quarter-on-quarter basis (Q-o-Q).

Revenues for the same quarter increased 3.54% to Rs 5,944 Cr versus Rs 5,741 Cr (Q-o-Q).

Numbers were above the markets expectations. CNBC-TV18 was expecting net profit at Rs 1,581.2 Cr and revenues at Rs 5,847.6 Cr.

But what disappointed the street was the company's FY11 guidance in rupee terms. It expects EPS at Rs 106.82-111.28 per share and revenue growth of 9-11%.

Q4FY10:

Operating margins declined to 34.02% versus 35.5% (Q-o-Q) and FY10 EPS stood at Rs 109.72 per share.

Revenues from North America grew by 4.4% (Q-o-Q) & 4.5% in constant currency and from Europe grew by 7.9% (Q-o-Q) & 11.8% in constant currency.

BFSI grew by 5.9% (Q-o-Q) & 6.7% in constant currency and manufacturing grew by 10.2% (Q-o-Q) & 11.3% in constant currency.

The company recruited 27639 employees in FY10 and has made 19000 campus offers for FY11.

Its USD 200 million plus client was down from 2 in Q3 to 1 in Q4. Top 5 client's contribution was down from 17.6% to 15.8% in Q4 versus Q3.

FY11 Guidance:

In dollar terms, the company expects 16-18% growth in revenues for the next year i.e. FY11. It expects revenues at USD 5.57-5.67 billion and EPS growth at 4.3-8.6% for the next financial year.

In rupee terms, Infosys lowered its guidance for FY11. It expects EPS at Rs 106.82-111.28 per share and revenue growth of 9-11%.

Gayatri Projects - Trudging on High Growth Trajectory

Equity Share Capital - 11.00 Cr

No. of equity shares – 1,11,04,761

Promoter holding – 54%

General Public – 12.77%

Market Cap – Rs.466 Cr

Book Value – Rs.195

Reserves – Rs.205 Cr

EPS (Rs) – Rs.41

52 week high/low – Rs.472.10/Rs. 70.50

CMP – Rs.420

Company Profile:

GPL specialises in road and irrigation projects and has a pan-India presence. Three new divisions—urban infrastructure, water and industrial construction—were added recently as part of its plan to expand into other verticals of infrastructure and de-risk its business. The company has displayed extensive execution capabilities in the past and has completed several projects in diverse segments like irrigation, dams, railways, highways, water treatment plants, airport runways, port projects, industrial structures and onshore projects.

Strong growth visibility:

Gayatri Projects Ltd (GPL) has an impressive order book of Rs.6,250 Cr—more than 6x its FY2009 revenues. Besides, the company is the lowest bidder (L1) for projects worth Rs.2,250 Cr which include a highway built-operate-transfer (BOT) project of Rs.2,000 Cr and a road construction project of Rs.250 Cr. Currently, irrigation projects dominate the order book with a 61% share while road projects account for 35%. To de-risk its business model GPL is strategically venturing into newer segments: urban infrastructure, water division and industrial construction.

BOT deals add to the value:

At present GPL have six BOT road projects out of which four are on annuity basis and two are toll-based projects. Of these, five projects are expected to start generating revenue from FY2011. Two of its projects are completing ahead of schedule and hence would receive bonus of Rs.70 Cr.

Power project—financial closure near-term trigger:

As a strategy to expand vertically, GPL (under its subsidiary Gayatri Energy Ventures Ltd [GEVL]) is developing a 1,320MW (2X660MW) thermal power plant at Krishnapatnam, Andhra Pradesh (AP). About 70% of the debt for the project has already been tied up and the project is expected to achieve financial closure by May 2010. Moreover, GPL is expected to rope in a strategic partner in GEVL by diluting 49% stake at a substantial premium. We believe that positive developments related to the financial closure of the project and unlocking of value through the induction of a strategic partner in GEVL are the near-term triggers for the stock. GEVL can be valued at a 50% discount to its book value currently.

Strong growth despite issues in AP:

Despite the fact that some of GPL’s irrigation projects could get delayed in AP due to political issues, we expect the revenues and earnings to grow at CAGR of 26.4% and 35.4% respectively during FY2009-12. The EPS are expected to grow at a CAGR of 17.4% on the fully diluted equity base.

Attractive valuations:

Currently the stock is trading at 7.3x and 5.9x its FY2011E and FY2012E earnings respectively and the valuations are attractive given GPL’s growth plans. To discount for its AP focus, we have valued the core business at Rs463 which is 7x (as against 8x for the other mid-cap infrastructure companies in our coverage) FY2012 earnings. The SOTP based price target also includes Rs.37.8 for its six BOT projects (based on the NPV method) and Rs.48.4 for its power project (0.5x of its Rs.150 core investment in GEVL). Thus, we initiate coverage on the stock with a Buy recommendation and price target of Rs.549.

"India is on the verge of unprecedented multi decade growth."

A 20-bagger! Yes, that's what the US stock markets returned between 1981 and 1998, believed to be the best period ever for the US stock markets. Similarly, between 1978 and 1989, the Japanese stock market turned out to be a near 8-bagger. Please bear in mind that these were returns from the broader markets and there were many stocks in these countries that turned out to be 30, 40 and even 50 baggers. Clearly, if one could identify a multi decade bull market early, there could be no better place than equities.

So, is there any such bull market taking shape anywhere in the world right now? According to Rakesh Jhunjhunwala, one of India's most successful investors, there is a multi decade bull market making its presence felt right here in India. "India is on the verge of unprecedented multi decade growth. Choice of asset class will decide the return. I have allocated 100% of my portfolio to equity asset class", Rakesh opined at a recent seminar. He further added that investors should look for long-term growth prospects and growth-drivers of companies where they invest, rather than getting carried away by short-term apprehensions. Indeed. We couldn't have said it better. While the Indian economy is likely to grow at strong rates well into the future, it is only those companies that constantly churn out products that meet the needs of India's large populace, and also do it profitably will survive. Hence, investors should always be on the lookout for such companies.

Rakesh opines that there is no doubt that the developed world is going to go through a long period of slowdown. He believes that there are too many excesses in the developed world. And sooner or later, they would blow up. However, he himself does not know when the blow up will occur. But he believes that it will happen for sure and there will be below normal growth in developed economies like the US. He further adds that when the slowdown happens, there will be a shift of power, wealth and prosperity, from the West to the East. But this shift will not be easy & smooth. It will have its own problems and there could also be a lot of friction.

And who will benefit from this shift? Is it China that Rakesh is bullish on? Certainly not! Like a lot of other investor in recent times, even he is negative on China. He argues that the business model of the country is unsustainable and hence, not suitable for the long-term. Thus, it is India and Brazil that he believes will be the main beneficiaries of shift in power. Both the countries, he adds, have sustainable long-term models that would ensure years of strong growth. To sum up, he sees good future ahead with some sort of uncertainty. Not to forget the rise of India and Brazil.