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Wednesday, November 19, 2008

IKF Technologies - For Patient Investors

IKF Technologies Ltd. is a Public Limited company incorporated in the year of 2000 with the main objective of promoting IT, ITES, Telecom and Alternative Energy Resources across the Globe. Today it has emerged as one of the fastest growing company in IT and pioneering in the field of Bio Diesel. We will try to analyze if buying stocks of IKF could be good deal for invetsors in longer time frame duration.


A group of individuals bought a listed company in 2004 and turned it around. The software company they bought, has now expanded into telecom and even into the emerging bio-fuels business. Can we buy stocks of IKF to create wealth for us.

IKF Technologies is today a Rs 180-crore company and growing. In 2004-05, when the company was taken over by Pradeep Dutta and Sunil Kumar Goel, it had a share capital base of Rs 10 crore. Over the last two years, the company has invested in putting together infrastructure and technology, which has paid off. It grew its web development, software and BPO businesses internationally, to Australia and the UK.

Read: IKF plans Rs 400-cr GDR for biofuel biz

In 2006, it set up a 31-seat BPO for Tata Teleservices. “The initial couple of years went into restructuring and settling down in the core business,” says Pankaj Garg, director at IKF Technologies, which counts domestic telcos and banks among its clients. Though the promoters realise that they are late entrants in BPO outsourcing, they are looking at new markets.

IKF has now set up offices in Germany, Brazil, Dubai and Russia, and is hoping to see growth from these markets over the next two years. The idea of getting into telecom was there since 2006 but “since it was difficult to get a licence at that point in time, it never materialised”, says Garg. But it finally got a Category ‘A’ licence for Internet Service Provider (ISP) by the Department of Telecommunications (DoT) in January. Since then, it has been busy setting up its network. “We have already spent Rs 4-5 crore, and another Rs 8-9 crore will be spent in the future on developing the network,” informs Garg. As an initial foray in telecom, the company decided to get into VoIP services, a segment, which is not too crowded. That’s how IKF Tel came into being. The company is almost on the verge of launching its VoIP services for the retail market, having already launched the same for enterprise customers.

IKF has earmarked $2-3 million for its telecom business, of which, says Garg, $1 million has already been spent over the last one year. IKF expects revenues of Rs 100 crore from its telecom business in the next three years, growing both organically and inorganically. Taking its quest for emerging technologies forward, IKF is into bio-fuels too.

“The chairman of the company, Dr RP Singh, who is a former scientist at the Indian Agriculture Research Institute, led us into this field,” says Vishal Rawat, president bio-diesel at IKF Green Fuel. IKF Green Fuel is also planning to get into ethanol, solar and wind energy in the near future. For bio-diesel, though, it has signed an MoU with the government of Madhya Pradesh through which it is seeking 200 hectares of wasteland for jatropha cultivation and will also be setting up an oil extraction plant with an investment of Rs 30 crore.

It also engages in contract farming on private wasteland. “We have one refinery already at Udaipur, which can produce 3,000 litres a day but at the moment, it is being used for trial runs. We expect commercial production to start by 2010-11,” says Rawat. Commercial bio-diesel production would need a steady flow of jatropha seeds. To this effect, IKF has 10,000 hectares of jatropha under cultivation, both on leased and owned land. “By 2008-end, we hope to reach the 30,000-40,000 hectares mark,” says Rawat. Meanwhile, research is on for better seeds with agricultural universities and other institutions.

The company has been granted permission by the government of India for a GDR issue to raise Rs 500 crore. About Rs 200 crore are already been allocated for IKF Green Fuel, indicating the company’s commitment to the growing sector. It is also exploring JVs in Brazil and South Africa for plantation and extraction there. “We want to be the leader in the bio-fuels market by 2015,” says Rawat.

IKF Tech plans to grow jatropha in Africa-------
IKF Technologies, the country's first corporate jatropha refiner, has formally approached African Governments — Swaziland, Mozambique and South Africa — for permission to cultivate the plant. Armed with detailed project reports, the company has also applied for an area of 50,000 acres of wasteland in each of these countries for organised jatropha farming. Mr Mukesh Kumar Goel, a director of the company, told Business Line that official responses, however, were awaited. According to the company's estimates, the cost of acquiring the land (total 1.5 lakh acres), nursing the plants till the first fruition after 18 months, and setting up crushing facilities would be Rs 3,000 crore. In a phased manner If permissions were obtained, the purchases or acquisition of land through lease and taking up the plantation projects would be done in a phased manner over a long period of time. IKF has sought to own the land in Africa, and prefers not go in for contract farming, Mr Goel explained.

In India, it has opted for the contract-farming model in Rajasthan, where its existing refinery is located, in an area of 5,000 hectares. In Meghalaya, however, IKF cultivates on its own land.Its refinery was commissioned in March this year. Currently, it is procuring jatropha seeds from the open market since it began farming the plants in Meghalaya roughly 12 months ago.Though the first flush of seeds takes 18 months, jatropha harvests are available twice a year in the period after maturing. One hectare can accommodate roughly 2,500 plants.

The yield per tree in one harvest, according to thumb rule, is around 3.5 kg and from one kg of seeds, a little over 300 ml of bio-diesel can be had.The company has a one-year renewable technology agreement with Indian Oil Technologies Ltd, a subsidiary of Indian Oil Corporation, for perfecting mixing grade bio-diesel.

Refinery in Gujarat :
It has proposed to set up another refinery in Gujarat with a capacity of 1 lakh tonnes per annum at a cost of Rs 50 crore.

It has also sought permission for contract farming of jatropha in Gujarat and Chhattisgarh.

In Rajasthan, it has a refinery running with a capacity to produce 3,000 litres a day.

As a Market Analyst, I am strongly recommending to buy stock at CMP of around INR 3. It's future prospects are bright. Stock price could definately touch arround INR 200+ in 2012

15 comments:

  1. Dear Sir,

    Sir mine dream is to earn crore from the stock market and iam willing to take the risk,iam strictly a long term invester,can you pls recommend some stocks that can fullfill mine dreams,i had already bought 30k shares of IKFTECH after reading your post,no matter if i lose the money,but want to take the risk....pls recommend some stocks from small or midcap stocks that can be a multibagger in the future...

    ReplyDelete
  2. there r enough flaws in the argument from the owners of this company..
    1st one: very low promoter holding so Satyam like signal already...
    2nd one: Promoter says plat is in operation but in trial run and will remain so for another 2 yrs.. how on earth somebody can believe it. Plat is established to make money and if it can't be done then it is sure that promoters are siphoning money.
    Please remember that ...buy Stocks at reasonable rate with reasonable certainty of making money but never ever throw ur money away..
    I want to ask blog owner one thing ..is he related with the promoter in any way????

    ReplyDelete
  3. Hi Sumi,

    The promoters holding in this company is lesser since long time. This company was bought by set of people from original owner/promoter with new future plane 3 years back. The planning from new promoters is for sectors like Biofuel, VOIP telephony (internet phone) which have good future. There are always risk factors associated in stock markets. This company is a a small cap company. You should invest in small cap cpompany only when you are ready to loose your money invested in small caps. It will either give you phenomenal growth in or nothing. So it is always said, invest only 5- 10% of your entire portfolio in small caps meaning, if you are investing 1000 Rs. in stock market, buy stocks of IKF like companies of only Rs. 100. All the big companies were small some day and they went on becoming large caps with growth and time. If you believe in the story of Biofuels and VOIP like sectors, you can invest small amount of money and hold for long term. This money should not be your BREAD AND BUTTER but savings which you do not need for long time. Unless you do not have such allocation of money, you should not look at such investments.

    I am not associated with promoters of this company. I am also a small investor like you who keeps looking ways to make most out of his investments. I have invested small chunk of my money in this and I am buying stocks of IKF with small quantities around 3 Rs.

    I have provided more than few hundred stock reports on this site does not mean I am associated with promoters of all companies. :) :)

    Moderator

    ReplyDelete
  4. Some of the penny stocks has the capability to be the midcap and midcap to be the large cap stocks,this stock is in diversified biz(Telecom,voip,bio-fuel)i feel that this stock will do well in the future and has the capability to be the midcap stocks in the future.
    Take the example of United Phosphorous it was trading at 0.27 paisa in 2002 and now the CMP is around 104...

    This can also happend to IKFTECH.Sir request you to post some good stocks like united phos....

    Sir thanks for the brilliant post.

    ReplyDelete
  5. Hi Mr. Moderator,
    Thanks for ur comment
    Even if that is True..there are few things i could not understand. why r they running plants on trial? it says that either their process is not robust enough or technology is not mature enough..could you throw some light pls? if that is true it poses significant risk..isn't it?

    ReplyDelete
  6. With reference to your post on IKF Technologies dated on wednesday, November 19, 2008 at http://www.indianstocksnews.com/2008/11/definitive-multi-bagger-in-2012-2015.html request you to help me understand certain aspects related to the stock.

    1) what are the likely chances that company may consider an IPO for IKF BioFuels ?
    2) what will be the real value of IKF Tech in that senario?
    3) would the existing shareholders get any benefit of availing shares of IKF Biofuels when the company splits?
    4) what will be the real value of IKF Tech when the company splits?
    5) since the ikf tech has diversified verticals what are likely chances of demerger taking place under these verticals will it diminish the existing shareholder value or improve it?

    Look forward to your sincere and early reply,

    Thanks and regards

    Jinesh Shah



    To answer all your questions Jinesh.

    IKF Green Fuel Ltd. is a wholly owned subsidiary of IKF Technologies Ltd. (www.ikf-technologies.com), having its registered office in Shillong and corporate office in NOIDA, India.
    What does wholly owend subsidiary means?
    A wholly-owned subsidiary is a company whose stock is entirely owned by another company. The owner of a wholly-owned subsidiary is known as the parent company or holding company. Because the parent company owns all of the stock of the wholly-owned subsidiary, the parent company can control all of its activities. Moreover, under GAAP, all of the financial transactions of a wholly-owned subsidiary are consolidated with those of the parent company. Thus, all of the activities of the wholly-owned subsidiary are part and parcel of the parent company for both operating and reporting purposes.

    So going by this definition, IKF Technologies owns all shares of IKF Green Fuel Ltd. So all the profit / loss account comes under IKF Technologies.

    Even if IKF Technologies considers IPO for IKF Green Fuels, shareholders of IKF Technologies will have value linked with it. (dividends/Intrinsic value) So in a way shareholder of parent company have indirect holdings in subsidiary and it's profits. Stock markets calculates this intrinsic value when it comes to share price for stock trades.

    If you look at the following news, "IKF plans Rs 400-cr GDR for biofuel biz", IKF Technologies is raising all the money being parent and owner too. So all the growth in IKF Green Fuels definitely benefits to IKF tech.
    http://www.indianstocksnews.com/2008/08/ikf-plans-rs-400-cr-gdr-for-biofuel-biz.html

    As far as Diversified verticals are concerned, since these are diversified business verticals as mentioned in question itself, everything belongs to IKF tech. Chances of demerger, it solely depends on IKF Tech promoters wheather to demerge the business verticals at some poit of time or not. If it happens, it would definitely take care of IKF Tech shareholders as part of corporate governance thru the route of share distribution of demerging businesses.

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  7. Only suggestion...dont buy any stock of any firm that deals with Jatropha...no need to take my word but if you will not...you will wish later that better you would have been....

    ReplyDelete
  8. story sounds good but cautious for the decresing promoter holdings

    ReplyDelete
  9. financial result for the quarter ended on dec,2009-IKF Technologies, a leading technology solutions company headquartered out of Kolkata and setup at Delhi, Noida & Mumbai has posted consolidated net revenues of Rs 40.3 cr, representing a 105% YoY growth for the quarter ending December 31, 2009.
    In this quarter, the company recorded Profit After Tax of Rs4.87 Cr compared to Rs2.37 Cr for the same period last year, representing 105% growth YoY.

    ReplyDelete
  10. Respected sir,
    plz advice me on cerebra intigrated,i have 4900 share,i want to know abt its feature and e-waste plant.plz try yr level best for me.
    thx
    urmil desai

    ReplyDelete
  11. dear sir plz suggest ikf tech hold or sale avrg price 6/-

    ReplyDelete
  12. Sir, pls give your views about IKF Technology in present sceanario.buy, sell or hold.

    ReplyDelete
  13. Sir, pls give your views about IKF Technology in present sceanario.buy, sell or hold.

    ReplyDelete
  14. price of ikf technology is "selling freeze" from last few days. presently trading selling freeze at 1.24. what's your take on this????

    ReplyDelete
  15. Wanted to know why there are huge debtors as compared to its revenues - Standalone figures.
    The Consolidated figures look good, but the standalone business is in trouble or what?

    ReplyDelete

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