Cals refineries gets big investor - project to progress soon

The latest development in counter of Cals Refineries: It has got a big investor, Kuwait’s Kharafi Group as investor through company GDR issue. Kharafi Group operates in more than 30 countries and has more than 100,000 employees.

Al Qebla Al Watya, the Kharafi investment vehicle, will invest in with $150 million (Rs. 675 Crores) through global depository receipts (GDR) for Cals Refineries for building the refinery at Haldia.

This refinery project has been delayed by almost 3 years now and company management is facing problems in financial closure of the project. With this positive development, it is expected that management would be able to achieve financial closure soon and progress on the project.

Cals refineries stock was locked in upper circuit of 18.5% today with orders pending to buy shares at huge quantity (6.5 crores).

I have discussed Cals Refineries few times in last two years and have recommended it as penny stock bet. I have investment in it.

Read More on Cals Refineries:
CALS Refineries - Small Cap Stock & Penny Stock Analysis
Cals Refineries - Small Cap Penny Stock - What to do?

You may read detailed news in "The Telegraph" here.

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MOIL IPO - Should you subscribe?

MOIL IPO price band has been fixed up at Rs. 340-375. IPO has received good response on first day of it's opening. 0.76% has been subscription on day one despite market conditions being bad for past few days. Can MOIL IPO fetch you good returns in such conditions? Should you invest in IPO of MOIL? Let's see.

MOIL is largest manganese ore producer in India. It contributes almost 50% of the total domestic production. MOIL stands at fifth rank globally. Manganese ore business is growing day by day. MOIL has good quality manganese mine reserves with them and they are behind finding new mines continuously. Estimated good quality manganese ore for MOIL is approx at 22 MT.

Since MOIL has got good quality mines and huge manganese reserves, company's stock price, when listed in stock markets, would command the premium for these reserves on top of stock price based on company's financials.

MOIL is operating at EBITDA margin of 70% during H1FY11. This makes it among the lowest cost manganese ore producers. Company does not carry any debt on it's balance sheet. MOIL has Rs. 105 cash reserves per share as in H1 FY11.

The upper band of IPO is at Rs. 375. Even at the high end of this IPO price band, there is decent upside if one holds stock for 1 - 2 years. I would recommend to invest in IPO and look for decent listing gains and some good returns if one wants to hold for some time.

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Real Estate Stocks - To Buy Or Not Now?

With CBI taking action against guilty real estate companies, tainted banks and middle men for arranging loans for these companies, finance minister directing banks on NPA quality and the music real estate firms are facing in bribery scam, should you buy stocks of these companies since almost all real estate stocks are correcting significantly in ongoing market turmoil?

It was a big shock to real estate companies, banks and of course stock markets when CBI raided few banks and financial service providers and arrested key people like CEO, CMD and MD's from these banks and institutions for bribery cases. The entire real estate industry, banking space and overall India was shaken like 10 Richter scale earthquake has hit India.

Indian stock markets were shaken from top to bottom loosing all the steam when markets were trying to sustain the 20,000 levels. At one point of time, markets went below 19,000 levels today but recovered later.

Almost all real estate stocks have corrected more than 25% in last 2-3 days. So should you rush to buy stocks of real estate companies?

Indian stock markets have overreacted to this situation, which is a bribery case. These things were always there since long but it is just that this time it has come in light. While approving big loan amounts, bank officials are always bribed/pleased by loan seekers. These things are behind curtains. Loans are not going to go anywhere unless some real estate company fails to repay it. BUT ... yes there is a but ... banks would become overcautious now while sanctioning loans to real estate developers. This is going to create a liquidity crunch in market and this is going to pinch all real estate developers.

Real estate sector is well known for worst corporate governance and perhaps this is one of the most corrupted businesses running around. So whatever is happening is not new. Since it is a bribery case, hope so, guilty people would be punished and everything should be fine unless money has not been diverted to non existing participants (duplicate companies/stock market players etc.).

Real estate developers keep huge inventory (flats/properties) at their disposal which they want to sell at high rates. All the property prices in India are artificially maintained at higher levels by all property developers. They don't get entire cost of their product(flats/properties in this case) unless they actually build and deliver it to consumers. So where do they get money to construct properties till they deliver? Banks is the answer. Real estate developers get loans from banks for almost each project they plan for. And then they manage to not to lower the property prices even if they add up units to their inventories.

This is going to be difficult now. Real estate developers will have to get rid of their inventories (unsold flats/properties) since they would face difficulties in getting cash from banks. And you know what happens when everyone wants to sell in markets. Market gets oversupplied resulting in price crash. Property prices are going to correct which means real estate developers would get lesser money resulting in lesser revenues and even lesser profits.

Read more: Realty Stocks, Debt And Investors

Stock markets look only at topline and bottomline and for real estate companies, these two lines are definitely going to be damn difficult to maintain. This would result in unstable stock prices and growth in near future.

Conclusion: Let this turmoil settle, take a re-look at real estate stocks on stock to stock basis and then decide whether you should buy stocks of real estate companies in this correction or not.

If you have some good stocks researched, it could be a good opportunity to buy stocks of those companies since markets are in correction mode. Real estate stocks are exception to this suggestion.

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Realty Stocks, Debt And Investors

I just read a news about Realty stocks and the amount of debt they are carrying on their balance sheets. Realty companies normally carry big amount of debt for execution of real estate projects. Checkout how much debt these big real estate companies carry and what should be investor's stand on buying stocks of these companies.

Here is the amount of debt that big real estate companies in India have on their balance sheets. Economic times has published this list on 24th Nov. DLF, the biggest real estate company in India, is the leader of all, carrying more than twenty one thousand, six hundred crores of debt.



As per the news in Economic times, SEBI is worried about debt repayment ability of these real estate companies and so SEBI has told asset management companies (AMCs) to avoid exposure to real estate debt in their certain schemes. All regulators, including the RBI, are nervous about real estate, says this news.

"Also, the regulator is not satisfied with the reporting standards of most real estate companies. Balance-sheet strength, landbank valuation, authenticity of titles and project standards and execution are areas of concern for SEBI."

What does this development tells us as an individual small investor in stock markets? We need to be cautious on real estate stocks. Value investing principles talk clearly about debt and what my understanding is, if company id debt free, it has good potential to generate profits to share among shareholders. If company has a large debt, major portion of profits would go towards interest on debt and profits would be eroded, in which case, neither investors would get dividend nor stock price appreciation. Forget about such stocks being multibagger stocks and multiplying returns for their investors.

Click here to read related news in Economic Times.

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MOIL IPO Price Band Fixed at Rs 340-375

The government has fixed a price band of Rs 340-375 a share for MOIL IPO. This would raise up to Rs 1,238 crore through initial public offer of MOIL.

The Central government is diluting 10 per cent stake in MOIL which is country's largest manganese manufacturer. Madhya Pradesh and Maharashtra governments are othre shareholders who will sell 5 per cent each through the IPO that is opening on November 26 and close on December one.

MOIL IPO To Open on Nov. 26

For the half year ended September 30, the company's turnover was at Rs 635 crore as compared to Rs 430 crore in the first half of previous fiscal. Profit after tax for the first half of this year stood at Rs 330 crore against Rs 201 crore in the year-ago period.

We would soon publish IPO analysis and advice if you should buy IPO of MOIL. Stay tuned.

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Mid Cap Stock To Buy For Mid Term - Shanthi Gears

Here is one mid cap stock to buy in this falling market for medium term investment horizon. One may buy stocks of Shanthi Gears on every dip during ongoing correction in stock markets.

Shanthi Gears Limited is engaged in the manufacturing gears and gear products. The Company’s products include worm gear box, helical and bevel helical gear box, geared motor, custom-built gear box, mill gear box, open gearing, products for textile industries and CNC machine tools.

The Company’s services includes engineering design, modeling and drafting, analysis and simulation, assembly and animations, reverse engineering and tooling (mould and pattern) design and manufacturing.

Shanthi gears has registered strong show for the quarter ended September 2010. The company has clocked 137% jump in net profit to Rs. 6.37 crore for the quarter over a sale of 25% to Rs. 36.82 crore. Strong bottom-line growth was driven by good operating show over higher sales and equally backed by lower interest cost and depreciation.

Revenue for the quarter was higher by 25% (to Rs. 36.82 crore) but the value of production was higher by 48% to Rs. 36.41 crore on a lower base. While the value of production as % of sales for the quarter is lower by 1% of sales, it was lower by 16.6% in the corresponding previous period.

Strong operating performance was backed by higher other income. Other income was higher at Rs. 33 lakh compared to Rs. 5 lakh in the corresponding previous period. The company's total debt as end of Sep 2010 stood lower at 16.92 crore compared to Rs. 51.83 crore in the corresponding previous period translating into a fall of 67%. Moreover the cash and bank balance was higher by 8% (to Rs. 34.7 crore) on yoy basis. Gained by this the interest cost net of interest income was an income of Rs. 18 lakh compared to a expenses of Rs. 58 lakh in the corresponding previous period. The depreciation cost was lower by 1% to Rs. 6.71 crore. Thus the PBT has more than doubled (up 153%) to Rs. 9.82 crore.

With these kind of strong numbers, one may expect company to perform well in coming time and stock to appreciate in medium term time frame of 6 months. Stock price target could be Rs. 60 in mid term. One may buy stocks of Shanthi Gears in the price range of Rs. 40 to 45.

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MOIL IPO To Open on Nov. 26

MOIL's 3.3-crore shares initial public offering will open on November 26 and will close for institutional bidders on November 30 and for other investors on December 1.

MOIL was the largest producer of manganese ore by volume in India in Fiscal 2008 (Source: Indian Bureau of Mines, Indian Mineral Yearbook 2008). Its production of manganese ore increased from 864,890 tonnes in Fiscal 2006 to 1,093,363 tonnes in Fiscal 2010.

It currently operates seven underground mines (Kandri, Munsar, Beldongri, Gumgaon, Chikla, Balaghat and Ukwa mines) and three opencast mines (Dongri Buzurg, Sitapatore/Sukli, and Tirodi). Manganese ore is primarily used to make ferro-alloys for steel production.

Company will not receive any proceeds from the offer and all proceeds shall go to the selling shareholders (Central govt; Maharashtra and MP govt). In other words, money raised through this IPO is not going to be used for any kind of business expansion or company specific activity but government wants to liquidate their stake in MOIL and so the planned IPO.

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Stock To Buy Now - Noida Toll Bridge Company

I had recommended to buy stocks of Noida Toll Bridge Company earlier this year as well as in year 2009 from long term perspectives. It is definitely a stock to buy now looking at the valuations it is available at.

Business: Noida Toll Bridge company was promoted by Infrastructure Leasing and Financial Services Ltd. (IL&FS) as a special purpose vehicle (SPV) to construct, operate and maintain the Delhi - Noida Bridge on a Build Own Operate Transfer (BOOT) basis. The Delhi Noida Bridge is a tolled facility connecting Noida to South Delhi across the Yamuna river. The Company's principal source of revenue is from the levy of tolls on commuters on this facility.

Outlook: It should be prudent to note that the company's operating income comprises revenues from the toll it collects and hoardings/advertisements on the routes it has developed.The outlook for growth in traffic on the Delhi Noida Bridge is very positive. Traffic levels on the Delhi Noida Bridge are expected to increase as Noida and Greater Noida experience development and population growth. In their review, Halcrow Consulting estimate that by 2021 the population of Noida and Greater Noida areas will increase by 2 million and the daily vehicle trips on the Delhi Noida Bridge will increase to 200,504.

The company has set up a 100% subsidiary, DND Flyway, for the implementation of development rights. Part of the surplus land on the Noida side has been transferred to the subsidiary. These projects have thrown up fresh opportunities for NTBCL.

All this development could fetch huge returns for company and shareholders. Company's current valuation stands at Rs. 11 Billions. This calculates per share cost as on today at Rs. 55-60 and qualifies it as a stock to buy now.

Company has contract with NOIDA to recover the original total cost of project PLUS 20% returns on total cost of project. If in certain financial year, company can not achieve 20% returns due to lower traffic, the shortfall amount would be added to total cost of project which would form the new total cost of project as base cost for next years calculations. NTBCL’s annual report says this amount is Rs. 17 Billions. That comes at Rs. 91 per share. Although NOIDA would not pay it in cash to company, there is a provision in agreement that company has rights to operate the bridge and collect toll till company does not recovers this shortfall. Company management has estimated that it would take 70 years to recover all the shortfall of past and future!

The longevity of business is more than lifetime of a human being and that too assured one. Intrinsic value is very good which makes it a stock to buy. The assurance of income in the form of toll fees is there to remain. Company has all rights to increase toll rates in accordance with inflation rate with approval from NOIDA. Toll rate hike was not approved by NODIA due to recession in 2009, which is going to be reviewed soon by approximately 20% in near future.

Company has paid dividend of 0.50 paisa/share in 2010 which makes dividend yield at 1.5%. This should increase in future.

All in all, NOIDA Toll Bridge Company is a stock to buy now for long term. I would advice you to buy stocks of this company for at least 5 - 10 years.

P.S. I have used this bridge many times and it is truly a world class construction. I have seen the land around it and I consider it personally as one of the most prime land in Delhi and NOIDA area.
Disclaimer: I am buying stocks of NTBCL at CMP.

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Lavasa Corporation IPO - SEBI Clears Rs 2000 Cr IPO

Lavasa city developer Lavasa Corporation has received SEBI clearance for Rs 2,000 crore initial public offering (IPO).

Lavasa Corporation is Hindustan Construction Company's arm formed to develop Lavasa city.

HCC Real Estate (HREL), a 100% subsidiary of Hindustan Construction Company HCC holds 64.99% stake in Lavasa. Avantha Realty Limited and Venkateshwara Hatcheries Private Limited hold 16.25% & 12.79% stake in Lavasa.

ICICI Securities Limited, Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited and Axis Bank Limited are the book running lead managers to the issue.

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