Done deal: Godrej gets 100% of Godrej Sara Lee JV

Godrej Consumer Products today announced that it has acquired the remaining 51% stake in Godrej Sara Lee Limited from its JV partner Saralee Corporation, USA for €185 million or Rs. 1055 crore.

Sometime back I worked on trying to figure out the expected value of Godraj Sara Lee Limited deal. Am sharing the same here, hope it is useful.

Godrej Sara Lee Limited or GSLL, a 49:51 unlisted joint venture company between the Godrej Group and Saralee Corporation, USA, was incorporated on April 10, 1987. It is involved in the business of manufacture and marketing of mosquito repellants, air care, hair care, shoe care and home care products. The company owns popular brands like GoodKnight, Jet, Hit, AmbiPur, Brylcreem and Kiwi.

Godrej Consumerbiz Limited, a subsidiary of Godrej & Boyce Manufacturing Company Limited held 29% of GSLL shares and Godrej Hygiene Care Private Limited, a subsidiary of GIL held 20% of GSLL shares. Pursuant to a scheme of amalgamation, Godrej Consumer Products Limited (GCPL) bought this entire stake and now holds 49% stake in GSLL. For this, GCPL issued 30,296,727 equity shares of FV Re.1 to Godrej & Boyce Mfg Co Ltd and 20,939,409 equity shares of FV Re.1 to Godrej Industries Ltd. GCPL announced the amalgamation on May 27, 2009; we assume this to be the D-day of the deal valuation.

Calculations point that the shares offered by GCPL for GSLL were worth Rs. 846 crore on the day of the deal announcement, valuing Godrej Sara Lee at Rs. 1726 crore or 16.5 times its 2008-09 earnings.

In 2008-09, GSLL had sales of Rs 755 crore and a net profit of Rs 105 crore. Taking the most bearish estimates, I believed that GSLL could end 2009-10 with sales of Rs. 810 crore and a net profit of Rs. 115 crore. Assigning the same PE (of 16.5 times) to this, I arrived at a revised valuation of Rs. 1890 crore for GSLL. I also took into account the fact that Godrej could possibly end-up paying 10-15% more than this to Saralee Corporation due to: 1) better valuations in the equity markets; 2) premium for 100% control and 3) lucrative price offers by third parties.

However, as per the company announcement made today, it seems that the tide turned in favor of Godrej. In 2009-10, GSLL had sales of Rs 965 crore and a net profit of Rs 137 crore, way above my estimate of Rs. 810 crore and Rs. 115 crore. At Rs. 1055 for a 51% stake, GSLL was valued at just about 15 times its 2009-10 earnings.

Institutions stock-up Hero Honda, Idea Cellular, HDFC in 3Q 2010

Details of the changing shareholding pattern across the Nifty 50 stocks during Mar 2010 and Dec 2009 seems to suggest that FII/DII have turned bullish on stocks like: Hero Honda, Idea Cellular, HDFC, Maruti, Tata steel, Siemens, HDFC Bank, SBI.

Check the table below to learn more:

May 10 2010

Morgan Stanley bought a little more than half a million shares of Greaves Cotton Limited @ Rs. 359/- each. The stock is on the recommendation list of many a brokerages.

Reliance Mutual Fund bought nearly 1.5 million shares of Talwalkars’ Better Value Fitness Limited @ Rs. 152.60/- each. This is quite large, considering the fact that the latter had offered just 6 million shares @ Rs. 128/- each through the IPO.

Tuning In: Private Radio Broadcasting (an overview)

Radio broadcasting, once written off as a mode of entertainment, is again finding favor.

As per various studies, the Rs. 1000 crore Radio broadcasting industry of India is in for some serious business. Most players are looking forward to an improved business scenario post the expected changes from the Phase III policy.

The Government of India opened Radio broadcasting for private players sometime in 1999-2000 through the Phase I auction. At that time, the Ministry of Information & Broadcasting (MIB) offered 108 radio frequencies (channels) across 40 cities. It received 101 bids, aggregating to a license fee of Rs.425 crore. However, with most bidders defaulting MIB received just Rs. 160 crore for 37 channels. The sadder part is that a mere 22 channels were actually operationalized.

Discussions between the industry and government helped improve the situation through the Phase II auction held in 2006. In the Phase II policy, 337 radio frequencies across 91 cities were offered to the private sector. The MIB awarded 280 frequencies for Rs. 1150 crore, including OTMF by existing players. The new players paid OTEF or One Time Entry Fee, while the existing players paid OTMF or One Time Migration Fee.

Putting it frankly, the ‘revenue-sharing model’ under Phase II Policy came as a savior and helped infused life in the FM radio industry.

Phase I: Private FM allowed, Fixed License Fee, 15% escalation, 10 year validity, No FDI/FII, Open bidding
Phase II: Revenue sharing model, OTEF/OTMF, FDI/FII limit at 20%, 10 year validity, 15% max frequencies per operator, Closed bidding
Phase III: To be announced

Radio Mirchi owned by ENIL – a times group company – claims to be the largest private radio broadcaster in India. It earns over Rs 225 crores in revenues per year.

Radio Mirchi; 98.3; 32 stations; Times Group
BIG FM; 92.7; 45 stations; ADAG Group
Red FM; 93.5; 43 stations; Sun TV
Radio City; 91.1; 20 stations; MBPL
MY FM; 94.3; 17 stations; Dainik Bhaskar
FEVER; 104.0; 4 stations; HT Media
Radio One; 95.0; 7 stations; Mid-Day

Notes:
1) A Radio Broadcaster normally broks a day in 5-7 slots: like Breakfast Show, Youth, Afternoon Hour, Drive Time, Prime Time and Graveyard Shift.
2) Airtime Rates (advertisements on radio) are usually in the range of Rs. 300 - Rs. 1100 per 10 sec slot in smaller towns and Rs. 2500 - Rs. 5000 per 10 sec in case of Metros
For more details on this, write in to mtulsian@gmail.com

Bullish on Dabur; Buy Fem Care

Fem Care, which is set to amalgamate with FMCG major Dabur, is currently available at a discount of 2.75%. Few days back, the discount was as high as 7% due to a run-up in the stock price of Dabur India.

Based on the “Scheme of Amalgamation” following the acquisition of Fem Care by Dabur in 2008, Dabur India is to allot 5 Equity Shares of face value Rs. 1 each, for every 1 Equity Share of the face value of Rs. 10 held by the shareholders of Fem Care Pharma.

Fem Care Pharma Ltd. and Dabur India Ltd. closed at Rs. 875/- and Rs. 180/- respectively, on May 7 2010.

(Dabur had acquired close to 72% shares of Fem Care for Rs 203 crore. In Nov 2008, Dabur made the mandatory open offer to acquire additional 20% stake in Fem Care @ Rs. 800 per share. As a result Dabur owns 92% shares of the latter now.)

May 7 2010

Credo India Thematic Fund bought nearly one million shares of Gokul Refoils and Solvent Limited @ Rs. 75/- each. Gokul had reported extremely strong numbers for the quarter ended Dec 31 2009.

It is to be noted that Cresta Fund, an FII, holds close to 10% in the company.

GTL Ltd. bought close to 5 million shares in sister concern GTL Infrastructure @ Rs. 40.75/- each today. Both GTL and GTL Infrastructure (owned by Manoj Tirodkar) command market capitalization of Rs 4,000 crores each.

May 6 2010

Thakral Corporation sold-off its remaining stake in Gateway Distriparks Limited @ Rs. 123.50/- each. For more details refer to the previous posting on May 5 2010.

IDFC Mutual Fund is seen buying shares of Ceekay Daikin Ltd. for the past few trading sessions. The fund house bought 37,517 shares @ Rs. 176/- each today and 51,300 shares @ Rs. 176/- yesterday. This seems a little weird, since the shareholders of Ceekay Daikin have an open offer from Exedy Corporation (Japan) to sell out their shares @ Rs 178.50/- to the latter. The open offer closes on May 26, 2010.

India Discovery Fund Ltd buys 300,000 shares of Forbes & Co @ Rs. 390/- each. The fund already owns 5.8% in the Shapoorji Pallonji group company.

May 5 2010

SBI Mutual Fund and DSP Black Rock Mutual Fund bought 3 million shares each of Gateway Distriparks Limited @ Rs. 123.50/- from Thakral Corporation.

Thakral Group – an initial investor in Gateway Distriparks – had acquired these shares at an average price of Rs. 7.12 each. Thakral Group is a large distributor of consumer electronics in Singapore and a promoter in garments company Givo Limited.

The other big investors in Gateway Distriparks are: Fidelity, LIC of India, and Norges Bank (Norway).

Few months back, IFC and Blackstone had announced investments in two different a subsidiaries of Gateway Distriparks.

Jagran buys Print Business of Mid-Day for 174 crore

Jagran Prakashan announced an all stock acquisition of the print business of Mid-Day Multimedia today afternoon.

The deal will add nearly Rs. 100 crores or 15% to the topline of Jagran.

Based on the current market price of Rs. 33.50/- for Mid-Day and Rs. 115/- for Jagran, the deal will cost 15.1 million shares to Jagran or Rs. 174 crores worth of new shares. (The swap ratio has been decided as 7 : 2 – i.e. for each 7 fully paid up equity shares of Rs. 10 each of MML, its shareholders will be entitled to 2 fully paid up equity share of Rs.2 each of JPL).

Assuming a net profit margin of 20% in the Print Business, the deal has been done at a earnings multiple of 9x, a substantial discount to most companies (HT Media, DB Corp) in similar business.

It is to be noted that the radio business of Mid-Day, operated through Radio One FM94.3, will remain with the Ansari family of Mid-Day Multimedia Limited. Radio One FM94.3 one, a JV between Midday and BBC, operates in 7 key cities namely Mumbai, Delhi, Kolkata, Chennai, Bangalore, Pune and Ahmedabad. The business generates an annual revenue of Rs. 25-30 crores.

Last month Blackstone announced an investment of Rs. 225 crore in Jagran Media Network Private Ltd, the promoter holding company of Jagran Prakashan Ltd.

NYSE exits NSE India investment with over 50% gains

As per various media reports, NYSE Euronext is believed to have sold-off its 5% stake in the National Stock Exchange of India after three years for $175 million.

The deal values NSE at $3.5 billion vs. $2.3 billion, when NYSE bought the stake in 2007.

In Jan 2007, the NYSE Group had reached an agreement to buy 5% stake in NSE for $115 million in cash from a consortium of selling shareholders, including ICICI Bank Limited, IFCI Limited, IL&FS Trust Company Limited, Punjab National Bank, and GIC of India. The deal closed in April 2007.

(The Indian government allows international investors to buy as much as a combined 49% in any of the nation's stock exchanges with a limit of 5% for a single investor.)
As of March 2010, there were 1,470 companies listed on the NSE with a combined market capitalization of Rs. 60 lakh crore. The average daily trading turnover on the exchange is currently around Rs 88,000 crore. (Ratio of Cash:FO - 15:85)

At the time of NYSE deal, there were 1,185 companies listed on the NSE with a combined market capitalization of Rs. 36 lakh crore. The average daily trading turnover on the exchange stood at Rs 40,000 crore. (Ratio of Cash:FO - 20:80)

Other points that are noteworthy:

The average daily turnover (CM segment) on the NSE is nearly 2.5x that of the BSE.

NSE generates more than 7x the business generated by the BSE. Transaction charges earned by the NSE are close to Rs. 500 crores a year.

NSE/BSE members are required to pay transaction charges on trades undertaken by them. The transaction charges (payable on every Rs. 1 lakh of turnover) are higher in the CM segment than on the F&O segment.

For the period ended March 31, 2009, NSE generated an income of Rs. 1,025 crore and a net profit of Rs. 516 crore compared to Rs. 1,039 crore and Rs. 521 crore, respectively, in the previous year.

LIC, Birla Sun Life… bullish on Amtek Auto

Life Insurance Corporation of India, the largest investor in the Indian stock market, seems to have formed a bullish opinion on Amtek Auto. The LIC is believed to have bought over Rs. 100 crores of Amtek Auto shares at an average price of Rs. 165/- each over the past few months.

In fact, LIC is not alone. Birla Sun Life (Mutual Fund and Life Insurance) too is believed to have picked up over Rs. 125 crores of Amtek Auto shares at an average price of Rs. 170/- each during the past few months.

Some of the others who bought into the auto parts maker recently include: Swiss Finance Corporation, Macquarie Bank and Copthall Mauritius.

The cost of going Public

I had recently done a small study for a client and am sharing some of the findings from that on this blog, without infringing the contract obviously. I think it could be of interest to some of you.

The work tries to answer one simple question: How much would it cost a company if it were to move public via an IPO?

There’s no perfect answer to this.

Based on the data gathered from nearly 20 companies’ that went for an IPO this year, the cost could vary anything between 4% to 13% of the money raised. One can try to see this in the following format as well.

Slab x: Money Raised in cr: Cost %
Slab 1: Less than 100cr: 10%
Slab 2: 100cr to 200cr: 7.5%
Slab 3: 200cr to 500cr: 5.0%
Slab 4: 500cr and above: 4.0%

Cost or Issue Expenses are usually in the form of: Fee to BRLM; Marketing, Printing charges; Fee to SEBI/NSE/BSE; Fee to Legal Counsel; Fee for IPO Grading; Registrar charges; and Misc. expenses.

April 30 2010

Nomura India bought a million shares in Mcleod Russel @ Rs. 220/- each. Nomura held 1.6 million shares in the company as on March 31 2010 through "Nomura India Investment Fund Mother Fund".

Nomura India also happens to amongst the four anchor investors in Nitesh Estates.

Shree Ganesh Jewellery: Time to buy?

Shree Ganesh Jewellery, a kolkata-based exporter of handcrafted gold jewellery which recently came out with an IPO, is presently quoting at Rs. 132/- per share, nearly 50% discount to the issues price of Rs. 260/- per share. In fact, one will be surprised to learn that two years back when Credit Suisse invested in the company, it paid Rs. 160/- per share for buying a 10% stake.

At the current market price, Shree Ganesh Jewellery is available at 5 times full year earnings (expected), compared to 18x for Rajesh Exports, 8x for both Gitanjali Gems and the recently-listed Thangamayil Jewellery.

Shree Ganesh Jewellery is backed by Credit Suisse, which still holds 5.3% stake in the company. The IPO was managed by Axis Bank, ICICI Securities, and Avendus Capital. It received a subscription of 1.96x in total (1.4x in retail).

AT&T exits TechM; gets 752 crores

AT&T Inc. seems to have fully exited its investment in Tech Mahindra today. Based on the information available from the stock exchanges, AT&T sold 8.6 million shares of the Indian company @ Rs. 762.50/- each. Most of the shares were bought by the Life Insurance Corporation of India, whose stake could have increased to 13.4% post the deal.

The sale should come as a surprise since AT&T International had bought these shares from Mahindra BT Investment Company (Mauritius) Ltd in an off market deal in March 2010. However, the deal was a part of an “Option Agreement” dated May 10 2005 between the promoters of Tech Mahindra and SBC International, set to expire on July 31 2010.

Note that, in Jan 2005, SBC Communications Inc. acquired AT&T Corp., and the combined company was subsequently renamed AT&T Inc.

April 27 2010

Two stocks were in focus today – Balaji Distilleries and Maruti Suzuki India.

Boston-based Venus Capital Management Inc. bought 900,000 shares in Balaji Distilleries @ Rs. 43.50/- each; the seller here was DSP Merril Lynch.

Sometime back, Balaji Distilleries was in the process of being merged with Vijay Mallya’s United Spirits, the World's 2nd Largest Spirits Company. Based on the details available, holders of 55 shares of Balaji Distilleries were to be issued 2 shares of United Spirits upon the merger. My sense is that the shares of Balaji Distilleries were lapped up due to an arbitrage play here.

Swiss Finance Corporation (SFC) sold close to two million shares of Maruti Suzuki India @ Rs. 1290/- each. The counter has been witnessing selling action ever since the company announced quarterly results. SFC held 3.5 million shares of Maruti Suzuki at the end of March 31 2010.

April 26 2010

Buying interest was seen in Sasken Communication. The buyers this time being – Reliance Mutual Fund (1,73,000 shares @ Rs. 213/-) and Goldman Sachs (2,12,880 shares @ Rs. 217/-). Last week, ICICI Prudential had bought shares in the company.

Earlier this year, Nortel Networks sold a large part of its stake in Sasken. Check this link: http://www.vccircle.com/500/news/nortel-sells-45-stake-in-sasken-via-market-sale

Also, Wellington Management Company LLP has informed that it has increased its ownership in Magma Fincorp Limited to 6.56% from 1.49% earlier.

Jaypee Infratech to boost Jaiprakash Associates

Jaypee Infratech, a subsidiary of Jaiprakash Associates recently announced the price band for its upcoming IPO. The company is likely to raise an amount close to Rs. 2,300 crores by diluting anything between 15-20% stake, valuing Jaypee Infratech at over Rs. 12,000 crores.

At the CMP of Rs. 160 per share, Jaiprakash Associates commands a market capitalization of Rs. 34,000 crore. Another listed entity of the company, Jaiprakash Power Ventures has a market capitalization of Rs. 15,000 crore. (Jaiprakash Associates is a conglomerate with businesses like cement, power, hotels, real estate, and EPC amongst others).

According to various sources, the cement business and the EPC business of the company could be worth Rs. 16,000 crores if seen as separate entities. Adding the market value of Jaiprakash Power (76% share) and Jaypee Infratech (99% share) to this, we arrive at a value of Rs. 40,000 crores for the parent company. And...mind you…we still haven’t accounted for the real estate, hotels and few other businesses of Jaiprakash Associates.

No wonder, the counter is witnessing huge volumes on both the bourses.

HDFC Mutual Fund places big bet on Tata Motors DVR

Data from the NSE and BSE suggest that HDFC Mutual Fund bought shares worth Rs. 334 crores in Tata Motors DVR since the beginning of April 2010. Other large buyers include:
Dilipkumar V Lakhi (a diamond manufacturer) – Rs. 38 crore
JF India Fund – Rs. 38 crore
Sundaram BNP Paribas MF – Rs. 24 crore
Prulink Asian Equity Fund – Rs. 22 crore
International Opportunities Fundasian Equity Fund – Rs. 18 crore

Other large investors with Tata Motors DVR shares include: Nomura India, DSP Blackrock, Dragon Peacock Investments, Swiss Finance Corp, Pru India Equity, JM Financial and IFCI.

In October 2008, Tata Motors raised Rs.4139 crores through a simultaneous but unlinked rights issue of ordinary shares and a new group of ‘A’ ordinary shares with differential voting rights. The company issued 64,175,655 shares each of ordinary shares and ‘A’ ordinary shares of face value Rs.10 in the ratio of one ordinary and/or one ‘A’ ordinary share for every six ordinary shares at a premium of Rs.330 per share and Rs.295 per share respectively.

Ordinary shares: 6,41,75,655 * 340 = Rs. 2182 crores
‘A’ Ordinary shares 6,41,75,655 * 305 = Rs. 1957 crores

Till Dec 31 2008, 84% of the ‘A’ Ordinary shares were held by the promoter group. The same stood at 56% in Dec 31 2009.

Talwalkars IPO gets a good response

Data on the NSE suggests the following:
Overall subscription at 28.4 times. QIBs – 35.4x; NIIs – 51.5x; RIIs – 8.4x

April 23 2010

Sequoia Capital sold its entire stake (3,964,192 shares) in Manappuram General Finance & Leasing @ Rs. 740/- per share. The shares were bought by Wellington Management Company LLP (659,176 shares), Sloane Robinson LLP (1,374,000 shares) and Copthall Mauritius (1,340,479 shares).

Sequoia had invested in Manappuram by way of compulsorily convertible preference shares in Dec 2007 and in Nov 2008. Rough calculations indicate that the average cost of acquisition for shares by Sequoia in Manappuram was Rs. 150/-.

Sequoia exits Manappuram?

Sequoia Capital, which held 3.96 million shares in Manappuram General Finance & Leasing Ltd. as of March 2010, is believed to have exited the company netting around Rs. 300 crore today morning.

Sequoia had invested in Manappuram through its India Growth Investments I Fund in December 2007.

April 22 2010

HDFC Mutual Fund has again bought into TATA Motors DVR: 2 million shares @ Rs. 560/- each. HDFC MF has now bought close to 7 million Tata Motors DVR shares over the past few trading sessions.

Blackstone buys 500,000 shares in Ess Dee Aluminium @ Rs. 438/- each.

ICICI Prudential Mutual Fund buys 365,000 shares in Sasken Communication @ Rs. 190/- each. The company reported its quarterly results yesterday.

Rare Enterprises (Rakesh Jhunjhunwala) buys 100,000 shares in Visaka Industries @ Rs. 152/- each. The stock ended the day at Rs. 177.65/- or 12% up.

Talwalkars: Your gym buddy to go public

Mumbai-based Talwalkars, which runs a chain of fitness centres across the country, has finally received the go ahead from SEBI; the company announced the price band for its initial public offering few days back.

At Rs. 123 – Rs. 128 per share, the promoters are seeking a valuation of anything between Rs. 297 crores to Rs. 310 crore for the company. Assuming a PAT of Rs. 6 crores, Talwalkars would trade at a PE of 50x.

Prof. Mankekar, Radhakishan Damani (D’Mart) and Celebrity chef Sanjeev Kapoor are investors in the company.

Read the full story here: http://in.reuters.com/article/indiaDeals/idINIndia-44939420091223

April 21 2010

Goldman Sachs (GS) sold over 500,000 shares in UTV Software @ an average price of Rs. 438/-. My sense is that GS has fully exited the media company. As per a Bloombergutv report, GS has stake in over 25 Indian cos: Check the list here: http://www.bloombergutv.com/news/latest-business-news-india/49715/goldman-has-stake-in-over-25-indian-cos.html

Clearwater Capital Partners, LLC sold over 500,000 shares of pharmaceutical company Kopran @ Rs. 35/- each. The investment firm was recently in news for having hiked its stake in Diamond Cables.

Citigroup sold shares worth Rs 6.7 crores in Tata Coffee @ an average price of Rs. 400/-.

April 20 2010

Bay Pond (a $1.5 bn hedge fund within the Wellington Management Company LLP.) bought over a million shares of Magma Fincorp Limited @ Rs. 302/- each. Note that Abn Amro and Citigroup picked up shares of Magma Fincorp few months back.

April 19 2010

Three stocks were in focus today – Amtek Auto, South Indian Bank and Fortis Healthcare.

Birla Sun Life Mutual Fund bought a million shares of Amtek Auto @ Rs. 180/-. The fund had bought close to 2.5 million shares in the auto components company in March 2010.

Morgan Stanley bought a little more than 1.6 million shares of South Indian Bank @ Rs. 173.50/-. Morgan Stanley already holds 1.5 million shares in the kerala-based bank.

Trinity Capital cut stake in Fortis Healthcare. The UK-based fund sold over five million shares of the company at an average price of Rs. 160/-. As per information on the website of Trikona Trinity Capital PLC (http://www.trinityplc.com), the scheduled exit from Fortis Healthcare was meant to take place in Sept 2010.

FIIs pump money each single day since Feb 26, 2010

The Foreign institutional investors (better known as FIIs) have injected close to Rs 17000 crores into the Indian stock markets since March 2010. In fact, they’ve made net purchases each single day since Feb 26, 2010. The rising interest from the FIIs has in turn led to a 7% rally in the Nifty, which closed at 5,263 on April 16, 2010.

S&P CNX Nifty had closed at a 52 week high of 5,375 on April 07, 2010. Refer to the chart (below) to understand this. Note that the portion in RED denotes net flow of money from the FIIs; portion in GRAY denotes net flow from DIIs.

April 16 2010

Activity was again seen in the Tata Motors DVR counter today. Bulk deals data suggests that HDFC Mutual Fund and JF India Fund (JP Morgan) bought 10,00,000 shares and 7,00,000 shares each @ Rs. 548/- respectively. With this, HDFC Mutual Fund has now bought close to 5 million Tata Motors DVR shares over the past few trading sessions.

Another stock that did well was Orbit Corporation; CLSA bought more than 1.6 million shares in the real estate company @ Rs. 323/- today. Over the past few months we’ve seen buying in Orbit Corporation shares from Swedbank and Blackstone.

Tata Motors DVR

A lot is being said and written about shares with differential voting rights and their discount to the ordinary shares for Tata Motors.

I thought to do a small study in order to understand this better.

In Sept 2008, Tata Motors announced capital raising plan by way of ordinary shares on rights basis @ Rs. 340/- per share and through “A” ordinary shares @ Rs. 305/- per share. The rights on ordinary shares were at a 22% discount to the closing price of Tata Motors on the NSE; the same magnified to 30% for “A” ordinary shares.

As per the announcement made, the “A” shares would carry differential rights as to voting and dividend – one vote for every ten shares held and a 5% higher dividend than ordinary shares.

However, the Tata Motors DVR failed to generate investor interest and devolved on the promoters and the underwriter.

The only other publicly listed company that offered shares with differential voting rights in India is Pantaloon Retail. The Class B shares offered by Pantaloon Retail closed at a 31% discount yesterday; same as that for Tata Motors.

April 15 2010

Standard Chartered bought 1,97,000 shares of Kamat Hotels @ Rs. 109/-. The stock closed on the 20% upper circuit today.

Fidelity increased its exposure in Nucleus Software; the fund house bought 1,67,325 shares of the company @ Rs. 169/-. The stock closed at Rs. 170/- on the NSE.

Bain Capital sits pretty with notional gains of Rs 120 crore in Himadri

Bain Capital, which was recently in the news for having acquired a substantial stake in Lilliput Kidswear, is doing well for itself.

The PE firm is already counting its profits on the Rs 410 crore investment it made for acquiring a 25% stake in Kolkata-based Himadri Chemicals & Industries Limited, early this year. At the current market price of Rs. 520/- per share for Himadri, Bain Capital is making a nice 30% return on its two and a half month old investment. (Bain had bought shares in Himadri @ Rs. 400/- per share by way of preferential allotment and open offer in Feb 2010.)

Kolkata-based Himadri Chemicals is the largest manufacturer of coal tar pitch in India with a market share of 70% in terms of sales. The company manufactures three types of coal tar pitch – 1) Binder pitch: which is used in aluminium and graphite electrodes as binding material and; 2) Zero QI Insoluble pitch: finds use in graphite electrodes and; 3) Mesophase Pitch: used for producing lithium ion batteries

Established in 1984, Bain Capital is one of the world's leading private investment firms managing approximately USD65 billion in assets under management.

This is a nice presentation to understand the business of Himadri Chemicals: http://www.himadri.com/files/HCIL_presentation_vF_2-Sep-09.pdf

Indian Premier League: Hot Property

Bain Capital buys into Lilliput Kidswear

As per various newspapers, Bain Capital is picking up close to 31% stake in Lilliput Kidswear for $60 mn or Rs. 265 crore. Everstone Capital and the promoter of Lilliput, Sanjeev Narula would be selling a part of their shareholding to Bain Capital.

Based on my findings, Bain Capital has paid on the higher side (approx. 30% premium) to acquire the stake in Lilliput Kidswear. Using parameters like sales multiple and earnings multiple Lilliput Kidswear should’ve been valued at anything between Rs. 625-650 crore and not Rs. 850 crore.

The closest competitor to Lilliput Kidswear is Gini & Jony Ltd. The latter is backed by Reliance ADAG Group, and Arisaig India. It is currently mulling an IPO and is seeking a valuation of over Rs 500 crore.

Company Name: Lilliput Kidswear Ltd.
Incorporated: 1991
Production Capacity: 12 million units per annum
Retail Outlets: 250
Turnover: Rs. 350-400 crore
CEO/CMD: Sanjeev Narula
Other Investors: Everstone Capital (Future Group) invested in 2006

The Indian kidswear market is growing rapidly; in the range of 25-40% per annum. However, it is marred by poor profit margins – Ebitda Margins of 12-15% and Net Margins of 5-8%.

Funds seen lapping-up Tata Motors DVR shares

Buying interest has been seen in Tata Motors DVR ‘A’ Ordinary Shares. Many believe that there is a huge arbitrage opportunity in the stock given that Tata Motors trades at Rs. 775/- per share.

Over the past two days, we’ve seen buying from large fund houses: 35,00,000 shares by HDFC Mutual Fund, 5,10,691 shares by Sundaram BNP Paribas Mutual Fund and 4,44,725 shares by Prudential (Pramerica).

In 2008, Tata Motors had issued 64.17 million DVR shares as a part of its plan to raise Rs 4,145 crore through a rights issue for repaying the loan taken for JLR’s buy. The DVR shares carry one voting right for every 10 shares held and were issued @ Rs 305/- each.

Salt Profits: Catch me if you can…

Most of us take salt in our daily food. In fact it is said that, for humans, salt is as essential as water.

Now, let me ask you a simple question…which salt do you eat at home? Pat comes the reply… Tata salt or iodine salt. Reason being that Tata salt pioneered the branded salt movement in India way back in 1983. No wonder, it has c.45 percent market share in the national branded salt segment.

Okay…I now ask the next question – Can you guess the price of a 1kg packet of Tata salt? I’m sure half the people won’t be able to answer this.

It is approx. Rs. 10-12 per kg.

Does anyone know of Catch Salt? Dear friends “Catch Salt” which belongs to the well known DS Group – makers of Rajnigandha pan masala – sells for Rs. 20 per 200 grams or Rs. 100 per kg. I don’t think the product in the containers of Catch Salt is any different from that in plastic packets of Tata salt. However, despite this huge price difference, Catch Salt continues to do brisk business and has no competition.

Are you listening Mr Tata and Mr. Biyani?

Dhoots transfer portfolio holdings to Videocon Industries

Over the last few days we see that the Dhoot family has been selling shares held by group entities in various publicly listed companies to Videocon Industries Ltd. Listed below are the names of those companies, alongwith their market capitalization in Rs. Crore.
Archies (65)
IOL Netcom (75)
Deccan Cements (136)
Maxwell Industries (137)
Prime Securities (104)

Note that Videocon Industries Ltd. had recently announced for a Rs. 1150 crore rights issue priced at Rs. 225/- per share. The issue close today.

The Buzz Around Microfinance

The IPO of SKS Microfinance has created a whole lot of interest and debate on the money making involved in the business of financing the poor. What started out as a not-for-profit initiative by the MFI’s, has now turned into a for-profit business venture attracting a whole lot of private equity and venture capital firms.

Today I share with you the investment profile of Aavishkaar Goodwell, a specialized equity fund dedicated to supporting Indian MFIs. Aavishkaar Goodwell is a joint initiative of the teams behind Aavishkaar India, the world’s first for-profit microventure capital fund; and Goodwell, a Dutch microfinance investment company funded by social investors and pension funds.

2010: Shre Pathrakali (n.a)
2009: Bhartiya Samruddhi (Rs 9.0 cr), Suryoday (Rs 4.5 cr), Asomi (n.a)
2008: Grameen Koota (Rs. 9.0 cr), Equitas (Rs. 6.0 cr)
2007: Share Microfin (Rs 9.0 cr)

(In India, microfinance loans range in size from USD100 – USD500 with interest rates of 25% to 35% per annum.)

April 09 2010

Reliance MF bought 3,50,000 shares of Tamil Nadu Newsprint & Papers Ltd. @ Rs. 98/-
Birla Sun Life bought 1,46,100 shares of Bharti Shipyard @ Rs. 275/-
IDFC bought 33,00,000 shares of Bliss GVS Pharma @ Rs. 38/-

Note that Ballarpur Industries (one of the largest mfr. of paper in India) stock had performed exceptionally well during the last week.

Bliss GVS Pharma is a manufacturer of female contraceptives; the shares were sold by one of the Promoter.


Happy Investing!
Manish