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