BRUSSELS/SAN FRANCISCO: Google Inc won approval on Tuesday from the European Commission of its planned acquisition of DoubleClick Inc and promptly closed the deal, sending its stock 6 per cent higher.
The move will allow the Web search and advertising leader to accelerate its move into the market for corporate banner and display ads, where it has little business, and fulfill an expansion plan that has been on hold for a year.
Separately, a New York federal judge capped possible damages media conglomerate Viacom Inc can seek in its $1 billion lawsuit alleging Google was negligent allowing pirated programs on its YouTube online video sharing service.
The raft of favorable news, coming on a buoyant day for U.S. stock markets when the Dow Jones index closed up 3.6 per cent, countered a string of bad news that has had Wall Street debating whether Google's rapid growth is slowing.
Google shares enjoyed a minor rally, gaining 6.3 per cent to $440, as the stock began to reverse a sharp decline since the start of 2008, when it stood near $700.
Shares hit 17-month lows on Monday and remain off 36 per cent so far this year after jumping 50 per cent in 2007.
The Web search leader has been hampered in moves to expand into the market for corporate brand ads through its 2007 merger with DoubleClick and into the emerging video advertising market through its acquisition of YouTube in 2006.
"Google has kind of languished strategically over the past year," Sanford C. Bernstein analyst Jeffrey Lindsay said. "The strategy for 2007 was really put on ice for quite some time."
"It looks like Google is starting to make headway," the Wall Street analyst said. "They are coming back on something of a roll -- the wait-and-see period is coming to an end."
The EU approval of the $3.1 billion DoubleClick deal came despite objections from rivals and privacy advocates and followed an in-depth investigation by European competition officials. The merger, announced a year ago, was given a go-ahead by U.S. antitrust authorities late last year.
Software giant Microsoft, Internet rival Yahoo and AT&T Inc, the largest U.S. telephone company, had pressed regulators to block the Google-DoubleClick deal, arguing it gave Google too much power in online ad markets.
Within hours of the European Commission's approval of the DoubleClick deal, Google announced it had sealed the deal.
Google says it has been limited by law from making detailed integration plans with DoubleClick, but by early April it expects to have a plan to cut an unspecified number of jobs in DoubleClick's U.S. operations and, potentially, overseas.
"As with most mergers, there may be reductions in headcount. We expect these to take place in the U.S. and possibly in other regions as well," Google said in a statement.
DoubleClick has 1,500 employees. Google had 16,805 employees at the end of 2007.
Looking ahead again
On the legal front, US District Judge Louis Stanton denied a Viacom request to add punitive damages to its suit against Google, saying common law damages cannot be recovered under the Copyright Act.
A Viacom representative said the company had no comment.
The European Commission, the European Union's executive arm, said Google and DoubleClick operate in different parts of the online advertising world and their deal was not a marriage of rivals.
Google attracts nearly two-thirds of Web searches in the US and dominates the European Web search market with a share upward of 80 per cent, according to industry data.
That gives it an edge on the simple ads it sells, which appear on its search pages. DoubleClick deals with fancy display ads that it delivers to many kinds of Web sites.
But last month, a report by Web traffic researcher comScore Inc raised fears among investors that Google may be having trouble converting its search-market leadership into paid advertising, from which it derives 99 per cent of its revenue.
Many analysts countered by saying Google management's own moves to improve the effectiveness of ads by paring back the number it delivers on each Web page explain the decline.
Bernstein's Lindsay says investors are now focused on whether comScore's February data for Web search advertising, due out later this month, will show a continued slump or a rebound in the number of advertisements Web visitors viewed.
The Wall Street analyst believes the data will show improvements in Google ad viewership.
"That would confirm that Google has not been damaged by the economic downturn," said Lindsay, who recommends investors buy Google shares because they will outperform the market.
He said positive news at this juncture would lead him to change his rating to "strong buy" on the stock.
©Reuters
Wednesday, March 12, 2008
The Seeing-Eye Gene
A breakthrough in gene research may offer hope for the millions suffering from macular degeneration.
Candace Cox, a 56-year-old management consultant from Scottsdale, Ariz., has watched eight family members go blind, all as a result of age-related macular degeneration, or AMD, which afflicts 9 million people in the U.S. One-third of Americans over age 70 have it. Cox's eyes have signs of early degeneration, but she is determined to outwit her genes. "If it's inevitable, so be it," she says. "I just want to slow down the progression."
AMD comes in two versions, dry and wet. Most people will get only the dry kind, which gradually degrades vision over years. One out of ten dry cases turns into the wet kind, in which leaky blood vessels flood the retina. Wet AMD can completely destroy vision in a matter of weeks or months without regular shots in the eye (up to $2,000 a month) of cancer drug Avastin or its descendant Lucentis, which dry up the leaky vessels. But the fix is temporary, and it doesn't work for all.
Dry AMD patients have only herbs and quack remedies to choose from. But Candace Cox's doctor, University of Iowa ophthalmologist Gregory Hageman, is at the forefront of research on lasting treatments for dry AMD. Over the past four years Hageman has uncovered how AMD is linked to three variations of the so-called complement factor H gene, which is a crucial player in regulating the immune system. One variation of the gene produces proteins that seem to protect the eye. Those with it enjoy perfect sight well into their 90s. Another variation causes AMD.
Since 2005 a firm in New Haven, Conn. called Optherion has been developing Hageman's ideas into a drug to reverse AMD's effects. Animal tests are just getting under way, but in test-tube experiments the protective complement factor H proteins successfully repaired a population of red blood cells damaged by the "bad" variation. Optherion hopes to begin human trials next year.
A half-dozen other biotechs are working on dry AMD, but Optherion controls the patents to Hageman's ideas, has raised the most early-stage venture funding ($37 million) and is backed by veteran biotech investor David Scheer, who has launched eight companies in 20 years.
Hageman, who is now Optherion's chief scientific officer, began exploring the causes of AMD 20 years ago. When he dissected the blistery deposits, called drusen (German for "nodules"), that form on the surface of retinal cells in patients with AMD, he noticed that they contained a lot of complement factor H protein, about 25% of their mass. Hageman's theory: AMD destroys the eye because flawed factor H genes are signaling immune cells to go after friendly cells in the retina.
In 1993, without much data to support him, Hageman told his theory to an audience at an ophthalmology conference. "They laughed me off the stage," he says. Big Pharma passed on his theories for years. "They either didn't get it or didn't believe it," says Pamela York, director of the University of Iowa's research foundation.
But in 2005 Hageman showed that half of AMD patients had a flawed factor H gene. Later that year he converted more doubters, offering evidence that 85% of AMD cases could be pegged to one of the three complement factor genes. The paper also uncovered the super-vision factor H variation. Optherion is now cloning that gene's protein into a drug. The long bet is that a drug to fix a flawed complement pathway can treat many diseases. "The complement system is involved in everything from asthma to heart disease," says Optherion Chief Executive Colin Foster.
Some ophthalmologists think it's a mistake to depend on a single genetic location for identification and treatment. When Michael Gorin, an ophthalmologist at UCLA, replicated Hageman's 2005 study, he found that 50% of patients carrying a single copy of flawed complement H gene never develop AMD. "You've scared a lot of people, and we don't know whether the disease will ever manifest itself."L&T plans major restructuring
A massive reengineering is underway at Larsen & Toubro, India's premier engineering company, as it gears up to tap bigger opportunities.
AM Naik – the CMD of L&T, is getting ready for his biggest ever challenge to turn the engineering behemoth into focussed corporate entities, which could eventually be listed in the stock markets.
Sources say that L&T may be broken up into 4-5 companies and the company's top brass is evaluating value creation through a split. The operating companies are likely to be listed as separate entities.
L&T’s top brass maintains that recast blueprint will be taken up in its vision document Lakshya 2, which will lay down the 5-year roadmap post 2010.
While commenting on the restructuring move, Naik said, "Lakshya 2 will look into whether we need to to list companies separately or not."
As a first step L&T is creating 12 verticals comprising core businesses of engineering, construction and electricals businesses, which will function as operating companies from next month.
"The verticals will function as independent companies with functions like finance, HR vested on its board. It will only fall short of being separately listed," added Naik.
The company management says a final decision on the restructuring will be taken only if it is convinced that L&T can command a conglomeration premium by listing its verticals separately.
But for the moment the focus is clearly on making these verticals function like independent corporate entities just short of being separately listed.
ZymoGenetics Wins Over Warburg
Warburg Pincus is throwing its money behind ZymoGenetics' new drug pipeline, a stamp of approval most investors have been hesitant to give the biotechnology company lately.
The New York-based private equity firm has increased its stake in
ZymoGenetics shares shot up 3.1%, or 27 cents, to $9.03, on Wednesday afternoon.
The company’s stock has fallen 22.9% since the beginning of the year as investors worry whether ZymoGenetic’s new drug, Recothrom, a synthetic protein to control bleeding during surgery, will be able to take market share from the dominant player in the arena
On Jan. 17 the Food and Drug Administration approved Recothrom, but the big question is whether hospitals will quickly switch to Recothrom and whether ZymoGenetics will be able to compete with King, which offers its product for almost half the price of the new treatment. Recothrom is ZymoGenetics' first product and the company said in its latest annual report filed with the SEC that it was at least several years away from profitability.
Oppenheimer analyst Kevin DeGeeter said it will take two to three quarters before Recothrom’s success can be gauged. But DeGeeter says he’s less confident than most about the drug.
Investors are also hopeful about ZymoGenetics product pipeline, which includes Atacicept, a drug which is in development for rheumatoid arthritis and that the company believes could be pivotal for lupus, DeGeeter said. But DeGeeter said Phase 2 human testing data on Atacicept won’t be in until the second half of 2009 and won’t be launched until 2011 or 2012.
Wednesday’s announcement that Warburg Pincus increased its stake in the company seems to indicate that the firm believes in the success of ZymoGenetics’ pipeline products.
Meanwhile, in the SEC filing Warburg Pincus said it may seek to engage in future discussions with management regarding the company's strategy or the possibility of additional representation on the board. Two of the nine members currently serving on the company's board were designated by Warburg.
Warburg owns 9.4 million shares in the Seattle company, which had 68.6 million shares outstanding as of Feb. 22.
According to its filing, Warburg Pincus acquired shares of the company's series B convertible preferred stock in 2000, prior to ZymoGenetics' initial public offering. These shares automatically converted into roughly 7.2 million shares of common stock following the IPO and a subsequent stock split. The investment firm has since purchased an additional 2.2 million shares.
Warburg has plowed money into a number of investments in recent months. In September the firm bought convertible bonds in Chunghwa, one of Taiwan’s top producers of thin-film transistor liquid crystal displays. If fully converted, the bonds would give the firm a 10% stake in Chunghwa.
Then in October, Warburg picked up 11.2% of the electrical and power distribution company Havells India for $110 million, adding to its extensive portfolio of investments in India. In December Warburg gave bond insurer MBIA a $1 billion boost to its cash reserves in an effort to protect its sterling credit rating.
The Associated Press contributed to this article.
Gail India rubishes on news item
With reference to the news item appearing in a leading financial daily titled `Rumours of bonus issue lift Gail`, (Q, N,C,F)* Gail India clarified that the board has not considered any 
proposal pertaining to issuance of bonus shares.
The company registered a decline in net profit to Rs 6,213.20 million for the quarter ended December 2007 as compared with Rs 6,654.60 million for the corresponding quarter last year.
Shares of the company closed down Rs 4.35, or 1.03% at Rs 416.25. The total volume of shares traded at the BSE was 264,720. (Wednesday).
KSE recovers lost ground as Zain helps index rise 42.1 pts
KUWAIT CITY, March 11: Kuwait stocks revved up on Monday, recovering from the drop seen in the earlier session. The market climbed 42.1 points in volatile trading, led by Zain and Investment Dar. The telecom services provider surged 100 fils on brisk trading while Dar rallied 20 fils. Speculative buying interest in some of the mid and low priced stocks across the sectors also helped the advance. Blue chips mostly sagged as investors booked profit on the prime positions for the second day in a row. Agility shed 20 fils extending its losses while Kuwait Finance House jumped 40 fils. KSE index edged 0.3 percent higher to end at 14,218.2 points amid a decrease in volume turnover. Manufacturing sector pivotal, National Industries Group lost 20 fils and so did NBK after closing in the negative in the earlier session.
Tuesday, March 11, 2008
3 common mutual fund misconceptions
Few would dispute the utility that mutual funds as investment avenues can add to investors� portfolios. Similarly, in recent times, the greater acceptance of mutual funds and their impressive showing in the domestic context has been chronicled in detail. There is also a huge amount of information available on how to invest in mutual funds and make the most of them. Sadly, there is little being done to remove the several misconceptions doing the rounds. Thanks to these misconceptions, investors end up making incorrect investment decisions. In this article, we expose 3 common mutual fund misconceptions.
1. SIP is an investment avenue
SIP (systematic investment plan) is a buzzword of sorts in the mutual fund industry. Fund houses have done their bit to spread the gospel of SIP among investors. Advertisement campaigns exhorting investors to invest via an SIP are common place. However, many investors have been led to believe that SIP is an investment avenue. It is not uncommon to find investors who want to invest in an �SIP fund� (incidentally, there was even a mutual fund launched with that name).
The fact: SIP is a mode of investment, not an investment avenue. The conventional method of mutual fund investing entails making one-time lump sum investments. SIP investing involves making regular investments in a staggered manner. By spreading the investments over longer time frames (at least 12-24 months), investors stand to gain by lowering the average purchase cost vis-�-vis lump sum investments. This is most evident when equity markets experience prolonged bouts of turbulence. Also, SIP investing tends to be lighter on the wallet as opposed to lump sum investing.
#
SIP: All you need to know
2. �Since inception� numbers are comparable
It is a common practice to evaluate equity-oriented funds by comparing their performances over longer time frames like 3 years and 5 years. At times, investors are known to draw conclusions based on �since inception� performances. �Since inception� refers to the growth clocked by a fund since its origin.
The fact: �Since inception� performances are not comparable, simply because not all funds have the same inception date. For example, a diversified equity fund launched in 1995 can be compared with another fund launched in 2002 over the 3-Yr and 5-Yr time frames. However comparing their �since inception� performances would be inappropriate because the first fund has a 13-Yr track record while the latter has been in existence for 6 years. A fund�s performance since its inception can at best be considered for drawing comparisons vis-�-vis the benchmark index (i.e. by considering a corresponding period) to evaluate its relative performance.
3. Thematic funds make good investments
This is likely to be the most disputed misconception. After all, most thematic funds have delivered superlative performances over the last 18-24 months. Let�s not forget that just about every fund house worth its salt is launching thematic NFOs (new fund offers) and that includes fund houses like HDFC Mutual Fund which were always averse to the idea. Clearly, the worthiness of thematic funds cannot be doubted.
The fact: All the hype surrounding thematic funds doesn�t change the fact that they are high risk-high return investment propositions. Furthermore, such funds can deliver only so long as the underlying theme does well; once the theme runs out of steam (every theme does at some point in time), so does the fund. And given the restrictive investment mandate of a thematic fund, the fund manager has no option but to stay invested even in the aforementioned scenario.
Conversely, there are diversified equity funds that invest in an unrestricted manner. By not being tied down to any specific theme, they are free to seek attractive investment opportunities across the investment universe. Statistics reveal that over longer time frames (more than 5 years) well-managed diversified equity funds are known to score over their thematic peers. More importantly, diversified equity funds are known to outscore their thematic peers on the risk parameters i.e. they expose investors to lower risk levels.
At best, thematic funds are suited for informed investors who can time their entry into and exit from the fund. Retail investors should stick to diversified equity funds with proven track records over longer time frames and across market phases.
1. SIP is an investment avenue
SIP (systematic investment plan) is a buzzword of sorts in the mutual fund industry. Fund houses have done their bit to spread the gospel of SIP among investors. Advertisement campaigns exhorting investors to invest via an SIP are common place. However, many investors have been led to believe that SIP is an investment avenue. It is not uncommon to find investors who want to invest in an �SIP fund� (incidentally, there was even a mutual fund launched with that name).
The fact: SIP is a mode of investment, not an investment avenue. The conventional method of mutual fund investing entails making one-time lump sum investments. SIP investing involves making regular investments in a staggered manner. By spreading the investments over longer time frames (at least 12-24 months), investors stand to gain by lowering the average purchase cost vis-�-vis lump sum investments. This is most evident when equity markets experience prolonged bouts of turbulence. Also, SIP investing tends to be lighter on the wallet as opposed to lump sum investing.
#
SIP: All you need to know
2. �Since inception� numbers are comparable
It is a common practice to evaluate equity-oriented funds by comparing their performances over longer time frames like 3 years and 5 years. At times, investors are known to draw conclusions based on �since inception� performances. �Since inception� refers to the growth clocked by a fund since its origin.
The fact: �Since inception� performances are not comparable, simply because not all funds have the same inception date. For example, a diversified equity fund launched in 1995 can be compared with another fund launched in 2002 over the 3-Yr and 5-Yr time frames. However comparing their �since inception� performances would be inappropriate because the first fund has a 13-Yr track record while the latter has been in existence for 6 years. A fund�s performance since its inception can at best be considered for drawing comparisons vis-�-vis the benchmark index (i.e. by considering a corresponding period) to evaluate its relative performance.
3. Thematic funds make good investments
This is likely to be the most disputed misconception. After all, most thematic funds have delivered superlative performances over the last 18-24 months. Let�s not forget that just about every fund house worth its salt is launching thematic NFOs (new fund offers) and that includes fund houses like HDFC Mutual Fund which were always averse to the idea. Clearly, the worthiness of thematic funds cannot be doubted.
The fact: All the hype surrounding thematic funds doesn�t change the fact that they are high risk-high return investment propositions. Furthermore, such funds can deliver only so long as the underlying theme does well; once the theme runs out of steam (every theme does at some point in time), so does the fund. And given the restrictive investment mandate of a thematic fund, the fund manager has no option but to stay invested even in the aforementioned scenario.
Conversely, there are diversified equity funds that invest in an unrestricted manner. By not being tied down to any specific theme, they are free to seek attractive investment opportunities across the investment universe. Statistics reveal that over longer time frames (more than 5 years) well-managed diversified equity funds are known to score over their thematic peers. More importantly, diversified equity funds are known to outscore their thematic peers on the risk parameters i.e. they expose investors to lower risk levels.
At best, thematic funds are suited for informed investors who can time their entry into and exit from the fund. Retail investors should stick to diversified equity funds with proven track records over longer time frames and across market phases.
India's GAIL to consider bonus issue in 2-3 months
NEW DELHI, March 11 - India's state-run gas transmission firm GAIL (India) Ltd (GAIL.BO: Quote, Profile, Research) will consider issuing bonus shares in two to three months, its chairman U.D. Choubey said on Tuesday.
He said the company has planned a capital expenditure of 42 billion rupees ($1 billion) for the full year ending March 2009, up from 23 billion this year. ($1 = 40.5 rupees)
He said the company has planned a capital expenditure of 42 billion rupees ($1 billion) for the full year ending March 2009, up from 23 billion this year. ($1 = 40.5 rupees)
GENUS POWER
| Powering growth | |
 Genus Power Infrastructure has changed its name from Genus Overseas Electronics Ltd. and is a maker of electronic energy meters and inverters. The third quarter performance for the period ended 31st December 2007 has been consistent, the only solace being that at least there has not been any slip! On a QoQ, the net sales rose 4% at Rs.105.35 crore. Due to a 6% rise in the total expenditure, the EBIDTA took some beating; it fell by 5% at Rs.17.14 crore. Consequently, OPM fell marginally from 17.91% to 16.27%. Thanks to the lower interest outgo and marginally lower depreciation, the profit margins improved. PBT was up 6% at Rs.11.19 crore and PAT showed a small rise of 9% at Rs.9.97 crore. NOM improved from 9.10% to 9.46%. During the quarter, the company has issued 15 lakh equity shares on preferential basis at a premium of Rs.550/- per share and 3 lakh warrants have been converted to equity shares at a premium of Rs.189 per share. Consequent upon the issue of equity shares and conversion of warrants, the paid share capital of the company has increased by Rs.1.80 crore and share premium account by Rs.88.17 crore. Past trend indicates that for the company, the fourth quarter is always the best; maybe the onset of the summer season increases the sales of the company. So one can say that this lack luster performance is very much keeping in line with the usual trend of the company. Q4 will be better. The company has entered into a JV with Brazilian company Mobix to set up an electronic energy meter plant in Brazil, which is scheduled to commence production by Q4 of FY08. Due to commencement of this plant, export turnover of the company in FY 09 is likely to go up substantially. Moreover, the company bagged orders of Rs.125 crore for supply of electronic energy meters and execution of turnkey power distribution projects. With this, total order position, as at 1st March 2008 was at Rs.450 crore. |
Ratnagiri Power plans IPO to raise Rs 1,000 cr
| Ratnagiri Power plans IPO to raise Rs 1,000 cr | |
| Ratnagiri Power and Gas Company (RGPPL), which owns the 2,100 Mw Dabhol plant, is planning an IPO to raise up to Rs 1,000 crore for repaying debt and completing construction of the plant and the LNG terminal. The next step would be increase the authorised capital of the company from Rs 2,000 crore to Rs 4,000 crore. The public float is likely to be preceded by a private placement to raise Rs 500 crore. |
Indian basket of crude oil above $100/bl
| Indian basket of crude oil above $100/bl | |
| The basket of crude oil that Indian refiners buy breached the $100-mark for the first time yesterday. The Indian basket of crude oil was priced at $100.17 per barrel on Monday - the latest day for which data is available from the petroleum ministry. |
Reliance Energy
Reliance Energy seems to have stabilised at around Rs.1,250. Share may rise to Rs.1,400 levels in the near future, once share buy back is initiated by the company.
English Indian Clay
English Indian Clay having crossed Rs.1,000 mark has come out with rights issue at Rs.1,000 per share in the ratio of one share for every six shares held, which may see share price moving to Rs.1,100 levels. However, share reached to its optimum value at present.
J Kumar Infra may see 3 digits
J Kumar Infra, a recently listed stock have grabbed contracts for new flyovers in Mumbai. The company is projecting a topline of Rs.450 crores and an EPS of Rs.22 for FY 09. Share now ruling at Rs.84 may soon touch three digit mark.
Old Hyderabad and Bangalore airports to be closed
Government has not agreed to continue with operations of old Hyderabad and Bangalore airports, post commencement of new airports on 16th March and 30th March respectively. Share of GMR Infra would come on radar of high net worth investors post starting Hyderabad airport on 16th March 08. Share at Rs.155 makes a good short to medium term buy.
Monday, March 10, 2008
Gitanjali Gems forays into gold loans business
Gitanjali Gems, integrated diamond and jewellery manufacturer and
retailer, announced today that the company has made foray into the
business of providing gold loans, safe deposits vaults through
incorporation of its wholly owned subsidiary in the name of `Mohar
Jewels`.
The main objects of Mohar Jewels includes providing safe deposit
vaults and gold loans to individuals, entities or any other person and
to do the business of manufacturing, buying, selling, importing,
exporting of diamonds and other precious stones etc, the company added.
retailer, announced today that the company has made foray into the
business of providing gold loans, safe deposits vaults through
incorporation of its wholly owned subsidiary in the name of `Mohar
Jewels`.
The main objects of Mohar Jewels includes providing safe deposit
vaults and gold loans to individuals, entities or any other person and
to do the business of manufacturing, buying, selling, importing,
exporting of diamonds and other precious stones etc, the company added.
CEAT sells 7 acres land in Bhandup for Rs. 130 Crores
CEAT Ltd, the flagship company of the 13, 500 crore RPG Group and
one of India's leading tyre manufacturers has today signed an
agreement with M/s. Ashford InfoTech Limited for development of a
vacant portion of about 7 acres of land located at Village Road in
Bhandup, Mumbai.
The proceeds of the sale will augment the expansion plans of the
company. The transaction will not impact the Company's existing tyre
manufacturing operations or affect its existing workmen as the
ongoing operations will continue in the usual manner on the balance
portion of about 24 acres of land near the same location.
CEAT Tyres was established in 1958. Today it is one of India's
leading tyre manufactures, with an annual turnover of Rs.2391
crores. CEAT's solid brand equity has empowered the company to
establish a strong presence in both, domestic and international
markets. CEAT tyres, tubes and flaps are renowned for their superior
quality and durability, and are recognized by the famous line `born
tough'.
CEAT has the widest range of tyres for all user segments – Heavy
Duty Trucks & Buses, Light Commercial Vehicles, Earth Movers,
Forklifts, Tractors, Trailers, Cars, two & three Wheelers -- up to
17 tyre categories. It has three large tyre manufacturing facilities
in India – Mumbai, Nashik & Kerala, apart from its two Sri Lankan
plants. CEAT was the first Indian tyre company to establish
productin facilities outside India. CEAT is the market leader in Sri
Lanka.
one of India's leading tyre manufacturers has today signed an
agreement with M/s. Ashford InfoTech Limited for development of a
vacant portion of about 7 acres of land located at Village Road in
Bhandup, Mumbai.
The proceeds of the sale will augment the expansion plans of the
company. The transaction will not impact the Company's existing tyre
manufacturing operations or affect its existing workmen as the
ongoing operations will continue in the usual manner on the balance
portion of about 24 acres of land near the same location.
CEAT Tyres was established in 1958. Today it is one of India's
leading tyre manufactures, with an annual turnover of Rs.2391
crores. CEAT's solid brand equity has empowered the company to
establish a strong presence in both, domestic and international
markets. CEAT tyres, tubes and flaps are renowned for their superior
quality and durability, and are recognized by the famous line `born
tough'.
CEAT has the widest range of tyres for all user segments – Heavy
Duty Trucks & Buses, Light Commercial Vehicles, Earth Movers,
Forklifts, Tractors, Trailers, Cars, two & three Wheelers -- up to
17 tyre categories. It has three large tyre manufacturing facilities
in India – Mumbai, Nashik & Kerala, apart from its two Sri Lankan
plants. CEAT was the first Indian tyre company to establish
productin facilities outside India. CEAT is the market leader in Sri
Lanka.
NMDC to split stock in 1:10 ratio; issue bonus shares
MUMBAI: State-run National Mineral Development Corporation (NMDC) on Monday said it will split shares in a ratio of 1:10 and issue two bonus shares for every share held.
The company informed the Bombay Stock Exchange that it would seek shareholders approval for subdividing over 13.21 lakh equity shares of Rs 10 each into 1.32 crore shares of face value Re one a share, NMDC informed the Bombay Stock Exchange.
Further, the company would allot two bonus shares for every share held in the company out of the general reserve of Rs 264.31 crore, it said.
It would also increase the authorised share capital of the company to Rs 400 crore by creation of additional 250 crore shares.
Shares of NMDC closed at Rs 9,940.20, up 1.50 per cent on the BSE. In November last year, the scrip had touched its all-time high of Rs 16,584.
Besides, NMDC, a B group firm, is going to be included in the BSE-500 index in place of Bajaj Auto from March 14.
The company informed the Bombay Stock Exchange that it would seek shareholders approval for subdividing over 13.21 lakh equity shares of Rs 10 each into 1.32 crore shares of face value Re one a share, NMDC informed the Bombay Stock Exchange.
Further, the company would allot two bonus shares for every share held in the company out of the general reserve of Rs 264.31 crore, it said.
It would also increase the authorised share capital of the company to Rs 400 crore by creation of additional 250 crore shares.
Shares of NMDC closed at Rs 9,940.20, up 1.50 per cent on the BSE. In November last year, the scrip had touched its all-time high of Rs 16,584.
Besides, NMDC, a B group firm, is going to be included in the BSE-500 index in place of Bajaj Auto from March 14.
AT&T Lays Out Cable, Cash
AT&T Lays Out Cable, Cash
03.05.08, 3:00 PM ET
03.05.08, 3:00 PM ET
Remember the telecom bust of the 1990s, when a lot more fiber was laid than anybody needed? Well, they need it now.
AT&T says it's going to spend $1 billion this year, up 33% from last year, to build four undersea cables in an effort to expand its network.
"AT&T looks like its in the right place as the right time for a resurgence in the value of the networks core," said Sanford C. Bernstein analyst Craig Moffett. "AT&T is structurally and competitively on much more solid ground today. This signals that the business is much stronger than it used to be."
The cables will connect with Japan and the rest of Asia to fill demand for Internet telephony. The investment will also cover new network-to-network connections in the Asia Pacific, as well as the building of switches to route more traffic to the U.S. and Europe.
This investment is double what the company invested in 2006.
The boom and eventual bust in the telecom industry in the late-90s wreaked havoc on companies like
A few nay-sating analysts predicted at the time that the amount of cables being put into the ground would over-shoot the demand for the services and would be left behind by advances in technology. AT&T
"It comes after a period of real structural weakness in the backbone of the network where there years and years of oversupply and excess capacity, but rising demand for bandwidth, both in the consumer market and in the enterprise market, has finally necessitated the need for further capital investment," adds Moffett. "Today the core of the network is much healthier and the industry has dramatically consolidated. AT&T is the biggest fish in the backbone market."
The news of AT&T's investment has already begun to benefit network equipment makers that supply Internet phone systems and routers as shares of several went up in afternoon trading. Shares of
AT&T was up .2%, or 7 cents, to $34.94 in mid-Wednesday trading.
The decoupling debate
Could recession spread from America?
Satoshi Kambayashi
“DECOUPLING” is the source of a great deal of controversy. Economists argue about whether or not emerging economies will follow America into recession. The most pessimistic claim that as economies have become more intertwined through trade and finance, this should make business cycles more synchronised, not less. The slide in emerging stockmarkets on Wall Street’s coat-tails appears to endorse their view. Yet recent data suggest decoupling is no myth. Indeed, it may yet save the world economy.
Decoupling does not mean that an American recession will have no impact on developing countries. That would be daft. The point is that their GDP-growth rates will slow by much less than in previous American downturns. Most enjoyed strong growth during the fourth quarter of last year, and some speeded up, even as America’s economy ground to a virtual halt and its non-oil imports fell.
One reason is that while exports to America have stumbled, those to other emerging economies have surged (see chart 1). China’s growth in exports to America slowed to only 5% (in dollar terms) in the year to January, but exports to Brazil, India and Russia were up by more than 60%, and those to oil exporters by 45%. Half of China’s exports now go to other emerging economies. Likewise, South Korea's exports to the United States tumbled by 20% in the year to February, but its total exports rose by 20%, thanks to trade with other developing nations.
A second supporting factor is that in many emerging markets domestic consumption and investment quickened during 2007. Their consumer spending rose almost three times as fast as in the developed world. Investment seems to be holding up even better: according to HSBC real capital spending rose by a staggering 17% in emerging economies last year, compared with only 1.2% in rich economies.
Sceptics argue that much of this investment, especially in China, is in the export sector and so will collapse as sales to America weaken. But less than 15% of China’s investment is linked to exports. Over half is in infrastructure and property. It is not just China that is building power plants, roads and railways; a large chunk of the Gulf’s petrodollars are also being spent on gleaming skyscrapers and new airports. Mexico, Brazil and Russia have also launched big infrastructure projects that will take years to complete.
The four biggest emerging economies, which accounted for two-fifths of global GDP growth last year, are the least dependent on the United States: exports to America account for just 8% of China’s GDP, 4% of India’s, 3% of Brazil’s and 1% of Russia’s. Over 95% of China’s growth of 11.2% in the year to the fourth quarter came from domestic demand. China’s growth is widely expected to slow this year but to a still boisterous 9-10%.
American downturns have often caused the prices of oil and other raw materials to slump, but this time China’s surging demand is propping up prices and fuelling booms in Brazil, Russia and the Middle East. Brazil’s exports jumped by 26% in the year to February. In turn, if prices stay strong, so will China’s exports to commodity-producing countries. A sharp slowdown in China would hurt them more than an American recession will.
The popular argument that business cycles should become more synchronised in a globalised world rests on an out-dated impression that poor countries mainly export to rich ones. Instead, emerging economies’ trade with each other has risen faster and now accounts for over half of their total exports. Emerging markets as a group now export more to China than to the United States (see chart 2).
Some contend that this mainly reflects imports of intermediate goods into China for assembly; the finished goods are then exported to America and so will be hurt by slower growth. There is some truth to this, although Asian exports to China are increasingly driven by China’s own domestic demand.
Another reason why globalisation and decoupling can co-exist is that opening up economies has not only boosted poor countries’ trade, it has also spurred their productivity growth and hence domestic incomes and spending.
A severe recession in America could still have a nasty impact on the developing world if commodity prices collapsed and if it caused stockmarkets to fall more steeply, depressing global consumer and business confidence. A sharper fall in the dollar could also further squeeze emerging economies’ exports.
But for perhaps the first time ever, developing countries would be able to make full use of monetary and fiscal policy to cushion their economies. In the past, when they were net foreign borrowers, capital inflows tended to dry up during global downturns as foreign investors shunned risky assets. This forced governments to raise interest rates and tighten fiscal policy. Economies with large external deficits are still vulnerable, but most emerging economies now have a current-account surplus and large foreign reserves; many have a budget surplus or are close to balance, leaving ample room for a fiscal stimulus if necessary.
Perhaps the best support for decoupling comes from America itself. Fourth-quarter profits of big companies, such as Coca-Cola, IBM and DuPont, were better than expected as strong sales growth in emerging markets offset a sharp slowdown at home. Bits of American business are rising above their own economy. With luck, the world economy can rise above America’s.
::::::Apollo Hospitals to invest Rs 100 mn in R&D wing::::::
Apollo Hospitals group will soon be branching out a separate R&D
wing.
The group aims to form a full circle in the healthcare segment by
forming a separate R&D wing, which is expected to have
collaborations with premier global research organizations including
the US-based National Institutes of Health (NIH).
The group will be setting aside about Rs 100 million from its
revenues, to be pumped into the R&D wing. Besides, the group will
build up a team with scientists from the US and India to focus
primarily on cardiac-related diseases initially.
The group has over nine centers of excellence and the centre for
cardiology and cardio thoracic surgery, is claimed to be the largest
cardiovascular groups in the world. The group is also planning to
have collaborations with the US-based NIH and a decision towards
this is expected next week.
wing.
The group aims to form a full circle in the healthcare segment by
forming a separate R&D wing, which is expected to have
collaborations with premier global research organizations including
the US-based National Institutes of Health (NIH).
The group will be setting aside about Rs 100 million from its
revenues, to be pumped into the R&D wing. Besides, the group will
build up a team with scientists from the US and India to focus
primarily on cardiac-related diseases initially.
The group has over nine centers of excellence and the centre for
cardiology and cardio thoracic surgery, is claimed to be the largest
cardiovascular groups in the world. The group is also planning to
have collaborations with the US-based NIH and a decision towards
this is expected next week.
IPO Analysis
Sita Shree Food Products
Investors can refrain from subscribing to the initial public offer from Sita Shree Food Products.The risks associated with the company’s new business foray are high and may outweigh the return potential from this offer.
The company, which has been engaged in making wheat products such as atta, rava and sooji, proposes to raise Rs 31.5 crore through this book-built IPO to fund the setting up of new manufacturing facilities for soya oil and deoiled cake (500 tonnes per day) and to expand flour milling capacities (additional 275 tpd). The offer is being made in a price band of Rs 27-30, valuing the company at a stiff 24-27 times its earnings, without considering the equity expansion due to the offer.
Business
Sita Shree Foods makes wheat products which are sold mainly in bulk form. It has managed a steady ramp up in its sales from Rs 23 crore to Rs 82 crore between FY-04 and FY-07.
Operating profit margins in this business, however, have been thin, hovering in the 3 per cent range in recent years and net profits have risen from Rs 16 lakh to Rs 92 lakh over the same period.
The company has in the past been one of the suppliers to Godrej Pillsbury and Unilever and also counts retail chains such as Pantaloon Retail and Reliance Retail among its clients. Going forward, the opportunity for supplying wheat products in bulk or packaged form to retail chains may continue to expand as these players lay a greater thrust on dry groceries and private label sales.
Though the company’s expansion plans for wheat products may come in handy in this respect, margins may continue to be wafer thin, given competition from much larger and unorganised players in the flour milling segment.
Risk factors
The company’s foray into soya oil and soyameal business (used and exported as animal feed) comes at an opportune time, when global demand and prices for soya products are firm. Though good location advantages and the promoter’s experience in commodity trading may translate into procurement advantages, the lack of scale (competitors such as Ruchi Soya and Gujarat Ambuja Exports control capacities of over a million tonnes per annum) and an overseas presence pose risks to the company’s ability to find and sustain a market for its products. Though the company also plans to establish its own brands as well as a marketing network in the domestic market, it will face competition from players with much deeper pockets. The stiff pricing also pegs up the risk element.
The company, which has been engaged in making wheat products such as atta, rava and sooji, proposes to raise Rs 31.5 crore through this book-built IPO to fund the setting up of new manufacturing facilities for soya oil and deoiled cake (500 tonnes per day) and to expand flour milling capacities (additional 275 tpd). The offer is being made in a price band of Rs 27-30, valuing the company at a stiff 24-27 times its earnings, without considering the equity expansion due to the offer.
Business
Sita Shree Foods makes wheat products which are sold mainly in bulk form. It has managed a steady ramp up in its sales from Rs 23 crore to Rs 82 crore between FY-04 and FY-07.
Operating profit margins in this business, however, have been thin, hovering in the 3 per cent range in recent years and net profits have risen from Rs 16 lakh to Rs 92 lakh over the same period.
The company has in the past been one of the suppliers to Godrej Pillsbury and Unilever and also counts retail chains such as Pantaloon Retail and Reliance Retail among its clients. Going forward, the opportunity for supplying wheat products in bulk or packaged form to retail chains may continue to expand as these players lay a greater thrust on dry groceries and private label sales.
Though the company’s expansion plans for wheat products may come in handy in this respect, margins may continue to be wafer thin, given competition from much larger and unorganised players in the flour milling segment.
Risk factors
The company’s foray into soya oil and soyameal business (used and exported as animal feed) comes at an opportune time, when global demand and prices for soya products are firm. Though good location advantages and the promoter’s experience in commodity trading may translate into procurement advantages, the lack of scale (competitors such as Ruchi Soya and Gujarat Ambuja Exports control capacities of over a million tonnes per annum) and an overseas presence pose risks to the company’s ability to find and sustain a market for its products. Though the company also plans to establish its own brands as well as a marketing network in the domestic market, it will face competition from players with much deeper pockets. The stiff pricing also pegs up the risk element.
Via BL
Gammon Infrastructure Projects
Investors can stay away from the initial public offer of Gammon Infrastructure Projects Ltd. (GIPL). While the company’s unique positioning as a developer in the infrastructure space does provide long-term potential, the offer appears stiffly priced. At the price band of Rs 167-200, the offer values the company at 33-40 times the expected per share earnings for FY 2010. We, therefore, advocate revisiting the stock at a later date either when the secondary market offers better entry opportunities or when the company’s projects under development start contributing significantly to cash flows.
There is unlikely to be significant upside in GIPL’s earnings in FY 2009 as three of the seven projects under development are expected to become operational only by FY-10. The rest of the projects, mostly in the power segment, may have a longer gestation period before contributing to revenues. Besides, a number of other players in this business (not necessarily with the same business model) such as, IRB Developers and IVRCL, offer higher visibility for returns and have attractive valuations.
On the company and offer
GIPL is a holding company with subsidiaries and associates that are engaged in infrastructure project development. The company is a subsidiary of Gammon India. The parent will hold 73 per cent, post-issue. The company plans to raise Rs 270-330 crore through this offer, the proceeds of which would be invested in projects of subsidiaries and repayment of loan to the parent company. Post-issue, the market capitalisation of the company would be Rs 2,400-2,900 crore at the two ends of the price band.
Current projects
GIPL can be termed as one of the few pure infrastructure developers in the country as against a good number of players which remain part contractors. The company’s operations are clearly demarcated from its parent, as all infrastructure development projects are routed through GIPL.
The company also has a diversified basket of projects ranging from roads to power and ports with substantial holding in each of these. However, only four of the 11 projects are currently operational with the rest in the development phase (excluding the SEZs).
Of the operational projects, GIPL has two annuity road projects that provide a steady stream of revenues (by way of annuity and operation and maintenance) based on fixed long-term concession agreements. However, the fixed agreement rules out any scope for significant ramp up in revenues from these projects. Income from annuity constituted 70 per cent of revenues for the six months ended September 2007.
While the third subsidiary — Cochin Bridge Project — is toll-based, the project’s contribution to the revenue stream is minimal. Further, the Government has stipulated fixed toll rates, thus reducing the scope for any significant acceleration in revenues. The possibility of any surge in traffic also appears unlikely given the location of the bridge.
The fourth project — management of two berths in Visakhapatnam Port — now accounts for 12 per cent of revenues. While this subsidiary is yet to become profitable, we believe that the project holds high earnings visibility and lower risk, with favourable clauses such as take-or-pay. GIPL’s stake in this project is, however, restricted to 42 per cent at present as the project is in consortium with Portia Management Services of the UK. Of the four operational projects through subsidiaries, we expect the Vizag Sea Port to be the key revenue driver.
Revenue on a consolidated basis was Rs 147 crore for FY 2007 and Rs 77 crore for the half-year ended September 2007. Consolidated net profits for the above period stood at Rs 30 crore and Rs 11 crore respectively.
Future holds potential
GIPL’s more recently formed subsidiaries which have seven projects under development offer a diversified basket with toll and annuity road projects as well as hydro and bio-mass projects. Of these, the hydropower projects have longer gestation periods with operations expected to commence in FY 2011 and FY 2012. The renewable energy and container terminal projects are yet to witness financial closure and, therefore, not considered by us for valuation purposes.
The power projects could well hold potential what with a judicious mix of projects with power purchase agreements and those that can be sold as merchant power. For the biomass projects, while steady supply of raw materials such as rice straw or bagasse could be a constraint, the company is likely to be supported with good power tariffs in States such as Punjab and Haryana. Hydro and bio fuel projects hold the potential to improve the company’s profitability over the long term.
Similarly, the Mumbai Offshore Container Terminal Project in which the company has a 50 per cent stake holds favourable revenue sharing and exclusivity terms. The operation and maintenance clause is yet undecided with financial closure also pending. The business per se holds potential given the extreme congestion in the Mumbai harbour. Revenue flow from this stream has to be watched before assessing profitability.
Advantage of developer model
While the infrastructure space is generally known to offer low operating and net profit margins, infrastructure development lends potential for earning superior margins. Once the initial expenditure on building the asset is complete, such projects could provide a regular/accelerated stream of revenues.
As O&M cost of such assets are also paid for by the concessionaire, the profit margins are different from what are typically derived in a construction contract. GIPL’s operations currently earn margins of over 70 per cent on a consolidated basis. However, high interest costs (as each project involves significant debt-financing) can lead to more moderate net profit margins.
Though debt-free on a stand-alone basis, GIPL, on a consolidated basis, has a debt equity ratio of close to three. While the funds from the issue would strengthen the networth, the proceeds appear insignificant compared to the size of projects under implementation. Hence the subsidiaries would have to either tap debt avenues or look at further equity expansion at a later date. Such expansion over the medium term could dilute earnings, given that the payoff profiles for the company’s projects are fairly long.
The offer is open from March 10-13. Retail and non-institutional investors have the option of applying through a part-payment of Rs 50.
There is unlikely to be significant upside in GIPL’s earnings in FY 2009 as three of the seven projects under development are expected to become operational only by FY-10. The rest of the projects, mostly in the power segment, may have a longer gestation period before contributing to revenues. Besides, a number of other players in this business (not necessarily with the same business model) such as, IRB Developers and IVRCL, offer higher visibility for returns and have attractive valuations.
On the company and offer
GIPL is a holding company with subsidiaries and associates that are engaged in infrastructure project development. The company is a subsidiary of Gammon India. The parent will hold 73 per cent, post-issue. The company plans to raise Rs 270-330 crore through this offer, the proceeds of which would be invested in projects of subsidiaries and repayment of loan to the parent company. Post-issue, the market capitalisation of the company would be Rs 2,400-2,900 crore at the two ends of the price band.
Current projects
GIPL can be termed as one of the few pure infrastructure developers in the country as against a good number of players which remain part contractors. The company’s operations are clearly demarcated from its parent, as all infrastructure development projects are routed through GIPL.
The company also has a diversified basket of projects ranging from roads to power and ports with substantial holding in each of these. However, only four of the 11 projects are currently operational with the rest in the development phase (excluding the SEZs).
Of the operational projects, GIPL has two annuity road projects that provide a steady stream of revenues (by way of annuity and operation and maintenance) based on fixed long-term concession agreements. However, the fixed agreement rules out any scope for significant ramp up in revenues from these projects. Income from annuity constituted 70 per cent of revenues for the six months ended September 2007.
While the third subsidiary — Cochin Bridge Project — is toll-based, the project’s contribution to the revenue stream is minimal. Further, the Government has stipulated fixed toll rates, thus reducing the scope for any significant acceleration in revenues. The possibility of any surge in traffic also appears unlikely given the location of the bridge.
The fourth project — management of two berths in Visakhapatnam Port — now accounts for 12 per cent of revenues. While this subsidiary is yet to become profitable, we believe that the project holds high earnings visibility and lower risk, with favourable clauses such as take-or-pay. GIPL’s stake in this project is, however, restricted to 42 per cent at present as the project is in consortium with Portia Management Services of the UK. Of the four operational projects through subsidiaries, we expect the Vizag Sea Port to be the key revenue driver.
Revenue on a consolidated basis was Rs 147 crore for FY 2007 and Rs 77 crore for the half-year ended September 2007. Consolidated net profits for the above period stood at Rs 30 crore and Rs 11 crore respectively.
Future holds potential
GIPL’s more recently formed subsidiaries which have seven projects under development offer a diversified basket with toll and annuity road projects as well as hydro and bio-mass projects. Of these, the hydropower projects have longer gestation periods with operations expected to commence in FY 2011 and FY 2012. The renewable energy and container terminal projects are yet to witness financial closure and, therefore, not considered by us for valuation purposes.
The power projects could well hold potential what with a judicious mix of projects with power purchase agreements and those that can be sold as merchant power. For the biomass projects, while steady supply of raw materials such as rice straw or bagasse could be a constraint, the company is likely to be supported with good power tariffs in States such as Punjab and Haryana. Hydro and bio fuel projects hold the potential to improve the company’s profitability over the long term.
Similarly, the Mumbai Offshore Container Terminal Project in which the company has a 50 per cent stake holds favourable revenue sharing and exclusivity terms. The operation and maintenance clause is yet undecided with financial closure also pending. The business per se holds potential given the extreme congestion in the Mumbai harbour. Revenue flow from this stream has to be watched before assessing profitability.
Advantage of developer model
While the infrastructure space is generally known to offer low operating and net profit margins, infrastructure development lends potential for earning superior margins. Once the initial expenditure on building the asset is complete, such projects could provide a regular/accelerated stream of revenues.
As O&M cost of such assets are also paid for by the concessionaire, the profit margins are different from what are typically derived in a construction contract. GIPL’s operations currently earn margins of over 70 per cent on a consolidated basis. However, high interest costs (as each project involves significant debt-financing) can lead to more moderate net profit margins.
Though debt-free on a stand-alone basis, GIPL, on a consolidated basis, has a debt equity ratio of close to three. While the funds from the issue would strengthen the networth, the proceeds appear insignificant compared to the size of projects under implementation. Hence the subsidiaries would have to either tap debt avenues or look at further equity expansion at a later date. Such expansion over the medium term could dilute earnings, given that the payoff profiles for the company’s projects are fairly long.
The offer is open from March 10-13. Retail and non-institutional investors have the option of applying through a part-payment of Rs 50.
Via Businessline
Grey Market - V Guard, Gammon Infrastructure, Rural Electrification
Rural Electrification 105 12 to 14
V. Guard Ind. 82 4 to 5
Gammon Infra 167 to 200 16 to 18
Sita Shree Food Pro. 27 to 30 2 to 4
V. Guard Ind. 82 4 to 5
Gammon Infra 167 to 200 16 to 18
Sita Shree Food Pro. 27 to 30 2 to 4
::::::ACC plans Rs 3,600cr expansion Plan::::::
ACC has lined up Rs 3,600 crore investment to augment capacity to 32
million tonne (MT) by 2010 from the present capacity of 22 MT per
annum.
Sumit Banerjee, managing director, ACC, said: "We would take our
capacity to 32 MT per annum by 2010 entailing an investment of Rs
3,600 crore. All the investment would be done through internal
accruals."
The capacity expansion of the Mumbai-based firm would be carried out
at its existing plants. About Rs 1,400 crore would be invested in
the expansion of its Chanda unit from one MT per annum to four MT
per annum. It will also include a captive power plant of 25 Mw.
The expansion of the new Wadi plant to four MT per annum from the
current one MT per annum would account for an investment of around
Rs 1,500 crore
million tonne (MT) by 2010 from the present capacity of 22 MT per
annum.
Sumit Banerjee, managing director, ACC, said: "We would take our
capacity to 32 MT per annum by 2010 entailing an investment of Rs
3,600 crore. All the investment would be done through internal
accruals."
The capacity expansion of the Mumbai-based firm would be carried out
at its existing plants. About Rs 1,400 crore would be invested in
the expansion of its Chanda unit from one MT per annum to four MT
per annum. It will also include a captive power plant of 25 Mw.
The expansion of the new Wadi plant to four MT per annum from the
current one MT per annum would account for an investment of around
Rs 1,500 crore
Grindwell Norton - BUY Recommendation from Geojit
Report Date | March 7, 2008 | |||
Company Name | Grindwell Norton | |||
Recommendation | BUY | |||
| CMP – Rs. 133/- | Target Price – Rs. 180/- | Mkt. Cap. - Rs. 736.8 crore | ||
| Investment Rationale Ø GNL, 51.33% subsidiary of Euro 43 billion Saint–Gobain (SG) of France and India ’s leading manufacturer of Abrasives, Silicon Carbide (SiC) & High Performance Refractories, has reported excellent performance for Q4 CY 2007. Net sales grew @ 29.2% to Rs. 123.3 crore led by 54.7% spurt in Ceramic & plastic sales of Rs. 34.8 crore (Rs. 22.5 crore). Abrasives sales were up by 19.1% to Rs. 86.7 crore (Rs. 72.8 crore). OPM% enhanced considerably to 17.5% (15.6%) mainly because of strict control on other expenses (20.9% of sales as against 26.2% in Q4 CY 2006) and reduction in power cost (to 7.7% from 9.5% of sales). Further aided by 58.8% spurt in other income of Rs. 5.4 crore, PBT shot up by 59.1% to Rs. 23.7 crore and PAT by 53.5% to Rs. 15.5 crore. Ø For CY 2007, Net sales were up by 18.2% to Rs. 440.8 crore. Abrasives turnover increased to Rs. 330.2 crore (Rs. 285.6 crore), growth of 15.6%, while Ceramics & Plastics turnover grew @ 25% to Rs. 106.5 crore (Rs. 85.2 crore). OPM% declined to 16.6% mainly because of rising raw material and personnel cost. However, strong sales growth coupled with 64.9% jump in other income of Rs. 21.6 crore led to 20.1% increase in PBT of Rs. 82.3 crore and 22.8% increase in PAT (before extra ordinary items) of Rs. 56.5 crore. Net of tax profit on sale of stake in Lincoln Helios (group company) of Rs. 77 crore (NIL) boosted PAT substantially to Rs. 133.5 crore. Ø GNL caters to diverse industries like construction, automotive, steel, foundry, bearings, fabrication, laminates etc. In view of growing economy, GNL’s all user segments have been doing well and are expected to do well to provide scalable and de-risked growth profile in future. To meet growing demand and to further strengthen its competitive position (market share of ~31%), company is setting up a plant in tax haven in Himachal Pradesh for abrasives products at capex of Rs 37 crore in Phase I. Commercial production is likely to commence in H2 CY 2008. Further capex of Rs.20 crore will be incurred in Phase II. This plant will be key growth driver and it will give GNL an edge over its competitor & unorganised sector in terms of pricing : cost. Acquisition of bonded abrasive business of Orient Abrasives for Rs 26 crore in CY 2009 resulted in expansion of GNL’s product range and has given it an advantage in terms of new distribution channels, dealers and sales team. Ø Company has set up 70:30 JV in Bhutan in partnership with Singye Group of Bhutan (30%) to set up Rs.34 crore project to manufacture 20,000 tpa of Silicon Carbide in two phases of 10,000 tpa each. While 1/3rd production will be utilised in-house, 2/3rd would be sold outside. This plant will enable GNL to get SiC at cheaper rates, at the same time, it will be able to sell SiC to outside parties at high EBIDTA of ~25-30%. Full benefits of this project will be available from CY09 onwards. Ø Because of strong parentage, GNL has access to the best of products and technology and a global base. Company can buy raw materials / products from anywhere in the SG world to bring down costs. China , India and Brazil are 3 low cost manufacturing bases of SG. Over a period of time, SG will rationalize its manufacturing facilities so that GNL could become one of the hubs for certain products and certain markets. Ø GNL generates strong cash flows and has cash surplus to the extent of ~ Rs 85 crore after having sold investment in a group company that works out to Rs.15 per share. | ||||
| Valuation Ø At CMP, the share is trading at 13 times CY 2007 EPS of Rs.10.2 and times 10.5 times CY 2008 expected EPS of Rs.12.3. In view of promising future prospects, we recommend to “BUY” the share at CMP. | ||||
Financial Summary Rs. Crore
| | CY 2007 | CY 2006 | % | CY 2007 | CY 2006 | % |
| | Q4 | change | 12 months | change | ||
| Net Sales | 123.30 | 95.40 | 29.2% | 440.80 | 372.90 | 18.2% |
| Total Expenses | 101.70 | 80.50 | 26.3% | 367.60 | 308.10 | 19.3% |
| EBITDA | 21.60 | 14.90 | 45.0% | 73.20 | 64.80 | 13.0% |
| EBITDA (%) | 17.5% | 15.6% | | 16.6% | 17.4% | |
| Interest Expenses / (Income) | 0.10 | - | N.A. | 0.30 | 0.10 | 200.0% |
| Depreciation | 3.20 | 3.40 | -5.9% | 12.20 | 9.30 | 31.2% |
| Other Income | 5.40 | 3.40 | 58.8% | 21.60 | 13.10 | 64.9% |
| P.B.T. | 23.70 | 14.90 | 59.1% | 82.30 | 68.50 | 20.1% |
| Net Profit (before extra ordinary items) | 15.50 | 10.10 | 53.5% | 56.50 | 46.00 | 22.8% |
| Extra Ordinary items (net of tax) | - | - | N.A. | 77.00 | - | N.A. |
| Net Profit (after extra ordinary items) | 15.50 | 10.10 | 53.5% | 133.50 | 46.00 | 190.2% |
| Equity Capital (Rs 5/-) | 27.70 | 27.70 | | 27.70 | 27.70 | |
| EPS for the period (Rs) | 2.80 | 1.82 | 53.5% | 10.20 | 8.30 | 22.8% |
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