the best blog to describe indian market and equity
11.8.09
26 mutual funds waiting in the wings
Mumbai, Aug. 10 As many as 26 applications for setting up mutual funds arepending with the Securities and Exchange Board of India (SEBI) at various stages of approval. There are already 36 fund houses actively soliciting investments for over 2,000 schemes.
Room for more
Though retail investors have trouble selecting an MF scheme from among the thousands on offer, industry observers feel that there is headroom for many more to set up shop.
“In India, MF penetration is very low and the coverage in terms of the savings invested in mutual funds is also negligible,” said Mr A.P. Kurian, Chairman, Association of Mutual Funds in India.
With the top five MFs accounting for over 50 per cent of the total asset base, there is scope for more funds, said Mr Dhirendra Kumar, CEO of Value Research. The mutual fund industry manages an asset base of Rs 6,89,946 crore as on July end.
Those awaiting SEBI approval include IndiaBulls, India Infoline, Schroder Investment Management, Axis Bank, Sanlam Investment Management, ASK Investment Holdings Pvte Ltd, Karvy Stock Broking Ltd, Mahindra & Mahindra Financial Services, Union Bank a-KBC Asset Management and IDBI Bank.
Consolidation
With many more players foraying into the mutual fund space, some industry officials see scope for consolidation.
Some would even be coming in with a possible eye on for acquiring existing businesses, said Mr Kurian.
There might be consolidation in the future, with some marginal players wanting to exit and new and existing players taking over those businesses, said Mr Saurabh Nanavati, CEO of Religare Mutual Fund.
Room for more
Though retail investors have trouble selecting an MF scheme from among the thousands on offer, industry observers feel that there is headroom for many more to set up shop.
“In India, MF penetration is very low and the coverage in terms of the savings invested in mutual funds is also negligible,” said Mr A.P. Kurian, Chairman, Association of Mutual Funds in India.
With the top five MFs accounting for over 50 per cent of the total asset base, there is scope for more funds, said Mr Dhirendra Kumar, CEO of Value Research. The mutual fund industry manages an asset base of Rs 6,89,946 crore as on July end.
Those awaiting SEBI approval include IndiaBulls, India Infoline, Schroder Investment Management, Axis Bank, Sanlam Investment Management, ASK Investment Holdings Pvte Ltd, Karvy Stock Broking Ltd, Mahindra & Mahindra Financial Services, Union Bank a-KBC Asset Management and IDBI Bank.
Consolidation
With many more players foraying into the mutual fund space, some industry officials see scope for consolidation.
Some would even be coming in with a possible eye on for acquiring existing businesses, said Mr Kurian.
There might be consolidation in the future, with some marginal players wanting to exit and new and existing players taking over those businesses, said Mr Saurabh Nanavati, CEO of Religare Mutual Fund.
10.8.09
IPO: Offer price is not the only deciding factor
IT is said that Initial Public Offerings, popularly known as IPOs, can be a safe stepping stone for the first timers, who are entering the equity market. IPOs are supposed to be cheap and provide good upside potential to investors
if they hang around long enough.
For first time investors or those lacking enough experience, the trickiest part is to assess the fair value of the shares on offer in an IPO. This is important as it determines whether you should subscribe to the offer or instead bet your money on a related company already listed on the stock exchanges. But it is easier said than done. Most often prospective investors either get seduced or intimidated by the offer price.
This should not happen in an ideal world. After all an offer price or market price of a share is nothing but a company’s expected or total market value divided by the number of shares. This means that two companies with similar market value may trade at different prices simply due to difference in the number of shares
available for trading. But most of the new investors fail to determine this link between the market value and the share price.
This was clearly visible in the recent IPOs of the power sector companies. The investors have been baffled by the sheer variance in offer price of IPOs and the market price of their listed peers. For instance Adani Power was offered to the investors at Rs 100 per share. In comparison, Tata Power, which in the same line of business (i.e in thermal power) and of similar size (in terms of capacity), is right now trading in the range of Rs 1,200 per share.
On the other side of the spectrum is NHPC, which is being offered to the investors in the price band of Rs 30-36 per share. In comparison, another public sector power utility NTPC is trading at around Rs 210 per share. To a trained eye, there’s nothing unusual in the variation in the market price of various companies in a sector.
But for a retail investor, market price is the most visible and appealing information about the real worth of a company or business that is taken easily without much pondering.
Most retail investors and especially the first time investors in IPOs associate the offer price with the relative cheapness of the stock. To them, NHPC is so much cheaper than NTPC, while Adani Power IPO is a steal compared to Tata Power. They don’t care about the fact that at its lower price band NHPC is asking for around 30 times its earning per share (EPS) in FY09 while NTPC is available at a P/E multiple of just 20.
This brings us to the crux of the issue. How should retail investors with limited resources and experience assess the fair value of an IPO and compare it to related companies already listed on the bourses?
The starting point is to get hold of the company’s red herring prospectus (RHP), which contains all the relevant financial and operational details of the company . RHP as it’s called is freely available on SEBI’s website or the company’s portal.
The first item to look for in the RHP is the face value of the share. Next thing the investor should look for is the company’s capital structure represented by subscribed paid-up capital divided into certain number of shares. These two variables will help us to calculate the total number of shares that will be available for trade. This is important, as it is one of the key determinants of its offer price.
The other factor is earning per share, i.e., total profit divided by the total number of shares. Just to illustrate consider Adani Power IPO. Post IPO, Adani Power’s paid-up equity capital is around Rs 2,180 crore divided into 218 crore shares with face value of Rs 10 each. Now compare it to Tata Power’s capital structure.
At the end of June ’09 quarter, Tata Power’s paid-up equity capital is around Rs 222 crore represented by 22.2 crore equity shares with face value of Rs 10 each. Simply put, Adani Power has nearly ten times more equity shares than Tata Power. This means that for the same market value, Adani Power’s share price will be one-tenth that of Tata Power’s share price.
For instance at Rs 100 per share, Adani Power’s total market capitalisation will be Rs 21,800 crore (Rs 100 multiplied by 218 crore shares). If Tata Power gets the same market capitalisation, its share price would work out to be Rs 982 (Rs 21,800 crore divided by 22.2 crore shares).
But what determines company’s market valuation or market capitalisation? At the most simplest level, market cap is directly depended on company’s earnings or profitability in the preceding 12 months. Higher the net profit, higher will be its market value. Total net profit divided by the number of shares gives us earning per share. Now consider the case of NHPC and compare it to National Thermal Power Corporation (NTPC).
During the year ended March 2009, NHPC earned a net profit of Rs 1244 crore, which translates into a earning per share of Rs 1.01 per share (Rs 1244/1230). Post IPO NHPC paid-up equity capital will rise to Rs 12,300 crore represented by 1,230 crore shares with face value of Rs 10 each. In comparison, NTPC earned a net profit of Rs 8,201 crore during FY09, which works out to be Rs 9.95 per share.
Now divide NHPC offer price with its EPS and its gives you price to earning multiple, commonly known as P/E multiple. In case of NHPC, it works out to be 30 at the lower price band and 36 at the upper price band. In contrast NTPC is trading
at around 21 times its EPS in FY09. Obviously, latter is cheaper than the former.
If we set aside other complex issues involved in valuations such as quality of management, earnings quality and growth prospects, a company with lower P/E is preferable. And in the end, it is always preferable to invest in a company whose business is up & running, rather than a company, which promises to use the proceeds to set-up a business that will generate profits and cash flows in future. As they say, there is many a slip between the cup and the lip!
if they hang around long enough.
For first time investors or those lacking enough experience, the trickiest part is to assess the fair value of the shares on offer in an IPO. This is important as it determines whether you should subscribe to the offer or instead bet your money on a related company already listed on the stock exchanges. But it is easier said than done. Most often prospective investors either get seduced or intimidated by the offer price.
This should not happen in an ideal world. After all an offer price or market price of a share is nothing but a company’s expected or total market value divided by the number of shares. This means that two companies with similar market value may trade at different prices simply due to difference in the number of shares
available for trading. But most of the new investors fail to determine this link between the market value and the share price.
This was clearly visible in the recent IPOs of the power sector companies. The investors have been baffled by the sheer variance in offer price of IPOs and the market price of their listed peers. For instance Adani Power was offered to the investors at Rs 100 per share. In comparison, Tata Power, which in the same line of business (i.e in thermal power) and of similar size (in terms of capacity), is right now trading in the range of Rs 1,200 per share.
On the other side of the spectrum is NHPC, which is being offered to the investors in the price band of Rs 30-36 per share. In comparison, another public sector power utility NTPC is trading at around Rs 210 per share. To a trained eye, there’s nothing unusual in the variation in the market price of various companies in a sector.
But for a retail investor, market price is the most visible and appealing information about the real worth of a company or business that is taken easily without much pondering.
Most retail investors and especially the first time investors in IPOs associate the offer price with the relative cheapness of the stock. To them, NHPC is so much cheaper than NTPC, while Adani Power IPO is a steal compared to Tata Power. They don’t care about the fact that at its lower price band NHPC is asking for around 30 times its earning per share (EPS) in FY09 while NTPC is available at a P/E multiple of just 20.
This brings us to the crux of the issue. How should retail investors with limited resources and experience assess the fair value of an IPO and compare it to related companies already listed on the bourses?
The starting point is to get hold of the company’s red herring prospectus (RHP), which contains all the relevant financial and operational details of the company . RHP as it’s called is freely available on SEBI’s website or the company’s portal.
The first item to look for in the RHP is the face value of the share. Next thing the investor should look for is the company’s capital structure represented by subscribed paid-up capital divided into certain number of shares. These two variables will help us to calculate the total number of shares that will be available for trade. This is important, as it is one of the key determinants of its offer price.
The other factor is earning per share, i.e., total profit divided by the total number of shares. Just to illustrate consider Adani Power IPO. Post IPO, Adani Power’s paid-up equity capital is around Rs 2,180 crore divided into 218 crore shares with face value of Rs 10 each. Now compare it to Tata Power’s capital structure.
At the end of June ’09 quarter, Tata Power’s paid-up equity capital is around Rs 222 crore represented by 22.2 crore equity shares with face value of Rs 10 each. Simply put, Adani Power has nearly ten times more equity shares than Tata Power. This means that for the same market value, Adani Power’s share price will be one-tenth that of Tata Power’s share price.
For instance at Rs 100 per share, Adani Power’s total market capitalisation will be Rs 21,800 crore (Rs 100 multiplied by 218 crore shares). If Tata Power gets the same market capitalisation, its share price would work out to be Rs 982 (Rs 21,800 crore divided by 22.2 crore shares).
But what determines company’s market valuation or market capitalisation? At the most simplest level, market cap is directly depended on company’s earnings or profitability in the preceding 12 months. Higher the net profit, higher will be its market value. Total net profit divided by the number of shares gives us earning per share. Now consider the case of NHPC and compare it to National Thermal Power Corporation (NTPC).
During the year ended March 2009, NHPC earned a net profit of Rs 1244 crore, which translates into a earning per share of Rs 1.01 per share (Rs 1244/1230). Post IPO NHPC paid-up equity capital will rise to Rs 12,300 crore represented by 1,230 crore shares with face value of Rs 10 each. In comparison, NTPC earned a net profit of Rs 8,201 crore during FY09, which works out to be Rs 9.95 per share.
Now divide NHPC offer price with its EPS and its gives you price to earning multiple, commonly known as P/E multiple. In case of NHPC, it works out to be 30 at the lower price band and 36 at the upper price band. In contrast NTPC is trading
at around 21 times its EPS in FY09. Obviously, latter is cheaper than the former.
If we set aside other complex issues involved in valuations such as quality of management, earnings quality and growth prospects, a company with lower P/E is preferable. And in the end, it is always preferable to invest in a company whose business is up & running, rather than a company, which promises to use the proceeds to set-up a business that will generate profits and cash flows in future. As they say, there is many a slip between the cup and the lip!
3.8.09
Buy atlanta limited
TARGET : 300
CMP : 104
PERIOD : 12 MONTHS
FUNDAMENTALS
COMPANY PROFILE
The Company was incorporated under the name of 'Atlanta Construction Company (India) Private Limited' pursuant to a Certificate of Incorporation No. 11-031852 of 1984 dated January 17, 1984 issued by the Additional Registrar of Companies, Maharashtra. The name was changed to 'Atlanta Construction Company (India) Limited' April 5, 1991 on being deemed a public company under Section 43A (1A) of the Companies Act, 1956. The name changed to 'Atlanta Infrastructure Limited' on February 2, 1997 and to 'Atlanta Limited' on December 16, 2004
HISTORY AND MAJOR EVENTS
Year Event
October 17, 1995
Completed widening and strengthening of National Highway No. 45 from Km. 67/0 to Km. 160/2 Package V & VI valued at Rs. 395.56 for National Highways of Authority of India, Chengalpattu Tamil Nadu.
March 28, 1998
Completed construction of Udaipur Bypass Road Phase-II on B.O.T. Basis valued at Rs. 244.50 million for Public Works Department, Udaipur.
December 31, 2001
Completion of improvement of arterial and sub arterial roads in Bangalore valued at Rs. 652.22 million for Bangalore Mahanagar Palike.
2002-03
Completed extraction and transfer of Coal/Coal Measure Strata in deploying "surface miners" on hire basis at Belpahar OCP valued at Rs. 40.91 million for Mahanadi Coal Fields.
April 15, 2004
Completion of periodic renewal of Vapi-Ambethi (link to pient) and Vapi Daman road valued at Rs. 128.38 million for National Highways Authority of India.
February 15, 2006
Letter of recommendation for certification under ISO 9001:2000
NFRASTRUCTURE DEVELOPMENT
From executing India's first greenfield BOT project on National Highways - Udaipur Bypass and successfully participating in toll-based PPP infrastructure development projects to building roads, highways, bridges, runways, docks, ports, canals, water courses, irrigation, embankment, reservoirs and executing several EPC projects, Atlanta is at the forefront of developing India's infrastructure.
The company has serviced some of the biggest players in the industry such as National Highway Authority of India (NHAI), Ministry of Road Transport and Highways, Public Works Department, Municipal Corporation of Greater Mumbai and Airports Authority of India to name a few.
Atlanta has established an enviable reputation in the infrastructure development and EPC space due to its ability to harness technology to match the momentum of tomorrow. The company owns and employs modern, specialised and critical fleet of equipment to successfully execute large and complex projects.
Atlanta's EPC division is the oldest and the largest business division of the company and its key activities comprise the actual execution of theinfrastructure projects. This key in-house EPC capability helps the company deliver quality projects on time, amply demonstrated by the successful completion of the Udaipur Bypass project in less than half of the allocated time.
Projects under execution The company is currently executing two toll-based BOT projects: Mumbra Bypass (which is nearing completion) and Nagpur-Kondhali along with several other EPC projects.
Looking forward Atlanta being a forward thinking company, besides identifying traditional infrastructure development projects plans to foray into two new emerging segments: building and maintaining car parking plazas and airport management.
The company, is confident of success in both these segments due to its inherent construction expertise, flawless execution skills, technological know-how which will be backed by alliances with established foreign players in these field.
MINING
Atlanta is active in the high margin limestone and coal mining business with over a decades experience in contract mining, having gained valuable experience at a time when the captive mining business was not even on the radar of competitors.
Prominent features that make Atlanta the obvious contract mining partner of choice competent and best suited to take on the sector's specific needs and challenges include:
1. SURFACE MINING TECHNOLOGY
Atlanta is the first player in the country to have prudently invested in superior surface mining technology: a technology imported from Wirtgen, Germany and Volvo, Sweden that eliminates conventional operations like drilling, blasting and crushing. Surface mining technology enables controlled excavation, is not labour-intensive nor is it risky like the conventional mining process.
2. CAPACITY
Atlanta has the capacity to extract (limestone / coal) over 25000 tones per day, significantly higher than industry peers.
3. CREDIBLE PRESENCE
Atlanta’s distinguished clients include: Mahanadi Coal Fields Ltd. (a subsidiary of Coal India Ltd), Reliance Petroleum Ltd, The Associated Cement Companies Ltd, Narmada Cement Company Ltd, Tata Chemicals Ltd, amongst others.
REALTY
Having anticipated the market trends in the realty sector, Atlanta increased its preparedness to leverage the opportunities by prudently investing in land sites with clear land titles and concurrently demonstrated success and expertise across diverse formats by executing commercial projects and residential projects in prime and emerging locations in Mumbai.
With a longstanding sectoral presence in constructing and executing large projects, Atlanta is now on its way to build attractive properties in and around Mumbai and plans to develop innovative structures across all realty segments in emerging Tier II and Tier III cities across the country.
RESULTS
Quarterly Results (Rs. in Crores)
June2009
[1 Quarter] March2009
[4 Quarter] June2008
[1 Quarter]
CMP : 104
PERIOD : 12 MONTHS
FUNDAMENTALS
COMPANY PROFILE
The Company was incorporated under the name of 'Atlanta Construction Company (India) Private Limited' pursuant to a Certificate of Incorporation No. 11-031852 of 1984 dated January 17, 1984 issued by the Additional Registrar of Companies, Maharashtra. The name was changed to 'Atlanta Construction Company (India) Limited' April 5, 1991 on being deemed a public company under Section 43A (1A) of the Companies Act, 1956. The name changed to 'Atlanta Infrastructure Limited' on February 2, 1997 and to 'Atlanta Limited' on December 16, 2004
HISTORY AND MAJOR EVENTS
Year Event
October 17, 1995
Completed widening and strengthening of National Highway No. 45 from Km. 67/0 to Km. 160/2 Package V & VI valued at Rs. 395.56 for National Highways of Authority of India, Chengalpattu Tamil Nadu.
March 28, 1998
Completed construction of Udaipur Bypass Road Phase-II on B.O.T. Basis valued at Rs. 244.50 million for Public Works Department, Udaipur.
December 31, 2001
Completion of improvement of arterial and sub arterial roads in Bangalore valued at Rs. 652.22 million for Bangalore Mahanagar Palike.
2002-03
Completed extraction and transfer of Coal/Coal Measure Strata in deploying "surface miners" on hire basis at Belpahar OCP valued at Rs. 40.91 million for Mahanadi Coal Fields.
April 15, 2004
Completion of periodic renewal of Vapi-Ambethi (link to pient) and Vapi Daman road valued at Rs. 128.38 million for National Highways Authority of India.
February 15, 2006
Letter of recommendation for certification under ISO 9001:2000
NFRASTRUCTURE DEVELOPMENT
From executing India's first greenfield BOT project on National Highways - Udaipur Bypass and successfully participating in toll-based PPP infrastructure development projects to building roads, highways, bridges, runways, docks, ports, canals, water courses, irrigation, embankment, reservoirs and executing several EPC projects, Atlanta is at the forefront of developing India's infrastructure.
The company has serviced some of the biggest players in the industry such as National Highway Authority of India (NHAI), Ministry of Road Transport and Highways, Public Works Department, Municipal Corporation of Greater Mumbai and Airports Authority of India to name a few.
Atlanta has established an enviable reputation in the infrastructure development and EPC space due to its ability to harness technology to match the momentum of tomorrow. The company owns and employs modern, specialised and critical fleet of equipment to successfully execute large and complex projects.
Atlanta's EPC division is the oldest and the largest business division of the company and its key activities comprise the actual execution of theinfrastructure projects. This key in-house EPC capability helps the company deliver quality projects on time, amply demonstrated by the successful completion of the Udaipur Bypass project in less than half of the allocated time.
Projects under execution The company is currently executing two toll-based BOT projects: Mumbra Bypass (which is nearing completion) and Nagpur-Kondhali along with several other EPC projects.
Looking forward Atlanta being a forward thinking company, besides identifying traditional infrastructure development projects plans to foray into two new emerging segments: building and maintaining car parking plazas and airport management.
The company, is confident of success in both these segments due to its inherent construction expertise, flawless execution skills, technological know-how which will be backed by alliances with established foreign players in these field.
MINING
Atlanta is active in the high margin limestone and coal mining business with over a decades experience in contract mining, having gained valuable experience at a time when the captive mining business was not even on the radar of competitors.
Prominent features that make Atlanta the obvious contract mining partner of choice competent and best suited to take on the sector's specific needs and challenges include:
1. SURFACE MINING TECHNOLOGY
Atlanta is the first player in the country to have prudently invested in superior surface mining technology: a technology imported from Wirtgen, Germany and Volvo, Sweden that eliminates conventional operations like drilling, blasting and crushing. Surface mining technology enables controlled excavation, is not labour-intensive nor is it risky like the conventional mining process.
2. CAPACITY
Atlanta has the capacity to extract (limestone / coal) over 25000 tones per day, significantly higher than industry peers.
3. CREDIBLE PRESENCE
Atlanta’s distinguished clients include: Mahanadi Coal Fields Ltd. (a subsidiary of Coal India Ltd), Reliance Petroleum Ltd, The Associated Cement Companies Ltd, Narmada Cement Company Ltd, Tata Chemicals Ltd, amongst others.
REALTY
Having anticipated the market trends in the realty sector, Atlanta increased its preparedness to leverage the opportunities by prudently investing in land sites with clear land titles and concurrently demonstrated success and expertise across diverse formats by executing commercial projects and residential projects in prime and emerging locations in Mumbai.
With a longstanding sectoral presence in constructing and executing large projects, Atlanta is now on its way to build attractive properties in and around Mumbai and plans to develop innovative structures across all realty segments in emerging Tier II and Tier III cities across the country.
RESULTS
Quarterly Results (Rs. in Crores)
June2009
[1 Quarter] March2009
[4 Quarter] June2008
[1 Quarter]
Subscribe to:
Posts (Atom)