Jai balaji industries:-A King size Multibagger in making

Scripscan:Jai balaji industries
Traded in:Nse-bse
cmp:27
Marketcap:170crs

"Warren Buffett Quote":Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.

Story:Just five points which will speak the real value of this company:-

1)Company 1.1mtpa steel manufacturing company with diversified product range including pig iron, sponge iron, TMT bars, ferro alloys, alloy bars etc.Replacement cost of assets over 4000crs.Debt of 2000 odd crs.(NAV of the company 4000crs-2200crs=1800crs)

2)The company holds varying stakes in four coal blocks-Dumri and Rohne in Jharkhand and Andal and Jagannathpur in West Bengal.It posses 700mt of high graded coal.Coal valuation is all over the place(USD 3 per tonne to USD 25 per tonne).Taking most conservative value of 3USD per tonne,value comes at over 10500crs.

3)Recently it backwardly integrated by putting up a .35mtpa coke oven.Will help in saving 75-100crs input,enhancing margins.Did a CDR which further will help saving 25-40crs.Raw materials prices have started softening and product prices have jumped a bit,albeit in a very tiny manner.

4)Promoter bought over 6 lakhs shares from open market in the last few months and further allotting 1cr warrants at 50 bucks,promoter stake to move from 52% to 58% post warrants conversion.

5)Reduced pledged shares from 92% to 68% recently,should be below 60% with warrants conversion.Company may have further plans to release more pledged shares in due course.

Conclusion:So you are getting India's 8th largest backwardly integrated 3000crs revenue company with 12300crs of assets(10500crs of coal+1800crs of assets after deducting debt) at just 170crs.Sanity is not in vogue but probably will be someday.

ONLY FOR HIGH RISK INVESTORS.........

 Traditionally ,Investing in stocks considered as a high risk high return game compared with other opportunities like Real Estate ,Gold..etc.Even in stocks itself the degree of risk -return is different in the case of Blue Chips,Large Caps,small caps..etc.Investing in turnaround companies is a favourite option of high risk takers to generate maximum return at the cost of highest risk.This strategy  not at all suitable for average or below average risk takers .Investment in such stocks may make millionaire's as well as bankrupts based on the accuracy of one’s calculations.What I mean is , below is the name of such a stock/company, only for investors who are even willing to forget their entire capital invested and also having enough patience.

Ashapura Minechem

This company along with its subsidiaries are the largest exporters of bentonite from India and one among the biggest five in the world.In addition to bentonite, company is in the production of many other minerals including sizable operations in Bauxite , Kaolin, Attapulgite, Barites..etc.Its major product –Benonite- is widely used in metal casting, iron ore pelletizing, civil engineering, drilling,   paper, detergents, cosmetics..etc. Bauxite is the basic ore for producing Aluminium.Company was a darling of investors till 2008 and its share price (post FV split) was around Rs.400-500 level.A big blow came in the form of the  ban on export /sale of bauxite by the government of Gujarat in 2008-09.Only because of this unexpected ban many issues followed in the form of forex losses and claims by few shipping companies.Kaolin plant in Kerala went into trouble on account of some local issues.All these incidents derailed company’s operations and ends in big losses.New mineral policy announced by Gujarat Government in  2009 -10 bring clarity in mining policy and permitted bauxite mining again.But by that time company’s financial health eroded a lot and it declared as a Sick company in 2012.After many month’s sincere attempt by the management, now the company is in a recovery mode.Debt of the company restructured and promoters brought  more funds into the company by way of subscribing 40,00,000 Equity Shares of Rs. 2 each at a price of Rs. 36.83 per share and 40,00,000 Convertible Warrants to be converted into equity shares.Claims by shipping companies are challenged by the company in court and case with one company  already settled out of court.Management of Ashapura expecting a favorable verdict in other cases too.On the financial front company showing sharp improvement in past few quarters.In latest full year company reported a Sales of Rs.771 Cr and its bottom line also showing remarkable improvement even excluding other income component.

                                                         Due to environment related issues ,entry of new players in this segment is not very easy now and probably in future.This situation giving special advantage for existing miners .I believe ,the testing time of this company is over and it is the time for a new beginning in the history of this company .Currently stock is trading around Rs.42

MULTI-BAGGER ..... PRAJ INDUSTRIES

PRAJ INDUSTRIES                                   

Betting on Bio Fuels                                                                   Money Dalal

Cmp:49/-                                                                                         18-12-12.

Praj Industries (PIL), a leading manufacturer of ethanol and brewery plants with the domestic market share of 80% and 50% respectively, and a global market share of 8%, is well poised to leverage on the capacity expansion from these segments.

 Praj Industries ltd is a global Indian company that offers innovative solutions to significantly add value in bio-ethanol, alcohol, brewery plants, process equipment and water and wastewater treatment systems for customers, worldwide. Praj is a knowledge based company with expertise and experience in Bioprocesses and engineering. It has one of the largest resource bases in the industry with over 500 references across all five continents.

Money Dalal’s views:

 Praj is a long term story hence one need to have this stock in their bag for aiming the long term only.

 The key positive in this stock is that the Indian govt has initiated the process of blending ethonal with the petrol recently. The whole world is adopting this and now our policy makers started to curb the imports bill.

• ·         Rising crude prices are the key positives for this stock.
• ·         Brewery industries growing in a robust pace.
• ·         Sugar companies on expansion mode.
• ·         Waste water treatment has huge opportunity in the India.
• ·         Policy makers in india’s decision of more mix of ethanol in petrol.
• ·         Zero Debt Company with good track record of paying dividends.
• ·         Buy back at the price of Rs.90/-
  

Concerns: 

• ·       Margins are decreasing.
• ·       Lukewarm growth in order book.

With thanks 

Money Dalal

FDI IN RETAIL ......

For once, it is a pleasure to see the politicians talking and debating in the Lok Sabha. This is how things should function in the ideal world. But turn around to the Rajya Sabha and all the ugliness of coalition politics comes to fore.

FDI in multi brand retail has taken over all other policies and hopefully, once the voting gets over today, the Parliament will turn its attention to other policies. In the Lok Sabha, 251 votes are needed to get the go-ahead and UPA says it already has 261 votes in the pocket. Rajya Sabha on the other hand, is a completely different but depressing story.

It is high time that a decision is made on FDI at the earliest and we move on to other issues. Its been raging on for too long. If one may recollect, the Cabinet had approved 51% FDI in multi brand retail in November’11 but it did not get approval from Mamataji and hence was put in abeyance. But today, Mamataji is not much in the picture. The Congress has built it well, proposing to allow FDI in states which are not opposed to it; read that as “Congress governed states." What happens if in re-election, Congress loses its place in that State?

In a way, this partial allowance of FDI in multi brand retail is a good thing too. It will show whether or not it is good, in terms of employment, inflation, co-existence of kirana’s. If it proves to be good, maybe that in itself will convince the current states which are opposed to accept it too. And if it does bring in the evils which some states fear, then it is well and good that it is not being followed all across the country. The Congress governed states allowing the FDI will thus become experimental grounds.

In a nutshell let us have a look at the merits and demerits of having FDI.

A thumbs up!

It will do away with the middle men who have been holding the farmers to ransom. With companies procuring goods directly, costs could come down. Large retailers coming will mean investment in supply chains, cold storage, logistics, technology and global best practices. It will create employment The 51% equity means that foreign companies will have to necessarily tie-up with local companies. Markets will zoom if this goes through!

A thumbs down!

What if the companies do away with the middle men but they themselves become like middlemen? Costs could come down initially but once the MNCs get their foothold, will they start dictating the prices? Will global companies have a monopoly over the supply chains? It could encourage more migration into cities as foreign retailers can come up only in cities with a population of at least 10 lakh. Small mom and pop shops, kiranas could shut down. Markets are sure to tank if FDI is scuttled.

The market is already celebrating an approval. Does that mean that companies will have foreign retailers knocking on their doors immediately the next day after the approval comes through? Not likely. The nod would be more psychological, making more of a perceptional difference. For us and the companies to see the changes, it will take over 6 -8 months. Infact the most awaited entrant, Wal Mart, when it entered China in 1996, expected good growth with a short time but it took more than a decade for the Chinese operations to become successful. Thus the likes of Wal Mart, Tesco, Carrefour could see become a reality in some states in India. And yes, we are sure to have visitors from other “opposing” states, coming down to shop at Wal Mart or Tesco.

We cannot fight development and live in a spaceship. The small retailers may or not be affected; we do not know. Thus to shun it without knowing is foolish. Computerisation in banks, FDI in insurance; almost each and every thing has faced opposition but today we clearly see that every water finds its own level. LIC feared that it would lose business if FDI in insurance was allowed; has that happened? Infact LIC has only grown stronger. The advantages of FD in retail, in terms of developing the infrastructure, building the much needed supply chains, direct procurement from farmers; all will lead to better development. India is too vast a country, with too many people thus fearing closure of mom-and-pop shops is being too nave. Dubai, a city of malls has more small shops today than it did when there were lesser malls.

For the layman (in some states), what this news means is that there will be more malls, more choices, more shopping. This is the direction in which the world is moving today, either join it or get left behind. Can India afford to get left behind when we are already globally linked?

regards
money dalal