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VOL. XVI No. 2 Monday, Nov. 27 – Dec. 3, 2006 Pages 18

Liquidity driven market to witness volatility & choppiness By Sanjay R. Bhatia The uptrend continued on the bourses amidst intermediate bouts of correction and consolidation on the back of strong fund flows. The markets also displayed bouts of heavy volatility and choppiness as they conquered new historic peaks. The volumes recorded continued to remain good amid mixed advance-decline ratios. Traders and speculators were active in banking, capital goods, power, tech and telecom stocks but were also seen booking profits at higher levels. Incidentally, FIIs continued to remain big buyers on the bourses. Mutual funds, however, were seen booking profits at higher levels.

The global market cues remained mixed as crude prices bounced back on bad weather conditions and Alaska port halted crude oil shipments. The US markets displayed a flat trend due to a truncated trading week but the Asian markets remained strong. Liquidity, as we have been indicating in the last few issues, continued to drive the markets up and they witnessed occasional bouts of profit booking at higher levels. Even though the markets are witnessing profit taking at higher levels, they display strong resilience and support at lower levels. Market valuations continue to look stretched and a correction is long overdue. Hopefully, a broad based correction would be witnessed next month as FIIs go on their annual Christmas vacation and fund flows are likely to remain weak during this period. Till such time, the markets would continue to take cues from global markets and crude oil prices but liquidity would

continue to drive the markets. The markets would witness stock specific action amid intermediate bouts of correction, volatility and choppiness due to the derivatives segment expiry next week. Technically, as we had indicated in the last issue, the Sensex has successfully tested the 13600-13700 levels and the Nifty the 3950 level. Now, it is important that the Sensex moves and sustains above the 13700 level for it to test the 13900-14000 level. On the downside, the 13429 is an important support level for the Sensex. On the upside, if the S&P CNX Nifty manages to sustain above the 3950 level, it is likely to test the 4000 level. On the downside, the 3777 level is an important support level for the Nifty. Traders and speculators should continue book partial profits at higher levels and keep trailing stop losses on the outstanding positions and could buy Adlabs with a stop loss of Rs.390 and a target price of Rs.454.

New support base of 13200 - 12950 TRADING ON TECHNICALS

By Hitendra Vasudeo This weekly update is on a cut short on basis with Thursday’s (23/11/06) closing as my annual holiday begins on Friday and I will be back on 1st Dec.’06 to resume office on 4th Dec.’06. I hope and anticipate that the market remains in good shape and continues to make new highs consistently. The Sensex crossed an important mark of 13640 and closed above it on 23/11/06. We hope to see a close above 13640 on Friday to confirm a weekly close above 13640 as well. The new high registered is 13790 and if we see a further rise and close above it as well, then expect the Sensex to move towards 14150-14600-15064. Expect 14150 at least in days to come on sustained rise and close above 13790.

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The incomplete week as on Thursday 23rd Nov, opened at 13390.95, fell to a low of 13200 and recovered to make a new high at 13790.82. Finally, the Sensex closed on Thursday at 13680. The weekly trend is up since the weekly closing of 10680 on 28/07/06 and the Sensex has moved to a high of 13790. The weekly trend is still up and can turn down on fall below 13200 or if the Friday weekly close is below 13381. Weekly support will be at 13390-13200. Weekly resistance will be at 13790. Expect correction in the market only on fall and close below 13200. Strategy for the fortnight Roll long positions till 13200 is in tact. Corrective dips to 13557-13323 can be used for buying with a stop loss of 13200 and a Friday weekly closing stop loss of 13381 on 1st Dec.’06.

Learn to beat the market BAZAR.COM

By Fakhri H. Sabuwala As one turns to the morning daily, glaring at you out there are the screaming headlines about the market cap being up or down by a few thousand crore, which appears phenomenal but remains notional as not a penny gets in or out of our pockets. Its nice to read that the Rs.10,000 invested a year back appreciated by 26% in gold, 56% in Sensex, 53% in silver etc. But at the end of the day we just come to terms with a simple fact of life:- Trying to understand the game of investments and doing better than the benchmarks i.e. outperforming the Nifty or the Sensex and learning to keep afloat. We become a bundle of emotions when we undertake this exercise. And for once you not only feel the greed and fear but also even see it. Learning to beat the market just cannot be acquired by reading Peter Lynch or perfecting the art of value picking by following Warren Buffet. In fact, it is a balancing act like getting on the bicycle and riding it yourself. It just cannot be a copybook style. First and foremost is to develop the right frame of mind and control your emotions. Invest in the stock market with a time frame of three to five years. Remember that investment is a risky business and the risk can be brought down by a longer-term perspective. In case you are yourself an investor but looks at stock prices at an hourly basis, its time you change your stance and call yourself a trader. Believe me, no one sheds a tear for a trader! The second point and which is nothing but pure common sense is to invest in a business that you understand. Put your money in companies that are in the businesses that a layman understands – something that enjoys demand, has brand value and franchise value and touches our daily life. Little wonder, Warren Buffet holds a majority stake in ‘Washington Post’, a popular US daily newspaper, Coca Cola, a very popular drink, or Gillette, the manufacturer of razor blades and shaving kits that half the world population uses every morning. But he does not own a single share of Microsoft in spite of his close friendship with Bill Gates because he does not understand the software business. And finally, invest in a business that is so well organised that any fool can run it. But who manages the company is the most important factor before you decide to put your money into it. Narayan Murthy’s passion and vision has shaped Infosys and created a fortune for us. Ratan Tata’s conviction about the success of small cars turned around the fortunes of Tata Motors. In short, learn more and more about the management’s vision and corporate mission and the commitment of the core team. This quality is not found in arithmetic statistics or financial figures but goes to create them, which in turn creates value for stakeholders. Subjective analysis is important to evaluate it by objective interpretation, one needs to look on the quarterly results and track the progress of the project. Numbers ultimately tell you how the company has fared. Guidance for the next few quarters and the commentaries by different experts on the working results will give you an idea about the shape of things and what to expect of your investments. Last but not the least, make investments a habit of constant care and staying in touch to strike your pot of gold. Also, place some of your money with fund managers and handle some of it on your own. The results will show that by following a strict discipline, you too can do a job as good as the professionals. Market Review: The week just concluded has been unique in more ways than one. The Sensex is racing to meet 14K mark and the top performers, which shall make it possible, are HDFC, ONGC, Reliance, Bharti & Infosys. The power segment is heading for a fresh run up and the given quantum of orders that are pouring into the kitty of Siemens, BHEL, ABB, Areva, Crompton Greaves etc., one can safely conclude the best for them is yet to come. M&M has been in the news since the past few weeks and with the type of innovations, joint ventures and entries into new virgin markets makes it a scrip of the future. Despite witnessing a consistent rise, the scrip has a long way to go over the next few years and will emerge a real multi-bagger even from hereon. Amid the mid-caps IDBI, BOI, Gateway Distriparks, GMR Infrastructure, Spanco Telesystem, Panacea Biotech, Biocon and JSW Steel remain the favourites.

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Amarjothi Spinning Mills Ltd (Code: 521097) Rs.38 BEST BETS

Incorporated in 1987, Amarjothi Spinning Mills Ltd (ASML) was promoted by the well-known Amarjothi Group of Tirupur, which has diverse interest in finance, power, education, real estate and textiles. It has emerged as a major yarn producer with special emphasis on mélange yarn. Melange means mixture in French and the company has perfected the art of manufacturing yarn, which gives mixed effect of colour in the yarn. It is a 100 % cotton two tone yarn and could be blended with most fibres like polyester, viscose, modal, wool, silk, polynosic, tencel, lycra etc. Although the company derives major revenue by catering to the local Tirupur market it also exports to Europe, Mauritius, Sri Lanka, Israel, Egypt, Turkey, Hong Kong, Malaysia, Philippines, Korea, China, Japan, USA, European and South African Countries. ASML’s plant is located at Pudusuripalayam in Tamilnadu and has a capacity of around 40,000 spindles, which results in annual production of around 48,00,000 MT of yarn. It also has an in-house dyeing unit at Perundurai, Erode with capacity for fibre dyeing upto 3000 kgs per day. Moreover, its three windmills with a total capacity of 4.95 MW are in operation generating a substantial portion of power requirement of its spinning mill. ASML has been improving the share of its value added yarn in the market in the form of dyed fibre yarn, dyed cotton yarn, PC yarn, etc. It offers competitive price due to low power cost through windmills, low interest cost, low processing cost, etc. Importantly, the company has obtained ISO 9001:2000 certification, MGMT.SYS RVA C 216 Certification for quality management and systems and OEKO TEX STANDARD-100 certification for not using any harmful substances in the product. Due to market uncertainties and not so aggressive management, the proposed expansion plan of raising the spinning capacity to 58,000 spindles was put on hold in spite of loans being sanctioned for the purpose. The modernization was also restricted to essential machinery and the balance kept in abeyance. Still, the company reported encouraging numbers for H1 FY07. Both Sales and PAT grew by around 30% to Rs.48 cr. and Rs.3.35 cr. respectively. For full year FY07, it is estimated to clock a turnover of Rs.100 cr. with net profit of Rs.7.50 cr. This will lead to an EPS of Rs.11 on its equity of Rs.6.75 cr. With reserves of more than Rs.25 cr., the book value of its share stands at Rs.48. It declared 14% dividend for FY06 and may announce 16% for FY07, which would give a yield of more than 4% at CMP. With a current market cap of only Rs.25 cr. and its 52W H/L as Rs.79/35 respectively, this scrip is available for a song. Investors are strongly recommended to buy for a price target of Rs.55 (45% return) in 9-12 months. Long-term investors can expect 100% return in 18-24 months. Savera Hotels Ltd. (Code: 512634) Rs.60 Established in 1969, Savera Hotels Ltd. (SHL) is a leading classified four-star hotel company. It owns the huge 260 rooms, centrally air-conditioned ‘The Savera’ hotel located in the heart of Chennai, which is just 11 km from the international airport and merely 5 km from the main railway station. The company also owns a pub in Bangalore and a restaurant cum pub in Hyderabad - both of which are doing extremely well. Notably, the facilities provided by the hotel are nothing less than five star category and are of an international standard. It has a hi-tech business centre with secretarial service, private office space, boardrooms, all modern communication devices round the clock service apart from Interpreters/translators on call. It boasts of having 9 conference halls of varying capacities starting from 50 people upto 800 people for conducting seminars, meetings and functions. Banquet facilities are also offered to host wedding receptions, birthday parties, anniversaries and get-togethers. Interestingly, the hotel has various restaurants including a 24 hour multi-cuisine restaurant cum coffee shop, a roof top restaurant offering authentic Mughlai Cuisine, a South Indian speciality restaurant, a cosy Bar offering a range of imported and Indian liquors and a cake shop. Besides, the hotel has a health club, fitness centre, swimming pool, florist, beauty parlour, men’s saloon, shopping arcade, book shop, travel desk, money changer etc. SHL is taking significant steps to enhance the guest experience by improving its products and service levels in line with international standards. Furthermore, the company continued with its ongoing programme of investing in renovation and upgradation of rooms, suites and other public related services thereby improving the average room rate. To cash in on the ongoing boom in the hotel industry, the company has started exploring new business avenues in the pilgrims/business destinations and soon new hotel outlets with innovative measures will be launched in Madurai, Coimbatore and Hyderabad. SHL is also focusing on diversification in the floriculture business at Ooty by acquiring control of an existing company. With infrastructure developments taking place in Chennai and huge commercial space being added, business in the city is bound to increase. Besides the tourism industry is growing significantly throughout the world and more particularly in India. The average room rate (ARR) and occupancy levels are quite high and expected to remain robust in future. For FY06, while the company’s topline increased by 20% to Rs.30 cr., its net profit zoomed by 190% to Rs.3.60 cr. due to higher room rates. H1 FY07 is much more encouraging with sales improving by nearly 20% to Rs.16 cr. and net profit

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doubling to Rs.1.60 cr. The second half is traditionally better for hotels; SHL is expected to end FY07 with total revenue of Rs.35 cr. and profit of Rs.4.50 cr. This means an EPS of Rs.8 on its equity of Rs.6 cr. In spite of such strong fundamentals, the SHL scrip is trading every cheap at market cap of only Rs.35 cr. With real estate prices hitting sky high, the replacement cost is several times higher than its market cap. Lastly, with a book value of Rs.30 and dividend yield of more than 3%, the scrip has the potential to double in 15-18 months.

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By V.H. Dave EXPERT EYE

MAN Industries (India) Ltd. (MIL) (Code: 513269) (Rs.214) the flagship company of the Man Group is a leading manufacturer of large diameter SAW pipes and coating systems for high pressure applications like transportation of oil, gas and other petrochemical products. MIL has an order book of over Rs.1700 cr. and is all set to post an EPS of over Rs.22 in FY07. The shares are traded at a forward P/E of 9.5. MIL is an ISO 9001, ISO-14001 and ISO-18001 certified and all its facilities hold valid API Licences, which is a mandatory requirement for production of high pressure line pipes for hydrocarbons. Its plants are located Pithampur (MP) and at Kutch, Gujarat. MIL’s diversification into manufacture of SAW/Spiral pipes in 1994 contributes more to its turnover than the aluminium extrusion division. During FY06, while the production capacity of aluminium sections, stood at 6000 TPA, the capacity of pipes increased from 3,75,000 TPA to 4,25,000 TPA. MIL has recently commissioned its windmill in Kutch and reported the revenue from wind energy for the first time. MIL is putting up additional capacity of 4.5 MW in wind energy. During FY06, MIL increased sales by 66% to Rs.800 cr. and earned 91% higher net profit of Rs.35 cr. yielding an EPS of Rs.12.9 and paid a dividend of 25%. In Q2FY07, while sales jumped by 60% to Rs.292 cr., net profit shot up by 85% to

Rs.14.9 cr. During H1FY06, sales and net profit have both advanced by 65% to Rs.500 cr. and Rs.25 cr. respectively.

January – March 2006

EBG Quarterly Performance: 100% once again

During January – March 2006, which is the second quarter of the third year of ‘Early Bird Gains’ (EBG) – the investment newsletter

that spots multi-baggers, it has scored 100% success with all17 recommendations recording an appreciation.

EBG has, therefore, consistently, maintained quality while the bonus issues in excess of 20% highlight the confidence of its

recommendations. Issue Dated

Scrip Buy Price

Highest price since

recom.

Growth %

MIL’s equity capital is Rs.26.6 cr. and with reserves of Rs.248 cr., the book value of the share works out to Rs.103. The value of its gross block is a whopping Rs.307 cr. and its debt equity ratio stood at 0.9:1 as on 31st March’06. The Man Group of UK holds 12.4% while the Mansukhanis, the Indian promoters, hold 28% in the equity. Institutions/Mutual Funds hold 18% leaving 42% with the investing public. MIL has recently bagged orders worth Rs.700 cr. from overseas and domestic buyers. Its manufacturing facilities have also won the approval of the Russian natural gas company, Gazprom. Orders worth Rs.600 cr. have come from companies in the US, Nigeria and West Asia, while Indian companies have given orders worth Rs.100 cr. The total orders on hand amount to Rs.1700 cr.

04-01-06 Paradyne Infotech 79.00 93 17.7 11-01-06 Ramsarup Industries 83.00 134 61.4 11-01-06 Tilaknagar Industries 65.00 85 30.7 18-01-06 Austin Engg. 75.70 130 71.7 25-01-06 City Union Bank 110.00 135 22.7 02-02-06 Varun Shipping 78.90 99 25.3 08-02-06 Shri Dinesh Mills 1045.00 1589 52.7 15-02-06 Tinplate Company 81.00 106 30.9

MIL has embarked upon an expansion project in the HSAW division at Anjar to increase its installed capacity for HSAW pipes by 200,000 MTA, which will go on stream from July’07. MIL also completed a GDR offering of US $35 million at Dubai International Financial Exchange and will use the funds for refurbishing its capacity and as long-term working capital.

22-02-06 Modern Dairies Ltd. 27.00 29 7.4 01-03-06 Industrial Organics Ltd. 56.00 75 33.9 01-03-06 Acknit Knitting Ltd. 63.00 81 28.6 08-03-06 Alembic Ltd.* 380.00 83 9.2 08-03-06 G M Breweries 77.00 151 96 15-03-06 Empire Industries Ltd. 252.00 627 148.9 15-03-06 Lakshmi Electrical 269.00 377 40 22-03-06 Micro Technologies 270.00 371 37.4 29-03-06 Josts Engineering 342.00 431 26

EBG for sure profits Coming to the prospects, the massive expansion by gas & oil majors augurs well for

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MIL. Recently, the MP government has cleared MIL’s proposed Rs.14,000 cr. IT special economic zone, where the company plans to develop over 265 acres in 10 years developing a million square metres each year. MIL is in the process of de-merging its aluminium division to enhance shareholder value, which envisages one share in exchange for every & shares held in Man Industries. Major applications for seamless pipes are in oil exploration, boilers, ball bearings, roller bearings, automobiles, fertilizer, petrochemicals, etc. With the boom in the oil & gas sector and drilling and laying of cross-country pipelines, the pipe & tube industry is witnessing an unprecedented demand driven growth. Given the bright prospects of the pipe industry, the MIL is confident of continuing the momentum growth and is all set to post an EPS of about Rs.22 during FY07, which would further increase in coming years on the back of various projects being implemented. The MIL share trades at a forward P/E of 9.5 on its estimated FY07 earnings. In view of the robust business prospects and the company's ability to grow fast and its strong fundamentals coupled MIL’s decision to demerge its aluminium division into a separate business entity, the MIL share looks attractive for long-term capital appreciation. The 52-week high/low of the share has been Rs.302/Rs.130.

***** Sun Pharmaceuticals Inds. Ltd. (SPIL) (Code: 524715) (Rs.982), the 5th largest and one of the fastest-growing specialty drug companies is in the process of demerging its R&D division into separate entity, which would result in substantial increase in its bottomline, as R&D expenses currently constitute about 9.5% of its net sales revenue of Rs.1681 cr. Seeing the great potential in the future of SPIL, FIIs have collectively taken 16% in the equity. SPL manufactures and markets a large basket of pharma formulations as branded generics as well as generics in India, US and several other markets across the globe. In India, it is a leader in niche therapy areas of psychiatry, neurology, cardiology, diabetology, gastroenterology and orthopaedics. Its wholly-owned subsidiary, Caraco Pharma Labs in USA has acquired the assets of another US company, Able Laboratories, for $23.5 million (around Rs.106 cr.), which has 36 non-steroidal drugs spread in the anti-inflammatory, weight management, allergy, analgesic (urinary), anti-psychotics and corticosteroids categories. Able Labs had won 16 ANDA approvals in 2004 and six were pending till February'05. While sales does not include contract rights, an undisclosed number of contracts will be transferred to the purchaser. This acquisition will increase SPIL’s presence in the US generic drugs market ready with difficult-to-manufacture generics. One of SPIL’s products is in the first phase of trials. In NDDS, the company is working on four replicable platforms including biodegradable membranes, oral release, dry powder inhalers and targeted drug delivery systems for cancer. It is increasing its presence in the international generic drugs market and plans to earn half its revenue from it, up from 15% now. Between SPIL and Caraco, 44 products have been filed with the USFDA and are awaiting approval building a strong pipeline that will drive its US business going ahead. A strong intellectual property cache has been built-up with 56 patents received while another 339 are filed and await approval. Significant advances in filings of the API business were also made in FY06 with 24 approvals and 35 filings awaiting approval for US and Europe. Some of these filings support SPIL’s ANDA plans and will enable it to compete as an integrated major in the injectable/ peptide/ steroid/ anti-cancer areas, where it has identified several opportunities. During FY06, SPIL’s sales moved up by 40% to Rs.1682 cr. and net profit advanced by 50% to Rs.451 cr. and the EPS was Rs.23.3 on the face value of Rs.5 per share and it paid a dividend of 110%. During Q2FY07, sales advanced by 29% to Rs.553 cr. and net profit by 41% to Rs.141 cr. In the H1FY07 sales have gone up by 29% to Rs.1094 cr. and net profit surged by 30% to Rs.308 cr. The proposed demerger of its innovative R&D centre will unburden the company’s core business of generics and provide an opportunity for the two businesses to grow on their own steam. After the demerger, SPIL will focus on its core generics business, which is about Rs.200 cr. in cash and assets worth Rs.50 cr. The costs on the R&D expenses of Rs.161 cr. in FY06 about 9.5% of the net turnover, will be transferred to the new entity, thus boosting the bottomline of SPIL. Future revenues of the R&D company would be through out-licensing its products to other drug companies for further development or marketing, besides bringing products to market on its own steam. With significant acceleration in innovative business, the growth in the R&D spend may be much faster than the growth of the generic business over the next few years. Hence the de-merger plan is timely and should help create shareholder value. Investors can also choose to exit the R&D entity and stay invested in the core company if its risk profile does not suit them. SPL has been a liberal distributor. Apart from handsome dividends, it has a record of rewarding bonus shares in 2:1 proportion in 2000 and 1:1 in 2005.

The future prospects of SPIL look extremely bright as the Rs.26,000 cr. market for prescription products in India is growing at 16% per annum. Its US presence is one of its fastest growing business that it has strengthened considerably in the past year by acquiring two more facilities in mainland USA. The shares of SPIL are currently traded at Rs.983 discounting its estimated EPS of Rs.32 by 30.7 times. The US acquisition and restructuring are likely to push its EPS to a staggering Rs.45 in FY08, which would bring down the P/E to an attractive level of 22 against the present industry average P/E of 28. With the combined value of its proposed demerged entity, investment in this share is likely to yield an appreciation of more than 40% in one year.

By Saarthi STOCK WATCH

Liberty Phosphate Ltd. (Code: 530273) (Rs.18.50) is the largest manufacture of Single Super Phosphate commanding more than 14% market share. Its ‘Double Horse’ brand is very popular among farmers and is said to have the having highest sale in India. Due to unimpressive numbers for the Sept.’06 quarter, its share price is stagnant and the scrip has not participated in the ongoing rally. However, for the 6 months ending Sept.’06, its sales have more than doubled to Rs.75 cr. whereas net profit rose marginally to Rs.1.70 cr. due to higher interest cost and depreciation. Recently, it raised around Rs.5 cr. through an issue of 20 lakh equity shares at Rs.15 per share to promoters and their relatives. For FY07, it is estimated to clock a turnover of Rs.150 cr. with net profit of Rs.3.50 cr., which works out to an EPS of Rs.6 on its diluted equity of Rs.6.13 cr. With a market cap of only Rs.12 cr. this is the cheapest profit making fertilizer company stock.

***** Last week, cement scrips saw some correction giving an opportunity to accumulate them. Vinay Cements Ltd. (Code: 518051) (Rs.27) is a leading manufacturers of cement in the North East and has a small cement plant with a capacity of around 2,50,000 MTA producing both Ordinary Portland Cement and Pozzolana Portland Cement under the brand name ‘Vinay’. On the back of higher realization, it reported stunning numbers for the Sept.’06 quarter as sales jumped up by 130% to Rs.13 cr. and net profit shot up by 500% to Rs.1.60 cr. With the demand for cement expected to remain strong, it can end FY07 with turnover of Rs.55 cr. and net profit of Rs.6.50 cr. This would lead to an EPS of Rs.6.50 on its equity of Rs.10 cr. Hence at a P/E multiple of 4, book value of Rs.33 and a market cap of only Rs.25 cr., this is one of the cheapest scrips in the cement sector.

***** Recently, Hazoor Media & Power Ltd. (Code: 532467) (Rs.31) came out with a decent set of numbers for the Aug.’06 quarter. Revenue increased by 35% to Rs.5.30 cr. whereas net profit rose by 10% to Rs.1.45 cr. For the full year ending Aug.’06, its topline grew by 40% to Rs.20 cr. and net profit increased by 25% to Rs.5.5 cr. This works out to an EPS of Rs.6 on its current equity of Rs.3.70 cr. having a face value of Rs.4 per share. It declared 10% dividend also apart from announcing 1:1 bonus earlier. Of late, the company has ventured into real estate development and is getting itself renamed as ‘Hazoor Multi Projects Ltd.’. Notably, it owns huge property near Amby Valley Lake City, Lonavala, and has already deployed Rs.17 cr. for development and intends to make further investment of Rs.65 cr. in Phase I. It is a debt-free company and its current market cap is just Rs.25 cr. To fund its construction activity the company is planning to raise capital through the equity route, which will lead to a re-rating of the scrip.

***** Gradually, the paper sector is coming into the limelight again with some foreign broking firms getting bullish on this sector. South India Paper Mills Ltd. (Code: 516108) (Rs.52) is trading relatively cheap at a market cap of less than Rs.40 cr. It reported satisfactory numbers for Sept.’06 quarter with sales registering 10% rise at Rs.28 cr. while PBT grew by 23% to Rs.3.75 cr. For H1FY07, its sales improved by 15% to Rs.55 cr. and net profit rose by 12% to Rs.5.30 cr. in spite of a higher tax outgo. The company is planning to raise its capacity to around 86,000 TPA by Dec.’07 from 55,000 TPA. For FY07, it may report a total revenue of Rs.110 cr. with net profit of Rs.9 cr. i.e. EPS of Rs.12 on its equity of Rs.7.50 cr. Moreover, it’s a handsome dividend paying company with the yield working out to around 5% at CMP. A safe bet in the current market situation.

***** Real Strips Ltd. (Code: 513558) (Rs.33) is a leading manufacturer and exporter of stainless steel strips, coils and cold rolled coils. Its products are used in various industries like automobiles, construction, oil & gas, petrochemicals, food & dairy, sugar, pipes & tubes, chemical process, electronics, surgicals etc for very specialized application. It declared fantastic numbers for Sept.’06 quarter. Sales jumped by 70% to Rs.23 cr. and net profit spurted by 55% to Rs.1.10 cr. thereby registering an EPS of Rs.3.30 for the quarter. H1FY07 numbers are also very encouraging. The company has even put up windmills with a capacity of 1.25 MW and 0.35 MW respectively, as alternative energies to save power cost. For the full year FY07, it is estimated to clock a turnover of Rs.85 cr. and net profit of Rs.3.25 cr. i.e. EPS of Rs.10 on its tiny

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equity of Rs.3.27 cr. At a current market cap of Rs.10 cr. only and with a book value of Rs.37, this scrip is trading extremely cheap.

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By Kukku FIFTY FIFTY

Investment Calls * Jaihind Projects Ltd. (Rs.38.75) is an engineering & construction company serving the oil & gas, steel, water supply and power sectors. The company has executed the following orders for Gujarat Adani Energy Ltd. Rs.350.71 lakh Pipe Laying for Ahmedabad City Gas Distribution Project; for Indian Oil Corporation Ltd. Rs.104.38 lakh excavation, removal of old coat and wrap, cleaning pipes by sand blasting, priming coating with CTE based tape, sleeving, Holiday testing and back filling in Salaya-Viramgam & Viramgam-Chaksu-Mathuta sections of SMPL and Koyali-Viramgam Section of KVSPL; Rs.1182 lakh laying of cross country pipelines and associate facilities for Koyali-Dahej Product Pipeline. For Essar Oil Refinery: Rs.184.07 lakh Fire Water Facilities Piping COT Area, Rs.157 lakh Grit Blasting and painting for various piping work, Rs.34 lakh CTE, Coating and Wrapping of Pipes & Pipes Fitting including surface preparation by grit/shot blasting. For Bharat Petroleum: Rs.690 lakh composite works involving cross country pipeline laying jobs including civil, structural, electrical for Lube Oil pipeline. It has a range of corrosion protection equipment ranging from mobile pipeline coating plants to field coating equipment. It also has arrangements with international pipeline coating companies to execute projects jointly for polyethylene coating. The company is said to be faring very well and has strong order position of above Rs.80 cr. It is said to have recovered its long due of around Rs.9 cr. from one of its customer while its market cap is just Rs.19.25 cr. The company is expected to achieve sales of Rs.100 cr. in the current year with expected net profit of around Rs.4.5/Rs.5 cr. on its small capital of Rs.5.11 cr. The company is said to have purchased some plant & machinery from the Dodsal group. It is also in the process of getting around Rs.150/Rs.200 cr. orders from Gulf countries. Investors can safely add this stock around Rs.35/Rs.37 level for expected target of around Rs.60/Rs.65 in the next 8 to 10 months. * Uniabex (Rs.105) is engaged in manufacturing centrifugal-casting alloys. The company supplies majority of its products to core sector industries like petroleum, petrochemicals, fertilizer, iron & steel, manufacturers of decanters, valves, heat-treatment plants and engineering industries. This casting can be further divided into heat resistant alloy and corrosion resistant alloys. Non-ferrous metals like nickel, chromium and stainless steel are the major raw material for the company’s products. User industries can be broadly classified into Decanters (43% revenue), Petro industry (21%), Iron & Steel industry (8%) and the rest from Chemicals, Fertilizer and others. The company is one of the major suppliers of Decanter components to Alfa Laval (nearly 63% of revenues). It sold nearly 745 MT of castings inFY05, 879 MT in FY06 and is likely to sell 1000 MT in FY07. It has increased the installed capacity of castings by 50% to 1500 MTA in FY06, which will be further increased to 2000 MT in a phased manner in two years. Its capex for FY06 was Rs.3.0 cr. and will be of Rs.1.5 cr. for FY07. Its export realizations are better than domestic sales at present as many foundries in EU and USA are closed and the

orders are coming to India. The company expects its export revenues to touch 50% in next couple of years from the present 30%. Its Sept.’06 quarter profits were

targets Rs.54 cr.

down because it could not fully execute Rs.10 cr. castings which were in work in progress status. This will now be reflected in 2nd half working. The companysales for FY’07 with Rs.35 cr. from domestic market and the rest from exports and has set sales target of Rs.100 cr. by 2010 on sales of around Rs.54 cr. in FY07, it can report PAT of Rs.5.5 to 6 cr. on margins of around 8% and post an EPS of around Rs.28/Rs.30 on its

small capital of Rs.1.98 cr. Investors can safely accumulate this stock between Rs.95/Rs.100 level for good long term growth. Market Guidance * For the year ending 30th Sept’06, Walchandnagar Inds. (Rs.902) reported sales of around Rs.359 cr. which was 39% higher on YoY basis and net profit was up by 72 % at Rs.13.29 cr. after making 112 % higher tax provision of Rs.8 cr. Full year EPS is Rs.44 and the dividend was raised from 30% to 45%. It has orders in hand of around Rs.1000 cr. and sales are likely to be around Rs.550 cr. with net profit in the region of Rs.27 to Rs.30 cr. on its tiny capital of Rs.3 cr. Seeing the strong order position, a liberal bonus can be expected in the next one year. Investors can still accumulate this stock around Rs.800 level for a long-term target of around Rs.1500/1800. * B L Kashyap (Rs.1390) stock is under accumulation by smart HNI investors. Closing above Rs.1410 should give a good upmove. * There is heavy informed speculative buying in the stock Confidence Petro 5.37. * BF Utility (Rs.3233) may be headed for a good upside for a good target. Investors can continue to hold on this stock. * There may be demerger of real estate division of Prime Textiles (Rs.141). The company may shift its textile division from Tirupur. There are reports of four lane highway coming up near the 30 acres real estate that it owns there. * Shriram Mills (Rs.490) is attracting buying from a broking firm for its HNIs client. The company has 24 acres land at prime location which is valued around Rs.1200. Name of the company is being changed to ‘Shree Ram Urban Infrastructure Ltd.’ through a postal ballot. * Ingersoll Rand (Rs.359) is under accumulation by knowledgeable circles. * Punj Lloyd (Rs.960) likely to reach its earlier high as per market sources. * Shree Pre-coated Steels (Rs.500) had a good run in the last few months. Placement of shares is expected around Rs.600 level. Investors can continue to hold this stock. * TRF (Rs.433), Canfin Homes (Rs.60.8), Kilburn Engineering (Rs.73), D.S. Kulkarni (Rs.360) closed well. Investors should continue to hold their stocks. * Investors can book part profits in Ansal Properties & Infra (Rs.1000), Electrotherm around Rs.415 to Rs.450 level and switching to Hikal, Birla Corpn, Ultra Tech or even Walchand Nagar or Revathi Equipments.

The march continues MARKET REVIEW

By Ashok D. Singh For the week ended 24 Nov.’06, the Sensex gained 273.85 points or 2.04% to settle at 13,703.33. The NSE Nifty rose 98.05 points or 2.54% to 3,950.85 and the market continued its upward march on consistent buying support from FIIs. On 20 Nov., the Sensex staged a solid intra-day reversal from its lows of 13,200.36 to settle 1.23 points higher at 13,430.71. RBI's draft circular prescribing tighter guidelines for banks’ capital market exposure resulted in the Sensex tumbling by over 200 points in intra-day trades on that day. Renewed buying in blue-chips helped the Sensex surge 186.06 points to 13,616.77 on Tuesday, 21st Nov. The Sensex rose 89.76 points on 22 Nov. to settle at 13,706.53, an all-time closing high backed by firm Asian markets but ended 25.70 points lower at 13,680.83 amid a mixed trend in various constituents of the barometer index on Thursday, 23rd Nov. after surging to its lifetime high of 13,790.82 in early trades. However it finished with a modest 22.50-points gain on 24th Nov. at 13,703.33 as buying support continued. Mutual Funds were net sellers worth Rs.434.56 cr. for the first four days of the week. FIIs were net buyers for the first two days of the week to the tune of Rs.700.30 cr. On 21 Nov., Sebi directed 2 depositories and 8 depository participant to pay Rs.116 cr. as compensation to retail investors who suffered opportunity losses in the IPO scam that came to light last year. The wholesale price index rose 5.29% marginally lower than the previous week's annual rise of 5.30% for the year ended 11th Nov., due to lower energy and milk prices. The annual inflation rate was at 4.09% during the corresponding week of the previous year. Telecom services provider Bharti Airtel rose 5.56% to Rs.614.20 after hitting a lifetime high of Rs.644.90 on 23 Nov.. There are reports that the Department of Telecom (DoT) will make available, additional radio frequency for cellular service providers. Tata Steel rose 1.61% to Rs.483.55. On Friday, it denied media reports about a sweetened bid for Corus Group, to stall the counter-bid by a Brazilian company. NTPC advanced 7.87% to Rs.149.95 after striking a 52-week high of Rs.150.70. Aditya Birla Nuvo rose 3.20% to Rs.1,107 after the company’s board decided to issue 2 shares for every 17 held on a rights basis at Rs.793 per share. Following the rights issue, the equity will go up to Rs.93.32 cr. from Rs.83.50 cr. EMCO jumped 6% to Rs.695, after bagging a Rs.38 cr. project for a 400 Kv sub-station of the Power Grid Corporation of India contract. Its current order-book is Rs.830 cr.

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For the week ended 24 Nov., the Sensex gained 273.85 points to end at 13,703.33. The BSE Sensex has so far rallied 46% for the calendar year’06. Foreign brokerage firm Merrill Lynch expects a slowdown in earnings growth of Sensex companies in FY08 (year ending 31 March 2008). FIIs have invested Rs.7,220.60 cr. for the month of Nov., till 21st Nov.. In the near term, the market would take cues from the ruling government’s ability to pass some of the financial sector reforms. The winter session will debate, among other things, the Banking Regulation (Amendment) Bill, which proposes to increase the voting rights of foreign stakeholders in private banks presently capped at 10%. However, the Left parties are opposed to the amendment fearing that it will lead to a takeover of private banks by foreign entities. The winter session has just begun and will last for almost a month. Profit booking may emerge at higher levels and volatility may take centrestage in the next few days ahead of the expiry of Nov.’06 derivatives contracts on Thursday.

* As ACE Ltd has run up very sharply, Guj Apollo Equipment looks very cheap in comparison. Technically, the scrip has consolidated and is ready for a sharp breakout. Just keep a watch.

TOWER TALK

* A reputed Gujarat-based broking firm recommends Jupiter Bioscience as it is raising Rs.95 cr. for expansion. Trading volumes have improved substantially in last week and the scrip is due for a sharp re-rating. Keep a close watch. * MTNL will be getting a tax refund of Rs.1800 cr. as it is allowed to treat license fee as expenditure. Besides, it may demerge its real estate division which will unlock shareholder value. Few big players are already accumulating the scrip. * Something is cooking in Aftek Ltd. and a shrewd operator is playing with the counter. It seems the scrip has bottomed out and may witness a vertical rise in coming days. Buy before it shoots up. * A leading FII is bullish on Hindalco and is learnt to be buying heavily from the open market. Scrip may see some sharp upmove in the coming week. * Permanent Magnets is a stock to watch as it is doing well on the export front and its Board has approved the amalgamation of Taparia Magnetics, a group company, with itself. * Garware Marine is seeing action of late since it has about 15 lakh shares of Garware Offshore, whose prospects led to the sharp upswing in Garware Marine’s share price and plans to declare a dividend after a long time. * Indsil Electrosmelts plans to raise its hydel power generation capability to 50 MW by 2008-2009.This low priced hydel

power stock can do well in good monsoon years. * IFB Agro’s emission reduction and energy conservation project will earn it excellent Carbon credits. With expected consolidated EPS of over Rs.12 likely in FY07 and Rs.18 in FY08, the share can give sizeable appreciation. * Roto Pumps Ltd. has completed the restructuring exercise and is expected to garner 40% YoY growth in the following quarters. * Today Gravity (I) Ltd.’s new garment factory will commence production the next month on arrival of the first lot of machines from Germany. * There are strong rumours that FCS Software will touch Rs.200 this time. The stock hit the buyer freeze with number of pending orders to be executed. * Conart Engineers may see some action after the Board meeting on Saturday. * According to some market watchers, Kesoram Industries belonging to the B. K. Birla group is tipped to be the future Grasim in the making. * The Sensex shall cross 15K mark by April’07 and the heavy weights that shall make it happen are Infosys, Reliance, Bharti Airtel, HDFC, Rel Comm and SBI. * Is the Mittal-Arcelor group behind trying to prevent Tata Steel from acquiring Coru, which will be a great centenary gift to Tisco shareholders?

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* With Nokia deciding to sell 50% cell phones through its own network had led HCL Info into software development and clinch deals with BSNL and others. * Jain Irrigation Systems reports a 100% rise in its H1FY07 results over H1FY06 but industry sources believe that the best is yet to come. * Nectar Life Sciences has become the fund manager’s favourite in the small-cap segment. With an EPS of Rs.13 for H1FY07, it may end the year with an EPS of around Rs.30. * Asian Electronics has placed 21 lakh equity shares at Rs.460 to QIBs and the company’s equity has risen to Rs.11 cr. Marketmen believe that a share split with a face value of Re.1 is on the cards. * Satyam Computers is breaking new grounds and may touch Rs.600 by March’07.

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Market consolidates as it rises MARKET

Buy ACC Ltd. before it flares up By G.S. Roongta Over the past two weeks, I had observed some weakness in the market based on my analysis of the confusing Advance-Decline ratios as elaborated in my article in the last issue dated November 20th. Both bulls and bears were afraid of keeping their positions intact uncertain of the direction of the market, which resulted in large-scale profit booking at higher levels. This was the theme of my articles for the past two issues. Two weeks of high drama with large-scale profit booking in side stocks with declines outpacing advances by two or three times each day while the benchmark indices (BSE Sensex and CNX Nifty) were moving in a positive direction, ended abruptly on Monday, 20th Nov.’06. The selling pressure intensified as the session progressed on Monday, 20th Nov. The

bears tried to drag down the Sensex stocks to the days low of 13200 i.e. a fall of nearly 230 points below its previous close and created a panic of sorts. Technical analysts, who had projected the Sensex over 14000 by November end were suddenly caught by this change in sentiment and feared that such large scale selling might turn into a sharp correction hereon. They immediately indicated the new lower levels that would be tested if the indices breached the current support levels. Readers might have observed that while most publications and TV media do a post mortem, Money Times forecasts both the long-term trend and the immediate weekly outlook well in advance to forewarn and protect its readers. My articles over the last two weeks are an ample testimony to this as I

categorically said that the real and apparent movement (as represented by the indices) in opposite directions was nothing but in an attempt to fool investors but could not last for long.

G.S. Roongta

As such, the bubble burst on Monday, 20th Nov. but also revealed the under current of the market being as strong as value buying emerged during the last half hour after the crash. This forced the bears to cover their short positions or else face the consequences of a bull market. As a result, the days trading ending flat with a minor change of 1.23 points. Those who squared up their positions the same day suffered less compared to those who carried forward their short positions and were hit badly as their losses mounted with bounce back to gain by nearly 500 points on the Sensex on subsequent days. The given table shows some of the few stocks that were hit badly on Monday and how they rose thereafter. Anybody who shorted them paid the price.

These are but a few pivotal stocks while the real list is quite long. But it gives a clue to the sharp bounce back in stocks from the freefall they experienced on the first day of last week i.e. Monday, 20th Nov. The fluctuation in stock prices thus varied from 5% to 10% in just 3 days! This shows that the market is now in high orbit where such price fluctuations will be the order of the day and a regular feature of the market for quite sometime.

Scrip Price on

20/11/06 High

thereafter Gain (in points)

ABB 3347 3635 278

ACC 1041 1080 47

Bajaj Auto 2535 2685 115

BOB 252 283 18

Grasim 2612 2705 138

Hindalco 166 179 21

Reliance 1236 1275 50

Tisco 459 486 21

Tata Motor 802 830 48

Sterlite 196 220 30

Optical

Shree Cement 1240 1364 110

Hence investors interested in trading should remain extra cautious as there is no surety about the market going up or down on a day to day or for that matter on an intra-day basis. It may even witness sharp correction in intra-day trades as seen on Monday, 20th Nov.’06, which witnessed a sharp fluctuation of 460 points. My view is that the market trend is bullish and will remain so but fluctuations will also be sharp and sudden. Investors should therefore take due care.

Last week, I had recommended Hindalco Industries Ltd. Those who bought the scrip on my recommendation must have got it at the lowest price at about Rs.166 on Monday 20th November because of the sharp price corrections as discussed

above. The rights issue subscription will end this week where after I expect good buying to emerge in this counter considering its attractive valuation and super fundamentals. This week I recommend ACC Ltd., which appears as attractive as Shree Cements and J.K. Lakshmi Cement, both of which have been recommended earlier in this column. ACC Ltd. The company’s name has now been changed from the Associated Cement Companies Ltd. to just ACC Ltd. after the takeover by the global giant Holcil. The ACC stock appears to be the cheapest cement scrip compared to Gujarat Ambuja Cements, Grasim Industries and Ultratech Cement based on their huge capacities. ACC is the largest cement player followed by Grasim, Gujarat Ambuja, Ultratech and India Cements. ACC has already achieved a sale of 14 million metric tones (MMT) in nine months from 1st Jan.’06 to 30th Sept.’06 and may touch 18.5 to 19 MMT by the end of the calendar year 2006. Net sales turnover in volume terms can be around Rs.6500 cr. to Rs.6800 cr., which works out to 85% to 100% appreciation on YoY basis. Profit before interest, depreciation and taxes (PBIDT) better known as cash profit was Rs.1240.75 cr. upto 30th Sept.’06 as compared to Rs.668.06 cr. in the corresponding previous nine month ended financial year FY05. Thus its profitability has appreciated by nearly 100% in just nine months and may exceed Rs.1450 cr. to Rs.1500 cr. by the year end to record an increase of 110% to 115% on YoY basis. After providing for interest and depreciation and minority interest but before tax and exceptional items, its net profit has already exceeded Rs.1008.45 cr. for the nine month period, which is 150% higher than Rs.426.25 cr. recorded in the previous financial year. The full year PBT may end up 120% higher on YoY basis at Rs.1500 cr. for the current financial year ending 31st Dec.’06. The companies paid-up capital is only Rs.187.39 cr., which is just equal enough for creating half million cement capacity today whereas ACC Ltd. has a capacity of 20 MMT as on date. Its reserves, which were Rs.1966.19 cr. last year will sky rocket by another Rs.1000 cr. Thus in one single year it will exceed in creating more than 50% reserves that it took in building since inception or in over 50 years. This really makes an interesting study as the company is in very sound position to earn and add to its profitability in one single year that took decades earlier. Despite such a mind boggling outcome in ACC’s fortunes, its share price is inching up slowly which is not understandable. According to me, its share price can shoot up to Rs.1500 in no time as Shree Cement has already crossed the Rs.1500 mark, Grasim Ltd. is ruling at an all time high at over Rs.2700. Why should ACC Ltd. then lag behind, when it is the market leader and a fancy is building into the stock after takeover by foreign players. It is, therefore, time to buy ACC Ltd. as per your capacity and add the stock to your portfolio. Its dividend payout is expected to touch 100% this year.

Pitti Laminations Ltd.: On the fast growth track ANALYSIS

By Devdas Mogili Pitti Laminations Ltd., (PLL), a 23 year old Hyderabad-based company was originally incorporated as a private limited company in 1983 and converted into public limited in Dec.’92. Promoted by the Pittis of Hyderabad, the company entered into the capital market in 1994 with a public issue of 19 lakh equity shares of face value of Rs.10 each at a premium of Rs.10 per share in Jan.’94 to part-finance its Rs.5.6 cr. project to expand the company's product range of electrical-grade stampings. PLL is primarily engaged in the manufacture of electrical steel stampings, which form a critical part in motors, alternators, pump sets and DG sets. It also manufactures die cast rotors, tools, jigs, fixtures and moulds. The company’s manufacturing facilities are located in Nandigaon village near Hyderabad. Sharad B. Pitti is the chairman and managing director of the company. Expansion: During 1994-95, PLL expanded its capacity to 4000 TPA. The company undertook a second expansion programme to raise the capacity to 6000 TPA at an estimated cost of Rs.4.80 cr. and produce stampings of different diameters. It plans to integrate forward into the manufacture of die-cast rotors and wound stators. Clientele: The company’s clientele includes Asea Brown Boveri (ABB), Siemens, GEC, Kirloskar, Crompton Greaves, Bharat Bijlee etc. and is the exclusive supplier to Siemens. Performance: The company’s performance prior to 2003 was not too encouraging. In fact, for 1998-99, the company's accumulated losses exceeded its net worth and the case was referred to the BIFR. However, the company overcame its problems with the rehabilitation package worked out by IDBI and came out of the red. The bottom-line turned black as it reported highly encouraging results from 2004-05 onwards.

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For FY06, the company reported a turnover of Rs.94.98 cr. with a net profit of Rs.6.89 cr. posting a basic EPS of Rs.8.79 and a diluted EPS of Rs.8.59. Enthused by its performance, the company also hiked the dividend by 5 points from 15% to 20% for the year 2005-06. Financial Highlights: ( Rs. in lakhs)

Q2 Results: It can be seen that the company notched up net sales of Rs.37.82 cr. with a net profit of Rs.2.34 cr. netting a basic/diluted EPS of Rs.2.54. The annualized EPS works out to Rs.9.36.

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Financials: The company has an equity base of Rs.9.21 cr. and with reserves of Rs.19.29 cr., the book value works out to Rs.30.86. It recorded a RONW of 36.1% and operating profit margin of 14.4% for the year 2005-06. Share Profile: The shares of PLL are listed both on BSE and NSE and is presently traded under Indonext (S) segment. Its share price touched a 52-week high/low of Rs.135/Rs.63. At its current market price of Rs.82, it has a market capitalization of around Rs.76 cr. Dividends: The company paid its maiden dividend of 15% during the year 2004-05 and hiked the dividend by 5

points to 20% for the year 2005-06.

Particulars QE 30/09/06

QE 30/09/05

HYE 30/09/06

HYE 30/09/05

YE 31/03/06

Gross Sales 4154.61 2607.45 7444.02 4395.31 9497.52 Less: Tax & Dues 373.01 300.37 638.38 508.25 1043.77 Net Sales/Incom 3781.6 2307.08 6805.64 3887.06 8453.75 Other Income 6.5 3.72 8.46 4.7 11.2 Total Income 3788.1 2310.8 6814.1 3891.76 8464.95 Expenditure i. Inc/Dec stock -176.99 -238.65 -229.54 -344.26 -624.46 ii) Raw Material 2666.59 1674.38 4717.69 2665.2 5827.14 iii) Staff Cost 214.91 142.1 440.01 253.58 592.02 iv) Other Exp 582.59 362.12 961.44 669.57 1288.56 v) Interest 109.46 45.5 192.83 76.69 191.8 vi) Depreciation 39.33 23.79 74.13 44.67 118.04 Total Expenditur 3435.89 2009.24 6156.56 3365.45 7393.1 Profit before tax 352.21 301.56 657.54 526.31 1071.85 Prov for taxation Current Tax 118.56 101.51 221.33 177.16 314.11 Deferred Tax 47.56 FBT 20.71 Net Profit 233.65 200.05 436.21 349.15 689.47 Paid up equity 920.51 783.57 920.51 783.37 783.42 Res Exc Rev Re - - - - 1929.02 EPS Basic (Rs) 2.54 2.55 5.07 4.9 8.79 Diluted (Rs) 2.54 2.55 5.07 4.9 8.79

Shareholding Pattern: As on 30th Sept.’06, the promoter holding was to the extent of 39% while non-promoter holding was 61%. During Aug.’06, the DBS Chola Mutual Fund added the company’s shares to its various portfolio schemes like Opportunities Fund, Midcap Fund and Multicap fund. Prospects: The demand for the company's products continue to be dependent on the performance of the capital goods sector. The buoyant demand witnessed in 2005-06 continues to influence the market in the current year as well and based on the prospects, the company targets sales of around 6500 MT with a 20% growth in the current year. PLL became debt-free following the rehabilitation package of the IDBI and is hopeful that the current year would be a promising one with vibrant domestic demand and thrust on exports. Conclusion: PLL after initial hiccups has finally turned around. It has been reporting good results for the last two years registering higher income and profits. It also stepped up the dividend this year. The company’s expanded capacities are expected to yield results in the current year. Moreover, with thrust on exports and a reputed list of clientele, the company has now entered on a fast growth track. At its current market price of Rs.82, the share is discounted less than 10 times its estimated FY07 earnings against the industry average P/E multiple of 19 times. The share is reasonably priced and exposures can be considered with a medium to long-term perspective.

LT Overseas Ltd. issue opens on 27th Nov. MONEY FOLIO

LT Overseas Ltd., manufacturer of basmati rice and owner of ‘Dawat’brand of basmati rice, is entering the capital market with an IPO of 7,035,714 equity shares of Rs.10 each for cash at a premium to be decided through the book-building process in the price band between Rs.50 and Rs.56 per equity share of Rs.10 each. The issue opens for subscription/ bids on Monday, 27th Nov. and closes on Thursday, 20th Nov.’06. The pre-IPO placement the company has placed 714,286 equity shares with Bennett Coleman & Company Ltd. and another 50,000 equity shares with Deramann Ltd. Rs.70 per share. LT Overseas is primarily involved in the business of milling, processing and marketing of branded & non-branded basmati rice and manufacturing of rice food products in the domestic and overseas market. It is among the top three players in the domestic packaged basmati rice segment in volume terms as per an AC Nielson ORG-MARG 2005 survey and owns 19 brands altogether.

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It has the capacity to process 30.5 TPH of paddy, of which 27 TPH is processed in its facility at Bahalgarh, Haryana and 3.5 TPH is processed in a facility leased from group concerns located in Amritsar (Punjab) and Sonepat (Haryana). LT Overseas reported an income f Rs.403.6 cr. for FY06 of which export turnover accounted for Rs.150.1 cr. and domestic turnover was Rs.218.4 cr. respectively. Profit during the year amounted to Rs.11.1 cr. indicating a profit margin of 2.76%. Kovilpatti Lakshmi Roller Flour Mills FPO opens on 27th Nov. Kovilpatti Lakshmi Roller Flour Mills Ltd. (Kovilpatti Lakshmi), a 46 year old diversified profit-making, dividend paying company engaged in wheat flour milling, cotton yarn, sheet metal fabrication and generation of wind mill power proposes to enter the capital market on Monday’ 27th Nov.’06 with a public issue of 26,00,000 equity shares of Rs.10 each at a premium of Rs.46 per share aggregating Rs.14.30 cr., which will close on Friday, 1st Dec.’06. Kovilpatti Lakshmi currently has three divisions viz. Flour Mill, Spinning & Engineering. The milling capacities and spinning capacities are sizeable while the engineering division is relatively small and the management intends to focus on the same, going forward. As a part of this, the company has taken over Eletx Super Castings Ltd., a Coimbatore based foundry engaged in the manufacture of Grey Iron, SG Iron and Alloy Iron castings for the last thirty years. The company proposes to utilize the net proceeds of the issue to part finance its Rs.30.60 cr. expansion plan and investment into Coimbatore-based Eltex Super Castings Ltd. and setting up of two additional windmills of 1.25 MW each for captive consumption. The balance fuding of Rs.16.30 cr. is being funded through tern loan and internal accruals. The company reported a turnover of Rs.93.07 cr. and PAT of Rs.3.11 cr. for FY06 and the half year ended 30th Sept.’06, it recorded a turnover of Rs.55.70 cr. with PAT of Rs.1.89 cr. The two windmills are expected to generate a new power output of approximately 68 lakh units and the net financial benefit to the company is expected to be approximately Rs.68 lakh in electricity costs as per the current consumption pattern. Gateway Distriparks acquires Snowman to enter cold chain logistics Gateway Distriparks Ltd. (GDL), a leading port-based container logistics company, has acquired 50.1% of the total paid up equity capital of Snowman Frozen Foods Ltd. of Rs.48.12 cr. including Rs.36.11 cr. as fresh infusion of equity into the company to be funded out of its GDR proceeds. Snowman Frozen Foods Ltd. is amongst the leading comprehensive cold chain logistics service providers in India. It currently has 16 cold stores spread across the country with a total capacity of 8600 pallets, operates around 90 refrigerated trucks and has the capability to handle variety of products. For the 5 months ended 31st Aug.’06, Snowman had operating revenues of Rs.11.63 cr. and an operating profit of Rs.2 cr. With this acquisition, GDL has entered into a share subscription and shareholders agreement with Snowman and its present shareholder, Mitsubishi Corporation, Mitsubishi Logistics Corporation and Nichirei Logistics Group Inc., all companies incorporated in Japan, who will continue as substantial shareholders of Snowman with an aggregate 48.69% shareholding in Snowman. Chinese thrust to create global brands Although Chinese economy is leap-frogging and China is emerging as a global superpower, there is not a single Chinese Company among the top FORTUNE 500, marketing experts from several Western and Eastern countries in the World unanimously felt at the Chinese Marketing Summit, held recently at Shanghai and Beijing, China. This unique 4-day meet also saw members of the Worldwide Partners Inc, the world's largest network of independent marketing communications companies, interact with local business community to better understand the Chinese market and its workings. Speaking to the Chinese business leaders, Mr C D Ramachandran, representing India, laid emphasis on the fact that both, China and India had a lot of similarities. "We both have a long and cherished association that dates back centuries," he said. "And, it only augurs well for both of us that we continue with this association for mutual benefit." Attended by the who's who of Chinese business community, the focus of the China Marketing Summit, was to understand where Chinese enterprises and brands stood globally, and the challenges that lay in their path to reach out to potential consumers in the developed US and European markets. Some also used the opportunity to learn the global best practices that Chinese enterprises needed to adopt to be a global player. Mr. C D Ramachandran, Chairman & Managing Director of Imageads, who addressed the gathering of leading Chinese businessmen, economists and marketing professionals stated that India, which is also a fast-growing economy, has thrown opportunities for global players and felt that the Chinese businessmen have not been able to leverage the opportunities fully.

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