KSB PUPMS

The prime reason for the Indian economy being able to clock growth rates in excess of 8% over the past few years were the higher investments by public and private sector across industries such as infrastructure, power and petrochemicals. In these industries pumps and valves are used extensively. That brought us to initiating our research on a leading pump and valve manufacturing company, KSB Pumps.

Sector overview: The growth of the pump and valves sector is driven by the growth and increased investments in power and energy sectors apart from the agricultural sector. It is estimated that the size of the Indian pump industry is currently around US$ 980 m and is expected to grow by around 7% in the medium term. Almost 95% of the country’s demand is met by domestic players. India produces nearly 1.5 m pumps per year for various applications and the market is still highly fragmented with presence of several small and medium scale companies that compete with large domestic and international players.

Company overview: KSB Pumps India has been promoted by KSB group, Germany, a global market leader in manufacturing of pumps and valves. KSB Pumps India manufactures various pumps and valves and of various specifications to enable fluid transportation. It is perhaps the only company that manufactures pumps and valves to support functions of agricultural sector and water and sewage management systems apart from industrial applications such as power, petrochemicals, etc.

The company has 5 plants in India – two in Pune that cater to the requirements of irrigation and power projects, one in Nashik that manufactures multistage pumps, water and submersible motor pumps, a valve manufacturing plant in Coimbatore and a foundry in Ahmednagar to support captive consumption of castings. In 1997, the company acquired MIL Controls, a producer of control valves and level instruments to support its growth.

Business structure: The company earns 30% of its revenues by way of sales of standard products, 65% through project based (made to order) revenues and the remaining by way of after sales services. It also extends services like repairing instruments of other makes, both imported and indigenous and offers all possible assistance in maintenance. KSB Pumps has registered 20% compounded annual growth in revenues in past 5 years, while bottomline growth for the same period stood at 31%. The government’s increased focus on infrastructure investment led to increase in demand of pumps and valves. Thus, the topline growth has come in on account of increased volumes. On the other hand, the earnings growth has been supported by improved product mix, cost control measures and introduction of new products in the high growth areas such as submersible business.

If one looks at the cost structure, cost of raw materials has increased in the recent past. Castings and forgings are key inputs, the prices of which are linked to steel prices. Volatility in steel prices impacts company’s raw material costs. Despite consistent hike in cost of materials the company was able to expand margins mainly on account of improved product mix and introduction of value added products that fetch better margins. It is also a segment where the company enjoys competitive edge over other players on account of its quality and ability to provide products as per specifications, made to order or project based.

Thus, while the agricultural sector reported single digit growth of 2% to 3%, the company’s increased focus to cater to the needs of industrial sector. The company has also an established dealer network serving customer needs on pan India basis. All these have resulted in higher margins and increased earnings.

Our view
KSB Pumps being a leading manufacturer of custom-made pumps and valves is all set to reap the benefit of increased investments in end user industries. Economic slowdown is likely to trim down growth rate in medium term., However, the long term growth prospects remain intact considering the planned investment outlay. At the current price of Rs 246, the stock is trading at 6 times its CY08 earnings. We shall soon update readers with our discussion with the management and our view on the stock.

Tanla Solutions

Tanla offers end-to-end mobile commerce, mobile entertainment, mobile Internet and mobile advertising solutions. Tanla is a global provider of mobile commerce, mobile entertainment, mobile marketing and advertising solutions to the Telecommunications, Media and Digital Content industries.

Companies today are faced by the challenge of integrating various IT systems, technologies, communication methods and applications to benefit from convergence. Tanla aims to bridge the telecommunications gap for customers by “connecting the various dots” and providing fully managed services which include end-to-end mobile content management, billing, messaging and delivery of mobile services.

Tanla has offices in Colombo, Dubai, Dublin, Hyderabad, London, New York and Singapore.

NEWS:-

• Company has deployed 3G platform with MTNL.
• It has launched Missed Call Alert solutions for Aircel.
• US continues to be difficult market for the company.
• MMS traffic is showing growth from 20% to 25%.
• Total consolidated cash position is Rs 151.3 crore.
• It added 6 new customers during the quarter.
• It has total debtors of Rs 278 crores.
• Total capex for the year is 97.25 crore. In India, it is 12.9 crore.
• Recession in UK is one of the reason for drop in PSMS transactions

Subsidiaries

The Company had 3 subsidiaries at the beginning of the year: Tanla Solutions (UK) Limited, Tanla Mobile Asia Pacific Pte. Ltd., Singapore and MufiThumb Entertainment Private Limited (Previously known as Smartnet Communication Systems Private Limited) and 3 step down subsidiaries: Tanla Mobile Limited, Tanla Mobile Inc. and Tanla Mobile Ireland Pvt. Ltd.

Subsidiaries incorporated during the year are:

1) Tanla Mobile Middle East FZ LLC, Dubai

2) Tanla Mobile Spain SL, Spain

3) Tanla Mobile South Africa Proprietary Ltd, South Africa

4) Tanla Mobile South Asia (Pvt) Ltd, Sri Lanka

5) Tanla Mobile Malaysia Sdn. Bhd. Malaysia

6) Tanla Mobile Finland O Y, Finland

7) Tanla Mobile Australia Pvt. Ltd, Australia

Tanla Mobile selected by AEG Live to provide mobile registration for Michel Jackson''s comeback tour".

Stock has fallen from 270 to 21 now technically it has a breakout at 28.Rs.stock could touch 40in a week.

Outlook for Indian Equity Market-A.K.Prabhakar & Tanmay G Purohit

1. Why should one invest in equities?

There are many investment avenues available – Debt, Equity, Currency, Commodities, Real Estate, many others like Art, Antiques; the list is definitely not exhaustive. Why equity has a good probability to return handsomely – global recession has made indices all over the world drop to historical lows, creating an opportunity for investors. Gold is already near All-time highs, real estate prices themselves haven't dropped to mouth-watering levels so far, and equity is sold off. So by simple logic one choice is equity. Zero interest rates in developed parts of the world make Equity best investment with many company dividend yields around 4-5%.

What is special about India as an investment destination? What's India's strength?

	Parameter	USA	UK	Brazil	Russia	China	India
	Investment to GDP ratio (%)	14.6	16.7	18.6	24.7	40.2	39
	Median Age (Yrs)	36.7	39.9	28.3	38.3	33.6	25.1
	Exports to GDP Ratio (%)	9.44	20.55	9.85	21.39	18.78	5.29

· India has one of the highest savings to GDP ratio. Had it not been for low savings in USA and UK, recession would not have been so deep.

· Young population: India has one of the lowest Median-age of population, living a big working class which doesn't have to serve a lot of ageing population. Many other country nationals will be getting older as Indian youth will blossom in the boom once the recession recedes. Major benefit is that many can speak English easily. English is a world language and China still hasn't developed well in this aspect but they are coping with it.

· Exports to GDP ratio and Imports to GDP ratio is one of the lowest for India, some may think of it as a lagging factor, but it is how you see it. May be reason for why so many economists feel India will not be impacted so much by recession lies in the fact that we have low Exports and Imports compared to our GDP. The closer the economy, lesser the global recession affects you.

· Everybody knows that General Motors may file for bankruptcy but just have a look what Indian auto sector is doing! Maruti has hit all-time high sales figures in Jan and Feb 2009, didn't India have slowdown? How come people buy cars in recession? Thanks to pay commission and economic stimuli! In fact India is becoming export hub for auto like GM was some years ago. Other sectors where exports can do better are Capital Goods, Pharmaceutical and Technology.

· Outsourcing deals have improved and Indian exports in terms of talent and intelligence makes India receiver of one of the highest remittances in the Globe, which is why the economy has sustained well.

So where does India lag behind?

Problem for India is Growth. It's not that India can't grow, but nobody is going to get attracted here by so-called Hindu Growth Rate of 3-4%. Growing at 8-10% will be great as China has done it even with such a huge population base. But how do we get there? So far India has had Consumption-led growth whereas many other nations had Investment-led growth.

· We need more investments into Infrastructure and Power; it is not so difficult with such a high savings rate.

· We need speedier trains. Average speed for Indian trains lies around 70-80 km/hr which is way below other Railways like of China and Japan. Speedier reach to far-away places prevents unnecessary urbanization; people can come from villages to metro-cities, do their work and go back.

· India has 346 airports, China 467, Brazil 4263, Russia 1260, Japan 176, UK 449, USA 14947 – we still have a long way to go. (Japan's number is not small compared to size.)

· Fiscal Deficit has been a big problem- think of an election year in a country like India and immediately one can imagine the expenditure incumbent parties do to keep voters happy. Just add recession in the same year and you will have to provide stimulus to the economy, cut taxes, boost demand howsoever you can. All this is together and makes a perfect recipe for a high fiscal deficit.

Elections 2009 – will it be a spoilsport?

Elections are due in April 2009 and as per estimates Rs 10,000 crores are to be spent on it. From 1996 till date we have seen 4 governments into power – all have been Coalition Governments, but we have grown in such a situation too. This time around as well, many fear a hanging Lok Sabha, but any new government will try to continue reforms as Indian problems won't be solved if it doesn't grow.

New government will try to wipe out the fiscal deficit as much as possible, new measures can be partial or full disinvestment of PSUs and residual stake sales in companies like Maruti, Tata Comm.

Recent positive developments:-

· Nuke Deal is signed and many countries like Russia, Kazakhstan and France are already eager to do business with India in that field. Nuclear power capcaity 2100MW now can triple in 1 year time to 6000MW with no addition in capacity.

· India GDP grew at 5.3% in Q3, below many estimates. But in a quarter where corporate profits declined 33%, growth above 5% is appreciable.

· India has signed many Free Trade Agreements in recent past and benefits will start flowing in quickly once global economy stabilizes somewhat. Indian companies have already started benefitting by investments from Japan (deals like Ranbaxy-Dai ichi and TTML- NTT DoCoMo) after the Delhi-Tokyo Freight Corridor.

· Sensex/Nifty trade around 11 times forward P/E and India growing more than 6% warrants more investments as it is anyway 2^nd fastest growing economy. The stimulus packages so far will have their effects in 6-8 months time and any new government is expected to continue the reform process. Infrastructure here has tremendous scope for growth and new initiatives are needed.

· CMIE predicts net profits of Indian companies to rise by 74.4% in FY10. The PAT margin will also improve to 7.7% from 4.8% in FY 09 and expects petroleum products companies returning into profits in the March 2009 quarter.

· KG-D6 gas will start flowing later this month and it can save India around $19bn through savings in imports and savings for Indian consumers through the approved price, there are other capacities also like CAIRN and ONGC will come on stream in next few years. Reliance gas that is being priced at USD 4.20 per million British thermal unit -- at least 50 per cent cheaper than competitive domestic gas -- would increase supply of urea in the country and bring down fertiliser subsidy, as stated by Murli Deora recently. It would also increase power generation and reduce dependence on imported oil to meet energy needs.

What about the new bottom?

That is the question everybody is asking before investing in India. In my view that really doesn't matter. Sensex is currently placed around 8100 levels. If one thinks it can reach 18000-19000 in 2-3 year period to say the least, even if it is to come near 5000, the risk-reward is still very favourable for the buyer. It is an opportunity provided by nature in my view and should be grabbed by those who can wait patiently.

As an investor, one should not get tired of buying. Peter Lynch once said, "When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom." Bear market is the best time to build a portfolio. Those who miss out on such opportunities, have to beg for corrections so that they can get a chance to buy, but they hardly get any offerings. The time is not too far for the rally. Better to be a beneficiary of a bull-run than a beggar of a bull-run.

From where can the money come?

· Savings rate near 40% is bringing huge investment into stocks

· Mutual Funds collected nearly Rs One lakh Crores in the last 3 months and Equity Mutual funds alone is sitting on cash of around Rs 42500 Crores (January'09 figure)

· Hot money has taken exit mostly and hedge fund redemption looks to end. March and May have been bottoming-out periods for our markets.

Which sectors and stocks can be looked at?

Auto, FMCG, Power, Technology can be good for investment. Maruti, Tata Motors, M&M, Hind Unilever, Colgate, ITC, NTPC, PowerGrid, Infosys, TCS, TATATEA, TATAPOWER can be stocks from these sectors. ABB, ACC, BHEL, CAIRN, Reliance, RPL, BEL, SIEMENS, SAIL, NACLO, Tata Steel, BEML, APIL are a few stocks from other sectors that can outperform in my view.


source:navneetsinghal.blogspot.com

Gayatri Projects

Gayatri Projects Ltd (GPL) is a 43 years old Hyderabad based
construction company, having diversified capabilities in
construction of irrigation, dams,canals, highways, bridges, roads
and BOT projects. Going forward,
GPL is keen to transform itself into an integrated infrastructure
developer by executing & recording significant turnover with the
aid of a healthy order-book of Rs 34.5bn; of which Irrigation
projects accounts for 31%, Roads (Cash Contract) 36% & BOT
roads (Highways) 31% and others 2%. Based on the rate of
completion of the existing order book and new order growth.

1. Equity Capital :- 10.11
2. BOOK VALUE:- 177cr
3. Total debit :- 300cr
4. LAST E.P.S :- 39.7 Rs
5. EXPECTED E.P.S:- 45Rs
6. (Market cap =one time profit)
7. DIVIDEND:- 25%
8. CURRNET PRICE :-43.5
9. YEAR HIGH:- 525Rs
10. Year low:-43.5
11. Promoter holding:- 56.73%
12. FIIS AND M.F :- 24.56 %
13. PUBLIC Holding :- 7.7%

SMART TALK: Sandeep Reddy, Managing Director, Gayatri Projects

Irrigation accounts for 50% of order book: Gayatri Projects

Construction company, Gayatri Projects recently won two large irrigation projects worth Rs 2,132 crore taking its total order book to about Rs 5,000 crore. These numbers stand out as the company has an annual turnover of Rs 750 crore in 2007-08 and a market capitalisation of just Rs 65 crore. The other side of the coin could be the challenges including the company’s ability to execute large scale projects, high debt levels and the current economic environment. Additionally, the company has also partnered with Maytas Infra in BOT road projects. Jitendra Kumar Gupta spoke to Sandeep Reddy, managing director, Gayatri Projects to understand his view as to how the company is going to balance its growth while dealing with the challenges. Excerpts:

What will be the impact of falling interest rates and commodity prices?
Interest rates only affect the BOT (build-operate-transfer) projects. It does not affect the regular construction or EPC companies. While we have about one third of our exposure to BOT projects, we have already completed the financial closure and hence, it does not affect us.

As far as commodity prices are concerned, all our contracts are covered under the cost escalation clause. Except BOT projects, which are fixed price projects, there was a slight stress because of the increase in commodity prices. It has now again come to normal levels. For the coming quarter, we should be able to maintain our margins.

The company has recently won Rs 2,131 core worth of orders. Can you tell us about the current order book?
Till September 2008, we had an order book of Rs 3,000 crore. With the recent order of Rs 2,100 crore and another Rs 500 crore that we expect by March 2009, we should be having an outstanding order book of about Rs 5,000 crore ending March 2009.

How do you expect to manage projects of such large scale?
It is an EPC contract, where we will get five per cent advance, which is enough to fund the project. Besides, we might require some amount of working capital. Also, this is a long-term project having completion period of 53 months (4.5 years). We will have to first complete the survey and design of the project and then start the construction, which itself will take another six months. So, per annum what we need to achieve is within our reach.

The company is perceived as a regional player with large exposure to roads segment. Your comments.
We are well diversified in other states as well and have been bidding for projects where we see an opportunity. And, we are also strong in irrigation and have been working on such projects for some time now. However, compared to the size of the road projects, irrigation projects were small due to the larger capex happening in the road and infrastructure. But now, irrigation is picking up; Andhra Pradesh alone is spending Rs 40,000-50,000 crore. This is also a reason our order book mix after the recent win is equally divided between roads and irrigation.

The promoters have pledged shares. Can you throw light on this?
We have not taken any loan against shares. We pledged them as a collateral securities wherein this is just additional security given; for investment in group ventures.

What will be the fate of projects where Maytas Infra is a partner?
Three of the five BOT projects (undertaken by Gayatri Infra) are with Maytas Infra. But, we have already given an undertaking for the balance equity; whatever Maytas cannot put in, we are ready to take over.

Also, Maytas is involved in EPC work in only two projects, where again, we are ready to take over the EPC work. However, we are awaiting developments on a decision from the Company Law Board or till the new board of Maytas is formed.

What are your plans with the Gayatri Infra Ventures?
This is a separate subsidiary for the BOT projects, where we are aiming to win Rs 2,000-5,000 crore worth of orders over the next five years. In terms of funding, a part of the equity is already infused and AMP Capital of Australia has invested Rs 100 crore for a 30 per cent stake. We will further dilute our stake up to 51 per cent and get fresh capital. We will probably go for an IPO after three years. The company owns and is commissioning five BOT projects, which will start generating cash flow by March 2010.

Do you foresee any slowdown in new projects due to impending elections?
Yes. There are some projects announced, but since this is the election period there could be some slowdown in the next 3-4 months.

During Q3FY09, despite the rise in sales by 25.3 per cent, why did profits fall by 17.6 per cent?
Q3 saw the major impact of commodity prices. The BOT project operating margins were hit by 1-2 percentage points because of high commodity prices. In Q4, we margins should improve.

What steps are you taking to reduce debt burden and increase interest coverage?
We have a working capital requirement of about Rs 200 crore and a term loan of Rs 70-80 crore. We will probably be taking more working capital in future in proportion to the increase in turnover, which banks are ready to fund.

Our total debt is about Rs 300 crore and net worth would be Rs 300 crore by March 2009, so the debt-equity will be comfortable at 1:1. Now, probably next year, we will take Rs 30-40 crore of debt, but relative to this our turnover will increase from Rs 1,000 crore to Rs 1,500 crore. So, automatically our net profit will be higher to take care of the interest cover.

Has there been a delay in customer dues?
The payments are on schedule, except for private clients pertaining to a few steel plants getting little delayed, resulting in some issues in the last quarter. But, our exposure to private clients is just Rs 200-300 crore.

Have revenue and profit guidance changed? Also, if you can comment on operating margins in future?
Earlier, our net profit guidance for FY10 was Rs 70 crore, which has been brought down to Rs 60 crore (net margin of 4 per cent) on targeted revenues of Rs 1,500 crore. In FY09, our revenues could be Rs 1,000 crore and net profit about Rs 45 crore (4.5 per cent margin). Even if it does not improve, we should be able to protect our operating margins at current levels of 12 per cent due to the rising revenue share of high-margin irrigation business (15 per cent margins).

Gayatri Projects has not made provision for losses incurred by its 50:50 joint venture, with ECI Engineering. What could be the liability for the company?
The judicial process is going on. We have already filed a claim for Rs 300-450 crore. So, in the worst case, if we lose, the liability could be about Rs 50 crore.

BUY ON EVERY DECLINE