Jaiprakash Power Ventures Limited

BSE Code: 532627

CMP: Rs.12.43

Book Value: Rs.22

Market Cap: Rs.3,651.94 crore

Introduction: Jaiprakash Power Ventures Limited (JPVL), is the largest Hydro Power generating Company in the Private Sector in the country. The Company today has operating capacity of 1791 MW (Hydro) and 500 MW (Thermal). Currently it is operating three Hydro Power Plants and one Thermal Power Plant, namely:

i) 300 MW Jaypee Baspa-II Hydro Power Plant in Himachal Pradesh;

ii) 400 MW Jaypee Vishnuprayag Hydro Power Plant in Uttarakhand; 

iii) 1091 MW Jaypee Karcham Wangtoo Hydro Power Plant in Himachal Pradesh; and

iv) 500 MW Jaypee Bina Thermal Power Plant in Madhya Pradesh.

The  implementation  of  1320  MW  (2  X  660  MW)  Jaypee  Nigrie Super Thermal Power Project at Nigrie, Distt. Singrauli in Madhya Pradesh is progressing satisfactorily. And commissioning of first unit has already been done on 3rd September, 2014 and second unit would be done by December, 2014. Steam Generator and Steam Turbine Generator have been supplied by L&T- MHI Boilers Private Limited and Larsen & Toubro Limited. All major statutory approvals are in place. Entire requirement of 5 Million MTPA coal for the Project will be met from dedicated coal mines at Amelia (North) and Dongri Tal-II.  The Financial Closure of the Project has already been achieved. For  400  kV  D/C  Transmission  Line,  Forest  Clearance,  including approval  of  Hon’ble  Supreme  Court  of  India  for  Wild  Life  Son-Ghariyal Sanctuary has been obtained. The Line profile of entire 161 kms route has been completed. Approval for the energisation of 400 kV Bays at Satna Substation has been received from Central Electricity Authority (CEA). The overall progress of implementation of the Project continues to be satisfactory. The first unit of the Project has been successfully synchronised with the grid on 7th May, 2014.  Moreover, to effectively use the fly ash from the Thermal Power Plant and to make the plant environment friendly, a 4 MTPA Cement Grinding Unit at Nigrie, Distt. Singrauli in Madhya Pradesh with its Project Cost estimated at Rs.550 crore is being set up which is expected to be commissioned by March 2015 (Line I) and July, 2015 (Line II) of 2 MTPA each.

Subsidiary Companies: The Company has following subsidiaries :

i) Jaypee Powergrid Limited: It is a joint venture of Jaiprakash Power Ventures Limited and Power Grid Corporation of India Limited (a Central Government Power Utility Undertaking) has set up 217 kms long 400 Kv Quad Bundle Conductor Double Circuit Transmission Line for evacuation of Power from the pothead yard of 1091 MW Karcham Wangtoo Plant in the State of Himachal Pradesh to Abdullapur in the State of Haryana and LILO with the existing Baspa-Jhakri Double circuit line.

ii) Jaypee Arunachal Power Limited: It is a  wholly  owned subsidiary of the Company is implementing 2700 MW Lower Siang and 500 MW Hirong H.E. Projects in the State of Arunachal  Pradesh. The  Company along with its associates will ultimately hold 89% of the Equity of JAPL and the balance 11% will be held  by the Government of Arunachal Pradesh. For  the  2700  MW  Lower  Siang  Hydro-Electric Project, CEA approval was obtained in February, 2010 and revalidation of DPR is in process with CEA. Land acquisition is in progress. In-principle Approval has been granted and Power Purchase Agreements (PPAs) are to be submitted for final approval with respect to the grant of Mega Power status of the project. Draft Rehabilitation & Resettlement Plan has been submitted to the State Government. For 500 MW Hirong Hydro Power Project, CEA has accorded Techno-Economic Concurrence on 10th April, 2013. For the Environmental/Forest Clearance of the Project, the EIA & EMP Reports have been submitted to MoEF

iii) Prayagraj Power Generation Company Limited: It was acquired from Uttar Pradesh Power Corporation Limited through competitive bidding  process. It is implementing  1980  MW  (3x660  MW) Thermal Power Project (with permission to add two additional generation  units  of  660MW  each)  in  Tehsil  Bara  of  District Allahabad, Uttar Pradesh. Fuel Supply Agreement between PPGCL & Northern Coalfields Limited has been executed on 29th August, 2013, for Phase-I. All Statutory/Regulatory approvals required for the current stage of the Project are in place. Financial Closure has already been achieved and for the revised project costs, steps are being taken to fund the additional financial assistance. The supplies from BHEL for Boiler, Turbine and Generator for Phase-I of the Project are in progress. All major packages have been awarded. Supply of materials is in progress. The progress on the implementation of the Project is satisfactory.  An expenditure of approximately Rs.9372 crore has been incurred on the implementation of the Project upto 30th June, 2014.

iv) Sangam Power Generation Company Limited: It was  acquired from Uttar Pradesh Power Corporation Limited (UPPCL) through competitive bidding process, for the implementation of 1980 MW (3 x 660 MW) Thermal Power Project in Tehsil Karchana of District Allahabad, Uttar Pradesh. It executed Deed of Conveyance with Uttar Pradesh Power Corporation Limited (UPPCL) but the district administration could not hand over physical possession of land to the Company due to local villagers agitation. As such, no physical activity could be started on the ground.The company has written to UPPCL and all procurers that the Power Purchase Agreement is rendered void and cannot be enforced. As such, the Company’s claims be settled amicably for closing the agreement(s). Necessary supporting documents in support of the Company’s claim have been furnished to UPPCL which is under their review.

v) Jaypee Meghalaya Power Limited: It was incorporated by the Company  as  its  wholly-owned subsidiary  to  implement  two Hydro-electric  Projects  i.e.  270  MW  Umngot  H.E.P.  in  the Umngot River Basin and 450 MW Kynshi-II H.E.P. in the Kynshi River Basin both in Meghalaya  on BOOT (Build, Own, Operate and Transfer) basis. The Company along with its associates will ultimately hold 74% of the Equity of JMPL and the balance 26% will be held by the Government of Meghalaya. With respect to 450 MW Kynshi-II H.E.P., the field work of survey & investigation and EIA studies have already been completed. Drilling and drifting in Power house area have been completed. The revised proposal with involvement of lesser forest area has been submitted to the State Government and Ministry of Environment and Forest. The control levels i.e. FRL & TWL have been approved by the State Government. Approval of CEA has been accorded to the water availability series for power potential studies. With respect to 270 MW Umngot H.E.P, the State Government has advised that the project will not be operationalized as per MoA till further orders. The matter is being pursued with the State Government for permission to resume the works.

vi) Himachal Baspa Power Company Limited and Himachal Karcham Power Company Limited: These companies were incorporated as a sequel to the proposed transaction of divestment of Baspa-II & Karcham Wangtoo Hydro Power Projects.

With a view to  deleverage the Company’s Balance Sheet  and also to enhance Shareholders’ value, the Board in its meeting held on 1st March, 2014 approved a Scheme of Arrangement, subject to statutory and regulatory approvals and sanction of the Scheme by the relevant High Court, for hiving off 300 MW Baspa-II HEP and 1091 MW Karcham Wangtoo HEP to two separate wholly owned subsidiaries and eventual transfer of ownership of the said wholly owned  subsidiaries  to  a  consortium  led  by  TAQA  India  Power Ventures  Private  Limited  (TAQA).  However,  the  Company  has received a notice from TAQA in July, 2014 intimating their withdrawal from the said transaction as a result of a change in the business strategy and priorities of their group. With withdrawal of TAQA, the Acquisition Agreement dated 1st March, 2014 automatically stands terminated.  Further,  this  withdrawal  makes  TAQA  liable  to  make payment of break fee of US $ 9 million in terms of the said Agreement for which necessary notice has been issued to TAQA. Meanwhile, JSW Energy Limited said that it had agreed to buy 3 operating power plants from Jaiprakash Power Ventures Limited, as it looks to expand its portfolio beyond coal and lignite-based plants. The company in a statement said that JSW Energy, controlled by billionaire Mr Sajjan Jindal, will acquire two of Jaiprakash's three hydropower plants in Himachal Pradesh and a thermal power plant in Central India.According to the statement, the three plants together have a combined capacity of 1,891 MW. Mr Jindal said that the financial terms of the deal were still being worked out, but the deal was probably the largest in India's power sector to date. The Company  in  line  with  publically  stated  policy  of Jaypee Group, remains focused and committed on reduction of debt through sale of some of its assets, to deleverage its Balance Sheet and enhance Shareholders’ value.

MORE COMING WAIT TILL TOMORROW............BUT IN BETWEEN DON'T FORGET TO BUY THE SCRIP .......

Gitanjali Gems Ltd: Buy

CMP: Rs.61.90

Book Value: Rs.287.39

Key world markets for Gems and Jewelry

Introduction: Gitanjali Gems is one of the largest integrated diamond and jewelry manufacturers and retailers in India. Its presence across the entire value chain gives it the scale that it enjoys. Founded as a single company, cutting and polishing diamonds for the jewelry trade at Surat, Gujarat, in 1966, the Gitanjali Group became, many times over, a pioneer among major diamond and jewelry houses. Business model now integrates all operations, from rough diamond sourcing, cutting, polishing and distribution, and jewelry manufacture, to jewelry branding and retail, as well as global lifestyle brands, in India and abroad. It is the first to offer diamond studded jewelry at affordable prices, of standardised designs, quality and pricing across locations – progressively precision-producing replicable designs using the latest CAD and CAM processes and equipment. The Group’s  factories  are  strategically located in Surat and Hyderabad where the diamond industry  thrives. It has won over 50 awards from the Ministry of Commerce, India for outstanding exports of diamond and jewelry, is today over $3000 million multinational group, and a publicly listed entity. Its operations span, all the way from USA, UK, Belgium, Italy and the Middle East to Thailand, South East Asia China, and Japan.

Shareholding Pattern: The promoters hold 36.08%, while the general public holds 63.92% of the shares

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of the company. The institutions hold 20.31% shares of the company. The FIIs hold 15.35% while the DIIs hold 4.97% of the shares of the company.

Results: For Q1FY15, the total revenues of the company came as Rs.1534.39 Cr as against Rs.1158.35 Cr in Q4FY14 and Rs.2565.64 Cr in Q1FY14.  The net profit of the company for Q1FY15 came out to be RS.7.97 Cr as against  a loss of Rs.34.97 Cr in Q4FY14 and Rs.5.94 Cr in Q1FY14. On a Y-o-Y, the company's EPS has also improved in Q1FY15. Sequentially speaking the interest cost has come down to Rs.109.89 Cr in Q1FY15 as against Rs.112.78 Cr in Q4FY14, showing initial signs of a turnaround.
On a consolidated basis the net profit of Gitanjali Gems Ltd declined 71.11% to Rs.10.15 crore in the quarter ended June 2014 as against Rs.35.13 crore during the previous quarter ended June 2013. Sales declined 47.11% to Rs.2072.87 crore in the quarter ended June 2014 as against Rs.3919.18 crore during the previous quarter ended June 2013.

Triggers: 

• The company significantly rationalized its operations costs: primarily the manpower and administration

  

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  costs. The company has identified opportunities of growth, by bringing about significant changes in the business model. It has now decided to focus more on studded jewelry which is not only margin accretive but has also been its core competency, while offering better value additions--the focus is also segments like alternative metals and low carat gold. With its strong portfolio, manufacturing capabilities, and wide-spread distribution, the company is very well positioned to undergo this transformation. 
• During FY14, the company also further strengthened and consolidated its international presence in markets like the US, Middle East, Japan and China. The recent regulations attributed to the company, shifting focus to its international market which grew to contribute to around 60% of the group's revenue in FY14.  
• The branded jewelry that Gitanjali manufactures includes: diamond  studded  and other  precious stones studded jewelry. The Group has produced branded jewelry in India for over 20 years. During FY14, Gitanjali upgraded all its diamond and studded  jewelry  manufacturing  facilities  based in Hyderabad, Mumbai, Jaipur, China and has also added the Thailand facility - which is one of the largest of its kind. Gitanjali is looking to further strengthen its manufacturing capabilities to enable it  to constantly  innovate  and  adapt  to  changing consumer trends.
• Gitanjali over the years has graduated through the various stages of the value chain to move from the diamond manufacturing business to jewelry manufacturing and retailing to unlock maximum value which  accrues  through  downstream expansion. Having introduced the first diamond jewelry brand “Gili” in India in 1994, Gitanjali has pioneered the branded jewelry revolution in the country. It has changed the way jewelry was viewed in India. Ever  since  then,  Gitanjali  added a plethora of brands such as Nakshatra, Asmi, Sangini, D’damas to  name  a  few  to cater  to  diverse  age groups, occasions, price points and geographies. Recently Gitanjali made a foray into affordable fine jewelry with its Viola Italia range of jewelry. This  vibrant  new  collection  is  the  company’s endeavour to cater to a wider audience and ensure that need-gaps in the market are addressed. Gitanjali’s brands enjoy  tremendous  recall  and the group has leveraged upon this by extending its brands to include lifestyle categories such as apparels under the Gili and Diya brands which have been reasonably successful ventures. 
• The company intends to increase its international business with complementary categories like platinum, precious stones and silver jewelry. The focus is on capitalizing on the high margin mature markets such as the US and Japan and also on the rapidly growing markets like Middle East. As a step in this direction, the company recently entered into a strategic alliance with Paris Gallery, Dubai to retail its jewelry brands to the Indian diaspora in UAE. The also intends expanding in emerging markets such as Russia, Africa and South East Asia through its distribution channels.
• Currently  the  company  distributes  its  jewelry through around 360 distributors, who cater to more than 3000 retailers. The company also enjoys a significant retail presence through around 239 Own Stores,  305  franchisees  and  640  Shop-in-shops. Gitanjali is also strongly exploring newer channels such as e-commerce and has launched exclusive as well as multi-brand portals and has also created an online market place. The Group’s retail operations are supported by a strong inventory management system.
• As mentioned earlier, the Group is present across in the top five global diamond jewelry markets – USA, Japan, Middle East, China and India. The USA is the largest diamond jewelry market in the world. Gitanjali enjoys a retail presence through over 104 doors of its retail chain Samuels Jewels Inc. The  Samuels  chain  has  exclusive designer jewelry  collections  and  a  large  selection  of loose and mounted diamonds under brands such as  “Samuels Jewelers”,  “Schubach  Jewelers”, “Samuels Diamonds”,  “Rogers  Jewelers”  and “Andrews Jewelers” which are primarily targeted at middle and upper middle class consumers in the United States. Samuels’ retail chain is positioned as a wedding jeweler with category focus on bridal collections in the United States. The Group also distributes its jewelry to other local players in the US. The Group’s US business has been witnessing a steady growth of around 10-12% on year on year basis. The US  being  the largest diamond jewelry market with superior margins, is one of the most ambitious markets for Gitanjali.
• The UAE is another significant market for jewellery in the world. Gitanjali retails its Jewellery from the bouquet  of  Gitanjali’s  Indian  brands  such as  “Nakshatra”, “Gili”, “Asmi”,  as  well  as  the collection  of  Italian  brands  such  as  “Stefan Hafner”,  “Nouvelle  Bague”,  “IO  SI”,  “Porratti” and “Valente”. Gitanjali also recently entered into a tie-up with Paris Gallery to retail its jewelry throughout UAE. The Group currently distributes its jewelry through 4 retail stores and over 50 SIS in local jewellers as well as through duty free stores at Dubai airport.  Japan  is also one of the largest consumers of diamond jewellery in the world. The Group has a minority stake in a listed Japanese entity – Verite and supplies to over 100 stores of Verite in Japan. The Group also has 20% stake in Gems TV which is a jewellery selling TV channel in Japan. The Group incorporated Leading Jewels of Japan KK (LJJ)  which sources jewellery from Gitanjali Group’s manufacturing facilities in India, China and Thailand and distributes this jewellery to some of the largest customers in Japan. The large team of Jewellery designers from India, China and Thailand supports to customize  according  to local  tastes and requirements of Japan. LJJ also distributes the Group’s Italian brands “Stefen Hafner”, Nouvelle Bague”,  “IO  SI”,  “Porrati”  and  “Valente”  to customers in Japan.
• Other  International  Markets-  The  Company distributes  its  jewelry  internationally  through its subsidiaries  in  USA,  Hong  Kong,  Thailand, Belgium, Italy and China. These subsidiaries supply within their local markets as well as other global markets such as Australia, Russia, UK and other parts of Europe. Its customers include jewelry manufacturers, wholesalers and large retailers.
• With INR more or less stabilizing against the USD, adverse effects due to this factor, has been reduced considerably. Moreover, Gold demand will get a boost as festivals such as Diwali approaches. Also, owing to Thanksgiving, Christmas and New Year celebrations in the coming months, the group’s retail arm in the USA, Samuels Jewels Inc  is likely to witness good rise in sales. Besides, the overdue installment of ECB as at of March 31, 2014 was paid in June 2014. The delay was due to liquidity challenges which Company is facing.
• The branded retail jewelry market is growing at a robust rate and going forward, many domestic and international brands would capture substantial market size given number of factors like increased urbanizations and changing demographics. As a matter of on-going practice, the masses still prefer to purchase jewelry from their tried and trusted jewelers but the constant exercise of ‘branding’ through advertising and other sales promotional activities has ensured steady inflow of new customers in this segment of organised retailing. India’s small and independent jewelers are starting to organize themselves and expand in size to share a common brand identity and marketing strategy.
• It has in-house manufacturing capacity of nearly half a million pieces of finished jewelry per month ensures consistent supply, economies of scale and flexibility to adapt to changing consumer needs rapidly.
• Indian diamond jewelry manufacturers and exporters are currently witnessing a rebound on consumer sentiment both India and abroad ahead of the festive seasons. Jewelry sales in the domestic markets are expected to remain robust during the ongoing festive season beginning Dussehra. The festive glitter was added with a decline in food inflation which left more disposable income at the hands of consumers. The upbeat business sentiment is likely to add glitter to the festive jewelry demand. Also, the steep fall in gold and silver prices has made investment in diamond jewelry attractive. The long term fundamental of the diamond industry remains strong and robust despite liquidity squeeze because of the closure of Antwerp Diamond Bank. Diamonds sales are growing in emerging markets including China and India. In fact the Indian diamond processors have seen a robust consumers trend after months of lull sales.Both Domestic and global markets show a positive sign in the coming festive, wedding and thanksgiving season which comprises over a third of annual sales. The economic uptrend in the United States has increased jewelry orders to India. Experts estimate 10-15% jump orders for this festive season which will reflect in October's gems and jewelry export figures..

Caution: The  Company  is  passing  through  difficult  financial conditions due to extraneous factors beyond its control viz, restrictions imposed in revised gold policy and increase in import duty on gold. It is in discussion with LIC for realignment of outstanding debt obligations in respect of non convertible debentures and  the  management  is confident  that  the same will be realigned shortly. Once it is realigned, cash deposit will be created as required by circular 4/2013 dated February 11, 2013 issued by ministry of corporate affairs. LIC currently holds 4.59% of the shares of the company.

Conclusion: Gitanjali has 104 stores of Samuels in the USA, spread across the south-west coast, a minority stake in the 3rd largest chain in Japan (Verite) and a 20% stake in Gems TV (One of Japan’s largest jewelry selling TV channels). Gitanjali also supplies jewelry to 50 retail stores in China and is present via  50 points of sale in the Middle East. Its diversified presence across geographies helps in de-risking its portfolio. The Group is focused on retail expansion. In particular, the major focus for growth is expected to be through the franchise model with a number of flagship stores for support. Gitanjali intends to penetrate Tier 2 and Tier 3 markets in India primarily through franchising. The Group shall continue to increase its online presence through its own portals as well as through strategic tie-ups. In addition, there are plans to further strengthen and consolidate the international presence.
Meanwhile, the luxury jewelry exports from India and demand of luxury jewelry will grow given factors like talented pool of jewelry designers and artisans, low-cost but quality base and understanding the likes and dislikes of end-user market. The Indian luxury market is expected to jump from US$3.5 billion in 2010 to approximately US$30 billion by 2015 and a significant majority of about US$9 billion will be jewelry (Source: Solitaire Magazine - GJEPC, May 2011 issue). In India major driver for luxury jewelry is wedding related primarily bridal jewelry which forms over 50% of jewelry sales. The other major drivers are festivals and special occasions. With festival season continuing and wedding season about to begin, the company is expected to witness a jump in its sales.
Now at the CMP of Rs.61.90, the scrip seems to have formed a bottom of sorts. The investors are suggested to buy the scrip for a target of Rs.72-75, in the short term. The long term target for the scrip is Rs.500, plus. The point is that, when the company is taking all the measures to revamp its operations and the green shoots are already seen, this becomes a MUST BUY for the long term investors at the current price. 

Pipavav Defence and Offshore Eng Ltd (PDO): Buy

Company Overview:
1. Pipavav is India‟s first world class Defence, Ship Building & Offshore Infrastructure Company.

2. Pipavav is India‟s first private company to get License and Contracts to build warships for the Indian Navy.

3. Pipavav is the first company in the country to have been approved as a partner of choice by Mazagon Docks to build frontline warships, to help them liquidate their multi billion dollar contracts.

4. Pipavav owns the country‟s first and only Modular Shipbuilding Facility with the largest Dry Dock, armored with the country‟s first fully scalable and expansion accommodating capacity.

5. Pipavav owns the country‟s only facility capable of accommodating the largest Aircraft Carriers and other strategic vessels for docking, maintenance and repair.

6. Pipavav has an undisputed upper hand in terms of Infrastructure, Team on the ground and critical Technology & Strategic tie-ups.

Caution:

(i) Margins might continue to remain under pressure due to increased raw material cost.

(ii) Commercial order book execution remains under a cloud. 
(iii) Poor shipbuilding market has resulted into deteriorating revenues and profitability over the last few quarters for PDO. Order book on paper worth around Rs.12, 000 Cr looks strong, but a large part of the order book may be vulnerable to cancellation. 
(iv) Currently the shipbuilding market is precariously placed with: a) Demand levels falling below the construction capacity, 
b) Contract cancellations and 
c) Lack of financing options for buyers. 

Profitability of PDO might therefore, be under pressure due to poor shipbuilding market, high interest cost and increasing contingent liabilities. 

However, it can be compared with big yards in Japan and Korea as it has huge infrastructure and opportunities in defense. According to Live Mint, September, 23, 2014, the government of India, is likely to extend shipping subsidy period. The said Extension is likely to benefit shipyards that are still building ships under contracts signed when the scheme was on, and even for some which have already delivered ships but awaiting subsidy 

Kotak Securities in its June 25, 2014 research report has said that the company is planning to raise around $150 million through a listing on the London Stock Exchange or a strategic stake sale. The brokerage house, holds the view that the company is expected to utilize the proceeds, to convert its second wet dock into a dry dock, by end of CY17. This is likely to double the capacity for PDO from current Rs.60 bn to Rs. 100 bn in terms of revenues. 

According to the Business Standard, September, 15, 2014:

To promote shipping industry, the government plans to come out with a ship building scheme to encourage India ship yards to bag foreign ship building orders. A Cabinet note with this regards has been prepared, minister for Road Transport and Highways Nitin Gadkari said in his conference on 100 days of his ministry. 

At the CMP of Rs.38.75, it is a sure shot BUY for the long term (18 months perspective) with a price target of Rs.90.

Resurge Mines and Minerals Ltd

BSE Code: 533017

Resurgere Mines & Minerals India Limited (Formerly Exfin Shipping (India) Ltd.) is presently engaged in the business of extraction and processing of iron ore products ie lump ore and size ore, and is predominantly a manufacturer of calibrated lump ore (CLO) and Iron Ore Fines.

• Resurgere Mines is also engaged into merchant export of iron ore fines to China.

• Resurgere Mines is a member of CAPEXIL, FIEO and FIMI and is a recognized STAR TRADING HOUSE.

• Resurgere Mines also owns a bauxite mine in the state of Maharashtra with 60% ownership, through a wholly owned subsidiary and estimated reserves of 4.92 million tons.

Financials and other Statistics:

## CMP: Rs.2.66 in BSE and Rs.2.40 in NSE, as of 9th July, 2014.

## Face Value: Rs.10 (not Re.1),

## Book Value: Rs.26.49,

## Market Cap: Rs. 57.87 Cr, down from Rs.1500 Crore in 2008.

##  IPO Price Band: Rs.263 - Rs.272 Per Equity Share

## IPO Issue Date: Aug 11, 2008 - Aug 13, 2008

Major Triggers: 

(i) Mahalmiriya (Bauxite) Mines in Maharashtra, has got the approval from the authorities. The mining could start post monsoon, after some issues regarding the lease agreement gets solved.

(ii) The mining is already taking place in the Soapstone Mine, Dhelana, Rajashtan.

URL: http://www.resurgere.in/environmentalreport/dhelana-clearance30-3-2012.pdf

(iii Yelwan Jugai Bauxite Mine in Maharashtra and Satarda Iron Ore Mine are expected to get fast approvals from the  the current NDA government led by Narendra Modi.

(iv) The book value of the share of the company is Rs.26.49 and the market cap is only Rs.52.50 Cr. The market cap of the company is less than price of the machineries purchased by the company till now for the mining operations. So, you are getting the business of the company Free? 

Approvals==>> 

a) Environmental Clearances

(b) Forest Clearances, etc.

(v) The mining sector stocks are likely to boom in the coming days, after the recent landmark, Supreme Court verdict. At present even the stocks like SVC Resources Ltd (BSE Code: 512449), which are from the same sector is trading multiple times its face value of Re.1 (now Rs.10). Another stock, NMDC Ltd having face value of Re.1 is trading at Rs.173.65. Whereas Resurgere Mines and Minerals Ltd, having a face value of Rs.10 (not Re.1) is trading at Rs.2.40 in the NSE. Is it  not surprising? 

Clarifications of baseless Rumours: 
(a) The promoters holding came down due to GDR and other issues. It did not come down because they directly sold shares in the market. 
(b) At present there are three directors of the company and they are: 
## Subhash Sharma: Chairman & Managing Director
#  Mayur Shah: Ind. Non-Executive Director
## Alok Ambastha: Ind. Non-Executive Director
(c) One of the auditors did not want to sign the balance sheet, but the subsequent auditors had no problem. The said auditor, went to the media without informing the management of the company, which by any standard is a breach of trust and constitutes a type of criminal conspiracy; though the management decided not initiate any legal action against the said auditor. 
(d) The company during the last few years, was affected due to mining ban in many states of Indian union, besides, the UPA government had a very unfavorable policy towards the Iron Ore exporters and dealers. However, in future, as the mining policy gets changed the company hopes to do well.  
(e) Inspite of getting approvals, the company could not start the operations in Mahalmiriya (Bauxite) Mines in Maharashtra because of some problems in the lease agreement. Also, mining generally does not take place during the monsoon season, because they are open fields. 

Conclusion: Accumulate on dips and keep holding for a target of Rs.9-10 in the coming days. This is a turnaround story. On the downside, it can fall maximum upto Rs.2.30. In the NSE the price is already Rs.2.40. 
Also, note that some panic selling due to vested interest groups, is going on, which will not be sustained in the long run, due to sheer fundamentals of the company. 

Rohit Ferro-Tech Ltd: Buy on dips

CMP: Rs.11.90

Introduction: Promoted by Mr. S K Patni, Rohit Ferro-Tech Ltd (RFTL) started its journey in 2003 with a humble capacity of 24,000 TPA from its 2 x 9 MVA furnaces in Bishnupur, West Bengal. 

In 2006, RFTL also expanded its wings into State of Orissa by installing a 110,000 mtpa manufacturing unit with 4 nos. 16.5 MVA furnaces at Kalinganagar Industrial Complex in Jajpur to manufacture bulk ferro alloys.

Recently, the company added another feather in its cap by fully commissioning its Manganese alloys production facility of 100,000 mtpa with 6 nos. 9 MVA furnaces in Haldia, West Bengal. The unit has got a status of 100% EOU.

Presently, with the total installed capacity of 300,000 mtpa, RFTL exports nearly 70% of its production.

Furthermore the company is setting up an additional 33 MVA SAF at its jajpur unit. The company is also in the process of setting up a 67.5 MW Captive Power Plant at its jajpur unit.

In an attempt to forward-integrate, RFTL has set up a 100,000 mtpa Stainless Steel manufacturing facility at its Bishnupur unit. On the side of backward integration, RFTL has acquired economic interest in Coking coal and Thermal coal mines in Indonesia.

Since its inception, the Company has come a long way to position itself as a leading producer of High Carbon Ferro Chrome. RFTL has accreditation like ISO 9001:2000, a Four Star Export House Status, Membership of ICDA (International Chrome Development Association), IMNI (International Manganese Institute) etc. The company recently got an award from EEPC as “Star Performer In Product Group - Medium Enterprise” on all India basis.

The company carries a part of its business activity through a Wholly owned Subsidiary Company M/S SKP Overseas Pte. Ltd incorporated at Singapore. During FY13, the Wholly Owned Subsidiary Company has acquired 60% equity stake in a company M/S PT Bara Prima Mandiri of Indonesia, a Company in which M/S SKP Overseas Pte. Ltd already had 60% economic interest . By virtue of the acquisition of equity stake M/W PT Bara Prima Mandiri of Indonesia has become a subsidiary of M/S SKP Oversea Pte. Ltd.

Since its inception, the Company has come a long way to position itself as one of the leading producer of High Carbon Ferro Chrome. RFTL has accreditation like ISO 9001:2000, a Two Star Export House Status, award for Export Excellence by EEPC, Membership of ICDA (International Chrome Development Association), IMNI (International Manganese Institute), etc.

Shareholding Pattern: The promoters  hold 72% (controlling) stake in the company while the general public holds 28%. In the general category,  Shriramrathi Marketing Pvt Ltd, Anumati Stock Broking Pvt Ltd and Quest Financial Services Ltd holds more than 1% stake in the company. 

Triggers: 

• During FY13, the company had allotted 3, 35, 00, 000 equity shares at Rs.10 each on preferential basis at a premium of Rs.50 per share aggregating to Rs.201.00 Cr to the entities belonging to promoter group and strategic investors belonging to the non promoters group. 
• The company is expected to install 67.5 MW captive power plant at its Jajpur unit. The basic engineering, civil work and structural fabrication has progressed significantly. All major equipment having long lead time has been received at the site and erection work is at the final stages. Since, Ferro-alloy sector is power intensive, it will save a substantial part of the cost of production. 
• The basic engineering, civil and fabrication work of 33 MVA Arc Furnace at Jajpur unit is  under progress. The company has placed order for all major Plant and Machinery and the delivery of the plant and Machinery are as per Schedule. 
• The company has acquired 60% equity state in a coking coal mine in Indonesia owned by M/S PT Bara Prima Mandiri Through its Subsidiary M/S SKP Overseas Pte. Ltd, Singapore. The mine located in Central Kalimantan province of Indonesia has an estimated coking coal reserve of 10 MN tonnes. 
• The company is also having 60% economic interest in thermal coal mine in Indonesia owned by M/S PT Palopo Indah Raya through its aforesaid subsidiary. The mine located in Central Kalimantan Province of Indonesia has an estimated thermal coal reserve of 20 MN. 
• The Finance Minister in this budget could rationalize the tax and duty structures of the ferro-alloys sector. There are already talks of raising the import duty, so that foreign countries are not able to dump their cheap products in Indian markets, easily.  
• India enjoys a natural advantage as it has the fifth-largest in chrome ore with a 100 million tones estimated reserve and the sixth-largest in manganese ore with an estimated 176 million tones reserve.

Conclusion: Ferro Alloys are used in the production of steel as de-oxidant and alloying agents and act as an intermediate industry to the iron and steel sector. The demand and prices of ferro alloys depend on the production and consumption of steel which in turn depends upon its user industries. 

Many Ferro-alloys companies, has substituted iron ore with pallets.The UPA Government during their tenure introduced duty on export of Iron ore fines, which has resulted in reduction in export from 25 million tons earlier to 3 million tons. Due to this, there has been improvement in availability of Iron ore fines for conversion  to pellets. Further, there are many pellets plants which are expected to come online in the next 6-12 months. This will in turn reduce the dependence of industry on sized ore and will  in-fact be a new source of raw material, thus increasing the overall availability substantially. With this new source of raw  material not only the availability of will increase but prices will also come down to normal level. Most of these plants are either merchant plants or their capacity is more than what is required by them captively for their own consumption. This will further increase the availability of raw material. 

Moreover, this will in turn reduce the dependence of industry on sized ore and will in-fact be a new source of raw material, thus increasing the overall availability substantially. With this new source of raw material not only the availability of will increase but prices will also come down to normal level. Most of these plants are either merchant plants or their capacity is more than what is required by them for their own consumption. This will further increase the availability of raw material.

Due proactive steps taken by the State Governments and favourable Supreme Court verdict in Karnataka the mining sector is slowly limping back to its normal operational level. 
Further, Orissa Government has also taken proactive steps and has recently allowed restart of mining in some of the mines, which is expected to alleviate the scarcity of raw material. The yield from Pellets is higher than yield from poor quality material.

However, the UPA government also imposed a 5% export duty on iron ore pellets, an agglomerated form of the raw material. Now, while the Associated Chambers of Commerce and Industry of India was of the view that the government should raise the export duty on iron ore pellets even further to safeguard the interests of India’s steel industry, the Pellet Manufacturers’ Association of India has demanded that commerce ministry remove the duty, claiming it was choking the industry and would stunt growth. 

Insiders have told the media that the Steel and Mining Minister seems inclined to continuing allow the export tax to stand. When asked for his reaction, Tomar told news agency, the Press Trust of India (PTI), that a conciliation had to be reached on the two issues, and that his ministry was studying both demands.

Though the Steel demand was low in 2012-14 due to continuing economic crisis and fall in the Indian GDP growth, however, spurt in demand is expected in 2014- 15. The Government of India has planned to invest about Rs.56.32 lakh crore in infrastructure during the 12th Five Year Plan period 2012-17. This will augur well for the industry.

Besides, the market cap of the company is only Rs.136.30 Cr and the book value of the shares of the company is Rs.50.87, as compared to the CMP of Rs.11.90. 

Going forward, the demand for Ferro Alloys is excepted to improve due to increase in investment plan in road sector, expansion in railways, increase in volume by automobile sector, uses of special steel in power sectors and refocus on the manufacturing sector. 

The scrip should bounce from the oversold positions and move up on the optimism of new power plant coming up. The stock could be accumulated around the support region of Rs.11.70-12, for a target of Rs.16-17 in the coming days. 

Jai Balaji Industries Ltd: A Hidden Mining Story

CMP: Rs.23.80

Aditya Jajodia, CMD, Jai Balaji Group
Photo: Moneycontrol.com

Introduction: Jai Balaji Group is one of the largest manufacturers of steel in the private sector in Eastern India. It has integrated facilities for producing steel in its manufacturing units spread across the states of West Bengal, Chhattisgarh, Orissa and Jharkhand in India. 

The Group has a chain of value-added products which include DRI, Pig Iron, Ferro Alloys, Alloy and Mild Steel Billets, Reinforcement Steel TMT Bars, Wire Rods, Ductile Iron Pipes and Alloy and Mild Steel Heavy Rounds. Jai Balaji Industries Ltd continues to have three wholly owned subsidiaries namely:

• M/s. Nilachal Iron & Power Limited==> It is a wholly owned subsidiary of the Company since 26.10.2007, having its manufacturing plant located in Kandra near Jamshedpur, Jharkhand. It currently, manufactures sponge iron. Work on increasing its capacity by 60,000 tonnes per annum has been initiated.
  The company has been allotted the Dumri Coal Block for captive mining from the Government of India, about 300 kms from the plant. Mining of coal is expected to start shortly and a Coal Washery ill also be installed to improve efficiency of the raisings. 
• M/s. Jai Balaji Steels (Purulia) Limited
• & M/s. Jai Balaji Energy (Purulia)

The company also has 101.1 MW power plant, Sinter plant to utilize cheaper iron ore fines and have also put up Coke Oven Plant.

Shareholding Pattern: The promoters hold 54.57% of the shares of the company while general public holds 41.07% of the shares of the company. The corporate bodies hold 13.14% of the shares of the company while the FIIs hold 4.3% of the shares of the company. In fact the  FIIs' holdings have increased from 3.71% in October, 2013 quarter to 4.36% in March, 2014 quarter. 

Financials: Net Loss of Jai Balaji Industries came as Rs.123.49 crore in the quarter ended March 2014 as against net loss of Rs.63.46 crore during the previous quarter ended March 2013. Sales declined 14.62% to Rs 434.35 crore in the quarter ended March 2014 as against Rs.508.70 crore during the previous quarter ended March 2013.

For the full year,net loss reported to Rs.318.95 crore in the year ended March 2014 as against net loss of Rs.213.13 crore during the previous year ended March 2013. Sales rose 27.81% to Rs.1946.00 crore in the year ended March 2014 as against Rs.1522.58 crore during the previous year ended March 2013.

Due to the increase in the raw materials cost, such as Iron Ore and Coke/Coal as a percentage of net sales, post FY11 and inability to increase end product prices due to competitive environment, resulted in EBITDA margins of the company taking a hit. This is one of the prime reasons why the company is posting huge losses. 

Now, most of the established companies, like SAIL, Tata Steel, Jindal Steel and Power Ltd etc, have their own captive iron ore and coal mines which puts a lid on the costs. But Jai Balaji Industries Ltd has to procure this at market prices and under such circumstances, the going got tough for it. 
As a matter of fact the it was allotted both Coking and Non Coking in the past and have also formed joint venture companies for implementation. But due to some nagging issues surrounding coal block allotment, the things got unnecessarily delayed. However, off late Dumri Coal Block received Environmental clearance and Forest Go Certificate. Forest clearance stage one has been received and stage two is under process. This is expected to significantly reduce the cost of the production in the days ahead. 

Triggers: 

• Company has 1.1 mtpa steel manufacturing company with diversified product range including pig iron, sponge iron, TMT bars, ferro alloys, alloy bars etc. Replacement cost of assets is over Rs.5000 Cr. It has debts around Rs.2200 Cr. The NAV of the company therefore stands at Rs.2800 Cr. 
• The company is also hopeful of commencing work on its proposed steel plant at Raghunathpur in the Purulia district of West Bengal soon. According to information available on the company's Web site, it plans to set up 5-mt steel plant, 3-mt cement plant along with a 1,215-MW power plant at an estimated investment of Rs.16,000 crore.
• The company holds varying stakes in four coal blocks-Dumri and Rohne in Jharkhand and Andal and Jagannathpur in West Bengal. It posses 700 mt of high graded coal. 
• The DRI Plant of 60000 MT & coal washery in subsidiary company M/s Nilachal Iron & Power Limited started its commercial production during FY13. In FY13, the company’s project for expansion of 350000 MTPA Coke Oven Plant along with Waste Heat Recovery Boiler of 80 TPH was completed and capitalized. The said coke oven plant is presently running satisfactorily. These efforts are helping it to improve the margins. 
• The company completed a CDR-scheme where it got reliefs both in terms of interest rate and debt. It is estimated it will be able to save Rs.25-30 Cr annually through CDR mechanism only. Moreover, steel demand was low in FY14 due to continuing economic crisis, however, spurt in demand is expected in 2014-15. A sharp pullback in demand of steel in the third quarter has pushed up steel consumption in the fourth quarter of FY14. Also, with as the government talking tough on inflation, the raw material price are expected to come down albeit in a very tiny manner and very slowly. This is expected to give an upward push in its bottomline going forward. 
• Jai Balaji Industries Ltd has recently informed the BSE that the Board of Directors of the Company at its meeting held on May 29, 2014, inter alia, have converted the remaining 65,05,000 warrants which were allotted on July 04, 2013 to Hari Management Limited, Promoter Group Company of the Company into 65,05,000 equity shares of Rs.50 each (including premium of Rs.40 per equity share). Earlier the Company on 4th July, 2013, issued and allotted 10,000,000 warrants to promoter group companies namely M/s. Enfield Suppliers Limited (1,900,000 warrants) and M/s. Hari Management Limited (8,100,000 warrants) on a private placement basis at an issue price of Rs.50 each. Also, the number of pledged shares have come down from its peak level of 92%. Company has further plans to release more pledged shares in due course of time.
• A Joint Venture Company ‘M/s.Rohne Coal Company Private Limited’ was formed in 2008-09 with the Registrar of Companies, NCT of Delhi & Haryana, in which the company along with M/s. JSW Steel Limited & M/s. Bhushan Power & Steel Limited are venture partners. The said Joint Venture Company was formed in terms of allocation of Rohne-Coking Coal Block in the State of Jharkhand by Ministry of Coal, Government of India. Both the Joint Venture Companies are in the process of setting up coal mining facilities at respective coal blocks. The Ministry of Environment and Forest (MoEF) has already granted the first stage forest clearance the Rohne coking coal block in Jharkhand.

Conclusion: Persistent slowdown in demand for steel and falling steel prices has squeezed profitability of steel companies in India. This was reflected in the Financials of the company during FY14. However, the global steel demand is expected to grow over by 10% in the next five years. Steel industry is vital for overall economic development of every nation as it is one of the core sectors. India is the largest producer of sponge iron in the world. Despite all the headwinds and lingering difficulties, the steel industry is likely to deliver growth with the current NDA government focusing on infrastructure development. 

At present the Indian Steel industry is on the growth path due to growing domestic demand, unexplored rural market and rapid urbanization. The strong growth in automotive industry and power sectors would drive steel output and consumption, in future. With the improvement in the economic recessions in the west, the potential for increase in demand is high.

Moreover, the total revenue of Jai Balaji Industries Ltd for FY14, came out to be Rs.1990.78 Cr, plus its assets (Coal Blocks + NAV) are available at just Rs.175.60 Cr. The book value of the shares of the company is Rs.72.59 against the CMP of only Rs.23.80. 

Chartically speaking, the stocks seems to be at the end of downtrend and should find support around Rs.22.40--21.70 ranges. The investors are suggested to accumulate the scrip, if this level holds. In any case, in the short term, the scrip is not likely break Rs.19.70 on the downside. The short term target for the scrip is Rs.29-31. 

Birla Shloka Edutech Ltd: A Turnaround Story
CMP: Rs.5.08

Introduction: Birla Shloka Edutech Ltd is one of the leading company in the field of educational services and has created its own niche through reliable, budget friendly and ethical approaches. Birla Shloka Edutech Limited was incorporated on 25th May, 1992 (Registration Number 066910) with Registrar of Mumbai as Rathi Mercantile Industries Limited. It was acquired in the year 1998 by the prestigious Yash Birla Group. The Company got its name as Birla Shloka Edutech Limited in December 2008. Today the company stands tall with the trust and confidence of its millions of delighted customers who form the backbone of the company’s new product innovations and researched. Company is engaged in providing IT Services & sale of IT products and has a curriculam based educational software programe viz., “XL@School “ as per the syllabus prescribed by different educational board that is  designed to impart academic knowledge through electronic media

The Company has three subsidiaries: 

• Birla Edutech Limited.
• Wholly-owned foreign subsidiary, viz. Birla Shloka Edutech ltd.FZE.
• Ojus Healthcare private Limited.The Shares in the later Subsidiary (51.10%) was acquired by the Company during FY13. The main object of the subsidiary is to establish hospitals, conducting research and development activities in the areas of medical science, to carry the business of providing the healthcare and health information. In addition to the main object it can also pursue e - Governance Project.

The company derives its revenue from either supply or on installation of educational content and services, content licensing, sale of content and technology products. 

Shareholding Pattern: The promoters have increased their stakes to 17.03% in Q4FY14 from 9.23% in the December, 2013 quarter. The general public holds 82.97% of the shares of the company. Among the general public Birla Bombay Pvt Ltd,  holds 2.68% of the shares of the company. Also, 4% shares of the company are locked in for trade. Moreover, corporate bodies  hold 12.42% of the shares of the company. 

Financials: For Q4FY14, the total income of the company came out to be Rs.33.69 Cr as against Rs.54.3 Cr in the same period previous year. The net profit of the company jumped to Rs.3.53 Cr as against Rs.2.77 Cr in the same period previous year. The EPS of the company for Q4FY14, came out to be Rs.1.68 as against Rs.1.32 in the same period previous year. On a consolidated basis, the total income of the company for FY14 came out to be Rs.101.09 Cr as against Rs.279.4 Cr in the same period previous year. The net loss of the company came out to be Rs.9.45 lakhs as against a net profit of Rs.30.8 Cr in the same period previous year. The reserves of the company as of 31st March, 2014 stood out to be Rs.93.99 Cr as against Rs.87.81 Cr in the same period previous year. 

Triggers:

• The Company has a curriculum based educational software program viz., ‘XL@school’ as per the syllabus prescribed by different Educational Boards that is designed to impart academic knowledge through electronic media. To cope up with the increased business opportunities, the Company has made considerable investment in research and development areas, ongoing quality enhancement program and infrastructure facilities, etc. 
• The Company has expanded its business in Information and Communication Technology (ICT) solution for various government schools segment. In March, 2014, Birla Shloka Edutech Ltd informed the BSE that it had received an order from School Education Department, Government of Tamil Nadu for implementation of Information and Communication Technology Scheme in 1820 Government High & Higher Secondary Schools in Tamil Nadu State with a Total Project Value of Rs.359 Cr. Few more such orders could flow into the company's kitty this Fiscal. 
• The government of India is keen to explore the Public Private Partnership (PPP) model for setting up of Schools which the private partner will design, build, finance and manage. The company sees enormous potential in this space for future growth as more and more states are likely to devise and implement similar schemes for Senior Secondary Education and probably in primary education too.
• The Company is aggressively participating in tenders of various state government projects and vigorously pursuing such initiatives across the country.
• The need for ICT solution in government school is growing and opportunities are available in this space. Retails opportunities are available by way of sale of software contents to the end customer directly.
• The Education sector is one of the most promising sector creating tremendous opportunities. Being a country having 50% of its population less than 25 yrs old, the Company sees bright prospects in this fiscal. The Company sees tremendous growth opportunities in the following areas:
  (i) ICT projects availed from School Educational Department, Government of Maharashtra: The School Education Department, Maharashtra along with DES & HS had invited various reputed and experienced organizations/ Institutes for the supply of Computer and connected accessories, Education software's, Online M.I.S., teaching faculty and provision of IT Education Services in 5000 Government Secondary and Higher Secondary schools in 10 groups (i.e. 10 regions) from the districts of the State of Maharashtra as specified in DTN for a period of five years through e-tender. The proposed project is about setting up of computer laboratories in Secondary and Higher Secondary schools all across the state of Maharashtra. It has been decided that a region wise implementation is to be done for the same and a representative number of schools have been chosen from the regions created. The Company has been awarded with the project for providing Computer and connected accessories, Education software's, Online M.I.S., teaching faculty and provision of IT Education Services to 850 Government Secondary and Higher Secondary schools for a period of five years. The Total Value of the Project is Rs.152 Cr. The ICT Solutions provided by the Company under this project will be on BOOT (Build Own Operate Transfer) model and will be transferred to the respective school(s) at the end of the tenure of Contract at an agreed price of Re. 1.
  (ii) Interactive multimedia learning and education system: The company has a well developed library of syllabus based interactive multimedia learning content for CBSE & Maharashtra State Board. The company has initiated the process of enhancing the features of the existing content and also develop the syllabus based interactive multimedia content for other state and central boards to expand the footprints in the segment of Multimedia Content for learning across the country.
  (iii) Development of Teaching Solutions and Learning Aids for Early Year Schooling: The company intends to set up development centre to create learning solutions for the young learners about the space, environment & relationships around them. The program will aid children to explore & nurture relationships they share within the spectrum of this space/ environment, empowering them to take ownership of the environment and relationships around them while contributing positively towards it. This unique solution together with the learning aids and collaterals developed by the company intends to provide unique teaching methodology and aids for Pre Schools. The company intends to have strategic tie ups with leading providers of collaterals like storybooks, music CDs, Story CDs, games and manipulative games, theme kits, toys, interactive games etc., to augment the solutions developed by the company.
  (iv) Supply of ICT solution to government and private schools: The company sees numerous opportunities under the ever increasing scope of Information and Communication Technology (ICT) of Government of India. The ICT is being presently used from School Education to University Education. The government is increasingly focusing at the Public Private Partnership (PPP) model to set up more number of Centers of Excellence and Skill Based Vocational Training Centers which will enhance the employability potential of students. The government of India, with the aim of improving Computer Literacy in Public Schools is increasingly opting for Public Private Partnerships to source IT Infrastructure and training under Sarva Shiksha Abhiyaan (SSA) Programme. Institutions have varying requirements and the private sector may be able to offer innovative solutions that will provide quality services and value for money.
  (v) Setting up and managing Teacher Training Institutes: In the coming years India is expected to face a huge demand for schools and teachers to educate its rapidly increasing school population. The curriculum in most of the existing Teacher Training Institutes does not equip teachers with the requisite skills to prepare students for tomorrow. The company is committed to setting up state of the art Teacher Training Institutes across the country that will attract the country's leading talent and prepare a cadre of highly skilled teachers who can ensure that each child learns in our classrooms.
  (vi) Supply of software as per customer specifications and requirements: The company is engaged in the business of providing customized software based on the specifications and requirements of its customers. The company sees more prospects and growth in this segment and therefore, is enhancing its capabilities and offer more products and services in this segment.
• The company came up with 100% Book Built FPO in Jan 11, 2010 - Jan 13, 2010 at an Issue Price: Rs.45 - Rs.50 per Equity Share to meet: (i) Capital expenditure for Turnkey Projects executed by the company under the BOOT model (ii) Capital expenditure on up-gradation of infrastructure and content development for XL@School (iii) Funding the proposed M&A activities and (iv) The Working Capital requirements This price is around 9-10 times the CMP of the shares of the company. 
• Recently there were some media reports that, the NDA govt will focus on e-governance for transparency, efficiency and accountability. President Pranab Mukherjee, who addressed the joint session of Parliament for the first time after the 16th Lok Sabha was constituted, said the government would embrace digitization of records and leverage technology. Pointing out that e-governance brings empowerment, equity and efficiency, Mukherjee said the newly-elected government will use the tool to improve service delivery and programme implementation. President Pranab Mukherjee said ICT will play a crucial role in the ways of working of the new government as it will be used to drive re-engineering of government processes to improve service delivery and program implementation. All these are positive for the companies like Birla Shloka Edutech Ltd. 

Conclusion: The Book Value of the shares of the company is Rs.50.36 and at Rs.5.08 it has a market cap of only Rs.10.47 Cr, against reserves of Rs.93.99 Cr as, of 31st March, 2014. In March, 2014 quarter it showed a turnaround. On the daily candle stick chart too, it seems a temporary bottom has been formed, as it bounced back from the oversold positions. Risk taking traders can buy at least 10, 000 shares of the company and keep holding. It is a screaming buy at the current market price.

Allied Digital Services Ltd: Future Prospects Look Good 

CMP: Rs.21.40

Introduction: Allied Digital Services Ltd provides a range of IT infrastructure services and solutions including managed services and physical and information security solutions to leading Indian and global corporations. The company has a presence in over 132 locations in India, and over 40 states in the USA, through its acquisition of Enpointe Global Services. 

Allied is an ISO 9001: 2000 certified company with a global command center certified  under ISO 27001: 2005. Allied Digital Services Ltd, is among the few companies, with a truly pan India direct  presence in 132 locations across the length and breadth of India--serving over 40, 000 pin-codes on the same day. It has the following subsidiaries:  

(i) Allied Digital Services LLC 

(ii) Digicomp Complete Solutions Limited

(iii) Allied Digital Inc (USA) 

(iv) En Pointe Technologies India Private Limited

(v) Allied Digital Singapore Pte Limited 

(vi) Allied Digital Asia Pacific Pty Limited (Australia) 

(vii) E-Cop Surveillance India Pvt. Ltd

Shareholding Pattern: The promoters holds  43.71% while the general public hold 56.29% of the shares of the company. Among the general category, the FIIs hold 2.96% of the shares of the company and corporate bodies hold 8.47% of the shares of the company. It has a very small equity capital of Rs.29.09 Crore and hence, the number of floating shares are also less. 

Please Click on the Chart to get an Expanded View

Financials: The company recorded a profit at the net level of Rs.9.2 Cr in FY14, as compared to the net loss of Rs.5.1 Cr in the corresponding quarter previous year. The Basic EPS stood at Rs.2, an increase of 281.8% over the same period previous year. The EBIDTA margins have also improved by 420 bps and the company has returned to black after a long phase. The market cap of the company is only Rs.99.84 Cr against the FY14 turnover of Rs.181.88 Cr. Moreover, the P/E of the shares of the company is only 7.73, while the industry P/E is 20.73. A decent P/E re-rating of around 15, can take the scrip to around Rs.41-42. The book value of the shares of the company is Rs.149.40, while the price to book is only 0.14. 

Triggers:

• The Company has been taking transformation initiatives coupled with key innovations to make the business future ready. Key among the initiatives under this program is skilling the entire organization in terms of technology, process and leadership to ensure that the organization is ahead of the curve when the opportunities present itself to it. 
• The company has laid great emphasis on sustaining profitability going forward. One of the key drivers identified for this is a change in customer focus where buying patterns are moving from a capex model to an opex model. Earlier the company laid more stress on selling hardware to the clients while the present focus is on selling solution and services there by benefiting the customer as well as adding to its bottomline. From a business model perspective, it continues to focus on the Infrastructure Management Services vertical where the management believes that the fastest growth is predicted to happen. 
• The IMS industry currently accounts for US$ 524 billion, nearly a quarter of the US$2.3 trillion overall IT spend and is moving towards a remote delivery model where services are increasingly delivered by vendors from low-cost locations. India being one of them, hence, the company stands to benefit. 
• As a strategy, the company has been concentrating on weeding out low margin hardware business, which has depressed the topline of the company. It is expected that the fortunes of the US business will improve as the economy in the US is improving. With the new immigration law being underway, the local US IT  services business mi see acceleration. Though the UK market is a bit cautious, the rest of Europe barring couple of countries, have started to show some improvement.
• The India business is showing a radical change from its stand on cloud services compared to last year. Now many organizations are ready to move to cloud based services. The apprehension for security in cloud is declining. Data analytics is also an area of attraction globally. Mobile enablement of applications continues to get focus globally. The IT surveillance business is going to be a big one in the current year globally. IT infrastructure transformation continues to be of prime importance. The company management hopes to be a major beneficiary from  all the transformations. 
• The company's internal processes have improved, while its US operations are very stable with improved  credit rating. Its UK operations are also getting stabilized. The company recently completed its fifth anniversary in the US. Globally, the company in its transformation journey has revamped its offering with a new branding called “ADiCube”. Moreover, its “Integrated Service Delivery Framework”, has matured into a successful product venture “ADiTaaS (Allied Digital integrated Tool-as-a-Service).
• As a Master Systems Integrator of ICT and PSS, Allied Digital provides greater depth of solution and support to its customers combined with a single point of responsibility and accountability. This has helped Allied Digital to sign several on-going sales agreements instead of one off sale agreement with Banks, Retail chains and other multi locational customers who are interested in dealing with a single MSI having Pan India presence instead of signing multiple contracts with regional / local systems Integrators. This provides cumulative growth opportunity for the Physical Safety and Security business as well as increased customer retention for Allied Digital.
• As a Master Systems Integrator Allied Digital now carries a larger portfolio of solutions that includes Video Surveillance, Access Control, Intelligent Traffic and Toll Management systems, Building Management and Energy Management systems. Adoption of ICT in PSS has further strengthened Allied Digital’s presence in the market as a total Systems Integration solution provider as compared to traditional Physical Security Systems OEMs who are now product focussed.
• Its emphasis on quality has now started showing results with excellent growth in its Remote Management business. The company not only increased business from existing customers but also added several new overseas customers who are being serviced remotely from its state-of-the-art Remote Management centers in Mumbai, Pune and California.
• During, FY15, the company aims to deepen its engagements with existing clients, draw repeat business, and emerge as the "First Choice" and the preferred partner for its marquee global customers.The Company sees its eco-system of critical partnerships and alliances with reputed global companies as an important asset and will continue to explore opportunities to further expand it. The Company’s differentiated business model with strong capabilities in its chosen verticals, programme management track-record, investments in intellectual property, and a reinforced leadership team are great advantages in the prevailing macro-environment that remains volatile.
• The management truly believes that the investments that it has made in the last few years to build world class infrastructure and expertise in the space of Network Operating Center (NOC), Security Operating Centre (SOC) and Cloud are going to put it ahead of its competitors. It has a world-class facility at Rancho (USA) to assemble, test and deploy machines in large quantities. Similarly its enhanced capacity at its Global Command Center (NOC and SOC) can take on the additional businesses, which it expects in the space of Remote Infrastructure Management Services (RIMS) and Managed Security Services (MSS). 
• It has already demonstrated our cutting-edge Mobility Solutions to one of the leading players in the industry ad it has been extremely well received and deployed. The mass adoption of cloud, virtualization, mobility etc. will place the organization in a much positive and profitable position in the near future.
• Primarily its foreign currency earnings are in US dollars. The exchange rate between the Indian rupee and US dollar has been favourable to the company in FY15. 
• Although the company has a fairly matured security services practice with large customer base, it does not contribute large share in its overall business. Currently, managed security services contribute to about 5-7% of the total business of Allied Digital. It feels that Indian security industry is at an inflection point and from here only those players who have strong security practice will survive. Hence, it sees a huge growth potential in security services space. Also, Nevada Gaming commission had issued Information Technology Service Provider License to Allied Digital. 
• Allied Digital won MSP of the Year 2013 Award – LANDesk Software USA. In May 2014, Sunil Bhatt, CTO received the award for MSP of the Year 2013 on behalf of Allied Digital in Las Vegas, USA---this is the third award in the row.

Conclusion: The company earlier bagged a massive order of Rs.224 Cr in Pune City. The company's overseas branches have started to perform. Looking both chartically and fundamentally, the scrip looks attractive for short term perspective. The investors should accumulate the stock of the company on all declines, for a target of Rs.41-42 in the coming days.