All posts by : Khyati Shah

Megasoft Ltd
IT Software Products
FV – Rs 10; 52wks H/L – 14/4; TTQ – 85000; CMP (May 24, 2016) – Rs 9.76;

Market Cap – Rs 43 Crs

Consolidated Financials and Valuations for 9MFY16 (Amt in Rs Crs unless specified)

*As of September 2015

Consolidated Financials and Valuations for 15 Months ended FY15 (Amt in Rs Crs unless specified)

• The company lost its biggest customer contract from Q3 of 2013, resulted in lower revenues and EBITDA in the FY15.
• The share price has moved up by 45.67% in the last two months from Rs 6.7 (24/3/2016) to Rs 9.76 (24/5/2016). However, the stock has breached Lower Circuit three times in the last one week.
• Company’s top five clients contribute to more than 50% of the revenues.

Recent Updates

• Megasoft was awarded a patent in Near Field Communication (NFC) technology in July 2015. The invention relates to a smart integration of dual architecture contactless SIM into mobile devices and describes the method of efficiently performing various financial transactions. The patent was filed in February 2010 and was awarded by the US Patent and Trademark Office in July this year.

Near field communication (NFC) is a set of communication protocols that enable two electronic devices, one of which is usually a portable device such as a Smartphone, to establish communication by bringing them within 4 cm (2 in) of each other ~ Wikipedia

• In June 2015, the company was awarded patent pertaining to the method for performing authentication and service translation for Mobile Virtual Network Operators (MVNOs). The patented technology is at the core of the company’s XIUS Mobile Services Platform (MSP) and has been granted by the US Patent and Trademark Office.

A mobile virtual network operator (MVNO), or mobile other licensed operator (MOLO), is a wireless communications services provider that does not own the wireless network infrastructure over which the MVNO provides services to its customers. An MVNO enters into a business agreement with a mobile network operator to obtain bulk access to network services at wholesale rates, and then sets retail prices independently. An MVNO may use its own customer service, billing support systems, marketing, and sales personnel, or it could employ the services of a mobile virtual network enabler (MVNE) ~ Wikipedia

Bulk Deals

Overview:

• The Company is principally engaged in computer programming, consultancy and related activities. It was established in 1994. It operates in two key technology segments ~ Core network infrastructure and mobile payments.
• The Company focuses on the telecom sector through its XIUS brand.
• Through XIUS, the Company offers personalized and specialized services, including computer software design, computer systems analysis and systems integration, to bring solutions to its clients.
• With Headquarters in the USA, XIUS offers solutions in the areas of mobile infrastructure and services, and mobile banking and payments.
• Megasoft has offices in the US, Singapore, Malaysia and in Hyderabad & Chennai in India.
• The company has filed 120 patents, with 35 awarded to date.
• XIUS Infrastructure solutions process and manage in excess of 350 million calls a day and the mobile payments solutions manage over $US 1 billion worth of payment transactions monthly.
• The company has received the title and has completed the registration formalities on May 23, 2015 for lands situated at Madhapur (0.75 acres) and Nanakramaguda, Hyderabad (acquired through amalgamation of VisualSoft Technologies Limited in 2006) allotted by TSIIC (previously APMC).
• Out of 15.61 acres originally allotted at Nanakramguda, Hyderabad, as per the directions of Government of Telangana the Company surrendered an area of 7.29 acres and retained the balance land. The said land is located at Nanak Ram Guda abutting Hyderabad Financial District, which has become a centre for the back office operations of several premier Indian and global financial institutions. ~ Megasoft parts with land for Google campus
• The company has started investing in new products ~ 4G LTE, NFV (Network Function Virtualisation), Predictive Analytics, Mobile based Payments Bank etc.

Management:

• Mr  G. V  Kumar is the Managing Director & Compliance Officer

None of the promoter’s holding is pledged

Consolidated Financial Trends ~ Amt in Rs Crs

• *Certain advances made by the wholly owned subsidiary company prior to 2007 have been set-off to retained earnings by that wholly owned subsidiary.
• The Company lost its prepaid system contract with its largest customer by the end of 2011. The full year effect of this was felt in 2012, which resulted in a 22% decline in the revenues in FY 12 and further decline of 25% in revenues in FY 13.

R Systems International Ltd
IT Consulting & Software
FV – Re 1; 52wks H/L – 89/53; TTQ – 7736; CMP (May 23, 2016; 1.45 pm) – Rs 56.75;

Market Cap – Rs 720 Crs

Consolidated Financials and Valuations for Q1 FY16 (Amt in Rs Crs unless specified)

*As of December 31, 2015

Consolidated Financials and Valuations for December ended FY15 (Amt in Rs Crs unless specified)

Company’s MD on his outlook about R Systems ~ ‘I am extremely positive about the outlook for your company. The USA economy is giving mixed signals now but I feel that over the years IT industry has learnt to live in uncertainty’

Valuation Parameters

1. EV/EBITDA: 8.26
2. EV/Share: Rs 50
3. EV/Sale: 1.04
4. Market Cap/ Sale: 1.18
5. Debt to Equity: ~0

6. RoI: 40.26%

Recent Updates

• In its most recent Board Meeting held on April 30, 2015, the Board of Directors approved to Grant 150000 stock options at price of Rs 12.07 per option (i.e. the price at which the options were granted earlier on July 11, 2007) under existing R Systems International Limited Employee Stock Option Scheme 2007 as recommended by the Compensation Committee.
• The Board has also approved opening a subsidiary company of Computaris International Limited, U.K. (wholly owned subsidiary of the Company) in Philippines.
• In FY 15 , the Company issued 90,000 equity shares of Re 1 each at an exercise price of Rs 12.07 per share, pursuant to exercise of employee stock options under the R Systems International Limited Employee Stock Option Scheme 2007.

Other updates

• In 2015, R Systems acquired IBIZ, a Microsoft gold channel partner having ERP and Business Intelligence competencies. IBIZ is having presence in South East Asia. It also acquired a relatively small but strategic telecom IT business in Europe from a renowned telecom operator.
• On July 11, 2014, the Company had incorporated a wholly owned subsidiary in India ~ R Systems Products & Technologies Limited. It was later converted into R Systems Products & Technologies Private Limited (RSPTPL) on May 28, 2015. The shareholders of the Company by passing special resolution through postal ballot on September 23, 2014 had accorded necessary approval for transfer of the Company’s Indus Business Unit operated out of Pune and Chennai to RSPTPL.
• The Company had entered into ‘Business Transfer Agreement’ (BTA) with RSPTPL on June 27, 2015 for the aforesaid transfer on a going concern basis by way of slump sale, for consideration of Rs 78.39 Crs to be discharged by RSPTPL through issuance of 60,000,003 equity shares of Re 1 each at a premium of Rs 6.227 per share and 35,026 compulsorily redeemable debentures of Rs 10000 each, on the terms and conditions agreed in BTA.
• The Company also entered into Share Purchase Agreement (SPA) with BD Capital Partners Ltd. (BDC), a Mauritius based company on June 27, 2015 to sell 93% of its equity share in RSPTPL to BDC for a consideration of Rs 44.32 Crs. Subject to the satisfaction of certain conditions, BDC has also agreed to purchase the balance 7% equity shares for a consideration up to Rs.6.62 Crs. These conditions are under evaluation and yet to be concluded as at the quarter and year ended December 31, 2015. The Company will continue to hold the compulsorily redeemable debentures having an aggregate face value of Rs 35 Crs in accordance with the terms of the BTA. The closing (as defined in the agreements) under the BTA and SPA occurred on July 07, 2015.
• The gain on sale of Indus Business Unit amounting to Rs 56.61 Crs (net of related expenses) and gain on sale of aforesaid equity share in RSPTPL amounting to Rs 2.87 Crs (net of related expenses) is disclosed as ‘Exceptional items’ in the financial results for the year ended December 31, 2015. The name of RSPTPL has been changed to Indus Software Technologies Private Limited w.e.f. August 19, 2015.
• Accordingly, the aforesaid Indus Business Unit, being part of Information technology services and products segment, is considered as “Discontinuing Operations” till July 07, 2015.
• ECnet Limited, a subsidiary of the Company has recorded an impairment loss amounting to Rs 1.2 Crs related to the certain intangible assets acquired in earlier years which is included under ‘Exceptional items’ for the quarter and year ended December 31, 2015.

Overview:

• The Company is engaged in providing Information Technology (IT) Services and Solutions and IT-enabled Services to a range of global customers.
• The Company operates in two segments: Information technology services and products, and Business process outsourcing services.
• The Company’s portfolio of services include the following: Outsourced Product Development through Integrated Product Lifecycle Management (OPD-iPLM) services, application services, testing services, analytics services, business process outsourcing and knowledge process outsourcing services, and packaged services.
• The Company provides its IT services and solutions to a variety of services to organizations in the healthcare industry, telecom and digital media, banking and finance, manufacturing and logistics, and government services.

Consolidated Revenue by Geography in 2015

“SEAC” ~ South East Asian Countries

Management:

• Mr Satinder Singh Rekhi is the MD
• Gen. Baldev Singh (Retd.) is the President and Senior Executive Director

None of the promoter’s holding is pledged

Share Price Trend

Segment Results ~ Amt in Rs Crs

Consolidated Financial Trends ~ Amt in Rs Crs

• *There was a stock split in the year 20014 ~ sub-division of one equity share of face value of Rs 10 into ten equity shares of face value of Re 1 each fully paid up. The sub-division was effected as per record date of February 28, 2014.
• Net profit for 2015 contains an exceptional profit of Rs 54 Crs as against Rs 18.5 Crs in 2014. The exceptional profit for 2015 mainly relates to sale of Indus product division as against sale of Europe BPO in 2014.
• Revenues for FY15 decreased because of realignment of business activities and divestment of Indus Business Division.
• In FY 15, the Company bought back 678155 fully paid-up equity shares of face value Re 1 each from the open market through stock exchanges.
• Consolidated profits for FY14 include exceptional profit (net of tax) of Rs 18.5Crs. Out of this Rs 16.9 Crs pertains to profit on sale of Europe BPO Business and Rs 1.6 Crs on buy-back of shares of Computaris International Limited (a wholly owned subsidiary).
• Reserves declined in FY14 because the Company paid hefty dividends ~ the Board had recommended a final dividend of Re 0.95 per equity share of face value of Re 1 each. This is in addition to four interim dividends aggregating to Rs 4.90 per equity share of face value of Re 1 each declared during the year ended December 31, 2014. Based on Companies Act, 2013 provisions applicable on the aforesaid dividends, the Company has not transferred any amount to the general reserves as the dividends has been declared and paid after April 1, 2014.
• Proposed Dividend for FY14 was Rs 12.17 Crs which was in line with Rs 12.06 Crs of FY13. The Interim dividend in FY14 stood at Rs 62.43 Crs, way high from that of Rs 13.9 Crs in FY13.

Ricoh India Ltd

The shares of Ricoh India Ltd are locked up at Upper circuit at a price of Rs 273 before hitting a Lower circuit early in the day. The share price has been vacillating between Lower circuits and Upper circuits alternatively for a number of days. The share price has fallen by 75% from its 52 week high of Rs 1072 made in July 2015.

Ricoh India is a subsidiary of Japanese multinational imaging and electronics company Ricoh Company, which directly holds 46.04% stake in its Indian arm. The parent company holds another 27.56% of Ricoh India through NRG Group, thus taking total holding to 73.6% in Ricoh India.

The Company has now filed a police against “suspected wrong-doers” ~ Ricoh files police complaint against suspected wrong-doers

The company has not yet reported it Quarter 2 results for the Financial Year ending 2016. The reason for the delay has been stated as a change of auditors which happened last year. Ricoh India’s auditors were originally a local firm called “M/s Sahni Natarajan and Bahl”. They were replaced by M/s BSR & Co. LLP, the Indian avatar of KPMG. The problems seem to be having started from then. Subsequently the company has also further delayed its reporting of quarter 3 results for FY16. Whereas when its parent company in Japan announced its third quarter results it sounded very much positive on the performance of its Indian IT service operations.

In January this year, India Ratings, a unit of Fitch, had upgraded its rating for Ricoh India’s Rs 200 Crs Long Ter Non-Convertible Debentures to Ind AA – from Ind A with a stable outlook and also that of Long Term Issuer Rating of Ricoh India to Ind AA- from Ind A with a stable outlook. Later, on March 15, the ratings agency placed the Company’s Long Term Issuer Rating, its Rs 200 Crs NCDs and its Commercial Papers on a Negative rating. The stock reacted by falling over 100 points from its day’s high of Rs 580.25 to Rs Rs 479.75 on March 16^th 2016.

In February it won an order worth Rs 344 Crs from Kerala State Electronics Development Corporation Ltd for Supply, Installation and Commissioning of Computer Hardware, Connected Accessories, Software, Maintenance of Equipments and provision of Computer Education Services in 2000 Government & Government Aided High Schools in the State of Odisha on 5 Years BOOT Model Project under ICT School Scheme.

In its March 29^th notification to the Stock exchange, the company communicated that it has “not yet received the signed limited review report from the auditors and the audit committee would take up again the matter with the Statutory Auditors to submit their limited review report on an immediate basis.” The notification also mentioned that “In order to assist the audit committee, the audit committee has sought the opinion of an Independent Agency in this regard”.

It is evident from the communication that the auditors have finished the audit but are refusing to issue a limited review report. A possible explanation to this could be that auditors must have pointed out severe objections on the accounts and are demanding a proper disclosure from Ricoh India. The communication also revealed that the “the review process is being coordinated by employees other than those who have been involved in the preparation, review, approval and signatures of the books and accounts.” and the excuse for this is “some of the employees in the latter category have been requested to avail leave with pay with effect on and from the 30th day of March, 2016”. The Company has called this a “standard practice” but the standard practice is that employees who prepare the accounts are at the forefront are supposed to answer the auditor’s queries. On April 1^st, the Company notified that it has appointed an independent agency, an independent Law firm and accountants to assist the Auditor committee. Further, Ricoh India has requested its Mr Manoj Kumar, MD and CEO, Mr Arvind Singhal, CFO and Mr anil Saini, Senior VP and COO to take leave with pay during the review process. On behalf of the above officers, Mr A.T Rajan would be in charge of CEO and COO duties and Mr Bibek Chowdhury would be in charge of CFO functions. Later on April 4^th Mr Manoj Kumar resigned from the Board of Directors with effect from April 2, 2016.

The scrip was transferred to ‘Z’ group from ‘B’ group on BSE due to non-compliance issues with effect from March 28th. The trades in these scrips executed in ‘Z’ group will be settled on trade for trade basis. If a company is shifted for settlement on trade-to-trade basis, selling or buying of shares in that scrip results into giving or taking delivery of shares at the gross level and no intra-day netting off/squaring off is permitted. The scrips which form part of the ‘Z’ group are compulsorily settled on a trade-to-trade basis.

The Company is now under regulatory glare amid allegations of financial irregularities that recently led to its top officials stepping down. The Securities and Exchange Board of India is looking into complaints including the lag in announcement of results by the company and the reasons that caused the delay.

Now, the BSE has issued notification on May 4^th that trading in Ricoh India will be suspended from May 26, 2016 on account of non –compliance with Regulation 33 of SEBI Listing Regulations, 2015 for two consecutive quarters. And the most recent update being Ricoh India’s board will meet on May 17, 2016 to discuss Q2 FY16 results.

Standalone Financial Results – Amt in Rs Crs

*TTM EPS for Q1 FY16

The Company has issued – Debentures from Related Party – Unsecured Redeemable Non Convertible Debentures in FY 15 – 2,000 units of 7.8% Debentures unsecured, non-cumulative, redeemable, taxable, listed, rated non-convertible of a face value of Rs. 10 lacs each privately placed at par during the year is redeemable in Financial Year 2017-18 for cash at par.

Trade Receivables for FY 15 have almost doubled to Rs 662 Crs from Rs 319 Crs in FY 14.

Cash and Cash equivalents have doubled as well for FY 15 to Rs 70 Crs from Rs 38 Crs. Balances with banks in this case have reduced to Rs 17 Crs from Rs 27 Crs, Cheques on hand have increased to Rs 40 Crs from Rs 2 Crs and Margin Money has also increased to Rs 13 Crs from Rs 9 Crs. Banks with balances includes blocked accounts amounting to Rs 3.17 Lakhs at the pre-devaluation rates of exchange.

Other short term loans and advances for FY 15 have increased 2.5 times to Rs 50 Crs from Rs 20 Crs in FY 14.

Ricoh India’s delisting offer had failed in 2014. Its Japanese parent had announced for delisting of the Indian arm in November 2013. The Share price had tripled in months after the news. The offer failed later on as the company’s Japanese promoters rejected the price discovered through the reverse book building (RBB) process and said Ricoh India would continue to remain listed.  The share price then dropped by 40% on the news. Ricoh India dips 36% in two sessions after delisting bid fails

Crest ventures Ltd
Misc. Commercial Services
FV – Rs 10; 52wks H/L –63.35/31.70; TTQ – 21 K; CMP – Rs 63.35 (As On May 16th 2016; 13.00);                                  

Market Cap – Rs 110.04 Crs

Consolidated Financials and Valuations for FY16 (Amt in Rs Crs unless specified)

Consolidated Financials and Valuations for Q4 FY16  

 Valuation Parameters:

1. Long Term Debt to Equity – 0.23
2. ROE % – 15
3. Market Cap/Sales – 3.2

Crest Ventures Ltd is mainly engaged in Investing, Managing and Consulting. It is currently evaluating small investments in web-based business opportunities.

The company is also into the tours and travel business as Tamarind Tours Pvt.Ltd

Key Updates:

• The Company sold its investment in SAI to Systra – a French Government owned company, one of the largest companies in the world, in consultancy of metro and high speed rails. This reinforces the Company’s ability to invest in and build businesses which create value.
• The Company’s investment phase for building projects will reach completion by mid-2016 and will invest in building up the asset management business and they will also continue to invest in organisation building.
• The Company’s focus this year was completion of on–going projects, evaluating new projects and building CREST as a quality and premium brand. The Business Development team has been proactively scouting for projects in and around Mumbai and has been actively participating in the tender process for re-development projects.

Bulk Deals:

Overview:

• Crest Ventures Limited, formerly Sharyans Resources Limited, is an angel investment company with a diverse portfolio of investments across a broad range of industries. (The Ministry of Corporate Affairs, Registrar of Companies, Mumbai has vide Fresh Certificate of Incorporation pursuant to change of name dated September 01, 2014 approved the change of name of the Company from Sharyans Resources Limited to CREST VENTURES LIMITED.)
• The Company is involved in ongoing management and advising for most of its investments.
• It engages in ongoing financial review of its portfolio investments, annual strategic planning, financing, and management decisions and endeavors to provide the benefit of past experience to its entrepreneurs, and encourage inter-company relationships.
• The Company also consults and advises entrepreneurs in relation to investment, mergers and acquisitions, and strategic relationships.
• The Company Ventures is currently evaluating small investments in web-based business opportunities.
• The Company’s portfolio companies include real estate, web businesses, apparel, publishing and hardware.

The company’s current Portfolio Investment includes:

1. com – FreeLegalAid.com is a simple search engine for providing free legal resources. The site is built on an advertising model, and has grown significantly since its inception in 1997.
2. com – LetterPOP is an online newsletter creation tool with a powerful email marketing component.  Use LetterPOP to create amazing visual communications that you can send to your mailing list, manage your contacts, and much more!
3. Coastal Discount Realty – Coastal Discount Realty is an early stage web-based discount realty listing service servicing San Diego County. The business offers a flat fee MLS listing service, and ala carte real estate brokering services.
4. BIZ – FileOnline.BIZ is a self-help legal filing service that offers users a means to file incorporation documents in any state. The site also allows users to request a copyright filing or a trademark filing. Useful information and links are provided to enable users to “help themselves” using the site.
5. GetinBusiness! – GetinBusiness! is a resource center for small businesses, hosting the blog and podcast of Dana Robinson, entrepreneur, attorney and know-it-all.  Download Dana’s inexpensive “GetinBusiness Guides” and grab free business and legal advice.
6. Lexington Court Appartments – Lexington Court Apartments are in Downtown Phoenix, in the Roosevelt Arts District, surrounded by redeveloped properties. The apartments have been zoned for high rise, entitlements granted for redevelopment, and La Jolla Ventures plans to either develop the property with a development partner, or sell the property at an appreciated value.
7. Garfield Commons – Garfield Commons owns a 9 unit apartment complex that has received several grants for rehabilitation. The property has been through a City of Phoenix rehab construction grant, and was completed 2009.
8. Fieldcrest Investments – Fieldcrest Investments is a Lafayette, Louisiana real estate acquisition and development company. The company owns three parcels in Lafayette, and has completed a subdivision of 64 parcels on one lot that are currently under construction of low-priced single family homes.
9. Surya Rising – Surya Rising is the first app incubator to challenge its participants to launch an app within 90 days.  The participants bring their mobile apps and concepts to the company, where they are incubated and managed from inception to launch.  The company has 30 apps under development and in the iTunes app store.
10. ChristianAudio – ChristianAudio is the largest online publisher of Christian audio books. The company operates several publishing imprints, and sells audio books throughout the United States through retail book stores and other retail outlets. The company owns a proprietary “Audible style” downloadable audio book website where it offers its own products and third party products.
11. Esquivel Designs – Esquivel Designs is an Orange County based high end men’s shoe maker. George Esquivel, 2009 CFDA/Vogue Fashion Fund finalist, and shoe maker to rock stars and Hollywood elite, designs and manufactures bespoke footwear from its manufacturing plant in Southern California. The company has distribution in China through the Esquviel store in Beijing.  Find Esquivel shoes in Bergdorf Goodman NYC, Brown’s London, Net-a-porter.com and other fine stores.
12. Modern Cooperage – Modern Cooperage is a two year old manufacturer of patented wine barrel systems that provide a means to use a re-usable stainless barrel with the full exposure to oak staves.  Products are in testing with some of the largest wineries in the United States.
13. Cloud Canvas – loud Canvas is a browser application development platform, providing an array of browser based apps, as well as a platform for developers to deploy and monetize browser apps.  The CloudCanvas application platform allows 3rd party developers to build applications that run on other websites. By using CloudCanvas’s development platform, developers do not have to worry about cross-browser support (Firefox, Chrome and Internet Explorer), and can focus on the application (not on the back-end technology)

Non – Current Investments:

Classic Mall Development Co. (Crest Ltd holds 42.19% ) engages in Real Estate business in Chennai and now it operates as the subsidiary of  The Pheonix Mills Ltd. Sharyans Ltd has acquired stake in Classic Mall jointly with Kshitij Venture Capital fund.

(http://www.thehindubusinessline.com/companies/announcements/others/acquisition-of-stake-in-classic-mall-development-company-private-limited/article5019025.ece)

Classic Mall Development Co. is inolved in Real estate activities with own or leased property. [This class includes buying, selling, renting and operating of self-owned or leased real estate such as apartment building and dwellings, non-residential buildings, developing and subdividing real estate into lots etc. Also included are development and sale of land and cemetery lots, operating of apartment hotels and residential mobile home sites.

Management:

• Vasudeo Galkar – Chairman
• Vijay Choraria – Managing Director
• Vishal Mehta – CFO

The Equity Capital is @ Rs 17.37 Crs consisting of 173700000 equity Shares of FV Rs 10 currently held.

None Of the Promoter’s Holding is pledged.

Major Non-Promoter Holdings:

Consolidated Financial Trends (In Rs. Crs) :

During the year FY13 additional 2500000 equity shares were issued at face value of Rs.10 per share.

Radico Khaitan Ltd
Breweries & Distilleries
FV – Rs 2; 52wks H/L –130.9/78.10; TTQ – 6 K; CMP – Rs 89 (As On May 13th 2016; 11.00);                             

     Market Cap – Rs 1138.83 Crs

Consolidated Financials and Valuations for FY16 (Amt in Rs Crs unless specified)

Consolidated Financials and Valuations for Q4 FY16  

 Valuation Parameters:

1. Long Term Debt to Equity – 0.22
2. ROE % – 8.5
3. Market Cap/Sales – 0.7

The company has roped in celebrity Hrithik Roshan as its brand ambassador.

Key Updates:

• In the IMFL segment, more than 20% of the company’s volumes come from prestige and above products, which is a high margin business, and the balance volumes come from regular and others brands.
• Since the last eight years, the company’s prestige and above brands’ volume has reported a CAGR of ~23% and their share in the product mix has increased from 7.9% in FY2009 to 24% in FY2016.
• RKL has a strong sales and distribution network with a presence in retail and offtrade outlets in the relevant segments in different parts of India. Currently, the company is selling its products through over 45,000 retail outlets and over 5,000 on-premise outlets.
• The company exports to about 60 countries worldwide and has made a good presence in the international markets.

Bulk Deals:

During the quarter the Karnataka government gave a price increase (`35/case) to the company which would be effective from July 1, 2016 and would contribute towards margin improvement. Further, the government of Uttar Pradesh has reduced the excise duty on Indian made foreign liquor (IMFL) by 20-25% with effect from April 1, 2016, which is expected to result in an increase in IMFL sales volume in the state going forward.

These policy actions should significantly benefit the company as the two states account for ~20% of its volumes.

Overview:

• Radico Khaitan Ltd is an spirits company engaged in the manufacture of liquor.
• The company has three distilleries and one JV with total capacity of 150mn litres and 33 bottling units spread across the country.
• The company is one of the largest providers of branded IMFL to the Canteen Stores Department (CSD), which has significant entry barriers.
• RKL’s brands include After Dark Whisky, Magic Moments Vodka, Morpheus Brandy, Contessa Rum, Old Admiral Brandy and 8 PM.
• Its liquor business also includes rectified spirit and country liquor. Its alcohol products include rectified spirit, silent spirit, cane juice spirit, malt spirit, grain spirit and ethanol.
• The company’s PET division produces a range of PET bottles and jars for industries such as pharmaceutical, cosmetics, home and personal care, edible oil and confectionery.

Management:

• Lalit Khaitan – CMD
• Abhishek Khaitan – CEO
• Dilip Banthiya – CFO

Major Non-Promoter Holdings:

Consolidated Financial Trends (In Rs. Crs) :

The company has not performed well in the last two years due to increasing raw material costs (ENA is a key raw material) and with it not receiving significant price hikes from various states.

The company reported a net profit of 14.8cr  on account of higher interest costs and taxes.

The company made repayment of 67.8 Crs during the year FY15.

(*ENA – Extra Neutral Alcohol)

Risks:

• Change in Legal Drinking Age.
• Change in Tax.
• Competition from International Markets and Forex rate Fluctuations.
• Changing Consumer Preferences.
• Increase in Raw Material Prices.

Orient Cement Ltd
Cement and Cement Products
FV – Re 1; 52wks H/L – 198/128; TTQ – 15000; CMP (May 12, 2016) – Rs 155;

Market Cap – Rs 3167 Crs

Standalone Financials and Valuations for FY16 (Amt in Rs Crs unless specified)

Valuation Parameters

1. EV/EBITDA: 24.25
2. EV/Share: Rs 217
3. EV/Sale: 2.94
4. Market Cap/ Sale: 2.09
5. Debt to Equity: 1.22
6. RoI: 6.1 %

• In September 2015, Orient Cement commissioned its new plant located near Chittapur, District Gulbarga, Karnataka and has an installed capacity of 3 million tonnes per annum (MTPA). The company now has a total capacity of 8 MT including the recently commissioned capacity in Karnataka. The company had invested Rs 2000 Crs in the Karnataka plant.
• It sells 60% of its cement production in Maharashtra and close to 40% in Telangana. Nearly 80% of its sales are in the trade segment with a focus on rural housing.
• Orient Cement has set a target of achieving 15Mt/yr production capacity by the end of 2020. The company is now looking at acquiring a few production plants with 2Mt/yr and 3Mt/yr production capacities in eastern India.

Recent Updates

• The Company’s fourth-quarter net profit fell 77% to Rs 19 Crs from Rs 85 Crs in the same period last year, largely due to a sharp fall in realisation. Overall realisation was down 17%to Rs 3228 per tonne.
• The ramp up of production at the new plant in Karnataka’s Gulbarga district is progressing well and helped achieve a volume growth of 40%.
• The capacity utilisation has touched 44% at new plant, while it was 86% at the old plant. Overall capacity utilisation stood at 74%. The company targets 60% capacity utilisation at new plant for the coming year and 86-88% for the old plants.
• For Q4 of FY 16, the company did a total volume of nearly 13.9 lakhs tonne. The company is targeting sales volume of 14.5-15 lakhs tonnes in coming quarters and also looking at higher usage of pet coke as cement plant stabilise.
• Given the Debt to equity at 1.2, the company is comfortable with it and has no plan to bring it down in current year.
• Remuneration paid to MD and CEO of the company for FY 16has exceeded the limit prescribed under section 197 read with the Schedule V of the Companies Act.
• Aiming for 14.5-15 lakh tonne sales: Orient Cement

Bulk Deals

Block Deals

Overview:

• The company started its operations in 1982 and is engaged in the manufacture and sale of cement.
• The Company’s manufacturing facilities are located at Devapur in Telangana and Jalgaon in Maharashtra.
• The Company’s products include Birla A1 Premium Cement, Birla A1 Premium Cement-OPC 53 Grade and Birla A1 Premium Cement-OPC 43 Grade. The Company’s Greenfield cement plant, located near Chittapur, District Gulbarga, Karnataka, has an installed capacity of approximately three million tons per annum (MTPA).
• The Company is part of the CK Birla Group, which operates in three industry clusters, including technology and automotive, home and building, and healthcare and education.
• The Company operates through a network of over 40 offices.
• Orient Cement operates largely in rural and semi-urban markets in Telangana and Maharashtra. Its target customer is the independent house builder in these markets. Therefore, dependence on the organised real-estate sector is small.

Management:

• Mr C K Birla is the Chairman
• Mr Desh Deepak Khetrapal is the MD and the CEO

Major Non – Promoter Holdings:

Standalone Financial Trends ~ Amt in Rs Crs

• The costs related to the commissioning/stabilisation of the new integrated unit at Chittapur (Karnataka) has affected the firm’s operating and net profit numbers in the last two quarters of FY16.
• Increase in long term borrowing in FY 15 was to finance the new plant at Karnataka.

7. K.M. Sugar Mills Ltd
   Plastic Products
   FV – Rs 2; 52wks H/L –7.7/1.65; TTQ – 21 K; CMP – Rs 6.80 (As On May 11th 2016; 10:30) ;

Market Cap – Rs 62.56 Crs

Standalone Financials and Valuations for 9Months FY16 (Amt in Rs.Crs unless specified)

Standalone Financials and Valuations for FY15 (Amt in Rs Crs unless specified)

Overview:

• M. Sugar Mills Ltd. is an India-based company, engaged in the manufacturing of sugar.
• The Company operates in sugar division, distillery division and power division. The Company manufactures white crystal sugar, which is used for human consumption and in the industries, such as food, beverage and soft drinks.
• It manufactures and sells three grades of sugar, such as L 31, M 31 and S 31.
• Its sugar manufacturing facility is in Faizabad district of Uttar Pradesh.
• It has its own distillery unit of capacity 45 KLPD and manufactures rectified spirit, Ethanol and extra neutral alcohol (ENA) at its facility at Motinagar, Faizabad.
• The Company’s Bio Compost unit manufactures bio fertilizer which is marketed in the name of Moti Super. The Bio fertilizer is manufactured by utilizing the by-product of sugar unit, such as Press Mud and the by-product of distillery division, such as spent wash along with culture.

Industry Updates:

• India is the second largest producer of sugar in the world and its production’s share in 2014-15 was 16%.
• The Government hiked the import duty on sugar 40% from 15% to curb inflow of cheaper sweetener, a move that could see a rise in sugar prices.
• notifies export subsidy of Rs. 4,000/- per ton for raw sugar.

Management:

• L. K. Jhunjhunwala – Chairman
• Aditya Jhunjhunwala – MD

Products:

• Sugar

The company manufactures and sells three grades of Sugar in jute bags as well as in PP bags. On the basis of quality and size products are as under:

1. L 31
2. M 31
3. M 30
4. S 31
5. S 30

• Distillery

KMSML manufactures Rectified Spirit, Ethanol and Extra Neutral Alcohol (ENA) at its facility at Motinagar, Faizabad. Out of total production of rectified spirit 85% is grade-I quality and 15% is Grade-II.

1. Grade-I rectified spirit
2. Grade-II rectified spirit
3. Extra Neutral Alcohol
4. Fuel Grade Ethanol

• Clean Power
• The company has its own baggased based co-gen Power plant with the capacity of 25 MW in Motinagar, Faizabad, Uttar Pradesh.
• The company supply the power to the Uttar Pradesh Power Corporation Limited (UPPCL).
• Bio-Manure
• The Bio Compost unit manufactures bio fertilizer which is marketed in the name of ‘Moti Super’. The Bio Fertilizer is manufactured by utilizing the by-product of sugar unit, i.e. Press Mud and the e by-product of Distillery division, i.e. spent wash along with culture.
• The Bio Fertilizer is manufactured in our own plant with a process called ‘Triochem process, which takes around 45 days for converting press mud into bio-compost
• Country Liquor
• The company also entered into the business bottling of alcohol and set-up the bottling plant in Bapudham Motihari, Bihar.
• The unit supplies the country liquor in Pet Bottles of 200 ML with the capacity of 4 lacs Bottles per day. The country liquor is supplied to the Bihar State Beverage Corporation Limited (BSBCL) in the districts East Champaran and West Champaran.

Major Non-Promoter Holdings:

Standalone Financial Trends (In Rs.Crs):

The figures are of 18 months as of 31^st March 2015 and others year ended 31th September.

Krebs Biochemicals & Industries Ltd
Pharmaceuticals
FV – Rs 10; 52wks H/L –165/76.90; TTQ – 2 K; CMP – Rs 103 (As On May 5th 2016; 11:00) ;

Market Cap – Rs 127.87 Crs

Standalone Financials and Valuations for 9Months FY16 (Amt in Rs.Crs unless specified)

Standalone Financials and Valuations for FY15 (Amt in Rs Crs unless specified)

IPCA Labs picked up 23 Lacs shares (26%) in Krebs Biochemicals ltd through an open offer at Rs.54/- per share.

(http://www.thehindubusinessline.com/markets/ipca-labs-to-pick-up-26-stake-in-krebs-bio/article6891198.ece)

The successful completion of USFDA (United States of Food and Drug administration) audit and its approval for Unit-I is an added advantage for the Company to attract good customers.

The company didn’t record turnover during the period on account of closure of both the manufacturing plants due to power shortage in Andhra Pradesh.

Reserves of the company decreased from Rs.6 Crs to Rs.14 Crs due to increased losses during the year.

Overview:

• Krebs Biochemicals and Industries Ltd is an India-based company engaged in the business of manufacture of active pharmaceutical ingredients.
• The Company is producing a number of pain killers, anti-asthmatic and anti-human immunodeficiency virus (HIV) drugs under contract manufacturing.
• The Company offers Simvastatin and Lovastatin as anti-cholesterols, and Ephedrine and Pseudo ephedrine as anti-asthmatic.
• The Company’s products under development include Adenine as an intermediate for Tenofovir Anti HIV; Atorvastatin Intermediates as Anti Cholesterols; Phenylephrine for Cough and cold, and Orlistat against obesity.

The Company has two manufacturing facilities one at Regadichelaka, Nellore and another one at Kothapalli Village, Kasimkota Mandal, Vishakapatnam, both in India.

The company has entered in to an agreement with M/s Edelweiss Asset Reconstruction Co. Ltd. for repayment of the assigned debt by Exim Bank in instalments commencing from June, 2015.

Industry Updates:

• Global Pharmaceutical Industry is estimated now to be US $ 1 trillion and is growing at a rate of 4-5% per annum. Pharmaceutical industry is facing many challenges and uncertainties.
• A number of Big Generics based Pharmaceutical companies have emerged in India over the past decade and are driving the growth in the Pharmaceutical sector in India.
• India’s own requirement of pharmaceuticals is seeing a steady and significantly higher than world average growth. This is the very reason large Pharma companies are eyeing the Indian market and trying to grab a slice of the pie by way of acquisitions and large marketing outlays.

Management:

• Dr. R. T. Ravi – Chairman
• Mr. Avinash Ravi – MD

Major Non-Promoter Holdings:

Standalone Financial Trends (In Rs.Crs):

The numbers are of 6 months ended FY15 and 15 months for FY14 (Sept 14) and same for FY13.

Only FY11 and FY12 are 12 months ended.

The Company announced to consider and allot 650000 equity shares and 680000 warrants convertible to Equity shares of Rs.10 each on preferential basis.

Nirlon Ltd
Misc. Commercial Services
FV – Rs 10; 52wks H/L –213.9/153; TTQ – 273; CMP – Rs 192(As On March 9 2016; 11:30) ;   

Market Cap – Rs 1734.77 Crs                        

Standalone Financials and Valuations for 9Months FY16 (Amt in Rs.Crs unless specified)

Standalone Financials and Valuations for FY15 (Amt in Rs Crs unless specified)

Valuation Parameters:

1. Market Cap/Sales – 7.2
2. Long Term Debt to Equity – 0.4
3. ROE% – 2.3

The company declared dividend of Rs. 0.75 (7.5%) in 2014 during first time since 1985.

The boards of directors of Nirlon Ltd approved proposal for expansion of Phase V of NKP and to raise funds of Rs. 500 Crs from HDFC.

(http://articles.economictimes.indiatimes.com/2016-01-30/news/70201048_1_1980s-nirlon-rs-500-crore-hdfc)

GIC raises stake in Mumbai IT park Nirlon to 63.9% for $90M through open offer.

(http://www.vccircle.com/news/real-estate/2015/04/23/gic-raises-stake-mumbai-it-park-nirlon-639-90m-through-open-offer)

Overview:

• Nirlon Ltd is engaged in the business of development of an industrial park/information technology (IT) Park and is involved in licensing of immovable property.
• The Company is an owner of Nirlon Knowledge Park (NKP), a 23 acre campus located in Goregaon (East), Mumbai. A total of approximately 29.46 lakh square feet has been constructed in Phases I, II, III and IV corresponding to approximately 18.78 lakh square feet licensable area. The Company is in the process of conceptualizing, planning and evaluating the feasibility of further development/re-development of its existing old buildings in NKP (Phase V).
• The total constructed area for Phases I, II, III and IV includes two levels of basements in Phase I, II and III and one level of basement, the ground floor (part), mezzanine and four upper levels of parking in Phase IV, as well as a 10 floor multi-level car parking (MLCP) housing the utilities, such as generator, chillers, water tanks and electrical infrastructure.

Management:

• Mr. Moosa Raza – Chairman
• Mr. Manish Parikh – CFO

Major Non-Promoter Holdings:

Standalone Financial Trends (In Rs.Crs) :

REI Agro Ltd
Packaged Foods
FV – Rs 1; 52wks H/L –1.63/0.38; TTQ – 13.64 Lacs; CMP – Rs 0.76(As On January 5th 2016; 15:00) ;

Market Cap – Rs 45.87 Crs

Standalone Financials and Valuations for H1 FY16 (Amt in Rs.Crs unless specified)

Consolidated Financials and Valuations for FY15 (Amt in Rs Crs unless specified)

Overview:

REI Agro Limited is an India-based basmati rice processing and marketing company. The Company operates through the business of manufacturing, trading and marketing of agro products segment. The Company’s geographical segments include Within India and Outside India. The Company offers products under a number of brands like Raindrops ELG (Extra Long Grain), Raindrops Gold Supreme, Raindrops Gold Royal, Raindrops Gold Super, Raindrops Supreme, Raindrops Royal, Raindrops Select, Raindrops Super, Raindrops Popular, Raindrops Daily and Raindrops Rozana. The Company undertakes various activities right from procuring paddy to drying, de-husking, milling and polishing, color sorting, grading, inspection, packing, branding, distribution and retailing. The Company offers its products in various markets, which include India, the United States and countries in Europe, Africa, the Middle East and the Far East. Its plants are located at Rewari District, Haryana.

Bulk Deals:

Management:

• Mr. Sandip Jhunjhunwala – CMD
• Mr. Ranjan Majumdar – CFO

Major Non-Promoter Holdings:

Consolidated Financial Trends (In Rs.Crs):