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Sunday, October 30, 2011


India pays nearly Rs. 1.6 lakhs cr as subsidies, which in order burdens on India's fiscal. India has total public debt of US$ 852,827,671,233 and at Rs. 50/$ it is at Rs. 42,64,138 Lakhs Cr. And always there will be a question whether the said subsidy is used by the genuine citizen or the most needy, Can there be any alternative were by the real effected people of India can be benefited by the subsidy given by government.
9 months back Iran managed to reduced its subsidies by 50 % and this is how they did –
First, they announced the roll out of subsidy removal. Next, the government asked every individual to fill in forms listing the names of the members in each household; the number of cars in that house hold; details of assets especially apartments & land; wealth & other sources of income. This data was then cross – checked with the existing databases from Banks, car registration data, other data banks of the respective departments & property records.
Once the list was verified all the identified persons were asked to open accounts (Something similar to that of UID project hopes to do in INDIA). As of February 2011, subsidy compensation of $45 per head per month was credited into each person’s account irrespective of whether the person was rich or poor. This way all people are treated alike, rather than attempt to divide population into economically backward, cast reservation.
The logic behind is simple – The rich man may get $45 per month from government but will end up paying a few hundred $ more for the unsubsidised oil & electricity that he purchases. For the poor man the $45 per month allows him to decide whether he will opt for bread or fuel. Each car owned now gets 60 liters of semi – subsidised petrol at Rs. 15 equivalent a liter against an electronic smart card, the rest he must purchased at the subsidised rate of Rs. 28 per liter.
          Iran’s one more interesting is the way it plans to encourage its young to raise family in decent surrounding. The government gave each child irrespective of gender as soon as it is born a sum of around $950 is paid as a trust fund into that child’s account. To that, the parents of the child must add another $20. The amount may not be withdrawn or mortgaged till the child turns 20 years of age. Every year government tops up this amount by around $200 with the parents contributing another around 1/3rd of this amount. With passage of time & accrual of interest each child ends up with $60,000 - $75,000 by the time he turns 20 years of age. At the time the boy or girl decides to marry will have a corpus of around $120,000 which they could use either to purchase a house or to invest in business?
          To ensure that there is no shortage of houses government gave land free to developers on 99 years of lease for building houses using pre approval designs & plans. Developers are also given subsidised loan of $15000/ apartment to meet capital cost. If a person retires after 25 years of his service he is eligible to receive 30 days of his monthly income regularly even after retirement. If he retires after 20 years of his services he gets monthly retirement package equals to 25 days of his last drawn salary.
           Off course the retire plan & the child development plans is difficult to implement in our country but as far as the oil subsidy is concern it’s not so difficult, UID project is gaining popularity and once done the said method would be easy to implement and also could tam out some of the corruption related to subsidies. 
         I remember there is a country called Mongolia which is the best performing stock market over the last year and they are coming out of the privatization programme as the largest coal company and what they have done is that they have given every Mongolian 500 shares of that company with the mandate that whenever it gets listed you can sell and create wealth. You need to do something to kick start this kind of company. Here we are not saying give shares for free but you need to make a system that every Indian member or the public can apply for few hundred shares and guaranteed allotment at a favorable price that brings people back into the markets and create the favorable churn. You need something to kick start the disinvestment programme, otherwise it is going to remain high talk and low delivery.
           Hope some day our UID project helps to reduce our subsidy burden..  

Sunday, October 23, 2011


Scrip Code: 533200 TALWALKARS

CMP:  Rs. 166.00; Buy at current levels. Short term Target: Rs. 210, 6 month Target – Rs. 250; STOP LOSS – Rs. 152.75; Market Cap: Rs. 400.32 cr; 52 Week High/Low: Rs. 306.80 / Rs. 157.70
Total Shares: 2,41,15,672 shares; Promoters : 1,43,45,856 shares –59.49 %; Total Public holding : 97,69,816 shares – 40.51 %; Book Value: Rs. 51.74; Face Value: Rs. 10.00; EPS: Rs. 6.21; Div: 10.00 % ; P/E: 26.73 times; Ind. P/E: 26.33; EV/EBITDA: 19.00
Total Debt: Rs. 111.38 cr; Enterprise Value: Rs. 511.70 cr.

TALWALKARS BETTER VALUE FITNESS LTD: The Company was founded in 1932 and is based in Mumbai, India.  Talwalkars Better Value Fitness Limited (TBVF) was formerly known as Talwalkars Better Value Fitness Private Limited. The company operates a fitness chain in India. The company offers a suite of services, including gyms, spas, aerobics, nutrition counseling, physiotherapy guidance, yoga classes and health counseling under the ‘Talwalkars’ brand.  The Company has an 8,000 square feet residential training academy at Thane. The training academy offers about 4 to 6 weeks of training program for its staff joining at the new centers.  As of May 11- 2011, it had 102 health clubs in 52 towns and had more than 75,000 members. Its health clubs/training centers are located in Andhra Pradesh, Gujarat, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal.

Investment Rationale: Talwalkar Better Value Fitness (TBVF) is the largest health club player in India and amongst top 20 in the world. It is an early entrant into the health club market in India and has been able to build a strong brand name by providing high quality gym equipment and services. The fitness market size in India is estimated to be US$113 mn. The penetration of fitness market in India is 0.4 % taken for top 7 cities which are significantly lower than other nations like China 2.3 % & Japan 3.1 % & 3.7 % in Asia Pacific region. In India - the total number of fitness clubs are around 765 and number of membership are around 23,00,000. The industry is highly fragmented with many standalone gyms. This industry is in the early growth stages with little differentiation and high price sensitivity. A growing economy, growing income, increasing urbanization, improving lifestyle and higher health awareness in India will result in higher penetration of fitness market. As TBVF is the largest player in the market with a strong brand it will be a major beneficiary of this growing market. TBVF has a strong brand name in the health club market in the country. It has been able to provide high quality equipment with good service which has thus enabled it to be a prominent player in the otherwise fragmented market. TBVF is one of the first movers in the industry and has a pan India presence about 50 towns which will enable it to cater to the widespread market. TBVF will increase its owned gyms by double to 143 gyms by FY13. TBVF had raised Rs. 77.40 Cr in 2010 through an IPO to repay its high cost debt of Rs. 20.6 Cr and to fund its expansion plans for 27 gyms for Rs 50.2 Cr. The company has been able to deploy the funds as per expected use and will now require no further dilution for its future growth plans of 35 gyms each by FY13. With no further dilution required and the benefits of expansions to come, the return ratios are going to improve;It is expected that ROE to be around 20 % & ROIC – 13.7 % by FY13. TBVF had a debt-equity ratio of 2.1 x in FY10. Post the IPO the debt-equity has come down to 0.7 x in FY11.

Outlook and Valuation:
In India, as per United Nations the percentage of urban population is going to increase from 30 % in 2010 to 54.2 % by 2050. Increasing urbanization will result in greater usage of fitness club due to higher health awareness and growing lifestyle diseases. India has a young population and it is expected that the population will continue to remain young for the next two decades. Currently 65 % of the population is between the age of 15 - 64 and it is expected that 68 % of the population in 2030 will remain in this age group. It has been globally seen that the people in the age group of 18-54 tend to exercise more. As per TBVF every city/town with a population of 6,00,000 can accommodate one health club of its kind. The growing urbanization will thus increase the number of towns/cities with a population greater than 6,00,000 whereby further expanding the potential market for TBVF. The combination of a young population, higher literacy and increased awareness will result in increased number of people having membership of fitness clubs. As TBVF is one of the major players in the health club market in India with a pan India presence and has a first mover advantage it stands to gain tremendously. TBVF target markets are geographies where the population is greater than 6,00,000. TBVF gets 800-900 members within the first year of operations of the health club and 1,000 members within 18 months. The membership fee is around Rs. 13,000-15,000 p.a. and the payback period for a health club is around 3-4 years. TBVF besides having its own gyms models also has franchisees models. It has 7 franchisees & it charges 6 % - 8 % of revenues as royalty. The company plans to focus on opening more of its own gyms. TBVF in April, 2011 has announced to enter into the Tier III & Tier IV cities with the launch of HiFi Gyms. These gyms will be priced lower than the existing gyms and will have lesser facilities but will have similar operating margins as the current gyms. TBVF is opening 70 new owned gyms during FY12-FY13 across India and these are expected to contribute to the top line and bottom line. TBVF will be able to show CAGR in Revenue/PAT of 41%/38% during FY11-13. TBFV is a play on the growing healthcare market in India. It has a strong brand name and is now capitalizing, with rapid expansion. There are not any listed comparable players and thus its closest comparable peers are the consumption companies like Jubilant Food works, Page Industries, Titan Industries etc which trades at an average PE of 28 x FY13. 

At the current market price of Rs. 166.00, the stock is trading at 20.24 x FY12E and 13.07 x FY13E respectively. Earnings per share (EPS) of the company for FY12E and FY13E are seen at Rs. 8.20 and Rs. 12.70 respectively. It is expected that the company will keep its growth story intact in the coming quarters also. One could BUY TALWALKARS BETTER VALUE FITNESS LTD with a target price of Rs. 285.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 210.00

No. of Health Clubs 100 55 03 31
Size of Gym (Sq ft) 4,000 - 5,000 6,000 - 8,000 14,000 - 22,000 15,000 - 18,000
Avg.Fees/per annum (appx.) 14,000 - 16,000 16,000 - 18,000 24,000 - 35,000 16,000 - 18,000

SALES (Rs. Crs) 66.10 102.30 148.50 203.90
NET PROFIT (Rs. Crs) 8.20 16.00 19.80 30.70
EPS (Rs.) 3.40 6.60 8.20 12.70
PE (x) 48.30 24.50 19.90 12.80
P/BV (x) 9.50 3.10 2.70 2.30
EV/EBITDA (x) 19.00 12.20 9.10 7.00
ROCE (%) 26.40 19.00 14.50 19.40
RONW (%) 11.00 11.10 11.12 13.70

I would buy TALWALKARS BETTER VALUE FITNESS LTD with a price target of Rs. 210 for the short term and Rs. 285 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 152.75 on every purchase. 

Saturday, October 22, 2011


It’s time again for the Festival of lights – DIWALI – and we as Indians love to celebrate it. Whether it's shopping for new clothes, jewellery, sweets or decoration of homes the festival brings with it excitement and loads of enthusiasm. The first day of DIWALI is celebrated as DHANTERAS  - also known as Dhanwantri Triodasi. Dhanteras brings with it the festive mood of DIWALI. Though considered a festival of wealth, it signifies new beginnings & promises for a better future ahead.
The word DHANTERAS is a combination of DHAN means wealth & TERAS means the thirteenth night of the month in which it is celebrated. It is believed that the best day for making purchases of GOLD or any other precious metals should be done on DHANTERAS – as by doing so the goddess of money, LAKSHMI will bless the family throughout the year with prosperity.
On Dhanteras, buying precious metals like gold & silver are considered as good luck and hence major people pick Dhanteras as the day to buy gold, this day there is a splurge on gold jewellery & coins, you can see all the jewellery showrooms filled with buyers - some buy small gold coins or silver coins & some will buy according to their pockets. Apart from its festive significance, an investment in gold is also considered to bring with it a great potential to store value.
But physical gold purchases bring with them purity concerns & safety issues. Also, you stand to lose 10 % - 15 % of the value each time you send your physical gold for remarking, irrespective of whether the gold is certified or not. And there are deductions in the form of making changes. Besides, the exorbitant rates make it difficult to invest a lump sum amount. You have to budget for other expenses too during the festive season.
That’s why this DHANTERAS, there are new alternatives to invest in GOLD ETF’s

ETF’s – Exchange Traded Funds which are listed on NSE. ETF just like mutual funds collect money and invests in the market. GOLD ETF’s collects funds and invests in GOLD. They buy gold physically – so the units are backed by 0.995 finesse gold. When you invest in GOLD ETF you are allotted a unit same as in mutual fund, here 1 unit of GOLD ETF can be 1 gm or 1/2 gm of gold depending on the funds – So Gold ETF are affordable. GOLD ETF’s trade like normal equity shares on exchanges whose prices are in tandem with the domestic gold prices. If you dint have a Demat account you still can invest in GOLD FUNDS like SBI GOLD FUND, Quantum Gold Saving Fund. You can also invest in these ETFs in a Systematic Investment way (SIP) with as low as Rs. 500. JUST call your broker to buy GOLD ETF’s (List of listed ETFs are mentioned below) or just visit your nearest bank and ask for GOLD FUND (if you don’t have a trading account)


Dhanteras sets the festive mood for DIWALI and signifies new beginnings for a better future ahead. This SAMVAT 2068, start the festival of lights with a difference – invest in gold – invest in GOLD ETF.


Thursday, October 13, 2011


Scrip Code: 500114 TITAN
CMP:  Rs. 220.00; Buy at Rs.200 - 215 levels. Short term Target - Rs. 240;
6 month Target – Rs. 285; STOP LOSS – Rs. 184.00; Market Cap: Rs. 19,531.29 cr; 52 Week High/Low: Rs. 237.75 / Rs. 140.00.
Total Shares: 88,77,86,160 shares; Promoters : 47,32,67,660 shares –53.31 %; Total Public holding : 41,45,18,500 shares – 46.69 %; Book Value: Rs. 13.01; Face Value: Rs. 1.00; EPS: Rs. 5.55; Div: 250 % ; P/E: 39.59 times; Ind. P/E: 42.76; EV/EBITDA: 46.25
Total Debt: Rs. 1455.96 cr; Enterprise Value: Rs. 20,987.25 cr.

TITAN INDUSTRIES LTD:  The Company was founded in 1984 and is based in Bengaluru, India. Titan Industries Limited manufactures and sells in retail watches, jewelry, clocks, and eye wear primarily in India and internationally. The company provides its watches under its brand names Titan Edge, Titan Raga, Nebula, Sonata, Xylys, Fastrack. It also markets brands, such as Tommy Hilfiger, Hugo Boss, and FCUK under a licensed agreement. It also offers jewelry under the Tanishq and Goldplus brand names, as well as operates a chain of luxury jewelry boutiques under the Zoya brand. In addition, the company provides sunglasses under its Fastrack brand; and prescription eyewear, such as lenses and contact lenses. It sells frames, sunglasses, and accessories of proprietary brands and other premium brands, as well as provides optometry services. Further, the company provides precision engineering components and sub-assemblies, machine building and automation solutions, tooling solutions, and electronic sub-assemblies for use various industries, in aerospace, automotive, oil and gas, engineering, hydraulics, solar, and medical instruments. It operates approximately 665 retail stores, including approximately 311 World of Titan showrooms; approximately 124 Tanishq boutiques and Zoya stores; approximately 29 Gold Plus stores; and approximately 150 Titan Eye+ stores. The company also sells its product through departmental stores such as Shoppers stop, Central, Westside, Pantaloons & Reliance retail.  

Investment Rationale: Titan plans to aggressively expand its mass market jewellery franchisee – Goldplus. The company also plans to launch lower price jewellery using a diamond-like material – Diamantine to cater to the aspiring middle-class consumer. Titan has also tied up with Muthoot Finance to offer a new scheme — Swarna Samridhi — in the Andhra Pradesh market. Under the scheme, customers have to pay 20 % of the actual price during purchase while the remaining is to be paid through installments to Muthoot Finance. These installments can be paid between 12 - 24 months, with an 11.5 % interest rate. Customers will be given a 30-day interest-free period to repay the loan amount. Once this model stabilises it will be taken to other parts of the country as well. Also Titan is planning to enter the Indonesian market in six months through a distribution tie-up. This is in line with the company’s strategy to expand into one new country each year. Price hikes in watches and eyewear segment will protect its margins, Titan is planning to take a price hike to the extent of 4 % to mitigate the impact of input cost increases. Titan buys some of its watches and eyewear products from China. China has steadily raised labour costs over the last three years. Hence, the company will need to take price hikes to pass on the impact of the same in order to protect its margins. In Watches, Titan targets Rs. 3,500 Cr turnover by FY15E (Rs. 1,250 Cr in FY11) to be driven by network expansion, introduction of new designs as well as shift towards branded segment. Titan aspires to expand the category in Eye-wear and Accessories (currently 177 stores) segment by getting into new sub-categories. It’s targeting FY13E beak-even and believes potential margins can be higher than Watches. It intends to enter new life-style categories in medium to long term.

Outlook and Valuation:
A growing economy, increasing Per Capita income & improving lifestyle helps Titan to get continuous benefit from the shift of consumer preference from unbranded to branded jewellery. Notwithstanding the higher Gold prices, Titan continues to charge an average 22 % of Gold price as its making charge. Titan has not experienced any impact on account of government regulation regarding PAN card (for any purchase of above Rs.5 Lakhs in Jewellery, PAN number is mandatory) as its ticket size is far lower at Rs. 30-50k. As there is no specific reason to rise in Diamond prices (which are up 90% in 6 months), management expects to pass on any correction in Diamond prices to consumers. Titan sources its Diamonds from India and doesn’t hedge. Titan enjoys 10 % premium on Diamond compared to its competitors in normal scenario. Studded jewellery sales were 23 % of Jewellery revenues in 1QFY12. Titan targets 40 % by FY14E. As per Titan’s research, wedding jewellery buyer prefers larger store owing to availability of wide range of designs. Also, the service levels in large format stores are better. From Titan’s viewpoint, large format stores not only help increase sales/sq ft but also increase its market share and build a better brand image. As per management, large format stores are used as brand positioning tool. After opening a large format stores in Mumbai and Pune, 2 more are in pipeline in Hyderabad and Kolkata. As per management, large format stores take less than 2 years to break-even. Chennai store is expected to achieve its breakeven in less than 18 months. Currently out of 124 Tanishq stores - 90 are Franchisee stores. All large format stores are company owned stores. Titan offers 9 % of sales as margins to Franchisee partners in Jewellery segment. Titan also aims to tap into youth segment so as to create a loyal customer base for future. It believes Youth segment has high potential and needs to be lured via innovative designs and price points. Given the rising gold prices and anticipated potential impact on its volumes, in the medium term Titan aims to work around the price points by offering lower caratage jewellery (18c, 14c etc) and creating more opportunities of purchase. Titan’s distribution network is its biggest competitor advantage. Titan has a vision to establish Eyewear as “Function + Style” product. 25m pieces market is growing at 20-25 % per annum & unbranded market constitutes sizable chunk of the opportunity. With the market size of around Rs. 2,500 Cr this segment is highly fragmented with no national brand. Currently in Eye-wear, Titan has a network of 177 stores (90 owned) and offers 35 % of its sales as franchisee fees. Management believes that potential margins in Eyewear segment are higher than Watches. It expects margins to converge with Watch margins in 3-4 years time. At the current market price of Rs.220.00, the stock is trading at 33.33 x FY12E and 26.50 x FY13E respectively. Earnings per share (EPS) of the company for FY12E and FY13E are seen at Rs. 6.60 and Rs. 8.30 respectively. It is expected that the company will keep its growth story intact in the coming quarters also. TITAN Q2 RESULTS ARE ON 24th OCTOBER 2011. One could BUY TITAN INDUSTRIES with a target price of Rs. 285.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 240.00 

SALES (Rs. Crs) 4,677.20 6,533.00 8,533.00 10,356.80
NET PROFIT (Rs. Crs) 251.30 433.10 585.10 732.80
EPS (Rs.) 2.80 4.90 6.60 8.30
PE (x) 71.70 41.60 30.80 24.60
P/BV (x) 24.60 17.40 12.10 9.00
ROCE (%) 39.00 49.00 46.30 41.90
RONW (%) 35.10 46.00 44.50 40.90

I would buy TITAN INDUSTRIES LTD with a price target of Rs. 285 for the 6 month target for short term players target should be Rs. 240. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 184.00 on every purchase.

Sunday, October 9, 2011

Biggest Nations of the World in Debt Trap !!!

Lots of among us from the financial markets talk about Double dip recession in United States &  Europe going burst so what’s the condition of US economy in compare with the European nations & the rest of countries.  But first some points – Deficit spending, government Debt and private sector borrowing are the unstated rule in most of the western countries, but due to financial crisis some of these nations are in worst debt condition than others. Throughout the financial crisis, many national economies have looked to their government & foreign lenders for financial support, which translates to increase in spending, borrowing & in most cases, growing national debts.
External debt is a measure of nation’s foreign liabilities, capital plus interest that the government must eventually pay.  A useful measure of a country’s debt position is by comparing gross external debt to GDP. By comparing a country’s debt to what it produces, this ratio can be used to help determine the likelihood that country as a whole will be able to repay its debts.
The debt situations of many of these countries have become so influential that countries like India also get affected. India’s April – June quarter GDP slipped to 18 month low to 7.7 %, the second consecutive quarter of sub 8 % growth. But India is somewhat in better place than its Asian peers. Positives for India includes the country’s low exports to GDP ratio, domestically financed fiscal deficit, limited exposure to foreign liabilities and a healthy banking system. 

Country External Debt (% of GDP) Gross External Debt2010 GDP (Est)External Debt/ Capita
Ireland 1,382 %$ 2.38 trillion$ 172.3 billion $ 5,66,756
UK 413.3 %$ 8.981 trillion$ 2.173 trillion $ 1,46,953
Switzerland 401.9 %$ 1.304 trillion$ 324.5 billion $ 1,71,528
Netherlands 376.3 %$ 2.55 trillion$ 676.9 billion $ 1,52,380
Belgium 335.9 %$ 1.324 trillion$ 394.3 billion $ 1,27,197
Denmark 310.4 %$ 626.1 billion$ 201.7 billion $ 1,13,826
Sweden 282.2 %$ 1.001 trillion$ 354.7 billion $ 1,10,479
Finland 271.5 %$ 505.06 billion$ 186 billion $ 96,197
Austria 261.1 %$ 867.14 billion$ 332 billion $ 1,05,616
Norway 251 %$ 640.7 billion$ 255.3 billion $ 1,37,476
Hong Kong 250.4 %$ 815.65 billion$ 325.8 billion $ 1,15,612
France 250 %$ 5.37 trillion$ 2.15 trillion $ 83,781
Portugal 223.6 %$ 552.23 billion$ 247 billion $ 51,572
Germany 185.1 %$ 5.44 trillion$ 2.94 trillion $ 51,572
Greece 182.2 %$ 579.7 billion$ 318.1 billion $ 53,984
Spain 179.4 %$ 2.46 trillion$ 1.37 trillion $ 60,614
Italy 146.6 %$ 2.602 trillion$ 1.77 trillion $ 44,760
Australia 138.9 %$ 1.23 trillion$ 882,4 billion $ 57,641
Hungary 120.1 %$ 225.24 billion$ 187.6 billion $ 22,739
United States 101.1 %$ 14.825 trillion$ 14.66 trillion $ 48,258

I would say that if US goes into recession and Europe defaults - yes in that case, we will be affected, but we will be still running with 7.00 % of GDP growth rate, whereas these countries would be on oxygen tanks with their GDP in minuses……..So money will flow looking for growth & better returns from these countries to Emerging countries like INDIA, CHINA,BRAZIL,RUSSIA. HAPPY INVESTING !!
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