ADITYA BIRLA NUVO LTD: Value Unlocking Candidate !!!

Scrip Code: 500303 / ABIRLANUVO

CMP:  Rs. 913.90; Buy at Rs.900 levels.
Short term Target: Rs. 950, Long term Target – Rs. 1050; STOP LOSS – Rs. 810.00; Market Cap: Rs. 10,373.65 Cr; 52 Week High/Low: Rs. 994.00 / Rs. 707.00

Total Shares: 11,35,09,729 shares; Promoters: 5,79,44,697 shares –51.05 %; Total Public holding: 5,55,65,032 shares – 48.95 %; Book Value: Rs. 475.41; Face Value: Rs. 10.00; EPS: Rs. 33.60; Div: 55.00 %; P/E: 27.19 times; Ind. P/E: 24.44; EV/EBITDA: 16.59

Total Debt: Rs. 4006.21 Cr; Enterprise Value: Rs. 15,259.11 Cr.

ADITYA BIRLA NUVO LTD: The Company was incorporated in 1956. Aditya Birla Nuvo Limited is a large diversified conglomerate, which engages into apparel, viscose filament yarn, carbon black, branded garments, textiles, agri business activities, life insurance business, IT solutions & telecom business. Its Apparel business consists of Madura Garments Lifestyle Brands Division, Peter England Menswear Brands Division, Peter England Fashions & Retail, Madura Garments Lifestyle Retail Co. Ltd., and Madura Garments Exports Ltd. Its Agri Business manufactures and markets urea, agricultural seeds and agrochemicals under the brand name of Birla Shaktiman Urea Gold, Birla Shaktiman Urea KrishiDev neem coated, traded fertilizers, Birla Shaktiman seeds - mainly paddy and wheat, and Birla Shaktiman pesticides. Its Viscose Filament Yarn (VFY) unit, consist of Indian Rayon, producer of viscose filament yarn in India. Company’s IT services business consists of Aditya Birla Minacs IT Services Ltd., which offers clients domain-centered solutions for the financial supply chain, enterprise solutions and business assurance. Its Life Insurance business consists of Birla Sun Life Insurance Company Limited (BSLI), which offers insurance-related wealth accumulation products and services for individuals, groups and NRIs. ABNUVO’s Asset Management consists of Birla Sun Life Asset Management Company Limited (BSLAMC), a joint venture between the Aditya Birla Group and Sun Life Financial Services of Canada, which provides ethical, innovative, research and analysis based investments and wealth management services. & also operates as the investment manager of Birla Sun Life Mutual Fund. It also includes ADITYA BIRLA MONEY which provides money management & brokerage services to domestic & international clients. ADITYA BIRLA NUVO is the major share holder with 51 % in telecom company - Idea Cellular Limited (IDEA), which is a major GSM mobile service operator in India.

Investment Rationale:

Manufacturing business:

This segment witnessed expansion led by revenue growth, margins impacted by raw material cost push. The manufacturing business (comprising of agri, carbon black, rayon and textiles) saw a strong revenue growth of +25.5 % on a Y-o-Y basis for the quarter, largely driven by a growth in textiles, agri and rayon yarn. Sales in the insulator segment declined by 8.2 % YoY as the dispatches got deferred. The EBIDTA margin in the manufacturing segment declined to 13.1 % during the quarter as against 17.6 % in Q2FY2011. EBIDTA remained flat at Rs. 44 cr against Rs. 42 cr in Q2FY2011. The business reported a profit of Rs. 12 cr for the quarter against Rs. 16 cr in the same quarter last year

IT & IT SERVICE:

ABNL acquired 11.72 % holding in Aditya Birla Minacs. The IT and the ITES subsidiaries have been merged and ABNL holds 99.71 % in the merged entity. For the quarter, the segment posted a top line growth of 19% on a Y-o-Y basis to Rs. 481 cr.

TELECOM:

Idea Cellular (Idea) services, Margins contracted due to the higher rural subscriber base Subdued revenues and the increasing overheads, coupled with enhanced losses from the circles resulted in an operating margin contraction from 26.7 % to 25.7 % in the quarter under review. Consequently the EBITDA declined by 1.4 % on a sequential basis. Earnings are down due to subdued operating performance, increased charges on 3G related expenses, and a foreign exchange (forex) loss; the reported earnings were down by a substantial 40.3 % on a sequential basis. GSM operators including Idea have increased tariff rates by 20%. But, with all this adversities the telecom business’ profitability was up by 37.2 %. The revenue and operating profit and OPM are likely to remain strong. It is expected that Idea can post a compounded annual growth rate (CAGR) of 23 % in the EBITDA over FY2011-13.

Life Insurance Business:

The efficiency and cost management efforts in the life insurance business made this segment to post an increase in profitability from Rs. 22.5 cr in Q2FY2011 to Rs. 105 cr in the quarter. The life Insurance business is in line with the industry trend, the new business premium for Birla Insurance also showed a deceleration of 14 % on a Y-o-Y basis. Last year with effect from September 1, 2010, the new ULIP guidelines came into force, which has not affected the new business premium much. With waning base & a growing in-force book and a lower new business strain led to a significant uproar in the profitability. The net profit showed an around 5x fold rise from a mere Rs. 20 cr in Q2FY2011 to Rs. 97 cr in Q1FY2012. For the full year FY2011 the insurance arm’s NBAP margin was amongst the highest in the industry at 27.5 % with the exit margin at 22 %.  Going forward, it is believed that second half of FY2012 is likely to witness a good growth in the new business premium. Thus experts estimate a 7 % growth for FY2012. The management remains confident of the medium to long term growth trajectory of the business and has guided for a steady and stable new business shall achieve a premium (NBAP) margin of 20-21 %.

Branded apparel:

This segment showed robust performance led by a strong volume growth of 28 %, the net sales showed a growth of 24 % on a Y-o-Y basis while the same store sales growth for the quarter stood strong at 15%. Due to rise in cotton prices and the mandatory excise duty level, the margin expanded from 9.4 % to 9.8 %. But the EBITDA posted a strong 28.9 % growth. The company launched 90 Exclusive Brand Outlets (EBOs), the company now has presence of 1,021 EBOs or a 1.5 million square feet of retail space. Company continues to explore value unlocking opportunities and is awaiting foreign direct investment (FDI) guidelines in this respect. Which is expected soon may be by end of DEC 2011.  

Outlook and Valuation:

Recently Department of Industrial Policy and Promotion (DIPP) floated the cabinet note proposing a 51% FDI in multi-brand retail and hike of 100% in single-brand retail. At present, the country allows 51% FDI in single brand retail, 100% in cash and carry (wholesale) business, but bars it completely in multi-brand retail. Cabinet have laid few conditions like  for Single Brand Retail - Cabinet note proposes that products should be sold under the same brand internationally;Single brand product only for manufactured brands;Foreign investor should be the owner of the brand. For Multi brand retail - note proposes that minimum amount to be brought in by Foreign Direct Investment should be US$ 100 million; At least 50 % of total FDI should be in back ended infra; 30 % of procurement of manufacturing products should be done from small industries; Government will have first right to procurement of agri products; fresh agri products can be unbranded; Retails locations should be in cities with the population above 10 lakhs. If this proposed note is approved in this winter session of parliament then the major beneficiary will be ADITYA BIRLA NUVO. On consolidated basis Aditya Birla Nuvo Ltd (ABNL) reported strong Q2FY2012 results with the consolidated net revenue growth of 17.80 %, operating profit growth at 25 % and adjusted profit grew at 11.6 % Y-o-Y basis. The company had strong growth in the fertilisers and agri business followed by telecom and the fashion & lifestyle business which led to the revenue growth, Efficiency and cost management efforts in the life insurance and the telecom businesses resulted in a strong operating performance. ABNL is best valued using the sum-of-the-parts (SOTP) method. Looking at the robust and resilient performance of the key segments, ADITYA BIRLA NUVO can bought with the price target of Rs. 1,050. 

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
NET PROFIT (Rs. Crs)	283.80	302.2	367.50	473.00
EPS (Rs.)	25.00	26.60	32.40	41.70
PE (x)	38.10	35.70	29.40	22.80
P/BV (x)	2.30	2.20	2.10	1.90
EV/EBITDA (x)	17.60	15.50	13.90	11.80
ROCE (%)	7.70	8.20	8.90	10.00
RONW (%)	6.10	6.30	7.10	8.30

I would buy ADITYA BIRLA NUVO LTD with a price target of Rs. 1050 for the short term and Rs. 1150 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. 810.00 on every purchase.
As the author of this blog I disclose that I do hold ADITYA BIRLA NUVO LTD in my investment portfolio.

CRISIL LTD: Make your portfolio rate good !!!

Scrip Code: 500092 / CRISIL

CMP:  Rs. 929.30; Buy at Rs.910-920 levels. 

Short term Target: Rs. 1000, 6 month Target – Rs. 1150; STOP LOSS – Rs. 856.00; Market Cap: Rs. 6,595.09 Cr; 52 Week High/Low: Rs. 936.70 / Rs. 560.00

Total Shares: 7,09,68,440 shares; Promoters: 3,72,09,480 shares –52.43 %; Total Public holding: 3,37,58,960 shares – 47.57 %; Book Value: Rs. 51.08; Face Value: Rs. 1.00; EPS: Rs. 25.60; Div: 2000 %; P/E: 36.30 times; Ind. P/E: 34.60; EV/EBITDA: 24.52

Total Debt: Rs. NIL ; Enterprise Value: Rs. 6595.09 Cr.

CRISIL LTD: The Company was founded in 1987 and is headquartered in Mumbai, India. CRISIL Limited operates as a subsidiary of Standard & Poor's. It was formerly known as The Credit Rating Information Services of India Limited and changed its name to CRISIL Limited in December 2003. CRISIL Limited - together with its subsidiaries, provides ratings, research, and risk & policy advisory services primarily in India, United Kingdom and United States. It offers services in the areas of credit ratings; research on Indian economy, industries, companies; also provides with fund services, risk management & infrastructure advisory services. The company provides research and analytics services to commercial and investment banks, insurance companies, corporations, consulting firms, private equity players and asset management firms. It offers ratings for long-term instruments, such as debentures/bonds and preference shares, fixed deposits and loans, as well as pass through certificates and structured finance instruments and short-term instruments comprising commercial papers, certificates of deposits, and short-term debts. The company also provides equity and corporate research, industry reports, customized research assignments, subscription to data services, and initial public offer grading services. In addition, it offers fund research, rankings, and ratings to mutual funds industry; infrastructure advisory services in the renewable energy, transportation and logistics, oil and gas, and minerals sectors; and risk management services to banks, financial institutions, and corporations. The company has a joint venture with the National Stock Exchange of India Limited to provide various indices and index-related services and products to the capital markets.

Investment Rationale:

CRISIL witnesses robust growth in credit rating business. CRISIL currently has 60 % market share of the credit ratings business and 51 % market share in bank loan ratings (BLR).  Nearly 20,000 of the 35,000 clients are the clients who have taken loans of less than Rs. 10 crores & are yet to be rated. The growth will come from newer clients as there are enhancements of the limits of the existing clients and annual surveillance fees. More growth is expected from this segment. Basel II norms specify mandatory credit ratings for bank loans above Rs. 5 crores. The recent incidence of scams is also prompting more small and medium companies to get the respectability of an independent credit rating while raising funds. Apart from that, new products like Education ratings will continue to add to growth. The government and the regulators are currently focusing to increase access of the infrastructure sector to the bond market and to do so they have increased the FII limit in corporate bond to US$ 40 billion from US$ 20 billion; increased credit enhancement schemes for infrastructure entities and draft new CDS guidelines issued by RBI. In Dec'2010, CRISIL acquired Chicago-based Pipal Research Corp. - one of the leading players in the knowledge process outsourcing (KPO) industry from First Source Solution for US$13 mn (around Rs. 58 cr).  Pipal has a strong presence in the corporate sector mainly in North America and Europe and reported revenue of US$8 mn (around Rs. 37 cr) in FY2010. Pipal’s client base includes leading telecommunications, technology, consumer packaged goods and industrial companies. Pipal research is of the same size as what was Irevna in 2005 when CRISIL acquired it. Pipal has 30 Fortune 500 clients. The entire integration process is over and CRISIL is bullish on both Irevna and Pipal for CY'11. Infact, there is a significant increase in staff cost during Q1 CY'11 as the headcount of Pipal has increased by more than 1/3rd during the quarter. In Research business, the margins for CY'10 stood at about 32 % as against 36 % Y-o-Y largely due to forex losses. When CRISIL acquired Irevna in 2009, CRISIL’s turnover stood at Rs. 537 crores. Irevna acquired 23 new clients and its total number of clients stood at 63. This business derives its synergies from its tie ups with banks and as a provider of research for its treasury products. CRISIL launched CRISIL Real Estate Star (CREST) Rating, a first-of-its-kind service for retail investors in the real estate sector. It provides a city specific all round assessment of real estate projects and helps buyers benchmark and identify quality project within a city. The product has received an encouraging response from all stake holders, developers, buyers, investors and bankers. CRISIL has already evaluated 29 projects across 10 cities. CRISIL has also expanded operations at Global Analytical Center (GAC) to support Standard & Poor’s (S&P). It has expanded its geographical presence with sales office in Sydney and research center in China. With over 5500 bank loan ratings (BLR) outstanding which is the largest number of BLR in India; 2434 new ratings assigned during the year, the company has crossed one of the milestone of 17,500 small and medium enterprises (SME) ratings; 7800 new SME ratings was assigned in 2010.

Outlook and Valuation: 

CRISIL has been Ranked # 1 firm in the world in financial services research, risk management and actuarial services, corporate finance support and financial services analytics by the Black Book of Outsourcing – a Data monitor company which also assisted the Ministry of Rural Development, Government of India (GoI), in a unique and innovative public-private-partnership project to provide urban services in rural areas (PURA); the pilot project promises to be the first of many such endeavors. Helped the Ministry of Non-Conventional Energy, GoI, design the framework for exchange of renewable energy purchase obligations, and a platform for trading in renewable energy certificates. CRISIL received a renewed mandate from the World Bank to conduct training program in enhancing the regulatory reform capabilities of member regulators of the East Asia Pacific Infrastructure regulators forum (EAPIRF). CRISIL has won key accounts in the public and private banking sector – portfolio of customers now includes 9 of India’s top 10 banks. It also entered the global arena, winning two prestigious mandates including a reputed multilateral development institution in South East Asia. CRISIL has developed a loan origination system to enable automation of a bank’s credit appraisal process as an important module in its internal rating platform. The Company has a downside risk with respect to the slowing down of our economy. However this may get offset by the low value 20,000 odd SME’s accounts it expects to be added in Q3 of CY11. The company stock is trading currently near its 52 week high, in spite of the fact that most other stocks are trading at a huge discount of their inherent strength of the fundamentals of the company. CRISIL always trades at high P/E , the stock is not exactly cheap, but it commands a higher PE because of its strong market share & robust financial numbers that shows immunity to current economic downturn. CRISIL registered strong top-line growth in 2QCY2011. The company’s net sales grew by 35 % y-o-y to Rs. 203 crores led by strong growth in research segment because of addition of Pipal’s.

Recently Company declared split in face value of shares from Rs. 10 to Re. 1.00 on 20^th JULY 2011, stock quoted ex split basis from 28 Sep 2011. Crisil declared its Second buyback program which has already started from NOV 3rd, 2011, The buy back is for the aggregate amount of Rs. 87 Cr & the shares would be bought back up to Rs. 1,000/Share.
CRISIL's average operating cash flow over the last 4 years stood at Rs. 280 Cr. CRISIL completed its previous buy back in Nov, 2010 of 1,28,156 (12,81,560 post split) shares at an average price of Rs. 6,200 (Rs. 620 post split), totaling to Rs. 79.5 Cr. As per the current buy back rule Section 77A(2)(c) - a company can buy back 25 % of its Total paid up capital & free reserves, for CRISIL it amounts to Rs. 86.97 Cr (25 % of 347.87 Cr). At Rs 929.30/shares, CRISIL can buy back up to 9,36,188 shares or 1.31 % of the equity.

Peers comparison

Company	Face Value (Rs.)	EPS (Rs.)	P/E Ratio	RoNW (%)	Book Value (Rs.)
CRISIL	1.00	25.60	36.30	64.70	51.05
ICRA	10.00	33.26	27.71	23.90	242.34
Credit Analysis & Research Ltd*	10.00	31.89	---	30.11	105.92

(* Proposed IPO)
Some Key Financials

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	628.40	809.50	980.70	1173.50
NET PROFIT (Rs. Crs)	164.50	200.10	244.60	293.20
EPS (Rs.)	23.20	28.60	34.90	41.90
PE (x)	36.20	29.40	24.00	20.00
P/BV (x)	19.10	22.70	11.90	8.40
EV/EBITDA (x)	26.50	20.40	16.30	13.30
ROCE (%)	48.60	70.10	65.00	49.20
RONW (%)	64.70	83.30	76.70	65.30

I would buy CRISIL LTD with a price target of Rs. 1000 for the short term and Rs. 1150 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. 856.00 on every purchase.

CAREER POINT LTD : Invest In Future - A Long Term Bet !!!

Scrip Code: 533260 / CPIL

CMP:  Rs. 274.15; Buy at current levels. 

Short term Target: Rs. 285, 6 month Target – Rs. 330; STOP LOSS – Rs. 252.20; Market Cap: Rs. 497.11 cr; 52 Week High/Low: Rs. 535.70 / Rs. 245.00

Total Shares: 1,81,32,939 shares; Promoters : 1,08,66,000 shares –59.92 %; Total Public holding : 72,66,939 shares – 40.08 %; Book Value: Rs. 150.65; Face Value: Rs. 10.00; EPS: Rs. 16.11; Div: 10.00 % ; P/E: 17.01 times; Ind. P/E: 27.46; EV/EBITDA: 14.34

Total Debt: Rs. NIL cr; Enterprise Value: Rs. 497.11 cr.

CAREER POINT LTD: The Company was founded in 1993 and is based in Kota, India. Promoted by Pramod Maheshwari, Om Prakash Maheshwari and Nawal Kishore Maheshwari. The company was formerly known as Career Point Infosystems Limited and changed its name to Career Point Ltd. in September 2011. Career Point is one of the leading providers of tutorial services in India, with the main centre in Kota, Rajasthan. Career point infosystems ltd engages in the provision of tutorial services in India. The company offers tutorial services to high school and post high school students for various competitive entrance examinations, including IIT JEE, AIEEE, SLEEE, AIPMT, NTSE, KVPY, and Science Olympiad. It provides its tutorial services through its owned/operated and franchised training centers, synchro-school courses integrated with schools, distance learning courses, and TechEdge and knowledge labs. The company also offers education consultancy and management services to schools, colleges, and universities, as well as infrastructure support services for setting up educational institutions. In addition, it provides assessment and online testing services through the a2zfeedback.com, a2zexam.com, Ecareerpoint, and Examtayari Web sites. Company has two subsidiaries: Career Point Infra (CP Infra) and Career Point Edutech. CP Infra renders infrastructure and allied services for setting up physical infrastructure for educational institutions. Edutech develops technologybased educational solution and software. Company has 14 Company-operated training Centers and 18 franchised Centers. CPIL made a successful IPO at Rs. 310/sh & got listed on Oct 10 2010.

Investment Rationale: The Kota centre's average fee for each student for IIT-JEE course is Rs 64000, for AIEEE - Rs 35000, for AIPPMT - Rs 40000, and for distance learning Rs 5000.  Each year, the Kota centre's fee is hiked by 6 %, while a new centre's fee is hiked by 20 % after a year, by 10 % to 15 % after three years to 15 %, and by 6 % subsequently. Company has two subsidiaries: Career Point Infra (CP Infra) and Career Point Edutech. CP Infra renders infrastructure and allied services for setting up physical infrastructure for educational institutions. Edutech develops technology based educational solution and software. Both subsidiaries are yet to make money. Career Point Infosystems has a team of 231 faculty members, excluding faculty members of franchisees, comprising graduates in engineering and science. It has over a period of time built content repository of over 10,000 pages of text content and over 12,000 minutes of video content for various tutorial services. CPIL has a strong presence in Kota providing its educational services to over 25 % of the total students that enroll in Kota each year. The company currently operates 12 training centers and 11 franchisees throughout the country. They plan to open 10 training centers and 5 franchisees every year till FY14E. The company also plans to set up an integrated university campus (Kota) to cater to its captive students via its subsidiary Career Point Infrastructure Ltd, at an approximate cost of Rs 65 crores with a capacity of 3000 students. The campus will offer housing, lodging and eating facilities to its students. The company plans Capital Expenditures worth Rs 120 cr in the current fiscal year out of which Rs 45 crores have already been spent. The cash in their books stood at Rs 150 crores (Q1FY12) which should allow them to continue their ongoing operations and expansions for another year without needing to raise any additional funds. With the business model of providing educational solution, the company primarily generates sufficient cash/revenue to support its working capital needs of its various centers and ongoing activities. Sufficient Internal Accruals is the primary reason why the company does not need to raise additional debt nor dilute its equity to fund its ongoing expansion plans. The margins in the educational space make the business quite profitable provided the company maintains the quality of its services. CPIL's Revenue generation depends mainly on the numbers of students the company can enroll and hence, the company recruits reputed professionals/teachers in order to attract a majority of these students. The company has bifurcated its overall curriculum into smaller courses in order to lower its dependence on a niche category of professors. Career Point Ltd will have to increase its student base in order to grow and maintain its reputed image as a quality educational solutions provider. The company plans to further increase its foothold in the Formal Education space through the PPP model along with the Government. This will enable the company to tap the Formal Education space in the country. CPIL also plans to expand their Synchro schools, which involves forming partnerships with associated schools to provide tutorial services for entrance exams to its students. The advantage of this type of model is that it allows them to manage various colleges and schools without having to incurr infrastructure cost of actually building campuses. Apart from the university in KOTA they also plan to set up a university in Hamirpur, Himachal Pradesh along with various Technical campuses at Rajsamand, Rajasthan; offering Engineering, MBA and MCA degrees/courses. The company is also focusing on expanding through technology like broadband, to offer their services to a much broader market. This will inable them to cater to a larger student base via the internet hence reducing the cost of setting up a number of training centres.

Outlook and Valuation:

The company has managed to build a strong brand name in the North Western region of India when it comes to the educational solution's space. The very fact that more than 25 % of the students enrolled in Kota avail CPIL's expertise; this shows the trust by the students in the company's services. In the educational solutions space trust and popularity comes from past experience and word of mouth. CPIL has created a strong foothold in Kota and has expanded to several other Northern States in the country. AIEEE, IIT-JEE and AIPMT are really competitive and valued entrance exams. Past results in these exams have shown that CPIL's students were amongst the toppers. This re-affirms the quality of coaching CPIL's various training centers offer.  Another positive for the industry is the number of students that appear for these exams. Nearly 85 % of the students appearing for these exams take the help of coaching classes. More than 10 lakhs students from all over the country had applied for the AIEEE entrance alone. The competitive nature of these exams and the importance they are given on the educational front enables the company to price its expertise at a premium as compared to others in the field. The company's aggressive expansion plans in the Formal Educational space via PPP, Synchro schools, etc will expose it to a much larger market in terms of revenue and growth potential. CPIL has started CPlive to offer live online tutorials via the internet. They also have also started an E-learning portal called ecareerpoint.com that offers “Adaptive Testing” for the preparation of Engineering Entrance Exams like IIT-JEE, AIEEE and BIT-SAT. CPIL's revenue growth will depend on the number of student’s its manages to enroll. With the sector getting more competitive the company needs to expand its operations as well as maintain its brand name. Some companies in the tutorial space offer the same courses as CPIL and have a better brand image and financials than the company. The tutorial space is currently unregulated by the Government. With the rapidly increasing market size of this space, the Government will pass regulations and legislations in the future to regulate the operations of the players in this sector. Any adverse policies might harm CPIL's operations or profitability. It is expected that CPIL's revenues to grow by 20 % and 14 % in FY12E and FY13E respectively. CPIL's internal accruals should take care of their expansion plans for the next 1-1.5 years which puts them in a good position to post above average return ratios. I have a bullish view on the “Educational Sector” from a long term perspective.  At the current market price of Rs. 274.15, the stock is trading at 20.45 x FY12E and 14.58 x FY13E respectively. Earnings per share (EPS) of company for FY12E and FY13E are seen at Rs. 13.40 and Rs. 18.80 respectively. One can buy CPIL with a target price of Rs. 330.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 285.00

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	61.70	78.63	84.30	132.90
NET PROFIT (Rs. Crs)	17.80	23.20	24.20	34.10
EPS (Rs.)	12.30	12.80	13.40	18.80
PE (x)	21.30	20.40	19.60	13.90
P/BV (x)	2.80	1.80	1.60	1.50
EV/EBITDA (x)	19.00	15.30	14.60	9.20
ROCE (%)	13.30	8.70	8.40	10.50
RONW (%)	11.20	7.10	6.40	9.10

I would buy CAREER POINT INFOSYSTEMS LTD with a price target of Rs. 285 for the short term and Rs. 330 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. 252.20 on every purchase.

EASY WAY FOR INDIA TO DO AWAY WITH SUBSIDIES !!!

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 1/3^rd 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..