GITANJALI GEMS LTD - Buy on every Dips

Scrip Code : 532715 / GITANJALI

CMP :  Rs. 210.85; Buy at Rs. 190-195
Target: Rs. 370.00 - DIWALI 2011
Market Cap : Rs. 1776.83 cr
52 Week High/Low : Rs. 394.95/Rs. 92.55

Total Shares : 84270000 shares; Promoters : 45472424 shares – 53.95 %; Public holding : 9754593 shares – 11.58 %

Book Value : Rs. 241.60; Face Value : Rs. 10; EPS : Rs. 20.99

P/E : 10.08 times; Ind P/E : 12.73; EV/EBITDA : 12.65
Total Debt : Rs. 1601.46 cr; Enterprise Value : Rs. 3384.28 cr.

Gitanjali Gems Ltd - Gitanjali Gems is one of the largest manufacturers and retailers of diamonds and jewellery in India. It sources rough diamonds from various primary or secondary sources then engages in the cutting and polishing the rough diamond for export to the international market as well as manufacture and sale of diamond and other jewellery through its retail operations in India and abroad. The company was started in 1966 as a partnership. It came with an IPO in the year 2006 with 1.70 cr shares at the price band of Rs.170 -195. The demand for diamond and jewellery products is largely dependents on higher employment and economic levels, which leave higher disposable income in the hands of the consumers. In downturn consumers can quite easily scale down their consumption of jewellery and diamonds.

Gitanjali Gems has got two-diamond manufacturing facilities located at Borivali in Mumbai and at the Special Economic Zone in Surat. It has also got a 100% export oriented unit in SEEPZ Mumbai, which produces gold and platinum studded jewellery. There are also jewellery-manufacturing facilities at MIDC, Andheri, which produces branded jewellery for the retail operations in India. The company has a workforce of over 2300 employees.

Company sells its jewellery under the brand - Asmi - Premium work wear collection & has 104 outlets, 2 exclusive stores; Sangini - Entire product range including bridal jewelry; Nakshatra - Entire product range including bridal jewelry available with 374 retailers and 1 franchisee. More franchisees are being added; Gili - Diamond jewelry at reasonable prices having 256 outlets of which 3 are exclusive stores; Vivvaha - Wedding jewelry; Maya - Gold jewelry for wedding and other similar events; D’Damas - International quality designs combined with Indian values sells through 380 retailers, 2 exclusive outlets, 3 shop-in-malls and 21 franchisees; Hoop - Fashion Silver Jewelry.

The Gitanjali Group has acquired Lucera for Rs 25 crores in 2008. In October 2009, the UK-based Brand Finance, valued the four leading brands of the company at Rs.514 crore (Nakshatra), Rs.468 crore (Gili), Rs.309 cr. (D'Damas) and Rs.210 cr. (Asmi), respectively. GGL is not only gearing towards improving sales but is also looking at multiplying the value of these brands by 1.5 to 2 times by 2011-2012.

Recently, Gitanjali Gems Ltd. (GGL) is in talks with global PE investors Blackstone and CX Partners to divest 10 % of equity to raise $100 million in its restructured jewellery brand holding company. According to sources, in a separate valuation prepared by these PE players, the holding company is valued at close to Rs 5,000 crore, three times the current market capitalisation of Rs 1,700 crore of the entire group. Sources say, around Rs 50 crore will go to the GGL account, while the remaining Rs 400 crore will be re-invested in the company for working capital and inventory build up.

So the question comes that how the subsidiary would have a higher valuation than the parent company? The answer may be that the subsidiary would be a low-debt company, with a minimum working capital cycle, along with high possibility of return on investment. Considering half of the PE multiple of the industry leader, Tanishq, the valuation could be much higher. GGL’s current book value is close to Rs 2,200 crore. This company is in a low margin business because of raw material costs, which is Gold. Now Gitanjali holds gold stock from 11000 levels, so no more margin pressure from raw material side till now. 

On 28^th December 2010 - Promoter Mr.Mehul Choksi bought 15113 shares at Rs.195.75/sh, making his holding to 38274421 shares a 45.42%.   

On 29^th December 2010 - Promoter Mr.Mehul Choksi bought 100000 shares at Rs.213.57/sh, making his holding to 38374421 shares a 45.54%. 

MORE PROMOTERS DEAL - CLICK HERE 
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FMP's Better than Bank FD's

Fixed Maturity Plans are being offered by various banks now a days, So what are these FMP's ?


A Fixed Maturity Plans (FMP) is that instrument which invests in bank Certificates of Deposits (CD) & which are compared with bank FDs & a FMP that invests in corporate debt are compared with fixed deposits of corporates of similar rating of credit.

FMP's also invests in Debt & money market  instruments- typically AAA rate corporate bonds. The tenure's are around One year & almost 100 % of their funds are invested in Commercial paper (CP) & CD's. These CP's & CD's rates tend to shoot up in a raising interest rates regime, making FMP investment more attractive. Fund managers of  FMP's does not need to Buy/Sell the instrument on continuous basis, which means low management fees.

FMP's have a minimum investment of Rs 5000. Capital gains on FMP will be short term capital if hold for less than 1 year and at short term capital tax rate, which is clubbed to your income for that year and taxed according to the tax bracket you fall in. If you hold for more than 1 year than long term capital gain tax will be applicable

Whereas in FD's the tax on income is based on the tax slab the investor is in (which can be as high as 31%) the investor can earn tax free dividends (subject to dividend distribution tax of 14 % for retail investors & for corporates 22 %). So if you are in top tax bracket then the capital gain on that FMP will be taxed accordingly. Indexation method will apply to FMP's if holded over a year. So I would prefer to go for 2 year FMP rather than 1 year as they give better tax adjusted returns.

PRAJ Industries Ltd : A Value BUY!!!!

Scrip Code: 522205 / PRAJIND

CMP: Rs. 70.60; Buy at Rs. 68 - 70 levels

Target: Rs. 76.00

Market Cap: Rs. 1304.25 cr.

52 Week High-Low: Rs. 113/Rs. 63.90

Total Shares: 18,47,38,492 shares; Promoters – 4,21,06,432 shares – 22.77 %;

Total Public holding – 6,52,37,191 shares – 35.31 %

Book Value: Rs. 28.82; Face Value - Rs. 2.00; EPS - Rs. 3.69; Div – 72.00 %.

P/E – 19.08 times; Ind P/E – 23.98; EV/EBITDA: 9.73

Total Debt – ZERO; Enterprise Value: Rs. 70.50 per share;

FAIR VALUE – Rs. 77.00 per share.

PRAJ INDUSTRIES -  A global green technology provider,an Ethanol manufacturer, A ZERO DEBT company, having a confirmed order-book of Rs 600cr to be executed over 12-14 months period. Offers a very good Value buying opportunity. US senate has passed the law making 15% ethanol mixing mandatory for Oil companies. This move by US will create demand for additional bio refinery capacity of approx 4 Bn gallons per annum. Capex required would be of  $ 1.75 for each gallon of bio refinery capacity created. Thus this move will be an business opportunity of USD 7-8 Bn for Praj Industries. Company have started receiving enquiries for the same. US has promoted this law for employment generation in this business. Praj will be able to win good chunk of this business.

Management has decided to restructure its business plans. Accordingly the company has the current structure of Plant & Equipment for Ethanol and Breweries; Consultancy services to brewery & Ethanol industries.

Company will be entering into newer business lines to capitalize on its domain expertise –

Water and waste water treatment: The Company has already started with 50 man team for this business unit. The team comprises of people with relevant experience in the field. Praj has hired AT Kerney for detailed business plan and the consultant will be handing over the same to the management in next 1-1/2 month. The company has won small order in water and waste water treatment space Kerney. As per the estimates current market size in India for water and waste water treatment business is to the tune of USD 1.7 Bn per annum.

Customised Engineering and manufacturing: Company’s facilities are approved by key customers like General Electric Inc and Cargill and all their global units can source their requirement from Praj. The company has won a small order in this segment as well. The key thing to be noted here is that there are huge untapped opportunities both domestically & globally and estimated market per annum to the tune of USD 3.5Bn to USD 4 Bn. Key players in this space are L&T, Godrej & Boyce. Praj’s advantage is in customization of equipment as per clients specification. To tap this opportunity, company is erecting a new facility near Satara Road, approx 30 Km from Pune and they have facility at Kandla SEZ as well. They will be serving overseas market from Kandla facility while domestic market will be serviced from Satara facility. Their Kandla facility has been approved by GE Power, GE Oil, Cargil etc and they have registered themselves with 50 companies and are qualified to supply plants and equipments to them. Company will be spending approx Rs 100 cr to set up Satara facility.

Valuation &amp:

At the CMP of Rs 70.60, Praj is trading at 19.28 x FY11e EPS of Rs 3.66 and 9.67 FY12e EPS of Rs 7.30 which looks very attractive.

The Value of Praj at 15x FY12e EPS of Rs 7.72, gives the target price of Rs 116, an upside of 63%.

Mr. Promod Chaudhari (Promoter) has bought 14,73,379 shares from market on 25th & 26th November 2010 at an Avg price of Rs. 69.27 per share.

Ms. Parimal Chaudhari (Non Executive Director) has bought 3,25,050 shares from market on 9th & 10th of December 2010 at an avg.price of Rs.69 per share.

Mr. Promod Chaudhari lastly bought 4,34,200 shares from the open market on 9th & 10th December at an avg. price of Rs. 69.27 per share totaling to Rs. 3,00,77,627.45

As on 13th December 2010 – Mr. Chaudhari holds 3,15,00,000 shares 17.05%

Always Buy DVR shares (Differential Voting Rights) !!!

DVR shares are Differential Voting Rights – which is just like ordinary Equity shares, paying dividends as ordinary equity shares, has voting rights. But the difference is that these DVR shares carry lower Voting Rights and higher Dividends.

The class “A” DVR shares carries 1/10th of voting rights i.e. 1 voting Right for every 10 DVR shares held. The class “A” DVR shares offers 5% more Dividend than ordinary equity shares.

Because of such reasons, DVR shares normally trade at 10% to 15 % discount to the ordinary equity shares of that company. The Companies Act allows companies to issue differential voting rights upto 25 % of its total issued share capital with the conditions that it should have distributable profits & no default in filing annual returns in past 3 years.

We hold Equity shares in small quantities and we do not attend Annual General Meetings of the companies, also our vote does not have any importance or relevance to these companies. So, in order to let go my voting rights (which I normally don’t use) I get paid with 5% extra dividends, my return on investment goes up, Dividend yield goes up, all that by just letting away my voting rights go, that’s it….. 

Globally DVRS trade between 10 % - 15 % discount to its Equity shares depending upon the extra dividend offered to DVR, for e.g. If a company's equity shares trades at Rs.100/sh and dividend declared is Rs.10/sh and its DVR holders gets Rs.10.50 as dividend (Rs. 0.50 extra because he let go its voting rights) means that its DVR should be trading at Rs.89.50/share. According to Indian Company Law, 1) the shares with Differential Rights shall not exceed 26 % of the total post-issue paid up Equity Share Capital including equity shares with differential rights issued at any point of time (voting rights ratio should range from 2:1 to 10:1 only), 2) Issuing company to have consistent track record of distributable profits for last 3 years. But since the Indian audiences are not aware about this beautiful instrument, DVR trends to trade at 40 % - 50 % discount to its Equity shares. One should buy DVR at 40 % - 45 % discount to its EQ SH & Sell when DVR comes near to 10 % - 15 % discount to its EQ SH.

So, friends it makes sense to buy DVR shares. 

Tata Motors DVR – The first company to come with an DVR, Tata Motors DVR trades at 30 % discount to its equity shares market price. Normally it should trade at 10% - 15% discount to its equity shares. Globally DVR’s are traded at 10% discount to its equity shares, but see the ignorance of us Indian investors who buys the shares which have No Fundamentals but fails to understand such a beautiful instrument. They feel that DVR’s are complicated & offers lower rights, but ideally he should buy such shares if the company offering DVR share is good in fundamentals.

TATA MOTORS offered 6.42 Cr DVR share at Rs.295 which was at 10% discount to its equity shares price of Rs.330 on Nov 5th 2008 to raise Rs.1896.85 Cr with 1 voting right for every 10 DVR shares held along with 5 % extra dividend over ordinary shares. The class “A” DVR share is 15.8% of total share capital of Tata Motors. Tata Sons holds 34.25% stake.
After Tata Motor , Pantaloon Retail India & Gujarat NRE Coke have also issued its DVR shares.
Pantaloon Retail India issued 1 bonus share with different voting & dividend rights for every 10 held in 2008. the new class is called "B" shares with 5% more dividend than ordinary shares & would have 1 vote for 10 shares held.
Gujarat NRE Coke issued DVR in May 2010 as bonus shares in ratio of 1 DVR bonus shares for every 10 Equity shares held, here the DVR bonus shares would hold 1 voting right to 100 shares held.  

DVR's	Tata Motors DVR	Guj. NRE Coke DVR	Pantaloon Retail DVR
Total number of DVR Shares	6,41,76,680	5,07,14,292	1,59,29,152
Promoters Holdings	2,32,64,396 - 36.26 %	2,41,01,468 - 47.51 %	74,07,693 - 46.53 %
Number of Shares Holders	16,700	1,53,382	18,998

SOME BRIEF ABOUT COMPANIES ISSUED DVR's GLOBALLY

COMPANY	Country	Voting rights (ord)	Per Share DVR	Extra Dividend	Business
BMW	Germany	1	N0	€ 0.02	Automobile
Bombardier	Canada	10	1	$0.001563	Aircraft & Train Mfg
Brown Forman	US	1	No	---	Alcohol
Comcast Corp	US	1	No	---	Media
Fiat	Italy	1	Sp.cases	€ 0.31	Automobile
Forest City	US	10	1	----	Real Estate
Haverty Furniture	US	10	1	5 % of FV	Others
Hubbell Inc	US	20	1	----	Electrical s.
Lennar Corp	US	10	1	----	Real Estate
News Corp	US	10	1	----	Media
Samsung Electronics	Korea	1	No	----	Electronics
Telephone & Data System	US	1	No	----	Telecom
Viacom	US	1	No	----	Media
Volkswagen	Germany	1	No	€ 0.06	Automobile
Guj.NRE Coke	India	1	1/10th	----	Metals
Tata Motors	India	1	1/10th	Re 0.50	Automobile
Pantaloon Retail	India	1	1/10th	Re 0.10	Retail

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Punjab and Sind Bank : SUBSCRIBE IPO Fairly Valued

Price Band- Rs.113-120, Face Value- Rs.10, Discount to Retailers – 5%. Issue opens on- 13th December 2010, Monday
Issue closes on- 16th December 2010, Thursday
Listing on – th 2010, Lot Size - 50 
QIB Book- 1,90,00,000 shares.
Retail Book – 1,33,00,000 shares.
Employee Reservation- 20,00,000 shares
Total No. of Shares offered- 4,00,00,000 shares.
Equity Shares outstanding prior the Issue- 18,30,56,000 Sh
Equity Shares outstanding after Issue- 22,30,56,000 Sh
Total Size of the Issue- Rs.452 Crs. - Rs. 480 Crs.

FINANCIAL DETAILS AS ON – 31st March 2010
TOTAL ASSET – Rs.56099.58 cr
TOTAL INCOME - Rs. 4326.30 cr
NET PROFIT – Rs. 501.13 cr
NETWORTH – Rs.2106.58 cr
Equity Share Capital – Rs. 183.06 cr
Preference Share Capital – Rs.200 cr
Reserves & Surplus – Rs. 1723.52 cr
Earning Per Share – Rs. 26.70/sh.
Book Value – Rs. 104.15/sh.
FINANCIAL DETAILS UPTO – 30th September 2010
TOTAL ASSET – Rs.58343.02 cr
TOTAL INCOME - Rs. 2522.95 cr
NET PROFIT – Rs. 276.38 cr
NETWORTH – Rs.2382.07 cr
Equity Share Capital – Rs. 183.06 cr
Preference Share Capital – Rs.200 cr
Reserves & Surplus – Rs. 1999.01 cr
Earning Per Share – Rs. 15.10/sh.
Book Value – Rs. 119.20/sh.

PUNJAB AND SIND BANK
Punjab and Sind Bank, began its business in 1895, is the smallest of the state-run banks in terms of business. This Bank has its traces way back to the Swadeshi movement against the British, started with a capital of Rs200,000, working capital of Rs20,000 and a staff of 9 whom it paid a total monthly salary of Rs. 320, Is coming with an IPO to offer about 4 cr shares. the price band is declared at Rs. 113 - Rs.120 which according to me fairly valued in comparision of its peers. I expect Punjab and Sind Bank should grow at above 20%, at the end of the last fiscal in March, the bank had total deposits of Rs. 52,945.09 crore and advances of Rs. 35,859.97 crore. It had 926 branches as of 31 October.Bank’s Gross NPAs were Rs. 206.15 crore as of March 31, 2010, representing 0.63% of its gross advances and 0.36% of its total assets.
State-run banks have performed well over the years in the face of competition from aggressive rivals in the private sector and from foreign banks. Government-owned banks control 70% of India’s banking industry, foreign banks just around 7% and the rest is held by private sector banks.

SOME PEER COMPARISIONs
Punjab & Sind Bank - Face Value – Rs.10 ; Book Value – Rs. 104.15 ; EPS – Rs. 26.70 ; Price/Earning – 4.23 to 4.49  ; Price/Book Value –  1.08 to 1.15

Andhra Bank - Face Value – Rs.10 ; Book Value – Rs. 90.93 ; EPS – Rs.23.49 ; Price/Earning – 6.26 ; Price/Book Value – 1.62

Bank of Maharashtra - Face Value – Rs.10 ; Book Value – Rs. 55.84 ; EPS – Rs.9.80 ; Price/Earning – 6.64 ; Price/Book Value – 1.13

Corporation Bank - Face Value – Rs.10 ; Book Value – Rs. 402.60 ; EPS – Rs.90.83 ; Price/Earning – 6.85 ; Price/Book Value – 1.55

Dena Bank - Face Value – Rs.10 ; Book Value – Rs. 83.43 ; EPS – Rs.19.91 ; Price/Earning – 6.02 ; Price/Book Value – 1.44

United Bank of India - Face Value – Rs.10 ; Book Value – Rs. 91.61 ; EPS – Rs.12.19 ; Price/Earning – 8.70 ; Price/Book Value – 1.16

Vijaya Bank - Face Value – Rs.10 ; Book Value – Rs. 61.44 ; EPS – Rs.13.22 ; Price/Earning – 7.09 ; Price/Book Value – 1.53.

SO, I give a SUBSCRIBE/BUY rating to the PUNJAB & SIND BANK with the listing gains and expect to trade near 1.40 x times the book value. Rs. 146 to Rs. 170