VISAKA INDUSTRIES LTD: A strong rural play with strong fundamentals !!!!

Scrip Code: 509055 / VISAKAIND

CMP:  Rs. 87.15; Buy at current levels.
Short term Target: Rs. 100, 6 month Target – Rs. 150; STOP LOSS – Rs. 78.00; Market Cap: Rs. 138.40 cr; 52 Week High/Low: Rs. 173.70 / Rs. 82.55

Total Shares: 1,58,80,952 shares; Promoters : 59,87,530 shares –37.70 %; Total Public holding : 98,93,422 shares – 62.30 %; Book Value: Rs. 164.54; Face Value: Rs. 10.00; EPS: Rs. 25.24; Div: 50 % ; P/E: 3.45 times; Ind. P/E: 5.73; EV/EBITDA: 3.37.

Total Debt: Rs. 188.85 cr; Enterprise Value: Rs. 323.74 cr.

VISAKA INDUSTRIES LTD: was incorporated in 1981 in Secunderabad, India. Visaka Industries Limited manufactures and sells corrugated cement fiber sheets in India and internationally. It operates in two segments, Building Products and Textile Synthetic Yarn. The Building Products segment produces asbestos sheets, accessories, and non asbestos flat sheets that are used as roofing materials and interiors. Its accessories include close fitting adjustable ridges, apron piece, north light ridges, barge boards, north light curve, serrated adjustable ridges, roof lights, and ridge finials. This segment also offers V Boards and V Panels, which are used for false ceiling, wall partitions, wall paneling, door panels, mezzanine flooring, back liners, structural glazing back lining, prefabricated buildings, and roofing, as well as for fixed furniture, such as computer tables, black boards, dressing tables, shoe racks, A.C. duct covers, photo frames, and office tables. The Textile Synthetic Yarn segment manufactures yarns out of the blends of polyester, viscose, and other materials to produce various fabrics, including shirting, suiting, fashion fabrics, upholstery, and embroidery laces. This segment also exports its products to Italy, Belgium, the United Kingdom, the United States, Spain, Germany, Australia, Mexico, and Turkey. Visaka Industries markets its products through dealers for the retail market, and directly for projects and government departments.

Investment Rationale:

Visaka industries limited is the second largest manufacturer of fiber cement sheets in India with an estimated market share of more than 15 % by sales. VIL’s high-tech Fiber Cement plant is fully automated factory with the latest sophisticated technology.  The Cement Asbestos segment produces asbestos sheets and accessories used primarily for as roofing material. Visaka industries is a rural sector player which holds tremendous potential for its asbestos division as whenever economic conditions of the rural populations improves, their spending in durable products like asbestos cement sheets is likely to be increased. VIL is growing at a CAGR of 29% for past five years, highest in the industry. Company is making continuous efforts to increase production capacity through new and existing plants. Company’s new product in Reinforced Building Product is accepted in the market as it is preferred over wood/gypsum based products. Company has commenced the commercial production of V-Panel unit from January 01, 2010. V-Panel is a revolutionary building product, which is being manufactured with technical collaboration from M/s Dantotech of Australia. Company has its asbestos cement sheets unit at pune. Visaka industries commenced the commercial production in Reinforced Building Boards division on 1st May 2008. This unit is situated in Miryalguda Taluq, Nalgonda District, in the state of Andhra Pradesh. The product from this unit is branded as “V-Board”. The company exports its products to the countries likes of Srilanka, Bangladesh, and Middle East. VIL has through a special purpose vehicle Visaka Thermal Power Ltd ventured into Coal- based power of 1050 MW at an estimated cost of Rs. 5000 crores in Orissa. The project implementation is spread over a period of 9 years in 3 stages of 350 MW each. Also VIL has Synthetic yarn business, engaged in the manufacturing of yarn using state-of-the-art Twin Air Jet Spinning technology from Murata, Japan, with 28 MTS machines equivalent to 60,000 spindles Visaka has earned recognition as the largest Unit in the world with MTS installation. As of now company produces 10000 MT of yarn per year and exports around 4000 tons across the world.

Outlook and Valuation:

Real estate and construction and infrastructure dominate the growth for Cement product industry. With the initiatives made by the government in various infrastructure projects, road networks and housing facilities the cement product industry especially the asbestos cement manufacturers cheer on the importance given to rural infrastructure in the union budget especially on the thrust given on rural housing by the government through Indira Awaas Yojana and increased allocation to rural housing is a positive sign. Fiber cement sheets are gaining popularity because of their strong physical properties as compared other roofing materials. Asbestos cement industry is growing at 10- 12%, at this growth VIL can significantly be able to service its debts. In my view VIL could report EPS in FY11 FY12E of Rs. 28.30/sh and Rs. 22.70/sh, respectively. I would buy VISAKA INDUSTRIES LTD which is currently available at a discount to its Book Value of Rs. 164.54; I would buy VIL for the long term with a price target of Rs. 15o and for the SHORT TERM PLAYERS it would be Rs.100.00 

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	600.90	653.40	712.90	823.60
NET PROFIT (Rs. Crs)	60.00	45.10	36.10	46.90
EPS (Rs.)	37.70	28.30	22.70	29.50
PE (x)	3.50	3.70	4.60	3.50
P/BV (x)	0.90	0.60	0.60	0.50
EV/EBITDA (x)	2.60	3.50	3.00	2.40
ROCE (%)	28.30	18.10	13.10	15.30
RONW (%)	26.50	16.90	15.50	18.00

I would buy VISAKA INDUSTRIES LTD with a price target of Rs. 100 for the short term and Rs. 150 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. 78.00 on your purchase.

RELIANCE CAPITAL : Long Term Bet !!!

Scrip Code: 500111 / RELCAPITAL

CMP:  Rs. 437.40; Buy at Rs. 400 - 415 levels.
Short term Target: Rs. 475, 6 month Target – Rs. 550; STOP LOSS – Rs. 370.00; Market Cap: Rs. 10,751.04  cr; 52 Week High/Low: Rs. 882.30 / Rs. 388.40 ; Total Shares: 24,56,32,800 shares; Promoters : 13,29,82,274 shares –54.14 %; Total Public holding : 11,26,50,526 shares – 45.86 %; Book Value: Rs. 282.70; Face Value: Rs. 10.00; EPS: Rs. 9.31; Div: 65 % ; P/E: 46.91 times; EV/EBITDA: 13.46.

Total Debt: Rs. 11,958.14 cr; Enterprise Value: Rs. 23,213.03 cr.

RELIANCE CAPITAL LIMITED: RCAP was incorporated in 1986, in India. The company engages in lending, investing, asset management, insurance and broking activities. It operates as a Non Banking Financial Company. Reliance Capital Asset Management (RCAM) manages money under the New Pension Scheme (NPS), it has been selected to manage funds for both EPFO & NPS. Reliance Consumer Finance offers products like personal loans, auto loans, housing loans & SME loans. Reliance Money is one of the top leading brokerage houses in India serving 3o lakhs customers approximately. Reliance General Insurance is considered one of the top player in general insurance businesses in India. In the year 2008, Reliance Equities International its institutional broking arm and Reliance Asset Reconstruction business commenced its operation. Company has an initiative named Reliance Capital Services which cross sell its products to the other customers of Reliance ADAG which also got operational from 2008 onwards. RCAP subsidiaries include Reliance Capital Trustees Co.ltd., Reliance Gilts Ltd, and Reliance Capital Research Pvt. Ltd. among others.

Investment Rationale:

The Reliance Capital has an AUM size of Rs. 1,01,600 Cr with an income of around Rs. 250 -290 Cr. Income continues to be strong as the retail proportion in debt AUM is rising. Commercial finance to be a game changer which contributes around Rs. 269 Cr, its loan book grew 34 % YOY to Rs. 1,230 Cr with 97 % book fully secured. Loan books are expected to grow by 25 % - 30 % for next two years. The General Insurance has been slower which reported a loss of Rs. 309 Cr, this includes Reliance Capitals share of Rs. 183 Cr in the total motor pool provision of Rs. 7000 Cr which the entire General Insurance industry had to provide. It’s AMC, Commercial finance and broking & distribution business generated approximately Rs. 620 Cr of profit. The company could be a contender for the banking license as RBI is in the process of finalizing guidelines for issue of new banking license; it is believed that ADAG group through RCAP could bid for banking license. RBI is believed to give banking license to those corporate houses which have market capitalization of more than Rs. 10,000 Cr. RCAP is among others who has the eligibility to win the license as it has a market cap of over Rs. 10,000 Cr & also has strong professional management to its side. Debts will be a concern, but I believe that with good professionals on board it is taken care off. IRDA recently said that a 10 year lock in guidelines does not apply for Reliance life insurance’s 26 % stake sale to Japan based Nippon Insurance, RCAP is likely to peg $680 million or Rs. 3,062 Cr once the deal is complete it would be biggest offshore investments in an Indian insurance company. Under the insurance law promoters of life insurance companies looking to offload 26 % stake the maximum permissible limit of their holding can do it only after completing 10 years of operation. It’s heard that RCAP is in talks with Axis Bank and Syndicate Bank to sell 23 % in its life insurance business to boost distribution network. This will be the second deal after Nippon deal if approved by the regulators.

Outlook and Valuation:

As told RCAP deal with Nippon Insurance is awaiting approval and if capital gains from the deal are factored then ROE to be around 10 % - 11 % , but since the deal is not approved yet it is expected that ROE to be around 8 % - 9 %. It is believed that the core profit to grow at 25 % CAGR over FY11 – FY13E. Also post profit of the life insurance may also get consolidated with the parent RCAP like other subsidiaries. General Insurance has been a slower in overall profits for many quarters which is expected to have a turn around. Broking and Distribution combined generated about Rs. 223 Cr due dip in average daily volumes to Rs. 1,400 Cr leading to market share decline to 0.9 % with a profit before tax of Rs.34.5 Cr. In my view RCAP could report EPS in the FY11 FY12E of Rs. 11.60/sh and Rs. 26.30/sh, respectively. RCAP TO DECLARE ITS RESULT ON 13 AUG 2011. RCAP’s stock price has corrected from its recent high on the back of the bad news on US economy, but I maintain a positive view on the stock & believe that any further correction would be a good buying opportunity for long term holders, as for short term, stock could be bought with a price target of Rs. 475

KEY FINANCIALS	FY10	FY11E	FY12E	FY13E
SALES (Rs. Crs)	6,140.60	5,498.10	6,433.20	7,592.60
NET PROFIT (Rs. Crs)	434.60	291.50	646.20	739.70
EPS (Rs.)	17.70	11.60	26.30	30.10
PE (x)	34.90	53.10	23.50	20.50
P/BV (x)	2.0	1.9	1.7	1.6
ROCE (%)	5.70	3.70	7.70	8.20
RONW (%)	2.00	1.20	2.50	2.60

I would buy RELIANCE CAPITAL with a price target of Rs. 475 for the short term and Rs. 550 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. 370.00 on purchase.

COAL INDIA : Enjoying the whole Cake, best Investment !!!

Scrip Code: 533278 / COALINDIA

CMP:  Rs. 397.30; Buy at Rs. 370 for long term & at Current levels for short term
Short term Target: Rs. 415, 6 month Target – Rs. 435; STOP LOSS – Rs. 340; Market Cap: Rs. 2,50,949.15 cr; 52 Week High/Low: Rs. 422.35 / Rs. 289.00.

Total Shares: 631,63,64,400 shares; Promoters : 568,47,27,960 shares –90.00 %; Total Public holding : 63,16,36,440 shares – 10.00 %; Book Value: Rs. 52.7; Face Value: Rs. 10.00; EPS: Rs. 17.20; Div: 35 % ; P/E: 23.09 times; Ind P/E: 24.18; EV/EBITDA: 13.50.

Total Debt: Rs. 3,663.49 cr; Enterprise Value: Rs. 2,54,612.64 cr.

COAL INDIA LIMITED: CIL was incorporated in 1973 in Kolkata, India. It was formerly known as Coal Mines Authority Limited. CIL is a leading public sector undertaking engaged in coal mining & selling coal fines in India and is working on establishing its footprint globally through acquisitions. Company operates 471 mines in 21 coalfields across 8 states in India, which includes 163 open cast mines, 273 underground mines & 35 mixed mines – open & underground mines. CIL operates through its 9 wholly owned subsidiaries, of which 1 subsidiary is engaged in exploration and feasibility study analysis. Its subsidiaries include Eastern Coalfields Ltd (ECL), Bharat Coking Coal India Ltd (BCCL), Central Coalfields Ltd (CCL), Northern Coalfields Ltd (NCL), Western Coalfields Ltd (WCL) and South Eastern Coalfields Ltd (SECL). CIL has total reserves of 64.3 billion tons and proved reserves of 52.4 billion tons, of which extractable reserves stands at 21.7 billion tons. The company also provides middlings used by fuel plants, brick manufacturing units, cement plants, industrial plants, as well as for power generation. CIL coal fines/coke fines are used in industrial furnaces, as well as for domestic purposes. It serves primarily power, steel, cement, and fertilizer industries.

Investment Rationale:

The Group of Ministers (GoM) has approved the Draft Mines and Minerals Development Regulation (MMDR) bill which states that coal mining companies will have to share 26 % of their profits after tax of the previous year with the local public where the mining takes place. The current draft states that profits which is to be distributed should be calculated on Net Profit of each of the mining company including their subsidiaries, more clarifications on the matter is awaited and is believed that there could be significant impact of the bill on the EPS of the mining stocks (See the Table below). There are good chances of CIL to able to adjust prices over a period of time. It is believed that CIL will be able to acquire land & mines easily after the law in enacted. Coal India’s 26 % net profit will be 5 % – 5.5 % of its net sales and an impact of 10 % in FY12 EPS. Complete pass through of the wage hike and mining tax is a challenge and could act as an overhang on the stock performance in the medium term. CIL has access to 64.3 billion tons of reserves, the largest in the world. From this, 52.4 billion tons are based on Indian Standard Procedure (ISP) guidelines, representing 6 % share of the global proven reserves. CIL's profitability and earnings growth are strong, demand from power and other industries ensure favorable return, with upside from e-auction and washed coal. CIL is ramping up its washed coal capacity from 39.4 million to over 111 million tons, with the addition of 20 new facilities. Washed coal earns superior returns for CIL and volume is expected to grow from 16 million tons in FY11 (4 % of total) to 65 million tons by FY 16 (12.5 % of total).

IMPACTED COMPANY	IMPACT ON EPS (%)
COAL INDIA	10.00
HINDALCO	1.00
JSPL	3.00
JSW STEEL	2.00
NALCO	1.00
SAIL	11.00
SESA GOA	9.00
STERLITE IND	6.00
TATA STEEL	6.00

Outlook and Valuation:

India's coal demand for FY 10 stood at 600 million tonnes as against the domestic availability of 535 million tonnes; this gap was filled up by the import of 65 million tonnes. CIL is well positioned to capitalize the widening gap of demand & supply as it controls 80 % of the coal supply in India. CIL has been facing problems for its planned expansion, due to delays in requisite environment and forest clearances and land acquisition issues. In FY11 Coal dispatches to be at 425 million tonnes & 455 million tonnes for FY12E; Realisation to be of Rs. 1,183/tonne in FY11 & Rs. 1,321/tonne for FY12E; EBITDA to be Rs. 318/tonne in FY11 & Rs. 392/tonne in FY12E. Company to hold board meeting on 12th August 2011 for quarterly results; To hold AGM on 20th September 2011; Final dividend of 4 % (Rs. 0.40) on 8th September 2011; Book Closure for dividend from 12th September to 16th September 2011 

In my view CIL could report EPS of Rs. 22.10/sh and Rs. 26.50/sh, respectively. CIL’s stock price has corrected from high of Rs. 422/sh, on the back of the development on profit sharing. I maintain a positive view on the stock & believe that any further correction would be a good buying opportunity for long term holders, as for short term, stock could be bought with a price target of Rs. 415.

KEY FINANCIALS	FY11	FY12E	FY13E
SALES (Rs. Crs)	50,233.60	60,578.60	65,494.70
NET PROFIT (Rs. Crs)	10,867.40	13,905.95	16,742.73
EPS (Rs.)	17.30	22.01	26.50
PE (x)	22.70	17.97	14.90
P/BV (x)	6.80	5.69	4.50
EV/EBITDA (x)	13.50	11.40	9.70
ROCE (%)	26.40	37.80	33.90
RONW (%)	54.20	53.40	50.90

MAJOR EVENTS OF COAL INDIA

DATE	KEY EVENTS	MKT.CAP (Rs. Cr)	PRICE (Rs.)
4thNOV 2010	Listed on NSE/BSE	2,16,240.58	342.55
15thMAR 2011	Positioned no.3 in market cap	2,13,335.06	338.45
23rdMAY 2011	Positioned no.2 in market cap	2,31,020.87	365.40
8thJULY 2011	Fell down to 4th positon in market cap	2,28,652.23	362.65
12thJULY 2011	Regained 3rd position in market cap	2,30,673.47	365.30
27thJULY 2011	Regained 2nd position in market cap	2,52,117.51	398.95
8thAUG 2011	Will be included in SENSEX	------	-----

I would buy COAL INDIA LTD with a price target of Rs. 415 for the short term and Rs. 435 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. 340.00 on your purchase.

L & T Finance Holdings : Subscribe for LONG TERM !!!

Price Band - Rs. 51- Rs. 59, Face Value- Rs.10.

Discount - 2% to L&T Employees & Shareholders.

Minimum Lot Size –  100 Shares.

Issue opens on - 27th July 2011, Wednesday.

Issue closes on – 29th July 2011, Friday.

Listing on – 12th August 2011.

Total No. of Shares offered – 21.1 Cr shares if priced at Rs.59

Total No. of Shares offered – 24.4 Cr shares if priced at Rs.51

Total Size of the Issue - Rs. 1,245.00 Crs.

IPO GRADING – 5/5 - CRISIL, 5/5 - ICRA – Strong Fundamentals

FAIR VALUE - Rs. 65 - Rs. 70.

KEY FINANCIALS (Consolidated)	FY 2010	FY 2011
Net Interest Income (Rs. in Cr)	726.00	1,039
Net Profit (Rs. in Cr)	242.00	398.00
Net Interest Margin %	7.80	7.10
EPS (Rs.)	1.80	2.80
Price to Book Value (x)	3.60	2.60
Return on Asset %	2.50	2.50
Return on Equity %	21.10	16.30

L&T Finance Holdings Limited was incorporated in 2008 and is a holding company for many of the L&T group companies. It has mainly 2 fully owned non-banking finance companies (NBFCs) – L&T Infrastructure Finance ( which contributes 33 % of its revenues) and L&T Finance (which contributes 66 % of its revenues).  Apart, from these L&TFH owns close to a 5 % stake in Federal Bank and City Union Bank. It also owns L&T Mutual Fund which has an asset base of Rs. 5,200 Cr as of June 2011. The company has a presence in 23 states, with 837 points-of-presence across India. The company’s operations are primarily into 4 business groups namely the Infrastructure Finance Group, the Retail Finance Group, the Corporate Finance Group and the Investment Management Group.  Company intends to use the IPO proceeds for the repayment of intercorporate deposit issued by the parent company L&T about Rs. 345 Crs; infusion of capital in L&T Finance for about Rs. 515 Cr and L&T Infrastructure Finance Company for about Rs. 485 Cr. There is a reservation for employees for Rs. 50 Cr and an additional reservation of Rs. 120 Cr for L&T shareholders, both of would get an Rs. 2.00 discount to the issue price. Out of the total of Rs. 537.5 Cr has been reserved for qualified institutional buyers (QIBs), Rs. 161.25 Cr for non-institutional investors (HNIs) and Rs 376.25 Cr for retail investors. The company had done a pre – IPO placement at Rs. 55/sh and anchor book to have a subscription of Rs. 56/sh, a nearly Rs. 153 cr are committed by anchor investor.

The company got the Infrastructure Financing Status in July 2010 it will benefit to raise more funds, of longer tenors and at lower costs, and in turn to lend more to infrastructure companies. The company's current net worth is around Rs 2,900 crore & post issue net worth including a 30% growth for FY12 would come be around Rs 4,700 crore. The company could be a contender for the banking license with RBI in the process of finalizing guidelines for issue of new banking license; it is believed that L&T group through L&TFH could bid for receiving license. RBI is believed to give banking license to those corporate houses which have market capitalization of more than Rs. 10,000 Cr. L&T comes winner as its promoter stake is less than 25 % and is driven by strong professional management.

Comparisons with Industry as on 31st March 2011

KEY FINANCIALS	FV (Rs.)	EPS (Rs.)	P/E (x)	RoNW %	BV/ Sh (Rs.)
L & T Finance HLDG	10.00	2.87	---	13.58	20.40
Shriram Transport Fin.	10.00	53.92	12.10	24.84	216.37
M&M Financial Ser	10.00	50.92	12.30	19.36	244.70
IDFC	10.00	8.77	15.40	11.39	76.97
REC	10.00	26.18	7.60	20.15	129.90
Pow.Fin.Corp	10.00	23.06	8.30	17.37	132.79
Sundaram Finance	10.00	70.01	7.70	21.53	325.22

According to me the fair value of L&T Finance Holdings Ltd comes to Rs. 65.00 - Rs. 70.00. Off - course it will trade into discount but for long term investors that will be a good opportunity, buy at if it trades below Rs. 55.00.   

SUBSCRIBE FOR LONG TERM & IF FOR TRADING PROSPECTIVE GO FOR IT ON LISTING GAINS......

ZEE Entertainment Enterprises Ltd : Offering growth opportunities !!

Umeed Se Saaje Jindagi

Scrip Code: 505537 / ZEEL
CMP:  Rs. 134.00; Buy at Rs. 120 - 126.00 levels; Short term Target: Rs. 150, 6 Month target – Rs. 200 ; STOP LOSS - Rs.110; Market Cap: Rs. 13,107.11 cr. 

52 Week High/Low: Rs. 164.33 / Rs. 105.80
Total Shares: 97,81,42,930 shares; Promoters : 41,84,72,440 shares –42.79 %; Total Public holding : 55,96,03,690 shares –57.21 %; Book Value: Rs. 29.69; Face Value: Rs. 1.00; EPS: Rs. 5.92; Div: 200 % ; P/E: 27.11 times; Ind P/E: 21.27; EV/EBITDA: 20.48

Total Debt: Rs. 268.01 cr; Enterprise Value: Rs. 29,409.98 cr

ZEE Entertainment Ltd was founded in the year 1982, based in Mumbai. Company was formerly known as Zee Teleflims Limited and changed its name to Zee Entertainment Enterprises Limited in January 2007. ZEEL, together with its subsidiaries, operates as a vertically integrated media and entertainment company in India. It operates in three segments: Broadcasting and Content, Education, and Film Production. The Broadcasting and Content segment develops, produces, and procures television programming and film content, and delivers through satellites, cable, and Internet. It broadcasts channels, such as Hindi general entertainment channels and regional language general entertainment channels, Bollywood channels, sports channels, English entertainment channels, alternate lifestyle channels. Company earns revenues by the way of advertisement and subscription revenues and syndication The Education segment engages in distribution of software learning products; and provides education and training in information technology. The Film Production segment produces and distributes films. The company has a library housing approximately 80,000 hours of television content; and rights to approximately 3,000 movie titles. Effective March 29, 2010, Zee News Ltd. demerged its Regional General Entertainment Channel Business Undertaking and transferred its operation to Zee Entertainment Enterprises Limited It has operations in India, the United States, Canada, Europe, Africa, the Middle East, Southeast Asia, Australia, and New Zealand.

Investment Rationale:

Zee - Turner signed a distribution JV with Star-Den which will be a game-changer, as it will significantly increase the bargaining power with local cable operators. Company’s subscriptions will be strong after this JV with Star Den which will also set up a Media Pro Enterprise India which will be 50:50 partnerships between Zee Turner and Star Den Media Services, for combined distribution of TV channels. ZEE and Star networks together controls 40 % - 45 % of viewer ship share.  The JV will be effective from July 2011 and the subscription revenue would be visible from FY13. It is expected that a 17 % Y-o-Y growth will be seen in analog subscription revenue for ZEE in FY13 as against an estimated 5 % growth in FY12. Recently on 19th June 2011, Zee unveiled its new brand identity by a new logo & a new slogan with the objective of taking forward of progressive outlook for the channel. Zee Entertainment Enterprises (ZEEL) announced a share buyback programme that will have a cash outflow of up to Rs. 700 cr. The buyback would be of its fully paid-up equity shares of face value Re.1.00 each, at a price not exceeding Rs. 126.00 per equity share. ZEEL proposes to buyback a minimum of 1.26 crore shares. The Maximum Buyback Size is within the company law limit of 25% of the aggregate of the Company’s paid-up equity capital and free reserves as on March 31, 2010. The aggregate paid up equity share capital and free reserves of the Company as at March 31, 2010 was Rs. 2,818.33 Cr. The date of opening of Buyback offer is July 27, 2011 and will end at March 23, 2012.

Concerns regarding margin pressure:

Margins are likely to be under pressure, it is believed that there could be a pressure on core business margins, as volumes will slowdown coinciding with the ramp-up in original programming hours. Original Programming Hours for the flagship channel like Zee TV has increased from 24 hours per week to 29.5 hours per week and the management targets to increase original programming hour further to 33-35 hours per week by March 2012.  On the contrary, Star Plus is currently running at original programming hours of 40 hours per week while Colors is at 30-31 hours per week.

Outlook & Valuation:

Though there are visible signs of slowdown in ad growth likely due to macro slowdown and a pause in ad spends after the spending of Rs.1,500 cr on cricket season (ICC Cricket World Cup + Indian Premier League). While there is no indication of a cut in ad-budgets as yet, advertisers have turned more cautious, thus impacting advertising volumes. A buy back & 11 % ad revenue growth in FY12 and 12 % growth in FY13 makes a buy in ZEEL with a target price of Rs. 150 The stock trades at 20x FY12E EPS of Rs. 6.70 and 16.5x FY13E EPS of Rs. 8.2 with a price target of Rs. 150 (18x FY13E EPS). I believe that buy back will be EPS accretive by 1.288 %. 

Result Update:

Zee Entertainment Enterprises Ltd (ZEEL) posted 13.28 % decline in its consolidated net profit at Rs. 130.16 Cr for the first quarter ended June 30, 2011. In the same quarter of the previous fiscal, the company’s net profit was Rs. 150.10 Cr. For the three months ended June 30, 2011, the company’s consolidated sales increased 3.14 per cent to Rs 698.30 crore compared with Rs. 676.99 crore in the same quarter of 2010—11. The company’s advertising revenues increased 0.5 % during the quarter to Rs. 378.74 crore (Rs 376.91 crore). As said earlier, with the onset of festival season, the company is expecting to see normalcy in advertising spends. ZEEL’s subscription revenues increased 16.7 % during the first quarter of the current financial year to Rs. 305.09 Cr v/s Rs. 261.42 Cr in the same quarter last fiscal. Zee final Dividend of 200 % i.e Rs. 2.00 on 28th July 2011, AGM on 10th Aug 2011. Book Closure from 30th July 2011 to 5th Aug 2011  

KEY FINANCIALS	FY10	FY11E	FY12E	FY13E
SALES (Rs. crs)	2,196.60	2,941.40	3,238.20	3,674.30
NET PROFIT (Rs. crs)	468.60	570.00	660.20	803.10
EPS (Rs.)	5.20	5.80	6.70	8.20
PE (x)	25.80	23.20	20.00	16.50
P/BV (x)	3.50	3.10	2.80	2.60
EV/EBITDA (x)	21.00	17.10	14.30	12.00
RONW (%)	13.00	13.80	14.40	16.20
ROCE (%)	17.80	19.50	21.2	23.80

I maintain my buy status on ZEE Entertainment Enterprises Ltd with the price target of Rs. 150 in short term. For long term my target is of Rs. 200. As I always say do respect the market and keep a strict stop loss of 8 % or Rs. 110 on your every purchases.