ADITYA BIRLA NUVO LTD : HUGE VALUE UNLOCKING OPPOURTUNITY !!!

Scrip Code: 500303 / ABIRLANUVO

CMP:  Rs. 1,735.70; Market Cap: Rs. 22,587.33 Cr; 52 Week High/Low: Rs. 1916.15 / Rs. 1032.25 ; Total Shares: 13,01,33,885 shares; Promoters : 7,44,44,697 shares – 57.21 %; Total Public holding : 5,56,89,188 shares – 42.79 %; Book Value: Rs. 859.77; Face Value: Rs. 10.00; EPS: Rs. 96.82; Dividend: 70.00 % ; P/E: 17.92 times; Ind. P/E: 31.69; EV/EBITDA: 7.28.

Total Debt: 18,429.86 Cr; Enterprise Value: Rs. 40,350.65 Cr.

ADITYA BIRLA NUVO LIMITED: The Company was incorporated in 1956 and was earlier known as Indian Rayon Corporation Limited and changed its name to Indian Rayon and Industries Ltd in 1987. The company in the year 2005 again changed its name to Aditya Birla Nuvo Ltd. 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 Fashion & Lifestyle Brands Division; its brands are Louis Philippe, Van Heusen, Allen Solly, Peter England, Espirit, People, The Collective- A international retailing brand, Peter England Menswear Brands Division, Peter England Fashions & Retail, Madura Garments Lifestyle Retail Co. Ltd., and Madura Garments Exports Ltd. Its Textiles business consists of Jaya Shree Textiles. Its Agri Business manufactures and markets urea, agricultural seeds and agrochemicals under the brand name of Indo Gulf Fertilisers, Birla Shaktiman Urea Gold, Birla Shaktiman Urea KrishiDev neem coated, traded fertilizers, Birla Shaktiman seeds - mainly paddy and wheat, and Birla Shaktiman pesticides. Its Insulators business consists of Aditya Birla Insulators. Its Viscose Filament Yarn (VFY) unit, consist of Indian Rayon and Ray One, producer of viscose filament yarn in India. Company’s Carbon Black business consists of Hi-Tech Carbon. Company’s IT services business consists of Aditya Birla Minacs IT Services Ltd., which offers clients domain-centred 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 and is a 74:26 joint venture between ABNUVO & Sun Life Financial, Canada. ABNUVO’s Asset Management consists of Birla Sun Life Asset Management Company Limited (BSLAMC), and is a 50:50 joint venture between the ABNUVO 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. ABNUVO also has NBFC named Aditya Birla Finance Ltd- a 100% subsidiary of ABNUVO. Company also includes Other Financial Services namely ADITYA BIRLA MONEY which provides money management & brokerage services to domestic & international clients, Aditya Birla Capital Advisory Private Ltd which is into Private Equity, Aditya Birla Money Mart Limited which is into Wealth Management, Aditya  Birla Insurance Brokers Limited which is into General Insurance Advisory. ABNUVO is the major shareholder with 23.29 % in Telecom company - Idea Cellular Limited (IDEA), which is a major GSM mobile service operator in India. ADITYA BIRLA NUVO is locally compared with Bajaj Finserv Ltd, Piramal Enterprises and Globally compared with Berkshire Hathaway of USA, Agricultural Bank of China of China, Royal Dutch Shell of USA, HSBC Holdings of Hong Kong, Exxon Mobile Corporation of USA, General Electric Company of USA, JPMorgan Chase & Co of USA, China Construction Bank of China, Industrial & Commercial Bank of China of China, MNRB Holdings Berhad of Malaysia, Great Eastern Holdings Ltd of Singapore, Lifenet Insurance Company of Japan, PetroChina Company Ltd of China.

Investment Rationale:

Aditya Birla Nuvo is a US$4 billion conglomerate operating in the services and manufacturing sectors, where it commands a leadership position. Its service sector businesses include Financial Services - Life Insurance, Asset Management, NBFC, Private Equity, Broking, Wealth Management and general insurance advisory, Fashion & Lifestyle - Branded apparels & Textiles and Telecom. Its manufacturing businesses comprise the Agri, Rayon and Insulators Businesses. Aditya Birla Nuvo is part of the Aditya Birla Group, a US$40 billion Indian multinational. The Group operates in 36 countries across the globe and is anchored by an extraordinary force of about 120,000 employees belonging to 42 nationalities and derives more than 50 per cent of its revenue from its overseas operations. The company sells two branded apparels every second from its Fashion & Lifestyle Business & is one of the largest branded apparel players in India. Louis Philippe, Allen Solly and Van Heusen are the prime and amongst famous brands & continue to be the best selling brands in India. It opened one store per day & now had expanded its retail presence to 1,750 exclusive brand outlets-stores, spanning nationwide across 4.3 million square feet. Companies has its insurance business and the Indian Life insurance industry currently comprises 23 life insurers and one public sector life insurer – LIC. The top 7 out of 23 private players contributed to 74 % of the private sector’s total new business premium in 2013-14. In 2013-14, the industry’s new business premium was up by 3 % to Rs. 59,041 Crore. LIC grew by 8 % while private players de-grew by 5 %. Consequently, the share of private players in the total pie declined from 40 % to 37 %. In terms of Individual Life new business, private life insurers as well as LIC de-grew by 3 % (Source: IRDA). Given the macro-economic environment and product transition to meet regulatory guidelines, sales growth across the industry was impacted. Following major regulatory changes in 2009, there has been a perceptible slowdown in the industry. However, this has given an opportunity to existing insurance players to review their operating models to drive towards higher efficiencies and focus on more balanced growth objectives. ABNUVO has its Retail Segment, and operates in the organised retailing market; clothing and fashion retailing. These are the largest and the most penetrated segment. The organised apparel market is growing at a faster pace than the overall apparel retail market driven by multiple factors including significant growth in discretionary income and changing lifestyles. Easy availability of credit and use of ‘Plastic Money’ have contributed to a strong and growing consumer culture in India. Expansion in the size of the upper middle class and higher advertisement outlays have led to high brand consciousness- awareness and encouraged more spending on luxury products. Within the organized apparel market, men’s category is the largest segment with more than 50 % share. Menswear will continue to dominate the market in the years to come, however, the women’s wear and kids wear are expected to grow faster and enhance their share in the overall expanding pie. In fiscal 2013-14, persistently high inflation coupled with a slowdown in the economy had a bearing on the clothing and fashion retailing segment too due to subdued consumer discretionary spending, which is now changing into positive and will be good for retail arm of ABNUVO. The Company has its Telecom business and the mobile telecommunications industry in India is divided into 22 Service Areas – 3 metro Service Areas, and 19 other Service Areas. As of March 31, 2014, India had a total reported subscriber base of 904.5 million and a VLR (active) subscriber base of 790.9 million. As of March 31, 2014, mobile Tele-density was at 72.9 % based on reported subscriber and 63.8 % based on VLR subscribers. Indian Mobile Subscriber stats as on December 2014 were 94.4 Cr Total with 83.3 Cr Active subscribers, 14.3 Cr MNP Request and Broadband subscribers of 8.57 Cr. In fiscal 2013-14, the gross revenue of the Indian wireless sector grew year-on-year by 10% to Rs. 1,65,100 Cr (US$ 28 billion). The top three cellular operators in India - Bharti Airtel, Vodafone and Idea Cellular, garnered 70 % revenue market share up from 68 % a year ago. The competitive intensity in the Telecomm industry has decreased since the quashing of the licenses and the associated spectrum by the Supreme Court of India in February 2012. The Small operators are forced to exit or reduce their presence in India. The number of licensees has therefore decreased to 6-10 mobile operators per Service Area. In addition, increasing losses have forced operators to start rationalizing tariffs to protect their investments. As a result, realizations have started to improve. And Idea the Telecom arm of ABNUVO has good footing in this sector with good sales promotion and better tariff to offer. This is surely a plus point for ABNUVO. The company’s Financial Services is Gaining its market share in the Life Insurance business through good quality sales, driven by an efficient distribution network with acceptable expense levels, and with Growing profitable assets while maintaining fund performance in the Asset Management business. The company is expanding its book size in the NBFC business, while keeping risk under control. Company has managed to capture the growing Housing Finance business and has also forayed into the Health Insurance business; this will drive the profitable growth in other businesses. The Company has been successful in Capitalising on Brand !DEA, which has strong cash flows and expanding spectrum profile & infrastructure in the Telecom business will help further to capture opportunities in the voice & the emerging wireless broadband business segments. Leveraging brand leadership of Company’s Fashion & Lifestyle by scaling up retail space & enriching product portfolio in Branded Apparels business will be added advantage, It has Expanded its linen yarn capacity to tap sector growth & is now focusing on high margin linen fabric retail in Textiles. Capturing such growth sectors gives immense opportunities and will improve margins in the Manufacturing businesses.

Outlook and Valuation:

Aditya Birla Nuvo Ltd (ABNL), a US$ 4 billion diversified conglomerate by revenue size and is a part of Aditya Birla Group, a US$ 40 billion Indian business house. Aditya Birla Nuvo Limited has an interesting mix of value-creating businesses that represent domestic consumption sector like telecom, fashion and garments, import substitution like fertiliser, viscose fibre yarn and financial services like insurance, NBFC lending, asset management among several others. These business lines give ABNUVO a unique competitive advantage in allocating funds across varied businesses and lower cost of capital. It can finance longer gestation businesses and withstand short-term earnings volatility while keeping in sight long-term goals and value creation. ABNUVO was predominantly a manufacturing house till a few years ago but now it’s a huge diversified conglomerate. It has embarked on a programme to build a new economy services sector business backed by cash flows from the manufacturing business and captured that transition successfully. During FY05-13, the share of manufacturing in revenue dropped from 67 % to 28 %. Services and consumption revenues now constitute the bigger part and reflect future opportunities. The company has painstakingly gained leadership position across business lines and has widened the moat on the back of disciplined execution. These key milestones achieved by the company have defined the entrepreneurial spirit of the company and laid the foundation for robust growth in future. ABNUVO has successfully built a pan-India telecommunications powerhouse, “Idea Cellular” and this telecom business has crossed the regulatory minefield and increased its market share to the current 16 % and is considered amongst top 3 in India, while competition intensity has reduced considerably. The company is the sole investment vehicle of the Aditya Birla group in telecom sector and has 23.30 % investment in Idea Cellular. The sector was marked with high capital investments of around Rs. 9,000 crore by ABNUVO and it gave poor returns. However, with the reduction in competitive intensity the return on capital employed (RoCE) has improved for the company and it’s now one of the successful feathers in the wings of the company. The ABNUVO has built a high-growth fashion and branded garment business, Madura Lifestyle that generates RoCE in excess of 20 % a year and is leader in its sector. This business was a loss-making acquisition for a long time, but with its unique operating structure and stable earnings of the group has led to business creation over the last eight years, while most competitors have floundered in the downturn. Recently, Allen Solly, the premium Readymade brand from Madura Garments citied to set a target of a turnover of Rs. 1,000 Cr in FY16 and expects to touch Rs. 800 Cr in sales this fiscal and Rs. 1000 Cr in the next. The Allen Solly brand has been growing at 34 % CAGR for the last three years and expects to maintain that. Last fiscal its revenue stood at Rs. 600 Cr. Mens wear enjoys a lion's share of the Allen Solly revenue with womens apparel constitutiong only 18 % & childrens wear 7 % & exports around 5 % mainly to SAARC countries & West Asia. Allen Solly brand also has footwear, handbags and accessories which contributes around 5 % of the sales. Allen Solly has a 10 year licencing agreement for Wimbledon merchandise through Solly to sell mens wear. Also, ABNUVO has built insurance business with 8 % of market share and in asset management, it has 9.4 % market share, this business is a JV and is among the top 5 players in terms of market share and profitability. It is also one of the prime candidates among 26 applicants for new banking licences to be issued by the Reserve Bank. ABNUVO also has presence in retail broking, wealth management, distribution of financial products and general insurance advisory and has forayed into private equity as well. While ABNUVO transformed its portfolio and grew new businesses, its market cap has grown only marginally. Shareholders have for long complained about lack of focus, low RoE-RoCE generated by the operating businesses and investment structures with long payoffs. But these all is changing & Companies efforts are being paid off. During 2007-2013, ABNUVO seeded new businesses. Its key businesses are now attaining critical mass within their industry segments. Now it is positioned to deploy sizeable capital and realise attractive returns. The company has switched from investment mode to harvest mode now, and has a three-pronged strategy to achieve this. The first part is to consolidate segment leadership with bolt-on acquisitions. In 2012, ABNUVO acquired the retail format business of Pantaloon for Rs 1,200 crore, employing its management bandwidth to harness synergy and turn around this business. This creates a combined fashion enterprise of about Rs 4,000 crore (sales) with revenue growing in excess of 15 % a year, synergies of scale and a tight control over working capital. Given that most competitors operate in niches or lack the financial capability to drive consolidation in the industry, the company is well placed to lead the rapid transition from unorganised to organised markets. It is also eagerly waiting for policy guidelines for the fertiliser business and is geared up to make significant investments in this business, which has a good RoCE. Second, ABNUVO is realigning its business portfolio. It has divested the low-margin carbon black business and redeployed capital in the NBFC lending business, which is generating higher RoCE over an economic cycle. It has also marked out the Rs. 2,400-crore IT-ITES business, which generates a RoCE of less than 9 %, for divestment. This will release capital of Rs. 2,000 crore that can be deployed in other businesses. The third part of the strategy relates to “Value Unlocking”. ABNUVO has considerable experience in financial services through its activities in NBFC lending, life insurance and asset management. With its impeccable track record, the group was always a strong contender for a banking licence. If that happens, the financial services businesses will be spun off into a separate structure, thereby unlocking the value of the investments and reducing the holding company discount attributed to the listed company. ABNUVO’s Sales, profit after tax and book value have grown at a CAGR 30 % over the past eight years. The company has achieved this with minimal dilution of equity. It generated cumulative operating cash flow of over Rs. 15,000 crore, which has been deployed in various growth businesses as well as to reduce debt. Overall, the total debt level is close to 1.65X, much less if we remove the leverage by NBFC. Most of the new businesses have attained a reasonable size and market leadership in their respective industry. There could be a significant improvement in consolidated RoCE from the current 11 % for the next three years. With Superior RoCE in various businesses will benefit the company and could trigger re-rating for the company. At the current market price of Rs. 1735.70, the stock is trading at a PE of 18.37 x FY15E and 16.83 x FY15E respectively. It can post EPS of Rs. 94.46 for FY15E & of Rs. 103.08 for FY16E. It is expected that the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also.

KEY FINANCIALS	FY13A	FY14A	FY15E	FY16E
SALES (₹ Crs)	25,490.20	25,893.39	27,964.86	29,922.40
NET PROFIT (₹ Cr)	1,058.89	1,142.88	1,228.79	1,340.90
EPS (₹)	88.09	87.86	94.46	103.08
PE (x)	17.73	17.78	16.54	15.15
P/BV (x)	2.05	1.82	1.63	1.46
EV/EBITDA (x)	11.05	10.84	10.31	9.87
ROE (%)	12.92	10.92	10.39	10.10
ROCE (%)	21.54	22.10	22.14	22.12

-------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------
Disclaimer: 

This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.

---------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------

*Dear Reader friend, if you enjoyed this article, please do share it with your Friends and Colleagues through Facebook and Twitter, and drop in your valuable thoughts in comment box..

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

VIEW THE POWER POINT PRESENTATION ON

RETURN ON CAPITAL

UNION BUDGET 2015-16 : HIGHLIGHTS !!!

GROSS DOMESTIC PRODUCT ESTIMATED TO GROW AT at 8.00 % - 8.50 % for FY15 - 16

AT CURRENT PRICES THE ADVANCE GDP ESTIMATE OF 2014 - 15 IS ₹ Rs. 126,53,762 LAKHS CR AND AT 2011-12 PRICES ITS AT Rs. 106,56,925 LAKHS CR.

FY15 FISCAL DEFICIT AT Rs. 5,55,649 CR.
FY15 TOTAL SUBSIDES AT Rs. 2,43,811 CR.

FY15 FERTILIZER SUBSIDIES AT  Rs. 72,968 CR.

FY15 FOOD SUBSIDIES AT  Rs. 1,24,000 CR.

FY15 OIL-PETROLUEM SUBSIDIES AT Rs. 30,270 CR.

FY15 NET MARKET LOANS OF Rs. 4,56,205 CR.

FY15 STATE PF OF Rs. 10,000 CR.

FY15 EXTERNAL AID OF Rs. 11,173 CR.

THE CENTER'S EXPENDITURE 2014-15 IS PROJECTED AT Rs. 17,77,477 Cr.

INFLOWS (Rs. in Crs)	AMOUNT
CORPORATE TAX	4,70,628
INCOME TAX	3,27,367
CUSTOMS DUTY	2,08,336
EXCISE DUTY	2,29,808
SERVICE TAX	2,09,774
TAX OF UNION TERRITORY	3,577
GROSS TAX REVENUES	14,49,490
TAX RECEIPTS (net)	9,19,842

NON TAX RECEIPTS (Rs. in Crs)	AMOUNT
INTEREST RECEIPTS	23,600
DIVIDENDS & PROFITS	1,00,651
EXTERNAL GRANTS	1,774
OTHER NON TAX RECEIPTS	94,413
RECEIPTS OF UNION TERRITORY	1,296
TOTAL	2,21,734

DEBT RECEIPT (Rs. in Crs)	AMOUNT
MARKET LOANS	4,56,405
SHORT TERM BORROWINGS	30,063
Securities Issued against Small Savings	22,408
STATE PROVIDEND FUND (Net)	10,000
EXTERNAL ASSISTANCE (Net)	11,173
OTHER RECEIPTS (Net)	13,559
TOTAL	5,43,608

NON DEBT CAPITAL RECEIPTS (Rs. in Crs)	AMOUNT
RECOVERY OF LOANS & ADVANCES	10,753
MISC. CAPITAL RECEIPTS	69,500
TOTAL	80,253

* Out of the Tax Receipts the Center has to keep aside States share of Rs. 5,24,000 cr & for Calamity & Contingency Fund of Rs. 5,690 crs.

OUT FLOW (Rs. in Cr)	AMOUNT
PLAN EXPENDITURE	3,30,020
NON PLAN EXPENDITURE	12,06,027
OR
REVENUE EXPENDITURE	15,36,047
CAPITAL EXPENDITURE	2,41,430
DEFENCE	2,46,727
SUBSIDIES	2,43,811
GRANTS TO STATES & UTs	1,08,552
PENSIONS	88,521
INTEREST PAYMENTS	4,56,145
OTHER GENERAL SERVICES	30,936
POSTAL DEFICIT	6,665
EXPENSES of UTs without Legislature	4,998
ECONOMIC SERVICES	28,984
OTHER NON PLAN CAPITAL OUTLAY	10,582
ECONOMIC SERVICES	22,075
GRANTS TO FOREIGN GOVT.	4,342
POLICE	51,791
SOCIAL SERVICES	29,143
LOANS TO STATE & UT GOVT	79
LOANS TO FOREGIN GOVT	158
OTHERS	188

SOME MORE POINTS FROM BUDGET

®  Govt. committed to achieve Fiscal deficit target of 4.1 % of GDP followed by fiscal deficit of 3.9 % for 2015-16 and to achived 3.00 % in next 3 years with target of 3.5 % in 2016-17 and 3 % in 2017-18.

®   Rs. 2,46,726 Cr allocated to Defence sector and focus will be on Make In India for quick Manufacturing of Defence Equipment.  

® Propose to merge commodity regulator Forward Market Commission with SEBI. Proposes to introduce a public contract resolution of disputes bill.

®    To bring a new Bankruptcy Code in 2015-16. To establish an Autonomous bank board bureau to improve management of Public Sector banks.
®  Abolition of Wealth Tax this will be a loss of Rs. 1008 cr but proposes additional 2 % surcharge for the super rich with income of over Rs. 1 Cr. 

®  No Changes in Tax Rates & Slabs for Individuals, but proposes rate of corporate tax to be reduce to 25 % over next four years.
®   Total exemption of upto Rs. 4,44,200 can be achieved; Service Tax increased to 14 %. 

®  Announced a universal security system that would require half the corpus being contributed by the Union. And the premium woould be as low as Rs. 12 per annum.
® Announced the Atal Pension Yojana, where the government will contibute 50 % of premium limited to Rs. 1000 per year and a Prime Minister Jeevan Jyoti Bima Yojana which will provide insurance cover of Rs. 3 lakh with a premium of just Rs, 330 per year. The Pradhan Mantri Suraksha Bina Yojna will cover accidental death risk of Rs. 2 Lakh for a premium of just Rs. 12 per year. Proposes to create a Universal Social Security System for all Indians.
®  To introduce Prime Minister Jeevan Jyoti Bima Yojana which will provide insurance cover of Rs. 3 lakh with a premium of just Rs, 330 per year. The Pradhan Mantri Suraksha Bina Yojna will cover accidental death risk of Rs. 2 Lakh for a premium of just Rs. 12 per year. Proposes to create a Universal Social Security System for all Indians. To introduce new schemes for physical aids and assisted living devices for people aged over 80. Govt to use Rs. 9,000 Cr unclaimed funds in PPF/EPF accounts for Senior Citizens Fund. 
®  Transport allowance has been raised from Rs. 800 per month to Rs. 1600 per month. Health Insurance premium deduction has been hiked from Rs. 15,000 to Rs. 25,000.
®  To allow Rs. 80,000 as deduction for serious diesases for senior citizens, Super senior citizens to get 30,000 deduction on medical expenses.

® Allocates Rs. 5,000 Cr additional allocation for MGNREGA. Also Proposes 100 % exemption for contribution to Swachch Bharat apart from CSR.
®   To allocate Rs. 25,000 Cr for Rural Infrastructure Development Bank, to allocate Rs. 5,300 Cr to support Micro Irrigation Programme and sets Farmers credit to be Rs. 8.5 lakh Cr. To allocate Rs. 70,000 Cr to Infrastructure sector. To issue Tax Free Bonds for projects in Rails & Irrigation. To Allocate Rs. 150 Cr for Research & Developement. Proposes to set up 5 Ultra Mega Power Projects each of 4,000 MW. 

®  Atal Innovation Mission to be established to draw on expertise of entrepreneurs and researchers to foster scientific innovation.

®    Visas on arrivals extended from 43 countries to 150 countries. Development schemes for Churches and Convents in Old Goa, Hampi, Elephanta Caves, Forests of Rajasthan, Leh Palace, Varanasi town, Jallianwala Baugh, Qutb Shahi tombs at Hyderabad to be under the new toursim scheme.

® GAAR deferred for two years. And Financial Inclusion of 12.5 Cr families now financially mainstreamed in 100 Days. To introduce Sovereign Gold Bond as an Alternative to purchasing metal gold. New scheme for depositors of gold to earn interest and jewellers to obtain loans on their metal accounts. To Develop an Indian Gold Voin, which will carry Ashok Chakra on its face to reduce the demand for foregin coins and recycle the gold available in the country.

®  To allocate Rs. 75 Cr for Electric Car Production. Targets 100 KMW in Solar, 60 KMW in Wind, 10 KMW in biomass and 5 KMW in small hydra in renewable enrgy by 2022. Clear Energy Cess increased from Rs. 100 to Rs. 200 per metric ton of Coal to Finance Green Energy Fund. 

® Government to construct 50,000 toilets under Swachh Bharat Abhiyan. Two programmes to be introduced - GST & JAM Trinity. GST will be implemented by April 2016. Gov. targets Housing for all by 2020. To have upgradation of 80,000 Secondary schools.
®  MUDRA bank will refinance micro finance orgs to encourage first generation SC/ST entrepreneurs.

® Direct Benefits Transfer will be further expanded from 1 Cr to 10.3 Cr people. 

® To Allocate Rs. 33,150 Cr to healthcare. To Construct AIIMS in J&K, Punjab, Tamil Nadu, Himachal Pradesh, Bihar & Assam. And proposes IIT in Karnataka Indian Institute of Mines in Dhanbad to be upgraded to IIT. To construct Post Graduate Instiute of Horticulture in Amritsar. To construct Centre of Film production, animation and gaming to come up in Arunachal Pradesh.

® Plans to set up national Investment Infra Fund. And will need to build additional 1,00,000 Km of Road and need to encourage Public Ports to corporatize under companies act.

®   Prosposes to do away with different types of Foregin Investment & Replace them withh composite caps. To allow Foregin investment in Alternative Investment Funds.

®  Excise duty on footwear with leather uppers and having retail price of more than Rs. 1000 per pair reduced to 6 % from 10 %. Proposed to Exempt SAD on all items. Increase excise duty to 12.5%. Reduced custom duty on 22 items. Custom Duty on commercial Vehicals raised from 10 % to 40 %. 

®    Excise levy on Cigarettes and the compounded levy Scheme applicable to Pan Masala, Gutkha and other Tobacco products also changed.

®   Clean Energy cess increased from Rs. 100 to Rs. 200 per metric tonne of coal .etc to finance clean Environment.  

®  Proposes to rationalised capital gains tax regime for real estates investmetn trusts. Rental Income from REITS to have pass through facility.

®  Quoting PAN a must for all Purchase or Sale above Rs. 1,00,000. Acceptance of re-payment of an advance of Rs. 20,000 or more in Cash for Purchase of Immovable Property to be prohibited. Benami Transaction (Prohibition) Bill to curb domestic black money be introduced in current session of Parliament. Provision will be made to tackle splitting of reportable transaction.

®   Additional Investmetn allowance (@15%) and additional depreciation (@35%) to new manufacturing units set up during the period 01-04-2015 to 31-03-2020 in notified backward areas of Andhra Pradesh and Telangana. Rate of Income Tax on royalty and fees for technical services & support reduced from 25 % to 10 % to facilitate technology inflow.    

®  FY15 disinvestment target Rs. 69,500 Crs and 26,353 Cr through disinvestments in PSUs. Market Stabilisation Scheme of Rs. 20,000 Cr, Communication receipt Rs. 42,865 Cr

*Dear Reader friend, if you enjoyed this article, please do share it with your Friends and Colleagues through Facebook and Twitter, and drop in your valuable thoughts in comment box..

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

VIEW THE POWER POINT PRESENTATION ON

RETURN ON CAPITAL

INFOEDGE INDIA LTD : NEXT ALIBABA IN MAKING !!!

Scrip Code: 532777 / NAUKRI

CMP:  Rs. 812.35; Market Cap: Rs. 9,765.75 Cr; 52 Week High/Low: Rs. 1015.05 / Rs. 523.70.

Total Shares: 12,02,16,159 shares; Promoters : 5,33,32,091 shares –44.36 %; Total Public holding : 6,68,84,068 shares – 55.63 %; Book Value: Rs. 64.32; Face Value: Rs. 10.00; EPS: Rs. 12.08; Dividend: 25.00 %; P/E: 67.24 times; Ind. P/E: 40.11; EV/EBITDA:41.60.

Total Debt: 0.48 Cr; Enterprise Value: Rs. 9,648.13 Cr.

INFO EDGE INDIA LTD: Info Edge (India) Ltd was incorporated in 1995 and is based in Nodia, India. Info Edge (India) Limited is an India-based company engaged in the business of providing online classifieds and certain related services. The Company operates its business principally through four different divisions: Naukri.com, Jeevansathi.com and 99acres.com. It provides recruitment classifieds and services through its Naukri.com and Quadrangle business divisions. The company came out with an IPO on November 2006 offering 53,23,851 equity shares of Rs. 10 each for Rs. 320 per share raising Rs. 170.36 Cr, the shares of INFO EDGE got listed on 22 November 2006 at Rs. 623.80 per share. The company has given bonus shares in the ratio of 1:1 in the year 2010 and second bonus shares in the ratio of 1:1 in the year 2012. Info Edge (India) Limited provides recruitment classifieds and related services to job seekers and employers and recruitment consultants through its website: www.naukri.com, as well as through its office network. Through the Quadrangle division, the Company provides executive search services to its various corporate customers in the information technology and information technology-enabled services. Naukri.com is an online job posting website that offers services for recruiters, job seekers, and employers. Jeevansathi.com provides matrimonial classifieds and related services for prospective brides, grooms, and relatives. The Company also offers a real estate classifieds service through its Website: 99acres.com and an education portal Shiksha.com. Info Edge also owns Allcheckdeals.com, an online real estate brokerage firm which is run as a subsidiary company. Company also owns naukrigulf.com in Middle East. It also operates brijj.com, a professional networking site; firstnaukri.com, a fresher hiring site; quadrangle.com, an offline executive search business site; Meritnation.com that offers kindergarten to class 12 assignment and tuitions; and zomato.com, an online food guide portal. The company’s subsidiary as on 31 March 2014 includes: Naukri Internet Services Private Limited and Jeevansathi Internet Services Private Ltd both of which is own internet domain names and related trademarks used in it business, Allcheckdeals.com India Private Ltd, Applect Learning Systems Pvt Ltd which owns and operates meritnation.com, Zomato media Pvt Ltd , MakeSense Technologies Pvt Ltd and Info Edge (India) Mauritius Ltd. Info Edge India Ltd is locally compared with HOMESHOP 18, Justdial Ltd and Globally compared with Monster.com , Seek.com, carsales.com , Truila Inc, HomeAway Inc, Zillow Inc, SouFun Holdings, REA Group, Rightmove PLC, Yelp Inc of USA, Yahoo! Inc of USA, eBay Inc of USA, Googlr Inc of USA, Facebook Inc of USA, Linkedin Corp of USA, Pandora Media Inc of USA, Shutterstock Inc of USA, Sciquest Inc of USA, Zillow Inc od USA, Monster Worlwide Inc of USA, America OnLine from USA, Bazaarvoice Inc of USA, Xo Group Inc of USA, Twitter Inc of USA, Verisign Inc of USA, Yelp Inc of USA, Carsales.com Ltd of Australila, Moneysupermarket.com from UK, XING AG of Germany, United Internet AG of Germany, Opera Software ASA of Norway, Vistaprint N.V. of Netherlands, Baidu Inc of China, Beijing 58 Information and Technology Co Ltd of China, 21Vianet group Inc of China, iProperty Group Ltd of Malaysia, Nifty Corporation of Japan, Wix.com of Israel, Ateam inc of Japan, CROOZ Inc of Japan, F@N Communication Inc of Japan, Infomart Corp of Japan, Excite Japan Co Ltd of Japan, Asahi Net Inc of Japan, Nexyz Corporation of Japan, Drecom Co ltd of Japan, Zappallas Inc of Japan.

Investment Rationale:

InfoEdge (India) Ltd operates a wide range of online websites. It enjoys leadership position in recruitment website-Naukri.com, in property website-99acres.com and is among the top 3 players in matrimony website-Jeevansathi.com. Apart from this, InfoEdge has made significant strategic investments into emerging internet companies like meritnation.com, policybazaar.com, mydala.com, Canvera.com and zomato.com. With its headquarters in Noida (NCR), the company employs over 2,460 people and operates through a network of 57 offices located in 32 cities throughout India. These offices primarily engage in sales, marketing and payment collection activities for company’s businesses. To cater to the Gulf market they have 2 offices in Dubai and 1 each in Bahrain, Riyadh and Abu Dhabi. Recently, in January 2015, its subsidiary in Restaurant listing and review site Zomato.com, has acquired its sixth & biggest overseas acquisition of Urbanspoon, a restaurant information and table booking property. The deal was an all-cash transaction worth $52 million or Rs. 325 crore. This was done from the funds raised in November 2014, where Zomato raised $60 million in a fresh round of funding at a pre-money valuation of $600 million from existing investors Info Edge (India) and Sequoia while adding Vy Capital as a new investor. This transaction instantly inflated Zomato's size by many times over across multiple parameters and most importantly it now marks Zomato's entry into the North American market which was till now dominated by Yelp. Zomato will now have a presence in 500+ cities, 1mn+ restaurant listings, 31mn app downloads, 1.4mn reviews, 80mn+ monthly visits and garner leadership in Canada, Australia and some key cities in the US. Urbanspoon, besides restaurant reviews, also allows users to book restaurant tables with integration of OpenTable to its site. Zomato also has a similar arrangement with OpenTable for certain overseas markets such as the UK. Zomato clocks 3.5 Cr+ visits a month which would rise to 8 Cr+ post the acquisition; its presence would also rise over threefold to over 500 cities against 150 currently with number of restaurants listed increasing to the same extent to over 10 Lakhs restaurants. The biggest differentiator, however, would be that the number of ratings would rise around 9x to 4.3 Cr with number of reviewers rising to over 1.4 million as against 400,000 at present. Urbanspoon is the sixth such deal by Zomato since July of 2014. Zomato also strucked its seventh overseas deal by acquiring Turkey Based resturant search service Mekanist after Urbanspoon later this month. All the Mekanist App users will be able to use the Zomato app and Zomato will cover over 75,000 resturants from the current 27,500 in Turkey and would be serving over 30 lakh user a month. Mekanist is one of the heavyweights in the online resturant search services in Turkey and is also one of the first and most successful tech startup from Turkey. It has 1,90,000 listed establishments such as resturants , cafes, bars along with over 5,00,000 reviews from its 15,00,000 strong signed up user based on web & mobile. Just last December 2014 it acquired Italy-based web and mobile restaurant search services start up Cibando Ltd. for an undisclosed sum. Over the last few months Zomato has acquired four other companies, including MenuMania in New Zealand; Lunchtime in the Czech Republic; Obedovat in Slovakia; and Gastronauci in Poland. To date, Zomato has raised more than $113 million, over multiple rounds of funding from investors including Vy Capital, Info Edge and Sequoia Capital. And definitely this deal benefits in the valuation of Info Edge India Ltd. Info Edge India Ltd, is a clear leader in key online classifieds segments and now is one of the primary beneficiaries of structural shift in ad spends towards online platforms which is clearly driven by increasing smartphone penetration and which is on the cusp of a J curve. 

India is among the world's youngest nations with a median age of 26 years. 65 % of Indian population is estimated to be below 35 years of age and India will have 7 Cr new entrants to its work force over the next 5 years. India currently has about 21.4 Cr internet users, the third largest in the world and is likely to have 33 Cr to 37 Cr internet users in 2015 which would then be the second largest in terms of incremental growth. Currently, as of December 2014 the TRAI reports that India had 85.74 Cr broadband subscribers which was 82.22 Cr - this gives a growth of 4.28 % MoM. The wired subscribers at the end of Dec 2014 was 1.53 Cr, Mobile devices users (Phone & Dongles were 6.99 Cr, Fixed Wireless subscribers (Wi-Fi, Wi-Max,Point-to-Point Radio & VSAT) subscribers at 4,30,000. Now, with declining costs of Internet access and mobile devices, nearly 55 % of aggregate user base in 2015 is expected to have an access to the internet from a mobile or tablet device in India. Economic contribution from Internet in India can be potentially doubled from current 1.6 % of GDP to 2.8 % to 3.3 % by 2015. Internet-related economy is expected to grow bigger than education and as big as healthcare sector in terms of current GDP share. Internet’s effect on the Indian economy goes well beyond iGDP. The Current levels of internet-related expenditure are estimated to create about 60 lakhs direct and indirect jobs. As the direct impact of the internet on India’s GDP has the potential to treble by 2015, an additional 1.6 Cr jobs could be created. Info Edge Lts is a long term play on the internet space in India. With lead in the online recruitment market (through Naukri.com) and presence in the online classified space has the potential to establish a market leading position and grab large pie of increasing online adoption. As various businesses come out of the recent slowdown it is seen that the recruitment industry to grow significantly as it is highly correlated to the economic health of the growth of domestic corporate sector. 

Outlook and Valuation: 

Info Edge (India) ltd is India’s one of the largest leading online company with its strong brands and sustainable growing businesses. It has a very excellent and experienced management team. The company have invested in several internet start-ups ventures. Info Edge’s Naukri has garnered higher market share in this slowdown, also its innovative products helps naukri to combat threat against Linkedin.com, naukri continues to invest in its brand, sales team, customer service, tech and product innovation and support. Info Edge’s 99acre.com is benefiting from the increase in the real estate advertising and has increased its market share. 99acres.com have improved its site by improving user experience- pricing trends, photos and videos, android Apps and the site is now have spread its sales coverage across cities, this has helped 99acres.com to bring in more traffic, 99acre.com soon plans to launch a verified listings. Info Edge’s Jeevansathi.com has leveraged its IP built over last 5 years through investing in brand building. Management will continue to invest its analytics and algorithms. Info Edge’s other brands like Shiksha, FirstNaukri, naukrigulf continues to perform well. Management is committed to invest in potential big businesses of future like zomato, meritnation, policybazaar and is vouching for potential start-ups and M&A’s. On financial side Info Edge posted revenue growth of 18.1 % to Rs. 145.7 Cr on the back of healthy increase of 19 % YoY in recruitment business and mere 15.5 % YoY the lowest in last 20 quarters growth in other verticals. Operating profit declined by 14 % YoY, as A&P expenses increased by 55 % YoY while employee cost was up by 30 % as headcount increased by 32 % YoY. Though operating margin in the recruitment vertical was at 49.8 %, other verticals posted operating loss of Rs. 18.4 Cr including Rs. 14.4 Cr loss in 99acres. PAT was up by 20 % on the back of high other income. Management has guided for 18-20 % revenue growth for the recruitment vertical for the next 2 years. It is believed that with the upturn in the economy, new product launches and client additions will spur growth. While IT sector has grown at a healthy pace, and so it can be safely believed that the other sectors will follow suit in the near term. With market share of 65-70 %, the company can maintain margins in 50 % range. Revenue growth in 99acres slowed down to 20 % YoY which is lowest in past years during the quarter as key cities including NCR, Mumbai, Chennai did not show much activity in the real estate sector due to uncertain market conditions. At the same time, hyper competition from recently funded portals resulted in higher client acquisition cost impacting operating performance wherein operating loss was the highest ever at Rs. 14. 4Cr. However, with market share of 30-35 %, new product launches such as listings verification, new UI design, analytics and focus on mobile phones with 30 % traffic will help the company in the medium to long run. Zomato is focusing on expanding business and this could result delay in breaking even however, Urbanspoon, acquisition is a stepping stone for Zomato in US market giving it a foothold in the US, where Urbanspoon enjoys number two position. Zomato has learnt from the tough experience in the UK, where it found it difficult to expand organically. In terms of business, Urbanspoon serves three million unique monthly visitors or 1/12 of Zomato’s user base. Its valuation of US$52 mn needs to be seen in this context versus US$670 mn valuation of Zomato based on the recent transaction. Info Edge had expected the Zomato business to break even at a top line of Rs. 40. Cr to Rs. 50 Cr. This is in contrast to the current losses at projected topline of Rs. 80 Cr to Rs. 90 Cr in FY2015E. It believes Zomato will leverage its recent acquisitions to cross-sell products and establish a presence in new markets. Presently most of the revenues of the portal come from India and the UAE. However, given that Zomato will need additional funding, there is a chance that INFO EDGE might not be able to retain its 50 % stake in Zomato unless it decides to raise further capital or divert some of the $125mn raised from the recent QIP towards Zomato. The QIP money was raised by Info Edge with the intention of investing into 99acres which is the real estate classified business. Post the last round of fund infusion into Zomato which was in January 2015, INFO EDGE would have Rs. 1060 Cr in cash of which Rs. 750 Cr is earmarked for investment into 99acres. There is a high growth potential of Infoedge to unlock the actual value of the stock over the years to come. Listing of its subsidiaries can also be supporting to the company’s valuation. On SOTP (sum-of-the-parts) basis, the value of INFO EDGE alone comes at Rs. 505.00 per share valueing 29.70 x its FY17E EPS of Rs. 17. The valuation of the Investee comapnies - the value of 99acers comes at Rs. 167 per share, Zomato Media valuing it at 10x to sales having 50 % stake comes to Rs. 178 per share; Applect Learning Systems valuing 6x to sales having 56 % gives Rs. 13 per share; Canvera Digital Technologies valuing 6x to sales having 33 % stake gives us Rs. 35 per share, totaling this gives us the value of its subsidiaries at Rs. 332 per share. And valuing the whole gives us the value of INFO EDGE of Rs. 986.00 per share. It is expected that the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also. 

SOTP VALUATIONS :

Business Subsidiary	Value Per Share (₹)
InfoEdge Standalone	505.00
99acres (Non-Listed)	167.00
Zomato (Non-Listed)	178.00
Applect Learning Systems (Non-Listed)	13.00
Canvera Digital Technologies (Non-Listed)	35.00
Other Investments	88.00
TOTAL	986.00

KEY FINANCIALS	FY14	FY15E	FY16E	FY17E
SALES (₹ Crs)	505.09	604.70	736.50	891.70
NET PROFIT (₹ Cr)	128.50	155.70	203.80	251.70
EPS (₹)	11.80	13.00	17.00	21.00
PE (x)	74.00	62.30	47.60	38.50
P/BV (x)	11.60	6.00	5.50	5.00
EV/EBITDA (x)	47.90	44.10	34.40	26.60
ROE (%)	18.40	13.10	12.00	13.50
ROCE (%)	14.30	9.30	8.30	9.50

-------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------
Disclaimer: 

This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.

---------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------

*Dear Reader friend, if you enjoyed this article, please do share it with your Friends and Colleagues through Facebook and Twitter, and drop in your valuable thoughts in comment box..

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

VIEW THE POWER POINT PRESENTATION ON

RETURN ON CAPITAL