ASTRA MICROWAVE PRODUCTS LTD - A NICHE PLAYER IN DEFENCE SECTOR

 

Astra Microwave product offering a good investment opportunity in the less penetrated defence sector by private sector companies.This Hyderabad based company is one of the very few listed players concentrating in this sector.Company manufacturing various Radio Frequency and Microwave based products for  sectors like Defence,Telecom,Space..etc.Its product list includes different  types of Radars,Modulators,Transmitters and Amplifiers.It is a one of the very few reliable Indian suppliers of such products to Public sector companies operating in defense and space  sector in India  like BEL and ISRO. Using their strong R&D AMP indigenously developed and supplied  many critical parts of  India’s first  radar Imaging Satellite (RISAT-1) which launched in 2012. Company also having strong business relations with overseas defence and space sector players. AMPL is working on a wide variety of important and high-tech defence projects such as Airborne Early Warning and Control (AEW&C) programme of DRDO, various ground and air-based radar programmes for Indian armed forces, sub-systems for Akash and Astra missiles, and Unmanned Aerial Vehicles (UAVs) like Nishant and Rustom.

Companies strong relations with ISRO and DRDO as a reliable supplier in a quality quotient industry creates a niche status for this company.Last year company received one high value order worth Rs.350 Cr from an overseas customer for supply of microwave sub systems.In fact it is one of the largest orders placed by a foreign company to an Indian private sector company in defence sector.We can take it as a testimony for the quality of the products supplied by AMP.

                                                                                Indian defence sector is expected to open up for private sector players in a big way going forward.Companies like L&T ,Mahindra..etc are scouting plans to tap the upcoming opportunities in this sector.With less than 25% promoter stake AMP is really a potential take over target for any serious player in this sector. In the past many rumors are there in the market connected with a possible take over by L&T,Mahindra ,BEL ..etc. L&T already acquired close to 10 % stake in AMP. Presence of some private equity investors and mutual funds makes it vulnerable as an easy take over target .One such investor is reducing their stake through open market sales but on  the other side ,promoters are very aggressively hiking their stake in past few weeks through open market purchases.Whether there is a take over in future or not ,there is nothing much  to loose at CMP of Rs.35.Company having very good order book position of Rs.1025 cr  which is almost 5 times of  company’s last year turnover.Such kind of a visibility is very rare in these days of recession. I hope ,share price will move to the next orbit once the supply from this single source ends .Recommending a BUY at CMP of Rs.35 with a long term view.Stock listed both in NSE and BSE

Link to company Website HERE

Related Readings

  BEL plans to invest in Astra Microwave

Astra Microwave wins Rs 310 crore defence contract

 

No fresh stake sale to L&T, says Astra Microwave MD

L&T To Buy Strategic Venture's Stake In Astra Microwave

SEBI = SMART ,PROMOTERS = OVER SMART

Our smart regulator SEBI introduced Periodic Call Auction to save retail investors from PRICE MANIPULATION AND LOW LIQUIDITY !!!!.But  some over smart promoters  find ways to escape from this system ,that itself without  selling  even  100 shares to general public in one quarter. Unbelievable ? , no,  it is possible.Read it below :

As per the circular issued by SEBI ,a stock will fall into PCA if it is satisfying all the below three conditions.

Based on this circular  if there is an average daily  trding volume of 10000 (Total shares traded in the given period / no of trading days.)   ,such stocks will be excluded from this system.

See the below picture to see the daily trading volume of WESTLIFE DEVELOPMENT LTD :

 

It is clear from the data that ,out of 56 trading days during this period ,every day except on 22/03/2013
just one or two shares traded.But on 22 nd,total traded volume was as high as 625001. The most interesting part is that even you  entered a buy order on that day at the very first second of trading hour on upper circuit ,you can't become a share holder of this company .The entire traded quantity on that day executed through the block deal window between few promoters itself . ( see the data below)

Block deal is a facility provided by exchanges In order to facilitate execution of large trades.A separate trading window is provided. A trade, with a minimum quantity of 5,00,000 shares or minimum value of Rs.5 crore executed through a single transaction on this separate window of the stock exchange will constitute a BLOCK Deal

It is clear that normally Block Deal window is out of reach of common investors.

WITH THIS SINGLE BLOCK DEAL WITHIN FAMILY MEMBERS ,COMPANY SUCCESSFULLY  SATISFIED THE CRITERIA ( MORE THAN 10000 SHARS PER DAY)  TO COME OUT OF PCA WITHOUT GIVING   100 SHARES TO GENERAL PUBLIC.

ON THE OTHER SIDE ,THERE IS LOT OF GOOD COMPANIES WITH DAILY VOLUME OF 2000 OR 5000 ARE CAUGHT IN PCA .

THIS SAME COMPANY DONE THE SAME GAME IN THIS ONGOING QUARTER WITH A BLOCK DEAL OF 630000 SHARES ON 19/06/2013 ,AND IT WILL ESCAPE THIS TIME TOO IF SEBI IS NOT CONSIDERING IT AS A SEPERATE CASE.


CONCLUSION

MESSAGE FROM SEBI TO PROMOTERS :-  IF YOU WANT TO EXIT FROM PCA , DO SOME FRAUD PRACTICES LIKE THIS ,IF YOU ARE GENUINE WE WILL PUNISH YOU .

Falling Rupee and Stocks .....

Weakness of Rupee is the headline of financial media for the past many weeks.But the case of our currency is not an isolated one and the currencies of many other  countries are also showing the same trend.Possibility of an early withdrawal of QE may be an important  reason for this  along with many other.Lot of amount bearing cheap interest rate originated from US are deployed in various assets across the globe .Even partial withdrawal of this money may create wide fluctuations in currency values especially in  countries like India with an unfavourable CAD position.But ultimately ,in a long run this withdrawal of money from various assets  and commodities may reduce the inflationary pressure which may  help the government to start aggressive rate cuts. If we take the case of India, even if WPI showing signs of cool off CPI is not giving any comfort. Only  Creating a strong and fair distribution channel and taking stern action against those who are unwilling to pass on the benefits of falling WPI to the end user  will ensure the reach of any benefit to the common man.Otherwise all these gains of falling WPI will ends in the hands of few middlemen and politicians and we can’t expect any significant reduction in CPI.

As investors in stocks ,we are always looking for opportunities to gain out of weakening rupee.But blindly selecting an export oriented  company may not save the purpose.Company’s obligations in the form of foreign debt which took at an earlier stage when rupee was in strength is playing the spoil spot of many companies in these days.This sharp crash in rupee value force them to pay back huge extra amount to settle the debt  which is beyond the ability of many companies .What I mean is, before selecting a company for investment based on ‘weak rupee ‘ theme we should also check the size of  obligation in foreign currency  and their ability to repay it .Normally IT and Pharma companies are first catching the attention during a weak rupee scenario. Major IT  companies are debt free  and immune from this threat.But many companies in this sector heavily depending non US countries mainly Europe for their business and the early signs of revival is visible only in US economy and no respite for EU countries .Such a situation may offset the possible gains due to weak rupee .More than that the currency hedge adopted by big players may limit their risk as well as gain.In the case of Pharma companies one should analyse the percentage of  export income and import of raw materials to get a clear picture. 

                                                                              Other than these two sectors another one which may benefit from the rupee weakness is rice exporting companies .If the earlier sign of monsoon is any indication ,there is no chances for any change in export policy of rice in this year.If it is the case ,companies from this sector may immensely benefit due to the current scenario.We should also watch the price trend of offerings  by other major rice producers in the world market to get a fair picture.Stock price of  companies  from this sector started to show some firmness in last few sessions but they are still at the lower level if we take a ten year statistics. Many of these companies  reported good numbers even in the  latest March quarter itself .Lakshmi Energy and Foods,Kohinoor Foods,KRBL,REI Agro,LT Foods ( Daawat)..etc are the major  listed players in this sector.I expect some out performance of companies from this sector in the ongoing FY...

CUMMINS INDIA - REPEAT

This stock recommended as a BUY on 11 May 2013 @ Rs.520 .Stock now corrected to Rs.465 / .One can average it and hold for long term.For old posting Click HERE

ONLY FOR HIGH RISK INVESTORS.........

Traditionally ,Investing in stocks considered as a high risk high return game compared with other opportunities like Real Estate ,Gold..etc.Even in stocks itself the degree of risk -return is different in the case of Blue Chips,Large Caps,small caps..etc.Investing in turnaround companies is a favourite option of high risk takers to generate maximum return at the cost of highest risk.This strategy  not at all suitable for average or below average risk takers .Investment in such stocks may make millionaire's as well as bankrupts based on the accuracy of one’s calculations.What I mean is , below two stocks are from such a category and suitable only for investors who are even willing to forget their entire capital invested and also having enough patience.

2     Ashapura Minechem

This company along with its subsidiaries are the largest exporters of bentonite from India and one among the biggest five in the world.In addition to bentonite, company is in the production of many other minerals including sizable operations in Bauxite , Kaolin, Attapulgite, Barites..etc.Its major product –Benonite- is widely used in metal casting, iron ore pelletizing, civil engineering, drilling,   paper, detergents, cosmetics..etc. Bauxite is the basic ore for producing Aluminium.Company was a darling of investors till 2008 and its share price (post FV split) was around Rs.400-500 level.A big blow came in the form of the  ban on export /sale of bauxite by the government of Gujarat in 2008-09.Only because of this unexpected ban many issues followed in the form of forex losses and claims by few shipping companies.Kaolin plant in Kerala went into trouble on account of some local issues.All these incidents derailed company’s operations and ends in big losses.New mineral policy announced by Gujarat Government in  2009 -10 bring clarity in mining policy and permitted bauxite mining again.But by that time company’s financial health eroded a lot and it declared as a Sick company in 2012.After many month’s sincere attempt by the management, now the company is in a recovery mode.Debt of the company restructured and promoters brought  more funds into the company by way of subscribing 40,00,000 Equity Shares of Rs. 2 each at a price of Rs. 36.83 per share and 40,00,000 Convertible Warrants to be converted into equity shares.Claims by shipping companies are challenged by the company in court and case with one company  already settled out of court.Management of Ashapura expecting a favorable verdict in other cases too.On the financial front company showing sharp improvement in past few quarters.In latest full year company reported a Sales of Rs.771 Cr and its bottom line also showing remarkable improvement even excluding other income component.

                                                         Due to environment related issues ,entry of new players in this segment is not very easy now and probably in future.This situation giving special advantage for existing miners .I believe ,the testing time of this company is over and it is the time for a new beginning in the history of this company .Currently stock is trading around Rs.42

NITCO LTD

This stock once recommended around Rs.60 ( old posting HERE) which is currently trading around Rs.15.Recently company received permission to restructure its debt .As in the above case ,now promoters are making additional investment of Rs.57 Cr  by subscribing 22099206 shares at a price of Rs.25.20 each.Company is still a reputed brand in its category and  reported a turnover of Rs.800 Cr in latest FY 2012-13.

Conclusion

There is lot of companies moving between life or death situation.Reasons may vary from fraud promoters,sluggish economic growth,adverse rupee movement..etc etc.Even after restructuring or debt reduction only a few will survive and regain their past glory .Promoters interest to bring back business and their hard working is the moot  point deciding the success or failure.Among many of these companies ,the above mentioned two cases deserves special attention not only due to the fund infusion by promoters but because of the fact that even they are going through tough times still they are reporting respectable top line in the range of Rs.700-800 Cr each.I think ,their business are still viable and they can recover from the trouble if properly managed .Promoters may be in a better position to understand their SWOT by now.Hence I recommending both these stocks for extreme risk takers .

Price History :

Company Name                All time High            Low( UA)       High         Low             CMP

                                       ( Un Adjusted)                                      (Adj*)         (Adj)

      

Ashapura Minechem*           Rs.1212                 Rs.9              Rs.567        Rs.9        Rs.42

Nitco Ltd                                 Rs.336                   Rs.12            Rs.336        Rs.12      Rs.15

·         * stock Split in 2006

Link to Ashapura Minechem Website HERE 

Link to Nitco Ltd Website HERE