Saturday, August 30, 2014




With your overwhelming response in past five occasions and repeated requests thereafter , this is the sixth one in this GTS series.Try to find out the company using the below given clues and send the answer to my mail id ( with subject line ' GTS-6 ' ,till Friday noon .Name of readers with the correct answer will be posted on Friday Evening and details of company on next Saturday.Please don't ask for more clues or expect any reply for comments related with the name of stock till next Saturday.

 # This company operating in an Industry with decent growth potential.

# One promoter of this company is a well experienced veteran in this industry

# Co promoter of this company is another  listed  company  which is one of the  market leaders in an Industry .

# Promoters are holding more than 50 % stake in this company.

# Company’s current market cap is less than 25 % of its last year Sales.

# Face value of Stock is Rs.10.

# It is listed only in BSE.

# Company is more than 40 years old and listed in BSE for more than 10 years .

# In latest June quarter , Company reported growth in top- line and bottom line both on yearly and sequential basis.

# In latest June quarter , company reported sharp improvement in its OPM  and NPM.

# MD of the company changed during last FY ( 2013-14).

# At the end of FY 2013 , company's debt is less than Rs.5 Cr.

Monday, August 25, 2014


This stock recommended @ Rs.86 about five months back (  HERE ) which is currently trading around Rs.425. Today company declared its last quarter and full year financial results. For the quarter ended June 2014 , CAPPL reported a top line of Rs.48 Cr v/s Rs.39 and bottom line of Rs.7 Cr v/s Rs.1.5 Cr ,compared with same period last year.

For the full year FY 2013-14( Company's year ending is in June) , total sales is Rs.173 Cr v/s Rs.127 Cr and net profit is Rs.26 Cr v/s Rs.14 Cr . Full year EPS is Rs.17.11 v/s  Rs.9.25 .

Company also declared a dividend of 40 % ( Rs.4 each) for FY 2013-14.

Contribution from company's newly started manufacturing facility is expected to reflect from next quarter onwards . Those with some risk appetite can still HOLD the stock,

Link to the latest interview with the MD of the company HERE

Saturday, August 23, 2014


Coutresy : Economic Times

If you have Rs 2 lakh to invest, your bank may roll out a red carpet, your stock broker may inundate you with hot tips and the friendly neighbourhood jeweller may even offer a discount on making charges. However, you will probably get laughed out of the estate agent's office. Not anymore. With Sebi issuing final guidelines for real estate investment trusts (REITs), you will soon be able to get a piece of the action in the property market with as little as Rs 2 lakh.

REITs are just like mutual funds, but instead of using the money collected from investors to buy stocks and bonds, they invest in property. After more than a decade of discussions, this unique form of mutual fund is finally taking shape in India. Last month, the Union Budget removed an important hurdle by giving pass-through taxation status to REITs.
Last fortnight, market regulator Sebi issued final guidelines for REITs, settling several of the concerns raised by the real estate industry. Industry watchers claim that the launch of REITs will increase the flow of funds to the cash-starved real estate industry. "Even if half of the currently available Grade A office space gets converted to REIT and is listed in the next 2-3 years, it can mean an inflow of Rs 60,000-72,000 crore," says Anuj Puri, chairman and country head, JLL India.

High entry barrier

The problem with real estate as an investment is that it either occupies no place or a lot of it in a portfolio. Whether you invest in a residential property or commercial space in a metro or tier I city, the minimum investment is normally upwards of Rs 30-40 lakh. Sebi's guidelines for REITs have pegged the minimum investment at Rs 2 lakh, which will allow retail investors to participate in the real estate market. In the secondary market, the minimum holding could be even lower at Rs 1 lakh. "REITs allow even middle income individuals to invest in real estate. Without this, they can't participate in real estate because of the huge entry barrier," says Keki Mistry, vice-chairman and CEO, HDFC. The low ticket size means that investors can diversify their portfolios by including real estate without investing huge amounts in the asset class.
The high entry barrier is not the only problem with investments in real estate. With no real estate regulator in place, individual investors are at the mercy of politically connected builders in India. If, however, they invest in a REIT, they will be able to join hands and get bargaining power against the real estate developers.
The other benefit that REITs offer is diversification. When one invests in a real estate project, the returns are dependent on how well that project is received in the market and the rental income it is able to command. On the other hand, REITs invest in several projects and, therefore, provide the benefit of diversification to the investor. With a low entry barrier of Rs 1 lakh in the secondary market when units are listed, an investor can spread his investment across 3-4 REITs launchThe liquidity offered by REITs is another positive feature of this mode. Real estate is an illiquid asset, and selling a property can take weeks, even months, but REITs will inject liquidity into the investment by listing the units on the stock exchanges. The day is not far when one will be able to buy and sell property at the click of the mouse.

REITs also generate a regular flow of income which could move up in tandem with inflation. This explains why REITs are a hit in most developed markets. "Around 40% of the global alternative investment assets is through REITs," says Anshu Kapoor, head of Global Wealth Management, Edelweiss.

How attractive is the investment?

While Sebi has given the go-ahead to REITs, right now they can invest only in commercial real estate. This narrows the scope considerably because most of the action in the sector is in residential real estate. Even in commercial projects, 80% of the investment must be in rent-earning projects. The balance 20% can be in other assets, including projects under construction (restricted to 10% of the total REIT assets), listed or unlisted  debt of real estate companies, equity shares of real estate companies having 75% income from realty activities, government securities and money market instruments.

Though some may see this as an unnecessary restriction (investors should have the freedom to select the place where they want to invest), the straitjacket of rental yielding projects is actually a blessing in disguise. First, there is major difference between rental yield from commercial and residential properties in India now. "While the rental yield on commercial property is slightly lower than the interest rate, the one on residential property is very low. So REITs will not work in the residential market now," says Mistry.

If the rental yield from commercial projects is less than the prevailing interest rate, why should one consider investing in REITs? "The rental yield is not very attractive now, but is expected to rise in the future," says Ujwala Rao, national director, capital markets, JLL. Besides, there is always the possibility of capital appreciation that will push up the NAV. "REIT will not only provide opportunity to earn regular rental income but also capital appreciation on such assets along with liquididity of listed market," says Sharad Mittal, director & head, real estate fund, Motilal Oswal Real Estate.
Bottom of the cycle

Still, there are several factors that investors need to keep in mind. As of now, the commercial real estate market is in doldrums. "In several pockets, the price of commercial real estate is around 30% cheaper compared to residential real estate," says Kapoor. Though there is an escalation clause in most commercial real estate projects, it is a users' market and, therefore, they are able to renegotiate the rents downwards.
This also means that commercial real estate is reasonably priced right now. There is a greater scope for appreciation. As the economy picks up momentum and commercial activity increases, things are likely to improve in the coming years. "This is the time to get into commercial real estate because it is at the bottom of the cycle," says Kapoor. Other experts join the chorus of optimism. "For the REIT to work, you need a buoyant real estate market. Nothing much had been happening in the past 3-4  years, but things have started picking up now," says Mistry.

"Commercial real estate is linked to economic recovery. Rentals may remain under pressure for the next 12-18 months given the oversupply, but with the speed of supply moderating in the coming years, the situation should improve if we get back to the economic recovery mode," says Mittal. The huge commercial real estate projects that were launched between 2005 and 2008 are being delivered now. With the builders facing financial stress, the supply of fresh real estate has moderated in recent years.
Taxation of REIT income

This was the biggest bone of contention for REITs. The recent budget offered some relief when the finance minister announced that REITs will be a pass-through vehicle. In the earlier structure, both the trust as well as the investors had to pay tax. Now, the trust will not pay tax on income. Only the investor will be taxed when he gets the income or sells the units. However, experts warn that this passthrough benefit is not applicable to all types of incomes from the REIT (see table) "The pass-through benefit is only for interest income earned by the REIT from its special purpose vehicle (SPV). As of now, there is no pass-through for rent or other income received by the REIT from property directly held by it," says Sriram Govind, core member of the international tax team, Nishith Desai Associates. He says the REIT has to pay corporate tax on such income earned by the SPV. Similarly, the REIT will also have to pay capital gains tax on sale of shares of the SPV. There is also no relaxation on the dividend distribution tax on payouts by the SPV to the REIT," says Govind. Though the dividend received from the SPV is tax-free for the REIT as well as the investor, the SPV would have already paid corporate tax and dividend distribution tax on such income. Factor this tax into the calculation of returns from REITs.
Though the dividend distribution tax is a prickly problem, what more than makes up for it is the treatment of capital gains from the REIT. Since there is a securities transaction tax (STT) on the listed REITs, the longterm capital gains will be tax-free while short-term capital gains will be taxed at a concessional rate of 15%.

However, you need to hold the REIT units for at least three years to qualify for longterm capital gains. In addition, the investor has to pay tax on part of the  income received during the period. "The listed pass-through vehicles are at a tax disadvantage," says Feroze Azeez, director, Investment Products, Anand Rathi Private Wealth Management.
Since some of the income from the REIT will be tax-free and some other will be taxable, the big question is, how will investors know the difference? "There will be some reporting mechanism and the break-up will come at the time of income distribution from the REIT," says Rao of JLL.

Interestingly, REITs offer a better deal to NRIs on the tax front. The withholding tax for them is only 5% compared to 10% for resident Indians. And the amount received may be tax-free for them, at least in  most countries, while the Indian investors have to pay tax based on their slab rates. If the NRI has to pay tax on the income in the country of residence, he can claim this 5% as a rebate.

What are the risks?

The biggest risk can come in the form of developers keeping their prime rent-earning properties and dumping their not-so-good assets on REITs. Though there will be professional valuers, the real estate market is notorious for its opacity. It is still a builder's market and the investors don't have any access to the valuation process. Though the introduction of REITs is expected to improve the situation, the lack of transparency and the black money component in the real estate deals is another possible risk. Finally, there may be stable regular income, but the capital appreciation or depreciation depends on the market price of commercial real estate and, therefore, will be volatile.

Sebi's guidelines for REITs is only the first step. There are bound to be teething problems when the market starts functioning. However, this has paved the way for a more vibrant market for real estate. If you want to invest in real estate but don't have deep pockets, you can consider REITs as the vehicle that can take you there.

Thursday, August 21, 2014



Recommended Price Rs.493

Current Price Rs.1249

Current Recommendation : HOLD.

Recommendation Link HERE


Recommended Price Rs.1360

Current Price Rs.2468

Current Recommendation : HOLD

Recommendation Link HERE


Recommended Price Rs.550

Current Price Rs.1112

Current Recommendation : HOLD

Recommendation Link HERE


Recommended Price Rs.66

Current Price Rs.1287

Current Recommendation : Sell 10 % of remaining holding and keep the rest.

Recommendation Link HERE

Tuesday, August 19, 2014


Marksans Pharma recommended @ Rs.4 about one year back ( Recommendation Link HERE ).Currently this stock is trading above Rs.50 , a return of more than 12 times during this period . At current rate ,  company's market cap is around Rs.2000 Cr . Purely on valuation basis , - for an average risk taker -  recommending to take some profit at current level .

Saturday, August 16, 2014


"The best thing that happens to us is when a great company gets into temporary trouble...We want to buy them when they're on the operating table."

I believe , the above quote by Warren Buffett is apt for Polyplex Corporation at this point of time.This company needs no  Introduction to  senior investors and it was a favorite stock of  FII's,Mutual Funds ..etc during 2008-2011 period and  its stock price traded above four figure mark during  2010.This company  lost its glory thereafter due to reasons beyond the control of promoters and now in a recovery path . Let us look into its past - present and future.

  The company  

Polyplex corporation is an India based multinational  company  manufacturing plastic films (PET, BOPP & CPP)  used for packaging, electrical and other industrial applications .Company having manufacturing facilities in   six countries  viz - Netherlands. China. USA. Turkey. Thailand. and   India . Company is the  world's 4th largest producer of thin polyester film and one of the few fully integrated companies in the entire world. Products manufactured by Polyplex selling in more than 80 countries.Major portion of  company’s products are used for manufacturing  flexible  packaging materials for  food and FMCG items. Having said , Polyplex is a global company operating through various subsidiaries . One of its subsidiary in Thailand named ‘Polyplex Thailand’ is a listed company in Stock Exchange of Thailand (SET).Company is geographically well diversified . 28 % of total sales coming from India ,26% from Europe ,18 % from North America ,17 % from South East Asia and balance from Rest of the world.Till 2012 ,company’s performance was robust backed by good demand and better realisation.Citing the good demand scenario during 2009-10 , on a global level ,many companies started to add large capacities and started commercial production by 2012-13 .This resulted in oversupply of the products and at the same time the peak of global recession adversely affected the demand scenario.Due to this reason,Polyplex reported loss on a consolidated level in last Financial year.

The Road Ahead

Good consolidation happened in this industry in past few years .As per the management of Polyplex, major major  players in this industry is only completing the already started projects ( if any ) and   not thinking about  any major expansion in near future.   On the other side demand condition is improving worldwide . In India itself ,BOPP film production reported more than 25 % growth in June 2014 over the same month in the previous year.Worldwide the trend is almost similar  . Price of company’s  products  also showing firm trend. For the past many years company was mainly concentrating in thin pet films(thickness below 50 micron) and now  started the production of thick films which is  used in many industrial segments other than packaging like photovoltaic and flat screen panel for TV’s and Computer monitors .In addition to thin and thick grade PET films ,company’s  Bottle Grade PET Resins plant at Turkey at an advanced stage of completion.Bottle grade PET finding applications in packaging of Soft Drinks, Carbonated water,Mineral water ..etc and there is lot of growth potential in these sectors.

Valuation and Recommendation


As mentioned at the beginning ,Polyplex is a vertically integrated global player with a turnover of more than Rs.3200 Cr  with geographical presence in all major markets.This large company is currently trading at a market capitalisation of just Rs.695 Cr  . The real irony is , Polyplex’s listed subsidiary  ( Listed in Thailand Stock Exchange)  trading at a market cap of Rs.1500 Cr (INR) .On a consolidated basis debt of Polyplex is close to Rs.1421 Cr which mainly raised for capacity expansion and the benefits of  this expansion is just starting to reflect . On the other hand , company holding a cash and Bank Balance of Rs.900 Cr and its total reserve is close to Rs.2000 Cr .Debt equity ratio is 0.86 . Company’s book value is more than Rs.600 where it is currently trading close to 1/3 of its book value.Company is managed by a group of highly professional ,ethical and investor friendly management .Before the issues set in, its dividend pay out was 70-80 % annually and rewarded share holders with bonus. Promoters holding close to 47 % stake without any pledge and other large investors and mutual funds holding another 31 % .This business is a cyclical one and I believe ,some early signs of a revival in this business is visible now. As a fully integrated global major ,Polyplex will be one of the biggest beneficiary of emerging trend . Now company reported its latest June quarter result where its top-line increased from Rs.694 Cr to Rs.855 Cr . On net level company reported a  profit of Rs.27 Cr against a loss of Rs.9 Cr . As Warren Buffett mentioned ,it is a good company passed through some tough times in recent past .I believe , for long term investors it is the right time to enter in it @ CMP of Rs.216.Stock listed in both exchanges.

Link to Company Website HERE

Link to Polyplex Thailand  HERE

Disc: It is safe to assume that I have vested interest in Polyplex


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