Sugar Industry

Some of the dominant factors influencing the Indian Sugar Industry

• Currently there's a ban on export, which might be lifted any time soon
• But, international prices are falling, so the later the ban is lifted, the lower it's benefits. Also further delay would co-incide with Thai exports, bringing down prices further
  
• Cane prices are set to increase due to upcoming elections in UP
• Domestic prices are expected to fall, due in bumper production - this will actually initiate lifting the ban on exports.
• Companies are counting on capacity-expansion to improve profits - but this is also likely to increase the supply, which would again pull down prices. Diversification into power and ethanol production would help.
• Currently 5% ethanol blending is required in most states and 10% blend is targetted by June 2007. Oil companies to set up tenders to buy ethanol to meet the 5% requirement.
• Ethanol could save the sugar industry - Diversion of cane to ethanol production esp. Brazil could help in easing the pressure on sugar prices. Ethanol can be directly produced from cane, which is cheaper than production from molasses. Ethanol can also be produced from sweet sorghum, but currently supply of raw-material is an issue.
  
• US subsidizes home-grown sugar and imposes tariffs on imported sugar, keeping domestic prices artificially high. As a side-effect this makes preparation of ethanol from sugar unviable and promotes it's preparation from corn (which is less energy efficient).
  
• EU also subsidizes beet sugar at a loss.

Other miscellanous facts

• Although being the second largest producer and the largest consumer, the per-capita intake of sugar is low in India
• The largest buyers are the bakeries and candy companies

Removing the ban on export immediately would provide some relief in offloading the surplus
Secondly, companies which have diversified into production of ethanol are likely to benefit.

Mangalam Timber

• My take : Possible turnaround, held by Ramesh Damani. (But this is definitely not enough reason to buy). Another problem is I don't understand the business properly and not very sure about it's competitiveness vis-a-vis other companies.
  
• Hoping to wipe out accumulated losses in 1-2 years, by 2005-2006
  
• Revival process hampered by strike in 2005
• The shareholders have decided to reduce the paid-up capital of the company from Rs 18.32 crore to Rs 7 crore. This would be done by reducing the face value of the existing equity shares to Rs 4 from Rs 10. The BIFR is yet to clear this proposal. This decision was later revoked by the BOD.
• June2005
• KESORAM Industries Ltd has increased its holding in Mangalam Timber Products Ltd by acquiring 5.35 per cent from an Orissa Government outfit for Rs 2 crore. It's one of the major promoters of MTPL.(Both are BK Birla group companies)
• Although the company's net profit increased from Rs. 48 lakh in 2003-04 to Rs. 2.89 crore in 2004-05, shareholders might have to wait for some time before dividends could be declared. Accumulated losses of the company (after adjustments of deferred tax assets worth Rs 7.89 crore) had dropped to Rs 6.41 crore from Rs 19.60 crore on March 2004
• Mr. Gupta said the emphasis on plantation activities was giving the company an edge, enabling cost saving.The company will start getting timber from next fiscal. In another four years, its entire requirement of 1-lakh tonne timber would be procured from its own plantations. It undertook plantation of about 12,000 acres under farm forestry schemes in Orissa and Chhattisgarh and has recently launched a similar scheme in Andhra Pradesh.
• The company had also gained self-sufficiency in formaldehyde, another raw material which it was also selling outside. In 2004, the company had commissioned a 40 tonnes per day formaldehyde plant. It was set up at a cost of Rs 2 crore. This plant is expected to generate 10 per cent of the company's revenues and would also help it in its backward integration.

• Nov2005
  Operations commenced in 1987 and since then, it was in the red. Came out of BIFR after almost 7 years (since inception!). Plans to approach bankers for reducing interest rates on working capital

Infomedia India

• Publisher of Infomedia Yellow pages and special interest publications such as CHIP, OVERDRIVE etc.
• ICICI Ventures came in as main equity holder after buying out TATA.
• (14-Jan-2006) Approved buyback of 14% stock at 245/-
• (21-Mar-06)Would be acquiring International Typesetting and Composition, a Noida-based publishing services company with front-end in the US, for $12 million. The higher acquisition cost is partly attributed to the quality of clientele and the stickiness of those business relationships.
• December 2005 takeover of Keyword Group of the UK and the Bangalore-based Cepha Imaging Systems - also in the publishing services business space - for $7 million.
• (31-Mar-06)Currently focussing on
• Yellow pages
• Special interest publications
• Publishing services biz. (Publishing BPO)
  
• Outsourced printing work is not very profitable (only cost advantage is in labour which comprises max 15% of entire cost. Paper forms a bulk of the cost, but is generally imported)
• 75% of revenues come from Yellow Pages and Spl. Int. Pub.
• Pub. Services to contribute to fiscal from next year
• Mainly into yellow pages and magazines (spl. int. etc)...trying for a toehold in pub. services business.

Macmillan India.

• Price has been hovering around 400 since almost a year. Seems like an early pioneer, but currently a laggard. Maybe into a number of different services, while others are niche players.I
• In India since 1977, and has a growth rate of 20% in India as compared to other arms of the global company.
• Macmillan India has a significant outsourced business for typesetting, data coding and converting editorial services to global publishers. Also has major plans to branch out into legal information and financial information processes.
• The company has also set up a new subsidiary called MPS Technologies, which provides high-end software products for publishers. This company will provide electronic access and a content delivery platform. The company plans to start fulfilment services. The company offers Web-based solutions and IT services to publishers globally through its software services unit, emacmillan. Macmillan is an established brand in the English Language teaching market for both the school and college segments. School textbook market is worth Rs 3,000 crore, of which only 20 per cent was English medium.
• The company had been catering to the CBSE (Central Board of Secondary Education) and the ICSE (Indian Certificate of Secondary Education) schools. The next step will be to get into publishing for the various State board schools. The idea is to work with the State Governments and bring out top class books. Macmillan India has been acknowledged as a business `Superbrand' this year.
• Plans to publish Nature from India. Plans to boost its investment and set up its science journals, including the popular magazine Nature in India
• Acquired a 100 per cent stake in the US-based Interactive Composition Corp (ICC) for around Rs 15 crore.ICC has a wholly-owned subsidiary in Delhi. It employs 300 people and provides typesetting and other services to major book publishers in the US - strategic acquisition to achieve two major objectives, of having a significant presence in the US, and acquiring premier book publishing customers. Also places them in the big league of full service providers in the book publishing market.
• Macmillan India has been aggressively making acquisitions and had acquired Charon Tec, a Chennai-based typesetting company, last year (with clients in Europe and US). Expected to contribute $3m to topline in 2006.
• 12% growth expected at CMP~490 (EPS=24.79, PE=19.7)
  

Other companies in publishing outsourcing.

- MacMillan India
- Thomson Digital
- TechBooks
- Q2A Solutions
- Knowledge Works Global
- Newgen Imaging Systems
- Digital Publishing Solutions
- Kolam Information Services (SPI)
- Olympus Infotech
- Integra Software Services
- Datapage
- Alden Prepress

Links:
http://www.researchandmarkets.com/reportinfo.asp?report_id=306459&t=e&cat_id=15

Gujarat NRE Coke

• 50 cr steel plant in Kutch commenced production.
• In the process of setting up a 20 MW captive power plant - reduce unit cost of production.
• New low ash metallurgical coke manufacturing unit in Karnataka
• 2 coal mines in Australia. The company has also acquired substantial interests in a number of mineral exploration projects in Australia, Peru and Chile.
• Largest non-captive coking coal company.
• (29-Mar-06)
  Raising $50mn. by issuing FCCBs which opened today would close on April 11 and would be listed on the Luxembourg Stock Exchange and trade on its Euro MTF Market.
  The proceeds of the issue would be used for capex plans of 400,000 MTPA greenfield LAMC project in Dharwad, 20 MW captive power plant and to meet various financial needs of other expansion plans.
  

Dewan Housing Finance Ltd.

1. Basic business - lending home-loans to lower and lower-middle class. This segment is seen as high-risk by banks such as HDFC and other private players. DHFL awards loans at rates comparatively higher than others, but much lower in comparision to the local money-lenders. (Fortune at the bottom of the pyramid approach)
   
2. Planning to open super-market chain under service mark Spinach, on the model of a kirana shop.
3. Launched Amar Chaya in association with SBI Life Insurance -selling insurance cover to borrowers to protect them, if the primary borrower dies before loan-repayment.For instance, a borrower aged 40 years whose loan has a term of 20 years would pay an EMI of Rs 47 per Rs 1 lakh borrowed as a housing loan towards the premium amount. The minimum amount of premium is fixed at Rs 500. As per the policy, DHFL would also extend loans towards the payment of the premium and this would be clubbed along with the equated monthly installments (EMIs) for recovery purposes. In case of the borrower's death, SBI Life takes the onus of repaying the outstanding loan amount, based on the original EMI, directly to DHFL.
4. (31-Mar-06)
   Wadhawan said DHFL has, effective from March 1, increased its retail prime lending rate to 11.25 per cent, bringing the floating rate on loans in the range of 8.5-10 per cent. Consequently, the fixed home loan borrowers will have to pay a rate of 9.5-11 per cent

Himalya International

• Into food-processing, exporting freh vegetables, mushrooms and cheese.Sources fresh vegetables through contract-farming, mushrooms by in-house production
• Clocked a turn-over of 25 cr. and expects to reach 75 cr. by next year.
• The company has invested $2.5 million in the project and 19 per cent of the investment has been funded by US-based First Family Holding through the foreign direct investment route.
  Malik (MD) revealed that a mega-project with an investment of $40 million was on the anvil and would be operational by next year.
• Buffalo milk would be the main ingredient for the cheese.
• He said the company’s foreign partners would help in technology transfer and market access. Winina Foods, North America’s largest producer and distributor of wheat, would market Himalya’s mozzarella cheese through newly-formed company Artiginale Italiano Inc., which is a 100 per cent export-oriented unit. North America and the European market will be the main export destinations.
• Price of mozarella cheese is almost double that of ordinary cheese, so demand in domestic market is miniscule.
• Himalya International would be the first company outside Italy to specialise in mozzarella cheese production. It remains to be seen if it can compete with the Italians...
  

Time to learn and earn - VII

Interview with Asit Kotecha, MD, Ask-Raymond James

19yr old in charge of liquidating family portfolio, after his dad suffered a major loss.

Started off as a trader. But did not make a lot of money in trading. Was more successful in investing. Because of short-term fluctuations and leveraged positions he had to sell some of his gems

Sold out completely in 1992 when valuations went berserk. Then came the scam and the bear-market started. Market went from 4500 to below 2000

Missed out on the tech boom.
It seemed like a labour-oriented oppurtunity which would no be manageable when the scale (no. of employees) increase.
Outsourcing was like a commodity- what Infosys did could be done by Wipro, Satyam, TCS etc. But what he missed out on, was the size of the oppurtunity.(Btw, this is exactly what Damani latched on to)

Majorly influenced by Nimesh Kampani and Radhakrishna Damani
Nimesh was very strong with numbers - he went through the annual reports mintutely and knew his companies by their numbers
RK Damani worked in 2 compartments - speculation and investing. But they never inter-mingled or interfered with each other.

Asit looks closely at sectors undergoing massive changes and tries to pick winners in that sector.

Getting out is very important in commodity-based or other cyclical industries.

Advice to any young boy joining him.

1. You have to develop your own understanding about your companies - Do your homework
2. Greed/Excitement are your enemies in this market.
   You have to be fearful when others are greedy and vice versa. Even a 18% compounded return can take you a long way.
3. Know your business, know your investments.

Time to learn and earn - VI

Interview with Nilesh Shah, Equity Strategy, Kotak Securities

Executive to Executive Director. Did his MBA in 1992

Sold ancestral holding in Arvind Mills - Bluechip at that time
Never be attached to your stocks - never fall in love with them

Nothings succeeds like success - Initially people were sceptic to his recommendations but later...

Thematic inv. Pick a theme - get the Big picture right , pick stocks by a bottom-up approach. eg. Outsourcing theme. infrastructure theme.

Pantaloon retail - was priced around 50 with a size of 90 cr, aiming to reach 1000cr. within 5yrs. There were not many believers in Biyani at that time, whether they would be able to achieve the high vision that they have.
Nilesh went around the malls setup, the Big Bazaar in B'bay and saw the queues lined up.

Learnings from BUffett.
1) Look at businesses from a long-term perspective and evaluate how businesses will pan outover a period of time.
2) Margin of Safety.

Do not get bogged down by past mistakes. Take them as an oppurtunity to learn.
Do you get out of mistakes immediately or let the price rise a bit?
If your call was based on an external factor, like a policy change which doesn't happen - then immediate exit. Otherwise...

Conviction is as important as passion and discipline.

A lot of his investment ideas have come from reading. (Newspapers, magazines or books)

Exiting right is as important as buying right.
Valuations and understanding growth prospects are important. But there will be times when you exit early and the scrip doubles up after that.

Peter Lynch says that the common sense way of investing is probably the simplest and the best.

Watching stock-prices during market hours digresses your attention and makes you lose your focus. (Lynch also confirms that the ticker is one of the most addictive and expensive past-time)