European Union: May 18,2010: March 2010 External Trade Surplus 4.5 billion Euro

European union consist of two set of countries EA(Euro Area) & EU (European Union)
EA16 includes: Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxemburg, Malta, Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland.

EU27 includes: Belgium, Bulgarai, Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain,  France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden and United Kingdom

The EA16 nations have adopted the common currency (Euro) while the other EU27 have not yet completely integrated (currency) into the european union. As per the latest stats provided by the european union as of May 18,2010
EA16 Trade balance for the month : March 2010: +ve 4.5 Billion Euro (+ve 1.6 billion Euro March 2009)
EU27 Trade balance for the month : March 2010: -ve 7.1 Billion Euro (-ve 9.2 Billion Euro March 2009)

EA16 Inflation:  April 2010: +ve 1.5% (+ve 0.6% April 2009)
EU27 Inflation: April 2010: +ve 2.00% (+ve 1.3% April 2009)

EA16 Industrial Order Index: March 2010 +5.2%
EU27 Industrial Order Index: March 2010 +ve 5.9%

Conclusion: Be a contrarian investor and look at the Euro and the Euro region as an area of growth. This would be a good to time buy Euro for the long term.

PN: these are my personal views based on public info available at the european union statistics website (Link)

Q&A: Karuturi Global: DUMP DUMP!! DUMP!!

Karuturi Global:
CMP: 13.75
Market Cap: 672.79Cr
Debt March 2009: 395Cr
ROCE March 2009: 2.77%
EPS: 0.11
Website: http://www.karuturi.com/

Karuturi Global was incorporated in 1994 and is today the largest producer of cut roses in the world, with are area of over 239 hectares under Greenhouse cultivation and an annual production capacity of around 555 million stems.
An integrated production model encompassing in-house plantation, cultivation and distribution capabilities coupled with a series of green initiatives make us one of the lowest cost producer of cut roses in the world. Almost our entire produce is exported to high-value markets such as Holland, Germany, United Kingdom, Italy, Singapore, Hong Kong, Taiwan, Bahrain, Muscat, Dubai, Australia, Japan, New Zealand, Brunei and North America, with a small portion sold in India.
Having established our strong presence in floriculture, we now aim to broad base our portfolio into a larger agri-produce basket. The acquisition of large tracts of land in Ethiopia has set the stage for us to become a complete agriculture production company. Our goal now is to make a significant contribution to elevate the global and african food prices.
Equipped with a robust and de-risked business model, Karuturi Global’s other fast-growing business realms are food processing, floriculture retail including a flower auction portal and information technology.

First company is in farming business and its goal is to "elevate" (Increase) food prices!! or is it "alleviate" (lighten/reduce) global food prices. I think this statement in itself is contentious. Karuturi is in the food growing business and it wants to reduce food prices!! or Karuturi is in the food business and it wants to increase food prices!! So I think the management has to really look at what is their goal, without a definite and clear goal the company is going to be lost in a maze.. this is quite evident in  their next statement.
"Equipped with a robust and de-risked business model, Karuturi Global’s other fast-growing business realms are food processing, floriculture retail including a flower auction portal and information technology"
Karuturi is already looking at other business realms of "food processing", "Floriculture retail" including "Auction portal" and "Information Technology"
what we have here in Karuturi is a company:
1. With no clear definition of goal/vision
2. Without a clear focus the company is looking in each and every direction and lapping up anything that looks like a profitable venture (and mildly related to its area of farming).. from food processing, floriculture retailing, online portal and Information Technology.
3. Its like looking at vegetable selling at 45 per kg in bangalore and then say
- I can grow it for less than 10 bucks.
- Once you start growing it you see that the traders dont buy for more than 10 bucks.. do very little value addition.. so karuturi enters into food processing.
- Once it is producing processed "vegetables" it find that retailers are making more money ..so enter retail business.
- Now suddenly karuturi finds retailing is expensive so karuturi enters into online portal eliminating the middle man.
 
Promoter shareholding: As per the latest March 2010 results. promoter shareholding is 26.73% increase from 23.84% but look a little further and promoters have pledged most of the shares and FREE(non pledged) holding by the promoters is 9.47% .. yes you can rub your eyes.. Karuturi Global has reported a 28.16% increase in its consolidated net profit.. Karuturi has reported a Consolidated Net Profit of 146Cr and promoters free holding is just 9.47% !! Wait wait.. I would be lying to you if I did not tell you the next part.. Promoter FREE holding in March 2009 was 5.19% so a 9.47% shareholding is actually an increase in FREE shareholding by the promoters!! by 82.46%
PN: To me this looks like the lenders arm twisting the promoters to increasing their shareholding in the company.
 
Profits and Taxes!!: Yes we are in the good part of the story. Karuturi global has reported a Consolidated topline of 551.9Cr and PBIT of 155.79Cr thats an operating profit margin of around 28.22% very good operating margins.  Net Profits have also increase to 149.15Cr from 117.33Cr.
 
Before we look at taxes lets remember that "Death and taxes" are two things we can be sure about in life. Karuturi taxes for year ending March 2010: 59.7 lacs, Taxes for Year ending March 2009: 81.11 lacs
So karuturi global has a 28.22% increase in profits to 155.79Cr but taxes dropped down to 59.7 lacs!!
ie a drop of 26.3%. Also if we look at the taxes as a percentage of operating profit
March 2009 (Taxes as percentage of operating profit) = 81 lacs/13800.75 lacs = 0.58%
March 2010 (Taxes as percentage of operating profit)= 59.7 lacs/15579.41 lacs = 0.38%
Wow!! we need to learn a lot from Karuturi management about how to keep the tax man at bay!!
Infact Ambani, Birla's, Ambani's have to take a leaf out of Karuturi's management..
 
Everybody should become a farmer!! look at Karuturi Global and the operating margins.. even in Ethiopia looks like there are huge subsidies for farming.
 
Conclusion: Karuturi Global is a stock to be Dumped!! Dumped is the word not Sold!!. Promoters are taking all of us for a ride. It could very well be the next Satyam.. Company has Enterprise Value of approximately 1060Cr and an inflated bottomline of 149Cr. Equity dilution is rampant and surely the promoters cannot keep this going on forever and they know it cause they hold less than 10% free shares..Dividents are going to a thing of the past. You can expect further dilution in share price.. 
 
One must understand that Food is a commodity and we donot pay any premium for corn from Karuturi or from Tata's for that matter. Also it is a perishable item and seasonal. Yes it is a basic necessity but to really take advantage of it you need to be an integrated player. Players like Reliance and Aditya birla group are well established houses with strong cash flows required to setup retail stores and also integrate backward into contract farming. Karuturi global is doing farming in Ethiopia one of the poorest nations.. which is really very good for Ethiopia as they will soon be self sufficient but every nation protects its local food industry.. (why would you want to be dependent on imports for such a basic thing as staple food!!) Demand for agriculture produce is going to increase with time as earning potential of huge populations of India and China have surplus cash and it has been observed that with increase in income protein content of food intake increases. This increased demand by large asian economies has reduced exports which has increased food prices globally. Specially impacted are food importing nations like Ethiopia and other poor African nations dependent on UN food program. What Karuturi global is doing is noble but clearly not profitable.
 
Also the concept is great but streamlining operations is going to take some time. One can avoid the stock and can buy after debt reorganization.
 
Promoter shareholding clearly demonstrates the low commitment by the promoters. Also increased debt is going to soon make the financial condition of Karuturi very unstable and explosive. Avoid at all costs. Also if the pledged shares are sold you will soon have the promoter holding of 17% in the market ..
If you are looking for investment on agro produce then a company with strong set of numbers is "Gujarat Ambuja Exports" a recommended Best Buy
Another very interesting Agro/Peak Oil play not very well publicised is Castor derivatives major "Jayant Agro Organics"  also recomended as a Best Buy!!
 

Q&A List.

March 28,2010: FII & DII Investment Activity
May 12,2010: Short Term Trading Call: sell NIFTY 5100PUT
May 21,2010: Q&A: How to do basic valuations
May 22,2010: Q&A: Confidence Petroleum: No Confidence in Confidence Petroleum.
May 26,2010: Q&A: Karuturi Global: DUMP DUMP DUMP
June 2,2010: Q&A: Confidence Petroleum: March 2010 Result review
June 16,2010: Value Investing in MidCap and SmallCap universe most profitable
June 17,2010: Peak Oil: Where do we go from here..
June 19,2010: Hydrodrive: Biofuels, Hydrogen Fuel with Positive Coefficient of Performance
June 30,2010: Arman Financial and Ganesh Polytex - Avoid
Oct 20,2010: Sell CALL NIFTY 6100 at 44
Oct 25,2010: Buy NIFTY OCT NIFTY 6000 PUT at 7.20
Oct 30,2010: SEBI Guideline 50% of public holding in Demat
April 14,2011: Short term Interest rates: Secret behind Market Moves
Sept 12,2011: EU Debt, Balance of Payment??
Sept 13,2011: Sell GOLD: Cost of Credit Vs Creation of Credit
Oct 3,2011: Where To Get Research Info for Free
Nov 11,2011: Aviation Turbine Fuel Cheaper than Petrol by 11-14 Rupees
Nov 19,2011: Buy Reliance: Marcellus Shale reserves at 41.6 TCFNG
Dec 17,2012: Ultimate Pyramid Scheme: Peak Prosperity
Dec 21,2011: The Rise of the US Dollar
Dec 20,2012: Alzheimer's Cure: Chewing Tobacco
Dec 29,2012: 3D Printing Demonstration
Jan 2,2013:Economic Times:500 List
Jan 12, 2013: One Idiot: Saving & Investing Initiative by IDFC
Feb 26,2013: Safal Niveshak: Learning how to fish
March 15,2013:Perfect Storm:Decaying Growth Dynamics

Q&A: No Confidence in Confidence Petroleum.

Question: 
Confidence Petroleum:
CMP: 7.60
Market Cap: 196.71Cr
Total Debt March 2009: 70Cr
Sales March 2009: 253.65Cr
PBDIT March 2009: 22.80Cr
Tax: 2.15Cr
Net Profit: 13.91Cr
Cash flow from Operations: -ve 3.35Cr
Return on Capital Employed: 8.83%
Enterprise Value= 196.71(Mcap)+70Cr(Debt) -14.93Cr (investments) -9.9Cr(cash)
EV: 241Cr

Confidence Petroleum is in the business of LPG Cylinders, Auto LPG filling stations.
Observations: Return on Capital Employed is 8.83% which is close to FD returns from corporates such as L&T Finance. So the companies return on Capital employed is poor and any additional debt or mismanagement of funds could easily push the company downhill.

Cash Flow from Operations -ve 3.35Cr well that gives an indication at the Operations level the company is still loosing money. The increased equity and additional debt financing all point to "No Confidence!!"

Company is in the business of retailing LPG filling stations.. which should cost a lot as each additional center needs investment capital.

Reliance discovered the largest gas find in the history of India and as per the production sharing contract .. a percentage of gas RIL is free to sell to anybody.. but Govt intervenes and is dictating the terms of a priority list of industries which will be supplied gas. So folks Petroleum/Oil is a barrel which is going to explode and I think in my lifetime we will see rationing of petroleum resources or very very high prices of oil.

All this is great news for LPG/CNG well Yes!! and No!!
Yes the demand will increase and everyone will be running behind any available quantity of LPG/CNG available.
No!! because Confidence is very very low in the food chain of LPG/CNG. Most likely the role of a provider that confidence wants to play could completely be done away with..
Look at all the piped Gas lines being setup in mumbai.. It is definitely more expensive to set up piped gas lines and cylinders would have been more cost effective.. but if we consider the future cost of transportation fuel.. and the transportation cost of hauling gas cylinders to each household..
I think piped gas is one of the cheapest way of transportation of fuel/CNG/LPG.

Conclusion: Confidence petroleum is really a new entrant in the business where we have established players with backing from GAIL, BPCL,HPCL. Also considering the near future all the assets being setup by confidence would be obsolete.. if people are forced to move to public transportation..en masse by the govt.

Look at Videocon.. I remember a few years back news was flashing in front of our eyes Videocon is the largest CPT(Colour Picture Tube) manufacturer in the world.. Thompson has sold all its plants to Videocon and now videocon has plants in every continent..  Look at the computer screen and look around you for CPT .. there are none around.. and all the investment made by Videocon has gone in dumps..

This is my personal view but Confidence is confidently moving towards a dead end.
- It is in a field where there is no moat and margins are going to be low..
- Company has a lot of capital expenditure in the future setting up new filling stations
- Does not have any back linkages like Reliance to provide LPG..
- Profits are going to be poor or dressed up.
- Divident payout not in sight in the near future as the company is still trying to reach a critical mass.
- Enterprise Value of 241Cr (approximately 1 times sale) is too high for a startup.
- Avoid

One can really look at GAIL if we need any exposure to natural gas or fertiliser companies as food is a very basic necessity and govt will always prioritise food safety(availability)

Question and Answers

Just trying to make the blog more interactive and one way would be to answer questions..
Will try and answer most of them.. my ability to answer depends on my knowledge and time

Hope we all learn something new as we progress in life.

If you have any questions or answers please post as a comment to this thread and we can start new threads for interesting topics.

=happy investing

Question on May 21,2010: Posted by Jaig56:
Thank you very much for the information In your old write up on Venky available in your blog But can you give me some idea about the tools for arriving at reasonable value of a stock Present stock value of Venky is said by some to be highly overvalued This will be great help for long term investor Further what is your view about i) Confidence Petroleum ii) Karuturi Global iii) Gammon infrastructure ...

Answer: Jaig56..Beauty is in the eyes of the beholder.. similarly reasonable valuation is also a moving target.. it is not an exact science..

Steps for Valuation of a Company (let us take Venky's as an example):
Step 1: Calculate Enterprise Value.
The current most common valuation technique is Enterprise Value of the company/Shares.
Enterprise Value = Current Market Cap+Debt - (Cash/Cash Equivalents)

Enterprise Value for Venkys = 373.36Cr(Current Market Cap)+ 93.89Cr(Total Debt)- 58.18(Cash + investments) = 409.07Cr

Enterprise value is the theoretical cost of acquiring 100% ownership at current market price. It also takes into consideration debt and free cash in the company to get a number closer to real value.

Ideally companies are valued at 1 times sales is considered fairly valued. Ofcourse this is just a plain statement.. companies can be valued at higher/lower levels based on their market share, reserves in case of resource based companies, news flow, latest developments and plain demand and supply.

Enterprise Value is like asking what's the price of a plain white shirt. Then we can add/subtract from the price based on a number of not so plain features like brand, exclusivity, texture, appeal. So Enterprise value will help you baseline the cost on simple numbers.

Step 2. Determine Company sales, PBDIT (Profit Before Depreciation, Interest and Tax), ROCE (Return on Capital Employed), Market Cap High/Market Cap low for past 4-10 years (check out the history)
Year/Sales/PBDIT/ROCE/High MCap/Low Mcap
2009/573.52Cr/47.64Cr/14.36%/234Cr/65.43Cr
2008/534.87Cr/58.89Cr/19.2%/149Cr/66.67Cr
2007/425.66Cr/29.86Cr/9.43%/188.03Cr/98.08Cr
2006/387.39Cr/27.28Cr/10.78%/162.35Cr/101.88Cr
2005/341.38Cr/35.77Cr/20.31%/Not Available/NA

Step 3: Read the data and crunch the information.
1st Observation: Venkys High Market Cap has always been in the past close to 50% of annual sales number
2nd Observation:  Company has been profitable for all the years and sales and profits are trending upwards.
3rd Observation:  ROCE is 14.81% which is higher than the rate of interest in India. If Venky's borrows money since its return on capital is 14.8% ideally it should have the ability to payback the loan amount. If the avg interest rate is 12% and the ROCE is consistently 10% .. loan funds/debt can bring the company to its knees but Venky's ROCE is high enough to safeguard the company in case of any such issues.

Step 4: Check out dividend payment, Loan/Debt in its books.Debt equity of venkys is below 1 and long term debt equity is below 0.5 which means the company is not swimming in debt. Also Venkys has been paying dividends on a regular basis (past 9 years) (no data available beyond 9 years)

Step 5: Check Cash flows of the company Operating Cash flows should be +ve for a well established company. Venkys Avg Cash flow from operations is +ve 26.23Cr for past 5 years which is good

Observations: Venkys is a well established company and is profitable and dividend paying company. Company has decent Return on Capital and low Debt so 5-10 years down the line we can still expect Venky's to be existing as a corporate. (keep track of above numbers ROCE/Cash Flows/Debt Equity and you will be able to identify any issues well before they are published)

After this very basic analysis which confirms Venkys as a good company with long term sustainability we need to dig deeper and see company website (http://www.venkys.com/)
We need to look at any announcements made (like the acquisition of shares from the market by the promoters) SPF egg manufacturing facilities, National Egg coordination committee read annual reports

My Final Conclusion: Venkys from the eyes of an investor seems to be over priced considering its historic valuation of Market Cap = 50% of sales. having said that Venky's is more than chicken and has a host of subsidiaries and at a consolidated level I am sure like Godrej industries worth a lot more. With the growth of the Indian economy consumption of chicken products is going to increase and we can expect Venkys top line and bottom line to improve substantially. Also promoters buying stock till levels of 170 clearly shows that there is some strategic change that is taking place.. I would at a personal level buy Venkys when it reaches its 200 DMA and try and reduce my Avg cost of shares (recommendation for new entrants)


- People already holding shares in Venkys at lower levels can continue to hold. Those who feel the company stock is overpriced are suggested to sell small amount and reduce Avg cost down to 170 levels. Hold the rest of the stocks for long term as the company is a well established company in its line of business and can be expected to do well for years to come.. It is a direct play in the growing consumerism that we are witnessing in India.
==========================
Regarding Karuturi Global, Confidence Petroleum, Gammon Infrastructure I have not evaluated these companies and generally would suggest.
- Shift from Karuturi to Gujarat Ambuja Exports (22.20)
- Confidence Petroleum and Gammon Infrastructure: No comments as I have not valued these companies but I would suggest exposure to Jayant Agro (78/=)as a play for the coming Peak oil which we are destined to see in our lifetime.
==========================
Visitors are free to pen down their thoughts about Karuturi, Confidence Petro, Gammon Infra, Venky's and any other stock. This is an open forum and appreciate any participation and questions

Most of the Data (Sales, ROCE,Cash flows) for the discussion is available for free in moneycontrol.com

Best Buys

Best buy is a collection of stocks that I personally believe to be really good and hold tremendous value for a Value investors. Here is the current crop of best buy Indian Stock recommendations:

Dec 25,2009: Gujarat Ambuja Exports
May 15,2010: Jayant Agro Organics
July 12,2010: NHPC: National Hydro Power Corporation
Nov 27,2010: Tata Communications: Long Term Multibagger

Jayant Agro Organics

May 15,2010: Jayant Agro Organics: Value Buy??
May 20,2010: Jayant Agro Organics: Shareholding and Insider trading
June 24,2010: Jayant Agro Organics: 35% compounded growth ..next 2 years
Oct 12, 2010: Jayant Agro Organics: Multibagger target 300 in 18 months
Oct 15,2010: Jayant Agro Organics: Sept 2010 shareholding and Bonus possibilities
Oct 22,2010: Jayant Agro Organics: Half Year Sept 2010 Results: Consolidated Net Profit: 12.42Cr
Dec 11,2010: Jayant Agro Organics: Back UP the Truck!!: Strong Buy!
Jan 16,2011: Jayant Agro Organics: Dec 31,2010 Shareholding data review
Jan 24,2011: Jayant Agro Organics: Dec 31,2010 Result Review
Jan 26,2011: Jayant Agro Organics: Castor Oil Derivatives and their Applications
Feb 13,2011: Jayant Agro Organics: Largest Castor Oil and Derivatives Manufacturer in India
March 10,2011: Jayant Agro Organics: Castor Oil derivatives used in Solar Panel manufacturing
March 22,2011: Jayant Agro Organics: CRISIL Company report March 2011
March 29,2011: Jayant Agro Organics: Castor oil used in synthesis of Silver Nano particles
May 9,2011: Jayant Agro Organics: Back up the Truck!!
May 20,2011: Jayant Agro Organics: March 2011 Results
Sept 03,2011: Bio-Plasticiser Surge in Demand
Sept 11,2011: Jayant Agro: March 2011 Annual Report Review (Must Read)
Sept 21,2011: Jayant Agro: Solvent Extractor's Association Castor Crop survey 2010-11
Sept 29,2011: Jayant Agro AGM Sept 29,2011 Report
Oct 1,2011: Jayant Agro: Ford Focus 2012 features first castor oil based automotive foam
Oct 21,2011: Jayant Agro: Castor oil derivative: Automotive Fuel line has long term resistance to bio-diesel
Nov 10,2011: Jayant Agro Results 6 months ending Sept 30,2011
Jan 23,2012: Jayant Agro Dec 2011 Result review
Feb 20,2012: Jayant Agro: Promoters buy 5.6lakh shares from Open Market for Rs6.5Cr
Feb 20,2012: CRISIL upgrades Credit rating of Jayant Agro Organics
March 13,2012: Jayant Agro: Castor Oil Derivative -Primer (Must Read)
March 27,2012: Jayant Agro: Castor Oil Report - Download Link (Must Download)
April 1,2012: Jayant Agro: Sebacic Acid used in "Sustained Release" Medicine
April 17,2012: Jayant Agro: PA12 shortage Castor oil derived PA-11 in demand
April 21,2012: Jayant Agro: Castor oil to the rescue of Auto companies
April 23,2012: Jayant Agro: Castor crop survey SEA:estimated Jayant March 2012 earnings
April 29,2012: Castor Oil Loan Scam 1100cr detected by CVC
April 29,2012: 5000 tonnes castor seed sold by ACAZIS AG
May 27,2012: Jayant Agro year ending March 2012 result review
June 09,2012: Jayant Agro Organics: Peek into the future
June 16,2012: Jayant Agro Organics: Star trading house: June 2012 FOB Data (Must Read)
June 18,2012:Jayant Agro: Swastka Investmart Recommends Jayant@128 target 217.60
June 29,2012: Jayant Agro: May 2012 FOB Export data 
July 04,2012: Jayant agro: DGFT June 2012 Export Data
July 12,2012: Jayant agro: Castor oil Derivatives shoe by Nike!
Aug 24,2012: Jayant Agro: Q1 June 2012 Result Review
Oct 11,2012: Jayant Agro: July-Aug-Sept 2012 DGFT Export Numbers
Nov 16,2012: Jayant Agro: Alarming Oct 2012 DGFT Export Numbers
Dec 31,2012: Jayant Agro: New Year Gift :Bonus by Jayant Agro
Feb 7,2013: Jayant Agro: Dec 2012 Quarterly Result Review
March 12,2013: Jayant agro: Under reporting Export Incentives
April 11,2013: Jayant Agro: Strong Buy: Arkema to buy 25% stake in Jayant Agro subsidiary
May 7,2013: Jayant agro: Falling Export Numbers: worried?
June 10,2013: Jayant Agro: Latest FOB Data: charts
July 2,2013: Jayant Agro: June 2013: FOB Data
July 2,2013: Jayant Agro: Old Annual Report 2000 - 2004
Aug 22,2013: Jayant Agro: Annual Report March 2013: where have the dividend's gone?
Aug 26,2013: Jayant agro:Stand alone Profits: Under reporting profits by a factor of 3
Sept 10,2013: Jayant Agro: New JV for Bio-Polyols(Jayant Agro,Mitsui Chemicals, Itoh Oil)
Oct 17,2013: Jayant agro: Before Results-Estimated Sales/Profits for Quarter ending Sept 2013
Nov 1,2013:Jayant agro: Plant based Polyurethane opens up the future of Japanese Auto Manufacturing
Dec 28,2013: Jayant Agro: Bio-Based Polyamides, India the assured raw material supplier
Feb 1,2014: Jayant Agro: Castor Based Green Solvents: Industrial Green Chemical World-2013
Feb 7,2014: Jayant Agro: Third Industrial Revolution-Best Buys-Jayant agro, GAEL, NHPC & Tata Comm
Feb 12,2014: Jayant Agro: Bio-Polyol Plant Joint Venture with Mitsui Chemical & ITOH OIL
Feb 22,2014: Jayant Agro: Stats: Castor Oil based Patents
Feb 27,2014: Jayant Agro: Castor Oil Presentation-Indian Institute of Chemical Technology-Hyderabad
May 4,2014: Jayant Agro-SEWA(NGO)-Castor Supply Chain
July 3,2014: Jayant Agro:Why I Love this 2% Net Profit Margin Business
July 8,2014: Jayant Agro:Unresolved Global Oil Supply and Demand Poses Risk
July 9,2014: Jayant Agro: Postal Ballot for 700Cr Debt or Stake/Asset Sale
July 18,2014: Jayant Agro: Auditors of Jayant Agro hold more than 1% in Jayant Agro
July 22,2014: Jayant Agro: only 676 shareholders hold 92.91% stake in Jayant Agro
July 23,2014: Jayant Agro: The good guys in the US Court case against now defunct Biotor Industries
July 25,2014: Jayant Agro: Moneycontrol understating Return On Capital Employed for Jayant Agro
Aug 10,2014: Jayant Agro: Quarter 1 2014, Result Review
Aug 25,2014: Jayant Agro: Chart Reading: Predicting the future
Oct 15,2015: Jayant Agro: Short Term Debt: Is it really Bad or Good Debt?

Company Website www.jayantagro.com
Annual Report March 1999-2000
Annual Report March 2000-2001
Annual Report March 2001-2002
Annual Report March 2002-2003
Annual Report March 2003-2004
Annual Report March 2008
Annual Report March 2009
Annual Report March 2010
Annual Report March 2011
Annual Report March 2012
Annual Report March 2013
Annual Report March 2014
AnnualReport March 2015


Investor Section in Jayant Agro Website where we can get Annual Report of Subsidiary

Spilling the Beans about Castor Oil and its Derivatives

Jayant Agro Organics: Shareholding and Insider trading

Jayant Agro Organics is the next Best Buy recommendation.
CMP: 80.90, Market Cap: 121Cr, Free Float: 54Cr (44.60%)

Let us look at the latest shareholding figure for Jayant Agro Organics.

1. Promoters hold 59.93% of the equity
2. 295 Corporate bodies own 11.78% of the equity.
3. 5695 Individual shareholders (holding less than 20,000 shares) own 18.15% of the equity.
4. 19 High net worth individual shareholders (holding more than 20,000 shares) own 5.87% of the equity.
5. Total number of shareholders are just 6096 (including promoters)
6. There are 4 corporates who hold 12.13% of the shareholding. Invest India securities private limited holds 4.99% of shares.
7. Itoh Oil Chemicals Co Ltd holds 4% of shares of Jayant Agro Organics.

there are only 5695 Individual shareholders and that's the stock we are trying to buy/sell as promoters and corporates are all long term players. 5695 shareholders own 2,722,599 shares (18.15%) ie on average 478 shares are held by an individual investor.

We can see that 4 corporates hold 12.13% shares (Public holding more than 1% of the shares) while the bodies corporate holding is 11.78% (point 2) so most likely individual shareholding is still lower.

Also the free floating stock which is reported as 44.60% is actually 18.15% ie 21.96Cr. Cause rest of the stock is in strong hands and most likely not going to be available in the market for buy/sell.

Let us also look at another chart for Jayant Agro:

As can be seen promoters have been increasing their shareholding and public/individual investors are being crowded out. Corporate holding are somewhat steady.

Jayant Agro Oragnics is right now also very close to its 200 Day Moving Average so attractively priced.
=========================
Lets dig a little deeper into the corporate shareholding.
Itoh Oil Chemical Company which is holding 4% stake was issued shares at a price of Rs 105 per share in 2007. Itoh Oil Company is a world leader in castor oil derivatives and started manufacturing castor oil derivatives in 1946. Check out company website link

Invest India Securities private limited was issued warrants as special investors in jan 2007 along with promoters at a price of 65/= so needless to say they will also be linked to promoters in some way or the other.
=========================
It has been stated before that the promoters have increased shareholding in Jayant Agro Organics by 4.99% which is the maximum that the promoters can buy from the market in a year as part of creeping acquisition.
Lets look at the acquisitons reported to the SEBI and stock exchanges.
1. April 22, 2009 : Jayant Finvest Limited Acquired 3,25,094 shares between Nov 26,2008 to April 22,2009 ( Acquired in 24 different transactions)
2. August 28,2009: Jayant Finvest Limited Acquired 3,02,266 shares between April 23,2009 to August 24,2009 (Acquired in 30 seperate transactions)
3. Jan 1, 2010: Jayant Finvest Limited Acquired 3,17,737 shares between August 25,2009 to Jan 4,2010 (Acquired in 72 different dates)
So in
=========================

Conclusion: Actual liquidity in Jayant Agro Organics shares which is basically the free float and published as 54Cr (44.6% of Current Market Cap: 121Cr) is not really free float as large individual investors are long term investors and will hold the stock long term. Actual free float is around 18.15% small individual investor holding (21.96Cr). As can be seen from the chart above Jayant Agro Organics Stock has outperformed the index and rightly so as promoters are increasing shareholding in the company reducing liquidity in the market.

Jayant Agro Organics is now the largest player in India in Castor business. India is the largest castor oil producer in the world. Jayant Agro Organics right now is destined to be the largest Castor Oil derivatives player in the world and with complete backward integration from farming to high end derivatives. We can safely assume Jayant Agro Organics is going to be the Reliance Industries of Castor Oil. Companies valuation right now is Very Very Very Cheap. I would conclude Jayant Agro Organics is a better bet than even Gujarat Ambuja Exports .. though on paper (numbers..) Gujarat Ambuja Exports is too good to be true and beats Jayant Agro Organics hands down.

So here we have it..Jayant Agro Organics and Gujarat Ambuja Exports are 2 "Fire and Forget" missiles of investment for the future.. you can expect them to be multibaggers in 2-3 years times. On a shorter 12 months time frame we can expect both stocks to easily double from current levels. They are both agro based derivatives manufacturers and Jayant Agro Organics  products Castor oil can substitute petroleum products

Jayant Agro Value Buy?

Jayant Agro Oragnics
Current Market Price: 81.55
Market Cap: 122Cr
Free Float: 55Cr
Sales March 2010: 863.72Cr
PBIT March 2010: 27.23Cr
Interest March 2010: 12.05Cr
Profit Before Tax 2010: 15.18Cr
Tax: 7.09Cr
Net Profit 2010: 8.08Cr
ROCE March 2009: 19.62%
Debt Equity Ratio March 2009: 0.92
Long Term Debt Equity Ration March 2009: 0.63
The profits declared by Jayant Agro Organics is not that great and does give an impression of a fairly valued company in a low margin industry. But we need to dig a little deeper to get the real information about Jayant Agro Organics.. Lets start with the consolidated numbers  for Year ending March 2010:

Yes consolidated profits are double of standalone profits but before that I would first like to look at the percentage of public shareholding.(Point 1) It has decreased from 45.06% last year 2009 to 40.07% in 2010 thats a decrease of 4.99% in public shareholding.. Incidently SEBI has an upper limit to creeping acquisition by promoters of 5% every year and Jayant Agro Organics promoters have used up that limit completely.

Now lets look at the PBDIT numbers (Point2) on a standalone and consolidated basis. PBDIT numbers have increased from 29.70Cr Standalone to 41.04Cr (consolidated)  for year ending march 2010 an increase of 38.19% considering the fact that sales have increased from 863.72Cr to 887.17Cr for the same period an increase of 27.14%. So the subsidiary company has:
 Sales March 2010: 23.44Cr (887.17-863.72)
PBDIT March 2010: 11.34Cr (41.04-29.70)
That gives an operating profit margin of 48.38% for its subsidiary.. WOW!!.

Personally I feel the numbers are not really that good and what we are seeing is a supressed standalone numbers (to depress the stock price) and hence the consolidated numbers (Operating margins of subsidiary) are high. This has been done to allow the promoters to accumulate the stock when the prices are still low (as standalone profit numbers are low). The other reason is because the high value added subsidiary is expected to commence production only in March 2010.

Jayant Agro Organics is the largest listed Castor based speciality chemical company in India. India is the largest castor producing nation in the world with 60% of the world wide production of castor seeds. Consumption of castor is highest in european countries, USA and Japan.

Castor oil is a triglyceride with 90% of fatty acid chain is ricinoleic acid. Ricinoleic acid is a monosaturated, 18 carbon fatty acid and ricinoleic acid has a hydroxy functional group on the 12 carbon.

This functional group causes ricinoleic acid (and castor oil) to be unusually polar, and also allows chemical derivatization that is not practical with most other seed oils. It is this hydroxyl group which makes castor oil and ricinoleic acid valuable as chemical feedstocks.

Compared to other seed oils which lack the hydroxyl group, castor oil commands a higher price. As an example, in July 2007 Indian castor oil sold for about US$0.90 per kilogram (US$0.41 per pound)[3] while U.S. soybean, sunflower and canola oil sold for about US$0.30 per kilogram (US$0.14 per pound).[4]

Castor Oil and its Bio-derivatives is used as a raw material in the manufacture of Lubricants, Greases, Polyurethanes (Coatings Adhesives, Sealants Elastomers & Foam), High performance Polyamides[HPPA] (Nylon), Plastizers, Personal Care Products, Pharmaceuticals and Fragrances.

Castor Oil is a Natural Oil Polyol-There is no substitute in nature for its unique Biochemical structure. Modification of the Molecular Structure by dehydration yields a unique drying oil-that is superior to any other vegetable oil. Castor Oil Derivatives are unique to high performance greases and cannot be substituted. Castor Oil and Castor derivatives are Bio-Renewable, Biosustainable and where necessary Bio-Degradable.

Principally, Castor Oil & its bio-derivatives applications can be found in following industries:

Lubricants: Hydrogenated Castor Oil , 12 Hydroxy Stearic acid and Sebacic Acid are used in the manufacture of greases.

Polyurethanes: Polyester Polyols are used in the manufacture of polyurethane Coatings, Adhesives, Sealants, Elastomers and Flexible & Rigid Foams.

High Performance Polyamides (HPPA): Sebacic Acid and C10-Diamine are the building blocks for Nylon 6-10 and Nylon 10-10 . Sebacic Acid is available in Granular and Powder forms.

Pharmaceuticals: Castor Oil BP / USP / EP / DAB 10 grades are used in a range of pharmaceutical products.

Paints & Coatings: Dehydrated castor oil is a unique drying oil used in high gloss, non-yellowing paints Dehydrated Castor Oil Fatty Acids are used to make high solids alkyd, acrylic and epoxy ester resins for coating applications. Castor based reactive polyamides are used in high performance coatings.

Cosmetics: Special de-odorized castor oil, Hydrogenated Castor Oil, & ethoxylated derivatives are widely used in a range of cosmetics & toiletries. Undecylenic acid is used in anti-dandruff applications.

Plastic Polymer Rubber:  HCO is used in plastic master batches. Blown castor Oil is used as a plasticizer for synthetic rubbers. Nylon 11, a very important engineering polymer with a wide range of applications is made from Castor Oil.

Electronics & Telecommunications: Castor Oil BSS (COFSG) & electrical grade is used in the manufacture of capacitors used for electronic applications. Nylon 11 is used for sheathing of optic fibers in broadband networks.

Perfumery: Heptaldehyde & Undecylenic acid are used to make key aroma chemicals used in perfumes. An important aroma chemical is Undecylenic aldehyde used in many fragrances.

Agriculture: Undecylenic Acid, a derivative of Castor Oil is an important input for the growth of mushrooms. Castor Meal is used in organic farming.

Paper & Inks: Non reactive polyamides are used for lamination of paper. Castor derivatives are used in making special resin coatings used in various types of printing inks. Blown Castor Oils are utilized in many Bio-based Ink Formulations.

Country wise production numbers:

As can be seen India is the largest producer and EU, USA and Japan are the largest consumers.. Even China is now consuming more that its production capacity and is a net importer.
Let us look at the value addition that is happening.

Castor Seed - > Raw Castor Oil  ---------------126% price difference.
Castor Seed - > Pharma grade Castor oil ------------186% price difference
Castor Seed - > High Performance Polyamides (HPPA)------2122% price difference.

China is now the largest producer of HPPA in the world and infact imports castor oil from India. Indian manufacturers have been happy selling raw castor oil.

Jayant Agro Organics has two subsidiaries: Ihsedu Agro-Chem Private Limited and Ihsedu Speciality Chemicals Limited.
Ihsedu Agro-Chem Private Limited is located in Banaskantha which is one of the largest castor growing districts in Gujarat. Gujarat produces 71% , Rajasthan 16% of India's total castor seed production.

This plant has a crushing capacity of 350 MT oil / Day and also have solvent extraction plant. Jayant Agro Organics had acquired the crushing unit from Gujarat Agro Industries Corporation Limited.

Ihsedu Speciality Chemicals Limited is a speciality chemicals manufacturer with 24% stake with Mitsui and co. Ihsedu speciality chemicals limited is going to manufacturer HPPA product Sebacic Acid. The recent March 2010 result has disclosed that "Ihsedu Speciality Chemicals Pvt limited a subsidiary of the company has commenced production with effect from March 27,2010"

So what we have happening in Jayant Agro is:
1. Company has backward integrated by acquiring the seed crushing unit from Gujarat Agro Industries Corporation Limited in the largest castor growing district in Gujarat. Jayant Agro has increased capacity of the unit and has also installed a solvent extraction plant (which helps in extracting more oil from the Castor seeds) This step has helped Jayant Agro to consolidate its hold on raw material (castor seeds)
2. Company has forward integrated and tied up with Mitsui of Japan to manufacture high value added product sebacic acid which is a HPPA product and has a high profit margin (2122% price difference between castor seed and final HPPA product Sebacic acid)
3. Jayant Agro Organics had a preferential capital of 3Cr which has been paid off and additional equity capital has been issued 1,110,000 shares at Rs 60 per share to promoters. Equity capital has increased to 7.5Cr from 6.95Cr
4. Promoters have bought in the past 12 months 4.99% of equity from the market reducing the available traded shares by 9,45,097.

Conclusion: Jayant Agro is a strong buy for the long term and is a multibagger for sure. BITOR (Jayant Oil) a private castor oil company run by Kapadia's (different promoters) was the largest player in castor oil in India till 2004. With the acquisition of seed crushing capacity in the heart of the castor produucing region Jayant Agro has become the largest player. BITOR a private company had a private placement of shares and 23% stake was valued at 300Cr giving BITOR a market capitalization of 1304Cr. (link)Jayant Agro with revenues of 800Cr+ is valued in the market at 122Cr..Jayant is at the begining of its journey. With the commencement of production by its special chemicals division of sebacic acid we will see the consolidated numbers sky rocket..

Jayant Agro due to its strong leadership position and relatively cheap valuation is a Best Value BUY recommendation along  with Gujarat Ambuja Exports.

Short Term Trading Call: Sell NIFTY 5100 PUT at 78.50

Here is a short term trading call.
Recommendation: Sell NIFTY 5100 PUT at CMP: 78.50 2 lots

Investment amount : 55,000
Buy NIFTY 5100 Put back at Rs 5 ..2 lots Buy date: anytime between May 13,2010 and May 27,2010 when the strike price is reached ie Rs5/=

Difference: 73/= Profit 7,300 on investment of 55,000 for next 15 days: Returns is: 13.27% in 2 weeks.

PN: This is a short term trading call. Since this is a naked short ..there is a possibility of total loss of capital 55,000. This is a free recommendation please do your own deep dive. The author is not responsible for the loss of capital (which is possible) Please do your own deep dive before investing. Comments are welcome!! ..Questions will NOT be entertained.

=happy investing

Superhouse: Value Buy??

Superhouse
CMP: 50.35
Market Cap: 55.51Cr
Free Float: 27Cr
Debt: 88.70Cr
Sales Year 2009: 344.45Cr
Operating Profit: 30.05Cr
Taxes: 5.68Cr
Net Profit: 7.57Cr
ROCE: 12.73%
Debt Equity: 0.92
Long Term Debt Equity: 0.36
Divident: Rs 1.20
Divident Yield: 2.38%

Company Website: http://www.superhousegroup.com/
Superhouse is an established firm dealing in production of finished leather, leather products and textile garments. It is also established as the largest manufacturer of riding products such as breeches and riding shoes. It has 15 manufacturing units located in agra, kanpur, noida and unnao. It is an approved vendor for global brands such as Walmart, filanto, Carrefour , Metro MGB Group, Auchan, Andre, Shoe Fayre, Hudson Bay, Heckel Securite, Secura.

It also has its own brand of shoes Allen Cooper (Mens Shoes) and Double Duty (Safety Shoes)

Company results in recent quarters has been improving.. the stock also seems to be trending up.
The promoters have been increasing their shareholding in the company:
March 2006: 37.03% March 2007: 41.83%,  March 2008: 44.84%,  March 2009: 49.55%, March 2010: 54.50% Most of the increase in shareholding has happened through preferential allotment and amalgamation of private companies in the same line of business.


Conclusion: Company looks all set to deliver better results in the future. It is also entering into the indian retail segment. Margin expansion can be seen for 12 trailing months as compared to last year. Presence of privately held companies in the same line of business exist which could result in diversion of profits but a lot of private companies have been amalgamated which shows the intent of the promoters to concentrate business in Superhouse limited. An initial investment can be considered keeping the attractive valuation in mind. Also the stock is not yet discovered so we will get a finder's fees.. This is a long term play and any investment should be considered keeping at a minimum 1-2 year horizon or more.