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Saturday, November 20, 2010

Company: Varun Industries: Listed Stock which is a Uranium Play?

Varun Industries:
CMP: 214.20
Market Cap: 473.68Cr
Sales TTM: 2159.36Cr
Gross Profit TTM: 160.42Cr
Net Profit TTM: 36.44Cr
Interest Payments TTM: 87.68Cr
Debt: 830Cr
Reserves: 150Cr

Varun Industries Limited has evolved from being India's leading steel ware exporter  to a highly proactive multi-dimensional global conglomerate with business interests that include steel ware and steel raw materials, oil and natural gas, wind energy, uranium, mining, gems and jewellery...
Established in 1989 as a small trading house it was incorporated as Varun Continental Ltd in March  1996 and changed to Varun Industries Limited  in  April 2005.
An ISO 9001: 2008 company, Varun was listed in November 2007 on both Bombay Stock Exchange and National Stock Exchange and  has featured in the list of Top 500 Indian companies in both 2008 and 2009 compiled by Dun & Bradstreet , Economic Times and other reputed agencies.  More important, the group is currently  touted as among the 50 fastest moving mid sized Indian companies.

Enterprise Value: 473.68+830-0.78 = 1302.90Cr 

Varun is not a deep discount stock.. but then when you hear about its uranium prospects:
The Varun Group has acquired 1011 blocks (100 in process) covering approximately 6900 sq. kms and with estimated reserves of 17,00,000 tons of uranium, 43,50,000 tons tons thorium and traces of gold for the purpose of exploration, exploitation and out put sale.
The preliminary work has been completed and the evaluation of Reserves will commence shortly. The Group is optimistic of completion of the Exploration phase before the generally estimated 2-5 years.

Oil and Gas Prospects:
Varun Group has acquired block 3101 covering approx. 6800 sq. kms . This block is located in the confirmed petroleum province of Madagascar. Varun also has an offshore Natural Gas block measuring 13,200 sq.kms on the basin of the Indian Ocean which is possibly among the largest in the world Geophysical and Geological inhouse studies have been completed and the prognostics are promising.

Madagascar is an island nation in Indian ocean you can read more about it in Wikipedia 
http://en.wikipedia.org/wiki/Madagascar Oil prospects and uranium both seem to be valid
and well known.. 

Varun however has a lot of debt and lot of sundry debtors 681.93Cr.

Conclusion: Uranium and Oil in a future with scarce energy resources is too good to be true.. Investors should keep an eye on the stock and maybe take small positions just in case  any positive developments take place in uranium and oil fields.. and we might get a bump..Right now the promoters are more interested in backward integration for their steel business.. which gives a fair indication that the uranium and oil prospects will remain prospects for some time. promoter's own estimate is 2-5 years for any development activity so hold on don't jump the gun yet.. watch and invest in dips..

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