Jayant Agro Organics: Sebacic Acid used in Tissue Engineering

Sebacic Acid (SA) which is a derivative of Castor oil. Sebacic Acid has been found to assist in tissue engineering. Sebacic Acid when used along with Polycaprolactone (PCL) as a gel is cyto-compatible and capable of maintaining high cell viability. Addition of Sebacic Acid in PolyCaproLactone (PCL) increases the biodegradability of PCL. 

Title: Biocompatibility and biodegradation of polycaprolactone-sebacic acid blended gels.

Abstract: Tissue engineering aims at creating biological body parts as an alternative for transplanting tissues and organs. A current new approach for such materials consists in injectable biodegradable polymers. Their major advantages are the ability to fill-in defects, easy incorporation of therapeutic agents or cells, and the possibility of minimal invasive surgical procedures. Polycaprolactone (PCL) is a promising biodegradable and elastic biomaterial, with the drawback of low-degradation kinetics in vivo. In this work a biodegradable injectable gel of PCL blended with sebacic acid (SA) was prepared, to improve the degradation rate of the biomaterial. 

Sebacic Acid (SA) is known for its high degradation rate, although in high concentrations it could originate a pH decrease and thus disturb the biocompatibility of PCL. Degradation tests on phosphate buffered saline were carried out using 5% of Sebacic Acid on the blend and the biomaterial stability was evaluated after degradation using differential scanning calorimetry, dynamical mechanical analysis, and scanning electronic microscopy. After degradation the elastic properties of the blend decreased and the material became more crystalline and stiffer, although at a lower extent when compared with pure PCL. The blend also degraded faster with a loss of the crystalline phase on the beginning (30 days), although its thermal and mechanical properties remained comparable with those of the pure material, thus showing that it achieved the intended objectives.

After cell assays the  Polycaprolactone-Sebacic Acid (PCL-SA) gel was shown to be cytocompatible and capable of maintaining high cell viability (over 90%). © 2011 Wiley Periodicals, Inc. J Biomed Mater Res Part A, 2011.

Link to article

The Energy Equation is changing fast.

I dont know where to start and dont know where to end it. We all have just seen a price hike in India for "Petrol" to around Rs 72 per liter. An american Gallon is 3.78 liters which means in India we pay close to Indian Rupees: 272.16 per gallon of "Gas" which assuming Rs 50 per Dollar is 5.44 Dollars per Gallon of Gas.

Again the question is not about the Price of oil but Peak oil.
- Peak oil means world has reached a peak (maximum) barrels of oil production. and this number will never exceed.
- Peak oil does not mean there will be no more oil .. but oil will be "MORE" expensive to produce.
- Food is the largest consumer of Oil Resource followed by Transportation and then Housing.
- According to published data "Peak oil " production was: 74.82 Million barrels per day on July 2008.

This is an old image with data from 2009 as the latest data.
If you see the chart "Peaks" are preceded or followed by "Drop" in production which basically means some of this is carry forward oil. (planning for Winter requirements or Peak driving periods)

Here is a more recent data provided by US EIA (Energy Information Administration).

Here also we can see new peaks but again preceded and followed by slump .. which means its more due to preparation for projected demand. Its better to look at yearly avg production.

Another important point of view worth pointing out is the "7 Month Data" looking from a different perspective. We are looking at countries which are still increasing production and countries which have a fall in production of crude.

Increase In Production: Persian Gulf Nations, Canada, China, Russia, United States and World
Decrease in Production: Egypt, Mexico, Norway, United Kingdom, Total Non OPEC.

- This is production figures for crude oil, does not include natural gas and plant liquids.
- China and US are increasing production based on Shale Oil??
- Canada is producing based on Tar Sands??
- Total Non OPEC is down which means without OPEC at World level we are producing less oil.

Again we are getting carried away in the details..
- India with annual fuel production of 500-700,000 barrels per day and imports of 1,500,000 barrels per day is in a very bad position.
- India with large production capacity of food, fruits, vegetables, milk is favorably placed to take care of the basic needs of  the population.
- Fertilizer's and pesticides require Oil.
- Energy requirements are also there for communication, transportation.
- Population control is a must to keep a population size that is sustainable.
- Debate about Peak oil and alternative society structures to build sustainable communities is very important.
- Ayurveda, Unani, Homeopathy traditional medicine should be encouraged for general well being.
- Off the GRID setup like Biogas, Solar and transportation are urgent requirements.
- learn important trade skills for a future with "Peak oil"
- Instead of debating Fuel Price hike we should be debating Peak oil and the required changes in social structure.
- Personal transportation is a strict No-No. Reduce unnecessary use of fuel guzzlers. Use public transport.

Conclusion: Stock market no longer seems to be a long term area for investment. Very Very stock specific investments will have to be made and keep in mind Peak oil and energy footprint of companies. Auto, transportation, Airlines, travel, are a strict No-No for investment ideas. Also real estate investment is a big risk. Banks (No). Mind you these are long term themes and we could see short term spikes.







EIA Monthly Data 
The Oil Drum 

Sweet Spot for Growth.

Peak oil has been the underlying theme for investment ideas in this blog. Peak oil will certainly result in global growth coming to a halt. Current economic downturn on a world wide basis does have "Peak oil" as the underlying theme. Recent data with regards to shale gas will maybe give a window of opportunity to growth.

Shale gas resource data has been published by US Energy Information Administration. Top of the list is China and USA. USA is where the largest shale gas exploration work is done and first off the block with production. This has caused the natural gas prices in North America to be well below the world wide levels..

China and US as 2 large new energy sources.. we could be having a revival in economic growth.

India is busy importing the new energy from US for its growing economy.

Energy is the source of growth. The fact that US is producing surplus energy for export speaks of the volume of Shale gas being produced and confirms the reserves. We can expect the growth to be +ve in US. It has been said that efficiency in production ..though a good word will result in faster consumption of natural gas resources.

Conclusion: Shale gas reserves and technology to economically extract it will be a boon for world energy requirements. Subsequent efforts for exploration of  shale gas worldwide could keep the available world energy levels comfortable for the next couple of years at the least. Industries that can take advantage of cheap natural gas are set to reap profit.Current high energy prices could make some industries unprofitable. Hopefully this time (of relative stable energy prices) will be utilized for building a more energy efficient and sustainable industrial society.

References:

U.S. Energy Information Administration

Economist Intelligence Unit

Bio Gas plant for home using food waste

The price of energy is steadily rising. Best Buy Investment idea's are based on the theme of "Peak oil" 

I have been looking around for some energy security (for home) and bumped into ARTI (Appropriate Rural Technology Institute) 

What we are looking at is "Biogas plant" for home. here are some points to keep in mind.

- This is a Biogas plant but it does not require any "Cow-Dung" "Manure"

- What is fed into the "Biogas Plant" is starchy food waste.(kitchen waste)

- This is a small unit 1000-1500 liters plastic tanks are used to build the unit.

- Cost for complete setup as mentioned is around Rs 15,000/= (but consider inflation.. as I see different price tags)

- Input is food waste.

Storyline:  Biogas plant does not require "Cow dung" The bacteria that generate "Methane" reside in the stomach of "Cows" and are available in the cow dung hence cow dung is used in biogas plants. 

So if you have added the bacteria into the biogas plant you can feed organic matter (just like you feed cow fodder) and you will get "Methane" 

If Organic matter is starchy then its great (That would be potato peel, rice, wheat, bread) 

Methane has a calorific value of 11,000Kcal/Kg If you want high output of methane then input should also have high calorific value. Cow-dung has low calorific value as it is the excreta and hence we need 40kg of cow-dung which requires 40 days to decompose making biogas plants large and unmanageable.

If you put 1 kg of starch you can generate the same amount of Methane (as 40kg cow-dung) in 24 hours making the Biogas plant compact and manageable. (that is the underlying principle)

Story in picture..

Story in Video

There are issues with Hydrogen Sulphide in Methane as its harmful for humans.
Link to ARTI related info:
http://www.arti-india.org
http://www.samuchit.com/images/stories/products/std_designs.pdf (Price list)
http://www.samuchit.com/
http://www.indiatogether.org/2006/jul/env-karve.htm

I did find another company http://biotech-india.org  providing bio-gas plants and they do have more info like the BioScrubber technology to remove Hydrogen Sulphide.

By the way Gujarat Ambuja Export which uses Maize Starch "Big time" has "Bio-Gas Plants and has installed "Bio-Scrubbers"

Conclusion: Soon we will see energy price deregulation which also includes things like Zero subsidy on LPG cylinders (which means LPG cylinders will cost somewhere close to Rs700 per cylinder) considering the added advantage of organic manure for the gardens.. I think we have a winner in a "bio-gas" plant for home. 
just keep in mind the "Hydrogen Sulphide" issue

Diwali 2011

Its that part of the year when we look at how our investments are doing. Anyone who has been following the stock market will know that its pretty bad. Well lets look at the numbers for the recommended stocks

There are 28 stocks and the return from the day of investment is 4.9% ie an investment of Rs 10,000 in each of the 28 share would be worth 2,92,223.74. Profit is 12,223.74. Dividends have not been considered. If it wasn't for Venky's we would be in negative territory.  

Looking back at the stock prices my understanding is:

- Interest rate spike is one of the key reasons for the market downturn.

- Global liquidity squeeze is "on" which is restricting investment flows.

- Fear is directing investment rather than rational decisions.

There are multiple ways to look at the current market scenario. My belief still is that "Peak oil" is the prime underlying theme. Further extrapolation of "Peak oil" is high inflation (due to rising energy costs for transportation, energy, fertiliser) I also see "Growth falling" at worldwide basis. 

Growth would specifically impact discretionary items. Also if you see the trend of "Carbon footprint" "Eco-Conscience" the trend is moving toward minimalism.

Though there are 27 recommended stocks in the blog .. my personal investment is heavily geared towards my "Best Buy's" Jayant Agro Organics, Gujarat Ambuja Exports, Tata Communication and NHPC. These 4 cover 90% of my investment funds and all are somewhat linked to the "Peak Oil" theory.

Jayant Agro Organics:  Jayant as we have discussed time and again is one of the largest listed Castor oil and castor oil derivatives manufacturer in India. Castor is a replacement for crude in the chemical industry and is "The Green Chemical"

Gujarat Ambuja Exports: It is a play on the consumption story of India. GAEL is also a very fundamentally sound agro processing major. The management is committed and GAEL with time we should see the market acknowledge its sound fundamentals.

Tata Communications: Not much discussed in the blog but Tata Communications has quietly setup the largest network of submarine cables and connection endpoints in the world. This basically ensures that customers get a better deal signing up with Tata communications for their network needs than any other company. With Peak oil "Travel" is going to be more and more virtual. Whether you use "Tata Telepresence" or just plain simple "Video conferencing" you will be touched by "Tata communications"

NHPC: National Hydro Power Corporation is the largest "Hydro power" corporation in India and all set to maintain the status for time to come. Electrical energy with "Natural Water Cycle" as the source of energy is definitely very very attractive.

My suggestion to investors is.. This is as good a time as any to take a good look at which stocks to sell and which stocks to buy. Markets will rise considering the huge pile of cash lying around.. not all stocks will do well stock picking is highly recommended. Avoid Auto, Airlines and discretionary stuff. I would also recommend that the "Best Buy" stocks must be considered for investment.

Jayant Agro: Fuel Line Made of Renewably Sourced DuPont™ Zytel® Nylon Provides Long-Term Resistance to Biodiesel

Castor oil derivatives specifically sebacic acid is used to produce "Fuel lines" used by diesel engines and bio-diesel engines. The renewably sourced long-chain nylon was chosen in preference to competitive grades of PA12 on the basis of its superior temperature resistance and long-term aging performance in biodiesel.

Geneva (PRWEB) October 18, 2011

The fluid transfer system supplier Hutchinson SRL, of Rivoli, Italy, has specified a DuPont™ Zytel® RS grade based on PA1010 for the production of fuel lines used with both diesel and biodiesel. The renewably sourced long-chain nylon was chosen in preference to competitive grades of PA12 on the basis of its superior temperature resistance and long-term aging performance in biodiesel.

The extruded, monolayer fuel line from Hutchinson is already in use on commercial new turbo and multijet diesel engines used on several Fiat vehicles, including the Fiat 500, Panda, Punto, Lancia Delta, Alfa Romeo MiTo and Giulietta. As well as seeking to increase the use of renewably sourced polymers to reduce dependence on fossil fuels, automotive component manufacturers, OEMs and materials suppliers are modifying engine and fuel systems to run efficiently on the latest generation of biofuels, including biodiesel.

Components for such systems must resist the chemically aggressive biofuels, temperature extremes and mechanical stresses for the lifetime of the vehicle. This specific Zytel® RS grade based on PA1010, which contains more than 60 percent renewably sourced ingredient by weight, offers properties typical of flexible polyamides with additional benefits such as superior high-temperature resistance when compared to materials such as PA 12, high chemical resistance and low permeability to fuel and gases. It is suitable for a range of extrusion applications including fuel lines, hydraulic hoses, corrugated tubes, transmission oil cooler hoses and pneumatic tubes.

“We were seeking a polymer for our fuel line application that was preferably renewably sourced, for a more sustainable solution, and was able to provide the best aging stability in biodiesel,” explains Katia Rossi, development manager at Hutchinson. “We considered a number of flexible polyamides, including PA12 as they had previously been specified for similar fuel line systems, but material testing showed Zytel® RS PA1010 to meet our requirements. It combines, for example, superior temperature resistance to PA12 with the best resistance to biodiesel at high temperatures.”

Data on aging performance in biodiesel was obtained by immersing the materials in the most common biodiesel – rapeseed methyl ester (RME) – at 125 °C (257 °F) for 1,000 hours and measuring retained mechanical properties. The B30 biodiesel used for testing is made up of 30 percent biofuel from rapeseed and recycled vegetable oil and 70 percent standard diesel and is suitable for many diesel cars.

By specifying the DuPont material for its fuel line for diesel engines, Hutchinson gains a longer-lasting solution that also is market leading in terms of its renewably sourced content. “With more than 60 percent by weight, this Zytel® RS grade based on PA1010 has one of the highest levels of renewably sourced content currently available for a high-performance nylon,” confirms Mario Delbosco, development programs manager at DuPont Performance Polymers. The renewable carbon in PA1010 comes from sebacic acid, which in turn is derived from castor oil.

The successful adoption of renewably sourced Zytel® nylon for the fuel line has encouraged Hutchinson to extend the application to other automotive manufacturers in Europe and beyond as well as other fuel system applications. Hutchinson is a subsidiary of the Total Group with representations in Europe, America and Asia, and is one of the world’s leading suppliers to the automotive industry. The product portfolio includes components for vibration technologies, drive train systems, sealants and adhesives, fluid transfer systems (low and high pressure), body parts and sealing systems as well as precision seals and molded parts.

DuPont offers more than 100 materials and product families for the global automotive industry. Through its global application development network, DuPont Automotive is committed to collaborating with customers throughout the value chain to develop new products, materials, components and systems that help reduce dependence on fossil fuels and protect people and the environment. For more information, visit automotive.dupont.com.

DuPont (NYSE: DD) has been bringing world-class science and engineering to the global marketplace in the form of innovative products, materials, and services since 1802. The company believes that by collaborating with customers, governments, NGOs, and thought leaders we can help find solutions to such global challenges as providing enough healthy food for people everywhere, decreasing dependence on fossil fuels, and protecting life and the environment. For additional information about DuPont and its commitment to inclusive innovation, please visit http://www.dupont.com.

The DuPont Oval Logo, DuPont™, The miracles of science™ and Zytel® are registered trademarks or trademarks of DuPont or its affiliates.

Source: http://www.prweb.com/releases/2011/10/prweb8879628.htm

Conclusion: The race is "ON" just like the demand for "GOLD" as an investment was in every investors mind.  Renew-ably sourced, decreasing dependence on fossil fuels, and protecting life and the environment are the buzzwords and castor is the underlying source. The good part is castor derivatives have always been superior to crude oil derivatives so we are going to get better product/performance characteristics and demand is going to increase.. I hope India and Jayant can increase production with competitive pricing to increase their market share of the emerging "Green Chemicals" business.

Jayant Agro Archives
Zytel Info

Bharat Gears: Value Buy at these prices.

Bharat Gears:

CMP: 46.75

Market Cap: 35.69Cr

Debt: 58.14Cr

Sales TTM: 361.45Cr
PBDIT TTM: 34.31Cr
Net Profit TTM: 10.24Cr
6 yrs Avg Cash Flows from Operations:  +ve 24.28Cr

Bharat Gears Limited (BGL) is india's largest gear manufacturer  (I think its the largest gear manufacturer for Commercial vehicles, Farm machines and Construction equipment) . Bharat Gears manufacturers a wide range of Ring Gears and Pinions, Transmission Gears and Shafts, Differential Gears, Gear Boxes.

Bharat Gears has 3 divisions: Gears, Furnace and Automotive components.

Clients for Gears and Automotive components include: Ashok Leyland, Godrej, Mahindra & Mahindra, Tata Motors, Axles India, Hero Motors, Mahindra Sona, GE Aviation, Carraro-India, Italy, China, Hindustan Hardy Spicer, New Holland Fiat India Ltd, Toyota Kirloskar Auto Parts, CLAAS-India, France,  Hyva India, Paharpur Cooling Towers, Transaxle Manufacturing of America, Dana Corporation USA, JCB India, SAME Deutz - Fahr, Voltas, Eaton USA, JDCW USA, Spicer India, ZF China, Elgi Equipments, JDEPL India, Swaraj Mazda, Agriking Tractors and Equipments, Escorts, John Deer Iberica, Spain, TAFE.

BGL Furnaces engineers and constructs batch and continuous heat-treating furnace systems in technical association with AFC-Holcroft, Michigan, USA.

More than 110 BGL-AFC-HOLCROFT heat treating furnace systems are in service at several customers' plants in India, including Ashok Leyland, Automotive Axles, Bajaj Auto, Ceekay Daikin, Endurance, Fairfield, Greaves, Hindustan Motors, Mahindra & Mahindra, Mukand, National Engineering Industries, Precision Fasteners, Premier Automobiles, Raunaq Auto, Sona Koyo Steering, Sundaram Fasteners, TATA-Timken, TELCO, Tractor Engineers and Varroc.

Company has redeemed 1Cr worth of preferential equity which had 10% interest rate. Bharat Gears also has "leased" some of its manufacturing equipment with estimated lease obligation of 9.65 cr (last year 5.08Cr) and one year lease payment due of 2.49Cr (last year 1.56Cr) This is interesting cause this is the model being used by "Telecom players" and I must say it should be beneficial for Bharat Gears.

There are expansion plans with a new plant at Satara but I think it will take a year or more for it to really start building (right now land has been purchased)

Conclusions: Bharat Gear seems to be cheap.. its market cap of 35.69Cr is equal to 34.31Cr  PBDIT for year ending March 2011. It has also been reporting consistent +ve cash flows. Leasing of equipment seems to be working for Bharat Gears and looks like it is going to drive the growth as Bharat Gears can get latest equipment at a  fraction of cost and service the demands of the customers.. Its target automotive segment is: commercial vehicles, farm machines and construction equipment which are all growth areas for a growing economy like India. I would expect Bharat Gears to close the year with 400Cr or more of sales. Dec and March are the most profitable quarters.

Company Website
Bhart Gears Annual Report 2011:
Bhart Gears Annual Report 2010:
Bhart Gears Annual Report 2009:
Bhart Gears Annual Report 2008:

Where to get research info for Free.

I was just thinking its very important to learn fishing (investing) so that we can all start fishing.

Here is a list of places to go for ideas.

1. NSE and BSE sponsor research for companies using their "Investor Protection Fund".

NSE Link :  http://www.nseindia.com/education/content/reports/eq_research_reports.htm
(dont know why the link is not working)
This is a better link for NSE (link)

BSE Link: BSE Sponsored Research Reports

2. Economic Times Top 500 companies in India based on revenues

ET-500 Home Page (link)
ET-500 Complete List (link)

3. Edelweisse Score for Stocks

Edelweisse Score for GAEL

The good part of Edelweisse site is that they did catch the consolidated data for Jayant which is generally missed by others.

4. MoneySights website.

Moneywebsite for GAEL

What I like in moneysights website is that along with fundamental analysis the "Upside Potential"  which could indicate that the stock is fundamentally good but under-priced or over-priced. 

5. Hindustan Bulls : Candle sticks, Technical Analysis.

Sometimes its good to see and get some idea how the candle stick data looks.

GAEL Data link

6. Money Control: MoneyControl is where I generally start as almost all data is available directly from BSE/NSE

Moneycontrol Link

7. GeojitBNP Paribas: What I like is the Market cap data for 5yrs on month-month basis ..which is very important to see to what level the stock can fall (support) and at what price are we getting in.

Geojit-GAEL Link

8. Technical Data: EMA 500, 200, 50 is good for technical related info.

Moneycontrol website

9. Screens to filter stocks based on parameters..
http://www.screener.in/screens/all/

10. Quantitative data for stocks..
http://www.quantspartner.com/B.aspx

Jayant Agro: Ford Focus 2012: Features First Castor Oil based Automotive Foam

Ford mixed things up a bit when it introduced a special soy-based automotive foam to make up the seat cushions of many of its vehicles in 2008, but now the automaker has teamed up with BASF to produce a special new foam to make a soft-touch dashboard.

Ford and BASF have developed a seamless soft-touch dashboard that comes from plant-based castor oil and offers greater flexibility, durability and faster production than a traditional petroleum-based product.

“Working with BASF, we now can offer our North American customers the new Ford Focus with the industry’s first seamless soft-touch instrument panel that’s stronger, better-looking and better on the environment,” said Bari Brown, Ford advanced product development engineer. “Castor oil from plants helps deliver sustainable interior foam that reduces petroleum use while improving vehicle craftsmanship. It’s beneficial both for the customer and Mother Nature.”

Ford says the new material is “significantly more durable” than the material it used previously, offering 36 percent more tensile strength. Tear strength improved by five percent, while unwanted elongation from temperature or impact stress reduced by 12 percent.

The automaker says it will also reduce production time by 43 percent, an added benefit, but the real benefit and goal of the product was to create a more sustainable car that has a smaller impact on the environment.

Dan Pierce of Ford Motor Company told Leftlane that the automaker already has soy foam in 75 percent of its seats and most of its headliners, something it intends to eventually move to 100 percent. With the new castor oil-based foam for the dashboards, Ford intends to take a similar path towards eventually completely phasing out traditional petroleum-based foam in all of its products.

Pierce says the new dashboard has been slowly integrated into the 2012 Focus product lineup, and is now at 100 percent utilization in all models being built.

Link to original Article (Link)

Ford Focus sales in America 2010: 172,421 units

Conclusion: Castor oil is the best replacement product for crude oil. In-fact castor oil properties are better than petroleum based products (as mentioned above). The only reason crude oil replaced castor oil was because "Crude oil" was cheaper and abundant. Now with crude oil prices at $ 80-100 USD and Peak oil a reality.. Castor oil will fast replace Crude..  

Maybe the real underlying reason could be the virtual ban by European Union of crude oil based plasticiser (- Bio-Plasticiser Surge in Demand )

Jayant Agro Organics is the largest processor of Castor oil in India 

Market Cap:  Rs 1,249 million 

Year end March 2011

- Sales:  Rs11,719.9 million

- PBDIT: Rs 634.5 million

- Net Profit: Rs 245.7 million 

Deep Deep Value and a must have (only for long term investment) 

Old Blog articles of interest:

- Bio-Plasticiser Surge in Demand

- Castor Oil used in synthesis of Silver nano particles

- Castor Oil derivatives used in Solar Panel manufacturing

- Castor Oil: its Derivatives and their application

- Jayant Agro Organics: Castor Oil Derivative manufacturer (blog archives)

Jayant Agro Organics: Sept 29,2011 AGM report.

Attended the Jayant Agro Organics AGM in Mumbai today Sept 29,2011. The AGM was scheduled for 9:30am.There were quite a few people considering that Jayant has only 6000 odd shareholders.

Quite a few people were upset coming early in the morning during market trading hours to attend the AGM.

Around 5 shareholders got onto the podium to bring up their view points.

1st shareholder started out with a bang.. mincing no worlds and outright frank in his language A bit to sharp.. he acknowledged the good results of Jayant Agro Organics.. but pointed out concerns such as 

- lower dividend payouts.. payouts had increased by about 50 lakhs (over last year) while Jayant made about 10Cr additional net profit over last year.

- Advantages of paying out higher dividends was mentioned.

- Interesting points were put forward with suggestions to the management to approach Mutual funds flush with funds so that mutual funds also invest in Jayant increasing its stock price. Right now Mutual fund ownership is just 7200 shares.

- Concerns were raised about huge interest payments (22.78Cr)  and debt levels (230.36Cr)

- Concerns were also raised about Forward contracts of 253.9Cr

- Concerns were raised about funds loaned to subsidiaries and what rate of interest was paid.

- Concerns raised about "Ihsedu Specialities Limited" which has been doing "Trial production" for past 1 year?? with close to70Cr of assets

I am sure I have forgotten a few more but the gentleman practically covered every point that was there.

2nd shareholder also appreciated Jayant agro for its results and wished the chairman of Jayant Agro Mr Vithaldas Udeshi a speedy recovery. He was more pleasing in his speech and appreciated the fact that  Jayant Agro had provided us with an 18 yrs financial history and that we now also have a list of end products that use castor listed out clearly. He was appreciative of the management in the good progress made by Jayant to report 1000Cr turnover in such a short duration of its existence. More information was sought about "Sebacic acid" its uses and future growth of the company. Castor meal being sold as fertilizer and if there is any liability of taxes as fertilizers are taxed. Hybrid Castor Seeds business also needed some colour..

The other shareholders also brought up similar points .. question of dividends.. bonus .. Ihsedu Specialities Chemicals status.. more info about how castor seeds price changes impact Jayant +ve co-relation or negative corelation. Question was raised about how many kg of castor seeds are required to produce 1kg of castor oil
What was Jayant Agro's share in the Castor market in India. what would be the impact to topline when the sebacic acid plant of 8000MT goes onstream. What do the year end numbers look like? since 6 months are already passed for 2012

Management answers:
I must state the management was a little out of sync with shareholder demands. The floor management for the AGM was tardy at the best. Most of the answers from the management was done by Vikram.V Udeshi  (CFO)..
Debt was short term debt taken primarily for working capital related activities. Since the volume of business was increasing substantially the working capital requirements and hence interest payments would increase in the future also. Since long term Debt/Equity was around 0.40 the debt equity of 1.4 or so should not be of concern as its primarily working capital related.

Forward contracts worth 253.90Cr was for hedging and not "Naked open ended contracts" these are for protecting the exchange fluctuations and represented 10-15% of total business. Future contracts was not speculative in nature..

Management said there was an increase in dividend payment and going forward there will be gradual increases in dividend payouts.. It has to balance between capital expenditures and payouts to shareholders.. The management said they would be most happy to announce higher dividend payouts as they would be the largest beneficiaries..  Management will first take care of capital expenditure and then as the capacity stabilizes they will look at dividend distribution and bonuses..

About loans to Subsidiaries the management said that interest was being paid for the loans given to subsidiaries and interest was around 10-12% and mentioned in the books.

The accounts were not double counting the sales and internal consumption was not being considered.

About Ihsedu Specialities chemicals .. the JV partner Mitsui's stake has been bought and the continuous processing plant should be stabilized in 4 months time frame as some equipment delivery was expected before continuous production can be started..

With Regards to topline impact of 8000MT Sebacic acid plant the management said it would add around 200Cr to topline.

With Regards to Ihsedu Agro Chem .. Its a subsidiary which is concentrating on backward integration of seed crushing and castor oil and its derivatives.. The management has no plans to merge Ihsedu Agro chem with Jayant Agro.

Seed requirement for 1 kg of Castor oil is 2.2 to 2.4 kg. I personally feel thats solvent extraction process based but cold pressed Castor oil would have a oil to seed ratio of 30%.

Jayant is the largest player for castor in India but the management would not like to make a statement.

Food served was: Veg sandwich, Paneer Sandwich, Vada, dahi-vada (kind off), idli, gulab jamun, sambar, tea cofee.

I felt the underlying tone of the shareholders was bullish. There were heavy weight (Senior) Gujju bhai investors .. yes the meeting could have been more well managed.. Next meeting room needs to be larger for sure. It has to be set closer to the beginning of the AGM season and not at the very end. Also preferably after trading hours.. and yes Pls higher dividend payouts!!

Pls Note: These are not recorded minutes and I donot guarantee that anything mentioned here is true or false. It is what I heard or interpreted or thought the management  and shareholders were saying.
Jayant Agro Blog Archives 

NHPC: National Hydro Power Corporation Limited

Sept 28,2011: NHPC: 11 Years Data Review

July 4,2010: NHPC: Long Term Buy

Company Website: Link

Annual Report: 

March 2011

March 2010

NHPC 11 Years Data Review.

NHPC:

CMP: 23.65

Market Cap: 29,029.75Cr

Dividend yield 2.54%

Advantages of Hydro Power:

- A renewable source of energy - saves scarce fuel reserves.

- Non-polluting and hence environment friendly.

- Long life - The first hydro project completed in 1897 is still in operation at Darjeeling is still in operation.

- Cost of generation, operation and maintenance is lower than the other sources of energy.

- Ability to start and stop quickly and instantaneous load acceptance/rejection makes it suitable to meet peak demand and for enhancing system reliability and stability.

- Has higher efficiency (over 90%) compared to thermal (35%) and gas (around 50%). (I did not know that!)

- Cost of generation is free from inflationary effects after the initial installation.

- Storage based hydro schemes often provide attendant benefits of irrigation, flood control, drinking water supply, navigation, recreation, tourism, pisciculture (breeding, hatching, and rearing of fish under controlled conditions) etc.

- Being located in remote regions leads to development of interior backward areas (education, medical, road communication, telecommunication etc.)

Lets look at the 11 yrs data which is available.

As we can see:

1. 11 years of continious increase in dividend payouts

2. Reserves have also been growing regularly.

3. Sale price per unit has also been increasing.

Equity dilution has also taken place and units of power generation is also increasing steadily. 

Rate of Equity dilution as compared to increase in Dividends is pretty low. Also going forward  don't see future equity dilutions as Debt is lower so capacity expansion can be done by adding new debt. 

Conclusion: NHPC is quoting below the IPO Price.. also current dividend yield is 2.54% and considering its track record of consistent increase in dividends we can expect long term shareholders to get higher % dividend yields. The stock price will also respond positively to higher dividends. Energy prices are sure to increase so sale prices will also increase. NHPC is the largest player in Hydro Power sector and we can expect it to get a larger share of new Hydro power projects based on experience and size.  Its a good safe compounder with almost assured increase in dividend payouts in the future. A no-brainer stock to buy.

Is the Markets ready for a 15 Trillion Dollar Liquidity Pump.

Mr Bernanke has just started "Operation Twist" and the world is in financial crisis. Well here is a different "Twisted" view about what's really happening. Just look at the table below.

1. The first table is FED data H.3 "Aggregate Reserves of Depository Institutions and the Monetary Base"
All the Data is in Millions of USD (US Dollars) Seasonaly Adjusted, Break Adjusted.

2. The FED is looking at the Monetary Base and reporting it.
- In Jan 2007 (2007-01) the monetary base was $813 Billion
- In the peak of financial crisis Oct 2008 (2008-10) the monetary base was $1,129Billion (1.12Trillion)
- 26 months later in Jan 2010 (2010-01) the monetary base was expanded to $1,987Billion  (1.987 Trillion)
- In August 2011 the monetary base has expanded to $2,658 Billion (2.658 Trillion)

On the first look we can clearly see the FED has increased the monetary base by 235.42% (Oct 2008 to August 2011) in the past 35 months but the ground reality is that there has not been any comparable increase in economic activity.. We conclude .. US is in depression.

3. Lets look at "Reserves of Depository Institutions Required" column. A more common term used to describe "Reserves of Depository Institutions Required" is "Cash Reserve Ratio" or CRR.

As per Investopedia:
The portion (expressed as a percent) of depositors' balances banks must have on hand as cash. This is a requirement determined by the country's central bank, which in the U.S. is the Federal Reserve. The reserve ratio affects the money supply in a country. This is also referred to as the "cash reserve ratio" (CRR).


For example, if the reserve ratio in the U.S. is determined by the Fed to be 11%, this means all banks must have 11% of their depositers' money on reserve in the bank. So, if a bank has deposits of $1 billion, it is required to have $110 million on reserve. 

US CRR rate is 10% and lets look at the column titled "Reserves of Depository Institutions Required"
2008-10 (Oct 2008) Reserve Required: $48.366 Billion.
2011-08 (August 2011) Reserve Required: $83.843 Billion.

- The banks in US had deposits of $483.66 Billion in Oct 2008 (10% is $48.36 Billion)
- August 2011 the Deposits in US banking system has increased to $838.43 Billion (10% is $83.843Billion)

Reserve Required has increased by 173.35% but compared to 235.42% increase in Monetary base deposit growth is 62.06% lower. This would mean there is an increase in savings but definitely its lower than the increase in monetary base so if its a Vanilla Savings account your money would have lost value as the monetary base has increased at a higher rate.

4. This is the column titled: "Reserves of Depository Institutions non borrowed"  This column indicates the reserves held by Banks with the FED and its their "own money" "NON Borrowed (from FED)".
Before 2008 The FED paid Zero interest on the "Reserves of depository Institutions"  and from 2008 FED has started paying interest of 0.25% (25 basis points) on the "Reserves of Depository Institutions"

  a. in Jan 2007 (2007-01)
Reserves of Depository Institutions Non borrowed: $41.672 Billion
Reserves of Depository Institutions Required: $41.338 Billion
The numbers were matching .. so the banks maintained a reserve level with the FED just equal to the minimum required levels. (as there was no interest payments of 0.25% )

  b. In Oct 2008 (2008-10) just as the financial crisis imploded.
Reserves of Depository Institutions Total: $315.522 Billion
Reserves of Depository Institutions Non borrowed: -ve $332.798 Billion
Reserves of Depository Institutions Required: $48.366Billion
Monetary Base: $1,129.938 Billion ($1.129 Trillion)

The banks were really facing a liquidity crisis.. and also a crisis of confidence. 
-Reserves were higher ($315.522 Billion) than Minimum Required levels of $48.366 Billion (which indicates a crisis of confidence)
-All of the reserves was borrowed money (from the FED) which indicates a liquidity crisis.

  c. In Aug 2011 (2011-08) what is really happening.
- Reserves of Depository Institutions Non Borrowed: $1,655.535 Billion ($1.65 Trillion)
- Reserves of Depository Institutions Required: $83.843 Billion
- Monetary Base: $2,658.972 Billion ($2.658Trillion)

The banks are flush with Cash and the banks are storing it with FED as Reserves. The Scenario has completely changed from Oct 2008 where the banks had no money and were borrowing from the FED. 
Now the banks have large amount of money and are not willing to lend and are holding it with the "FED as Reserves" 

I have done some calculations and it looks like this:

1. Money in the system:
Money in the system = Monetary Base - Reserves of Depository Institutions Non borrowed.
Jan 2007  (2007-01) Money in the system: $771.434 Billion
Oct 2008 (2008-10) Money in the system: $1,462.736 Billion (1.462 Trillion)
Aug 2011 (2011-08) Money in the system: $1,003.437 Billion ( 1.003 Trillion)

On Oct 2008 the banking system had cash deficit and had borrowed from the FED $332.798 Billion so Money in the system was more than the Monetary base of $1,129.938 Billion. Money in the system was $1,462.736 Billion

2. As we can see in Aug 2011  the Monetary base is 1,003.437 Billion which is less than what was in Oct 2008 ( $1462.736 Billion start of Financial turmoil)
So even after an expansion of 235.4% in monetary base  the actual "Money in the System" is less than what it was in Oct 2008. All the money has been deposited with the FED as "Reserves" by the big banks. So a recession scenario has been created by "Tight Liquidity" by reducing the actual "Money in the system"

Conclusion: The FED has done a lot of liquidity infusion into the system. unfortunately it has never reached the  financial system. The gatekeepers "The big banks" have deposited all of it about $1.57 Trillion dollars back with the FED as "Excess Reserve holdings" This money could have been deployed in the Bond market but that has also not been done at the expense of profits and also with the intention of curbing liquidity (I think) 


Since Cash Reserve Ratio is 10% so $1.57 Trillion in reserves would translate at M3 levels $15.7 Trillion.
What has happened is .. in the past 3 yrs the liquidity infusion by the FED and the banks keeping the liquidity out of the system by depositing it with the FED as reserves .. the control (flow of liquidity) has moved from the FED into the hands of banks. 


If and when this money enters the financial system..
- Dollar should get devalued.
- Inflation in US will rise.
- Exports should become cheaper for US Exporters.
- Gold in Dollar terms could rise further while in Indian Rupee terms.. Gold could be worth  much less.
- A lot of this excess cash will look for attractive destinations and Indian Stock market should "Break away from the developed markets" Also other BRIIC markets which are driven by internal consumption could see increased valuations.


The current strengthening of the US dollar is temporary in nature. It is advisable for American Investors to move out of dollar into other stock markets and buy into good stable companies. Indian Bond market with 10% interest rates is also very attractive..Export based companies in US should also do well. US also has large natural resources and these resource based companies would also do well.
Indian Investors should remain invested in Indian companies. Exporters need to worry about Dollar devaluation and its advisable to shift to non US Dollar denominated currencies for export or Indian Rupee. 


Keeping "Peak oil" in view it is advisable to invest in basic consumption oriented ideas and Hydro power companies (NHPC). Energy "Peak oil" will make everything expensive so large value one time expenses can be front loaded. It is advisable to buy NIFTY Call Options 1 year down the line if available at attractive valuations. Best Value buy stocks are: GAEL, Jayant Agro, NHPC and Tata Communications.

PN: these are my personal views/understanding about publicly available information. Please do your own deep dive before investing.

FED H3. Data (link)
FED H4.1 Factors affecting Reserve Balances (Link)

Jayant Agro: Castor Crop Survey 2010-2011 SEA

Solvent Extractors Association (SEA) has conducted a crop estimation survey with Nielson India conducting the survey on behalf of SEA.

- Total area under Castor crop in India year 2010-11 is 8.59 lakh hectares. It has increased by 14% as compared to previous year.

- Estimated Castor Seeds in India for the year 2010-2011 is 11.90 lakh tonnes. It has increased by 22% as compared to previous year.

- Average yield for 2010-11 is 1385 kg/hectare as against 1297 kg/hectare during the year 2009-10. Yield has increased by 7% as compared to previous year.

All India State-wise data.

As can be seen Gujarat is the 800 pound gorilla in the castor space.

Gujarat State Castor crop data

- Total area under Castor crop for 2010-11 is 4.83 hectares, an increase of 10% as compared to previous year.

- Estimated total production of castor seeds in Gujarat for the year 2010-11 is 8.60 lakh tonnes, an increase of 17% compared to previous year.

- Average yield for the year 2010-11 is 1781 kg/hectare as against 1683 kg/hectare during the year 2009-2010

Gujarat District wise castor crop information

As can be seen "Banaskantha" is the largest castor growing district in Gujarat and Jayant Agro Organics has bought the Gujarat Agro Industries corporation limited plant located in Palanpur Gujarat. Palanpur is a city located in Banaskantha district. Ihsedu Agro Chem Private limited is the subsidiary company which is running the plant in Banaskantha. 

Ihsedu AgroChem has increased its seed crushing capacity to 360,000 MT (Year 2010-210,000 MT) Ihsedu AgroChem for year ending March 2011 had sales of 279Cr and a net profit of 6.97Cr

Coincidentally Jayant Agro Organics March 2010 standalone profits was 7.84Cr..  so Ihsedu AgroChem is growing by leaps and bounds and is the primary subsidiary company  contributing to profits for Jayant Agro for the year 2010-11.

Conclusion: Most of the earnings growth that we have seen in Jayant Agro's consolidated profits is related to the successful backward integration through Ihsedu AgroChem. Having the seed crushing plant in the largest castor seed growing district in Gujarat has been a winning combination. 

Ihsedu Speciality Chemicals Pvt limited has not yet been able to stabilize its production problems. The promoters have acknowledged the problem. The plant which was being sourced from china but in technical consultation with Mitsui seems to be facing problems. As per my understanding "Sebacic Acid" production is being done in India in pvt held companies.. so its a complex product to produce but not an impossible product.

Jayant promoters also have a patent filing for efficient process of producing Sebacic acid (Link) .. so looks like more of an implementation issue. We need to better understand what exactly is the problem and steps being taken to overcome the problem.

Solvent Extractor's Association Report for castor production (Link)

National Multi-commodity Exchange of India Limited Castor Study (Link)

Karvy Castor Seed Report (Link)

Jayant Agro Blog Archives (Link)

Cost of Credit Vs Creation of Credit: Sell GOLD

I was going through some of the financial news and this is a very interesting discussion .. I would say its an  "Insight" by Mr Bill Gross of PIMCO.. A MUST Must See..

Here is what I understand.

There is "Cost of Credit" and "Creation of Credit" 

Cost of credit: is basically the rate of interest you pay when you take out a loan.

Creation of Credit: If you deposit Rs 100 in the banking system.. the bank can due to "fraction reserve lending rules" create a loan of Rs1000 with your Rs 100 deposit. thus "creating credit". But if you remove Rs 100 from the banking system you reduce the available credit in the banking system by Rs1000/= effectively "destroying credit creation" 

What Mr. Bill Gross said in Financial Times: 

 Helicopter Ben Risks destroying credit creation by flooring maturities out to two years then, and perhaps longer as a result of maturity extension policies envisioned in a forthcoming operation twist later this month, the Fed may in effect lower the cost of capital.

Monetary policy at the Zero interest rate bound introduces a new dynamic that may conflict or even reverse standard logic that lower interest rates across the sovereign yield curve are stimulative to economic growth 

My understanding is that Mr Bill Gross is saying that "Zero Interest rate binding" which is supposed to stimulate economic growth by lowering the cost of capital .. but "Zero Interest rate binding"  will cause a lot of the money to be pulled out of the banking system thus stop the "Creation of credit Cycle" which will result in actually stalling the economic growth cycle.

The example Mr Bill Gross gives is: 

The FED has done a conditional "freezing" of 2 yrs treasury rates at 0.25% So by taking a 90% cash position and 10% in 30yrs treasury bonds we can get a 2 yrs yield of 0.50%. This conditional "freezing" of 2 yrs treasury rates has resulted in 90% of cash remaining out of the banking system.. causing a "Destruction of Credit creation"   Ideally we should have 100% in 2 yrs treasury to achieve the same.. and the money stays in circulation.

This explanation is Mind Blowing!! Revelation I must confess.!!

Mr Bill Gross delves further and states.. The banks instead of rotating the money in the banking system have parked all their funds with FED as "reserves" which is paying then a 0.25% return reducing "Credit" in the banking system.

Investment in "Gold" is taking the money out of circulation from banks causing "Destruction of Credit" As per my understanding Pvt holdings of Gold in India is "18,000 Tonnes "Largest reserves in the world. Its high time we be smart and reduce investment in this asset class (when the prices are high..) cause we are going to see a fall in price of gold. 

Conclusion: I would say if you have been investing in GOLD start lightening up. every time GOLD goes up "SELL" and invest in a productive asset. For me that would be "GAEL, Jayant, NHPC and Tata Communications" (Recommended Best Buys) News like this does not just flow.. its an indication that its time to switch from non productive assets such as gold into productive assets.. There is a SBI 9.5% 2026 bond where one can invest the cash if you are looking for fixed income. GAEL has 35Cr invested in the same bonds.

EU Debt, Balance of Payment out of control??

There is a lot of market volatility with regards to "Greek debt" markets are swinging wild. lets look at the real numbers. here is the EU Balance of Payment numbers as reported by European Central Bank.

1. The Balance of Payment for EU27 states is -ve 1.4% of GDP which is very very manageable number.

2. If we look at the "Balance of Trade in Services" there is a positive number of 22.9 Billion and quite stable.

Total balance of payment of -ve 43.2 Billion for Q2,2011 is  only   

-ve1.4% of GDP of EU27 nations. The EU nations are also competitive in services export.

India has a Balance of Payment at -ve7.5% of GDP.. last year's numbers for India was -ve8.6% of GDP. As you can clearly see its once again one of those "Action news" with no real basis for much concern. 

Conclusion:

Take your pick of the investments that have fallen. This will pass without any real impact as its a lot of fluff.

Link to the European Union data.

Jayant Agro: March 2011 Annual Report Result Review.

Jayant Agro Organics published its Annual Report for year ending March 2011 on Sept 8,2011. Due to green initiatives by the Govt. Electronic copies of the annual report are being provided. An electronic copy i.e. pdf version of the document is available in company website (link).

The presentation has improved with coloured pages to highlight the must read sections. The Chairman's message to shareholders gives us a brief overview of Jayant's achievements and major milestones. It also provides us a perspective about the long term value creation by Jayant agro.

- Jayant Agro was started in 1993 with sales of 13.07Cr and in 2011 Jayant agro sales were 1175.26Cr a sales growth of 8992% in 18 years.

- Jayant Agro's  networth increased from 3Cr to 116.65Cr a growth of 3888.33% in 18 years.

- Cumulative dividend payout has been 42.16Cr (including dividend tax) in EPS terms dividend worth Rs 103.31 per share has been distributed (based on Original share of Rs10)

Another important milestone was the separation from the parent company in 2002. From my personal understanding of Jayant Agro's history. Parent Company was "Jayant Oil and Derivatives" which was started in partnership. The partnership between  "Kapadia's and Udeshi's"   family fell through and we had 2 separate companies "Jayant Agro Organics" and "Jayant Oil and Derivatives" now renamed as "BIOTOR Industries Limited" (Pvt. Company)

The list of end user products where Castor oil and its derivatives are used is listed. 

A document which is worth mentioning is Jayant Agro's 18 years financial figures. which indicates a consistent dividend payment policy. The company also did give out a bonus .. but the timing looks like its related to the separation effort between the owners.

Capital Expenditure:
Lets look at the Consolidated Capital Expenditure of Jayant Agro and its subsidiaries

1. In past 5 years 2007-2011 Jayant Agro and its subsidiaries have spent 83.34Cr that's an average of:  16.67Cr every year.
2. The maximum amount of money has been spent in expanding "Castor Oil" capacity. I would say backward integration to secure seed crushing and solvent extraction capacity.
3. The major derivatives capacity expansion project was the year 2010 "Sebacic Acid" plant which has incurred capital expenditure equal to 50% of all derivatives capacity expenditure for the past 5 years.

Things of concern are: Ihsedu Speciality Chemicals Pvt. Limited has still not stabilized its production process. The "high value add complex derivatives production system is still not into commercial production and as we are aware the JV partner Mitsui has been bought out by parent company ie.Jayant Agro  which could mean (My understanding) the problems are not that easy to fix and could take more time. This project status I think is the most important development for Jayant and something the shareholders should ask in forth coming AGM.

Positive outlook is the growing revenues of Jayant and its other (backward integration) subsidiary "Ihsedu Agrochem Pvt Limited"  Ihsedu Agrochem has reported March 2011 sales of 279.47Cr and PBT of 9.36Cr.
Jayant agro had bought Gujarat Agro Industries Corporation Limited Castor seed crushing plant in Banaskantha and established Ihsedu Agrochem Pvt. Limited to operate the same. Banaskantha is the largest castor growing district in Gujarat responsible for approximately 20% of Gujarat's castor seed production.

I was also looking at the castor oil exports data from India.

The numbers in "Red" are Jayant Agro Organics consolidated "Castor Oil" export numbers. As we can see Jayant is responsible for 25% or more of all Castor oil exports from India. Also almost 50% of Jayant Agro sales are related to castor oil derivatives. It would be safe to assume Jayant Agro's share in Castor oil and its Derivatives on an all India level is anywhere between 25-35%.

Conclusion: Jayant Agro Organics is trying to reach out to the shareholders with an annual report which is easier to read highlighting the important points so that investors have a better understanding of  Jayant Agro and castor oil in general. Fundamentally Jayant Agro has been increasing capacity both at the back-end (seed crushing and solvent extraction) as well as at the higher value added castor oil derivatives segment.  The recent increase in profitability looks like  is because of better control over its castor seed/oil processing capabilities. As we are well aware the sebacic acid derivative plant is still not fully functional and is a cause of concern. Any positive news about the sebacic acid plant entering into commercial production should improve Jayant Agro's fortune for the better.