Established during 1964 in Kolkata, Tantia Construction Ltd (TCL) has gradually evolved over the years from a pure railway construction company to a full-fledged infrastructure company executing various diversified projects. Today it boasts of having presence in roads and highways, railways, tunnels, bridges and flyovers, urban instructure, sewerage and drainage, civil & housing construction etc. Lately, company also ventured into the lucrative marine infrastructure space, power transmission and distribution segment and aviation infrastructure. It is among the few companies which have very strong domain expertise in servicing the Indian Railways – earthwork, ballast, rail-track linking and welding, bridges, tunnels, electrification and signaling. Infact, TCL is among the five Indian companies capable of providing ‘foundation-to-finish’ for mega railway bridges spanning 2-km or more. More importantly, TCL has a very strong presence in the eastern and north-eastern region which gives it an edge, as very few players are interested in bidding in these regions due to difficult terrain. Company’s expertise can be evaluated from the fact that it has constructed over 250 km of roads in the hilly areas of Mizoram, coastal areas of Kerala, plains of Punjab/Haryana and plateaus of Karnataka. On the power project front, company has remarkably garnered the capability of in-house manufacturing and erecting transmission towers within a very short time. Incidentally, company has impeccable track record of completing every single assignment since inception.
In recent years TCL has executed various prestigious and large scale projects in the states of West Bengal, Assam, Bihar, Uttar Pradesh, Tamil Nadu, Kerala and Mizoram, and in neighboring countries like Bangladesh, Nepal and Bhutan. As more than 90% of revenue comes from government project it caters to several govt bodies including Indian railways, Kolkatta Metro railway, NHAI, State PWD, Central PWD, State Electricity boards, HIDCO, KMC, Airport Authority of India apart from NTPC, Ircon Int, SAIL, RITES, IOC etc. It enjoys excellent business relations and has good direct contact with govt resulting in repeat orders of similar nature, extension of projects of a higher value and a listing among preferred partners. Presently, TCL has diversified and huge order in hand position of more than 1000 cr to be executed in next 24 months. Out of that road projects is approx 45%, Railway 20%, urban infrastructure 25% and others 10%. Thus, company has a strong revenue visibility for coming years.
Going forward TCL is planning to bid for bigger projects in power transmission segment as it has executed various power projects and is now qualified to bid for the same. In near future company intends to foray into BOT & BOOT projects to boost up its margin. It is also looking to bag airport projects coming up in non- metro cities. To cash on the boom in civil construction, it is even contemplating to enter into real estate development. As a long term strategy, TCL intends to enter in logistics sector by constructing and owning ware-houses at strategic places across India. Water treatment, solid waste management and sewage treatment are also being considered to widen its work profile.
In March 2006, TCL came out with an IPO of 1.125 cr of equity shares @ Rs 50 per share with public net offer of 42.50 lakh shares. The issue was finally oversubscribed by whopping 83x times. Ironically, against the high of Rs 310 in 2006, scrip is hardly finding any buyer now at Rs 70. Infact it hit an all time low of Rs 56 in July’08 although its fundamentals have improved considerably in last couple of years. For FY08, its revenue jumped up 50% to Rs 362 cr and PBT increased by 30% to Rs 20 cr. However due to higher tax provisioning its PAT improved by only 15% to Rs 15.40 cr posting an EPS of Rs 10 on equity of Rs 15.60 cr. It declared lower dividend of 15% against 20% in FY07. Meanwhile, for Q1FY09 it recorded 40% rise in topline as well as bottomline to Rs 99 cr and Rs 5 cr respectively. Hence for entire FY09 it may clock a turnover of more than Rs 450 cr and profit of Rs 20 cr i.e. EPS of Rs 12 on diluted equity of Rs 16.30 cr. Recently company raised around Rs 30 cr thru FCCB route to be convertible into equity shares @ Rs 140. Considering the CMP, the possibility of conversion in near this fiscal seems bleak, hence not considered in calculating the diluted equity. Being discounted at less than 6x times, this scrip is available fairly cheap. Hence investors are strongly recommended to buy at current levels as share price can double in 12~15 months
courtesy : saarthi
Friday, August 15, 2008
small is beautiful
For the latest June qtr, Lokesh Machines (64.00) reported almost flat nos with NP of Rs 3.10 cr on sales of Rs 20.50. But importantly it reported a higher operating margin of 37% which indicates company may be able to maintain its profit going forward. Secondly it has declared a dividend of 25% which gives a yield of nearly 4% on CMP. Company is engaged in the design, development and manufacture of custom built special purpose machines and general purpose CNC (computerized numerical controls) machines along with their components. It derives 70% revenue from machining division whereas rest 30% comes from auto component division. It primarily caters to customers in the auto OEM, auto ancillaries and general engineering space. Hence it supplies mainly to Tata Motors, Bajaj Auto, Force Motors, Cummins, Bharat Forge, Kirloskar Oil Engines, Everest Kanto Cylinders etc with separate dedicated facilities for M&M and Ashok Leyland. Although it concentrates mainly on domestic market, but lately it has also made a foray in the overseas markets with good orders. On a conservative basis, for FY09 it can report sales of Rs 110 and PAT of Rs 11 cr i.e. EPS of Rs 9 on equity of Rs 11.80 cr. Accumulate at sharp declines.
Caustic soda prices have increased substantially in the recent past, but at the same time the input cost like coal have also shot up considerably. Accordingly, even though there was not much improvement in the profit margin still Bihar Caustic (72.00) reported fantastic nos for the June’08 quarter on the back of increased capacity and sale of aluminium chloride. It registered 55% growth in sales to Rs 53 cr whereas the net profit doubled to Rs 13 cr posting an EPS of Rs 5.50 for the single quarter. To maintain its growth, company has almost completed the expansion of its caustic soda capacity by 20% to 265 TPD by addition of electrolysers as well by debottlenecking. Last fiscal it also commissioned the stable bleaching powder plant with installed capacity of 60 TPD. Moreover its aluminium chloride project with a capacity of 12000 TPA is doing extremely well. At the same time company is taking initiative to reduce its total debt which will bring down the interest cost substantially. To conclude, company is expected to report a top line of Rs 200 cr and profit of Rs 52 cr for FY09 leading to an EPS of Rs 22 on equity of Rs 23.40 cr. Despite being a ‘Aditya Birla’ group company it has been very poorly discounted and is ripe for re-rating.
Accurate Transformers (100.00) is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 40 MVA - in up to 220 KV class. It is looking to venture into manufacturing of higher capacity Power Transformers of 160 MVA from FY10. It also carries out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. Unfortunately, despite having installed capacity of more than 8000 MVA company is working at very low capacity utilization of less than 50% due to high working capital requirement and shortage of funds. That’s why, at the time when its peer companies are growing at phenomenal pace this company has been registering normal double digit growth. Infact for the June’08 it posted marginal de-growth in topline whereas net profit declined by 35% to 1 cr. Despite this it can clock sales of Rs 225 cr and PAT of Rs 8.50 for FY09 leading to an EPS of Rs 29 on tiny equity of Rs 2.96 cr. Company is looking to raise fresh funds thru equity route mainly to fund its working capital requirement. Only aggressive investors can buy at current levels as scrip can double in year’s time.
Recently, Ramsarup Industries (118.00) has come out with decent set of nos for the June quarter. Sales grew by 10% to Rs 383 cr but NP increased by 25% to Rs 15.80 cr on the back of better operating margin. Company is engaged in manufacturing of various grades of steel wires (mainly used by power industry) and TMT Bars. To cater the rising demand company is expanding its total wire manufacturing capacities from 233,000 tonnes to 600,000 tonnes including the production of Low Relaxation Pre-stressed Concrete (LRPC) wires over the next two years. It has acquired 60 acres land in West Bengal and major plant and machinery are being imported from Italy. Importantly, to get access to cheaper and regular raw material supply, last year company took over Balasore Minerals Co, which has iron ore, limestone and dolomite mines located in neighboring Orissa state. But more importantly company is merging its other group company called Ramsarup Loha Udyog which is emerging as an integrated steel producer with captive production of sponge iron, pig iron, billets, power etc. As no official figures are available for the group company, so on a standalone basis company is expected to clock a turnover of Rs 1750 cr and PAT of Rs 65 cr for FY09. This translates into EPS of Rs 37 on current equity of Rs 17.50 cr. Post merger equity is expected to get diluted to roughly around Rs 35 cr.
courtesy : saarthi
Caustic soda prices have increased substantially in the recent past, but at the same time the input cost like coal have also shot up considerably. Accordingly, even though there was not much improvement in the profit margin still Bihar Caustic (72.00) reported fantastic nos for the June’08 quarter on the back of increased capacity and sale of aluminium chloride. It registered 55% growth in sales to Rs 53 cr whereas the net profit doubled to Rs 13 cr posting an EPS of Rs 5.50 for the single quarter. To maintain its growth, company has almost completed the expansion of its caustic soda capacity by 20% to 265 TPD by addition of electrolysers as well by debottlenecking. Last fiscal it also commissioned the stable bleaching powder plant with installed capacity of 60 TPD. Moreover its aluminium chloride project with a capacity of 12000 TPA is doing extremely well. At the same time company is taking initiative to reduce its total debt which will bring down the interest cost substantially. To conclude, company is expected to report a top line of Rs 200 cr and profit of Rs 52 cr for FY09 leading to an EPS of Rs 22 on equity of Rs 23.40 cr. Despite being a ‘Aditya Birla’ group company it has been very poorly discounted and is ripe for re-rating.
Accurate Transformers (100.00) is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 40 MVA - in up to 220 KV class. It is looking to venture into manufacturing of higher capacity Power Transformers of 160 MVA from FY10. It also carries out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. Unfortunately, despite having installed capacity of more than 8000 MVA company is working at very low capacity utilization of less than 50% due to high working capital requirement and shortage of funds. That’s why, at the time when its peer companies are growing at phenomenal pace this company has been registering normal double digit growth. Infact for the June’08 it posted marginal de-growth in topline whereas net profit declined by 35% to 1 cr. Despite this it can clock sales of Rs 225 cr and PAT of Rs 8.50 for FY09 leading to an EPS of Rs 29 on tiny equity of Rs 2.96 cr. Company is looking to raise fresh funds thru equity route mainly to fund its working capital requirement. Only aggressive investors can buy at current levels as scrip can double in year’s time.
Recently, Ramsarup Industries (118.00) has come out with decent set of nos for the June quarter. Sales grew by 10% to Rs 383 cr but NP increased by 25% to Rs 15.80 cr on the back of better operating margin. Company is engaged in manufacturing of various grades of steel wires (mainly used by power industry) and TMT Bars. To cater the rising demand company is expanding its total wire manufacturing capacities from 233,000 tonnes to 600,000 tonnes including the production of Low Relaxation Pre-stressed Concrete (LRPC) wires over the next two years. It has acquired 60 acres land in West Bengal and major plant and machinery are being imported from Italy. Importantly, to get access to cheaper and regular raw material supply, last year company took over Balasore Minerals Co, which has iron ore, limestone and dolomite mines located in neighboring Orissa state. But more importantly company is merging its other group company called Ramsarup Loha Udyog which is emerging as an integrated steel producer with captive production of sponge iron, pig iron, billets, power etc. As no official figures are available for the group company, so on a standalone basis company is expected to clock a turnover of Rs 1750 cr and PAT of Rs 65 cr for FY09. This translates into EPS of Rs 37 on current equity of Rs 17.50 cr. Post merger equity is expected to get diluted to roughly around Rs 35 cr.
courtesy : saarthi
Thursday, August 14, 2008
Wednesday, August 13, 2008
Tuesday, August 12, 2008
Why stock split is done?
Why stock split is done?
1) Companies usually split their stock when they think the price of their stock exceeds the amount smaller investors would be willing to pay. “It is aimed at making the stock more affordable and liquid from retail investors’ point of view.”
2) Generally, there are more buyers and sellers of shares trading at Rs.100 than say, Rs.400, as retail shareholders may find low-price stocks to be better bargains. Stock splits are usually initiated after a huge run-up in the share. This run-up may be linked to the performance of the stock.
3) The company may declare such splits in different ratios like 2-for-1, 3-for-1, 3-for-2, or like 4-for-1. Some companies may go to the extent of declaring a 10 for 1 split, as power services company GVK Power did recently.
For example, XYZ Company is trading at Rs.250 and you hold 100 shares. Hence, the total value of your holding is Rs.25, 000 (250x100).
4) If this company declares a 2-for-1 stock split, your 100 shares become 200 and the share price is adjusted to Rs.125.
The value of your investment still remains the same (this time, 125x200). And if the company had 10 lakh outstanding shares before the split, it will now have 20 lakh outstanding shares after this split, keeping the market cap unchanged.
5) Sometimes, companies may choose to club stock split issue with bonus shares. Bangalore based jewelery manufacturer Rajesh Exports recently declared a 2-for-1 stock split along with a bonus offer of two shares for each share held.
6) This means that each share becomes two, post-split. Now, for these two shares, shareholders will get four additional shares as bonus. Thus, one share translates into six after stock split and bonus issue.
“To ensure increased liquidity for existing shareholders and easy entry point for new shareholders, the decision was made to split the share.”
Benefit to shareholders after stock split and bonus issue.
Due to stock split, the high priced stocks will be available at lower rates. The retailer or small investors can easily afford to buy stocks of low price. There is also a probability that after stock split; the stock price may go up as more investors may rush to buy stocks at lower rates.
1) Companies usually split their stock when they think the price of their stock exceeds the amount smaller investors would be willing to pay. “It is aimed at making the stock more affordable and liquid from retail investors’ point of view.”
2) Generally, there are more buyers and sellers of shares trading at Rs.100 than say, Rs.400, as retail shareholders may find low-price stocks to be better bargains. Stock splits are usually initiated after a huge run-up in the share. This run-up may be linked to the performance of the stock.
3) The company may declare such splits in different ratios like 2-for-1, 3-for-1, 3-for-2, or like 4-for-1. Some companies may go to the extent of declaring a 10 for 1 split, as power services company GVK Power did recently.
For example, XYZ Company is trading at Rs.250 and you hold 100 shares. Hence, the total value of your holding is Rs.25, 000 (250x100).
4) If this company declares a 2-for-1 stock split, your 100 shares become 200 and the share price is adjusted to Rs.125.
The value of your investment still remains the same (this time, 125x200). And if the company had 10 lakh outstanding shares before the split, it will now have 20 lakh outstanding shares after this split, keeping the market cap unchanged.
5) Sometimes, companies may choose to club stock split issue with bonus shares. Bangalore based jewelery manufacturer Rajesh Exports recently declared a 2-for-1 stock split along with a bonus offer of two shares for each share held.
6) This means that each share becomes two, post-split. Now, for these two shares, shareholders will get four additional shares as bonus. Thus, one share translates into six after stock split and bonus issue.
“To ensure increased liquidity for existing shareholders and easy entry point for new shareholders, the decision was made to split the share.”
Benefit to shareholders after stock split and bonus issue.
Due to stock split, the high priced stocks will be available at lower rates. The retailer or small investors can easily afford to buy stocks of low price. There is also a probability that after stock split; the stock price may go up as more investors may rush to buy stocks at lower rates.
Sunday, August 10, 2008
Best Contrarion picks
Best contrarian picks
In equity markets, a person who dares to go against the tide wins big because
when the tide turns he is best prepared for it while others are caught unaware.
This is known as contrarian strategy and has delivered very good returns in
the past especially after the markets have peaked. For this strategy to succeed,
you have to buy stocks at maximum pessimism and when you are confident
about good prospects for the company/sector in medium to long term.
Besides the right timing you need a lot of patience too as in short term it may
continue to lag behind current favourites of the market.
Two sectors which are ripe for contrarian investment right now are banking
and automobiles. Let us look at the rationale behind them:
Banks, automobile stocks have been beaten down a lot while actual
performance is not so bad looking at the credit growth or automobile
sales.
High interest rates and high inflation which have hit these sectors hard
seem to have peaked and things will get better only over time as crude
oil prices drop.
A major proportion of the losses (currency futures) reported by banks
are marked to market which are just notional losses and can recover
soon in future (just like the losses in your portfolio are notional until
you book them by selling).
Due to Basel II norms, small banks need to merge with bigger banks in
next 2-3 years which will create a lot of value for the shareholders of
the big banks. Our recommendation for investors is to concentrate on
top 5 banks in private sector, top 5 in public sector and specialised
banks catering to niche market segments like Yes bank.
25% of world population below 25 years lives in India which is a huge
opportunity for both banks and automobile sector as the income rises.
Young people tend to take more loans from bank and buy luxury items
like cars more.
India is set to become an export hub (due to cost advantage) of small
cars to other emerging economies like Nepal, Sri Lanka, Africa etc.
and hence companies like Maruti, Tata Motors are going to be big
winners. One achievement we all Indians should be proud of is that
Maruti India is soon set to overtake Suzuki Japan in terms of number
of cars produced.
Banks like SBI, ICICI etc have very valuable subsidiaries in
businesses like insurance, asset management etc. value of which is not
fully reflected in the current prices. Example: ICICI insurance arm is
roughly valued at Rs 57000 Crore!
In equity markets, a person who dares to go against the tide wins big because
when the tide turns he is best prepared for it while others are caught unaware.
This is known as contrarian strategy and has delivered very good returns in
the past especially after the markets have peaked. For this strategy to succeed,
you have to buy stocks at maximum pessimism and when you are confident
about good prospects for the company/sector in medium to long term.
Besides the right timing you need a lot of patience too as in short term it may
continue to lag behind current favourites of the market.
Two sectors which are ripe for contrarian investment right now are banking
and automobiles. Let us look at the rationale behind them:
Banks, automobile stocks have been beaten down a lot while actual
performance is not so bad looking at the credit growth or automobile
sales.
High interest rates and high inflation which have hit these sectors hard
seem to have peaked and things will get better only over time as crude
oil prices drop.
A major proportion of the losses (currency futures) reported by banks
are marked to market which are just notional losses and can recover
soon in future (just like the losses in your portfolio are notional until
you book them by selling).
Due to Basel II norms, small banks need to merge with bigger banks in
next 2-3 years which will create a lot of value for the shareholders of
the big banks. Our recommendation for investors is to concentrate on
top 5 banks in private sector, top 5 in public sector and specialised
banks catering to niche market segments like Yes bank.
25% of world population below 25 years lives in India which is a huge
opportunity for both banks and automobile sector as the income rises.
Young people tend to take more loans from bank and buy luxury items
like cars more.
India is set to become an export hub (due to cost advantage) of small
cars to other emerging economies like Nepal, Sri Lanka, Africa etc.
and hence companies like Maruti, Tata Motors are going to be big
winners. One achievement we all Indians should be proud of is that
Maruti India is soon set to overtake Suzuki Japan in terms of number
of cars produced.
Banks like SBI, ICICI etc have very valuable subsidiaries in
businesses like insurance, asset management etc. value of which is not
fully reflected in the current prices. Example: ICICI insurance arm is
roughly valued at Rs 57000 Crore!
Saturday, August 9, 2008
Friday, August 8, 2008
Scripscan:Noida Toll Bridge Company Ltd
CMP:35
Traded on:NSE-BSE
Business:Noida Toll Bridge was promoted by Infrastructure Leasing and Financial Services Ltd. (IL&FS) as a special purpose vehicle (SPV) to construct, operate and maintain the Delhi - Noida Bridge on a Build Own Operate Transfer (BOOT) basis. The Delhi Noida Bridge is a tolled facility connecting Noida to South Delhi across the Yamuna river.The Company's principal source of revenue is from the levy of tolls on commuters on this facility.
Outlook:It should be prudent to note that the company's operating income comprises revenues from the toll it collects and hoardings/advertisements on the routes it has developed.The outlook for growth in traffic on the Delhi Noida Bridge is very positive. Traffic levels on the Delhi Noida Bridge are expected to increase as Noida and Greater Noida experience development and population growth. In their review, Halcrow Consulting estimate that by 2021 the population of Noida and Greater Noida areas will increase by 2 million and the daily vehicle trips on the Delhi Noida Bridge will increase to 200,504.
Triggers-The company is presently constructing a fast link between Mayur Vihar and Noida.The bridge is in an advanced stage of completion and is likely to become fully operational in the third quarter of FY08.It has also access to developmental rights of over 200 acres as part of these projects.
The company has got a huge surplus of land bank,which the company intends to develop over the next couple of years.The value is expected to be immense on account of the very prime location of the land.Once that happens,there is a huge amount of value unlocking that will happen.
Risks and Concerns:The Concession Agreement provides for traffic risk mitigation measures by allowing for New Okhla Industrial Development Authority (NOIDA) to grant Development Rights. The Company has, in its possession, land around the DND Flyway both in Noida and Delhi, which will be developed in phases, subject to grant of Development Rights by NOIDA / Govt. of UP / Govt. of Delhi, which are under process.The denial of Development Rights or conditional grant of the same will also pose a financial threat to the Company.
Financials:The company has shown strong consistency in both topline as well as on bottomline over the last several years.The trend is expected to continue and with so many developemnts happening,Noida toll may just surprise us on its forward numbers.
Conclusion:The Government of India as well as many State Governments are laying great emphasis on development of the road network and have drawn up ambitious plans which require the private sector to play a key role in the fulfillment of these plans.I remain very positive on the prospects of the company, driven by the growth prospects of its real estate foray and the Mayur Vihar-Noida link.On valuation parameters the company on an expected EPS of rs 3.2 and at 11 P.E may look a tad high but with the kind of growth that we are talking about keeps decent scope of good capital appreciation in the coming days.
CMP:35
Traded on:NSE-BSE
Business:Noida Toll Bridge was promoted by Infrastructure Leasing and Financial Services Ltd. (IL&FS) as a special purpose vehicle (SPV) to construct, operate and maintain the Delhi - Noida Bridge on a Build Own Operate Transfer (BOOT) basis. The Delhi Noida Bridge is a tolled facility connecting Noida to South Delhi across the Yamuna river.The Company's principal source of revenue is from the levy of tolls on commuters on this facility.
Outlook:It should be prudent to note that the company's operating income comprises revenues from the toll it collects and hoardings/advertisements on the routes it has developed.The outlook for growth in traffic on the Delhi Noida Bridge is very positive. Traffic levels on the Delhi Noida Bridge are expected to increase as Noida and Greater Noida experience development and population growth. In their review, Halcrow Consulting estimate that by 2021 the population of Noida and Greater Noida areas will increase by 2 million and the daily vehicle trips on the Delhi Noida Bridge will increase to 200,504.
Triggers-The company is presently constructing a fast link between Mayur Vihar and Noida.The bridge is in an advanced stage of completion and is likely to become fully operational in the third quarter of FY08.It has also access to developmental rights of over 200 acres as part of these projects.
The company has got a huge surplus of land bank,which the company intends to develop over the next couple of years.The value is expected to be immense on account of the very prime location of the land.Once that happens,there is a huge amount of value unlocking that will happen.
Risks and Concerns:The Concession Agreement provides for traffic risk mitigation measures by allowing for New Okhla Industrial Development Authority (NOIDA) to grant Development Rights. The Company has, in its possession, land around the DND Flyway both in Noida and Delhi, which will be developed in phases, subject to grant of Development Rights by NOIDA / Govt. of UP / Govt. of Delhi, which are under process.The denial of Development Rights or conditional grant of the same will also pose a financial threat to the Company.
Financials:The company has shown strong consistency in both topline as well as on bottomline over the last several years.The trend is expected to continue and with so many developemnts happening,Noida toll may just surprise us on its forward numbers.
Conclusion:The Government of India as well as many State Governments are laying great emphasis on development of the road network and have drawn up ambitious plans which require the private sector to play a key role in the fulfillment of these plans.I remain very positive on the prospects of the company, driven by the growth prospects of its real estate foray and the Mayur Vihar-Noida link.On valuation parameters the company on an expected EPS of rs 3.2 and at 11 P.E may look a tad high but with the kind of growth that we are talking about keeps decent scope of good capital appreciation in the coming days.
Thursday, July 31, 2008
Tuesday, July 29, 2008
an autobiography of Lee Iacocca, former President of Ford
read an autobiography of Lee Iacocca, former President of Ford and then CEO of its arch-rivals Chrysler. First guy in the world to lead the top 2 car companies one after another. Here is a small book review/note on his life i've written for my readers:
If Business Executives had a Hall of Fame, Lee Iacocca would probably have a floor dedicated to him. Iacocca's life was wilder then a roller coast, his failures made headlines across the nation and his successes were 'larger then life'. He came from an Italian immigrant family, and in the first few chapters speaks of his experiences in school, college and pre-Ford life. Initially an engineer, he switched to the sales force and is largely credited for the phenomenal Ford Mustang car and for his nationwide programs along with being credited with the revival of the Mercury Brand and making Ford Fiesta (older model) and was also the 'moving force' behind Ford Pinto, Mercury Cougar and many other cars.
He rose through the ranks of Ford to become Ford Motor's youngest president and stay on for 8 years, only to fired by an arrogant boss Henry even when the company made record profits of $2 billion. He tasted sweet revenge in an almost capitalistic way by taking Chrysler out of bankruptcy and beating Henry Ford in the marketplace.
Lee Iacocca exemplifies the battered business executive who led a battle for a dying cause to bolster Chrysler, which made his name a symbol of integrity, grit, hard work, and guts for millions of people.
The one quote of his I really loved was
There are times in everyone's life when something constructive is born out of adversity. There are times when things seem so bad that you've got to grab your fate by the shoulders and shake it.
In one such adversity, he convinced the United States Congress to extend a $1.5 billion loan guarantee to the company (Chrysler). This propelled him to he set up his old management team at Chrysler, sell off their tractors division, and spend aggressively on advertising. In order to make the company profitable he was forced to take very tough decisions like introducing spending cuts, laying-off workers, closing plant divisions and personally taking home a $1 salary to give inspiration to employees to accept pay cuts.
this book will teach you how to grow, good insights on leaders, and how to overcome adversities!!! a good reading!
If Business Executives had a Hall of Fame, Lee Iacocca would probably have a floor dedicated to him. Iacocca's life was wilder then a roller coast, his failures made headlines across the nation and his successes were 'larger then life'. He came from an Italian immigrant family, and in the first few chapters speaks of his experiences in school, college and pre-Ford life. Initially an engineer, he switched to the sales force and is largely credited for the phenomenal Ford Mustang car and for his nationwide programs along with being credited with the revival of the Mercury Brand and making Ford Fiesta (older model) and was also the 'moving force' behind Ford Pinto, Mercury Cougar and many other cars.
He rose through the ranks of Ford to become Ford Motor's youngest president and stay on for 8 years, only to fired by an arrogant boss Henry even when the company made record profits of $2 billion. He tasted sweet revenge in an almost capitalistic way by taking Chrysler out of bankruptcy and beating Henry Ford in the marketplace.
Lee Iacocca exemplifies the battered business executive who led a battle for a dying cause to bolster Chrysler, which made his name a symbol of integrity, grit, hard work, and guts for millions of people.
The one quote of his I really loved was
There are times in everyone's life when something constructive is born out of adversity. There are times when things seem so bad that you've got to grab your fate by the shoulders and shake it.
In one such adversity, he convinced the United States Congress to extend a $1.5 billion loan guarantee to the company (Chrysler). This propelled him to he set up his old management team at Chrysler, sell off their tractors division, and spend aggressively on advertising. In order to make the company profitable he was forced to take very tough decisions like introducing spending cuts, laying-off workers, closing plant divisions and personally taking home a $1 salary to give inspiration to employees to accept pay cuts.
this book will teach you how to grow, good insights on leaders, and how to overcome adversities!!! a good reading!
Right time for investors to accumulate green stocks
The oilfield of the future is not 200 feet deep below the surface. It is 96 million miles above the ground .
This is not an understatement. High oil prices in the 1970s ended the era of crude oil as a source of electric power and kick-started the wind energy industry in Europe and elsewhere.
Will the current regime of triple-digit crude oil prices begin the era of renewable energy? Conventional sources of energy, including oil and coal, not only have to bear the brunt of higher costs, they are also under attack by the green brigade. These hydrocarbon fuels are blamed for global warming and climate change. And with climate change taking centre-stage in energy concerns across the globe, policymakers and investors are waking up to the potential of green energy — be it with wind, small-hydel, solar, bio-mass or ethanol.
Renewable energy sources like geothermal, solar and wind constitute approximately 2.2% of global energy generation. Internationally, a lot of investment is taking place in green fuels which are renewable and non-polluting. The momentum is the strongest in Europe and the fever is just catching up in India.
Barring wind energy and ethanol, there are few commercially operational projects in this space. This makes it difficult for equipment suppliers to establish scale and thus, bring down costs to competitive levels. With technological development being critical in the industry, these companies need huge funding in the initial years. Consequently, while many companies have forayed into the renewable space, only a handful of them have made it their main business.
We feel that this is a suitable time for investors to start accumulating right stocks in this space. Given the size of the global energy market, the sky is the limit for companies which get it right. We, at ETIG, bring you a bouquet of companies in the green-energy segment. Take your pick.
Wind power
As pointed out earlier, wind power is the largest and most popular among renewal sources right now. Initiated by government subsidies, the growth in wind energy in India has primarily been driven by technological advancement and higher scale of operations.
And as technology improves, wind energy is becoming costcompetitive vis-à-vis conventional sources. In the 1980s, a typical wind turbine generator (WTG) could produce one-tenth of a megawatt ( mw) of electricity; now 5-mw capacity WTGs are commonplace. The industry now plans to move offshore, where wind speed is higher and more consistent.
Offshore WTGs can produce up to 20 mw, which will radically change the scale and economics of wind energy. The best way to gain from growth in wind energy is to invest in equipment suppliers. In India, Suzlon Energyis the only major listed company in this space. It has grown beyond the domestic market to emerge as the world’s fifth largest wind turbine supplier with over 10.5% of global market share.
It is now aggressively investing in technology and manufacturing capacity to emerge as one of the top three global WTG suppliers. Its revenues have been rising steadily. But the company’s margins have come under pressure in the past six quarters due to a product recall involving one of its bigger customers in the US. In terms of valuations, Suzlon compares well with other equipment manufacturers like Bhel, which supplies equipment for coal-fired power plants. Considering its future growth potential and ambitious growth plans, investors can accumulate the stock.
Small hydel
Hydro power is one of the oldest sources of renewable energy. But it has lost out to thermal power due to the cost, complexity and time involved in executing large projects. These require construction of huge dams and reservoirs, damaging environment and displacing people.
This has created global interest in small projects, which are simpler to construct and do not damage ecology. Small rivers, rivulets and artificially-created storage dams or other small water bodies can be tapped to generate up to 20 mw power, which can be used locally.
Jyoti: This is a engineering company which manufactures small hydro-power (SHP) sets. It is the single source for hydro turbines and auxiliary equipment. This division contributes 20-25% to the company’s total revenues of over Rs 200 crore. Jyoti is in the growth stage and has achieved a turnaround from being a lossmaking company till FY05. With increasing government focus on renewable energy, Jyoti’s business in the domestic and global markets is picking up. It expects to be a Rs 500-crore company in three years and is optimistic of growth in the SHP segment.
A New Dawn...
Solar power
According to various studies, the earth receives more solar energy in just one hour than the world consumes in one year. Unfortunately, today, solar energy contributes only 0.1% of the world’s total energy needs. The key challenge in harnessing solar energy is the efficiency of technology and equipment.
The technology in the sector is still evolving and nearly half a dozen technologies are vying for supremacy. Among the emerging technologies, thin film solar panels and concentrators are best positioned to be commercialised. While solar energy costs are declining, the costs of other sources of energy, including generation and distribution costs, are rising. This indicates grid parity can be reached earlier than estimated.
In the long term, companies are differentiated on the scale or manufacturing efficiencies, access to technology and level of integration along the photo voltaic (PV) value chain. Two promising companies in this sector are Moser Baer and Webel SL Energy. Moser Baer: This is India’s largest and world’s second largest optical storage media manufacturer. The company has now ventured into the less capital-intensive and high-margin business of solar photo voltaic cells (PVC).
With a strategy to offer multiple PV technologies, the company is aiming at bringing down PV electricity costs to match conventional energy price points. In the long run, it plans to set up the world’s largest thin film solar fabrication unit in the country. Its PV business earned revenues of $43 million in FY08, contributing nearly 10% to the total revenues of the company.
It is expanding its crystalline silicon capacity from 40 mw to 80 mw. The company’s thin film project facility is nearing completion and is on track to raise its capacity to 180 mw by FY09. Webel SL Energy: This is a leading manufacturer of solar PVC and modules in India.
It is one of the fastest growing manufacturers of solar PVC in Asia (outside Japan). The company has an installed capacity of 10 mw and intends to grow to 40 mw by FY10. Rising silicon prices are pushing up its raw material costs, affecting margins. To combat this, Webel is investing in technology and forward integration into raw material production.
Key financials
Biomass
Renewable energy can be extracted from biowaste arising from trees, crops and garbage. This energy is released either by burning biomass in a controlled environment or converting it to other usable forms of energy like methane gas, ethanol or bio-diesel.
The bagasse obtained as a by-product by the sugar companies is used to generate power, which is either consumed internally or sold commercially. Most sugar mills now use molasses, another byproduct, to produce ethanol, which is an alternative transport fuel.
In India, leading sugar companies like Bajaj Hindustan, Balrampur Chini and Bannari Amman are actively into co-generation of power and manufacture of ethanol. India’s largest sugar company, Bajaj Hindusthan,earns 15% of its revenues from nonsugar businesses like ethanol and power generation. It intends to earn 35-40% of its revenues from value-added and non-cyclical business.
It expects exportable surplus from its co-generation units to cross 100 mw in the sugar season, which will start in November ’08. It generated around 80 mw a year ago. For Balrampur Chini, power co-generation contributes more than 15% to the company’s total revenues and is a major driver of profit growth. In view of the recent capacity expansions, the total saleable co-generation capacity stands at 126 mw.
Besides the co-generation of power, sugar company Bannari Ammanhas also ventured into wind power generation while de-risking its business model. Power generation contributes more than 20% to its total revenues. Equipment suppliers like Praj Industries, Triveni Engineering and Thermax are yet another set of companies associated with bio-mass energy. They are leading suppliers of equipment to companies in this sector.
Praj Industriesis one of the largest suppliers of processes and systems to companies manufacturing ethanol, biodiesel and distillery industry. The ethanol business contributes 85% of the order book of the Rs 700-crore company. Praj is involved in R&D to make breakthrough cellulosic technology for ethanol. Triveni Engineeringmanufactures steam turbines, high speed gears and water & wastewater treatment equipment. It earns 40% of its revenues from its non-seasonal high-margin yielding business of steam turbines and co-generation of power.
Thermaxis a leading manufacturer of engineering equipment like boilers and heaters, absorption cooling, power and cogeneration systems and water and wastewater solutions among others. Around 80% of its revenue comes from its energy business. So,take your pick... join the ‘Go Green’ movement and save the planet.
This is not an understatement. High oil prices in the 1970s ended the era of crude oil as a source of electric power and kick-started the wind energy industry in Europe and elsewhere.
Will the current regime of triple-digit crude oil prices begin the era of renewable energy? Conventional sources of energy, including oil and coal, not only have to bear the brunt of higher costs, they are also under attack by the green brigade. These hydrocarbon fuels are blamed for global warming and climate change. And with climate change taking centre-stage in energy concerns across the globe, policymakers and investors are waking up to the potential of green energy — be it with wind, small-hydel, solar, bio-mass or ethanol.
Renewable energy sources like geothermal, solar and wind constitute approximately 2.2% of global energy generation. Internationally, a lot of investment is taking place in green fuels which are renewable and non-polluting. The momentum is the strongest in Europe and the fever is just catching up in India.
Barring wind energy and ethanol, there are few commercially operational projects in this space. This makes it difficult for equipment suppliers to establish scale and thus, bring down costs to competitive levels. With technological development being critical in the industry, these companies need huge funding in the initial years. Consequently, while many companies have forayed into the renewable space, only a handful of them have made it their main business.
We feel that this is a suitable time for investors to start accumulating right stocks in this space. Given the size of the global energy market, the sky is the limit for companies which get it right. We, at ETIG, bring you a bouquet of companies in the green-energy segment. Take your pick.
Wind power
As pointed out earlier, wind power is the largest and most popular among renewal sources right now. Initiated by government subsidies, the growth in wind energy in India has primarily been driven by technological advancement and higher scale of operations.
And as technology improves, wind energy is becoming costcompetitive vis-à-vis conventional sources. In the 1980s, a typical wind turbine generator (WTG) could produce one-tenth of a megawatt ( mw) of electricity; now 5-mw capacity WTGs are commonplace. The industry now plans to move offshore, where wind speed is higher and more consistent.
Offshore WTGs can produce up to 20 mw, which will radically change the scale and economics of wind energy. The best way to gain from growth in wind energy is to invest in equipment suppliers. In India, Suzlon Energyis the only major listed company in this space. It has grown beyond the domestic market to emerge as the world’s fifth largest wind turbine supplier with over 10.5% of global market share.
It is now aggressively investing in technology and manufacturing capacity to emerge as one of the top three global WTG suppliers. Its revenues have been rising steadily. But the company’s margins have come under pressure in the past six quarters due to a product recall involving one of its bigger customers in the US. In terms of valuations, Suzlon compares well with other equipment manufacturers like Bhel, which supplies equipment for coal-fired power plants. Considering its future growth potential and ambitious growth plans, investors can accumulate the stock.
Small hydel
Hydro power is one of the oldest sources of renewable energy. But it has lost out to thermal power due to the cost, complexity and time involved in executing large projects. These require construction of huge dams and reservoirs, damaging environment and displacing people.
This has created global interest in small projects, which are simpler to construct and do not damage ecology. Small rivers, rivulets and artificially-created storage dams or other small water bodies can be tapped to generate up to 20 mw power, which can be used locally.
Jyoti: This is a engineering company which manufactures small hydro-power (SHP) sets. It is the single source for hydro turbines and auxiliary equipment. This division contributes 20-25% to the company’s total revenues of over Rs 200 crore. Jyoti is in the growth stage and has achieved a turnaround from being a lossmaking company till FY05. With increasing government focus on renewable energy, Jyoti’s business in the domestic and global markets is picking up. It expects to be a Rs 500-crore company in three years and is optimistic of growth in the SHP segment.
A New Dawn...
Solar power
According to various studies, the earth receives more solar energy in just one hour than the world consumes in one year. Unfortunately, today, solar energy contributes only 0.1% of the world’s total energy needs. The key challenge in harnessing solar energy is the efficiency of technology and equipment.
The technology in the sector is still evolving and nearly half a dozen technologies are vying for supremacy. Among the emerging technologies, thin film solar panels and concentrators are best positioned to be commercialised. While solar energy costs are declining, the costs of other sources of energy, including generation and distribution costs, are rising. This indicates grid parity can be reached earlier than estimated.
In the long term, companies are differentiated on the scale or manufacturing efficiencies, access to technology and level of integration along the photo voltaic (PV) value chain. Two promising companies in this sector are Moser Baer and Webel SL Energy. Moser Baer: This is India’s largest and world’s second largest optical storage media manufacturer. The company has now ventured into the less capital-intensive and high-margin business of solar photo voltaic cells (PVC).
With a strategy to offer multiple PV technologies, the company is aiming at bringing down PV electricity costs to match conventional energy price points. In the long run, it plans to set up the world’s largest thin film solar fabrication unit in the country. Its PV business earned revenues of $43 million in FY08, contributing nearly 10% to the total revenues of the company.
It is expanding its crystalline silicon capacity from 40 mw to 80 mw. The company’s thin film project facility is nearing completion and is on track to raise its capacity to 180 mw by FY09. Webel SL Energy: This is a leading manufacturer of solar PVC and modules in India.
It is one of the fastest growing manufacturers of solar PVC in Asia (outside Japan). The company has an installed capacity of 10 mw and intends to grow to 40 mw by FY10. Rising silicon prices are pushing up its raw material costs, affecting margins. To combat this, Webel is investing in technology and forward integration into raw material production.
Key financials
Biomass
Renewable energy can be extracted from biowaste arising from trees, crops and garbage. This energy is released either by burning biomass in a controlled environment or converting it to other usable forms of energy like methane gas, ethanol or bio-diesel.
The bagasse obtained as a by-product by the sugar companies is used to generate power, which is either consumed internally or sold commercially. Most sugar mills now use molasses, another byproduct, to produce ethanol, which is an alternative transport fuel.
In India, leading sugar companies like Bajaj Hindustan, Balrampur Chini and Bannari Amman are actively into co-generation of power and manufacture of ethanol. India’s largest sugar company, Bajaj Hindusthan,earns 15% of its revenues from nonsugar businesses like ethanol and power generation. It intends to earn 35-40% of its revenues from value-added and non-cyclical business.
It expects exportable surplus from its co-generation units to cross 100 mw in the sugar season, which will start in November ’08. It generated around 80 mw a year ago. For Balrampur Chini, power co-generation contributes more than 15% to the company’s total revenues and is a major driver of profit growth. In view of the recent capacity expansions, the total saleable co-generation capacity stands at 126 mw.
Besides the co-generation of power, sugar company Bannari Ammanhas also ventured into wind power generation while de-risking its business model. Power generation contributes more than 20% to its total revenues. Equipment suppliers like Praj Industries, Triveni Engineering and Thermax are yet another set of companies associated with bio-mass energy. They are leading suppliers of equipment to companies in this sector.
Praj Industriesis one of the largest suppliers of processes and systems to companies manufacturing ethanol, biodiesel and distillery industry. The ethanol business contributes 85% of the order book of the Rs 700-crore company. Praj is involved in R&D to make breakthrough cellulosic technology for ethanol. Triveni Engineeringmanufactures steam turbines, high speed gears and water & wastewater treatment equipment. It earns 40% of its revenues from its non-seasonal high-margin yielding business of steam turbines and co-generation of power.
Thermaxis a leading manufacturer of engineering equipment like boilers and heaters, absorption cooling, power and cogeneration systems and water and wastewater solutions among others. Around 80% of its revenue comes from its energy business. So,take your pick... join the ‘Go Green’ movement and save the planet.
Rise in rates haunts realty stocks; index down 7%
MUMBAI: Reserve Bank of India’s decision to increase repo rate by 50 basis points and cash reserve ratio by 25 basis points has come as a surprise to many who were expecting the central bank to be less hawkish.
Stock indices, which were down close to 2 per cent, plunged soon after the news flashed across terminals. At 12:15 pm, Bombay Stock Exchange’s Sensex was down 501 points or 3.49 per cent.
Interest rate sensitive sectors were the worst hit. Any hike in interest rates directly impacts growth of these industries. BSE Realty Index fell 6.10 per cent to 4769.40.
Realty sector faces a two-fold problem. Rise in interest rates will result in poor sales, which has been on a decline since the beginning of the year and secondly, companies which have loans on their books will be hit again due to high rates. Analysts said, it will result in liquidity crunch for real estate players, virtually leaving them cashless.
The BSE Realty Index was down almost 7 per cent, dragged by losses in India Bulls Real Estate (-9.6%), Unitech (-8.41%), DLF (-6.14%) and Phoenix Mill (-5.62%).
“This hike in rates is an indication of a similar move ahead. Negative sentiment for the sector is likely to continue and realty stocks will find it difficult to perform in such circumstances,” said an analyst from a local brokerage.
Stock indices, which were down close to 2 per cent, plunged soon after the news flashed across terminals. At 12:15 pm, Bombay Stock Exchange’s Sensex was down 501 points or 3.49 per cent.
Interest rate sensitive sectors were the worst hit. Any hike in interest rates directly impacts growth of these industries. BSE Realty Index fell 6.10 per cent to 4769.40.
Realty sector faces a two-fold problem. Rise in interest rates will result in poor sales, which has been on a decline since the beginning of the year and secondly, companies which have loans on their books will be hit again due to high rates. Analysts said, it will result in liquidity crunch for real estate players, virtually leaving them cashless.
The BSE Realty Index was down almost 7 per cent, dragged by losses in India Bulls Real Estate (-9.6%), Unitech (-8.41%), DLF (-6.14%) and Phoenix Mill (-5.62%).
“This hike in rates is an indication of a similar move ahead. Negative sentiment for the sector is likely to continue and realty stocks will find it difficult to perform in such circumstances,” said an analyst from a local brokerage.
Sunday, July 27, 2008
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Stocks,Finance & Investments
1. Do you have confidence in stock markets?
July 27, 2008, ET- Mumbai
The five-day rally in the stock markets that bracketed the confidence motion in the Parliament must have excited investors. But it's the dips seen during Thursday and Friday that tell us of the uncertainty that still remains.
So please keep the following in mind before finalizing between debt and equities:
The stock market's troubles are far from over. The biggest concerns – inflation and high crude prices – continue to bog world economy, despite the latter now showing a downward movement.
A big challenge for the corporate sector is high input costs and, for the tech sector, the
In this background, short-term investors should invest in debt products as they give assured returns, in doubt-digits at that. On the other hand, if – and only if – investors are prepared to wait for at least three years, they can look at equity. But they need to invest in a staggered manner.
For instance, look at daily and weekly STPs (systematic transfer plans). Here, a lump sum gets invested in a debt fund with a fixed amount getting transferred from it to an equity or balanced fund regularly.
This will allow the investor to take advantage of market volatility by spreading his exposure. STPs are also cheaper as fund houses do not charge any entry fee for the transfer. However, STPs are applicable for investments of over Rs 50K as a smaller corpus can get invested in a
Investors with a long-term view can also look at accumulating stocks in sectors such as capital goods, construction, media and entertainment. In the case of construction, the investment would be 'contrarian', as the sector has been beaten down heavily in the last few months.
Aggressive investors can also look at banking and financial services as these could get a much-needed reform boost soon. But remember that these sectors are still not free from the problem of high interest rates. In the end, it’s you who will have to decide whether you have the confidence in the potential of the stock markets.
2. Long term investors have more choice
27 Jul, 2008, 0429 hrs IST,Srikala Bhashyam , ET Bureau
Many would call it a relief rally or some could dub it a short covering, but the markets managed to stage a smart recovery during the last week and have proved that all is not so bad with the domestic markets.
Though many things haven't changed fundamentally for investors, the near-2000 point rally in a matter of less than a week, has thrown up some interesting facts. The startling revelation was the active buying of domestic investors ahead of the UPA government's trust vote. Interestingly, the same fund managers resorted to profit booking in the following trading session.
The domestic institutional investors' investment strategy is a clear indicator of the continued uncertain mood which has continued to persist due to various factors. At the international level, though gold has begun to soften down, the financial crisis in the
Though oil has stopped its upward journey, it is still way above the comfort zone for international economies. As a result, most economies are still reeling under double digit inflation.
In the case of the domestic economy, new problems seem to be replacing the old ones. While inflation is showing signs of stability (at above 11 per cent) there have been fresh fears of drought which could have a huge impact over the next couple of quarters. In this background, it would be interesting to see the performance report cards of companies which till now have managed to be as per expectations.
Going forward, the market is likely to be range-bound with the index hovering in the range of 13,000 to 14,000. While long-term investors are likely to get plenty of opportunities at regular intervals, life is likely to get tough for those with a shortterm view.
In the current market scenario, it has become difficult for traders to pick stocks with sectors having shorter (uptrend) cycles than ever. For instance, the realty sector has shown signs of recovery though not many things have changed fundamentally.
For instance, there is not much respite on the interest front and on the contrary, the rate is likely to move up further in the short term with shortterm FMPs (fixed maturity plans) offering double digit returns.
On the demand side too, investors have turned cautious with property prices ruling firm. However, one can still accumulate stocks of bigger realty companies which have a track record of timely completion.
Besides stocks, you can also park a portion of your corpus in short-term FMPs where the yield has turned attractive.
Many FMPs with three-month records are offering an indicative yield of 10 percent with many even offering roll-over options. The time has come for investors to make better use of their liquidity, particularly in the short term as this gets more tax-efficient returns.
On the fixed maturity front, action has also gone up with the corporate sector resorting to aggressive borrowing. In the case of housing finance companies, the rates are touching the double digit mark. However, investors need to be cautious with their choice of company.
3. Market forces good for contra investing
27 Jul, 2008, 0435 hrs IST,V Ramesh, ET Bureau
Many investors are worried that their portfolios are bleeding. The thought, they say, gives them sleepless nights. While on the one hand there are people who suggest that the market is at an attractive level, there are others who still fear the doom. It's true. One must remember that the very basis for a stock market to function is such diverse views. At any point, when someone thinks that a share is priced enough and sells, another person thinks that there is steam left. If all think that the price will go down, then who will buy? Likewise, if everyone thinks that the price will rise, who will sell? Thus, both the views are needed.
The question now is how will one decide the right time to buy? The saying goes 'once bitten twice shy'. So, those who have lost money will swear not to invest again or to wait till the market finds the 'bottom'. But in a bear market, finding and knowing the bottom is an art in itself. You continue to get negative news one after the other. Predicting the market's direction itself will become difficult. Is this familiar? Yes. That is the situation now and many investors would have experienced it. Just when the market gets into a positive mode, you have the inflation number, IIP number or other things staring hard and we are again in the red.
It is time to do some contra investing. You must have heard the maxim 'buy low, sell high'. It is easier said than done. But such a philosophy works very well in conjunction with a philosophy of contra investing. One may ask, "What is contra investing?" It is an approach of investing where one takes investment calls contrary to the current trend. For example, when the rupee was appreciating, stocks of information technology (IT) companies were not favoured by investors. A contra investor would buy IT stocks at such a point in time. The benefit here would have been that when the rupee depreciates, the stock's flavour will come back. That is what actually happened in the last two to three months when the whole market was crashing, the IT stocks were generally falling by only around 3-5 per cent.
Coming to the current situation, one could say that banks and financial services is a good sector for contra investing. With inflation on the rise and carrying with it the interest rate, nothing seems right for the banks. There won't be much credit off-take, deposit rates will have to be raised and the margins will get squeezed, among other things. There seems to be only bad news for this sector. Banking, being an essential part of the economy and having an established business model, probably provides a great chance for contra investing. With interest rates and inflation currently standing at record high levels, one can visualise them stabilising at some time. After this, the banking sector would benefit.
However, contra investing is not easy. It needs careful consideration and understanding of those sectors. It needs substantial amount of research, coupled with loads of conviction and courage. Besides, it is also important to take bets on sectors that have an established and good business model. As you know, going the contrary way is not easy in any aspect of life. This includes investing.
4. Why things go wrong?
Sanjeev Sinha, ECONOMICTIMES.COM
Have you lately started falling short of your investment target or having difficulty in meeting your monthly expenses? Or have you been forced to take one credit card to clear the dues of another?
If yes, you’ve got some serious financial trouble ahead, which may be because of some simple financial mistakes you must have made in the past. Surprisingly, not only common but even seasoned investors make financial mistakes, which they sometimes find difficult to rectify.
"For many aspects of financial planning, there is no going back, at least without some sort of penalty," says Harminder Garg, CFP, Financial Planning Standards Board,
The good news, however, is that it’s never too late to learn from your own mistakes or those of others.
Here are the top 10 financial mistakes people generally make:
1. Putting off financial planning
Undeniably, the biggest mistake that people make is to ignore the value of financial planning. Financial planning, in fact, requires thinking and setting of lifetime financial goals which enable one to determine the appropriate asset allocation required for oneself and one’s family.
Without a plan, people tend to try and ‘maximise’ returns in each and every investment and take on more than commensurate risks, thereby endangering the meeting of the goals which ought to have been simple to achieve in the first place.
"It’s very much like driving at 80 km per hour in a 40-kmph speed limit zone because you just don’t know how far you have to go to your destination. While there is a chance that you may reach there early, there is a possibility that you may not reach there at all," says
2. Not starting early in life
People generally think that they need not plan early. Depending upon their individual time-frame, they do not like planning for more than three weeks or three months or, rarely, three years in advance.
"Let’s imagine that we are kicking off from the centre in the football match. We need to score a goal more than the other team to win. You can’t hope that you will defend your goal for 89 minutes and then attack in the last minute and score the winning goal," says Navlakhi.
According to him, this is just like planning funds for retirement about a year before actual retirement date. Or even taking a life insurance policy a month before one’s death. No need to say that having a goal and starting early to meet that goal are absolute musts.
3. Ignoring the power of compounding
Investors often overlook the power of compounding. After all, the first lesson in even the most basic investment guide is to let the ‘magic of compound interest’ work for you.
Compounding investment earnings, in fact, can turn your small investments into a whopping sum after a period of time. Its power is so immense that your investments will multiply 30 times in 30 years, assuming a nominal return of 12% per annum. And that is being a one-time investment only.
What if you are investing every month or at least a year? No wonder even Albert Einstein called the power of compounding ‘the greatest discovery of all time’, and Benjamin Franklin described it as ‘the eighth wonder of the world’!
A majority of investors, however, still believe that big money is made by big money only.
4. Living beyond one's means
Whoever advised the world to cut its coat according to its cloth was surely not an insane person. After all, people lose more than they ever gain, simply by living large or beyond their means.
Lots of people, in fact, generally get seduced by big-debt, big-ticket luxury items, sometimes going all the way into bankruptcy. "If you spend money on non-priority assets or other things, mostly under the pressure of today’s lifestyles or driven by heavy advertisements, there is something seriously wrong with the way you manage your finances," says Kunj Bansal, senior VP, portfolio management service, Kotak Securities.
5. No rainy day fund
The need for having an emergency fund, particularly keeping some cash at home or in a bank account, has always been emphasised by investment planners.
"Even standard financial principles suggest that you should keep aside cash to cover three to six months of living expenses, which would also be able to cover most emergency expenses," says Garg.
In real life, however, very few people see the importance of keeping an emergency fund in their portfolio. Forget those who can’t afford it. It’s true even for those who heavily invest in stocks, real estate and other assets - and sometimes pay heavily for their mistake.
6. Ability to pay is ability to afford
People start living on borrowed money once they confuse their ability to pay with their ability to afford. And the availability of easy money - particularly plastic money and the growing EMI culture - fuels their dream. So if today it’s a Santro, it must be a Honda City tomorrow and a BMW the day after. Thus, "people get into plastic money’s revolving credit trap as they don’t understand that it provides them just the ability to pay, not the ability to afford," says Sunil Kakar, senior director & CFO, Max New York Life Insurance.
It’s also because they don’t assess their long-term ability to pay before taking readily-available loan.
However, paying interest as a result of failure to pay off credit card bills makes the price of the charged items a great deal more expensive, sometimes taking decades to clear the dues.
7. Inadequate insurance cover
Insurance is surely an asset because it works as a safety net in case of an unfortunate event. However, besides having no or inadequate insurance cover, people in today’s scenario are buying insurance as investment which may not be appropriate.
"Clubbing investment with insurance involves binding oneself to pay big amount of regular insurance premium, leading to a fixed liability," says Garg.
For best cover, individuals should take insurance on the basis of human life value (the quantum of money required by the family in case of death of the bread winner) with the advice of a qualified professional, if required.
8. Relying on tips
Too much relying on tips or on even educated professionals in a public forum (like TV channels) is another big error that people make. No expert can profess what every individual who is hearing the channel needs to follow.
"Beware of the glib helper who fills your head with fantasies while he fills his pockets with fees," warns Warren Buffett, world’s greatest investor.
"You should, therefore, never invest on recommendations alone. Instead, always has proper analysis before investing," advises Sameer Bhargava, regional VP, north, Principal PNB Asset Management Company. If you are unable to do that, you can take the help of a qualified financial planner.
9. Putting all eggs in one basket
Instead of putting all your eggs in one basket (which means that a major part of the portfolio is invested in a single or same type of financial instrument which increases risks, resulting in high losses/ profits), you should always try to diversify your portfolio as possible.
This way you could earn optimum returns with minimum risk - a strategy not commonly followed by investors. Investment portfolio, however, should be diversified in accordance to one’s risk appetite.
10. Having Unrealistic Expectations
There’s nothing wrong with hoping for the ‘best’ from your investments, but you could be heading for trouble if your financial goals are based on unrealistic assumptions.
For instance, if your property prices more than doubled during 2004-2007, it doesn’t mean that you should expect 30% annual return from real estate in future also. The bursting of stock market bubbles is a case in point.
Therefore, when Warren Buffett says that earning more than 12% in stock is pure dumb luck and you laugh at it, you’re surely in for trouble!
5. Are the markets out of the woods?
27 Jul, 2008, 1530 hrs IST, ET Bureau
The domestic stock markets had a great rally last week after the government won the trust vote in the parliament, as it kindled hopes for a revival of stalled economic reforms. For the first time in four years the government has the freedom to push through its reforms agenda.
Traders felt the government may now try to push through banking, insurance and pension reforms such as easing foreign investment limits and allowing higher private participation.
So the stock market gave its vote of confidence in favour of the government in the form of an 850-point rally. The markets had more reasons to cheer. Further good news came in as oil prices fell sharply on Wednesday on the fears of waning energy demand.
In fact, this rally was very much on the cards from the last week because of a sharp sell-off in crude. Rising crude oil prices was the biggest bugbear for the stock markets - such that the slightest indication of weakening crude prices led to a sharp rally in equity markets globally.
Will the rally continue?
The question on everybody's minds is whether this rally indicates the resumption of bull markets and the days of sharp declines are over. The scenario looks temptingly so. With crude prices falling and reforms on the anvil the picture seems rosy enough for the rally to sustain.
Uncertainty about the government is out of the way. The all-important crude is cooling off. Reforms could be accelerated. Indeed the negatives are slowly fading away. But it may not be so.
The government's new partners are such a diverse group with different ideological thinking that pushing through reforms may not be so easy. Further, the basic problems like the deficits; high commodity prices and food crisis are continuing to stoke inflation.
Concerns remain
While the oil prices have come down from their highs and provided some sort of relief to markets around the world, the food crisis just refuses to go away. According to the United Nations Food and Agriculture Organisation, the rising prices of basic foodstuffs have pushed 50 mn more people into poverty and this number is likely to go up to 100 mn.
According to the World Bank, grain prices have more than doubled since January 2006, with over 60 per cent of the rise in food prices occurring since January 2008. Rice prices more than tripled between January and May 2008, with a slight price reduction in June.
So far,
The markets have, to some extent, factored in crude prices, inflation, and slowdown, but most estimates of GDP have been based on a normal monsoon. Hence, any change in the monsoon's behaviour could be negative for the stock markets.
Currently, we are in the amidst of a strong rally which may last for some time. In fact, each rally looks like a genuine rally and the start of a new bull market. But sharp rallies sometimes do not sustain, indicating that markets are not out of the woods yet.
Hence, it could be too premature to assume that this is the turning point in the markets. The inflation rate is way above the comfort zone of regulators.
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