View On Results Of Sugar companies

Seven sugar companies have declared their financial results for the quarter ending March 09, of which, 5 companies are from U.P. while 2 are from south. These companies are Bajaj Hindustan, Balrampur Chini, Triveni Engg., Oudh Sugar, Upper Ganges, Shree Renuka Sugars and Thiru Arooran Sugars. Though this represents less than 25% amongst listed peers of about 30 sugar companies, but in terms of capacity, it constitutes close to 70%.

We have been taking a bullish call on sugar sector with a view of 12-18 months on account of following parameters :

1. Lower estimated production of about 15 million tones(mt) in India, during season 08-09, which is far below the original estimate of 22 mt and about 45% lower then the last year’s production. If we take opening stock of 8 mt, as also import of raw and white during the year of about 2 mt, we would have total sugar availability of about 25 mt for season 08-09, against our annual domestic consumption of 23 mt. This will result in low carry forward inventory in next season on 30-9-09. Even for next season 09-10, India’s sugar production is not likely to exceed 18 mt.

2. Globally, sugar is heading towards its first deficit in four years in 08-09, with global production estimated to be lower at 157 mt, a decline of over 9 mt from previous season, against global consumption, estimated to rise by 2.5 mt to 161 mt. With India importing sugar, global prices should remain firm and landed cost of sugar in the country will act as a floor for the domestic sugar prices.

3. Looking to the results of the 7 companies declared so far, optically either they look flat or little disappointing. For example, Balrampur Chini had sales of Rs.357 crores with PAT of Rs.66.20 crores for quarter ending March,09, against income of Rs.311 crores and PAT of Rs.65.65 crores in the corresponding quarter of the previous year. This means, absolutely flat results. Same trend was seen in Triveni and Renuka while decline in PAT was seen for Oudh and Upper Ganges. PAT of Bajaj Hind doubled to Rs.81.39 crores for March 09 quarter, thanks to forex losses write back, provided earlier. Thiru Arooran PAT improved to Rs.5.50 crores from Rs.2.42 crores, mainly due to a lower base.

4. In the Results of sugar industries ,EBIT from segment has shown a good rise. The average realization of sugar, ex-mill in U.P., in December 08 quarter was at Rs.1,752 per quintal which rose to Rs.2,082 in March 09 quarter and now ruling over Rs.2,400 per quintal, ex-mill.

It may be seen that Renuka had maximum increase in inventory of Rs.336 crores during March 09 quarter, while it is at Rs.578 crores for 6 months ending March 09. In case of Bajaj Hind it is Rs.224 crores and Rs.338 crores, respectively, while for Triveni, it is Rs.196 crores and Rs.346 crores. In case of Balrampur Chini, it is Rs.313 crores and Rs.354 crores. However this increase is not very significant for Oudh, Upper and Thiru Arooran.

Shree Renuka has been holding 5.12 lakh bag of sugar as at 31-03-09, on which unrealized of about Rs.250 crores would get made in the current and coming quarter.Similarly, Balrampur Chini is going to report its highest ever bottomline for the year ending September, 09.

So to correctly assess the results of a sugar company, is not to see the quarterly results, but, to see how much profit would get made on the inventory being carried on by the company. Since next season is going to be more critical, an ex-mill realization of Rs.27 per kg. is just a matter of time. This gives a clear visibility of growth in the bottomline of all the big sugar companies, over next 4-6 quarters. So, keep a bullish view on the sector.

My View On Indiabulls & Maruti Suzuki

View On India Bulls

Indiabulls Real estate has been moving in a range of Rs 150-130 for the last few days and in yesterday’s fall it has closed at the lower end of the range. The medium charts look very strong and if it breaks Rs 130, in the short-term it could be available at Rs 120 which could be good level to enter on long positions for a positional trader.

View on Maruti Suzuki

Maruti Suzuki India Ltd (MSIL) reported net sales of Rs 6,432.9 crore, up 35% y-o-y & 39% q-o-q. The growth in the net sales was mainly driven by a healthy 17% growth in volumes and 13% growth in realisation. We believe that MSIL is likely to get some cushion from the export market as it has received order of 30,000 units from Nissan. MSIL is also likely to benefit from the ramp up of exports of A star in the European markets."

However, the company’s earnings are likely to be affected from appreciating yen. We expect the royalty and selling & distribution expense to increase on the back of ramp-up in exports. Power & fuel cost is also likely to be high as the Manesar plant runs on diesel and it is expected that CNG power is to be implemented after a year. MSIL may face tough competition in its A1 and A2 segment from the Tata Nano launch. As well as Swift has major challenges in the coming quarters with the launch of diesel variants of the i10 and i20 from Hyundai. We recommend 'Reduce' on the stock with target price of Rs 775,

Disclosure: I do not have any personal holding in either of these stocks.

My view On Bajaj Hindusthan Ltd.

About The Company

Bajaj Hindusthan being the company headed by the most reputed BAJAJ group.The stock has been fairly fancied among the investors in the capital market. The financial results need to be studied with care before making any fresh position in this stock.

About The Results

Bajaj Hindusthan has posted its Q2 results for March 09 which has really disappointed or can be termed as flat. Optically it looks good, which is due to reversal of forex losses of Rs.83.66 crores provided earlier and now credited back to profit & loss account. On total income of Rs.516 crores,( including other income of Rs.91.07, which largely consist of forex gain referred above) PBT is at Rs.118.18 crores while PAT is at 81.39 crores. If we exclude this forex gain, PBT would have been at Rs.35.15 crores.

However major disappointment is from its sugar and distillery segment. The company, as at 30-09-08, had a closing stock of 35.56 lakh bags of sugar, valued at Rs.16.25 per kg., at Rs.578 crores. It is learnt that the company had crushed 64 lakh tonnes of sugarcane in the current season and has produced 57 lakh bags of sugar with a recovery of 8.9%. Part of opening stock, out of 35.56 lakh bags, were sold in Q1 and remaining quantity got sold in Q2. In Q1 average sugar realization was at Rs.17.75 per kg. while it was at Rs.20.60 per kg. in Q2. So, sugar segment earned an EBIT of about Rs.4.35 per kg. But this is not reflected in the results as its sugar segment had an income of Rs.408 crores and EBIT of just Rs.30.50 crores. Even distillery for Q2 had a turnover of Rs.38.63 crores and negative EBIT of Rs.1.19 crores which is surprising.

Considering overall results, the company being the largest sugar mill in the country with a capacity of 96,000 TCD, has really disappointed.

Major Drawbacks

1. Since, inventory of lower cost is now being replaced with higher cost, increase in stock, of Rs.338 crores for 6 months ending March 09 is also not very encouraging.

2. Rising interest cost also remains an area of concern.

About The Stock

The performance of the company is not suggesting to make any additional or fresh position in this counter at least before the results for the upcoming quarters gets better.

Disclosure: I do not have any personal holding in this stock.

SEBI Decision Details

As a surveillance measure SEBI has required the Exchanges to use the following stock’s selection criteria for allowing or including them in Futures & Options (F&O) category of the exchange, with immediate effect:

The eligibility criteria for inclusion of scrips in F&O segment shall be as under:

· The stock shall be chosen from amongst the top 500 stocks in terms of average daily market capitalization and average daily traded value in the previous six months on a rolling basis.

· The stock’s median quarter sigma order size over the last six months shall be not less than Rs. 5 lakhs.

· The market wide position limit (MWPL) in the stock shall not be less than Rs. 100 crores.

The criteria for exclusion of scrips in F&O segment shall be as under:

For an existing F&O stock, the continued eligibility criteria is that market wide position limit in the stock shall not be less than Rs. 60 crores and stock’s median quarter-sigma order size over the last six months shall be not less than Rs. 2 lakh. The stock shall be excluded if the above criteria is not fulfilled for consecutively three months.

Further, once the stock is excluded from the F&O list, it shall not be considered for re-inclusion for a period of one year.

In pursuance to these guidelines, following 50 stocks are getting excluded from F&O segment of NSE for new expiry months on expiry of existing contract months.

Sr No	Symbol	Security
1	3IINFOTECH	3i Infotech Limited
2	ALOKTEXT	Alok Industries Limited
3	AMTEKAUTO	Amtek Auto Ltd
4	APTECHT	Aptech Limited
5	ARVIND	Arvind Limited
6	BALAJITELE	Balaji Telefilms Ltd.
7	BALLARPUR	Ballarpur Industries Limited
8	BATAINDIA	Bata India Ltd
9	BIRLACORPN	Birla Corporation Ltd
10	BOMDYEING	Bombay Dyeing & Mfg Co. Ltd
11	CENTRALBK	Central Bank of India
12	DCB	Development Credit Bank Limited
13	EDELWEISS	Edelweiss Capital Limited
14	ESCORTS	Escorts Ltd
15	EVERONN	Everonn Systems India Limited
16	GDL	Gateway Distriparks Limited
17	GITANJALI	Gitanjali Gems Limited
18	GNFC	Gujarat Narmada Valley Fertilizer Co. Ltd.
19	GUJALKALI	Gujarat Alkalies and Chemicals Ltd.
20	HAVELLS	Havells India Limited
21	HCL-INSYS	HCL Infosystems Ltd
22	HINDOILEXP	Hindustan Oil Exploration Co. Ltd
23	IRB	IRB Infrastructure Developers Limited
24	JETAIRWAYS	Jet Airways (India) Ltd.
25	JSL	JSL Limited
26	KESORAMIND	Kesoram Industries Ltd.
27	KSK	KSK Energy Ventures Limited
28	KTKBANK	The Karnataka Bank Limited
29	LAXMIMACH	Lakshmi Machine Works Ltd.
30	MAHLIFE	Mahindra Lifespace Developers Limited
31	MAHSEAMLES	Maharashtra Seamless Ltd
32	MINDTREE	MindTree Limited
33	MONNETISPA	Monnet Ispat Ltd
34	MRF	MRF Ltd.
35	NBVENTURES	Nava Bharat Ventures Limited
36	NDTV	New Delhi Television Limited
37	NETWORK18	Network 18 Fincap Limited
38	NIITLTD	NIIT Limited
39	PENINLAND	Peninsula Land Limited
40	RAJESHEXPO	Rajesh Exports Ltd.
41	RIIL	Reliance Industrial Infrastructure Limited
42	SKUMARSYNF	S. Kumars Nationwide Ltd
43	SREINTFIN	SREI Infrastructure Finance Limited
44	SRF	SRF Ltd.
45	STAR	Strides Arcolab Limited
46	THERMAX	Thermax Ltd
47	TORNTPOWER	Torrent Power Limited
48	TVSMOTOR	TVS Motor Company Limited
49	UTVSOF	UTV Software Communications Limited
50	WOCKPHARMA	Wockhardt Limited

However, the existing unexpired contracts for the month of April, May and June 2009 would continue to be available for trading till their respective expiry and new strikes would also be introduced in these existing contract months.

This is a welcome move, as, in many of the stocks now excluded, F&O segment is used as a platform to rig the price as there is no circuit filter in this segment. Also, in case of low public float and high promoters’ holding, it has become more easy for the players to rig up the price. Many of these stocks are having lower value in two digits, resulting in higher lot size coupled with huge intra-day volatility , which, a small trader is unable to face it but can’t refrain from trading in it.

However SEBI and exchanges should also think of increasing Market Wide Limit to around 50% of float as also to make F&O segment securities settled , instead of present system of cash settled , to make it more healthy, transparent and trader friendly as also to curb rampant speculative and momentum play in some of the stocks included in F&O segment.

A Review on " RBI CREDIT POLICY "

The Reserve Bank of India (RBI) in its annual policy review has cut the repo rate by 25 basis points (bps) to 4.75 per cent from the existing 5 per cent while the reverse repo has also been cut by 25 bps to 3.25 per cent from the existing 3.5 per cent. The CRR has been left untouched at 5 per cent. The GDP forecast for the FY10 has been pegged at about 6 per cent RBI cut its growth estimates for FY 09 , for the year ending 31st March,09 to 6.5 to 6.7 per cent and said that managing large Government borrowings in 2009-10 in a non-disruptive manner would be a major challenge and said , it would use a mix of monetary and debt management tools to ensure that this is done smoothly.

Large borrowings also militate against the low interest rate environment that the Reserve Bank is trying to maintain to spur investment demand in keeping with the stance of monetary policy, said RBI.

The RBI has now cut its short-term lending rate by 425 basis points in six steps since Oct. 20 as the global economic crisis has hit Asia's third-largest economy harder than expected. The RBI said wholesale-priced based inflation was expected to turn negative early in the current fiscal year, but this should not be interpreted as deflation for policy purposes. RBI projected WPI inflation would be around 4 percent at the end of 2009/10.

The RBI said a planned April 2009 review of the policy on foreign banks in India would now not go ahead until there is greater clarity regarding stability, recovery of the global financial system and better global coordination on regulation and supervision.

Market has welcomed the Credit Policy and found it to help in easy availability of credit , especially to infrastructure sector, which will see demand imporoving for core industries like cement, steel, metal and other commodities. Even GDP growth estimation of 6 per cent for FY10 has been viewed quite positive, as RBI has always been conservative in its estimation and has not been as liberal as seen in case of Finance Minisry, Planning Commission or other Government Agencies which make it look rosy for obvious reasons. Also, it is seen that with a stable government likely to get roped in the Centre, this growth can reasonably rise to 7 per cent, which will be considered more than satisfactory by the global investors.

My View On BASF

About The Company

The company has been engaged in chemical business from long time and has been fairly fancied among the investors in the capital market.

About The Results

BASF India always has flat Q4 quarter as Agri Solution division does not contribute anything significantly to the topline and virtually nil to the bottomline. Inspite of this, the company posted a PAT of Rs.5.48 crores for Q4 against Rs.4.41 in corresponding quarter of previous year, on total income of Rs.204 crores against Rs.197 crores. FY 09 had total income of Rs.1,124 crores against Rs.917 crores of FY 08 while PAT is at Rs.68.64 crores against Rs.59.37 crores. EPS for FY 09 is placed at Rs.21.06 (Rs.17.24). Dividend of 70% has been maintained.

On consolidated basis, BASF Polyurethanes a wholly owned subsidiary is incurring losses, due to which, EPS of the company on consolidated basis, got reduced to Rs.17.24 for the year However, promoters of the company BASF SE have expressed their intention to acquire this subsidiary, which if happens, would re-rate the company as also would increase its bottomline even on consolidated basis.

In July 08, Promoters of the company raised their stake from 52.69% to 71.18% by acquiring shares under open offer at Rs.300 per share. Open offer at the time did not evoke full response as insurance companies and financial institutions did not tender shares in open offer and continue to hold about 18% in the company. The move to delist the company, above Rs.300 may get reinitiated by the Promoters in the near future. Even if it does not, share now ruling at Rs.220 discount current earnings by about 11 times which makes stock a good buy, which can give 30% annualized return

About The Stock

At present market scenario any investment at this level of index should be avoided. A wait & watch theory will hold good at the moment.

Disclaimer : I do not have any personal holding in this stock.