My View On Goa Carbon Ltd for Investments

About The Company

A part of the Dempo group, it is one of the leading manufacturers of calcined petroleum coke (CPC) in India. The company has a capacity to produce 2,40,000 tonnes per annum (tpa) of calcined petroleum coke, which is next only to Rain Commodity’s annual production capacity of around 6,00,000 tpa. The company supplies raw petroleum coke to Indian Oil Corporation, Baruni and Bangaigaon Refinery and Petrochemicals. The plants of the company situated at Goa, Bilaspur and Paradeep. It exports to Australia, Egypt, Dubai, France, Kuwait, Iran, Saudi Arabia, Singapore, Malaysia, Indonesia, Thailand, South Africa, Russia, Wales and England.

About The Financial Results

The company has had a very volatile time, oscillating between losses and profits. The company has been making losses since Q4FY09 and now has run into Q1FY10 also. Being dependent to a large extent on exports and given the overall slowdown, lack/postponement of orders is what has ailed the company.

For Q1FY10, net sales on a QoQ was up 59% at Rs.47.41 crore. It ended with a net loss of Rs.4.82 crore, which is again an improvement over the net loss of Rs.7.05 crore in Q4FY09.

The company was unable to pass on the burden of increased costs to the customers as many has postponed delivery. The costs have gone up due to imported raw materials and exchange rate fluctuations. Realisations were down. The company had a write down of finished goods inventory during the quarter of Rs.28.78 crore to bring to net realisable value. Also due to reduction of viable export & domestic orders, the plants were shut down during the quarter, where Goa plant was shut for 80 days and Paradeep plant was closed for 40 days.

The Board has approved the setting up of a wholly owned subsidiary outside India to invest in a JV in China to manufacture CPC.

About The Stock

My view are reserved only for the registered members and exclusively meant for them.All registered member may email me to have my advice on this stock mentioning there date of registration.

Bharat Nirman

The Govt has announced its second phase of Bharat Nirman which has a deadline of 2014.

This includes providing electricity to 40,000 villages, connect 23,000 villages by roads, raise the number of low cost houses to be constructed from 6 million to 12 million. Given the stress it has laid on promoting agriculture growth, it aims to being 3.5 million hectares of land under irrigation. Bharat Nirman is split into six parts – roads, electricity, low cost housing, drinking water, irrigation and telecom.

This sounds good but no one is really too excited at the moment as it is yet to clear the huge backlog from phase I itself. It proposed to give road connection to 66,802 eligible habitations which was later scaled down the target to 59,536 habitations. The achievement, however, has fallen short of the target – it provided only 49% of the proposed new roads, 55% in upgraded and developed roads and it managed to reach only 49% of the proposed habitations.

Providing electricity has been its biggest failure. Till 31st March 2009, 60 thousand villages remained untouched by electric power. Totally, of the targeted 7.8 crore households, which were to be provided with electricity, it reached only 7% households.

In irrigation, the target till March 2009 was 10 million hectare but it achieved only 5.58 million hectares, which is around 44% short of the target.

In water supply, the target was to provide potable water to 6,03,639 villages but it provided to only 4,79,898 villages till March 2009, which is 20% less than the target.

But in providing low cost housing to the rural population, it has actually exceeded the target. Done under the banner of Indira Awas Yojana, it is routed through the panchayats. As against the target of providing 60 million units, it has managed to provide 61 million houses, which is 102% above the target.

In telephones, the aim was to provide telephone connection to 66,822 number of villages without a telephone and replace presently dysfunctional systems. Of this, till March 2009, it managed to achieve 84% of the target at 56.030 villages.

Bharat Nirman has been an excellent idea, not just for the UPA as it helped them win the elections but also for India. But clearly, it has to work on speeding up when it comes to implementation. Till 31st March 2009, it had spent Rs.1.14 lakh crore on Bharat Nirman which is two-thirds of the target. This means, paucity of funds was the issue. Land litigation, vested political interests, problems with private contractors, corruption and cost overruns too its toll.

New Direct Tax Code

New Direct Tax Code

A new Direct tax code has been introduced , which would replace the Income Tax Act of 1961 within the next 45 days.It will change the way we Indians have been paying tax. And maybe prompt those who have been shirking away paying their taxes as now rates would be lower and it’s so simple.

It was like a mini Budget.The entire Income Tax Act 1961 has actually got replaced with a more progressive norm, more in lines with what the developed countries follow.

The Code is like a law. What is stipulated in the Code is what remains. So this means, the Budget would probably be more about indirect taxes and other budgetary allocations. Once this Direct Tax Code gets implemented, the Budget might then not have this anticipation in terms of changes in Income Tax.The new direct tax code would become a law only by 2011, which is 50 years since Income Tax Act came into being.

The second very important take away from this Code is that all direct tax codes would come under one umbrella.

Third facet is that it has been kept very simple and that is done to ensure better compliance and eliminate scope of litigations. The code also ensures that we will not have any confusion over assessment year and financial year and previous year. It will be about financial year, like how we have for our corporate results.

Negative Points Of New Code

According to the new proposals, all interest on savings will be taxed from 2011 onwards. And that is something which would not really go down too well with people. The markets might not be too happy with the idea of reintroducing long term capital gains on securities trading which means that there is really no incentive for along term investor to stay put.

The Code also suggested that perquisites given to employees should be included in salary income. This would inflate the taxable income of certain categories of salaried persons and this might not be such a welcome move.

Highlights of the Direct Tax Code:

1. No tax on annual income upto Rs.1.60 lakh

2. 10% tax for Rs 10 lakh income; 20% for Rs.25 lakhs and 30% for over Rs.25 lakhs

3. Corporate tax to come down from 30% to 25%

4. Wealth tax on wealth over Rs.50 crore

5. Increase deduction limit for savings upto Rs.3 lakhs

6. Interest on savings to be taxed

7. Security transaction tax (STT) to be abolished

8. To do away with long, short-term capital gains differentiation

9. Base year for calculation of capital gains tax moved to Apr '00

10. Allow indefinite carry forward of business losses

11. No tax deduction on interest payable on any Govt security

12. Rationalization of taxation of all non profit organizations

13. Annual disclosure of profits of non-life insurance business

14. Reintroduction of tax on long term capital gains on securities trading

15. Foreign companies to pay additional tax of 15% as branch profit tax

All About The Concept " Non Convertible Debenture "

NCD ROUTE IN INDIAN DOMESTIC CAPITAL MARKET

Tata Capital, which even in the most troubled times, when others were harping about lack of investor interest and general apathy to all investment instruments, it managed to close its non-convertible debenture (NCD) issue with a resounding success. That was way back in Feb 09’ when it had managed to raise Rs.1500 crore thro the NCD issue. This success proved that companies with a good brand presence can manage to get investors to part with their money as the bond of trust has already been established.

And now, a new record of sorts has been set by the NCD issue of Shriram Transport, which managed to garner an unbelievable Rs.4500 crore as against the need of Rs.500 crore, that too on the first day itself. The issue will close on 14th August and it would be interesting to see how much amount it did manage to collect.

Enthused by this, there are others now queuing up with their NCD issues. L&T has already announced that it plans to raise Rs.1000 crore via NCDs to meet its capex plans and Dewan Housing too has plans to raise Rs.1000 crore, once again through the NCD route. Indian Hotels said that it might take the debt or the equity route to raise money for its capex. And there are quite a few more companies, from NBFCs as well as from the manufacturing sectors which are looking at taking the NCD route.

Why is NCD a preferred route today?

1. Currently people have the money and being constantly on the lookout for a better avenue to park their funds, NCD is coming forth as a stable, low risk investment,

2. NCDs give better returns than the bank deposits and in the equity market, small retail investors feel most of the stocks have gone beyond their reach.

3. Rules are softer when it comes to NCD issues - easier declaration requirements, remains open for more than 5 days which is the time stipulated for equity issues and advertising rules are also more relaxed.

4. For NBFCs especially this is the most viable route to raise long term money as they heavily on institutional funding and such long term money of five year duration is almost never available.

5. A NCD is a debt instrument that is issued for a fixed maturity and in which, no part of the debenture is convertible into equity. So this means, no equity dilution for the offering companies.

6. NCDs offer a higher interest interest rate as opposed to convertible debentures do and the security of the capital being intact is a big plus in today’s turbulent times.

REFINANCING

What is Refinancing ?

Refinancing refers to the replacement of an existing debt obligation with a debt obligation bearing different terms. The most common consumer refinancing is for a home mortgage.

Advantages of Refinancing..

Refinancing may be undertaken to reduce interest rate/interest costs (by refinancing at a lower rate), to extend the repayment time, to pay off other debt(s), to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce or alter risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to raise cash for investment, consumption, or the payment of a dividend.

In essence, refinancing can alter the monthly payments owed on the loan either by changing the loan's interest rate, or by altering the term to maturity of the loan. More favorable lending conditions may reduce overall borrowing costs. Refinancing is used in most cases to improve overall cash flow.

Another use of refinancing is to reduce the risk associated with an existing loan. Interest rates on adjustable-rate loans and mortgages shift up and down based on the movements of the various indices used to calculate them. By refinancing an adjustable-rate mortgage into a fixed-rate one, the risk of interest rates increasing dramatically is removed, thus ensuring a steady interest rate over time. This flexibility comes at a price as lenders typically charge a risk premium for fixed rate loans.

In the context of personal (as opposed to corporate) finance, refinancing a loan or a series of debts can assist in paying off high-interest debt such as credit card debt, with lower-interest debt such as that of a fixed-rate home mortgage. This can allow a lender to reduce borrowing costs by more closely aligning the cost of borrowing with the general creditworthiness and collateral security available from the borrower. For home mortgages, in the United States, there may be certain tax advantages available with refinancing, particularly if one does not pay alternative minimum tax

Risk Of Refinancing

Most fixed-term debt contains penalty clauses (known as "call provisions") that are triggered by an early payment of the loan, either in its entirety or a specified portion. In addition, there are also closing and transaction fees typically associated with refinancing debt. In some cases, these fees may outweigh any savings generated through refinancing the loan itself. Typically, one only rationally considers refinancing if the potential for a substantial cost savings exists, or if there is a need to extend the loan due to weak cash flow or other non-recurring commitments.

In addition, some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance.

Types Of Refinancing

No Closing Cost

Borrowers with this type of refinancing typically pay few upfront fees to get the new mortgage loan. In fact, as long as the prevailing market rate is lower than your existing rate by 1.5 percentage point or more, it is financially beneficial to refinance because there is little or no cost in doing so.

However, what most lenders fail to disclose is that the money you save upfront is being collected on the back through what's called yield spread premium (YSP). Yield spread premiums are the cash that a mortgage company receives for steering a borrower into a home loan with a higher interest rate. The latter will even eventually lead to borrower's overpaying.

Cash Out

This type of refinance may not help lower the monthly payment or shorten mortgage periods. It can be used for home improvement, credit card and other debt consolidation if the borrower qualifies with their current home equity; they can refinance with a loan amount larger than their current mortgage and keep the cash difference.