My View On Sugar Industry

About The Sugar Price Fluctuations

Though the whole market has been going up, sugar stocks are on a rise for the last over two weeks. This is mainly due to commodity prices having moved to Rs.25 per kg., ex-mill in U.P. and at Rs.24 per kg. in other parts of the country. Prices in retail has risen to over Rs.27 per kg.
Inspite of the fact that first phase of general election has commenced today and would end on 13^th May, in its fifth and last phase. Maybe, by then, prices may go up by another one rupee per kg.

Inspite of this, some people have the apprehensions of this being a politically sensitive commodity or not much sugar stocks available in the market. To answer both these, if global and Indian production of sugar is low, how any government can really control it? People need sugar to eat and its production can’t get increased by policies or merely by setting up the sugar mills. One needs sugarcane which takes 10 - 12 months to grow. Secondly, there are over 35 listed stocks available for investment and trading, of which 4 are in F&O segment. Since all these companies having produced sugar, will gain and would get reflected in the share prices. The companies are even making a profit of Rs.5 per kg.on sugar produced, from bagasse and molasses (by-products) which is enough to cover the cost of production from sugarcane to sugar, estimated at Rs.5 per Kg.

About The Sugar Sector Stock

Sweetness of sugar stocks will keep rising for next 6-8 quarters and those taking a time call on these stocks will gain.

Is the time ripe to buy property now?

If you have been among those who have been waiting for the 'right' time to buy a home,now maybe that time. Interest rates have been falling, making your loan cheaper. Not just that, property rates have visibly started falling too. Wealth takes stock of whether it is indeed the right time to buy a home!

Property prices are falling

Project developers have been facing liquidity problems, thanks to the slowdown, and are finally cutting down prices. According to the December 2008 figures released by Knight Frank India Pvt. Ltd, property rates are down by 20-30 per cent from peak (that is mid 2008). Narain Corp, Property Consultants and Realtors, also estimate that rates have already gone down by 10 to 20 per cent since the beginning of 2009.

Home loan are also getting cheaper

Interest rates have been falling steadily. Call money market rates have dropped to 2-3% and bulk deposit rates have fallen sharply. This indicates liquidity in the system which would mean that interest rates are likely to come down a little more.

Many lenders such as State Bank of India (SBI), HDFC Ltd., LIC Housing Finance, etc. have reduced their loan interest rates. Bank of India is also expected to reduce its interest rates by 50 basis points. Then, have interest rates bottomed out?

Chairman and Managing Director of Punjab National Bank, KC Chakrabarty says, "Lending rates will come down by a maximum of 50 basis points."

Principal Economist, CRISIL, DK Joshi explains, "A further rate cut (by Reserve Bank of India) is expected in the next two to three months. There will be more action once the Central Bank announces the annual monetary policy by the end of April 2009."

Financial Planning

Financial planning. If that word is a put off, don't let it be. It's the all important word in your money dictionary. Here, we simplify it for you.

Step 1 - Put your finances in order

We spend more than half our lives working and saving, but hardly spend any time planning on how to put that hard-earned money to work more effectively. So, how do you plan your financial life?

Put your (financial) house in order

Financial planning starts with a review of your overall financial profile, and not at investing. Before rushing to build an investment portfolio, you need to address the following issues:

Insure your health, life and assets

Start by protecting your family’s current lifestyle against events/ expenses beyond your control. Buy appropriate insurance policies for your medical expenses, life, car, and other important assets.

Repay high-cost loans

Paying credit card bills on time can save you more money in interest costs than most of your investments could earn you. Ditto for borrowings that cost you more than 15% pa. So, put high-cost loans behind you, and only then start building your investment portfolio.

Put money aside for emergencies

Deploy some money in short-term investments that can be encashed on demand to help you tide over unforeseen needs and emergencies.

Draw up a savings plan

Income - Expenditure = Savings

Do not leave this equation to chance – make a savings plan. Put away as much as you can, as regularly as you can, aim to save at least 15% of your take home annual income.

Step 2 – Prepare to invest

Investment planning is simpler than you think, and more rewarding than you would imagine.

Your age and investment size does not matter, nor do you have do be a money whiz – just do it NOW. So where do you start?

Identify your financial goals

What are your goals? What are you saving for – A house? Child's education/ marriage? New car? World tour? Retirement? Quantify this in terms of amount of money needed, and time horizons.


Understand your risk profile

Depending on our income and needs, we all have different capacity for risk. We also have a different risk tolerance, based on our individual psychological make-up. Understand your risk profile and plan your portfolio accordingly.


Plan your asset allocation

Returns should not be your primary objective; you could end up taking more risk than you are financially/ psychologically capable of. It helps seek expert advice and create a portfolio with the right spread across asset classes to minimise risk of incurring a loss.

Step 3 – Start investing NOW

The only thing worse than investing late is not investing at all.

Use the power of compounding

Compounding is the best reason for starting early. The sooner you begin investing the better – every day that you are invested is a day that your money is working for you.

Invest as per your needs

If you know you will need cash next year (down payment for a house, child’s college fee etc), opt for a shorter term, low capital risk investment (such as liquid/ gilt/ money market funds, bank term deposits or top-rated company deposits/ fixed income investment options).

Similarly, invest money that you will not need for 3-5 years in the stock market.

Evaluate your investing skills

Finding the right money manager for your investments is important. You could manage your money yourself, use professional money managers, or invest through mutual funds.

Financial planning is not about financial expertise and hard work. All it needs is the right approach and discipline.

LIFE INSURANCE - A Must , But How?

You heard enough about why you should buy insurance. So you wake up one morning and decide to buy yours that day. And then, you realize, you have no clue where to begin. Well, how about here for a start.

Step 1 – Evaluate your life insurance needs
An extremely popular product, life insurance offers a lot more than just tax planning and investment returns. You are afforded the ability to plan for unforeseen events that could adversely affect your family's financial profile.

Factors to consider

Your financial profile and needs are different from your neighbour’s. The same holds true for your insurance needs. Your decision when going for insurance must revolve around the number of dependants and their financial needs.

Factors you should consider

1.Wealth, income and expense levels of your dependants
2.Significant foreseeable expenses
3.Inheritance you would leave them
4.Lifestyle you want to provide for them

How much insurance?

Obviously the above factors don’t mean much unless they are quantified. A time-tested approach used by insurance and financial planners globally is the capital needs analysis method.

Step 2 – Understand the key concepts

Risk cover v/s investment returns

Insurance options range – from low premium policies with that offer almost no returns, to high premium ones that offer returns depending on the fund option you choose.

We recommend you buy policies skewed towards investment returns only if you are in the high-tax bracket, prefer to invest in low-risk, fixed-income options and have exhausted all the other such investment options available.

Whole life v/s limited period

As you grow older, the number of dependants may decrease (since children would be independent). Also, your wealth may reach a level where it can support your dependents’ financial needs in the event of your death.

You should therefore consider whether if you need to insure yourself for whole life or for a limited term. Obviously, the cost of insurance for the latter is lower.

We recommend you go for whole life only if you do not expect your wealth to ever reach a level where it can support the financial needs of your dependents.

Step 3 – Selecting a policy

Calculate the insurance you need

Consider the current expense profile of your dependents and the current wealth level of your family. Consider also the risk tolerance level of your Dependants.

Selecting your Premium Paying Term (PPT)

How long do you want to pay your insurance premium for? This decision depend on the following factors:

1. How many years of regular income you expect
2. Level of your regular savings
3. How much insurance premium you can firmly commit to
4. How long you want to be insured versus how long you expect to pay a premium for

Other important questions

1. Do you want to participate in bonus/ profit share?
2. What is the primary objective - risk cover or investment returns?
3. Do you want accident cover? Today ULIPs are more popular than any other option. But your life insurance agent may be the only one recommending you the ULIP.

Tax Planning

The premium paid for an insurance policy also qualifies for tax deduction under Section 80C of the Income Tax Act. But don't buy insurance only to save tax.

Step 3 – Selecting a policy

Calculate the insurance you need

Consider the current expense profile of your dependents and the current wealth level of your family. Consider also the risk tolerance level of your dependants.

Selecting your Premium Paying Term (PPT)

How long do you want to pay your insurance premium for? This decision depend on the following factors:

1. How many years of regular income you expect
2. Level of your regular savings
3. How much insurance premium you can firmly commit to
4. How long you want to be insured versus how long you expect to pay a premium for

Other important questions

1. Do you want to participate in bonus/ profit share?
2. What is the primary objective - risk cover or investment returns?
3. Do you want accident cover?

Updates On Satyam Sale

Stage is all set for stake sale in Satyam Computers, for which, financial bids will be submitted by the potential acquirers by Monday, 13^th April. This date was earlier at 9^th April, which got extended after L&T and Tech Mahindra sought additional information, to enable them to prepare the bids.

There has been speculation that IBM has pulled out of the race, on fears of 13 US Class Action Suits, filed against Satyam in courts by ADR holders. IBM which had stated Infosys, Wipro and Satyam as its main competitors in its Annual Report, which was filed with NYSE in Feb. 09, finds Satyam , a fit company to acquire, which they have been eyeing for quite sometime. Earlier, Raju had stated that Satyam is a hostile take-over target of IBM, due to low promoter stake and hence the Satyam needs to utilise its idle cash of Rs. 5,000 crores lying in its books. Even IBM had carried out due diligence inspite of knowing the existence of 13 suits. Hence, it is hard to believe that IBM opts out of race , which otherwise strategically fits in.

Earlier, iGate, Hinduja Group and B K Modi controlled Spice Group opted out of the race, though, Spice Group maintains that it could re-enter the bidding, if its conditions for an open auction and transparent process are met.

As of date, there are 4 serious bidders in the fray and they are L&T, Tech Mahindra, Cognizant Technologies and P E Firm W L Ross. It needs to be understood that it is not the number but quality of the potential acquirers, which will decide the valuations of Satyam. Of the 4 bidders, if the name of IBM also gets added, it will result in aggressive bids by them.

It is learnt that Satyam is owning close to 75 lakh Sq.Feet of constructed area across the globe with huge chunk of land in Hyderabad, Bangalore, Chennai, Madurai, Vizag and other parts of the country. The present value of all these real estates is pegged at close to Rs. 4,000 crores. Apart from this, topline of close to US $2 Billion, also give it a good valuation on intangible front and can be taken at Rs. 5,000 crores, if a multiple of 0.5 is given to it , against the industry average of 2.5 to 3 times.

US Class Action Suit liabilities, which were estimated in extreme case scenario at US$800 million (Rs. 4,000 crores) can get largely offset by the tangibles and intangibles of Satyam. Also, prospects of recovering funds of Satyam, having diverted to Maytas also exist. So all this can result in a valuation of Rs.60- Rs.72 per share. Also, if two top acquirers are in a 10% band, open bidding can take it to upper range of Rs. 72. The final bidder, will give direction to the share price and if IBM or L&T are in this, share price can move closer to the bidding price, as many investors may not be keen to tender it in the open offer.

It is learnt that bids will be received by 10 a.m. on 13^th April and would be opened on that day itself. Since market is closed on 14^th April, we will see share price responding to the bids on 15^th April.

In the given circumstances, we feel that bids are likely to be aggressive and share price is likely to react upward and positive. In this situation, if one remains invested upto 15^th April in the stock would stand to gain.

Updates On NOVARTIS

We have seen promoters going public by diluting part of their stakes in their closely held companies, which keep primary market moving. But, due to market giving poor valuations to the listed ones, no one is really keen to go public and we are seeing virtually a non-existent primary market. However, some small issues keep coming, which infact, is killing it further.

Due to pathetic valuations existing for major listed companies, many cash rich promoters are keen to delist. We have seen these moves having been initiated by the promoters of PSI Data and Madras Aluminium while Novartis and Matrix Lab is in the process of doing it. Companies like Ingersoll Rand and Lotte India are doing it in a phased manner.

We see share price shooting up the moment such move is proposed by the promoters.Madras Aluminium touched its 52 week low of Rs. 35, on 24-11-08 and finally discovered a delisting price of Rs.115, on 20-3-09. A rise of 230% in less than 4 months.We may see many companies waiting on the sidelines to do so and prominent amongst them could be Oracle Finance and Blue Dart.

The arguments by the promoters , going in for delisting, are that, in view of a holding of 75% or more by them in the company, they are prohibited to buy anything more , inspite of good growth visibility and rich assets value, which otherwise is not recognised by the market .In such a scenario, they have no other option but to go for delisting .It is also planned by them that once the capital market , especially primary market revives, which is bound to happen in the next 5 years ,the promoters may plan to divest a minor stake at much higher and better valuations. In the interim period , the company also saves on compliance costs and issues.

We are seeing share price of many companies ruling at close to 10% to 20% of its IPO price, inspite of rich asset quality and good growth pipeline .Realty stocks are some of them. The problem of these companies is not of solvency but of liquidity, which is temporary in nature and would get corrected over a period.

There are many stocks which are now ruling at a market capitalisation, lower than the cash and listed investments held by the company. The core business comes absolutely free. Even there are pseudo realty companies having quality realty assets located in Tier I cities having present value of close to 5 times of its market capitalisation.

Hence, delisting can be a trigger for the market to move up or even shareholders of such companies should take a fundamental call on these stocks and can hold, instead of taking a value call on them, based on day to day market price.

Updates On DLF Limited

About The company

DLF is the giant of Indian realty sector and has been the most admired promoter well known for its quality in work and the experience they hold.

About the present situation of the sector

The reality sector is the one , who is worst hit in this slowdown. The promoting company has to face many challenges , thereby losing the considerable part of the total income earned in the past rally. Either new projects are not launched , who were scheduled to be inaugurated and those who has already in process has negligible speed in the work progress due to lack of realization of installment and excess cancellation of bookings.

DLF Nightmare

Almost 300 buyers, who had backed out of DLF’s ‘Garden City’ project in Chennai, refused to leave its premises till they got a written assurance that their money would be paid back in full. The total number of exiters from the project was 580 out of its existing base of 1,800 customers and DLF was to give a letter outlining the timeline of refund. But people just continued waiting and and finally patience wore off and angry people refused to leave DLF premises until they got the refund letters.

DLF has now assured them that the formal refund letter addressed individually to the exiters would be given by April first and the process of full refund will commence from 1st April, 2009, and will be completed before 30 September, 2009. The priority of disbursement shall be based on the order of first exit letters received and will be intimated by 10th April 2009. Times are indeed bad but it seems to be the worst phase for realty developers.

My View On Sugar Sector

We have been maintaining our bullish view on the Sugar sector since Nov.08, mainly on the expectations of lower production in the country. When the Govt. has been estimating country’s production at 22 million tonnes (mt) for season 08-09, in Nov. 08, we expected it to be 18.5mt. On collecting details of production on all India basis, upto 15-3-09, it is estimated at 13.1 mt. Season 08-09(expiring in Sept 09) is not likely to see a production of more than 15mt.

The reason for lower production is low yield per hectare of sugarcane crop, lower sugar recovery by the mills, farmers migrating to other crops like wheat, rice and potato and lesser number of running of mills across the country due to lower availability of sugarcane, even after paying higher rate above SAP in U.P.

If we consider opening stock of 8mt and an expected import of 2mt of raw sugar with estimated domestic production of 15mt, we will be having 25mt against our annual domestic consumption of 23mt. Therefore, as at 30-9-09, we will be left with a closing stock of just 2 mt which would be very alarming.

Though the Govt. is contemplating allowing import of white sugar at 0 duty against present rate of duty at 60%, but the same is not feasible and workable. Taking a price of $395 per tonne and a freight of $35 per tonne and adding a cost of Rs. 1,000 per tonne as port handling, insurance and transport the landed cost of white sugar works out at Rs. 23 per kg. against ex-mill price of Rs. 20 per kg. in Maharashtra and Rs. 21 per kg. in U.P.

Even import of raw is now not feasible unless the importer is confident of realising above Rs.23 per kg. Due to the lower raw price in Dec. 08, importers have contracted to import about 9 lakh tonnes of raw sugar. These include 5.25 lt by Shree Renuka Sugars, 90,000 tonnes by NCS Sugars, 50,000 tonnes by Dalmia Sugars, 40,000 tonnes each by Simbhaoli, Dharani and Rana Sugars, 25,000 tonnes each by Dhampur Sugar and the EID Parry-Cargill refinery at Kakinada, and 22,000 tonnes by the KK Birla Group. Since February 20, not a single new contract has been entered into.

Realizing this shortage and hoping that this does not spoil the mood of the voters due to an expected steep rise in the price of sugar (as sugar , onion and potato are very sensitive items during elections, making Govt. to loose it) the Govt is making all the efforts to keep retail price within Rs. 25 per kg. till elections get over. This price control is achieved with free market release mechanism, releasing buffer stock created by the Govt. last year, inventory limits having imposed on the traders and by asking mills to go slow on price hike for a month or so.

Once the last phase of election gets over by 13^th May it is certain that ex-mill price of sugar will rise to about Rs. 24 per kg. in next couple of months. This in turn will see a retail price of Rs. 28 per kg. Hence, mills carrying stock will reap windfall gain on its inventory. Also, Tamil Nadu mills will be at an advantage as they will continue to produce with estimated number of crushing of about 220 days. Those mills also have the benefits of lower cane price and higher realisation of Molasses.

Hence, sugar companies with higher inventory held by them will be making good profits which would get reflected in its share price from mid May. It is expected that all the sugar stocks would be able to rise by about 50% from its current levels in the next 5-6 months.

My View On Gontermann Peipers India Ltd

About The Company

Gontermann Peipers India Ltd (GIP) was promoted in technical and financial collaboration with Gontermann-Peipers GmbH, Germany, a front-ranker in the manufacture of Rolls – casting and forging rolls. In 1981 the company was taken over by the Ispat Group. The promoters and their various companies hold 55.13% of the equity.

About The Results

The financial performance of the company had not been too encouraging for the second quarter and as predicted, it got only worse for the third quarter ended 31^st Dec 2008. YoY, sales dipped 27%. When the beginning was bad, the ending had to suffer. It ended the quarter with a net loss of Rs.1.08 crore. OPM more than halved from 23% in Q3FY08 to around 7% in Q3FY09.

Apart from the slowdown, what really made matters worse was the minor fire that occurred in the Melting & Foundry Division of the factory on November 28, 2008 and it reopened on 1^st Dec 2008. Operations were partially affected and though the company has adequate insurance cover, the loss on account of production was higher.

About The Stock

I would not recommend to go for this stock at present or early coming times.

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

My View On Mutual Funds : Part VI

What are the rights that are available to a Mutual Fund holder?

As per SEBI Regulations on Mutual Funds, an investor is entitled to
1. Receive Unit certificates or statements of accounts confirming your title within 6 weeks from the date your request for a unit certificate is received by the Mutual Fund.
2. Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme;
3. Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase
4. The trustees shall be bound to make such disclosures to the unit holders as are essential in order to keep them informed about any information which may have an adverse bearing on their investments.
5. 75% of the unit holders with the prior approval of SEBI can terminate the AMC of the fund.
6. 75% of the unit holders can pass a resolution to wind-up the scheme.
7. An investor can send complaints to SEBI, who will take up the matter with the concerned Mutual Funds and follow up with them till they are resolved.

It is very often said that Mutual Funds have performed badly. Please explain?

The performance of Mutual Funds is evaluated on the basis of absolute increase or decrease in its Net Asset Value (NAV). However a fund's performance should be evaluated on the basis of a comparison with the relevant indices and alternative instruments. The NAV varies from fund to fund. Therefore this argument is not entirely true. However some funds have performed poorly with their NAV quoting well below their original IPO price.

Can I purchase after the time which is displayed beside the scheme?

In order to get the NAV of the same day, you can purchase up to the cut-off time of the scheme, after which you will get the next day's NAV. (If the next day is a holiday, then the NAV of the next working day

Will TDS be deducted on the redemption of units? If yes what will be the basis of deduction of TDS

TDS is not deducted on the sale proceeds for Resident Indians.
In case of NRI's, TDS will be deducted on the sale proceeds. The TDS will deducted depending upon whether it is a short-term capital gain or long term capital gains. For short term capital gain the tax is deducted @ 33% while in case of long term capital gains it is deducted @ 11%

What is Entry Load on Mutual Fund Applications?

On every purchase of mutual fund units, the Asset Management Company (AMC) charges an entry load from the customer.

The entry load is reduced from the total amount paid and units for the remaining amount are allotted to the investors.

For example:
If Investment is Rs 100
And Entry Load is 2%
Net Amount for investment will be Rs. 98. (100- 2% of 100)
If current NAV is Rupees 10
Units allotted will be 9.8 (98/10)