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.

Focus On RBI CREDIT POLICY

Reserve Bank Of India Credit Policy

1.CRR, Repo and Reverse Repo rates have been kept unchanged. It has upped inflation target from 4% to 5%. It has kept the GDP target at the same levels of 6% with an upward bias. M3 supply target has been increased from 17% to 18%.

2.The various stimulus packages are now doing their jobs, the first quarter results have been good, hence it made no sense to right now tinker with any rates.

3.Growth has been taken care of by the Govt but as expected, RBI is concerned about inflation which is why we saw the target upped.

4.RBI has stated that there were indications of inflation firming up by the end of the year due to increases in commodity prices, easy monetary policy and expansionary fiscal policy.

5.has reiterated that it will maintain an accommodative monetary stance until there are definite and robust signs of recovery,

6.RBI has said that banks have cut rates but need to do more. The message which RBI has thus sent across is that it has done its job well and the ball now lies in the court of the banks. They need to lend but not mindless lending. But once banks loosen their purse strings, demand would pick up and this as per RBI, is where the trick now lies.

Reaction Of Indian Stock Market.

The market opened lackluster and remained low but it had already discounted the credit policy and it was absolutely no surprise to anyone on the street. RBI has sent a message across that it has adopted a neutral stance and is now allowing the market forces to play.

IT COMPANIES ARE RECOVERING VERY SHARPLY

Most of the bigwig IT companies have declared their performance for Q1FY10 and call it muted analysts expectations or improved performance, most of the bigwigs have done well despite the trying circumstances.

It started with Infosys which for first quarter of current fiscal posted a 17.2% YoY rise in net profit at Rs.1,527 crore but QoQ, it was down 5.3%. But what really worried the marketmen was its guidance for FY10, where it has forecast consolidated revenue to fall 3.1-4.6% to $4.45-$4.52 billion and expects earnings to decline 11.1-12.3% in dollar terms. For Q2FY10, its guidance states that it expects revenues to decline by 1.9% to 0.1%.

TCS showed a YoY 23% and QoQ 15% growth in net profit at Rs.1520 crore. TCS does not give guidance. But the news on the street is that the company is expected to show a higher forex loss of around Rs.90 crore in Q2FY10, up from Rs.84 crore in Q1FY10. This is because the company expects over $112 million of its forex hedges expected to mature during the period.

Wipro showed a 5% (YoY) rise in revenues during the first quarter at Rs.6,274 crore but QoQ it fell marginally by 3%. Net profit was up 11.78% (YoY) at Rs 1015.5 crore and almost flat when compared on a QoQ. The company however provided a cautious and flat forecast for the quarter ending September reflecting lower demand for India’s $40-billion software export industry.

The common thread running between all three bigwigs is that their Q1FY10 numbers beat expectations – both of the market as well of analysts, who had expected a much dismal performance. Another commonality is that they all have given a much subdued guidance for Q2FY10 and for FY10.

There is no doubt that the Indian IT companies have managed to keep their heads up even in these turbulent times. Despite having a wide exposure to America, Europe and also the BFSI sector, which witnessed the big bash-up, these companies have managed to walk tall. Yes, their businesses to these developed countries have come down marginally. But what it has also done is open up new opportunities which would have remained unexplored but for this recession. So these bigwigs are now looking at new markets like Latin America, South East Asia.

Things have also started stabilizing in the developed countries as volume shrinkages have stopped and business ramp downs have also tapered off. Hence in that context, we can say that the worst does seem to be over. And the companies have given a lower guidance to be more on the safer side. As per a survey conducted by Bloomberg of economists, the consensus is that the U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession. This optimism could have also stemmed from the fact that IBM the world’s biggest computer-services provider, on July 16 reported second-quarter earnings that topped analysts’ estimates and raised its full- year forecast.

Also most of these companies have re-negotiated prices at lower rates for the current year and they do not expect the prices to go up any time soon though at the same time, they do not expect the prices to fall also. It is a happy situation for them even if prices are maintained at current levels.

Another positive for the Indian frontline IT companies is that they have also started looking at home itself for big time business. Wipro and TCS have always had a presence in the domestic market, especially when it came to execution of Govt projects. But Infosys is looking anew at the Indian shores and the business potential it sees is immense. Infosys is looking at a business worth $2 billion in India itself to keep the slump at bay.

Apart from the Unique Identity Card project, there is the $2 billion e-biz program initiated under the National e-governance Plan which has 27 mission mode projects. Government organisations such as India Post, Indian Railways are also earmarked for major computerization exercise. There are also smaller outsourcing contracts from ONGC, LIC and the State Bank of India. Based on their track record and reputation, these bigwigs are sure to get massive orders from the Indian Govt in the coming months and this will more than makeup for the loss of business in

developed countries.

POWER GENERATION PROGRAMME OF INDIA

The Power Minister said that India would add 100,000 MW capacities during the 12th Plan period and the target for 11th Plan (ends in 2012) is 60,000MW. This has actually been scaled down from earlier announced 78,000MW for the 11th Plan. This scale down was blamed on the shortage of power supply equipments from BHEL and L&T. Till April 2008, we had achieved just about one percent of the earlier set target which is probably the main reason why the target has been scaled down considerably. Yet even this scaled down target seems difficult.

Of the target of 60,000MW, till date only 21% has been completed, meaning only 12,500MW has been added. So over the next three years, we are looking at a capacity addition of 47,500MW. This means, on an average, we have to add on 15,800MW every year till 2012. Well, 12,500MW took two years, can we have 15,800MW each year? When broken down as simply as this, clearly, it seems like a pipe dream. The Govt is banking on the private sector to deliver around 30% of the target before the end of the 11th Plan. It expects parts of the UMPPs to start adding on – 600MW from Reliance Power’s Rosa unit (end of 2009), 1320 MW from Reliance Power’s Sasan (by 2012) and Butiburi power unit to contribute 300MW by 2011. Tata Power has set itself a target of 5800MW by 2012 which includes parts of the Mundra UMPP going on stream and it expects 4000MW JV project with Damodar Valley to also be commissioned before end of 2012. So, putting together Reliance Power and Tata Power, we are looking at the best case scenario of 8000MW coming up by 2012.

JSW Energy is setting up a 3200MW power project and by March 2010, it expects 1200MW to go stream. Lanco Infratech also hopes to get 1000MW on stream by end of the current fiscal. GVK Power is also hoping to add another 1200MW before 2012. The biggest contributor would probably be Adani Power which is looking at delivering 6600MW by 2012. Indiabulls Power is also planning on huge power units but no major capacities are expected to go on stream before 2012. So when we total up all this, we are looking at another 10,000MW by 2012. And if we take into account Tata Power and Reliance Power, we are looking at the private sector contributing around 18,000MW of power by 2012. This is way above the 30% target given by the Govt but then we are assuming that there would be no slippages and the biggest contributor – Adani Power will keep up to its schedule.

The rest is to come from NTPC, which seems to be talking in the wind when it says that it is looking at setting up 30,000MW by 2012. Infact the private sector might deliver but NTPC will fall way short of the target and that could jeopardize the entire 11th Plan target.

To conclude, we will continue to have power shortages – both, in terms of actual supply of power and also in terms of generation but the private sector might just be able to keep the shortage at a lesser level if it does manage to keep to its schedules.

IPO's are back !!!!!!!!!!!!!!!!!!

The near comatose IPO market is surely showing of life and that too good life. All of a sudden, there seems to be a bevy of activity around the IPO markets and investors are reminded that apart from the secondary market, there is also the option of primary market coming forth soon.

The issue of Mahindra Holiday, despite being expensive managed to do well and the fact that it listed well above the IPO price, 5% premium over the issue price, has managed to buoy the moods – not just of the investors but of the companies too. The success of Mahindra IPO sent out a strong message – there is an appetite for IPOs but investors clearly are now careful about where they are investing. Known and reputed companies are what will see a good response.

The first such big issue is from Adani Power. This issue is opening on the 28th of July and closing on 31st July. This is the biggest power IPO to come to the market in a long while. The news on the street is that in all probability the IPO would be priced at around Rs.100-110 and aims to raise over Rs.3000 crore. Adani Enterprise, the listed group company, has been up since this news was announced as it holds a substantial stake in the company.

Then on 7thAugust, there is the IPO of PSU National Hydroelectric Power Co. (NHPC). The issue closes on August 12 and aims to raise over Rs 2,500 crore. As per the DRHP, the company is coming out with a public issue of 167,73,74,015 shares of Rs 10 each, which comprises a fresh issue of 1,11,82,49,343 equity shares by NHPC and an offer for sale of 55,91,24,672 equity shares by the president of India acting through the ministry of power, government of India. The issue shall constitute 13.64% of the post-issue capital of NHPC.

A month later, on 7th September, we have the IPO of Oil India Ltd (OIL), which aims to raise around Rs.2000 crore. The DRHP states that the issue is up to 26,449,982 equity shares of Rs 10 each and will be 11% of the fully diluted post-issue capital of the company.

So by September the IPO market aims to have raised Rs.6000 – Rs.7000 crore and surely, once this gate of raising money opens up, we will soon a flurry of activity. Infact Indiabulls Power has filed its DRHP with SEBI and it expects to raise around Rs.1500 crore.

As per Prime Database, 16 more companies have regulatory approvals and are finalizing plans to raise over Rs.5,700 crore from the IPO markets in this year. So what we are saying here is that 2009 would probably see around Rs.8000-Rs.10,000 crore being raised from the IPO markets. And those who have seen the IPO of Reliance Power, cannot help but ask, “will the market be able to absorb so much?”

The fact that over Rs.12,000 crore was raised via QIPs and there are more in the pipeline means that even the FIIs are waiting in the sidelines. Another point in favour of the primary markets this time around is that we are not in the stratosphere, with a zooming index. The Sensex is more subdued right now and this makes the pricing more attractive.

COMMODITIES TO BE BULLISH AHEAD

Rains are lashing Mumbai city and the commercial capital of India, is facing flooding in many areas and public transportation system is grappling to keep going despite the rains. Though this does not talk too highly about the infrastructure development of the city, it certainly is good news if the lakes manage to get sufficient water to quench the thirst of the city.

Though Mumbai is having a good rainfall today, the other states in India, especially Northern India is facing a tough time. Jharkhand today declared four of its districts as drought hit. The Met department is worried but not yet panicking. Revival of monsoon since July 8th has managed to reduce the deficiency from 46% to 33%. The Met Dept today stated that states of Madhya Pradesh and Maharashtra and Gujarat would get good rainfall over the next two days.

And in the midst of all these clouds, one thing shining brightly is the emerging truth that commodities might well turn out to be the 'next big thing'.

A deficient rain would mean lower agricultural production, meaning pressure on foodgrains and crops, which in turn means that prices would go up further. Unlike the stock market, where there are more downs than ups, the outlook is extremely bullish on commodities. If there is a drought, the prices will go up and if the rainfall in sufficient, production would be higher and that signals a positive for the commodities. We all need food, irrespective of a bull or a bear run. If there is a drought, imports will have to come in to feed us all. And once there is a bounce back in the economy, it is commodities which will be the first to see a jump. What happens if the downturn continues? People will still back commodities as the faith in currencies is slowly getting lost.

Take a look at the trend in China. In a bid to steer away from US dollars and stop putting all its reserves in the US dollars, China has been secretly stocking up on gold to diversify its vast foreign reserves. Usually, gold prices rise when dollar weakens and that is probably the trend which China, like the rest of the world, foresees in the future. Russia is another country which has been increasing its holdings of bullion.

Metals too will be the first to rise once the bounce back happens. Currently, the rally in iron ores is driven by China and its controversy with Rio Tinto. The three largest suppliers of iron ore in the world - Vael, SA, Rio Tinto and BHP Billiton are currently holding out to their cash sales to China to ensure supplies to customers in Europe, Japan and South Korea. Commodity experts say that demand and prices for Indian ore may increase should the Chinese state investigation discourage purchase of ore from Australia and Brazil. As per data put out by Bloomberg, China’s iron ore imports rose 3.4% in June to the second highest level this year. The shipments had hit a record of 57 million tons in April.

There are some murmurs in the corridors of corporate honchos that negative data from US came in at a time when it was essential to pull down the stock markets, timing it with the auction of the US Treasury Bonds last Wednesday. The usual trend is that people turn towards bonds when equities slip and in that auction, there was record demand for the bonds even as world over Govt's are having a tough time with bonds. The auction was three times oversubscribed, and this was the first time it had happened since 1994. But some time soon, US will realise that it is borrowing too much and that is the time which is feared by the currency traders.

Overall, the perception is that global stock markets would remain volatile, the dollar long term outlook does not look too good but outlook for commodities is bullish.