The Chembur head quartered co-op bank will open its fourth branch at Sea wood,(E), Nerul, next month. At present, the bank has branches at Bhandup(W),Chembur and Mulund (W).The group has also promoted various educational institutions in Sree Narayana Nagar,Chembur and rendering exemplary service to the society.
Goenka Diamond and Jewels, which is in the business of diamond manufacturing and retailing of diamond jewellery, plans to raise Rs 145cr from the market through IPO. The issue will open on 23-03-10 and closes on 26-03-10. The company is offering 1, 00, 000, 00 equity shares of Rs 10 each, in the price band of Rs 135-145. CARE has awarded grade -2 for the IPO. SBI Capital Markets Limited is the sole BRLM.
BUSINESS
The company is one of the leading manufacturer and trader of cut and polished diamonds (CPDs) in the country. The company is also engaged in manufacturing and marketing of studded jewellery through its retail stores - G Wild and CERES. Goenka has state of the art facilities at Surat (Gujarat) and Goregaon (Mumbai).
Goenka Diamond initially was in the business of export of coloured stones and has since then expanded into diamond trade in 1994 and manufacturing of diamond studded jewellery in 2003. The manufacturing activity got boost in 2006, when the company established its own diamond-processing unit at an SEZ in Surat for processing of rough diamonds. In 2007, the company also set up a facility for processing of rough diamonds in Mumbai to cater to the local market and for in-house jewellery making operations. Goenka scaled up the diamond jewellery making operations by establishing a dedicated manufacturing facility in Mumbai and launched the first jewellery retail store in July 2008.
OBJECTS OF THE ISSUE
The company intends to utilize the proceeds from the issue, among others, for retail expansion, for working capital requirements and establishing a jewellery manufacturing facility.
FINANCIALS (RS IN CRORES)
07
08
09
TOTAL INCOME
73.61
200.62
451.29
NET PROFIT
2.70
12.41
27.38
EPS (RS)
1.93
9.56
20.60
RONW (%)
7.55
27.34
37.14
COMPARISON WITH THE PEERS
TURN OVER (FY 09)
NET PROFIT
EPS
P/E
BV
CLASSIC DIAMOND
677.20
3.50
16.60
7.5
57
GEETANJALI
2693.90
126.90
14.60
7.20
226
SU-RAJ
2417.80
33.40
5.40
6.5
123
SHRENUJ
911.40
13.40
1.90
14.80
29
GOENKA
451.29
27.38
20.60
**
55
RISKS FACTORS
1.The company faces execution risks in scaling up the retail business, where its track record is limited.
2. The diamond processing facility is geographically located in one area. Any localized unrest, political disturbances in the area could adversely affect results of operations.
3. The requirement of high working capital will put pressure on the margins.
4. Family owned, controlled business enterprise.
VALUATION AND RECOMMENDATIONS
Other than Rajesh Exports Limited (Leading gold jewellery exporter), the stocks in this sector are not fancied by investors. Su-Raj Diamonds and Geetanjali Gems, whose turnover, net profit and BV is much more than the Goenka Diamonds are available at less than 7.5 P/E. At Rs 135-145, the valuation looks expensive compared to the established players in the industry. Investors may stay away from the issue.
The Kolkata based, manufacturer and exporter of hand crafted gold jewellery is entering the capital market with issue of 1,42, 69,831 equity shares of Rs 10/- each, including the offer for sale of 21, 33,334 equity shares. The issue opens on 19-03-10 and closes on 23-03-10.
Nilesh Parekh and associates are the promoters of the company.
A Four Star Export House, exports its products to U.A.E, Singapore and Hong Kong. The Company’s export income has grown at a CAGR of 72.71% from FY 2007 to FY 2009 and Company’s share in the India’s gold jewellery exports has increased from 1.83% to 6.10% during the same period. During the FY 2007, 2008 and 2009 the company exported 86.73%, 94.19% and 99.23% of its products, respectively.
The Company’s export performance has been recognized by the Gems and Jewellery Export Promotion Council (“GJEPC”) in 2007 – 2008 and in 2008 – 2009 and has been awarded the ‘Outstanding Export Performance and Contribution in the Trade for Plain Precious Metal Jewellery Exports by Unit from EoU/EPZ’ for both the years.
Shree Ganesh Jewellery intends to utilize the issue proceeds, apart from expanding the existing facilities, to set-up new manufacturing facilities and for meeting the working capital requirements.
FINANCIALS (Rs in crores)
07
08
09
TOTAL INCOME
827.24
1283.03
2218.20
NET PROFIT
48.53
89.66
132.45
EPS (Rs)
11.32
20.65
27.29
RONW (%)
51.39
33.45
33.31
The NAV per share as on 30-09-10 is Rs99.01
RISKS
The company proposes to diversify into the manufacture of machine made jewellery, diamond studded jewellery at the proposed plants, and intend to expand the chain of retail outlets. The limited experience in setting up and operating a manufacturing facility and under taking retail operations at a larger scale poses risks.
The government, stung by the poor response to stake sale in NTPC, REC and NMDC has decided to review the performance of the investment bankers in the earlier issues managed by them, before it gives them the mandate. Under the new rules being considered, 70% Weightage for quality aspects and 30% for transaction fees. Currently, the merchant bankers are selected purely based on bids. Again, the thinking of the government on the above matters is off the track. Although the credibility and reputation of the merchant bankers are required, you cannot sell an issue on that alone. Pricing and valuation are very important.
UBS Securities, CITI group global, Edelweiss Capital, Kotak Mahindra Capital, Morgan Stanely, managed NMDC FPO. These private merchant bankers are reputed and have good track record in issue management. However, the FPO of NMDC got poor response and had to be bailed out by government controlled financial institutions. As compared to that, in the same week NMDC FPO opened for public, SBI capital Markets Limited, a public sector out fit, managed the public issue of DQ international which was over subscribed by 86 times. There was nothing wrong with the timing of NMDC issue. Then what went wrong? Definitely, there was some thing wrong with the pricing. NMDC FPO issue had all the plus points – operating margin is in excess of 75%, net profit margin of 51% and RNOW is around 40%. Zero Debt Company. Healthy dividend pay out record. The bonus component in the capital is 66.66%. However, the investor response to the issue was poor. In the FY 2010-11, government plans to mobilize Rs 40,000cr from disinvestment. The valuations of the issues have to be attractive to get good investor response. Government should think on this aspect instead of blaming the merchant bankers.
Other than preparing a quality offer document and giving sound investment advice, the strength and capability of all the merchant bankers, so far as attracting/inducing the investors for subscription for an issue, are the same. I don't think that there is any merchant banker in the country, who can sell an issue, only on his strength, irrespective of valuations and market conditions.
The NAVRATNA’S follow on public offer received decent recent response on the first day, with bids for 17 percent of the shares on offer. Considering the size of the issue this response is very good. However, the offer received bids mostly at the lower end of its price band of Rs300. NMDC shares ended at 379.85 rupees, up 1.1 percent in the exchanges.
RS 40,000CR DIS INVESTMENT IN NEXT FISCAL
The government is likely to go ahead with divestment in 12-15 public sector units, including SAIL, Coal India, Hindustan Copper, SJVNL and EIL and others next fiscal to raise Rs40,000 crore, as indicated in the budget. The said divestment in some of these companies will be through initial public offers while in some others it will be follow-on public offers.
The base rate, which will replace the current benchmark prime lending rate (BPRL) from July 1, should keep the all categories of home loans out side the base rate. Currently, home loans are offered at 8.5% p.a. The base rate is expected to be around 10% p.a. Even an increase of one percent in interest rate will push up the EMI of housing loans substantially, since the tenure of the loans ranges from 10 to 25 years. A shelter for themselves is what the middle class and the poorer section of the society always want to own. Affordable housing loans should be made available these deserving sections of the society. The economics of cost of funds for banks, while lending to this section, must be kept out of the purview.
The Gulf Finance Home (GFH) will develop a special economic zone in Navi Mumbai that will be spread over 1700 acres and will attract investments in excess of Rs 45,000cr. The economic zone will constitue Energu City India,Telecom City Mumbai, Software City Mumbai and Entertainment City Mumbai.
The CPI (M) leadership is thinking of voluntarily retire, the ageing, unfit ministers and functionaries to rejuvenate the party. The party has cited the example of CPM patriarch the late Jyoti Basu, who always volunteered for this kind of proposals. The CPM top brass need not have to initiate such a painful and unpleasant exercise. Just they have to wait for couple of months – for the assembly elections in West Bengal and Kerala. All leaders, irrespective of age and fitness will be forced to retire compulsorily. There is no necessity for the leadership to take such unpleasant decision now.
Look at this irony – the wealthiest and the richest industrialists/business men in the country have access to the cheapest credit, around 8% p.a. from Banks and Financial institutions. Where as the poor, the down trodden and the and other unfortunate sections of the society pays the highest interest, anywhere between 30%-40%p.a. when they borrow from the Micro Financial Institutions (MFI).
Micro finance – objectives
Despite the vast expansion of the formal credit system in the country, the dependence of the rural poor on moneylenders continues in many areas, especially for meeting emergent requirements. Such dependence in the case of marginal farmers, landless labourers, and petty traders and rural artisans belonging to socially and economically backward classes and tribes whose propensity to save is limited or too small to be mopped up by the banks. Micro finance is the provision of financial services to low income clients, including consumers and the self employed that traditionally lack access to banking and related services. It is a movement whose object is to create a platform, for as many poor and near poor as possible, to have permanent access to an appropriate range of high quality financial services, including savings, insurance and fund transfers, at an affordable cost. Those who promote microfinance generally believe that such access will help poor people out of poverty. Microfinance is one of the tools that can reduce the suffering of people by financial services that enable the poor to use the existing knowledge and experiences.
In 1994, the RBI constituted a Working Group on NGOs and Self Help Groups (SHG). On the recommendations of the Group, the Reserve Bank advised that the banks’ financing of SHG should be reckoned as part of their lending to weaker sections and such lending should be reviewed by banks at regular intervals. As a follow up of these commendations, the RBI took a series of measures in April 1996 to give a thrust to micro-finance based lending. Currently, all loans by banks to MFIs are categorised as priority sector lending, that banks have to fulfill as part of their social obligation and regulatory requirement.
Usurious rate
The interest rate applicable to loans given by banks to micro-credit organisations or by the micro-credit organizations to Self Help Groups/member beneficiaries is left to their discretion. Since the advances to MFIs are classifieds as priority sector advances, the applicable interest rate is around 15%p.a. However, the MFIs are collecting interest between 24% to 36% p.a. from the hapless borrowers. The Micro Finance Institutions, instead of providing credit at affordable interest rate, exploiting the situation and looking for a return on investments in excess of 30% p.a. Micro finance should not be viewed as a business venture where one can expect very high return on investments. RBI should put a cap on the interest to be charged on the end users, as most of their income goes for servicing the debt with no savings. This kind of situation is no better than the one the poor borrowers had experienced with the traditional moneylenders. They also defeat the very purpose of establishing the Micro Finance Institutions.
The RBI should also exercise greater control over MFIs, bring more transparency in their operations and derecognize the MFIs, which are known for bad corporate governance.
With the exception of Paramount Airways and Indigo Airlines, all other airlines reported losses for the financial year 2008-09. The national carrier, Air India reported the highest loss of Rs 5548cr. The following table shows the profit/loss reported by other airlines. (Rs in Cr) NAME OF THE AIRLINE PROFIT/LOSS King Fisher -1602 Jet Airways -402 Go Air -23 Spice jet -353 Jetlite -630 Paramount Airways +7 IndiGo +82
Indian and international air travel has rebounded from last year's slump because of an economic pick-up. Domestic Indian travel jumped 23 per cent in January to 4.1 million passengers, according to the Civil Aviation Ministry. Worldwide international airline passenger traffic rose 6.4 per cent that month, to the International Air Transport Association.
The last quarter of 2009 and early signs in 2010 gives an indication that the worst could be over, if the present growth is maintained, the Indian aviation sector is on a strong path of recovery by the beginning of 2011.
However, Air India is still struggling amid the upturn as its debt had more than doubled after paying for 100 odd new planes. The government last month approved Rs 800cr cash injection into Air India.
The RBI, which had set the April 1 as the deadline for banks to migrate to the base-rate regime, has given the banks a three-month breather to move to base rate. The loans against fixed deposits, staff loans and DIR loans are exempted from base rate. While determining the base rate banks have to take into account the cost of deposits, adjustments for negative-carry for CRR and SLR, unallocatable overhead costs. Bankers request for lending below the base rate for corporates (short term) was not considered fauvorably by the RBI.
There is apprehension in some quarters of the Congress that if the bill is passed, the party may lose allies it may need later. The so-called allies who are supporting the UPA from out side are – RJD, JD (U) and SP. The BSP may vote in favor or abstain on some frivolous reason. There are number of small parties and independents that will support the bill, which is pending since 1996. On the pretext of sub quota for OBCs and minorities, the Yadavs moving heaven and earth to stall the same. The Congress should ignore the threat of Yadavs and get the bill passed in both the houses. There is already dissent in JD (U) and the Bihar chief minister Nitish Kumar has come out in support of the bill. The Congress need not worry about the remaining tenure of the UPA. Even if RJD and SP withdraw their support, the UPA will have comfortable majority in the Lok Sabha.
