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Thursday, November 03, 2016

Rasandik Engineering: Deep Discounted stock.

Rasandik Engineering India Limited.
Market Cap: 31.09Cr
Equity:47.3 Lakh Shares. 4.73Cr (Face Value:10/-)
Sales (March 2016): 214.55Cr
Net Profit: 1.14Cr

Rasandik established in 1986 as manufacturers of Fuel Tanks & Sheet Metal Components has been pioneering new frontiers in Tailor Welded Blanks(TWB), Engineering Solutions, Tooling and Product Design. The use of high level of automation, robotics, softwares like Catia, Unigraphics, Hyperform and Rasandik’s passion for innovation and latest technology have triggered a chain reaction catapulting it to its ‘pioneering market leader’ status today. Company caters to the following Product Sectors:
- Sheet Metal components for Cars, Trucks, Tractors, Two Wheelers
- Three Wheelers,
- Die and Tools,
- TWB (Tailored Welding Blanks)

Rasandik Engineering Industries India Limited (Rasandik) is engaged in the manufacture of sheet metal components for automobiles. The company offers tailor welded blanks, body-in-white parts and subassemblies, tools and dies, suspension parts and sub-assemblies, fuel tanks, exhaust line and CNC bending products, and scissor jacks. It also provides white goods, such as air-conditioner body stampings and assemblies, refrigerator body stampings, and washing machine body stampings. In addition, the company offers engineering solutions in the areas of hyperform draw analysis, tractor body parts, point cloud data, surface model, and MUV wire frame.

TWB’s is a technology that is futuristic & helps OEM’s manufacture light weight and cost effective vehicles. We provide a single point responsibility from product design to product delivery. Rasandik is rapidly moving up the value addition chain and becoming an integrated component manufacturer.

Customer List:
Cars/SUV/MUV: Maruti, Honda, General Motors, Tata, Mahindra, Renault-Nissan, FIAT,Hindustan Motors.
Motor Cycle: TVS, Honda Motor Cycles
LCV,HCV: Swaraj Mazda,AMW, Force Motors, Ashok Leyland,
Tractors: NewHolland, Mahindra Swaraj, Renault Agriculture, CLAAS.
WhiteGoods: LG
Press Tools & Dies: Maruti Suzuki, Tata, General Motors, Gindustan Motors, Hero Motor Corp, Honda Motorcycles, TVS.

Rasandik Engineering was started by Shri. Rajeev Kapoor (IIT-Delhi 1977 batch) worked with F.L.Smidth & Company, Denmark and subsequently started Rasandik Engineering in 1986. .

Our Mission for 2015 - 16... to build capabilities for Aluminum & Titanium, metal working for Aerospace Sector, Stainless Steel and Special Steels heavy fabrication. Feasibility study to build capabilities for GI & SGI castings. To achieve this, my message to the Rasandik team is to continue providing quality as a way of life and inculcate an attitude of ‘Do it right the first time and every time’.

Our Vision 2020... to Build Capabilities for Design to manufacture of components and aggregates for to Build for Design to manufacture of components and aggregates for Automotive Sector, Aerospace Industry and to carry out Heavy Fabrication.

Rasandik Engineering had taken a 10 Million USD 3%  (45.79Cr) Foreign Currency Convertible Bonds  which matured in April 2009 company has paid 80% of the bonds and 2 million worth (9.158Cr) are unpaid Company has stated that its been provided for in their books. So it could be a case of identity of bond holder or other issue not in control of the company.

Rasandik is reporting losses and does have 117Cr worth of borrowings. and Capital expenditure is also consistently close to 35Cr every year which is quite high for a 225Cr sales company.Could be due to vision of entering into Aluminium/Titanium Welding space and entry into aerospace/defense engineering or the fact that technology is the differentiating factor in the auto component space to survive.

Conclusion: With forcasted lower interest rate regime(I expect the rates to be low going forward for a long time - new trend) companies which have debt in their books and who are well established should be able to take advantage of the lower rates. Already Automobile companies are reporting higher sales number. All said and done @ 30Cr market cap..low equity base.. I'm expecting the management to turnaround the company.Good value buy for the long term investor.

Wednesday, November 02, 2016

How Are We Doing Diwali 2016

Wishing All Investors. Readers & Visitors A Very Happy, Healthy and Prosperous New Year...
Let us start with a review of performance of stocks recommended in this blog.

Its been around 7 years since the blog was started.. A total of 30 stocks have been suggested as good investment ideas.10,000 invested in each of the 30 stocks ie 3,00,000/- lakh invested over the 7 years would have been worth 9,64,764.70 (Including dividends) would have given a return of 38.64% per year.
without including dividends the return would have been 36.41%

This is hypothetical case, because there have been rights issued and I have assumed that rights shares have been bought.  Also the total invested days is 2093 days as the stocks were introduced over the period of 7 yrs (2 of them in 2016)

The Recommended Best Buy stocks have turned around in 2016-17 Last year the Best Buy stocks had a 6 yrs absolute return of 50.51%  and this year 7 yrs absolute return is 271.67% an increase of 220% in one year..
In past 1 year
GAEL has increased from 45.20 to 95.4
Jayant Agro has increased from 109.90 to 551.40
NHPC has increased from 17.70 to 26.90
Tata Comm has increased from 431.30 to 634.55

The point being made is its very difficult to know when the stock becomes active and starts to be valued by investors increasing demand and increasing stock price. I also feel management suppport is important and management is in a position to project the right image to investors..

The question is.. is there still value left in these recommended businesses? The answer is yes!! These companies will still continue to perform well and with passage of time the value of their business will grow..

One of the most important things about a business/company is its ability to pay taxes after all expenses are considered. An individual gets a salary.. which is first taxed .. and then we pay for our expenses and finally we save the remaining income.
For example
A company earning 1000 having 500 as expenses  paying 30% tax has following savings
1000 - 500 = 500 which is then Taxed @ 30% (150/-)
Savings : 1000-500-150 = 350.00

An Individual earning 1000 and having 500 as expenses and paying 30% tax has following savings
1000 income is Taxed @ 30% ( 300/- ) & 500 Expense,
Savings = 1000-300-500 = 200.00

As you can see All things equal.. Individual saves 200/- while corporate saves 350/- A corporation can save 75% more than an individual just because in case of corporates you pay taxes  after all expenses are paid.. while in case of an individual you pay taxes before your expenses are paid. (BIG Difference!!)

So one of the important functions of a corporation is the tax benefit and hence corporates have an incentive to invest and grow. Over a period of time the effect of compounding increases the wealth of corporates. Management is always an important factor as they can make or break a corporation.

Outlook: BASEL-III implementation is just being rolled out.. so banks are going to have a tough time growing their books. due to lower leverage than normal.(due to basel -III restrictions) . what is the need of the hour is "excessive printing of paper currencies" and all the central bankers are busy doing it..

Excessive printing is required to replace the lower leverage in the balance sheet of the banks.. now the Goverment balance sheets are expanding... and till the bank leverage stays low we are all good.. the problem will be when the banks return to their old ways and leverage their books.. that is when the problem will start.

India is one of the few countries where the level of leverage in the system is very low. A large portion of the Indian population is still unbanked.. NBFC with no basel-III restrictions can really eat the cake of the banking industry.. and a NBFC owned by a bank would be able to somehow have the best of both worlds..


Thursday, October 06, 2016

Tata Power: Hidden Asset: Strategic Engineering Division

Tata Power:
CMP:  78.20
Market Cap:21,150Cr, Free Float: 14,170Cr
Annual March 2016
Sales: 36,700Cr,
PBDIT: 8070.13Cr
Net Profit: 873Cr
Annual Report March 2016
Power is a controlled commodity as its one of the basic necessities of modern life. Govt of India regulations exist such that power companies whether its Coal, Nuclear, Hydro, Solar, Wind, are entitled to a fixed return on their capital which is around 16%.  This results in Power companies leveraging their balance sheet so that during the initial growing years (new capacity addition) the company earnings are always under pressure from the debt repayment as well as depreciation.

Electricity pricing is a very politically sensitive subject and profits of any power company will be questioned for electoral gains.. so please consider this before considering Tata power as an investment destination.

But then what makes Tata Power attractive is its subsidiary " Tata Power Strategic Engineering Division"


Centre for Excellence in Strategic Electronics
For close to four decades, The Tata Power Company Limited through its Strategic Engineering Division (Tata Power SED) has been a leading private-sector player in the indigenous Design, Development, Production, Integration, Supply and Life-cycle Support of mission critical Defence Systems of Strategic importance. During this period, the Division has partnered the Ministry of Defence (MoD), the Armed Forces, DPSUs and DRDO in the development & supply of state-of-the-art Systems and emerged as a Prime Contractor to MoD for Indigenous Defence Production when it secured Orders for Pinaka Multi Barrel Rocket Launcher, Akash Army Launcher and Integrated EW System for the Indian Army and for the Akash Air Force Launcher, COTS-based Automatic Data Handling System for Air Defence and Modernisation of Airfield Infrastructure (MAFI) for the Indian Air Force.

Tata Power SED has the unique distinction of participating in Defence Programs through a dedicated R&D Centre at Mumbai and a Production facility along with an R&D Facility at Bengaluru. As a leading domestic player in Strategic Engineering, the Division is now globally recognised for harnessing its “Systems and Engineering” capabilities and has been appraised at Maturity Level 5 of CMMI® for Development v1.3.

Success in modern war depends on Integrated operations over distributed geographies using Sensors and Weapons of varying vintage. Tata Power SED's team has the right blend of technological and operational experience in integrating these heterogeneous systems, using both industry standard and system specific interfaces and protocols.

In recognition of its pioneering capabilities in Design, Development, Manufacturing and System Integration, Tata Power SED was nominated by MoD as a Major Work Centre for the Samyukta Electronic Warfare Program under the aegis of DRDO. Tata Power SED has also received several national awards from industry associations such as the Federation of the Indian Chamber of Commerce and Industry (FICCI), the Confederation of Indian Industry (CII) and the Ministry of Science and Technology.

The Government of India, Ministry of Defence awarded Tata Power SED in 2006, seven Defence Production Licenses, thereby empowering the Division to design, develop, manufacture, assemble and upgrade mission critical systems in seven core areas of Defence Strategic Electronics.

These Production Licenses open a vast domestic addressable market, which include upgrades of existing Weapon systems and platforms. Additionally, business opportunities through ‘Offsets’ for Systems Design, Engineering and Testing Services will also be targeted by the Division, thus opening up the export market.

The seven Defence Production Licenses received are:
1. Electronic Warfare Systems (Stand-alone & integrated) for Army, Navy, Air Force, Para-military and Inland Security,
2. State-of-the-art Network-Centric Warfare Enablers, including Tactical and Strategic Communication systems GPS-based Navigation & Tracking  and GIS systems.
3. Avionics, Airborne assemblies, Systems and Equipment for Aircrafts, Helicopters & AWACS including development of UAVs (Unmanned Aerial Vehicles) and UVs (Unmanned Vehicles) of all types.
4. Air Defence / Naval guns, Field Artillery, Tanks, Combat Vehicles, Anti-Tank Weapons systems, Mortar, Shell, missiles, rockets etc., and any associated systems.
5. Naval Combat, Air Defence, Artillery, Command & Control Systems, Border Security and Surveillance, including sensors such as Radars, Sonar, Thermal Imaging, Radiography, Optronics and Night Vision sub-systems.
6. MIL (Military Grade) products such as Display Consoles, Rugged Computers, Workstations Servers, On-board Computers, GPS Receivers, Printers, Documents / Bio-metric Security Systems etc.
7. Weapon Systems – Rocket and Missile Launchers, for Ground and Naval applications including associated systems and sub-systems, including inertial and GPS based navigation and tracking systems.
 The Tata Power Company Limited through its Strategic Engineering Division (Tata Power SED) has consistently harnessed cutting edge technology to fulfill its deep rooted commitment to the Nation.

In 1975, Tata Power SED, originally known as the R&D Division of Tata Electric Companies (TEC R&D), started its foray into the development of systems for Indian Defence. It developed and supplied systems for the Air Defence Ground Equipment System (ADGES) built by Tata Institute of Fundamental Research (TIFR). The systems covered Radar PPI displays & Random Scan Displays (with synthetic graphics and text display facility).

Since the mid 80s, Tata Power SED also made a significant contribution to the Integrated Guided Missile Development initiatives of Dr. APJ Abdul Kalam and has to its credit, the development and supply of AKASH Launchers (Army and Air Force versions), Missile Interface Units for AGNI Launcher, On-board Computers and Launcher Electrical Systems for PRITHVI Launcher and a host of other Ground Electronics support systems.

Tata Power SED has now evolved into a Systems Integrator for programs of national importance such as the Pinaka MBRL System, Launchers for the Akash Air Force and Army Programs, Electronic Warfare Program, Command & Control Systems for Air Defence and Naval Combat.

With its sound knowledge of interfacing and integrating Weapon Systems, coupled with its capabilities in the area of Mission Critical Software, Data Fusion, Communications and Large System Integration, Tata Power SED has the multi-disciplinary resources necessary to take the decade old partnership with the Armed Forces into a new dimension in the era of Digital Wars.

Interesting news Item: Tata Power SED to make 16 Akash surface to Air Missile Launchers for 36 Million USD .. it goes on to say that Total order over the next 20 yrs is 3000 Akash Missile launchers for Army and Airforce. (March 2009 News Item)


Weapon Systems and their Upgradation for Ground Forces
=>Pinaka Multi Barrel Rocket Launcher
=>Akash Army and Air Force Missile Launchers
=>Medium Range Surface to Air Missile Launcher
=>TCT A5 Launcher
=>105mm Mounted Gun System
=>Upgrade of Air Defence Guns with EO Sights and on board Ballistic Computers
=>Launchers with Integrated sensors for All Types of Missiles and Rockets
=>Fire Control Computer for Tanks and ICVs
=>155/52mm Mounted Gun System
=>155/52mm Self Propelled Gun (Tracked)
=>Remote Weapon Station
=>Pragati Mobile Launcher System

Upgradation of Tanks, Armoured Vehicles and related Equipment
=>Advanced Hull Electrical Systems for Armoured Vehicles
=>Thermal Imager Fire Control Systems

Ballistics and Data Fusion
=>Ballistic Software for Air Defence Guns
=>Ballistic Software for Field Artillery Weapon Systems
=>Ballistic Software for T-90 tank (Indian and Russian Projectiles including Tank fired Missiles)
=>Data Fusion

Aerial Reconnaissance Equipment, Airborne Radio Transmitters / Receivers, Radars and Navigation Equipment
=>Reconnaissance payloads for UAV
=>Operational Data Link
=>Navigation Equipment including GPS and INS
=>Medium Altitude Long Endurance UAV
=>PTA - Digital version

Air Defence Data Handling Systems including Ground Radar and Equipment including Air Defence Control & Reporting System
=>Air Defence Artillery Control & Reporting System
=>Radar Interface Devices
=>Mobile Command Post for Command & Control for Air Defence Artillery

Computer-based Trainers, Simulators and other Training Equipment
=>Air Traffic Control Training Simulator
=>Operator Training Simulator for Pinaka MBRL System

Ruggedised Computers and Peripheral Equipment
=>Tactical Field Computer (TFC)
=>RUGBY - Rugged computers
=>Fire Control Computer (FCC)
=>Dual-Redundant Rugged Computer
=>Tactical Consoles
=>Rugged Workstations on Mobile Platforms

Network Centric Warfare Enablers, Tactical/Secure Communication Systems including Network & Spectrum Management Systems, Electronic Warfare and Power Supplies
=>Systems for Tactical Communications and Network Centric Operations
=>Spectrum / Network Management System
=>Signal Command and Control System
=>Operational Data link
=>Tactical Radio with Mobile ad-hoc technology (Adaptive SDR)
=>DC-DC Converters and Ruggedised Power Supplies
=>Intracom for Electronic Warfare Systems
=>Tactical Rugged Router
=>Rugged Multimedia Communication Systems
=>Integrated Packet Voice Communication System (IPVCS)
=>Indigenous Security based Messaging and Networking Solutions (ISMNS)
=>Evolved Packet System (EPS)
=>Sectorial Antenna System with Amplifiers
=>Multi-service Tactical Access Switch

Vehicle Equipment and Trailers
=>EMI / EMC and EMP Hardened Mobile Command and Control Posts
=>Payload retraction and hoist system
=>Hydraulic / Electrical / Electro-mechanical Outrigger Assemblies

Electronic Warfare Systems and Related Equipment
=>Integrated Electronic Warfare System for Mountainous Terrain
=>Low Power Jammer systems
=>Low Intensity Conflict EW Systems
=>Heliborne EW Systems
=>Aerostat Based COMINT Systems
=>Spectrum Monitoring and DF for IAF
=>Command & Control Software for Com and Non Com EW Systems
=>Countermeasures Control Centre Software
=>Voice / Tone Recognition and Keyword Spotting System
=>Antenna Retraction and Servo System
=>Ruggedised Work Stations and Consoles for EW Entities
=>Entity Engineering on various platforms including Tracked vehicles and HMVs
=>Synchronized Direction Finders and location fixing
=>Intra Com for EW Systems
=>Indigenous GIS and High Speed Light Weight GIS
=>Passive Interception and decoding of GSM (Encryption type 5.1 and 5.2) and CDMA
=>Migration from Solaris based systems to Linux / Windows based client - Server systems
=>Voice Recognition and Analysis System
=>Fast Scan Receiver

Air Defence Systems & associated products
=>Radar Data Processors
=>Multi-sensor Data Fusion
=>Plot Extraction Devices
=>Dual Channel Video Extractors
=>Area Moving Target Indicators
=>Futuristic Automated Air Defence System
=>COTS-based Air Defence System
=>Integrated Air C&C System
=>Mission Planning Package
=>Air Intelligence Package
=>Mission Computer for Sukhoi Aircraft
=>SRSC - Software Radar Scan Converter
=>AURA - Remote Control and Monitoring System for Airfield Lights

Unmanned Aerial Vehicles, Aerial Reconnaissance Equipment, PTA & Air-Ground Data Link
=>Reconnaissance payloads for UAV (Gimbal Payload Assembly)
=>Electronic Modules for PTA (Lakshya)
=>Digital version PTA

Command Posts, Displays and Multi Function Consoles
=>Dual Monitor Multi Function Consoles (DMFC)
=>Tactical Naval Consoles

Setting up / Upgradation / Modernisation of Air field Infrastructure, Strategic facilities & Bases
=>Modernisation of Air Field Infrastructure

Sensors / Underwater Sensors
=>Thermal Imaging / Night Vision Systems
=>Electro Optical Payloads
=>Tadpole Sonobuoys

Border Security Management Systems
=>Secured Perimeter with Intelligent Detection and Effective Response
=>Remote Pan/Tilt Observation System
=>Ground Based/ Underground Sensors
=>Solar Panel based un-attended Power Supplies

Manufacturing, Documentation, Maintenance, Support and Repair Services
=>Design Engineering Services
=>Value Added Electronic Manufacturing Services
=>Life Cycle Support
=>System Up-gradations in case of non-availability of obsolete components
=>Refurbishments, Retro-fitments and modifications as per User requirements
=>Warranty Support/Comprehensive Annual Maintenance Contracts
=>Obsolescence Management / Drop-in Replacements
=>Structured Training Modules for Operations and Maintenance
=>Customised Technical Documentation – JSS0251 Standards
=>Inventory management with Component-level traceability for components
=>All India network of Service Centres: Resident engineers deputed at remote installation sites

Pinaka Multibarrel Rocket launchers are now the de-facto standard Multibarrel Rocket Launchers for Army. and Army is producing 5000 rockets per year (2014)

My take: if you consider the Defence capabilities built in "TataPower SED" I think Tata Power SED will be worth atleast 20,000Cr. Tata Power power assets are also substantial as its the largest Pvt sector power company In India. From the look of it tata Power SED is into Electronic & Communication systems for Indian Defence industry.. and does everything under the sun. For someone who is looking for an above the market returns over the next 5-10 yrs can expect Tata Power to deliver the same. I would say a multibagger with risk reward in favour of investors..

Tuesday, October 04, 2016

Permanent Magnets: Hidden Gem, Value Buy!!


Permanent Magnet  www.pmlindia.com

CMP: 18.8
Market Cap: 16.17Cr
Annual Sales March 2016: 67.7Cr
PBDIT: 3.81Cr
Net Profit: 0.93Cr (93 Lakhs)
EPS: Rs1.08
Debt: Long term: 3.82Cr
Debt Short term: 13.82Cr
Annual Report March 2016

Permanent Magnets Limited is one of the flagship companies of Taparia Group, Mumbai and also one of the leading manufacturers of Alnico Cast Magnets and Yoke Assemblies. It is a front-runner among young, dynamic and growing companies in India.

PML magnets are used extensively in key industry sectors such as electronics, electricity meters, automobile industries, telecommunication, defense, space research, aeronautics, railways and electricity generation.

The technical collaboration started in 1963 with “Centro Magneti Permanenti” (CMP) Italy. In 1973, PML started manufacturing Ferrite magnets. In 1983, PML upgraded technology with help of Dowa Mining (Japan) and Sumitomo (Japan).

PML started manufacturing magnetic assemblies such as Separators, lifting devices, holding devices etc. in 1984. In 1996, PML implemented the ISO 9001:1994 system for the first time. PML has been growing since then in the field of Magnets, Assemblies, Shunts and High Permeability components.

PML is into manufacturing electricity meter components (electro mechanical meters) used in metering systems installed in households. it also manufacturers a large variety of magnetic material equipment for industiral as well as personal use.
With the move worldwide to smart electronic meters (meters which provide additional data such as energy utilization, remote meter reading..) the company had to retool itself to manufacture these smart electronic meter components.
Smart meters consist of digital displays for displaying detailed energy usage,and the cost related to the energy usage. With the detailed energy usage and cost displayed on digital display, the consumers are able to understand and act accordingly to conserve the energy For instance; the consumers adjust their consumption patterns when they discover the amount of power used and the cost of operation of the several appliances.

The major appliances in the home, such as washing machines can be automated with the help of smart meters. This allows such appliances to take various advantages, such as time-of-use tariffs. With the two-way communication offered between intelligent household appliances and meters, the consumers are able to make note of the power being consumed. By two-way communications, energy service provider or utilities are also able to control elements of the consumer’s usage for lowering their bill.
Taparia group is a well established name in "Hand tools market and is a market leader in India" so the management is a well established business group.

PML India intends to address the smart meter market in India and abroad and the management seems to be experienced in this business (as they used to manufacture magnetic components for electro-mechanical electricity meters before.)

Valuation wise due to low profitability it is not yet clear how it will all pan out. But looking at the addressable market and the growing demand and strong promoter background, I expect Permanent magnet valuation to rise further as the firm becomes entrenched in the market, fundamentals improve and the market acknowledges its position.

Fair valuation will be a market cap equal to 1 times sales.  liquidity is very low so one needs to patiently accumulate. Long term value buy, multibagger