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Wednesday, November 15, 2006
Blue Bird (India) Ltd. IPO
Analysis
Background
- The company was incorporated in the year 1999 as Anil Apporv Printers & Manufacturers Pvt Ltd and it changed its name subsequently to Blue Bird (India) Ltd (BBL) in the year 2005.
- BBL is engaged in the business of manufacturing of paper-based notebook products, commercial printing and publication. Company’s product portfolio includes student/exercise books, stationery products like files, perforated pads, registers, filler papers and other bespoke commercial printing of items such as calendars, diaries, leaflets, product pamphlets, instruction materials and publish books etc.
- BBL has its manufacturing facilities at Pune. Company has converted 38,468 metric tons of processed paper into notebooks during fiscal 2006 and the average production of notebooks per day is approximately 131 metric tons of notebooks. Capacity utilization for the FY 2006 stood at 74.3% for the manufacturing and binding of standard notebooks.
- BBL clientele includes approximately 600 wholesalers/dealers and approximately 9,000 retailers. Commercial printing segment is catering to the needs of various business concerns including entertainment companies, financial institutions, publishers and educational authorities.
- BBL’s income consists primarily of revenues (88%) from the sale of notebooks. Company also generates income(4%) through commercial printing and publication (6%). Since fiscal 2005 it has begun to generate income (2%) through the export of notebooks and printed matter to Ghana, Kenya and South Africa.
- Unorganized regional manufacturers control approximately 80% of Rs. 80,000 million of the Indian stationery market. Only 20% of the market is organized out of which the large players control 15% and the medium sized players control the balance 5%. Of which Rs. 51,000 million is attributable to the sale of notebooks and exercise books.
Objects of the issue are:
- Setting up of new manufacturing facilities for manufacturing of notebooks in southern India.
- Expansion of our existing facility at Pune to increase the capacity of manufacturing of notebooks and printing/publication.
- Replenishing the internal accruals of the Company used for purchase of factory land located at Pune.
- Purchase of existing Registered/Corporate office premises presently on leave and license.
- Capital expenditure for setting up of new regional sales offices.
- Repayment of existing long term debts.
- Augmentation of long-term working capital.
- General corporate purposes.
Strengths:
- Company has the highest market share of 7.2% and is the largest organized player for paper based notebook products as of May 31 2006 (As per AC Nielsen ORG MARG). The second largest player has a market share of 2.55% and the remaining 8 other players have a combined market share of 5.25%.
- Sale of notebooks, which constitutes major portion of income and has increased at a CAGR of 69.5% from Rs. 428.1 million in FY 02 to Rs. 3530 million in FY 06.
- The large-scale versatile manufacturing infrastructure provide BBL an edge over unorganized printers (which control around 80% of the market) in the student/exercise book and allow company to compete more effectively with organized manufacturers by developing efficient and cost-effective processes for different products at short notice.
- Company is planning to focus on products such as diaries and other stationery products designed for personal use. These products involve higher margins. Moreover it also planning to emphasize on commercial printing and publication businesses, which also generate higher margins by taking advantage of existing customer relationships and brand recognition.
Weakness
- Company is allowing approximately 90 days of credit facility to its customer.However it does not enjoy similar favourable terms with its suppliers led to mismatch in realization and payment time and has caused company to experience negative operating cash flow in previous years.
- BBL depends on the sale of notebooks for a predominant proportion of its revenues. During fiscal 2006 and 2005, 87.9% and 89.3% of company’s revenues were derived from sales of notebooks reflecting towards less diversified product mix.
- The prices of printing and writing paper continue on an upward direction. With the absence of long-term contract and stiff competition from local players it may face lower margins going forward.
- The Company has high cost long term borrowings aggregating to Rs. 192.36 million as on March 31 2006. Leading to high interest expenses. Interest coverage ratio of the company decreased during FY 06 to 4.79% from 5.38% in FY 05
- Company has regional concentration as 96.9% and 97.9% of BBL’s revenues during fiscal 2006 and 2005 were derived from sales to customers in the state of Maharastra and western India.
Peer Analysis for the half year ended 30th September 2006
| COMPANY | Blue Bird (India) Ltd. | Navneet Publications |
| Sales | 2371 million | 2342 million |
| PAT | 151 million | 38.8 million |
| RONW | 40.02 % | N.A |
| EPS | 12.08 | 4.07 |
| NPM | 6.4 % | 16.56 % |
| OPM | 13.09 % | 26.18 % |
Valuation
- The net profit of the company has been increasing at a CAGR of 166.6% from Rs. 4.99 million in FY 2002 to Rs. 251.16 million in FY 2006. Total income of the company increased at a CAGR of 66.5% from Rs. 522.5 million to Rs. 4016 million for the same period.
- Company’s net worth as on 30th September 2006 stood at Rs. 752.23 million.While the book value as on 31st March 2006 was at Rs.24.5.
- Post issue Annualized EPS based on 30th September 2006 earnings comes out to be Rs. 8.62. Shares are being offered in the price band of Rs. 90 to Rs. 105. At P/E multiple of 10.4 to 12.2 while industry is trading at a P/E of 13.5.
Movers & Shakers
- Satyam slipped despite launching a 100-seater development centre in Guangzhou Software Park, China.
- Ranbaxy inched up on reports that the US court has upheld the company�s 180-day exclusivity on Simvastatin tablets.
- HDFC eased despite reports of the launch of its operations in London to facilitate the Indians in the UK to acquire property in India.
- United Phosphorus gained on picking up a stake in the Cerexagri group.
- i-flex Solutions ended weak despite the launch of Flexcube as a hosted offering to community banks in the USA.
Another record, another feather in Sensex cap
A rally in bank shares, gains in cement shares and in cellular services major Bharti Airtel, lifted the BSE Sensex to another record closing high today. Firm global bourses and continued strong FII-inflow supported the domestic bourses, which have been breaking their own records almost every day now. An overnight surge in US stocks and a steep fall in US core producer prices, which eased worries of rate hike by the Federal Reserve, cheered markets across the world on Wednesday.
The Sensex gained a modest 43.87 points, settling at 13,469.37. The S&P CNX Nifty added 10.40 points (0.2%), to finish at 3,876.30. Both are lodged at life highs presently.
The market was volatile. The Sensex had lost about 35 points for the day, at one point of time in early trade, in contrast to an 80-point surge at the onset of the trading session. It had trimmed gains in late trading, after a new high of 13,506.08. It came off the higher level in the last half an hour of trade, mainly due to a weakness in index heavyweight Reliance Industries (RIL). The BSE Sensex swung 115.29 points for the day, between 13,390.79 and 13,506.08.
The market-breadth was weak. For 1,509 shares that declined on BSE, 1,035 rose. As many as 69 shares were unchanged. Losers outpaced gainers by a ratio of 1.45:1. Although the Sensex has been hitting a string of new highs, what has been lacking is participation from across the board. The market-breadth has failed on a few occasions recently.
The BSE clocked a turnover of Rs 5,088 crore, compared to Tuesday’s Rs 5,151 crore.
Revision in earnings estimates by brokerages for companies following strong Q2 results has fuelled a surge in FII inflow in the past few weeks. FII-inflow for calendar 2006 has reached $7.5 billion (till 13 November) compared to a record inflow of $10.7 billion in 2005. Another factor that has contributed to the surge in FII inflows, is the the ever growing number of FIIs getting registered with Sebi every day. Since January this year, there has been an addition of over 150 FIIs, and the aggregate now stands at 978. Strong global liquidity has aided the fund flow.
A section of the market attributes the solid surge on the Indian bourses to increasing recognition of India’s long-term growth prospects. From 4,644 on 23 June 2004, it has galloped 190% in less than two and a half years.
Bank shares surged today due to easing interest rate worries, and as 10-year bond prices scaled a six-month high on Wednesday. State Bank of India jumped 4.6% to Rs 1,179. The stock also struck a record high of Rs 1,184.40. RBI on Tuesday said the recent fall in global crude oil prices should help ease inflation pressures.
ICICI Bank gained nearly 3% to Rs 880. The stock hit Rs 888, a lifetime high. ICICI Bank was also boosted by reports that RBI has permitted the largest private sector bank to open new branches and off-site ATMs. BSE banking sector index, the Bankex, hit an all-time high.
Bharti Airtel gained nearly 2% to Rs 580.95. The stock hit Rs 582.50, a lifetime high for the scrip. It has replaced TCS as the fifth largest company in terms of market-cap today.
Reliance Industries shed 1.3% to Rs 1,260. Motital Oswal Securities has downgraded the stock. It is the second brokerage after Kotak Securities to downgrade the scrip, citing stretched valuation.
FMCG giant Hindustan Lever shed 1.8% to Rs 243.30. A large block deal of 10 lakh shares was executed in the scrip at Rs 243.80 per share, on BSE.
MTNL jumped nearly 7% to Rs 142.60, on a whopping 28.3 lakh shares on BSE. Following a clarification by the Income Tax Department on treatment of license fee, MTNL is set to pocket Rs 1,800 crore as refund -- principal of about Rs 1,400 crore and Rs 400 crore as interest.
Cement shares rose on firm cement prices. Gujarat Ambuja Cements gained 2% to Rs 138.05, UltraTech Cement added 1.4% to Rs 914.85, ACC rose 1.3% to Rs 1,021 and Grasim added 1.3% to Rs 2,708.
Software major Infosys Technologies also gained in volatile trade. The stock rose 0.7% to Rs 2,227. On Tuesday, its ADR rose 2.4% to $56.50. Investors are keenly watching the trend in Infosys' ADR as pricing of the issue will be linked to the ADR's ruling market price.
ONGC ended flat at Rs 880. The stock had risen 1.6% in opening trade, to 894.70, amid media reports that ONGC Videsh, the international arm of ONGC, had struck oil in an Iranian block.
Airlines rose on reports of airlines gearing to raise airfares between 3 - 5%. Jet Airways rose 3.6% to Rs 656. Among low cost airlines, Deccan Aviation jumped 10% to Rs 119 and SpiceJet added nearly 5% to Rs 47.30.
Real estate developer Mahindra Gesco Developer jumped 20% to Rs 952.85. The stock rose on heavy volume of 35.1 lakh shares on BSE.
OCL India rose nearly 7% to Rs 178.95. Two large block deals of 9.9 lakh shares and 12.3 lakh shares, were executed on BSE at Rs 173 per share.
Glenmark Pharma jumped nearly 15% to Rs 584.35, extending its recent solid surge. As per reports, the new drug policy will extend tax benefits on pharma R&D till 2015, which will benefit research focused companies like Glenmark. The scrip rose on high volume of 29.4 lakh shares on BSE.
Arvind Mills lost 1.2% to Rs 54.30. The National Stock Exchange (NSE) has barred fresh FII positions in the derivatives segment in Arvind Mills as such positions in the scrip have crossed 95% of the market wide position limit.
i-flex solutions shed 0.4%, at Rs 1,520. Financial Services (FSI) said on Tuesday, it will now offer Flexcube, the core banking solution from i-flex, as a hosted offering to community banks in the United States.
Though there has not been an across the board rally in stocks in the recent market surge, small-cap and mid-cap stocks have surged on a selective basis in the past few days.
Banking stocks shine in lacklustre market
he market exhibited a listless trend, with the Sensex managing to end the day with small gains on selective buying. The day belonged to the banking stocks that shrugged off the sluggish trend and rallied sharply, with the BSE Bankex notching up gains of 2.86% to close at 7060. The benchmark BSE Sensex moved past 13500 after a positive opening at 13476 before profit taking dragged it to 13391 in early trades. Recouping lost ground, the Sensex witnessed strong buying in the afternoon and touched a new intra-day high of 13506. However, lack of further movement and some profit booking saw the Sensex end the session at 13469, up 44 points for the day. The Nifty added ten points to close at 3876.
Among the gainers, SBI surged 4.56% at Rs1,178, ICICI Bank soared 2.77% at Rs881, Bharti Airtel jumped 1.52% at Rs578.60, Gujarat Ambuja Cements rose 1.48% at Rs137, HDFC Bank advanced 1.41% at Rs1,077, Grasim added 1.28% at Rs2,708 and ACC moved up by 1.25% at Rs1,020. ITC, Hero Honda, Infosys, Reliance Communication, Ranbaxy, BHEL, Bajaj Auto, Wipro, L&T and ONGC ended the day in positive territory. However, HLL dropped 1.86% at Rs243, REL fell 1.80% at Rs525, Dr Reddy's lost 1.44% at Rs780, Reliance Industries shed 1.23% at Rs1,262, HDFC slumped 1.19% at Rs1,531, Tata Steel was down 1.04% at Rs486, NTPC dropped 1.03% at Rs134 and Satyam slipped 1% at Rs427. TCS, Tata Motors, Hindalco, Cipla and Maruti ended the day in negative territory.
The market breadth was negative, with the losers outpacing the gainers in the ratio of 1:0.69. Of the 2,606 stocks traded on the BSE, 1,034 stocks advanced, 1,508 stocks declined and 64 stocks ended unchanged. Among the sectoral indices the BSE Bankex was the major gainer and soared 2.86% at 7060 followed by the BSE PSU index (up 0.81% at 6138).
Banking stocks were in the limelight and rose sharply. Bank of India soared 7.54% at Rs186, Punjab National Bank advanced 5.85% at Rs546, Kotak Mahindra Bank rose 5.22% at Rs402, SBI surged 4.56% at Rs1,178, Indian Overseas Bank added 4.56% at Rs116, Bank of Baroda added 4.49% at Rs271 and Oriental Bank of Commerce gained 4.22% at Rs251. Andhra Bank, Union Bank of India, Vijaya Bank, ICICI Bank, Canara Bank, Karnataka Bank and Allahabad Bank gained 2-3% each. HDFC Bank and Federal Bank were up 1% each. However Centurion Bank of Punjab dropped 2.86% at Rs29 while UTI Bank was down 1.45% at Rs467.
Over 1.06 crore GV Films shares changed hands on the BSE followed by Hanung Toys (60.72 lakh shares), Silverline Technologies (38.82 lakh shares), Mahindra Gesco (35.19 lakh shares) and OCL India (32.21 lakh shares).
Value-wise Mahindra Gesco registered a turnover of Rs314.29 crore on the BSE followed by Hindustan Zinc (Rs187.71 crore), Punj Lloyd (Rs181.35 crore), Tech Mahindra (Rs175.86 crore) and Glenmark Pharma (Rs162.82 crore).
Bullion: Easing inflationary concerns cap upside
Gold fell in New York for the third straight session after the prices paid to US producers matched the biggest monthly slide ever in October, reducing the precious metal's appeal as a hedge against inflation. The 1.6% drop in the prices paid to factories, farmers and other producers followed a 1.3% decline in September. Analysts expect the USA to report lower consumer prices on November 16, which would put further pressure on gold.
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BREAKING NEWS - Welspun Gujarat gets 4.60 bln rupees order
Steel pipes maker Welspun Gujarat Stahl Rohren Ltd.
A stock exchange notice earlier said the company had secured orders, but Welspun Gujarat said in a statement that it was a single order.
The company expects to execute the order for the 120-kilometre (74.56 miles) pipeline by 2007. Its order book stands at about 25 billion rupees, it said.
Shares in the company rose 0.61 percent to 82.40 rupees in a firm Mumbai market.
Sensex may strike new high on strong FII inflow
Continued strong FII inflow and surge in US stocks on Tuesday may see Sensex strike fresh all time high today. RBI staking on Tuesday that recent fall in global crude oil prices should help ease inflation pressures would further boost market sentiment. But higher levels may attract profit taking due to a sharp surge in Sensex over the past few weeks.
As per provisional data, FIIs were net buyers to the tune of Rs 1270 crore on Tuesday (14 November), the day when Sensex had gained 26.50 points in volatile trade. Their cumulative inflow for calendar 2006 has reached $7.5 billion (till 13 November) compared to a record inflow of $10.7 billion in 2005.
Revision in earnings estimates by brokerages for companies following strong Q2 results has fuelled surge in FII inflow in the past few weeks. Another factor that has contributed to the surge in FII inflows is the fresh number of FIIs registering with Sebi every day. Since January this year, there has been an addition of over 150 FIIs, and the aggregate now stands at 978. A strong global liquidity, too, has aided the fund flow.
A section of the market attributes the solid surge on the Indian bourses to increasing recognition of India’s long-term growth prospects. From 4,644 on 23 June 2004, it has galloped 189% in less than two and a half years.
Asian stocks were in the green on Wednesday (15 November). Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.04% to 0.6%.
US stocks rallied on Tuesday, pushing the Dow to a record closing high, after Wal-Mart Stores Inc. and Target Corp. posted stronger-than-expected profits and inflation data eased interest-rate concerns. Tuesday's record finish is the 15th record close for the blue-chip Dow average since the beginning of October. The Dow Jones industrial average shot up 86.13 points, or 0.71 percent, to end at a record 12,218.01. The Standard & Poor's 500 Index gained 8.80 points, or 0.64 percent, for a close at 1,393.22. The Nasdaq Composite Index rose 24.28 points, or 1.01 percent, to 2,430.66.
Firm global indices may lift sentiment
Overall buoyancy in the international markets coupled with rising FII inflows in the current month and strong fundamentals may help the market edge higher. All the Asian indices are marginally up in morning trades which may help the domestic indices commence on a firm note. On the market technicals, the Nifty could test higher levels around 3857 while on the downside it has a support at 3830-3810 range. The Sensex has a likely support at 13330 and may face resistance at 13500.
US indices rallied sharply for the second consecutive session on Tuesday with the Dow Jones adding 86 points to close at 12218, this been the 15th record close since the beginning of October, while the Nasdaq advanced by 24 points to close at 2431.
Barring few all the Indian ADRs had a firm outing on the US bourses. Rediff was the major gainer and rose over 5% followed by Wipro which up by 4%, Infosys, Patni Computer and HDFC Bank gained over 2% each. However amongst the losers VSNL shed over 2% followed by ICICI Bank which was down by 1%. Tata Motors and Dr Reddys ended with marginally losses.
Crude oil prices in the US market slipped on Tuesday, with the Nymex Light Crude oil for December delivery falling by 30 cents to close at $58.28 a barrel and the London Brent crude declining by 66 cents at $59.05 per barrel. In the commodity space, the Comex gold for December series lost 50 cents to settle at $625.30 a troy ounce.
On Nov 13 2006, FIIs were net buyers of stocks to the tune of Rs778.20 crore (purchases worth Rs1927.70 crore and sales of Rs1149.50 crore) while domestic mutual funds were net buyers of stocks to the tune of Rs52.10 crore (purchases worth Rs549.28 crore and sales of Rs497.27 crore).
Google and the selling of simplicity - Jonathan Weber
Can Google succeed in the print world the same way it has online?
The incredible success of Google is easy enough to understand - the company built a better mousetrap, and the world beat a path to its door. Its search results are generally much better than that of other search engines, and it has discovered that relevant text ads next to search results are a powerful advertising medium. The relevance of the ads that Google places on other publishers' websites is far higher than that offered by competitors and thus they get more clicks, and the publisher gets more money. I've seen this first-hand on NewWest.Net.
From another standpoint, however, Google's current dominance of the online advertising world looks anomalous. A large and growing chunk of Google's business involves serving as the middleman between advertisers and publishers and that's a position, in the age of the internet, which is supposed to be inherently insecure. That's especially true when the middleman takes a huge cut. Google is so powerful that it doesn't feel the need to tell its customers how much it is taking, but judging by the company's profits it is a lot.
In theory, cutting out this ravenous middleman should be easy. All a publisher need do is look at the ads showing up on Google Adsense, call the advertiser, and offer them the same link for less. The result? Cheaper ads for the advertiser and more profit for the publisher. But this kind of thing doesn't seem to be happening much - at least not yet. Google has made things simple and effective for the advertiser and they like it that way.
Indeed, it has succeeded so well in selling simplicity that the company is now widening its net. It is making a substantial effort to sell advertising in other media including radio, television and newspapers. Google will use its systems to target and auction ad space, and provide advertisers with creative support as well as buying power. It is, in part, a simplification of the services traditionally offered by ad agencies, which small advertisers cannot afford.
Google's initial foray into selling print magazine pages has reportedly been something of a bust but the company seems undeterred. Certainly, the agency system could use some modernising, and there seems to be a market for offering more and better tools to small advertisers. But will Google enjoy the same competitive edge in this business as it does in the world of search? I'm not sure.
Its online advantage is huge. For all the dramatic growth in online advertising and all the talk of millions of new publishers with blogs and podcasts and YouTube videos, a remarkable 75 per cent of all online advertising revenue is flowing to the ten largest ad-supported websites (with Google, of course, at the very top of the list). Either the consolidation of the new media world has already happened and the leaders have built a position of dominance that will last for some time, or we are still at a very early stage and the 'long tail' of smaller, newer internet enterprises is just beginning to wag. I tend to believe the latter.
Google continues to insist that it is not a media company because it does not produce or own content; it is an aggregator that provides services to the media industry. It would stand to reason that content companies, once they stop bemoaning the end of the good old days and begin re-making their businesses in earnest, will be able to develop some of these services themselves. At the very least, any business carrying the kind of gross margins that Google enjoys will attract - indeed is already attracting -a ton of competition. All kinds of intermediaries will be trying to connect advertisers with relevant media and specific types of consumer behavior.
A popular question on the conference circuit these days is whether Google is a friend or a foe of media companies. I think it is neither: it is a vendor, one whose services currently command a large premium because they are superior to those of the competition. Will that last forever? I have my doubts.
DLF settles minority shareholders' issue
DLF on Tuesday resolved the pending minority shareholders' issue, which clears the way for the company to file the draft red herring prospectus with the market regulator SEBI for its initial public offering.
In an extra-ordinary general body meeting, the company approved the revival/revalidation and issue of 81,983-two per cent unsecured redeemable debentures of Rs 100 each.
The debentures are optionally, fully or partly convertible at par or at premium to the shareholders in accordance with their entitlement.
Rewrite prospectus
The company will have to rewrite its prospectus accordingly, a process that it will initiate shortly and file for the IPO "very soon", said a source close to the development.
The IPO size may also be revised by the company, he said. The process of allotment of these 81,983 debentures will take about two weeks.
The company also approved that the debentures on issue and allotment and on being fully paid-up, be converted into equity shares in the ratio of 10 equity shares of Rs 10 each for every one debenture of Rs 100 each held by them.
Approves share split
The EGM also approved the split of shares so issued into five shares of Rs 2 each for every Rs 10 paid-up share.
A further bonus share issue of seven equity shares of Rs 2 each for every share of Rs 2 held after the conversion of the debentures into equity shares and subsequent splitting of shares was also approved.
The new shares so issued will rank pari-passu with existing shares of the company and carry the same benefits.
The Board of Directors had been advised that there were no lapses committed by the company in respect of the offer of debentures made to the shareholders in December 2005, but keeping the interest of the minority shareholders in mind and to maintain their goodwill, the board decided to revive the lapsed offer of debentures to the minority shareholders.
The move will benefit minority shareholders of DLF. The EGM was attended by around 55 shareholders and their representativesFII: +Rs778.20Cr & MF +Rs52Cr
FII Gross purchases Rs 1927.70 Cr Gross Sellers Rs 1149.50 Cr Net Buyer Rs 778.20 Cr
MF Gross Purchases Rs 549.28 Cr Gross Sellers Rs 497.27 Cr Net Buyers Rs 52 Cr
Strong buying continues and markets continue to be strong. The provisional buy figure of Rs 1270 crore which includes a 900 cr block deal of TCS
Greaves Cotton plunges 18 pc
The stock of Greaves Cotton plummeted by more than 18 per cent on Tuesday on the BSE on rumours that Piaggio is likely to set up a plant in India. Given that 30-35 per cent of the company's revenue comes from Piaggio, this news is expected to dampen its future prospects.
Greaves Cotton manufactures diesel engines for Piaggio. Dealers also said that a leading domestic fund, which holds more than six per cent equity in the company, had turned seller on this counter. The stock closed at Rs 322.55, down 18.23 per cent
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