With so much uncertainty in the interest rates and notwithstanding the fact that RBI has loosened the purse strings in terms of lowering CRR ( Cash reserve ratio) , lower repo rate ( lending from RBI to Banks ) , thus releasing a huge amount of money ( I think CRR lowering has been of the order of 200 BPS in the last few months) around Rs 1 lac Crs and more, Banks are not too keen on increasing their loan portfolio. Availability of funds is one thing, lending the same is another.
Banks are keeping the taps closed for now.
Companies which were dependent for expansions on borrowed capital are going to be in some kind of trouble for the next year or so, I would think. Also Companies with a high Debt equity ratio are likely to witness a period of high interest costs. One hears from the market that , Banks are chosing to increase interest rates even on existing loans to weed out slightly higher risk customers. They are all looking to upgrade their risk profile
This being the case, it makes more sense to invest in Companies with a low debt equity ratio, relatively less expansions planned for the immediate future, low working capital .
While I am expressing an opinion as to choice of Companies, the bottomline is that this is a good time to start doing a staggerred investment
Had recommended Seshasayee paper along with a few other Companies in one of my earlier blogs. i still think, at Rs 70 it is a good investment. Their profits are down from Rs 14 Crs per quarter to Rs 4.5 Crs per quarter. Primary reason for this is the fact that they import 75-90% of their raw materials . Rupee having depreciated, by almost 20 % in the last year , this has had an impact . Expectations are that rupee is likely to settle down at 10 % higher ( appreciation)
With the US economy being what it is, this seems to be a reasonable assumption. This company could get back to an EPS of Rs 30 . Market cap is around Rs 75 Crs for a capacity of 1.2 lacs Ton paper.
Worth adding to the portfolio in small numbers. There is an element of risk , albeit a low one
Banks are keeping the taps closed for now.
Companies which were dependent for expansions on borrowed capital are going to be in some kind of trouble for the next year or so, I would think. Also Companies with a high Debt equity ratio are likely to witness a period of high interest costs. One hears from the market that , Banks are chosing to increase interest rates even on existing loans to weed out slightly higher risk customers. They are all looking to upgrade their risk profile
This being the case, it makes more sense to invest in Companies with a low debt equity ratio, relatively less expansions planned for the immediate future, low working capital .
While I am expressing an opinion as to choice of Companies, the bottomline is that this is a good time to start doing a staggerred investment
Had recommended Seshasayee paper along with a few other Companies in one of my earlier blogs. i still think, at Rs 70 it is a good investment. Their profits are down from Rs 14 Crs per quarter to Rs 4.5 Crs per quarter. Primary reason for this is the fact that they import 75-90% of their raw materials . Rupee having depreciated, by almost 20 % in the last year , this has had an impact . Expectations are that rupee is likely to settle down at 10 % higher ( appreciation)
With the US economy being what it is, this seems to be a reasonable assumption. This company could get back to an EPS of Rs 30 . Market cap is around Rs 75 Crs for a capacity of 1.2 lacs Ton paper.
Worth adding to the portfolio in small numbers. There is an element of risk , albeit a low one
