India Nippon- Could be a very Interesting buy

Went through the financials of India Nippon Electricals Ltd, part of Lucas TVS ...

Very interesting. The financials are very good. Good and steady EPS, last EPS was around Rs 30

Very little or no debt. Is a subsidiary of (51% holding ) Lucas Indian services which in turn is a 100% subsidiary of Lucas TVS.

India Nippon holds 8% in Lucas TVS. Lucas TVS plus Lucas Indian Service themselves could be around Rs 1200 Crs value  considering the fact that as of Mar 2011, the two together has PAT of around Rs 100 Crs.

Market capitalisation of India Nippon is Rs 200 Crs ( approx) out of which value of embedded investment alone would be Rs 100 Crs. 

Turnover of India Nippon is Rs 260 Crs and pays dividend of Rs 9-10/share.

Asset base is also small, just around Rs 38 Crs

Not much could go wrong in this share at Rs 180-190 per share.Equit of Rs 11.3 Crs

One can't expect some super normal profits but one can expect returns of around 10-12% compounded .

Sundaram Clayton and Tata Investments-Good buy and arbitrage opportunity

Was trying to look in to the shareholdings of some of the TVS Companies. One interesting fact which cam up a few months back was the fact that Sundaram Clayton which holds more than 50 % in TVS Motors has an embedded value which is at a significant discount to the price of TVS Motors Ltd.

Buying one share of Sundaram Clayton is equivalent to investing in to Sundaram Clayton standalone plus  14 shares of TVS Motors.

Sundaram Clayton is selling at Rs 320 and TVS motors at Rs 37 per share. You can see that against embedded value in terms of TVSM itself of Rs 518 per share of SCL (14 shares of TVSM at Rs 37 per share ) plus the standalone value of SCL, you get the share  at Rs 320 , a discount of 38% and more or if and when there is parity , you could gain 62 % on your investment .

Of course, there has always been a trend of the Holding Company being at a discount Vis a vis the embedded value of subsidiaries in the same. Can't understand the reason. 

The case of Tata Investment is quite different. It is in the business of investing in to equity of Tata and other Companies also. It is almost like investment in to a Mutual fund.

In Tata Investment case, the NAV is almost Rs 800 plus , the share is available at Rs 450.When we subscribe to mutual funds at NAV , why not in to Tata Investments.

Largest democracy ?

Atroicious, two girls being arrested on putting comments about the overreaction in the City of Mumbai after Bal Thackeray's death.

One girl had put up a comment on the following lines

.... why such a fuss over the death of a man when many like him die everyday. We hardly observe a two minute silence rememebering Bhagat Singh and Sukhdev.....

This girl was arrested and the other one who liked it also arrested.

She is entitled to her opinion. You can't be arresting some person for such an innocuous comment. This is no better than Mamata's arrest of the professor in Bengal who had some unsavoury remarks about her handling of things.

Scary. Are we living in a democracy or are we also getting  Talibanised ? Clear Fascists laenings. Use of State machinery to cow down people. Just shows , Hindu or Muslim, if we start pandering to religious fundamental elements, this is the likely trajectory and shape the nation could take . Is it competitive fundamentalism . You are fundamental , I am more fundamental .

 It is quite possible that the girl who commented was a Muslim influenced the action of the mob.

Her uncle's clinic was vandalised. No arrests of the vandals.

Nation's DNA especially the Political class was shaped by Indira Gandhi in the 70 s. She made "State control" , an acceptable norm .

Dangerous precedent.

SPB and Ponni Sugars

A few years back had progressively bought a couple of thousand shares of  Seshasayee Paper and Boards Ltd and around 500 shares of Ponni Sugars Ltd.

 Have risen to Rs 270 plus and Rs 390 plus respectively. Wish, I had invested a lot more in both. Atleast in the case of Ponni , had seriously thought of buying some more. No point in regretting now.Happy that I had not sold earlier when the price went up to Rs 200/share ( Ponni)

Now the more difficult question is when to exit.

Interestingly , SPB has 21% in Ponni and Ponni has 10.67% in SPB.

Had run the numbers and found them interesting. SPB has a capacity of around 120 k Tonnes paper production and Ponni has been producing around 76 k tonnes of sugar

SPB had initiated process to add on to capacity , instead has gone ahead and bought a Paper Company Subburaj Papers with a capacity of around 98k tonnes.

They seem to have paid Rs 25 Crs to acquire 83 % equity plus taken over Rs 210 crs of debt, I think. Total debt free consideration is Rs 240 Crs. Appears okay , considering that SPB has an asset base of Rs 400 Crs currently.

SPB is planning a merger with an equity swap of 1 SPB for 11 shares of Subburaj papers. 125 lac shares -83%. Total shares should be 150 lacs. SPB would end up addding 1.36 crs to equity (13.6 lac shares )

41.67% would be held by Ponni and balance with SPB Ltd. promoters and shareholders.

Ponni sugars might have reached close to the peak, SPB may have some steam left.
My assessment is that Ponni could touch Rs 500 and SPB also around 500-600 , after which sale would make sense. May be pushing my luck a bit, but prepared to wait.