Friday, April 8, 2011

Portfolio Update

Moktan Capital LLP has bought a further 10,000 shares of Suzlon on 9 Feb at Rs. 44.5 per share and 5,575 shares of Kavveri Telecom on 24 Feb 2011 at Rs. 111.9 per share.


  1. Gurudev, direct 51% in Bharat Bijlee, valuations must be really compelling !

  2. Moktan, investing in Bharat Bijlee is a bit of a surprise. Can you share your rationale

    Net sales (excluding other income) has increased by by 49% since 2006-07. The growth has been at 9% CAGR, not too astounding a figure.
    Further, their costs have risen by 60% over the same period. This shows an inability to pass on the rising costs to their customers. Reasons could be increasing competition, poorer execution or others.

    This has resulted in operating profit numbers going down from 91 Crore in 2006-07 to 70 Crore in 2010-11. Further, this decline has been more or less consistent over these years. The PBDIT numbers look good only by combining "other income" in which I do not have visibility of how it has risen from 1 Crore to 41 Crore in 5 years.

    The only saving grace is dividend. The stock currently yields 3% dividend. But am not sure if this is a compelling enough reason to invest in a stock. Care to elaborate?


  3. Thx for your comment Kunal.

    2007 and 2008 were peak years and I think it would be a bit unfair to compare 2010-11 with your all-time best performances. If we look at the last 10 years data, the numbers tell a slightly different story.

    Net sales have risen at a CAGR of 21% since 2002 and 18% since 2006.

    In the same time period costs (Sales-profit before tax) have increased at a CAGR of 18.3% (vs 21% sales growth) and 9.7% (vs 18% sales growth) respectively. (Source: annual report Pg 30)

    The average operating profit for the last ten years (excluding the one-time gain in 2011) was Rs. 93 crores (Rs. 88 cr in the last 5 years). The average net profit was Rs. 32 crores (Rs. 51 cr in the last 5 years).

    Against this if we look at the Enterprise Value of the company - the mcap currently is Rs. 475 cr and debt Rs. 24 cr. Thus EV is around Rs. 500 cr. The EV/Average operating profit is 5.4x (5.7x in the last 5 years)and Mcap/Average Net Profit is 14.8x (9.3x in the last 5 years)

    Like you pointed out, the company has a strong track record of dividends and has paid Rs. 89 cr over the last 10 years. It is also a well-known company in Mumbai with very good corporate governance practices. It is one of the few companies which has Deepak Parekh on it's Board.

    However, these are not the main reasons for buying the stock. The company owns shares of Siemens Ltd, HDFC, ICICI and HOEC worth Rs. 300 cr (book value Rs. 4.2 cr on the balance sheet). Thus the business is selling for around Rs. 200 cr. The EV/EBITDA and P/E numbers on this value appear ridiculously cheap. With promoters owning only 36%, there is a lot of pressure to sell and declare a large dividend or give bonus shares. I think over time Mr. Market will correctly value this company.

    Hope this answers all your questions.


  4. hi kunal,
    just saw your blog...dude the suzlon story is becoming better by the week.with increased orders and declining market price what more can a value boy ask for?
    i guess they will probably get the fccb bond holders to agree for an extension to 27 july,seriously considering buying the (pretty illiquid) june options... i mean seems reasonable,considering we live in a land with almost non existent bankruptcy laws
    hope you ll blog about the suzlon story as it is NOW AND NOT GO ON ANOTHER YEAR LONG HIATUS LAZY BONES!
    (maybe even sks ?)
    eagerly awaiting a reply/ the next post

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  6. Hi all - Thx for all your comments. I admit I have not been very active on the blog and I apologise for not replying to all of you earlier.However, I continue to closely monitor all my investments and analyse new opportunities. All my new blogs/updates have been to my investors in the LLP. You can follow everything at Hope you will find the materials there useful. I continue to read all your comments and suggestions.


  7. This is very good. I like your updation

  8. Is the Moktan capital website still active ?