Tuesday, March 31, 2009

Profile IVRCL Infrastructure & Projects operates in high-growth potential sectors like water & environment, transport, buildings and power.

On Firm Grounds


The company started operations in 1990 and established itself as a premier engineering procurement, construction and commissioning (EPCC) and lump sum turn key (LSTK) service provider.

It now ranks amongst the fastest growing, profitable companies in the country in the infrastructure space with sales growth of 44 per cent CAGR (2004-07).

With an eye on expanding into emerging infrastructure sectors like railway infrastructure, metro rail projects and oil and gas sectors, it has acquired Alkor Petroo Limited so that it can take part in exploration activities in Egypt and Yemen. Moreover it has partnered with major corporations to bid for the upcoming projects world over.

Promoter
The company is promoted by E. Sudhir Reddy. Currently he is the Chairman and Managing Director of the company with 3.93 per cent holding of the company.

Rest 5.80 per cent of the promoter holdings are held by various relatives and holding firms of Mr. Sudhir Reddy. The major share holders of the company are FIIs and Mutual Funds, the combined shareholdings by them is over 65 per cent.

Investment Rationale
Revenue Momentum to Sustain
For Q3FY09, IVRCL's revenue was at Rs 11.8 billion, up by 22 per cent YoY. However, PAT went down by 27 per cent to Rs 465 million, led by higher interest charge of Rs 419 million, up by 137 per cent. The company's EBITDA margins of 9..1 per cent were lower by 230 bps due to higher material, labour and staff costs. However, revenue growth is expected to continue with the current order backlog at 3x its FY09E revenue.

Debt Levels to be Maintained
IVRCL has advanced a loan of Rs 2.8 billion to its real estate arm, IVR Prime. The company's total loans and advances to its subsidiaries stands at Rs 4 billion YTD. In FY09E, IVRCL expects to get Rs 0.8 billion back from IVR Prime, of which Rs 0.3 billion have already been received.

However, the company expects to borrow an additional Rs 1 to 1.5 billion, depending on their requirement for project execution. But debt costs are expected to subside in FY10E on the back of internal cash accruals from its core construction business. Further-more, with toll revenue flowing in from its BoT project from 2QFY10E, no significant rise in its debt is expected.

Strong Order Book
IVRCL's order book of Rs 143 billion is at 4x its FY08 revenues and has an average execution cycle of 24 to 30 months. Furthermore, 95 per cent of the company's order book is protected by price escalation clauses.

A major part of the order book (65 per cent) is from the water segment. The balance, 20 per cent comes from buildings and the rest from transportation and power. IVRCL's focus is to secure government contracts. So far this year, the company has managed to secure contracts worth Rs 50 billion and expects to further secure additional contracts worth Rs 17 billion.

Positive Macro Outlook
As per the planning commission, for the 11th five-year plan, spending on water supply and sanitation infrastructure development is pegged at Rs 1991 billion, up by 207 per cent. IVRCL is perfectly positioned with immense domain expertise to gain from this.

Risk & Concerns
Policy Dependence
Number of projects of the company depends on the government. Any unfavourable change in policy environment is going to adversely affect the company. This high dependence on a single client increases the operating risk of the company.

Working Capital
IVRCL's working capital needs are expected to remain high over the next few years in order to support its top-line growth. As a result, we believe that the operating cash flow would remain negative. Con-sequently the company would need to borrow to fund its working capital requirement. Hence there is a good chance that the current debt-equity ratio is going to deteriorate in coming times.

Valuation
At CMP of Rs 110, IVRCL's stock trades 6x of the FY10E EPS. The company has been valued to arrive at a target price of Rs 132.

Even though the economic growth is slowing down, but due to the water-related infrastructure focus of the company, the order book of the company is going to remain robust in the coming times. After the hammering it got in 2008 the stock looks well poised for an upside.



Financials


FY06
FY07
FY08
9 Mths*
Net sales (Rs Cr)
1,491
2,293
3,646
3,255
PAT (Rs Cr)
93
141
210
147
Operating profit (Rs Cr)
93
160
240
280
Interest payments (Rs Cr)
30
48
91
92
Borrowings (Rs Cr)
679
556
1068
-
Ret on networth (%)
25
16
15
-
Ret on cap employed (%)
26
23
28
-
* FY09



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Edelweiss on PSL Limited-BUY

We met with the management of PSL. Following are the key takeaways:

Management's view on industry

1. Domestic gas pipeline demand remains buoyant – medium term driver

There have been no delays witnessed so far in order flows/tenders. Further, pipeline

projects typically form the last leg of any project, making its delay less likely.

Three large tenders (two already out) by Mar-09 are likely to create incremental

requirement for 700,000-800, 000 MT of pipes.

RIL could explore options with domestic pipe manufacturers. This is likely to expand

opportunities for players like PSL.

PSL' regional capacity is a key competitive advantage, as tenders are for delivered

pipes at a select location. Transport costs are typically 20-25% of the cost of the

pipe. For example, for the southern projects (Kakinada to Bangalore, Bangalore to

Cochin & Chennai to Vizag), PSL is likely to incur 1/3 the freight cost than other

players.

2. US pipeline demand – PSL has location advantage

PSL's US mill (located in southern region) can benefit from its location advantage.

PSL's US mill for firm orders for 12-15 months of production (till Mar-10). Customer

has also procured the steel, ensuring the sanctity of order book.

3. Competition from Chinese players - Despite plunge in freight costs, logistics management

(as customers insist on delivery to location) is likely to be a deterrent.

Capacity expansion

1. PSL has a domestic pipeline capacity of 1.1 MMT. Their large capacity in HSAW is

favorable, as they can be eligible for bidding 100% capacity in many tenders.

Additionally, their domestic capacity is spread regionally (near pipeline construction

points), imparting freight advantage.

2. The company is setting up an incremental 150,000 MT capacity in US. The HSAW plant in

the US has been completed and is awaiting API approval (likely by Feb-09).

3. Sharjah capacity expansion plans have been put on hold, until the company gets firm

orders. Existing capacity is 75,000 MT.

Order book details

1. PSL's total order book aggregates INR 6,000 crores, out of which INR 4,000 crore is for

Indian operations (executable by Mar-10). Approximately, INR 2,000 crores order book is

from GAIL.

2. EBITDA for order book ranges from INR 125-200/MT. Conversion costs range between

INR 110-180/MT.

Upcoming tenders – status

1. Three major tenders are expected to create incremental requirement for 700,000-

800,000 MT of pipes through Mar-09..


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Monday, March 30, 2009

Bank NPAs Set To Rise As RBI Changes Reporting Norms

Net NPAs of most banks will rise because of the effect of a recent circular by the Reserve Bank of India, that has taken most bankers by surprise. In the circular issued a few days ago, the RBI disallowed banks the option of using excess provisions (floating provision) to set off against gross NPAs, thus denying them a means of showing a lesser net NPA level in their balance sheets.
 
Earlier, the banks had this option. Conversely, they could take the floating provision to Tier-II capital. Now, the option is not there — banks will necessarily have to take floating provision amount to Tier-II capital. In effect, the excess provisions will be treated like retained earnings.
 
One banker said that the circular would have the effect of raising net NPAs of banks by anywhere between 20 and 50 basis points. Different banks have different amounts as floating provisions and hence they would be affected differently.
 
For example, published figures show that Indian Bank has Rs 92 crore of floating provisions. The bank may be an outlier, the impact may not be much. Net NPA may go up by about 15 basis points. Indian Overseas Bank has about Rs 170 crore and the impact may be about 25-30 basis points. The private sector City Union Bank has Rs 19 crore of floating provisions. The impact may be about 30 basis points.
 
All the bankers that Business Line spoke to, said on conditions of anonymity that the circular is a big let down by the RBI. Most banks are adequately capitalised and hence the positive impact on capital adequacy is estimated to be negligible.
 
On the other hand, bankers delight in showing low net NPA levels.
 
Many bankers gave vent to their feelings more on the point of principle — there was no consultation by the RBI, the circular came out of the blue. Nor has any reason been given.
 
Besides, the provisions are made out of profits earned. Bankers said that unlike the manufacturing industry, banks ought to moderate profits using excess provisioning as banks cannot be seen as being highly profitable in one year and less so in the next as it would affect public sentiment.


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TATA AIG LIFE : MAHALIFE GOLD INSURANCE


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L&T - Reduce - Target INR 536

Sharp drop in PPP projects in 2008; no awards expected until after elections; reinforces our slowdown thesis.

L&T considering ~50% of identified opportunity; complex regulations a hurdle; new govt’s policy to dictate spending.

INR536 TP (standalone INR460 [8.5x FY10E EBITDA], subsidiaries INR76). Maintain REDUCE.

T H E  B N P  P A R I B A S  A N G L E

[Investors Please Listen] Market Plotter 30-Mar-09-EDEL

Market in a nutshell

 

§         After a jump of more than 10% in the last week, markets nose dived today on weak global cues and profit booking. The domestic bourses continued the downward journey as the session progressed and ended the day deep in the red with Nifty closing at 2,978 (down 131 points) while Sensex ended the day at 9,568 (down 480 points)

§         Nifty April Futures were trading in a range of 10-15 points premium for the major part of the session

§         The BSE Bank stocks under performed the benchmark indices and declined 8.58% to close at 4,414 on profit booking. After the recent surge, ICICI Bank plunged 12.3% to INR 338. The BSE Metal index closed with decrease of 7.41% at 5,658 with Tata Steel falling 12% to INR 196.

§         Market breadth was negative with an Advance: Decline ratio of 1:2.1. Jai Prakash Associates plummeted 12% to INR 78 while Reliance Infrastructure declined 11.4% to INR 503.

§         Cash volumes were at INR 137,957 mn (NSE+BSE) as against a 5 DMA of INR 170,771 mn. F&O volumes were at INR 502,382 mn as against a 5 DMA of INR 688,310 mn.       

 

Eye Catchers

 

§         Matrix Labs surged 3.2% to INR 146 with volumes of 1,181,600 (up 400%)

 

Market News

 

§         The rupee was trading at INR 51.18 against the dollar.

§         Nymex crude rose to trade at USD 50.66/bbl. Base metals were trading on a weak note.

§         L&T bagged INR 3450 mn order from NPCIL.

 

 

 

Indices performance 

 

 

CURRENT

PREV.

%CHANGE

 

 

 

S&P CNX NIFTY

       2,978.15

    3,108.65

-4.20%

 

 

 

CNX NIFTY JUNIOR

       4,247.40

    4,390.55

-3.26%

 

 

 

CNX IT

       2,267.35

    2,387.75

-5.04%

 

 

 

BANK NIFTY

       4,035.70

    4,406.80

-8.42%

 

 

 

CNX 100

       2,791.05

    2,909.65

-4.08%

 

 

 

S&P CNX DEFTY

       2,017.15

    2,128.30

-5.22%

 

 

 

S&P CNX 500

       2,259.50

    2,343.70

-3.59%

 

 

 

CNX MIDCAP

       3,356.40

    3,385.00

-0.84%

 

 

 

NIFTY MIDCAP 50

       1,139.80

    1,175.25

-3.02%

 

 

 

 

 

 

 

 

 

 

Top Gainers

 

 

 

 

 

 

Symbol

Open

High

Low

Last Price

Prev. Close

% Change

BPCL

          364.00

       377.70

         363.15

         369.20

            364.15

        1.39

NTPC

          167.50

       185.50

         167.50

         183.50

            182.10

        0.77

SUNPHARMA

       1,090.00

    1,110.20

      1,070.15

      1,085.05

         1,080.50

        0.42

 

 

 

 

 

 

 

Top Losers

 

 

 

 

 

 

Symbol

Open

High

Low

Last Price

Prev. Close

% Change

ICICIBANK

          376.90

       377.00

         334.60

         338.10

            385.20

     (12.23)

TATASTEEL

          215.00

       221.00

         192.35

         196.35

            223.20

     (12.03)

RELINFRA

          550.05

       554.00

         496.00

         502.85

            567.75

     (11.43)

PNB

          438.70

       438.70

         390.00

         395.45

            438.85

       (9.89)

DLF

          178.00

       179.70

         163.30

         165.50

            182.80

       (9.46)

 

 

 

 

 

 


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Sunday, March 29, 2009

A no-frills claim

Tinesh Bhasin / Mumbai March 29, 2009, 0:05 IST

Ensure maximum payout from the insurer when opting for a non-network hospital.

Medical insurance is bought as a protection against an unforeseen health expenditure. But that's just half the work done. The other half actually begins when any illness is detected. Customers blame insurance companies and agents when the entire claim or a part of it is rejected due to lack of documents.

"Insurance companies settle the claims only on the basis of the paperwork," says Gaurav Mashruwala, a certified financial planner.

Let's look at a few things that will help you to make a hassle free claim.

starhealth

When you are diagnosed with an illness and are likely to make a claim, intimate your insurer. Insurance companies provide a helpline number on the insurance card that comes along with the policy. You should also inform them through fax and email. This intimation should just mention your policy number and illness.

The insurance company or its third party administrator (TPA) will get in touch with you. You will be guided to a network hospital. TPAs will also tell you about the terms and conditions of the policy, in case you have missed the fine print.

In case of an emergency hospitalisation in a non-network hospital, insurance companies give 24 hours for you to inform them. Network hospitals, typically, inform TPAs on their own.

A network hospital does not necessarily mean that the procedure will be cashless. Many renowned hospitals that are a part of an insurance company's network may still require you to pay in cash. Also, the biggest insurers – public sector companies – do not have a 100-per cent cashless facility.

In case of a non-network hospital, the company will require a copy of the hospital's registration certificate when you submit the documents for a claim.

Some companies, such as ICICI and Bajaj, pay only 80-90 per cent of the hospital bills in case the treatment is done in a non-network hospital. This is called co-payment.

When a person has to shell out cash initially, the smallest of details need to be taken care of for a smooth settlement.

  • Each bill, whether medical or investigation (tests), needs to have supporting evidence. The insurer requires the original copy of test result and the doctor's slip asking you to conduct the test.
  • Each bill should carry the name of the patient as well as the doctor’s. Same goes for the investigation reports. If both the requisites are not fulfilled, the insurance company may reject the bill and the report.
  • The name of the patient should be mentioned on the bills in the same way as it is stated in the insurance policy documents.
  • The most important piece of document is the discharge certificate.
  • All insurance companies require the bills with subheads. This is necessary as insurers have a cap on some expenses. For instance, National Insurance Company gives only 20 per cent of the sum assured as doctor's fee and up to 50 per cent on medicines.
  • Copies of the documents should be submitted to a TPA within seven days of discharge. All original bills need to be submitted to the TPA.
  • While submitting the bill, make a covering letter and attach a copy of the policy. It should also have a doctor's note describing the illness. Also, include a copy of the pre-authorisation from the TPA and a copy of the insurance card.
  • When you submit the bills, take acknowledgement that the TPA has received the bills.
  • In case of post-hospitalisation charges, do make a note of it in the claim. Ask the TPA what is the prescribed time limit to submit the relevant documents.

    Having an insurance policy does not mean that you should be carefree with the charges hospitals levy. Keep a track of them. Each policy has a finite sum assured. You will need to pay the additional amount.

    medishield-main Try and save on the bills as much as possible. During the remaining tenure of the policy, the disease may relapse or the insured may face another emergency.

    Hospitals usually give a discount if you bargain with them. "They reduce charges, such as nursing, room and investigations," said an insurance broker.

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