tag:blogger.com,1999:blog-23508137701368427602024-03-04T21:49:59.022-09:00Investing Reflections On IndiaAn Individual Investor's Perspectives On The Indian Financial MarketsThe Conservative Investorhttp://www.blogger.com/profile/02930004048703190625noreply@blogger.comBlogger223125tag:blogger.com,1999:blog-2350813770136842760.post-79491561318691315002014-12-31T01:12:00.000-09:002014-12-31T01:12:36.792-09:00On The Radar: India's Small-Cap Equities (Concluded)<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">We have been running a series of
articles titled ‘Under The Radar: India’s Small-Cap Equities’ beginning in
December 2011 - and followed up twice - with the last article in December
2013.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">We would like to conclude this
series after updating the small-cap index level and returns, comparing it to our
expectations ex-ante, and analysing the current scenario. Following this, we
have also outlined where we may take this blog in the future.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">The small-cap index closed at 11,087.07
on December 31<sup>st</sup>, 2014. This
compares to a level of 6,150.65 in our last article – resulting in an advance
of over 80% to date.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">This is a handsome absolute
return by any standard, particularly compared to Indian government bonds, which
yielded around 8-9% for the period. <o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">This justifies the conclusion at
the end of our previous article that “small-caps in India offer among the most
attractive bargains during any time since 2006 and certainly in the entire Indian
stock market today”.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">Of course external events have
played out in our favour; but the focus of the true investor is to do his
buying carefully and let external events take care of themselves – for value
will be reflected in the financial markets eventually, as our mentor Benjamin
Graham taught several decades ago.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">The major ostensible reason for
such an advance is the change of government at the centre and resulting expectations
for earnings growth. It might also be
worth bearing in mind that the depth of the slump in the latter years of the
previous regime has also contributed to such a spectacular advance.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">The advance masks individual stocks
that have advanced substantially and others which have failed relatively. Even though many companies with poor
managements have participated in this rally, we have observed that there has
been some discrimination against stocks with poor governance (as is appropriate). Therefore, the advance has not been
all-encompassing.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">We are unable to use the price to
book value metric to analyse the current situation as the BSE website appears
to have changed its methodology substantially – resulting in a meaningless
comparison.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">From our own experience analysing
individual stocks, we can express that the number of quantitative bargains in
the small-cap market has reduced substantially – almost to the point of
extinction. This appears to be the result of earnings growth being priced into
most small-cap stocks.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">The implication of the above
observation is that companies would need to achieve the earnings growth baked
into their stock prices to justify those prices.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">It is beyond our competence to
judge the likelihood and extent of such growth; all that is clear is that stock
prices have incorporated a substantially cheerier consensus than last year.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">We would conclude that the
small-cap index today does not offer the same possibilities of substantial
profit <i>with low risk</i> that it offered
at the end of last year.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">This does not mean that the
small-cap index will not appreciate substantially from here; it just means that we
are not convinced that it remains substantially undervalued.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">To that extent, we believe that
smaller stocks in India are now on the radar of most investors - a scenario 180
degrees from that prevailing in 2011 to 2013 - and this justifies the
conclusion of this series of articles. </span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">This
series has revealed the considerations, actions, and vindication of a simple
value approach applied to the small-cap stock index in India over a multi-year
time period in real time.<o:p></o:p></span></div>
<br />
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">In the future, we would like for
this blog to remain a voice for minority shareholders in India. Under this
over-arching purpose, we may comment on news that impact minority shareholder
rights, analyse certain ‘special situations’ arising from corporate
announcements (rather than market movements) that provide possibilities for
profit, and produce other articles for the general education and edification of
minority shareholders in India. In this context,
we welcome comments from our readers on matters that would help them. <o:p></o:p></span></div>
</div>
Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-2350813770136842760.post-71857535182679250792013-12-17T09:14:00.002-09:002013-12-17T10:02:24.253-09:00Under The Radar: India’s Small-Cap Equities (Part Three)<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span>
<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">In February of this year, we
summarised the valuation parameters of the BSE Small-cap Index in India (now
the S&P BSE Small Cap Index) - following on from an earlier report we wrote
in December, 2011 - and drew certain conclusions.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">We would like to update the valuation
scenario with the data today, review those conclusions, and form new ones based
on the available information.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">The small-cap index closed today (17<sup>th</sup>
December, 2013) at 6,150.65 with an indicated price to book value of 1.04.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">The closing value as on February,
2013 was 7,006.73 representing a decline of over 12% as of today. <o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">The current index value masks a
greater fall of over 27% to a low of 5,085.56 in August, 2013.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">This represents an unsatisfactory
overall performance for those who invested in small caps at the beginning of
the year.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">In our earlier report, we made
two assumptions towards the end of our report to form a conclusion as to prices
then:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Garamond; mso-bidi-font-weight: bold; mso-fareast-font-family: Garamond;"> </span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Garamond; mso-bidi-font-weight: bold; mso-fareast-font-family: Garamond;"> 1)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">“The market has a
tendency to over-react to negative news”:
The market’s reaction to the news at the start of the year was
undoubtedly negative as represented by the prices accorded to the book values
of small caps in comparison to the historical average. What we didn’t emphasise was that the
reaction can get more negative and for longer than expected (certainly greater
than a year).<o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Garamond; mso-bidi-font-weight: bold; mso-fareast-font-family: Garamond;"> 2)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">“Small businesses
will operate as they have in the past”: It is plainly evident to those
observing events in India over the last year that the environment in which
small businesses operate has been significantly more challenging as compared to
the boom period between 2004 and 2008.
Elaboration of the adverse factors may be unnecessary but some of the significant
aspects were inflation in input costs and compression of profit margins. (The revenues, however, grew in most cases
and this may be an important positive sign.)
Therefore, this assumption certainly didn’t hold true during this year.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">The above factors represent some
of the pitfalls of value investing by the numbers but this is part of the
business.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">The only point we can say in our
defence in our last report is that we stated that the market has just as much
chances of quoting significantly lower prices as higher – however, this is of
scant comfort to those who were heavily invested in small caps at the beginning
of the year (including us).<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">Turning our attention to the
current data, we note that the price to book value is now about <i>half</i> of the seven-year average from 2006
to 2012 (of about 2.05 – see last report below). This certainly proves the point that “cheap
can get much cheaper” but we don’t wish to labour the point since we don’t
believe that market timing can be done reliably and consistently over a long
period of time – however, it is something the <i>bonafide</i> value investor must always bear in mind (this must be
distinguished from the “buy the dips” mentality that prevails in bull markets
where momentum speculators masquerade as value investors).<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">Without doubt, the valuations are
more compelling now than at the (already low) levels earlier this year.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">Further evidence of the neglect
in the small-cap market is provided by trading volumes. Although the historic data on trading volumes
used to be available on the BSE site, it is no longer provided (same goes for
historic price to book value information, which is why we don’t have updated
monthly tables for this year).
Therefore, we are unable to present this data in this report. Nevertheless, observations until a few weeks
ago indicated that the trading volumes in small caps over the last few months
were among the lowest in the last eight years - rivalling the bear market
following the Lehmann collapse between September, 2008 and March, 2009.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">We’ve observed that trading
volumes are directly proportional to the market level in the small-cap space.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">All of this bolsters our
conviction that the speculative participation in the small cap space is currently
at a minimum. This was accentuated by
the introduction of the new auction system by SEBI during this year (which also
has severe limitations for true investors; criticism reserved for another
article).<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">Moreover, we have observed there was
(and still is) substantial insider buying of stock at several small-cap
companies over the last year as compared to previous years. These transactions are required to be filed
with the exchanges almost immediately after purchase. This is further evidence that the current
market in small caps contains more serious investors as compared to the past.
(By serious investors, we mean investors focused on business values as opposed
to short-term market price appreciation.)<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">Regardless of what others do, the
price to book value is a rough indication as to the cheapness of the current
market. As indicated in last year’s
report, we do not recommend purchase of the small cap index as a whole – but purchase
of select companies after due diligence.
We write this report only to indicate the <i>general</i> changes in market price and valuation of the small cap universe.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">On that basis and from a
dispassionate perspective, the current market prices appear very low compared
to historical market valuations - as to offer low risk of permanent impairment
of investment capital with the potential of large gains in capital value when
business conditions return to normal as past experience and probabilities indicates
they should.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">Significant questions remain as
to timeframe for appreciation, confidence that the business environment will
return to normal, political environment, etc.<o:p></o:p></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">Re-stating the caveats in our
last report regarding markets going lower for longer than expected may seem
like a cop-out and the intelligent reader is justified in asking “How Long?” –
we have been forced to grapple with such questions in the Indian market in real
time and will write more about this issue in another article – suffice it to
say that we don’t believe an investment operation or a thesis to be successful
or correct unless it can show superior performance </span><span style="font-family: Garamond, serif; font-size: 16px; line-height: 18px;">over bonds or alternative investment strategies </span><span style="font-family: Garamond, serif; font-size: 12pt; line-height: 115%;">over a rolling five-year
period.</span></div>
<br />
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<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;">Keeping this in mind and going
against the prevailing mood of pessimism at this time (which hasn’t completely
escaped us), we believe that small-caps in India offer among the most
attractive bargains during any time since 2006 and certainly in the entire Indian
stock market today.<o:p></o:p></span><br />
<span style="font-family: "Garamond","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-weight: bold;"><br /></span></div>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-77360113756218351072013-02-04T02:13:00.002-09:002013-02-04T07:06:28.484-09:00Under the Radar: India's Small-Cap Equities (Part Two)<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
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About a year ago, we analysed the valuation of India's small and
mid-cap indices to determine whether they were attractive for purchase by
investors (see post below). </div>
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<br /></div>
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Our analysis revealed that the indices appeared undervalued
by historical standards.</div>
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<br /></div>
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We decided to have another look at the current valuations of
the indices to recap performance and determine the price attractiveness today.</div>
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<br /></div>
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When we wrote our post last year, the small-cap index closed
out at the level of 5,550.14.</div>
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<br /></div>
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The closing level today is 7,006.73 – resulting in a gain of
over 26% in a little over a year.</div>
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<br /></div>
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So, how does this level stack up against the basic
fundamental metrics of the underlying businesses? Here’s a summary of the valuations sourced
from the BSE website:</div>
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<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
</div>
<div class="MsoNormal">
<b>Table 1: Annual
valuations (2006 to 2012)<o:p></o:p></b></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 4.65pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 360px;">
<tbody>
<tr style="height: 15.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td rowspan="2" style="background: #D6D6D6; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" width="64"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Year<o:p></o:p></span></div>
</td>
<td rowspan="2" style="background: #D6D6D6; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 59.1pt;" width="79"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">High<o:p></o:p></span></div>
</td>
<td rowspan="2" style="background: #D6D6D6; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.35pt;" width="64"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Low<o:p></o:p></span></div>
</td>
<td rowspan="2" style="background: #D6D6D6; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 57.95pt;" width="77"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Close<o:p></o:p></span></div>
</td>
<td style="background: #D6D6D6; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" width="76"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Price/<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 1;">
<td style="background: #D6D6D6; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" width="76"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Book value<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 2;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">2006<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 59.1pt;" valign="bottom" width="79"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,872.80 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.35pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 4,480.45
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 57.95pt;" valign="bottom" width="77"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,892.32 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
2.05 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 3;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">2007<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 59.1pt;" valign="bottom" width="79"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 13,376.80 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.35pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,001.33
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 57.95pt;" valign="bottom" width="77"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 13,348.37 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
2.78 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 4;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">2008<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 59.1pt;" valign="bottom" width="79"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 14,239.24 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.35pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 3,221.70
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 57.95pt;" valign="bottom" width="77"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
3,683.11 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
2.13 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 5;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">2009<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 59.1pt;" valign="bottom" width="79"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
8,425.57 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.35pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 2,864.24
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 57.95pt;" valign="bottom" width="77"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
8,357.62 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.49 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 6;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">2010<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 59.1pt;" valign="bottom" width="79"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 11,366.68 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.35pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 7,926.82
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 57.95pt;" valign="bottom" width="77"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
9,670.31 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
2.39 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 7;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">2011<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 59.1pt;" valign="bottom" width="79"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
9,920.58 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.35pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 5,460.31
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 57.95pt;" valign="bottom" width="77"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
5,550.14 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.84 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 8;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">2012<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 59.1pt;" valign="bottom" width="79"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,525.68 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.35pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 5,540.30
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 57.95pt;" valign="bottom" width="77"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,379.94 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.29 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9; mso-yfti-lastrow: yes;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 59.1pt;" valign="bottom" width="79"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b>Median<o:p></o:p></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.35pt;" valign="bottom" width="64"></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 57.95pt;" valign="bottom" width="77"></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b> 2.05 <o:p></o:p></b></div>
</td>
</tr>
</tbody></table>
<br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Table 2: Monthly
valuations (Last 12 Months)</b></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 4.65pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 333px;">
<tbody>
<tr style="height: 21.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td rowspan="2" style="background: #D6D6D6; height: 21.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" width="64"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Month<o:p></o:p></span></div>
</td>
<td rowspan="2" style="background: #D6D6D6; height: 21.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">High<o:p></o:p></span></div>
</td>
<td rowspan="2" style="background: #D6D6D6; height: 21.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" width="67"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Low<o:p></o:p></span></div>
</td>
<td rowspan="2" style="background: #D6D6D6; height: 21.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" width="68"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Close<o:p></o:p></span></div>
</td>
<td style="background: #D6D6D6; height: 21.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" width="67"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Price/<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 1;">
<td style="background: #D6D6D6; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" width="67"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: white; font-family: "Arial","sans-serif"; font-size: 9.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">Book value<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 2;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Jan-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,504.14 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 5,540.30
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,463.30 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.32 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 3;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Feb-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,263.11 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,464.29
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,859.97 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.47 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 4;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Mar-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,914.90 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,434.17
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,629.38 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.44 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 5;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Apr-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,982.30 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,641.72
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,764.62 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.35 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 6;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">May-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,844.92 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,202.13
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,271.00 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.22 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 7;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Jun-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,547.61 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,132.10
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,543.75 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.21 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 8;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Jul-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,870.17 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,355.15
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,447.89 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.21 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Aug-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,687.31 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,336.09
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,395.09 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.17 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 10;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Sep-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,045.06 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,388.01
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,017.89 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.21 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 11;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Oct-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 7,252.49
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,949.96
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
6,989.17 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.29 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 12;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Nov-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,287.09 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 6,975.15
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,275.65 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.29 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 13;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Dec-12<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,525.68 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 7,283.14
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,379.94 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.33 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 14;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Jan-13<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,696.74 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 7,049.69
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,074.07 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.34 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 15;">
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.0pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">Feb-13<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,114.58 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;"> 7,055.59
<o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.0pt;" valign="bottom" width="68"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
7,056.48 <o:p></o:p></span></div>
</td>
<td style="background: white; height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, sans-serif; font-size: 9pt;">
1.29 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 16; mso-yfti-lastrow: yes;">
<td colspan="4" nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 200.0pt;" valign="bottom" width="267"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b>Current Discount to Historical Median<o:p></o:p></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b>37.1%<o:p></o:p></b></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<o:p><br /></o:p></div>
<div class="MsoNormal">
As is apparent from the above tables, the small-cap index is
still trading at a substantial discount from its historic valuations.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Despite the 26% appreciation in market values over the last
13 months, book values have grown at approximately the same pace. (The smaller discount is a result of
including 2012 valuations to our sample last year). </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Assuming we preferred to stick to historical
facts without considering future prospects, the increase in market values just about
kept pace with the increase in business values without any revision in market
multiples.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Of course, the market may be moving toward a lower and more
permanent valuation standard for small-cap companies. Furthermore, our previous sample of six years
was shorter than ideal due to data constraints mentioned in last year’s
post. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Our current sample of seven years may be more representative
of a full business cycle than last year – particularly since it includes a mix of generally
favourable business conditions (2006, 2007, 2008, 2010) and unfavourable ones (2009,
2011, 2012). Therefore, the median
valuation may be a more appropriate ‘normal’.
If anything, we think it may be on the conservative side.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If we continue on our path of sticking to the facts, the
current valuation appears to be at a significant discount from a ‘normal’
valuation and would indicate considerable potential for appreciation before any
meaningful risk (of impairment) materialises.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The reasons for such a large discount are easily
obtainable from a casual reading of the prominent financial newspapers. The real question is whether there is an
opportunity to invest at current prices with limited risk.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Buoyed by the performance of the previous year, it is easy
to get over-confident and presume that there is nothing but good that can
happen to investors at current prices over the long-run. But this would be naive.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We know that markets can do silly things over the short-run
and it has just as much chance of quoting significantly lower prices as higher.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Since we are writing for true businesslike investors rather than market
speculators, the above factor should not concern us. What should concern us is permanent
impairment of business values.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Again, a number of factors may be quoted to prove this point
– such as a permanently lower growth rate for the country, unreliability of the
executive branch of government, poor investment rate, etc.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We are not qualified to pass judgment on the above factors –
what is clear is that the market has passed its verdict and it is evident in
current prices.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
IF we operate under the assumption that the market has a tendency
to over-react to positive and negative news (as it has done throughout history), AND that small businesses in India
will continue to operate in the future pretty much as they have over the last
seven years, current prices may offer an attractive buying opportunity despite
last year’s price appreciation.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
As the legendary investor Warren Buffett said: “The future is never clear; you pay a very
high price in the stock market for a cheery consensus. Uncertainty actually is
the friend of the buyer of long-term values.” And "So if you wait for the robins, spring will be over.”</div>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-4062042462735806122012-06-30T10:00:00.000-08:002020-05-22T13:11:36.307-08:00Chemfab Alkalies<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Chemfab Alkalies operates in the heavy chemicals industry
and is in the business of manufacturing Chlor Alkali products. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It primarily manufactures Caustic Soda Lye, comprising about
75% of revenues, which is used in various basic industries such as paper,
aluminium, textiles, etc. It also
produces chlorine (comprising 12%-13% of revenues), hydrogen, sodium hypo
chlorate, and hydro chloric acid – also finding applications in various manufacturing
industries.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported reasonably stable (albeit somewhat
declining) operating profits and revenues in the last five years – reporting about
16cr in operating profits on revenues of 77cr in the last financial year. It held cash and liquid assets of over 27cr
as at 31<sup>st</sup> March, 2012 </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is very cyclical – dependent not only on international
demand fluctuations (primarily from aluminium manufacturers) arising from global
economic cycles but also global oversupply in its own industry arising from
capacity additions by competitors. For
e.g., the company operated only at 75-80% capacity in the previous year when
excess supply was not fully absorbed by demand.
This situation results in dampening of selling prices.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is exposed to increases in energy as well as
raw material costs. This is usually
passed through to customers but this appears to be more a function of industry
practice than firm-specific competitive advantages.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is also exposed to a weakening INR as it is generally a
net importer of capital equipment.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The outlook for the chlorine business doesn’t appear to be
promising and demand growth is slower than the caustic business – management
foresees low capacity utilisation in this segment for the near future.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management have adopted a niggardly dividend policy despite
the abundance of liquid resources (see above). They have stated “lower volumes
.. lower profitability .. need to conserve liquid funds” as reasons for not
recommending ANY dividend for the year.
Any equity shareholder reading this should forcefully challenge management on
this reasoning – the extent of the policy is surely unreasonable considering
the abundance of liquid assets available with the company. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management of several listed companies have gotten away for far too long with
such disregard for equity shareholders – it is time for equity shareholders to step up and
take action to rightfully assert a more rational dividend policy concerning
their equity shares.<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--></div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-13014888781280847932012-06-30T09:56:00.000-08:002020-05-22T13:11:35.260-08:00IFB Agro Industries<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
IFB Agro Industries is in the business of producing alcohol (70% to 75%
of revenues) and marine products.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is based out of the state of West Bengal (WB),
which is well known for its regressive attitudes towards businesses. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the alcohol segment, it distributes ‘Volga’ vodka,
‘Jubilation’ rum, ‘Benjamin’ brandy (latter two launched recently). Demand in the Indian Made Foreign Liquor
(IMFL) appears to have a promising outlook with growth estimated at about 20%
per annum. It has also installed a new
plant to enhance its country liquor production capacity since demand was
outstripping supply – however, licenses weren’t granted by the state as at the
end of last year. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the marine segment, it distributes frozen marine products
in the major metros through retail chains under the “IFB Royal” brand. It also has a 48% market share in the shrimp
feed trading business. It had recently
enhanced capacities in the marine division including new IQF machines and cold
room facilities.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company has reported somewhat erratic overall profitability
during the last five years on a growing revenue base – reporting a record high
of 50cr in operating profits on revenues of almost 600cr in the last financial
year. It operated with a net cash
position (including liquid investments) of over 15cr as at 31<sup>st</sup>
March, 2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
One of the key risk factors that impact this business
appears to be its dependence on the state government in various aspects of its
business from reimbursement for molasses transport and CDM benefits for use of
rice husk in the grain distillery to allotment of ‘privilege’ land for country
liquor and export benefits in the marine segment.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The reimbursement for molasses transport and allotment of
privilege land were revoked by the state government last year and these should
be removed in any future estimate of earnings.
Other factors such as CDM benefits depend on the local availability of
rice.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Another key factor that impacts this business is the availability
of molasses, which is the raw material for the distillery. Due to the removal of above state benefit for
transport, this business is no longer viable since the price of rectified
spirit from nearby states is much cheaper.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Increases in costs of grain (due to lack of availability or
otherwise), fuel, electricity, and transportation reduce profit margins of the
grain distillery.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The state implemented MRP based pricing for country spirit,
which acts as a ceiling, and intensified the competition among existing bottlers who
are bringing out their own branded products.
This business is exposed to the whims of state government in providing
licenses despite installation of a new plant leading to idle capacity. The removal of the privilege area has reduced
barriers of entry for new competitors.
Moreover, additional capacity installation would be problematic due to
the difficulty in obtaining land for commercial use in WB.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The lucrative IMFL segment is exposed to intense competition
from large Indian and multi-national brands where the company does not yet have
any meaningful competitive edge.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is a net exporter in the marine segment and
likely to be adversely impacted by a strengthening INR. It is also exposed to rises in the cost of
raw materials for marine products.
Management expects to aggressively market its marine products to
penetrate the Indian retail segment – which is likely to entail large
expenditures in the near future that will reduce profits from this segment.</div>
</div>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-2350813770136842760.post-65983298216345340392012-06-30T09:53:00.000-08:002020-05-22T13:11:37.072-08:00Bharat Fertilisers<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Bharat Fertilisers is engaged in the fertiliser business and
construction activities.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Fertiliser is considered a core sector industry in India and
management assert that the company has the expertise, knowledge, and
infrastructure available to operate in this industry. Due to the troubles facing the industry (see
below), management are buying up ‘sick’ Single Super Phosphate (SSP) units in
the states of Gujarat, Madhya Pradesh, Karnataka, and Andhra Pradesh.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Its construction and real estate activities are concentrated
in Thane, Maharashtra. It expects to let
out commercial space within the next two to three years and generate about 5cr
in lease fees per annum (before costs).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported erratic/marginal operating profits
prior to the year ended 31<sup>st</sup> March, 2009 but has shown growth in
revenues and operating profits since then except for a minor downturn in the
last financial year when it reported over 12cr in operating profits on revenues
of about 30cr. It did not operate with
any net debt as at 31<sup>st</sup> March, 2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The primary risk pertaining to this business is total
government control on the revenue and cost side through pricing regulation and
other mechanisms – making it one of the most heavily regulated industries in
the country. This is ostensibly to
protect farmers since a large proportion of India’s population is engaged in
agricultural activities. However, the
pricing regulation has been so inefficient in the past as to threaten the
long-term viability of the industry, which could lead to withdrawal of
companies and unintended disastrous consequences for farmers.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is forced to meet production targets set by the
government.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It also faces frequent labour problems/strikes/lockouts,
which are endemic to the industry.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It faces severe delays in receiving subsidies for selling at
below-market rates to farmers putting significant pressure on its cash flows. Moreover, it incurs punitive interest rates
of 24% per annum and additional penalties for delays in refunding subsidies.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is exposed to lack of availability of raw material in the
domestic market forcing it to buy it from the international market to meet
production targets (which don’t consider these factors). It is also exposed to increases in crude oil
prices and a weakening INR when importing its raw materials.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The inefficiency of government regulation is reflected in
non-revision of SSP prices and subsidies (including inadequate freight
subsidies for SSP relative to other fertilisers) to reflect relevant economic
conditions.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The construction and real-estate business is cyclical and
exposed to economic downturns and consequent downturns in demand. In addition, inflationary factors and
government regulations (taxes, etc.) increase costs and reduce profit margins.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The real estate business is marked by heavy competition
where it is difficult to gain a competitive edge.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Government has not accorded “Industry” status to real estate
and hence, it is difficult for businesses to avail term loans from banks for
real estate development and construction.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This segment is expected to exhibit subdued performance in
the next few years as a result of the release of additional supply into the
market under the Government’s ‘Affordable Housing’ initiative under various
schemes.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-63233219186475452472012-06-30T09:51:00.003-08:002020-05-22T13:11:36.963-08:00Dhanalaxmi Roto Spinners<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Dhanalaxmi Roto Spinners is in the business of trading
textiles, paper, and wood pulp.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is established in the paper and wood pulp markets and
management intends to set up a manufacturing facility for forestry and logging
products. Management also intends to
enter commodity trading and exports.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company has reported growing operating profits on a
growing revenue base in the last five years – reporting about 1.3cr in operating
profits on a revenue base of about 30cr in the last financial year. It operated with a net cash position of 3cr.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is currently exclusively engaged in the trading
business and hence, does not own valuable long-term assets that can generate
consistent earnings. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The wood pulp market is dependent on the international
demand/supply situation and hence, slowing demand and oversupply has a
detrimental impact on the company’s profitability. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is dependent on suppliers for product and has
virtually no pricing power with customers.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Moreover, there is intense competition in this business and
a weakening INR does not help matters by making imports more expensive.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management does not have demonstrable experience in
commodity exports – and hence, their venture into this area entails above
average risk. This business would also
be subject to adverse government policies on exports based on domestic
production/consumption patterns.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management are also likely to incur substantial capital
expenditure in the near future by pursuing the manufacturing route and this is
likely to reduce cash flows available to shareholders.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Even the existing cash resources available to shareholders
have not been given to them in the past despite the low returns earned from the
business. This should call management’s
expansion plan into question and shareholders ought to demand a more rational
dividend policy concerning the cash resources that belong to them.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-27007003304208183882012-06-30T09:50:00.001-08:002020-05-22T13:11:35.921-08:00Dhan Jeevan<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Dhan Jeevan operates a hospital offering various diagnostic
and therapeutic services.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The hospital operates in various areas of medicine including
Urology, Gastroenterology, Cardiology, Neurology, Internal Medicine, and
Radiology (including MRI). </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It generally enjoys a high occupancy rate of its beds. Further, the trend of greater numbers of people
taking health insurance coverage bodes well for the hospital industry’s
revenues.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
As a result of the above and other related factors,
management intends on increasing the hospital’s bed capacity and expanding some
of the hospital’s other facilities. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported stable operating profits on similarly
stable revenues (with minor growth) – reporting almost 1cr in operating profits
on revenues of over 4.5cr. It did not
operate with any net debt as at 31<sup>st</sup> March, 2012 although this is
likely to change in the near future (see below).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is not immune to reduced demand as a result of
economic slowdowns as patients put off non-emergency visits. Even rises in interest rates reduces demand
for those patients who finance treatment with loans. Other macro-economic factors such as general
cost inflation, slow rate of infrastructure development (roads, etc.), high
taxes, etc. play their part in reducing demand.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Moreover, there is an inherent conflict of interest in this
business where higher profits may not be consistent with quality patient care.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business earns low returns on invested capital and
hence, significant expansion plans are likely to destroy shareholder
value. Moreover, management have
explicitly stated their intention to raise funds for this purpose – either
enhancing financial risk via external borrowings or diluting existing
shareholders. Further, management have
not paid dividends to shareholders in the past despite low returns. All this raises serious questions about
management’s fidelity towards their employers – the equity shareholders.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-82647174211182436822012-06-30T09:49:00.004-08:002020-05-22T13:11:37.649-08:00Rishiroop Rubber<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Rishiroop Rubber is in the business of trading of industrial
raw materials.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company supplies raw materials to various
industries. Management expects to widen the
company’s product offerings and customer base – both domestically as well as
internationally.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported losses or marginal operating profits in
the years leading up to 31<sup>st</sup> March, 2009 – after which it reported
growing operating profits on growing revenues – reporting about 7cr in
operating profits on revenues of about 60cr in the last financial year. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Investors ought to note that cash flows have not kept up (as
is usually the case in rapidly growing enterprises due to working capital needs
among other factors) and their commitments would also depend on how well
management manages its financial position rather than just growth for its own
sake.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, the company reported liquid assets and cash of
about 12cr as at 31<sup>st</sup> March, 2012.
Nevertheless, management have never declared a dividend to equity
shareholders – raising questions about management’s fidelity towards them as
well as the effectiveness with which management will deploy their capital in
the future.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is a trading outfit and hence, does not own
valuable long-term assets. It is wholly
dependent on suppliers for its products and has practically no pricing power
with customers. Moreover, it is exposed
to intense competition in its business partly as a result of low barriers to
entry.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Demand for its products is adversely impacted by a global
economic slowdown.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is exposed to raw material price volatility
that adversely impacts its profitability.
It is also adversely impacted by a weakening INR since it is a net
importer of raw materials. Other cost
inflationary pressures reduce overall profitability since it faces resistance
from customers on price increases.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-14192558603271152322012-06-30T09:48:00.001-08:002020-05-22T13:11:35.400-08:00Key Corp<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Key Corp is a non-banking finance company (NBFC) engaged in
vehicle financing.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company specialises in financing old/used vehicles and
currently finances a large portfolio of old vehicles. It is based out of the state of Uttar Pradesh
(UP) and has operated in this business for over 23 years. Management foresees ample scope for continuing
and expanding its activities.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported marginal operating profits on a reasonably
stable revenue base in the last five years except during the 2008/2009 downturn
when performance took a hit as expected.
It reported about 30-40 lacs in net interest income on gross interest
income of about 80-90 lacs in the last financial year. It held liquid assets of about 12cr in
various equity and debt funds as at 31<sup>st</sup> March, 2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is exposed to economic downturns, which reduces
demand for vehicles, and a high interest-rate environment, which increases its
cost of operation and squeezes margins.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business also faces increasing competition from private
sector banks, which are aggressively expanding into this area. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Moreover, there is generally a higher risk of operating in
this type of business in UP and similar regions due to the general lawlessness
in these areas relative to the rest of the country (for e.g. when collecting
dues).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management have never paid a dividend in the last five years
despite drowning in liquid assets raising serious questions about its attitude
towards minority shareholders.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-86057125556312000552012-06-30T09:47:00.000-08:002020-05-22T13:11:37.815-08:00Elnet Technologies<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Elnet Technologies is in the business of providing
infrastructure to the business process outsourcing (BPO) industry.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is engaged in letting commercial office space to software
and BPO firms in Chennai. Despite the
recent economic slowdown, these industries are still exhibiting good growth
rates.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported stable operating profits on a stable
revenue base – reporting about 9cr in operating profits on revenues of 17cr in
the last financial year. It did not
operate with a net debt position as at 31<sup>st</sup> March, 2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is naturally exposed to the fortunes of the
software/BPO industries. These are, in
turn, exposed to global economic slowdowns, adverse western policies on
outsourcing, demand uncertainty, etc.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is also exposed to oversupply in the industry where large
scale commercial space availability is putting pressure on rates per sq ft and
occupancy levels.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-17528731027303591522012-06-30T09:46:00.001-08:002020-05-22T13:11:35.646-08:00Arihant Capital<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Arihant Capital is in the business of providing integrated
financial services.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is primarily an equity broker but also provides
commodity, currency, and bond brokerage as well as merchant banking, financing,
distribution of financial products, financial planning, and depository services
to over 100,000 customers across the country in the retail, corporate, and
institutional customer segments. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company has reported fluctuating operating performance
in the last five years roughly corresponding to the movements in the financial
markets. It reported 16cr in operating
profits on revenues of nearly 60cr in the last financial year, while operating
with net cash and liquid assets of about 50cr as at 31<sup>st</sup> March,
2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is primarily exposed to low equity brokerage volumes
and declines in cash volumes during times of indifferent financial market
sentiment, which usually parallels periods following panic and may be
protracted. Further, retail customers
are unlikely to generate much brokerage revenue in times other than bull
markets. Moreover, financial market
sentiments are highly unpredictable making for difficulty in estimating trading
volumes and future revenues.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Another acute risk facing the business is the intensity of
competition on the brokerage scene – reducing brokerage rates across the
board. This reduces expected revenues
and profitability.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Part of the above risk entails a constant upkeep with the
latest technology – barring which the business model could be rendered obsolete
in short order. This involves
substantial capital outlays, which reduces cash flows available to
shareholders. Moreover, these
investments are likely to only bring the company’s competitive position to par
rather than give it a sustainable edge. Furthermore,
the company is still exposed to occasional breakdowns in the system causing
customer fury and potential irreparable damage to the company’s reputation.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business also involves incurring some credit risk with
customers, who may default on contracts.
The collaterals are exposed to the risk of quick and severe
deterioration of market value. It also
involves regular customer grievances due to the nature of the business and
consequent litigation, arbitration, etc. – which could lead to penalties and
fines reducing profits.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is
highly regulated by various regulatory bodies including SEBI and the stock
exchanges – non-compliance with any regulation could subject it to fines,
penalties and even suspension of its license to operate.</div>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-23057353321988465112012-06-30T09:44:00.001-08:002020-05-22T13:11:35.756-08:00Panasonic Energy<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Panasonic Energy manufactures Dry Cell Batteries.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The batteries fall under two main categories – Zinc Carbon
and Alkaline (aimed at the high income segment). All batteries are now sold under the
“Panasonic” brand name. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company recently commenced manufacturing of Flashlights
to complement the battery business.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported erratic performance in the last five
years – reporting 5cr in operating profits on revenues of over 180cr in the
last financial year. It held a net cash
position of over 20cr as at 31<sup>st</sup> March, 2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management seems optimistic about the business as a result
of very low consumption of batteries per person in India relative to global
standards. They also assert that the
concepts of compactness and portable energy needs should spur demand for
battery appliances and hence, batteries.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Demand growth, however, is very low at about 4% per year –
and some markets are even declining.
Moreover, changes in consumer usage patterns of gadgets and appliances
impacts demand for various battery types.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is exposed to a major risk of cheap imports of
low-performance AAA batteries from China in large volumes.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Further, increases in raw material costs (zinc, metal sheets,
carbon rods, manganese ore, etc.) directly impacts profit margins since the
business does not have much pricing power with customers.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The low penetration of battery appliances may not turn for
the better as management expects if technological advances in product
development reduce the need and hence, demand for batteries.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-66529116893682548322012-05-31T17:41:00.005-08:002020-05-22T13:11:37.127-08:00Garware Polyester<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Garware Polyester manufactures polyester films, which has a
variety of applications in packaging, insulation, imaging, etc. among several
others. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is the largest exporter of polyester films based
out of India and is one of only two global manufacturers producing dyed
polyester films. It owns the “Global”
brand of polyester films, which is prominent in the US and now introduced
successfully in the Indian market.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It produces polyester films in three broad categories, which
are – plain (e.g. shrink film), sun control (used in automobiles), and thermal
films, which is a recent addition.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management is looking to invest in research and development
for launching new branded products in the solar film market; as well as market
window films for offices, commercial buildings and malls to the premium segment
of that market.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported reasonably stable performance over the
last five years but has dipped in the last twelve months (see below) –
reporting just under 100cr in operating profits on revenues of about 800cr for
the year ended 31<sup>st</sup> March, 2012.
It operated with a moderate net debt load as at 30<sup>th</sup>
September, 2011.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The demand for the company’s products is largely cyclical
and dependent on both global and domestic economic cycles. For example, demand for sun control film is
dependent on the automobile industry’s fortunes, which is reliant on the
interest rate cycle and the economic cycle.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is directly exposed to increases in interest
rates on its loans, which constitutes about 25% of total capital. About half of these are foreign currency
loans and therefore, it is exposed to a weakening INR as well.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is not immune from substantial oversupply in its
industry arising from excess production capacity (as currently) and for
extended periods, which dampens selling prices and reduces profitability. The rectification of this would depend on
demand growth and the extent of excess capacity as well as other
company-specific factors.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The operations are exposed to rising crude oil prices, which
is an important raw material for production.
Moreover, there is a time lag in pricing these cost increases in the
export market, which may diminish profitability in the intervening period.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is a net exporter and therefore, its profitability would
be negatively impacted in the case of a strengthening INR.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is adversely impacted by increases in central
and state taxes including arbitrary retrospective taxes (as applied last year
by the Maharashtra state government), which would deplete the company’s
resources. In one sense, the company is
exposed to the state governments’ inefficiencies in managing its finances.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-4840525723209665152012-05-31T17:40:00.002-08:002020-05-22T13:11:36.525-08:00MVL Industries<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
MVL Industries operates in the consumer electronics (CE) industry.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company largely supplies televisions, vcd/dvd players
and the like. It owns the ‘Media’ and
‘MVL’ brands.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company operated with a high debt load in the last
financial year - which comprised largely of secured loans from banks.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company also owns quoted investments – the largest of
which are holdings in MVL Limited, which has seen a decline of over 75% in
value over the last year – resulting in market value of holdings amounting to
about 40cr.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The balance sheet largely comprises of receivables although
they are reported to be less than six months old. It is difficult to ascertain their
recoverability from publicly available information.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, the company has reported consistent growth in
operating profits and revenues over the last five years – reporting over 30cr
in operating profits on revenues of over 470cr in the last financial year. The interest expense, arising out of the
above debt, makes the net profit far more sensitive to revenue changes.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is exposed to high interest rates at the peak
of the interest rate cycle – both on its own debt as well as diminished
consumer demand that relies on loan financing for CE purchases.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The products are subject to a high risk of technological
obsolescence as rapid innovation renders current products out of date in ever shorter
timeframes.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is a low-margin business reflecting a variety
of factors foremost of which is that it is essentially a retail/trading/distribution
outlet with brands that are not prominent.
It is dependent on suppliers for products and its earnings are subject
to heavy competition from unorganised players as well as high taxes imposed by
the government.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management have not exhibited exemplary fidelity to the
company’s minority shareholders by - engaging in reinvestments in unprofitable
growth, refusing to pay out dividends, and allotting new shares to promoters on
a preferential basis. Overall they have
raised substantial financing from outside sources over the last few years that
have diluted minority shareholders.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-17266869047668813802012-05-31T17:39:00.000-08:002020-05-22T13:11:35.509-08:00Mafatlal Industries<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Mafatlal Industries operates in the textile industry
engaging in spinning, weaving, and processing of textiles.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company was de-registered from BIFR in 2011 as a result
of restoring its net worth and paying down debts. It did this by selling one of its properties
to the Piramal Group for 600cr and using the proceeds to pay off outstanding
debt.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The balance sheet revealed a much more comfortable debt
position as at the end of the last financial year as compared to the year
before.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management now plans to incur capital expenditures of 65cr
for enhancing processing capacities along with 10cr for power generation. They also intend to raise additional bank
loans to finance these capital expenditures.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported large operating losses in nine out of the
last ten years – enough to wipe out equity and then some – landing it with the
BIFR. Apparently, it is stuck with old
equipment and high labour costs. This
isn’t helped by aggressive competition from low-cost domestic and foreign
competitors. The weaving/processing
segments are fragmented and comprised of a large number of competitors.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Further, the industry suffers from below-par growth of 3 to
5% p.a. relative to other industries.
Therefore, demand growth is unlikely to ease the burden on competition.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The operations are exposed to volatile and rising cotton and
polyester prices, which comprises the bulk of the company’s raw materials and
adversely impacts profitability.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company has a significant subsidiary – NOCIL – which is
engaged in supplying rubber chemicals.
This business is subject to the risk of heavy dumping of cheap products
by Korean competitors.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is still in a ‘rehabilitation’ period with BIFR
until 2016 unless it pays off all its debts.
Until then, it faces restrictions on paying out dividends to equity
holders. It was also forced to take up
spinning activities as part of conditions set out by the Maharashtra government
for de-reserving some property that was surrendered to it (and in accordance
with BIFR sanctioned schemes). These are
some of the restrictions that equity holders need to be aware as a result of
the company being a former BIFR case.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-28105299326283648392012-05-31T17:36:00.000-08:002020-05-22T13:11:35.975-08:00Windsor Machines<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Windsor Machines manufactures capital equipment machinery
for use in injection moulding and extrusion activities – both dividing sales
equally.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It has technical collaboration with Italian and German
manufacturers for producing its plastic processing and pipe machines. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported accumulated losses in the past as a
result of a combination of poor aggregate operating performances and an extraordinarily
high debt load. Its shutdown was avoided
by secured lenders taking a 55% haircut on their loans. It had a more manageable debt load as at 30<sup>th</sup>
September, 2011 (if the company can continue to be reasonably profitable).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Its debts comprised of unsecured loans from a company and a
smaller inter-corporate loan – implying that their terms are likely to be
softer than secured loans from banks and therefore subject to less stringent
action should operating conditions turn worse.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It reported 18cr of deferred tax assets (as at 30<sup>th</sup>
September, 2011), which have value only if the company can generate sufficient
future profits to utilise them – this is far from certain.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It also lacked adequate working capital, as at that date, putting
further strain on financing its operations.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported reasonable operating profits in the financial
years (FY) ended 2010 and 2011 on growing revenues but this has taken a hit in
the last twelve months with operating profits of just over 15cr on a revenue
base of about 230cr.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It sold 608 machines in FY 2011 and 520 machines in the year
before – these numbers are likely to come under severe pressure in the
near-term due to the factors below.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Demand for extrusion machines from packaging customers has
been severely hit by the government ban on plastic packaging – this should be
discounted in the investors’ forecast of future performance.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is extremely cyclical – marked by the capital
investment cycle, which is heavily influenced by interest rates and the
economic environment. Therefore, a
period of high interest rates (such as now) would adversely impact its
operations.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is exposed to oversupply in customer industries such as
that affecting the pipe industry currently.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is adversely impacted by heavy competition –
particularly from far-east manufacturers who are setting up capacity in India
for injection moulding machines.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The operation is subject to rising costs of iron and steel –
its raw materials.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Apart from the above, the business is also exposed to
technology obsolescence, government duties and taxes, and a strengthening INR
(company is a net exporter) among other factors.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-187280127616077662012-05-31T17:34:00.000-08:002020-05-22T13:11:35.701-08:00Frontier Springs<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Frontier Springs manufactures coil and leaf springs.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is a market leader in this niche segment and supplies to
prominent customers such as Indian railways, BHEL, BEML, etc. Moreover, Siemens
Germany approved its manufacturing facilities for use in its switch gears
production.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management aims to focus on exports to increase future
profitability.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported growing operating profits on growing
revenues in the last five years, although this has taken a slight dip in the
last twelve months (see below) – with operating profits of over 5cr on revenues
of over 35cr. It operated with a modest
net debt load as at 31<sup>st</sup> March, 2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is largely dependent on the capital investment
cycle for its revenues, which is adversely impacted by high interest rates (such
as now).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is also exposed to increasing costs of steel, its primary
raw material. This is, in turn,
dependent on the global steel demand/supply scenario. Management is attempting to enter long-term
supply contracts with vendors to mitigate this risk.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Further, there has been an increase in competition, which is
putting downward pressure on selling prices.
Its easing would depend on the quality of the company’s
products/services as well as demand growth and the creation of additional capacity
in the industry.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company generally imports its plant and machinery
(albeit infrequently) and is therefore adversely impacted by a weakening INR –
as currently.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-31963061554030104362012-05-31T17:32:00.000-08:002020-05-22T13:11:36.140-08:00Haldyn Glass<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Haldyn Glass is in the business of manufacturing glass
bottles for use in the liquor, pharmaceutical, retail, food and beverage, and
other industries.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The product is more hygienic and eco-friendly than
substitutes.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management expects good growth in the customer industries –
particularly liquor, which has grown at 12% p.a. in the recent past. They are investing in advanced technologies
and bottle-printing and decoration facilities to add value to its offerings to
the food and beverage sector.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported good growth in revenues and operating
profits in the last five years – reporting over 45cr in operating profits on
revenues of about 175cr in the year ending 31<sup>st</sup> March, 2012. It operated with minimal net debt as at that date.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company’s order book is dependent on the global and
domestic economic cycles.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business requires investment in up to date technologies
to remain competitive. The product is
largely a commodity and doesn’t appear to be differentiated in any significant
manner.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The cost structure is adversely impacted by natural gas
price rises (for furnace) as well as increases in cullet, chemicals, minerals,
etc. that are required for production.</div>
</div>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-2350813770136842760.post-29605410051231395972012-05-31T17:30:00.002-08:002020-05-22T13:11:36.030-08:00ABM Knowledgeware<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
ABM Knowledgeware executes IT projects primarily for state
governments.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It primarily executes e-governance projects, which enjoys a
virtuous circle when government departments see the results of successful
implementation with their peers. The
company is currently operating in Maharashtra but plans to expand to other
states.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported consistent growth in revenues and
operating profits in the last five years – reporting over 20cr of operating
profits on over 90cr of revenues in the last twelve months. It operated with a net cash balance of just
under 15cr as at 31<sup>st</sup> March, 2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The primary risk facing the business is government apathy
and/or spending cuts, which curtails projects and reduces revenues.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business also faces substantial risks in technology
obsolescence in meeting client objectives, and acquiring and retaining skilled
manpower at reasonable costs.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Other risks include execution difficulties (leading to cost
overruns), lack of citizen awareness (leading to lesser future projects),
minimal of electricity, telephone and internet access for many citizens, lack
of coordination/inefficiencies among various government departments (increasing
execution costs), inflationary cost increases, etc.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported about 25cr in “long-term loans and
advances”, which appear to be capital work-in-progress. However, management haven’t provided details
on this item, which is somewhat surprising considering that it sticks out like
a sore thumb from the balance sheet.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-25104113515729536842012-05-31T17:29:00.001-08:002020-05-22T13:11:35.866-08:00Sicagen<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Sicagen is a trading outfit based out of Chennai.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is primarily engaged in trading commercial vehicles and
construction materials. It is a
distributor for Tata Motors.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It reported marginal operating profits on growing revenues
over the last five years – reporting over 25cr in operating profits on revenues
of 900cr in the year ended 31<sup>st</sup> March, 2012. It operated with a moderate debt load
relative to its current assets as at that date.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported 38cr in market value of quoted
investments as at 2011 year-end – this would be lower as at 2012 year-end but
not by too much.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The reported assets on the balance sheet are largely
comprised of sundry receivables and other loans and advances – their
recoverability is unknown from publicly available information.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is totally dependent on the interest-rate
environment – being adversely exposed to high interest rates, crimping demand
for its products.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is also impacted by the cyclical factors from the supply
side – including those affecting the steel industry. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Government regulations on fuel, duties, and taxes play a
large role in impacting demand for the company’s automobiles.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Being a trading outfit, the company is exposed to
significant competition resulting in low profit margins. Entry of new players could put the existing
margins at risk.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-51981791215345122892012-05-31T17:28:00.002-08:002020-05-22T13:11:36.634-08:00Veljan Denison<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Veljan Denison manufactures engineered fluid power products
such as hydraulic motors, pumps, valves, etc. that cater to the infrastructure,
construction and other manufacturing industries.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported reasonably good growth in operating
profits and revenues in the last five years – reporting over 20cr in operating
profits on revenues of over 80cr in the year ended 31<sup>st</sup> March, 2012. It operated with a very modest debt load as
at the end of the last financial year.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The demand for the company’s products is exposed to the
infrastructure and construction cycles, which are linked to the economic
cycles. Therefore, being a relatively
small player, its revenues are potentially exposed to disturbing declines
during economic slowdowns.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is subject to competition from both domestic and
foreign competitors – who are both entering as well as expanding in the Indian
market. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The operations are adversely impacted by high steel/pig iron
prices, which are the primary raw materials – and by unreliable supply of
castings from vendors. Moreover, it
faces general cost increases in power, human resources, etc. resulting from
inflation. It is a net importer of
machinery (albeit an infrequent one) as well as some raw materials - and is
therefore adversely affected by a weakening INR.</div>
</div>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-2350813770136842760.post-34732352642153265612012-05-31T17:27:00.001-08:002020-05-22T13:11:36.252-08:00Salora International<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Salora International is engaged in the distribution, supply,
and after-sales service of consumer electronics, IT, Telecom, televisions, and
other products. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It supplies products for brands such as Acer, Motorola, MTS, Sharp,
etc. along with some Chinese manufacturers.
It also supplies televisions under its own brand name ‘Salora’.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported declining operating profits (now
losses) on declining revenues over the last five years. It reported net losses of 8cr on a revenue
base of just over 400cr in the year ended 31<sup>st</sup> March, 2012. Despite the losses, the debt load appeared
moderate in relation to its current assets – assuming that its receivables and inventories
were valued conservatively.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is exposed to the interest rate cycle – with
high rates adversely impacting both the servicing costs of the company’s debts
and consumer demand i.e. those who finance purchases with loans.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is also exposed to the considerable risk of
technological obsolescence where products can be rapidly rendered out-of-date
as a result of aggressive competitor innovations.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The high level of competition in electronics retailing
results in pressure on selling prices.
The cost structure is adversely impacted by inflation, government taxes,
customer defaults (>50% of debtors exceed six months), and foreign exchange
movements among other factors.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-45760001242912126552012-05-31T17:25:00.004-08:002020-05-22T13:11:36.363-08:00Solitaire Machine Tools<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
Solitaire Machine Tools manufactures ‘Centreless Grinder’
machines for use in the automobile, textile, steel, bearings and precision
engineering industries.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management believes there is opportunity to increase sales
on the back of manufacturers looking to outsource auto ancillary products from
India.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported stable operating profits on reasonably
stable revenues – reporting just under 3cr of operating profits on revenues of
about 14cr in the last twelve months. It
operated with no net debt as at 31<sup>st</sup> March, 2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company sold 37 machines in FY 2011 as compared 24 in
the previous year – but this figure is likely to come under pressure in the
near future as the business is adversely impacted by a high interest-rate
environment (such as currently), which dampens customers’ capital investment
plans.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company is also heavily influenced by government
policies- particularly in the areas of import/export and incentives for
investments, which can affect demand and competition for the company’s
products.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is exposed to increases in raw material pricing
and/or lack of its availability.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Management plans to boost revenue via exports to Europe may
have to take a back seat for the time being as a result of the demand slowdown
there.</div>
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2350813770136842760.post-53782260840734922732012-05-31T17:25:00.000-08:002020-05-22T13:11:36.688-08:00International Travel House<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
International Travel House provides travel related services
to corporate clients. It is an associate
of ITC Limited (ITC).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It provides air ticketing, car rentals, inbound tourism,
holidays packages, conference, events and exhibition management services to
companies and conference organisers.
However, about half of revenues are generated from ITC.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The company reported consistent growth in revenues and
operating profits over the last five years – reporting 35cr in operating profits
on revenues of over 160cr in the last twelve months. It operated with no net debt as at 31<sup>st</sup>
March, 2012.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The business is exposed to all the adverse factors impacting
air travel including affordability, high fuel prices (both intrinsic and as a
result of INR depreciation), government taxes, economic downturns, natural
disasters, terror attacks, etc.</div>
</div>Unknownnoreply@blogger.com0