The Indian Bull – THE MACRO VIEW

Hello Investors’ One Question is running in my mind from last couple of weeks “WHY INDIANS ARE SO OPTIMISTIC ABOUT BULL MARKET IN COMING FUTURE”?? The answer to this question may throw some light on the feelings of Indian man about its market / the future growth on India / the rising Indian economy. Indian economy is no doubt on the growth path and truly it will rise exponentially in future to come. The financial black hole has eaten up some biggest financial firms in USA last week; Lehman Brother, Merrill and AIG (who begs loans for government for its survival) are name to few.

Indians always think of lower-rates and strong earnings and I too. Elsewhere bears are ubiquitous, but behavior has not become ultra-bearish yet.

Two-third of Fund managers in India are outright bullish, some extremely so and many are puzzled as to why the Indian market has fallen at all this year and why foreigners have been the net seller. Now a More Good News comes here that Indian market has outperformed MSCI Asia ex Japan by 25% in last two months, Also Indian domestic equity fund market has enjoyed a huge increase in average monthly inflows of INR 40 billion this year, compared to INR20 billion last year.

IN SUPPORT TO BULL RUN IN COMING FUTURE
Here I am trying to support my views “why I am bullish about India long term growth story” by giving some facts. I might be wrong here so I request you all to please correct me if I say anything not-correct

Now let me give you an interesting overview of psychology about managing money, I hope you will enjoy reading it:
If anybody continues to receive the cash to invest, he/she will hardly feel too bearish and this is double true when you live in a country whose long term growth is tremendously optimistic.
End of tightening cycle Lead by RBI
Maximum numbers of Indians believe that inflation is now close to its peak and is bound to fall in next quarters. Also commodity prices are falling and they are too close to peak out. These two main factors will force RBI to cut the rates within next few months in my opinions. The movie created by RBI in late 2004 is going to over very soon. Further falling in commodity prices lead to higher earnings of companies
Fall in oil prices will load-off some pressure from government’s budget. And the main point what I am thinking is that before elections govt will lower the fuel prices and pressure the RBI to cut down the rates for a better political environment.

The US economic condition: Now Indian investor knows to the financial crisis in US lead by credit crunch. I am pleased to see that many know that it will not affect India too much due to its domestic exponential growth. Indian companies are sitting on the mountain of cash they earned in last five and have very low leverage

Strong inflows
Domestic Indian equity MF inflows in 2008 = INR 272 billion
ULIP Inflows grown by 170% this year
In Korea, in-flow has fried up.
In China many recently launched MF funds failed to attract as much investors


The truth that we have to accept is that “investors have reacted to the stock market sell-off and gloomy macro news by hankering down and doing little.

The Main fear-factor
The rise of the dollar against the rupee has almost nullified the fall in Crude Oil price. Dollar has risen from Rs 40 to Rs 46 in just few months and that is nullifying the effect of fall in crude from 150 to 100 USD/bbl. For sharp up move in market, dollar has to settle in some lower range.

Lehman bankrupt already, Merrill bought, AIG going to collapse: Where does it all end?

Lehman bankrupt already, Merrill bought, AIG going to collapse: Where does it all end?

The global financial system is now crying for help. Lehman already bankrupt, Bank of America has bought Merill for $40 billion USD. AIG is going to next Lehman soon.

AIG has asked for 40 million USD loan from government.

These news are very uneasy to hear really. But the key question at this point is "What will make it stop?"

I am trying to present the small stories about bankruptcy of a 158-year-old financial firm, the acquisition of one of the most storied names on Wall Street, and a major restructuring of one of the world’s largest insurance companies

Lehman Brothers Holdings Inc -- > was expected to file for bankruptcy two days back. That outcome was far from certain as Bank of America was expected to bid for the “good” par of Lehman, but US declined to backstop Lehman’s bad part so Bank of America withdrew its offer and now Lehman shareholders will be wiped out. Still it is not clear how severely the Lehman’s Bankruptcy will hurt global markets

Merrill Lynch & Co --> Bank of America has agreed to pay $29 per share for Merill. This is really great news because it will give Merrill shareholders a $12 a share premium and it takes out what would have been the next firm to fail.

AIG (American International Group) --> AIG is currently under investigation to make sure that it has sufficient capital reserves to pay policy holders and remain solvent. AIG plans to announce a major restructuring Monday. Might be it will “dispose its aircraft-leasing arm, International Lease Finance Corp” valued at more than $50 billion. It is estimated that AIG needs $18 billion to stave off credit downgrades. If AIG don’t do that then it will be bankrupt completely


Meanwhile, how will global markets react to the shockingly rapid implosion of the US banking industry? Is there anything that can be done to stop the slide? If it were not so serious, I would say this feels like the end of an episode of Batman. Unfortunately, it's all too real and it's going to spread the pain around for some time to come. Meanwhile futures point to a bloodbath in global markets over the next 24 hours.

I don't know what will stop the bleeding.

My Report Copied on superstargems.blogspot.com

http://www.superstargems.blogspot.com/ has copied my report of Gremach Infra.....

I am not blaming this blogs owner for copying my reports to his blog, but instead he could have appreciated my work on his blog.....

Lehman Brother Files for Chapter 11 Bankcrupcy

Lehman Brothers has filed for Chapter 11 Bankcruptcy after Barclays and Bank of America abandoned talks to buy the company.

Lehman said that no broker-dealer subsidiaries will be included in bankcruptcy filing. It added that it is exploring sale of its broker-dealer operations. It further said that it is in advanced talks with potential buyers for investment management division.

Lehman added that the customers of the company may continue to trade/take action with respect to their accounts.

The Saga of Lehman

Only a day ago, the head of Lehman Brothers, the beleaguered investment bank, sought to assure Wall Street that the firm could survive on its own.

But those assurances seemed empty on Thursday as Lehman’ share price went into another free-fall, declining 41 percent, to $4.22. Lehman, which had been negotiating to sell its prized investment management division, is now seeking to sell the entire company. Fed officials have hinted that they would be more receptive to a bank buying Lehman, rather than a private equity firm.

Watch Crude Sinking to 80$/bbl

I think Crude will sink to 80 USD per barrel in coming days... Watch it Out....

What’s China doing differently than India?

Dear Friends, I am writing this very small article just to mention some major differences between the Indian and Chinese economy. I tried to be very simple and straight-forward in this article.

The Key Factors:
1) The Chinese economic model has been screaming “Foreign Direct Investment” and “free enterprise”.

2) The Chinese export market is mostly funded by Foreign Direct investments. Majority of the export manufacturers have foreign investments – a large portion of it coming from the Chinese population living abroad!

3) China has empowered its local authorities to clear foreign investment proposals. This makes the process faster than that in India, where RBI still has a major role to play with respect to inflow of foreign funds.

4) India’s policy to protect private domestic players is in contrast to China’s ‘free enterprise’ policy.

5) India hasn’t been as successful in tapping the potential of NRI funds.

6) Banks in China furnish loans at comparatively low interest rates to encourage entrepreneurship.

7) China has channelized its economic policies on manufacturing growth as well as the services industry. For example, the growth in the hardware manufacturing has fueled demand for related software services. One must note here that the cheap and hardworking, disciplined labor from China poses a threat to India’s software dreams!

8) The infrastructure development in China has also been overwhelming. The rising skyline of Shanghai is a result of a decade of hard work and constant labor. The Chinese economic policy has been protective of its State ventures. Most of the infrastructure development in China has been undertaken by the public sector.

REPORT ON GREMACH INFRA – Investors can take this as Buy Call

Dear investors, I am giving buy call on gremach infra for a medium to long term (2 to 3 years). We can see multifold returns in this counter. I am writing this article with all me consensus
Gremach’s foray into the oil rig business and the robust demand prospects suggest strong growth. GIEPL’s foray into oil rigs holds immense potential

Sources:
www.bseindia.com , www.money.rediff.com , www.gremach.com

CMP: 80

Year High: 504

Year Low: 72

PE: 3.28

EPS: 24.43 (March 08)

Expected EPS: 30 (FY 09)

Sales: 102.36 Crores (June 08)

Equity MCAP: 127.76

Return on average equity ~ 35%

Debt/equity: 0.6

Net Operating Income per share: Rs 135 (March 07)… amazing



Some Key factors that are favoring gremach to become a money machine:

Drilling rigs
Addition of four onshore drilling rigs with plans to add36 more in three-four years, acquisition of controlling stake in coal mines in Mozambique and the booming market for equipment rentals suggest good earnings prospects. There is a global shortage and crisis of hard coking coal and this will add huge value to the profitability of the Company.

Demand-supply mismatch
A demand-supply mismatches resulting in rising oil rig rentals. Rising rentals and better utilization levels have shrunk the average payback period for oil rigs.

NEPL
The increasing number of onshore blocks in each and every phase of the New Exploration License Program (NEPL) points to strong demand prospects. Drilling costs account for 20-25 per cent of the cost of developing an oil well and are showing an increasing trend in the earnings of company. Great factor to consider

MOU
Gremach has signed a MOU (memorandum of understanding) with Baoji Oilfield Machinery (BOMCO), subsidiary of China National Petroleum Corp for the delivery of 40 rigs, which includes 36 onshore and four offshore rigs

Infra-Equipment business- rose exponentially
The rental business of infra equipment has rose exponentially due to back of firm demand..

Entering into Coal Business
Gremach has taken a 75 per cent controlling stake in 11 coal mines in Mozambique. This region falls in the Karoo basin, which is recognized as a prime hard coking coal area in Africa

Gremach has incorporated a Singapore based SPV named Petrogrema Energy Pte Ltd. Gremach shall be making investment up to USD One Billion considering the vast global market potential in oil drilling business (subject to requisite RBI approval). This business proposal is considered highly profitable, with projected IRR 35% in the light of huge market demand for on shore and off shore drilling rigs considering unprecedented rise in crude prices. Infact, rig rental day rates for Off-Shore Rigs have risen by 13%, averaging to around $ 3 to 5 lacs per day. In the case of on shore rigs the payback period is estimated at 3 years. Several reputed Banks and other financial institutions have evinced keen interest to fund the above business Proposal / Acquisition.


The Financial Data - Impressive
Net Sales of gremach has grown from 347.38 million in quarter June,07 to 1023.62 million in quarter June, 08. Net profit has risen from 40.55 million in quarter June,07 to 121.31 million in quarter June,08. EPS for the same period has jumped from Rs. 2.66 to Rs. 7.97 in the current quarter. Sequentially, the EPS has grown from Rs. 6.16 in quarter March, 08 to Rs. 7.97 in quarter June,08. Net Profit margin has also gone up both sequentially as well as quarter on quarter.
Year High ~ Rs 500
Current CMP ~80


See its Client List…….. Hmmm it’s quite impressive…
Larsen and Toubro Ltd.
VRCL Infrastructure & Projects Ltd
Gammon
JMC Projects Ltd.
Punj Lyod
LG E & CD – NCC JV
ACC Ltd.
Reliance Eng. Assoc. Pvt.
Madhucon Projects
Nagarjuna Constructions Ltd
Hindustan Cons. Co. Ltd.
Simplex Infrastructure Ltd.
Grasim
UP State Bridge Corp.. Ltd.
IRCON International Ltd. (Govt.)
Afcons

The most esteemed infra players are the clients of Gremach. In my views its really impressive clientele list.


Shareholding pattern --- Good Holding by Promoters and MFs / Banks
Promoters: 55.68%
FII/MF/Banks: 16.36%
Public: 44.32%



Risks:
Delay in Delivery of rigs or drilling projects
Downfall in rigs rental


I would like to play on this counter for long term… remember it takes years to have multifold returns….