Indian Budget & Clean Energy

Everyone around was looking forward to US Federal Budget, because it was accepted that President Obama's government would definitely unveil sops for the companies in the clean energy sector and they can take advantage by buying those stocks. I am not very sure what was the extent of sops offered and the stock market impact on the companies in US.

However, not much attention was given the Indian Budget presented by Mr. Mukherjee which surprisingly offered a plenty of sops for the clean energy sector. Though he allocated a small proportion of its stimulus measures to climate investment but on the back of its new carbon-intensity target, the government has included a range of measures in the 2010-11 budget. Some of the key ones are:

• National Clean Energy Fund has been announced for research and innovation. This will be financed by a dedicated levy of INR50 (USD1.1) per ton of coal produced or imported. With annual coal demand of 550m tons in 2008- 09, the new clean- energy fund is expected to reach at least USD550m annually

• Photovoltaic and solar-power equipment has received a 5% excise duty exemption. Excise has also been reduced on environmentally friendly LED lights by 4%

• The budget also allocates INR14bn (cUSD300m) to environmental and clean energy projects with USD110m going for renewables and the rest for waste and water

• Finally, the allocation for India’s Ministry of New and Renewable Energy has been increased by more than 60% to USD220m in 2010-11

In total, the budget allocates over USD1bn for clean energy and other climate-related measures and thus I believe one theme that could be worked on for a long term period is this clean energy sector. The only problem I see with this is that the companies model is a high risk high return one and so the gestation period can be longer than estimate.

Happy Investing...!!!

Karuturi Global: From Flowers to Food Security

The next stock I believe has the potential to provide good long term returns is Karuturi Global Ltd. The company is the leader in $ 64 bn cut rose industry with 8% market share.

The biggest theme that plays around the probable success of this stock is world's food shortage which the company is trying to meet. For their agricultural venture the company has acquired 310000 ha of land (almost 7 times the size of Mumbai) in Ethiopia. The company will develop this land to produce food crops to meed the ever rising demand in the global market.

I strongly believe at the current price of around Rs 18/share the stock is highly undervalued (trading at a TTM P/E of around 6 ) despite the high past growth rate and strong future growth potential. The only risk one can assign to this stock is the high execution risk, whether or not the management has the ability to handle a project of this magnitude and scale.

Hence, one should add this stock to a long term investment portfolio.

To read a detailed report on this stock please use the following LINK

Happy Investing...!!!

BGR Energy: Building the Power Story

Last week I heard a very interesting story which eventually gave me the idea of investing in BGR Energy Systems Ltd. Thought of sharing with you.

Years back when the South African Government opened their country for outsiders to come and do mining for diamonds, entrepreneurs form all over the world rushed to South Africa in the hope of finding diamonds and changing their fortunes. Of them only very few were able to do so and become rich. But there was one African business man who instead of joining this rat race to discover diamond started the business of selling/renting hammers and other mining material whoever was coming to discover diamond. He eventually became a millionaire and one of the most successful entrepreneur of this Diamond run.

I hope some of you must have realized the point I am trying to put here. In India currently most of the companies are running to set up the power plant to generate power and other half are running to build the great power generating turbines or boilers. But very few are there in the business of building the Balance of Plants (BOP) which accounts for more than 35% of the total money spent in building up a power plant.

Thus, I strongly believe that there is a huge potential in this sector and BGR energy being the undisputed leader with a strong order book and execution track record offers great long term investment opportunity.

I would recommend one to start a SIP form of investment in this stock for a minimum of 2.5-3 years period, since at the current levels investing lump sum might be a little dangerous given the market conditions.

For further information regarding the stock, please use the LINK to download a detailed report on the same.

Happy Investing...!!!

Continuing the Medication...!!

Suppose you are seriously ill since 2 years and are on medication. Your condition is also improving slightly. However, on your last doctor's visit, he says that he will continue your medication for the extended period. What would this mean to you and your family, that actually you have not recovered well and so accordingly is the doctor's advice.

However, instead of being concerned with this advice of the doctor, your family and friends started celebrating and became very cheerful.

Doesn't this sounds a little funny or strange...?

But that is exactly what the Global capital markets has done in last 18 odd hours since the US Fed maintained the pledge that it would keep the interest rates low for an "extended period". This could only mean that the FED believes that the economy is not completely back on tracks from the slump. But the overall mood in the global markets is really cheerful, with all the key benchmark indices being up by around 1-1.5%.

Hence, I would again as always suggest that the things are not as good as the media is putting in, the markets have already given a whopping over 110% plus returns since last one year and hence the upside potential is capped. So, be cautious...!!

There are two stocks I believe could be added to an investment portfolio with 2-3 yrs time horizon. BGR energy and Karuturi Global. I will shortly come up with a detailed analysis of the same.

Happy Investing..!!

11 basis points to Go...!!!

You must be wondering what this 11 basis points refer to. Its actually the number of basis points India's Wholesale price index needs to cross the RBI's threshold mark of 10%.

The wholesale price index (WPI) jumped 9.89 % in February 2010. compared to a rise of 8.56% in January 2010. Meanwhile, the WPI for December 2009 revised upwards to 8.1% from a provisional rise of 7.31%. It could be that the WPI for Feb may also be revised upwards in the month of April and the government is just choosing to keep it below the 10% mark for the sake of comfort of capital markets.

At its January policy review, the Reserve Bank had raised its WPI inflation projection for end-March 2010 to 8.5% and it is already much above that in the month of February. Thus, I believe that it would in all probability lead to a hike in the key rates by RBI of a minimum 50bps in the April policy review of its monetary policy.

Hence, I believe the way the markets are cherishing the higher advance tax figures is not justified. One has to keep in mind that the figures with which Q4 advance tax numbers are being compared are Q4 FY09 numbers which is a period of peak recession, hence the numbers will certainly look good. So, nothing to get overwhelmed. Some of the markets experts believe that the India Inc. is set to come up with a fresh round of QIP placements and in order to make sure that the positive euphoria remains so that the issues can be done through easily, they are paying higher advance taxes.

So, idea is to remain over cautious and only invest in non rate sensitive sectors like FMCG, Agriculture, Pharma and Media.

Happy Investing...!!!

"Bharat & India" Theme: Indian Food Processing Sector

As mentioned in my last post that me and my team are currently working on the sectors that could really benefit because of the recent thrust on the Indian rural sector that intends to bridge the gap between Bharat & India.

We strongly believe that We strongly believe that the current impetus given to the agriculture sector in general and food processing in particular provides a good opportunity to invest in the Indian Food processing sector.

The key advantages of this sector is that:

• It provides value addition to the food
• Increasing the shelf life of food and reduce wastage
• Value addition helps in improving the quality of the agri-produce leading to compensable prices for farmers for their produce
• Thus is provides more money in the hands of poor farmers and

The final stocks we recommend are Ruchi Soya, Lakshmi Energy & Foods Ltd and Agro Tech Foods Ltd.

However, Given the fact that because of the rise in global equity markets the prices of the mentioned stocks have already gone up by an average of 150% in last 6 months, one can make an

initial small investment and then add on dips. The SIP form of investment with equal weight

on the three stocks is also a feasible way to invest.

You can use the LINK to download the full report which contains the detailed analysis.

Happy Investing..!!