VC, PE updates (Last week)

VCcircle.com

Tesco Finally Gets Indian Partner, Tata’s Trent
Oman Investment Fund, Others Invest $185M In Quippo Telecom
Russell Investments To Increase Exposure To Indian Real Estate
Why SPV Is A Preferred Route For Real Estate Investors Now
Credit Suisse PE Invests $100 Million In Hydrabad’s Indu Projects

Australia’s IPGA Buys Into Real Estate Portal RealAcres.com
Helion Ventures Invests $4 Million In HummingBird Suites
News Roundup: Pharma Co Bags $35M UNICEF Order, RPG Big On Telecom Towers
WL Ross & Goldman Sachs To Put In $100 Million In SpiceJet
Vistaar Religare Film Fund Gets SEBI Approval; Plans To Raise $50 Million

For Acumen Fund, ROI = Profits + Social Impact
SHCIL, IFCI Offload NSE Shares; Reported Valuation Of NSE $4B
Deutsche Telekom Invests $75 Million In Devas Multimedia
Govt Rejects SBI-SocGen JV Proposal For Depository Services
News Roundup: ICICI Ventures Eyeing KIMS, ONGC In Race For Marathon’s Angola Field

Last Week’s Top Stories

Anil Ambani And Spielberg Close To Signing A Deal: Report
Rajan Anandan New MD, Microsoft India; Jaspreet Bindra To Head Entertainment Div
Walt Disney Picks Up 15% Stake In UTV’s Broadcasting Arm
Capvent Readies $250-Million To Invest In First & Second Time Funds
PE Funds To Pick Up 11% Stake In Banglore’s Dynamatic Technolgies For $18M

AMP Capital Announces $750-M Asian Infra Fund; To Invest In India
News Roundup: Suzlon Eyes Shanthi Gears, BSNL Unions Reject ESOP Offer
Government To Draft New Norms For VC/PE Industry
ICICI Venture’s Mezzanine Fund Invests $10M In MAS Financial
E-Publishing Firm PreMedia Raises $4 Million From NEA IndoUS Ventures

Seedfund Is Now Targeting $50 Million Fund: Report
Publicis Buys Google’s Search Engine Marketing Business
Mumbai Angels Invests $500K In Mobile TV Company
Lighthouse Announces First Closing Of Rs 500-Crore India 2020 Fund
Fabiani’s Frontline Strategy Invests $7 Million in Krishna Saa Fabs

Voice Search Firm Ubona Gets Series A Funding From Capital18
News Analysis: Who All Will Benefit From 3G?
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IndiaPE.com

PEs buy in as realtors face a cash crunch
VC firm sets up incubation centre in India to spot fundable start-ups
Private equity lures B-schools
Ross, Goldman to invest $100m in SpiceJet
ICSA plans buyouts in US, SE Asia

Quippo Telecom to raise $185 mn
VCs continue their bargain hunt
VC in Bollywood promises directors to newer platforms
ICICI Venture eyes stake in KIMS
Direct Logistics eyes cos in N America & Europe

BoR to raise Rs 250 crore through private placement
Australian Firm To Acquire Stake In Indian Online Portal
Deutsche Tele picks up 17% stake in Devas Multimedia
EVENT ALERT: HEDGE FUNDS INVESTMENT AND RISK ANALYSIS to be held on 20-21 October 2008 in Singapore
PEs still heading to India


Source: Above sites.

India's 10 prosperous cities

India's 10 prosperous cities

A study jointly conducted by the National Council of Applied Economic Research's Rajesh Shukla and Future Capital Research's Roopa Purushothaman says that on conservative estimates, 379 million people will be added to India's urban spaces over the next 40 years -- more than the entire population of the United States today.

The study also mentions which cities have India's richest households and identifies 20 key cities to track. These cities together account for just under 10 per cent of India's population, but generate 30.8 per cent of disposable income.

The cities have been put in three categories: Megacities, which are the largest cities in terms of population and overall consumer markets; Boomtowns, which stand out as the next set of big-population cities with high expenditure per household; and Niche Cities, which are smaller in terms of overall population but still hit well above their weight in spending per household.

The Megacities are -- (Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, and Pune); the Boomtowns are -- (Surat, Kanpur, Jaipur, Lucknow, Nagpur, Bhopal, and Coimbatore); and the Niche Cities -- (Faridabad, Amritsar, Ludhiana, Chandigarh, Jalandhar).


More @ http://specials.rediff.com/money/2008/aug/11sl1.htm


Source: Rediff.com

New 39 FNO stocks from Aug 21,2008

http://www.nseindia.com/content/circulars/faop11119.htm
NSE/FAOP/11119

Introduction of futures and options contracts on 39 additional individual securities

With reference to circulars no NSE/F&O/0014/2001 dated June 29, 2001, NSE/F&O/0027/2001 dated November 07, 2001, SEBI circular SMDRP/DNPD/CIR -26/2004/07/16 dated July 16, 2004, and approval received from SEBI, members are hereby notified that the following 39 additional securities will be available for trading in F&O with effect from August 21, 2008:



Sr No Symbol Security Name
1 ABGSHIP ABG SHIPYARD LTD
2 AKRUTI AKRUTI CITY LIMITED
3 ASIANPAINT ASIAN PAINTS LIMITED
4 BALAJITELE BALAJI TELEFILMS LIMITED.
5 CONCOR CONTAINER CORP OF IND LTD
6 COREPROTEC CORE PROJ. & TECH. LTD.
7 DCHL DECCAN CHRONICLE HOLD LTD
8 DISHTV DISH TV INDIA LTD.
9 EVERONN EVERONN SYSTEMS IND. LTD
10 FSL FIRSTSOURCE SOLU. LTD.
11 GSPL GUJARAT STATE PETRO LTD
12 GTLINFRA GTL INFRA.LTD
13 GVKPIL GVK POW. & INFRA LTD.
14 HCL-INSYS HCL INFOSYSTEMS LTD
15 IBREALEST INDIABULLS REAL EST. LTD
16 ICSA ICSA (INDIA) LIMITED
17 KLGSYSTEL KLG SYSTEL LTD.
18 KSOILS K S OILS LIMITED
19 MIC MIC ELECTRONICS LIMITED
20 MINDTREE MINDTREE LIMITED
21 MLL MERCATOR LINES LIMITED
22 MONNETISPA MONNET ISPAT LTD
23 MRF MRF LTD
24 NBVENTURES NAVA BHARAT VENTURES LIMI
25 NOIDATOLL NOIDA TOLL BRIDGE CO LTD
26 OPTOCIRCUI OPTO CIRCUITS (I) LTD.
27 ORBITCORP ORBIT CORP. LTD.
28 PRISMCEM PRISM CEMENTS LTD
29 PTC PTC INDIA LIMITED
30 RIIL RELIANCE INDUSTRIAL INFRASTRUCTU LTD
31 SINTEX SINTEX INDUSTRIES LTD
32 SREINTFIN SREI INFRASTRUCTURE FINAN
33 THERMAX THERMAX LTD
34 TORNTPOWER TORRENT POWER LTD
35 TV-18 TV18 INDIA LIMITED
36 UCOBANK UCO BANK
37 UTVSOF UTV SOFT. COMM. LTD.
38 VOLTAMP VOLTAMP TRANSFORMERS LTD
39 WALCHANNAG WALCHANDNAGAR INDUSTRIES

The details of market lot and list of contracts being made available for trading in the above securities will be informed to members separately through a circular on August 20, 2008.

For any clarification members are requested to contact following officials
Sachin Dhar & Janardhan Gujaran on 022-26598151, 022-26598152


-----------------------------------
These stks may get action in near term. Watch this space.

Source: NSEindia.com

P-Notes back on SEBI agenda

P-Notes back on SEBI agenda

Participatory Notes are once again on the agenda of the capital market regulator, with the Securities and Exchange Board of India (SEBI) set to begin a review of the entire “regulatory framework” governing these instruments at its board meeting on August 13.

The PN virus! SEBI announces new payment system for IPOs

The return of PNs to the agenda of the SEBI board has triggered expectations among market participants that the capital market regulator may look at easing some of the restrictions that were introduced in October 2007 as there has been a change in the economic environment and also in the market conditions.

At the time, SEBI had proposed that foreign institutional investors (FIIs) and their sub-accounts cannot issue or renew PNs with underlying as derivatives with immediate effect.

Sebi for easing financial reporting norms SEBI disgorges Rs 80.34 lakh from 33 entities

They had to unwind their current position within 18 months. The capital market regulator had also said that FIIs cannot hold over 40 per cent of assets in PNs. Official sources indicated that part of the review could include a fresh look at the 18-month deadline in view of the recent developments in the market.

“A lot of data has flowed in on PNs since October last year. This would help us in the review on August 13,” official sources said. They added that any decision on policy change was unlikely on the same day as it would be the first meeting on the subject.

FIIs are concerned that their sub-accounts have been barred from participating in futures and options. Moreover, the capital market regulator had ordered winding up of PNs issued to investors in unregulated jurisdictions.

PNs are offshore derivative instruments that allow foreign investors to invest indirectly in a country’s stock markets without disclosing their identity. The October 2007 restrictions on PNs were brought in the backdrop of copious capital flows into the country.

Ever since the curbs on PNs were announced, the FIIs had been net sellers, initially due to these restrictions and later beginning January 2008 on account of global financial turmoil following deepening of US sub-prime crisis.

“Since the start of the calendar year, it is difficult to say whether FII selling was driven by curbs on PNs or was it due to global financial turmoil. It looked to be combination of factors,” sources said.

In the meanwhile, SEBI had overhauled the entire FII regulations and also simplified the process of their registration with the regulator. Official sources said that there was no problem as such on FII registrations now and indicated that the board would not consider this subject on August 13.

However, of late, there are concerns of market business being driven out of India to places like the Singapore stock exchange, where volumes of trading on Nifty futures and options have surged in recent times. This may now compel SEBI to take measures to discourage participants to shift to alternative market places.

Source: SIfy

Reliance in talks with HPCL, CPCL, KRL for D6 oil

Reliance in talks with HPCL, CPCL, KRL for D6 oil

Reliance Industries is in talks with state refiners for sale of crude oil it plans to start pumping from its eastern offshore KG-D6 block from next month. The company is in advanced talks with Hindustan Petroleum Corp, Chennai Refinery and Kochi Refineries for sale of 34,000 barrels per day of oil it will start producing from the gas-rich KG-D6 block on Krishna Godavari basin from September. "We do not intend to use the D6 oil in our Jamnagar refinery and are close to tying up sales with state-refiners," a company source said.

The company is investing USD 2.234 billion in developing the MA-1 and MA-2 oil fields in the predominantly gas-rich block. Oil reserves in the block are estimated at 53.5 million barrels and production will last 11 years, beginning with 20,000 bpd in first year and rising to 30,000 bpd in second year before beginning to decline.

Sources said the Aker Smart-1 floating production storage and offloading system (FPSO) is expected on the field any day now. It may take 4-6 weeks to install at the field and oil production will begin soon after. The FPSO, contracted for USD 733 million, will help eliminate the need for piping the oil to the shore for onward transportation to refineries.

Oil tankers can directly load at the FPSO and carry the oil to the destined refineries. Reliance is separately investing USD 5.2 billion in phase I of its gas field development plan, the first output of which is expected around the same time as oil.


Other ET top stories:
What made RIL a global player?
Tesco to invest Rs 480 cr in India, ties up with Tata
Market Review: Investors book profit ahead of P-notes meet
Infosys cuts down hiring target by 10,000 this fiscal
UBS posts Q2 losses, writedowns of $5.1 bn

Min No To Special Oil Tax
Bindra magic: Now, corporates to sponsor shooting
Cabinet forms committee to review impact of high ATF prices
Min No To Special Oil Tax
Award damages if gas pact with RIL doesn't work out: RNRL

L&T bags Rs 38.16 bn order from metal industry
Reliance Retail to bring UK's Hamleys toys to India

Stocks to watch: Elder Pharma
Stocks to watch: Jindal Saw
AnandRathi assigns 'buy' to Crompton Greaves; target Rs 320
Buy Punj Lloyd for target Rs 532: Sharekhan
ULJK assigns accumulate on Voltamp Transformers; target Rs 1025

Stocks to watch : Punjab National Bank
Stocks to watch: Panacea Biotec, Texmaco
MF Global Sify puts hold on VIP Industries
Sharekhan puts 'buy' on Aban Offshore; target Rs 4829


Source:ET, http://economictimes.indiatimes.com/headlines.cms

Industrial growth slows down to 5.4% in June

Industrial growth slows down to 5.4% in June
Investors book profit ahead of P-notes meet
Market tanks on false alarm over IIP

A slowdown in the manufacturing sector pulled down India's industrial growth in June to 5.4 per cent from 8.9 per cent a year ago, but consumer sector nursed its way back to health growing 10 per cent. Growth in manufacturing sector, which accounts for over two-third of the Index of Industrial Production, fell drastically to 5.9 per cent from 9.7 per cent a year ago. Manufacturing exhibited a similar trend in the first quarter as well, growing by a poor 5.6 per cent compared with 11.1 per cent last year.

The only silver lining was that consumer durables growth gathered momentum in June registering a growth of 3.5 per cent against a negative growth of 3.6 per cent last year, pushing up the overall consumer sector growth to 10 per cent. Electricity sector growth fell to 2.6 per cent against 6.8 per cent a year ago, while mining sector bounced back to post 2.9 per cent growth compared with 1.5 per cent.

Industrial growth almost halved to 5.2 per cent in the first quarter of 2008-09 from 10.3 per cent a year ago. Even though industrial growth slowed down in June year-on- year, the pace was much less in the earlier two months of this fiscal compared to a year ago. According to revised figures, IIP grew by 4.19 per cent in May against 10.6 per cent a year ago and 6.2 per cent in April against 11.3 per cent in the first month of 2007-08.

For the quarter under review, electricity growth slowed down to two per cent against 8.3 per cent, but mining growth was up by 4.7 per cent against 2.7 per cent. Consumer goods sector, which bore the brunt of rising interest rates, showed revival with durables segment coming out from negative growth in June and also the first quarter. In the first quarter, consumer durables grew by 3.8 per cent against -0.7 per cent.

Consumer non-durables segment growth was up by a whopping 12.2 per cent in June against 6.3 per cent a year ago. However, for the first quarter, the growth in consumer non-durables was 10.1 per cent against 12.4 per cent because of less growth in April and May. Overall consumer goods sector grew by 8.5 per cent in the first quarter from nine per cent a year ago.

However capital goods production, which is crucial for future industrial production, grew by just 5.6 per cent in June against 23.1 per cent a year ago. Intermediate goods growth was 2.9 per cent in June against 8.6 per cent and basic goods 2.9 per cent from 9.2 per cent. In terms of industries, ten out of 17 industry groups have shown positive growth in June. The industry group Beverages, Tobacco and Related Products have shown the highest growth of 22.3 per cent, followed by 12.6 per cent in Transport Equipment and Parts and 11.5 per cent in Basic Chemicals and Chemical Products.

----------------------------------------------
Mkts fall 291 pts

Investors overlooked June IIP data and declining crude oil prices to book profit on Tuesday, bringing an end to five-day rally. They were also cautious ahead of SEBI meet on participatory notes Wednesday, marketmen said. India's industrial output grew by 5.4 per cent in June compared with a growth of 8.9 per cent a year ago. However, the growth was in line with market expectation of 5 per cent. Manufacturing sector, which accounts for over two-third of the Index of Industrial Production, grew by 5.9 per cent against 9.7 per cent a year ago.

“IIP numbers for June were in line with expectations. The growth has definitely slowed compared to last year. Though this moderation raises some concerns on the overall growth, we do not see the situation worsening. The moderation in IIP is due to previous tightening by RBI. Inflation being the key priority, both RBI and the finance ministry have traded growth for containing inflation,” said Krupesh Thakkar of India Capital Markets.

Bombay Stock Exchange’s Sensex closed at 15,212.13, down 291.79 points or 1.88 per cent. The index touched a high of 15579.78 and low of 15124.91 during the day. National Stock Exchange’s Nifty ended at 4555.50, down 1.40 per cent or 65 points. It touched an intra-day high of 4649.85 and low of 4525.75.

“Rally in the market for the last three weeks has been sentiment based, which took benchmarks up by 24 per cent. We are still in a bear market and it was right time to book profits. IIP figures have disappointed to some extent,” said Vinod Nair, deputy head of research at Religare Securities.

Source: ET

Sensex up 336 pts, Nifty up 90 pts at 4620

Closing Bell: Benchmarks close over 2% up

Fresh bout of buying towards close of trade Monday helped benchmark indices close over 2 per cent higher. Banks, real estate were gained while IT stocks ended in the red.

Bombay Stock Exchange’s Sensex closed at 15,497.05, up 329.23 points or 2.17 per cent. It touched a high of 15,520.71 and low of 15,367.97. National Stock Exchange’s Nifty ended at 4620.15, up 90.65 points or 2 per cent. The broader index touched a high of 4625.20 and low of 4529.35 in the day.

BSE Midcap index ended 1.58 per cent up at 5980.22 and BSE Smallcap Index closed 1.22 per cent up at 7,269.65.

BSE Realty Index closed 5.31 per cent up at 5,801.34 and BSE Bankex ended 3.76 per cent higher at 7,673.25. BSE IT Index ended flat-to-negative at 3,882.07. Biggest Sensex gainers were Jaiprakash Associates (8.17%), Reliance Infrastructure (7.76%), Maruti Suzuki (5.16%), ICICI Bank (4.93%), State Bank of India (4.92%) and ONGC (4.31%). Losers comprised Sterlite Industries (-2.24%), Tata Consultancy Services (-1.06%), Tata Steel (-0.98%) and Infosys Technologies (-0.58%). Market breadth was positive on the BSE with 1723 advances and 985 declines. In Europe, FTSE was up 0.70 per cent, DAX gained 0.33 per cent and CAC 40 was up 0.46 per cent.
(above figures are provisional)
------------------------------------------------
Sensex ends up 336pts; realty, banking stocks shine

The Sensex opened with a positive gap of 262 points at 15,430 on the back of positive cues from the global markets. The index, thereafter, displayed firm trend throughout the day on the back of smart gains in banking, realty and oil & gas stocks.

The index touched a high of 15,521, and finally settled with a gain of 336 points at 15,504.
The BSE Realty index surged 5.3% to 5,799. The Bankex advanced over 4% to 7,702, and the Oil & Gas index surged 3% to 10,437.

The market breadth was fairly bullish - out of 2,776 stocks traded, 1,736 moved up, 971 declined and the rest were unchanged today.The NSE Nifty moved up 91 points to end at 4,620.

INDEX MOVERS

Jaiprakash Associates soared 7.7% to Rs 198. Reliance Infrastructure surged 6.7% to Rs 1,102. DLF added 3.5% to Rs 568.
ICICI Bank rallied 5.7% to Rs 771. SBI moved up 4.7% to Rs 1,593. HDFC and HDFC Bank added 2.2% each to Rs 2,570 and Rs 1,309, respectively.
Maruti surged over 5% to Rs 716. ONGC and Reliance Communications gained 3.7% each at Rs 1,103 and Rs 454, respectively. Reliance advanced 3.3% to Rs 2,326. Mahindra & Mahindra added 2.8% to Rs 590, and BHEL was up 2.5% at Rs 1,827.

...AND THE SHAKERS
Sterlite slipped over 2% to Rs 625. TCS and Tata Steel were down 1% each at Rs 834 and Rs 645, respectively.

VALUE & VOLUME TOPPERS
Reliance Communications topped the value chart with a turnover of Rs 239.50 crore followed by Reliance (Rs 232.50 crore), Reliance Capital (Rs 220.70 crore), debutant Vishal Info (Rs 216.25 crore) and Reliance Natural Resources (Rs 181.20 crore).Reliance Natural Resources led the volume chart with trades of around 1.73 crore shares followed by Vishal Info (1.17 crore), Kashyap Technologies (1.05 crore), IFCI (99 lakh) and Cals (73 lakh).

Source:ET, BS

India's Abinav wins Gold.... India's First Individual Gold in Olympic History

Abhinav Bindra makes history
India wins Gold

Abhinav Bindra [Images] won India's first ever individual Olympic gold medal on Monday with a thrilling come-from-behind victory in the men's 10 metres air rifle event.

Congratulate Abhinav Bindra!

Bindra was fourth after qualifying but had a brilliant final round and even hit a near perfect 10.8 on his last visit to pull in front of Henri Hakkinen of Finland, who dropped to bronze with a poor final shot of 9.7.

How Abhinav clinched gold

That allowed China's Zhu Qinan, the defending Olympic champion and heavy favourite, to pass him on his final shot and win the silver medal.

"It's just great," Bindra said just before climbing on to the podium.

Zhu suffered a late lapse in concentration in the qualification earlier on Monday morning when he had to rush his final shots to make the time limit, thus dropping to second place behind Hakkinen ahead of the final.

He was close to tears and said: "I was under tremendous pressure and at times I felt really agitated. But I tried my best."

India's last Olympic gold medal was from hockey (8th gold) at the 1980 Moscow [Images] Olympics [Images]. Bindra's feat betters the silver medal effort of double trap shooter Rajyavardhan Singh Rathore [Images] at the Athens Games in 2004.

Randhir Singh, Indian Olympic Association secretary-general and former shooter who was present at the range, was stricken with nerves as the competition reached its climax.
"I haven't prayed so much in my life. With the second last shot they tied together and then he (Bindra) shot a 10.8. It couldn't have got better," he said.

Bindra won the 2006 World championships and finished seventh in Athens four years ago.
Earlier, Gagan Narang failed to make the final cut in the same event as he finished ninth with a score of 595/600. He shot a series of 97,100,100,100,98,100, while Bindra, a Khel Ratna winner, finished the qualifying event joint-fourth with Romania's George Alin Moldoveanu. The duo had a score of 596/600.

The bespectacled shooter scoring sequence was 100, 99, 100, 98, 100 and 99.
Finland's Henri Hakkinen qualified first for the event with a score of 598/600 after shooting a series of 100, 100, 99, 100, 100 and 99.

China's Qinan Zhu was a point adrift of Hakkinen with a series of 100, 100, 100, 100, 99 and 98.
---------------------------------------------
Abhinav Bindra: Grit and determination personified
Olympics: Abhinav Bindra wins men's 10m air rifle gold
Congratulate Abhinav Bindra / Greet Abhinav
India must give Abhinav respect GOLD-en words / Images
Goldfinger Bindra makes history
Not bothered about history: Bindra
• Victory of nation: Abhinav’s parents
• President, PM congratulate Bindra
• 'Abhinav has made India proud'
• Happiest moment of my life: Milkha• India's Olympic medal winners


Source:ET, Rediff

IPO analysis: Austral coke, Resurgere Mines Minerals

Mining for more?

COMPANY : AUSTRAL COKE & PROJ ISSUE
SIZE : Rs 119.1-142 .3 CRORE PRICE BAND : Rs 164-196
DATE : AUGUST 7-13 , ’08 RATING: ***

Austral Coke looks attractive at the current offer price. Investors are advised to subscribe to this issue Austral Coke & Projects, a metallurgical coke manufacturer and provider of construction equipment on lease, has come out with a public issue of 7.26 million equity shares and another 1.09 million shares will be available under a greenshoe option. It plans to use the funds mainly to set up a metallurgical coke plant of 1.5 lakh tonne capacity and an 8-mw captive power plant. Post-issue , the promoters’ holding in the company will decline from 87.41 per cent to 63.18 per cent.

BUSINESS:

Austral manufactures coke and refractory, and provides construction equipment on lease to medium/large construction companies. Around 55 per cent of the company’s topline comes from the coke division and 25 per cent from equipment. But the coke business accounts for 80 per cent of its operating profit, compared to 15 per cent contributed by equipment. Austral has a current met coke capacity of 3.75 lakh tones, which will rise to 5.25 lakh tonnes by the end of FY09. Its captive power plant will also come up at the same time. The company’s customer base is welldiversified and is thus, insulated from any slowdown in a particular industry. Its customers include Jindal Saw, Essar Steel, DCW and Nirma. The company plans to get away from its leasing business and focus on acquiring coking coal mines and manufacturing coke. It also plans to start mining from its mine in Mozambique.

FINANCIALS :

Austral’s revenue from manufacturing has almost quadrupled in the past three years. Its focus on coke manufacturing and use of advanced technology (stamp charging) has improved its operating margin by five times in the past three years to 35 per cent. In fact, this is higher than 27 per cent for its closest competitor, Gujarat NRE Coke (GNCL). Though the company has made many investments in recent years, the average RoCE for the past three years works out to a modest 17 per cent. Traditionally, Austral’s debt-equity ratio (DER) has remained slightly below 1, while the interest coverage ratio is well above 5. Post-issue , the company’s DER will further fall to around 0.5.

GROWTH POTENTIAL :
Huge demand for coke from steelmakers has pushed up price to $700-800 a tonne. Given huge expansion plans by steel companies, demand is set to stay robust, as there’s not enough supply of this commodity globally.

VALUATIONS :
The company’s closest listed peer is GNCL, which was originally promoted by the current promoters of Austral. By end-FY 09, Austral will have a met coke manufacturing capacity equal to 42 per cent of that of GNCL. The latter has an m-cap of Rs 3,500 crore. So, Austral should have a market value of around Rs 1,500 crore . Though both companies have mining assets abroad, in case of Austral, mining from these assets has not yet started. Even after discounting this value by 50 per cent, the fair value per equity share of Austral is almost double that of the offer price. At the upper price band, Austral’s trailing P/E is close to 15.4, which is at par with its peers. We have assumed full exercise of the greenshoe option and its diluting effect on shares for these estimates . Considering its attractive valuations , investors can subscribe to this issue.

RISKS:
Austral sells in the spot market; hence, it is subject to spot price fluctuations. Further, any downturn in the commodity cycle will hit the company’s profitability.
------------------------------------------------
COMPANY :
RESURGERE MINES & MINERALS
ISSUE SIZE : Rs 117-121 CRORE PRICE BAND : Rs 263-272
DATE : AUGUST 11-13 , ’08 RATING : ** 1/2

Negative cash flow from operations is a major concern for Resurgere Mines. Only investors with high risk appetite should consider the IPO Resurgere Mines & Minerals, an iron-ore miner , has come out with a public issue of 4.45 million shares, which includes 0.25 million shares reserved for its employees. The company plans to use the IPO proceeds to purchase mining equipment to set up extraction and crushing facilities at mines. It will also invest in six railway rakes to set up transportation logistics facilities for captive purposes. Post-issue , the promoters’ holding will decline to 56.12 per cent from 66.5 per cent.

BUSINESS:
The company produces iron ore of different sizes and trades iron ore fines. Currently, it operates in three mines - two in Orissa and one in Jharkhand. But it carries out mining activities in the area of third parties, who have the original mining lease. Resurgere has also got a bauxite mining lease through one of its wholly owned subsidiaries. The total amount of iron ore and bauxite reserves in the current mining area of these mines is estimated at 74.82 and 4.92 million tonnes (mt), respectively.

FINANCIALS:
Resurgere’s revenue from mining and trading activities has more than quadrupled in the past three years, while operating profit has risen by more than seven times. The company’s operating margin (currently 26.7 per cent) has remained volatile due to the variation in trading amounts. Once export of iron-ore fines commences , margins are set to improve further. One major concern for the company is the negative operating cash flow in the past five years. The company has tried to maintain a low debt-equity ratio (currently 0.24). With the IPO, this ratio will fall further.

VALUATIONS:
The company’s enterprise value (EV) is close to Rs 820 crore at the upper price band. A discounted cash flow approach reveals that even at 30 per cent of capital cost and 20% growth rate, it will take only 5-6 years to recover the EV from operating cash flow . Further, an estimated inventory of iron-ore fines worth Rs 34 crore is lying idle, which can be used once the company obtains railway rakes from next year. The bauxite mine, with estimated reserves of 4.9 mt in 43 acres out of a total 661 acres will add further value. All these facts indicate reasonably good valuations at current offer price. But the main concern lies in the company’s ability to convert its revenue into cash flow, since it has failed to generate cash from operations in each of the past five years. We believe the issue is risky and only investors with above-average risk appetite should subscribe to it.

RISKS: Any downturn in the commodity cycle will majorly impact the company’s profitability.

Source:ET