Thursday, 26 September 2013

Forbes Gokak

How the movie Mughel E azam is linked to Tata group? And who is the single largest shareholder of Tata Sons (Holding company of Tata Group)?

Well the answer for both these doesn't have any link with Tata. I come to second question first, the single largest shareholder is Mr. Shapoorji Pallonji Mistry, the 82 years old veteran of Shapoorji Pallonji Group who holds 18.4% in tata sons and he was the person who produced the Movie Moughel e azam with whopping 1.5 cr in 1952 and then spent 5 cr for giving it colorful touch in 2007.

Shapoorji pallonji group made huge factories for tata group which offered them shares in its group companies as payments. They further acquired stakes of those who left tata group and thus leading to current holding of 18.4%.

His daughter is married to Noel tata, half brother of ratan Tata and MD of Trent Limited (Retail arm of Tata).
But most importantly he is the father of Cyris Mistry, new chairman of tata group.

SP group is one of the largest and best construction group of india (Also oldest around 250 years Old) credited with some of the country’s most iconic constructions, including the Taj Intercontinental Hotel, the Reserve Bank of India building,Bombay Stock Exchange building  and the HSBC building all in Mumbai and some famous sports stadia such as the Braboune stadium in Mumbai and the Jawaharlal Nehru stadium in Delhi.

Apart from these,the company has built a stone palace for the Sultan of  Oman in 1971.
After the 2008 Mumbai Attacks,the company was involved in the repairs and renovation of  Taj Mahal Palace & Tower  which was severely damaged by the attack .
Other notable projects include The Imperial in Mumbai, Jumeirah Lake Towers in Dubai and Ebene Cyber City in Mauritius.

They are around 15000 cr group. Their construction business is not listed. But they have some very interesting business listed in india and that is what got my attention.

Water will be the next big thing in the gold. we can survive without power and petrol but not without water. Hence i think all the companies dealing in water technologies (Only serious and Honest Groups) are great for investment. we picked Va Tech Wabag around 450/- and it touched 580/-. Now it is around 535/- and is still a great buy.

but there is another company which is having the lion's share ( around 60% ) of indian water purification market.

what will we see in our mind if someone says 'Cadbury'? we recognize 'milk chocolate', say 'Xerox' and we understand photocopiers. Say Aquaguard? and here we is water purifier.

Yes , it is the one who teaches us if something looks clear doesn't mean that it is safe...EUREKAFORBES. It is part of the Pallonji group, but it isn't listed directly. Infact it is 100% subsidiary of group's Listed company Forbes Gokak Limited, Which is mainly into precision tools and shipping/logistic sector with turnover of around 300 cr. it was in losses sometimes back but coming back to profits now.

However their main crown Eurekaforbes is having a turnover of around 1500 cr with NP of 35 crores. it is the company which brings the concept of direct selling to india in 1990's and still today it is having a dedicated workforce of around 8000. On the most of it, it is featuring among the best employers list of india for last three years. this feat of having 8000 strong workforce of direct selling employees is almost impossible to emulate in today's world. they were the main building blocks of the success of Eurekaforbes, because the locations, which are having water supplies having less dissolved particles, they don’t need RO system...but you need experience selling agent to check all these variables and this is where Eurekaforbes scored much better.

when all the companies in india has one line in their mission statement "To Enhance/maximise shareholder value" , Eureka is having Customer satisfaction and relationship as mainstay of its corporate existence vision. And this Customer Concentration is what renowned management schools are teaching now  days, leaving aside the shareholder value maximisation. A pharma company can enhance shareholder value by selling a product which is dangerous for public health.
But you care for customers and you become a brand, a force to reckon with and shareholder value grows up automatically. Indian companies copy these management Mantras from their western counterparts. 

how can "maximising shareholders Value" can be the mission of a comapny? doesn't it look too selfish and vague? It was western companies like Ford who brought the mantra of Professional management setting aside management by family persons from promoter group. Professional people are required when scale of business becomes very large for a family conglomerate or where specific skills are required like our Air India, The maharaja which is ailing because people who are running it doesn’t know anything about an airlines.

Eureka forbes is bringing in some great water purifying technologies into india like one iodine based earlier used by NASA for its space programmes. Iodine is very safe compared to chlorine and bromine.  It is eyeing global footwork and has entered into a jv with Lux international from Switzerland ( Not our Lux Soap) forming Forbes Lux Inc to distribute water/air  purifiers, security system across the globe mainly in west Asia.

The credentials of management group are top class since one of their director Cyris Mistry is now steering the Tata group. I don’t have any reason to be sceptic of management group. Shapoorji Mistry, 48, the elder brother of Cyris is now heading the group who has strong ambitions to take the group to global scale. The whole SP group is media Shy and they rarely appear into the scene or media. They are very humble and down to earth people.

Their precision tools business is also growing. I couldn’t study much about their shipping business which i feel can also grow stronger in line with overall growth in Indian port based logistic business. Their new venture Forbes Technosys which is into process automation segment like ATM’s, MICR handlers, includes e-Governance solutions such as G2C transaction kiosks, bill payment kiosks, POS terminals, electronic cash registers, portable biometric enabled platforms for UID registration and authentication. It has already won several innovation awards globally .

The turnover for this segment doubled in 2011-12 to 91 cr from 45 cr. It is having strong order book from banks and govt dept and added several new customers like  volkswagan, shriram finance, maruti suzuki. It got its first order from Indian railways for 80 ATVM’s ( automatic ticket vending machines ). Although it has incurred losses of 8 crores but future is great with the increase in scale.

It is having 22 subsidiaries , but scale of others are small. Its stock price is at 530/- after touching 1075/- from 400/- after the news came for Cyris mistry to mentor the tata group. its 2008 low is around 350/- hence its price is still not upto its full potential. On the basis of 2012-13 consolidated results, it has achieved a turnover of 1976 crore with Net profit of 83 crore with EPS of 67. it is trading at a PE ratio of around 8 which is low given it has great scope for ample growth going forward.

Group may consider listing some of its unlisted companies like infra and construction. But for Forbes Gokak, the real value lies in Eureka forbes and if it gets listed then the price can touch sky.  It is a very vast group and i’m yet to study some of the main segments of their business like their venture of solar lamps named Eurodiya ,their foray into packaged bottled water through franchise mode etc.

But for me it is a buy at current prices and at a every fall. Only problem is it is traded at a very low volumes hence fragmented buying is the best option.


(Views are personal and should not be taken as a recommendation for buy or sell a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing)

No comments:

Post a Comment