Companies at Crossroads: Tube Investments of india ltd, Jagran Prakshan Ltd, EID Parry Ltd, Hinduja Ventures ltd, VIP Industries Ltd, Future consumer enterprise Ltd

Off late I am planning to post a study on some companies who are at a crucial juncture in their lifeline; one right step and they will belong to another league. But I am not being able to post the study as i am very busy these days due to shifting to Nagpur. But in just a week Future Consumer Enterprise has been zoomed from 14 to 20. I have been sharing my views about this via personal emails to some readers of this blog but couldn’t post a study on this. So I am writing this post on some of these stocks which really can become a big force in the future…due to time constraint I am just writing small snapshots of the details about them. I will post the full study in the future.

Tube Investment of india: This is the maker of BSA, Montra and Hercules bicycle brands in india apart from distributing foreign luxury bicycle brands in india. It is getting around 1200 cr from bicycle sales and is profitable. I think cycle will see a big transformation in the near future from being a transportation vehicle to sports and leisure equipment. ROE of cycle division is around 60% which is great. Apart from it, it is a market leader in auto ancillary products like precision tubes, door frame and chains with turnover of around 2500 cr. It is also holding company of Cholamandalam finance and investment (50.45% stake and listed) and Cholamandalam MS general insurance ( around 70% and unlisted). Total valuation of these two is much bigger than given by the market. Few days back Gurgaon tried car free day and response was good as most used bicycle. It just need one Salman Khan to promote and and we will see this bicycle maker turning into a rocket. I have invested around 400/- CMP is 413/-

Jagran Prakashan: newspaper will not become a news of the past. I do not think that they will ever die. Online newspapers are no doubt growing but still no comparison with a morning tea with fresh newspaper. They are very important for getting regional and local news and advertisements. Print advertisements are most peaceful, they do not interfere…they just sit quietly…but they are very effective if planned in a creative way. TV ads are an interruptive phenomenon, they are attacking, forced on us…we never like them but they work on the notion of familiarness;   we have seen something so we feel attached to it and will prefer it if given an option. But most of the time, for most of the brands and products TV ads are not suitable…they are just huge wastage of money.

Jagran has a very interesting brand activation division which promotes brands in a very creative and interactive way with consumers. It is also having Out of the Home advertisement unit. I like these very much but very sad to hear that management is planning to sell these as these are not as profitable. Although I feel that management should focus more on it as very soon we will see marketing managers of a new brand will understand the weakness of TV ads and look out for something more engaging and unique.

Apart from hindi newspaper, it is also having an English paper, Mid Day media,  which is very popular in Mumbai and Gujarat. However most interesting is its Radio business for which it is investing very big. Highly profitable group and dividend is also good. My investment at 135/- CMP 145.

EID Parry: Sugar company but with great visionary management. I am a fan of them just because of their deep understanding of creating value for the company by making their suppliers more valuable. Poor farmers are their suppliers but this company cares for them like a mother. In 2011 cyclone Thane hit their factory and sugar farms in tamil nadu and badly damaged the factory and crop. Farmers were fearing for the unknown but the management took a great step and bought the damaged crop at full price and incurred loss of around 4.5 cr. But those farmers are now their biggest friend. Company provides loans to them for everything by giving guarantees to banks, guides farmers with everything.

EID is the first asian sugar company to get the certificate from Bonsucro, a global multi-stakeholder organisation for sustainable sugar growth.The farmers, who serve EID Parry’s 4,500 TCD sugar plant at Pugalur in Tamil Nadu, have undergone 53 different  tests over the last 3 years to see that they not only achieved 10-20% more sugarcane yield per acre but also saved power and water substantially through drip irrigation.

But most importantly, they have launched a branded sugar “Amrit” which is made 100% from cane with preserving all the natural minerals (potassium, calcium, magnesium, phosphorous and iron), the sugar retains the original brown colour. Normal sugar gets its white colour due to refining process. The product would be initially launched in Chennai and Bengaluru in the initial stage and would look at launching across South India by January, 2016. The initial product is a 500 gram, at a maximum retail price of Rs 30 per pack. 

We have seen branded salt (tata chemicals), Flour (Aashirwad, ITC), Dal (I-shakti, tata chemicals)…but so far nobody has tried sugar but I was waiting for the one. EID is the parent of Coromandel international (62% share) and receives heavy dividends from it, around 60-70 cr (need to check). I think as there is no shortage of funds to the group, so they can spend big on the brand promotion of Amrit sugar and it really can become a big success. CMP is 163/- around its multiyear lows.

Hinduja Ventures ltd: It is one of the biggest player in digital cable tv (Incable) and invested huge amount in next generation cable tv via satellite, HITS via name NXT Digital. MSO like Siti, Den, Hathway, Incable are still far away from realizing the full benefit of digital cable tv. People are thinking that with digitization now they are getting full revenue from Local cable operators, but it is not the case, LCO are still paying them Rs. 60-80-100 per connection (earlier it was around 30-40) and retaining the balance. Fight is still on to decide who will bill the customer and the revenue sharing. So just hold your stocks of these MSO’s as we will see the real benefit coming in the future when a more logical deal will be stuck between both.

Hinduja has launched HITS via NXT digital for catering to phase 3 of digitization covering around 5 cr subscribers by Dec-2015. Phase 3 is related to small cities (phase 4 will cover most of rural india by Dec-16) where small Local cable operators work and they lack funds to move towards digital cable from analogues. They would need huge money for digital move for having digital access system, conditional access system and subscriber management system apart from expensive hardware. HITS can save all these costs for them…so chances are big that HITS can give DTH a run for its money as DTH falters in rain, DTH can’t show local channels which are a must in small cities. Even small Goa has 13 local Konkani channels.

Actually in TV broadcasting what happens is that a TV channel like Colors uplinks its signals to a satellite. An MSO like Den downlinks the channels signals from different broadcasters from different satellites at a place in a geography (take Bhopal in MP) which is called Headend ( huge cluster of dishes, a single dish for every channel) where they are bundled together and transmitted to LCO via cables who then distributes the same to our homes. But a single Headend cannot serve entire country due to cable costs, hardware limitations, signal weakness etc so MSO have to install Headends in the entire country ( Hinduja has around 40 Headends) which is very costly.

However in HITS things are done in a different manner, here HITS operator downlinks the channels from all broadcasters at a single earth station from where signals are uplinked to a satellite used by HITS operator, so it is called Headend in the Sky, HITS. The HITS satellite further downlinks the signals directly to LCO or MSO, who will need just one Dish type transmodulator to transmit the signal directly to consumer via cables. So need for costly Headends will be reduced greatly which will benefit both the LCO/MSO and customers. HITS operator will also handle the Conditional access system and subscriber management system on their behalf which are also very costly and there is no need to install them at every Headend as in the case of a normal MSO. I am sure this HITS can compete with DTH in phase 3 & 4 of the digitization in india.

I will cover more details on HITS later on but just today read that Hinduja has already acquired 10 lac customers in first 3 weeks of the launch.

It is also having a treasury arm which earns big from investing, trading; it holds around 3.5% in indusind bank and around 5 acre in prime location in Bengaluru which is being developed by the group company. My average is around 320 as I am holding it for long and buying currently around 390. Dividend is 15/- per share! CMP is 396.

VIP Industries:  I like this stock for long. Radhika Piramal, the daughter of Dilip Piramal (promoter) is doing some really good things to VIP. I am a big supporter of doing innovative things for branding of a good high quality product. Radhika brought Alia bhatt for Caprese, which i think will be a great product. I have seen girls here in india wearing very expensive jewelry and apparel but holding very cheap hand bag as they have not still covered the hand bag in their style quotient while in western countries it is one of the sought after style.

In fact we only follow them in hand bag styles.But time is changing fast here in indi also and costly hand bags are becoming a regular. Caprese deals in mid and high range. 

Radhika has also brought back Skybags brand of luggages which are trendy, colorful by endorsing Dhawan as the face. Introduction of Alia and Dhawan is a master step as people were taking VIP as old age thing. But Alia/Dhawan are the faces of young stylish india.

VIP has started their manufacturing facility in Bangladesh in place of imports from china, which will aid into margins...more on this later. CMP is 84/-

If anybody has money and looking for a good high quality stock...this is just the place to unpack your luggage.

Future Consumer Enterprise: I have been positive on Future group companies for a long time. I think Biyani will create his real magic this time as now he understands the nitty gritty of retail and FMCG branding. FCEL has invested big in creating big fmcg product manufacturing. It has started a 110 acre food parks in Telangana. It can sell all these FMCG products in its own and other group retail chains along with other reputed brands at lower rates. My average cost is just 9 as I am accumulating it from 5 to 14 in Aug-15. It is now around 19 and it is not cheap as its market value is above 3000 cr on a sale of around 1500 cr. But scope of growth is still huge and now with Baba Ramdev with it, both can together create big brands in Indian FMCG sector due to high technological capacity of FCEL in its food park. Buy at every fall, CMP is 19.65/-

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