Avoid Temptation Foods and Compact Disc India - Fraud, Fake companies

Temptation Foods - Amazing valuation

I was shocked when I found a company with the balance sheet of temptation foods selling so low - almost close to its EPS. Although it is possible to find several stocks current market which are 'value for money' a company which has such a decent growth as Temptation Foods and which is selling at a P/E of around 1.2 - makes me feel suspicious. Ok, let me be honest, this time, I was less suspicious and more excited at first about the investment opportunity. However, as I continued finding our more about Temptation Foods - I have decided to stay away from this stock. Here are two quick reasons:

1. Temptation Foods had manipulated it balance sheet to show that it holds 11% stake in Kohinoor Foods, when it actually held 5% stake. A SEBI notice regarding this sent the stock plummeting to hit the lower circuit. Consequently all FII's have dumped this stock, and rightly so.
2. The company now wants to double the equity by issuing warrants at Rs. 36. The EPS of the company is Rs. 25. There is no way the management can justify a price as low as Rs. 36. This is clearly a dubious money-making attempt of the management of Temptation Foods India.

I would like to add a note that probably Temptation Foods is not a fake company. Which means it seems to actually have products in the market (unlike Compact Disc India mentioned below). However, with the given management, it is a wise decision to avoid investing in this stock. Remember, a fraudulent management can really leave the investors in a shock (remember what Satyam's managers did to that company?). You will hear a lot of things about Temptation Foods - for e.g. it being the next possible acquisition target for Nestle etc. While this may or may not be true- with this kind of managers, I would get rid of this stock - NOW!.

Compact Disc India - a step further in Fraud

Compact disc india looks even a bigger fraud than Temptation Foods. From what I read, this looks like a completely fake company !

The promoter of this company - Suresh Kumar has a dubious record. Mumbai police has written to SEBI about Suresh Kumar floating fake companies to make money. The details are summarized very well in Tarkeshwar's blog. So I won't elaborate further.

Please avoid Compact disc india if you love your hard earned money !

Best Dividend Paying Stocks in India - highest dividend payout ratio

Dividend yield versus Dividend payout ratio.

In this post I will list some of the best stocks in india which have highest dividend payout ratio. Whenever a company earns profit, it distributes part of the profit as dividend to stock holders.
The amount of dividend paid out by the company is best measured by "Dividend Payout Ratio" which is defined as the ratio of dividend distributed by the company to PAT - the total profit earned (after tax). Companies with a dividend payout ratio of over 50% can be considered as those who distribute the dividend generously.

However, there is an alternative way of measuring how much dividend you get on a stock - called the "Dividend Yield". This is nothing but the amount of dividend you get per stock divided by the price you pay. Note that dividend yield changes as the price of the stock changes. A dividend yield of a stock can be high, either because the company has a high dividend payout ratio, or simply because its price is very low.

Best Dividend Paying stocks with highest dividend yield

In any case, if what matters to you is how much dividend you get per amount of money invested, then you should look at 'Dividend yield'. Here are some good stocks which have good dividend yields as of July 2010. I have also made sure that the stocks have some good fundamentals like ROE of 15%+, high interest cover, and good future prospects.

Dividend yields, at the time of writing this post (july 2010). I will update this list every quarter.

Name of the Company / Stock	Dividend Yield
SRF Ltd.	6%
HCL Infosystems	4.6%
NIIT Technologies	4%
Tamil Nadu Newsprint and papers	4%
J K Lakshmi Cement	3.9%
Ballarpur Chini Mills	3.5%
Graphite India	3%
Castrol India	2.9%
Tata Steel	2.8%
GE Shipping	2.8%

My personal choice (also considering the future growth prospects of the company, and not just dividend yield)

1. Graphite India
2. Tamil Nadu Newsprint and Paper ltd.
3. NIIT Technologies (this stock will be risky if debt crisis in Europe worsens).
   

List of best, highest dividend paying stocks in India with not just highest dividend payout ratio, but strong fundamentals

As mentioned above, Dividend yield is price dependent, and you must check the latest price to get correct idea of dividend yield in the above list. However, a dividend payout ratio is something which is price independent and reflects the policy of the company in paying dividends. Below is a list of stocks with high dividend payout ratio.

In compiling the list below, I have not just focused on the dividend payout ratio, but also on other key financial ratios which ensure that the company is sound and safe, and has good growth prospects. Here are some of the factors that have been considered.

1. Dividend payout ratio of at least 30%. This is the ratio of dividend distributed by the company to the total amount of profit after tax earned.
   
2. Market capitalization of 500 crore+
   
3. Interest cover of 3 or above.
4. ROE of 15% or above.
5. Qualitative factors which focus on future growth and prospects for the company.
   

So here is the list. I think these stocks really make a good investment option.

Typically, well established FMCG companies top the list of high dividend paying stocks, as can be seen in the list below. However the list of good dividend paying stocks mentioned below also includes companies from other sectors like Pharma, IT, consumer durables, Power/Energy, etc.

1. Hindustan Unilever (HUL) - This is the biggest FMCG company in India. It has a dividend pay out ratio of about 65% - 85% ! one of the highest in the industry. Other positives for this stock include - less sensitive to economic downturns, low debt, highest ROE (over 120% - indicating a highly efficient business model), and decent growth. However, note that recently HUL has been losing market share to Godrej Consumer Products, especially in rural areas. So although I wouldn't put all my money on this stock, this is definitely a stock you want to have in your portfolio if you are focusing on dividend.
2. Tata tea - Again, one of the good FMCG stocks to have in your portfolio. Dividend payout ratio of over 75%.
3. Castrol India - This is a debt free company with a dividend payout ratio of over 75% on average. Other attractive numbers - ROE of over 70%, almost debt free. The company has been growing at modest pace of 10% in the past 3 years (due to recession), however bottom line has grown by over 30%.
4. Nestle India - Again, a good FMCG stock with average dividend payout ratio of over 70%.
   
5. Godrej Consumer Products Limited (GPCL) - Godrej has better growth prospects than Hindustan Unilever, I think. It is also a good dividend paying stock, with dividend payout ratio of over 65%.
6. ITC - Indian Tobacco Company - average dividend payout ratio of about 65%, in 2009, it was 94%!.
7. Glaxo Smithkline Pharma (GLAXO) - a good pharmaceutical company, with dividend payout ratio of over 60%. I had mentioned this stock in the list of best stocks to invest in 2009, and it has indeed given over 2 times the index returns.
   
8. HCL Technologies - A good IT stock. Dividend payout ratio of over 60%. However, note that IT stocks are in general vulnerable to slowdown in Europe, US.
9. Clariant Chemicals - This is also a good value stock. Dividend payout ratio of over 60%.
   
10. Alstom Projects India - This is one stock I am planning to put my money on, not just for its high dividend payout ratio of 35%-40%, but also because this is one company which is going to benefit by the possible 'nuclear energy boom' in the country. With the Indo-US nuclear deal passed, India will see lot of investments in building Nuclear reactors. Alstom is one (of the several other) players to be benefited by this.
    
11. CRISIL - Crisil is the leading credit rating agency in India with a market share of over 60%. Crisil has a dividend payout ratio of around 45%. Must have stock in your portfolio.
12. Blue Star - Blue star is the market leader in India in commercial air conditioner business. It has a dividend payout ratio of over 35% and a highly efficient business model with ROE of nearly 50%. Moreover, with increasing summer temperatures throughout india, Air conditioners is something you can bet a portion of your money on.
    

The above is not an analysis or recommendation to buy the stocks, but it is certainly a good list from which you can pick your 'best dividend paying stocks'. I myself own several of the above stocks. Especially the last 3 stocks in the list are not exactly 'best dividend paying', but they are good dividend paying stocks which have one of the best growth prospects.

List of Best Stocks by category : Best Dividend Paying Stocks Best Small Cap stocks (coming soon!) Best MidCap Stocks (coming soon!). Best Stocks across all categories (coming soon!). Posts related to the theme "Best Stocks to Buy Now" (2010) Suzlon Energy - Best Wind Energy Stock for 3-5 yr investment. Crisil - Best Stock for Long term Investment Titan Industries - Best Consumer Durables Stock for long term Investment Apollo Hospitals - Good Stock to buy for Long term investment. Godrej Consumer Products - Best FMCG stock to Invest Now Stocks which were "Best Stocks to Invest" for year 2009, but now, the analysis may or may not apply, as prospects for the current year have changed. Best Stocks to buy in 2009. Glaxo - Best Pharma Stock Cipla - Good Pharma Stock Tata Tea- Best FMCG Stock Hero Honda - Best Auto Stock for 2009. Hindustan Unilever - Safe FMCG stock Posts on Investment Basics Understanding the P/E Ratio Return on Equity (ROE), ROCE and Shareholder's Equity Consolidated results vs. Standalone Results. Topline Growth vs Bottomline Growth

Suzlon Energy and RePower - Best Wind Energy Stock - detailed Analysis

Wind Energy

I am bullish on Wind Energy - and other green energies like those from Biofuels. There are several reasons for this and some of them are discussed in my earlier post on Investing in Wind Energy Stocks. No doubt, other forms of energies like Nuclear energy will also play an increasing role. However, there are strong reasons why I think that we will soon see a period where there will be a 'boom' in wind energy, with several companies trying to set up their own wind farms and wind turbines to satisfy their energy requirements. In this post I am going to analyze a Wind Turbine manufacturing company 'Suzlon Wind Power' (together with Repower, its subsidiary) and explain why at current valuations, this company offers the best investment opportunity, with a time frame of 3 to 5 years. Even if you are not located in India, you can buy stocks of Indian companies, for e.g. by registering with Interactive Brokers.

Suzlon Wind Energy and Repower- best Wind Energy Stock

Suzlon owns 90% of the Repower, and Suzlon Repower combine are the third largest wind turbine manufacturers by market share. Suzlon acquired Repower in 2009, by aggressively outbidding Areva. Read more about Suzlon acquires Repower. Here is the general business overview of Suzlon and Repower.

1. Suzlon manufactures wind turbines in the range of upto 2.1 MW capacity and targets developing and emerging economies like India, China, Latin America, etc. In 2009, Suzlon held a market share of 53% in India. See Suzlon Products Portfolio on Suzlon's homepage.
   
2. Repower manufactures turbines in from 2.5 MW to 6.15 MW capacity and mainly targets developed nations like Europe, UK, US, etc. Repower 6.15 MW turbines are highly suitable for offshore wind farms, something we will see more in the coming years - as building large wind farms in the sea becomes more economically viable option than using up the expensive land area. See Repower products Portfolio on Repower's homepage.
   

Although the above is only a rough guideline, note that Suzlon also has sold several wind turbines in developed world e.g. U.S., Australia, etc. To dig deeper into Suzlon's business model, i recommend reading Suzlon's Investor Presentation.

Note on REPOWER wind energy stock : Note that REPOWER stock can be bought separately (but not in India, in German stock exchanges). Since the offshore wind farms are expected to see a 'boom', Repower alone also in my opinion is one of the best wind energy stocks available at the moment. This is given the fact that Repower margins are expected to improve because of the advantage of Suzlon's marketing network.

Suzlon Wind Energy stock - financials

1. Suzlon's current Debt equity ratio is about 1.5.
   
2. ROE for the years 2005 to 2008 has been 38%, 29%, 28%, 20%. From 2008 to 2010 Suzlon has not had a profitable year.
3. Exepected topline growth is about 20% in Wind industry, once the global economy recovers.
4. EBITDA margins during 2005-2008 were about 8% to 10%. In 2008, and 2009, margins have dropped to less than 4% due to various reasons like lower volumes, recall of some of its problematic blades, etc.
   

EBITDA margins are expected to grow as volumes increase (at least this is what Suzlon Wind Energy claims in one of its presentation). Suzlon is doing a lot for managing its debt, it has achieved a 24% reduction in debt in the previous financial year by sale of 35% stake in Hannsen Gearbox. In the financial year 2010-2011, it has launched a 2:15 rights issue, which again it plans to use to reduce its debt.

Suzlon Wind Energy stock - Positives

1. Suzulon's products are nearly 20%-25% cheaper than other leading wind turbine manufacturers. Since initial cost for setting up wind farms is quite significant, this is a great advantage.
2. Suzlon is a vertically integrated company, and can leverage its network to increase sales of Repower products too.
3. Suzlon held a 53% market share in India, a fast growing market for Wind turbines.
4. Management of Suzlon has been very aggressive in expansion of the company. The company started with merely 3 employees in 1995 and went on to become the third largest in the industry by 2009.
5. Several governments have and are likely to provide tax incentives to encourage clean energy options like Wind Energy.

Suzlon Wind Energy stock - Risks, Negatives.

1. There is extremely high competition in the industry with several different players.
2. Suzlons blades have been a major problem in the past with almost all blades supplied to the US developing cracks. These had to be replaced costing Suzlon over Rs. 2000 crore.
3. Suzlon has serious debt problems. It has $500 million in zero coupon FCCB (foreign currency convertible bonds) due on June 2012 and Oct 2012. Suzlon has managed to bring down the floor price of this bond. However, if the company does not do well by June 2012, and these bonds do not get converted, then the company is in deep trouble in paying back the money. Moreover, even if all the FCCB get converted, there will be about 20% equity dilution.
   
4. Any slowdown in China, US and Europe will impact sales.

In all, it is worth investing in Suzlon only if you understand these risks.

Suzlon Wind Energy stock- summary

Concerns about the quality of its blades and high debt remain the main risk factors in investing Suzlon Wind Energy stock. However one should note that recalls and problems with products is something which has been experienced by other large companies, - remember the largest car company Toyota recalled more than 8 million vehicles worldwide?. That does not necessarily mean the company cannot overcome the problem. Moreover, at current valuations (1.6 times Book Value), Suzlon Wind energy stock is attractively priced and I think of this as the Best Stock available and makes a great investment opportunity.

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The Future of Wind Power - invest in Wind Energy stocks

Wind energy - The best green, renewable energy of the future

The Wind Industry has been growing at the rate of about 20% annually in the past few years (at least if you exclude the years of global recession). One can try to expect similar growth figures in the future. But what this article does is to present (with rigorous support of facts) that there will much greater growth in wind industry by 2015-2020. In other words, the coming decade will witness a BOOM in wind energy. Is Wind power 'the next Big thing?'. Continue reading the post and if you have any more insight to offer, please share it in a comment with the readers.

Fossil Fuels - A predictable end

The addiction of Human kind to Fossil Fuels is very disturbing. There are two problems with Fossil Fuels. First, it is highly polluting, environmentally damaging - and as oil companies dig deeper and deeper for more oil reserves, the chances of devastating oil spills like the one caused by BP in the Gulf of Mexico will increase. However there is also another big problem with Fossil Fuels and Oil - they are simply not going to last !. If you look at current oil reserves , you will notice how most oil reserves will last only for the next 50-100 years. Of course, new reserves are being found and there are also some even more environmentally damaging alternatives like heavy crude oil. But clearly, all these are not enough to meet the growing requirements of the world economy. Currently more than 50% of the worlds power is generated by Fossil Fuels (including coal). These non-renewable energy sources, although may not get 'finished' very soon, will become more and more expensive. A glimpse of this was seen at the end of 2007, when oil prices reached $140 per barrel. Thus Fossil Fuels are heading towards a very predictable end - slowly they will get more and more expensive and there will be a 'tipping point' when investments in alternative energy sources like wind energy, solar energy, bio fuels will attract a lot of attention. Fossil Fuels are supposed to remain dominant until 2030, but slowly their importance will be reduced.

Wind Energy Facts

Wind energy is one of the best, abundantly available renewable energy source on this planet. Here is a list of Wind Energy Facts which will convince you why this is the best green energy that human kind should start investing in.

1. According to a wind study done in 2005, the total quantity of wind energy on earth is roughly five times our total energy requirement ! Wind energy is abundant, convinced?
   
2. Energy required to construct and install wind energy equipments (like turbines, towers etc.) is paid off back in less than 9 months of time. Thus this is truly a green energy.
   
3. The current wind power usage (as of 2009) shows that the wind energy accounts for only 2% of the total power generated in this world. Thus plenty of room for a 'big boom' in wind energy.
   

Before explaining how to financially benefit from this possible future boom of wind energy, let me first list some of the advantages and disadvantages of wind energy.

Wind Energy - Pros and Cons

Wind energy advantages -

1. Renewable, plentiful available energy source.
2. Wind turbines operate 24/7, unlike solar energy which can only produce power during the day.
   
3. Zero pollution - completely environmentally friendly, green energy.
4. Wind farms can also be built in the sea (offshore wind farms).
   

Wind energy disadvantages -

1. Building large on shore wind farms may require a lot of land, thus it is usually not economically viable to build wind farms near big cities.
   
2. Visibility- some people complain that wind farms do not look very pleasant (minor disadvantage - from my viewpoint).
3. Wind farms, wind turbines, occasionally kill birds when they pass through the blades. (but the number of birds killed by fossil fuel pollution is much greater than this)
   

In the next post, I will list some of the best wind energy stocks, along with their analysis.

TTitan Industries - best stock in Consumer Durables for long term

Titan Industries - best stock to buy now

This article plans to convince the reader with facts that Titan industries is one of the best stock available in Consumer durables, (or even when compared to stocks in other sectors). This stock was listed as the Best stock to buy in 2009, and since Jan 2009 (when that post was written) the stock has gained over 150% (as compared to 80% returns given by the index over the same period). The core business of Titan Industries is manufacturing and retailing of wrist watches and Gold jewelry (Tanishq). Titan is also emerging as an important player in Eye-wear retailing (Titan Eye Plus). Below is a review of Titan Industries (including comments about its subsidiaries Tanishq and Titan Eye +), its financials, risk and business outlook.

Titan World - Wrist Watches

The current core business of Titan Industries, Titan Watches is expected to grow at the rate of 20%-25% in the coming few years. One biggest plus point of Titan, is that being a market leader, it enjoys a competitive advantage. Moreover, the management takes continuous efforts to maintain/increase market share, for example:

1. Titan Releases one stylish watch design every month.
   
2. Titan, with the recent launch of Titan Zoop has aggressive plans in place to capture the currently untapped market for kids watches.

Tanishq - Gold and other Jewelery

Tanishq is a fully owned subsidiary of Titan Industries. Tanishq expects its topline to grow by 30% to 40% in the coming few years, faster than the watch segment. The market for Jewelery in India is evergreen and growing and although there is high competition in this segment, Tanishq is the only player selling branded products.

Titan Eye +

Titan was again quick to realize that the market for Eye-wear - frames, glasses and lenses, also lacks branded items. Titan Eye + or Titan Eye plus is a fully owned subsidiary of Titan Industries and being an extremely new player has more scope for growth. Titan Eye plus currently has 85 stores across 42 cities. It plans to expand this to 300 stores in the next 3-4 years. I expect margins to significantly improve in the coming 3 for years, so the bottomline will grow faster than the topline.

Titan Industries - Financial ratios, Risks and drawbacks

Here are the key financial ratios of Titan industries.

1. ROE of about 30%, consistently in the past 5 years.
   
2. Long term debt equity ratio of 0.2.
3. Operating Profit Margins have been slightly above 8% which is not bad as compared to other retail industries.
   
4. P/E ratio of about 39 (At the current Market price of 2200). This is a bit high and thus the stock may not be an excellent buy from short term or medium term perspective.
   

Thus the meaning of "BEST Stock" in the title should be understood as Best stock for Long term investment (3 to 5 years or more). It is best to 'accumulate' this stock, i.e. buy on every dips in small portions, rather than buy lump-some.

Titan Industries - overseas expansion plans

Titan watches have a strong market presence in South East Asia and Middle East and some African countries like Kenya. About 10% of its revenues from watch segment come from outside. However recently Titan has clarified that it has put its plans to expand overseas on hold (read Titan news ). Its attempt to launch brand Tanishq in United States has failed to obtain the desired response and hence the stores have been closed. Although currently Titan is focused on the Indian Market, since it is constantly looking for growth opportunities, may think of overseas acquisition or expansion plans especially in China and Russia. In any case, this is the kind of stock that I like to buy and hold, without worrying too much about market movements (after I have bought the stock). Disclosure- I have started buying this stock in small portions. I plan to buy a big chunk if the price falls below Rs. 2000.

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Godrej Consumer Products (GPCL) - best FMCG stock

Godrej Consumer products - best FMCG stock

Godrej consumer products is a leading FMCG company based in India which manufactures soaps, personal and hair care items, and other home care products like insecticide, hand sanitizers, etc. Some of the popular brands of Godrej include Cinthol (soap), Renew (Hair Color), Colour Soft (Hair Color), Hit (insecticide), Goodknight (mosquito repellent - insecticide), Brylcream (hair styling gel), etc.

Godrej 3x3 strategy and recent acquisitions

Godrej Consumer products has been talking about its 3 x 3 strategy - a strategy to spread to 3 continents (Asia, Africa, South America) in 3 areas of Home Care, Personal Care and Hair care. Godrej has been aggressive in its expansion plans to the above mentioned continents (frequently referred to as the emerging markets) and its recent five acquisitions include

• Acquisition of the Issue group (hair color) in Latin America.
• Acquisition of Tura Brand in Nigeria.
• Acquisition of Megasari group in Indonesia.
• Acquisition of the remaining 51% stake in Godrej Sara Lee (a joint venture)
• Acquisition of Argencos (hair styling cream) in Latin America.

Godrej Consumer products - stock price and financials

Godrej consumer products stock is currently (as I write this post) selling at a price of about Rs. 343 which is at about 40 P/E. 40 P/E is very high. It looks likely that godrej will grow at about 20-25% in the coming years, which vaguely speaking justifies a P/E of about 20-30. However, despite the high P/E, the stock seems to be cheap, especially because of its current acquisitions. According to a press release by Godrej, it expects to see revenues of Rs. 4000 crore in the coming financial year as a result of the coming acquisitions. This is more than 3 times its current revenues. This together with the anticipated growth of 20% in the coming years points out about 50% possible upside in this stock. The debt arising from the above acquisitions is not likely to decrease the valuations so much because of a healthy ROCE (of about 30%). Especially because of the acquisition and the current valuations, this stock is likely to provide over 30% returns per annum for the next two years.

Competition with HUL

Hindustan Unilever remains a market leader in several segments (like soap) in India. However HUL seems to be slowly loosing its market share to Godrej, which has slightly less expensive prodcuts. Moreover profit margins of Godrej are significantly higher than those of HUL. This is what makes GodrejCP one of the best FMCG stocks available right now in Indian stock market.

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Crisil - Best Stock to buy for Long Term Investment

Crisil - why is this one of the best stocks ?

Crisil - or Credit Rating and Information Services India Limited - assigns ratings to various financial instruments like bonds, debt and even mutual funds. Credit Rating Agencies like CRISIL are important for market efficiency because investors rely on their ratings for risk assessment. For e.g. if you want to buy bonds of a company or say even invest in a mutual fund, it would be very difficult for individual investors to conduct individual study. Crisil is a market leader in India with 60% market share in domestic bond market and 53% market share in bank loan market segment.

Growth prospects and financial info

Crisil is currently trading at a P/E of 25 as I write this post. To check the latest P/E go to moneycontrol.com or BSE PLUS. Crisil sales have been growing at an alarming rate of about 80% in the past five years. Although this amount of growth may not be sustainable in the long term, as more and more companies want to raise capital through bond market, I expect CRISIL to grow at 30% or more. Crisil is a debt free company with operating profit margin of about 50%.



disclosure: I own this stock.

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Apollo Hospitals - Good stock to buy for Long term

Apollos Hospitals - Company Overview

Apollo hospitals group, started in 1983 in Chennai, is an integrated healthcare organization which currently runs over 50 hospitals across India and overseas. Its operations include a chain of Apollo Pharmacies and neighbourhood diagnostic clinics. However, Apollo hospitals is planning to divest at least 50% of Apollo pharmacies, its retail pharmacy industry.

Apollo hospitals - Growth

Apollo hospitals limited has been growing at a rate of about 35 to 35% in the past 5 years. Although Operating Profit margins have decreased over the past 5 years, they are still at a comfortable 15%. It looks likely that Apollo Hospitals, the largest such company in south asia, and with its expanding overseas operations, can sustain about 25% to 30% growth in the coming few years. Apollo hospitals has also entered into a joint venture with Cisco to revolutionize healthcare (or telemedicine) using Communications technology.

I would enter the stock at its current valuation (690 @ 28P/E).
disclosure: I already own this stock. The investment time frame I have in mind is 3 years.

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