| It's not even a year since the company raised about Rs 130 crore through an IPO, and the FCCB issue will add another Rs 235 crore to the company's kitty. |
| Needless to say, the company is adopting a rather aggressive growth strategy, and has made the most of the demand for its paper in the stock markets to fund its expansion plans. |
| The company has already spend close to Rs 80 crore on two acquisitions, Asian Age and Odyssey India. While the acquisition of majority (90 per cent) stake in Asian Age would give it a presence in the Mumbai newspaper market, the Odyssey buy led to diversification into the retail space. |
| Odyssey is a leisure retail chain which sells books, music, toys, greeting cards and FMCG products of leading domestic and international brands. |
| According to analysts, the company is expected to continue exploring the inorganic route for growth, especially since it could soon be flush with funds from the FCCB issue. For now, the inorganic route has propelled the company's growth rates. Revenues of the businesses, which existed last year, are expected to grow only about 15 per cent this fiscal, but thanks to the new launches and acquisitions, overall growth is expected to be about 100 to 110 per cent this fiscal. |
| The markets have lapped up the Deccan Chronicle stock, thanks to these exciting growth prospects, what with its price more than doubling from its IPO price of Rs 162. |
| The stock now trades at about 20 times estimated FY06 earnings, which on the one hand seems high for a newspaper company, while on the other is a fraction of the growth expected in the near term. |
| Gujarat NRE |
| Gujarat NRE Coke has acquired a 5 per cent stake in Australian coal producer, Resource Pacific Holdings Ltd for A$8.1 million (approximately Rs 27 crore). |
| This deal would give the company access to a minimum of five million tonne of coal for the next 10 years. This is not the first time that the company has tied up with overseas suppliers to control surging raw material costs-the company had earlier decided to buy up to a 30 per cent stake in Australian exploration company, Zinico Resources NL and also acquired a controlling stake in a mine near Sydney via its subsidiary. |
| All these acquisitions are mainly to curb raw material costs, which have been rising sharply lately. As a percentage of net sales, raw material costs grew 400 basis points to 43.4 per cent in the June quarter. |
| Meanwhile, prices of met coke have not showed signs of improving and are hovering at about $270 per tonne, compared to $275 a tonne at the end of the June quarter. Met coke prices had reached about $450 a tonne at the beginning of CY05 and have fallen since because of a drop in demand from China. |
| Nevertheless, the company's key domestic clients like foundries and soda-ash manufacturers are ramping up capacities and in a bid to leverage this opportunity, the company is also expanding its met coke capacity by about 40 per cent to 1.4 million tonne. |
| The Gujarat NRE Coke stock trades at about 11.5 times estimated earnings for the year ended September 2005, which adequately reflects these growth prospects as well as concerns about global met coke prices. |
| Ceat: burning rubber? |
| The Ceat stock was up 5.2 per cent at Rs 99.55 on Tuesday, on reports that the company's board will be meeting shortly to consider a rights issue. |
| Prior to this announcement, the stock had gained almost 5.5 per cent over the past one week thanks to the trend in spot rubber prices, which were showing signs of stabilising at about Rs 60 per kg. |
| Current rubber prices are about 11 per cent lower than the nine-high year reached in the first week of July. Inputs costs like rubber typically account for 65 per cent of net sales of a tyre company. |
| The positive investor response to the stock is also partly because of reports that the company is evaluating options for its surplus land in Mumbai. |
| The company's planned rights issue is expected to strengthen its working capital as well as enhance production capacity, point out analysts. |
| The company produced 34.96 lakh automotive tyres, 78.52 lakh automotive tubes and 23.07 lakh automotive flaps in FY05. |
| While the current drop in rubber prices is expected to ease some of the margin pressure on Ceat and other tyre companies, rubber prices are still about 12 per cent higher on a y-o-y basis. |
| Earlier, a 19.4 per cent rise in raw material costs to Rs 279.89 crore resulted in the company reporting a loss of Rs 2.36 crore before tax in the June quarter. |
| Considering that the Ceat stock has gained nearly 70 per cent since the beginning of the year, the excitement looks a bit overdone. |
| With contributions from Mobis Philipose and Amriteshwar Mathur |
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