Dear Members,

We have released 21st May’17 – TCS buy back update, Coverage closure update on Ratnamani Metals and Tubes and Mar’17 earnings update on Pokarna. The same have been produced below. For other updates, please log into the website at the following link –

Date: 21st May’17

Tata Consultancy Services (NSE – TCS) – Feb’17 Special Situation

CMP – 2506.80 (BSE); 2507.15 (NSE)

Rating – Neutral; this is not an investment advice (refer rating interpretation), the rating is only for indicative purpose and please take your own investment decision regarding the same.

TCS opportunity was initiated in Feb’17 around 2490 odd levels based on the tender buy-back announcement made by the company.

The ex-date for the buy-back was 5th May’17, so anyone who bought the shares before 5th May’17 is eligible to participate in the buy-back offer.

The buyback offer price is Rs 2,850/- per share. The buyback window opens on 18th May’17 and closes on 31st May’17.

Members holding 85 or less than 85 shares of TCS will fall in small shareholder category. In the small shareholder category the buy-back entitlement is 9 shares out of 20 shares (i.e. ~45%) held as on the record date.

Basically, the above means that if you are holding 60 shares and fall in the small shareholder category and if you tender 27 shares or more then minimum 27 shares will be accepted by the company at 2,850/- per share. Acceptance over and above 27 shares would depend on tendering of other shareholders. In general it’s been observed that not all shareholders participate and therefore acceptance might be higher than 45%.

We would recommend tendering all your shares in the buy-back window as we believe acceptance will be higher than 45%. If the acceptance is less than 100%, you will be left with some small quantity of shares which can thereafter be sold in open market.

Procedure for tendering: The tender buy-back window closes on 31st May’17. The procedure for participation is simple: On or before 31st May’17 and during regular market hours please inform your respective stock broker about the number of shares you wish to tender in TCS buy-back offer. The stock broker would place a bid on your behalf using the Acquisition Window of Stock exchanges.

Upon placing the bid, the stock broker shall provide a Transaction Registration Slip (“TRS”) generated by the exchange bidding system to the Shareholder on whose behalf the bid has been placed. TRS will contain details of order submitted like Bid ID No., Application No., DP ID, Client ID, No. of Equity Shares tendered etc.

Once you have received the TRS from the broker, you may deliver the Tender Form duly signed along with the TRS generated by the exchange bidding system either by registered post or courier or hand delivery to the Registrar to the Buyback Offer latest by 2nd Jun’17 (by 5 PM). The envelope should be superscribed as ““TCS Buyback Offer 2017”.

Address of Registrar: Link Intime India Private Limited

C-101, 247 Park, L.B.S. Marg, Vikhroli (West), Mumbai 400 083

Ratnamani Metals and Tubes (NSE – RATNAMANI) – Oct’14 Alpha stock

CMP – 750.50 (BSE); 747.80 (NSE)

Rating – Negative and Coverage closure; this is not an investment advice (refer rating interpretation), the rating is only for indicative purpose and please take your own investment decision regarding the same.

 Ratnamani Metals Oct’14-May’17 Price chart               Source: BSE India

Ratnamani Metals and Tubes Investment report was initiated in Oct’14 around levels of 440-450

For FY 17 the company has reported around 19% decline in sales, 10% drop in EBITDA and 14.5% drop in PBT. While management is hopeful of 15% growth in volumes in FY 18, we believe margins of the company might come under pressure on account of increased competitive intensity in the Stainless Steel segment. Further, we believe the current valuations are high at around 24.5 times trailing twelve months earnings for a commodity and cost plus player.

We therefore have a negative view on the stock and closing coverage on the same

Pokarna (NSE – POKARNA) – Jun’15 Alpha stock

CMP – 1484.75 (BSE); 1481.50 (NSE)

Rating – Positive – 3% weightage; this is not an investment advice (refer rating interpretation), the rating is only for indicative purpose and please take your own investment decision regarding the same.

Pokarna Jun’15-May’17 Price chart                  Source: BSE India

Sales of the company for the quarter ending Mar’17 are flattish on YOY basis at Rs 100 crores against Rs 102.76 crores in Mar’16 quarter. The company has 3 business divisions: Granite, Apparel and Quartz. Granite division has reported 18.5% drop in sales while the Quartz division has reported 11.67% growth in sales.

Apparel division is inconsequential in terms of turnover and the management has decided to sell of the business.

The business in the granite division continues to be challenging due to excess competition from Brazil and thereby lower realizations; however the management also believes that this might be the bottom. Further, in order to strengthen the profitability the company is focusing on cut to size segment as the realizations are higher in the same. The company has also commenced operations on a new quarry.

In the quartz segment, there’s slight improvement in revenue run-rate to 58 crores from the earlier range of 50-55 crores. As per the management, at current capacity around 60 crores is the peak value of production they can achieve in a quarter.

The new Quartz line (with 130% capacity of the existing capacity) is expected to commence operations from 2nd Quarter of FY 19.

On the front of raw materials, the company has recorded gross margins of 78.16% against 77.37% in Mar’16 quarter. From the segment reporting, it’s evident that Granite division improved its margins while the margins contracted slightly in the Quartz division. Quartz division uses resin as one of the raw materials and the polymer prices have strengthened with increase in crude prices.

The company has exercises strong control on operating expenses which are more or less same as last year. As a result, despite the impact of strengthening rupee (company is a net exporter) and strengthening raw material prices, company has been able to maintain its EBITDA at Rs 32.9 crores with EBITDA margins of 32.9% against 34.12% in Mar’16 quarter.

With higher other income and lower interest cost the PBT of the company for the quarter is up by 6.48% on YOY basis to Rs 23.48 crore.

We believe the performance of the company is along the expected lines. Going forward for the next 18 months or so no major change is expected on revenue front as the company is facing capacity constraints and the new quartz line is expected to be operational from 2nd quarter of FY 19. So, FY 18 is expected to be a year of consolidation.

On the front of profits, while strengthening rupee and crude prices is negative for the company, improvements can come in if the company is able to quickly sell off apparel division (currently incurring 7-8 crore loss at EBIT level), or if there’s improvement in granite division which seems to have bottomed out and if there’s improvement in utilization levels at Quartz. Further, quicker conversion of existing loans into foreign currency loans can reduce the interest cost for the company substantially.

The stock is currently quoting around 13.20 times trailing twelve months (TTM) earnings.

Disclosure: Out of the stocks discussed above I have personal investment in TCS, Ratnamani Metals and Tubes and Pokarna.

Best Regards,
Ekansh Mittal
Research Analyst
Ph.: +91-727-5050062, Mob: +91-9818866676
Email: [email protected]

Rating Interpretation

Positive – Expected return of ~15% + on annualized basis in medium to long term
Neutral – Expected Absolute return in the range of +/- 15%
Negative – Expected Absolute return of over -15%
Coverage closure – No further update on the stock
% weightage – allocation in the subject stock with respect to equity investments

Short term – Less than 1 year
Medium term – Greater than 1 year and less than 3 years
Long term – Greater than 3 years

Research Analyst Details

Name: Ekansh Mittal     Email Id: [email protected]    Ph: +91 727 5050062

Analyst ownership of the stock: In TCS, Ratnamani Metals and Pokarna

Details of Associates: Not Applicable

Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.

Disclaimer: (here in referred to as Katalyst Wealth) is the domain owned by Ekansh Mittal. Mr. Ekansh Mittal is the sole proprietor of Mittal Consulting and offers independent equity research services to retail clients on subscription basis. SEBI (Research Analyst) Regulations 2014, Registration No. INH100001690

Ekansh Mittal or its associates including its relatives/analyst do not hold beneficial ownership of more than 1% in the company covered by Analyst as of the last day of the month preceding the publication of the research report. Ekansh Mittal or its associates/analyst has not received any compensation from the company/third party covered by Analyst ever. Ekansh Mittal/Mittal Consulting/analyst has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market-making activity of the company covered by Analyst.

We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.

The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision

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