Query Board
CHOLAMANDALAM INVESTMENT
I hold some shares of Cholamandalam Investment bought at Rs 1645. Should I hold or exit from a 6-month time frame - Vinay Mestry
Cholamandalam Investment & Finance Corporation is part of Murugappa Group having interest in CV financing and loan against property (LAP) financing. As on March 31, 2018, the company’s AUM stood at Rs 43,830 crore, which has witnessed a growth of 20 per cent CAGR over the last 10 years. The company has transformed itself from financing LCVs to financing of two-wheelers, tractors, construction equipments, cars, etc. Besides, the company also started financing used and new vehicles. The NII for the quarter rose by 34 per cent YoY to Rs 891 crore in Q4FY18 versus Rs 665 crore in the corresponding quarter previous year. The interest income for the company grew by 24.6 per cent YoY to Rs 1511 crore in Q4FY18. The provisions for the quarter rose by 40.6 per cent YoY to Rs 73.6 crore in Q4FY18 as against Rs 52.3 crore in Q4FY1. As a result, the net profit for the quarter rose to Rs 291 crore in Q4FY18 as compared with Rs 219.6 crore in the corresponding quarter previous year. Strong traction in infrastructure and construction activity is expected to give boost to commercial vehicle cycle, which in turn would benefit commercial vehicle financing. Being one of the largest commercial vehicle financing company, Cholamandalam is likely to benefit from this development. Thus, we recommend our reader-investors to HOLD this stock.
DEEP INDUSTRIES
I have 100 shares of Deep Industries bought at Rs 180. Kindly advice on this stock- S. Kumar
Deep Industries Ltd caters to oil and gas industry. Its segment includes exploration and production (E&P) of oil and gas. In service business, the company is involved in workover and drilling rigs, natural gas compression and natural gas dehydration.On the financial front, the company’s net sales for Q4FY18 was at Rs 79.1 crore, representing marginal increase of 5.6 per cent from Q4FY17. However, the net profit during the quarter dipped almost 20 per cent YoY to Rs 18.6 crore. Looking at the company’s full year performance, net sales for FY18 rose almost 12 per cent YoY to Rs 312.7 crore. The net profit for the full year grew marginally by 4.7 per cent YoY to Rs 77.5 crore. The company is in the process of separating its services business and E&P business in two separate listed entities. This will result in own management expertise and financial and operational resources. However, Central Bureau of Investigation (CBI) has filed a case against 13 officials of ONGC and Deep Industries after complaint filed by ONGC’s vigilance department regarding contract worth Rs 312 crore awarded to Deep Industries in 2014 by ONGC for supply of gas dehydration units. In this case, Deep Industries has filed petitions with the high court in Hyderabad. we will have to wait till the court gives its verdict. Thus, we recommend our reader-investors to EXIT this stock.
IDFC BANK
I have bought 1000 shares of IDFC Bank at Rs 50 per share. As long term investor, should I hold or sell ? -Anil
IDFC Bank, a part of Infrastructure Development Finance Corporation Ltd (IDFC Ltd), is a private sector bank. IDFC Ltd received a universal banking licence from RBI in July 2015 and started operations in October 2015. The bank serves corporate and private customers in India, including the infrastructure sector that IDFC Ltd specialised in since its inception in 1997. The bank offers fixed deposits, debit cards, savings account, cash management and other services. IDFC Bank plans to build a network of more than one lakh points-ofpresence in the coming months to enable people across the country to transact digitally. The private lender plans to set up about 30,000 micro ATMs and about 75,000 Aadhaar Pay merchant points. While the micro ATMs function as a bank-ina-box, most of the Aadhaar Pay merchants will be converted into business correspondents and will deliver basic financial services.
IDFC reported a 76 per cent plunge in its quarterly profit due to jump in provisions to cover bad loans. Its net profit stood at Rs 41.93 crore ($6.3 million) for the quarter ended March 2018 as compared with Rs 176 crore a year ago. Gross bad loans as a percentage of total loans stood at 3.31 per cent in Q4FY18 as compared with 5.62 per cent in the preceding quarter and 2.99 per cent a year ago period. Provisions and contingencies surged to Rs 242 crore in the March quarter from Rs 4.8 crore in the same quarter previous year.
On an annual basis, its operating income stood at Rs 3056 crore from Rs 3030 crore in FY17. The company’s PAT declined to Rs 859 crore in FY18 from Rs 1020 crore in FY17. The bank’s EPS declined from Rs 3 in FY17 to Rs 2.5 in FY18.
With the merger of Capital First, IDFC may finally be able to shed its image as an infrastructure finance company. The merger could be a way for the bank to build its retail book, something it has been unable to do since becoming a bank. If an investor can wait for 5 years, then we recommend a HOLD on the stock.
ADLABS ENTERTAINMENT
Should I invest in the equity shares of Adlabs Entertainment Ltd? Kindly advice me. - Nilotpal Saha
Adlabs Entertainment Ltd is engaged in the business of development and operations of theme-based entertainment destinations in India, including theme parks, water parks and associated activities, including retail merchandising and food and beverages. Its segments include tickets, restaurants, merchandise, hotel and other operations.
Adlabs also owns and operates an integrated entertainment holiday destination, Imagica, which includes a theme park, a water park, a snow park, a hotel and other associated activities like retail and merchandise, and food and beverages (F&B). Its project is branded as Adlabs Imagica for the theme park component and Adlabs Aquamagica for the water park component. The company also owns and operates Novotel Imagica, Khopoli, a theme park-based hotel. It also owns and operates a range of F&B outlets at Imagica, which include Roberto’s Food Court, Red Bonnet, Imagica Capital, Zeze Bar and Grill themed on an African Zulu village.
On the financial front, the company posted net sales of Rs 50.83 crore in Q4FY18 as compared to Rs 55.67 crore in Q4FY17. The company’s reported a negative PBDT of Rs 17.47 crore in Q4FY18 as compared to a negative PBDT of Rs 18.05 crore in FY17. Also, the company reported a loss of Rs 40.07 crore in Q4FY18 as compared to a loss of Rs 31.18 crore in Q4FY17. On an annual basis, the company posted net sales of Rs 236.29 crore in FY18 as compared to Rs 238.29 crore in FY17. The company’s PBDT loss widened to Rs 62.75 crore in FY18 as against Rs 58.53 crore in FY17. The company’s net loss widened to Rs 155.17 crore in FY18 from a loss of Rs 117.14 crore in FY17.
The company has a debt-to-equity of 2.73x. The company has low interest coverage ratio. Further, the company has a negative return on equity of -22.98 per cent for the last three years. Also, the promoters have pledged over 63 per cent of their holdings. We don’t recommend a fresh entry in the stock. We recommend our reader-investors to EXIT the stock.