Key Figures ~ Indian Economy ~ Week Ending Dec 07 2012

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Here are some key figures of the Indian Economy as of Dec 07 2012

Quick Snapshot of Sensex Companies: TTM EPS & PE Ratios

Overview

The Sensex is a barometer of the Indian stock market, representing the performance of the 30 largest and most liquid companies listed on the Bombay Stock Exchange (BSE).
Tracking TTM EPS (Earnings Per Share) and PE (Price-to-Earnings) Ratios provides valuable insight into the valuation and earnings potential of these companies.

The TTM PE ratio is a key metric used by investors to assess whether a stock is overvalued or undervalued based on its recent earnings performance.

TTM EPS & PE Ratios of Key Sensex Companies (As of November 2009)

Sensex TTM PE Ratio (Overall): ~20
(Data Source: Ace Equity)

Understanding TTM EPS & PE Ratios

What Is TTM EPS?

• Earnings Per Share (EPS) refers to a company’s profitability on a per-share basis.

• TTM EPS refers to the Trailing Twelve Months EPS, which is the sum of the EPS over the last 12 months. It provides a more accurate and up-to-date measure of a company’s profitability than yearly EPS.

What Is PE Ratio?

• The Price-to-Earnings (PE) Ratio is a key valuation metric that compares a company’s stock price to its EPS.

• PE Ratio = Price per Share / EPS

• A high PE ratio generally indicates that the market has high expectations for future growth, while a low PE ratio may indicate the opposite.

Key Takeaways

• Sensex TTM PE Ratio: A PE ratio of around 20 indicates that the market is valuing the top 30 companies at 20 times their earnings over the last 12 months.

• High EPS and Low PE Ratio: Companies like BHEL (PE: 8.11) and SBI (PE: 9.83) might appear undervalued relative to their earnings.

• Growth Expectations: Companies like Sun Pharma (PE: 41.56) and Tata Motors (PE: 41.95) have relatively higher PE ratios, suggesting that the market expects significant growth.

Conclusion

Tracking EPS and PE ratios of Sensex companies is essential for investors who are looking to evaluate the valuation and earnings potential of India’s largest listed companies.
Investors should consider both the individual PE ratio of stocks and the overall market PE to make informed decisions on equity investments.

Disclaimer

The information presented here is for educational purposes only and should not be construed as investment advice. Please consult your financial advisor before making any investment decisions. Past performance is not indicative of future results.

Tara Jewels IPO Analysis – Valuation Appears Expensive Compared to Peers

IPO Snapshot

Tara Jewels Limited is coming out with a 100% book-building Initial Public Offering (IPO) of 79,77,778 equity shares of face value ₹10 each, in a price band of ₹225–₹230 per share.

• Issue opens: 21 November 2012

• Issue closes: 23 November 2012

• Listing: Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE)

Issue Allocation

• Up to 50% – Qualified Institutional Buyers (QIBs), including 5% for mutual funds

• Minimum 15% – Non-Institutional Investors (NIIs)

• 35% – Retail Individual Investors

Key Issue Details

• Lead Managers: Enam Securities, ICICI Securities

• Compliance Officer: Amol Raje

• Face Value: ₹10

• Issue Price Multiple:

  • 22.5x at ₹225

  • 23.0x at ₹230

Company Profile

Tara Jewels is an integrated jewellery company, operating across manufacturing, exports, and retail. The company has been conferred Star Trading House status by the Ministry of Commerce & Industry, Government of India, and has been among the top exporters in the gems and jewellery sector in FY2009 and FY2010.

Product Portfolio

• Gold, platinum, honeydium, pristinium, and silver jewellery

• With or without precious and semi-precious stones

• Caters to high-end, mid-market, and value segments

Manufacturing & Operations

• Manufacturing units: 4

  • 1 in Panyu, China

  • 3 in Mumbai (2 in SEEPZ, 1 in MIDC)

• Total manufacturing area: 84,584 sq. ft.

• Workforce:

  • 35 designers

  • 955 craftsmen (as of 30 September 2012)

Production Volumes

• FY2010: 2,562.91 kg

• FY2011: 4,753.25 kg

• FY2012: 10,616.40 kg

• Two months ended May 31, 2012: 554.77 kg

Export Business Overview

Tara Jewels is primarily an export-driven company.

• Key export markets: USA, Canada, Australia, China, EU, UK, UAE, South Africa

• EU exports span 12 countries, including Germany, Switzerland, and Austria

• Export income CAGR (FY10–FY12): 19.77%

Export Contribution to Total Income

• FY2010: 97.59%

• FY2011: 80.99%

• FY2012: 80.90%

• 2 months ended May 31, 2012: 78.82%

IPO Grading

CARE Ratings has assigned an IPO Grade 3, indicating average fundamentals.

Objects of the Issue

The IPO proceeds will be utilised for:

1. Establishing retail stores

2. Repayment / prepayment of loans

3. General corporate purposes

Industry Overview – Gems & Jewellery

• The US is the largest jewellery market, followed by China, India, and the Middle East

• Global jewellery sales expected to grow at 4.6% CAGR (2010–2015)

• India is the largest consumer of gold and a major exporter of:

  • Cut and polished diamonds

  • Gold jewellery

Key Industry Highlights

• ~95% of imported gold is used for jewellery

• 11 out of 12 diamonds sold globally are cut and polished in India

• Gems & jewellery accounted for ~17.5% of India’s merchandise exports in FY2011

Strengths of Tara Jewels

• Leadership in studded jewellery exports

• Access to advanced manufacturing technology

• Established global client relationships

• Strong sales and distribution network

Risks & Concerns

• Customer concentration risk: Top 10 customers contribute ~70% of export revenue

• Highly competitive Indian retail jewellery market

• No long-term export contracts

• Dependence on key suppliers for gold and diamonds

• Seasonal demand patterns

• Domestic retail contributes only ~20% of revenue

• High working-capital intensity

• Debt-equity ratio remains elevated even post-IPO

Financial Performance (₹ Crore)

Valuation Analysis

• FY2012 EPS: ₹30

• Book Value (FY12): ₹154 per share

• Implied P/E (Post Issue): ~10.5x

Peer Comparison (Post-Issue P/E)

• Renaissance Jewellery: ~4x

• Rajesh Exports: ~8.8x

• Shree Ganesh Jewellery: ~1.6x

• Gitanjali Gems: ~8.3x

Tara Jewels is seeking a premium valuation relative to peers, despite:

• Lower domestic retail contribution

• High working-capital dependence

• Significant leverage

Investment View

While the jewellery sector is witnessing positive momentum and a short-term listing pop cannot be ruled out, the IPO valuation appears on the higher side compared to listed peers.

Given:

• Intense competition

• Capital-intensive operations

• Elevated receivables and inventory levels

Long-term investors may consider avoiding the IPO and evaluate the stock post-listing if available at more attractive valuations.

Conclusion

Tara Jewels has a strong export presence and operational scale, but valuation comfort is limited at the IPO price band. Selective participation post-listing may offer better risk-reward.

Disclaimer

This article is for educational and informational purposes only. It does not constitute investment advice or a recommendation to buy, sell, or hold any security. Investors should read the Red Herring Prospectus carefully and consult their financial advisor before investing. Capital market investments are subject to market risks.

CARE IPO Analysis

Reasonable Valuation | Strong Profitability | Long-Term Business Visibility

IPO Overview

Credit Analysis & Research (CARE) has launched its Initial Public Offering (IPO) through a pure Offer for Sale (OFS).

The issue consists of 7,199,700 equity shares of face value ₹10 each.
The price band is fixed at ₹700–₹750 per share, aiming to raise up to ₹540 crore.

• Issue opens: December 7, 2012

• Issue closes: December 11, 2012

Importantly, since this is an OFS, the company will not receive any proceeds.
All proceeds will go to the existing shareholders.

Company Profile

CARE is the second-largest full-service credit rating company in India.

It provides rating and grading services across multiple instruments and industries.
Over the years, the company has built a strong institutional presence.

Key Services Offered

• Credit ratings for debt instruments

• Ratings for bank loans and credit facilities

• IPO grading and equity grading

• Enterprise and project grading, including:

  • Real estate

  • Construction companies

  • Shipyards

  • Maritime training institutes

As of the offer date, CARE had 4,644 active clients.
These clients span manufacturing, services, banking, and infrastructure sectors.

Business Strengths

CARE benefits from a high-quality and scalable business model.

Key Positives

• Strong brand credibility in credit ratings

• Deep sector knowledge across industries

• Stable and highly profitable operations

• Debt-free balance sheet

• Strong cash generation and return ratios

Moreover, the rating industry has high entry barriers.
Regulatory oversight and long-term client relationships further strengthen the moat.

Key Risks and Concerns

However, investors should also consider the risks.

Risk Factors to Note

• High dependence on rating services for revenue

• New business diversification may impact margins initially

• Possible impact from banks shifting to IRB-based internal ratings

• Retention risk of skilled professionals

• Limited operating experience outside India

These risks are typical for the credit rating and financial services industry.

Valuation Analysis

Based on FY12 EPS of ₹40.52, valuation appears reasonable.

• P/E at ₹700: ~17.3×

• P/E at ₹750: ~18.5×

Peer Comparison (TTM P/E)

• ICRA: ~24.8×

• CRISIL: ~37.8×

In contrast, CARE is offered at a clear discount to peers.
This is despite similar business quality and profitability.

Industry Outlook

Looking ahead, the sector outlook remains favourable.

The credit rating industry should benefit from:

• Growth in corporate bond markets

• Increased focus on credit transparency

• Rising demand for ratings across products

• Expansion in infrastructure financing

Additionally, CARE’s diversification plans and global ambitions could support long-term growth, subject to execution discipline.

Financial Performance Summary

(₹ in millions)

Investment View

Overall, CARE appears reasonably valued at the IPO price band.

Key positives include:

• Debt-free structure

• High profitability

• Strong return ratios

• Favorable industry tailwinds

That said, investors should remember that this is an Offer for Sale.
Future returns will depend on earnings growth and regulatory stability.

Long-Term Perspective

From a long-term portfolio standpoint, CARE represents a stable financial services franchise.

It suits investors seeking:

• Consistent profitability

• Strong cash flows

• Moderate risk exposure

Allocation should, however, align with individual risk appetite.

Disclaimer

This article is for educational and informational purposes only.
It does not constitute investment advice or a recommendation.

Equity investments are subject to market risks.
Investors should read the offer document carefully and consult their financial advisor before investing.