Investing in Formal Education In India?

Investing in Formal Education In India? My thoughts on risk!

As an investor in the education space, I sometimes ask other investors who are investing in Formal education space in the country, whether they have built in risk of regulation clamping down on the popular "innovative structures"  (aka services and real estate companies attached to institutes) and almost without exception they look at me with disdain. They clearly see no risk (or some who do, many would not know how to model it in their valuation and simply believe in the greater fool theory) . Or they get opinion from a advisor/lawyer who makes a living out of advising companies to take this route, sidestepping regulation.

It turns out it was silly of me to expect them to see this risk. Many of these foreign investors, who operate out of the country take recourse to these innovative structures (well silly me again! these are in fact quite standard) to operate out of the country through their advisory arms, which are set up as independent companies, apparently to give investment advise (to themselves!)

Sorry guys (and girls) the joke is on me!

Tata Motors- Q2 FY11 Results Update - Buy!!

Tata Motors posted excellent results with revenues up ~35% YoY and profit up to 2223 Cr vs only 22 cr last year in the same quarter. Its seems that the contrarian  investments that the tata group had made during the downturn (Corus by Tata Steel and JLR by Tata Motors) is now paying rich dividends, as the global economy recovers.

These are fantastic results by Tata Motors and much beyond street expectation, despite the fact that Tata Nano is yet to take off. Could lead to serious re-rating of the stock over the next couple of quarters. Won't be surprised if the stock climbs 50%+ in the next one year. Key thing to watch would be how it absorbs commodity  price increases in the next 2 quarters as a result of QE2

Value Stock - Kale Consultants

Stock Pick - Value Stock

Kale Consultants

This stock is what you call a low downside, high upside stock. Kale consultants has been in the news recently with all the rumors of it being acquired soon (first by wipro, NTT and then by InterGlobe or another European company)

The rumors have since been denied by promoters (check bse company annoncements) but the recent slump sale of one of its loss making divisions could possibly be cleanup before the actual sale.

Kale had  net earnings of 26 crores (EPS of 18.1)  last year with 40 Cr EBITDA and a healthy growth year over year. It has about 40 Cr of cash and no debt. At current market cap of about 200 Cr it has a PE of 7.6 and EV/EBITDA of 4.2 (versus average PE & EV/EBITDA of about 10 and 5.5 respectively for the smaller listed IT companies) which gives it an upside of 30-40% even if there is no control premium or deal does not happen

The slump sale of its logistics division gives it about 6-7 Cr of profit and therefore about 60 cr additional equity value. for a total possible upside of  60-70%

Value Picks - Equity Investing: Empee Distilleries (NSE Symbol - EDL)

Value Picks - Equity Investing

Empee Distilleries  (NSE Symbol - EDL)

• At Rs149 it has a market cap of 281 Crores
• It holds 2.81 Cr shares of Empee Sugars with market value (at CMP 66) of 185 Crores
• Company made a profit of about 12 crores in Q1 FY11  (double that of Q1 in FY10)  and eps of 6.2 Rs per share (non annualized and standalone). 
• It had reveneues of 900 Cr in FY10

Net value attributed to the business appears to be very low. The promoters have been recently increasing their share through open market purchase. Represents an excellent value buy and can be a multibagger especially if the company can improve its profits even marginally and improve investor awareness.

What makes it even more attractive is the high dividend yield.It has announced a dividend of 6 Rs/Share, which gives it an high dividend yield of 4% (tax free) certainly higher than your savings account which gives 3.5% yield (before interest)