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'Glaxo is the stock to watch after 2005'Mumbai, March 9, 2004: 'The PSU, which focuses on domestic economy benefits. However growth should return to FMCG and banks,' says Ramesh Shrichand Damani.Hi Ramesh I am a NRI and a professional investor. I have followed with interest your contrarian insights on the liquor industry in emerging markets. Along the same theme, I own Ceylon Breweries and Distilleries Co. in Sri Lanka. I apologize if I am beating a dead horse if you have already discussed this before, but it is tough to find info on these cos when one is outside India. What is the corporate relationship between UB Holdings, United Breweries and McDowell? Secondly, if UB Hldgs is a Mallya vehicle to control UB and McDow, are there any investment merits in owning UB Hldgs, apart from the subsidiary stakes? If this is too long to discuss here, you can mail me at sjohn@sloan-group.com if you like.Thanks. Ramesh S Damani : Thanks for joining. Let's start. Mallya does not personally own much. McDowell and UB -- it is through UB Holdings so it is strategic. UB Holdings has some high quality shares like Aventis Pharma in its balance sheet. Also some valuable 13 acres or so of property in Bangalre, which is being built as UB City. Look at the recent valuations to Ambev in Brazil. I just can't figure out these valuations. Anyway be patient. I do own all these shares. Thanks. maha : Sir, FIIs are pouring money into India on the ground that our economy is one of the fastest growing and betting on domestic consumption. Also the Rupee appreciation is negative to the Exports. In this scenario, please advise the still undiscovered sectors, which have good potential for future growth. Thanks! Ramesh S Damani : Cleary the PSU, which focuses on domestic economy benefits. However growth should return to FMCG and banks. subram : thoughts on alembic, wockhardt, glaxo and arvind remedies? Ramesh S Damani : Glaxo is the stock to watch after 2005. charu : SIR ,IS TATA TELECOM AND WYETH LEDERLE GOOD BET AT CURRENT PRICES OF 220 AND 400 RESPLY Ramesh S Damani : They look like good bets. Tata Telecom from outsourcing supplies and Wyeth post 2005. Newbieatstock : sir everyones including you are shifting money into ruppe based companies, isint goldiam an exception to that since its an export company Ramesh S Damani : It is too small and in a niche business so I am comfortable with the company. anaam : Sir,I have bought GILLETTE INDIA @ Rs 720/- which has gone down to Rs 605/- Companies results seems OK & when GDP growth should give impetus to comapanies growth then why is this selling presure? Any thing I have missed or is it that I was too early to enter the stock???????? Ramesh S Damani : No these stocks should be valued one year at a time. They will do well. I own it. baracuda : 35 million cases is what ub spirits division is planning to sell this year are yu happy with this number dont yu feel they can do betterand radico has reduced its high cost debt through ecb again they are making the right movewhat are your thoghts Ramesh S Damani : Just remember that UB and McDowell control 40 per cent of Indian liquor markets. We cannot ignore the big tiger. However, Radico is a good secondary play. hathiram : Is Kale exposed to BPO backlash to any significant extent? What is their key strength? Appreciate your reply! Ramesh S Damani : They cater to the airline industry. It would be exposed in terms of publicity but at these marketcap and prices it is all built in to the price. sunil : sir, whether FII investment is key factor for Indian market's spectacular performance to continue? Ramesh S Damani : It is important but retail will come in after they get ONGC/GAIL. hathiram : PSL Holdings is expected to double turnover this year. Competes with SAW PIPES and Welspun. Future of steel pipes and pipe coating seems good. Whats your opinion on this company? Ramesh S Damani : They are doing well since huge investments are going into pipeline companies. hathiram : PLEASE ADVISE ON HOW SOLECTRON IS DOING OPERATIONALLY AND FINANCIALLY. I AM INTERESTED IN KNOWING MORE FROM YOU. DO YOU LIKE THIS COMPANY AND IS IT AT A GOOD PRICE CURRENTLY? Ramesh S Damani : They are doing well and have some domestic orders. However, it is not currently on my buy list. baracuda : if most of the indian large cap cos and many of the medium cap raise capital through ecb then to whom are indian banks going to lendand doesnt the ecb is subject to curreny fluctuations Ramesh S Damani : Retail lending may become big along with credit cards and auto finance. hathiram : IT IS HARD TO FIND A GOOD STOCK IN THE POWER SECTOR. RAMESH, PLEASE GIVE US A COUPLE OF MID CAP IDEAS IN POWER - THANKS! Ramesh S Damani : If I find them I will let you know. I have not bought anything recently in that sector. shaynemjohn : Ramesh, are you more bullish on the prospects for margin expansion in UB or McDow - in other words, in which company will the Mallya management allow margins to reach normalized levels? It is hard for any investor with experience in the brewing and liquor industries (either Western or emerging markets) to believe that the current reported margins of both UB and McDowell is anywhere near their normal earnings power. Ramesh S Damani : Clearly they are not for reasons that are well known. This should change as FIIs come into the sector and industry is deregulated. baracuda : please explain what is Ambev in brazil what is its valuations Ramesh S Damani : the valuation Interbrew paid for was 11.5 billion euros. It is the largest brewer in Brazil. Deep : UB H : I think u said they sold 3 acres for 33 crores . with this 13 acres comes around 150 cr approx whereas u were talking about 1000 cr. property conservetively earlier. Ramesh S Damani : That includes holding in Aventis Pharma, other stocks etc etc. Its property is just a part of the equation. vikas5 : TECH SHARES : In your recent chat in moneycontrol u said Rs appreciation is problem for large caps, what about mid and small caps like visual / infotech / kale Ramesh S Damani : These are niche players with some pricing power, perhaps. However, it would pose a problem if the rupee went to 35, which it could in 1-2 years. srt : Many factors in the market like FDI hike, strategic tie ups will give boost to telecom sector in long run. 1. Are Bharti Tele, Tata Teleservices good scrips to pick at these levels? what is your suggestion about these scrips? Especially Tata Teleservices?2. Is Tata Teleservices (Maharashtra) is the stock listed for Tata Teleservices? Ramesh S Damani : We need some exposure to telecom since the sector is booming. Both look good bets to me. sai : Sir, Just give an idea about future of PTC, BoM and Petronet LNG. Ramesh S Damani : PTC, BoM should open higher. Petronet will be sluggish but offers good prospects in 2 -3 years. shaynemjohn : Do you think it's time to look at names such as P&G and Colgate, given the ongoing detergent war and generally horrible sentiment from professional and retail investors towards FMCG stocks? At some point over the next 12 months, the higher rural purchasing power from good harvests should kick in and help these cos.These are still among the highest ROIC stories around, even though their earnings have become quite volatile. Ramesh S Damani : That is correct. sanujkadavil : SirIn a week market liquor stocks like ub holdings, mcdowells ,united breweries and shaw Wallace post good volumes. Is finally some one slowly picking these shares. 35 million cases what UB SPIRITS IS GOING TO SELL IN FY04. are you expecting much better profitability in coming quarters Ramesh S Damani : No. Enough on liquor. I have said all I know. Just be patient that is all I can say. GirishMA : Hi Ramesh, I have received a special application for ONGC IPO since I am an existing shareholder. I heard that existing shareholders get 5% discount. So if I have to apply for IPO, should apply @Rs.750 or @Rs.712.50? Ramesh S Damani : I don't know the mechanics apply at the highest price and you will get a refund if done at a lower price. vikas5 : GOLDIAM : Is almost at 2.5 PE on 04 expected EPS. Isn't a great ( possibly multibgger ) stock ? Ramesh S Damani : I am hoping it can double and give a good yield. It is not ready to be a great multi-bagger yet. SINGARAJU : Good evening sir.Reg. liquor industry.Consider this facts.1).Just 15 years back beer was allmost unknown in china.And now it is the top beer consuming market with percapita off 12 litors on it huge population base even ahed of US.2).India is following China in allmost every thing say from car sales to computor to mobile phone etc.Then can we safely assume that the China story is going to be repeated in India also?.And will you please give us a chinees co. that travelled along with chinees beer(liqour) market`s zoro to horo journy.Thanks in advance. Ramesh S Damani : Oh the Chinese companies are getting great valuations. I don't remember all the names. They contribute 17% of beer market. I think Tsing Tao and a few others. I will get back on the names later. baracuda : vijaya bank seems to be going from strenght to strenght a few months back basantmaheshwari had asked to take a close look at this bank when the price was 30 dont yu feel it is still agood investment , they have recently entered the insurance business which yu likeand they dont depend to avery large extent on treasury income also dont yu feel that the govt will ultimately reduce its holdings in all these banks to below 33% Ramesh S Damani : They are doing well. You can only follow that many sectors/stocks. subodhgk : I own some stock of Sai Services which is a Maruti and Bajaj dealer. This co. is owned by Mr. Kalmade of Congress party. That is why probably it is a low profile stock. But one Ashok Kumar bought nearly 15% stake in the co. Why would anyone buy such a huge stake in an illiquid stock ? It has to be in connivance with the managemnt ? Do you think it can go up ? Ramesh S Damani : My sense is that they are trying take the company private. Margins seem poor for that kind of business. Newbieatstock : sir do u hedge your portfolio at all, going short the nifty futures during times of election etc Ramesh S Damani : Generally know. Especially when I am bullish. sanujkadavil : Last I noticed warren buffet has invested only one company in asia ie petrochina. And now hearing 1$billion bid in ongc. Is he thinking ongc is proxy of Indian economy than others like reliance or sbi.. do you believe the bid news is right.?????? Is he serious on INDIA. I think he is looking and study ing indiaan markets.. Ramesh S Damani : The reports were wrong. srt : Is Logix MicroSystems a ITESBPO company? Their website doesn't seem to indicate that! Also, it is not traded in NSE - is this a bad sign? Ramesh S Damani : It is a product company and getting into BPO. However. it is too small at the current time. Let's see management deliver growth. ranj : good evening sir,i would like to know as to is there any particular reson for MICO stocks to so volatile Ramesh S Damani : Limited floating stock. AnandBBhatt : Sir,If John Kerry wins,[since he is making outsourcing his main issue] do you think it can cause a lot of problems for the Tech sector like say if he passes some legislation saying that companies that send work offshore will be taxed double or some stupid thing like that?because today what was on CMBC about GE on the SEC website saying that they might consider changing their views on outsourcing if the political climate becomes unfavourable.Even Raman Roy of Wipro Spectramind said that it would adversly affect sentiment if the matter got worse. All this makes it difficult to invest in Tech,as it is the rupee problem exists.SO valuations look good liek you Tech basket?What would you do with all this to worry about?Would you buy? Ramesh S Damani : I beleive that outsourcing cannot be reversed. Would you buy something for $5 that is available for $1. Not many people can afford that. Not even the US with its record deficit. They are crying in an election year. Newbieatstock : sir i dont have any exposure to the oil and gas sector, i remmber u talking about gail when it was at 100 odd or so, being new i didnt undertstand much then, how do u see the sector panning out now, do u think gas will be a big pay just as it was in the U.S. Also with all the noise in gas sector would u recommend buying anything new in this sector. Ramesh S Damani : GAIL will compound, it is not a flashy stock or company. Good steady returns likely. Deep : LOGIX : Has fallen to 20 from 30 after your call. Are u compelled to average it out though u are not in favour of averaging out Ramesh S Damani : I am not. Q1 should be the first test if new strategy is working, let's see. subodhgk : If Sai Service goes private then will I get an exit route at a decent premium to the current price ? Ramesh S Damani : Management is not known to be too shareholder friendly. Newbieatstock : what do u think will be the new triggers for Tisco, at 13 odd pe u think its still got a long way to go or it should be a safe % bet over the next 6 months or so. Ramesh S Damani : I think it is headed higher, they are doing well. shaynemjohn : Ramesh, I agree that a larger FII presence in the sector should help put pressure on Mallya to focus on business rather than everythin else under the sun. Arisaig Partners out of Singapore is now the largest FII in McDow, UB and makes it a point to rattle cages about corporate governance, just as they did with Distilleries in Sri Lanka where they are the largest shareholders. But then on the other hand, the Mallya reputation for being reluctant to institute meaningful changes is alsp well-founded. Any comments? Ramesh S Damani : Time is the great equaliser just as it was in PSU stocks. nriinv4 : Sir Also about Kale they are pciking up a stake in Onward Tech, You r comments Ramesh S Damani : They sold them a division, and did not buy a stake in them. sanujkadavil : Sirnews flash .news flashNews just beginning thet GE board asks investors to vote agaist outsourcing resolution. Do you think US fearing of a old third world country India. Ge think they canot improve profitability because of outsourcing. Ramesh S Damani : When you lose jobs it becomes a political issue. nriinv4 : did you read Warreen Buffet letter to his shareholders about the devaluation of the US Dollars. If the fall in the dollar continues what is your take on tech. Ramesh S Damani : It would pose a problem. Deep : APOLLO HOSPITAL : Could you give your views on Apollo as they seem to be on right track Ramesh S Damani : Management does not deliver, otherwise it is a good company. Newbieatstock : so even at this price you would recommend buying gail. compund over a period of 3 years Ramesh S Damani : Yes if you are willing to be patient. SINGARAJU : SIR.You told last week that entertinement industry is in its infancy in India today.ADLABS FILMS is well positioned to take advantage of the evolution of the industry.It is the co. that spearheads the digital revolution which is expected to change the way the films are showed.Strong, visonory management in place.still it is not find a place in your recomendaton list.why?. Ramesh S Damani : The stock had done well, I prefer content companies since they will drive the whole business, not so much distribution. nriinv4 : If Disney shareholders can put pressure and oust their CEO why cant the same pressure be put on Vijay Mallya, he just cant have all the fun. Ramesh S Damani : It will in due time. simplyfine : Any views on Trent ? Cash rich company on an expansion spree too..looks good to me at these rates.. Ramesh S Damani : I like it and have a small position in it. vikas5 : Are u sure u have written Rs. could touch 35 in 1-2 yrs. If that is the case Tech shares does not hold good long term view Ramesh S Damani : Could. But will it. No one can say for sure. Just thinking aloud. shaynemjohn : Ramesh, are you still positive on tobacco stocks, such as VST? If you still follow VST, what do you think the company is likely to do with its sizable cash hoard? Is there a stated management policy in this regard? Ramesh S Damani : Like liquor, tobaccos stocks in emerging markets should command a premium. It is a good value buy. channda : sir BALAJI her many popular serials are replacing established actors with new one.. then viewership likely to go down and in the coming months full of crickets and election they may not get that much ad revenue.. what is your call hold or sell??? Ramesh S Damani : I am holding. The company is valued cheaply. SINGARAJU : Sir.A small co. called HELLIOS&MATHESON SOFTWARE is said to be doing well.What is your call on it? Ramesh S Damani : My friend is buying it. I have not yet looked at it. muk : Hi Ramji,good even. one frd had visted nelco recnt . he say that the company will become a major turnaround in coming yrs. company got a very big order from defence...do u have any idea? Ramesh S Damani : That is the general drift. Some one from TCS is trying to Turn it around. subodhgk : Mr. Damani, your comments on GM breweries please ? U have answered all queris on other liquor co ... U can mail me on subodhgk@yahoo.com if u don't want to go public. Thanks ... Ramesh S Damani : Don't follow it. nriinv4 : Sir Onward in their EGM yesterday alloted some prefenrential shares at above Rs. 30 price to Kale, you mean they were just paying them for their Division. Ramesh S Damani : Maybe, let me find out. Deep : Please correct us if you wrote Rs. can appreciate to 35 in a year or two,.If that is the sense then tech is great risk even if outsourcing continues Ramesh S Damani : The yen went from 365 to 100 to the dollar. Yet Japan had trade surplus. Productivity and moving up the value chain are important. channda : sir what is the meaning o fhaving position?? because as soon as i buy a stock it comes in to my D MAT account so it is buying.. Ramesh S Damani : Yup. Just language. sanujkadavil : sirwhy ARVIND MILLS languising 45 levels FIIS have almost 18% in arvind. they thinks it wil be best bet fot post 2005. are you buy the stock for long term .becoz its a large cap fii money first come to these stocks when textiles rebounds Ramesh S Damani : Sorry I don't follow it. anaam : Why not all of you are participants of this chat & most are shareholder of UB Group of comanies start complaining to Companies Law Board,Ministry of Finance,& various related department & even to the co itself... Ramesh S Damani : I think the best way is for the market to teach a lesson. One day some one will write 26% of the equity and block any bad deals. It is bound to happen if valuations remain at this level. vikas5 : IND SWIFT LAB : It is considered to surprise like Matrix did last year. Do u have any views on IND SWIFT group ( chandigarh based ) at the same time JUPITER BIOSCIENCE is also doing well and has margins only next to Matrix . Do u think that will attract investors Ramesh S Damani : I am sorry I don't. nriinv4 : Sir problem with Balaji Teleflims is they have too many anti social messages, overtime these will not be accepted, how can you invest in a company which is shaping a bad opinion? Ramesh S Damani : Look at her numbers. It is at 4 -5 times pretax earnings. SINGARAJU : Sir.What is your call on MOSCHIP ,India`s only listed chip co.?.PLEASE ANSWER SIR. Ramesh S Damani : I have not looked at it recently. Anything new? muke : hi rameshji..kindly check form ur side if possible for nelco..my frd had details discussion with vice prd of the companny..he is saying bel in making .. Ramesh S Damani : I will. Thanks. Planning to visit them next month. sanujkadavil : sirwhy no fund or high networth individuals buying UB holdings. becoz if you have 90lakhs you can buy i% of 1.5$ billin ub group. ie means you are buying 1% of worlds fifth largest brewer. i thinks its pretty cheap. but on one understanding it. Ramesh S Damani : That happens in markets, it is called herd mentality. mahaaa : Sir, Kale sold the banking divn.for some cash and stock. Ramesh S Damani : Thanks. sanujkadavil : Why market is discounting BALAJI TELEFILMS than other media stocks like zee and tv 18. tv 18 tradina p/e of 20 and marketcap/sales of 10. zee is trading 8 times its sales. And 25p/e. but balaji only 2.5 times its sales and 7 p/e..what is the reason fot that???/.. I think the over ownership of fiis is effecting the stock. But normally what seeing is when fiis like one stock they should cover it long time and buy LARGE CHUNK Ramesh S Damani : It beats me. Growth has been sluggish may be because of that. mukesh : hi rameshji,,,u view about jaiprakash..do u think that it worth buying at current ...becoz all the sector in which jp ind is doing well..plus reliance power project in north Ramesh S Damani : They always do well in a bull market and then fade away. So trade. nriinv4 : I am also invested in Balaji I hope eventually they stop soaps and go into something sensible. Hope somebody in Balaji feels the pulse of the people before the people reject them outright. Ramesh S Damani : Thanks for your thoughts. See you next week. Bye. |