A little while ago I had written about the lack of a silver ETF in India, and that was prompted by a question from reader Prasanna. He stumbled upon this scheme called the Milestone Bullion Series – 1, which lets you get into a structured investment and gain exposure to gold and silver, and was kind enough to send their brochure along my way.
This is a structured product, and the minimum investment needed to get into this product is Rs. 5 lakhs, so this is clearly not for everyone.
The way it works is that they take the money and invest in a portfolio with the following assets:
Silver: Up to 40%
Gold forwards / Gold deposit schemes: up to 40%
Gold linked structure: up to 30%
The fee charged is as follows:
One time set up fee of 2% or 2.5% in case of investment less than 10 lacs.
Annual Management fee of 1.5% of the committed amount.
The brochure states that there is a 10% profit sharing as well, but I think that kicks in only after a certain hurdle rate has been met.
Now, the first and second components of Silver and Gold forwards / Gold deposit schemes are pretty self explanatory, so I won’t go there, but where it gets interesting is the third component of a gold linked structure.
Simply put, this is a debenture with the interest rate linked to the price of gold. So that means your principal is protected (to the tune of 30%) and the interest rate is linked to the price of gold. Since this is a debenture, this exposes you to counter party risk, however low you may perceive that to be (remember Lehman?).
The brochure included a couple of scenarios which I am pasting below:
Milestone Bullion Silver
So by investing in Milestone Bullion Series I – you are getting a bit of gold, silver, and this structured product which is like an ETN (Exchange Traded Note), and if this kind of thing interests you then you can get further details from Milestone Capital.
Personally, I am staying away from gold and silver, and I will list my thoughts in a future post, but thanks to Prasanna for making us aware of this option.
Coal India IPO is likely to be the biggest Indian IPO when it opens on the 18th of October this year. The IPO is expected to fetch the government $3 billion, by divesting about 10% of it’s stake in this Navratna. The big numbers are not surprising given that Coal India is the biggest coal producer in the world with a production of 431.26 million tons in 2010. Coal India also holds the highest coal reserves in the world, and produced 81.9% of total coal production in India. They had revenues of Rs. 525,922.92 million in 2010, with a profit after tax of Rs. 98,294.09 million in 2010. The Networth was Rs. 258,437.73 million, cash and bank balances of Rs. 390,777.60 million, and total debt of Rs. 20,868.51 million, and had 397,158 employees.
With numbers such as these, it is easy to see why CARE assigned a grade of 5 out of 5 to the Coal India IPO. Point worth repeating is that IPO grades don’t take pricing into account, and only consider the fundamental strength of the company.
Coal India operates 471 mines in 21 major coal fields across 8 states in India. They produce non coking coal, and coking coal, but the majority of raw coal production is non coking coal with 91.6%. Despite the big numbers, Coal India continues to expand with 45 projects lined up as of March 2010. Of these – 22 projects are capacity expansion projects and 23 are new mine projects.
The company sells to power generation, steel and cement companies among other industrial companies. NTPC was their biggest customer, and the top 5 customers are all public sector power utilities. The company prices it’s high grade quality coal 15% below the landed cost of comparative imported coal in India.
Financials of Coal India IPO
The company has grown its revenues consistently over the last few years, and they were Rs. 525,922.92 million for 2009 – 10, Rs. 460,640.65 million for 2008-09, and Rs. 386,166.97 million for 2007-08.
The profit after tax was Rs. 96,224.47 million for 2010, Rs. 20,786.92 million for 2008-09, and Rs. 52,432.72 million for 2007-08.
The dip in profits in between is due to an increased expense on employee remuneration. The employee remuneration charge was Rs. 166,555.22 million in 2010, Rs. 197,420.85 million in 2009, and Rs. 126, 351.59 million in 2008.
This increase was due to the provision for retroactive increase in remuneration. What this means is that they had a salary increase for executive, non executive employees, and in the amount of gratuity as well, and this amount was increased retrospectively due to which the company had to create provisions for increased remuneration in 2008, 2009 and 2010, with 2009 being the biggest number at Rs. 41,157.80 million for salaries and wages, and Rs. 39,997.01 million for increased liability towards gratuity.
The total workforce size reduced from 2007 to 2010, but the productivity as measured by output per manshift increased from 2.54 tons in 2007 to 4.47 tons in 2010.
Coal India had an EPS of Rs. 15.56 in 2010, Rs. 6.43 in 2009, and Rs. 6.78 in 2008. The Return on Net Worth (RONW) was 38.03% for 2010, 21.37% for 2009 and 24.91% for 2008.
Coal India IPO Grading Rationale
It’s not often that an IPO gets graded 5 out of 5, but it’s not very hard to see why Coal India got graded that based on their near monopolistic position, and their huge size. Here are some points from the ICRA grading report about the Coal India IPO.
Coal India is the largest coal company in the world with access to vast reserves.
Highly favorable demand supply situation in the domestic coal industry.
Coal India’s near monopolistic position in this industry.
Continuous labor productivity due to the use of technology, and high share of production from open cast mines.
Deregulated coal pricing regime gives them the power to price their coal along with other factors like favorable demand – supply, and cost competitiveness.
Coal India IPO Price and Dates
The price for this IPO hasn’t been fixed yet, and I will update this section once it is done. The IPO will most likely open on the 18th October, and close on the 21st October.
These were some of the more interesting things I found in the prospectus that Coal India has filed for its IPO, and this is no way is a comprehensive review, but I hope you will find this useful in deciding how well Coal India fits in your portfolio. I will update this post with more information as and when I find it.
Update: The price band has been fixed between Rs. 225 and Rs. 245, and there is a 5% discount for retail investors.
Reader Parin emailed me asking about companies that operate in the green energy space after reading my post about the green energy space in India, so I set out to prepare this list of green energy companies in India.
There are a handful of green energy companies in India, and I could only find 5 that were listed. So, I created this post with 5 listed, and 5 private green technology companies in India.
Please don’t consider this is a buy recommendation as just being in a sector that’s promising doesn’t mean anything; ask anyone who invested in tech stocks in 2000. Also, keep in mind that some of these companies are private, and are not listed in the stock exchange.
Listed Green Energy Companies in India
Suzlon
1. Suzlon Energy: Suzlon is of course the first company that comes to mind. They are one of the leading wind energy companies in India are one of the better known alternative energy companies in India. Here are some details from their website.
Conceived in 1995 with just 20 people, Suzlon is now a leading wind power company with:
Over 16,000 people in 25 countries
Operations across the Americas, Asia, Australia and Europe
Fully integrated supply chain with manufacturing facilities in three continents
Sophisticated R&D capabilities in Belgium, Denmark, Germany, India and The Netherlands
Market leader in Asia, Suzlon Market Share (Combined with REpower) rose to 9.8% thereby making Suzlon 3rd * largest wind turbine manufacturing company in the world.
Orient Green Power
2. Orient Green Power Limited:This is a company that recently had its IPO, and is primarily engaged in the Wind and Biomass energy space. Currently wind constitutes the majority of their energy portfolio, so this is another one of India’s wind energy companies. As of March 31, 2010, their total portfolio of operating projects included 193.1 MW of aggregate installed capacity, which comprised 152.6 MW of wind energy projects and 40.5 MW of biomass projects. Their portfolio of committed and development projects included approximately 815.5 MW of prospective capacity, which comprised an estimated 622.0 MW of wind energy projects, 178.5 MW of biomass projects and a 15.0 MW small hydroelectric project.
Indowind Energy
3. Indowind Energy Limited: Indowind Energy Limited is also a wind energy company that develops wind farms for sale, manages the wind assets, and generates green power for sale to utilities and corporates. Turnkey implementation of Wind Power Projects, from concept to commissioning. Wind Asset Management Solution for installed assets, including operations, billing, collection of revenue to project customers. Supply of Green Power to Customers. CERs (Carbon Credit) Sales and Trading. This is a listed company.
Suryachakra Power Company
4. Suryachakra Power Corporation Limited: SPCL is the flagship company of Suryachakra Group with interests in Power generation – renewable energy (biomass, Solar, hydro, Wind) and Clean Technology / Ultra Super Critical Thermal Power Plants (coal, Gas), Engineering Consultancy and Urban infrastructure development activities. Suryachakra Power Corporation Limited has established 3 wholly owned subsidiaries for setting up of renewable energy (biomass) power projects and also acquired stake in Sri Panchajanya Power Private limited, which was setting up a 10 MW Biomass Power Plant at Hingoli, Maharashtra.
NEPC India
5. NEPC India:Thisis a Public Limited Company promoted by the Khemka Group with the primary objective of promoting wind energy. This successful Group has a multi crore turnover from diversified activities in the field of Power Generation from Wind Energy and manufacture and marketing of Wind Turbine Generator (a renewable energy device).
Private Green Energy Companies in India
Azure Power
6. Azure Power: Azure Power is not publicly listed but operates in the green energy space as it is one of the solar energy companies in India. It is a solar power company, and from the website I saw that they are supplying power to 20,000 people in 32 villages in Punjab.
Auro Mira
7. AuroMira Energy:Auro Mira is also a green technology energy company that is private, and present in the Biomass, Small Hydel and Wind Sectors. It plans to develop over 1000 MW capacity by 2012. AME is presently focusing in Biomass, Small Hydro and Wind Sectors. AME plans to invest $ 900 Million to develop, own and operate over 1000 MW in clean energy in addition to WTG manufacture and to develop over 15000 acres of energy plantation in the next five years. AME intends to foray into other clean energy technologies, solar, bio-diesel etc. in the future.
Husk Power Systems
8. Husk Power Systems: Any guesses on what this company uses to generate power? Anyone? Did I hear rice husk? Yes, that’s right! This is truly an alternate energy company which owns and operates 35-100 kW “mini power-plants†that use discarded rice husks to deliver electricity to off-grid villages in the Indian “Rice Belt”. Check out their great coverage in NY Times.
Excerpt:
Many of India’s cities have become bustling centers for high technology and heavy industry, but hundreds of millions of people in the countryside remain off the grid. Growing up in rural Bihar State, Manoj Sinha knew what it was like to sit in the dark. So after earning an electrical engineering degree at the University of Massachusetts, Amherst, and working for the Intel Corporation, he began exploring ways to turn farm waste into electricity, with the dream of building village-scale generators.
RRB Energy
9. RRB Energy Limited:This company is in the field of Wind Power Generation, and is an ISO 9001:2008 and ISO 14001:2004 certified Company. RRBEL is also an Independent Power Producer having established wind farms of aggregate megawatt capacity.
The then Merrill Lynch had invested Rs. 218 crores in this company in 2007, and that’s the time it got into the export market as well. However, since this is a private company you won’t be able to invest in it through the stock market.
Moser Baer Solar Energy
10. Moser Baer Solar Limited:This is a subsidiary of Moser Baer that is one of the solar energy companies as well. The Group’s photovoltaic manufacturing business was established between 2005 and 2007 with the primary objective of providing reliable solar power as a competitive non-subsidized source of energy.
The best thing I read this week was Wesabe’s co-founder’s post explaining why he felt Wesabe lost out to Mint. Most of you probably know about Mint because they have entered the Indian market as well, and Wesabe was a similar website which was launched ahead of Mint but couldn’t compete with them and shut shop earlier this year.
This post is really great because it is so brutally honest, and I can only imagine how painful it must be for an entrepreneur to not only close down their business, but then dissect it with the honesty that is showed here. It touches upon some important aspects of managing personal finances, and is a must read.
Bad Money Advice does these great posts at the end of every month where he highlights some trends from the PF blogosphere, and as usual it is witty and makes for a great read.
The Psy – Fi blog is becoming one of my favorite blogs because of the wit and the clarity of thought displayed there, and I present to you another great post titled dying to invest.
