Oct 15, 2010

SOUTHERN ISPAT & ENERGY LTD : Buy / Outperformer / Multibagger / Penny stock / Growth prospects and Sell / hold / analysis -- Be and Make

Investors with a long-term perspective and a high-risk appetite can buy this stock. Investors can take exposure in the stock in “small quantities regularly” considering the company's aggressive move towards making it complete integrated player.

Company background: 

            SOUTHERN ISPAT LIMITED by Agarwal Group founded in 1995. The name of the Company was changed to SOUTHERN ISPAT & ENERGY LIMITED with effect from 18th September 2008. SIEL is engaged in the manufacture of Steel Billets based out of Kerala. Southern Ispat and Energy is engaged in manufacturing and trading of steel products in India, the company product includes ingots of iron and steels other then high carbon steel bars and rods, hot rolled in irregularly wound coils and non alloy steel, it also involves in the provision of contract services and commission agents service.

  1. Southern Ispat Ltd, amalgamating the Kerala Sponge and iron Ltd which can double the current capacity post the amalgamation.
  2. The SIEL acquired the New Tech Forge and Foundry Ltd in Gujarat to diversify its business. The website of the company : http://www.newtechgroup.net/home.html
  3. The company is planning to acquire the iron ore mines in Madhya Pradesh in 150hectres and 230 mt for a cost of Rs.50cr
  4. SIEL purchased the 14mt coal mines for a cost of Rs.35cr in Indonesia
  5. For its expansion the company has capex plan of Rs. 300 crores for which it has recently issued GDR and last year the company has acquired New Tech Forge for Rs. 95 crores. For all this it has raised its authorized share capital from Rs.18cr to Rs.78cr. The company also got approval from its share holders to complete all of its planned expansions for up to Rs.1000cr.
  6. After GDR issue the company equity raised from Rs.11cr to Rs.43cr so that it balances the debt/equity ratio. 1090780 GDRs, which can be converted in to 32723400 shares at a price of 9.17dollars. So, the price would be around Rs.14.10 which also enticing when viewed at the cmp of the stock.
  7. The SIEL has small power plant working on the basis of the waste management with an installed capacity of 8MW. Now, it is planning to expand to 100MW in phases and in first phase it would be 30MW.
  8. The company listed in the NSE on 1st October 2010. It will enhance the liquidity of the stock for sure.
  9. On 27th of May 2010 1 crore warrants were issued to non promoters at Rs 32 per share (Rs 10 face value + Rs 22 premium) So, we can consider that they believed the value of the share is at Rs.32/- after 18 months but now it is available at Rs.11/-
  10.  The company has extended its financial year to 30th june 2010 and the AGM would be in December and before that all the amalgamations and acquisitions will be completed.
  11. Post the acquisitions and amalgamations company promoters’ stake is likely to increase substantially.

The promoters holding is quite low at this point of time and would be around 20% only. The company wants to go for very aggressive in-organic expansions, how it will pan-out is the big question for the share holders. The market cap and promoter stake of the company is low and previously Tata steel eyed this company to take over it. If any thing happens, this can become negative for the company in some instances.   


The future story looks very promising if everything goes right for the company. So, we can expect Rs.500cr revenue in FY10-11, and Rs.900cr in FY11-12. The demand for the steel is also likely to increase in the upcoming years globally. Technically too the volumes suddenly increased from last one month with consolidating in the share price around the Rs.11/- which is the clear indication that some huge guys started accumulating this stock at the current levels. Considering all the events issues the stock has the potential to become a multi-bagger in the 18-24 months.

So, one can add this stock in their portfolio in “small quantities regularly” aiming for the long term.

With thanks
Be and make
To get the complete report in PDF format for free: Southern Ispat 

Disclaimer: Before investing please do your own analysis and research. I/we tried to summarize all the recent events with my/our own views they may end with negative or positive hence do your good work without fail before investing. I/we have collected the news or information from various sources and the sources may or may not be the authorized hence they may be proved wrong. Hence, please do your own analysis and research before going to take my/our views. I/we strongly recommend or advice to consult the financial advisor or analyst before taking the decision. It is safe to assume that I or my followers or my friends etc., have positions in this stock. The numbers mentioned if any are purely based on my/our own estimates and they can not be the exact or audit number. They may be have some errors or wrong entries or wrongly estimated hence you are strongly recommended to consult your/ other financial advisor or stock analyst etc., to check the data published here.


Manju said...

Dear Be and make

Can you please give your comments on Southern Ispat I entered at @11.8

Thank you


Be and Make said...

Dear Manju - Sorry for the delayed reply.

How are you? I think everything fine for you!

Please go through my recent posts about the southern ispat and market outlook for 2011. Promoter stake is the big concern for this stock, management has guided that they will likely to increase their stake very soon in Q2FY11. Till now, there is no such measure from the management. Hence, one should avoid it till some positive news comes in the promoter stake.

With thanks
be and make

Manju said...

Dear Be and make

hope you are doing good. some how Southern Ispat due to lack of experience or not followed your comments. I need you expertise to hold or to sell. i bout at @11.25.

Thanks in Advance


Some very interesting stocks

Manju said...

Dear Be and Make

Please Give your comment on hold or sell?

Best Regards

Be and Make said...

Dear Manju - Better to exit from this stock. As i am predicting a very wide range for this year and market going to drift further in the short term better to have some cash in your bag at this point and it should not be less than 30%.
In such case, better to exit from the illiquid and small caps which would be set for big beating.

With thanks
be and make