Bharti Airtel, A good long term pick

Bharti Airtel and Tata Communications are two companies from the telecommunication sector in my watch list. Both are a good buys at the current market price with a long term perspective. Bharti Airtel current market price on 28th April is 293.80 and Tata Communication is available at 271.50. Since the market has been treating telecom sector stocks very badly for some time, its market valuation has become attractive. The current market treatment is mainly due to intense competition in the Telecom market which has resulted in aggressive price war and dented the profitability. But it is considered as a short term phenomena.

The immediate future of Bharti Airtel continues to remain pretty cloudy. Long term investments with 5-7 years horizon until when the positive effects of consolidation in the sector could be more pronounced in nature. The company is also well-placed to benefit from the 3G revolution. Post Africa’s Zain acquisition, the company is in a better position to diversify its revenue source and allay the fears of saturation in the Indian markets. Bharti Airtel’s acquisition of 15 of Zain’s African mobile networks will make it one of the five largest mobile groups in the world by subscriber connections, according to the latest Wireless Intelligence operator-group rankings.

2009-10 Result

Consolidated sales grow by 12% during FY10, 5% during 4QFY10 compared to same period last year. Growth for the full year was led by a 38% rise in revenues from the passive infrastructure segment. Revenues from the mobile services segment stands at 63% of sales and has increased by 7% from last year. Mobile subscriber base grows by 36% during the year. Total count of subscribers stood at around 128 m at the end of March 2010.  Operating margins decline by 0.5% during the year owing to higher network operating costs (as percentage of sales). Net profit drops by 1% during 4QFY10 as compared to same period last year, grows by 17% during the full financial year 2009-10. While higher interest income aids profit growth, the higher tax expenses curbs growth during the year. Exceptional items during the year and quarter relate to acquisition related costs such as advisory and professional fees directly attributable to the acquisitions in Bangladesh and Africa. It recommended a dividend of Re 1 per share.

Subscribers

One can reasonably expect a lot of potential growth in subscriber numbers that is still remaining in the India’s telecom industry. India added a record 20 million new mobile subscribers in March 2010. India had 584.32 million subscribers at the end of March, which indicates that 49.6 percent of Indians have mobile connections, according to TRAI. India’s largest operator, Bharti Airtel had a 21.84 percent share of the market at the end of March 2010, followed by Reliance Communications with 17.53 percent share, and Vodafone Essar with a 17.26 percent share, TRAI said.

Mobile phone operator Vodafone Essar has added 3.6 million new users in March to pip number one player Bharti Airtel in mobile subscriber additions.  Bharti Airtel and Reliance added 3 million subscribers each.

Competition and Price war

Indian mobile operators have dropped voice call rates to below 0.01 Indian rupees per second in a bid to gain market share, even as new entrants are rolling out services. These gains have come at the expense of lower average revenue per user and fewer calling minutes used by subscribers. Last year, the offer of a pay-per-second plan by a new operator triggered off a price war, leading to charges of predatory pricing by some telecom operators. In Q4 2009, new telecom operators such as MTS and Uninor extended the price wars with 30 paise per minute plans which led to many cases of multiple number ownerships and churn rates. Revenue per minute (a key measurable in the telecom industry) is expected to fall by five to six per cent.

3G Spectrum

All eyes are now on the 3G auctions in which the operators are expected to participate aggressively. Failing to win 3G spectrum in metros and Circle ‘A’ areas could place them at a disadvantage vis-à-vis competition. They would, therefore, be prepared to incur higher cash outflows.

Zain Deal

The last quarter gone by also saw Bharti Airtel entering into an agreement with the Zain Group to acquire Zain Africa assets for $10.7 billion. “In the short term, Zain Telecom’s financials may have some negative overhang on Bharti’s consolidated results but on a long term basis the same would prove to be earnings accretive. The key points to be monitored are market share gains in key geographies like Nigeria, the operational turnaround of Zain Telecom’s African operations and the acceptability and success of Bharti`s model in Africa,” Sharekhan Securities said in a recent report.

Airtel is to takeover Zain’s mobile operations in 15 African countries which cover a total population of over 450 million with telecom penetration at approximately 32 percent. As well as its home market of India, Airtel also launched in Sri Lanka in 2009 and acquired Warid Telecom in Bangladesh in January 2010, bringing its total to 18 markets, a global footprint surpassed only by the large European operator groups and its new African rival, MTN. Based on Q4 2009 pro forma data, international (non-Indian) markets will account for around 30 percent of Airtel’s total connections following completion of the Zain deal.

For an enlarged Airtel Group, the challenge is obtaining approvals. Given Airtel’s domestic market is in the midst of a next-generation rollout and calls for consolidation, managing existing operations whilst steering a pan-African purchase seems a daunting challenge. Airtel already has the experience of managing one of the fastest growing markets in the world. A major opportunity for Airtel would be to transplant their Indian pricing model into some of the low-usage markets Zain occupies to drive usage quickly and garner market share. Hard work lies ahead for the Indian company to turn Zain’s loss making operations into a profitable business venture.

New Services

Airtel digital TV Recorder

Recently, Airtel digital TV- the DTH service from Bharti Airtel launched ‘Airtel digital TV Recorder’, an enhanced Set Top Box (STB) with capability to record live television, anytime, anywhere. A first of its kind example of convergence between the mobile and TV screen, Airtel offers customers the convenience, to record their favorite shows using their mobile phones from anywhere in the world.

Airtel has also introduced the first universal remote in India, 9 interactive (iTV) applications, a multilingual EPG, low battery indicator and more that offer customers the freedom to book movie ticket or update themselves on the latest stock news.

3G enabled smart phones

Taiwan-based handset maker HTC entered into an exclusive partnership with cellullar operator Bharti Airtel to launch a 3G-enabled smartphone priced at Rs 9,990. As per the alliance, the touchscreen phone will be available in the country exclusively on Airtel networks.  With the operators gearing up to launch the 3G service by the end of this year, the handset makers are coming up with 3G-enabled handsets. Besides, service providers like Airtel and Vodafone had already launched the 3G version of Apple’s iPhone in India.

Airtel Talkies, World Sim and Khel Radio

Airtel Talkies a new service that offers previews and trailers of movies which are yet to come. It also offers all time classic movies in five languages – Hindi, Tamil, Telugu, Kannada and Malayalam.

Bharti Airtel launched this month a new SIM card for global travellers through which a customer can save upto 85% on international calls. Bharti Airtel and Radio Mirchi announced a new tie-up to offer mobile radio service, ‘Mirchi Mobile’ allowing Airtel’s mobile subscribers to listen to Radio Mirchi’s FM radio services of any region. It also launched a new value added service, ‘Khel Radio’ for the subscribers of UP East, UP  West, Bihar, Mumbai,Maharashtra, and Goa. Now the Airtel subscribers can enjoy bollywood quizzes, antakshari, pehchaaan kaun and exciting games with exotic prizes everyday. Airtel prepaid and postpaid customers can access this portal by calling 56655 at a charge of Rs 1/min.

Network expansion and upgrade

The recent $1.3 billion contract with Ericsson to supply its industry-leading portfolio of energy efficient 2G/2.5G radio base stations, circuit and packet core, microwave transmission and Intelligent Network will improve voice quality and faster data access to its customers. Bharti Airtel can now look forward to reduce time to market and enable the fast rollout of 3G services as its core and transport network will be 3G-ready. The expansion, according to the agreement, will cover some of the latest technologies within the wireless world. According to Ericsson, this will bring better quality voice to end users, support more users in using one base station, enhanced data rates using Evolved EDGE technology and other new services.

Reference:

India Adds Record 20 Million Mobile Subscribers in March

April 27, 2010

http://www.pcworld.com/businesscenter/article/195025/india_adds_record_20_million_mobile_subscribers_in_march.html

Airtel launches World SIM

April 26, 2010

http://infotech.indiatimes.com/news/telecom/Airtel_launches_World_SIM/articleshow/5859922.cms

Bharti Airtel follows OnMobile in launching geographical barrier-free mobile radio services

April 26, 2010

http://www.telecomtiger.com/fullstory.aspx?storyid=8984&section=S126

Bharti Airtel launches ‘Khel Radio’ exclusive Bollywood portal

April 22, 2010

http://www.cellbharat.com/blog/7075/bharti-airtel-launches-khel-radio-exclusive-bollywood-portal/

Mobile tariffs likely to go down further

Apr 21, 2010

http://timesofindia.indiatimes.com/biz/india-business/Mobile-tariffs-likely-to-go-down-further/articleshow/5838005.cms

Top 5 Stocks to Invest in Indian Markets

April 19, 2010

http://trak.in/tags/business/2010/04/19/top-5-stocks-indian-markets/

Bharti Airtel to become global mobile superplayer: WI

Apr 15, 2010

http://www.indiainfoline.com/Markets/News/New-Wireless-Intelligence-operator-ranking-sees-Indian-market-leader-enter-top-five/4816163891

Record TV Shows Using Your Mobile Phone With Airtel

Apr 15, 2010

http://tech2.in.com/india/news/general/record-tv-shows-using-your-mobile-phone-with-airtel/119312/0

Bharti, RCom, Idea Cellular may post lower Q4 profits

April 12, 2010

http://www.thehindubusinessline.com/2010/04/13/stories/2010041352150400.htm

Bharti Airtel Selects Ericsson for Network Expansion

April 06, 2010

http://voice-quality.tmcnet.com/topics/voice-quality/articles/80907-bharti-airtel-selects-ericsson-network-expansion.htm

Airtel Talkies brings movie content on mobiles pre-release

April 05, 2010

http://economictimes.indiatimes.com/news/news-by-industry/media/entertainment-/entertainment/Airtel-Talkies-brings-movie-content-on-mobiles-pre-release/articleshow/5763054.cms

HTC in tie-up with Airtel for 3G smart phone handset

April 03, 2010

http://indiatoday.intoday.in/site/Story/91154/Business/HTC+in+tie-up+with+Airtel+for+3G+smartphone+handset.html


Portfolio Review

Sensex gained 0.59% to 17,694 and Nifty by 0.79% to 5,304 this week. Year to date gain of Sensex stands at 1.31% and Nifty 1.98%. Year to date gain in my equity portfolio stands at 2.26% which slightly beat the market!

In my watch list, Bharti Airtel (297.70) and Tata Communications (277.60) in Telecom sector, Hero Honda (1,883.65) in Automobile sector, and NIIT Technologies (177.70) in IT sector are the good buys at the current market price. As always, set limits for individual shares and individual sectors in order to avoid concentration on a few shares in your portfolio.

Top 5 in my equity portfolio

Company Sector Average Holding Period
Infosys IT 2.5 Years
Tata Tea FMCG 1.5 Years
Bharti Airtel Telecom 5 Months
Dabur India FMCG 3 Years
Gujarat Fas Energy 4 Years

Shares I bought this Week

Company Price
Nil

Most gain (absolute)

Company %  Gain Average period of holding
Gujarat Gas 124% 4 Years
Dabur India 122% 3 Years
Tata Tea 94% 1.5 Years
Suzlon Energy 83% 1.5 Years
Infosys 63% 2.5 Years
Average period of holding


Pharma may log modest growth in Q4

The pharma sector is expected to log a modest performance for the quarter ended March 2010. Mid-sized pharma companies like Cadila Healthcare, Lupin, Piramal Healthcare, Biocon, Glenmark Pharma are likely to outperform sector biggies like Cipla and Ranbaxy. – A report in Economic Times says.

Aggressive product launches in the US, growth registered in the emerging markets and revival in contract manufacturing are likely to trigger this growth. Though rupee appreciation is negative for export oriented companies, the companies with foreign debts will benefit.

Read complete report of Economic Times

Related Link

Biocon | Cadila Healthcare | Glenmark Pharma | Pharma


Hero Honda 4th Quarter result

Hero Honda Motors Ltd., India’s biggest motorcycle maker, reported a better-than-estimated 49 percent increase in fourth-quarter net income as sales climbed. Profit totalled 5.99 billion rupees in the three months ended in March from 4 billion rupees a year earlier, the company said in a statement today. The company’s operating profit margin  was 17.2 percent in the quarter, according to the statement.

For the entire 2009-10 financial year, the profit soared by 74.1 per cent to Rs 2,231.83 crore. The total turnover in the last fiscal stood at Rs 15,860.51 crore, up 28.1 per cent compared to that in 2008-09. During FY 2010, the company’s total sales increased by 23.6 per cent to 46,00,130 units. The company, which had set a target of selling 40 lakh units in 2009-10, had launched nine new models and variants across segments in last fiscal.

Hero Honda will pay a final dividend of 30 rupees a share.

Related Links:

Hero Honda’s Net Income Gains 49% on Indian Motorcycle Sales: Business Week

Hero Honda’s profit up 50 per cent in Q4: Hindustan Times

More updates

Hero Honda’s Net Income Gains 49% on Indian Motorcycle Sales


Hero Honda

The Hero Honda is a joint venture between the Honda Motors Co., Japan and India’s Hero Group. Honda Motors Co., Japan is among the pioneers of the global motorcycle industry. The Hero Group has a long track record of mass manufacturing and distribution from the days of Hero Cycles.

Hero Honda has been the largest two wheeler company in the world for eight consecutive years. The company crossed the ten million unit milestone over a 19-year span. In the new millennium, Hero Honda has scaled this to 15 million units in just five years! As one of the world’s technology leaders in the automotive sector, Honda has been able to consistently provide technical know-how, design specifications and R&D innovations. This has led to the development of world class, value – for- money motorcycles and scooters for the Indian market. Hero Honda is recognized today as one of the most successful joint ventures in the world.

Two positive indicators for Hero Honda are the company is efficient in managing capital and it has an excellent track record of rewarding shareholders by paying out dividends. Its management is shareholder friendly though largely a family managed entity.  It enjoys strong brand equity and distribution network. The brand Hero Honda is associated with fuel efficiency.

The company also has a strong distribution system. Hero Honda’s bikes are sold and serviced through a network of over 3500 customer touch points, comprising a mix of dealers, service centres and stockists located across rural and urban India. Hero Honda has world-class manufacturing facilities at Dharuhera and Gurgaon in Haryana and a most sophisticated plant at Haridwar. The company is able to introduce a variety of models cutting across the entry (100 cc), deluxe (100 to 125 cc) and premium (125 to 250 cc) segments.

Competition is strong and it has no pricing power. It may be noted that Indian motorcycle industry has become extremely competitive. Undoubtedly, the new competitors pose a formidable challenge in the premium segment with dazzling models, which will attract the affluent metro crowd.  However it is difficult to beat Hero Honda in the entry and deluxe segments. These segments cater to India’s value conscious smaller centers where the company’s distribution network, service capabilities and goodwill are unmatched.

Hero Honda has been consistently generating returns on equity well above 35% in the last 10 years. Over the past 5 years, the company has posted returns of around 41% on an average. Importantly, the rapid increase in return on equity has not been fuelled by debt. During this entire time, it has utilised little or no debt. The company is able to generate funds from the internal accruals for the capital expenditure. Same time it has a good track record of paying handsome dividends to its shareholders.

Updates Company website | Market Information | News and Analysis |


Good Buys in Indian Shares

Sensex declined 1.91% to 17,591 and Nifty declined by 1.85% to 5,263 this week. With this, year to date gain of Sensex reduced to mere 0.72% and Nifty to 1.18%. Year to date gain in my equity portfolio stands at 1.98% which lightly beat the market!

In the Indian share market which is believed to be overpriced, there are still a few stocks that are attractively priced. In my watch list, Bharti Airtel (304.35) and Tata Communications (280.40) in Telecom sector, Hero Honda (1,919.50) in Automobile sector, and NIIT Technologies (179.15) in IT sector are the good buys at the current market price. As always, set limits for individual shares and individual sectors in order to avoid concentration on a few shares in your portfolio.


Update on Watchlist of Indian Shares

Here is an update on shares in my watch list.

Opportunities to Buy:

Company Sector Current Price
Bharti airtel Telecom 308.05
Tata Communications Telecom 288.95
Hero Honda Auto 2,056.80

Hold if these are in your portfolio

Company Sector Current Price
Biocon Pharma 307.60
Blue Star Engineering 410.25
Cadila Healthcare Pharma 568.35
Castrol Energy 364.50
Exide Industries Auto Ancil 120.25
Glenmark Pharma Pharma 278.85
GSK Pharma Pharma 1,780.25
HCLT IT 343.40
HLL FMCG 221.30
IGL Energy 229.25
Infosys IT 2,678.85
NIIT Tech IT 170.00
NTPC Power 211.50
Page Industries Textiles 835.00
Pfizer Pharma 1,028.40
Piramal Healthcare Pharma 467.45
Sun Pharma Pharma 1,770.25
Suzlon Energy Power 75.10

It is time to sell if these are in your portfolio

Company Sector Current Price
ACC Cement 957.30
Ambuja Cements Cement 120.00
Ashok Leyland Auto 56.05
Asian Paints Paints 2,042.30
Aventis Pharma Pharma 1,830.00
bajaj auto Auto 2,066.80
bharat forge Auto Ancil 271.10
Bhel Engineering 2,563.75
Colgate P FMCG 711.40
Container Corporation Logistics 1,403.85
Crompton Greaves Engineering 270.35
Cummins India Engineering 528.20
Dabur India FMCG 176.15
GAIL Energy 424.85
GatewayDL Logistics 131.15
GodrejCP FMCG 282.65
Grasim Diversified 2,884.50
GSK Consumer Food 1,525.05
Gujarat Gas Energy 291.65
Kansai Nerolac Paints 1,325.00
L&T Engineering 1,641.35
Lupin Pharma 1,630.15
m&M Auto 528.25
Marico FMCG 113.60
Maruti Auto 1,381.15
Nalco Metal 408.65
Nestle Food 2,699.65
ONGC Energy 1,065.65
P&G FMCG 2,125.85
SAIL Metal 234.50
Siemens Engineering 749.00
Tata Power Power 1,365.00
Tech Mahindra IT 850.05
Ultratech Cement Cement 1,154.00
Voltas Engineering 185.80
Wipro IT 710.10
16/02/2010 bharti airtel Telecom Equitymaster
16/02/2010 Tata Communications Telecom Equitymaster
02/03/2010 hero honda Auto ValuePro

Resources for investors

There are a plenty of information on internet about investment opportunities. Many of them are junk which often mislead or confuse retail investors. Ignorant and careless people fall victims of those so called experts advices. Undoubtedly there are many reliable and trustworthy sources as well on which can be relied upon. Investors always should double check with multiple sources in order to reduce risk of uninformed investment decision. There are various paid and free resources such as paid and free research reports, contents on web and print media. If you are an investor, don’t solely depend on broker’s recommendation as it may not be always good for an investor who aims for long term wealth creation. Remember that brokers earn fee and make money when you buy and sell more often, not when you buy and hold it.

We list some of those resources here.

News and Market information on Indian Capital Market

Moneycontrol.com

Moneycontrol.com is an information hypermarket for Indian capital market. It provides in depth coverage on market information including IPO’s and mutual funds. Their free portfolio service is an essential tool to track the equities.

Google India Business News

Google India Business News provides a collection of latest business news from various websites.

Research Reports on Indian Equity

Equitymaster.com

Equitymaster.com provides many paid subscriptions through its web sites and email. Research reports and recommendation by Equitymaster is purely based on the fundamental analysis for long term investors. It strongly discourages share traders and technical analysis.  Stock Select, Mid Cap Select, Hidden Treasure, Research Pro, Value Pro are the research products from Equitymaster.

KRChoksey

K R Chocksey offers many paid subscription to various reports under KRC Earning Ideas based on technical and fundamental analysis. One among them is Between the Lines which is a daily corporate analysis report providing analytical points of corporate developments market actions. Other research products under KRC Earning Ideas are Market Outlook, Good Evening KRC and Cherry Picks.

IDBI Paisabuilder

IDBI Paisabuilder provides many free research reports and information on stock markets, mutual funds, IPO’s, corporate and industry. It also provide interactive tool to Multex Company Estimates and top analyst recommendations. Its Corporate Library section provides comprehensive research on over 4000 companies with detailed company financial information about companies which you will need for investing in shares – company snapshot, background, management, P&L, Assets & Liabilities, Sources of Funds, Important Ratios, Results Dividends, Capital history, Share prices, news. You can also compare these among peer companies. Explore this section for all your company stock information needs. IDBI Pasisabuilder is indeed a best free tool available.

Business Line Investment World

The Hindu Business Line Investment world published every Sunday give recommendation based on fundamental research on 3-5 stocks every week. Recommendations provided through this feature have been very successful. Investor can consider these recommendations.

Business News and Market information for UAE and Middle East

ameinfo.com

It claims itself as ultimate Middle East business resources. It provides comprehensive business news and analysis in UAE and other Middle East countries. It also provide on its website third-party research reports on equities and stock

Noozz.com

Noozz claims itself as the leading provider of premium business information on emerging markets. It provides news, market research and business services under one roof focused on individual emerging market like UAE, Saudi Arabia, Kuwait, Qatar etc. Its contents is provided on paid subscription

Arabian Business

ArabianBusiness.com is the Middle East’s premier business portal. It provides most up to date comprehensive news and reports


Build your equity portfolio with Drops Savings and Investments

There are thousands of companies listed in Indian stock exchanges. It may not be possible for a common man to do research to find out the right company to invest in. The information and recommendations found on various websites are often confusing or misleading. It is not economical for small scale retail investors to spend money for independent research reports which are very few and expensive. It does not mean the common man should stay away from investing in stocks.

Drops Savings and Investments help you to identify right stocks through Valappil’s portfolio updates. Valappil provides the information on what he buys and sells from time to time.  It is based on the paid and unpaid research reports provided by various independent professional investment analysts and research service providers.  Valappil is a finance professional with experience of more than 14 years. He has been closely watching stock markets since 2002 and started investing in shares in 2004.

We encourage investment in companies with a long term perspective. If you bother day to day fluctuations in the index level, our features may not sound interesting to you. Invest in company, not in market or index. You think about your company only – its business, its operational performance and its financial standing!

You may follow Valappil’s portfolio updates, you may solely depend on these updates for your investments or you may consider this along with other information.  You are most welcome to share your ideas and suggestions.


When to Buy and Sell shares?

When to buy?

You can buy shares any time. Look for good companies with shares at attractive valuation. Best proven method of investing in shares is invest regularly and periodically. Invest a portion of your savings in to shares every month, don’t bother about index level. It may go up and down. But a regular investor can average the cost and earn a decent return in the long run.

When to Sell?

Sell when your investment objectives reach. If you bought shares of good companies, normally you don’t have to sell your shares until your investment objectives reach. When you start investing in shares, you should have a long term goal such as marriage after 3-5 years, buying or building a home after 5-10 year, children’s higher education after 15-20 years, children’s marriage after 15-25 years, or your retirement. Sell your shares only when time of your investment goal arrive. Don’t be panic to sell shares when the overall market fall or don’t tempt to sell when share market soars. But just have an eye on news about the industry and the company you invested in. If there is a real reason to believe that it is not worth continue to hold due to a concern about the prospect of company or the industry, then don’t hold but sell.