Birla Corporation

Over the last one month, majority of all cement stocks have dropped .. and so have a number of diversified companies that are with the cement, steel, rubber or allied businesses. Consequently, a number of them have moved into the realm of a plausible value buy. Birla Corporation is a likely candidate.

Birla Corporation is a diversified company with interests in cement, steel, auto trims and jute. It has a particularly strong balance sheet and sales of over Rs. 1500 crs. Some specs from the company reports are enclosed :

Share capital = 77.01 crs
LY profits = 125 crs
Loan on books = 231 crs
Investments = 175 crs
Dividend = 2.25 rupees per share
FV = Rs. 10
CMP = 207 rupees (09-Mar)

Hence, some prelim stats would be :
Dividend yield = 1.09%
NCAV = (19.40) rupees per share
EPS = 16.23
P/E = 12.75 (based on LY numbers)

The last 4 quarters have gone extremely well for the company. The CARE ratings are at AA which shows very low credit risks on it's papers. And with estimated profits for FY 2007 at 295 crs, the 4 qtr trailing P/E will amount to just 5.33.

Noticeably, there is value in the company on the investments front. Investments of 175 crs, can be neatly labeled as -
> current invt (in MFs primarily) : 121 crs
> long term MFs (closed ended) : 35 crs
> other investments : 19 crs

... other investments : represent shares in various companies with the top 3 holdings in -
1. Century Textiles - 1807660 shares @ 52.1 (actual CMP = 553.0)
2. Birla Ericsson Optical - 938515 shares @ 50.0 (actual CMP = 19.4)
3. Universal Cables - 468000 shares @ 22.8 (actual CMP = 95.5)

Net net, value worth Rs. 106.2 crs was stated as 15.1 crs --- a difference of 91.1 crs.

I am particularly impressed (or maybe not, discerning to the lack of management vigour in managing leverage), the debt recapitalisation of this company would come to a massive 854 crs ... which is 57% of current market capitalisation (which is quite monstrous for a company of this size).


The charting of the stock is enclosed. Birla Corporation is at it's lowest.

I expect a substantial rise in the stock's price (to around 370 rupees per share) over the next 12 months. A BUY candidate (i bought some shares yesterday)