My Top Picks - All small cap - Value picks

Dear Sree selva,

I like sterlite technologies.

Some latest news on large new order inflow:

http://articles.economictimes.indiatimes.com/2013-08-15/news/41413539_1_sterlite-technologies-lowest-bidder-finolex-cables Link: http://articles.economictimes.indiatimes.com/2013-08-15/news/41413539_1_sterlite-technologies-lowest-bidder-finolex-cables

I think both telecom and power segments will grow over the long term. Sterlite is a very efficient player in the market and the growth potential is huge. Also business is not too capital intensive. If you we take out of the debt related to BOOM Power Transmission lines which the company plans to own (more like utility business) it is close to debt free with minimal debt. I see lot of scalabilityin their business. Currently making around 3400 revenues and has a market cap of just 700 crores. I think the company has the potential to grow revenues at a rapid pace. Further margins are also at cyclical trough and should improve. (Check latest Annual Report). Rupee depreciation also will help their export revenues.

BOOM Project revenues also to start coming soon. To me it looks like a 5 bagger over the long term.

Key Risk is that it is a cyclical business. Also over the long term if there is a change in technology which makes it possible to transmit signals wireless which reduces demand for optic fibre cables.

Views Invited.

Regards,

Sriram

Discl: I hold first bought in June-July and have been trading since then selling partially whenever it goes up and buying again on declines and hold at a cost of 15 Rs per share.

AK Capital debt raising business is picking up. Not sure if that is the reason for the 20% rise in price last 2 days. Still going very cheap.

Few issues where they are currently (next 2 months) raising capital are 3,500 crores REC tax fre bonds, 8,171 crores IIFCL issue, 500 cr Sriram Finance Corp Issue & 200 cr SREI Infra issue. I think this year they should earn large fee income. Where interest rates will go and how their bond portfolio will perform is something one has to wait and watch.

http://www.moneycontrol.com/news/business/iifcl-seeks-sebi-nod-to-raise-rs-8171cr-via-tax-free-bonds_947525.html

What happend to First leasing company today?

http://www.thehindubusinessline.com/industry-and-economy/banking/first-leasing-shares-dive-after-rbi-bars-it-from-doing-business/article5134278.ece

It will hit another lower circuit today.

118 crores in dividend paid historically which is well above market cap when i recommended. Historical taxes paid to government again well above market cap when i recommended. 27.32% capital adequacy ratio which is well above requirement. They lend only to high quality borrowers with high credit ratings.

All ratings agency have historically given very good ratings to the company. Even 2 months back they got excellent ratings. Really not sure what happened whether it is politically motivated or they had some accounting policy issues. Overall shocking and shows how unexpected things can happen in financials space.

Neeraj marathe has written a nice block on the same:

Rating Date Security Type Amount Rating Rating Type

04-07-2013 Commercial Paper 200 A1+

04-07-2013 Debt Progamme 150 AA- Instruments carrying this rating are judged to be of high quality by all standards. They are also classified as high investment grade. They are rated lower than CARE AAA securities because of somewhat lower margins of protection. Changes in assumptions may have a greater impact or the long-term risks may be somewhat larger. Overall, the difference with CARE AAA rated securities is marginal.

04-07-2013 Debt Progamme 1325 AA Instruments carrying this rating are judged to be of high quality by all standards. They are also classified as high investment grade. They are rated lower than CARE AAA securities because of somewhat lower margins of protection. Changes in assumptions may have a greater impact or the long-term risks may be somewhat larger. Overall, the difference with CARE AAA rated securities is marginal.

Headline in the ET today - “First Leasing’s Irani Pulls a Ramalinga Raju Now… confesses that the company he has led for four decades has a hole of 1000 cr on its balance sheet”.

cant find the link.

Here’s it is;

http://economictimes.indiatimes.com/news/news-by-industry/et-cetera/first-leasings-farouk-irani-admits-rs-1000-crore-gap-in-balance-sheet/articleshow/23279365.cms Link: http://economictimes.indiatimes.com/news/news-by-industry/et-cetera/first-leasings-farouk-irani-admits-rs-1000-crore-gap-in-balance-sheet/articleshow/23279365.cms

Hi Sriram,

Seems like you are not interested in sharing all your top 5 picks picks :-).