Recent quarterly Q2 results of Nahar Spinning and Nahar Exports indicate to me a rerating of both the stocks during the next few weeks or latest few months.Here are some of the facts:
- Nahar Spinning Mills Ltd. NSML,the flagship company of Nahar Group is expected to become a Rs. 1000+ crore top line company after amalgamation of Textile Division of Nahar Exports with the Company.Infact the expected Top Line for FY07 is Rs. 1250 crores based on the Q2 results and the ongoing expansion getting commissioned shortly.Post reorganisation number of shares of FV 5 shall be 3.6 crores.Expected PAT on turnover of Rs. 1250 crores is Rs.145 crores, thus giving an EPS of Rs. 40 per share.Even on P/E of 10 the share should quote at Rs. 400 per share .
- Shareholders of NSMLwill get shares of Nahar Capital and Finance Services Ltd NCFSL a new company formed to look after investments of Nahar Group which amount to Rs. 600+ crores, including Rs. 240+ Crores of Nahar Exports Ltd. NEL, On a capital of 3.6 crore shares of FV 5 NAV per share of NCFSL shall come to about Rs. 160, and the share is expected to quote at Rs. 50 per share.
- NSML and NEL have between the two a large landbank which they want to develope and for this purpose a new company Nahar Real Estate shall be the SPV . Shareholders of NSML and NEL shall get shares of Nahar Real Estate, say two years from now.
- Shareholders of NEL will get shares of NSML in the ratio of 55 shares of NSML for every 100 shares of NEL.And shareholders of NEL will retain 75 shares of NEL for every 100 shares of NEL. FV of NEL shares shall come down to Rs.5 per share.Within the next one year shareholders of NEL will get shares of NCFSL.Residual business of Nahar Exports is going to be Garmenting and Exports,with good margins.I expect that EPS of Nahar Exports on equity of 2.7 crore shares of FV Rs. 5 shall be atleast Rs. 5 per share and growing and thus should have a market quote of atleast Rs. 60+.P/E of 12 is very low compared to its peers like Pearl Global,Givo etc.
- Adding up if one buys 100 shares of NEL today @ Rs. 80 per share then within ONE year one should have 55 shares of NSML ,75 shares of NEL,and 55 shares of NCFSL.On a conservative basis Rs. 8000 invested today should become Rs. 55*400 + 75*60 +55*50 = Rs. 29250 or 250% appreciation.Whatever you get for Nahar Real Estate which could be substantial will be a huge BONUS.
- However if one BUYS 100 shares of NSML @ Rs. 240 per share, then at the end of one year,one would have 100 shares of NSML and 100 shares of NCFSL valued at Rs. 45000 or an appreciation of less than 100%.
- So better BUY is NEL
Declaration: I am invested in Nahar group comapnies NEL, NSML and Nahar Industries Ltd.and so I have a vested interest in their share prices going up. Please consult your financial advisor before investing in any of these companies.