Tata Coffee - Price drops lead to margin compression, really???

HDFC Bank - In the name of customer service!

Had a chance to visit the nearest HDFC bank, got to see their customer service from close quarters:)

Take their savings account for instance:

• First up, I just got to know that excess savings in the SA account can actually be swept in and out into a 1 yr TD w/o any hassle! vaguely remember my ex-boss mentioning a facility like this
• We ask the CSR person there a few questions, here's the gist:
• What's the minimum balance above which you can sweep in/out?
• 1 lac !!!! (vs a PSU banks where it is hardly INR 10,000 and can be as low as INR 500)
• Do you educate the customer about this option?
• 32 teeth glaring:)
• Do you have the flexibility to fix the amount that can be swept in?
• Sir, you are asking too many good Qs. Where do you work?

This things holistically are good for investors/bank i.e. high CASA balances translating to better NIMs translating to better RoEs...Isn't customer one of the stake holder though?

GDL - 12% away from all time; 12% CAGR in EPS since 2007, 7% div yield! will it touch 9% div yield?

Consolidated	200503	200603	200703	200803	200903	201003	201103	201203
Net Sales	95.6	138.6	161	271.4	452	516.6	602.5	821.5
Total Income	96.6	149.6	185.9	285.8	462.9	532.2	613.8	844.5
Total Expenditure	42.9	54.8	79.5	168.1	303.8	393.7	439.6	580.4
PBIDT	53.7	94.8	106.5	117.7	159	138.5	174.3	264.2
PBIT	46.5	84.2	92.6	88.5	114.5	93	124	201.3
PBT	41.6	81.5	91	85.6	93.4	72.4	104.1	186.4
PAT	34.6	72.2	77.1	72	77.5	80.3	99.7	135.6
Cash Profit	41.8	82.8	90.9	101.2	121.9	125.8	150	198.4
Sources of Funds
Equity Paid Up	75	92.2	92.4	115.6	107.7	107.9	108	108.3
Reserves and Surplus	90.9	482.6	525.4	530.3	514.7	555.4	578.9	638.7
Net Worth	165.9	574.8	617.8	645	621.7	662.9	686.9	747
Total Debt	85.8	31.9	7.5	17.9	204.5	209.9	134.9	129.3
Application of Funds
Gross Block	193.9	238.7	437.3	718.6	933.3	1003.6	1143.2	1230.3
Investments	0	14.4	0	0	23	15	13	0
Cash and Bank balance	92.7	352.6	206.8	95.7	59.3	79.5	137.7	166.2
Net Current Assets	76.4	404.5	213.3	79	93.3	84.6	140.7	151.3
Total Current Liabilities	36.7	39.6	43.4	91.2	106.4	167.8	107.9	116.2
Total Assets	299.9	659.7	733	836.2	1013.6	1123.2	1323	1434.7
Cash Flow
Cash Flow from Operations	47.8	30.4	121.5	88.2	111.2	162.8	33.5	208.7
Cash Flow from Investing activities	-84.4	-49.2	-191.2	-192.3	-203.7	-88.3	-160.2	-88.4
Cash Flow from Finance activities	123	278.7	-76.1	-7.1	56.2	-54.3	121.9	-94
Free Cash flow	-36.6	-18.8	-69.7	-104.1	-92.5	74.5	-126.7	120.3
Ratios
No. of Shares	7.5	9.22	9.24	11.56	10.77	10.79	10.8	10.83	10.83
Market Capitalization	840.4	2339.7	1525	1139.2	580.6	1353.7	1310	1668.6	1137
Price	112.1	253.8	165.0	98.5	53.9	125.5	121.3	154.1	105
Returns
RoE		19%	13%	11%	12%	13%	15%	19%
ROCE		29%	19%	12%	12%	10%	11%	12%
Multiples
P/E	24.3	32.4	19.8	15.8	7.5	16.9	13.1	12.3	8.4
EV/EBITDA	17.2	25.0	14.4	9.8	4.9	11.3	8.3	6.8	4.8
						*12% away from all time low multiples
DPS								7	6.7%

Mr. Buffett by Mr. Gates

Like the 3rd point a lot - a point stressed upon by several great people

I’m looking forward to sharing posts from time to time about things I’ve learned in my career atMicrosoft and the Gates Foundation. (I also post frequently on my blog.)

Last month, I went to Omaha for the annual Berkshire Hathaway shareholders meeting. It’s always a lot of fun, and not just because of the ping-pong matches and the newspaper-throwing contest I have with Warren Buffett. It’s also fun because I get to learn from Warren and gain insight into how he thinks.

Here are three things I’ve learned from Warren over the years:

1. It’s not just about investing.

The first thing people learn from Warren, of course, is how to think about investing. That’s natural, given his amazing track record. Unfortunately, that’s where a lot of people stop, and they miss out on the fact that he has a whole framework for business thinking that is very powerful. For example, he talks about looking for a company’s moat—its competitive advantage—and whether the moat is shrinking or growing. He says a shareholder has to act as if he owns the entire business, looking at the future profit stream and deciding what it’s worth. And you have to be willing to ignore the market rather than follow it, because you want to take advantage of the market’s mistakes—the companies that have been underpriced.

I have to admit, when I first met Warren, the fact that he had this framework was a real surprise to me. I met him at a dinner my mother had put together. On my way there, I thought, “Why would I want to meet this guy who picks stocks?” I thought he just used various market-related things—like volume, or how the price had changed over time—to make his decisions. But when we started talking that day, he didn’t ask me about any of those things. Instead he started asking big questions about the fundamentals of our business. “Why can’t IBM do what Microsoft does? Why has Microsoft been so profitable?” That’s when I realized he thought about business in a much more profound way than I’d given him credit for.

2. Use your platform.

A lot of business leaders write letters to their shareholders, but Warren is justly famous for his. Partly that’s because his natural good humor shines through. Partly it’s because people think it will help them invest better (and they’re right). But it’s also because he’s been willing to speak frankly and criticize things like stock options and financial derivatives. He’s not afraid to take positions, like his stand on raising taxes on the rich, that run counter to his self-interest. Warren inspired me to start writing my own annual letter about the foundation’s work. I still have a ways to go before mine is as good as Warren’s, but it’s been helpful to sit down once a year and explain the results we’re seeing, both good and bad.

3. Know how valuable your time is.

No matter how much money you have, you can’t buy more time. There are only 24 hours in everyone’s day. Warren has a keen sense of this. He doesn’t let his calendar get filled up with useless meetings. On the other hand, he’s very generous with his time for the people he trusts. He gives his close advisers at Berkshire his phone number, and they can just call him up and he’ll answer the phone.

Although Warren makes a point of meeting with dozens of university classes every year, not many people get to ask him for advice on a regular basis. I feel very lucky in that regard: The dialogue has been invaluable to me, and not only at Microsoft. When Melinda and I started our foundation, I turned to him for advice. We talked a lot about the idea that philanthropy could be just as impactful in its own way as software had been. It turns out that Warren’s brilliant way of looking at the world is just as useful in attacking poverty and disease as it is in building a business. He’s one of a kind.

Photo: Bill Gates 

Gateway Distriparks - Technical Chart - Buy!

Gateway Distriparks - Norwest investment in Snowman

Original Shareholding			Post infusion
GDL	53%		GDL	50%
IFC	20%		IFC	16%
Others	27%		Others	22%
			Norwest	14%
			Post money	420

What should be the holdco discount? 60% empirically?

Valuation of Snowman - INR 250 crores => FY13 P/E of 25.0 x or FY15 P/E of 15 x; seems high

Bear Case, I would value it at 10 P/E - INR 100 crores - INR 150 crores is the range of valuation

CFS - 10 P/E for a 15% RoE business - 90 crores => 900 crores

Rail - INR 30 crore PAT => INR 300 crore valuation - 60% holdco discount? => 180 crores

Overall: Valuation should be around 1250-1300 crores

Trades at 1210 crores

5%+ div yield + atleast 10% growth in EPS => 15% CAGR in stock price; longer term only private player who has actually scaled.

Other triggers:

• Passing on the rail freight increase to customers
• uptick in the economy; therefore CFS volumes
• 7 times P/OCF

So why hasn't the stock performed over the last two years?

my two cents: 

• earnings growth tapered off - investors like to see atleast 15% growth in earnings on a constant basis
• need insulation from cyclical businesses
• Indian market is more growth oriented - value needs patience and patience needs large quantum of capital

Disc: I own some in the stock

Tata Coffee - efficient market blah blah blah!

Capital First - Yippee

The trader in me says "Yippee"; investor says "hold your horses"!

Capital First - WTF?

20% drop in stock price for no good reason! pheww!

First things first - CAPF does not have any international funding sources aka $ loans; so rupee has no specific impact!

Lets examine promise and delivery -

• Will focus on retail and MSME - retail like Bajaj Finance i.e. consumer durables etc
• Retail contribution in FY10 was 10% and is now 74% (31st March 13)
• Key Qs: has the yield improved? what exactly is retail?
• Retail - 80% is LAP - 13-15% yields, basically MSME loan

• Distribution Network was supposed to increase to 300 outlets by FY13
• Investor presentation says 180 outlets by FY13; aika!
• Key Qs: were there any outlets that were shutdown

• Risk mgmt practices:
• Tough to judge from the outside - barring the conservative writeoff policy

• Loan targets
• 2 x in 2 years; 

Other interesting points:

• Clean board: Vaidi is a marathon runner - significant equity tied up to the company performance
• WP increased stake to 70% - Why should they keep this listed? delist and sell? will definitely be sold one day
• Credit rating up 3 notches at AA+

at P/ABV of 1.0x - it is a no-brainer!

Kovai Medical - MDA over the years

2012

COMPREHENSIVE CANCER CENTER

The Comprehensive Cancer Center was inaugurated by his Excellency Dr.K.Rosaiah, Governor of Tamil Nadu on 07.11.2011.The center has a well knit team across radiation oncology, surgical oncology, medical oncology and nuclear medicine. Don't know what is the most advanced form of cancer treatment available at other places!

2011

The new cancer facility embarked by our Hospital will be equipped with the state-of-the-art equipments like Triology High Energy Linear Accelerator, PET Scan, SPECT Nuclear Scan and other imaging equipments. PET/CT is purely non-invasive diagnostic tool which provides best results than any other imaging technique.

Radiology Department has been equipped with latest 3T MRI equipment, Digital Mammography, Ultrasound and latest X-ray units making it as one of the most sophisticated ultra modern radiology facilities in the country.

Neuro interventions and Neuro surgeries are complemented by world class facilities. Biplan Cathlab, Sterotactic and functional Neuro equipments recently installed in our Hospital will aid in advancement of neurological procedures.

The additional Medical ICU, Neuro ICU and Surgical ICU facilities which are equipped with latest equipments and supported by highly competent Doctors proficient in intensive care has tremendously improved the critical care services in our Hospital.

• Aren't all these pretty standard across normal hospitals? should ask doc!

Since the Company is fundamentally strong, the required finance for the expansion / modernization programmes can be mobilised from Banks / Financial Institutions/internal sources. - nice

2010

In the light of these developments Rs.200 crores expansion programme at our main hospital seems to be very appropriate and need of the hour. As a part of this expansion program 170 beds have been to be added and have started yielding revenue. The new radiotherapy facility and upgrading of the existing Radiology services will be completed by January 2011. Work for building of 7 state of the art operation theaters is also in progress and will be operational by January 2011. Highly sophisticated procedures like Liver Transplant and Bone Marrow Transplant are expected to be done in the new complex. Three new Cardio Thoracic theaters and 18 beds Neonatal ICU are also being built which will be operational by September 2010

• Bed expansion on track - as was stated in 2010, although original plan of 2008 was bit too optimistic

2009

In light of the above and as reported earlier the Rs. 200 crore expansion plan for adding 250 beds and 7 operation theaters along with a cancer therapy unit covering an estimated 4 lac square feet is on course and the construction activity is making steady progress. However in order to meet the urgent demand we added 35 beds during January 2009. 

The next phase of 110 beds is expected to be ready by September 2009. The cancer unit is expected to be ready by April 2010. It is also planned to have exclusive outpatient block to house all the consultant rooms and service areas like reception .outpatient pharmacy with about 80000 Sq.ft area in the final phase by end 2010.

• interesting to see capex remaining the same, beds scaled down (for a general purpose hospi, what is the capex per bed at a place like coimbo?);
• By Dec 08 - 200 beds were supposed to be complete - 35 were delivered; would have been happy if atleast 50% of the target was delivered - clearly there were issues either with doc ramp-up or facility ramp-up - would expect the former
• Cancer unit got delayed by a year - Kudos!

Your hospital has acquired 5000 square feet of land adjacent to the Speciality Hospital at Erode. It is planned to merge the existing Hospital at Erode with Speciality Hospital to optimize the resources and to exploit the synergy to provide improved services to patients. There has been persistent requests from the patients in Coimbatore city to expand the facilities at our City Center in Coimbatore Ramnagar area. Therefore we have planned to build a good outpatient clinic facility with the state of the art radiology and laboratory investigation equipments with good outpatient consultant rooms. This new facility will be ready during the year 2010.

2008

We had reported during the last year that your hospital has embarked on an massive 100 crore expansion plan to add patient beds and also provide cancer treatment facilities, organ transplant facilities. We are all aware that Coimbatore has become the central hub of industrial activity in the state of Tamil Nadu.

Keeping these developments in view we have revised our expansion programme outlay to 200 crores with an addition of 300 beds and 7 additional operation theaters for organ transplantation, cancer and cardiac surgeries.The programme will also include a nursing college and nursing hostel. Work for building infrastructure consisting of 5 lakh square feet in progress. Expansion programme is planned in three phases. The first phase of the programme with 200 beds is expected to be completed December 2008. The second phase with the 7 operation theaters and 100 beds is expected to be completed by the end of the year 2009. However the third phase will be completed during the year 2010 which will consist of the new outpatient block to be built for housing the consultants and supporting facilities at the hospital.

You'll be happy to know that in the new expansion project we are planning for about 50 beds exclusively dedicated to the medical tourism patients from foreign countries US, UK, Saudi Arabia, Sudan, Nigeria. In order to ensure quality and also to instill confidence in the medical tourism patients, it has become absolutely essential to get hospital accreditation from the recognized national or international accrediting agencies. Towards this end, your hospital has already applied for the Indian National quality accreditation from the National Accreditation Board for Hospitals (NABH) affiliated to the Quality Council of India which is a government of India certified institution. We expect to get the accreditation by March 2009.

How many international patients are actually landing up at the hospital?

2007

Ongoing Expansion Programme

At present we are embarking on a 100 crore expansion project comprising of establishing additional 200 patient beds, a speciality centre to provide cancer treatment facilities, organ transplant facilities for Kidney, Liver and Bone Marrow have already commenced and is progressing.

Acquisitions and mergers and strategic alliances

In a globalised economy, economies of scale, technology management and innovations are essential for sustenance and growth. In order to expand our operations we need to look at both organic and inorganic growth in our company.

Acquisitions and strategic alliances are essential for rapid growth and in this regard, we have entered into an MOU with a speciality Hospital in Erode, which is expected to be in operation by July 2007. We are also on the look out for more strategic alliances to capitalize on our strengths and core competence in heathcare industry.

Quality Management initiatives

Your hospital has always been on the forefront to promote quality in the health-care delivery system. As reported last year, the work on getting both national and international accreditations like National Accreditation Board for Hospitals (NABH) and Joint Commission International (JCl) and - Australian Council on Healthcare Standards (ACHS) - is in progress and we hope that we will be able to get these accreditations by the end of the year 2009.

The driver for these accreditations is not only our quest for quality but also the prequalification requirement for getting the affiliation to the various national and international insurance companies and multinational companies who are providing medical treatment to their customers and employees.

• NABH - done; JCI and ACHS - what is the status?
• http://healthcare.financialexpress.com/200807/coverstory13.shtml

PROPOSED ACQUISITION OF IDHAYAM HOSPITALS ERODE LIMITED, ERODE

During the year the Company has entered into an MoU with M/s.ldhayam Hospitals Erode Limited to acquire its 100% share capital of the Company. The entire Share capital of Idhayam Hospitals Erode Limited was acquired on 23.04.2007 and in view of this Idhayam Hospitals Erode Limited has become wholly owned subsidiary of our Hospital effective from the above date.

More details:

Kovai Medical Center & Hospital Ltd has announced that the Company has entered into a Memorandum of Understanding (MOU) with Idhayam Hospitals Erode Ltd on February 27, 2007 at Erode, Tamil Nadu.

Idhayam Hospitals Erode Ltd has been incorporated as a Public Limited Company in the year 2001 and its Registered Office is situated at 181 Perundurai Road, Erode, Tamil Nadu. It is proposed to acquire 100% stake of the transferor Company and make it as the Company's wholly owned subsidiary.

It is a closely held Company with a paid-up capital of Rs 372 Lacs. At present the Transferor Company is running a 50 bedded Hospital at Erode which is exclusively for Cardio-thoracic patients.

The agreed purchase consideration is Rs 925 Lacs which involves discharge of unsecured loans, one time settlement with Indian Overseas Bank, Main Branch, Erode, Cost of Medical Equipments and payment to shareholders.

The whole process is expected to be completed within a period of two months.

• 9 crores for a 50 bed hospital (cardio) - seems like a decent deal without knowing profitability and doc strength etc. 
• Overall impression: Decent track record of execution

Kovai Medical - What's in an employee's name?

Employees (current & past):

• Dr. Mohan Kumar:
• Was head of pulmonary department till 1992; not bad at all given his impressive background
• http://www.sriramakrishnahospital.com/drmohankumar.html

• Dr. Devi Palaniswami or (Mrs. Palaniswami)
• Paediatrician from USA - JMD since 2005

•