Tuesday, August 4, 2009

XL Tele ....whopping Loss of Rs 200 cr.....

Friends,

I have seen the results and the loss is huge.It is 202 cr and seems the orders stopped coming in from Europian countries.I agree that debt is big for XL Tele and if the situation do not improves drastically then it will be difficult for XL Tele to come out from high debt as for paying the interest to bank, let principle be forgotten for time being, sales is neccesary and if that do not come then things can become bad for XL.Though actually the loss they have taken is for MTM loss, inventory piling up loss but the problem here is bank has marked this as a loss and i.e. as big as Rs 200 cr which will quezze the liquidity for XL Tele and hence they will need the money very badly and 200 cr is no small amt.I would suggest to switchover from XL Tele to some other good stocks.Gremach Infra looks good to me still even though promoter Rishiraj has sold some of his stake but here again I may go wrong.

Well,that's all I can say and I may prove wrong in my analysis.I was so confident of XL Tele even with high debt but they come out cropper.These are the risk one has to face when one invest in stock Market.I think there is very remote chance for XL Tele to come good within next 2-3 quaters and if they come good then it means they manipulated figures and tried to fool investors.
I am very disheartened by the way the things has gone at XL Tele but that is what all is in stock market......

9 comments:

  1. There are very few people in this world who admits their mistake; you are one of them.

    Hats off to you Rajeev.

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  2. "Nakul"ji I had a small investment in this stock. However this is just one stock when compared to your recommendtiaons. Keep the good working going

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  3. raju bhai
    We all admire u for your hard work. Sold immidiately ,,,,,gayatri project was excillant.
    great going.... keep it up

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  4. Dear rajeev ji i am taking the folloowing comment from another site adn posting iit for ur view and expert opinion. Please do go hrough the same and advice. thankyou. "the company provided Rs.204.94 Cr towards MTM of inventories in hand (in view of sluggish demand in Europe), high interest cost due to loan for ongoing mega project (which is nearing completion) and other Capex, what I feel is that the bottomline is not bad.

    It seems instead of capitalizing the interest cost on the loan which it has borrowed for expansion, the company is writing it off as a revenue expenditure. The stock hit the lower circuits to air the knee jerk reaction from the traders. But then following points needs to be looked into:

    1. Crude Oil price is now moving up which generally pushes the demand for the renewal energies (Solar, Wind, Geo-thermal, etc). From $15 bn now, the solar photovoltaics market, at a 25-30% CAGR, is expected to reach $ 32-40 billion by 2010. Higher oil and gas prices, environmental concerns, aggressive subsidies and declining “solar” costs would lead to growth picking up. The growth in Europe has started to pick up with higher crude oil prices.

    2. It has a capital work in progress of nearly Rs.250 Cr. So the day new plant comes into full action, it will report a sudden jump in topline as well as bottomline, like it happened in case of Ennore Coke Ltd. It is to be remembered that XL Telecom in order to tap the vast and growing opportunities in solar photovoltaics (a nearly $ 40bn marketsize by FY10 from the current $17bn) is setting up a solar cell facility of 120 MW in Hyderabad and ramping up the module-making capacity to 65 MW at an outlay of Rs 3bn. This would help integrate its solar photovoltaic business and will cater to the booming demand for SPV systems, chiefly in Europe and the US. The revenue from the energy segment is expected to dominate in FY10 onwards which according to some estimates would cross 70% in FY11. Earnings are expected to grow exponentially from FY10 onwards as the Mega-project gets completed.

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  5. 3. The book value of the shares of the company is Rs.152.11 (Price to book is absured at 0.31), EPS of Rs.8.89, dividend yield of 3.21%. The P/E of the shares of the company is 5.26 against the industry average of Rs.32.53. Hence at this price it is still looking cheap--any spurt in demand in the European markets is expected to give exponential returns going forward. Moreover, the mega-project could start production within the next few months, which should kick start both the top and bottomlines.

    4. Raw material makes up roughly 70% of the cost in the solar cell division. With approximately 80,000 tons of silicon capacity coming up globally by 2010, supply constraints are expected to ease. However, the company needs to clear up the inventory (even at a discount), which it might have made using higher priced silicon.

    4. Earlier XL Telecom and Energy secured orders of Rs 2.2 bn to supply solar photovoltaic modules to Spain. Further, it is in the process of acquiring international certification (TUV) to cater to other high-growth markets. Any escalation of demand from other European countries and the US could bulge its order book going forward.

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  6. 5. In order to fund its growth plans, XL Telecom raised nearly Rs.59 cr in Dec 2006 through IPO route @ Rs 150 per share, then approx Rs.175 cr through FCCB and simultaneously even allotted 52,50,000 warrants @ Rs.135. With part of FCCB and warrants already been converted, the equity share capital currently stands at Rs 18.80 Cr.

    6. On the mandatory blending of ethanol with petrol (at 5%), demand for ethanol is expected to be between 650m and 680m litres a year. Earlier company had aggressive plans when the crude oil was shooting above $120 per litre. But with the drastic fall in liquid gold and unfriendly policies of the centre it has decided to go slow on the same. It has an ethanol fuel facility at Nanded in Maharashtra with a production capacity of 1.5 lakh litres per day. The plant has been inspected and cleared technically by oil companies both in terms of capacity utilisation and the quality of the products being produced. In order to meet the raw material requirement for ethanol production, company is contemplating to establish the distillery unit for which it has already incurred about Rs.27 Cr out of total planned capex of Rs.72 Cr.

    7. Worldwide, annual Photo Voltaic (PV) cell installation is projected to reach 11 gigawatts by 2010, continuing at a 26% CAGR the next few years in spite of problems, notably a growing shortage of silicon feedstock and lack in demand from Europe/US. The overall PV market is expected to reach $40bn by 2010, from $17 bn now. Favorable policy changes in the US and Europe could further alter significantly the PV market estimates.

    8. The company's telecom business used to be its main stay earlier but due to saturation in Indian market and better opportunities in energy sector, company reduced its focus and efforts towards this segment. But still it continues to manufacture / market CDMA Handsets & Fixed Wireless Phones. It has established only “ASSEMBLY” facility for manufacture of mobile phones in partnership with KYOCERA Inc of USA and has a capacity to produce about 35 Lakh handsets per annum. It is supplying multiple models to all CDMA Operators like BSNL, MTNL, TATA and Reliance. Similarly it has established partnership with AXESSTEL of US for Fixed Wireless Phones with BSNL as its main customer.

    Concerns:

    Solar cell capacity is expected to grow much faster than demand in the coming days. This could squeeze prices significantly in the coming two years. However, favorable policy changes in the US and other developed markets can create fresh demand, quite difficult to now quantify.
    Since the solar division is an EOU, the appreciating rupee directly hits the sales figures. However, the company imports its raw materials, roughly 75% of the expenses. To some extent, this mitigates the overall risk.
    The company depends on government-run enterprises for telecom orders, which are quite uncertain. However, if Kyocera comes out with a low-priced handset, the company might get a huge order from CDMA operators, which would compensate for the uncertainty with regard to government-run enterprises.
    Though I believe that the company has a unique business model, but any delay in execution of the project may lead to lower then expected earnings.

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  7. Dear kk,
    Sector is good but the way the things hass happened at XL Tele , I am wary of this co now.I know operators use to do such type of things through promoters so that investor would not touch it.
    That is a game plan but if it is so then we do not want to invest there.There are still scores of cos with great fundamentals with great management going cheap.
    That is all I would comment here....

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  8. XL TELECOME CAN GIVE BEST VALUE OF YOUR MONEY RIGHT NOW PRICE IS RS. 43.50 . THEY IS FEW TENDER ARE ON THE WAY , AS WELL AS USA THEY GOT LICENCE TO SALE XL TEL , PRODUCTS IN USA. AS WELL AS TALK GOING ON IN EUROPE FOR NEW ORDER , SO END OF THIS DECEMBER '09 ABOUT 150 CR. ATLEAST INVETOREY WILL CLEARD . IF U TRY TO BUY THAT TIME PRICE WILL BE AROUND RS. 70 TO RS. 80 THAT TIME THIS SHARE INVESTER FEEL EXPANSIVE. PEOPLE TAKE HIGHER RISK WILL GET HIGH RETURN . DOWN TERN IS VERY LIMITED . PRICE WILL NOT GO BELOW RS. 40.00 . SO FURITS ARE READY TO RIPE . WAIT FOR ATLEAST 3 MONTH YOU WILL GET DOUBLE PRICE . ONE GOOD NEW WILL COME , U WILL NOT SEE ANY SALER ONLY UPPER CICUITE. SO INVEST WITH SMART BRAIN.

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  9. Dear Nick,
    That is why I have written in one of my post that XL Tele can regain its past glory.
    It seems to be a ploy to give big loss and break it.

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