Tuesday, March 30, 2010

Dagger Frost-Tools....cmp 12....M&A SUP BY 66 % IN JAN-FEB....

Couple of readers has come out with some interesting observation.It seems that not whole of Dagger Frost-Tools Ltd has been sold to Motherson gr and hence my call remains null and void.
I would say that ...only after further more clarification one can buy..............
I think I made a mistake to comeout with a buy call without looking at the finer prints properly......
So I put a HOLD on the call for Dagger Frost-Tools Ltd......
It is good that before the market has opened ..I got to know that.....so there should be no casualty....

M&A SUPBY66 % INJAN-FEB -The two main driving motivations are access to new markets and entry into new product lines...


Merger and acquisition (M&A) activity involving Indian small and medium enterprises (SMEs) are on the rise. During the first two months of 2010 M&A transactions worth $155 million (around Rs 713 crore) have been concluded in the SME sector, up by 66 per cent over the $93 million (around Rs 427.8 crore) in transactions in the corresponding period of 2009.

Private equity (PE) investment, which has been the key for acquisitions, also witnessed a121 per cent increase during this period.
According to Venture Intelligence, a Chennai-based research firm focusing on M&A and PE transactions, there were 22 M&A deals in January-February 2010, compared to 16 deals during the corresponding period of last year — an increase of 55 per cent.
The research firm has included all unlisted companies and listed companies with a market capital of less than Rs 500 crore. All inbound transactions have also been excluded.
Some of the major M&A transactions of January-February 2010 include Dorf Ketal Chemicals’ acquisition of DuPont Chemicals and Fluoro Products (sale of assets) for $40 million (around Rs 184 crore) in January, followed by Greenko Group’s acquisition of Hemavathy Power Project for $33 million (around Rs 151.8 crore).
This was followed by VLCC’s acquisition of The Grooming Company for $32 million (around Rs 147.2 crore); Air Works India Engineering’s acquisition of Air Livery for $20 million (around Rs 92 crore); and Advanta India’s acquisition of Crosbyon Seed Company for $13 million (around Rs 59.8 crore).
Top M&A transactions of January-February 2009 include Nuziveedu Seeds’ acquisition of Yaaganti Seeds for $51 million (about Rs 234.6 crore); followed by Cosmo Films’ $17 million acquisition of GBC Commercial Print Finishing; INX Media’s acquisition by Indi Media for $10 million (around Rs 46 crore); the acquisition of Dagger Forst Tools by the Samvardhana Motherson Group for $9 million (around Rs 41.4 crore); and the acquisition of Nippon Express India by Nippon Express Company for $6 million (around Rs 27.6 crore).
What sets this wave of M&A deals apart from those of the past is that previous deals tended towards the expansion of production capacity, while this time the two main driving motivations are access to new markets and entry into new product lines, said industry observers.
For instance, in February Elgi Equipments Ltd (EEL), aCoimbatore-based manufacturer of industrial compressors, acquired Belair SA France, which is engaged in the assembly, sales and service of industrial compressors, piping, fittings and accessories. The acquisition was valued at euro 700,000 (around Rs 4.3 crore).
Jairam Varadaraj, managing director of EEL, said that the company follows a model of “multi- local” acquisition of small-to-medium companies with strong brand names and supports them with the ‘Elgi Inside’ strategy of providing key technologies and product extensions.
“In line with this strategy, we have purchased a 100 per cent shareholding in Belair SA, which supplies compressors to the industrial segment with about 3 per cent of the French market,” he added. Belair’s sales are euro 6.5 million (around Rs 40.3 crore) per year.
M&As have also been driven by the need for access to capacity and new products. SMEs, mainly manufacturers, are showing interest in acquiring factories in Europe, which would give them access to machinery and equipment.
“The recent downturn hit SMEs in Europe, and they are looking for buyers,” said S Murugan, a textile exporter from Tirupur, who is negotiating with two European manufacturers to acquire their assets.
“We are also looking for good acquisition opportunities for capacity enhancement, which a capacity of 1,500 tonnes per month to the company,” said T Pavithra, director, Pioneer Alloy Castings, which is planning to increase its capacity three-fold to 120,000 tonnes per annum with an investment of around Rs 150 crore.
Another example is EdServ, aChennai-based education and placement company, which has acquired SmartLearn WebTV for Rs 4.6 crore. It also acquired Hyderabad-based SchoolMATE, a CRM and ERP software solution provider to schools, for Rs 4 crore.
“This acquisition will help the company to go pan-India and will give us access to new product lines,” said S Giridharan, chairman and chief executive.
The company has got approval from its board to raise up to Rs 130 crore through the issue of equity shares through the QIP (Qualified Institutional Placement) route, which will be used for further acquisitions, he added.
The wave of M&A activity also reflects increasing strategic clarity. “M&As can be used to get a handle on new opportunities and new trends, and not just for expanding existing production capacities,” said a PE fund representative.
PE is a key source of funding for M&As. PE firms have begun exploring growth opportunities in the West for Indian SMEs in their portfolios, helping them to make overseas acquisitions that can benefit these small firms in the long run. Such PE fund companies include KKR India Advisors Pvt. Ltd, Bain Capital Advisors (India) Pvt. Ltd and Carlyle India Advisors Pvt. Ltd.
PE fund managers are of the opinion that entering into cross-border deals and diluting equity to help Indian SMEs acquire assets abroad will not only increase the company’s value, but also enable PE fund companies to get a higher return at the time of exit.
This had boosted PE investments to $126 million in January-February 2010 from $57 million in the year-ago period. However, the number of deals dropped to nine from 13 during the same period.
Major investments include $45 million by TA Associates in Micromax; $21 million by DAR Capital in Valuable Media; $15 million by a consortium of SVB, DFJ, Canaan Partners and SAP Ventures in iYogi; $12 million by Helion Ventures, Charles River Ventures and Globespan Capital Partners in SMS GupShup; and $10 million by Asiabridge in Alok H&A Textiles.
SMEs, mainly manufacturers, are showing interest in acquiring factories in Europe, which would give them access to machinery and equipment..

My Comments:

I have highlighted in RED letter that Motherson gr bought Dagger Frost Tools Ltd at Rs 41 cr...in the above post..
Now if we look at the Mcap then Dagger Frost Tools have 14 cr as Mcap ...means Motherson Gr gave 3 times more to acquire Dagger Frost Tools.....so we can very easily assume that Dagger Frost is a 3 bagger from here on.......With Motherson gr as management it can go up even more.......but it will take time.....those are ready to hold it with patience may buy it now.....It is going cheap at Rs 12......just like I recomended SNL Bearing at 11.....but can't give any guarentee it will move like SNL that too in ST.....but  Dagger Frost looks good to me as of now......


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  2. What makes Rakesh Jhunjhunwala different from other mere mortals who put their money in the stock market? Back in 1985, Jhunjhunwala, a green-behind-the-ears chartered accountant started out by investing a few thousand rupees in the market ? and he didn?t have a father or an uncle in the business. Today, he?s worth anywhere between Rs 1500 crore and Rs 5000 crore,depending on which estimate you believe. He shrugs off questions about his wealth with a terse,?what does it matter.?But this is all in a day?s work for the man who is often described as the Warren Buffett of the Indian stock market. Remember that Warren Buffett, who started investing in the ?50s is now worth around $60 billion and is the world?s second richest man.Buffett earned this vast wealth by picking well-managed companies that were slightly undervalued and then putting big bets on them.
    Quite simply, Jhunjhunwala has followed a similar, diligent and methodical approach and built up a giant fortune over the last 24 years.Mid Day reckoned that he was the most influential man in the Indian stock markets.Companies want him to invest because the moment he picks up a stake,awareness increases.He has a Pied Piper effect.? Adds Jhunjhunwala,I like to identify good companies and stay with them.Get one thing straight.Jhunjhunwala isnt a stock market player in the mould of Harshad Mehta or Ketan Parekh, whose fortunes soared and then tumbled. Jhunjhunwala plays an entirely different game. Says an associate, They were market manipulators and tried to dominate the market. Rakesh invests in business that has the potential of going up.
    In short, hes what is termed a value investor and will stay with a company for years.Typically, he is likely to spot a mid-sized company that he likes and then accumulate a sizeable stake in it ? also, he doesnt manage anyone elses money.Its all his own.About couple of years ago,for instance, he took a big stake in, and then joined the board of Praj Industries, a medium-sized engineering company. He has also, at different times, bought sizeable stakes in companies like Lupin Labs, Matrix, and Geometric Software.Its rumoured that when Jhunjhunwala takes a big stake in a company, it can be upto Rs 50 crore. Also, hes on the board of several favourite companies.
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  3. He's one of the smartest investors in the Indian market. His understanding of the broader issues that affect the market is excellent.This encompasses everything from stockpicking to buying at the right price and selling at the right price to monitoring the stock and making use of every opportunity to create wealth. Usually, people are only good at a couple of these things but hes a blend of all these,says a large market participant.Then, theres his famed bullishness about India.Outside his office are two sculptures of a bull and a bear respectively.But Jhunjhunwala is usually viewed as an optimistic bull, who has unwaveringly put his money on the Indian economic story.?This country is going through a giant change,he says. In a country in which 30,000 people are being born every day it doesn?t pay to be bearish.As an investor,I am always optimistic.And, for Jhunjhunwala optimism has paid off in a spectacular way.
    Rakesh Jhunjhunwala has always prided himself on being that rare creature on the stock market: a value investor. But what is a value investor and how is such a beast different from the other players on the market? Basically, value investing is a tough business that advocates buying stocks on the cheap. In other words, the trick is to hunt out under-priced stocks and then wait patiently for the market price to climb.Talk about value investing and the first names that spring to mind are world-famous marketmen like Warren Buffett who is probably the most admired investor in the world today. Or, there are other slightly less famous figures like Sir John Templeton, the founder of the eponymous mutual fund company (acquired by Franklin Resources in 1992) who was the first person to practise global value investing. But the man who is regarded as the founder of value investing, and who strongly influenced even Buffett, is Benjamin Graham.
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  4. Hi Rajeev,

    I tried to see the P&L statements and Balance Sheet of Dagger Frost and see that they are not too encouraging. As I am new to looking at these, I was wondering whether my interpretation is wrong. Can I know if you had a chance to look at these and if so can you help me understanding the reasons for Profit being so less or negative.


  5. Hi Rajeev,

    You made a very interesting observation, but i am pasting below news article about the acquisition which was priced at 51.75 crores in Aug 09 and it says they are selling only a part of the business. But my question is what happened to that sales proceeds as the money would have come long ago to the company. you can see the interest figure still in Dec quarter P&L. I feel management is not reliable....

    Dagger Forst Tools transfers SBUs to Motherson Advanced Tooling Solutions
    Written by Vivek
    Wednesday, 19 August 2009
    Mumbai: Dagger Forst Tools Ltd has completed the transfer of its Specified Business Undertakings(SBUs) to M/s. Motherson Advanced Tooling Solutions Ltd., pursuant to the Business Transfer Agreement executed by the Company with M/s. Motherson Advanced Tooling Solutions Ltd on January 29, 2009 and following amendments.

    With this sale and transfer of undertakings, the Board of Directors feels that the Company will be able to diversify to more profit making sectors in the same line of business including machining of castings (which Is already under implementation).
    The sale proceeds are proposed to be utilized to pay the long term/short term debts of the Company and make the Company debt-free.

    Dagger Forst Tools Ltd's facilities in Aurangabad, Gujarat and Thane have been transferred for total consideration of Rs 51,75,00,000 to Motherson Advanced Tooling Solutions Limrted.

    Dagger Forst Tools was engaged in manufacturing of highly specialized cutting tools like broaches, hobs, shapers, cutters and gear cutting tools.

    Motherson Advanced Tooling Solutions Limited is a subsidiary of Samvardhana Motherson Finance Limited and is part of the Motherson Group which is involved in the manufacture and sale of integrated wiring harnesses, plastic blow moulded and injection moulded components, wires and other components primarily for automobile industry.

  6. dear rajeev

    thanks for reco. ennore coke .. its 98+ today.


  7. Hi,
    Cronimet alloys formerly known as GMR Ferro has announced a delisting price of 34.9 for the shares of the company.I got this from money control stock news page.What is the future course of action in this script.This is my first stock which has a delisting offer. So I would be glad if you tell whether it is good to hold on to the shares as my buy price is close to their delisting price. Any suggestions will be welcome.


  8. Hi Rajeev,
    I'm a regular reader of your blog. Can you please help me how to find the stocks which have a cmp of less than Rs.1 . How can i generate such list. Is it available anywhere?


  9. edelweiss screener might help u

  10. Hi Astro,
    Can u give me the link for delisting offer?