| . | The volatility of the stock markets was brought under control during last week after a ban was imposed on short sales. However as the investors were recovering their breath, SEBI has once again succumbed to the pressures of the bear lobby and has agreed to lift the ban from July 6th. SEBI has however assured that it would curb bear hammering through the impositions of margins and has setup a monitoring committee for the purpose. The movements in the stock markets in India have been see sawing for quite some time now indicating that only traders have remained in the markets and no genuine investor is participating in the buying or selling activity. Short sales are the prime reason for such a trend in the market. In as much as short sales in any form represent a desire to speculate and bring pressure on the markets to be moved southwards, it is an undesirable element. More so when the general trend in the market is one of recession. The argument of the bear lobbyists that short sales is an important element of liquidity in the market does not take into account that the fundamental nature of an investment market should be to provide a reasonable reward to investors who commit their funds. If short sales keep moving the markets downwards for a prolonged period as we see now in India and threaten the very existence of investors, they need to be checked with a firm hand. In order to correct this situation investors have to bring counter pressure on SEBI and ensure that unless the markets reach an unreasonable bullish phase short sales should be banned. While we wait for the impact of the lifting of the short sales ban to unfold, we can look at a low risk investment opportunity in a 100 % export oriented unit with a good track record namely the Bangalore based Himatsingka Seide. This company has been a silent performer for several years. It manufactures and exports Silk fabrics, Premium furnishings, wall coverings and silk dress materials. For the year ending March 1998, the company notched up a turnover of Rs 59.49 crore which was more or less the same as in the last year. The net profits however moved up by around 9 % from Rs 22.55 crore to Rs 24.63 crore due to a lower tax incidence during the year. The EPS on an equity base of Rs 9.56 crore moved up from Rs 23.4 to Rs 25.6. The shares which are presently quoted around Rs 133 represent a P/E of less than 5. During the last few years, the company has shown a steady trend of growth (Ref table) which indicates that lack of growth in 1998 could be only temporary. The company has made fresh investments of around Rs 75 crore recently to set up a spun silk manufacturing unit and weaving unit. This should help the company to reduce its import dependence and the attendant cost while its exports would continue to benefit from the current bout of Rupee depreciation. The results of 1999 should therefore show an improvement over the 1998 performance.
The share holding pattern of the company indicates a high 59 % holding by the promoters and around 17 % by the institutions. The public holding is therefore not high and as such the volume of transactions in the market is low. However the company is traditionally a high dividend payer and the investors should therefore receive a more than average yield on investment that can be expected on such scrips. The book value of the shares is around Rs 125 and the market price represents only a marginal premium on the same. There is a speculation in the market about a possible bonus issue. If his materialises the resulting increase in the floating stock could add some more value to the share. The prospects for investors in the scrip are therefore encouraging. Na.Vijayashankar E-Mail: naavi@iname.com June 27,1998 | . |