i Develop Stocks Advisory

Where the GOLD lies GTC which has decided to de-merge of its PARLE land is set to de list its shares on the stock exchange. The value of the prime land in Parle will be nothing less than Rs 1500 per share in case of GTC. The shareholders who acquire these shares now may have to probably wait for the de listing and then for re listing. On re listing the cig biz itself will give valuation of nothing less than Rs 250 to 300 per shares which is at least 50% higher than the current market price. The stock price has corrected from Rs 700 to Rs 200 with very thin volume which may be taken into account by smart investors. Those who are looking for opportunity for making sure returns and prepared to wait till re listing of its realty business may enter GTC that too at their own risk as the stock is fully controlled by big operators and stock will not move against his wish. GTC Industries is a Sanjay Dalmia group company engaged in manufacturing cigarettes with an installed capacity of 17,322 million cigarettes per annum. For FY 07, the total income of the company was placed at Rs.201.15 crores, PBT of Rs.27.65 crores and PAT of Rs.51.72 crores. The increase in PAT over PBT is due to tax refund of Rs.24.07 crores. The present equity of the company is at Rs.17.60 crores, of which 45.42% is held by the promoters 15% cornered by FII and informed investors such as CLSA, Merrill Lynch, India Infoline etc leaving the balance 40% with the public. The net worth of the company became positive from FY 07, and hence the company was discharged as sick company, by BIFR, on 29-06-07. The concern is on the pending income-tax appeals, against the company, with Apellate Authorities, for I-Tax demand of Rs.762 crores and penalty of Rs.488 crores. However, management is confident of winning these appeals, as similar appeals have gone in company’s favour. The company has real estate, in the form of huge land, at Hyderabad, Vadodara and Mumbai and also has necessary exemption under Urban Land Ceiling Act for land in Maharashtra and Andhra Pradesh. The company intends to develop its Hyderabad Property in immediate future, either through joint development or alone. The company also has property at Vadodara which could also get unlocked either by development or outright sale. The company has two running plants in Mumbai, one at Vile Parle and another one at Chakala, commercial suburbs of Mumbai. The company may shift its operations of Vile Parle unit to Chakala and may develop Vile Parle property. Vile Parle property has developable area of about 15 lakh sq. ft. which could be developed as a commercial hub, as it is ideally located on S. V. Road. This property is valued at Rs.3000 crores. All the properties of the company are valued at over Rs.3500 crores, including Chakala property, which is about 2.5 acres, valued at close to Rs.500 crores. The company is debt free, net off cash and bank balance. This is a remarkable feat for the company, as it recently, came out of BIFR and is now debt free. The share of the company is ruling at Rs 207 thanks to recent market crash and also lower price hitting with thin volumes which works into a market capitalization of Rs 365 crores. This kind of valuation gets attributed to its core business, due to some of the strong brands of cigarettes of the company. Realty valuation comes close to Rs 1,800 per share and cigerette and tobacco business at Rs 300 per share. Share is a good bet at Rs 207 levels, mainly considering its realty values, which would get unlocked, sooner or later. Co has already announced de merger of the realty business in the board meeting dated 29th Feb 2008. Do not expect sharp reversal in the share price immediately the value unlocking will happen over a period of 2 to 3 years where you can expect at least 10 times returns in this stock.