Small but Strong Companies : Ideal for your Long Term Portfolio (5Y+)

Wealth report 2012 released by CITI and Knight Frank predicts fall of North America and West Europes share in World GDP from 41% to 18% by 2050. And Share of Asia, especially Chindia, would go up from 27% to 49%. This simply summarizes that India and Chinda would grow rapidly for the next 40 years.

As per Goldman Sachs, India could grow 40 times by 2050. And India's GDP would grow from $960 Billion in 2010 to $8165 Billion by 2050. And this growth is expected at mear GDP growth of 5.5% !

If you thought it was unachievable, let us rewind. Since 1991, our cement industry has grown 4.4 times, Finished steel by 5.6 times, Electricity by 3.1 times and Coal by 2.5 times. On an average our GDP has increased 4 times since 1991. With 1.2 billion population, furture growth is very much a possibiility but for the caveats like reforms, corruption etc.

This booming economy has given birth to many enterprises like Apollo Hospitals (1979), Pantaloon Retail (1987), Bharti Airtel (1995), Infoedge (1995), MCX (2002) and Jubliand Foodworks(1995).

This HUGE growth opportunity is definitely a very positive news for enterpreneurs and Equity investors who could invest in such companies and grow with them.

Following are list of small companies which have been financially strong, consistent dividend giving with positive networth for past 10 years. These companies have Debt equity ratio of 0.5 in each of past 10 years.

A word of caution: Small companies are usually volatile since the shares are relatively illiquid with low trading volume. Hence it is advisable to restrict your investment to such small companies to maximum of 10% of your overall equity portfolio. You should have patience to buy and patience to sell.

WENDT Indis:
- Part of Wendt GmbH (MNC) Switzerland, which is a leader in super abrasive tooling solutions and high precision grinding machines for 80 years.
- 3 Verticals : Super abarasive, Non super abarasive and International Businesses.
- 2 subsidaries : in Thailand and in Middle East Sharjah.
- Exports contribute 20% of revenue.

VESUVIUS India:
- Vesuvius UK (MNC) holds 55% stake
- Parent company - leader in consumable high performance speciality ceramic refractory with 57 manufacturing facility across the world.
- Started production in Kolkata from July 1994
- Supplies Slide gate equipment, porous plugs, monolithics, precasret shapes and taphole clay and cruciles for NON Ferous Industry.
- Makes refractory product for Steel, cement and glass industry
- Has facility @ Kolkata, Gujarat and two in Vizag. Fifth plant coming up @ Vizag again.

GANDHI SPECIAL TUBES:
- Debt Free
- 100 Crore + turnover
- Manufactures welded seeamless tubes and cold formed coupling nuts
- Supplies to Original Equipment Manufacturers (OEMs) of Automotive, Refrigiration and other engineering industries.
- Liberal Dividend payment : 30% in 2012 and 28% in 2011
- Paid dividend of Rs.8.8 Crores from PAT of 29.8 Crores in 2012.

ADOR WELDING:
- Debt Free
- earlier known as Advani-Oerlikon
- commenced operations in 1951
- 75% of revenue fromWelding consumables
- 25% revenue from equipment and project engineering which includes manufactre of flares, incinerators and Env.engineering products
- Caters to overseas market of Middle east, africa and south east asia.
- Exports @ 34 Crores
- Manufacturing facility @ Gujarat, Chennai, Chattisgargh, Pune
- Fund's its expansion purely through internal accruals and not on borrowings.

ANUH PHARMA:
- Largest producer of erythromycin salts since 1989
- Ramped up its production of 15 tonne per annum in 1989 to 900 TPA now.
- One of leading producer of Active Pharma Ingredients.
- Manufactures anti bacterial, anti tuberculosis, anti malarial and corticosteroids
- Client base of 350
- Products exported to over 50 countries, contributing 45% of revenue.
- Expects to grow 20% per annum for next few years.
- Rs.10 invested (in 1 share of ANUH in 1989 is worth 96 shares of Rs.5 each,) valued at Rs.11500 in FY2012. That is a 1150 times increase in capital !!! or an annualized growth of ___%

AGC Networks:
- Earlier known as Avaya Global Connect
- Avaya Inc sold its 59.13% stake in AGC to Essar in April 2010.
- At present, AGC is subsidary of Aegis - part of Essar Group.
- Tech solution in 9 countries, 16 officesin India, 2500 customers including fortune 500 companies.
- 63% revenue from United communications
- 31% from customer ser ices
- 6% from CRM solutions
- Capital has appreciated 9 times in last 10 years.
- Goal is to reach $ 1 Billion revenue by 2015.

Hercules Hoists :
- Completed 50 years of business in 2012.
- Shekhar Bajaj Group
- Manufactures Material handling equipments like Chain Pully Blocks, Chain and wire rope electric hoists, ratchet lever hoist, pulling and lifting machinery etc.
- Manufactures under brand name INDEF
- Growth depend on new projects and expansion of existing companies apart from replacement market.

TVS IMPAL:
- India Motor Parts and accesories - a TVS group company incorporated in 1954
- Distributor of auto spare parts and accessories of over 50 manuacturers
- Network of 52 branches
- Distributes Engine components, Brake systems, Fastners, Radiators, Suspensions, Axles, Auto Electricals, Wheels, Steering Linkages and Instrument.
- Reported 17% growth in turnover, crossing Rs.500 crore milestone.

WIM Plast :
- Startedin 1988
- Manufacturers plastic moulded furnitures @ Daman in 1994
- launched 25 new models in premium segment and household category
- Despite aggressive expansion, remains debt free

International Travel House :
- ITC holds 61.69% stake
- Started in 1981
- Offers full boquet of travel services for business and leisure
- offers Business travel, car rental, destination management services, domestic and world tour, corporate conference and management services.
- 10 International air transport offices, 13 car rental offices and 19 travel counters
- Owns largest Branded car Rental company - with 900 cars.
- Through global star travel management system, the company has access to 75 partners in 63 countries.
- Will be implementing Phase II of IT based integrated platform

Aeonian Investment Company:
- Very small company
- Investment company that invests moneh in listed and unlisted shares and mutual funds.
- Funds managed by ENAM - professional portfolio managers
- Reported profit in all the past 10 financial years.
- Consistent dividend between 150% to 1000% on face value of Rs.2
- Turnover is little less than 5 Crore andn Profit of Rs.3.7 Crore
- Market value is Rs.51.3 Crore
- Shareholder base : 2197 only
- Promoters hold 86.9% stake
- Book Value is Rs.188 per share against current market price of Rs.107

Fundamental's of Stock Picking : Profitability Ratio's

Profitability ratios measure a company's ability to generate profit and cash flow relative to sales, assets and equity. Common examples of profitability ratio's include :
- Return to sales,
- Return on Investment
- Return on equity
- Return on Capital Employed
- Operation Profit Margin
- Gross profit margin
- Net Profit margin

Companies with high profitability ratios
- generate adequate cash flow
- can fund capital expenditures from internal accruals
- often reward investors with rich dividend, bonus shares, buy back and open offers.
- No need for debt
- No fear of equity dilution
- In better position to grab opportunities like diversification, acquisition, expansion or plain investment in other companies / MFs
- Evergreen Investment options - irrespective of market directions

Among them Return on equity and ROCE are basic ratios that we must understand before investing. Companies with High ROE and ROCE usually reward investors in times of slowdown. They also go for organic and inorganic growth.

Return on equity:
- is also known as Return on Networth:
- measures overall efficiency
- Indicates how much profit a company earned in comparision to the total amount of share holders equity
- = (Net profit - Prefence dividend)/ share holders equity

ROCE :
- also known as ROI
- Indicates how well a company can generate cash from Total Capital Employed
- = Operation Profit / capital Employed
- Capital employed includes long term funds from owners and creditors
- Considered as primary measure of profitability-since it compares inputs with outputs

Mahindra Lifespace Developers

With real estate stocks in deep trouble, it is common to generalize that the real estate industry is not doing well. As usual, there is an exception here.

- Mahindra Lifespace - has not reported slowdown even in 2008 financial crisis
- So far - completed 7.14 million sq ft in Mumbai, Chennai, Pune, National capital region(NCR) and Bangalore.
- Ongoing projects - 3.7 MSF
- Forthcoming projects - 6.84 MSF
- Land Bank: 12.1 MSF
- In process of building integrated business cities in Chennai ( 1550 Acres) and Jaipur (3000 Acres)
- Entered Nagpure - developing 25 acres
- Expected to launch first project in Hyderabad over 9.7 acres
- Debt-Equity Ratio : 0.16 times

Mayur Uniquoters

- started in 1994
- One of largest manufacturer of Syntheric leather
- Capacity - 1.85 million linear meters per month
- Supply to automobiles (Ford, chrysler, Maruthi, TATA Motor, M&M, Herohonda) and Footwear (Bata, Action and Liberty)
- Negligible debt of 3.8 cr
- Targets revenue of Rs.540 Cr in FY 2015
- Aug 2012 - Bonus share : 1:1

PAGE Industries

- Incorporated in 1994
- IPO in March 2007
- Exclusive licensee of Jockey Inc US - to manufacture and distribute Jockey brand innerwear in India, Srilanka, Bangladesh, Nepal and UAE.
- 10 plants - all located in Bangalore - employs 13000 Indiv, has access to 23000 retail outlet in 1200 cities. 79 exclusive stores.
- In 2012 - entered into exclusive licensing agreement with SPEEDO Intl to manufacture and market Swimwears, water shorts, apparel, equipment and footwear.- Available in 410 stores in India.
- Speedo expected to drive PAGE's growth as the branded swimwear market in India is in early stage

PTC India Financial Services (PFS)

- Many of us confuse PFS with PTC
- PFS is Non Deposit taking NBFC
- Exclusive financial assistance to projects in energy sector
- Enjoys status of Infra companies
- So far has invested in 90 projects
- Has helped in 24000 MW power capacity creation
- Holds 60% stakein PTC India.
- Concerns - Bankrupt state electricity boards

Zydus Wellness :

- 90% of low cal sugar : Sugar Free
- Ever Yuth : skin care product in scrubs and peel off category
- Nutralite : Margarine product : dry fruit cakes
- Actilife : Nutritional Milk additive for adult
- Current revenue : 331 crores in FY 2012
- Targeted revenue : 500 Crores by FY 2014

Astral Poly Technik : Background

- Manufactures plumbing systems with all kinds of fittings.
- first licensee of Lubrizol of US and India
- JV with Speciality process US to manufacture CPVC plumbing systems
- Speciality holds 14% stake
- In May 2012, commenced commercial production of bendable pipes for first time in the world with technical support of Lubrizol
- Total 65,496 tonnes capacity

Talwalkars Better Value Fitness :

- India's only listed Gym (fitness) company
- One among Asia's largest health club chains in Asia
- From 16 clubs in 2004, it has grown to 130 clubs across 69 cities with 1,26,000 members
- 10% market share in organized health club market
- 25000 sq ft residential training academy for trainers
- Value add : NuForm Gym Studio for weight loss and slimming
- Value add : Spa @ 13 locations aerobics and personal training.

Info Edge (India) :

- Listed on October 2006
- Debt Free
- Recession proof stock
- Operatin profit market : 42.9%
- Net profit market : 26.7%
- Portals :
- Naukri.com
- jeevansathi.com
- 99acres.com
- shiksha.com
- Naukri Gulf jobsite
- strategic invesmtent in Meritnation.com., policybazzar.com, mydala.com, 99labels.com and zomato.com
- Has offline executive search firm : Quadrangle
- 48 officies in 31 cities employing just 2000 individeuals

Nitin Fire Protection industries : Facts

- Founded in 1995
- Supplies Fire protection systems in India, UAE and South East Asia
- Primary focus : Gas based suppression systems for mission critical areas.
- Manufacture facility in Mumbai & Vizag.
- Sourcing tie up with Apollo fire detectors (UK), Dupont (US), Kidde Fire (UK), Control Equipment (UK) etc
- Acquired 40% stake in New Age Co LLC in Dubai in 2008
- JV with Worthington Industries for manufacturing cylinders in 2011

Usher Agro - Lesser known stock

-Listed on stock exchange in 2006
-Rice and wheat milling company
-Total Rice milling capacity: 5,43,600 tonnes
-Total Wheat milling capacity: 75,000 tonnes.
- Since listing, has increased its revenue and profit in each and every financial year.
- Has signed MoU with National Bulk Handing Corporation (NBHC) for providing storage and handling of food grains.
- stock price movement has roller coater ride.

Gujarat Pipavav Port (GPPL) - Facts

- India's first private port
- Promoted by APM Terminals which hold 43% stake
- Provides port services for containers, bulk, LPG cargoes.
- Also provides Railway cargo services, operates Container freight stations
- Also into land related and infrastructure activities.
- Has 30 years concession agreement with Gujarat Maritime Board and the Govt of Gujarat till 2028
- Container capacity of 8,50,000 twenty foot equivalent units per annum
- Has 360 meters dedicated dry bulk berth
- Has 350 meters multipurpose berty
- Has 65 meters liquid jetty.
- Has capacity for 5 million tinnes of bulk cargo and two million tonnes for liquid cargo.
- Market cap is Rs.2557 crores
- Networth is Rs.793 crores

Bharti Airtel - Facts

- Market leader in Telecom
- Market cap of US$ 20 Billion.
- Has 252 Million customers in Asia and Africa including India
- World's 4th biggest mobile phone service provider
- Net revenue increases 23 times to Rs.71505 crores in past Nine Years.
- Networth jumped 14 times to Rs.50600 Crores
- commands 20% of domestic wireless market
- Subsidary - Bharti Infratel owns over 33000 mobile towers across 11 circles in India
- Has 42% equity stake in Indus Towers which has over 1,09,000 Towers across 15 circles in the world.
- Purchased African mobile company : Zain Telecom for US$ 10.7 Billion - One of largest overseas acquisition by Indian company

YES Bank

-Yes Bank : Started in 2003
-Today, it is 4th Largest Private Sector Bank.
-Started by Dr.Rana Kapoor (Ex Bank of America, Ex ANZ Grindlays Bank, Ex Rabo Bank India)
-Dr. Rana Kapoor is the Founder, Managing Director & CEO of YES Bank.
-YES Bank founded with vision "Building the Best Quality Bank of the world in India" by 2015. -Rana Kapoor and Late Ashok Kapoor held 26% stake in Yes bank, while Rabobank International held 20% stake.
-Net revenue has increased 210 times to over Rs.6300 Cr in past seven years.
-Market cap : Rs.14000 Crores (vs City Union Bank 2350 Cr, Federal bank 7900 Cr, KTK Bank 2150 Cr and South Indian bank 3150 Cr).
- has 356 Branches
- Advances of Rs.38,000 Crores
- Deposits of Rs.49,150 Crores
- set targest of "Version 2" for FY 2015 : Planst to achieve balance sheet size of Rs.1,50,000 Cr, advances of Rs.1,00,000 Cr and deposits of Rs1,25,000 Cr, establish 900 branches and 2000 ATM's.

Reliance Industries & Gas Pricing

'Real' Investors are those who keep on the look out for critical information and act upon them. Be it a sell decision or buy decision, they act upon and 'decide'.

All of us read the same news paper - be it the Hindu or Businessline or Economic times or browse the same websites for latest news. But only few of us are able to 'fish out' the relevant information. Others just glance through these information and fail to capitalize on the news. And some of them even go to an extent of blaming the media for not alerting at the right moment. They blame TV channels for misleading them. No doubt - you get all sorts of news on these platforms. It is upto the investors ability to distinguish the right news from the wrong ones and use it to their advantage.

We had earlier reported on RIL and its Gas pricing on 23rd May 2012, when its share price was Rs.687 per share. Now, as on 25th Oct 2012, its price is 799 after hitting high of 873. When various analyst and reports have critized Reliance for its falling Gas production. But We had clearly analyzed why RIL would do well going forward. To read this article click here.

Infact on 1st Oct 2012, there was news scroll on CNBC TV about RIL the impact if gas pricing gets revised. We had discussed about this issue on our 23rd May 2012 article. Infact this TV Scroll was so casual, many might not have noted it. But events unfold later.

And today's The Hindu news paper has quoted the RIL Gas pricing politics and the eventual change in Oil minister from Mr.Jaipal Reddy to Mr.Veerapa Moily. Todays news article does clearly indicate the apparent interest of Prime Minister office in getting the Gas Price revised. No doubt RIL found its way - as usual.

Now what is the logical outcome in RIL Gas pricing issue. Most likely the gas price would be revised as per RIL's 'request'. We are not debating weather it is right or wrong to revise the price. All we highlight is - if we can grasp some of these informations - it could be beneficial for your investment portfolio. These informations are scattered in all the newspapers / magazines / TV channels. It is upto you to catch hold of them. It is never too late. Investors need to keep their eyes and ears open if they want to succeed in capital market investing. Keep reading this blog for more such updates. Stay in touch with your comments / opinion.

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Manmohan set to end reliance on Jaipal for oil and gas

Jaipal Reddy — the minister who took on Mukesh Ambani in a regulatory battle on gas prices that saved the exchequer thousands of crores of rupees — is set to be divested of the crucial Petroleum and Natural Gas portfolio, The Hindu has learnt.

Mr. Reddy, who took over from Murli Deora in January 2011, resisted and then rolled back the influence of Mr. Ambani’s Reliance Industries Ltd. on the Ministry. On his watch, RIL’s high-pressure campaign to revise the price of natural gas upwards was blocked. He also questioned the steep decline in gas production from the company’s once prolific KG D6 gas block off the Andhra coast and brought RIL under the scrutiny of the Comptroller and Auditor- General.

Against the backdrop of rising global gas prices, RIL has been demanding that it be paid more for the natural gas it produces from the KG basin. But with the price of domestic gas — as set by the Empowered Group of Ministers (EGoM) in 2010 — not due for revision till April 2014, Mr. Reddy said no. He also ordered scrutiny of the expenditure the company claimed to have incurred in bringing KG D6 into production. The result: RIL was disallowed a $1.46-billion expenditure for its failure to maintain the gas output from its KG basin facility. RIL has blamed the sharp drop in output from the 53-54 million metric standard cubic meters per day (mmscmd) achieved in March 2010 to almost 27.5 mmscmd on production difficulties related to the structure of the gas field but Ministry officials harbour doubts.

They say that during 2011-12, RIL’s output should have averaged around 70 mmscmd. Instead, it stood at 42 mmscmd, causing a direct loss of Rs. 20,000 crore to the exchequer. During 2012-13, production stands at 25 mmscmd instead of the projected 80 mmscmd, leading to a loss of around Rs. 45,000 crore to the exchequer. “Every 1 mmscmd drop in production of gas means a loss of 210 MW of power capacity. Power plants in various parts of the country to the capacity of nearly 20,000 MW with bank guarantees of around Rs. 30,000 crore are lying idle without gas. Fertilizer was being imported more than anticipated due to the fall in gas output from the KG basin. This is a huge loss to the nation, and who knows if gas production was being suppressed for want of revised price,” a senior official told The Hindu .

As Mr. Ambani pressed his case on Raisina Hill, the demand to revise gas prices upwards even before the April 2014 deadline soon started coming from other Ministers and also the Prime Minister’s Office (PMO). “There was strong pressure within the EGoM to revise the price. The matter was referred to the Attorney-General. The AG said it was a matter of policy and not law but the April 2014 deadline for price revision was still valid. The PMO was all the time putting pressure on the Petroleum Ministry to work out a solution to allow RIL a revised price. But Mr. Reddy resisted on the grounds that it would cause a loss of $6.3 billion to the exchequer and put a huge burden on the common man, the farmers and the fertilizer industry in the shape of a sharp hike in the price of power and fertilizers,” the official said.

RIL was also upset at being forced to agree to an audit of the KG D6 gas field by the CAG. The company had insisted that it was a private entity and couldn’t be audited. However, Mr. Reddy and his team of officials maintained that they were well within their rights under section 1.9 of the production sharing contract to seek a second audit and that RIL would have to submit itself to CAG scrutiny or face non-approval of its field development plans and expenditure.

In 2006, Mani Shankar Aiyar was ousted unceremoniously from the Ministry amid rumours that the Congress wanted a more “industry friendly” minister in the key portfolio.

Telecom Industry : Top 15 Companies in World

Many Indian companies have grown beyond India. They operate in various countries. That means just like Multinational companies like Glaxo or P&G or Colgate or Bata having businesses in India, these Indian companies like TATA's, Bharti Airtel etc have become MNC's. The sad part is many investors are not aware of this development and keep crimping on these companies performance. They fail to appreciate these companies global business.

Of various Industries, the growth in Telecom can be attributed purely to the Block Buster success of early 21st Century. The momentum in mobile phone subscription has been alarming and amazing. This very development has made communication affordable across geographies. And Indian Companies have rightly managed to grow and compete with global giants. For instance, Bharti Airtel is ranked 4th in the world operating in 20 countries !!!. Of course other two Indian companies are yet to go beyond India. No doubt, our companies need to improve a lot in terms of business management and augmenting the Average Revenue per subscriber (ARUP). As the economy develops, so does the leadership companies of the respective countries. We need to understand and take advantage of these Indian companies which have good management and vision.

Here is a crisp comparison on TOP 15 Telecom companies in the world, ranked on the basis of total subscribers.

• China Mobile is a state-owned telecommunication company that provides multimedia services through its nationwide mobile telecommunications network. The company is the world’s largest mobile operator group with 683.08 million connections and is listed on both the NYSE and the Hong Kong stock exchange. It generates revenue of $22.05 billion
• The Vodafone group comes in second with 386.88 million connections. It is a British multinational telecommunications company and operates networks in over 30 countries and partner networks in more than 40 additional countries. Vodafone’s revenue is $13.92 billion.
• Owned by Mexico’s richest man Carlos Slim, the América Móvil Group has 251.83 million connections and a revenue of $7.98 billion. The company is headquartered in Mexico City and its subsidiary Telcel is the largest mobile operator in Mexico
• India’s first provider and the fourth all over, Bharti Airtel commands 250.04 million connections and has a revenue of $3.04 billion. Airtel also operates in 20 countries across South Asia, Africa and the Channel Islands. The company is also the first to achieve Cisco Gold Certification.
• Representing Spain is the Telefónica Group with 243.51 million connections and a revenue of $11.40 billion. Telefónica also has operations in Europe, the USA and Latin America and is the former public monopoly of telecommunications in Spain.
• Another Chinese company in the list, China Unicom has 219.25 million connections and a revenue of $4.95 billion. China Unicom is a state-owned telecommunications operator established in 1994 and started out as a wireless paging and GSM mobile operator.
• Bringing the Netherlands to the list is the VimpelCom Group with 205.05 million connections and a revenue of $4.58 billion. Most of the company’s revenue, however, comes from Russia and Italy. VimpelCom was founded by a Soviet engineer, Dmitry Zimin who received a State Prize for his research in the field of phased arrays.
• Yet another Indian company in the list, Reliance Communications controls 154.60 million connections and generates a revenue of $0.48 billion. It provides wireless operations, broadband as well as direct-to-home services. It was founded by Anil Ambani in 2004
• Norway’s Telenor Group, which made news in India regarding its controversy with Uninor brings 152.74 million communications and a revenue of $2.55 billion. The Telenor Group has become an international wireless carrier with operations in Scandinavia, Eastern Europe and Asia, chiefly under the Telenor brand
• The last Chinese company on the list, China Telecom commands 144.18 million connections with a revenue of $3.37 billion. The company provides fixed-line and broadband internet access and as been listed on the Hong Kong and New York stock exchanges since 2002.
• A South Africa-based multinational mobile telecommunications company, the MTN Group has 136.59 million connections with a revenue of $3.85 billion. The company operates in many African and Middle Eastern countries as well.
• The France Telecom Group, popularly known as Orange (it represents the official brand for mobile and landline telephone services, ISP, mobile internet services and IP television), has 133.38 million connections and a revenue of $7.18 billion. It is the largest telecommunications company in Europe
• Indonesia’s Telkomsel Group has 117.24 million connections and a revenue of $1.43 billion. The company was incorporated in 1995 and is based in Jakarta. It provides network coverage for over 95 percent of Indonesia.
• The third representative from India, Idea Cellular has 117.16 million connections with a revenue of $1 billion. It started out as Tata Cellular which provided mobile services in Andhra Pradesh and after Birla-AT&T merged the service was rebranded as Idea. Currently, the Aditya Birla Group holds 49.1 percent of the total shares of the company.
• The Sistema Group from Russia which provides telecommunication service under MTS commands 114.51 million connections and a revenue of $2.54 billion. The Group offers mobile and fixed-line, broadband, and pay-TV, as well as content and entertainment services.

Should "ITC" be part of your long term portfolio:

ITC's stock touched a new high of Rs 299.2 last Friday following a stellar performance logged by the company in the September quarter. Most investors who had not invested in the stock would be sulking on the missed opportunity of participating in the gains made by the tobacco-to-FMCG major over the last couple of years.

However, there are four solid reasons why one can still invest in ITC but with a clear long-term horizon:

1. The company is consciously reducing its dependence on the cigarettes business. It is effectively pumping the cash generated by the cigarettes business in fast growing businesses like FMCG, agri and hospitality. Ten years ago, the company's tobacco business was contributing 80% to its total revenues. Today, its contribution is down to 40%. The business still earns 90% of the company's bottomline. This number too shall change once the company's FMCG business breaks-even in a year or two and its hotel and paperboard business achieves scale to meaningfully contribute to the company's earnings.

2. ITC has built businesses, which will accrue long-term returns. Be it the FMCG business, agri, paperboard or the hotels business, each of these are businesses in which current investments are going to create properties capable of accruing long term benefits for the company.

3. It has achieved leadership in most of the businesses it is in. It is the leader in the cigarettes and paper business in the country. It is among the three players in the hotels business. In FMCG, it is fast gaining market share in high-clutter categories like biscuits, salty snacks, noodles and personal products.

4. ITC has handsomely rewarded shareholders in the last 20 years. The stock has appreciated from trading at rupee one at the end of 1991 to now trading at Rs 290. And during this period the company has doled out cumulative dividends of nearly Rs 19,000 crore to its shareholders! The company has announced two bonus issues a 1:2 bonus issue in 2005 and a 1:1 bonus issue in 2010. Investing in a company with this past track record is safer than an investment in a penny stock.

Rakesh Jhunjhunwala : Interview after FDI in Retail Announcement

Rakesh Jhunjhunwala thinks politicians are creating a ruckus over retail for no reason; he strongly believes that while agriculture and media offer interesting stock opportunities, infrastructure may not. He says he not only loves gambling but is also bullish on the casino business. Jhunjhunwala outlined his investment philosophy and discussed his portfolio in a conversation with Punita Kumar Sinha, the host of the show, 'Global Insights', on ET NOW. Edited excerpts:

You've said the two big challenges for the India growth story are inflation and reforms. So are you happy with whatever announcements have been made or do you think more needs to be done?

I am happy with the fact that some reforms have come out. I am not very hopeful that in the tenure of this government there would be many major reforms. But there is tremendous political opposition to whatever the government wants. But whether it happens now or it happens 12 months later, it has to happen. You remember when the FDI opened up in so many items, there was so much opposition. Who is talking about it now? I think that the opposition to FDI in retail is all humbug because they say you will import goods from China. Aren't Pantaloon, DMart, Trent and Titan importing? You have to make your economy competitive. Goods will be procured from where you will get the cheapest price and the best quality.

It could risk increasing India's trade deficit, which is already quite high.

But, Indian retailers are importing already...

But now the scale will change.

Who says that the Indian scale would not go up? Do you think Walmart can open 100 stores in a month or a year? It is not magic. It is like saying that when computers first came, government employees were striking saying that they would lose their jobs. So I think all these politicians are creating a humbug for no purpose and no reason.

Are you trying to capitalise on opportunities in the sectors where there have been announcements? I heard you have bought SpiceJet, infrastructure and wherever there have been announcements like digitisation.

I don't want to discuss my trades. I already have a lot of investment in the retail sector. I think the retail sector is going to be one of the fastest growing sectors in the economy.

What about aviation? You seem to have taken a position there.

I have taken some small positions there and liquidated also. I am not so bullish on the sector until oil prices come down... to previous levels of $90. I don't think FDI is really going to make a difference to their basic profitability, that will only improve once the oil prices come down. They are at maximum load factors already.

Where do you see the value right now?

• I am bullish on things related to agriculture. 
• I am very bullish on retailing. 
• I think there will be opportunity in some of the badly beaten-down infrastructure and real estate stocks. 
• There will be opportunity in media. 
• There are opportunities - but money isn't there and that is the problem.