Stock updates: GMR, RIL, SBI and Balaji

GMR Infrastructure - Post IPO story

I had suggested avoiding the GMR IPO, which was later issued at Rs. 210 per share.

Current Price: Rs. 225.05

IPO Price: Rs. 210

Gains: 7.2% (since Aug 21 listing)

Recommendation: Don’t bother.

Largely I don’t like high P/E stocks where visible growth is limited. The spike in the price could be the “close to listing day” period gains, but it’s interesting to note that the stock opened close to the purchase price. I’m not sure this share is worth locking your money for.

Reliance Industries Limited (RIL)

First recommended here, and follow up here.

Current Price: Rs. 1112.3

Recommended at: Rs. 850

Additional (free) shares since recommendation: Reliance Infocomm (Rs. 298) and others equivalent to about Rs. 100.

Total Gain: 78% (in 8 months)

Recommend: Hold. Sell if it falls below 1,100 or touches 1,200.

I’ve always liked this company, but I would recommend you hold (don’t buy more). For a more aggressive approach, sell 5 out of 10 shares you own. The share seems like it’s overvalued with growth at around 7% projected in 2007 and current P/E is already 13.9. Stop losses at Rs.1,100 and exit at Rs. 1,200.

State Bank of India (SBI)

First recommended here and follow up here.

Current Price: Rs. 905

Recommended at: Rs. 922

Total Loss: (-2%) (in 8 months)

Recommend: Sell.

Bad hit there. The share went to Rs. 1000 and then dipped, down to Rs. 690 (I bought a few that day) and it’s back up on news that the SBI act has been modified to allow it to issue preferential shares. The bad news is that interest rates are rising and banks are being forced by this government to keep interest rates artificially lower - maybe not right now but next time there will be more vociferous opposition to raising rates. Additionally the Insurance business has not yet started contributing to profits, and the losses will be amortised for a while. The new chairman has also reversed some of the key Purwar decisions like spreading the banking software, and foreign acquisitions.

In this light my recommendation is to sell. There’s a good time now, with prices hovering around Rs. 900. If the outlook starts getting better in terms of stable interest rates, greater credit offtake or faster growth predictions, I will post here.

Balaji Telefilms

First recommended here.

Current Price: Rs. 136

Recommended at: Rs. 118

Total Gain: 17% (in 10 days)

Recommend: Hold, buy below 130, sell at 175.

The share looks pretty good and the company has paid out dividends very fast (Rs. 3 per share). The reserves are now at around Rs. 25 per share, and the TV viewership and ratings seem to be increasing for their shows. Balaji has recently set up a subsediary in Sharjah for the Middle eastern market - Operational from November 2006. This is very positive use of the cash kitty. Further, the first quarter earnings for FY 2006-07 are up 38% from 1st Q 05-06. This points to a FY 06-07 earnings of about 13 per share, which, at today’s PE of 15 will fetch a price of Rs. 195 per share. I would suggest a target price of Rs. 175 in one year.