Videocon Industries l BUY l Rs. 214
__________________________________________________________Revenue12500 Cr.
Net Profit 1100 Cr.
EPS48
Price Earning 6
Book Value305
Equity230 Cr.
Market Cap 5,400 cr.
Debt 10,000 Cr.
Videocon Industries is known as a dominant player in the Consumer Durables business. However investors should look at the company today for its Oil & Gas Exploration and Production business. Videocon has highly valuable Oil Assets at Ravva Fields in India, Brazil, Australia, Oman and Timor. For the Sept 08 ending financial year company earned Oil revenue of Rs.1900 cr. and Oil profit of Rs.575 Cr. Most of this revenue is coming from the fully operational Ravva Field at Andhra Pradesh.
Global Oil Fields of Videocon are estimated to have huge reserves, especially Brazil and Oman. Some unconfirmed reports recently indicated over 100 billion barrels reserve in Brazil Oilfield, where company has 12.5% participating interest. BPCL too has 12.5% share in this particular project. However it is too early to take such `exceptionally high` figures into consideration. I believe that Videocon would announce pretty impressive numbers about the 2P Reserves in its various oilfields.
Now, coming back to the stock, investors are not at all happy with the quality, culture and attitude of the management. Dhoots have ignored the aspect of creating wealth for the minority shareholders and it seems they like it that way! However I feel that they are about to change themselves after the popular ad campaign `CHANGE`, being launched. And it makes sense to do so in the light of the high debt and future fund requirements. Demerging of Oil Assets could be a trigger if it happens!
Videocon`s 74% subsidiary Datacom Solutions has GSM license for 22 circles and that is another potential value creator. Company`s non-focussed interest in too many other activities like Power, DTH, Broadcasting, Steel, SEZ, Broadband, Semiconductors, Photovoltaic Cells, Retail and Hospitality is not appreciated in the market place. Videocon has already invested lots of money into some of these business.
It is not easy to make an Enterprise Valuation of this company. My instincts tell me that multiple triggers are in pipeline for the stock price for considerable appreciation.
Disclaimer: This Research Note is created for information to the clients of Equity Intelligence India Private Limited, a SEBI Registered Portfolio Manager.
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