By Girish Gulati
Morarka Finance Limited was incorporated in the year 1985. It belongs to the Finance & investment industry. Company has equity capital of 4.5 crores and out of this, promoters holds 60.27 % shares of the company. G.R. Morarka is the promoter of the company.
The Equity Markets continued its upward journey in the year 2003-2004 also in the 2004-2005 The BSE Sensex & NSE is making all time high continuously .The Company in the business of finance & investment, therefore lot of opportunity is emerging to the company.
Investment of the company
As the company belongs to Finance and Investment Sector, it has invested its money in the shares of the other company. The company has Net fund of 6.52 crore (Equity share capital 4.5 crores, Redeemable Preference Shares 0.65 crores & Reserves & surplus of 1.37 crores). For this fund, the company has invest its money in Dwarikesh Sugar.
As on 31.03.2005 the company holds 23,48,818 shares of the company. It is also noted, that Mr.G.R. Morarka is the promoter of both the companies i.e. Dwarikesh Sugar & Morarka Finance.
The company is totally debt free. The turnover of the 9 months ended for Financial year 2005 increased by 296.30% to Rs. 1.07 crores as compared FY04 (09) to Rs.0.27 crores .The Company posted a steady performance with Profit before Tax of Rs. 0.97 crores in FY05(09) registering an increase of 506.25 % ,if compared with FY04(09).
The Profit after Tax stood at Rs. 0.97 crores as against Rs. 0.16 crores over the last nine months. Operating income rose by 470.60% to Rs 0.97 crore as against Rs 0.17 crore. Operating Profit in the December quarter of FY05 was higher by 10,000 % to Rs 1.00 crore as against Rs .0.01 crore in the corresponding previous quarter. Earnings per share stood at Rs.2.16 for the three-quarters ended 31 st December 2004 under review as against Rs. 0.36 in the corresponding period. Net worth (including preference share capital) at Rs 6.52 crore as at 31 st March 2004, as the company is total debt free company
The increase can be attributed to increase in revenue, decrease in operating expenses. Operating efficiencies and no interest payout supplemented by better management for controlling the cost and efficient working capital management has resulted in an impressive growth in profit in this year and also in the future.
One thing is simple, that 45,00,000 shareholders hold 23,48,818 shares of Dwarikesh, meaning there by every one share of Morarka has value of half shares of Dwarikesh Sugar. The company is totally debt free company and does not have any other business. If you buy 1,000 Morarka, then you are holders of 500 Dwarikesh Sugar.
At the current level Dwarikesh Sugar is traded at approximately (Rs.). 150. If we multiplied 23,48,818 shares by 150 then the value comes out is (Rs.). 35.23 crores. Morarka finance has only 45,00,000/- shares and it does not have any debt therefore, the value of each share of the Morarka Finance comes out to be approximately (Rs.). 78 and the share at this moment is trading only (Rs.). 24. Besides this, the company result for the nine months in the year 2004-2005 is very good, as discussed in detail above.
Above all, the future of sugar industry is good for at least two years. For crushing season 2004-05 Dwarikesh Sugar factory is still running (crushing continue on 13-4-2005) Total crushing 8012900 till13-4-2005 with recovery 10.46%, its good in sugar industry, more capacity addition. As, the future of the overall sugar Industry is very much bright and in the overall boom the price of shares of Dwarikesh Sugar will also increase, ultimately it will in the benefit of the shareholders of Morarka Finance.
Morarka likely to declare 15 % dividend this year because, recently the company sold 1,70,000 shares of Dwarikesh sugar and make good profit.
Performance of Dwarikesh Sugar
In a recent interview Management gave a guidance of a net profit of Rs.40crs for the FY05. Dwarikesh Sugars is likely to end up with an EPS of Rs.40 and its share price is expected to reach Rs. 300 in next six months.
The Company expects a further growth in both revenue and earnings due to better management support. Thus the company remains confident of continuing robust growth for the current fiscal and the years to come
It is expected that the company will end up with a minimum of EPS of Rs.3 for FY06 and thus Morarka Finance is trading at a forward P/E of 8, without considering that it has 24,48,818 shares of Dwarikesh Sugar. The price of Dwarikesh sugar is also expected to shoot up, providing an extra cushion. Thus a strong buy is recommended on this scrip for long term buyers with a vision of at least 1-year. Expected price after year is around Rs. 80.
Published on: Valuenotes.com on April 29, 2005
Disclaimer: Views expressed in the above articles are independent views of the writer only and they don't express the company's official policy, decisions or views. The article has been reproduced here for the sole purpose of public knowledge and information. Morarka Finance Limited doesn't take any responsibility for the views expressed above.