Multi Baggers

Shree Digvijay Cement

Digvijay Cement a definite Vijay for small shareholders. Risk reward 2 for 24

Two key triggers and fundamentally the cheapest stock available in the space:

Fundamental Perspective:

The company has a foreign promoter which is world top 10 cement producers "Votorantim" based in Brazil. The company is almost a debt free co. and is available at a compelling valuation of 20$ per ton when the cement world is trading anywhere between $ 70-130 EV per ton. The current capacity of the company is 1.3 million ton All the deals that has happened in India has happened around 100$+. Previously the company was owned by Aditya Birla Group. AB Group sold its stake to 'Cimpor Cementos' for 42.5 per share. After that there were major transfer of assets and multi level restructuring between Cimpor Camargo and Votorantim where they bartered certain assets and as per deal Votorantim got ownership of Digvijay Cement.

Remember there was exchange of assets and no cash transaction between two stocks thus Votorantim made an open offer based on price trade volume. Small shareholders contended the same. This year media reported of SEBI to investigate at Cimpor and Votorantim restructuring and may ask the company to revise open offer in order to protect rights of small shareholders but lacking the deal details the Regulatory body have not given any verdict.

The stock is expected to hog limelight based on certain new developments which will act as a catalyst for the stock.

Votorantim SA is looking for IPO (ADR Nasdaq listing and also listing in the Brazilian country. Last year it backed out because of poor market condition) The Company was planning to raise appx. 3.7 billion dollar from the IPO.

The year 2014 can be a fresh attempt as sentiments have improved and company would like to tap opportunity and this will create another opportunity for shareholders

Events that will come into picture:

Now for Nasdaq listing the company need to have reasoning for valuation done by merchant bankers and as per current capacity it roughly works out to be 100$ per ton. Here small shareholders will have a chance to go back to SEBI and suggest the multi level restructuring was unfair. The company will give a fair offer to shareholders in order to reflect the image of an Investor friendly company because the big picture runs in Billions of dollars and giving an open offer at 30-35 will not cost them even 100 crores

The CATCH 22 situation may also benefit small shareholders where company will make a pre-emptive move to delist the stock in order to avoid the small tussle which may hurt reputation before IPO.

The next possibility, Company is going to raise over 28000 crore of INR equivalent and have small presence in India and China. The two top growth economies. A part of the proceeds will definitely see commitments to our markets. Even a 700-1000 crore investment will instigate the stock to new levels. As far as MNC stocks are concerned the stock tends to multiply once the parent starts taking interest in the business of that economy. Vesuvius India recommended at 100 in 2009 is trading at 440 in 2013 end where we still feel potential of company is still unleashed as management is focusing on India Story.

Considering the valuation of 20-25$ it's a rerating candidate on valuation front. One more important aspect that can be seen is company has offered VRS and that has resulted in loss of 26 crore last quarter.

We arrive at a target of 35 valuing company at EV of 70$ and also expecting either a delisting move or SEBI directing the company to protect interest of small shareholders or company making a pre-emptive move in all situation we feel the small shareholders will make handsome profit. If delisting move happens the extent of price could even go to 60-70 which will value company at reasonable limits thus the potential and circumstances point out it to in favor of shareholders.