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Saturday, April 17, 2010

Buy Pioneer Investcorp Ltd - Bet for long term

Pioneer Investcorp Limited: The Group's principal activities are providing Project and Financial Advisory Services and Financial Solutions for Corporate and Industrial Houses Development Projects. It operates under three segments: Advisory & Merchant Banking, Income from Securities/Investment and Equity Brokerage and related income. Its offerings include formulating capital structure, raising capital, debt restructuring, project financing and other corporate advisory services.

Better known for its research division PINC research, Pioneer Investcorp is an integrated financial service company promoted by Charted Accountant, Gaurang Manhar Gandhi (Ex.ICICI). This two-decade-old company is still unknown because of its less concentration in retail broking business and brand building efforts. In 2007, there was some strong news in the market that Citigroup Venture Capital International (CVCI) is close to acquiring an equity stake in Pioneer Investcorp for about Rs 400 crore. Later, Pioneer Investcorp announced a massive expansion in all its verticals, the Promoter cum Managing director Mr. Gaurang Gandhi took 15,00,000 Warrants (convertible into one Equity Shares of the face value of Rs 10/- each) at a price of Rs 630/- per Warrant (including a premium of Rs 620/- per Warrant). The said deal could not struck due to the unexpected global financial crises and the problems faced by the Citi Group.

Pioneer Investcorp is one of the worst affected stocks in the 2008 market crash, which eroded almost 98% of its value as it fell from Rs. 930 to Rs. 13. As expected, the promoter did not convert his above mentioned warrants. But it is noted that he converted 85000 warrants (which he took earlier) at a price of Rs.110/- at a time when the market price was only Rs.35/- in October 2008. Aquiring shares at almost 200% premium to the market price by the managing director is really a confidence booster.

For nine months ended December 2009, the company reported an income of Rs 27.8 crores and net pofit of RS 9.14 crores. On an equity base of 12.2 Cr, nine months EPS stood at Rs 7.5. The company’s promoter is holding 51.36% stake in the company. Another 19% stake is holding various Pvt Ltd. Companies which seems as promoter related entities. Now the stock is trading at Rs. 62. But, still the company is one of the cheap and best quality stocks in the promising financial service industry in India.

Another interesting fact is Pioneer Investcorp is noticed and rated by Wright Investor's Service. Wright Investor's service is an internationally recognized investment management and financial advisory firm headquartered in Milford, Connecticut, USA. Wright Investor's Service has recently published its corporate research report and rated Pioneer Investcorp as LDNN (Limited Investment Acceptance & Fair Financial Strength)

Saral Gyan Recommendation:

Since there is sanity and hope of revival in financial service sector globally, company may revive its big plans in near future. Price movement of past few month has shown signs of accumulation at 47 - 50 Rs levels. Considering all the above facts, we recommend a buy on Pioneer Investcorp with a long term view. Long term Investors can add this stock in their portfolio. Good levels to enter in Pioneer Investcorp is at a range of Rs. 50-55.

Note: The stocks discussed in Saral Gyan through posts are not a part of "Hidden Gems" issue which we recommend to our paid subscribers only. These are just stock specific views by Saral Gyan Team; one must do the due diligence before doing any investment based on our recommendations