Which of the Birla Groups in India is most valuable? – Part 4

Sundaramurthy Vadivelu

Disclosure Please click the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher. Please send your feedback

In this last part of article series let us discuss about the Aditya Birla group. The group manages the following companies in India.

• Grasim Industries (Viscose staple fibre, grey cement, white cement, sponge iron, chemicals and textiles)

• Hindalco Industries (Alumnium and copper)

• Aditya Birla Nuvo (Carbon black, chemicals, fertilizers, textiles, garments and viscose filament yarn)

• UltraTech Cement

• PSI Data Systems

• Aditya Birla Minacs Worldwide

• Essel Mining & Industries

• Shree Digvijay Cement

• Idea Cellular

• Aditya Birla Insulators

• Aditya Birla Retail

• Bihar Caustic and Chemicals

In addition, the group has presence in other countries too. It manages 6 companies in Thailand, 4 in Philippines, 5 in Indonesia, 3 in China, 2 each in Egypt and Canada, one each in Australia and Laos.

The group has a market capitalization of USD 31.5 billion and a combined workforce of 100,000 in 25 countries. It was adjudged "The Best Employer in India and among the top 20 in Asia" by the Hewitt-Economic Times and Wall Street Journal Study 2007.

Summary:

Scrip/NSE Ticker	BSE Group	Scrip Code	Price 16-Nov
Grasim Industries (GRASIM)	A	500300	3837.00
Hindalco Industries (HINDALCO)	A	500440	203.75
Aditya Birla Nuvo (ABIRLANUVO)	A	500303	1562.00
UltraTech Cement (ULTRACEMCO)	B1	532538	1004.00
Idea Cellular (IDEA)	A	532822	127.00
Bihar Caustic & Chemicals (BCCL)	B1	500057	81.25

The following table shows the key financial ratios:

Scrip	P/E	P/BV	Gain since 01-Jan
GRASIM	20.19	5.65	38.14
HINDALCO	9.29	1.90	17.97
ABIRLANUVO	74.44	4.66	26.80
ULTRACEMCO	15.55	7.09	(5.52)
IDEA 1	75.45	29.81	69.33
BCCL	5.93	1.29	85.45

¹ Idea Cellular was listed on March 9, 2007 and the gain has been computed based on IPO price of Rs.75.

Grasim:

During July 2007, an “ascending triangle breakout” (bullish continuation pattern) occurred in the medium term chart of Grasim. The technical target of 3948 was achieved when the stock hit a high of 4051 a couple of weeks ago. As such, there are no reversal signs yet. Hence it can be concluded that the bull run should continue. The next target for the stock works out to 4602. However, the declining volumes during the uptrend is a concern.

Hindalco:

The stock had fallen by about 52% between May 2006 and May 2007 as can be seen above. The resistance at 192.70 could not be broken during the uptrend that started in May. However, it has now successfully closed above it for two weeks in a row. The stock has already touched a high of 240 which is 100% retracement from the low of 120. It is likely to test the previous high at 251.30 when the uptrend continues. National Aluminium Company (NALCO) has gained 88.47% this year compared to Hindalco’s 17.97%.

Aditya Birla Nuvo:

We had already discussed about this stock in my previous article, “Which of India’s Top 10 “Family Named” Stocks is Most Valuable? – Part 1”.

I had mentioned that the stock is bullish for the medium term. It is on a corrective decline now and it should find support at around 1400 levels. The support trendline is intact and we need to wait for a confirmation for a trend reversal. The next target for the stock works out to 2000.

UltraTech Cement:

This stock has so far not yet closed above its resistance at 1250 in medium term chart. However, the support trendline has not been broken. There are no reversal signs yet. In the absence of such confirmations, it may be concluded that the bullish trend will continue. The projected technical target for the current upmove is 1324.

Idea Cellular:

Like UltraTech, this stock is also bullish and it is on a decline. Suport exists at around 117. Once again, let us wait for a technical confirmation for a trend reversal.

Bihar Caustic & Chemicals:

This stock too, is bullish. It broke the previous resistance at 65.50 three weeks ago with good volumes. We can see a bullish “triple bottom” formation. This is a highly bullish sign and the stock is expected to reach a target of 121.50 in the medium term.

Conclusion:

All the six stocks belonging to Aditya Birla group are bullish in the medium term charts.

Grand Finale: The India Street verdict

Parameter	MP Birla	GP – CK Birla
Stocks	4	2
Bullish stocks	1	2
Price appreciation above 20% since January 1	1	2
Growth stocks (High P/E)	1	1

Parameter	KK Birla	Aditya Birla
Stocks	6	6
Bullish stocks	4	6
Price appreciation above 20% since January 1	4	4
Growth stocks (High P/E)	1	2

The GP – CK Birla group is the smallest as far as number of listed companies are concerned. Only one stock from MP Birla group is bullish. KK Birla and Aditya Birla groups have six listed stocks each and technically, all the Aditya Birla group stocks are bullish compared to 4 of KK Birla group; two of its companies (Aditya Birla Nuvo and Idea Cellular) are ‘growth’ stocks compared to Texmaco of KK Birla group.

Kumar Mangalam Birla

Therefore, we can conclude that the Aditya Birla group companies are more valuable in Indian stock market.

Sundaramurthy Vadivelu

Suggested Reading

Which of the Birla Groups is Most Valuable? Which of the Birla Groups in India is most valuable? – Part 2 Which of the Birla Groups in India is most valuable? – Part 3

Which of the Birla Groups is Most Valuable?

Sundaramurthy Vadivelu

Disclosure Please click the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher. Please send your feedback

Introduction:

In our earlier article series, “Which of India’s Top 10 “Family Named” Stocks is Most Valuable?” we discussed about ten companies with “Family” names like Birla, Bajaj, Dalmia etc. We also compared Mukesh Ambani and Anil Ambani groups previously in “Mukesh Ambani vs Anil Ambani : Which Brother's Companies are the better Investment?”. Let us now analyze the Birla Groups from a stock market perspective.

Basis for our analysis:

• Only those group companies belonging to Group ‘A’ or ‘B1’ (which are also traded at NSE) will be discussed here. As I have mentioned earlier, some brokers place restrictions in online trading of other group stocks; there is no point in analyzing such stocks if one can’t trade those.

The Birla Family:

The Birla Group was founded by Baldeodas Birla and it is one of the oldest business houses in the country along with the Tatas. Birlas supported the nation during freedom struggle. They were close family friends of Mahatma Gandhi. They are also known for their philanthropic and social work like the Tatas. Birla Institute of Technology & Science is a premier educational institution in the country. Aditya Birla Group’s Tanfac Jan Seva Trust shared half the cost of constructing 119 houses in Cuddalore district of Tamil Nadu, which was affected during the 2004 Tsunami.

Mrs. Rajashree Birla presenting a symbolic key to

Cuddalore district collector Gagandeep Singh Bedi

The Birla Family Tree is shown below.

The following companies are managed by MP Birla group.

• Birla Corporation consisting of Cement Division, Jute Division, Synthetics Division, Carbide and Gases Division, Vinoleum Division & Auto Trim Division

• Universal Cables which manufactures power/instrumentation cables and capacitors

• Vindhya Telelink which is involved in jelly filled telephone cables business

• Birla Ericsson Optical which manufactures fibre optic cables

• Optic Fibre Goa Limited

• Hindustan Gum & Chemicals Limited

• Birla DLW Limited

• Birla Financial Corporation Limited

Summary:

Scrip/NSE Ticker	BSE Group	Scrip Code	Price 15-Nov
Birla Corporation (BIRLAJUTE)	A	500335	321.90
Universal Cables (UNIVCABLES)	B1	504212	98.40
Vindhya Telelink (VINDHYATEL)	B1	517015	243.70
Birla Ericsson Opticals (BIRLAERIC)	B1	500060	23.90

The following table shows the key financial ratios:

Scrip	P/E	P/BV	Gain since 01-Jan
BIRLAJUTE	6.86	3.77	(5.28)
UNIVCABLES	12.87	1.45	(4.37)
VINDHYATEL	112.99	1.29	82.21
BIRLAERIC	-	1.05	4.14

Let us now discuss the medium term technical scenario of these stocks.

• The weekly chart of Birla Corporation suggests that the stock had failed to close above its previous resistance at 372 made during the week ending Jan 26, 2007. It has however, not broken the support trendline as yet. A bearish engulfing pattern was formed near the resistance; however this could not be confirmed during the week that followed. We will need to wait for a technical confirmation in the weeks to come.

• The medium term chart of Universal Cables indicates that the stock had failed to close above the resistance trendline. The support however, has not been broken yet. It had formed one bullish piercing line pattern and two bullish engulfing patterns; but these reversals could not be confirmed. Like Birla Corporation, the current trend is unclear.

• Birla Ericsson Optical has been an unwanted commodity in the stock market since last 18 months. It has fallen from a high of 39.95 in May 2006 to a low of 15.60 in April 2007. This company declared a net loss of Rs.0.63 crores for the financial year 2006 – 07. However, during the last two quarters it has declared meagre profits. The stock has not been able to break resistances at all in the last 12 months or so. It has to close above 25 on a weekly basis for uptrend to begin.

• Vindhya Telelink has formed a bullish inverse head and shoulder pattern and the stock had broken its resistance trendline. It usually takes long periods of time for forming these type of chart patterns and the stocks invariably gain a lot. The medium term technical target for the stock works out to 261 when considering the low of 87.20.

Conclusion:

Apart from Vindhya Telelink, the other three companies from MP Birla Group have been underperformers this year. Their technical picture is also unclear.

Sundaramurthy Vadivelu

Suggested Reading

Which of India’s Top 10 “Family Named” Stocks is Most Valuable? – Part 1 Which of India’s Top 10 “Family Named” Stocks is Most Valuable? – Part 2 of 3 Which of India’s Top 10 “Family Named” Stocks is Most Valuable? – Part 3 of 3 Mukesh Ambani vs Anil Ambani : Which Brother's Companies are the better Investment?