Aditya Birla Nuvo: Diwali Muharat Pick by ShareKhan

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Aditya Birla Nuvo Ltd (erstwhile Indian Rayon and Industries Ltd) is a diversified conglomerate within
Aditya Birla Group. The company was entered into the industry in the year of 1956. It is a foremost player
in most of its business segments, including viscose filament yarn (VFY), carbon black, branded garments,
fertilisers, textiles and insulators. Over the past years, Aditya Birla Nuvo, through its subsidiaries and joint
ventures, has also made successful forays into life insurance, telecom, business process outsourcing (BPO),
IT services, asset management and other financial services, striking a balance between value businesses and
high growth businesses. The all the divisions of the company are ISO 9000 / 14001 certified.



Aditya Birla is all set to increase its promoter holding in the company by the way of converting the
preferential warrants into equity shares. Post the conversion the promoter holding in the company
would increase from current 46% to 51%.

Further the company is keen on entering the baking space through its financial arm- Aditya Birla Financial
services and thus has applied for new banking license for the same. We believe these developments and
the promoters increasing focus on the financial services arm augurs positive for the company.

We believe the value businesses of the company (insulators, textiles, fertilisers, carbon black and rayon)
have started witnessing increased efficiency as reflected in sharp improvement in their operating margins,
while the growth businesses (retail, BPO, life insurance and financial services) are showing improved
revenue visibility and gaining strong market share.

Given the diverse businesses ABN is into, the company is best valued using the sum-of-the-parts (SOTP)
method. The company’s value businesses have shown marked improvement over the last 12 months where
as on the growth businesses—telecom, insurance, asset management etc.

Valuation: At the current market price of Rs.846, the stock is trading at a price/earnings (PE) of 26.4X
FY2012E stand-alone earnings and an enterprise value (EV)/EBIDTA of 12.4x FY2012E.