The third quarter results are out and most of the businesses have come out with their results. The budget for the year 2015 – 16 is out, though we haven’t looked its impact on individual businesses but an increase in service tax will put a bit of pressure on inflation.

This is how the market have performed in the last nine months:

DEC 14 – FEB 15 SEP 14 – NOV 14 JUN 14 – AUG 14
NIFTY 50 3.65% 7.97% 10.02%
CNX 100 4.03% 8.38% 9.74%
CNX 500 4.65% 8.76% 9.61%


At this moment it looks that market might give returns in the range of 20% – 30%, but looking at the valuations it looks a bit overstretched. With expectations and estimates of 2016 GDP to be in range of 7%- 8% the market had really run up from June 14.

The average long term returns of the market are in range of 15% – 17% per year and we really had a handsome returns in the last two years. Will that momentum will continue? The honest answer is we don’t know. Looking at the valuations and guessing on budget implications we are not expecting market to rally another 10%. Don’t forget that our success rate in prophecy is only 30% in such situation.

In saying that we do not invest looking at the market. We look at the individual business economics before investing in any business.

At this time the only business we have found is still trading at bargain price is Tata Motors. Looking at in any ways, it is trading at 10.4X PE ratio and its enterprise value at 1.50X.

This is how Tata Motors stats look from last three years:

2012 2013 2014 2015 E
REVENUE 165,654 188,818 232,834 263,348
EBIT 13,534 13,633 18,869
NPAT 13,574 9,862 14,104 18,414


The revenues are ticking up generously and are expected to grow in the range of 12% – 15%. The profits have been a bit volatile but now are expected to be stable for a while.

Most analysts are expecting its revenues for the year 2016 to be around 302,000 crore and its earnings per share to be Rs 68 (NPAT: 21,000 crore).

We think these figures are too optimistic. Looking at the most pessimistic figure and assuming its revenue for the year 2016 to be Rs 280,000 and earnings to be Rs 18,000 crore, we still think it is trading around 10% discount to its value.

We do own this business in our fund and we do follow very closely this business.