BF Investment Analysis

BF Investment  is an investment holding company for the Kalyani Group ( flagship Bharat Forge Ltd.) with investments in related promoter companies.BF Investment was formed as a de-merged entity that took over the investment management business of BF Utilities, and was listed on the exchange starting 14th January 2011. 

Most of the investment value for BF Investment is hidden in its carried at cost investments portfolio in promotor companies. While it has significant direct investments in sister companies, its insignificant investment as shown on balance sheet in its unquoted investment( KSL Holdings Pvt Ltd 49.99%) is significantly higher. (documents provided for at the end of analysis, for some documents you might have to send in a request at pratik.thakkar@valueeinvestor.com)

Objective & Methodology: 

To Find per share Intrinsic Value of BF Investments Ltd.

BF Investment is a core investment company, which shall be viewed and analyzed as a closed ended Mutual fund, with passive management.For the purpose of Analysis, most of the assumptions have been made on a conservative basis. 

Operating and many other unquoted investments have not been considered in the analysis, which even though lend a significant value per share, some uncertainty and lack of data on them restrict their inclusion in the following analysis. 

Even though some investments are not included in the analysis, if their carrying value were to be reduced down to zero (operating assets have a net operating asset position, significantly over current operating liabilities) the investment value of BF Investment wouldn't change , and even if it does it would on the upside.

Following is a table looking at the Quoted and one Unquoted Investment (KSL Holdings Portfolio) for BF Investments Ltd.

BF Investment Update

* Date of Shares at which price was taken was the closing price on Tuesday December 20th 2011.


Insiders Buying:


In the recent few months insiders have been buying a substantial portion of the company's shares in the open markets.On aggregate basis, they have bought 4.79 % .

Following the table there is a graph representing, at what levels insiders have been buying indicated by the green pop ups in the whole.

Insider Buying_ValueeInvestor Sheet3

* Data obtained through NSE

Adjusted Balance Sheet:

Adjusted Balance sheet can be found by clicking on the link. There were 37.7 million shares outstanding as of 31st March-2011. Giving a per share net operating value( without considering Investment Portfolio) of around 22.25 Rs/Share.Which for the purpose of calculation, and in the matter of conservative approach have not been included in the analysis.

Documents: 

Following are the documents that could and would be made available on further request:

1) KSL Holdings Pvt Ltd. (Annual Report Filed with Registrar of Companies)

                                                           Disclaimer

Funds managed by ValueeInvestor and its affiliates own investments that are bullish on BF Investment’s prospects. ValueeInvestor generally invests in long positions and did so based upon our analysis of publicly available documents, general market data and other information.

This report is based uponValueeInvestor’s own reading of BF Investments BSE filings from 2010 to the present as well as other public documents. ValueeInvestor’s views are also informed by its knowledge of, experience in, and opinions about Investment related companies generally.

This report is not intended as investment advice to anyone. Others may disagree with some or all of the opinions expressed here.ValueeInvestor urges anyone interested in the company to read BF Investments public disclosures available on its website or on BSE,and to consult whatever other source they deem appropriate in order to form their own opinions on the topics covered in this report.

We welcome any reponse from anyone willing to get more information or clarification on the claims made inthe report. We are willing to make ourselves available 

This is in no way an advice to buy or sell the shares of the company, and ValueeInvestor takes no responsibility for the same.

Crude Oil Analysis

The objective in this post is to analyze crude oil prices with respect to two parameters initially and propose to look at further parameters to fully understand the things that do affect the pricing or crude oil on a general basis in the markets. 

What we can see in the table below is Price of Crude oil with regards to Inflation adjusted prices, and compare that against Nominal Prices as well as Inflation in the corresponding Periods.Moreover, we look at Production & Consumption on a daily basis, as well as the change in the Consumption and Production Variable over the years. 

One thing that strikes out from the table is the fact that much of the Crude oil Price on an Inflation adjusted basis is 

1) Nowhere close to the Top,but is significantly above the all time lows. Suggesting more of an all time downside to the upside rewards for taking the risk of investing into Crude. 

2) Inflation on the other hand is close to the lows seen during the 1960s right before the double digit inflation witnessed in the US for the next decade.

3) Differential between Nominal and Inflation adjusted Crude Price was higher during 1970s as compared to todays differential.

4) Consumption has outstripped demand in the last two decades, and has infact grown up 200 percent from 2000-2010 ( a big factor in the rise of crude oil prices)

The data above shows a  positive bias for crude oil prices on a demand driven basis, but not as much of a solid footing based purely on inflation and its threats (which even though obvious, is hard to determine with regards to timing and becomes more of a speculative game, rather than one based on pure fundamental basis)

Now the question here is what could bring down the supply demand gap, and if there is something that can what happens to the price of crude oil. 

While it is hard to predict what happens to the price of crude oil, it is much easier to say how and what can decrease the Consumption/Production Differential. 

1) Increase in Exploration and Resulting Production from new reservoirs

       A lot of efforts have been concentrated by many companies in their search for and production from new reservoirs of Oil, while the problem is usually the lead time from Exploration , Discovery & Production an increase in the crude oil supply from these new discoveries could negatively affect the Consumption/Production differential. 

Henceforth, we suggest to look at the number of such production process underway , and the potential increase in crude oil supply estimated over the future years. 

2) Change to Renewable Energy : If crude oil prices are to remain stubbornly as high as they are, renewable sources of energy could fill in the gap at some places decreasing the marginal demand at some places and substantial demand at others ( while it is hard to predict where, Utilities and Transportation is seeing a huge shift from Crude Oil Usage to CNG and Electric Cars) 

Again while the process is slow, it is still underway and the ground no doubt is dynamic and shifting. Last but not the least Department of Energy publishes data on Crude Oil Reserves for United States, a really helpful determinant in the short term. 

All said we at ValueeInvestor believe Crude oil might go high, or might go low in the coming years. We do not have any idea as to the course of actions , but what we definitely know is that we would want to stay away from the asset class, and have none of it in our portfolio. 

Crude Oil Data

DISCLAIMER :To be sure we are in no way predicting or advising anybody to take action, the research is based purely for and on an educational basis.Any actions taken based on the research is purely ones own decision, and we do not take any responsibility for the same.