Ashish Chugh unearths 2 smallcap hidden gems for Feb

Ashish Chugh, Investment Analyst & Author of Hidden Gems is bullish on smallcap companies IL&FS Investment Managers and Kakatiya Cements.

Below is a verbatim transcript of his views on CNBC-TV18. Also watch the attached video. On IL&FS Investment Managers
IL&FS Investment Managers is a subsidiary of IL&FS limited. It is the only listed private equity player in the country. This company raises funds and manages those assets typically on a 220 model, wherein it gets a fixed management fee of about 1.5-2% of the assets which it manages. There is also performance linked income, which is generally called the carry, of about 20% of the total profit it makes after a certain threshold.
This company has got assets of about USD 3.2 billion under management currently. It invests primarily in infrastructure and real estate sectors and also in the other growth companies. If you look at the financials of the company, FY11 sales were about 200 crore, profit after tax was about 70 crore and the EPS was about Rs 3.50. In the first nine months of the current financial year, sales is about Rs 157 crore with a profit after tax of Rs 54 crore, equity is about Rs 41.5 crore, which means an EPS of around Rs 3.5 to Rs 3.6.
Now, there are a couple of reasons we like this stock. One is very high dividend payouts. This company has been giving dividends of about 75% for the past two-three years, which at the current price would result in a dividend yield of about 5-5.5%. The stock currently trades at about Rs 29, so the dividend yield is pretty good.
Second is this is a debt-free company. It