ILandFS Investment a safe investment: Ashish Chugh

ILandFS Investment Managers is a safe investment for investors who don’t want to take too much risk in the stock market, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

Chugh told CNBC-TV18, "ILandFS Investment Managers is a part of IL&FS group. This is the only listed private equity firm in the country. This company manages money for foreign investors typically on a 220 basis wherein it gets a fixed return of about two percent of the amount of funds managed. Then there is a performance linked incentive of between 15-20 percent based upon the kind of returns which they generate for the investors after certain threshold."
He further added, "This company has been managing assets of close to about USD 3.2 billion and for the past couple of years it has been giving a consistent return of about 25 percent on the funds managed."
"If we look at the financials of the company, FY12 sales were about Rs 220 crore. Profit after tax was about Rs 75 crore. In the first nine months of the current financial year, sales are almost flat at Rs 163 crore which was same as the same period last year. Profit after tax is again flat. It is up by about 2.5 percent to Rs 55 crore."
"This company has been distributing roughly 40 percent of the profits which it makes of its profit after tax to the shareholders as dividend. This company has been giving a dividend of 75 percent each year for the past three-four years. Since the profits are consistent this year also, I expect them to, they have a board on 30th April for financial results and also declaration of dividend. So I believe that they may continue with a dividend of 75 percent which is a dividend of Rs 1.50 on a stock of about Rs 20 which means a dividend yield of close to 0.75 percent."
"On a long term basis, the performance of the company is a function of two things. One is the ability of the company to get fresh funds from management and also the ability of the company to deliver returns to the investors. In the past few years, I think the investment environment has been extremely tough and inspite of that, this company has managed a profit of Rs 70-75 crore, paid 40 percent profit to the shareholders as dividend and is giving a dividend yield of about 7.5 percent of the current market price."
'I think as the economic environment improves and as the profits of the company improves, I think investors can expect better returns in the future. So here, I am basically betting on the pedigree of the management which IL&FS, I would say is an excellent pedigree. It has been a consistently performing company and the best part is that the current market price, this company offers a dividend yield of 7.5 percent which in the current environment I would feel is an extremely good dividend yield. I would say this maybe a safe investment for investors who don’t want to take too much risk in the stock market."