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December 07,2010
PMS Newsletter

Dear Investors,

Market seems to be in a consolidating mode in December andmost mid-caps have corrected significantly higher than the SENSEX. This is dueto the fear factor leading to irrational liquidation by traders and short terminvestors. We will stay invested with in our conviction ideas like Godrej,Wockhardt, Tata Global Beverages, UTV, Indian Hotels, Selan Exploration etc. Itis going to be rewarding. Hope you have received the note on Tata Global Beverages,prepared last week.

Selan Exploration - Excellentasset to own

 I mademanagement visit of Selan Exploration at Delhi last week and met Mr. RohitKapur, Chairman of the company.  Selan ispart of our core holding and I feel good about it. Selan has 200 sq. kms of Discovered Oil &Gas acreage in five fields in oil rich Cambay basin in Gujarat. Tillrecently they have been operating only one field, called Bakrol, which isestimated to have oil reserves of 73 Million Barrels. Selan has spent Rs.100 Crduring current year for appraisal of oil fields and development ofinfrastructure. The results are very encouraging, but management do not want tobe highly transparent and too communicative due to over-regulation by variousgovt agencies.

Production from another two fields - Indrora and Lohar willstart from January. These fields have significantly higher recoverable oil andGas.  Selan is likely to cross 1 millionbarrel of oil production in two years time against the current production ofabout 2,30,000 barrels. This translates into a Revenue of Rs.350 Cr plus andProfits of Rs.250 Cr at current prices. The company is priced at around Rs.600Cr and it is a potential multi-bagger.

Management seems to be honest and conservative. BalanceSheet is very healthy with bank balance of Rs.100 Cr. Going by various methodsof valuation, the stock is quoting only a fraction of its true potential. Letus stay invested and monitor the developments.


Porinju Veliyath | Portfolio Manager


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