tag:blogger.com,1999:blog-75995137576326662032024-03-08T14:19:29.998+05:30The Spotlight with Anuj SinghalThis blog of mine is dedicated towards internals of Indian stock market and within that individual stocksAnuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.comBlogger55125tag:blogger.com,1999:blog-7599513757632666203.post-41531746497809663322018-04-21T14:44:00.001+05:302018-04-21T14:44:28.094+05:30Video blog: TCS at the cusp of $100 bn market cap<p dir="ltr">https://m.facebook.com/story.php?story_fbid=1780723388631718&id=169218193115587</p>
Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com9tag:blogger.com,1999:blog-7599513757632666203.post-27438184769202292172018-02-21T08:34:00.002+05:302018-02-21T08:34:36.194+05:301 YEAR OF CHANDRA: MIXED BAG<div dir="ltr" style="text-align: left;" trbidi="on">
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<b>1 YEAR OF CHANDRA:
MIXED BAG<o:p></o:p></b></div>
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There is a temptation to say N Chandra has stabilized the
Tata Group after the ugly Cyrus Mistry saga that played out. Let’s analyze that
and while the stock market is not the only yardstick to measure the
performance, since that’s an important barometer, let’s take a look at what
Tata Group has done under 1 year of N Chandra.</div>
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Tata Group is a large conglomerate which essentially has 1
giant company in TCS and 3 large companies in Tata Motors, Tata Steel and
Titan. Then it has some other decently sized companies like Voltas, Tata
Chemicals, Tata Global, Rallis India, Tata Communications and Tata Coffee among
others. <o:p></o:p></div>
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Let’s start with what truly is N Chandra’s baby – TCS.
The company that accounts for lion’s share of group’s revenues, profitability
and market cap. That stock is up 19.7% in last 1 year, which is good enough but
then the IT Index itself is up nearly 16% in that period and TCS has been
running under a good template for more than a decade.<o:p></o:p></div>
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Now let’s talk about the much fancied Tata Steel. The
stock is up 41% in last 1 year and there have been serious attempts to sort the
balance sheet of Tata Steel with the merger of European business with ThyssenKrupp.
But just to burst the bubble here, that process started before Mr Chandra took
over and the rally in Tata Steel stock is essentially a result of a huge steel
cycle where many would argue Tata Steel has actually underperformed. For
example during same period, JSW Steel is up 65% and the market now values JSW
Steel a good 10,000 crores more than Tata Steel. <o:p></o:p></div>
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Then, let’s come to Tata Motors. There is a school of
thought that under Chandra, the domestic CV business of Tata Motors has stabilized.
Here again, let’s just look at what Ashok Leyland has done compared to Tata
Motors. The stock is up 45% while Tata Motors is actually down 19%. Again, it
was a case of being at the right place at right time. The domestic CV market is
going through an up cycle and in that Tata Motors may have again
underperformed. Make no mistake about it, Tata Motors has been a failure for
last 1 year, especially the JLR performance. Ask shareholder of Tata Motors if
you don’t believe me. <o:p></o:p></div>
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The only 2 stocks which have truly managed to outperform
the markets are Tata Global and Titan, both of which have nearly doubled and
this is where Chandra deserves a lot of credit though many people would argue
that Titan has been a story of Bhaskar Bhat and Tata Global is bearing fruits
of good work done by Cyrus Mistry earlier. But to give credit where due, these
stocks have done remarkably well. <o:p></o:p></div>
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Let’s give benefit of doubt to Chandra and say that his 1<sup>st</sup>
year has not been a failure and under him, the group has made positive strides.
That cannot be denied and you have to give the man his due. But I would refrain
from saying that he has been a phenomenal success. Let’s see the next 2 years.
The jury is still out.<o:p></o:p></div>
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P.S. – This is entirely my personal opinion and I do understand that I could be wrong and I reserve the right of being wrong. <o:p></o:p></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com3tag:blogger.com,1999:blog-7599513757632666203.post-34149681996397419772017-03-15T07:37:00.000+05:302017-05-17T12:08:30.671+05:30DOMESTIC RETAIL INVESTORS: TIME TO SALUTE YOURSELF<div dir="ltr" style="text-align: left;" trbidi="on">
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This has to be said. Indian retail investors over last
many years has been at the receiving end of many jokes. Always buying at the top, selling
at bottom, “Dumb money” and what not. But the last 6 months have been
remarkably different. It’s time the domestic equity investors put their head
high and say “We are the smart money”</div>
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Picture this, FIIs sold stocks worth over Rs 40,000 cr
post demonetization and when during the initial part of this process the Nifty
fell from 8500 to 7900, a bear market loomed large. However, the domestic
investors said nothing doing and they started to buy. Dollar to dollar FII
selling was matched by DII buying and I am not even counting the direct retail
buying.<o:p></o:p></div>
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And now, yesterday FIIs bought 4,000 crores at the
highest level of Indian markets. Now this is not to say, FIIs have been
foolish. They have a choice of investing in various markets and there are many
markets which far outpaced Indian markets so they focused their energy
elsewhere. But while in the past, retail would throw in the towel at huge FII
selling, this time they kept buying treating this as a flash discount sale and
boy are they reaping rewards now?<o:p></o:p></div>
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Make no mistake, market is set to go through a frenzy now
but this is the time to sit back and enjoy while FIIs scramble to buy at
all-time highs. At some point, this market will become euphoric and fall under
its own weight but trust me that time is long long way off right now. <o:p></o:p></div>
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Picture this, over last 2 years when the Nifty has made a
move from 9100 to 7000 and back to 9100, the midcap index has surged 24%. So
retail has made huge money in individual midcaps. And a rising tide will lift
all boats, so the portfolios are set to surge higher even from here.<o:p></o:p></div>
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What if you missed this rally? No problem – wait for dips
and consolidations, they will inevitably come but when they do, have to
participate. There is no fun in watching someone else make all the money. <o:p></o:p></div>
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<span style="color: #333333; font-family: "arial" , sans-serif; font-size: 10pt;">Disclaimer:
The author of this article does not invest/trade in stock markets including
derivatives. His only exposure to stock markets is via the stock options given
to him by his employers as part of his compensation</span><span style="color: #333333; font-family: "arial" , "sans-serif"; font-size: 10.0pt;"><o:p></o:p></span></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com9tag:blogger.com,1999:blog-7599513757632666203.post-91591991673084378632017-03-09T07:45:00.004+05:302017-03-09T07:45:53.178+05:30HOW TO PLAY TODAY?<div dir="ltr" style="text-align: left;" trbidi="on">
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Extremely important day of trade coming up. As I write
this, the SGX Nifty is down about 35 points. The most important cue as we start
trade in first half is the big 5% decline in crude oil but the most important
cue of second half will be the impending exit polls which will be announced post
5:30 pm. The market will give great opportunities today. This is how I think
today can be played.</div>
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In first half, focus all your energy on users of crude
oil – Oil marketing companies, Paint companies and perhaps most importantly
aviation companies which could well go through a goldilocks scenario – tax advantage,
lower oil prices and under-owndership. And with state elections out of the way, OMCs should
swiftly move on petrol and diesel prices and paint cos too have corrected from
highs. So this appears to be the low hanging fruit.<o:p></o:p></div>
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Crucially, in second half – trading psychology will work.
Will shorts want to keep their positions open ahead of a mini binary event? Anecdotally,
exit polls favour BJP and the market will know that. So I won’t be surprised to
see a late surge in trade today, which could continue with a gap up tomorrow
inviting some weak hands and finally a Sell on news in tomorrow’s second half.<o:p></o:p></div>
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These are my thoughts. You should act on what you think
is right!!<o:p></o:p></div>
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<span style="background-color: #fefdfa; color: #333333; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px;">Disclaimer: The author of this article does not invest/trade in stock markets including derivatives. His only exposure to stock markets is via the stock options given to him by his employers as part of his compensation</span></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com6tag:blogger.com,1999:blog-7599513757632666203.post-49623292077208797152017-02-16T19:27:00.003+05:302017-02-16T19:27:22.915+05:30HDFC BANK: THE BIG NEWS FOR TOMORROW’S TRADE<div dir="ltr" style="text-align: left;" trbidi="on">
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This is going to be a short blog post. A very important
trigger for the biggest stock in the Nifty and the Bank Nifty. HDFC Bank is the
highest weighted stock on the Nifty and the Bank Nifty and it’s now out of the
ban list for FIIs. Simply put, tomorrow morning, FIIs can buy HDFC Bank in open
markets. So how crucial is this?</div>
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Well first of all, those FIIs who want to own a piece of
HDFC Bank all this while could still do it. However they could only do it from
their fellow FIIs in a special window and the premium on that is 12%. Even
today, while HDFC Bank closed at 1327 in the normal market - <a href="http://www.bseindia.com/stock-share-price/hdfc-bank-ltd/hdfcbank/500180/">http://www.bseindia.com/stock-share-price/hdfc-bank-ltd/hdfcbank/500180/</a>
, it traded at 1482 in the FII window: <a href="http://www.bseindia.com/stock-share-price/hdfc-bank-ltd/hdfcbank6/600180/">http://www.bseindia.com/stock-share-price/hdfc-bank-ltd/hdfcbank6/600180/</a></div>
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. So that’s the premium which some FIIs are willing to pay
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Now, I am not suggesting that the stock immediately goes up
12% tomorrow but what is interesting is that this window will last for all of 2
days, i.e 17<sup>th</sup> and 20<sup>th</sup> and by then it will be back in
the ban list as there will be enough demand. So it’s literally a case of a
flash sale that lasts for a few hours and you see huge demand.</div>
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By conservative estimates, I expect the stock to rally at
least 5-6% tomorrow. Do the arithmetic on what it could mean for the Nifty and
more importantly the Bank Nifty where it has over 30% weight. </div>
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<span style="background: #FEFDFA; color: #333333;">Disclaimer:
The author of this article does not invest/trade in stock markets including
derivatives. His only exposure to stock markets is via the stock options given
to him by his employers as part of his compensation</span></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com7tag:blogger.com,1999:blog-7599513757632666203.post-88081332354718353312016-12-12T21:16:00.002+05:302016-12-12T21:16:37.326+05:30THE TATA MOTORS DEAL: FIRST OF MANY BY TATA SONS?<div dir="ltr" style="text-align: left;" trbidi="on">
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You have all read the news – some unidentified buyer is
willing to buy 1.73% stake in Tata Motors at up to 10% premium. Sounds wow
right? May be that’s the intention. What I explain here is my gut feeling and I
could be completely wrong, so take this with a truckload of salt. Let’s understand
few things first. My sense is this unknown buyer is Tata Sons and now let’s get
to the deal.</div>
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This 10% premium sounds huge but is actually not much in
terms of meaning because a) This is screen based, so it’s a maximum of 10% and
b) the stock is already down 25% from its highs of 600, so it’s not as if this
is some outlandish price for Tata Motors. So what exactly am I trying to say
here?<o:p></o:p></div>
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While Tata Group is a huge conglomerate, there are only
2-3 really big stocks and TCS and Tata Motors clearly belong to the top. My
sense is that this is 1 step towards the final Tata-Mistry truce where the only
logical solution I see is Mistry selling the 18.4% stake in Tata Sons. Now it’s
in interest of both parties that this 18.4% gets a reasonable value.<o:p></o:p></div>
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So, this exercise in essence is to make sure the sum of
the part valuations of Tata Sons are brought to respectable levels. Curiously,
note how TCS was surging today while the rest of the IT pack was down and TCS is
the company where Tata Sons of course has highest stake. Keep watching this space, it could be first of
a few more deals to come in this space. <o:p></o:p></div>
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P.S. These are my first thoughts and my personal views. I
have not contacted Tata Sons for a response and please ignore the typos and
grammatical mistakes. <o:p></o:p></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com12tag:blogger.com,1999:blog-7599513757632666203.post-89806739277177887312016-09-20T11:30:00.002+05:302016-09-20T11:30:37.664+05:30CASTROL: THE BLOCK DEAL AND BEYOND<div dir="ltr" style="text-align: left;" trbidi="on">
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public knowledge now that the second tranche of promoter stale sale in Castrol
was due. In fact last month, many traders were caught short anticipating the
block deal that never took place and stock saw massive short covering.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">Something
interesting happened again here between yesterday and today. Lot of shorts got
built yesterday anticipating the conventional wisdom of the block getting
executed at a discount. In fact, yesterday there was some 40% jump in Open
Interest and the stock fell 4%<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">Now,
the interesting bit here which a lot of people have forgotten is that Castrol
India has been a massive underperformer over last 2 years. In fact the way
crude has fallen, this stock should have been a multibagger but actually over
last 2 years, it fell some 28% for variety of reasons but the promoter stake
sale was the main overhang.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">So
what happened this morning? The block deal book was launched at a price band of
Rs 408-422. First thing in morning, the entire issue was underwritten by a
single investor. Yes, a single investor was ready to commit Rs 1800 cr in
Castrol. This led to a lot of protest by other investors who all wanted a pie
of the share. After all, this is a global MNC, blue chip and a stock which has
underperformed with potential to rally big and with knowledge that promoters won't sell any more now with stake down to 51%. So finally, merchant bankers had to
drop the deal in the block window since the price in morning itself went much
beyond the band and the demand was too huge. And hence the deal at a premium
and once again shorts getting trapped.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">What
next? Well, looking at the appetite today and given it’s last 2 years of
underperformance, if the stock has hit an inflection point, I won’t be
surprised to see this stock running away to 550-600 and that too if you are
conservative. Of course, this won’t happen tomorrow and the stock is bound to
have periodic correction. But the market is offering you an interesting idea if
you are willing to pay a minor premium over the recent price move!!<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">P.S
– These are my first thoughts immediately after the deal and the feedback I
have got. Please bear with me for typos, grammatical errors etc.<o:p></o:p></span></div>
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<span style="background: #FEFDFA; color: #333333; font-family: "Arial","sans-serif"; font-size: 10.0pt;">Disclaimer: The author of this article does
not invest/trade in stock markets including derivatives. His only exposure to
stock markets is via the stock options given to him by his employers as part of
his compensation</span><o:p></o:p></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com6tag:blogger.com,1999:blog-7599513757632666203.post-86903945935917235782016-06-19T19:07:00.001+05:302016-06-19T21:06:31.545+05:30DON'T FRET OVER REXIT OR EVEN BREXIT, MARKETS ARE FINE!!<div dir="ltr" style="text-align: left;" trbidi="on">
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<b>WHY STOCK MARKETS
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I was in 2 minds about the conclusion of my thoughts on
markets post Rajan till 30 minutes back. That is when I decided to go for a
walk and by the time I was back, I was fairly certain about what I was going to
write. It rained cats and dogs and it still is while I write this. So makes my
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First things first – The only reason anyone should even fret
about Rajan exit was because of its timing. It couldn’t have come at more
uncertain time with market already bracing itself for the Brexit vote and some
renewed uncertainty over the progress of monsoon.</div>
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If this was 2015 second half or first 2 months of 2016 when
the stock market went through a cyclical bear phase, I wouldn’t have ben
surprised by a 300 point Nifty fall. However, things are different now. This is
a market in which smart money is so hungry for bad news (so that it gets an
opportunity to buy cheap) that the first major correction (if any) will be
lapped up by both hands. </div>
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The best example of what I am saying was the market’s
reaction to the changes in P notes regulations, which the market forgot in a
matter of 45 minutes. Last year, the market was making lower highs and lows on
the day of good news. This year, the market is making higher highs and lows on the
day bad news hits it. In stock markets, you don’t argue with the tape. It’s
telling you something</div>
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So what makes me so bullish and comfortable on the state of
markets? Let me go back to the opening para – the rains. The monsoon is THE
MOST IMPORTANT trigger this year for us and if we get a normal monsoon, then
you will find (with benefit of hindsight) that REXIT was a great buying
opportunity.</div>
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<o:p>After-all, RBI as an institution is way bigger than any individual. Yes, Rajan has done a good job in RBI's war on bad assets and crony capitalism but there is no reason to believe that his replacement will do any different. On the other hands, if the new governor leads to even slightly easier monetary policy, the market will get one more catalyst for a rally. </o:p></div>
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Now, the next important trigger this week would be BREXIT. If <st1:country-region w:st="on">Britain</st1:country-region> decided to stay within Euro zone, all
markets are poised for a big rally and <st1:country-region w:st="on">India</st1:country-region> would be part of that. If
however, the dreaded BREXIT does take place, then again I will repeat the same
point. If the monsoon is good, you will find that BREXIT was once in a lifetime
opportunity to accumulate stocks.</div>
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For tomorrow, trade with caution – Buy any significantly big
dips in good stocks and be prepared for a mark to market of 10-15% and don’t be
afraid to buy more if that happens. I don't see this market moving anywhere lower than 7800 in a worst case scenario. The way I see it, if we have a good
monsoon, this market is on course to hit a new all-time high at some point in
Oct-Dec quarter.</div>
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<span style="background-color: #fefdfa; color: #333333; font-family: "arial" , "tahoma" , "helvetica" , "freesans" , sans-serif; font-size: 13px; line-height: 18px;">Disclaimer: The author of this article does not invest/trade in stock markets including derivatives. His only exposure to stock markets is via the stock options given to him by his employers as part of his compensation</span></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com21tag:blogger.com,1999:blog-7599513757632666203.post-89583484842185605902016-06-03T09:12:00.002+05:302016-06-03T09:12:53.240+05:30SOME LESSONS IN LIFE FROM RAAMDEO AGRAWAL<div dir="ltr" style="text-align: left;" trbidi="on">
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<b>SOME LESSONS IN
LIFE FROM RAAMDEO AGRAWAL<o:p></o:p></b></div>
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I have started doing a new series – I go out and talk to
some of the most successful investors but not necessarily about stocks and
markets. I try to present the man (or woman) behind the face you see on
CNBC-TV18. The personal traits, the lessons of life, the likes, the dislikes,
the achievements, the regrets and everything else and then what lessons <o:p></o:p></div>
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So yesterday I went out and shot at the swanky and large
office of Motilal Oswal financial services and spoke to the face of the company
– Raamdeo Agrawal, someone who is one of the proponents of value and growth
investing. These are some interesting takeaways that came out from this
interview<o:p></o:p></div>
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<!--[if !supportLists]-->1)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Work on a solid foundation, rewards will come
later: When asked what has been his biggest achievement, Raamdeo says
completing his CA, even though it took time. He still rates the basic education
as the most important stepping stone for his huge success<o:p></o:p></div>
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<!--[if !supportLists]-->2)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->No excuses: Raamdeo grew up in a village with no
electricity and a very humble background. But that didn’t stop him from
dreaming big and constantly working towards achieving that dream<o:p></o:p></div>
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<!--[if !supportLists]-->3)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Enjoy your riches too and believe in giving:
Raamdeo enjoys his life. He is an avid traveler. There are only 28 countries left
in his bucket list and he will visit them over the next 5-10 years. He also believes
in sharing wealth and does a lot of charity work which satisfies him a lot<o:p></o:p></div>
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<!--[if !supportLists]-->4)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Take care of your employees: The facilities for
employees at Motilal Oswal rival that of some of the biggest MNCs. And they
keep working on improving that. According to Raamdeo, it’s more important to
retain talent than finding good talent and they go all out to make sure their
employees are happy<o:p></o:p></div>
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<!--[if !supportLists]-->5)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Read, read and read: To be a successful investor
or to be successful in general, Raamdeo believes it’s very important to read
good books and treasure your collection of good books. Till this date, he has
all the newsletters of Warren Buffet printed and hard bound and he keeps referring
to them<o:p></o:p></div>
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<!--[if !supportLists]-->6)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->No regrets: If you take a calculated decision
and it goes wrong – so be it. There have been instances where he has sold
stocks right at the point of a start of multi bagger cycle. But then, if he had
taken an educated call to sell the stock, he won’t regret it but won’t mind
buying it higher again if his conviction tells him so. <o:p></o:p></div>
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<!--[if !supportLists]-->7)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Price is last: For Raamdeo, price comes last.
Most important is quality, then growth and finally price. His belief is that if
quality and growth is sustained, price will have no option but to keep going
up. The best example of this is Eicher Motors per Raamdeo.<o:p></o:p></div>
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You can catch the show all through weekend and once the
Youtube edition is available, I will embed it on the blog. It was great
learning and fun<o:p></o:p></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com1tag:blogger.com,1999:blog-7599513757632666203.post-67574179156453507032014-11-22T19:59:00.001+05:302014-11-22T19:59:45.664+05:30KOTAK-ING DEAL: HINT OF UNPLEASANTNESS<div dir="ltr" style="text-align: left;" trbidi="on">
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It’s no secret that Kotak Mahindra Bank has walked away with
a steal with ING Vysya Bank. The stock behaviour on Thursday and Friday was
clearly telling us that the market liked the price at which it managed to get
this really great asset. But the deal has left some unanswered questions and I
dare say if I am an ING Vysya shareholder, I won’t hesitate to say, this even
leaves some stench of not following best corporate governance standards either.
I will explain why</div>
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First and foremost, it’s well known that ING desperately
wanted to cash out of ING Vysya Bank – the parent company’s troubles are well
known. So obviously, there is a hint of duress in this sale. But should that
matter if the owner wants to sell it? – yes it does and here is the primary
reason.</div>
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Take a look at the shareholding pattern of ING Vysya Bank: First of all, the promoters hold only 42.73% stake, not even 50%. Secondly, the total promoter shareholding of 42.73% is further subdivided into two
entities: ING Mauritius Holdings which holds 33.22%
and <span style="background: white;">ING Mauritius Investments which holds 9.51%.
Now take a look at what the regulations say regarding the shareholding and
voting cap for private banks.<o:p></o:p></span></div>
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<span style="background: white;">“Bodies Corporate
under Category A (2) Foreign consists of two wholly owned subsidiaries of ING
Bank N V namely (i) ING Mauritius Investments I (9.51%) and ING Mauritius
Holdings (33.22%). The First body Corporate enjoys full voting rights of 9.51%
. The voting of second body corporate is governed by section 12(2) of the
Banking Regulation Act, 1949 which says that no shareholder holding shares in a
banking company shall, in respect of any shares held by him, exercise voting
rights (on poll) in excess of ten per cent or such percentage as my be
permitted under the prevailing laws as may be amended from time to time of the
total voting rights of all the shareholders of the banking company. At present
the voting rights of any shareholder of the Bank, irrespective of the number of
shares held by him is restricted to 10% . As such voting rights of the second
body corporate is restricted to 10% and thus the aggregate voting rights of
Foreign bodies corporate stand at 19.51%”<o:p></o:p></span></div>
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<span style="background: white;"><o:p>So, there you go - ING may have 42%stake but it has less than 20% voting right. How can it make a decision on it's own?</o:p></span></div>
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<span style="background: white;">The second reason
is up for debate – normally in bank acquisitions, for a healthy bank – the
acquirer values the target at same valuations as itself – case in point being HDFC
Bank’s acquisition of Centurion Bank of <st1:place w:st="on">Punjab</st1:place>
at almost 5 times Book Value whereas Kotak is paying only 2 times the trailing
book value. In this case, there is a big discount of nearly 30-40% for an asset
which is far more complimentary that Centurion was for HDFC Bank. ING Vysya has
553 branches to Kotak’s 661 and has 638 ATMs vs 1156 for Kotak. Even in terms
of income and profit parameters, Kotak is no more than 3x ING Vysya Bank. But the deal has valued Kotak almost 6 times
of ING Vysya Bank. But as I said, this is an issue open for debate.<o:p></o:p></span></div>
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<span style="background: white;">The bottom line –
ING has a voting right of 19.51% in ING Vysya Bank. It cannot make a decision
for 100% shareholders. This deal should have been put to vote first and I can
guarantee you, this deal would have been struck down by shareholders. In fact,
I have spoken off the record to some institutions and they are already
planning to write to the RBI. The 57.37% shareholders classified as minority
shareholders actually control the voting rights and they have every reason to
ask for a better deal. This deal will face major hurdles from minority
shareholders and for good reasons.<o:p></o:p></span></div>
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<span style="background: white;">Disclaimer: These
are my personal views.<o:p></o:p></span></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com2tag:blogger.com,1999:blog-7599513757632666203.post-31063771394245069582014-11-21T10:56:00.000+05:302014-11-21T10:56:01.763+05:30MARKET LOVES KOTAK AND IT SHOWS IN STATS<div dir="ltr" style="text-align: left;" trbidi="on">
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Quick comment: The merger of Kotak and ING would create the fourth
largest private bank behind ICICI Bank, HDFC Bank and Axis Bank. However, the
combined market cap of Kotak and ING Vysya Bank now already equates the third
largest bank Axis Bank – But on all parameters, Axis Bank is nearly double of the
combined entity of Kotak + ING. Is the market justified in this? Well that’s
stock market for you…<o:p></o:p></div>
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<b>PARAMETER KOTAK + ING AXIS BANK<o:p></o:p></b></div>
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Market Cap Rs
1.11 lakh cr Rs 1.1 lakh cr<o:p></o:p></div>
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Branches 1214 2402<o:p></o:p></div>
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ATMs 1794 12,922<o:p></o:p></div>
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Income Rs
13,576 cr Rs 19,356 cr<o:p></o:p></div>
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PAT Rs
3,123 cr Rs 6,218 cr<o:p></o:p></div>
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Assets 2
lakh cr 3.8 lakh cr <o:p></o:p></div>
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Advances 1.2
lakh cr 2.3 lakh cr<o:p></o:p></div>
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Deposits 1.1
lakh cr 2.8 lakh cr<o:p></o:p></div>
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ROE 12.8% 18.2%<o:p></o:p></div>
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Profit per employee Rs
7.8 lakh Rs 15.4 lakh<o:p></o:p></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com0tag:blogger.com,1999:blog-7599513757632666203.post-72586418438852515402014-11-20T17:42:00.000+05:302014-11-20T17:42:16.177+05:30ADANI LOAN: WHY THE FUSS?<div dir="ltr" style="text-align: left;" trbidi="on">
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There is a group of people on twitter including some journalists and editors trying to suggest that Adani managed a loan from SBI because of his "alleged" proximity to prime minister Modi. One such editor, recently tweeted an article saying
“Adani group, already $10 bn in debt, gets $1 bn loan”…Now, one can only laugh at this kind of statement.</div>
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First of all, as clarified to the Bombay Stock Exchange by the Adani group – the loan is not final yet. There is a difference between MOU and
final agreement. Here is what Adani has told exchanges. </div>
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<i><span style="background: white;">Adani Enterprises Ltd replied stating
"The Company has signed Memorandum of Understanding (''MOU") with
State Bank of India ("SBI") wherein SBI has agreed in principle to
consider extending financial assistance of an amount upto USD 1 bn for
development of Carmichael coal mine. <b>This
is, however, subject to SBI's due diligence and internal credit approval and
also pursuant to the definitive understanding/agreement to be executed between
the parties</b>."<o:p></o:p></span></i></div>
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Note the phrase in bold– there will be due diligence by SBI. Raise this issue if they approve the loan without appropriate collateral in
place or without being satisfied by the viability of the project. Anyway that’s a technical issue, so we move on.What exactly is this project and how did Adani manage to
get this? Let’s take a look at a Reuters story just to put things in
perspective</div>
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<i>"This project has
the potential to be the largest coal mine in <st1:country-region w:st="on">Australia</st1:country-region>
and one of the largest in the world," <st1:state w:st="on"><st1:place w:st="on">Queensland</st1:place></st1:state> deputy premier Jeff Seeny said in
a statement.<o:p></o:p></i></div>
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<i>The state's report,
which set 190 conditions for Adani to meet, including compensating landholders
affected by any harm to water supplies, now goes to <st1:country-region w:st="on"><st1:place w:st="on">Australia</st1:place></st1:country-region>'s environment minister
for a final decision.<o:p></o:p></i></div>
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Now this is a $15 bn project, won by Adani fair
and square after meeting 190 conditions set by Australian government and more
importantly, this is not in India. Unless you want to brand the entire
Australian decision making body also a Modi agent, you would want to believe
that there is nothing wrong in winning a contract in <st1:country-region w:st="on">Australia</st1:country-region>. </div>
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Now coming back to the loan for a group which has a long-term debt of
$10 bn – yes, it has – but the group also has a market capitalization of $20
bn!! Ever heard of a concept called the debt/equity ratio? It has a networth of nearly $5 bn. For a power, infra, port conglomerate – this is a reasonably healthy ratio.</div>
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For me, the biggest question is “Has Adani ever defaulted on
any loan”? – The answer is no. </div>
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<span style="background: white;">This is an
absolute non issue. If you want to raise bad loan issues, go chase Mr Vijay
Mallya –whose Kingfisher Airlines kept getting loans from PSU banks under the
tenure of previous governments. <o:p></o:p></span></div>
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<span style="background: white;">Oh and one more
thing, yes Adani group has debt of $10 bn – but 60% of that, or nearly $6 bn is
not even raised in India – it’s overseas debt. Go find out all those Adani
agents in these countries. <o:p></o:p></span></div>
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<span style="background: white;">Disclaimer –
These are my personal views. <o:p></o:p></span></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com0tag:blogger.com,1999:blog-7599513757632666203.post-60645679433587508572014-08-12T07:45:00.003+05:302014-08-12T07:51:55.194+05:30TRADE SETUP - Aug 12, <div dir="ltr" style="text-align: left;" trbidi="on">
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Aug 12, 2014</div>
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Monday was quite a good day for bulls – just for one
reason. The market opened with a gap, no that was not the reason I referred to.
The fact that the market closed at day’s high was actually the best part about
the market. It belied the “Sell on every rally” concern that had arisen after
the last 3 days. But frankly, there were some warnings signs as well</div>
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For starters, FIIs net sold Rs 163 cr in cash markets albeit
on low volumes. The fact that there is reluctance to buy on way down but
propensity to sell at highs should be worrying. The other aspect was the nature
of rally which looked like complete short covering which can only take market
this far. After this, you need strong cash market buying to take markets
higher.</div>
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This morning, global cues look strictly OK. Yes, the wall
street rallied and <st1:place w:st="on">Europe</st1:place> gained but our
markets saw that coming. <st1:place w:st="on">Asia</st1:place> is relatively
muted and that’s the area of concern as is the rally in Dollar index.</div>
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So what next for the markets? Well looks like Nifty is still
in a broad 7450-7850 range and I would be keenly watching out for which way
does the range break. Also, the leadership of the market may have changed from
banking and L&T to individual names like Infosys, Tata Motors, HDFC which
actually may not be bad news if these stocks can keep the bears at bay.</div>
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But, let me reiterate the point I have been making for some
time now. Nifty is fine even if it corrects to 7300 or 7000. It’s the high beta
space that warrants caution currently.<br />
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Stocks to watch:<br />
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Tata Motors should rally 7-10% after blockbuster numbers.<br />
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IRB Infra: Might see big relief rally on clean chit from CBI on RTI activist murder case<br />
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BPCL: Crude has been soft and if currency stabilises this may rally<br />
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Ashok Leyland: Any rub off impact due to strong domestic numbers from Tamo as well<br />
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GAIL: Possible short covering after yesterday's slam dunk.</div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com0tag:blogger.com,1999:blog-7599513757632666203.post-44847695910697850932014-06-12T22:08:00.000+05:302014-06-12T22:08:32.007+05:30WHAT’S DRIVING TATA MOTORS DVR?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #222222; mso-bidi-font-weight: bold;">I have been pointing out for last one month about
Tata Motors DVR. It’s been outperforming almost on a daily basis. In fact, just
take a look at these stunning numbers<o:p></o:p></span></div>
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<span style="color: #222222; mso-bidi-font-weight: bold;">This year, the Tata Motors DVR is up 55% while the
stock is up a relatively sedate 20%. Even this month, the DVR has rallied
nearly 18% vs 8% for the normal stock. Now keep in mind, both these stocks are
available in derivatives and hence any pair trade would give you much more
outperformance than this 55%:20% due to the leverage factor.<o:p></o:p></span></div>
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<span style="color: #222222;">And
what’s the result of this outperformance? Well, when the DVR was launched, it
had a discount of 10%. Over the period, the discount kept widening and in fact
reached 55-60%. Now with this outperformance of DVR, the discount is down to
32%. Can this trim further and what is the reason that DVR has caught market’s
fancy?<o:p></o:p></span></div>
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<span style="color: #222222;">The
trigger perhaps was a bit global in nature. Google’s DVR trades at par with the
stock and others like Viacom trade at maximum 5-10% discount. But more importantly,
when Google announced a share split and that resulted in Google DVR, the
S&P had to do something unprecedented. It had to include both Google (GOOG)
and Google DVR (GOOGL) on the benchmark index to fully capture Google’s market
cap. So S&P 500 now has 501 stocks but is still called S&P 500.<o:p></o:p></span></div>
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<span style="color: #222222;">Now can
the same logic be applied in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:place></st1:country-region>?
Picture this – Tata Motors has free float market cap of Rs 85,000 cr and the
DVR has free float market cap of Rs 15,000 cr. Now Rs 15,000 cr is not big
enough to make it to the index but what if it reaches over Rs 20,000 cr? That’s
a question worth asking. I would still say the chances of Tata Motors DVR being
part of index is very low but then you never know in this market.<o:p></o:p></span></div>
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<span style="color: #222222; mso-bidi-font-weight: bold;">But
let me add a word of caution here: While logic says the discount should narrow
further, you must not lose sight of the fact that its vulnerable to any market
correction because of its outperformance. But all things being equal, it won’t
surprise me if the discount trims further to around 15-20%<o:p></o:p></span></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com1tag:blogger.com,1999:blog-7599513757632666203.post-56111724156577849772014-01-15T12:41:00.003+05:302014-01-15T12:41:47.237+05:30COAL INDIA: I HOPE SOMEONE IS WATCHING<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Verdana; font-size: x-small;"><span style="font-size: 11pt;"><br /></span></span></div>
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<span style="font-family: Verdana; font-size: x-small;"><span style="font-size: 11pt;">Coal
<st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> futures are outperforming the
stock by 4% and today is not even ex-date. So what really happened here?
<o:p></o:p></span></span></div>
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<span style="font-family: Verdana; font-size: x-small;"><span style="font-size: 11pt;">The
essence of the situation lies in the special situation rule that exchanges have
in treating futures and options contract. Normally the stock is adjusted for
dividend in cash market but the same adjustment is not carried out in futures
and hence, in earnings season, some of the index stocks tend to go into discount
as they factor in the dividend impact. However, if the dividend is more than 10%
of the market price, this falls into special category and even the futures
prices are adjusted to reflect that.<o:p></o:p></span></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana; font-size: x-small;"><span style="font-size: 11pt;">What
this means in simple terms is that come the ex-date, Coal India future price
will also be deducted by 29 Rupees to arrive at previous day’s price. If you
shorted Coal <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> and hence on ex-date you see
the price lower by 29 Rupees, don’t cheer it – you are not getting this money.
<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana; font-size: x-small;"><span style="font-size: 11pt;">The
case of Coal <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> was curious. By late afternoon
the gap between spot and futures was over 20 points but by the time the trade
wound up the discount had narrowed to 12 points. So clearly, there was some big
buying in Coal <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> futures before the markets
closed yesterday. Were some of these market participants sure of an over 10%
dividend?<span style="color: navy;"> And if you had bought the
future yesterday, you would be sitting on a gain of nearly 40-50% on your margin
money given the big move in future. </span><o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Verdana; font-size: x-small;"><span style="font-size: 11pt;">What
makes it even more interesting is the dividend component. A dividend of Rs 29 is
10.03% of the market price of Coal <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place>. Even 10 paise lower and the
dividend would have been less than 10% and miraculously, the discount would have
widened again today to nearly 28 Rupees instead of converging with future
price.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
</div>
<div class="MsoNormal">
<span style="font-family: Verdana; font-size: x-small;"><span style="font-size: 11pt;">So
really, should a 10% move on future price be dependent on a differential of
10-50 paise in dividend? And what would have been the reaction if this was a
private company? These are some important questions. May be time has come for
the exchange to do away with this special situation rule being applied only if
the dividend exceeds a certain percentage. Let them do it for all dividends. It
will take away some fun on stock futures trading but it will make the process a
lot more transparent. <o:p></o:p></span></span></div>
</div>
Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com4tag:blogger.com,1999:blog-7599513757632666203.post-67933404943593492462013-10-23T10:21:00.001+05:302013-10-23T10:21:14.878+05:30SINTEX –WHO IS REALLY BUYING?<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
Sintex stock is up 72% this month and what is truly amazing
is that the stock has started to rally right after 30<sup>th</sup> September,
which is end of the quarter. So what exactly happened in Q2 and what has
happened since?</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
I am just looking at the recent shareholding pattern
changes. In quarter ending September 30<sup>th</sup>, FIIs hold 3.7 crore
shares or 11.82% of equity, which is remarkably lower than 7.8 crore shares or
24.8% of equity they held at the end of June quarter. And what really amazes me
is that this was not bought by either mutual funds or other domestic financial
institutions whose total shareholding is almost flat between quarters. And the
promoter shareholding didn’t change as well – so who really bought?</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The non-promoter, non-institution shareholding is up sharply
to over 40% vs little over 27%. In fact individuals now own 8.3 crore shares vs
5.5 crore shares. But what is really perplexing is the category called “Bodies
corporate” – Their shareholding is up to 4 crore shares vs 2.8 crore shares.
That’s a jump from 8.9% to 12.9%. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Who are these corporate bodies and individuals? None of them
holds over 1% stake and hence it’s not shown in the breakup of shareholding
pattern, but if the grapevine is to be believed, we have seen a lot of
smart/informed buying by certain blue blooded investors (Also, this at times has been disguised promoter buying but we cannot infer that in every case)</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
By the way, promoters also bought 25 lakh shares between
October 17 and 18 and they made a proper disclosure to that effect. From those
levels, the stock is up 50%!!!</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now Q2 numbers looked good for Sintex, but the balance sheet
is still in a mess. In fact from the same shareholding pattern, you see Bank Of
Newyork holding 10.2 cr shares as a trustee for $140 m FCCB due in 2017. Now
10.2 crore shares are worth 350 crores and $140 m FCCB amount to Rs 870 crores.
So there is still a lot of risk that this company is carrying.</div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
What to do now with the stock? Well, if you managed to get
in early, there is no harm in booking say 35-40% of your holding which might
cover your entire costs and make some money as well and ride the rest with a
strict trailing stop loss. But if you have missed the bus, wait for the next
bus – don’t try to catch this one.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Note: This article was first published on moneycontrol.com</div>
<div class="MsoNormal">
<br /></div>
</div>
Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com1tag:blogger.com,1999:blog-7599513757632666203.post-14087359214316498272013-10-22T09:09:00.002+05:302013-10-22T09:24:35.432+05:30ASIAN PAINTS - HOW EVERYONE GOT IT WRONG<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
<div class="MsoNormal">
<b>ASIAN PAINTS - HOW EVERYONE GOT IT WRONG <o:p></o:p></b></div>
<div class="MsoNormal">
I love how people can be in
denial despite their call going horribly wrong. One of the leading brokerages
downgraded Asian Paints on October 14, cutting the target from Rs 505 to Rs
405, and since the brokerage is a real blue blooded one, the stock fell from Rs
485 to Rs 470 – the analyst must have felt a million dollars, but wait, within
3 days, the stock is back to 485 and on 5<sup>th</sup> day, the stock hits a
lifetime high of 530 Rupees after spectacular number. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The brokerage also had a research
tactical idea of the stock underperforming which was closed today. All they say
in closing the note is this – “This Research
Tactical Idea is closed because the stock price has moved contrary to our
expectations. Effective immediately, the Tactical Idea published on Asian
Paints (ASPN.NS) on October 14, 2013 has been discontinued and should no longer
be relied upon”<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now
my problem is not that an analyst call has gone wrong. My problem is the
resistance the analyst community has to eat their words and admitting that they
got it wrong. I have seen 5 brokerage reports this morning and none of them has
a buy on the stock, It’s a consensus Sell/Underperform/Underweight.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
To
all these analysts – I have just a one line response– the stock is up 8% this
week, 13% this month and 20% this year. Oh, and the stock is up over 100% since
the start of 2012. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now
of course, the key is what to do with this stock going forward. At 30-35x on
eyear forward earnings, this is one of the most expensive stocks. But then,
when has that stopped a stock from moving higher? If that was the case,
Jubilant Foodworks would have never had the rally it had – HUL would have
topped out at 450 or 500. Why are investors willing to pay this kind of
premium?</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The
answer lies in the factor that we sometimes ignore; the growth factor. The
company has seen double digit volume growth in a seasonally weak quarter. Over
the last many years, the company has grown its topline and bottomline in double
digits and the stock has been one of the most consistent performers over a 20
year period. In fact if you were to just take FY16 into account, the stock would
be available at around 25x earnings, still expensive but then at least you have
visibility and certainty of earnings.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Bottomline,
the stock may well correct 10% if the market gets into further risk on mood and
we see a shift from defensives to high beta. But as of now there is no evidence
to believe that the stock will change its texture of being a consistent long
term outperformer</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
<br /></div>
</div>
</div>
Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com0tag:blogger.com,1999:blog-7599513757632666203.post-43874965598088854662013-09-26T11:32:00.002+05:302013-09-26T11:32:50.378+05:30WHAT IS THE STREET PRICING IN FOR ONGC?<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
The ONGC stock has been in focus all through this year. In
fact this is the only PSU oil stock worth any significant weight on the index.
It’s a pity that this stock has been suffering from whims and fancies of Government
in an election year.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Let’s just take a look at what is going on. <st1:country-region w:st="on">India</st1:country-region>’s FY13
oil subsidy burden was Rs 1.6 lakh crores. The Government paid Rs 1 lakh crores
out of that and made upstream companies pay the balance Rs 60,000 cr. This
roughly works out to 62% for Govt and 38% for upstream, which has been stable
for 2-3 years. Out of this, of course ONGC paid the lion’s share of over 80%.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
FY14 started on a great note. Global crude price started to
soften and the government introduced a monthly price hike of 50 paise per litre
on diesel. The combined effect was a projection of only Rs 80,000 crore as
under-recovery for FY14 – a straight cut of 50%. However, just when things
looked sanguine, came the unknown devil of sharp Rupee depreciation. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A sharp depreciation from Rs 55/$ to around Rs 65/$, along
with 10-15% surge in crude prices from lows meant that the under-recovery
projection is now back to Rs 1.6 lakh crores. If the Govt bites the bullet and
hikes diesel prices by Rs 5/l in one go, this can come down to Rs 1.25 lakh
croes, however that diesel price hike is now looking a distant reality.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So where does ONGC stand amidst all this drama? As I wrote,
when the year started with an under-recovery projection of Rs 80,000 crores,
the street applied the formula of 38% and assumed that the upstream
contribution will be down to Rs 30,000 crores. However, it missed the risk that
the Government will want to take the benefit of its move on diesel and fall in
crude prices. Slowly but surely, street began to realize that there is a risk
of upstream still ending up paying Rs 60,000 cr as the ‘worst case scenario’.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, now even this Rs 60,000 cr burden actually looks
‘best case scenario’ for upstream instead of being ‘worst case scenario’. There
is a good chance that the Government makes upstream pay more than they did last
year citing the fact that upstream gains significantly due to Rupee
depreciation and at some stage needs to pass on some benefit to the Government.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The ONGC stock was comfortable above 300 when FY14 started,
even hitting a high of 355 – but since then it’s been a downward journey and we
have seen a correction of 22% from the highs. To be fair the stock is still YTD
positive and that’s because the street believes that while there may be near-term
concerns, the sheer value in stock may start to reflect once elections are out
of way.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="background: #FEFDFA; color: #333333;">Disclaimer:
The author of this article does not invest/trade in stock markets including
derivatives. His only exposure to stock markets is via the stock options given
to him by his employers as part of his compensation. All views expressed in
this blog are my personal views and my channel does not subscribe to the same<o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<br /></div>
</div>
Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com0tag:blogger.com,1999:blog-7599513757632666203.post-18458662639686957552013-08-23T09:01:00.002+05:302013-08-23T09:01:23.791+05:30BULLS BEWARE, BEARS HAVE THE KNIVES OUT<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
Thursday should reaffirm the extent of the bear market <st1:country-region w:st="on">India</st1:country-region> is going
through. I know a lot of people would think I looked at some other screen since
the Sensex was up 400 points and the Nifty rallied 100 points. But to me the
internals matter – and the internal that stood out yesterday was FIIs selling
Rs 1278 cr in cash markets. This is more selling than they have done on really
bad days. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
I raised this point yesterday during my show on CNBC-TV18,
before this data was out – if you are a bull you don’t want to see FII net sell
figure on a day like yesterday, and that’s precisely what happened. So
essentially, in a shallow market, the FIIs are now selling on any good day, and
yesterday was as good a day as any with so many large caps rising 4-5% or more
in certain cases.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Refer to my last post where I spoke of the market mayhem and
raised the possibility of FIIs selling in the last remaining safe bastions.
That’s starting to happen – so far FIIs have been protected with their
investments in IT, Pharma and to a certain degree some FMCG names, but the
currency is fast eating whatever limited gains they have made. And this is in a
relative world, where the <st1:country-region w:st="on">US</st1:country-region>
markets are trading pretty close to all time highs and investors have options
to park their money somewhere else.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now, next week assumes extreme significance. The bears are
in firm control and they have so much ammunition at their hand that any rallies
like yesterday would give them fodder to feed on, in this case bull’s meat to
feed on. Also, look at the options data in non conventional way – the way deep
out of money August Puts have added Open Interest, yesterday clearly looks like
another bear trap.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
I know the market is deeply oversold and almost everyone is
bearish and normally that’s the signal of the bottom. But the last stage of
bottom formation is always the most painful and results in most wealth erosion
for bulls. That may just be around the corner.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="background: #FEFDFA; color: #333333;">Disclaimer:
The author of this article does not invest/trade in stock markets including
derivatives. His only exposure to stock markets is via the stock options given
to him by his employers as part of his compensation. All views expressed in
this blog are my personal views and my channel does not subscribe to the same.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
<br /></div>
</div>
Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com0tag:blogger.com,1999:blog-7599513757632666203.post-40144970142705104212013-08-19T14:23:00.001+05:302013-08-19T14:23:45.826+05:30MAKING SENSE OF MARKET MAYHEM<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
So finally the market is capitulating. But what really is
happening out there? Who is selling and what should the market be weary of?</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The internal that would worry me the most is that FIIs have
actually invested $12.7 bn in cash markets this year. And the Nifty is down 8%
despite that. In fact the Dollar Nifty is down 16% year to date. Where exactly
has this money gone and what happens if even 10% of this money has to go out?</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Well let’s look at the Nifty internals. You would be amazed
that only 8 Nifty stocks are in the green this year, but those who are have
actually been money spinners. For example, at number 8 is ITC with 9% gains,
HUL is up 12%, Dr Reddy’s 17%, Lupin 28%, Infosys 30%, Sun Pharma and TCS are
up 40% and the biggest of them, HCL Tech is up over 50%</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
On the other end of spectrum, the 42 Nifty stocks that have
fallen – 33 of them have fallen more than 10% - within that 15 have actually
fallen over 30%, 7 over 40%, 2 over 50% and a poor soul by the name of JP Associates
nearly 70%. And I am not going into the Nifty Junior and midcaps because you
know what’s coming there.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So with some of the
erstwhile FII favourites likes SBI, BoB, L&T, ICICI Bank decimated, the key
concern should now be what happens to the likes of IT stocks and the pharma
stocks. And if that has to happen, will it finally lead to an FII exodus. Keep
in mind, even if this market was flat, an FII would have seen 8% erosion purely
because of currency.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The other angle
that’s scaring me is the absolute low levels of cash market volumes and hence
the depth of the market. 96% turnover is being generated in the derivative
market with lion’s shares coming out of Index options, which has become a
gambler’s den. Even if someone has to sell $10 m of stocks, that would lead to
big price damage. Factor this, on Friday, FIIs sold less than $100 m in cash
markets, DIIs more than bought that and still the Sensex ended with near 800
point collapse.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
And while the
consensus is that this market is only headed down, that has been the consensus
for some time now. And when a consensus trade is so right, sometimes the
bravado of approaching the market with contra views an be painful, unless of
course you have deep pockets and a really long term view. Somehow the internals
of the market and most importantly the ticker is telling us that there is more
to come.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
<span style="background: #FEFDFA; color: #333333;">Disclaimer:
The author of this article does not invest/trade in stock markets including
derivatives. His only exposure to stock markets is via the stock options given
to him by his employers as part of his compensation. All views expressed in
this blog are my personal views and my channel does not subscribe to the same.</span></div>
</div>
Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com2tag:blogger.com,1999:blog-7599513757632666203.post-33476355350712150952013-07-15T09:49:00.000+05:302013-07-15T09:49:08.776+05:30WANT TO BE A GOOD TRADER ALONG WITH INVESTOR? LEARN FROM LIC<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
Intriguing headline right? LIC, the biggest institutional
investor of Indian equities a savvy trader? Well that ladies and gentlemen is
the fact and the institution has proved it so right with the biggest of blue
chips – Infosys and this despite remaining essentially a large long-term
shareholder. So what am I saying?</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Let’s take a look at LIC’s investments in Infosys over the
last 3 quarters and try to see what it is up to. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
At the end of December 2012 quarter, LIC held 4.16 cr shares
of Infosys representing 7.2% stake. By the end of March quarter, this was down
to 3.42 cr shares representing 5.96% stake and in the just released June-ending
quarter, its gone back up to 3.86 cr shares representing 6.72% stake. What’s
the big deal you would ask?</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The big deal is that by cutting its stake LIC part protected
itself from that ill fated 22% fall Infosys had after Q4 results and by buying
after that fall, it managed to participate in the rally that followed,
especially the 10% thumbs up stock got after Q1 results. Let’s try to put some
numbers here.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
LIC sold 74 lakh shares between December to March. Stock
moved between Rs 2700-2900 during that period– so let’s assume an average price
of Rs 2,800 for that period. After Q4 numbers, stock collapsed to Rs 2,300. And
with an average price of Rs 2,200-2,400 for the quarter, let’s take the average
price of Rs 2,300 for the quarter in which LIC bought 44 lakh shares. And now
of course, the stock is back to Rs 2,800</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So just for those 44 lakh shares, LIC managed to sell at
highs and buy at lows with a difference of Rs 500/share – that translates into
Rs 220 cr of trading profit. Keep in mind LIC is a long term shareholder and
would have paid no tax on the shares it sold and the shares it acquired last
quarter for sure will again be held for long time.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Of course, LIC had its own compulsions last quarter as I had
written <a href="http://themarketinternals.blogspot.in/2013/04/is-lic-being-forced-to-sell-bluechips.html">here</a>
– it had to raise money for the plethora of PSU paper that hit the market, but
let’s give credit where it’s due. It managed to play a counter consensus trade
successfully for 2 straight quarters. And that’s the whole premise – even if
you hold a share with a very long term horizon, sometimes a minor churn or
tweaking in portfolios isn’t a bad idea</div>
<div class="MsoNormal">
<br /></div>
</div>
Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com0tag:blogger.com,1999:blog-7599513757632666203.post-36011878410430555872013-06-20T11:57:00.000+05:302013-06-20T11:57:38.657+05:30WHAT EXACTLY DO MARKETS THINK OF BEN BERNANKE?<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
This will be a short note as this is what’s there on top of
my mind.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So markets are selling off because the fed chairman believes
the <st1:country-region w:st="on">US</st1:country-region>
economy is recovering and hence by next year would not require the injection of
liquidity. But the markets are sulking – and are throwing fresh tantrums like a
kindergarten kid would if a toy has been taken away.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So what exactly do these financial markets players want?
They just want easy money at near zero interest rates, so that they can play
with these dollars in various markets with a knowledge that if they lose this
money, the big daddy will give more – and if they make gains out of that, they
will sound and look intelligent and take away fat bonuses, while a normal
labourer/cobbler/driver fights inflation and works his normal 14-hour shift
daily to earn his family a meal.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Make no mistake, the financial markets all around the world
are in a mess. Gone are the days where fund managers would require hours and
days and months of hard work to arrive at individual stocks that will generate
alpha – Right now everyone from an FII to an insurance company to a mutual fund
is a trader who can’t look beyond the next 3 months (with some exceptions of
course). </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The whole world had been watching for how the <st1:country-region w:st="on">US</st1:country-region> bond yields
had been moving. The <st1:place w:st="on">US</st1:place>
bond market is the savviest market of all asset classes. This market was for
long telling us that Bernanke’s dollar printing has run its course. The market
should have prepared for this event. What the bond markets had also been
telling us is that we need real economy growth and not just dollar supply for
markets to rally. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now what about <st1:country-region w:st="on">India</st1:country-region>? The Indian authorities are
in absolute denial mode. It’s worse than an ostrich who drags its head into
sand hoping the hunter hasn’t seen it (which by the way is a myth, ostriches don't do that). Last week, they approved hiking FII
limit in Government securities (In a week when FIIs sold over $3 bn Indian Govt
bonds) and yesterday they announced conducting an auction for G Secs. I mean, I
really want to know what kind of drugs are some of them consuming.</div>
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Now while twitterati and BBM groups have been swamped with
jokes on how India is back into the 1990s, yesterday a very respected economist
raised a big red flag saying India is actually back into the 70s low growth,
low employment rut. </div>
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The growth is sub 5%, currency is almost 60, we are
producing millions of engineers and MBAs every year with no real jobs and there
is very low likelihood of the economy bottoming out. Worse still, going by the
recent cabinet expansion, it doesn’t look like economy is anywhere on top of
Govt’s agenda. </div>
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There is a saying that dawn is closest when its darkest,
unfortunately there is no way of knowing, how much darker can the night get in <st1:country-region w:st="on">India</st1:country-region> right
now.</div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com0tag:blogger.com,1999:blog-7599513757632666203.post-42196214275853069472013-04-30T12:59:00.001+05:302013-04-30T12:59:38.908+05:30HUL OFFER IS A WATERSHED MOMENT, DON'T TALK VALUATIONS HERE<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial; font-size: 10pt;">The
voluntary open offer from Unilever for shareholders of Hindustan Unilever is
easily the most significant development for Indian market. Make no mistake, its
way bigger than a petrol price decontrol, or allowing FDI in retail or anything
where you may have heard lot more noise. What we should not do at this moment
is to belittle this deal by talking about valuations, acceptance ratios and
punting on what it means for other cash rich MNCs and their Indian arms.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10pt;">Just
think about it, Unilever is willing to put $5.4 bn cash to work, just to
increase their stake in Indian arm to 75% and be rest assured, they won’t get
all they want at Rs 600/share and they may at some point make a higher offer
which we cannot speculate at this point. (By the way, the promoters of Saint
Gobain and Fresenius Kabi should note this development and not dither over what
is loose change) <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10pt;">What
should an investor of HUL do? While the HUL stock is at life
time high, this does not take away the fact that the stock would still rank as
an underperformer if you invested in the stock 10 years back.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10pt;">You
will be amazed to know that despite all its massive outperformance in the last
3 years, only 3 index stocks have underperformed HUL over the last 10 years. While
HUL is up 190% in last 10 years, only Hindalco, Reliance Infra and Ranbaxy have
given lower returns if you take data from February 2003, which is when the
great Indian bull market actually started.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10pt;">During
these 10 years, Sesa Goa has become 82 fold, Lupin 47 fold, Kotak Mahindra Bank
a 40 bagger, and Axis Bank a 30 bagger. Ok, let’s agree that some of them have
not been the part of index for 10 years and have only been added after
significant outperformance. So look at peers, who have been in index for long. M&M
is a 30 bagger, L&T a 15 bagger, Tata Motors 8 bagger and even the closest
competitor ITC has been a 14 bagger. Of course all these stocks have had their
triggers over last 10 years in terms of economy and individual company issues. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10pt;">Unilever
clearly is not doing this for charity, nor is it doing this because it thinks
it owes it to shareholders. No way, it is doing that because it is betting on
the much larger theme, which is the Indian consumption story. And while we may
keep debating how expensive stocks look in the consumption basket, as the past
bull market has shown, the market can make absolute mockery of near term
valuations when it gets in the mood to reward a particular sector or a stock.<o:p></o:p></span></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com1tag:blogger.com,1999:blog-7599513757632666203.post-2427981339114392952013-04-26T10:19:00.000+05:302013-04-26T10:19:24.050+05:30ANOTHER MNC DELISTING GONE SOUR<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial; font-size: 10pt;">Are these
MNC promoters coming out with a clear message? Give us your shares at our
price, else we will short change you, and not even give you the current market
price and the Indian merchant bankers will help us short change the Indian
shareholders?</span></div>
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<span style="font-family: Arial; font-size: 10.0pt;">Since I got
a lot of feedback on Fresenius Kabi, here comes the next important issue on the
radar. Just look at how the minority shareholders of Saint Gobain Sekurit are
being treated. Again, all of this is done within the letter of the law, but the
spirit is nowhere to be followed.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10.0pt;">Just a
backgrounder – In 2012, the promoters of Saint Gobain Sekurit came out with a
delisting offer and indicated a price of Rs 31/share as acceptable to them. The
discovered price, to their horror was Rs 90/share and even at that price, not
enough investors tendered and hence the company rejected the delisting. Of course, even the shareholders got greedy and may be Rs 90/share was not the right price for Saint Gobain but what they are getting now is clearly not the right value. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10.0pt;">Now look at
what's happening. The same promoters have another company called Grindwell
Norton (which is much bigger in size) and now they are merging the 2 companies.
But the merger ratio leaves so much to be desired.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10.0pt;">A simple
stock price related swap would have meant 1 share of Grindwell for every 11
shares of Saint Gobain. Even in terms of sales, Grindwell is 9 times bigger
than Saint Gobain. And in terms of market cap, Grindwell is 7 times Sanit
Gobain. But look at the merger ratio – 17 shares of Saint Gobain are needed for
a small mercy of 1 share of Grindwell Norton.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10.0pt;">Simply put,
if you have shares worth Rs 380 of Saint Gobain, you will get a share of
Grindwell worth Rs 255. That’s a loss of 33%, technically the share of Saint
Gobain is now worth Rs 15/share. It’s the same company, where the promoters
were happy to delist at Rs 31/share.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10.0pt;">And more
importantly it does not end here. The merger process also involves merging 2
unlisted companies with Grindwell Norton and you don’t need knowledge of rocket
science to know that these 2 companies should be promoter entities and look at
the merger ratios here<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10.0pt;">For every 1
share of unlisted Saint Gobain Crystals, you get 2 shares of Grindwell Norton
and for every 1 share of unlisted SEPR, you get 2.6 shares of Grindwell Norton.
So technically, the assets of Grindwell Norton are being distributed among the
shareholders of unlisted companies while the minority shareholders of the
listed entity are being given the loose change. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10.0pt;">In the
listed Sanit Gobain Sekurit, the MNC promoters own 86% stake with no
institution holding and the balance 14% stake is with small shareholders. In
Grindwell Norton, promoters own 58%, has large institutional holding with both
domestic mutual funds and FIIs listed as shareholders.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 10.0pt;">Do the
promoters of Saint Gobain Sekurit have absolutely zero regard for the minority
14% shareholders of the company? It’s a 200 crore market cap company so 14%
represents a princely sum of Rs 28 crore. Why can’t they be fair to these small
investors? Or is this the new way of MNC promoters bullying small shareholders
and telling them – it’s either our way or highway.<o:p></o:p></span></div>
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com5tag:blogger.com,1999:blog-7599513757632666203.post-61196404863544154582013-04-17T11:56:00.003+05:302013-04-17T11:56:55.658+05:30IS SEBI WATCHING THIS DAYLIGHT ROBBERY?<div dir="ltr" style="text-align: left;" trbidi="on">
Fresenius Kabi! Rings a bell? It should, it was the first company that burst the bubble of MNC delisting hope story by opting for an offer for sale to reduce promoter stake. Basically, according to SEBI guidelines, promoters need to either cut stake to below 75% or delist the company. Fresenius Kabi had 90% promoter stake and was on top of the list of punters taking bets on top dollar delisting price.<br />
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Now take a look at the set of events. The stock first doubled from 85 in December 2011 to Rs 170 by April 2012 on hopes of deslisting. Then, the promoters opted for an OFS instead of delisting and the stock fell to Rs 80. The OFS took place at Rs 80 but what was interesting was that a large chunk of OFS was subscribed by 4 merchant bankers. RBS Merchant Bank subscribed 30.5 lakh shares, Macquarie bank 29.65 lakh shares, Morgan Stanley 25 lakh and Nomura another 23 lakh for a total of 1.08 crore shares. <br />
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Now this is not illegal, and at no point am I accusing any of the entities here but look at what the company is doing now. Its come out with a voluntary delisting offer with a floor price of Rs 130/share. I am not in the business of predicting these developments but if all these merchant bankers do tender at 130/share, that will go a long way in the company being delisted. Remember, with the current float of 19%, the company now only needs 9.5% stake to delist and keep in mind, it did an OFS of 9% to cut stake from 90% to 81%. Do the math here. Its far easier for company to accumulate 9.5% after having given 9% stake in an OFS to select entities than it was to garner 5% when the public float was 10%. And I won't be surprised if all those who were allotted shares in OFS actually do tender in delisting offer.<br />
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This stock was seen as undervalued at 180/share when delisting buzz was alive. Just imagine, what a daylight robbery it would be if indeed the promoters manage to delist the company at Rs 130/share. Is there anyone looking at the plight of minority shareholders? This is all being done within the law, but sometimes spirit of the law is ignored in just following the letter of the law.<br />
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My other fear is that once this delisting is through, this will provide perfect precedence to some other promoters on how to delist the company at throwaway prices.<br />
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Anuj Singhalhttp://www.blogger.com/profile/12304482119337906742noreply@blogger.com5