I’ve been asked to Value newly listed Emami Infrastructure Ltd (EIL) after it’s Price Acrobatics displayed on the first day of Listing,on Wednesday last week!  

I needed a ‘Saridon’ at the end of the Interesting and quite revealing Valuation exercise !…there should be a law against the number of companies that a Real Estate Player opens in the Group !…you will understand once you go through this blog

Emami Infrastructure Ltd listed on Wednesday,July 28,2010 and Price swings were crazy…opening at Rs 250 on NSE and then touching  heights of Rs 598.80 and lows of Rs 86 and closing at Rs 104.8…closed lower at Rs 101 on BSE…and today it’s Rs 91

On the first day of Listing,there are no Circuit Breakers…so price mischief through volatile swings is easily facilitated…seems Emami Infrastructure too is a prey to this Game…SEBI is planning to investigate Listing Day swings…also have a look at the Bulk deals on that day on BSE (source bse website)

BULK DEALS ON BSE ON THE FIRST DAY OF LISTING OF EMAMI INFRASTRUCTURE LTD

Scrip Code:533218   Date : Wednesday ,July 28,2010

Except for one,all have squared off at marginal profits…the only genuine sale is by an FII, T Rowe…they were in the Top Ten Shareholders list at the time of the Scheme of Arrangement…..clearly these are synchronised bulk trades to create volumes on the bourse…they do not serve the purpose of efficient price discovery,or genuine,credible and authentic trading……it’s a rampant misuse of the Bulk Trade Window….but why does this misuse continue !?……no prizes for guessing !….a lot of people,part of a nexus, should be brought to book for destroying the sanctity of our markets

Let’s turn to the Valuation of Emami Infrastructure Ltd….but before I do that,let’s revist how Emami took over Zandu in 2008  

An Ambitious Emami Group wins a Hostile Bid for Zandu

Remember how in 2008 for Rs 700 crs the Agarwals of Emami Group took over Zandu Pharmaceuticals from the Parikhs (no relations of mine!) in a hostile takeover battle…with more than a little help from the Anand Rathi Group…a lot of Coincidences here that surround the Birla Group….Emami Promoters are ex Birla Group Managers from the 1970s…Anand Rathi too headed the Finance Function in a leading Birla Company….Birla Financial Companies were aggressively buying Zandu in 2007/8 before the takeover bid….A Zandu share of FV Rs 100  was available below Rs 1000….the hostile takeover took it to Rs 20000 !…Friday,Zandu share was quoted at Rs 3100…..but effectively yet near Rs 16000 as a Zandu Shareholder was given 14 free shares of flagship, Emami Ltd of FV Rs 2 for every one share of FV Rs 100 held in Zandu under the Scheme of Arrangement of 2009..last week Emami split the FV from Rs 2 to Rs 1 and is quoted now at Rs 457 for a FV Rs 1 Share 

So what’s this great Scheme of Arrangement ? and what led to it ?

The answer lies in Zandu Pharmaceuticals…… it is headquartered in Dadar,a prime area in midtown Mumbai…it has 2.4 acres here…..Today’s papers report that a 2.39 acre property of NTC’s Poddar Mills at Worli Naka,also midtown Mumbai, was sold for a whopping Rs 474 crs in a winning e-bid by Indiabulls Real Estate,one of the eight bidders against a reserve price of Rs 250 crs…Zandu’s market cap today with share price at Rs 3100 levels is Rs 250 crs…it has 806400 shares of FV Rs 100 outstanding and records as of March 31,2010 show that the Emami Group holds 286329 shares or 35.51% of Zandu through just one company, Emami Rainbow Niketan Pvt Ltd….down from the 587055 shares or 72.80 % held by it through group six group companies at September 30,2009

This brings to the fore my first curiousity …. why has Emami reduced it’s holdings from 72.80 % to 35.51 % in Zandu Realty Ltd ? …Oh Yes,Zandu Pharmaceuticals ,after demergering the FMCG Business to Emami,has been renamed Zandu Realty Ltd……or has Emami merely sold partial stake to known people not forming part of Promoter or Promoter Group ?  

In 2009,Emami,probably working on it’s Zandu takeover gameplan, decided to demerge it’s Realty Business from it’s FMCG Business….even for Zandu

A scheme of Arrangement was arrived at with even help from a Big Four Firm,E & Y….in fact interestingly Emami Infrastructure Ltd boasts of just a 26 year old as one of it’s Directors…his address,interestingly also happens to be in the same building in Mumbai where my office is located !…actually that caught my eye first!…the Information memorandum released by the company http://www.emamiltd.in/press/eil.pdf profiles him as “he possesses  extensive knowledge and experience as Lead Advisory and Transaction Advisory Services in Ernst & Young India Ltd”  ….Wow! all at the young age of 26 !

The Gist of the Scheme of Arrangement is as below

• Zandu Pharmaceuticals will demerge it’s FMCG Business to Emami Ltd and it will be renamed Zandu Realty Ltd to reflect it’s continuing business….Every Shareholder of Zandu will retain his existing holding in Zandu and in addition will get 14 equity Shares of Emami Ltd of FV Rs 2 for every One Share of Zandu held of FV Rs 100…Emami has just split it’s FV further to Rs 1…thus effectively the Zandu Shareholder gets 28 Emami Shares of FV Rs 1 for every share he holds in Zandu  
• Simultaneously,Emami Ltd will demerge it’s Realty Business to Emami Infrastructure Ltd (EIL)….Every shareholder of Emami Ltd will get One Equity Share of EIL of FV Rs 2 for every Three Equity Shares of FV Rs 2 held in Emami Ltd…The Share Capital of Emami will stand as it is…so the Emami Shareholder will continue to hold his Emami shares + hold free entitled shares in EIL…the Realty Business transferred to EIL consists basically of two Investments….Rs 9.8 crs through  20 lakh shares or 100% holding in Emami Realty Ltd and Rs 165.3 crs through 555636 Shares or 68.9% holding in Zandu….A Zandu Shareholder entitled for Emami Shares will not be entitled for Shares in EIL through the new Emami Holding
• EIL will be listed seperately on BSE,NSE and KSE

An updated Information memorandum filed in July 2010 just before Listing of EIL provides the latest Financials as of March 31,2010….the earlier Information Memorandum of 2009 showed Financials as of September 30,2009

There is a huge difference in both….In the six months between September 30,2009 and March 31,2010,EIL has sold off it’s 555636 shares in Zandu Realty for Rs 210.64 crs.making a Profit of Rs 45.34 crs…it’s cost was Rs 165.3 crs,computing to Rs 2975/share…while sale computes to Rs 3791/share…Current Zandu Price is @ Rs 3100

This Rs 211 crs received by EIL has been applied as below as inferred from Financials of September 30,2009 and March 31,2010

• Repayment of Unsecured Loan  : Rs 144 crs…..Rounded of Difference between Unsecured loans of Rs 156.72 crs and Rs 12.55 crs at 30/9/2009 and 31/3/2010 respectively
• Donation : Rs 10 crs……clubbed under  Administration and Other Expenses in the P & L A/c
• Interest  : Rs 23 crs…..shown in the P/L A/c at 31/3/2010
• Rs 34 crs given as Loans and Advances : This is the addition to the Current Assets at 31/3/2010

EIL’s Equity Capital  (FV Rs 2) is Rs 4.86 crs……At March 31,2010,the Profit on Sale of Zandu Shares is Rs 45.34 crs…but after adjusting Rs 23 crs for Interest and Rs 10 crs for Donation and Rs 2.25 crs for Tax and normal expenses,the Net Profit  is Rs 10.68 crs…This gives an EPS of Rs 4.4 and on Share Price of Rs 91,a  Multiple of 20…..However the Auditor has taken 5289250 shares as the weighted avergae shares in the denominator to show an EPS of Rs 20.20….Perhaps this may have been the misunderstanding that led to a crazy near Rs 600 Share Price on Listing Day…The Actual Number of Shares of FV Rs 2 existing for EIL is 24298392

EIL’s Networth at March 31,2010 is Rs 38.97 crs giving a Book Value per share of Rs 16…that’s a near 6 Book Multiple…Reserves are Rs 34.10 crs of which the Capital Reserves are Rs 23.42 crs   

The Balance Sheet at March 31,2010 also interestingly shows a Lower Unsecured Loan amount of Rs 12.55 crs…there are no Fixed Assets and the only Investment is Rs 9.8 crs in wholly owened subsidiary ERL…it has Strong Net Current Assets of @ Rs 45 crs at March 31,2010…,but while cash is Rs 5.4 crs,Loans and Advances are hefty at Rs 39.93 crs…Of these Loans and Advances,Rs 27.62 crs are made to Parties other than Subsidiaries and Rs 7.4 crs are Recoverables in Value…Why keep Unsecured Loans Pending and dole out Loans & Advances ! ?

The Structure of EIL

EIL has a wholly owned Subsidary Emami Realty Ltd (ERL)….ERL in turn has several subsidiaries as below

100% Holding

Emami Ashiana Pvt Ltd

Emami Rainbow Niketan Pvt Ltd….owns 286329 shares or 35.51%  in Zandu Realty at March 31,2010…From 4/2/2010 Zandu Realty ceased to be a Subsidiary and from 31/3/2010 is an Associate Company in the Emami Group….I wonder though,if Emami will continue to consolidate Zandu in their Accounts the way they do for a Subsidiary as they will yet have control over the Board and Operations  

Nathvar Triacam Pvt Ltd…ceased to be a subsidiary from 28/1/2010

Octagon BPO Pvt Ltd…developing an IT Park over 0.64 acres at Rajarhat

80% Holding

Emami Constructions Pvt Ltd…..is developing jointly with Anand Rathi Realty Fund a Residential Complex of 510 Apartments over 4.46 acres in Kukatpally

60% Holding

New Age Realty Pvt Ltd

55% Holding

Delta PV Pvt Ltd…..is developing an IT Park over One Acre at Salt Lake Sector in joint venture with Anant Rathi Realty Fund and CD Equi Finance Pvt Ltd

Land Reserve

The Memorandum states that Wholly Owned Subsidiary of EIL,ERL OWNS a Land Reserve of 103.12 acres…..Projects are not directly in EIL,but in step down subsidiaries…..They are all at early stages of Planning and Revenues from them will not flow till 2013 atleast….This makes EIL merely a Holding Company….it has Strong Net Current Assets of @ Rs 45 crs at March 31,2010…,but while cash is Rs 5.4 crs,Loans and Advances are hefty at Rs 39.93 crs…Of these Loans and Advances,Rs 27.62 crs are made to Parties other than Subsidiaries and Rs 7.4 crs are Recoverables in Value

Reduction of Promoter Shareholding in ZANDU Realty  

Zandu’s market cap today with share price at Rs 3100 levels is Rs 250 crs…it has 806400 shares of FV Rs 100 outstanding and records as of March 31,2010 show that the Emami Group holds 286329 shares or 35.51% of Zandu through just one company, Emami Rainbow Niketan Pvt Ltd….down from the 587055 shares or 72.80 % held by it through group six group companies at September 30,2009

EIL has sold off it’s 555636 shares in Zandu Realty for Rs 210.64 crs.making a Profit of Rs 45.34 crs…it’s cost was Rs 165.3 crs,computing to Rs 2975/share…while sale computes to Rs 3791/share…Current Zandu Price is @ Rs 3100

Now only Emami Rainbow Niketan Pvt Ltd holds 286329 shares or 35.51 % in Zandu Realty….This moots the Question….Did ERNPL pick up these shares from EIL when EIL disposed it’s full holdings in Zandu for Rs 211 crs ?…Assuming it did,then the ERNPL Balance Sheet would show this Investment at a Cost of @ Rs 109 crs…How was this Funded ?…were  Unsecured Loans of similar amount merely transfered by EIL to ERNPL….this means the Profit Entry created in one group company,EIL on Sale of Zandu Shares, is negated by atleast half by mark to market loss in the Books of step down subsidiary, ERNPL…. Was this Profit created merely to provide some Earnings basis of Valuation to EIL to justify a High Price on Listing ?….EIL is unlikely to repeat this Profit unless it sells of Investments in ERL !….also Funding an Investment through an Unsecured Interest bearing loan brings into Focus the Rationality of doing this…as significant Interest is paid out…Rs 23 crs,because of Interest on Unsecured Loans shown at Rs 156 crs at September 30,2009 ,were knocked out from EIL profit…..Juggling Real Estate Assets,Loans,Loss and Profits in Group Entities ? 

Zandu Realty Shareholding Pattern reveals this….

• On September 30,2009,it had 11518 Shareholders,including Six Promoter Group Shareholders led by flagship company,Emami Ltd who held 587055 shares or  72.80 % of the Equity 
• On December 31,2010,it had 25303 Shareholders,including only One New Promoter Group Shareholder ,Emami Infrastructure Ltd who held 425502 shares or 52.77% of the Equity….so EIL has already started selling Zandu Realty Shares
• On March 31,2010,it had 39855 shareholders,including only one and a new one too,Promoter Shareholder,Emami Rainbow Niketan Pvt Ltd,who held 286329 Shares or 35.51 % of the Equity

No Non Promoter Shareholder holds more than 1% of the Equity on all three dates

Why would Promoter Emami Group reduce it’s holding in Zandu Realty from 72.80% to 35.51 % ?….of the 587055 shares it sold,assuming 286329 are now in ERNPL,then who has brought 300726 shares !?…The Jump in Shareholders from 30/9/2010 to 31/3/2010 is 28337…this implies an average Holding of 10 or 11 shares for the incremental shareholders !…SEBI needs to investigate this angle…more so what was the the need for Emami to reduce their stake in Zandu ?….Zandu’s current Price of Rs 3100 gives a market Cap of @ Rs 250 crs..Zandu’s Networth including FMCG Business at March 31,2008 was Rs 78 crs….after FMCG Business has been transfered to Emami,only the 2.4 acres Land remains as an Asset in Zandu Realty and it’s Networth dropped to Rs 23 crs at March 31,2009…..this 2.4 acres would be worth atleast Rs 500 crs in undeveloped state,if one takes this morning’s paper headlines as the benchmark…. NTC had sold their 2.4 acre Poddar Mill Plot at Worli,in Mumbai…a liitle distance from Zandu’s Dadar base…for Rs 474 crs…Indiabulls Real Estate was the winning e-bidder among eight that were contesting…If developed the Value is significantly much more,probably Rs 1000 crs….Emami held 72.80% of this at 30/9/2009….and Zandu was their subsidiary….now they hold just 35.51%…this makes Zandu just an Associate…have the Sold Shares gone to Promoter known Hands who do not form part of the Promoter Group on Paper ?

FIIs and MF Holding in EIL   

HSBC Global Investment Funds held 1265338 shares or 5.21% of EIL…..T Rowe Price International INC (T Rowe Price New Asia Fund) held 1098655 shares or 4.52% of EIl…HDFC Equity Fund held 400000 shares or 1.65% of EIL….these would have resulted under the Scheme of Arrangement because of their Emami Ltd Shareholding…..The Bulk Deals above show that T Rowe commenced disposing of their holding on the First day of Listing itself  

Now T Rowe should be assumed as an Intelligent FII…..

Conclusion

EIL is quoted at Rs 91…it’s Book Value is Rs 16….it is unlikely to repeat Rs 10 crs + FY 10 Profits anytime soon….it’s Real Value lies in the Projects and Land Reserves that are reflected in the books of it’s subsidiaries and step down subsidiaries….how much of it will flow back to EIL in the years ahead is a question mark…..moreover in my view the Promoters Emami Group have raised a Corporate Governance and ‘We could not care less for EIL Minority Shareholders’ Issues in showing full sale of EIL’s Zandu Investment (68.90 % of Zandu Equity) at Rs 211 crs by transfering ostensibly 35.51 %  from now listed EIL to it’s stepdown subsidiary ERNPL (Subsidiary of ERL) and selling of the rest to outside the Promoters Group

EIL shareholders would have benefited directly and substantially more in the years ahead if the Emami Group had retained the full (68.90% of Zandu’s Equity) Zandu Investments in now listed EIL itself and not shown 35.51 % in ERNPL and sold off the rest outside the group….I read it as a Ploy to Privatise Huge Profits that Zandu Realty may throw up in the Future on developing it’s 2.4 acres…..Today’s Winning Bid of Rs 474 crs for a similar acreage in a nearby plot in Mumbai is a clear indication of this….There was no need to reduce the Emami Group Stake in Zandu from 72.80% to 35.51%….because Zandu Realty Shareholders will surely reap the Bonanza in the years ahead from development of Zandu’s 2.4 acres….Zandu Market Cap is @ Rs 250 crs….it’s Property is worth atleast Rs 500 crs undeveloped and in all probability Rs 1000 crs when developed….EIL’s Selling price computes to Rs 3791 per Zandu Share….even at this Price the Market Cap of Zandu would have been just Rs 300+ crs….way below it’s true value

EIL Shareholders seem to have been shorted   

I daresay the Emami Group will not be winning too many friends any soon unless they are part of the gameplan  

Neither my Clients nor me hold shares in any Emami Group companies as of date

Zandu Realty Ltd at Rs 3100 though looks interesting !…apparently Emami Group does not share my view…they’ve reduced their Holding !

Cheers ! 

Ostensilbly under great pressure to vacate the banking field,the Tayals of Bank of Rajasthan are having their Cake at eating it too!

The Board of Directors of the Bank at their meeting yesterday have given an in-principle approval to amalgamate the Bank with ICICI Bank

The important issue here was what would the swap ratio be….Mrs Chanda Kochar,MD of ICICI Bank announced yesterday that,subject to due diligence,the swap ratio would be 25:118….for every 118 shares of BOR,the shareholder would get 25 Shares of ICICI Bank

Reacting to this,from morning BOR is 20% up on upper circuit at Rs 119.40,while ICICI Bank has dipped to Rs 855 from Rs 890 levels….if ICICI Bank remains at these levels,the BOR Price has to move past Rs 180 to reflect this swap ratio….that’s another 50% up

Tayal,who were always under some cloud or the other will benefit immensely

They had declared they held 28.60 % of the BOR Equity of Rs 161.35 crs (FV Rs 10)…However SEBI under an ex parte order of March 8,2010 have declared that Tayals have a 55.01% stake in the Bank

P K Tayal,claimed on TV yesterday that they were not selling any stake and it was only a 100% swap….however,what will prevent them from selling their stake in ICICI Bank on the swap….Considering their declaration that they hold 28.60%,it amounts to holding 4.61 cr shares of BOR…this would give them 97.67 lakh shares of ICICI Bank…At The price of Rs 855 now,this stake has a value of Rs 835 crs !

And if you take SEBI declaration as correct,Tayals hold 55.01 % in BOR…This means 8.88 crs shares which would be swapped for 1.88 crs shares of ICICI Bank….current value of this is over Rs 1600 crs!   

View this Bonanza in context of the Share Price of BOR when normally traded in the range of Rs 70 thereabouts,the whole Market Cap of BOR was below Rs 1200 crs !….This is today at Rs 1745 crs with BOR at Rs 119.40….when it touches Rs 180,the Market Cap will be over Rs 2900 crs !

Has SEBI won out here or have the Tayals ! ?….Clearly the Tayals….They have extracted Maximum Value for exiting the Banking Sector….their stake in ICICI Bank will be below 2%…..they have the Option to Hold it or monetize it by exiting fully or partially

No wonder P K Tayal had a Cheshire Cat Grin on TV yesterday…he’s awaiting the lickings !….and with him,the other shareholders too will benefit

Going by the Valuation of this Deal,look for other banks that may be forced to amalgamate as the Process of Consolidation quickens in the Banking Space….ICICI Bank has defended this swap Ratio stating it would have taken them another three years to build the current account and saving account relationships that BOR has + the Deal prices the market cap at @ Rs 6.5 crs per Branch of BOR….HDFC Bank had paid a Market Cap of @ Rs 26 crs per Branch when it acquired Centurion Bank of Punjab 

The Moral is Stay Invested with some Exposure in the Small and Mid Cap Banking Space….the Valuations will Fly when Deals are announced at over three times Book !

Cheers !

Well Done SEBI !

I have been advocating this for years !…that Annual Reports of Listed Companies had to be filed with the Exchange where listed as per the Listing Agreement….What prevents the Exchange from making these available on their website!?…I had asked an ex CEO of BSE this at one of our annual faculty meets…he had kept quiet,mumbling that the matter is being looked into !

In the meantime you had business spring up that sold you these Annual Reports in soft copy or allowed you access to them online for a High Fee….Serious Advisors,Investors,Brokers,Institutions,FIIs….had little option but to subscribe to such services 

Thankfully this should now stop with SEBI’s latest Directive of May 7,2010 to all Stock Exchanges to make available the Annual Reports on their websites as the EDIFAR system is being discontinued….At Long Last Now this Long Overdue Directive from SEBI….Very Welcome Step for Promoting Investor Awareness,Education and Protection

Why Pay Now for Something that would Now be Available Free !?

Having procalimed  this,I will yet pay Rs 2 to Individuals for an Original Print Copy of the latest Annual Report,that I don’t already have…in fact my best source is the local ‘pastiwala’…this is a cheaper source….most shareholders simply bundle the Annual Reports with their magazines for selling them by weight to the ‘pastiwala’…I pick up hundreds of Annual Reports from such ‘pastiwalas’…buying wholesale by weight it cost be less than a Rupee for each Annual Report ! 

I shall yet continue doing so,as I have a habit of sleeping and reading late after midnight and marking and scribbling comments on such Annual Reports for further diligence…A Print Copy is easier to read while I twist and turn in bed !…it’s also more personal !…reading from the computer is tres impersonal !

Cheers to SEBI !…Well Done ! 

The Listing of Kolkata based Nilesh and Umesh Parekh promoted Gold Jewellery House,Shree Ganesh Jewellery House Ltd on Friday,April 9,2010 has spooked everybody

The IPO was priced at the lower band of Rs 260,but listed lower and crashed to 160 levels pretty fast

……An interesting Bulk Deal caught my eye on this first day of listing itself…Standard Chartered Bank (Mauritius) Limited Emerging India Fund (SCBMLEIF) sold 531484 shares at Rs 169.23 aggregating Rs 8.99 crs

I checked the Prospectus and found that they were not part of the Pre IPO Non Promoter Shareholders…of these there were merely two…Shares were allotted in August 2009 at Rs 300,after conversion of fully convertible debentures to Bennet Coleman who ,after a 1:1 Bonus in September 2009 ,now hold 333334 shares at a cost of Rs 150 aggregating Rs 5 crs Investment and Credit Suisse PE Asia Investments (Mauritius) Limited who had invested Rs 80 crs in a CCP Issue and after conversion at Rs 300 and the bonus held 5333334 shares also at a cost of Rs 150…but now hold 3200000 shares after offering for sale shares in the recent IPO

The March 2010 Book Building IPO was made in the Price range of Rs 260-Rs 270,with Rs 260 finally fixed as the Issue Price….It was for 14269831 shares aggregating Rs 371 crs…of this  the fresh issue component was Rs 316 crs through 12136497 shares and an Offer for Sale by Credit Suisse of 2133334 shares aggregating Rs 55.47 crs

In fact SCBMLEIF also does not feature as an Anchor Investor…Of these there were three…IFCI,India Max Investment Fund and Bank Muscat India Fund who together committed Rs 65 crs for 25 lakh shares at Rs 260

The Issue was oversubscribed 1.96 times…QIB portion 1.38 times…Non Institutional Portion 6.12 times and the Retail Portion 1.39 times

So,I assume SCBMLEIF must be a FII allottee in the IPO at Rs 260….Selling off at Rs 169 levels and at a huge Loss of  nearly Rs 91 per share on the first day of listing begs the question “But Why!?”…the loss is Rs 4.83 crs as the Investment was Rs 13.82 crs

As I blog this,markets have just closed at 3.30 pm on Monday,April 12,2010 and the second day of listing for Shree Ganesh Jewellery House and it’s share price is yet Rs 163

Financials show a post IPO Equity of Rs 60.68 crs (FV Rs 10,Promoters hold 70% +)) and a Post IPO Networth estimated to be around Rs 900 crs ( Rs 481 crs at 30/9/2009 + Rs 100 crs second half profit + Rs 316 crs IPO Proceeds to the Company)…that’s a Book Value of close to Rs 150…Debt was Rs 377 crs at the half year at 30/9/2009….After recording a PAT of Rs 80 crs for the half year,the full year FY 10 PAT should be over Rs 180 crs and close to Rs 200 crs…that’s an EPS of atleast Rs 30…the Earnings Multiple is just over 5 times with the Share Price of Rs 163 and under 9 times at the issue Price of Rs 260 and the Book Multiple is just over 1

So what’s the Problem !?….can Standard Chartered Bank enlighten all of us !? SEBI,perhaps ?…or perhaps Bennet Coleman or Credit Suisse,the Pre-IPO non promoter shareholders !?….25% of the IPO Proceeds of Rs 316 that come to the company have been assigned for General Corporate Purposes….no specifics…that’s a very high component of nearly Rs 80 crs that can be spend at the discretion of the Promoters and the Management,albeit for the Company…the major proceeds will be towards the specifics of expanding the manufacturing and retail base    

IPO Allottees have been sledgehammered on Day 1 itself…..Should they also exit at a significant loss as something is greatly amiss !?…or is Shree Ganesh Jewellery House worth a Buy at Rs 163 !…just over one time it’s Post IPO Book Value ?…if you ask allotees to average,they’re going to kill you !….but one HNWI allottee I spoke to, was very optimistic and has full faith in the company and the promoters…he expects the price to move towards Rs 450…”kai karse!”….he was referring to the Promoters ! 

Clearly there was an IPO Gameplan….what was it exactly and who all are involved,is the key question !?…was SCBMLEIF part of it!?…they surely need to explain this first day sell off at a huge loss !…even Professional Stags don’t behave like this !

I’m not going into the Merits of Rama Pulp…it may be just all Pulp !

I leave it your judgement….this is the sequence of events

March 9,2010….I receive an unsolicited SMS,twice ,as must have thousands of others…Reproduced verbatim below

Message Details : Sender :(no name) TA-STKFANCY….Time Received : 13:15:39

Message in Verbatim: 

Buy for intraday JACKPOT: Buy RAMA PULP (502587) SL 35 Intra trg upper freez,Buy in bulk,FII buying in huge,Co contracted with WALLMART,

March 11,2010….I notice lakhs of quantities traded on March 10,2010  upto a Price of Rs 38.35 on the Bulk Deals Sement Reposting on the BSE Website…In fact seems there has been regular Bulk Deals happening in Rama Pulp this year and same Names appear in multiple Deals

In Many cases the Same names appear in Huge Buy Deals as also in Huge Sell Deals on the same day !

BSE has just closed…it’s past 3.30 pm and I check the Share Price of RAMA PULP…It has registered a High/Low of Rs 35/Rs 32.65 and closed down from yesterday at Rs 33.15 with a traded volume of 3.99 lakh shares…and interestingly a Two Week Average Traded Volume of is 12.96 lakh shares !…the Market Cap of this Company is a mere Rs 25 crs 

Be careful !…clearly seems to be an orchestrated move to seduce suckers to buy through unsolicited SMS recommendations with an objective to create a hype and market to offload huge quantity of shares by Sellers

BSE & SEBI need to figure out what’s the game here,if any, in RAMA PULP and who’s playing it, for the benefit of all Investors

In fact similar gameplans and ploys are visible in many scrips….cast a shadow over the sanctity of Trading on our Bourses…Transperancy and Credibility Issues

I had warned Investors of Thinksoft Global IPO in September 2009

Don’t ThinkHard about ThinkSoft Global Services’s IPO at Rs 120-130…Ignore it

However on Listing it kept defying gravity and on February 11,2010 it zoomed to a record high of Rs 544 with record Volumes

But since then in just Ten Trading days and Eight continous lower circuits,beginning with two 20% drops,then as lower filters were applied,a 10% drop,followed by now Five 5% lower circuit filters,Thinksoft Global has crashed today to a lower circuit of Rs 221.30

The Share Price and the Volumes were set up past one month…Have a look ….Something Stinks really Big Time Foul here

…methinks SEBI and BSE must quickly and conclusively bring the perpetrators to task,if they have to maintain the sanctity of our  Stock Exchanges and protect the sucker of the small Investor….

Classic case of Greed and Fear….we’ve seen such situations play up before too…like in the Austral Coke Company…dropped from near Rs 200 levels to under Rs 10 now

….The authorities must investigate any Promoter/Major Shareholder/Broker/Operator nexus in such cases…Such movements rarely occur without a criminal nexus…..Poor Retail and some HNWI suckers get trapped by this manipulation  

 Investor Education and Protection is one of the key purposes why I began this blog…to express my  concerns on several companies…In the recent past,Cranes Software and Karuturi Global…even Austral Coke ! and Thinksoft Global

However distasteful,unpleasant,bad,loss making Equity experiences should not permanently deter you from the Beauty of Equity…..A basket of Apples will have a few Bad ones !….Some are easy to Spot,some look great on the outside ,but are infested with Worms on the Inside……Learn to spot these worms and avoid such seemingly great Apples ! 

Be warned….There are many out there…. always on the Prowl to seduce you to lose Monies…because they make Monies,only when you lose !…and they have perfected the art of Seduction !….and think about this !…what chance do you stand against the 6000+ seductions listed on BSE !…and you will be double careful !

I reiterate my Quote “India and Insider Trading are Inseperable !”…which I discuss and debate in my sessions at various forums

Cheers !

On October 27,2009 I had blogged

Beware of Equity Advisors coming out likes worms in a rotten woodwork !

Then last month on January 10,2010 I again blogged

RED ALERT ! SIMPLY BEWARE OF UNSOLICITED STOCK ADVICE FROM UNKNOWN SOURCES THROUGH SMS AND EVEN EMAIL !

Now SEBI has warned Investors not to heed astrological advice on stock markets or even Investment advice from many websites or blogs and from many advisors as the advice has no reasonable basis

Well done SEBI…..would help immensely if you can identify and name  such dubious and vested interest sources 

I’VE BLOGGED THIS IN RED BOLD CAPITALS FOR A VERY OBVIOUS REASON…RED ALERT ! 

SIMPLY BEWARE OF UNSOLICITED STOCK ADVICE FROM UNKNOWN SOURCES THROUGH SMS AND EMAIL

IN BULLISH TIMES SUCH ADVICE SIMPLY POURS OUT LIKE WORMS OUT OF WOODWORK

JUST YESTERDAY I RECEIVED SMSes TO BUY INWINEX PHARMA AT 14.68 WITH A TARGET OF 23 TO 29 in 10 Days…..AVIVA IND AT 29.45 TARGET 38 TO 41.45 IN 7 DAYS AND MEMON BEARINGS NOW AT 48 TARGET 58 TO 64 IN 3 DAYS !

IGNORE THESE….I’M NOT EVEN GOING TO BOTHER DISCUSSING THE MERITS AND DEMERITS OF THESE SCRIPS

SUCH UNSOLICITED ADVICE OFTEN,I DARESAY IN ALL CASES, IS A COMMON TRAP BEING SET TO CREATE WIDESPREAD RETAIL BUYING BY THE PUBLIC WHO UNWITTINGLY ARE PROVIDING AN EXIT ROUTE IN VOLUMES FOR LARGELY ILLIQUID SCRIPS TO THE SELLERS…..YOU ARE EXPOSING YOURSELF TO A NEXUS WHOSE SOLE AIM IS TO RAPE YOU AND YOU WON’T EVEN SENSE IT COMING AS YOU ARE BEING SUCKED IN THE INITIAL EUPHORIA AS PRICES OF THESE SCRIPS ARE MANIPULATED TO 52 WEEK HIGHS AND OFTEN ON LOW VOLUMES TOO…..AND LATER WHEN YOU BECOME A VICTIM OF CONTINUOUS LOWER CIRCUITS DON’T CRY…YOU ASKED FOR IT ! YOU”LL HAVE BEEN PICKPOCKETED AND WON’T EVEN REALIZE IT TILL TOO LATE 

THE NEXUS GAMEPLAN, WHEN EXHORTING SUCH ADVICE, INVARIABLY INVOLVES ALL THE OPERATIONAL VICES OF CIRCULAR TRADING,SHARE PRICE MANIPULATION AND CREATING FALSE MARKET FOR THE SCRIPS….ALL IN VIOLATION OF THE SECURITIES ACT 

THERE IS NO WAY YOU CAN TRACE THE SOURCE UNLESS YOU INVESTIGATE FURTHER WITH THE HELP OF YOUR SERVICE PROVIDER……EVEN THEN YOU MAY HIT A WALL

METHINKS STRONGLY THAT SEBI SHOULD COME DOWN HEAVILY ON SUCH ADVISORS AND PENALISE THEM

THINK ABOUT THIS….HOW CAN ANYBODY SET EXACT TARGETS IN EXACT QUICK TIME UNLESS THEY ARE INVOLVED IN MANIPULATION OF THE SCRIP

BE CAREFUL….GREED AND FEAR ARE TWO SIDES OF THE SAME COIN IN THIS EQUITY JUNGLE….THEY PLAY ON YOUR PSYCHE TO MAKE YOU GREEDY FIRST AND THEN LET FEAR TAKE OVER !….THAT’S WHY THE TARGETS GIVEN ARE INCREDULOUS…LIKE INWINEX WILL GIVE YOU 97.55% RETURNS IN 10 DAYS…THAT’S AN ANNUALISED 3560 % ! WOW !…LIKE IT WILL !….DON’T FALL FOR IT EVEN IF YOU SEE INWINEX AT RS 17.75 TODAY…ANOTHER 52 WEEK HIGH !…….A MONTH OR TWO AGO SECUNDERABAD HEALTHCARE WAS RECOMMENDED JUST LIKE THIS AT RS 21 EXHORTING ONE TO BUY FOR A RS 40+TARGET IN DAYS…IT”S YET LANGUISHING AT RS 19 

BE CAREFUL….A FOOL AND HIS MONEY ARE SOON PARTED !….AND ALL OF YOU ARE NOT FOOLS…AFTER ALL, YOU ARE READING THIS BLOG  !

The pink newspapers this morning headlined that the Galleon Hedge Fund Founder and two Indian Americans among others were arrested for Insider Trading in USA…..Galleon has Investments in Edelweiss and Shriram too in India

Insider Trading is a pet issue with me and I discuss it vigorously at my training sessions when we are discussing Ethics

I even raised a debate that India and Insider Trading are inseparable….gave this as a question for a subjective essay type answer  at the Final Exams of the passing out class at a leading Management Institute in Mumbai 

Don’t confuse Insider Trading with genuine Research….but there is a thin line often between the two….because the conviction and confidence and credibility of your research is often based on sensitive ‘not available to the public’ information sourced from the company itself or those associated with it 

But the sad fact remains that most in our stock markets,even those who you make icons and idolise,and view on stock channels regularly, practice the philosophy of ‘What’s Integrity to an Opportunity !’ 

Another sad fact is that many in this young generation don’t regard Insider Trading as a Crime !…the crime is if you get caught !….Facebook is currrently running an application where you answer questions put up…one is ‘What would you like to be ? Rich or Famous?’….and kids are opting for Rich !

One more sad reality is that in this nexus between promoters,Operators,FIIs,politicians,media and authorities it’s the public that get’s screwed…..Often under pressure,the exchanges and regulatory authorities themselves turn a blind eye to obvious instances of Insider Trading

And the tragedy is that no one in India has really been arrested for Insider Trading yet !….Maybe,once you become Big,you become ‘Honest’ ! Maybe but not necessarily !…there are big corporate groups who too have indulged and continue to do so in Insider Trading…End justifying the Means ! and Means justifying the End !

…..and then you go and build Temples and Educational Institutions ,trying to cleanse your feeling of wrong doing!

Wonder what will come out if someone makes an application under RTI for information on the status of insider trading complaints pending with SEBI ! ? 

Several cases come to my mind immediately…some of which are featured in the Economic Times edition

Cheers !

It can’t be just a coincidence that this is my Blog Post No 420 !

Austral Coke came out with it’s controversial IPO in August 2008 in the price band Rs 164-Rs 196 for a FV Rs 10 share…The price was fixed at Rs 196 and it got listed on BSE on September 4,2008 rising to Rs 309,before closing at Rs 225…On October 28,2008 it dived below Rs 60 and since then has recovered to touch a high of Rs 570 last month before reacting ex split and post SEBI ban to Rs 48 today

The Company recently sub-divided the share into FV Rs 1 and it closed at Rs 48 today after SEBI banned it from raising capital…following disclosure by the Income Tax Authorities of Fradulent transactions of over Rs 1000 crs !

SEBI should have investigated it more last year before permitting the Company to raise Capital through an IPO.I had blogged this controversial IPO on August 8,2008 commenting that SEBI should have then itself verified claims of the Company on it’s capacities that were contested by Gujarat NRE Coke

Austral Coke went on to raise Capital in the IPO and it has now been also accused of diverting the proceeds too.

SEBI needs to get real serious about it’s prime objective of Investor Protection without fear or favour and probe Insider Trading more stringently

Expect the share price to fall further from Rs 48…if it does not then you know it’s being supported artificially by the company

If you hold the share,I would strongly advice you to sell as Promoters’ credibility continues to be suspect..and regulatory and tax authorities will continue to have Austral Coke under a heavy scanner…….and if you are an IPO allottee you’re already sitting on over 100% long term  gains….Take them