Those were the days, my friend
We thought they’d never end
We’d sing and dance forever and a day
We’d live the life we choose
We’d fight and never lose
Those were the days
Oh, yes, those were the days

This classic Mary Hopkins Song comes to my mind today as current Pakistan Cricketers yet again stand bluntly exposed for Matchfixing in a sting operation captured on Video…..Spot fixing…Three No Balls predecided as revealed before by the Match Fixer Bookie M Majeed ….In the Lords test against England,M Aamer to bowl one of the first ball of the third over and M Asif to bowl one of his last ball of his tenth over !…then the next day Aamer to again bowl a No ball of the third ball of his third over……all happened on cue !….coincidence ! ?….yeah ! Mangoes grow on Apple Trees !….and this has to involve the captain S Butt too as he had the discretion to decide who bowls which over……..

Let me tell you the rot begins at the top…and not just in Pakistan !

Once upon a Time Cricket was a Gentlemens’ Game…those were the Days my friend,we thought they’d never end…….

I was a Crazy Cricket Guy…played it at school,college and club levels in India and overseas…hold the record for hitting six sixes in a six ball over…so what if it was an inter-building Tennis ball match in the 1970s !…..

I was immensely patriotic whenever India played….was nine year old in 1971 when India, under Ajit Wadekar, registered their their first two overseas Series wins 1-0 against West Indies and England..I remember being glued to the Transistor to catch the running commentary and how some excited fans had put up a makeshift scoreboard on the Kemps Corner Flyover in South Mumbai and we kept a watch on it and cheered every wicket that India took and every run that India scored….I wore half pants then…still do even now but more as a fashion !

I was an allrounder and captained my school….felt great and proud when often the newspapers covered my scores and wickets taken….I’ve scored  a Century for H R College at Cross Maidan…have taken 5 wickets in an over for my Bahrain Team…have played several match winning Innings for the Indian Club in  Bahrain…many against top Pakistan Teams…there was always rivalry,often heated and bitter,and even blatant umpire bias whenever we played a Pakistan Team…I remember vividly one particular day that ended in big Violence initiated by the Pakistan supporters when we were playing the seven-a- side finals…..we had beated the top Pakistan team on the island in the semis…that hurt them bad….when they saw we were winning the finals too against a joint Indo-Pak Team from a Junior League,the Pakistan supporters and even their Cricketers swarmed the playing field with Bats ,stumps,hockey sticks and bottles…I was half way through my over….and it soon became a free for all !……I was pulled off the field by Murtaza Ali Baig,the brother of ex India Cricketer Abbas Ali Baig and told to stand on the sidelines….some of my more aggressive team members were giving it back with Stumps and Bats too !…..the match was abandoned…..we were forced to share the cup by the Governing Cricket Committee that was controlled largely by Pakistan Clubs representatives………    

Then I returned to India and Career took over…..yet was a regular at India Test Matches and ODIs at the Wankhede Stadium in Mumbai….even skipped office,pretending to be at Meetings to do so !

Those were the days my Friend…….

And then Big Money took over Cricket….where there is Money there will be stink !…so the Snake of Match Fixing reared it’s ugly and vicious head…..Bookies and Betting……adding to the Racism and Bias that always existed but now is no longer subtle

Cricket that should be Entertaining and Engrossing on the Field became so off  the field too……Bollywood also made a hit film ‘Jannat’ on Cricket Matchfixing…….Cricketers from several Nations yeilded to temptation of the Quick Wicked ‘W’ trio of Wealth,Wine and Women….An Indian ex Captain was banned for Life and is now a Congress MP…Wow ! 

T 20 Cricket Format was created and with it’s success our IPL was born….more obscene monies….more glamour….more stink

Somewhere down the years my Patriotic fervour began ebbing whenever India played…..many reasons….matchfixing is one of them……

MatchFixing and EquityFixing !….Corruption,Obscene Monies and Insider Trading in Both…..so what’s the Difference !     

So what’s a Double Dip ! ?….so I asked around and this is what I get…..

Young Daughter : It’s an Icecream, Dad !

Older Son : It’s when they serve starters with two types of Dips

My Tea-sing Wife : Darling, it’s what I do to make your ‘kadak’ Tea…Double Dips…Two Tea Bags in one cup of Tea

A Club Friend : It’s when I dive into the swimming pool twice in a single day

Ben Bernanke ,the US Fed Governor : USA is not facing it or causing it !

Clearly Individual Perspective influences the Definition

For those who really want to know….Double Dip refers to a Recession,followed by a short Recovery and then a more Deeper Recession than the previous one from which any recovery becomes more difficult….not good for the Economy and not good for Stock Markets….and USA is certainly facing the Possibility of a Double Dip Recession

So if the Dow goes Down bad,what shall be the fate of our Sensex !?

Let’s debate this over a Double Dip Tea ,shall we !

Cheers !

George Soros’ Quantum Fund has purchased a 4% Equity Stake in BSE from shareholder Dubai Financial for US $ 35 Million…this works out to @ Rs 380/share

In December 2009 I had updated the Value of the BSE Share which I had initiated in August 2008

Updated Valuation of BSE Ltd (December 8,2009) and

SHARES OF BSE LTD LOSING VALUE (August 5,2008)

So what’s the BSE Value in August 2010 ?

Let’s have a look at it’s latest unaudited performance for Q 1 FY 11

Clearly BSE is facing challenges….Average Turnover is declining…Profits are just about being maintained….if it were not for the cushion of  Income from Investments and Deposits,it would have a tough time meeting expenses

Current View on BSE Valuation

Let’s assume BSE just about maintains Profits in FY 11…this would mean a Net Profit of over Rs 200 crs and an EPS of Rs 19 and a 20 Multiple would mean Rs 380….thats what Soros has purchased into BSE at right now

The Reserves at March 31,2010 are Rs 1882 crs…these should move to @ Rs 2050 crs net of Dividend at March 31,2011…With Equity at Rs 10.34 crs the Networth should move from Rs 1892 crs in FY 10 to @ 2060 crs in FY 11…Thus Book Value would be @ Rs 200….At Two Book Multiple the BSE Share will be valued at Rs 400

BSE will face increasing Competition from existing and newer Equity Exchanges

Competition should be hotting up…BSE has lost ground in both Spot and Derivatives markets to NSE…In fact Derivatives has been a still born baby on BSE…..Now it will have MCX to contend with also…SEBI has been delaying giving the Green Signal to MCX to commence Equity Trading….MCX has gone to Court and SEBI has been directed to make a decision by September 30,2010 on this

Financial Gleanings from the Annual Report of BSE for FY 10

• BSE’s Networth of Rs 1892 crs at March 31,2010 is represented by Net Fixed Assets of Rs 85 crs,Investments of Rs 1917 crs ( Long term Rs 1383 crs and Current Rs 534 crs),Net Current Assets of Rs 169 crs net of Deposits from Members of Rs 278 crs and Other liability of Rs One Cr
• Net Fixed Assets of Rs 85 crs includes Freehold Land of Rs 10 crs and Buildings of Rs 9.4 crs….BSE’s 28 storey Jeejeebhoy Towers (not all is owned by BSE) and the Rotunda are icons for India’s Equity Markets….surely their Value is significantly much more…Tangible Fixed Assets are stated at Cost less accumulated Depreciation and Impairment…would be interesting and serve the need for more transperancy if a small note on potential revaluation is included in the Annual Report
• Investments have a market value of just @ Rs 40 crs more than on Books at March 31,2010
• Total Income includes Rs 59 crs from Services to Corporates….this constitutes Rs 19 crs as Listing Fees,Rs 10 crs from Bookbuilding Software and Rs 30 crs from Other Services
• Total Income also includes Rs 40 crs from Income from Other Services…these largely constitute Rs 13.5 crs from Rent and Maintenance,Rs 18.8 crs from Data Dissemination Fees (Rs 14.7 crs from Overseas) ad Rs 7.5 crs Miscellaneous Income

Conclusion

India Vision 2025 clearly sees India Poised to move smartly ahead in context of Sensex,Market Capitalisation and Equity Fund Inflows

BSE may face increased compettion from the likes of NSE and MCX and any others that may emerge….but the Pie is increasing in Size and BSE will strive to cut out a good piece for itself

A New Professional Team is now at the helm and a lot of ‘excess baggage and complacency’ is being dealt with…surely some good must come out of this….the true test is whether BSE is able to revive Turnover Volumes in Spot and bring to Life it’s F & O Market

BSE is debt free….It clearly has Land and Building Value in excess of what it shows under Fixed Assets

It needs to meet Annual Expenses of @ Rs Rs 180 to Rs 200 crs….Rs 50 crs for Computers,Rs 50 crs for Staff (over 500 Employees),Rs 40 crs for Admin & other Expenses and Rs 40 crs for Depreciation (Non Cash)…It earns Rs 245 crs from Income only from Investments and Deposits…this is thus it’s cushion….Contingent Liabilities reveal Rs 107 crs as possible legal claims against BSE of which Rs 103 crs have been assessed as remotely materialising

In this context paying Rs 380 to Rs 400 for a BSE Share is not really unjustified

My Intuition…reason in a hurry….. tells me that even if the View is Long term,an Investment in BSE Shares may just give you a healthy return even in the short to medium term

At Rs 380,BSE is valued just under Rs 4000 crs or under a Billion Dollars

The Future ahead may be challenging…but in these challenges lie the Opportunities on Scale ….and a Listing of BSE (delayed but should happen) will surely unlock this Potential going forward

Oh ! and BSE has contributed nearly Rs 4 crs to SEBI in FY 10

Cheers !

Moralities and Ethics….Just Words……Sad

Another Instance breaking out on Times Now….. this time it concerns how the Deputy NSA of USA, Michael B Froman, openly and quite bluntly telling Montek Singh Ahluwalia of our Planning Commission, in an email reply, to monitor and control Dow Chemicals Growing Noise in India regarding the Bhopal Gas Tragedy of 1984… this was in response to a request email by Ahluwalia to Froman to help at the World Bank Meeting to get IBRD to extend Borrowing limits for India 

What a Quid Pro Quo !…. Linking Commercial Interests to a Human Tragedy !

While this tactic is nothing new from USA, it was shocking to hear Ahluwalia on TV refusing to even acknowledge this demand by Froman in his email reply !… he was being hounded by a Times Now Reporter and moved away saying “Where’s the Tea ‘Yaar’ !?” to get away from the Times TV Reporter…. and he shockingly states he cannot remember whether he spoke to Froman or wrote to him !….. today is August 18, 2010…. and this email ‘to and fro’ took place less than three weeks ago on July 30, 2010 !…. he counters” Do you know how many emails I receive !?”…. Sad !

This is another Instance of how the current US Government is a front for top US Corporates, as aptly observed by Sunita Narain, Director, Centre for Science & Environment and a leading voice and activist for getting adequate compensation for the Bhopal Tragedy affected… she is shocked at USA’s Impunity in asking for such a quid pro quo 

Union Carbide was responsible for the Bhopal Gas Tragedy… It was taken over by Dow Chemicals…. Lakhs of people were affected, and 26 years hence many yet are, by the Bhopal Gas Tragedy and have received poor compensation…. Dow Chemicals actually took over Union Carbide’s US Liabilities but says it’s not responsible for any additional Indian Compensation Liability that is being sought… Dow Chemicals has business Interests in India through Technology Transfers and Licensing to Indian Companies for Speciality Chemicals

The US Government is clearly trying to arm twist India…. be it in it’s Pakistan Policy,it’s passing a Bill raising Visa Fees for certain Types of Visas used by Indian IT Companies to depute staff to US Clients… irony is that US Giant IBM is the second biggest private Indian Employer in India,employing 130000 Indians……. or in it’s Double Standards when dealing with the two Big ‘B’s’… British Petroleum and Bhopal !……. President Obama has come down heavily on British Petroleum for the ‘continuing from April’ Oil Leak that is yet affecting USA coastline… he has extracted, to begin with, a compensation of US $ 20 billion from BP… this is just one year’s profit for BP !….. India got just under Rs 500 crs or a little over US $ 100 Million for the Bhopal Tragedy and it was clearly ‘pressurised’ by USA in releasing Union Carbide Chairman, Warren Anderson and letting him fly back to USA!… wonder what quid pro quo was involved for this !…. was an Indian closely connected with the Powers in India and who was to serve a Long sentence,released from US Jail and deported ?… Aha !

An Indo-US Nuclear Bill has just been introduced in our Legislature…. Obama is to vist India in November this year

I just hope, India asserts itself with USA….. and does not cow or bow down to pressure tactics sacrificing Moralities, Ethics and Humanitarian Issues over Corporate and Commercial Interests! 

My simple observation is that why did Mr Ahluwalia not immediately disclose and make public this email reply from Froman on July 30, 2010 ?…. it is sensitive as Froman clearly says “…. it will have a chilling effect on our Investment Relationship”…… as Rachna Dhingra, another leading Bhopal Gas Tragedy activist, accuses that this is not the first time Mr Ahluwalia has lobbied for Dow Chemicals !… and Kamal Nath, responsible for our National Highways Grid, calls him an armchair economist… Interesting

….but then if Mr Ahluwalia had disclosed this email, Times Now would not have got this exclusive ‘Breaking News’ !…. I hope Times Now Sources don’t have any political scores to settle… and that the media is not being used to settle any……   

Whatever….. I strongly believe India does have a Conscience….. and a Credible & Honest Media are the Conscience Keepers of our Nation…..

We can do without Dow if we have to Bow or Cow !… Wow ! this rhymes ! 

Cheers !

How should one now view and play Sesa Goa and Cairns India ?

Markets have been excited for a few days by the Vedanta Group buying out the controlling stake in Cairns India from a subsidiary of Cairns Energy….. Cairns India had raced away to a new High of Rs 368 yesterday morning….. then came the press release by the Vedanta Group announcing this takeover in detail

My initial reaction was one of anger and worry that, as feared, Anil Agarwal of Vedanta was using Sesa Goa Cash for the Group

The Markets reacted sharply and Sesa Goa dropped over 8% to Rs 321 while Cairns India dropped over 6% to Rs 333

The takeover is by the Vedanta Group in this manner

• Vedanta Resources plc will acquire 51% Equity Stake in Cairns India from a subsidiary of Cairns Energy at Rs 355/share + Rs 50/share as Non Compete Fee for Three Years
• Sesa Goa, a Vedanta Group Company will tender for 20 % Equity Stake from the remaining Cairns India Shareholders at Rs 355/share… this is the mandatory Open Offer
• In case Sesa Goa receives less than 20% then Vedanta will make up the difference at cost… that’s Rs 405/share

My immediate concern is what will be the Impact on Sesa Goa as it has been my pet recommendation for several years now and recently very strongly from July 2008 cum bonus and cum split at Rs 3200 (that’s Rs 160 ex)…. On April 8, 2010, Sesa Goa zoomed to an all time high of Rs 494 for a FV Rs 1 Share as Iron Ore Prices crossed US $ 140/t

This acqusition will cost over US $ 9 Billion of which Sesa Goa will be investing from it’s cash resources US $ 3 Billion for a 20% stake…. it does not even have this on it’s Balance Sheet currently !….. The Drop in Share Prices of both Sesa Goa and Cairn India reflect the concerns that Investors have on Vedanta’s Corporate Governance and Credibility

Let’s have a quick look at whether such a reaction is a precursor to a further drop in the share prices of both

This is not an overnight acqusition….. negotiations must have commenced months ago with Cairns Group…. connect this with the uptick in Cairns India’s Share Price…. it moved from a range of Rs 150-Rs 200 a year ago, to Rs 200-250 and then from Rs 250-Rs 300 and yesterday zoomed to a High of Rs 368 before reacting to close at Rs 333

So what is Sesa Goa’s role in this Acquisition

Vedanta simply wants US $ 3 Billion from Sesa Goa….it would have created a ruckus to simply borrow all of this inter group…so part of the acquisition of Cairns India to the extent of 20% of the Equity Capital of Cairns India that,’coincidentally’ amounts to US $ 3 billion is to be shown as an Investment in the Books of Sesa Goa

Cairns India has a Share Capital (FV Rs 10)of Rs 1897.34 crs…. 20% of this is Rs 379.5 crs thats 37.95 crs number of Shares… to be exact 379496447 shares…. at Rs 355 that’s Rs 13471 crs…. at the agreed Exchange rate of US $ 1=Rs 46.765 that’s US $ 2.88 Billion…. This is expected to come in from the mandatory open offer of 20% that needs to be made to remaining shareholders….. any shortfall will be purchased from Vedanta’s 51% acquisition… but at a higher price of Rs 405, that’s Vedanta’s cost

So Sesa Goa’s Balance Sheet will merely reflect a movement on the Assets side from Cash to Investments after cashing out on existing Investments to fund this Stake

But the standalone Balance Sheet of Sesa Goa at March 31, 2010 does not support US $ 3 Billion!

Here’s how Sesa Goa looks at March 31,2010

Networth : Rs 7209 crs = Equity Rs 83 crs + Reserves Rs 7126 crs

Represented by : Rs 580 crs Fixed Assets + Rs 5479 crs Investments + Rs 3076 crs Net Current Assets - Rs 1926 crs Loans = Rs 7209 crs

Where is the US $ 3 Billion Cash or @ Rs 13500 crs on the Books of Sesa Goa ! ?….. It’s Balance Sheet Size for total Capital employed is Rs 9135 crs ! (Networth + Loans) !

The Deal is expected to be done by early Fy 2011

So it’s clear that even FY 11 Cash accruals will be used for the Investment and maybe Sesa Goa may raise fresh debt… in 2009/10 it already has issued 5000 5% Coupon Rate FCCBs and raised US $ 500 M… at March 31, 2010, 755 FCCBs had been converted at the prescribed Rs 346.88 per share at a fixed rate of Rs 48 to One US Dollar…. Funds received from the FCCBs are reflected in Fixed Deposits of Rs 2350 crs reflected in Current Assets

So I extrapolated Sesa Goa Balance Sheet at March 31, 2011… To fund the Investment of Rs 13500 crs in Cairns from Cash Reserves, Sesa Goa’s Networth has to climb from Rs 7209 crs to atleast Rs 15000 crs…. This would be through a combination of FCCB Conversion of @ Rs 1900 crs (Unsecured Loans) and Profits near Rs 6000 crs in the year…. The Assets Side would reflect Fixed Assets of Rs 600 crs + Investments of Rs 13500 crs atleast + Net Current Assets of Rs 1000 crs

And the MD of Sesa Goa, P K Muherjee claims that Sesa Goa Capex will not be affected ! and that the Board of Sesa Goa feels this Investment in Cairns India will be beneficial to Sesa Goa Shareholders and will be immediately EPS accretive !

One Interesting way of Looking at this is that if we assume that Sesa Goa will continue to generate atleast US $ 1 Billion ever year in Cash Profits, this Investment in Cairns India is Three Years of Cash Profits.

The Moot evaluation here is to see how this Investment of US $ 3 Billion will bear fruit for Sesa Goa….. This Evaluation is Interesting as I studied the Potential Earnings Capabilities of Cairns India and it’s Dividend Policy and Potential in the future….. The actual cash inflow as returns to Sesa Goa will be through Dividends from Cairns India… as this being a strategic long term Investment it is unlikely to be sold for Gains in the near future

Cairns India has a current production of @ 45000 barrels of Oil per day (boepd)… it plans to raise this to 125000  boepd and then  to 240000 boepd…. at this level of 240000 it will be 25% of India’s Oil Production…. Now One barrel is @ 42 gallons or 159 litres…. thus this would mean 72 Million barrels a year, assuming 300 days of Production… In Q 1 FY 11,the realisation by Cairns was US $ 67/barrel…. taking this realistion, the Annual Revenues for 72 Million Barrels would be US $ 4.8 billion or Rs 23000 crs…. with low production and operating costs Cairns India can be expected to show a Bottomline exceeding US $ One Billion, or near Rs 5000 crs in a few years time…. That’s an EPS Level of over Rs 25…. Dividend Payout should be atleast 20% of this if not more… that’s Rs 5 /share atleast in a few years time

Sesa Goa will hold 37.95 crs shares being 20% of Cairns India’s Equity…. thus it will receive Rs 190 crs as Dividend assuming Rs 5/share Dividend by Cairns…. It has Invested atleast @ Rs 13500 crs ( more if it buys Cairns India shares at Rs 405 from Vedanta)… so the return on Investment is a paltry 1.40% being the Dividend Yeild!…. Of course it will benefit if Cairns India Share Price moves up strongly from the Rs 355 Cost to Sesa Goa…. but this would merely remain a notional gain and cannot reflect in the books….. But will Cairns India move up strongly ?….. If EPS is Rs 25 a few years down the line then on a 15 multiple the Share Price would be Rs 375… and Rs 500 on a 20 multiple

Alternatively Sesa Goa could have used it’s Cash Reserves to generate higher ROI to benefit Shareholders and reward it’s Shareholders with a High Dividend and a higher Valuation for the Company and therefore a Higher Share Price

These Options are now no longer open in the short to medium term as all Monies are to be used for Investment in Cairns India

So how will this affect the Share Price of Sesa Goa !…. I would think in the short term there would be an adverse impact and the share Price could drop below Rs 300

But just hold this thought… even if Other Income figures would not be significant,the PAT from Operations itself could cross Rs 4000 crs atleast…. that’s an EPS of near Rs 45 on Equity of Rs 90 crs (once FCCB’s convert)… Sesa Goa has reacted to Rs 320…. this is just Seven times  FY 11 Projected EPS of Rs 45…. and even a lower multiple if the PAT crosses Rs 6000 crs !….. so the downside in Sesa Goa may be limited as long as the profitability levels from Iron Ore Mining and Exports is sustained… albeit on higher volumes and lower margins

So one can hold on to Sesa Goa at current levels of Rs 320 and Cairns India at Rs 333, but keep monitoring developments and Company Performance

Cheers !

Are you aware of the significance of August 9 ?

It was on this Day in

1942…. that the Quit India Movement began…. to gain Independence

1945…. that USA dropped an Atom Bomb on Nagasaki in Japan during World War II

1974… that President of USA, Richard Nixon resigned due to the Watergate Scandal

…. and also on August 9, 1962, my Mother decided that I needed to stop kicking her from within and begin kicking others on Planet Earth !

…. I’m yet kicking… because it is widely believed that unless Times of India in their ‘Personals’ does not greet you personally on your birthday, like they did BIG Lawyer, Mahesh Jethmalani and BIG Bazaar, Kishore Biyani this morning, you are not BIG !

A ROAR from a Lion to you’ll !….. and especially a BIG ROAR to those who wished on email, sms, skype, phone and Facebook !

…….. Like a close friend observing that a Hug is like a Boomerang… you get it right back…. I asked her if she had ever tried hugging a Bear !?… she said she would leave that to me !…. and I said I’ve already done this !… you see in my line of work, my Wife is the Bear and I’m the Bull !

……. Like another wishing me Many Happy Returns of the Day… and I tell her that unless I celebrate, I observe I don’t get Happy ‘Returns’… if you know what I mean

…… and my niece said “Mamu, Happy Birthday”… and I just saw ‘Munnabhai MBBS’ yet again on TV last night and so ‘Mamu’ was fresh in my mind…. but niece’s ‘mamu’ denoted a family relationship… so that’s alright

……. and one wisely wished me hoping that ‘May the Stock markets go up and up and up …..”… you see that we often corelate Happiness with an Up and UP and Buoyant Stock Market!… believing that these two are not inversely corelated !

……. and  Incidentally, one of my cubs thinks ROAR stands for ‘ Rights Of A Retard !’…. she’s not getting her Allowance this week !

Cheers !

Sinecure….. A Paid Job requiring little or no work

Now wouldn’t all of us just love a Sinecure !

Have come across this word several times and recently here in the Editorial of the Monday,August 2,2010 Edition of the Mumbai Tabloid, The Afternoon & Despatch Courier

http://afternoondc.in/afternoondc/editorial/higher-judiciary-too-cut-from-the-same-tattered-cloth-isnt-it/article_6327

It reveals that a few years ago, a Delhi High Court Judge, in what would appear to have to be a quid pro quo, was given a Sinecure, on retirement, in a quasi judicial body by the CM of Delhi because he squashed suo motu the Bofors FIR and lavished praise on our late PM, Rajiv Gandhi

The same article reveals that the Supreme Court Judge who signed the Order for CBI to close out the Shorabuddin Sheikh Investigation by a certain deadline was actually acused by the CBI itself for being a beneficiary of the Provident Funds Scam that rocked the Ghaziabad Courts…. seems he was exonerated just before retirement and CBI removed his name from the List of those who ought to be penalised for the PF Scam !….. shamming what the Congress Spokesmen have been ad nauseam repeating recently on Media News Channels that this is not a Vendetta against the Gujarat CM, Narendra Modi but this CBI Investigation is directed by the Supreme Court !… and Congress has nothing to do with it !

Mind you , I hold no brief for any one here….. No one’s a Saint here….. but I’ve always held that if it were not for our Judiciary and Media,our Politicians and Bureaucrats would have sold off even our Qutb Minar !….. Sadly and Dangerously too this View has been shaken in recent times

I’m sure there are many more instances of quid pro quo Sinecure !

“India is a Spiritual Mecca”…. Wow !… in just one brief observation, this Catholic Born, ‘Pretty Woman’, and  Hollywood Star, Julia Roberts, has combined Hindusim and Islam….

Roberts, now says she’s a “Practising Hindu”….. “I’ve been so spoiled with my Friends and Family in this Life. Next Time I want to be just something quiet and supporting”… she clearly wants to live a more Peaceful Existence in her next incarnation.

Just for the record, a few years ago, Roberts was the highest earning Hollywood Actress… she grossed over US $ 20 million in a  single year…. and just for the record it has just been announced that Sandra Bullock has grossed the highest for 2009… US $ 56 Million… beating Reese Witherspoon and Cameron Diaz by a long shot

And Just for the record, and if it does interest anyone, I’m born a Hindu but am a ‘Practising Secular’!… and don’t earn such Millions !

CommonWealth Games but UnCommonWealth Opportunities

Really Sad…..Corruption refuses to recede…. again rears it’s ugly head…Now at the Commonwealth Games Organising Committee

It’s adding to this India’s Hall of Shame of Thousands of Crores….Defence Scams……Mining Scams….Telecom Scams….Sports Scams

Are we a Shameless Nation with no Conscience where Corruption is concerned !?….Patriotism and Pride confront Reality

I remember 1982…and the Asian Games ,New Delhi…..was a 20 year old in college in Mumbai….and 14 of us formed a Group….stood in shifts overnight in Lines for Tickets for various Games Disciplines…got a 50% Railways Travel Discount as Students…. and thoroughly enjoyed the Asian Games…it was great Fun…interacting with the Singapore Sports Team on Janpath……cheering the English in the Equestrian Events….interacting with a Host of other nationalities…..and ofcourse cheering our wrestlers,boxers,athletes,swimmers,tennis,badminton  and table tennis stars and  our Hockey Team at the Events…New Delhi was one Big Festive City….A single Bus Pass took us around all Stadiums…Security was tight even then…..it was an experience that I was fortunate to see in person,while most sat at homes at viewed it on TV,many on the ’in demand’ Sony Wooden Box Model 5052 ! 

That was New Delhi then…Only Congress…no BJP…..only Door Darshan TV Channel….no Hundreds of Channels,Public and Private….and so virtually no external TV Media Scrutiny….Sportsmen and Women Playing for Country’s Pride…Games that cost a few Hundreds of Crores

This is New Delhi Now……Congress and BJP and a Host of other Political parties with a selfish coalition running India…..and Hundreds of TV Channels….RTI Act and extensive External Media Scrutiny…..Leading World Sports Personalities Dropping out of the Commonwealth Games on some pretext or the other…Games that have ballooning Costs of over Rs 11000 crs directly and over Rs 30000 crs if one includes building up our Capital’s Infrastructure that will benefit beyond the Games

We are taught to think Big and think Scale…..So with such Mega Bucks involved in organising the Commonwealth Games,even Corruption is being uncovered on Scale !…so if aggregate direct and indirect costs to host this Commonwealth games are close to Rs 35000 crs or close to US $ 8 Billion Dollars,it can be safely assumed that there will be leakage of atleast US $ One Billion at the least…an aggressive guess would be close to US $ 3 Billion !…Phew !  

What’s Integrity to An Opportunity !

What’s the Point of Naming Names ! ?…..Tell me who is not Corrupt….who does not abuse their Position and Power in Bureacracy,Business and Politics ?….who does not have a nexus with Criminals to further their vested interests?….I’m not talking of Exceptions to the Rule !….I strain my eyes to spot any selfless and visionary in our Political Set Up….my vision is getting blurred  

I’m afraid,it looks like even the Judiciary is made from the same Cloth that drapes our Executive and Legislature Arms….A True Democracy can only Thrive when these arms function Independently of each other’s Vested Influences

With Political Leaders and Parties either being Mute Spectators, Passive Observers or even defending,often too aggressively, all the Ministers,Leaders and Bureaucrats that are suspected to be involved or instrumental in the Scams stating that these are only accusations and they are all innocent till proven guilty is nothing but creating  complicity in the Scams

India’s 1.2 Billion People are being shorted by it’s Political Leaders and Parties to further their own interests and those of their Party….’Aam Aadmi’ be damned !….Often Party Spokesmen stoop to such levels in their ramblngs on TV News Channels that methinks they need Medical Counselling……they may win Comedy Shows but will lose in IQ Tests !….and most of them are Practising Lawyers by Profession !….rest my case !

Just under Two Months are left for the Games to begin…….We must deliver a Fabulous Commonwealth Games…….Ideally this Organising Committe should be superseded immediately by People of the Highest Integrity and Propriety in India to ensure Full Transperancy and Accountability and Respectability and Credibility too……This Government owes it to all of us…….However the ‘Not Enough Time’ Argument may just save this Organising Committee….but methinks that if they should be allowed to complete the arrangements it should be under new supervison of a High Level Panel of Three Above Board Leading Luminaries….that much atleast should be done today itself !    

With such controversies we now definitely need Divine Intervention from all our Gods to make a success of the Commonwealth Games 2010 in New Delhi 

Only Then can India be a serious bidder for the Olympic Games sometime early in this 21st Century and while I’m yet blogging!

Those who are involved in uncommonly privatising wealth in these Commonwealth Games surely will have to face their conscience…they live on a round earth and sooner or later their indiscretions and indulgencies will catch up with them full circle…either from serious Introspection or by Investigation….I’m sure of this   

Whatever….I love Sports…am a Sports Fanatic….and I’m going to enjoy the Commonwealth Games,New Delhi,2010…in full Spirit and Substance

Cheers !

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 !