Hey ! Manoj…this blog on Resurgere Mines and Minerals is on your request…..and it’s in  Red,some bold, for obvious reasons……..

What’s happening is that the Share Price is free falling ad racing downhill in Resurgence Mines & Minerals…..Ridiculous Situation….it’s rattling the Markets and destroying Investors and Traders

But this was always a Suspect Scrip right from Listing two years ago….One simply should not have flirted with it ever…devil in disguise!?

Headed by Subhash and Amit Sharma,Resurgere had its IPO in August 2008 in the Price band of Rs 263 to Rs 272 and the Price was fixed at Rs 270….FV is Rs 10….IPO Size was Rs 120 crs with issuance of 44.50 lakh shares….It got listed on BSE and NSE on September 1,2008 and was clearly manipulated to zoom to close at Rs 524…next day it zoomed again to Rs 626…then dropped on the third day,fourth and fifth day to Rs 500,Rs 400 and Rs 300 respectively….and thus inside five days of Listing the IPO Investor Returns Story ended !….it’s been downhill since then and touched a woeful Rs 36 on March 9,2009….it was issued just six months earlier at Rs 270!

Resurgere is simply poisoning all those who are drinking it…it’s like being lured to vist those tempting ‘Girlie Bars’ only to get drunk and realise,a bit too late, on getting sober that you’ve been stripped and robbed after your drink was spiked ! 

Resurgere seems to be simply digging Mines to extract ore and dump and bury it’s Investors in !  

I normally do not cover such companies that

• Appear as a strong recommendation in repeated unsolicited SMSes
• Appear regularly in Bulk Deals….Tool to rig volumes and prices to show false hyper activity
• Auditors have been changed inside months of listing….Resurgere did so in June 2009
• Earn well but skip dividends…creating doubt if earnings are truly genuine  
• New Non Executive & Independent Directors enter and exit the Board inside a year of the IPO as if it’s some Garden Party and they are merely Guests…have a look below

Directors who have exited

Pradeep Bishnoi…Appointed Whole Time Director post IPO on 16/10/2008….Resigned  in  eight months 19/6/2009

Aditya Singh…..Appointed Non Executive Independent Director on 16/10/2008…Resigned inside seven months on 8/5/2009

Suresh Kumar Singh….Appointed Non Executive Independent Director on 16/10/2008…Resigned inside eight months on 10/6/2009

I D Agarwal and Burzin Somandy…both  Non Executive Independent Directors resigned in August 2010

Non Executive and Independent Directors just appointed in August 2010

Ashwin Shankar Iyer and Ajay Sethi

It is High time that SEBI must make it mandatory for resigning Directors to specify the real reason that they are resigning…and that too within months of being appointed  

Post IPO GDR Issue,Conversion of Warrants and Announcement of Liberal Bonus and Split

On July 27,2010,Resurgere announced a liberal Bonus of 2:1 and Split in Face Value of the Equity Share from Rs 10 to Rs 1!…Price surged to Rs 146 and closed at Rs 140 on that day

Post IPO Capital was Rs 28.54 crs…Then In June 2010 it announced that it has successfully placed 5208333 GDRs @ US $ 10.32 each aggregating US $ 53.75 Million representing 31249998 Equity Shares at Rs 75…that’s a Rs 234 crs Issue…..in fact more than doubled the Equity !….On August 26,2010 it announced that 65 lakh Equity warrants will be converted to similar number of shares…..(This has been considered at Rs 75) Thus Equity Capital is now to be Rs 66.29 crs of FV Rs 10….With Bonus this will jump to Rs 198.87 crs !

The Reserves that were Rs 357 crs at March 31,2010 were boosted by an incremental Rs 203 crs to Rs 560 crs because of the GDR issue….This Issue also took the networth to Rs 620 crs….Book Value was adjusted from Rs 135 at March 31,2010 to Rs 103 on this issue and Rs 100 on conversion of warrants…it will further adjust to Rs 3.50 after the Bonus and Split and an assumption of Rs 30 crs PAT for the Current year…Reserves would be close to Rs 500 crs

Today the Share Price closed at Rs 69 cum bonus and cum split after hitting a 52 week low of Rs 62 on NSE…if you adjust for this the ex bonus and ex split price computes to just Rs 2.30  for  share of FV Rs 1!…Such Corporate Actions simply serve no purpose other than facilitating Price manipulation on the Bourses

In 2010 it earned Rs 27.50 crs and an EPS of near Rs 10…yet it failed to issue a Dividend….It’s latest quarter earnings at June 30,2010 are just above Rs 12 crs

Mines over 320 acres in Jharkhand has been reclaimed by the State Government from the leaseholder and Resurgere,who had taken a sub lease after paying a security deposit of Rs 10 crs and Advance Royalty of Rs 15 crs is unable to mine iron ore from these mines

So what will Resurgere earn in the coming year or two ?….I have assumed it will  continue to record atleast Rs 30 crs PAT….may show higher to seduce new ‘bakra’ investors 

As Corporate Governance issues surface,I’m sure SEBI,BSE and NSE will take this company to task…..wonder what’s taking them so long!

Nothing to Cheer about Resurgere…remember Austral Coke !…you can search it on this blog….Investors were destroyed there too after SEBI allowed the IPO despite significant controversies being raised

Sad…….

I have two Primary Issues…and several related ones….. with this SKS Microfinance Primary Issue

• Microfinance Industry emerged to alleviate Poverty by providing access of basic financial services like Loans and microinsurance to the poor…..I am frowning at this attempt to commercialise this Industry through an IPO at such a High Premium
• I am not going to contribute to the Profits of Pre IPO Shareholders…especially Sequoia Capital…. who are offering for Sale their Shares in this SKS Microfinance IPO that has opened today !

  16.79 Million Shares are on offer in the price band Rs 850 to Rs 985 !….of which only 7.45 million shares are Fresh Issue with IPO proceeds going to the Company while 9.34 Million Shares are Offer for Sale by Existing Investors…In fact Sequoia Capital,termed as a Promoter, is offloading 3.99 million shares in this IPO of their 9.1 million shares and will bring down their holding from 14.1 % Pre IPO Equity of Rs 64.52 crs to 7.1 % of Post IPO Equity of Rs 71.97 crs….Their average acquisition cost is Rs 61.18 only and they have been allotted shares in 2007 and 2008 in three tranches at Rs 49.77,Rs 70.67 and Rs 103.91….Just Imagine….Sequoia paid just under Rs 56 crs for their 9.1 million shares….If Rs 985 Top end Price is fixed for this IPO,the 3.99 million shares they are offering on sale will fetch them Rs 393 crs !…so they make a whopping near Rs 337 crs over their aggregate cost  for shares held for just  two to three years and yet have 5.1 million shares remaining with them !…reminds me of a similar ploy by Citigroup and Chrys Capital in the Suzlon issue a few years ago ! (Search my blog for this)                                                                                                                   There is something not right in Promoters enriching themselves handsomely by part cashing out in the IPO or pre IPO….In fact the Chief Promoter,Vikram Akula sold 9.45 lakh of his Shares just this year in February 2010 to Tree Line Asia Master Fund (Singapore) for US $ 12.92 million (works out to @ Rs 637)…In fact several top Employees also sold part of their Esop shareholdings to Tree Line for Rs 636.72….Encashing Profits of Crores like this just before the IPO brings into question Promoter and Top Management Committment to the Company….Maybe Legal…but….Feels like they are itching to exit at Rs 985 as they may not get this price again!….and inside a year Shareholders have been allotted Shares even at Rs 300….from here to the Gains are over 200%….Even after the IPO,the Pre IPO Shareholders will hold nearly 77% of the Post IPO Equity….This would entitle them to 77% of the Networth….which would have been substantially built by the Public who are paying Rs 985 per share in the IPO !…Nah !…now why would the Public do this ! ?…they are merely looking at one side of the Equation that they will benefit from the Share Price above Rs 985….they fail to see that their Rs 985 is creating Huge Assets of which they will merely own 23%…..while 77% will be owned by Pre IPO Shareholders who have contributed in the past one to three years just an average acquisition price of  Rs 24.54 to Rs 137.53 (Promoters) and upto just Rs 300 for Non Promoters     

While contending with my emotions on the above two issues, the High,near obscene IPO Price Band of Rs 850 to Rs 985 makes it easier for me to say ‘No’ to this Issue

One pays such high Premiums for a Rs 10 Face Value Share only if excited on massive non linear growth in Profits coming up in the near future and significant scalability of Operations…..but when over half of the Shares on Offer are actually Offer for Sale by existing Shareholders,one needs to be on alert and say “Hey ! Hold On ! Let’s have a better look at this !”

At Top end Rs 985 the IPO Size is Rs 1650 + crs of which only Rs 734 crs will go to the Company…..Market Cap will cross Rs 7200 crs if listing is around these levels

In my humble Opinion,Rs 850 to Rs 985 is simply too high a Price to pay right now for SKS Microfinance,despite the scalability potential…have a look at the past five years selected financials

 Now the Post IPO Equity will be Rs 71.97 crs and at Rs 985 Top end the Net IPO Proceeds that will accrue to the Company will be Rs 734 crs…thus Networth will move from Rs 950 crs at March 31,2010 to Rs 1730  + crs post IPO assuming Q1 Profits of Rs 50 crs…that’s a Book Value of Rs 240….this is a 4 Book Multiple of Top End Price of Rs 985

What SKS Microfinance is attempting to do with such a High Premium IPO is what Reliance Power and even Future Capital Holdings did in the past in 2008 !…Create High Networth through Obscene Premiums and Minimum Equity Dilution ….and both are quoted horribly below IPO Pricing….In fact Biyani’s Future Capital Holdings came at Rs 765 in January 2008…It’s Rs 247 today !…. 

However SKS Microfinance may not quote horribly below IPO Pricing because of scalability potential….in fact Rs 50 is the grey market Premium currently….Optimists can look at it this way…At March 31,2010 it showed  a Networth of Rs 950 crs and a PAT of Rs 175 crs…At March 31,2011 it will surely show a Networth of near Rs 2000 crs and a possible PAT of Rs 250 crs….that’s yet a high 28 multiple on a Possible FY 11 EPS of Rs 35 at Rs 985 IPO Price…now if it’s a straight double networth and double profits that means a PAT of Rs 350 crs,an EPS of Rs 49 and a Earnings Multiple of 20 !

I’m not recommending this Issue…but if you want to contribute to the Profits of Sequoia…be my guest !

An ABBA songs comes to my mind ” Money ! Money ! Money !…it’s a Rich Man’s World !”

Intentions of Promoters and Pre IPO Shareholders may be Noble….but Actions are clearly Profit Motivated and not singularly Selfless

Cheers !

I’m Looking Beyond the Financials here…..at the Standard Chartered Bank (SCB) INDIAN DEPOSITORY RECEIPTS (IDRs) Issue….am not inclined to recommend Investment,although the Pricing looks reasonable and it will not form part of the Overseas Investment Annual Limit of US $ 200k per Indian Citizen….probably a contrarion here as all seem to be recommending the IDR….I’m a bit worried about the Exchange Rate Risk involved…in that the Rupee may appreciate and as the underlying SCB Share is quoted in Pence and HK $ it would impact the Rupee Quote on BSE and NSE….Is my thinking conceptually flawed on this risk ?…do let me know 

I’ll let the IDR List and take a call on it as a Secondary Market Investment

Standard Chartered Bank,that is the sponsor of the Mumbai Marathon since it’s inception a few years ago,has just launched INDIAN DEPOSITORY RECEIPTS (IDRs) in India

The IDR Issue Specifics

The IDRs have been priced in the range of Rs 100 to Rs 115 with 10 IDRs equivalent to one SCB Share of US $ 0.50 Face Value…240 Million IDRs are on offer,with QIB reservation at 50%,Non Institutional at 20% and Retail at 30%…The Issue Opened on May 25,2010 and shall close on May 28,2010

Issue Price Range is at Relatively Reasonable Valuations on both Earnings and Assets basis 

Assets Basis

At December 31,2009,SCB had a Consolidated Networth ,net of Minority Interests of US $ 27340 Million,with Equity at US $ 1013 Million ( FV US $ 0.50) and Reserves at US $ 26327 million…That’s US $ 13.50/share or Rs 635/share (US $=Rs 47)….With 10 IDRs=One Share,it translates to Issue Price of Rs 1050/share,assuming the Pricing is finalised at Rs 105….That’s a Price to BV of just 1.65….The Networth should move towards US  $ 31000 million at December 31,2010 with Profits net of dividend of @ US $ 3000 million and IDR Proceeds of @ US $ 536 million (assuming Rs 105 pricing and Exchange rate of Rs 47 to the Dollar)…Equity will move up marginally to US $ 1025 million.The Book Value/Share would be @ US $ 15/share or Rs 705…The FY 10 P/BV would then drop to 1.5….   This is a shade lower than even the 1.6 projected for FY 11 March ending for  ICICI Bank and State Bank of India…and significantly lower than the over 2 times projected for Axis bank,HDFC Bank and Yes Bank…It’s more on less equal to that projected for overseas Banks like Westpac and National Australian Bank in Australia and even those in Hong Kong ….so the IDR is not priced  high on Assets basis

Earnings Basis

in 2009 SCB earned a consolidated US $ 3892 million  net of minority interest…That translates to Rs 18300 crs and an EPS of US $ 1.92 or Rs 90 based on 2025 million shares at December 31,2009…No of Shares will go up to 2049 million and Projected EPS would be US $ 2.10 or Rs 99…that’s a muiltiple of under 11 times at computed Share Price of Rs 1050,assuming IDR Price assumed Issue Price of Rs 105….This compares well with the higher earnings multiples afforded to the Banks named above

A word of caution…..

• As the IDR is not covered by the Securities Act ,Securities Transactions Tax will not be applicable on Trades….thus one  will not get the benefit of nil tax on Long term gains and lower tax rate on short term gains…Gains will be added to total taxable income and taxed on the applicable…for high earners the rate would cross 30% ….in any case the New Direct Taxes Code that is scheduled to be implemented from next year will provide a level playing field as it does away with STT and also any distinction between short term and long term gains….though there is hope that the Code is modified to revert to existing scenarios  
• As FIIs and Insurance Funds are not allowed to participate in the IDRs,the shareholder base would be missing these two significant categories…therefore interest even on listing could be muted
• There is no reverse fungibility…after a one year lock in, 10 IDRs can be converted to One SCB Share…but such a share can be held for a maximum of 30 days only and must be sold off and cannot be reconverted back to IDRs  
• As the IDR’s underlying is the SCB share,the Rupee quotes on BSE and NSE will reflect the quotes on London Stock Exchange which are in Pence and those on Hong Kong Stock Exchange which are in HK $…therefore Changes in Exchange Rates between the Pound and the HK $ on one side and the Rupee on the other will also impact the Rupee Quotes….and to make this even more complicated,the Face Value of the SCB Ordinary Share is designated in US $ at US $ 0.50 per share….With pan Asia Operations SCB took a US $ 2.8 Billion hit on FX Translations in 2008 and less in 2009…have a Look at the Exchange rate Impact on Indian Quotes….I’m not even considering the impact of Earnings and Multiples  

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 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 !

It’s not some startling truth that I’m revealing to you…..but deliberate misguidance has been a major weapon in the armoury of Investment Icons….I daresay when they play ‘Scale’ they will make monies only when you lose !….in that they influence and guide you to take contrary positions to what they actually do !…It’s a common occurrence in India Too…so when you Hear the experts on the stock channels,do play devils advocate and be skeptic…it could save you a lot of Money !

Last few days ,I have come across some very astute observations,which have gone largely unreported in the Press…deliberately so…you’ll understand why as you read this Blog

Our Vice President,Mr Hamid Ansari, gave a speech in January which highlighted the dangers of this fast growing practice of ‘Paid News’ in leading Newspapers with a National Footprint….he spoke of the potential danger of destabilising the Polity and Economy of India through this practice of  ’Buying Newspaper and Television Space’ to promote Interests by spreading what one wants to deliberately disseminate

The way I look at this is that this ‘Paid News’ is a way of legitimising an age old practice of wooing top Journalists and editors to plant headline stories !….I know of one leading ex-editor of a top Pink Paper who unabashedly indulged in this practice and was rewarded handsomely and regularly,obviously not on records!, by a top Industrial House….he also shamefully,in the 1980s,as if it was his right, ordered promoters of New Companies to allot shares to him from their quotas before the IPOs…made a killing from such cornered and preferred Investments !…SEBI and Demat came later in the 1990s…In return the Company’s IPO was reported favourably with high ratings…guaranteeing oversubscription and a high price on listing !

M V Kamath reported in his column in Mumbai’s daily tabloid that the Vice Prersident’s speech was covered only by ‘Hindu’….the others,deliberately did not cover it as they were the ‘ire’ of the Speech for resorting to ‘Paid News’…Money Matters,not Content !   

So don’t believe everything you read ! 

But more Interesting to me,is the accusations being levelled at two of our biggest Investment Icons in the World….Warren Buffett and George Soros

Both have been “talking their book”….giving opinions contrary to what they actually are implementing in their investment strategies 

Why would they do this ?….obviously to help them profit from their strategies…they would do so,only when those holding contrary positions to theirs lose…and the irony is that these contrary Investors would have lost if they followed or were guided by the stated ‘Opinions’ of these Icons! 

In 2009,Warren Buffett had heavily shorted the US Dollar and continued to ‘opine’ of it’s weakness…what he however was quietly doing was short covering the Dollar as it was clearly rebounding in the short term. so he’s being accused of fooling people for a short time to square up and exit his short position at a profit 

Then just last month in January 2010,in Davos in Switzerland, George Soros stated “The ultimate asset bubble is gold.” ….But SEC records reveal that Soros Fund Management had purchased 6.2 million shares of the SPDR Gold Trust ETF (NYSE: GLD) for $663 million !

Now this is what Soros said in the 1990s

Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited.

So who do you trust for Investment Advice with Integrity and no Vested Interests !?….Let me know if anyone fits the Bill !

Cheers !

I blog yet again after reviewing it’s latest financials

Performance of BSE

BSE has posted it’s half yearly performance at September 30,2009 on it’s site

The results are dated December 5,2009 and signed by the MD & CEO ( no name !)

Here’s the long and short of the audited numbers for the Half Year Performance at September 30,2009

• It has earned a lower net of Rs 113 crs in the first half of FY 2010 against Rs 117 crs in a similar period last year…For Full year 2009 it had earned Rs 213 crs
• The Total Income was higher at Rs 256 crs against Rs 214 crs…Full Year 2009 Income was Rs 421 crs
• The Exchange depends significantly on Income from Trading Members and from Investments and Deposits…these are 30% and 54% of Total Income respectively…an aggregate of Rs 84%
• The bonus enhanced (12:1) Equity is now Rs 10.29 crs from just 0.79 crs last year…Face Value is Rs 1
• The adjusted EPS is Rs 9.86 against Rs 10.34…Full Year 2009 EPS was Rs 18.67
• Reserves were Rs 1718 crs at March 31,2009 and would have moved up past Rs 1830 crs with this half year profits in the current year
• The Book Value would thus compute to Rs 169 at March 31,2009 and currently moves up to Rs 179

Valuation of BSE

The long awaited Listing of BSE is ,well,yet awaited !…BSE even issued a 12:1 Bonus to bring the Equity Capital to above Rs 10 crs as this was the minimum required for a Listing on the NSE

BSE had wished to list it’s shares on it’s own Exchange without an IPO, while SEBI is insisting on an IPO 

So what should be the Value of the BSE’s Share ?

On an Earnings Multiple basis an EPS of Rs 20 for FY 10 and a 20 Multiple would indicate a Value of Rs 400….On an Assets Basis and a Book Value of close to Rs 190 and a Multiple of 2,the Value would be Rs 380 

For all those who Bought BSE Share at Rs 5200

A few years ago,when Mr Rajnikant Patel was the MD of BSE,Member Brokers were invited to tender any part of 10000 shares allotted to them when the Exchange became a Company.The Price fixed was Rs 5200.These shares were then placed with overseas Bourses and Institutions.

Many Share Brokers tendered 4000 to 5000 shares and received upward of Rs 2 crs for the sale and many got out of financial troubles they were experiencing.

Adjusted for the Bonus of 12:1,the buyers of these shares at Rs 5200 now have a holding cost of Rs 400

The Current Performance indicates such a Value as opined above…so they would be happy to have atleast recovered their cost price,albeit even notionally in value

For those who did not sell any shares,the original 10000 shares allotted to them have now gone upto 130000 shares because of the bonus…At the Value of Rs 400,these are now worth Rs 5.2 crs…and the hypothetical Market Cap of BSE’s Equity of Rs 10.29 crs (FV Rs 1) would be Rs over Rs 4100 crs

Peer Valuation:Comparing with London Stock Exchange 

If we have a look at the Share Price of the Listed, London Stock Exchange on it’s own Exchange we find it is just over 710 p ,at a P/E of just under 10

If we use this Comparative 10 Multiple for BSE,then the Value of the BSE Share would be halved at Rs 200 only…that’s a hypothetical Market Cap of just over Rs 2000 crs an would mean that those who acquired the Share at Rs 5200 and have an adjusted holding cost of Rs 400 would be losing half their monies

Methinks,that BSE is in Emerging India with great potential and desrves a better Earnings Multiple than the 10 that LSE gets…I have taken 20 above…seems fair…optimists would argue for a yet higher multiple…I would have some reservations on this optimism….as the competition is heating up and MCX is ready to launch it’s own Stock Exchange…and more than BSE,it has been MCX that has emerged as a serious competitor to the leader,NSE…Derivatives Trading has been a Non starter at the BSE,despite several attempts to revive it

So if someone is offering the BSE Share to you at Rs 200-Rs 250,it’s interesting…not at Rs 400 though…the wait for Listing could be late into 2010 at that too at the earliest !

BSE was born in 1875…135 years ago….it’s tough and will survive….hope the new top team …Indians imported from USA…..delivers on all fronts…particularly on Corporate Governance

Yesterday there was a change of CEO guard at Jet Airways…The Austrian,Wolfgang Prock Schauer makes way for Nikos Kardassis after a tenure of six years…Schauer was quite emotional at the press meet yesterday…how he loved India and had steered Jet from loss to profit and from 40 planes to 110 planes and the IPO in 2005…He spoke lovingly to the media,appreciating the job that they do in communicating to investors….but he should spare a thought about the Investors themselves !  

The stark fact remains how an outlandish IPO Pricing can ruin the company and the shareholders…they issued the share in 2005 at Rs 1100….It got listed on March 14,2005 and touched a high of Rs 1339 that day and a few weeks later an all time high of Rs 1382……It never really took off and the share price has been landing ever since !….Promoter Naresh Goyal hold 80% of the Equity of Rs 86 crs,nearly all of it through Tail Winds Ltd…This itself had raised a stink as to who really owns Tail Winds…whose money really was being routed here !…Of course Promoters never bring in Monies at the IPO Pricing like we do !…if they do,it’s only a token shareholding…whether it be the Tantis of Suzlon or even Anil Ambani of Reliance Power or Goyal of Jet Airways….their shareholding is mostly at par and not at premium…so our risk is significantly more than theirs.

Jet Airway’s Share Price opened 2006 below Rs 1000 and 2007 below Rs 650 !…In the euphoric end 2007 and early 2008,it climbed back past Rs 1000 and then simply crashed to Rs 130 end October 2008 and even lower at Rs 115 in the first half of March this year ! It recovered to the Rs 250-Rs 300 range and has only just spurted past Rs 400

The Aviation Sector is reeling worldwide and India is no exception…Recession,Intense Competition,High Operating Costs,High Aviation Fuel Price and Mindless Expansion are some of the reasons for this state of affairs….Jet has declared a Q1 FY 10 loss of Rs 225 crs…the tough conditions are expected to continue 

Rs 1100 at a 10% CAGR in a Bank’s Fixed Deposit would have fetched you close to Rs 1800 in Five years…Instead with the share price of Jet at Rs 430 today,IPO shareholders still holding out in hope would have seen an erosion of 60%…better than the 90% erosion when price had crashed to Rs 115 in March this year ! 

This should be a great lesson to genuine companies who have a sustainable business model….if you obscenely price your IPO,you will end up screwing both,your shareholders and yourself !….If you want to command long term loyalty be fair in your pricing…leave something on the table for the shareholders to swear by you and not at you !

Cheers !  

Thinksoft Global Services,a Chennai based financial software testing service  is seducing you with a bookbuilding IPO in the band of Rs 120-Rs 130….Issue opens today and closes two days hence on Thursday,September 24,2009

Don’t ThinkHard on ThinkSoft !…ignore the Issue…this issue clearly is an exit route for an existing shareholder

The IPO is for 36.46 lakh shares…of which just one-third, 13.50 lakh shares are a fresh issue,while two-thirds, 22.96 lakh shares are being offered for sale by the Gibraltar based Euro Indo Investments…so the Company would get just Rs 17.55 crs at the top end price of Rs 130 to fund a planned 400 seat facility in the Madras Export Processing Zone…..while an existing shareholder would pocket Rs 29.85 crs while offloading 90% of it’s stake held in Thinksoft Global Services

ICRA has rated the IPO as Grade 2,indicating below average fundamentals

I’m taking both,the rating agency ICRA and the selling shareholder Euro Indo Investments, at face value here and not even going into the Company Fundamentals and IPO Pricing  

Yes,I know the IPO of Pipavav Shipyard Ltd  is oversubscribed and it closes today…..but pip-avoid Pipavav Shipyard

The IPO Price band of Rs 55-Rs 60 for an Equity Share of Face Value of Rs 10 is obscene in the first place and this 11 year old (an adult in context of Corporate Existence !) child is tapping at your car window with the traffic light at red and begging you for Rs 60 !..Red means Stop!…Stop even considering this IPO

God help those who were placed shares at Rs 80 pre-IPO !

I’m convinced you’ll get it at Rs 40 and even lower in the secondary market,when you can consider some exposure if you like the Sector and the Company’s Business Model and Prospects…I remain very skeptical though….an ex-head of a leading Institution who has dealt with this Company in the past supports my View…says he,”Avoid”…and it’s not just the Obscene Pricing that’s bothering and putting off both of us