Adieu 2010…Welcome 2011

They Say Our Life’s Expectancy is measured by the Number of Breathes we take…there’s a finite number pre ordained for each one of us….so here’s wishing that you take fewer Breathes in 2011,so that you live longer !

So Breathe Deeply and make your New Year Resolutions….and Breathe Deeper when you break them !

Given you some really huge Multibaggers in the 21st Century…Matrix Labs,Mercator Lines,Essar Oil,Sagar Cements,ICSA,Sesa Goa to name a few….have positioned you with a few more for the coming years

Let’s Hope 2011 throws up a real ‘Magic’ & ‘Miracle’ Stock up for you that makes you ‘breathless’! (so you live longer too!..refer up) and revs your Equity Portfolio up so fast that you can take an early retirement !….Maybe I’ll spot one for clients yet again…Now ! Now ! I said Maybe !

….but what I do promise on my blog is to keep warning you to stay away from Companies that seduce or are simply scandalously overpriced !…like Emami Infrastructure was when it got listed on the demerger !…High of Rs 600 on the NSE !…. and at Rs 100 + it was widely thought to have stabilised…it’s down to Rs 35-Rs 45 range now  within months !   

Cheers !   

Interesting press piece in today’s DNA….

105 scribes killed on job this year….

Media Watchdog Press Emblem Campaign released this figure describing the killing of reporters as an “epidemic with no cure”…in 2009,the figure was higher at 122 and in 2008 there were 91 journalists killed…Over five years ,529 journalists have been killed with over a fifth of them in Iraq….Mexico and Pakistan have been the most dangerous countries for media workers to report from in 2010

A Reflex Amusing but Angry Thought comes to mind…if financial reporting is covered then the notional killings of all those ‘experts and anchors and reporters’ that proliferate the Stock TV Channels and Print Media would have easily crossed 100 !….and the count of victims,that are the helpless and hapless Traders and Investors who are TV addicts glued to the Stock Channels,would easily have crossed over 10000 !

Cheers !

“It’s Spiritual and Healing”…she had said….the Touch’s the same,the Feeling’s not…she’s not said

Wishing all of you Christmas Cheer….If you’re going to ’Bottoms Up’ Drink or ‘Top Down’ Invest or vice versa…do so safely and wisely…and cheerfully

That time of the year when you need to reaffirm your Faith in Santa and Sensex…and you shall be rewarded

Enjoy the Chill with Family and Friends…time for some Hot Chocolate !

Cheers ! 

A2Z Maintenance & Engineering Services Ltd….IPO had scraped through at Rs 400…helped by High Net Worth Applications…probably a back up plan…..  as both the other segments QIBs and Retail were undersubscribed…..got a stressful Listing today…High/Low of Rs 398 +/Rs 318+ on BSE…did not even record the Issue Price at the Lower end of the Band of Rs 400….Interestingly Reliance Capital Group owns 37 lakh + shares as disclosed in the pre listing Shareholding at December 18,2010…Anchor Investors for @ Rs 148 crs at Rs 400/share…they’re down by Rs 27 crs today !  

…..in the news for  Rakesh Jhunjhunwala having made a huge bonanza in this Company…Invested Rs 20 crs for a 21% stake in May 2006 when it was a Private Company…Pre IPO he held 1.21 cr shares and offloaded @ 5 lakh shares in the IPO to get back the initial Rs 20 crs Invested…the rest is locked in for one year…he should have held 1.42 cr shares at an average cost of Rs 14/share,but after the first bonus of 11:1 on August 10,2007,he had 5698776 shares shares of which he sold 448776 shares at Rs 34.89 (this was his average cost of holding at that time) on August 20,2007 to 11 persons and got Rs 1.57 crs….Then in August/September 2009 he gifted 429550 shares to 13 persons before the last Bonus of 3:2 given on March 18,2010…thus his holding just prior to the IPO was 12051125 shares at a net Investment of Rs 18.43 crs giving an average cost of  Rs 15.3/share…so he’s got his bonanza of Rs 380 crs gains in 4 and a half years….nearly all of it is notional as lock in applies for a year….assuming the Share Price even after a year remains at Rs 330 levels,the gains could be realised…that’s a CAGR of a superb @ 82%

…..but those who were allotted the Shares in the IPO at Rs 400 are down 18% already on the first day’s closing BSE price of Rs 328.90

…if you are one of these over 12000 stressed out A2Z IPO allottees maybe you ought to try out another A2Z Service !…..those A2Z Relaxing Services ! that have proliferated all over ..check out the classifieds in the top Papers in your town or city !…both are rips off…but one stresses and the other de-stresses !

Cheers !

Shahzad…this one’s for you…you had asked for it a few days ago……Temptation Foods (TFL)

PRESS EXPOSE OF TEMPTATION FOODS & IT’S PROMOTER VINIT KUMAR

TFL and it’s arrested Promoter Vinit Kumar was yet again the News yesterday morning in the Mumbai Mirror …. the Mumbai Morninger from the Times of India Group was following up from it’s story of November 30,2010 that exposed the link between Kumar and the Home Ministry Mole Ravi Inder Singh

Yesterday press coverage breaks an Intelligence Bureau Report that links the barred scamster Ketan Parekh and his cronies and front companies to Vinit Kumar and Temptation Foods and the intended modus operandi to rig the share price of the Company….

…..and that Vinit Kumar was the middleman in the Telecom Scam !

TFL’s SHARE PRICE AND  VALUATION WILL SEDUCE YOU

TFL  closed at Rs 22 yesterday…a FV of Rs 10….If you look at the Valuation metrics,you’ll be excited

EPS : Rs 25….P/E : 0.88…..Market Cap : Rs 89 crs….Sales : Rs 1277 crs…..Mkt Cap/Sales : 0.07 !…Book Value : Kissing Rs 100…P/BV : 0.22 !

JUST DON’T GET TEMPTED !

ANNUAL REPORT OF TFL FOR 2009/10….ATHERSTONE AMUSES WITH THEIR ‘TRUTH’ THEME !

I was intrigued….I usually am where Item Girls and Songs are involved !….so I took a bite of Annual Report of TFL to begin with !…. I actually laughed !….here’s why….

…..What a lovely designer Annual Report 2009/10…was completely seduced by it…have a look…you’ll be stunned too….the concept,content and design is by Atherstone who are Professional Consultants and Specialists in Investor Communications….title says 2007-08 but the Annual Report is for 2009/10 so go ahead and click  

http://www.temptationfoods.com/reports/TFL_AnnualReport_2007-08.pdf

Atherstone surely must be trying to bury their heads in the sand!…their Annual Report Theme was ‘A TASTE FOR TRUTH’ !

Here are some marvellous gems from the Annual Report…even in the Report they are in Capital Letters and stated in big bold colours with each phrase hogging the whole Page ! 

A TASTE FOR TRUTH……TRUTH CAN BE HEARTBREAKING……TRUTH CAN BE UGLY….TRUTH CAN BE UNCOMFORTABLE…..TRUTH CAN BE BEAUTIFUL

THE JOURNEY FROM BLISSFULL IGNORANCE TO THE REALM OF TRUTH IS BOTH CHALLENGING AND ENLIGHTENING

Quotes Attributed to :

Socrates : ” ONCE YOU’VE TASTED THE TRUTH YOU WON’T EVER WANT TO GO BACK TO BEING IGNORANT”

Buddha : “Three things cannot be long hidden:the sun,the moon and the truth “

Michael Levy : ” YOU CAN BEND IT & TWIST IT….YOU CAN MISUSE & ABUSE IT….BUT EVEN GOD CANNOT CHANGE THE TRUTH “

Maybe Atherstone was trying to tell us something !

The Annual Report shows Ms Bhairavi Goswami to be an Independent and Non Executive Director….goes on to describe her as a reknowned expert in media,marketing and advertising….great…that perhaps also qualifies her to be on the Audit,Managerial Remuneration,Corporate Governance and Borrowings Committees !….Ms Goswami is a model turned actress…remember her in ‘Bheja Fry’ ?…I don’t…..she is reported to be Vinit Kumar’s companion and also cohabited with him….but the funny thing is that the press article quotes her as saying that she had no personal relationship with Kumar and that she is merely a salaried employee of Temptation Foods Ltd !….Whoah !…SEBI and BSE need to look into this…The Annual Report for 2009/10 was signed on May 28,2010…has she resigned as Director and become a paid employee since then?….if so, why has the BSE not been informed ?….travesty of Corporate Governance….She was Dependent on TFL and Vinit Kumar…How could she be an Independent and Non Executive Director !?…Media reports have positioned her and Vinit Kumar as jet set socialites…. owners of Porsche,Race Horses,Swank Sea Facing South Mumbai Worli Apartment…the Works really…..but where are the Monies coming from ! ?….The Annual Report shows that Kumar was paid Rs 37 lakhs in 2009/10 when he was entitled to over Rs 4 crs incentives based on adjusted profitability….was the Porsche owned by TFL…perhaps Tata Capital and Reliance Capital can confirm…they are the Vehicle Financiers for the outstanding of Rs 1.93 crs  in the Books of TFL at March 31,2010…….Intriguing Tamasha 

There have been regular Director and Top management Resignations….have the auditors,Sharp & Tannan bothered to inquire as to why ?

Don’t tell me all have been naive…the other Non Executive Directors like  Dr (Mrs) Kala Pant,the Banking Expert and on the Board of Several banks, the auditors Sharp & Tannan,the Bankers,ICICI Bank,Bank of Baroda,HDFC Bank,Punjab National Bank who provides the Working Capital Loan,United Bank of India which gives the Cash Credit facility,Yes Bank that provides an Overdraft and SBI Global Factors that is the factor funder…even Atherstone who have designed the Annual Report with ‘TRUTH’ as the Theme…and ofcourse sadly all the shareholders who flocked to buy TFL

Incidentally Vinit Kumar was earlier serving with Reliance Industries before setting up his Indigo Group  

ON THE WRONG SIDE OF THE LAW

Temptation Foods Ltd,it’s Promoter Vinit Kumar and his Promoter company,Venture Business Advisors Pvt Ltd (VBAPL) are not new to courting trouble from Government Agencies….In January 2009 SEBI gave a gag order in the matter of acquiring shares of Kohinoor Foods Ltd…In Feb 2009,the order was removed…However on June 4, 2009 SEBI passed an ex parte ad-interim order restraining VBAPL from accessing the Securities markets and further prohibiting them from selling or dealing in the markets directly or indirectly…VBAPL filed a consent application on December 4,2009 against the SEBI order…SEBI rejected this application on June 4,2010 citing pending investigations….in 2009/10,TFL sold off all their shares held in Kohinoor Foods,suffering a loss of Rs 11.96 crs which was shown as an extraordinary loss in the Accounts of 2009/10 

Then in September 2009 there was a Search & Seizure Operation by the Investigation Department of the Income Tax Authorities…this resulted in revising the returns and paying MAT of Rs 6.89 crs 

Even Karen Anand had to go to court in 2009 as her monthly cheques of Rs 5 lakhs stopped coming….TFL had acquired Karen Anand’s Business in 2007….the matter was settled amicably only in mid 2010

….and now these stunning charges and arrest of Vinit Kumar by the Delhi Police…linking him to already unmasked scamsters and spies and moles   

QUESTIONS AND MORE QUESTIONS !

As you wade through TFL more and more questions come to mind

• TFL earned an EPS of Rs 25 in 2009/10…yet the Dividend declared was just Rs 0.75 !…just 3% payout from profits !….funny…..Profits were Rs 62.50 crs,but Dividend to shareholders was just Rs 1.89 crs !……TFL’s boasts of taking care of stakeholders interests is laughable……ofcourse all other stakeholders,other than shareholders ,have been taken care off !….Taxes to Government were Rs 19.4 crs….Interest to Bankers and Other Lenders was Rs 21 crs……Playing in Stocks too was to the tune of over Rs 10 crs…Jindal Saw,Orchid Chemicals,LKP,Shree Renuka Sugars and ofcourse the controversial Kohinoor Foods being a few….but dividend to shareholders was a pittance at Rs 1.89 crs !
• What is the reason for investing Rs 5 Crs in 500000 Equity Shares of FV Rs 10 of unlisted Monnet Securities Pvt Ltd ?
• TFL boasts of 70000 tpa processing capacity at it’s plants in Jejuri and Sonepat….It actually produced 199580 tonnes and had some Opening Stock and sold 200156 tonnes to notch sales of Rs 1277 crs !…It says it outsources Production to other units…so how much has it produced in it’s own plants ?…it has only 165 employees on it’s rolls at March 31,2010
• TFL boasts of Exports to USA,Europe,Middle East…..In 2009/10 Sales outside India were merely Rs 45.64 lakhs of the total sales shown at Rs 1276 crs !…0.03% !…Wow !

REVEALING SHAREHOLDING TRENDS

This is interesting….Promoter Company,VBAPL holds just 10.85% of the Equity of Rs 40.46 crs (FV Rs 10)…4387780 shares to be precise…..of these 2350000 shares are pledged with SBI Global Factors Ltd…I suppose either the SEBI restraining order does not apply to pledging the shares or the June 2009 order came post the pledge….This Factoring Funding was Rs 37.66 crs at March 31,2010…..The Equity was Rs 25.14 crs at March 31,2010 ….remained at this level on June 30,2010 spread over 12540 shareholders…Then on August 24,2010,TFL allotted 15315000 shares at Rs 36 to Non Promoters as a preferential allotment…September 30,2010 shows 15358 shareholders holding equity of Rs 40.45 crs…..There are some interesting names among the shareholders with significant holding over 1% of the Equity….these have been recently on SEBI’s investigative radar….while the preferential allotment has been made to a handful of bodies corporates and individuals,many who now appear in the list of shareholders holding over 1% of the equity,the sad statistic is that approx 2800 are the incremental  individual shareholders holding less than 1% of the Equity from June 30,2010 to September 30,2010

At September 30,2010,589 Bodies Corporates held 16247370 shares or 40% of the Equity..158 Individuals held over 1% each of the Equity ..aggregate of 11333691 or 28% of the Equity….Thus 68% of the Equity was held by these two ostensibly Non Promoter Groups….while Promoter company VBAPL held just 10.85 % !…seems the control of TFL lies elsewhere and not with VBAPL or Vinit Kumar      

There were three FIIs holding 536109 shares on June 30,2010….this dropped to just One holding only 40000 shares at September 30,2010….Bulk Deals were quite regular in 2009….Merrill Lynch Espana and Copthall Mauritius were two names that stand out here

On August 11,2008,TFL had issued 73 lakh warrants on a preferential basis…300000 of these were to Directors and Business Associates…Each warrant held a right to convert into an equity share at Rs 200 within 18 months….Obviously the conversion did not take place as the Share Price of TFL dived…the Rs 14.60 crs paid as the 10% upfront was forfeited by TFL…Amusingly The Annual Report has spelled it as ‘Covertible’ Warrants instead of’ Convertible’ Warrants in Schedule 3….must have been a ‘covert’ operation

Some Strategic Investments made by TFL

• Rs 1.2 crs for a 46% stake in Jangipur Mega Food Park Ltd in West Bengal
• Just Over Rs 10 lakh for a 51 % in Temptation Foods FZE in the Sharjah Airport Free Trade Zone…the balance 49% held by Vinit Kumar in his individual capacity
• Temptation Foods International in British Virgin Islands….TFL feels that the purpose for which this Company was set up will not now materialise….so Annual Fees were not paid and thus this Company was struck of the BVI Companies Register….it can be revived inside 10 years paying a prescribed fee….however it ceases now to be a subsidiary of TFL                    

 Revaluation of Plant & Machinery

On March 31,2007 TFL had revalued the Jejuri Assets by Rs 8.11 crs….It had just acquired Karen Anand’s Conserves,Dressings and Sauces Business and Jejuri was where Karen processed her Fruits and Vegetables….what prompted this revaluation so soon after this acquisition ?….Then again on July 22,2009,TFL yet again revalued the Plan & Machinery at Jejuri and Sonepat by Rs 12.69 crs

BRANDS

TFL is also carrying Intangibles of Brands and Trademarks at Rs 13.79 crs in it’s Books at March 31,2010….Gross Value was Rs 18 crores and it’s being written off over Ten years as  prescribed by Accounting Standard 26….It has three Brands….’Ever fresh’ that it purchased from the K K Birla Group Company, Chambal Fertilisers….’Delika’ for the International market….and ‘Karen Anand’ that it acquired from Karen Anand  

METEORIC RISE IN SALES….ARE THESE GENUINE ? 

Sales have been unbelievably meteoric….From Rs 38 crs in 2006/7 to Rs 328 crs in 2007/8 to Rs 870 crs in 2008/9 and Rs 1276 crs in 2009/10….where are they producing and where are they selling ?….Exports have been insignificant….Domestic Sales averaged Rs 3.49 crs a day in 2009/10 !…..something disconnects here !…hope it’s not circular selling and buying !…if circular trading of a company’s shares on the exchange  can create false volumes and pricing,so can circular sales and purchases by the Company create false sales 

Networth is currently over Rs 350 crs…..Sales are on target to cross Rs 1500 crs in 2010/11…yet market cap is just Rs 89 crs……Profits should cross Rs 75 crs…..yet TFL has chosen not to renew the LIC Group Gratuity Scheme Policy

Net Profit and Market Cap are near each other !…Rs 75 crs to Rs 90 crs range !….How can this be ! ?….in such a situation should not the Share Price rise ?…but it’s not ! 

Something clearly disconnects…..TFL does not seem to own what it says it does…it does not sell what it shows it does…and it does not earn what it says it does !….The Promoter and his Company has scarce credibility…and it’s worsening by the day…..Serious Due Diligence on Sales,Receivables & Payables  and Inventories…the entire Supply and Demand Chain in fact…. will reveal the correct and genuine picture on real networth ,liquidity and sales and earnings      

A BOLLYWOOD THRILLER ….HEY ! HOPE A TOP PRODUCER RETAINS ME TO WRITE THE SCRIPT !

Gosh !….could write a lovely hit Bollywood script for this TFL Scrip !…The Hero turns out to be a Villain….has a pretty damsel with him at all times….Fast Cars…Fast Girls…Fast Horses….Fast Growing and Fascinating Food Processing Industry……  Five Star Glitter and Glamour….Designer Annual Reports….AGMs at Five Star Hotels till a few years ago….Espionage and Stock Scamster Links ….Overseas connections and FIIs….High Rollers….Cat and Mouse Games with Regulatory Authorities that include SEBI,The Ministry of Home Affairs,the Intelligence Bureau,the Income Tax Authorities,the Registrar of Companies and the Delhi Poilce Special Cell…High Stakes Telephone Tapping 

Wonder who can I cast in this Movie to play pivotal roles !….maybe one of the ‘Khans’…all in their 40s !…and the Damsel ?….I’m spoilt for Choice here !…maybe reallife will be willing to play reellife !

Can Money buy one Respectability ! ?….How one makes Monies is Important too…is it not !?

Temptation Foods at Rs 22….BSE needs to introspect here to allow such a Listing…because only when such a scrip is traded on an Exchange can it lure and seduce naive investors to buy into it !….know the Risks before you marry TFL on BSE…the divorce could be very costly

Enjoy TFL as the Christmas Thriller….read it…research it….but resist the temptation to taste it on BSE and expect a Christmas Miracle…there is no Santa Claus here that will come bearing you gains !

Cheers !

Paulo Coelho shares this……. 

Jean was out walking with his grandfather in Paris.
At one point, they saw a shoemaker being insulted by a customer who claimed that there was something wrong with his shoes.
The shoemaker calmly listened to his complaints, apologised and promised to make good the mistake.

 

 
Jean and his grandfather stopped to have a coffee.
At the next table, the waiter asked a man if he would mind moving his chair slightly so that he could get by.
The man erupted in a torrent of abuse and refused to move.

 
‘Never forget what you have seen,’ said Jean’s grandfather.
‘The shoemaker accepted the customer’s complaint, while this man next to us did not want to move.

‘People who perform some useful task are not bothered if they hear some critics to their work, but people who do no useful work at all always think themselves very important and hide their incompetence behind their authority.’

Tony, Shambu & Swaroop….this blog on MOIL is in response to your requests….but will serve the interests of all readers

As expected MOIL IPO received overwhelming subscription….Issued at Rs 375 with a 5% retail investors discount……and as expected it listed quite marvelously on December 15….reaching a High of Rs 591 on BSE…reacting sharply to close at Rs 466….then yesterday seeking another Low of Rs 451 before closing at Rs 462

What Now ?….Does it represent a Buying Opportunity at Rs 462 or will it drop yet further closer to it’s IPO Price of Rs 375 ?….Should Allottees who have yet not sold and new buyers continue to hold MOIL ?

My clear sense is that at Rs 462,MOIL appears fairly valued….at 12 Earnings Multiples for FY 2011 Projected EPS of Rs 39…..I am more concerned with some serious risks that MOIL is facing    

• The Proposed Mines & Minerals (Development & Regulation) Bill 2010 that seeks to replace the 1957 Act stipulates that the mine lease holder will have to set aside 26% of the Net Profit from the Mine as an annuity to the State Government towards compensation,assistance and employment for the rehabilitation and settlement of the tribals and people who stay around the Mines
• Technological Advances has reduced the consumption of Manganese Ore in the Production of Steel…From 46 kgs of ferro manganese consumed to produce a tonne of steel,the figure now stands at 30 kgs and in some industralised countries has dropped to even 10 kgs…this will impact the demand for Manganese Ore
• The Fortunes of the Manganese Ore Miners is inextricably linked to the Fortunes of and Demands from the Steel Companies…Manganese is the fourth most used Metal after Iron,Aluminium and Copper….Over 90% of the World’s production of Manganese is utilised for the desulphurisation and strengthening of Steel…The Recession of 2008/9 saw the Steel and Managanese Ore Prices drop 60% from their peak …Have a Look at this table for MOIL

•  In FY 2011 the Fortunes have revived and Average Sales Prices per tonne have again crossed Rs 11000 for Manganese Ore….however the volatility over the past five years is a matter of concern
• The last estimates show that World Reserves are 5200 Million Tonnes of Manganese Ore…South Africa holds 76.9% of these,followed by Ukraine at 10% and Australia a shade over 3% and India a shade under 3%….India has become a net importer of high grade Manganese Ore in the last three years from being a net exporter….yet South Africa’s  dominance in Reserves can impact World Prices as they can increase exports significantly once their sea,road and rail infrastructure strengthens…China is the world’s largest producer of Steel but holds just about 2% of the World’s reserves of Manganese Ore…so China Demand and Supply Situation will dictate World Prices

So what is MOIL doing to tackle these Risks ?

•  MOIL has entered into 50:50 JV in Chattisgarh with SAIL in 2008 to set up projects at a  cost of Rs 392 crs to produce 31000 tpa of Ferro Manganese and 75000 tpa of Silico Manganese…this high value addition products will add to profitability and margins
• MOIL has also set up a similar 50:50 JV  in Andhra Pradesh with RINL in 2009 to set up projects at a cost of Rs 206 crs to produce 20000 tpa of Ferro Manganese and 37500 tpa of Silico Manganese
• At a cost of Rs 300 crs it plans to deepen the mining depth from current 360 meters to 660 meters at it’s largest Mine at Balaghat in Madhya Pradesh…currently MOIL operates Ten Mines,six at Nagpur and Bhandara in Maharashtra and Four in Balaghat in Madhya Pradesh….all ten are over 100 years old….only three are opencast mines…Dongri Buzurg Mine in Bhandara produces Manganese Dioxide used in the dry cell industry…Rs 180 crs is being spend on this mine to expand production…In October 2009 the Mines Ministry has also reserved @815 hectares in Maharashtra for MOIL…MOIL has applied for prospecting licenses for this area…..all these efforts will help MOIL in achieving its target to scale up production from the current 1.15 mtpa to 1.5 mtpa by  2015/16  
• MOIL is already one of the lowest cost producer of Manganese in the World…it has set up a wind farm to generate power of 4MW for captive use…in FY 10 it generated 3.3 MW
• World Steel Capacities till 2009 end were 1750 million tonnes with Production at 1223 Million tonnes….India is expected to produce 65 Million tonnes this year and is expected to move from the fifth largest producer in the World to the second largest by 2015/16…As at October 1,2010,MOIL had 21.7 million tonnes of proven and probable reserves (55% of which have an average manganese content of 40% and above and 27% has manganese content of 36% to 39.9%) and 69.5 million of measured,indicated or inferred reserves…Being debt free and holding Cash at Rs 1763 crs at September 2010 (Rs 104/share) MOIL is expected to leverage on growing domestic demand for Steel as the Government plays out the Rs 1.73 trillion outlay on Infratructure as stated in the last budget…In fact Steel Capacity from 73 millions tonnes is expected to cross 120 million tonnes by 2012    

My sense is that MOIL applied some make up to it’s current year financials to look a little more attractive as it came out with it’s IPO ….Going Forward the Volatility in Prices of Manganese Ore based on the swings in Fortunes of the Steel Industry will guide Earnings….so keep an eye on the Price per tonne of Manganese Ore….last three years the cycles have shown average extremes of Rs 6500 to Rs 11600…MOIL’s scale of Operations is just a percentage of that of Giant NMDC….and thus MOIL’s Share Price  will reflect lower relative Multiples….at 12 times Forward FY 11 EPS,my sense is that MOIL is at present fairly priced….Any significant deviation from projected PAT of Rs 650 crs this year will impact MOIL’s Share Price….An Earnings Multiple Range of of 10-15 is being established….Share Price will move past Rs 550 only if there is a sense of higher earnings than Rs 650 crs this year and markets will then sustain higher PE Multiple of 14 and 15…On the downside the IPO Price of Rs 375 can be touched if actual PAT drops into the Rs 500-Rs 550 crs range for FY 11,offering an EPS of Rs 30…likely if it has to expense 26% of profits for rehabilitation as per the new Bill Proposed 

So with MOIL at Rs 462,I would say it’s fairly priced given earnings assumptions in the short term and the risks it faces as outlined above

Bottomline….I am not a Buyer of MOIL at Rs 462…..With a strong Listing at Rs 550 + day before it was a sell for all those allotted shares….only 17 shares were allotted to retail investors….even at Rs 462,don’t regret selling it off…retail allotments are simply too insignificant to hold on to…just like I had opined for Reliance Power in Feb 2008…there too the retail allotments were poor at 16 or 17 shares and the market offered you in the first few days to exit above IPO Price at Rs 427+…since then it has simply collapsed….MOIL may not collapse…but take this profit now,more so because your holdings are too small to impact your portfolio,rather than on Valuation

Also have a look at the Networth Parameter…Currently MOIL has a Networth of Rs 2000 crs,while the Market Capitalisation is just under four times at just under Rs 8000 crs at CMP of Rs 462….that’s not Cheap nor a Bargain

Government divested 20% in the MOIL IPO with the Maharastra and MP State Governments offering 10% each…it yet holds a controlling stake of 80%…The Allotment Shareholding shows FIIs holding 3.62 %,DIIs holding 5.37% and remaining 11.01 % spread with Body Corporates and the Public….However numerous Bulk Deals in the past few days may reveal an altered shareholding pattern

Now having listed MOIL,the Government will have to strengthen Corporate Governance….In this context ,the Auditors…Shah,Baheti,Chandak & Co…have passed two remarks in their Report in the FY 10 Annual Report…they observe that MOIL had only three Independent Directors when it should have had Four…they also have commented that MOIL needs to improve it’s Internal Audit System 

I did not apply in the IPO,nor did I advice Clients strongly to do so as I expected very poor allotments….neither have I traded or advised clients to do so in MOIL in the past two days of Listing……..so I hold no conflict of Interest in my View…and the three Real Risks I outlined above at the Outset have influenced my View to be a measured and conservative  one for MOIL ….furthermore the huge swings in Profitability in the past five years,typical of Commodity Stocks,adds to the Risk of holding such stocks….you have to catch the right swing for great profits…..not everyone’s cup of tea……Having said this,a decent Realised Profit is better than a Notional one    

Cheers !    

 Corporate Announcement 

 Corporate Announcement

Government is set to disinvest 5% from the 74.14 % of the Equity it holds in ONGC

…but see what Government Institution and Big Daddy Investor LIC is upto…obviously and surely under some direction…..As on September 30,2010 it held 3.10% of the equity in ONGC,holding 66206426 shares… it now informs BSE that it held 106939073 Equity Shares of ONGC as at November 19,2010….so it purchased 40732647 shares in October and November 2010 upto November 19,2010….it now holds exactly 5% of ONGC

So what’s my Point ?…two really !

• Even if the Government is to disinvest 5% of the equity,sometime in Feb 2011 as a Follow up Public Offer (FPO),it would be just a technical exercise……as it has already been shoring up on ONGC through LIC….which has picked up an incremental 1.9 % stake already…so what’s the big deal about the FPO….the shareholding pattern will merely reduce Promoter Government’s 74.14 % to 69.14%…but Government Institution LIC has already moved up shareholding by 1.9% from 3.1% to 5% and will surely participate in the FPO too….Government wants to show before March 2011 that it has received disinvestment proceeds of US $ 3 Billion (Rs 13000 crs +) for @107 Million shares of ONGC….in a sense LIC is giving it !…in a sense from one pan of the Government to another !
• Markets have been subdued of late…but they were buoyant in September and October 2010….even then  what made LIC pump in such a huge amount of @ Rs 5000 crs to acquire another 40.7 million shares or another 1.9 % of ONGC ?…were they asked to do so by the Government  as implied above or were they in the know and were hoping to make a huge inside kill on announcement of the 1:1 Bonus,Split and the Special Dividend ?….a subdued market is not allowing them too,even though ONGC has pulled back well to Rs 1329 from the December Low of Rs 1192 

Interesting….LIC seems to be in the thick of many things these days !…so will LIC be answerable to IRDA or SEBI on this !…the Insurance Regulator or the Investment Regulator…..Oh ! how does this matter anyway !…they’re all Government !

Cheers !

Could surely say this about the way we go about Trading and Investing in Stocks too !…either we are Impulsive or we are working for PhD Degrees …just creating thesis but not implementing !

Cheers !