Switched on my mobile this morning after a few days of tackling a tough Viral…thank you guys for all your “get well” wishes…they worked

Listened to the live broadcast on stock channels of Mukesh Ambani at the 36th AGM of RIL this morning in Mumbai rolled out the roadmap ahead for his Group…this are a few interesting bytes that really caught my ear

• Now with the rescinding of the Non Compete Agreement with brother,Anil Ambani’s (ADA) Group, Mukesh Ambani’s RIL Group will enter the Power Industry in a very big way…a blueprint is being prepared….what is amusing however is that despite discovering and drilling Gas from the KG Basin,RIL will not execute any gas based project till 2022…so it’s going to be coal based,hydel,nuclear and alternative energies projects….ironically it is supplying this Gas to Other Fertiliser and Power Plants as directed by the Government…even to ADA Group Power Plants when they are ready to accept and if the Government directs then
• Organised Retail has earned Revenues of Rs 4500 crs in 2009/10….in just Five Years it will jump ten fold to Rs 45000 crs !…..keeping in mind that RIL is the first Indian Company to cross Rs 200000 crs turnover this year,this would be a great contributor 

Anything BIG to earn and HIGH growth rates forecast,then rely on RIL to enter that sector….Petrochemicals,Petroleum,Retail,Infrastructure….nowTelecom,Pharma,Healthcare,Power,Education.

What next ?

How about Information Technology …RIL can take a look at the three World Tech Giants,Google,Apple and Microsoft……have a look at this Comparative Table I’ve prepared…RIL against Peers and these three Tech Giants…I’ve used todays ref rate US $ =Rs 46.14 for translating RIL’s Share Price of Rs 1055 and Market Cap of Rs 345135 crs…However RIL Financials are as sourced from RIL’s website (imputed rate used by them is US $ =Rs 44.64)…for the other Global Giants,the figures are sourced from the NYSE/Nasdaq 

KEY COMPARATIVE STATISTICS : RIL v/s Global Peers and Global Tech Giants

Clearly the Tech Giants rule the Exchanges in terms of Valuation and even Market Caps…High Multiples,High Profits and Profit Margins,Low or No Debt,Rising Revenues with new product launches have worked wonders for the three Tech Giants

RIL always thinks BIG…..Organic Growth in Technology Sector will take ages…But with a Market Cap of relatively lower US $ 75 b and the fact that 1/3rd of Capital Employed is through Debt even Inorganic Growth looks difficult for RIL to take over a major World Giant among it’s peers and even the Tech sector if it wants to enter it….what does look interesting is the Infotel playout it has just started with a near US $ 4 b layout…I’ve got their presentation on this and shall be examining it closely sometime soon

So are RIL’s Best Years Ahead as Mukesh Ambani assured shareholders today ?….With strong proven large scale project implementation capabilities RIL surely is excited about the opportunities opening up in India and even overseas…RIL is already a Giant in India in it’s Operations…With It’s Expansion Plans in Petrochemicals,it’s new big scale forays in diversified fields,it hopes to be reckoned as a Global Giant

It’s Best Years may certainly be ahead,but the above table shows it’s got a hell of a lot of catching up to do with Global Giants

Oh ! it’s near BP’s mkt cap only because BP share Price has crashed following the Gulf of Mexico Oil Rig Explosion that is throwing out ,latest upward estimates of 40000 to 60000 barrels of oil into the Sea and is yet to be capped…. seen to be the biggest economic disaster USA is facing….Interestingly President Obama has managed to extract a promise of an initial US $ 20 billion in an escrow account from BP for settling claims and damages for this continuing disaster….if you look at the table,that’s just one year’s sacrifice of PAT for BP….I’m sure there will be more extracted

So should RIL be in your Portfolio ?……and with what weightage?…Simple answer is “Yes”…and the weightage should be atleast 10% of the Equities you hold…..Like Larsen & Toubro and State Bank of India,RIL remains a strong proxy for the India Story…Who Knows ! remember the late 1980s and the BOB Fiscal fiasco when RIL had made a serious and aggressive and hostile bid for Larsen & Toubro only to be thwarted…with Larsen’s market cap under US $ 24 b today,RIL may just relaunch this ambition !…it has never liked losing !….OH ! I just love it when my mind meanders !

Cheers !   

For Years ,Brand Valuation has been part of my sessions on Valuation of Equity at BSE and Other Forums….so it was with great Interest that I read the Economic Times Front Page atricle today on ‘Cos flash brands to raise cash’

Strapped for cash,Kingfisher Airlines has managed to Borrow from State Bank of India against it’s Brand of ‘Kingfisher Airlines’ which has been valued at Rs 1900 crs,that’s US $ 391 Million at an Exchange Rate of US $ =Rs 48.50 

Interestingly,Kingfisher Airlines has actually included this Brand Value as an Asset in it’s Balance Sheet…If it had not,then the Debt/Equity ratio would have computed higher….However,It’s probably because the Brand  is shown in the Balance Sheet,that PSU Bank,State Bank of India has been convinced to lend against this Asset

‘Kingfisher Airlines’ is a seperate registered Brand than ‘Kingfisher’ for Beer and Wines…Just a thought…if the Airlines defaults ,then the bank could opt to make the Brand it’s property…It would need to monetise this to recover dues…so it will have to sell the Brand !…to a Competitor Airline or a new Airline maybe !?…does the Borrowing Agreement categorically state that this Brand also include all the licenses and permissions  etc ?…what’s the hairline % taken by the Bank for this Asset value when lending?

Now Brand Value,like Intellectual Property Rights and Goodwill is an Intangible Asset.It normally is never reflected in the Accounts,because no real consideration has been paid for it…Thus this makes this Asset Class,riskier to lend against…It may be difficult to liquidate or realise monies for it in case of default

Being an Intangible,Brand Valuation is one of the most subjective and controversial areas in Valuation…Valuing Tangible Assets is a more objective exercise

Will Banks lend against Brand Value even if it is not reflected in the Books as an Asset !?

Clearly,Corporates appear to be running out of Tangible Assets to pledge or offer as Collateral and therefore borrow against…….They are resorting to prop up their  Brand Values for actual Funds leverage 

An interesting Valuation and IPO assignment I was involved in recently,threw up this demand from the Promoters when we were working to price the placement and the IPO…”Does not our Brand count for anything ?”…Of course it did…In fact it is one of India’s largest companies in it’s field and has been in existence for over a hundred years !….but potential buyers were reluctant to negotiate a higher valuation that included,both soft and  hard numbers

This is also the reason many IPOs are priced simply too high,perhaps to capture even Brand Value…Mahindra Holidays and Resorts at Rs 300 is a very recent example…Last year Reliance Power short circuited us at Rs 427.50…Now we have Adani Power coming out in the Rs 90-Rs 100 Band…and all the pre-issue orchestrated Hype of the Company,Investment Bankers,Brokers,Paid Advisors and the Media suck all of us into applying for the IPOs at vulgar and excessive and obscene premiums,when Market Times and Sentiments are bullish

I recollect three very interesting instances in the past of Brand Valuations

1. Prakash Chauhan of Parle actually sold only his Brands of ‘Thumbs Up’,'Limca’, and ‘Gold Spot’ for Millions of Dollars to Coca Cola when they re-entered India
2. Goenkas of Raptakos Brett,quietly transferred out Four Pharmaceutical Brands into their Private Company and within a year had sold one of them for as much amount as they had paid Raptakos for all four Brands
3. In the 1990s,Amitabh Bachhan had promoted Amitabh Bachhan Company Ltd (ABCL)…Kotaks,who were advising ABCL, had valued Amitabh for,I think, Rs 18 crs and reflected this in the Equity of ABCL,without any Monies really coming in…When ABCL faced bankruptcy,it showed this Intagible Asset which could not be realised for any tangible and immediate Monies at the time   

And yet another recent and very Interesting Brand Valuation showed that the World’s Top Three Brands are

1. Google………..US $ 101.4 Billion 
2. Microsoft…….US $ 77.3 Billion
3. Coca Cola…….US $ 68.5 Billion

And if you pitch Google’s latest Market Cap of US $ 135 Billion (It quotes at US $ 428) against it’s Brand Value,it gives you a Valuation parameter of 1.33….Incidentally,Apple,with a Market Cap of US $ 140 Billion, has just surpassed Google….Google quotes at a ttm 30 Earnings Multiple….Mahindra Holidays and Resorts recently priced it’s IPO at Rs 300 at 30 times FY 09 Earnings   

Kingfisher Airlines is quoted at Rs 50,giving a Market Cap of Rs 1296 crs…if you pitch this against the Brand Value of Rs 1900 crs,you’ll get a lower Valuation parameter of 0.68…Clearly the Market is skeptical of the Company’s and Sector’s Prospects and is ignoring the Brand Valuation in the Balance Sheet

And hey ! someone told me that www.gauravblog.com is valued at US $ 1292.1 !…I googled this to be true !

I’m amused

Come on Guys ! I need all of you out there to help me add the Unit ‘Million’ to the Valuation !

This Blog will then be worth US $ 1.292 Billion !…I can then leverage it like Kingfisher Airlines ! …or just sell it ! Wishful Thinking ! 

Cheers !

Bill Gates,Founder of Microsoft,sold Ten Million Shares ,a little over 1% of his holdings, for US $ 227 Million in a week spanning October 31,2008 to November 6,2008

Microsoft is quoted now at just over US $ 21.Bill Gates still hold nearly 9% of the Equity and over 780 million shares which would be valued at over US $ 16.50 billion.

This is part of Bill Gates direct stake which he has sold…selling a slice in these uncertain and volatile times to secure a slice of his Future perhaps !…..Even the Richest Man on this Planet needs to encash to feel personally financially secure !…or does he plan some more charity ?

Incidentally Bill Gates slipped into India and Pune last week without informing his Charity Foundation Team here….he personally went to the red light areas in Pune to assess for himself whether his Charity Aid was actually reaching the people there

Really amusing that in the past whenever Bill Gates touched our shores, he was ardently wooed by Politicians and Industrialists and Media alike…every sentence he uttered became a “Quote”

This Time around we are all preoccupied with what will happen to us and our Sensex…not him….as Stock Markets are in a great sell off panic mode globally and the World’s Financial System is on the verge of Breaking Down as Recession raises it’s Ugly Head in US and Europe…..and our Sensex has chopped off over 50 % of it’s 2008 high and the Share Price of Microsoft is down to US $ 21.30,just over 11 times it’s trailing EPS of US $ 1.89 and a Market Cap of US $ 189 Billion…..In the heady days in 1999 Microsoft was quoted at 70 multiples and Bill Gates had warned that Investing in his Company at such crazy valuations would be a gamble…it was too much of a long Term risk as he did not expect his company to be in the top three after 25 years