Looooooooong Full House Saturday Equity Mumbai Workshop Sept 14 2019

It was a looooooooong,should have held it over two days,  Full House Equity Workshop in Mumbai on Saturday,September 14,2019 with a whole spectrum of smart participants that made for really invigorating interaction ~they came from Mumbai,Gurgaon & Pune ~ from young upwardly mobile grads & post grads from top ranked Management Institutes in India,UK (London) & USA(Harvard) to ‘ well tuned in’ professionals from the IT ,Consultancy,Broking,Corporate & Banking Sectors to veteran high networth investors . We commenced at 9.30 am & concluded well beyond 7.30 pm ~ 🙂 should have arranged dinner too

Thank you Guys !

Here are a few candid clicks from the Workshop :

The Coverage was expansive & the Interaction from Participants very intelligent & which opened out many threads that we examined with anecdotal support . When analysing a company ,they asked what is “Non Negotiable” &  “How to have Foresight as on Hindsight we are always right”

Really a lot was covered ,some of which is below  :

  • Macros through :
  1. Examining the Equity Table’s four legs of Valuation,Liquidity,Momentum & Sentiment & the Impact of FPI Flows ~ when Valuation,which should be the strongest leg,sometimes takes a back seat as Liquidity or even a lack of it drives the momentum & sentiment
  2.  Not getting Seduced by any Bounce at  Friday closing Sensex 37385 & Nifty 11076 Levels as Caution is strongly indicated by domestic & overseas economy & geo-political headwinds
  3. Negative Interest Rates Era vs the Magic of Compounding in such meltdowns
  4. Sensex & Earnings & Market Cap & low GDP growth Dynamics on Levels & Valuations ~ Past,Present & Forward & why downside risk remains wide open while the upside appears capped for now ~ we referred to 1991/92 abnormally high Sensex PE pre Harshad Mehta Scam exposure & the High PE in 2000 with Ketan Parekh was in action & where the markets were clearing running ahead of fundamentals by huge margins~ we referred to the Sensex PE of just 6 in the late 1980s when VP Singh was the PM 1988~ we covered Mkt Cap/GDP Highs pre Lehman collapse in 2007/8 & the levels now
  5. Fx Reserves  & Exchange Rate Risk &  the Risk of increasing Sovereign Debt as planned by Government ~ How our Rupee has always had a South trajectory,except when it soared from Rs 49 to the US $ to Rs 39 to the US $ creating havoc especially in the Diamond Sector
  6. Why Inversely co-related Gold & US $ are moving up together instead
  7. Turm-Oil & Impact on Fiscal Deficit & Rupee  like last happened in 2007/8( On Saturday at the workshop we were not yet clued in to the Drone Attack on the Oil Refinery in Saudi Arabia that saw Oil Prices dangerously soar 20% in spot) ~ India is hugely dependent on Oil Imports
  8. Interest & Inflation rates
  9. Trump ~ Not sure if he’s a macro or micro factor !
  • Micros through many companies  & sector dynamics covering :
  1. Checklist on how to Smartly & Effectively & thus Quickly Read a voluminous Annual Report
  2. Our Five Steps for Evaluating a Company for Investment
  3. Impact on the Financial Statements in Scenarios like Buy Back,Rights Issues,Fictitious Sales,RBI issuing a divergence on Provisioning for NPAs,non linear jump in Sales Realisations,5 G Spectrum Fees,Permanent Diminution in Investments,Monetising Assets & Depreciation of the Rupee
  4. Quick Brief on Absolute & Relative Valuation & how to prepare a quick Valuation Grid from the Annual Report, Market Price Trends & Shareholding
  5. Why Liquidity more than Profitability is the ‘Circle of Life’  for a Company as viewed through the lens of the Cash Flow Statement dervived from the Balance Sheet & Profit & Loss Ac & that distinguishes operating,financing & investing flows
  6. Corporate Governance Issues on inadequate Disclosure or Non Disclosure, Incorrect & questionable Accounting Treatment & Lack of Transparency &  irresponsible (deliberate?)  Management utterances  that give a leg to Insider Trading & huge Profits through  Derivatives Play
  7. Courage & Conviction Promoter or Institutional recent Buying in Vodafone,Yes Bank,I B Real Estate & Tata Motors & seeing more wealth destruction since in these   
  8. Basis for Disclaimer of Opinion by the Auditor of Reliance Infrastructure & what holds out some hope
  9. Intangibles,Investments & Impairments
  10. Reliance Industries’s Enterprise Value,Revenue Segments Potential,Spin offs of the Jio Telecom Infra into two trusts, Aramco’s 20% stake being negotiated in the Refining,Petroleum Retailing & Petrochemicals Business that should lead to further demerger & reviving & scaling the Gas Exploration Operations
  11. How Defaults & Corporate Governance Issues decimated into or near oblivion Eros,Cox & Kings,ManPasand,Tree House Education,Satyam,Jet Airways,Kingfisher & Talwalkars & is there any hope of operational & share price recovery with Asset values holding out some hope in a few ~ How Clearly the Statutory Auditors & Credit Rating Agencies were negligent or intentionally turned a blind eye in many cases
  12. Huge Potential Outlay of the ‘Nal sey Jal’ Scheme of the Government & the new Jal Shakti Ministry focus that should benefit many companies if the implementation & execution is as noteworthy as the intent
  13. How IndAs 115 continues to affect Bombay Dyeing
  14. How Exchanges continue to accept outright untrue or tepid clarifications from Companies
  15. Reference to Investment Gurus & Living Legends Warren Buffett & Peter Lynch Approaches & Success
  16.  Coverage of a few sectors like Defence, Hydrocarbons,Broking,Telecom,Real Estate,NBFCs,Banks & Automobiles & Disruption that’s in play in many
  17. Consolidation & Capitalisation of PSU Banks & the controversial Acquisition of Laxmi Vilas Bank by I B Housing Finance pending RBI approval
  18. Common Investor Mistakes

The next Equity Workshop is scheduled  pre-Diwali for Saturday ,October 19,2019 & will be announced soon on www.jsalphaa.com & social media

Touched by some warm & constructive feedback from participants :

  • thanks for a lovely interactive session…”
  • “enjoyed your session yday”
  • “it was great to meet again & reskill to be better prepared for opportunities which would arise”
  • “Thanks for being the Enabler,the last few days have been very encouraging”
  • “Cover the Scenarios Exercise more with Investor focus than just on Accounting Impact & take in a few Annual Reports before Lunch”  

😆 & I swear I did not pay for these ones !

  • ” You are very good at what you do,comes naturally to you,with a vastness of the subject to cover you did justice to cover the best you could with your insights and experience of all the treasures of knowledge,you are an encyclopedia of the subject with case studies,which is the best way of teaching, sharing & learning according to me,the various industries that you know of,the processes & the products,the promoters & the pitfalls,the auditors & the audited,you can understand in the readings the stated & the unstated,intention & intended,you truly personify_the integration of intellect with instinct_”   
  • “Whoever missed this one, missed learning a radical way to look at balance sheets. Very practically in a few minutes you can strip away the padding and bullshit that promoters hide their sins behind. If the stock market’s motto or rather rider has always been caveat emptor or buyer beware, Gaurav’s lessons in Analysis would ensure that a “fool and his money are not soon parted” for when emotions like fear and greed coupled with ignorance seize us even the wisest are prone to behave like fools. Especially the wisest!”
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    Coffee with CEO Meet with IES MBA Students

    IES MBA Meeting 1 IES MBA Meeting 2

    Hosted MBA Finance Students from the IES Management Institute,Mumbai in their ‘Coffee with CEO ‘ Initiative & courtesy Purv Shah,a younger & equally if not more passionate trainer in Capital Markets

    It also happened to be Children’s Day yesterday….always keep the child within alive

    It was a pre lunch session for an hour or two…covered… Insider Trading & Integrity…Chasing Passion & not Paisa…seeking good mentorship & being with fun people,to learn from the best like a sportsperson…to evolve

    …Oh ! & of course how to spot pedigree companies & people …mentioned a few of them to highlight Controversies & Corporate Misgovernance &  when to give a second chance too!…to read & read & read & then again read some more

    …spoke of Richard Branson & his book ‘Screw It ,Just Do it’ that changed my opinion of him to one of respect…how both of us have one thing in common in that he has cheated death several times on his adventure trips while I have too but not out of choice in health issues,Sahara sandstorm,BSE Bomb Blast & a car accident

    ….to trust to grow,to see the best in people,to B+ which also is my blood group which they knew having read me up before coming across….to be decisive & responsible…be curious to expand knowledge…be vibrant…attract people to you,who love being around you….share,not be arrogant,let the E-go

    Reiterated Theory without Application & Academics without Action is pointless….Eugene Fama & his Efficient Market Hypothesis & whether India & Insider Trading are truly Inseparable despite SEBI’s strengthening regulations

    At the start itself posed a question to them ” What did you notice is or is not there in my office?”…a few answers came forth like “No Noise” or “Less Staff” or “Open Glass Cabins”…Yeah all of these but what I was seeking was ” No TV with Stock & News Channels blaring away” & it did come from one eager young gentleman who was promptly rewarded with a gift

    Enjoyed interacting with them & I hope these fine young ladies & gentlemen took away at least one good thing from the meet

     

     

    Wow! A Full House NSE Training Fundamental Workshop !

    Wow! A Full House NSE Training Fundamental Workshop yesterday !

    Seems to get bigger & better every time !

    Did the first one on August 8,2015 and had blogged on it  as linked below

    Interesting Interaction at the NSE Equity Fundamental Training Workshop

    Sunday, August 16th, 2015

    Did this one too on “Interpretation of Financial Statements for Stock Analysis” under NSE’s Rapid Series at their NSE BKC Complex

    @ 30 Participants,both genders aged 22 to 58 from leading Broking Firms,Corporates,Banks and even Individuals who had come on dot and stayed till 8 pm ! expecting to learn how to read financial statements and  market dynamics to assess risks and opportunities in Indian Equities

    Common Question right from Manish Shah,who introduced himself  to me in the lift going up to the Class ” How are the Markets Looking “? ~ “Where will the Sensex & Nifty head in the short term”?

    Had taken a Bull along ! really !…a smaller version of the Wall Street one….told the class I love four animals…Elephants (Lord Ganesha),Lions (My Zodiac Sign),Tortoise(Good Luck & of course Bulls (I’m always one!)….and you’ll always find them on my office desk !…in fact four bulls of various sizes !…and clients know my market view on simply seeing how the bulls are placed !…if facing them straight up  (↑)  as they sit across me,I’m very bullish…if slanted ( ⁄ )towards them,I’m bullish…slant inclination reveals how much !….if a horizontal view (↔ ) then indicates market will remain flat to rangebound and if the bulls face me vertically (↓ ) I’m bearish !….and slant facing me shows intensity of being bearish !

    That got a few knowing laughs from the participants and set off the mood for the Workshop with humour being interspersed right through

    Interacted on the Sensex Dynamics right from base year 1978 and in the last 20 years from November 1,1995 to October 30,2015 when despite nearly half of the @ 4850 trading days saw the Sensex close negatively the Sensex ran up over 650% !…but is that enough!…..the Opportunities & Threats that were clearly visible during the years right from 1991 when Modern Reforms set in to 2001 when Markets had bottomed  out on the ICE Age Melting to the Sharp drop in Interest rates from 14% to 7% in and around 2004 to post Lehman 2008 levels of 8000 in October 2008 and March 2009….showed them from current Sensex of 26657 how to assess fundamentally where we could be heading and the risks associated….discussed Passive Index Investing vs Active Investing and therefore the need for Fundamental Analysis and therefore the need to Interpret Financials & therefore the need to assess Value vs Price  & therefore this Workshop  ! read more

    Financial Technologies @ Rs 144 ~ A Story of Guts and Glory now Guttered !

    Financial Technologies (FTIL)  @ Rs 144 (FV Rs 2)~ A Story of Guts and Glory now Guttered ! ?….though Jignesh Shah ,the Founder Chairman and MD of the FTIL Group (MCX,NSEL and others)states this in his message in the FY 13 Annual Report “….these are tough times the Company is facing and Financial Technologies is making all efforts to come out of such situation” 

    I don’t own any shares of the FTIL Group but I do have some very good friends and associates who work for it and are extremely wise and forward thinking and manage the FTKMC admirably and who graciously invited me for the MCX Equity Exchange Launch at Hotel Trident where our FM,Mr Chidambaram in his inaugural speech lamented Insider Trading and Speculation but amusingly went on to sound the gong for the Exchange’s first and symbolic Future trade !

    Media has justifiably gone to town on the NSEL and FTIL Group Plight ~Realms can be written on this and am sure a Best Seller Book too will finally be published to reveal what went wrong ! and was it a deliberate sinster plan right at the outset ! ~ and what is the extent of Political patronage at the highest level that’s keeping the Group alive and kicking till now !

    For Now this is all that I’m going to say…….

    From Rs 1224 on November 13,2012 last year the Share price of FTIL sank to Rs 102 on August 30,2013 and had recovered since then to Rs 160 levels

    However today the Share Price intraday dropped over 10% to Rs 140 levels as yesterday on the eve of the AGM the Auditors Deloitte Haskins & Sells has announced that their report of May 30,2013 on the standalone and consolidated results of FTIL results as on March 31,2013 should no longer be relied on ! 

    Remember the Satyam fiasco and how the Auditors Pricewater House had released a similar note warning that the last 39 quarters of their audited results should not be relied on ! ~ this went all the way back from 2009 to 2001 !

    FTIL’s EPS for FY 13 was Rs 70 ~ It’s June Q 1 FY 14 shows Rs 17 ~ but Deloitte now tells us not to rely on their report !

    FTIL owns nearly 100% of the troubled National Spot Exchange Ltd (NSEL) which is embroiled in a Rs 5600 crs payment crisis ~ there is more than meets the eye in NSEL ~ FTIL has already lend Rs 173 crs to NSEL to fund payouts to smaller investors ~How in Hell did this hole in NSEL go undetected for so long !? ~ the answer is suspected to lie in that there was hardly any internal control and deliberately so ~ there was no eternal regulation worth mentioning~ the Operators or Borrowers,the Exchange Administration,the Directors and FTIL as the near 100% Owner  were all seemingly colluding parties ~thousands of crores of borrowed monies were created for the benefit of just a chosen few ,and some were director related parties,through scheming financial structured products,supposedly backed by physical comfort of commodities in warehouses ~ these products were aggressively hawked to high networth investors by a network of brokers,including leading names like Motilal Oswal,Anand Rathi and India Infoline, for a few additional interest points and rolling commission or brokerage ! ~ Most of these funds  are suspected to be diverted away from the exchange read more

    Thanks Karnataka and Andhra Pradesh !….Bengaluru Equity Workshop Concludes Well

    Returned late night from Bengaluru at 1 am in the morning as Flight was delayed after delivering a two day Equity Workshop at the weekend…the  eight in a series for a Broking House…It was pouring as we drove to the New Airport,50 + kms away from the City…but we had a Mad Max Driver who drove as if his life,and ours !, depended on it ! weaving at 100 kmph through stranded cars in the fast flooding roads ! and despite incessant rain whipping the windscreen…paid a ridiculous Rs 260 User Fee to access the Airport

    Had gone earlier on Thursday,to spend two days at a friend’s 75 acre farm, 20 kms outside Bengaluru,on the fringe of the Bannnerghata Wildlife Park…what a great break !…could hear the silence !…had friend’s three dogs ( Small Datschund and Large Dalmatians!) all over me…Elephants and Monkeys destroy crops and so commercial farming becomes a tedious affair …tried to spot a Gharial in one of his four water harvested ponds on the farm…it had probably slipped in from the forest through the canals….relaxed company , great organic food,fresh vegetables,fresh mangoes,fresh coconut water,fresh jackfruit and fresh rains !…too short a break,though !

    Then switched to workshop mode on Saturday Morning….It was truly satisfying…When I threw the House open  for any questions on Sunday ,prompt came the first one “When will you come back to Bengaluru for your next workshop !?….Thanks! Karnataka and Andhra Pradesh ! for some great participation

    We had some fun discussing Valuations of Reliance Industries,Satyam and Reliance Power and even Jaiprakash Hydro among others companies…and am glad you’ll were genuine in your reactions when we played the Integrity,Insider Trading and Irrational Behaviour Scenarios

    Now you know how Mumbai,Vadodora and Rajkot got excited  on Reliance Ind Valuations in March and April 2009  at Rs 1100 to Rs 1300 !…maybe I should have come to Bengaluru first !

    So all of you know what is the appropriate Valuation Basis to use for Satyam…and how you can make some money on it ,based on an event based risk in June 2009 !

    You are now acquainted with the Valuation Risks of Reliance Power at Rs 180 and Jai Prakash Hydro at Rs 70 !

    Shanteeth,I hope we do get to 23000 + on the Sensex in 2009 itself, as you aggressively suggested at the outset of the workshop based on Technicals…though  I showed you why it looks highly improbable on Fundamentals !…glad you loved the Book I gave you “Screw it ! Just Do it! ” by Richard Branson…now pass it on so someone else enjoys it too ! read more

    What do Anand Mahindra and his stalwarts say about the Satyam Bid ?

    This evening ,it was interesting to view live on Stock Channels,Anand Mahindra,Vineet Nayyar (MD of Tech Mahindra) and Bharat Doshi (CFO of the M& M Group) and make sense of their sense on being the highest bidder at Rs 58 for Satyam

  • Anand Mahindra reiterated that their’s was yet only the Highest Bid and not the Winning Bid…they would need to await CLB approval to confirm that they indeed had won
  • Anand Mahindra spoke of contacting each and every one of Satyam’s clients,like Vikram Pandit of Citicorp and GM to assure them of the highest level of Client servicing…..I daresay,these American Giants are battling for their own survival ! 
  • On how they arrived at Rs 58 as the Bid,Anand Mahindra refused to disclose the specifics ,but suavely stated that they preferrred to look forward and not look back to see who’s chasing
  • The bid at Rs 58 did consider the quantum of legal liabilities that may arise,but Vineet Nayyar parried a question to disclose the exact amount they had estimated…This is a calculated risk that TM has taken,stated Anand Mahindra…Nayyar hoped they are right on this but cannot be 100% sure or guarantee limited liability.
  • The bid at Rs 58 also considered the fact the the Revenues had dropped from US $ 1.8 b to US $ 1.5 b and further to US $ 1.3 b and the low margins are actually seen as opportunities to plug…However this would mean a monthly turnover of just Rs 550 crs and operating profits of Rs 10 crs at current margins…This is bad and simply does not support a valuation and bid of Rs 58 !…This would mean an EPS of below Rs 2 !…Satyam needs to earn at a net level Rs 750 crs to Rs 1000 crs PAT per annum to show an EPS of Rs 8 to Rs 10 to support a price of Rs 58….This indicates a strong trimming of the workforce..Covered in the last point below
  • Vineet Nayyar disclosed that both,Satyam and Tech Mahindra complimented each other in many ways…TM had 70% of Revenues in GBP and Euros while Satyam had 70% in US Dollars,thus providing a natural currency hedge…though there were 600 clients,none were overlapping…also TM has Telecom Domain expertise,while Satyam was competent in several other verticals
  • Bharat Doshi disclosed that the Rs 2890 crs required to fund the 51% stake would be funded by Rs 700 Crs internal accruals in TM and Rs 2200 crs had been tied up as debt with Kotak.TM’s Balance Sheet comfortably supported raising this debt
  • The Bid was supported strongly by all Boards…Mahindra & Mahindra,Tech Mahindra and even British Telecom
  • It is too early to decide whether the Satyam Workforce will be trimmed…With falling revenues,low margins,I am quite sure this will happen…If they lay off 10000 ,there will be saving of Rs 400 crs 
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