Wealth Destroyers as Potential Multibaggers~ Mumbai Equity Workshop Sat June 17 2017

Wealth Destroyers as Potential Multibaggers~ Announcing a Full Day Mumbai Fundamental Equity Workshop on Saturday, June 17 2017 

🙂 This time in this Stock Selection ~Value Vs Price Workshop have kept an exciting Theme :

WEALTH DESTROYERS : POTENTIAL MULTIGAGGERS

As Limited Seats would advice to Book Your Seat right away here => http://www.jsalphaa.com/register.php

Plan to cover over 25 Wealth Destroyers to assess any Turnaround Value vs Price & thus a chance to redeem themselves and become Wealth Creators from here… or should just one move on in many of such Wealth Destroyers that are now beyond redemption

Here’s what some participants said of the December 2016 Mumbai Fundamental Workshop on Stock Selection : Value Vs Price…and this was before IB Ventures zoomed 7 x in months from Rs 20 to Rs 140 & HOV doubled in the same time to cross Rs 300… we had covered both these & more in Earnings & Asset Basis Valuation exercises

“Amazing… Awesome Session about Fundamental Stock Selection & Wealth Creation ”

“Full of Inspiration, filled with wisdom…. am really proud to be a part of this wonderful session”

 & from a repeat participant “recreated the same old magic of Bangalore in Mumbai… great Saturday”  

Would love to interact with you ~ So do invest one Saturday ,June 17, 2017 with me in my Mumbai Fort Office near BSE and above Starbucks & Croma

Register here => http://www.jsalphaa.com/register.php

Here’s the Detailed Template of this Workshop if you want more details on coverage

gap-master-class-mumbai-17june2017

🙂 See you Saturday, June 17, 2017 at my Mumbai Fort Office Conference Room… we’ll figure out if Suzlon will continue to be ZZZZZlon!  & dissect many such Wealth Destroyers!

Cheers !

State of State Bank of India @ Rs 225 ~ Shareholders Perspective

State of State Bank of India @ Rs 225 ~ Shareholders Perspective

Sensex is arguably reckoned to be the Barometer of our Economy & State Bank of India & Larsen & Toubro have been arguably reckoned to be the best India Proxy Plays in our growing Economy

Received a Forward from an Overseas NRI Friend enquiring if it was true that :

  • Rs 5 lakhs if invested in 2000 in a Fixed Deposit of State Bank of India would have been  currently worth Rs 26 lakhs while
  • Rs 5 lakhs if invested in 2000 in Shares of State Bank of India would be currently worth a whopping Rs 5.74 crs !

😈 Someone’s quite excitedly promoting  Investment in State Bank of India  & advocating Equity over Fixed Deposits over a long period….cannot blame the ‘someone’ for the excitement but deliberate exaggeration to prove the point !?

Anyway,gives me another opportunity to showcase the Magic & Power of Compounding with which I normally commence my Training Sessions

So FD ya Share?

Let’s take Investment in the Fixed Deposit first :

Here’s the Interest Rate Scenario in India form 2000 to date 2016

india-interest-rate

The average Interest Rate in the 16 years this Millennium is under 7% with Top High of 14.5% hitting in August 2000 & a low of 4.25% being recorded in April 2009

Assuming even that in July 2000 if one locked in the high rate of @ 14% in a 10 year deposit ,Rs 5 lakhs would have grown at a 14% CAGR to Rs 18.54 lakhs in 2010 & then at 8% CAGR grown to Rs 29.42 lakhs in the eight years till date July 2016….a straight CAGR would be 11.75% for 2000-2016 period….so the FD part of the Forward could be accepted when it states Rs  5 lakhs invested in a FD of SBI in 2000 would have grown to Rs 26 lakhs in 2016….this gives a CAGR of 11%

Now let’s Look at Equity Returns from State Bank of India :

The Forward excitedly proclaims that Rs 5 lakhs invested in the Shares of State Bank of India in 2000 would have grown to Rs 5.74 crs in 2016…..This would mean 11380% absolute returns and a CAGR of near 35%….Not Incredibly Unbelievable but certainly requires Verification

State Bank of India was at Rs 225 in July 2000 & is also Rs 225 today in July 13,2016,sixteen years hence….However the Face Value was Rs 10 in 2000  & now the Face Value is Rs 1

Thus Rs 5 lakhs invested in 2000 would have grown to Rs 50 lakhs now & not Rs 5.74 crs !….Original Investment of Rs 5 lakhs in 2000 would have been 2222 shares @ Rs 225(FV Rs 10)  which on 10:1 Split to FV Rs 1 in November 2014 would have been 22222 shares which at current price of Rs 225 would be worth Rs 50 lakhs.The Absolute Returns would have been 900% while CAGR would be @ 15.5% in this 2000 to 2016 period

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A Dose of Rakesh Jhunjhunwala

Rakesh Jhunjhunwala on Future of Equity Market

Methinks every Indian Equity Investor needs a dose of Rakesh Jhunjhunwala (RJ) every few years! ~ any sooner it could be an Overdose !  😆 ~ just kidding !

I like the guy ! ~ right since I interacted with him when I invited him around 15 years ago at the turn of this century for interacting in an evening  Q & A session with my packed class of @ 90 participants in my Equity Portfolio Structuring and Stock Analysis Workshop at the BSE Training Institute as I thought he would add practical value & he did

“Boss ! I’m a Sadak Chaap ! ”  he had told us then as also how he had reconstructed his equity portfolio to concentrate only in a few stocks after the 2000 ICE debacle…so in a sense most of his Wealth has grown only in this Millennium in the past 15 years ~ and to his credit in Selections that were not really Blue Chip or Core

Yesterday had gone for an  IMC interactive meet in Mumbai to check out if RJ has sobered & matured in his ‘manner of speak’ over the years ~ I rarely watch Stock Channels ~ don’t even have a TV in office~  so was not really conversant with how & what he delivered in his appearances though knew of his initiating big stakes in companies

I am delighted to blog he has not changed ! ~ shot straight from the hip & mouth again as he always does ” I’m a satodia(translated to mean speculator)  & investor & not an economist” ~ his investment portfolio has spread into the Alternatives of  Bollywood Movie Production too with Kareena & Arjun starrer ‘Ki & Ka’ being his latest co production~ is into horse racing too and owns a few horses ~ passions perhaps where return on investments need not be measured in monies !?

Many perceive him as Dehati or Crude Dude for his rustic loud boorish way of speech~ but don’t let it fool you ! & he does not make any pretenses ~ he’s a CA by training & wears a fairly sharp mind

Money Talks & Crowd Laps it up all !~ many vigorously & ‘knowledgeably’ nodding in agreement

These RJ’s views & responses to questions posed should interest you :

On The Future of Equity Markets ~ Reiterates this is only the Trailer & we are going to witness a Mother of all Bull Runs.India is a thriving young Democracy with US $ 600 b in Savings every year.Equity Markets receive just US $ 50 b from this.This has to improve and it will ~ anyone ,any  doubt!?   

On Returns from Equity  ~ Ironically while his riches have been through multibagger 1000% + equity gains in concentrated high weightage stocks like Titan & Crisil he asserts that one should be happy with 18% CAGR gains and if it goes to 24% one should be really happy

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Sensex disappoints in FY 16 as many of the 30 constituents lose big value

FY 16 has been a mixed year for Stocks with Markets on a downward drift  with  Sensex closing 9.4% lower  at 25341

Sensex disappoints in FY 16 as many of the 30 constituents lose big value 

Interesting & Heartening to it’s Shareholders ,Reliance has been the biggest constituent gainer at @ 27% while at the other end BHEL has lost half it’s value at 51% !  ~ another 11 companies have lost between @ 19% to 30 % values

Domestic Concerns revolved around  second consecutive failure of monsoon in 2015 &  slow pace of Reforms  & Corporate Earnings Lethargy with growth in single digits despite boasts of GDP Growth of over 7% and lower Inflation and Oil Price falling 40%

Global Concerns revolved around  China’s Growth slowing down considerably & It’s Stock Markets losing a lot of it’s froth in panic falls, continuing recession in Europe & expectations of the US Fed raising rate

Consequently FPI Inflows which were a record US $ 17 b in FY 2015, reversed to outflows of US 2.1 b in FY 16.These outflows would have been higher if last month March 2016  had not seen a reversal back to FPI Inflows of US $ 3.2 b 

In the first three months of this Calendar Year 2016 , January &  February 2016 witnessed significant outflows of US 1.67 b & US $0.8 b respectively that dropped Sensex to 23000 levels.On the back of many countries like Japan,Switzerland and Sweden embarking on Negative Interest Rate Policy,the  US Fed send out dovish signals and has delayed Rate hikes.This saw FPI Equity Inflows smartly cross US $ 3 b in  March 2016  getting them back into the Green in 2016 & revive the Sensex back up @ 10% to 25500 levels or else FY 16 would have seen a Sensex drop of nearly 5000 points & @ 18%,double than what it actually did in the end

Here are some FY 16 Trend observations :

  1. Sensex closed down 9.4%.It was down @ 18 % just around a month ago but smartly pulled back on record US $ 3b FPI Inflows in March 2016
  2. Of the 30 Sensex Constituents,amusingly after a seven year itch perhaps 🙂  Reliance is the biggest gainer  at 27% taking it’s Market Cap to US $ 49 b,next only to top TCS  which  despite a flat year retains Top Market Cap of US $ 73b !
  3. Six Scrips,including all weather favourite TCS (Market Cap US $ 73b) have remained flat
  4. Of the Four Banks,only HDFC Bank stays in the Green just about,the rest have lost lot of value from one third to one fifth
  5. India Growth Proxy Larsen & Toubro has lost 26% Value
  6. Four Pharma Majors have also dropped significantly from 13% to 28%
  7.  Three IT Bellweathers saw Wipro down 10%,Infy up 10% and TCS  in between remaining flat
  8. Of the Five Auto Majors,the two 2-wheelers are both in the green,two ,Maruti & M & M are flat while Tata Motors has lost 30% value
  9.  Three eternal FMCG Favorites,ITC,Asian Paints & HUL have held up
  10.    After a Steel Sector Battering past few years,Tata Steel is now catching it’s breath
  11. All  Five  Non Bank PSUs continue to flounder ~ BHEL has lost half it’s Value follwed by ONGC down 30% ,Coal India down 19%,NTPC down 13% & Gail down 8%
  12. Housing Finance Leader HDFC too has taken a beating of @ 16%
  13. Controversial Adani Group’s Adani Ports is down 20%
  14. Telecom Leader Bharti Airtel is down 11% despite getting a 4G breather as Reliance’s Jio ,expected to be a sector disruptive force,launch continues to be delayed but should be fully operative by FY 17 year end

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IDBI Bank @ Rs 68 ~ Will Govt really let go?

IDBI Bank @ Rs 68 ~ Will Govt really let go?

In 1995  IDBI the DFI came out with an IPO at Rs 130.I had given it the notorious sobriquet ‘Instant Death By Investment !’ as the Pricing was way to High.The IPO was bailed out by UTI at the time in a quid quo pro really as then IDBI subscribed to Unit 64 at the high purchase price which was a scam in itself as it was 60% higher than the actual Unit 64 NAV which hovered around par of Rs 10 !

Then in 2004  IDBI the DFI merged with IDBI Bank  and in 2010 I had recommended it at Rs 130 in 2010 for several reasons.It did climb past Rs 200 the same year but then disappointed and started it’s downward slide as NPA Demons begin surfacing big time.

Last Month in the second week of February these NPA Demons caused the Share Price to drop below Rs 50

On February 29,2016 our  FM made this  specific budget phraseology for IDBI :

“The process of transformation of IDBI Bank has already started. Government will take it forward and also consider the option of reducing its stake to below 50 per cent” 

It was a no brainer for the Share Price to begin rising the same day from Rs 58 levels to cross Rs 60

It’s now moved up @ Rs 68

Here’s the Share Price Trend of IDBI Bank  from 2004 to 2016 (in Rs)

Year

Open

High

Low

Close

2004

62.90

115.00

29.25

109.80

2005

110.95

130.95

76.30

97.15

2006

98.15

110.00

48.50

76.30

2007

76.80

181.00

66.50

165.30

2008

166.50

180.30

53.00

67.65

2009

68.00

140.00

39.75

127.45

2010

128.00

202.25

105.85

164.75

2011

165.75

168.30

77.40

77.80

2012

78.30

121.50

77.15

111.40

2013

112.10

118.20

52.30

66.45

2014

66.85

116.50

52.95

73.15

2015

73.25

95.70

52.45

87.80

2016

90.80

91.15

47.40

68.85

The Book Value of IDBI Bank is over Rs 110 giving the relative Valuation of  0.6….that’s of course one accepts current audited GPA levels of Rs 19615 crs ,that’s 8.94% of Advances and with a 62.92 % of Provision Coverage

Government owns 80.16% of IDBI Bank and if it is open to bring this down below 50% as proclaimed in the Budget by our FM then it begs the question ~ Will they just bring it down but yet retain Management Control or will IDBI really be up for Privatisation and therefore up for Sale ! ?

Quickly the IDBI Employees have voiced their displeasure and threatened to go on strike in the crucial last week of this month of March 2016 which closes out FY 16

Why would the IDBI Employees resist Privatisation or Government diluting it’s stake below 50!?

Seriously ask yourself this ! I reflected and immediately came up two big reasons in my view :

  1. Insecurity of Jobs ~ This is understandable as Employees have huge job security under the Government ~ Bank can Hire but not Fire ~ at best Government can try VRS as they’ve been doing over the years in PSU Banks ~ Connect this with how bloated Government Enterprises really are on workforce be it the Railways or Coal India
  2.  Accountability & Transparency in Operations ~ This would open a Pandora’s Box in the Bank for all the NPAs & who really is responsible in the Bank to have advanced Loans that have turned Bad.Of the over Rs 2 lakh crores advances ,the Bank reportedly has an exposure of  Rs 7000 crs  to the JaiPrakash Group,Rs 15000 crs to the Essar Group and @ Rs 925 crs to Kingfisher Airlines.In fact the ED is investigating Vijay Mallya & his Kingfisher Airlines for Siphoning off  @ Rs 300 crs Funds from the Rs 900+ crs IDBI Loan      

So will our Government be influenced by the IDBI Employees opposition & not go ahead with it’s plans to sell it’s stake in IDBI Bank to bring it below 50% ?…the Budget already shows FY 17 Disinvestment Target of Rs 36000 crs + Precise Strategic Disinvestment of Rs 20500 crs.This would  include  IDBI Bank Stake Sale planned

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Tumbling Top 10 PSU Banks ~ Govt & MOF & RBI & Banks all to Blame

Last Few Years I have consciously stayed away from PSU Banks,Oil  & Steel & Power Companies

Now you’ll know why !

There has been serious wealth destruction for those who had invested in them

So it was always with some degree of amusement I observed many analysts and fund managers and stock market experts recommend these over the years and justify their call even when it was obvious these companies were bleeding profusely

This Post is about  PSU Banks

Who is to Blame for this Wealth Destruction ?

I squarely lay the Collective Blame on the various Central & State Governments that ruled  & rule,Ministry of Finance Bureaucrats &  Finance Ministers,the Board of Directors of all these Banks led by the Chairman & MDs & even the RBI Boards led by the various Governors & their deputies in these last few years….they preach Corporate Governance but do not practice it….how else will vested interests be served

They have deliberately let this come to past throwing caution to the winds when Lending and then not providing adequately and in time for the NPAs many of which were not even identified as such ….and their delay in declaring many defaulters as wilful…Supreme Court has been seized of this danger and have directed RBI to provide to it within six weeks  in a sealed cover the list of all defaulters over Rs 500 crs.One Bank Chairman in the analyst meet for Q 3 FY 16 results recently  refused to identify the Big Defaulter for which the Provision was made !   

If it was not for the aggressive stand taken by the present Governor,Mr Raghuram Rajan and the Asset Quality Review in the second half of 2015,the Banks would have continued under providing for NPAs & even not identifying them in their entirety…the role of statutory auditors too comes under scrutiny here

The result has been a damaging Q 3 FY 16 for the PSU Banks as they have been forced by RBI to provide properly based on the AQR conducted

It is in this context I am astonished at the recent lament by none other than Mr Deepak Parekh who says that if the Banks have to undergo one more quarter of provisioning for NPAs like Q 3 it would tantamount to an Anesthesia  overdose & Banks would become comatose !…Come On Mr Parekh !

RBI has asked the Banks to clean up by March 2017

My worry is that NPA Levels may increase on better & proper identification & classification and there will be more pain for these Banks.This would mean higher Provisions for the next few quarters

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