SKS Microfinance drops 20% to Rs 360 today as not in RBI’s shortlist of 10 to be granted mini bank licenses

SKS Microfinance lost 20% in early morning trade on NSE dropping to lower circuit at Rs 360 before recovering to Rs 390.Previous Closing was Rs 450

This  defining fall was the consequence of not having made it to the RBI List of 10 lending entities shortlisted from 72 applicants to become mini banks for advancing to the unbanked and small farmers and other segments that do not receive funding from the bigger banks.Interestingly eight of the ten short listed are microlenders

I have never been a fan of SKS Micro and it’s Promoters and had warned in 2010 to avoid the obscenely priced IPO  in the price band of Rs 850 to Rs 985 more so as it involved an unhealthy element of Offer for Sale by Sequoia Capital.Also was critical of  Promoter Vikram Akula’s mindset too in profiting by himself exiting a large shareholding at an obscene price prior to the issue.Here’s the story I posted in 2010.The share Price collapsed after the IPO and even dropped below Rs 100 to Rs 90 in 2011 and even lower to Rs 54 in 2012 before recovering smartly to touch a 52 Week High of Rs 590 on July 31,2015

I have an Issue…actually several…..with the SKS Microfinance Issue !….Intentions may be Noble but Actions are Profit Motivated and not singularly Selfless !

Thursday, July 29th, 2010 Interestingly RBI has not even shortlisted Vikram Akula’s Vaya Finserve that he started after exiting SKS Micro ….Interesting are also the parameters by which the applicants were assessed as deserving….financial soundness,business plan and fit and proper status as conveyed by external agencies.I suspect it must have been the last criteria weightage that saw the exclusion of  the above Also a leading Broking House erred in haste when recommending SKS Micro to clients just recently setting a target of over Rs 700 for it.Now they have come out within days to state that in light of SKS Micro not being shortlisted the premium valuations will reduce and they have reduced the price  target to just over Rs 400 ! implying that  Rs 300 + in their target of over Rs 700 was based on the assumption and expectation of SKS Micro getting the mini bank licence  !….they should have waited for this confirmation or warned that the recommendation was only for aggressive players wishing to bet that SKS Micro would get the mini bank license. Now they are wiser as all are !…wonder what their Clients who hold SKS Micro must be doing with their holding…holding in hope yet or exiting as relative valuations for this Rs 1000+ crs Net worth company are  20+ PE and 4.5 PBV ! ? SKS Microfinance will find it increasingly difficult to compete with those who get the Mini Bank License as the latter will have access to lower cost and larger capital from the banks and many of them are promoted or supported by Big Entities

RBL Bank Ltd IPO @ Rs 200 & a Listing Market Cap of over Rs 8000 crs

RBL Bank Ltd (earlier The Ratnakar Bank Ltd) has finally filed it’s Draft Red Herring Prospectus with SEBI yesterday,Tuesday,June 23,2015

The  IPO will in all probability be in a Band of Rs 190 to Rs 200

 

FY 15 Year End Networth is @ Rs 2200 crs with Book Value @ Rs 75 levels with Equity at  Rs 300 cr levels.PAT was Rs 207 crs giving an EPS of @ Rs 7

The indicated IPO Pricing of  Rs 200 would mean PE of just under 30 times and a PBV of 2.7

Post IPO the Networth will move to Rs 3300 cr levels with Equity @ Rs 355 crs and Book Value rising to Rs 93 levels

The Listed DCB Bank @ Rs 129(FV Rs 10) is more or less similar in size to RBL Bank.In FY 15 it earned Rs 191 crs on an Equity of Rs 282 crs giving an EPS of Rs 7.2.The Networth is Rs 1534 crs giving a BV of Rs 54.PE & PBV are 18 and 2.4.Market Cap is Rs 3654 crs

Post IPO  of RBL  a similar 2.4 PBV if applied  on the post IPO BV of Rs 93 will mean a listing level of Rs 225…more likely Rs 250

Market Cap of RBL Bank on Listing should therefore be over Rs 8000 crs 

 

Suzlon or South Indian Bank? What is your Risk Profile?

🙂 Suzlon or South Indian Bank ? Both are in the Rs 25 to Rs 30 Share Price Range

What’s your Risk Profile ?

Suzlon Energy  (FV Rs 2) is a credible  turnaround idea with the entry of Dilip Shanghvi of Sun Pharma but yet has a negative networth and huge debt and losses…displaying a reviving momentum that has nearly trebled Market Cap to currently over Rs 10500 crs in just six months from a low of Rs 11 in late October 2014 to levels of Rs 28/29 today

South Indian Bank (FV Rs 1) is available @ Book at Rs 25 to Rs 27 range …steady with a Market Cap of just over Rs 3500 crs currently….many see it as a Value Idea

Would you consider them for your Equity Portfolio ?…and if Yes would you pick  both or  just one of the two ?

😀 And if you pick just one I’m betting even the Conservative Mindset may go for Suzlon over South Indian Bank !

Aha ! Equity is the place to be….spoilt for choices !

😆 For once I’m tempted to preach not to stay true to your risk Profile….known for being contrarion anyway !

Cheers !

Freeloading Promoters ~ Loved this Address by the RBI Governor Raghuram Rajan

Freeloading Promoters ~ Love the RBI Governor,Raghuram Rajan’s Strong Speech at the Third Verghese Kurien Lecture at the Institute of Rural Development Anand yesterday

resonates with the tagline of my blog “In India, Companies may fall sick but Promoters rarely do !”

Here are some superb extracts from the Address as linked above

” The Promoter enjoys riskless capitalism -even in these times of very slow growth,how many large promoters have lost their homes or have had to curb their lifestyles despite offering personal guarantee to lenders?” 

“We need a change in mindset, where the wilful or non-cooperative defaulter is not lionized as a captain of industry, but justly chastised as a freeloader on the hardworking people of this country,”

“In India, too many large borrowers insist on their divine right to stay in control…”

“…the promoter threatens to run the enterprise into the ground unless the government, banks, and regulators make the concessions that are necessary to keep it alive. And if the enterprise regains health, the promoter retains all the upside….!

“No wonder government ministers worry about a country where we have many sick companies but no “sick” promoters.”

“I also don’t want to argue against risk taking in business. If business does not take risks, we will not get architectural marvels like our new international airports, the “developed-for-India” low cost business model in the telecom sector, or our world class refineries. Risk taking inevitably means the possibility of default. An economy where there is no default is an economy where promoters and banks are taking too little risk. What I am warning against is the uneven sharing of risk and returns in enterprise, against all contractual norms established the world over – where promoters have a class of “super” equity which retains all the upside in good times and very little of the downside in bad times, while creditors, typically public sector banks, hold “junior” debt and get none of the fat returns in good times while absorbing much of the losses in bad times.

“The public believes the large promoter makes merry because of sweet deals between him and the banker. While these views have gained currency because of recent revelations of possible corruption in banks, my sense is that Occam’s Razor suggests a more relevant explanation – the system renders the banker helpless vis-a-vis the large and influential promoter.” read more

Union Budget 2014 ~ Will Sensex continue to Humour as Jaitley does not!

Have a look at our first impression posted  after our FM ‘s Union Budget Address and during market hours

Union Budget 2014 ~ Will Sensex continue to Humour as Jaitley does not!

Think he missed a great opportunity to provide us with the ‘Naya Soch’ of the new NDA Government

His Speech stated quite a few challenges and objectives like tackling Black Monies,raising Tax to GDP ratio,lowering Inflation and Fiscal Deficit % but stopped short of spelling out the specifics of solving these

Having just 45 days after NDA was elected he has opted for the easier option of simply following the UPA budget process and numbers too that the UPA FM Mr Chidambaram laid out in his Interim Budget in February 2014….whether it be Disinvestment or Tax Receipts or Fiscal Deficit Control Targets…made right noises but was tokenism in a few areas like social expenditure…thankfully nothing really adverse or anti poor though direct tax incentives are not really cause for any celebration

Sensex had quite a roller coaster ride today as to be expected….opening stable & pre budget speech at 25514 in the morning then sliding before noon over 300 points to 25117 from yesterday closing of 25445 during the budget speech before strongly racing away by over 700 points to 25920 …over 400 points previous day closing post budget speech only to reverse all the gains and close at 25373,down 72 points  from previous day closing

Will the Sensex continue to Humor us in the near term despite not an iota of Humor in the FM’s Speech !? …sense is that any correction will be a hiccup on the onward march towards 30000 on the back of increased FII Net Infows & Big Corporate Infra spending  

I see some clear big winners in the Infrastructure Space across the Board from Shipping to Power to SEZs to Real Estate to Highway Road Construction Companies and Pipeline Companies

 

 

Typical ~ Equity Investors are piling on at these Highs ~ they need to be cautious

Sensex has crossed a record 26000 & Nifty is now ahead of 7700

Typical ~ Equity Investors are piling on at these Highs  ~ they need to be cautious ~ especially those who are returning or initiating fresh exposure now not having done so in 2013 or earlier in 2014 ~ advisable to await the post budget scenario as there is a high probability that once euphoria abates the Sensex and Bellwether Scrips may correct 10% or more…the real danger though are the small caps and midcaps that have run up crazy,some over 100% in months…they may correct 25% to 50%…yes that high !  

At June 30,2014 ,Equity mutual funds saw record absolute rise in average AUM in the quarter, up by Rs 33000 crore or 16% to Rs 2,36,000 crore led by mark to market gains and inflows. The equity funds’ contribution to the gains in the industry assets was the highest among all categories

While this is to be expected on the back of the resounding BJP Victory and Narendra Modi assuming Prime Ministership there needs to some caution that should be exercised especially by those seeking instant profits and gratification as Sensex has crossed 26000 levels and seems to be running a little ahead of fundamentals for the near term on the back of  BJP & Narendra Modi sweeping the elections,FII Net Inflows exceeding US $ 8 Billion in 2014 till date and Great Expectations from the Budget in particular and the Government in general going forward

Great Expectations from the Union Budget this Thursday are countered by great challenges that continue to confront us on the economic and geo political front…Iraq & Ukraine Tension can escalate further causing Oil Price to surge even further past US 120/barrel and putting pressure on the Rupee…though a lot of the pressure has been taken off by record FII Net Inflows into India this year into both Debt & Equity

The Budget Backdrop is :

High ~ Inflation,Deficits & Debts

Low ~ Economic Growth with Manufacturing sector that needs urgent revival

45% + of the Projected FY 15 Fiscal Deficit has been reached in the first two months April & May  of FY 14 itself 

There is little room to lower Interest Rates immediately….so manufacturing thrust can be provided through diluting the Land Acquisition Act and opening out or increasing FDI cap in many sectors

It is commonly expected that the Budget will be kind to the Infrastructure,Housing Finance,Power & Banking Sector….a major beneficiary of this should also be the Cement Sector read more