Boom!as FM Busts Corporate Tax!~Wow!How!Now!?

Released today under my authorship in the SCRIP STANDPOINT Module of Jeena Scriptech Alpha Advisors Pvt Ltd  

“How’s the Josh !?”

Boom!as FM Busts Corporate Tax!~Wow!How!Now!?

The effect of Fun & Excitement peaks when the cause is least expected

Market Sentiment has reversed dramatically & instantaneously !  

BSE & NSE  has seen the Sensex & Nifty created historic surges moving respectively 5.32% & 1921 points up to 38015 & 569 points to 11274 on Friday,September 20,2019 & even more by 2.83% to 39090 & 11600 on Monday ,September 23,2019 to aggregate a surge of 8.3% in just two trading days with Total Market Capitalisation zooming up in just these two trading days by Rs 10,45,700 crs or nearly US $ 150 Billion  to  Rs 148,87,830 crs or near US $ 2.1 Trillion ,thus regaining US $ 2 Trillion Capitalisation quickly ! 

Date Sensex Close Up/(Down)  Points, % Approx Total Market Cap

(Rs Crs)

Total Market Cap Up (Down )

Rs Crs, %

Friday ,September 13,2019

A Week Before

37385 1,42,42,950
Thursday,September 19,2019

Day before Tax Rate  Game Changing Significant Slash Announcement

 

36093 (1292), – 3.46 1,38,42,130 (4,00,820),  -2.8
Friday,September 20,2019

Morning of  FM’s Tax Rate  Game Changing Significant Slash Announcement

38015 1922, 5.32 % 1,45,34,237 6,92,107,   5
Monday,September 23,2019

On Second Trading Day after  FM’s Tax Rate  Game Changing Significant Slash Announcement

39090 1075, 2.83 %

&

2997 in two days, 8.3%

1,48,87,830 3,53,593,   2.43

&

10,45,700,   7.56 

Wow ! How !  Now ! ?

It took a Government Sacrifice of  Rs 1,45,000 crs or US $ 20 Billion in Corporate Tax Revenues to create a 7x sacrifice surge in Market Cap of US $ 150 Billion in just two trading days !

It’s like the Government conceding to the Corporate Sector ” Hey Guys ! we’re transferring our Revenues to you as you’ll can put it to more productive use by funding an Investment Capex Cycle to stimulate more growth for better returns than we can through increased Government Spending “

What is clearly a Market Valuation Re-Rating Move,on the morning of Friday,September 19,2019 our FM Mrs Nirmala Sitharaman announced,what should be seen as a forced measure, a Tax Bonanza for Corporates busting the Tax Rate from an effective high of 34.94% for most to an effective 25.168% with no requirement for those who opt for this rate,  to pay the Minimum Alternate Tax which too was slashed to an effective 17% from  the current 18.5%.Another major tax incentive will be a Tax rate of just 15% for manufacturing companies incorporated after October 1,2019  & who commence manufacturing by March end 2023

Such Tax Rate Cuts & Incentives  announcements should have been part of the budget in early July.If one recalls since the NDA came to power in 2014,it’s always been their stated intent to reduce the Corporate Tax Rates gradually to 25%.Economic slowdown is a catalyst to this ‘one shot’ reduction now & that’s why it can be viewed as a forced measure

It’s a ‘No Brainer’ that Markets would instantly turn euphoric as back of envelopes calculations see the Nifty 50 Companies,whose aggregate FY 19 PAT was Rs 370000 crs , benefit by a clean Rs 27000 crs or US $ 3.8 billion in FY 20 on this Tax Rate reduction.Factor in Earnings Growth before Tax & the benefit is even higher  read more

Q&A Outlook Business~Dont See Elections as a Risk Factor for Indian Equities~See Value Pockets across Sectors

Screenshot_20190424-142037 Screenshot_20190424-141916 Screenshot_20190424-141824 Screenshot_20190424-141733 Screenshot_20190424-141724 Screenshot_20190424-141717 Screenshot_20190424-141704 Screenshot_20190424-141649 Screenshot_20190424-141628 Screenshot_20190424-141620 Screenshot_20190424-141609 Screenshot_20190424-141525

Some of you may be interested in this ~ It’s a brief video Interview that Outlook Business has carried on their website www.outlookbusiness.com  & on YouTube this month April 2019 & which can be viewed below reflecting my views on :

  • Lok Sabha Elections that have commenced~ don’t see them a as a risk factor for Indian Equities
  • Value Pockets across Sectors,PSUs too
  • A convincing real estate play ~ if inclined,do also read the detailed coverage  here 

Wishing all of you a profitable Financial Year 2019-20 after a roller coaster emotional FY 2018-19 for most who lived a disconnect between  Sensex & Nifty seeking record highs  & Small & Mid Caps giving up significant gains in quick time too

Cheers !

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 !

Promoters rooting for Change of Infosys Chair~Seshasayee to Subrahmanyam?

The Infosys Situation is getting as explosive as the Tata Group’s did with  Promoters rooting for Change of Infosys Chair~Seshasayee to Subrahmanyam?

Corporate (Mis)Governance Issues~First Tatas & now Infosys !~Chairman & Board under Attack by Promoters

It’s been disruptive global times in many ways with Trump now US President and India re-gearing up Post Demonetisation & the Indian Corporate Big League crying out “Me Too” .

Headlines were hogged for months as first Promoter Family’s Ratan Tata led the unusually aggressive initiative  in the illustrious Tata Group to fire it’s Chairman, Cyrus Mistry & now Promoter N R Narayana Murthy has called to replace Infosys Chairman with Prof Marti Subrahmanyam .Ex Directors T V Mohandas Pai & V Balakrishnan support Murthy on this  & are calling for the Chairman’s resignation for serious misgovernance on issues of High Severance Packages,Hike in CEO Package ,Director Appointments,Inducements to bag Contracts,non disclosures among others that strike at the very core values Infosys was build on

Narayan Murthy has just asserted in an interview that the unusually high severance package to the ex CFO was just hush money cloaked & that he was concerned about falling standards in corporate governance

Whoa ! That’s a criminal charge in my view !

N R Narayana Murthy is rooting to replace Seshasayee with Prof Marti Subrahmanyam,Charles E Merrill Professor of Finance at the New York University Stern School of Business.The Professor has already served as an independent director on the Infosys Board for thirteen years till 2011

Four Years ago in January 2013 I had an opportunity to interact with Prof Marti Subrahmanyam when he delivered a paper at BSE on the  manipulation of Libor Rates.I had blogged on this then.I had asked him if the  Banks simply had to rig the rates to survive & if this was the case then the orders had to come from the top.Prof was taken aback a bit by the query & clearly reluctant to confirm this.Expected truthful answer should have been “Yes” as the question was rhetoric.Instead he had brushed it off abruptly & I got the impression of an intellectual arrogance at display.That view has stayed as I’ve not got another opportunity to interact to be able to change this view …He’s quickly thrown in the hat to become Infosys Chairman.Clearly Narayan Murthy has been in touch with him on this before putting up his name to replace Seshasayee,Murthy has always been straightforward and blunt like in yesterday’s interview calling the severance pay as hush money !.Can’t imagine Subrahmanyam to be as straightforward & I daresay will be Murthy’s ‘Voice’ just as Ratan Tata,in my arguable view,wanted a ‘Yes’ Man Chairman to head Tata & which Cyrus Mistry turned out to be not read more

HCL Info up 12% to @ Rs 51 with super volumes~Will BSE & NSE ask Why again?

HCL Infosystems Ltd up 12% to @ Rs 51 with super volumes ~ Will BSE & NSE ask Why again?

Just under a fortnight ago on September 22,2016 HCL Info opened at @ Rs 42 & surged to Rs 48 before settling at Rs 47 on huge above average volumes with BSE clocking over 42 lakh shares and NSE  trading near 1.63 cr shares

BSE & NSE had asked the Company to Clarify on whether there was any reason for this surge in Volumes & Share Price

Interestingly the Company replied instantly that “The increase in volume seems speculative in nature”   

The Delivery % was just under 20

The Share Price then slid last week back to Rs under 43

Today  BSE  & NSE clocked even more super volumes exceeding 45+ lakh & 1.84+ cr  shares respectively with Share Price shooting up 12% to close just under Rs 51

What’s Happening? Will the Exchanges in 13 days yet again ask the Company for clarification for today’s surge too & will the company reply the same that it’s seems to be speculative & will thus the share price slide back ?

52 Week H/L is Rs 66.75/30 & Market Cap is Rs 1135 crs

The Company is part of the Shiv Nadar HCL Tech Group & has undergone a Scheme of Arrangement effective January 1,2013.It has 14 unlisted subsidiaries including eight step down & one jv associate and has suffered losses in the past three financial periods which even witnessed declining topline with the last dividend being paid for FY 12.Consolidated Networth on March 31,2016 declined to Rs 1008 crs with Equity (FV Rs 2) at Rs 44.58 crs  of which Rs 596 crs in reflected in Goodwill on Consolidation.There are no Non Current Investments in Consolidated Accounts.Standalone shows these at Rs 972 crs in six unquoted subsidiaries after providing for diminution (Original Investments Cost was Rs 1568 crs).Short Term & Long Term Borrowings,about evenly split at March 31,2016 aggregated 996 crs.Book Value at year end March 31,2016 was Rs 45

The Business Model is of Four Market Driven Business Units housing nine Lines of Business over Distribution,Services,Learning & Hardware Products & Solutions & the Company states in it’s FY 16 Annual Report that it will be their Core Enterprises Business of Distribution & Services that will be the engine for the next level of growth.Do remember that the Company has been contracted for UIDAI & the milestone of over 100 crs Aadhaars has been crossed.India has a population of over 125 crs.Their System Integration Business has seen many of the defence projects move towards commercial conclusion read more

Subex @ Rs 11 ~ Five Questions that come to Mind

Subex @ Rs 11  & thus available around par of FV Rs 10~ Five Questions that come to mind?

First a bit of background of Subex that got grounded bad from a high of Rs 887 in 2005 to a low of Rs 4 in 2013 before sputtering to show some life crossing Rs 18 in 2015 & again correcting sharply to below Rs 10….It’s showing some life again with Market Cap moving up to @ Rs 550 crs & huge Volumes .It’s in the Telecom Software Products space providing Business and Operations Support Systems (B/OSS) to Communication Service Providers (CSPs) across the Globe.

If you’re training with me you’d know how to look at it now….just listing in brief the five points I’m looking at :

  1. Management ~ Its now 48 year old Surjeet Singh ,ex CFO of Patni Computers managing Subex.He’s the CEO & MD & has a Cost to Subex Group Package of over Rs 5 crs.Till September 2012 it was the 1992 Founder Subhash Menon who ran the Show and even remained Director till 2015.Menon’s Rise & Fall Story has been covered in some interesting detail by Forbes in November 2012 .Do even read the Readers Feedback to the Forbes Article. The Board also has Sanjeev Aga,ex MD of Aditya Nuvo & Birla ATT (Idea) & Anil Singhvi of Ican & earlier known for his long tenure with Ambuja Cement.He also was an advisor for two years with the Reliance ADA Group & advised on the Enam Axis Bank Merger .The Promoter Category shows a few investors with a very low stake.In fact many  others especially FPIs have much larger stakes & a few were allegedly instrumental in Founder Menon’s ouster because of the Syndesis Acquisition debacle that crippled Subex.The suspicion was that there was more than meets the eye in this US $ 165 m acquisition & it’s funding by US $ 180 m FCCB 1(See below) ~ Question : What’s Surjeet Singh’s strategy going forward to address the challenges that yet remain & scale the Topline & Bottomline significantly ?       
  2. Networth Jump with FCCB Conversion~ Networth has jumped from Rs 209 crs at March 31,2015 to Rs 727 crs at March 31,2016 as Company revised FCCB III Conversion price downward yet again from Rs 22.79  to Rs 13 on May 14 2015.This attracted near full conversion of the FCCBs taking the Equity from Rs 182.92 crs to Rs 502.81 crs in FY 16….These FCCBs were the huge Debt overhang in the Balance Sheet.The Book Value thus became Rs 14.46 on March 31,2016 with the Balance Sheet showing very little Debt with just US $ 6.95 m o/s on all FCCBs I ,II & III .The FCCB Story commenced 10 years ago in 2006/7 when 2%  FCCB I for US $ 180 m was issued with Exchange rate fixed at Rs 44.08 & Conversion at Rs 656.20.In 2009/10 a restructuring proposal of FCCB 1 was offered at a 30% discount to Face Value.Those who held US $ 141 m face value FCCB I accepted & were issued 5% interest per annum, payable half yearly US $ 98.7 m FCCB II with exchange rate fixed at Rs 48.17  & Conversion at Rs 80.31.Redemption date was the same at March 9,2012 which RBI extended to July 9,2012.However another restructuring offer was made in June 2012 to FCCB I & II Holders & most (US $ 38m of the 39 m FCCB I o/s & US $ 53.4 m of the 54m FCCB II o/s) accepted it in July 2012 & were issued 5.7% interest per annum payable half yearly FCCB III for US $ 127.72 m with exchange rate fixed at Rs 56.0545 & Conversion Price at Rs 22.79 with maturity date of July  7,2017.On May 14,2015 the Conversion price was reset on these FCCB III to Rs 13  ~ Question : Though the FCCB Mess has been resolved where lies this High Networth & how is it going to be serviced?
  3. Goodwill on Consolidation ~ The Networth lies in the Carrying Values as on March 31,2016 of the Investments of Rs 647.39 crs made in Subex(UK) which contributes nearly all of topline & of Rs 124.96 crs(lower by Rs 54.90 crs) in Subex Americas Inc.Consolidated Accounts throws up these Investments in the Goodwill on Consolidation.Company has,and new auditors,S R Batliboi & Associates(Previous was Deloitte Haskins & Sells) have accepted the continuing Goodwill Value of Rs 670.36 crs for UK & the fresh assessed Rs 97.26 crs for Americas(down by Rs 88.70 crs from the Rs 186.06 crs carried till FY 15).Company views this as fair based on their assessment of operations  & cash flows going forward & even external valuations.~ Question : These are Intangible & carry risk of Impairment going forward & thus are they yet being overstated even now ?
  4. Topline ~ Sales continue to hover in the Rs 320 crs to Rs 360 crs range last four years despite regular annual report noises on the potential of  mobile telephony going forward.Bottomline remains relatively insignificant even as FY 16 generates Rs 50+ crs and an EPS of Rs 1…maybe enough to service stakeholders like Employees & Working Capital Lenders but what about Shareholders~ Question :Even assuming lower Interest Burden with the FCCB Conversions & less risk of Exchange Fluctuations how would such a flat growth topline generate enough bottomline to service the Equity of over Rs 500 crs now?
  5. Subsidiaries Outstandings set off sought from RBI ~ Standalone Financials as on March 31,2016 reveal Trade Receivables,net of Doubtful Debt) from Subsidiaries  at Rs 412.73 crs &  Payables at Rs 441.28 crs.Company plans to apply to RBI to allow them to set these off. No Accounting adjustment has been made for these & neither have Auditors qualified their Report on the Standalone Accounts though they have drawn attention to it as an Emphasis of Matter ~ Question : That these have grown so huge on either side over the years without being settled does it signal at least a part being accommodation entries?

Remember how I had analysed & exposed Geodesic in 2012/13 at @ Rs 10 & with huge FCCBs too when many were floating it as multi-bagger potential to cross Rs 100.It dropped to under Rs 2 & has since been suspended from trading         

Over 600 Employees yet believe that Subex will Turnaround under Surjeet Singh…Question is do you as a Potential Investor ….or is the risk a bit too adventurous for your profile….Subex has little long term debt & is showing a positive bottomline now ….well the FCCB Mess certainly has been cleared up but at the cost of FY 16 creating an additional 32 cr shares which already created a selling momentum after the conversion…some yet may have to be sold off.

This is anybody’s & everybody’s share now with insignificant Promoter Holding….There are many who jumped in excitedly at Rs 18 last year & saw their Investment halve in quick time on selling pressure created by additional 32 crs created from August 2015, earliest effective conversion date was in this month ,on the FCCB III.Remember these FCCB Holders had already faced 30% Face Value Loss on FCCB II issue  + Exchange Loss from original Rs 44 & then Rs 48 & then Rs 56 when current rate is @ Rs 67 ….and shares converted at Rs 13 would surely have been crying to sell at Rs 18 to recover some loss for the holders!…. Now there are many yet aggressively buying in at Rs 9.50 to Rs 11…Volumes & Price Trends are telling some story…Selling Pressure seems to be ebbing

🙂 Anybody interested in acquiring  majority stake in Subex ? will cost you under just US $ 45 m or under  Rs 300 crs (@ Rs 67 ex rate)  for a 51% stake & you’ll get a Rs 350 crs topline company with little debt & in profits & servicing  most of the leading Telecom Operators & Communication Service Providers worldwide…and the Book is near Rs 15 with very little equity dilution remaining on account of remaining FCCB conversion….you of course need to believe the carrying worth of Investments in Subex (UK) & Goodwill on Consolidation shown because of it…you would also need to believe in Surjeet Singh’s exclamation in his statement in the FY 15 Annual Report that it’s Inflection Point & all at Subex are very excited about the road ahead read more