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

 

 

Mahindra Hoilidays lists above Issue Price of Rs 300 on NSE today….stays and closes above too….but will it continue to stay above ? I continue to say ‘No’

Mahindra Holidays and Resorts India Ltd (MHRIL) was listed on NSE today….It was issued at Rs 300 and the Issue was comfortably oversubscribed

A freak trade saw a High of Rs 374.50 and a low was registered of Rs 311.35…but it closed at Rs 313,towards the Day’s Low

12.74 Million shares were traded and the average price was Rs 325.21 creating a turnover of Rs 414.42 crs

I yet hold a view that this price of Rs 300+ will not hold…my reasons have been spelled out when I reviewed in great detail the IPO on this blog on June 22,2009

So it was with some amusement that I viewed Tarun Kataria of HSBC,the IPO’s Underwriter, spelling out on UTVi this morning,his four reasons why MHRIL has done well on listing and is quoting at Rs 325 ,8% to 9% higher than IPO Price of Rs 300 levels…He was justifying the HSBC philosophy of Leaving something on the table for the Investors

Tarun,this margin has already reduced on the first day itself to below 5% if you take closing price of Rs 313 and I fear that we shall soon get MHRIL below issue Price of Rs 300…..in a sense the price will fall off the table !

Let’s take Tarun’s four reasons why he views MHRIL as a success…His view is in Black while my view on his view is in Red if I disagree and in Green if I tend to Agree

  • MHRIL epitomises Emerging Markets….It’s just a ‘feel good’ perception
  • MHRIL practices financial discipline and good corporate governance….I tend to agree
  • Embedded in MHRIL are the Value Systems of the Mahindra Group….I tend to agree
  • Pricing of MHRIL IPO at Rs 300 was to leave something on the table for the Investors.There was good interest at even top end bookbuilding range of  Rs 325I strongly disagree…even Rs 300 is high…you’ve priced it at 30 times earnings multiples…even with a high Promoter holding of 83 % it will be difficult to hold the Share Price above Rs 300

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Should you invest in the IPO of Mahindra Holidays & Resorts India Ltd in the Price Band of Rs 275-Rs 325 ?I don’t think you’re missing any Boat here

13 Years after Mahindra Holidays & Resorts India Ltd (MHRIL) set up,it is coming tomorrow to the Public to raise Equity Funds.It’s in the Business of Vacation Ownership and is a leader in this Field having a market share of over 70%.

Members are empowered with a right to stay at any of the Company’s resorts,subject to prior reservation, for a period of One to Seven Days during designated months and for a Period of 10,25 or 33 Years depending on which Plan they have joined.For this Right they have paid an average of Rupees Rs 2.5 lakh with options to spread the Payment over as long as even 5 Years…Recognition of Income is a portion of this Fee in the year of Joining,with the rest apportioned over the plan Period

In these 12 years,the progress has been slow and steady with momentum seen in only the last few years

As of March 31,2009,it has a cumulative of  92825 Members…..Currently It has 27 resorts,some owned,some on long lease and five on short (under Two year Lease) with 1261 Apartment and cottages across them

Financial Performance….In FY 09 It earned Rs 80 crs on an equity of Rs 77 crs giving an EPS of just over Rs 10…It’s networth was just under Rs 196 crs giving a Book Value of @ Rs 25

So do I like the Company ?………Yes

So do I like the IPO ?……..No

So would I rather be a Member of MHRIL than a Shareholder ?……….Neither

Why is that ?……Well,both issues should be evaluated seperately

Let’s take the prospect of being a Shareholder first

The Pedigree is good and the Prospects are fair…..but the IPO Pricing is expensive…At Rs 275-Rs 325 MHRIL is asking us to pay 30 earnings multiples and 13 Book Multiples on recent performance…That’s HIgh…They are justified in doing this only if they see strong and quicker quantum growth ahead in earnings…I don’t.Their Growth will be constrained by the Apartments and cottages thay have available for right of use…The Object for this Issue reveals that Rs 211 crs are to be spend for Five Properties…to expand at Asthamudi in Kerala and Coorg in Karnataka,to renovate an acquired property in Ooty in Tamil Nadu and to build two new properties in Tungi,near Lonavla in Maharashtra and in Theog,near Simla in Himachal Pradesh…Over Rs 150 crs are for the last two new projects…Rs 111 crs are planned for FY 10 and Rs 93 crs for FY 11,rest later…there are no definitive agreements for the capex spend as of yet…each room would cost an average of @ Rs 50 lakhs and capacity is being projected close to 1600 apartments and cottages within a few years

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