Equity ~Life Changers or Life Maimers ?

Equity ~Life Changers or Life Maimers ?

This Thought was inspired by a Whatsapp Forward received this morning titled Power of Equity .It listed many Life Changing Wealth Creators that grew many fold from just Rs 10000 invested in each  & carried a concluding Message in Capitals ” INVEST WISELY WITH LOTS OF PATIENCE “

This was the List & I’m assuming the Years & CAGR Maths is correct with Dividends not being considered :

  1. Eicher Motors-1992 => Rs 80 lakhs
  2. Asian Paints-1986 => Rs 90 lakhs
  3. HDFC -1990 => Rs One Crore
  4. Brittania – 1985 => Rs 1.06 crs
  5. MRF – 1985 => Rs 1.10 crs
  6. BOSCH -1985 => Rs 1.20 crs
  7. Amara Raja -1991 => Rs 1.25 crs
  8. Shree Cement -1990 => Rs 2.90 crs
  9. Infosys – 1993 => Rs 3 crs
  10. Dr Reddys -1986 => Rs 10 crs
  11. WIPRO -1981 => Rs 400 crs

Cannot Argue with this Message for I’ve seen three of my Scrips,in even relatively quick time inside five years of investment too becoming over 100 Baggers ~Matrix Labs( early Millenium & now delisted as sold to Mylan),Mercator(early Millenium) & WIPRO ( from 1997 to  early 2001)

It is rare for most investors to live the Conviction & Temperament to hold for long & ride the Huge Life Changing Gains.Imagine if more than Rs 10000 had been invested in each of the above,especially WIPRO!

However my Thought is what about Wrong Convictions on the High Fliers that became Wealth Destroyers &  Life Maimers !

Here are a few of them ,most yet listed & struggling to revive & how much worth would your Rs 10000 invested in each of them be now ….most are Horror Stories of the past decade or a little more…sure you can contribute more…My Horror Stories  have been the Damania Group’s Damania Capital Markets to mention one.Bad Judgement Call that Cost!It was compulsory delisted in July 2004.

~Suzlon -2005=>Rs 842  &  2008=>Rs 348 ! => 92% to 97% wiped out after considering 10:2 Split in January 2008 when it reached an all time high of Rs 2300 before split.Current Price Rs 16.Promoter Tulsi Tanti is yet on board though Dilip Shanghvi of Sun Pharma Group has acquired a major stake in it @ Rs 18 in February 2015.Mandatory Open Offer at Rs 18 to other Shareholders in January 2016 met with no success.The Share Price had raced to Rs 30 from where it has halved & is below the Open Offer & Stake Price of Rs 18.Shareholders hold out Hope of Revival back to Glory Days in the years ahead under Dilip Shanghavi.So far it’s been a muted share price trading range in recent months.

~Unitech-2006 => Rs 505 => 95% wiped out after adjusting for 12:1 Bonus & 10:2 Split in June 2006 & 1:1 Bonus in Aug 2007.Reached a high of Rs 14800 in 2006 before Bonus & split .Current Price under Rs 6

~Kingfisher Airlines-2006/7 => 0 ! => 100% wiped out & scrip suspended for trading from 2012/2013 & restricted trading from June 2015 ~ reached a High of Rs 335 in 2007

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Auditors Price Waterhouse….You are sealing your own Fate in this Satyam fraud!

The battered auditors of Satyam,Price Waterhouse,have just issued a letter dated January 13,2009 addressed to their Client,Satyam Computer Services Ltd and marked for the attention of the three New Directors in the New Board and the Company Secretary….This Letter is also been cced to SEBI,RBI,BSE,NSE,New York Stock Exchange,ROC,Hyderabad and the Central Board of Direct Taxes

The Letter reads like a Confession of sorts.First a gist of Some important extracts and then later my observations are as below

  • The letter is signed by a Partner (Name Not Given) on behalf of Price Waterhouse.It is not signed by PWC India Chairman,Ramesh Rajan,who ,a few days ago, sent an email to all employees intimating them that they have begun a comprehensive internal review and requesting them not to discuss the Satyam Issue or offer any comments to the Press or external Sources
  • It refers to the Audit Period from Quarter ending June 30,2000 to Quarter ending September 30,2008…that’s Eight and a Half Years that included 34 quarters
  • PW planned and performed the required audit procedures on the Financial Statements Prepared by Management,examined the books and records produced by the Management and relied on Management for Controls over Financial Reporting,Information and Explanations and Verbal and Written Representations
  • In light of the Confession of Fraud by the ex-chairman and promoter of Satyam,Ramalinga Raju,PW warns that their opinions on the financial statements may be rendered inaccurate and unreliable
  • In accordance with the Guidance Note of January 2003 of the ICAI for Revision of the Audit Report and which prescribes steps the auditor must follow to prevent reliance on audit reports under such circumstances,PW has stated that their audit reports and opinions in respect of the Financial Statements for the Audit Period should no longer be relied on
  • In USA,Under GAAP too such a requirement as above is prescribed…Under Sec10A of the US Securities and Exchange Act of 1934,the Information contained in the Chairman’s Letter indicates that an illegal act could have occured.PW advises the Board of Directors to conduct an independent investigation under this US Law section to unearth this illegal act. 

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