MOIL IPO Pricing attractive pricing band of Rs 340-Rs 375 ….but Allotment will be quite poor…Check out the Choice between MOIL and IFCI !

Government got Gold with Coal India’s IPO last month…It was a Win Win Situation all around…as Issue Size was huge the Retail Segment was oversubscribed 2.3 times and also benefited from the rollover of the unsubscribed Employee Quota …so allotments were good…max 199 shares at Rs 245 less 5% discount

And Now we have the IPO of MOIL….attractive Pricing Band of Rs 340-Rs 375….However the Issue Size is Small and the Retail Segment will be oversubscribed 20 times…..therefore the allotment will not be generous

…Now a Retail Investor can apply upto Rs 2 lakhs…….Minimum application in MOIL is for 17 shares and in multiples of 17 thereafter…..On a max application of 527 shares in MOIL expect to be allotted just 25 shares…If Rs 375 is fixed as the issue Price then with a 5% discount the cost to Retail Investors will be Rs 356.25….Currently the Grey Market Premium is Rs 240…thus on allotment of 25 shares the profitability will be @ Rs 258.75 from Cost…that’s a Profit of @ Rs 6500…thats a 3.3% return in a month on a Application of Rs 197625….that’s very good and quite probable…infact fairly certain 

…but consider this…Instead of Primary market IPO of MOIL,consider Secondary Market Investment of @ Rs 2 lakhs in 3400 Shares of IFCI @ Rs 59…IFCI has slipped sharply in this correction and is available at Book Value this year and is to apply for a Banking Licence….If it moves up by just Rs 3 to Rs 62 ,the gains will be Rs 10200…There is a strong probability that it may move up much higher in December but there is also a probability that it may drop even below Rs 59 ! 

So what would you choose ?…a certain smaller gain with little or no chance of any Loss or a bigger probable gain with some probability of loss too in December 2010 ! 

Loss Aversion Psychological Tests conducted by D Kahneman and A Twersky are quite revealing…They gave these Options to a Group to choose from

A : A sure gain of US $ 250

or

B : 25% chance of a Gain of US $ 1000 and 75% chance of no gain at all

84% of the Group opted for A over B ( with the same expected payout but much greater risk)

They then reframed the Question and asked the same group to chose from

C : A sure Loss of US $ 750

or

D : A 75% chance of losing US $ 1000 and a 25% chance of losing nothing at all

73% preferred the gamble (with an expected loss of US $ 750) over the certain loss and opted for D

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Sensex up 376 Points at 20445….Pre Diwali Fireworks fuelled by Coal and Wholesale Buying by FIIs….. while we Retail Indians await Diwali !

Sensex continues to seduce….is up 376 points today at 20445…Pre Diwali Fireworks fuelled by Coal perhaps !….a not so subtle reference to the Mega IPO of Coal India that opens on October 18….sentiment has to be kept sizzling

….and FIIs have already started celebrating Diwali a month or two early by intensifying wholesale buying of ‘Phatakas’ (stocks) and torching the Sensex past 20000 !…..while we Retail Indians yet await Diwali

….just think the Indian Sensex Torch has been carried by the FIIs in the relay past 20000…while most Indians have hardly participated in the Run and have just been cynical and wary spectators!….we are allowing the FIIs to ‘carpetbag’ us !

….hope you guys have got into IDBI Bank (blogged a few days ago)…it’s up smartly to Rs 158 today….and yes,IFCI too has surged past Rs 66 today

…..last Diwali I had  given just Two Safe Buys…to play a Safe Diwali…Larsen & Toubro and Gold…Both have been shining throught the year …Wonder what I’ll give this Diwali !

Cheers !

What a Tuesday !..some Tales of it…..

Tuesday Tale No 1

Have you ever been extended an invitation on Sunday evening for a Tuesday Dinner by Close Friends?…and you land up at their Residence on Tuesday and find the Hosts had simply forgotten about their Invite ! ?

It happened to us yesterday…My Wife and I were invited by really close friends for Dinner…just the four of us at their Residence…..we were told to come by 9.30 pm…Social Etiquette meant we reach by 9.45 pm…we did with our small Gift..a Box of Chocolate Cookies …only to find the Hostess in her Night Gown and simply no trace of the Host….she was so embarrased….we could either have got mad or laugh it off……we chose to do the latter…we gave the Cookies and quickly exited !…The Hostess told us that she had told her Husband Host to remind her in the Morning for the Dinner and he had forgotten and so had she !

Normally we don’t accept weekday dinner invites as Work Days could be tiring….and as it gets late into the Night,the next day begins with yawns!…and and especially with these friends the night would have gone past 1 am…probably 2 am as Dinner too is served at Midnight! !…they had invited for the weekend but as this was not possible we confirmed for Tuesday night….we had accepted as we had not met them for quite a while and  either they or us  were travelling or had other commitments and they were insisting that we meet and we are close friends!  

…Their Forgetting turned out to be a blessing in two ways……..The First was that we completed in the morning itself our Tuesday Religious Ritual of visiting the SiddhiVinayak Temple and St Anthony and Infant Jesus Shrine…in recent past our tight day schedule has meant doing this routine tired and sleepy past 11 pm in the night

……The second is that we yet had to have Dinner,so we rushed to catch the last order at 10.30 pm for Dinner at the Club and it turned out to be heavenly…and as usual great value for Money…I’ve been telling Wife to shut our Kitchen and just eat at the Club!…Rs 26 for the Soup of the Day…a wholesome Spinach and Corn Thick Soup served with hot crosissants with Butter chiplets on the side…Rs 57 for half portion of one of the Main Choices for the day and that can be shared easily by two….A Tasty Subz Hyderabadi that was Paneer,peas,corn,beans and carrots etc in a Green Gravy served with Rice (you could opt for Naan instead),Pickles,Salad and Roasted Papad…Wife preferred a Continental Choice for Rs 135 that she swooned over…Herbed Rice with a Fabulous Stew cooked in a rich brown non spicy gravy with Fresh Thyme and other herbs served with Boiled Vegetables as an accompaniment….washed down by her with a Coke with Ice,rather Ice with Coke (as she fills up the Glass with over Ten Ice Cubes and then pours the Coke !) for Rs 20 and by me with a Draught Beer for Rs 35….there were just a few tables occupied in the Dining Room on a Tuesday Night…so the service was very attentive….we skipped Dessert of the Day…a Blueberry Cheesecake or Fresh Orange IceCream…both below Rs 50….wonder how the Club,with all it’s Overheads, can afford such lovely low Pricing !…Good for us ! 

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IFCI at Rs 58…..Interest Reviving yet again…Rs 100 + inside a year ?

Several Times I had strongly recommended IFCI as a multibagger….. starting at Rs 16 in December 2006….It raced to Rs 130 levels as the Government called for bids to sell a Strategic Stake in it….A Joint Bid by Sterlite and Morgan fell through as the Government was not transparent on Conversion of Institutional Debt to Equity ……this would significantly have affected the Shareholding Break Up and diluted the Winning Bidders Holding…there was also Government reluctance to transfer Management Control

The Finance  Minister at the time,Mr Chidambaram had bravely stated that he will certainly revist IFCI strategic Stake sale at a later time and get even a higher Bid than the Rs 80-Rs 90 that was achieved at the time

IFCI quickly sunk and reached levels of even Rs 20 in the October 2008 and March 2009 Lows…this retracement wiped off Notional Gains build up in the Scrip….It has since moved up past Rs 45 levels and has surged in recent times….and is Rs 58 today….Can easily double from here too in the next six months on positive developments

The Interest in IFCI is now being revived….the key reason is that they are planning to apply to become a Bank once the new guidelines are announced…expected this month….The last to get permission were Yes Bank and Kotak Mahindra in 2002

In fact IFCI had pursued this route to convert to a bank way back in the 1990s along with IDBI,ICICI ,HDFC and UTI (now Axis Bank)….except for IFCI,all others had been given the green signal

IFCI was plagued for years with a high level of Non Performing Assets that had threatened to erode the Networth….In 2005/6 the NPA levels disclosed were Rs 3950 crs…I had even given it the Notorious Acronym of ‘I F….. the Country of India’ !

But in 2006/7 the revival and turnaround became clear…Real Estate,Investments and Recoveries spearheaded this…NPAs were brought down to a level of Rs 1366 crs….that’s why and when I recommended IFCI at Rs 16 as a SS 1 Scriptech Stock Select…It was beginning to turn around fast

Look at the latest Financials…..As at March 31,2010,the Equity (FV Rs 10) stands at Rs 738 crs ….The Networth is Rs 3152 crs giving a Book Value of near Rs 43…Standalone PAT is Rs 671 crs giving an EPS of Rs 9…a Dividend of 10% has been declared…so at Rs 58,it’s at a 6 + Earnings Multiple and a 1.3 Book Multiple…not expensive by any stretch

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You got to be Stock Selective at 15500 Sensex Levels…Markets again beginning to run ahead of Fundamentals

This is what I had blogged on October 27,2008

Some Pundits called Sensex of 12000 irrational…some saw irrationality at 10000…So what would they call 7500 ! ? …Begin to slide in now

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