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A Lion’s eye on the Bulls and Bears

“In India, companies may fall sick, but promoters rarely do!”

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August 5, 2008

Beware of Real Estate…the Reality is Worrying

Delay that purchase of Real Estate by a few months…Developers and Builders are on the edge…final straw would be lack lustre Festival Sales in October and November this year…post Diwali you will see a significant drop in Real Estate Prices across towns and cities…you’re already getting resales at 30% lower than Developer’s price in the same properties in areas like Gurgaon and Noida off Delhi……Pranay Vakil,Chairman of Knight Frank India,a leading Real Estate Broker and Advisor has warned that this is just the tip of the iceberg and a deeper correction is in the waiting

Rising Interest rates,Shrinking Pool of Buyers and increasing supply of Real Estate are the realities today and the Impact willplay out over the coming quarters

Early signs of Panic are clearly visible

If you’re invested in listed Real Estate companies and are convinced that this is only a temporary phase then atleast ensure that the Real Estate companies you hold dont carry much debt in their books and are well capitalised…also they are developing in select prime areas that has not seen much of a price decline….Bombay Dyeing for example…maybe even Orbit Corp too…Both are Mumbai centric….dont fall for the Land bank v/s Market Cap Valuation basis ….most of the Land Bank is not even in the name of the companies….many joint venture plans are falling through…land prices are declining and time and cost delays on project are routinely expected now……If you want exposure to Real Estate then it is advisable to stay with the Big Guns,DLF and Unitech


Remember when the Demutualisation Process was Completed last year at the BSE,each Member broker got 10000 shares of FV Rs 1 in BSE LTD ?

At Rs 5200/share many tendered a large part of their holdings to the BSE who then allocated them to the Singapore and German Stock Exchanges and other Institutions

Today there are sellers at Rs 4500 but no takers as the much awaited IPO and Listing has not yet materialised…there are some issues pending with SEBI…also more Business take place on the NSE and it has been recently valued through a stake sale at just under US $ 4 billion while at Rs 5200 the Value of BSE was just under a Billion dollars

I know a member broker who divested 83% of his bonanza holdings to realise Rs 4.31 crores and paid off all his liabilities like did many other Member Brokers

I also know of a Big Institutional Broker, who also advised the BSE on the divestments,who cornered a lot of BSE Ltd Shares fronting it’s High Networth Clients…..these clients were assured that the price of BSE Ltd Shares will cross Rs 15000 within a year !  

Things have not worked out to plan yet !  

Check out for yourself the Annual Accounts of BSE for 2006/7 at to assess what should be the Value of BSE Ltd

Annual Accounts for 2007/8 have yet to be uploaded by BSE on their site

BSE Ltd earned Rs 91 crores in 2006/7 and gave an EPS of Rs 131 on an Equity of Rs 69.50 lakhs (FV Rs 1).It had reserves of Rs 1005 crs and gave a Book Value of Rs 1447 per share

Even if BSE earnings move 50% higher in 2007/8  to register profits of @ Rs 140 crs  to give an EPS of @ Rs 200 and even if an 18 Multiple is used (  1.5 times the LSE Earnings Multiple of 12)  BSE  is valued at Rs 3600….much less than Rs 5000 per share….Rs 15000 is a far cry…unless somebody has found significant embedded and revalued asset value in BSE Ltd…..But even taking a Book Value Multiple of 3 the Value would be below Rs 5000

I’ll await the latest results to assess any embedded or hidden asset values…The results seem to have been delayed as BSE Chairman and another Director resigned earlier last month…I had emailed a SCRIPTECH STANDPOINT on these resignations to clients on June 19,2008……check an earlier Blog for this  

You want to compare this with the London Stock Exchange then take Rs 85 = One Pound and the results of LSE for the Year ended March 31,2008  and consider the following

  • The Share Price of LSE at GMT Noon today was Sterling Pounds 8.55 (Rs 726)
  • LSE earned a Net of Pounds 174 million (Rs 1479 crs) giving an EPS of 73.1 pence on average shares 237.8 million in the year 
  • LSE had an Equity of Pounds 19.1 million (Rs 163 crs) comprising 276.4 million shares of FV Pounds 0.69186 or 69 pence (Rs 58.8)
  • LSE’s net worth was Pounds 1268.4 million(Rs 10781 crs) giving it a Book Value of Pounds 4.59(Rs 390)
  • The P/E Multiple is 11.7 and the P/BV Multiple is 1.86
  • read more

    ABBA creates a record…1992 compilation album hits No One on UK Charts for the fourth time

    ABBA....The Fab Four

    I grew up on the Swedish Group ABBA…Agnetha,Bjorn,Benny and Anni-frid…..just love them…their “Winner Takes it All”  is one of my anthems….last year an ABBA clone group perfomed in Mumbai…Houseful…took the kids to it and show them what their Mom and Dad loved in School over 30 years ago! and still do….. we were all dancing in the aisles to their “Dancing Queen” 

    Guess What ?!….. ABBA made British chart history as their “Gold — Greatest Hits compilation” became the oldest album to reach number one. First released in 1992, the compilation has previously topped the charts on four separate occasions, but Sunday’s achievement was the first time an album had taken the number one spot after such a long interval.

    “Gold” has sold a record 26 million albums and ABBA has sold over 350 million albums so far and yet sell 3 million every year although the group disbanded over twenty years ago

    The Swedish group has enjoyed a resurgence on the back of the success of the film version of the hit musical “Mamma Mia !”, with the soundtrack topping the album charts two weeks ago. 

    Love you ABBA !

    Watch out for India Securities at Rs 25…Essar Group reviving their Sick NBFC

    The beleagured Essar Group Company,India Securities Limited (ISL) is poised to revive

    The Ruias are bringing in equity at Rs 70/share to bail ISL out.ISL has an accumulated loss of Rs 28 crs

    There will be a demerger in ISL where the Investment Division will be spun off to another Listed Company Essar Securities limited (ESL).ISL will continue to carry out NBFC Activities

    Post Demerger the Networth of ISL will be Rs 31 crs with the Ruias holding 73% stake after infusing Rs 28 crores through  40 lakh shares at Rs 70.ISL currently has a capital of Rs 26.5 crs with the promoters holding a 66% stake

    ISL has convened a meeting on August 11,2008 to approve the demerger.The Capital will be reduced by 40% and an equivalent stake will be given to the Shareholders in ESL which will get automatically listed after the demerger.The Demerger plan has been approved by BSE

    ISL close up on upper circuit of 5% at Rs 25.55 today with over 50000 share buyers but the actual volume was just 266 shares on the BSE  

    The Ruias are now worth billions of dollars with their forays in Telecom(in private capacity),Oil and Steel bearing rich fruit…albeit at the cost of many shareholders

    ISL is poised to revive big time in the next few months

    Murdoch launches the Dow Jones India Titans 30 Index

    In what is seen to be a direct taunt to the Sensex and the Nifty,Rupert Murdoch of the News Corporation Group launched a Dow Jones ” blue chip index”  in Mumbai yesterday

    This Index is the Dow Jones India Titans 30 Index and will measure the performance of the 30 largest and most liquid companies on the BSE and NSE.The Ranking and Composition will be based on the free float market capitalisation and the 12 month average daily trading volumes

    The three biggest sectors represented in the Index are Financials,Basic Materials,Oil and Gas

    Mukesh Ambani coterie accused by Samajwadi Party for Insider Trading in RPL and Jai Corp

    After supporting the Congress in winning the Trust Vote on the Indo Nuclear Deal I was wondering when would Amar Singh of the Samajwadi Party launch his attack on a man he hates,Mukesh Ambani…he bluntly disclosed this in a TV Interview a few months ago

    Well,he’s started doing so….he  and his party have moved SEBI to probe the Insider trading in Reliance Petroleum and Jai Corp

    A letter by Amar Singh addressed to the Chairman of SEBI,C B Bhave,has demanded a probe into the RPL matter under Sec 11C of the SEBI Act and the SEBI (Prohibition of Insider Trading) Regulations

    Amar Singh has provided details of how promoters,insiders and other associates of the Reliance Group became “unjustly” richer by over Rs 1000 crs.He has provided details of how they illegally sold RPL Futures between November 1-6,2007 armed with inside information of the impending part sale of the RPL holding by RIL….they made huge insider profits when RPL price fell sharply

    Amar Singh has also demanded an inquiry into ‘‘large scale price manipulation in the shares of Jai Corp Ltd’’ in the last two years.

    Singh’s letter dated July 28 also alleged that the manipulation had taken place under the nose of the market regulator SEBI and also the stock exchanges, which exhibited total lack of action by regulatory authorities and complete failure of its surveillance machinery.

    Jai Corp is owned by Anand Jain (very close to Mukesh Ambani….regarded by many as Dhirubhai’s third son) and his family.

    If you recall last year in a Bulk Deal on October 15,2007 after the Record date of October 12,2007 for Bonus Issue of 1:1 and Split of Shares from Rs 10 to Rs 1 FV,The Jain Family sold 2.19 crore Shares (12.69% of Equity) at Rs 1035 xb/xs and Rs 1036 xb/xs to a host of FIIs and Domestic Funds like Morgan,Merrill Lynch,Goldman Sachs,Citigroup,Barclays and Birla Mutual Fund…It was one of the largest deals of it’s kind of over Rs 2250 crores…Check it out on{55096F22-66E2-4252-AF0D-B661E38EC108}¶m1=1   

    Jai Corp is engaged in SEZ Developments in Vashi and Panvel Regions.The Share price currently has dropped to Rs 435 with Promoters now holding 72.54 % of the equity through eighteen shareholders….Ten are of the Jain Family and Eight are Companies

    RPL had surged  in 2007  and was made to zoom to near Rs 300 to facilitate the offload of 5% stake held by RIL and then drifted back lower to below Rs 150 after the stake sale…..Jai Corp too was controlled over 85% by the Jain Family before the stake dilution and it’s share price had a meteric rise to over Rs 15000 (FV Rs 10 and cb/cs) in October last year….making crores for those who had inside knowledge of things to come in this Company and who had acquired the shares at a price in the Hundreds. read more

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