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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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January 2009

Happy Republic Day to all Indians all around this Lovely planet Earth

We celebrate our Republic Day today,January 26, 2009…. Proud and Privileged and Blessed to be born a Free Indian and Live and Feel and Sense and Breathe this Beautiful Country from it’s Cosmopolitan Heart, Mumbai

Spend a Quiet and Reflective Day,listening to a host of Patriotic Songs and Inspiring Speeches by Visionary Indians and contemplating what lies ahead for all of us in 2009 and beyond

As every year, also viewed ‘Live’ on TV, the Impressive Republic Day Parade in New Delhi… our PM too did the same, as he is recuperating in the Hospital after an urgent second By pass heart Surgery.

As the Day ends, stand up to ‘Attention’ as our National Anthem reverberates all around us ” Jana Gana Mana Adhi Nayak Jaya He !……..”

Yes!, you too!, Mr Shashi Tharoor… I know you mean well, but do take that right hand off your Heart as the Anthem Plays…. It Commands Decorum and Great Respect and standing at full Attention!…… Mr Tharoor, perhaps you can express your warm sentiments from your Heart when ‘Vande Mataram…. Maa Tujhe Salaam!’ is being sung…. I’ll support you wholeheartedly   

Just saw ‘Slumdog Millionaire’.. I was disappointed… It ‘craftily’ translates, onto the Screen, a host of negative Indian Images entrenched deeply in Western Minds !

This Saturday afternoon I saw the highly acclaimed ‘Slumdog Millionaire’, winner of Four Golden Globe Awards and just nominated for the Oscars in Ten categories. It was released in Mumbai just yesterday

The Movie did not tug at my heart like ‘Taare Zameen Par’ which was not shortlisted in the Oscars in the Foreign Films Category… I was disappointed.

Amitabh Bachchan’s Blog raised controversy as media played up that the ‘Big B’ slammed the Film for portraying poverty…. ‘Big B’ accuses the Media and especially two Delhi based Indian journalists of the Gaurdian, Uk for their incontinence

Relevant Extracts of  what Amitabh Bachchan actually blogged from Paris on January 13, 2009, for ‘Slumdog Millionaire’ are as below:

A couple of hours, a few damp smelling minutes of those under the English Channel, self mobile operated pictures, early morning French countryside and PARIS..!!

The Salon du Cinema team meets me at the entrance to Paris-Nord station and after an exchange of greetings and flowers and video and stills, out into the wet and cold Paris streets, chased by a huge group of women, who scream and shout and clap, making you wonder what it is that I may have done to receive such an enthusiastic welcome in a country that hardly knows who I am. But, Fouad my driver and sincere personal guide during all my recent visits to the city, gathers me quickly into his car and drives off. They are migrants or asylum seekers from nearby or distant country and are begging he informs me. My ego brought into place I am saddened by their plight. Conditions the world over are so similar. Perceptions differ, but the reality of life and existence, unchanged.

On blog, comments for the film ‘SlumDog Millionaire’ and the anger by some on its contents, prompt me to say the above. If SM projects India as Third World dirty under belly developing nation and causes pain and disgust among nationalists and patriots, let it be known that a murky under belly exists and thrives even in the most developed nations. Its just that the SM idea authored by an Indian and conceived and cinematically put together by a Westerner, gets creative Globe recognition. The other would perhaps not.

The commercial escapist world of Indian Cinema had vociferously battled for years , on the attention paid and the adulation given to the legendary Satyajit Ray at all the prestigious Film Festivals of the West, and not a word of appreciation for the entertaining mass oriented box office block busters that were being churned out from Mumbai. The argument. Ray portrayed reality. The other escapism,  fantasy and incredulous posturing. Unimpressive for Cannes and Berlin and Venice. But look how rapidly all that is changing.  read more

Travelled in several Modes of Public Transport in Mumbai within hours yesterday

I had to vist Bandra from my office in Fountain for meetings late afternoon yesterday

With Mumbai’s notorious Traffic and Car Parking Woes and the fact that it was not peak hour,I bravely,like Millions of Mumbaikars do daily,ventured by the Local Train on the Western Line

Fortunately Churchgate is the originating Station so I got a seat easily in Class II of the 2.51 pm “Virar Fast”…Just as the Train was to commence it’s run,an announcement made be get off would not stop at Bandra….I switched to a Slow Train which commenced it’s run a few minutes later and within half an hour had reached Bandra

After finishing off one meeting at an Office near the Station on the West Side,I crossed over to the East Side through the Station again.

After over Ten Auto-rickshaw rejects,I managed to flag one to take me to my destination across the Western Express Highway, on the east side from Bandra Station…Later returning Home I reached Bandra Station by Auto,then got onto a Fast return train,switched to another at Mumbai Central as an announcement reverberated through the train that it would be running non stop to Churchgate and I needed to alight at Grant Road

Alighting at Grant Road,I has planned to cab it but instead hopped on to a waiting Bus ‘155’.This runs a circular route that originates and terminates at the Station.So easily got a Seat.It deposited me within Ten Minutes at the Bustop right at the lane where I reside

Rs 12 Return Train Ticket…Rs 15 and Rs 10 for Auto-rickshaw rides and Rs 5 for the Bus Ticket…That’s an aggregate of Rs 42 spend on three common modes of Public Transport and I finished my work and round trip inside Two Hours….A car or a cab ride to and fro,with time for my work too, would have taken over three hours and cost me over Rs 300 + traffic and parking woes

Mumbai Bus and Train Routes are well organised and run pretty much punctually and are the cheapest and fairly quick modes of Public Transport…..truly the Lifeline of Mumbai….so next time you ‘status’ conscious and ‘used to car and driver’ types…don’t snigger at Train or Bus Travel….you’ll save both Time and Money,and at not too much of a compromise,unless it’s peak morning and evening hours…..Remember how the heads of the US Auto majors got the US Public mad…they flew into Washington from Detroit in their private planes with a begging bowl to plead for government bail-outs of billions of dollars to survive….Next time they drove down !     read more

Is Larsen courageous or foolish to hike Satyam Stake to 12%!?

Just two days ago,on January 22,2009,I blogged that Larsen, to save itself, is trying to save Satyam..I had opined that it would be foolish to spend an additional @ Rs 1000 crs to take a controlling stake unless some protection was provided from contingent liabilities of the class action law suits in USA which could materilaise into hundreds of millions of dollars of Liability

And what does Mr A M Naik,CMD of Larsen do !?…Yesterday,he goes and raises Larsen’s stake in Satyam to 12%…39 million shares were purchased on the NSE at Rs 34.52 per share,aggregating Rs 134.73 crs and another 12 million shares were obtained at Rs 35.07 per share on th BSE,aggregating @ Rs 42 crs….So that’s another Rs 177 crs spend on Satyam Shares

This brings down the Larsen’s Average Holding cost per Satyam Share to Rs 80 from the earlier Rs 157… The total exposure is now over Rs 600 crs

So why did Mr Naik do this !?…After canvassing for political support for his Buy-Out Bid of Satyam,does he know something we don’t ? Is there some assurance or some tacit understanding between him and the government that some protection will be provided to insulate the Acquirer of Satyam from being exposed to the Contingent Liabilities of Hundreds of Millions of Dollars !…Would this not then be Insider Trading !?

This could explain his courage…otherwise unless there is clarity on protection from the contingent liabilities,it is foolish to buy More into Satyam

A Larsen Spokesman stated that the idea of rasing the stake was to average the Holding Cost and to strengthen it’s position to influence the Satyam Board….Real Reasons could well be to pre-empt any other Bids for Satyam as well as some prior understanding as spelled out above.

Shareholders have not taken it kindly and Larsen’s Share Price has dropped to Rs sub Rs 650 levels

If it purchases another Two Million Shares or 3% in Satyam to take it’s stake to 15%, Larsen will trigger the mandatory Open Offer to acquire atleast another 20% of Satyam’s equity from the Shareholders..that’s another 134 million shares…As per SEBI Formula the Offer has to be at the Highest of several Price parameters,which include the highest price it has paid to acquire Satyam…I believe this to be Rs 167…Therefore Larsen will have to shell out over Rs 2200 crs to acquire these 134 million shares….Surely it must be mad !

Media Reports suggest they have approached,or will approach SEBI to waive this Open Offer or allow the Offer Price adjustment to current Market Price of Satyam of @ Rs 40,at which Larsen will have to shell out only another Rs 536 crs for the Open Offer…..Even then the Exposure of Larsen would be close to Rs 1200 crs for a 35% quity stake…otherwise it would have been @ Rs 3000 crs read more

Supported by a rise in Other Income,Reliance Industries reports a respectable net profit of Rs 3501 crs in Q3

For Reliance Industries’s Q 3 Profits for the Q ended December 31,2008,few estimates were over Rs 3500 crs…some were even below Rs 2700 crs and the consensus revolved around Rs 3000 crs

Despite an expected drop in Margins,Revenues and Profits to reflect challenging times,Reliance,true to form,showed a respectable profit of  Rs 3501 crs in Q 3 against Rs 3882 crs yoy,supported by an increase in Other Income from Rs 241 crs yoy to Rs 641 crs

Gross Refining Margins are US $ 10/barrel.Cash and Cash Equivalents are Rs 28500 crs.Revenues are split 37% and 63% between Petrochemicals and Refining

Reliance may fail to notch an EPS of Rs 100+ for FY 2008/9 on fully diluted equity of Rs 1580 crs as it is unlikely to notch up profits of Rs 16000 crs for the full year.Gross Refining Margins and Quantum,if any,of Hedging or Speculative Loss on Oil Price Plays holds the key for profits that will be reported  for this Q 4 

Back of the Envelope Valuation on Earnings Multiples

Unless we are confronted with a shock on Derivative Losses on Oil Price Plays,even if camouflaged as Higher Cost Inventories,the likely EPS for FY 09 would be in the Rs 90 to Rs 95 range.At Rs 1136 closing today,the multiple would be @ 12.With expectations of Krishna Godavri Basin Gas contributing to revenues and profits from FY 10 and without much equity dilution,the Forward EPS estimates for FY 10 revolve around Rs 115…Applying a Multiple range of 7-14,the Share price Range in 2009 should be Rs 800-Rs 1600 and will depend on prevailing seniment and Earnings in FY 10.For Reliance to race away back towards Rs 2000 in 2009,a better sentiment has to prevail in the Markets to facilitate a higher multiple than 14…this is unlikely to happen anytime soon

Looking at the Downside…if the Sensex,currently has gone yet again below 9000 and is at 8800 levels, seeks to sink even below 7000 sometime in 2009,then Reliance will fall in sync towards Rs 800 with forward multiple falling to 7…unless global markets get hysterical and unless Reliance shocks with some significant scam,I don’t see Reliance below Rs 800 in 2009 or above Rs 1600 for that matter.It closed at Rs 1136 today.Results came in after market hours,so expect some rally tomorrow.   

Educomp’s Share Price Slumps as Bears orchestrate a Mauling

Educomp appears to be a victim of Bear Market Manipulation…After Satyam,the Markets have been expecting some more companies to be exposed….So when the Daily Pioneer came out with an adverse story on Educomp and it’ Promoters,the Share price simply collapsed to a low of Rs 1375 yesterday from above Rs 2100 on January 19,2009…Check out this story on

The journalists have raised questions on a host of issues…one of them is that the Promoters have made a lot of money by trading in their own shares between 2006 and 2008

First and Foremost it is not illegal for a Promoter or Top Manager or Director to reduce his Holding.A M Naik,CMD of Larsen,Narayan Murthy of Infosys….they all have sold off some part of their holdings to arrange Funds that they may have needed or to balance their portfolios …it may also have been that they may have thought that the Share price had run away too much ahead of Fundamentals and so they took advantage by selling…There is nothing wrong in this,unless it is out of the Ordinary

In this Context,Educomp’s head,Shantanu Prakash has come forward on business channels and frankly answered a lot of questions…he has also lodged a complaint with the Economic Offences Wing that somebody is out to create panic for Educomp Share prices and is spreading rumours to bring the Price down

If you recall,a few months ago,ICICI Bank share Price too had tumbled overnight and MV Kamath had filed a Complaint with the Police as well as with SEBI that some sub broker had send out 30000 smses bearing adverse new of ICICI Bank…The objective was that a ‘cartel’ wanted to bring the Share Price down…SEBI investigated but reported that there was no evidence of such a wrong and illegal practice 

Interestingly Wall Street Journal just carried a topical article that warns that White Collar Crimes may jump significantly this year as economic and financial market turmoil lead many to deviate from moral and proper activities to keep up the revenue stream or make a quick buck.

It refers to a ‘Global Fraud Report’ just released by New York based Risk Consultancy Firm,Kroll Inc.It warns of unscrupulous form of short selling where brokers and traders form ‘loosely organised cartels’ to start negative rumours about a company whose shares they are betting against

What happened or is happening to Educomp may just be this ! read more

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