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

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Day: August 20, 2009

Adani Power Struggles on Listing today…saves face by closing at Issue price of Rs 100

2 Comments / Controversies, Foreign Institutional Investors, Interesting News Sightings, INVESTOR MISTAKES, IPOs, Power, Reflections, Sensex, STOCKS, VALUATION / By

I had warned you on July 25,2009 that Adani Power (APL) may not have an exciting Listing…Though the grey market Premium of Rs 10 had indicated listing gains……Check out my take on the APL IPO

IPO of Adani Power at top end Rs 100….Aggressive Pricing makes it an Aggressive Investment

It listed today and struggled right through the day to stay above it’s Issue price of Rs 100…Clearly there was some directed Market Making so that it closed at a face saving Rs 100

If the Sensex seeks 13000 on the downside…It’s at 15000 levels today…. as India grapples with a Drought Situation and Rising Fiscal Deficit and Significant reversal of FII Flows in recent days,you can bet APL too will slide below Rs 90

Now watch out for the NHPC Listing in early September ! It was issued at an expensive Rs 36…Government was greedy….but so are the applicants !…Hoodwinked by the Hype,the Issue was heavily oversubscribed..NIB Portion 57 times !…I have bet you’ll get NHPC below Rs 30 shortly after Listing 

Pity all those who went for Leverage for better allotments…As it looks now,and with even historical evidence supporting,the only people who are laughing their way to the bank,having earned sure interest,are the Financiers.

Valuation Props you up…Hype knocks you down….What should you rationally choose ! ?…Make that Choice when another PSU,Oil India launches it’s IPO in early September…It was to come at Rs 800…Indications are Government wants Rs 1400 !…should be easy to make a rational choice at Rs 1400 ! 

Remember that Merchant Bankers appointed as Lead Managers have the Mandate from the Government  and the Company,not from you !…and Investor Protection and Education is merely Lip Service from the Government when it comes to Pricing  the PSU IPOs !…Aggressive Pricing leaves nothing on the table on Listing for the Investor..only the Risk !

So if you are a Long Term Investor and do like the Company ,but the IPO price is too Aggressive,then it’s safer to skip the issue and take a chance of acquiring the Shares at a lower than IPO Price in the Secondary Markets in the future

Think about It…Think Independently…don’t follow the Herd ! and don’t help in the Heavy Oversubscription of the IPO at an Aggressive Price…Remember Reliance Power in early 2008 !…The Lesson does not appear to have been learnt ! 

Warren E Buffett warns of the ‘Greenback Effect’

3 Comments / Controversies, Economy, Global Economic Crisis, Interesting News Sightings, Investing Themes, Investor Gurus, INVESTOR MISTAKES, Reflections / By

Warren E Buffett,while warning of consequences of the ‘Greenback Effect’,  is bravely being Optimistic and Patriotic ,like every true blue blooded US Citizen should be !

Says Buffett, ” The United States remains by far the most prosperous country on earth,and it’s debt-carrying capacity will grow in the future just as it has in the past”

Check out Buffett’s Op-Ed Column in yesterday’s edition of New York Times

Buffett is happy that Obama and his Men showed the much needed Wisdom,Courage and Decisiveness required to address the US Financial Crisis…He urges them to continue this Momentum and make some hard decisions

USA ,maybe out of the ICU,yet remains in the Woods…financial situation remains critical….Fiscal Deficit will climb to 13% of GDP this year…that’s US $ 1.8 trillion Dollars…This would be funded half by a Net Current Account balance of  US $ 400 billion(China-Foreign Debt Dependence)  and Expectations of National Savings of US $ 500 billion and that these will be routed through the Banks into the Economy…The other Half Funding of US $ 900 Billion will probably be from Fresh Printing of New Currency Notes

What if China reduces,or even halts, it’s Investment in US $ Treasury Bonds for fear of a Weakening Dollar !?…Currently it has an exposure of US  $ 800 Billion in such Bonds in it’s  FX Reserves of US $ 2 Trillion…China,while retaining it’s US exposure, may opt to Invest the Dollars it’s earning from US exports,in other US assets,like Real Estate,Stocks and Buyout of Companies ,rather than in US Treasuries

The Net US Debt will climb to 56% (from 41%) of GDP…that’s a huge US $ 7 Trillion of Debt

There are paradoxical and Catch 22 situations that exist….The USA Citizens need to both, Save and Consume ! to stimulate the Economy…the former will help in Capital Formation and the latter will stir demand and revive American Industry…With Unemployment at 10%,where is the Income in the first place for Millions of the American Workforce !…Yet,when Push has come to Shove in USA,we’ve witnessed Savings climb to 5% from lows of 1% and 2%

Obama’s stimulus packages may have prevented a collapse and depression and a meltdown but the critical growing levels of Fiscal Deficit and National Debt and their adverse Impact on the Dollar is causing sleepless nights,not just in USA but the World over read more

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