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

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October 2, 2014

Shemaroo Entertainment @ Rs 171 fails to Entertain on listing

Had strongly adviced to skip the Issue

Shemaroo Entertainment ~ IPO @ Rs 155-170 ~ Avoid Applying in this IPO

Extract from above link

“Don’t get seduced by the Grey Market Premium of @ Rs 40 and the 10% discount to Retail Investors on the Issue Price that will be fixed and by prominent anchor investors involved…. We advice you to give this IPO a Miss”

The IPO Price was fixed at the top end of Rs 170 …..Retail Investors were allotted at Rs 153 after the 10% discount offered to them

The IPO was subscribed 7.39 times with bids received for 4.22 crore shares, compared with 57.20 lakh shares on offer.

The qualified institutional buyers’ (QIBs) category was subscribed 5.69 times, non institutional investors’ category was subscribed 8.64 times and retail individual investors’ (RIIs) category was subscribed 7.79 times.

Given the risks involved I wonder how the grey market Pre IPO premium of Rs 40 was created !?

Surely all the IPO Applicants must have had Stag Intent and to sell on listing !?

Except for Retail Allotees who yet have this 10% gains margin on yesterday’s debut closing price of Rs 170,all the others have no margin

Not confident of the Price moving to Rs 200 and beyond

Perhaps Retail Investors need to consider to book this 10% …the bigger guys can decide for themselves

Update on October 12,2014

The Share Price is now down to Rs 154 levels wiping off the 10% gains margin that Retail Allottees had courtesy of the 10% discount on the IPO price of Rs 1870 given to them

The Company’s Investor Relations Guy had read my above post and connected with me inquiring that if I was right then what explains HDFC Mutual Fund,the Anchor Investor,also buying 250000 Shares in a Bulk Deal on listing Day October 1,2014 at Rs 174.60

This is how the conversation had gone…..

  • So why are reputed investors like Hdfc buying even as anchor, in qib and on listing day more? Is there Something fundamentally missing that the retail community is not understanding? I think so…
  •  Me :  You’re assuming HDFC is wise…maybe…they are convinced and seek a certain exposure …that’s the beauty of Equities…always a Buyer and a Seller…but as of now and at this price I don’t see fundamental value in it…running it up otherwise is of course another play…..we all have our risk profiles…I suppose each to his own counsel…Cheers ! 🙂 
  •   Dear Gaurav ji, we manage shemaroos Investor Relations, would love to meet you and understand your concerns and address them and explain you the fundamentals of their business and strategy before you make a judgement on their fundamentals…. 

Have yet to hear him explain the fundamentals and strategy of Shemaroo to me…and if convinced will showcase them to all of you

Update on October 17,2014

The Young Gentlemen who manages Investor Relations for Shemaroo and who had connected with me recently as above came and met me on the evening of October 14,2014…he was very passionate about Shemaroo and their business potential going forward as with their huge library content they were poised to exploit digital platforms and also purchase rights for second and third cycles of newer movies  at cheaper cost

Incidentally HDFC Mutual Fund bought another huge lot of 175000 shares from Ashoka PTE on October 10,2014 @ Rs 152.25 on NSE…earlier they had bought 450000 shares,364788  of them from Morgan Stanley too on day of Listing at @ Rs 177.04  on NSE  and also done a Bulk Deal on BSE too same day as stated in the October 12,2014 update  above….Both Ashoka PTE and Morgan Stanley Mauritius must be IPO Allotees at Rs 170 as they do not appear in the Prospectus as Shareholders and clearly appear to be Stag Funds with Mandate to sell on Listing or a few days within Listing !….makes me wonder if this was  an arrangement and exercise planned  pre IPO  and actioned during IPO and on Listing between these allottees and HDFC MF read more

HOV Services @ Rs 153~up 62% in 4 days and worth more despite undervaluation of Investment Sale to Promoters

Disclaimer : My Clients and I do have an interest in HOV Services from 2013

HOV Services @ Rs 153~up 62% in 4 days and worth much more despite undervaluation of Investment Sale to Promoters

Earlier SS Recommendation in 2013 of HOV Services @ Rs 39  

We had recommended this Pune based Scrip to Clients  last year at Rs 39 precisely for the potential unlocking of  value of  the 26.1 % equity stake  it held in US based SourceHOV through it’s wholly owned US Subsidiary…most of the remaining Equity of SourceHOV is held by Citigroup  through Citi Venture Capital International (CVCI Private Equity) which bought out on March 19,2013 the full ownership interest of Apollo Global Management LLC Private Equity Group that the latter had acquired as a result of the restructuring of SourceCorp + some stake held by some minority shareholders

Unlocking of  Value of the 26.1% Stake in SourceHOV by selling Stake at undervalued US % 95 m to Promoters themselves ! 

This 26.1% Stake is proposed to be sold for US $ 95 m (@ Rs 580+ crs) to US  based HandsOn Fund 4 LLC (HOF4LLC) whose ultimate beneficiary owners are from the promoters of the Indian Listed HOV Services Ltd !  

HOV Services Prospectus filed with SEBI when it came out with the IPO in 2005/6 reveals that HandsOn at that time was 100% owned by Mr Parvinder Chadha and members of his family and managed by a team of seven of which four were promoters of HOV Services Ltd…Mr Chadha currently is the Executive Director of HOV Services Ltd 

While this deal sounds like a bonanza for HOV Services Shareholders as it amounts to Rs 464 per share (HOV Services Equity is Rs 12.5 crs of FV Rs 10) the Deal Valuation is clearly undervalued in my view

The Valuation should be over 160% more @ US $ 250 m and not just US $ 95 m !

The Valuation of this stake should be @ US $ 250 m  => over 160% than just the US $ 95 m that has been arrived at  !

If this 26.1% stake is valued at just US $ 95 Million it means that the whole of SourceHOV is valued at just US $ 364 m ! =.just 0.6 of Sales of US $ 600 m !….when it was reported to be seeking a twice Sales US $ 1.2 Billion Valuation last year like faster growth and bigger competitor Genpact had

SourceHOV is a leader in providing  Transactions Processing Solutions  and this merger will create a Global Leadership position with Revenues exceeding US $ 900 m

In the latest 15 months Annual Report of HOV Services Ltd as on March 31,2014,the Chairman and Promoter,Mr Sunil Rajadhyaksha said this in his Message read more

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