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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 2015

What A Shame!~LIC bails out Government with US $ 1.2 b in IOC Disinvestment

Just a few days ago I had blogged that the IOC Disnvestment on Monday will be just a formality….But Monday’s Global Stocks Chinese Contagion Capitulation saw a very very poor response to the IOC  Disinvestment

It’s a real shame that the Government yet again  had to direct/order LIC to bail it out yet again…it would have been a wise idea to defer the issue rather than order LIC to invest in 86% of  Issue of Rs 9379 crs  bat Floor Price of Rs 387 !…. shoots up  LIC holding in IOC by a whopping 8.59% from 2.52% to 11.11%….it’s another issue that IOC is past Rs 400 today on signing a refinery deal with Nepal

This then sadly was not a real disnvestment just as it was not for a similar 10% last year too when Oil India & ONGC were ordered to pick up 5% each at Rs 220 .,,,just another continuing story of government selling from one PSU to another !

Its no wonder LIC does not want to go public ! and neither is the Government inclined to make it public !

Raises Huge Corporate Governance Issues on Investment Decision Making,Accountability and Tranparency

It’s happening for decades now….UTI was first the Big Market Daddy in the 1970’s to 1990’s before India opened out to FIIs and Other Mutual Funds that saw UTI losing it’s war of words with SEBI to be brought under it’s regulations….in the late 1980’s the UTI Chairman then had opened out to me in a candid interview on UTI’s Investment & Disinvestment Decisions Process,sometimes buying a company’s shares through one broker and selling the same company’s share on the same day through another !, and Competition emerging from other Mutual Funds sponsored by PSU Banks that were allowed to be set up .It was to be carried in a leading Magazine…it was explosive and so I send him the transcript to confirm he was not being misquoted….Phew! he panicked and  asked me not to carry the Interview….had told him it would be the Editor’s call….it was not carried finally !

LIC  yet stays out of SEBI regulation though its the Biggest Shareholder in Indian Equities and functions like a Government Proxy

Who’s to Question LIC !…or for that matter the Government ?…and the Disinvestment Secretary boasts of how with this Disinvestment it’s a been the best first half of the year in the last many years for Disinvestment Proceeds !

It’s the Cash Cow for the Government to lead and order the flow wherever it conveniently wants Investments ! read more

PEBS IPO at Rs 178 only to facilitate a super profitable exit to Zephyr Peacock!?

PEBS IPO at Rs 178 (FV Rs 10) only to facilitate super profitable exit to Zephyr Peacock!?

No Grudge against the Private Equity Investor Zephyr Peacock but if  you’re thinking of applying in the PEBs IPO that opens on August 25 you should be aware of this…..

Shareholding of Private Equity Player Zephyr Peacock in PEBS  

In March to May 2013 Zephyr Peacock infused Rs 35 crs in PEBS  through Preferential Allotments of 5468750 CCPS to be converted at Rs 64

PEBS is a subsidiary of the listed Pennar Industries which was quoted at Rs 20 at the time.I was intrigued by this CCPS Infusion as it was to be converted at Rs 64 while Parent Company Pennar Industries was quoted at just Rs 20….Digging deeper found that PEBS was soon becoming the Crown of this Group and it resulted in my strongly recommending Pennar Industries at @ Rs 20 to Rs 25 as a SS 2 Select in mid 2013.Today it’s @ Rs 56 after recording a High of Rs 71 earlier this month on August 10,2015

In March & May this year the CCPS conversion took place but not at Rs 64 but at Rs 58.17 as thus the Zephyr Peacock Funds got allotted 6016485 shares instead of 5468750 shares

However the Pre-issue Holding of both the Zephyr Peacock Funds is 8360235 shares.This difference of 2343750 Equity shares is on account of 2343750 shares being transferred by the Promoter group to these funds in the year 2013 at Rs 64 at the time of the Preferential Allotments

On Offer in the IPO

PEBS is launching it’s IPO through Book Building on August 25,2015 in the Price Band of Rs 170 to Rs 178

It comprises of a Fresh Issue of @ Rs 58 crs +  Offer for Sale of 5516141 equity shares

Assuming Rs 178 the Fresh Issue will involve new 3258427 Shares to raise Rs 58 crs

The Offer For Sale of  5516141 equity shares at Rs 178 will bring in Rs 98 crs + to the sellers

Of these 5516141 Shares on offer for sale by existing shareholders,5016141 or  @ 91% are from Zephyr Peacock.

Zephyr Peacock’s Average Cost of their pre IPO Holding of 8360235 shares is Rs 60 => Rs 50 crs and they’re exiting 5016141 shares at Rs 178 to get them @ Rs 89 crs !

This would leave them with 3344094 free shares + a profit of Rs 39 crs !  

To me this Stinks ! as the IPO of a total 8774568 shares which at Rs 178 gives the IPO Size at Rs 156 crs comprises 63 % or nearly 2/3rds of Offer For Sale to partially exiting Shareholders( remember 91% is Zephyr Peacock ) and only @ 1/3rd infusion onto the Company…and that too merely to reduce pressure on short term working capital borrowings !   read more

At Rs 387 Floor Price the IndianOil Disinvestment should be an easy formality

Government is now really reducing it’s stake in IndianOil Corporation on Monday,August 24,2015 in a Divestment Exercise.

Why do I say  “now really” !

….because last year in March 2014 it held 78.92% of the IOC Equity of Rs 2427.95 crs (FV Rs 10) and because it felt the market price at the time of @ Rs 240 did not reflect the real valuation, instead of an Open OFS ,it decided to offload 10 % stake of 242795248 shares divided equally to two other  listed GOVT PSUs Oil India & ONGC  at 10% below market price=>@ Rs 220 to collect Rs 5341.49 crs at the time.

The Returns have been @ 80% in 17 months for ONGC & Oil India on this.

In April 2015 the Govt transferred  20267 shares in an off market transaction without it being a sale to the Central Public Sector Enterprise Exchange Traded Fund as loyalty shares

Now IOC is quoted higher at Rs 394 with a 52 Week High of Rs 465 registered just last month and a low of Rs 307 earlier….at the 52 Week High the Gains to Oil India & ONGC on their purchase of IOC last year would have exceeded 110% in 16 months

The Floor Price of Rs 387 has been set for Monday’s Disinvestment of  a similar quantity of 242795248 as divested last year .The Market Cap is Rs 95770 crs .Govt Stake will now drop from 68.57 % to  58.57% and the Proceeds to them would exceed Rs 9350 crs (assuming floor price of Rs 387)

Question is whether IOC can replicate at least some of the super gains made in 2014/15 going forward

Nevertheless this Divestment should be an Easy Formality


MMTC @ Rs 44~92000+ Shareholders sob on 98% Wealth Erosion!

The Tag line for Government Owned and run and listed  MMTC is weepingly (sure this is a legit word!) ironic at “Touching Lives.Adding Value”

Wow !…considering a 98% Shareholder Wealth Erosion inside years ! 

MMTC could well be My ! My ! Take Care! ….Shareholders may well say “What’s Left to Take Care !” 

MMTC quotes currently  @ Rs 44 (FV Rs 1) and it’s 92000+ Shareholders surely continue sobbing and cursing !….Do you really expect the Government who owns the Company to really care !? their share is at Face Value Rs 1…sorry 50 paise as they too got the 1:1 Bonus in 2010

It’s such debacles and destruction in even PSUs like MMTC  that swept away Retail Investors in hordes from our Equity Markets…It’s been a Crisis of Credibility and Confidence that continues to affect their return though it seems Memory is short as Mutual Funds Numbers  are reflecting their return  

….and is not Government supposed to protect you through Investor Protection & Safety and Awareness & Education Measures through Regulator SEBI and the Exchanges !?

I suppose in MMTC you required protection from the Government itself ! 

MMTC began the Crazy pre Lehman Year of 2007 at Rs 2200 levels on a FV of Rs 10 and raced away in just eleven months by November 2007 to Rs 57000 levels ….what was hailed as a glorious magical life changer for the few who were considered God’s creatures to have been bestowed the opportunity to buy in early  in 2006 & 7 ! 

Share Price began correcting yet remaining at Rs 40000 levels at the beginning of 2010.In June 2010 the 1:1 Bonus and 10:1 Split dropped price to below Rs 2000 levels on the adjustment.

Whether one bought at 2007 High of Rs 57000 or even at Rs 40000 at the beginning of 2010 the erosion has been @ 98% after adjusting ex bonus and ex split cost to Rs 2850 and Rs 2000 per FV Rs 1 share respectively !…this inside three years as in August 2013 the Share Price sank below Rs 40….it’s being raising hopes only to belie in the past two years and is currently trying to stay over Rs 40 

Government from earlier 90% now owns 89.93 % of the Equity of Rs 100 crs after selling 731238 shares at Rs 57 to 309 Employees in 2013/14 …unlucky Employees !…Oh ! LIC owns 4.81% of the Equity.

Consolidated FY 15 Topline is @ Rs 24000 crs (Trading in Precious Metals,Coal,Hydrocarbons and Fertlisers) with Bottomline at @ Rs 78 crs before adjusting for associate company loss of Rs 120 crs that takes the final bottomline into a loss of Rs 42 crs.The Consolidated Accounts are for MMTC and one wholly owned subsidiary,Seven JVs where it owns 26% of the Equity in six and 18% in one,and two associated companies of  1.1 mtpa Steel Company Neelachal Ispat Nigam Ltd (NINL ~holds 49.78% of the Equity) and  Devona Thermal Power (owns 26% of the Equity).The Loss is from the Steel Company read more

Value Protects in Inefficient & Wildly Swinging Scary Stock Markets

Value will Protect in a Wildly Swinging Market !

How Terribly Inefficient our Stock Markets are !

The Share Price Swings in Small & Mid Caps can be equally exhilarating and devastating !…depends !

And all this happens when the Sensex and Nifty move in a very narrow range !

Down ! Down ! Down!

Look at Amtek Auto’s Crash yesterday and continuing today !…all because the Exchanges announced that it will no longer be traded in the F & O Segment 

It was Rs 141.50 on August 17,2015.Yesterday August 19,2015 it crashed  by nearly 40% and Rs 50 to hit a low of  Rs 78 before closing at Rs 89 !

And this morning August 20,2015  it crashed another 40% to a low of Rs 50.70 before now recovering to Rs 67 levels !  

So the fall in three days from a High of Rs 141.50 to a low of Rs 50.70 is 64% erosion of market cap  from Rs 3100 crs to Rs 1100 crs in just one big Breath ! with High Volumes but low Delivery %….SCARY !

And this is a Company where the Promoters Dhams & Their Companies own 48.98%,FPIs like Goldman Sachs & Macquarie hold 18.83%,Domestic Institutions like LIC hold 16.47% as on June 30,2015.

There were over 46000 shareholders on this date.Spare a thought for them !…and for those who were long in F & O !

…and Spare a Curse for those Broking Houses and FPIs who recommended this Scrip !

Did not all know that the Group is struggling with over Rs 25000 crs in debt !….Wise after the Event ! 








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Look at Stampede Capital  !

Rs 650 two days ago after an all time high of Rs 800 on August 6,2015 and down on two consecutive lower circuits of 20% yesterday at Rs 494 and even today to Rs 406 on BSE !….CRAZY !…and SCARY!….just over 2700 shareholders,one being Superstar Amitabh Bacchan (entered a year and a half ago picking up One Cr shares at Rs 88 & similar at  Rs 110 levels), at June 30,2015 in what is clearly a highly controlled scrip

Look at Ansal Buildwell ! Big Up & Down Swings in three days ! 

Clearly Insider trading Involved or can the long positions be defended as aggressive risk taking based in favourable anticipation of a Supreme Court Judgement that was announced yesterday on the Ansal Brothers for the Uphaar Cinema Hall Tragedy that took 59 lives 18 years ago in a devastating Fire !

On August 17,2015 the Share Price was Rs 123.On August 18,2015,just a day before Supreme Court Order the Price flared to Rs 148.30.Yesterday it closed up on upper circuit at Rs 163.10 ! as Supreme Court announced merely a Fine of Rs 60 crores on the Brothers and no Jail Sentence !….and today it’s on lower circuit at Rs 146.80 nearing noon !…and the rise was being justified as Market Cap just @ Rs 100 crs and land bank value worth Rs 10000 crs !       read more

Superstar Amitabh Bacchan invests a Million Dollars in Nitin Fire at Rs 42.99 !

Wow ! Superstar Amitabh Bacchan has invested nearly a Million Dollars in a Bulk Deal on NSE on August 14,2015 by purchasing 1.5 Million Shares of Nitin Fire Protection Industries at Rs 42.99 !

Consequently Nitin Fire has fired up today 10 % and was on  on upper circuit at Rs 47.05 on BSE and Rs 47.15 on NSE in the morning before opening again only to get back on circuit

Remember how Amitabh had stampeded by buying Two Lakh Shares into BSE Listed Stampede Capital at Rs 88 & Rs 110 levels in December 2013 and see where Stampede is today within a year and a half with long term gains exempt! => Rs 650 levels after crossing Rs 700 recently …that’s a five bagger !

So whats fired up Amitabh Bacchan ! …or is it payment in lieu of Advertising for Nitin Fire just as he took shares of Just Dial at par before IPO and made a killing !

And who’s sold to him ? as it’s a bulk deal in NSE and not a fresh allotment

Nitin Fire Products Industries is a FV Rs 2 Share with a FY 15 Consolidated Book of Rs 15 (moved up in June Q 1FY 16 to Rs 15.67) and an EPS of  Rs 2.3   …Networth is Rs 458 crs as on June 30,2015 with Equity at Rs 58.45 crs

Relative Valuations at Rs 47  work out to PBV of 3 and PE of 20 with Capital Employed of Rs 980 crs as on June 30,2015 spread Rs 343 crs in India and Rs 637 crs overseas

Finance Charges were Rs 41 crs in FY 15 and Rs 10 crs in Q 1 FY 16 but most of the Rs 400 cr Debt is actually short  term and therefore not reflected in Fixed Assets but in Current Assets

FY 15 Consolidated Topline & Bottomline were Rs 1150 crs & Rs 67 crs respectively.Overseas Sales contribute over half.The Company operates two plants at Navi Mumbai & Andhra Pradesh and has operations in Jebel Ali,Dubai and Singapore

They have an enabling provision to raise US $100 m in Equity and in FY 14 saw  a successful buy back of 13.47 lakh shares at Rs 57 average involving Rs 7.7 crs  too.Share was split in 2010 from Rs 10 to Rs 2 after raising Rs 64 crs in a 2007 IPO at Rs 190.Two Bonus Issues ,one liberal 5:2 in 2011 and one of 1:3 in 2014 have been given  to shareholders

Auditors Haribhakti & Co,LLP have qualified their Report for two non provisions being Rs 5 crs for a Derivative Contract Loss disputed with a Bank and Rs 45.76  crs Investment in Worthington Nitin Cylinders Pvt Ltd where the Company has relied on a Valuation Report to recover their Investment but Auditors are unable to comment on any potential Impairment as a Fair Valuation Report as required by Accounting Standard 13 is not available read more

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