GauravBlog Logo

A Lion’s eye on the Bulls and Bears

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

Gaurav's Blog


September 2015

SKS Microfinance drops 20% to Rs 360 today as not in RBI’s shortlist of 10 to be granted mini bank licenses

SKS Microfinance lost 20% in early morning trade on NSE dropping to lower circuit at Rs 360 before recovering to Rs 390.Previous Closing was Rs 450

This  defining fall was the consequence of not having made it to the RBI List of 10 lending entities shortlisted from 72 applicants to become mini banks for advancing to the unbanked and small farmers and other segments that do not receive funding from the bigger banks.Interestingly eight of the ten short listed are microlenders

I have never been a fan of SKS Micro and it’s Promoters and had warned in 2010 to avoid the obscenely priced IPO  in the price band of Rs 850 to Rs 985 more so as it involved an unhealthy element of Offer for Sale by Sequoia Capital.Also was critical of  Promoter Vikram Akula’s mindset too in profiting by himself exiting a large shareholding at an obscene price prior to the issue.Here’s the story I posted in 2010.The share Price collapsed after the IPO and even dropped below Rs 100 to Rs 90 in 2011 and even lower to Rs 54 in 2012 before recovering smartly to touch a 52 Week High of Rs 590 on July 31,2015

I have an Issue…actually several…..with the SKS Microfinance Issue !….Intentions may be Noble but Actions are Profit Motivated and not singularly Selfless !

Thursday, July 29th, 2010 Interestingly RBI has not even shortlisted Vikram Akula’s Vaya Finserve that he started after exiting SKS Micro ….Interesting are also the parameters by which the applicants were assessed as deserving….financial soundness,business plan and fit and proper status as conveyed by external agencies.I suspect it must have been the last criteria weightage that saw the exclusion of  the above Also a leading Broking House erred in haste when recommending SKS Micro to clients just recently setting a target of over Rs 700 for it.Now they have come out within days to state that in light of SKS Micro not being shortlisted the premium valuations will reduce and they have reduced the price  target to just over Rs 400 ! implying that  Rs 300 + in their target of over Rs 700 was based on the assumption and expectation of SKS Micro getting the mini bank licence  !….they should have waited for this confirmation or warned that the recommendation was only for aggressive players wishing to bet that SKS Micro would get the mini bank license. Now they are wiser as all are !…wonder what their Clients who hold SKS Micro must be doing with their holding…holding in hope yet or exiting as relative valuations for this Rs 1000+ crs Net worth company are  20+ PE and 4.5 PBV ! ? SKS Microfinance will find it increasingly difficult to compete with those who get the Mini Bank License as the latter will have access to lower cost and larger capital from the banks and many of them are promoted or supported by Big Entities

Anuh Pharma XB Rs 340 ~700% Gains in 2014-15 ~ Now What?

Anuh Pharma was Rs 280 yesterday morning and is up to Rs 340 this morning !….yet down from ex bonus High of Rs 414.75 on August 12,2015…It was a liberal 2:1 Bonus with xb date being August 5,2015.Cum Bonus the Share Price was at times over Rs 1000. 52 Week xb High of Rs 414.75 implies a cb Price of Rs 1244 while today’s xb price of Rs 340 implies a cb price of Rs 1020 .It was at just Rs 130 twenty months ago in January 2014.Gains are @ 700 % since then in 2014-15 till date

The Face Value is Rs 5 and the Equity has jumped from Rs 4.18 crs to Rs 12.54 crs with the Bonus

FY 15 PAT was @ Rs 22 crs with EPS over Rs 26.Reserves at March 31,2015 were Rs 96.7 crs giving a networth of  @ Rs 101 crs and a Book of @ Rs 121

Post the Bonus the Book had moved to just over Rs 43 (Rs 40 at March 31,2015) after considering the Rs 8 crs profit in  Q 1 FY 16

Assuming a FY PAT of Rs 25 crs and Rs 30 crs the FY 16 EPS would be @ Rs 10 and Rs 12 respectively

Fy 15  the Dividend was a healthy Rs 7 or 140 % (Interim of Rs 2 ~40%  & Final of Rs 5 ~100%)…this was @ 26.5%  payout from FY 15 Profits.Assuming similar payout for this year the Dividend should be @ 50% to 55 % on enhanced capital and would entail  payout towards  @ Rs 7 crs

Adjusted for  FY 16 Projected Dividend the Networth should be @ Rs 120 to Rs 125 crs giving a Book of @ Rs 48 to Rs 50 at March 31,2016

Using FY 16 Projected EPS & Book at the current share price of  Rs 340 this would  give a PE  Range of 28 to  34 and a PBV of @ 7

Even if Zero Debt such Valuations are High and need to be supported by high CAGR or non linear growth in the offing over the coming years or a Takeover Situation.Last 5 Years CAGR on Topline is 10% and on Bottomline  is 12%….. exciting to run up such Relative Valuations?.So if it’s not based on the Past is there any Game Changing or Life Changing Future or Takeover that’s exciting ?

Though the Company has acquired 7800 sqm adjoining existing 3600 sqm Tarapur,Boisar Factory Land for expansion it also states that they have enough capacity to produce more on demand and increase market share without further capex spend…they have a rated capacity of 900 mtpa for macrolides etc though maximum achievable capacity is 1140 mtpa and 12 mtpa for Corticosteroids…they are currently operating at 65% of the achievable capacity …that should be @ 750mtpa

FY 15 Annual Report does not show any significant addition to Fixed Assets on account of the 7800 sq m land purchased .This must reflect in FY 16 accounts read more

Hoping for A Merciless Market for Higher Gains at Lower Risk !

As a Concerning Week comes to a close,the Sensex again has chopped off a few hundred points and gone sub 25500

I’m Hoping for A Merciless Market !  ….that’s when you can get into serious wealth creation opportunities at lower risk for higher gain !

Have held from December 2014 that 2015 will be volatile and vulnerable and had repeatedly voiced cautions on SCRIP STANDPOINT Module on my company website

which would serve you well to visit and revisit  to understand why we thought so



This is the latest note emailed by me to clients and associates  earlier this week


We have been quiet for a few months now for a good reason. Those who are on our fundamental wavelength know what we stand for. We had cut down drastically on our ‘Buy’ recommendations  in all Modules in FY 16 till date.Too frequent communications then would have served little purpose other than the danger of generating ‘Noise’ from the exchanges !

A Communication is Now Due as to why on Indian Equities we had preferred to take the risk on Erring on the Side of Caution

Sensex closed down 2.23% or 587 points down today to close sub 25700 triggered by declaration of  Shortfall in Rain & lower that expected GDP for the last quarter 

While we are not into Equity Fundamental Advisory for Bragging Rights we must raise this issue to revalidate our cautious view held in 2015

We have held a view of Sensex Range of 25000 to 27000 for most part of this year 2015,especially after it touched 30000 on March 4,2015 after closing 2014 at 27500 levels.

We had opined in December 2014 itself and in January 2015 that the Sensex will record an all time high of 30000 early in 2015 as the three legs of the Equity Table ~Momentum,Sentiment and Liquidity ~ were all in favour although the fourth leg Valuation was beginning to raise an alert on the Corporate Earnings Front 

Early in 2015 we were unable to assess with the required degree of conviction on four domestic factors and three overseas factors that would play out in 2015.Of course everyone had a strong view or opinion on these !…these were :

Domestic Front

  • Significant Rate Cuts demanded by the Corporate Sector to revive Manufacturing Sector  ~ Yet awaited 
  • Corporate Earnings in FY 16 after a bad Q 4 FY 15 ~ Q1 & Q 2 FY 16 seem to carry forward from Q 4 FY 15 ~ Sensex FY 16 EPS projections lowering inevitable 
  • Normal Monsoon ~ After a promising June,it’s been downhill in July and August 2015 and Monsoon Shortfall is now a given
  • Pace of Economic Reforms especially on the GST ,Land and Make in India Initiatives ~ Not much Headway given the Political Opposition that has disrupted and washed out whole Parliament Sessions

Overseas Front

  • Was the record surge of Chinese Stocks backed by fundamentals 
  • Will Greece be bailed out or allowed to default and exit the Eurozone
  • When will the US Fed raise rate 

What we did assess with conviction was that FPI Inflows will ebb or even reverse in 2015 from the record inflows in 2014…another reason that should mute markets…as this was played out it was ignored by a frenzied midcap space market that justified it being balanced out by increased retail participation and absorption by increased Mutual Funds Investments  read more

Scroll to Top