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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 2016

Schadenfreude ~ Pleasure derived from the misfortune of another !

Came across Schadenfreude ~ Pleasure derived from the misfortune of another

….came across the use of this word while reading the Huge Mess of Hydel Power Projects in Arunachal Pradesh & the likes of business houses like Jindal Power,IL & FS & Lanco approaching National Hydel Power Corporation (NHPC) to take over their projects….NHPC is not too keen….Says M Rajshekhar,the author of this report “The reason for its reluctance goes beyond understandable schadenfreude. Its solitary project in Arunachal – Lower Subansiri – is stuck in a quagmire as well 

Rather Ironic now that many such Hydel Power Projects were actually taken away from NHPC between 2005 & 2009 and given to the likes of Reliance Energy,Jaiprakash Associates,DS Constructions,Jindal Power & KSK Energy….Most of them,if not all have turned into white elephants….and the privatisation actually led to many misdeeds like signing MOUs merely to raise monies and sell the MOUs itself !

Real woes experienced were the ” absence of roads and power lines. Not to mention local protests and extortion rackets, especially by local student unions. The state government too was a factor. While it wanted 26% equity in each project, it did not have the cash needed to pay for those shares.” says M Rajshekhar

And Now Presidents Rule is being imposed in Arunachal Pradesh !  

Of Course Political Patronage & Crony Capitalism have combined in this Privatisation endeavour that’s created this mess

Remember Reliance Power’s IPO in January 2008 at Rs 450 and the Prospectus announcing the roadmap to create nearly 30000 MW by 2016 & which included Hydel Projects in Arunachal Pradesh !

Max India ~ BSE & NSE mess up post de-merger quoting & adjusted bands today !

Max India ~ BSE & NSE mess up post de-merger quoting today !

From today,Wednesday,January 27,2016 Max India has started quoting ex Scheme of Arrangement that will involves three Companies as below

  1. Original Listed Company Max India  renamed as Max Financial Services (MFS)
  2.  Resulting Company,Taurus Ventures to be listed later and renamed Max India (Max)
  3. Resulting Company Capricorn Ventures to be listed later and renamed as Max Ventures & Indutries (MVI)

Record Date is set for tomorrow Thursday,January 28,2016 for :

  • Resulting Company Max to issue 1 share of FV Rs 2 for every 1 share of FV Rs 2 held in Original Company now MFS
  • Resulting Company MVI to isuue 1 share of FV Rs 10 for every 5 shares of FV Rs 2 held in Original Company now MFS
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    Spicejet Up & Indigo Down this morning !

    Spicejet Up & Indigo Down this morning !

    As expected both airlines have had a stellar record Q 3 FY 16 profit on the back of  favourable lower cost of Aviation Turbine Fuel that constitutes over 50% of Expenses

    However Indigo declared their Q 3  post market on Thursday,January 21,2016 revealing Rs 657 crs PAT in the December 2015 Quarter.On Friday,January 22,2016 the Interglobe Aviation (Indigo) Share Price crashed 20% before recovering slightly to close at Rs 968.75 on BSE

    This Monday Morning,January 25,2016  it has sunk further by over 7% in the first 20 minutes of trading to drop below Rs 900 !

    In contrast Spicejet declared a record  Rs 238 crs Q 3 FY 16 PAT postmarket hours on Friday,January 22,2016 and had held steadier @ Rs 70 levels after recovering from Rs 63 on the back of Indigo’s collapse

    This morning Spicejet opened strong up 10%  @ Rs 77 in contrast to Indigo’s continued fall and touched Rs 80 before correcting to @ Rs 75/76 levels,yet up over 7% over Friday closing inside first half an hour of trading

    Spicejet has made Rs 334 crs profit for the nine months at December 31,2015.Thus Full Year FY 16  EPS is likely to be @ Rs 10 on current Equity of @ Rs 600 crs (Face Value is Rs 10)

    However the Auditors ,while not qualifying their report, have directed attention to the huge net liabilities over assets of Rs 882 crs ,being accumulated loss of Rs 2877 crs against shareholder funds of Rs 1995 crs that could materially impact company’s survival going forward

    However,as Spicejet is on a recovery turnaround path,with Ajay Singh,it’s co founder in 2005 back at the helm & aided by lower & therefore favourable Aviation Turbine Fuel Prices,it should be able to meet operating and financial challenges

    Market Cap of Indigo presently  this morning at 9.45 am is just under Rs 33000 crs at Rs 910 Share Price levels while SpiceJet’s Market Cap is just over Rs 4600 crs at Rs 76.70 levels

    Sensex is up  over 210 points at 24650 levels

    Crude Oil Price has shown some re-bounce to US $ 31 a barrel from lows of US $ 28 a few days ago

    Aviation Sector will continue to thrive on lower ATF which will remain it’s underlying for Profitability levels

    Will be interesting to see how Jet,Indigo & Spicejet play out in 2016 !

    Go Air too is lining up for an IPO

    Disclaimer : Have an interest in Spicejet

    Epic Global Debt Defaults Inevitable

    Epic Global Debt Defaults are Inevitable 

    Financial Apocalypse inevitable ! ?

    Here’s a well summed up scenario by William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank for International Settlements (BIS).

    Extract ~The stimulus from quantitative easing and zero rates by the big central banks after the Lehman crisis leaked out across east Asia and emerging markets, stoking credit bubbles and a surge in dollar borrowing that was hard to control in a world of free capital flows.

    The result is that these countries have now been drawn into the morass as well. Combined public and private debt has surged to all-time highs to 185pc of GDP in emerging markets and to 265pc of GDP in the OECD club, both up by 35 percentage points since the top of the last credit cycle in 2007

    Hitting Ten Quotes by White :

  • “The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability”
  • “The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up” 
  • “Emerging markets were part of the solution after the Lehman crisis. Now they are part of the problem too”
  • “it is impossible know what the trigger will be for the next crisis since the global system has lost its anchor and is inherently prone to breakdown”
  • “A Chinese devaluation clearly has the potential to metastasize. Every major country is engaged in currency wars even though they insist that QE has nothing to do with competitive depreciation. They have all been playing the game except for China – so far – and it is a zero-sum game. China could really up the ante”
  • “In the end, the future catches up with you.By definition, this means you cannot spend the money tomorrow”
  • “Falling prices of manufactured goods masked the rampant asset inflation that was building up. Policy makers were seduced into inaction by a set of comforting beliefs, all of which we now see were false. They believed that if inflation was under control, all was well”
  • “In retrospect, central banks should have let the benign deflation of this (temporary) phase of globalisation run its course. By stoking debt bubbles, they have instead incubated what may prove to be a more malign variant, a classic 1930s-style “Fisherite” debt-deflation”
  • “the Fed is now in a horrible quandary as it tries to extract itself from QE and right the ship again. “It is a debt trap. Things are so bad that there is no right answer. If they raise rates it’ll be nasty. If they don’t raise rates, it just makes matters worse”
  • “There is no easy way out of this tangle.It would be a good start for governments to stop depending on central banks to do their dirty work. They should return to fiscal primacy – call it Keynesian, if you wish – and launch an investment blitz on infrastructure that pays for itself through higher growth.It was always dangerous to rely on central banks to sort out a solvency problem when all they can do is tackle liquidity problems. It is a recipe for disorder, and now we are hitting the limit”
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    Sensex sinks below 24000 & I love it !

    Sensex sinks below 24000 & I love it !

    Had sounded the alert way back in December 2014 that 2015 would be a volatile & vulnerable year & had reiterated this often in 2015….had opined that FPI Inflows will drop and even reverse after record Inflows in 2014 that gave the Sensex & Nifty the swagger to move ahead in 2014 and early 2015

    Global & Domestic Pulls & Pressures were unleashing on multiple fronts across China,Middle East,Russia,Brazil,South Africa in particular

    Falling Oil &  Slipping Currencies continue to play havoc with Economies of Countries that depend on Oil Revenues

    I’m reproducing an interesting and relevant blogpost of mine just over four months ago in September 2015

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

    Friday, September 4th, 2015

    A few Extracts from the above blogpost ……


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

    Too frequent communications then would have served little purpose other than the danger of generating ‘Noise’ from the exchanges !

    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 

    On ET Now Prime time on March 31,2015 I had aired my fundamental views for the new FY 16 that was dawning to a wider audience than just clients.I had stated that the markets were running ahead of fundamentals read more

    TAP GAP end 2015 Poser~Record Participation~100 Stock Selects!

    Fabulous Response to  TAP GAP end 2015 Poser as to which Stock will gain the highest in 2016 !

    Thank you all 43 Guys who have participated with 110 entries across Sectors !

    It’s been a Record Participation and after adjusting for  additional entries over maximum three allowed  there are 107 valid entries & after considering common selections there are exactly 100 Companies I have to select from !

    ….only one large Cap of over Rs 100000 crs Sensex & Nifty Selection of Larsen & Toubro features in the selections & it’s from Pushkar

    Selections are low to mid cap & I’m quite aware of many that are being deliberately driven in the markets despite questionable fundamentals….fake or real turnarounds ?

    Last year  there were 40 entries from 23 participants & I was fairly bang on in selecting Intellect Design from Hemant for the gauravblog hamper…it surged 271 % in 2015

    Hope I’m bang on this year too…..100 companies to review  & filter from !…. give me till this month end to decide !…I may just give more than one hamper

    But First I have made these decisions

  • Sameer ~ You seem to have lost count of your changes and so I am ignoring Reliance Industries and accepting Aptech as your third select….anyway Reliance has been flat last six to seven years and has been merely return of capital rather than return of capital !…of course there is optimism for the Future !
  • Divesh ~ Only Three Selections & thus have ignored  your fourth Next Media &  fifth Spicejet
  • Raghu Bhat ~ Have ignored your fourth selection  Bambino Agro for same reason as Divesh above….don’t scream if it does the best  in 2016 and Aluwalia wins it as he too has recommended this !
  • Srinivas ~ For sentimental reasons for Record Entries touching 100 Companies mark I have accepted your late entry of Arrow Textiles but will consider the higher closing price on January 15,2016
  • Have taken the recommended price as being the lower of closing on January 15,2016 on BSE & that when recommended by participant(after verifying and adjusting if necessary as available traded quote on that day & participants exact time of entry)
  •  Trust  that there is no single participant  who has submitted entries through multiple emails….now am I giving you ideas for the next year just because I dont ask for KYC proof !
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