GauravBlog Logo

A Lion’s eye on the Bulls and Bears

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

Gaurav's Blog

Categories

Open Offers & Buy Backs

Inefficient Markets or Inefficient Valuation !? ~ Saint-Gobain Sekurit is to amalgamate into Grindwell Norton

Inefficient Markets or Inefficient Valuation !? ~ Saint-Gobain Sekurit India (SGSI) is to amalgamate into Grindwell Norton (GN)

The Ratio is One Share of GN of  Face Value Rs 5(currently quoting @ Rs 259) for every 17 shares of Face Value Rs 10 of SGSI (currently on lower circuit of Rs 2o.25 )

Of course rationally all SGSI Shareholders should exit as the Market Price Gap is @ Rs 100 considering the Amalgamation Ratio ! ~ the Book Values of both listed companies indicated a better ratio of 1:12

Check out the details just posted on SCRIP STANDPOINT Module on my company website

Unfair Amalgamation Ratio of 1:17 ?~ Saint-Gobain Sekurit India into Grindwell Norton ~ 29-Apr-2013

Minority Shareholders of SGSI are just flies being shooed off  yet again after a failed delisting attempt by SGSI  in June 2012!

SEBI  needs to intervene to protect minority shareholders and to confirm which is Inefficient ~ Market or the Valuation !

Geodesic at Rs 9.97 ~ Wealth and Shareholders Nearly Exterminated !!!

Geodesic @ Rs 9.97 ~ Incredulous this yet Incredible Faith  in a Company that is completely undeserving !

Till late last year @ 30000  Shareholders,including 45 FIIs, were unaware they were sitting on the edge of the cliff ~ the cliff cracked and it’s been a horrific downward spiral from near Rs 60 to under Rs 10 inside months !

Wealth Nearly Exterminated ~ √

Shareholders Nearly  Exterminated ~ √

Perhaps Shareholders deserve this state and fate as only 110 of them attended the recent  AGM on February 11,2013 in Mumbai !

So what’s with so many recommending Geodesic last year  that’s it a great Buy ~ perhaps even a multibagger ! ~ and Shareholders climbing from 7500 levels in 2006 to 30000+ at December 31,2012 !~In fact 3000 +shareholders were added in the Quarter October to December 2012  ~ What were they excited about and what did they miss !? ~ Let’s examine

Who are the Promoters and what does the Company do

It’s a Troika that promoted Geodesic Ltd to offer software and software related products and services~ Pankaj Kumar is the Chairman while Kiran Kulkarni is the MD and Prashant Mulekar is the ED ~ At December 31,2012 they collectively held 14.90 % of the Equity of Rs 18 crs down from the 25% + held a quarter earlier ~ clearly pledged shares were being offloaded on share price beginning to drop in December  ~ The situation now may be even be a much lower stake  in terms of their holdings in the company on further offloading

Buyback Announced of upto 25% of the equity upto Rs 75  

November 27,2012

Geodesic Ltd has informed BSE that in continuation with the decision to buyback Equity Shares of the Company through stock exchange mechanism, the Board of Directors of the Company at their Meeting held on November 27, 2012 have discussed and approved to buy back upto 25% of the Equity Shares of the Company at a maximum buyback price of Rs. 75/- per share subject to the approval of the shareholders through Postal Ballot

Financials for FY 12, 15 months ended June 30,2012 

December 4,2012

Geodesic Ltd has informed BSE about the Audited Financial Results for the Financial Year ended June 30, 2012

Earnings ~ Standalone Profit is Rs 230 crs on Sales of  Rs 869 crs giving an EPS of Rs 25+ on an Equity of Rs 18 crs (FV Rs 2)

Assets ~ Standalone Networth is Rs 1266 crs with Reserves at Rs 1248 crs giving a Book Value of Rs 141

Consolidated Financials show EPS at just under Rs 29 with PAT at Rs 260 crs and Book Value at Rs 191 with the Networth at Rs 1721 crs ~ Also shows Cash & Cash Equivalents at Rs Rs 1139 crs ~ while the standalone shows this below Rs 1.5 crs ! read more

Future Capital Holdings is now Capital First and it zooms to Rs 190 today as Warburg Pincus & Group acquire it from the Biyani Group and other Shareholders at Rs 162!

Biyani is Out having sold out Future Capital Holdings to the Warburg Pincus Group at Rs 162

Cloverdell Investment Ltd, a private company limited by shares, incorporated under the laws of Mauritius (“Acquirer”) along with Warburg Pincus Private Equity XI, L.P., Warburg Pincus XI Partners, L.P., Warburg Pincus Private Equity XI-B, L.P., WP XI Partners, L.P., each a Delaware limited partnership, and Warburg Pincus Private Equity XI-C, L.P., a Cayman Islands exempted limited partnership, collectively referred to as persons acting in concert (“PAC”) now hold a strong controlling interest of 68.40% or 46794080 Equity Shares of Future Capital Holdings now renamed Capital First

These shares were acquired at Rs 162 as below

Acquisition Mode No of Shares of FV Rs 10 % of Fully Diluted Equity
By Agreements with Biyani Group Promoter Shareholders like Pantaloon Retail 30080137 43.97
By Open Offer 16713943 24.43
46794080 68.40

Capital First has zoomed to Rs 190 High today and currently at 1.40 pm is available at Rs 186 

Keep an Eye as Capital First is now with Strong Shareholders with proven multibagger success with Bharti Airtel and the likes in the past 

Just to jog your memory ~ Biyani earned the wrath of Investors when FCH failed miserably on the bourses sinking to lows of Rs 130 in recent times from the IPO Pricing of Rs 765 in January 2008 ~ Biyani tried to make amends with an at par Rs 10 IPO of Future Ventures but just about managed subscription ~ it quotes at Rs 9.25 today ~ I had blogged on it at the IPO in April 2011

Biyani’s Future Ventures IPO…First you seduce at an obscene premium…and then now you seduce at Par !

 Cheers for FUTURE !

Difficult to Ignore Reliance Industries !~ It’s a Love and Hate Relationship Alright! ~ Will it double from Rs 850 in three years time !?

Difficult to Ignore Reliance Industries (RIL) !~ It’s a Love and Hate Relationship Alright!

Profitability is Flat at Rs 20000 crs and Networth is Rs 166000 crs (Equity of FV Rs 10 is Rs 3271 crs) for 2011-12 ~Thus an  EPS of Rs 61 and Book Value of  Rs 507 giving Relative Valuations of a 14 PE and 1.7 PBV

At Rs 850 thereabouts it’s yet touted by Insiders to double by 2015 ! ~ that’s a CAGR of 30% +!

So why is there so much headwind!?~Cynics & Skeptics & RIL Bashers say it is a creation of  RIL’s own Making and quite deliberate too ! with tacit government support too !

This is the Situation

  1. Profitability Pangs ~ RIL is under ‘Growth in Profitability’ pressure as Lower Gas Production and capped till 2014 at US $ 4.2/mmbtu Gas Pricing is affecting Revenues and Profitability ~ Profitability in 2011-12 was flat at Rs 20000 crs ~ same levels as previous year
  2. RIL’s Demand for Gas Price Increase Rejected ~RIL wants the Gas Price to be adjusted to three times over the current US $ 4.2 mmbtu before 2014 when the New Pricing can be negotiated after it was decided  for a period of five years in 2009 ~ Government has quite rightly rejected this demand though Attorney General has adviced it has the prerogative to do so before 2014
  3. KG-D6 Gas Production Drops ~The Gas Production from the KG-D6 Field has alarmingly dropped to 27.5 mmcmd  when in fact it was initially projected to move to 80 mmcmd and even 120 mmcmd later ~ In 2011-12 the average production was 42.65 mmcmd ~Questions are arising as to why this has happened ? Reliance states that Problems relate to unforseen Reservoir Complexities and water ingress  ~ The suspicion is that Reliance is bound to sell the gas to the government for allocation largely to power and fertiliser project needs at the contracted price till 2014 of US $ 4.2 mmbtu,but it currently finds operations unviable at this price and expects that the Price will be upward of US $ 15 by 2014 and so is curtailing production and sacrificing current revenues to earn bonanza revenues and returns just two years down the line ~ reduced production also drives up prices ! ~don’t be surprised if it suddenly and timely announces it has discovered more gas reserves ! ~It is suspected that  in the late 1990s oil discoveries in Gujarat in a joint venture were not announced until the new NELP was announced in a Chidambaram Budget to get a better pricing from the Government under NELP !~ so it would be a time tested game strategy ! ~ The Truth must be found and told !  
  4. Government yet to give RIL a go ahead on  KG Basin Capex Spending ~ RIL is literally threatening the government that unless it clears the US $ 1.6 Billion Capex proposal for 2012/13  it is likely that the Field will be shut down in 2015 ~ Government is skpetical and rightly so ~ though some may accuse it of deliberately playing a pre-meditated gameplan to delay or deny and then give in or compromise ! ! ~ recollect the accusation by no less than, the now seperated in business, Anil Ambani,the brother of Mukesh Ambani who runs RIL,that RIL has deprived the Government of Early Royalties by hugely inflating the Initial Capex of the Basin than what should have been honestly actually incurred ~ If I recollect,the accusation was that the Capex should have been Rs 12000 crs but was inflated and shown at Rs 45000 crs ! ~ the production sharing contract allowed the Contractor to first cover the Investment costs from the Revenues before beginning the Royalties to the Government

Reliance Industries now says it is open to a financial audit for the spending of Billions of Dollars for the KG-D6 Field where the gas production has declined to 27.5 mmcmd per day instead of rising to 80 mmcmd per day and then even 120 mmcmd as originally touted !    

RIL  sold 30%  participatory interest in 21 Blocks including KG-D6 to UK’s British Petroleum in February 2011 for US $ 7.2 Billion and potential Royalties of US $ 1.8 Billion annually

So what is it going to do with all this Cash !?

  1. RIL has an enabling resolution till January 19,2013 to use Rs 10440 crs =>@ US $ 2 Billion to Buy Back between 3 crs to 12 cr nos of  it’s Shares at not more than Rs 870 per share~ till date September 25,2012 it has bought back @ 3.9 cr shares for under Rs 3000 crs ~ with Price at Rs 850 do not expect any more serious buy back quantities 
  2. It has  a US $ 1.6 billion Capex Plan pending Government approval
  3. It plans to reduce Debt significantly~ It has a standalone long term debt of Rs 48000 crs at March 31,2012
  4. It plans to bid for 2G as well as lay out a nationwide 4G Telecom Footprint
  5. It plans to invest US $ 8 Billion over time  in a State Owned Refinery in Venezuela  

Going Forward  RIL’s Operating Streams will remain diversified …..Current Core are Oil & Gas & Petrochemicals ~ Scaling up heavily in Telecom is on the cards

So will RIL’s Share Price double by 2015 from the current Rs 850 !? ~ Well, it needs the Government to cooperate and is making every effort that it does ! ~ don’t ask me more !

Remember the Insider Trading Case where RIL benefited over Rs 1000 crs inside 15 days on Reliance Petroleum !? ~ It remains pending with SEBI though RIL has tried to settle it several times through a consent order without accepting guilt

…and in May this year SEBI announced that Insider Trading Cases will be outside the purview of Consent Orders and those accused of perpetrating it cannot therefore apply for a settlement through a  Consent Order ! ~ with retrospective effect even for pending matters !? is the question !

Good to be Aware of the Specific Risks !

Reiterate as I stated at the beginning itself ~Difficult to Ignore Reliance Industries (RIL) !~ It’s a Love and Hate Relationship Alright!

Cheers !

Disclaimer ~ I do have RIL in Clients Portfolios and  yet retain it in the Core Category ~ because it’s a Huge Behemoth in Tangibly High Investment Core Businesses and such an entity cannot be replicated soon ~ Also Valuations are not obscene ~ The only reservations would be Corporate Governance Issues and to know the real Truth behind the Lower Gas Production read more

Sensex Prepares to break 16000 on the downside as Greece prepares for fresh elections…IPO Woes continue…another one bites the dust…Plastene India withdraws issue as received poor response…Interestingly SEBI continues Expansion Spree !…and Reliance continues to Buy back it’s shares !

Now you know why I’ve not been, of late, Valuing IPOs on this Blog …because of the high probability of them being withdrawn either because they are unworthy in the first place or simply overpriced or dangerously both !

IPO Woes continue…another one bites the dust…Plastene India withdraws issue as received poor response…Yesterday evening,Book Running Lead Manager, Motilal Oswal Investment Advisors Pvt Ltd informed the Exchanges that The IPO of Plastene India Ltd is being withdrawn due to unfavourable market conditions….The Issue was priced in the range Rs 81 to Rs 84 and was barely subscribed one third…Company,promoted by  Parekhs,is in the Flexible Packaging manufacturing business

Today the IPO of Speciality Restaurants Ltd has opened inviting offers in the Price Band Rs 146 to Rs 155…a bit steep,in line with valuations that Jubilant Food (Dominos Chain) commands…the BRLM is Kotak Mahindra Capital Company Ltd

Earlier this Month,the big IPO of Rs 1600 crs + of Samvardhana Motherson Finance too was withdrawn due to a poor response…while the IPO of Tribhovandas Bhimji Zaveri barely mustered subscription,but got through and is listed below Issue Price of Rs 120

As Greece prepares for Fresh Elections on June 17,2012 after an impasse in forming a coalition government,our Sensex prepares to break 16000 on the downside in early morning trading as I blog

In such an Environment,interesting to note that SEBI seems to be prospering………continues on an Expansion Spree of Hundreds of Crores…..now looking to own it’s own stand alone building in New Delhi and Residential Premises worth hundreds of crores….like it has done in Mumbai

…and Reliance continues to buy back it’s shares in terms of the Public Announcement it made on January 23,2012..as of yesterday it had bought back 14132375 shares at an aggregate of Rs 1028.71 crs (Excluding Brokerage,Service Tax,STT,Stamp Duty,Exchange Transaction Charges,and SEBI Fees)…that’s an average of Rs 728 per share….currently it quotes at 52 Week Lows @ Rs 675…check my recent blog on Reliance

Reliance Breaks Rs 700 On The Downside Yet Again …This Should Test Conviction Of Even Loyalists…The Name ‘Reliance’ Appears To Be A Misnomer And Misplaced Too !
May 10th, 2012

ONGC 5% Stake Disinvestment ~ Government’s ‘On The Road’ Campaign with LIC the Sole Listener !

ONGC 5% Stake Disinvestment ~ Government’s ‘On The Road’ Campaign with LIC the Sole Listener !

The Congress led UPA Government had announced a Disinvestment target of Rs 40000 crs in the FY 12 Union Budget…..It simply was a Non Starter

Now with the Union Budget Address scheduled for March 16,2012,the government hurriedly ordered a 5% Equity Stake Disinvestment in ONGC

On Offer were 427.7 Million Shares of ONGC.The Floor Price was kept at Rs 290 ~ Premium to the Traded Price….The Disinvestment was through an Auction Process with Competitive Realtime Online Bidding on the BSE and NSE

The Poor Response from Investors was clearly a rejection to Subscribe to the ONGC Issue and there was danger of the Auction  being declared a Fiasco and the Disinvestment in ONGC being cancelled….This would have been a slap in the face of an already pressurised government which is tackling a huge current and fiscal deficit that has led to high levels of Government Borrowing to fund these

So what does the Government predictably do !?….It turns to LIC and SBI and is strongly perceived to have ordered them to not only bid heavily but also above Rs 300 !…Tch! Tch!

The Issue sails through with LIC and SBI bidding…the weighted average price is Rs 303.67 thanks to the PSU saviours

For the record,Technical Glitches on the Exchanges are given as reason for undersubscription and lower bids received…SEBI is asked to investigate the cause for this

LIC’s tagline in TV ads is ‘Why go anywhere else !”….Our Government simply and literally agreed !

The Moot Question is not whether ONGC is worth Investing in or not !….but Fingers are being pointed at the Government for shamelessly just playing musical chairs with PSU Funds…from one to another !…the Government needs to be reminded that PSU Funds are those of the PSU Corporate and have to be applied for efficient returns…just because it holds majority shareholding it cannot throw caution to the winds and use PSU Funds,especially those of LIC,as it’s own to do as it pleases

ONGC needs a change in Professional Management to run more efficiently…just a change in shareholding by government chipping away periodically some % of it’s holdings will not do…How does it benefit ONGC !…government yet holds @ 70%  in it…so next time it needs some more monies when budget deficits refuse to be tamed,watch out ONGC,some more of your shares will be up for sale by the Government ! read more

Scroll to Top