L & T Finance Holdings recovers to Rs 70 & up 44% from Low inside Two Months

L & T Finance Holdings recovers to Rs 70 & up 44% from Low of Rs 48.30 on February 12,2016….that’s inside Two Months…it also trades in the F & O Segment

It opened 2016 at Rs 65  when Sensex levels were at 27500 +  and closed January 2016 at Rs 58 only to drop sharply below Rs 50 to Rs 48.30 on February 12,2016 and in fact closed February 2016 at Rs 52

Today it’s up to Rs 70 on a day when RBI has dropped Repo Rate to 6.50% ~ cut of 0.25% as expected by the markets & therefore priced in earlier.The Sensex post Noon  & announcement of repo rate cut has corrected over 330 points and is below 25100 currently  but L & T Finance is up 7.4% to Rs 70 !

Have always had a soft corner for L & T Group even when they’re in soft times  & in midst of controversies like just  two years ago in mid  March 2014 when it was introduced for trading in the F & O Segment in mid month just when parent Larsen & Toubro offered a stake through OFS on the Stock Exchange Window at a Floor Price of just Rs 70 on SEBI allowing this route even though they had sold shares in the prior six months.The F & O trading pattern a day or two before showed insiders ( who must have known lower floor price before hand) short selling at Rs 85 levels  & SEBI investigation revealed parties who had never before ever done F & O having indulged in it to make several Crores of Profit

Had been disappointed with L & T Finance Holding’s inability to leverage strongly on the parent L & T Brand in their Finance Foray….This Listed Company should have been over Rs 200 by now inside 5 years  after it’s IPO at Rs 52 in mid 2011….Had recommended it strongly in 2011 & saw it’s price move smartly to Rs 95+ Highs in 2012 & 2013 only to slide back….then had recommended exit as was not enamored with top management who always wore a bored & disinterested look at analyst meets

Then came in Bain Capital in September 2015 to stir the shareholding in the company by picking a preferential post issue  stake of 5.27% through an aggregate of 95.66 m shares & warrants ( to be exercised from six to eighteen months from allotment)  @ Rs 74.This would infuse over Rs 700 crs into the Company.It  also created another Rs 600 cr exposure through a 4.95 % post issue stake by buying 85.2 m shares from parent Larsen & Toubro in market deals at @ Rs 70…the Sensex at the time was @ 26200 levels with the Share Price of L & T Finance Holdings in the Rs 67 to Rs 70 range read more

Sensex disappoints in FY 16 as many of the 30 constituents lose big value

FY 16 has been a mixed year for Stocks with Markets on a downward drift  with  Sensex closing 9.4% lower  at 25341

Sensex disappoints in FY 16 as many of the 30 constituents lose big value 

Interesting & Heartening to it’s Shareholders ,Reliance has been the biggest constituent gainer at @ 27% while at the other end BHEL has lost half it’s value at 51% !  ~ another 11 companies have lost between @ 19% to 30 % values

Domestic Concerns revolved around  second consecutive failure of monsoon in 2015 &  slow pace of Reforms  & Corporate Earnings Lethargy with growth in single digits despite boasts of GDP Growth of over 7% and lower Inflation and Oil Price falling 40%

Global Concerns revolved around  China’s Growth slowing down considerably & It’s Stock Markets losing a lot of it’s froth in panic falls, continuing recession in Europe & expectations of the US Fed raising rate

Consequently FPI Inflows which were a record US $ 17 b in FY 2015, reversed to outflows of US 2.1 b in FY 16.These outflows would have been higher if last month March 2016  had not seen a reversal back to FPI Inflows of US $ 3.2 b 

In the first three months of this Calendar Year 2016 , January &  February 2016 witnessed significant outflows of US 1.67 b & US $0.8 b respectively that dropped Sensex to 23000 levels.On the back of many countries like Japan,Switzerland and Sweden embarking on Negative Interest Rate Policy,the  US Fed send out dovish signals and has delayed Rate hikes.This saw FPI Equity Inflows smartly cross US $ 3 b in  March 2016  getting them back into the Green in 2016 & revive the Sensex back up @ 10% to 25500 levels or else FY 16 would have seen a Sensex drop of nearly 5000 points & @ 18%,double than what it actually did in the end

Here are some FY 16 Trend observations :

  • Sensex closed down 9.4%.It was down @ 18 % just around a month ago but smartly pulled back on record US $ 3b FPI Inflows in March 2016
  • Of the 30 Sensex Constituents,amusingly after a seven year itch perhaps 🙂  Reliance is the biggest gainer  at 27% taking it’s Market Cap to US $ 49 b,next only to top TCS  which  despite a flat year retains Top Market Cap of US $ 73b !
  • Six Scrips,including all weather favourite TCS (Market Cap US $ 73b) have remained flat
  • Of the Four Banks,only HDFC Bank stays in the Green just about,the rest have lost lot of value from one third to one fifth
  • India Growth Proxy Larsen & Toubro has lost 26% Value
  • Four Pharma Majors have also dropped significantly from 13% to 28%
  •  Three IT Bellweathers saw Wipro down 10%,Infy up 10% and TCS  in between remaining flat
  • Of the Five Auto Majors,the two 2-wheelers are both in the green,two ,Maruti & M & M are flat while Tata Motors has lost 30% value
  •  Three eternal FMCG Favorites,ITC,Asian Paints & HUL have held up
  •    After a Steel Sector Battering past few years,Tata Steel is now catching it’s breath
  • All  Five  Non Bank PSUs continue to flounder ~ BHEL has lost half it’s Value follwed by ONGC down 30% ,Coal India down 19%,NTPC down 13% & Gail down 8%
  • Housing Finance Leader HDFC too has taken a beating of @ 16%
  • Controversial Adani Group’s Adani Ports is down 20%
  • Telecom Leader Bharti Airtel is down 11% despite getting a 4G breather as Reliance’s Jio ,expected to be a sector disruptive force,launch continues to be delayed but should be fully operative by FY 17 year end
  • read more

    Anil D Ambani Reliance Group~Market Cap & Debt ~ Defence to its Defence

    Have a Look at the Market Cap (today closing March 28,2016)& Consolidated Debt (September 30,2015) of these Five Listed Companies of Anil D Ambani

    Name Of The Company

    Market Cap (Rs.Crs)

    Total Debt (Rs.Crs)

    Reliance Power

    13015

    31428

    Reliance Infrastructure

    13747

    24645

    Reliance Capital

    9117

    22730

    Reliance Communication

    12457

    35254

    Reliance Defence

    5098

    6884

    Total

    53434

    120941

    Rs 120941 crs was the Aggregate Consolidated Long & Short Term Debt of Anil Ambani’s Reliance Five Listed Group Companies as on September 30,2015 while today’s Market Cap is Rs 53434 crs.Aggregate it and you’ll get Enterprise Value without adjusting for any Cash    

    Reliance Defence (erstwhile Pipavav) has come into his fold now and a turnaround is expected after CDR was approved ~ RCom is planning to reduce Debt substantially by selling Assets like it’s Tower Business.It also is being supported by Big Brother Mukesh Ambani’s tie ups for Jio Roll outs etc ~ RPower has just declared and paid it’s maiden interim dividend of 10% in December 2015 but continues to struggle to commission Samalkot Power Plant on non availability of Gas ~ Rinfra & RCap are the relatively stabler companies

    As long as his companies keeps servicing debt the Banks who have lend will not have to classify the Loans as NPAs….In fact with Anil Ambani planning huge Defence Sector Investments and Growth in his other Companies the aggregate Debt may increase even after Asset Sell offs

    Problem is that Anil Ambani has not been enjoying good Investor Credibility after wealth destruction in RCom & RPower & suspected involvement of top management in the 2G Telecom Scam.Investigation continues

    The Group’s Market Cap is Rs 53434 crs ~ Compare this with Big Brother Mukesh Ambani’s Reliance Industries that closed today with a Market Cap of Rs 330654 crs

    Now his big Focus is on Defence with India having embarked on a Huge Defence  ‘Make in India’ Endeavour opening out FDI  Cap to 49% in the Sector

    None of Anil Ambani’s Companies have approached it’s shareholders or the Public for funds after the Reliance Power IPO at Rs 450  in January 2008

    None have as None could !

    The Reliance Power IPO was a huge obscene premium assault on the Public from which the Public has yet to recover (Quotes at Rs 47 today after a Bonus Issue in 2008 itself  from the Premium collected that adjusted the Price to @ Rs 270!) .The Issue was hyped by the Investment Banker Wolves to create a huge oversubscription.

    Of course in January 2011 Anil Ambani had entered into a Consent Plea with SEBI without admission of guilt & was investigated for misuse of Overseas Borrowed Funds and was personally fined and banned access to Capital Markets for a year and Reliance Infra for two years    read more

    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 !

    Wow! A Full House NSE Training Fundamental Workshop !

    Wow! A Full House NSE Training Fundamental Workshop yesterday !

    Seems to get bigger & better every time !

    Did the first one on August 8,2015 and had blogged on it  as linked below

    Interesting Interaction at the NSE Equity Fundamental Training Workshop

    Sunday, August 16th, 2015

    Did this one too on “Interpretation of Financial Statements for Stock Analysis” under NSE’s Rapid Series at their NSE BKC Complex

    @ 30 Participants,both genders aged 22 to 58 from leading Broking Firms,Corporates,Banks and even Individuals who had come on dot and stayed till 8 pm ! expecting to learn how to read financial statements and  market dynamics to assess risks and opportunities in Indian Equities

    Common Question right from Manish Shah,who introduced himself  to me in the lift going up to the Class ” How are the Markets Looking “? ~ “Where will the Sensex & Nifty head in the short term”?

    Had taken a Bull along ! really !…a smaller version of the Wall Street one….told the class I love four animals…Elephants (Lord Ganesha),Lions (My Zodiac Sign),Tortoise(Good Luck & of course Bulls (I’m always one!)….and you’ll always find them on my office desk !…in fact four bulls of various sizes !…and clients know my market view on simply seeing how the bulls are placed !…if facing them straight up  (↑)  as they sit across me,I’m very bullish…if slanted ( ⁄ )towards them,I’m bullish…slant inclination reveals how much !….if a horizontal view (↔ ) then indicates market will remain flat to rangebound and if the bulls face me vertically (↓ ) I’m bearish !….and slant facing me shows intensity of being bearish !

    That got a few knowing laughs from the participants and set off the mood for the Workshop with humour being interspersed right through

    Interacted on the Sensex Dynamics right from base year 1978 and in the last 20 years from November 1,1995 to October 30,2015 when despite nearly half of the @ 4850 trading days saw the Sensex close negatively the Sensex ran up over 650% !…but is that enough!…..the Opportunities & Threats that were clearly visible during the years right from 1991 when Modern Reforms set in to 2001 when Markets had bottomed  out on the ICE Age Melting to the Sharp drop in Interest rates from 14% to 7% in and around 2004 to post Lehman 2008 levels of 8000 in October 2008 and March 2009….showed them from current Sensex of 26657 how to assess fundamentally where we could be heading and the risks associated….discussed Passive Index Investing vs Active Investing and therefore the need for Fundamental Analysis and therefore the need to Interpret Financials & therefore the need to assess Value vs Price  & therefore this Workshop  ! 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