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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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Jet Airways

Jet Airways at Rs 430…..IPO Shareholders at Rs 1100 never took off at all !…..From 2005 it’s been landing !

Yesterday there was a change of CEO guard at Jet Airways…The Austrian,Wolfgang Prock Schauer makes way for Nikos Kardassis after a tenure of six years…Schauer was quite emotional at the press meet yesterday…how he loved India and had steered Jet from loss to profit and from 40 planes to 110 planes and the IPO in 2005…He spoke lovingly to the media,appreciating the job that they do in communicating to investors….but he should spare a thought about the Investors themselves !  

The stark fact remains how an outlandish IPO Pricing can ruin the company and the shareholders…they issued the share in 2005 at Rs 1100….It got listed on March 14,2005 and touched a high of Rs 1339 that day and a few weeks later an all time high of Rs 1382……It never really took off and the share price has been landing ever since !….Promoter Naresh Goyal hold 80% of the Equity of Rs 86 crs,nearly all of it through Tail Winds Ltd…This itself had raised a stink as to who really owns Tail Winds…whose money really was being routed here !…Of course Promoters never bring in Monies at the IPO Pricing like we do !…if they do,it’s only a token shareholding…whether it be the Tantis of Suzlon or even Anil Ambani of Reliance Power or Goyal of Jet Airways….their shareholding is mostly at par and not at premium…so our risk is significantly more than theirs.

Jet Airway’s Share Price opened 2006 below Rs 1000 and 2007 below Rs 650 !…In the euphoric end 2007 and early 2008,it climbed back past Rs 1000 and then simply crashed to Rs 130 end October 2008 and even lower at Rs 115 in the first half of March this year ! It recovered to the Rs 250-Rs 300 range and has only just spurted past Rs 400

The Aviation Sector is reeling worldwide and India is no exception…Recession,Intense Competition,High Operating Costs,High Aviation Fuel Price and Mindless Expansion are some of the reasons for this state of affairs….Jet has declared a Q1 FY 10 loss of Rs 225 crs…the tough conditions are expected to continue 

Rs 1100 at a 10% CAGR in a Bank’s Fixed Deposit would have fetched you close to Rs 1800 in Five years…Instead with the share price of Jet at Rs 430 today,IPO shareholders still holding out in hope would have seen an erosion of 60%…better than the 90% erosion when price had crashed to Rs 115 in March this year ! 

This should be a great lesson to genuine companies who have a sustainable business model….if you obscenely price your IPO,you will end up screwing both,your shareholders and yourself !….If you want to command long term loyalty be fair in your pricing…leave something on the table for the shareholders to swear by you and not at you ! read more

Some Saturday Morning Shots…..of Strikes and Statues…..Austerity Measures and IPOs

Amusing or not so…you decide…….some Saturday morning shots….

  • Jet Airways Pilots Strike enters the fifth day…and I see  a Business Standard ad (Page 16) of Jet2Kerala with a tag line ‘Your dream holiday can now touch down’…Problem is you yet cannot take off !…Jet Airways has teamed up with Kerala Tourism to help you land the best holiday deals to God’s Own Country 
  • Listed Mumbai based Real Estate and Housing company HDIL raided  by over 100 Income Tax Officers and Rs 350 crs revealed as undisclosed Income…..Ashok Chavan,Maharashtra’s CM defends the contoversial Rs 350 crs plan to errect a statue of Shivaji in Mumbai Seas…Not considering Ecological and Marine Objections,if this is passed,maybe they should get HDIL to fund it !
  • While on Statues,the Supreme Court finally directs the UP CM,Mayawati to stop errecting her own statues…it’s costing the State Exchequer Hundreds of Crs….I can think of only Saddam Hussein who had his own statues errected while alive…possibly their argument is that they cannot errect their statues after they die !…and possibly they fear no one else may !
  • On the controversy of whether Members of Parliament should continue getting the privilege of flying Business Class in these drought times where austerity must not only be symbolic,the Congress Spokesman,MP Manish Tiwari,who’s all over the Channels, proclaims he’s willing to even travel in the Cargo !…I think we should allow him !
  • While on Austerity Measures, was not amused to hear of our two Ministers of External Affairs,Krishna (Senior) and Tharoor(Junior),living in Five Star Suite Luxury for the past three months,because their Official Houses were not ready…It’s no justification even if they’re spending from their own pockets,as they state…They don’t see the point ! even if it was for free,these Elected and Nominated Leaders in Public Life send out the wrong signals in these tight times to our Citizens
  • An amusing observation on Recent IPOs in 2009…Edserve Softsys was just about subscribed but has given near 100% gains…was it’s IPO underpriced or is a good fundamental play not spotted at the IPO Pricing or is this latest price manipulated ?..Others seems to have been fully or overpriced…Contrarion Thinking would suggest you investigate Rishabdev and Raj Oil…they have fallen off a lot from IPO Price…are they now worth Investing in !?…Like I had opined earlier for NHPC…not at Rs 36,but at Rs 25 !
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    Sensex soars while the Aviation Sector continues Diving…Could open out opportunities

    August 18,2009…Private Airlines,members of FIA,have just announced that will not operate nationwide services on this Day…only for the Day…but could even be indefinitely if there is no positive response from the government

    This announcement comes on a day when the Sensex has reached the highest level in fourteen months …15670 

    The Aviation Sector is facing a survival issue in India…says Naresh Goyal of Jet Airways all of us are bleeding…private sector or the public sector”

    Vijay Mallya of Kingfisher Airlines cries “we lose money because we are taxed to death”

    Jeh Wadia of Go Airways laments that the policy and tax structure continue to create inefficiencies“We are demanding a Transperant Tax Structure…Fuel as a % of Total Cost is 45% in India while everywhere in the world it is 26 %…this is because of higher taxes of @ 27% on ATF..This Tax on ATF should be given a ‘declared goods’ status to bring the taxes down”

    The Heavy Depreciation of the Rupee in 2008/9 has also increased the cost of Operations and Maintenance of Airplanes.The Sector should reveal a Rs 10000 crs loss in 2008/9…that’s just over two billion dollars 

    The government on the other hand feels that the woes of the Aviation Sector are largely due to the mindless expansion of the Airlines 

    Methinks this could open out some opportunities for Investment in selective Aviation Sector scrips if they continue to dive and are avaliable at throwaway prices…on the assumption that a solution will have to be found to resolve critical issues that are threatening this sector and that this sector will not be allowed to crash land

    Keeping an Eye on the Skies to grab opportunities if the Price is right…Spicejet,Jet Airways,Kingfisher Airlines…..   

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