L&T Management's role in Satyam Computers
Tuesday, January 27, 2009
L&T recently reported having hiked its stake in Satyam Computers by 8%, taking its total stake to 12.3% and investment to US$137M. AM Naik, Chairman and YM Deosthalee, CFO addressed analysts this morning.
The original 4% stake acquired in Satyam was with a strategic viewpoint; L&T apologised for the earlier impression that it was a portfolio investment. The initial purchases were made without the knowledge of fraud at Satyam. The intention of hiking the stake to 12.34% included - strengthening its position as a strategic investor, where L&T would have a clear say in Satyam's decisions, and bringing down the average cost of acquisition to Rs80.
L&T asserted that Services, including technology and financial, are core areas and strengthening these is a priority. L&T Infotech could see value erosion if it remains a mid-tier IT company with US$400M revenue. In the long-run, management wants to see services contribute 15% of the total business.
L&T Mgt appeared very positive on the role of the current Board as well as role of the govt in saving Satyam. Mgt claimed that it is receiving active encouragement and support from government - including the PM and Home Minister, on its role in Satyam.
Management has asserted that liabilities if any would not spillover to L&T and its worst case loss would be restricted to the value of investment in Satyam. L&T mgt felt that ongoing claims (class-action suits, U-paid claims) are not very strong. Finally, Mgt said they were 'evaluating' the future course, including hiking the stake to 15% and making an open offer in due course.
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Published by Webmaster @ 11:49 AM IST.
Jai Corp - Price Rigging Scam Anniversary
Sunday, January 25, 2009
We are certain that there is hardly anybody who hasn't heard about the name Mr. Anand Jain of Jai Corp Ltd counted along with Reliance Industry chief, Mr. Mukesh Ambani. On the anniversary of destroying 96% of shareholders value within 12 months, Jai Corp joins Dalal Street's Hall of Shame :-)Today we would like to present to our readers about Mr. Anand Jain's company Jai Corp Ltd and its stock performance in the past 12 months:-) If you look at the chart below, you will see that on 25th Jan 08, Jai Corp Stock was traded at Rs 1,358 and the same as on Jan-27th, 2009 is available at Rs 58 :-)
We are also attaching the Weekly Closing prices of Jai Corp Ltd here. Price was rigged in the stock from mere Rs 5.25 [yes just five rupees, 25 paise] in Jan-06 to an all time High of Rs 1449.90 in the week of Jan-11-08.
Jai Corp and its operators floated rumors, made announcement after announcement that they will be big beneficiary of Reliance SEZ [Which never took off]. We first wrote about Jai Corp in October-07, when the promoters offloaded 2.19 crore shares at Rs 1,078 a share.
On Nov-19th-07, we exposed how the management was trying to cheat investors by differential pricing of preferential allotment of shares - Investors at Rs 1,034 and promoters at Rs 99. A month earlier they had sold at Rs 1,078.
The moral of the story is - Scams, be it Banking Securities [Harshad Mehta], IT Stocks [Ketan Parekh] IPO, Satyam, Jai Corp are all parts of this system and they will continue to happen as successive Indian Government have lacked the will to clean up. Institutional Investors make up for the loss else where by bagging investment banking contract or arranging loans etc
As a small Investor, your Goal is to figure out the next sunrise industry and invest in it early. Recall the 20-60-20 formula ? The First 20 persons are the daredevil visionaries who invest in the opportunity. Then the lesser mortals who constitute the 60% enter the scene and as the last 20 begin to enter [Your Panwala, Bai, Watchman, etc ] the first 20 investors exit and you know what happens later :-) [Recall Reliance Power IPO]
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Published by Webmaster @ 3:45 PM IST.
No V-shaped recovery for Global Economy - MS
Thursday, January 15, 2009
Morgan Stanley's Asia's chief Stephen Roch has said that there will be no V-shaped recovery for a world economy that has just entered its most severe recession. The worst of the global downturn may run its course by late 2009. After a 5% global growth over the past 5 years, it is likely to average 3% over the next 3 years.
The US consumers have long been ripe for the fall. Vigorous consumption gains consistently outstripping a subpar pace of income generation over the past 14 years, saving-short, overly-indebted households drew freely on the combination of property and credit bubbles to take consumer spending up to a record 72% of real GDP in late 2006 and early 2007. But now, with those twin bubbles having burst, US consumption has fallen sharply at more than a 3% annual rate in the second half of 2008.
In short, prospects for a multi-year compression in US consumer demand pose a major problem for an unbalanced global economy. Americans consumed $9.7 trillion in 2007 more than thrice the combined consumption of only about $3 trillion coming from 40% of the world's population that lives in China and India.
Finally, the asymmetries of global rebalancing could well be decisive in shaping the contour of any recovery in the global economy.
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Published by Webmaster @ 10:28 AM IST.
Who Financed Ambani's Stake Hike in Reliance ?
Wednesday, January 14, 2009
In a announcement made to the BSE, Reliance Industries Ltd (RIL) has informed that the promoters of the company have hiked their stake from 44.80% to over 49% at the end of the third quarter.Disclosing the information, RIL stated that the promoters had purchased 12 crore shares during the period between September and December last year. As of now, the promoters hold 49.03% stake in the company. The shareholding as of December 31,2008 is, FII 24.55%, others 22.70% (total non promoters 47.2%) while rest 3.72% is held by custodian and against which depository receipts have been issued.
Mukesh Ambani's stake hike Financing ?
Even if you consider mere Rs 1,250 / share as weighted average at which Mukesh Ambani has bought 12 crore shares of RIL, he requires a whopping 15,000 crore [$3 bn]. I am not quite sure on how Mr. Mukesh Ambani managed to finance this deal when he is also building a billion dollar home and investing in his personal capacity in other ventures without known source of income.
Here is a report on Ambani's Investment and Filings which is currently under a private eye :-). Do let us know if you have any idea on How Mukesh Ambani managed this billion dollar purchase. Is there any Money Laundering, Havala, etc involved ?
Labels: Reliance--Promoters-Hike-Stake
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Published by Webmaster @ 3:12 PM IST.
Reliance + ADAG + DLF + Unitech - Worst on Corporate Governance
Monday, January 12, 2009
Live Mint, India's leading financial daily conducted a survey amongst Equity Analysts and found that Reliance ADAG [Anil Ambani] group Topped the List for Poor Corporate Governance, Ethics and Board Constitution. DLF and Unitech were the second most doubtful companies. Reliance Industries led by Mukesh Ambani scored far better than Anil's companies.
How to interpret the above Results ?12 indicates, 12 of the 20 analysts said they had doubts about Corporate Governance. Analysts were allowed to vote on multiple companies.
You may want to recall, we had an exclusive story on the performance of Reliance ADAG Stocks - that came crashing down like a house of cards. While covering the Satyam Fiasco we had already said what Live Mint survey is saying now,
So who is next in line ? Anil Ambani's Reliance Communications is already probed for Evasions. Indian Real Estate Companies are also known for their Inflated Land Bank Values...India Real Estate, pointed out in 2006 how Real Estate sector operates where they accept Black Money for the Apartments you book. RIL -Mukesh Ambani is also mistrusted but not to the extent like how Anil Ambani companies are. You can read the entire story here.
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Published by Webmaster @ 2:27 AM IST.
JP Morgan Upgrades India after a Year
Thursday, January 08, 2009
JP Morgan equity research upgraded India to neutral from underweight. They were underweight on 18 January 2008 due to expensive valuations, high earnings growth expectations, rising inflation, high borrowing costs, weak currency and widening twin deficits. Many of these factors have now reversed. Monetary and fiscal policies have turned significantly pro-growth.
Over the past few months, RBI and the Government has taken measures to control the inflation [though Food Prices are still high] and ensure credit flow to the productive sectors rather than fuel a bubble in Real Estate and restructure debt where needed.
The government lifted the interest rate cap on external commercial borrowings and permitted infrastructure dedicated NBFCs to use this route. Also, a SPV will help refinance high-quality but illiquid assets held by NBFC.
India's 12-month forward P/E premium relative to emerging markets has decreased from 77% in January 2008 to 16% currently. Consensus earnings growth expectations for 2008 are at 1.5% and for 2009 are 9.8%. The current expectations for 2009 EPS are still too high, but have been revised down 20% in the past 12 months. The cost of money for corporates has declined. Since their peak in July 2008, 10-year government bond yields have fallen from 9.4% to 5.1%.
Satyam Computers Scam is a company-specific problem. India has a vibrant press and developed regulatory and legal structure. It is the efficient operation of this system, particularly relative to other emerging markets, that long term investors should focus on.
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Published by Webmaster @ 7:49 PM IST.
Expectations for Q3 - Merrill
Tuesday, January 06, 2009
Indian Market is bracing for a poor set of results from corporate India for the quarter ended December 2008 - how bad ? Merrill bottom-up forecasts point to a slight drop in EBIDTA for the Sensex companies - we have not seen this in the past 10 years. Or there is likely a 2% increase in net profit largely due to - bond gains for banks and lower taxes, EPS would drop 1%. Nine out of the 30 Sensex companies are likely to report a decline in profits. Sensex to Kiss 7,000 in next 6 Months:
The poor quarterly earnings are well flagged but expectations of a quick earnings recovery following the stimuli package by the government may prove unfounded. Merrill think earnings will continue to disappoint for most of CY09 and are expecting a slower growth rate of 5-10% in Sensex EPS in FY10. Constant earnings downgrades, political uncertainties and no more government stimulus measures are likely to bring the market to a lower level (expect an index of 7,000) over the next 6 months.
Margins are expected to remain under pressure dropping by an estimated 90bp. Autos, cement and pharma companies are likely to report a drop in profits for the December quarter, led by falling sales and margin pressure Potential out performers are - Bharti Airtel, State Bank, Indian Bank and Educomp while Wipro, Maruti, M&M, Unitech, Tata Steel are likely to be under performers.
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Published by Webmaster @ 2:36 PM IST.
Macro Measures - Cautious on Banks - GS
Monday, January 05, 2009
The monetary policy will likely lead to better near-term prospects for banks. Market consensus expectation of earnings would be propped up by potential revaluation gains and earn trading income from bonds. However, expect the headwinds for the medium-term to stay. The aggregate SCB loan growth to ease significantly from 26% in 2008E to 14% in 2009E on the back of rapid deterioration in economic activity. Slower demand for loans and lending rate cuts would likely lead to slower operating revenue growth. A Word of Caution:
Deterioration in real economy is likely to lead to higher NPA formation. We expect gross NPA for our coverage group to rise from 2.5% in 2008E to 4.5%-5% by 2010E. Rapid deterioration in economic activity could present downside risk to expectation.
Goldman top picks are HDFC Bank and Axis Bank due to continued favorable growth prospects and strong profitability. It expects significant downside to earnings growth in Kotak Mahindra Bank, Punjab National Bank and Bank of Baroda.
Goldman's tone is more in-line with DSP Merrill Lynch as covered earlier.
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Published by Webmaster @ 11:47 AM IST.
Marginal Change in Vehicle Finance Rates
Saturday, January 03, 2009
It is always nice to read CRR, SLR, Repo Rate etc going down. However, the ground realities are lot different and to know what they are, we conducted a channel check and found that there has been no impact / marginal of the CRR / Repo cuts for the commercial vehicles segment. The interest rates across most financiers are in the range of 15%-18%, with large truck operators getting at the lower end of the range while small operators and first time buyers are at the higher end of the range.Finance rates for LCV's with load capacity below 2 tonnes are in the 16%-20% range. We expect LCV and Cargo 3W segment to continue to contract rapidly given the high financing rates and slowing economic activity.
There is a ~10% delinquency level (1 month or more behind on repayment) for their specific CV portfolios. Some financiers are now also looking at proactively working with customers to reschedule loans and extend tenors.
Overall, financiers remain cautious and appear to be lending in a more selective fashion. No doubt Ashok Leyland is cutting the working hours of its employees.
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Published by Webmaster @ 7:30 PM IST.
BoP risks overdone + Deficit Ok - Merrill
Friday, January 02, 2009
India is, after all, perhaps the only one among the usual suspects to survive without Fed/IMF support. Merrill estimates the FY09 current account deficit at a doable 2.2% of GDP. INR to consolidate around current levels. The INR should also benefit later in the year from stronger risk appetite. The upside, however, is likely bound by a growing policy preference for a weak INR to support exports; combat imported deflation; and recoup ~US$30bn sold in the Indian Equities.
Falling oil prices limit Current Account Deficit (CAD) - the FY09 CAD at a doable US$27.3bn (2.2% of GDP).
Capital account deficit: FDI funding FII outflows to slow. Expect the capital account to slip into deficit from 1HFY09's US$19.8bn, led by FII outflows and limited ECB inflows. The bulk of this, in our view, is already in the INR. Expect 2HFY09 FDI to slow with private equity contracting on a worsening growth outlook.
A significant part of Short-term external debt has already been repaid. It is the balance ~US$25bn of corporate trade credit that remains a potential trouble spot to be monitored closely.
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Published by Webmaster @ 2:19 AM IST.
Ambani's Reliance Lost Billions in Hedging ?
Thursday, January 01, 2009
If 2008 was a year of disaster for World Economy, 2009 doesn't seem to be much better either for Mukesh Ambani. It is widely reported in the press that he has lost close to $5 bn in Oil Hedging. However, our sources said that it is likely to be less than $1 bn but still a significant amount to be paid by the shareholders of Reliance Industries Ltd.Tehelka.com report said,
There have also been other setbacks. Reports emanating from Dubai indicate that Mukesh Ambani has also incurred major losses in crude oil hedging, perhaps to the tune of $5 to 7 billion. TWO TOP RIL officials, Harish Shah and Alok Aggarwal, have already put in their papers. In Delhi, Shankar Adawal, once a top RIL troubleshooter, has been totally sidelined and is flustered with calls from estranged employees.Anand Jain, a close confidant of Mukesh has been named in the report over the oil hedging losses.
Mukesh Ambani is far smarter than M. Raju of Satyam to cover the issue even if RIL has lost your money :-)
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Published by Webmaster @ 1:15 AM IST.
