tag:blogger.com,1999:blog-52362774555464343222024-03-08T16:12:31.074-08:00EazeetradeHelping you take informed decisionsPrashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.comBlogger26125tag:blogger.com,1999:blog-5236277455546434322.post-100341343744969262011-03-12T14:26:00.000-08:002011-03-12T14:29:32.121-08:00Define your Investment Strategy<div dir="ltr" style="text-align: left;" trbidi="on"><div style="color: purple; text-align: justify;">For years, if not decades, we've lived under complacent financial allocations. Most of us consider debt to be risk-free. Till a few years ago, most of us considered equities to be risk-free over the long-run. We systematically look at price targets on our investments without considering the downside risk we're taking on. The number of equities investors, who get paranoid when their portfolios are down 20% tells you everything you need to know about the lack of appreciation of risk that permeates societies across the world today. Mass-marketing of financial securities has led to a widespread under-appreciation of risk. These false convictions were both the foundations of and the consequence of one of the most pronounced financial bubbles in human history. </div><div style="color: purple; text-align: justify;"><br />
If there's one thing I'd like you to take from this blog, it's this: think through the impact of your financial decisions. Appreciate the risks involved. Pursue returns consistent with your risk-taking capacity. Also understand that the monetary system we live in penalizes idle money. Money loses value over time. A dollar today will be worth less in 2015. So, most of you probably don't want to leave your money idle. However, none of you want to be invested in a stock or commodity based purely on hope. There needs to be a compelling reason that draws your funds into a long-term investment.<br />
</div><div style="color: purple; text-align: justify;"></div><div style="color: purple; text-align: justify;">There needs to be a degree of conviction to a short-term trade. People have got rich based on good fortune in the past, and they will continue to do so - but, a competitive market punishes gamblers and rewards investors who enjoy a genuine edge in the market place. There is time tested wisdom to George Soros' assessment that "Once we realize that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes". </div><div style="color: purple; text-align: justify;"></div><div style="color: purple; text-align: justify;"><br />
Booking your losses is often an important ingredient in seeking long-term returns. Liberate yourself from any emotional ties to your investment decisions. Investing, trading and making money in markets is about buying low and selling high. Compelling ideas are worth more than mediocre ones - but all investments have a price beyond which they are irrational. Don't get caught up in irrational exuberance.</div><div style="color: purple; text-align: justify;"><br />
In the days, weeks and months that follow - I will often draw upon a compelling idea. I might tell you how much of my allocation I consider it worthy of. However, please always make an independent financial decision if you ever choose to follow a recommendation. Risk-assessment is something I will constantly re-visit on this blog. But, don't ever lose sight of the downside risk of any financial security. There are no "sure things" in financial markets - merely high probability events. Good bets and bad bets.</div><div style="color: purple;"><br />
</div><div style="color: purple;">Personally, I don't build hard and fast allocations. I've had zero percent in my equity portfolio on occasion. I've had exclusively long positions. Exclusively short positions. I've had a mix. I've moved significant portions of my portfolio to gold, and I've held no commodity at all. However, this is a consequence of dedicating myself to markets. For most of you, you will need to make allocations. While doing so, you need to consider your time horizon, your appetite for risk and the entry point of your investments. Always stress test your allocations. Consider a scenario where the risk you take on leads to significant downsides. Ponder what you would do in that situation.</div><div style="color: purple;"><br />
</div><div style="color: purple;">Don't expose yourself to risk levels that you can't handle emotionally. Markets tend to oscillate between greed and fear. If you learn to disassociate yourself from both emotions - you will increase your chances of making financially sound, rational decisions.</div><div style="color: purple;"><br />
</div><div style="color: purple;">Happy Investing </div></div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com4tag:blogger.com,1999:blog-5236277455546434322.post-38989521214139361812011-03-12T14:20:00.000-08:002011-03-12T14:37:27.600-08:00Welcome Back<div dir="ltr" style="text-align: left;" trbidi="on"><div style="color: blue; text-align: justify;">Welcome</div><div style="color: blue; text-align: justify;"><br />
Welcome to Eazeetrade. The goal behind this blog is to document my thoughts on global equities, macro-economic trends, economic theory and asset allocation. <br />
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A bit of background about me and my point of departure. I have spent several years trading and analyzing various investment instruments. I am more inclined to trade secular trends, but the life of a investor is incomplete without trading those tactical and strategic trades: so you will find plenty of those on here.<br />
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I certainly have a set of intellectual convictions. I am a libertarian and I believe in free markets. I am intellectually obsessed with money. There's nothing quite as interesting as it. It's one half of every transaction and perhaps the most important element to modern human history. Of course, I'd like to see a more sound currency. I'd like to see greater freedom. I'd like to see good businesses thrive and bad banks fail. But, let's not get carried away with the political side of what interests me.<br />
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As a trader, I'm often long markets which I believe are structurally flawed. There is no contradiction there. Trading isn't a lesson in philosophy, it's a life-long course in analyzing risk. You never want to be on the side of a ship with too many people on it. In certain circumstances, you have to learn to be a contrarian. On other occasions, the trend is your friend.<br />
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The best way to think about trading is to divide trades into three broad categories. Secular trades, which you want to be involved in over many years. These must be backed by a big idea. A thesis. A sound rationale and inescapably sound logic. Secular trades will usually make you the most money. The life of a trader isn't one that revolves around big secular calls, however. It revolves around the second type of trade. Strategic trades. These essentially involve making a limited call on the future. A strategic trade may be to short an automobile manufacturer under conditions of rising interest rates and commodity costs. It may be to go long exporters under conditions of a weakening domestic currency. It may be to be short the market due to expectations of a negative industrial output reading. Strategic calls are challenging - but, if they're well executed, they can be deeply rewarding. Finally, as a trader, you tend to spend a lot of time figuring out tactical trades. These aren't the most intellectual exercises on the planet. These calls focus on execution. They're all about getting involved in a terribly oversold stock, and getting out at the first sign of resistance. <br />
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The above is what I consider most relevant about my approach and background. I currently focus primarily on Investment opportunities in India, Canada and USA but my methods of analysis and views are primarily global. The blog will feature plenty of thoughts on global indices, commodities and such - but, stock specific stuff will usually be restricted to India, US of A and Canada. <br />
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One of the main reason's I am now documenting my trades is because over the last few years, I was deeply pessimistic about the economy at the top and I grew quite bullish in March '09. In between all that, I have picked out key variables that defined relative out-performance. I do believe my approach to markets is founded in a deeply agnostic, dispassionate approach which might aid some of you in your understanding of markets. I'm not a classic technical trader - but i use a lot of technical analysis in the way I trade markets. At some stage, this blog may be the starting point of bigger things.<br />
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Until I decide otherwise, consider this a free to view, free to use blog on the global economy. Feel free to comment on any posts - lively debate is always enjoyable. I will also be posting details on trades I enter, before I enter them, with my target price, stop-loss level and I'll sometimes take you through a trade where I change those levels around based on various indicators. I'm a passionate trader, a genuinely inspired economist and a generally curious human being who loves markets. I look forward to sharing thoughts on a range of issues with you.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">Cheers</div></div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-48747198635190379612011-01-15T11:32:00.000-08:002011-03-12T14:36:29.783-08:00Sincere Apologise for the Absence<div dir="ltr" style="text-align: left;" trbidi="on">Certain events in my life have kept me away from what I love doing, which is exploring the capital markets. Totally Unacceptable! I will begin updating regularly and more frequently from here on. Stay tuned, an update is coming next week.<br />
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I will move from this blog to my own domain<i> ( www.investmentmusings.com )</i>.Picked a new theme. Set the front page to a single page rather than latest Posts (good or bad idea? Comments please). will Import all my content and your comments from my blog ASAP.Please leave me your comments if any on how to improve and be user friendly.<br />
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Hope all of you enjoyed reading my previous posts, whil my previous posts covered investments ideas I will share with the readers some ideas obviously supported by a cogent reasoning<br />
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I would be pleased if viewers share their ideas and we can then discuss the investability of such idea.Mutually lets make money by sharing our knowledge.<br />
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Kind Regards<br />
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Prashant <br />
<b><i>www.investmentmusings.com</i></b></div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-70052040900731130392010-12-31T17:41:00.000-08:002010-12-31T17:49:50.932-08:00WISHING ALL VISITORS VERY HAPPY AND PROSPEROUS 2011<embed ="" height="350" src="http://i.123g.us/c/ejan_ny_formal_social/card/109653.swf" width="550"></embed><br />
<a href="http://www.snaphow.com/2008/12/new-year-animated-flash-greetings.html">Get the Scrap Code [?]</a>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-54145299685832324122010-10-31T20:14:00.000-07:002010-11-01T06:10:40.071-07:00Coal India Allotment Plan Out<div style="color: blue;">Dear Fellow Investors</div><div style="color: blue;"></div><div style="color: blue;"><br />
</div><div style="color: blue; text-align: justify;">Linkintime(<a href="http://www.linkintime.co.in/site/ipo.asp" rel="nofollow" target="_blank">http://www.linkintime.co.in/site/ipo.asp) </a>the Registrars to the IPO of Coal India completed the allotment of the shares today, I have been alloted 199 shares for every full application(Rs.98,000/-) I submitted, interestingly the allocation has been higher than most Pundits in the market had predicted. </div><br />
<div class="story" style="color: blue; text-align: justify;">Retail investors will get shares at Rs 232.75 apiece after a discount of 5 per cent on the issue price of Rs 245. </div><div style="color: blue;"></div><div class="story" style="color: blue; text-align: justify;"><br />
</div><div class="story" style="color: blue; text-align: justify;">Surprisingly many stock market <u><b>"Pundits"</b></u> had predicted a maximum allotment of <b>173-183</b> shares for retail investors despite having knowledge of two things — subscription of 2.31 times in the category and under-subscription in the employee quota, as is evident from the actual allotment that the Pundits got their calculations wrong <b>YET AGAIN</b>.</div><div align="left" class="story" style="color: blue;"><br />
</div><div class="story" style="color: blue; text-align: justify;">I am pleased to inform that I published a detailed analysis wherein I discussed various scenarios with a view to calculating the number of shares that will be allotted and in the process suggested an allocation of atleast 191 shares for every full application submitted, the link to my artcile is posted for your convenience<b>.</b></div><div class="story" style="color: blue; text-align: justify;"><br />
</div><b style="color: blue;">http://eazeetrade.blogspot.com/2010/10/coal-india-black-gold-allotment.html</b><br />
<div align="left" class="story" style="color: blue;"></div><div align="left" class="story" style="color: blue;"> </div><div class="story" style="color: blue; text-align: justify;">As I mentioned on my blog on the 26 October, Empowered Group of Ministers(EGOM) decided to distribute the unsubscribed portion of the shares in the employee quota proportionately among the qualified institutional bidders, high net worth individuals (HNIs) and retail investors. </div><div class="story" style="color: blue; text-align: justify;"><br />
</div><div class="story" style="color: blue; text-align: justify;">According to that formula, retail shareholders got 35 per cent of the unsubscribed shares added to their pot.</div><div class="story" style="color: blue; text-align: justify;"><br />
</div><div class="story" style="color: blue; text-align: justify;"></div><div style="color: blue;"></div><div class="story" style="color: blue; text-align: justify;">Of the 6.32-crore shares on offer for the employees, only 0.1 per cent were subscribed because of the persistent campaign by some Coal India unions who did not let employees apply for shares. </div><div align="left" class="story"><br />
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</div><div style="color: red;"><u><b>CIL Grey Market Premium:</b></u></div><br />
<div style="color: blue; text-align: justify;">Interestingly the grey market premium is still quoting between Rs.39-42 per share clearly indicating the euphoria, Please note retail investors have been allotted shares at 5% discount so RII's will be issued at Rs.232.50 per share, in net effect a retail investor's share has a total premium of atleast Rs.50 per share </div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">Now that we know that retail investors have been alloted 199 shares, in net effect each retail allottee is sitting on a profit of Rs.9,950 /-on a total investment of Rs.98,000/-that works out to 10% return on investment. <span style="color: red;"><b>Kudos to Coal India for leaving money on the table for the small investors.</b></span></div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">For those of you who pre-sold your allotment for Rs.4,800 to Rs.5,000/- unfortunately thats a notional loss of Rs.5,000/- per application.</div><br />
<div style="color: red; text-align: justify;"><u><b>Listing Strategy</b>: </u><u><b>04th November 2010</b></u></div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">In my opinion, Coal India deserves to trade at a premium to global coal peers with a price target of anywhere between Rs.300 to Rs.325 on listing. The coal-major has substantial headroom to increase prices in coming years and will provide a linear earnings trajectory and impressive returns on the capital employed.<u><b> </b></u></div><br />
<div style="color: blue; text-align: justify;">This is the first IPO in India which will have the listed company direct entry into Nifty 50 and Sensex 30 indices.</div><div style="color: blue; text-align: justify;"></div><div style="color: blue; text-align: justify;">This is the first IPO for which there will be a direct entry into the derivatives (futures & options) segment</div><br />
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<b style="color: #990000;">If in the process of booking profits if CIL lists at 275 and below, then please go out there and buy </b><b><span style="color: #990000;"><span style="color: red;">(obviously subject to your own due diligence</span></span></b><b style="color: #990000;">), this is a share which you can bequeath to your grand children.</b><br />
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</div><div style="color: blue;"><b>Happy Investing</b></div><div style="color: blue;"><br />
</div><div style="color: blue;"><b>Prashant </b></div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com2tag:blogger.com,1999:blog-5236277455546434322.post-74742688520630200332010-10-28T16:09:00.000-07:002011-01-31T15:08:28.649-08:00Curious case of SEBI's Misguided IPO Missile-Perspectives of a Retail Shareholder<div dir="ltr" style="text-align: left;" trbidi="on"><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">The Securities and Exchange Board of India (SEBI) on the 25th October 2010 decided to double the maximum application size for retail individual investors to Rs 2 lakh across all Intial public issues(IPO) by companies, without changing the retail quota. Currently, individual investors are classified as retail investors only if their investment is INR.1 lakh or less in an IPO. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">Presently in all IPOs, approximately 35 per cent is reserved for retail investors, 15 per cent for high net worth individuals(HNI) and 50 per cent for qualified institutional buyers(;QIB) it is suggested by SEBI that due to the previous low investment limit, very often the retail portion is undersubscribed. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
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<span style="font-size: small;">Addressing the media, SEBI Chairman Mr. C.B. Bhave said that “the complaint from both sides – the investors as well as the issuers of the IPO was that the quota for retail investors was insufficient thus causing under application.”</span><br />
</div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">According to a discussion paper released by SEBI, large-sized public issues easily require between 1.5-2 lakh applications to meet their retail quota. This is much higher than the 35-70,000 applications received from retail investors in recent issues claims SEBI. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">SEBI also noted that in recent public offerings, approximately 75% of applications in the retail category have come in the size of INR.80,000-Rs1 lakh. The number of applications in the non-institutional category, which is used by high net worth individuals, is usually above Rs5 lakh, but retail investors avoid investing in this segment since the reservation of shares is only 15% against 35% for retail.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">According to the regulator, the proposed increase in the investment limit is intended to keep pace with inflation and also the changing nature of market valuations. As per SEBI while inflation is close to double-digits, the market has risen over 125% since 2005. Rs1 lakh does not fetch the retail investor too many shares, given the bloat in share valuations.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">Except for a few, almost every expert on the street is supporting the proposal on the grounds that it will attract more retail participation.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">I beg to differ with the majority of the experts, for I strongly believe that all the changes proposed by SEBI would do is attract more money from some existing investors "who have the money " but who could not apply because of the previous limits, and not necessarily from new or small investors. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">This policy announcement singlehandedly creates a new investor category- sub-High Net worth Individuals(HNIs)," who would in all likely hood now eat into the share of the real retail investors. Because of the proportionate allotment system, and with the pie remaining the same, the allocation to the real small investors would go down substantially.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">However, if the sub-HNIs are now being expected to be the saviours, let it be clear that should the QIB response to an IPO not be enthusiastic, the sub-HNIs would not be there to bail out the retail portion.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">It should be understood that it is not increasing the investment cap that would bring more retail investors participation, instead it is the quality of the company, the offer price, the market sentiments and the availability of shares, among others, that will.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">SEBI has observed that in recent public offerings, approximately 75 per cent of applications in the retail category have come in the size of Rs. 80,000 to Rs.1 lakh, whereas in the HNI category, the number of applications in the size of less than Rs. 5 lakh is negligible. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">The above suggests that the retail who have the capacity and appetite to apply for securities worth above Rs.1 lakh were constrained from doing so because of the Rs. 1 lakh limit, nor do they make an application under the HNI category because the allocation there is limited to 15 per cent.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">Now, nearly 60 per cent of the applications were below Rs. 75,000 and 55 per cent were below Rs.50,000. At the upper end, only 8 per cent of the applications were in the Rs. 75,000-Rs,95.000 block while 32 per cent were at the Rs. 1 lakh level. These 32 per cent are the rich individuals and almost all of these would now move straight to Rs. 2 lakhs (and not to Rs. 1.25 lakh or Rs. 1.50 lakh).</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">If there is a concentration at the Rs.1 lakh level, it is because the few richer individuals, normally leveraged, are applying to get allotments which are difficult to get in the HNI category. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">In 2005, the cap was increased to Rs.1 lakh from Rs.50,000. This had a negative impact on allocation to the real small investors, as the richer guys started applying for Rs. 1 lakh and eat into this pie.<b> </b>The assumption that the existing investors have a larger appetite and are not able to fill it is, therefore, misguided.<b><i> In the proposed move, it is also the IPO financing firms who will benefit the most.</i></b></span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">Majority of the retail investors struggle to arrange the Rs. 1 lakh to put in an application, with SEBI having increased the limits to Rs.2lakhs, it will only benefit applicants with huge cash, the small real retail investor will suffer, now even the retail category will most likely be played by the richie richs of the country, the problem will increase even more when good issues are bunched together, the rule if implemented would work against the interest of the real small investor.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">SEBI's move would make it harder for small investors to obtain shares through IPOs. Investors who subscribed to only the minimum number of equity shares in an IPO will now get fewer shares whenever there is an over-subscription. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">For retail investor to have a better chance of allotment, the percentage allocated to retail category should have been raised. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">As stated above raising the capital limit works well for retail investors with lots of money. Since with the same percentage of IPO shares, bigger lots will get more shares and small investors who cannot put in full application will lose out on allotment, this will crowd out small investors.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">The decision is likely to deprive shares to smaller retail investors bidding in IPOs of companies with mass appeal and good track records. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">Policy, in any case, should not favour the HNIs at the expense of the retail, especially at this time when we are talking of increasing the retail investor base and of financial inclusion. If HNIs, in fact, need to be encouraged, let 5 to 10 per cent be taken out of the QIB quota and be given to them.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">Good companies with right price will always see phenomenal response from retail and Coal India's IPO is a case in point. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">Why should anyone be bothered if the retail portion goes undersubscribed in bad issues; it should actually make everyone happy.</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">In particular why on earth should I be bothered, I will always have the money to make a full application be it Rs.2 lakhs or even Rs.5lakhs if SEBI decides to increase the limit further. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">It is my belief that the policy was wrongly based around the concern that large IPOs might not elicit sufficient retail response, if it was SEBI’s intention to increase small shareholders participation in the IPO’s then the percentage allocated to retail category should have been raised. </span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;">Kind Regards</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><b>PRASHANT</b></span></div><div style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div class="MsoNormal" style="color: blue; font-family: Arial,Helvetica,sans-serif; line-height: 150%; text-align: justify;"><span style="font-size: small;"><br />
</span></div></div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com1tag:blogger.com,1999:blog-5236277455546434322.post-444139332897888762010-10-26T18:19:00.000-07:002010-10-31T14:48:59.928-07:00Coal India- Black Gold : Allotment<div style="color: blue; text-align: justify;">Dear All </div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">The mega IPO of Coal India has been has an astounding success and Empowered Group of ministers(EGOM) priced the issue at the upper end of the price band at Rs 245 per share(Retail investors will get 5% discount on the above price). The government will rake in an unprecedented Rs 15,200 crore from the issue</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">The icing on the cake is that 90% of the unsubscribed employee quota will be apportioned between Qualified Institutional Buyer (QIB), retail and high net worth individual (HNI) in<b> 50:35:15 ratio</b>, in net effect it will aproximately add 2 crore shares to the retail portion.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">Coal India IPO where the total IPO size was $3 billion and the retail bucket itself getting 2.5 times subscribed with close to $3 billion demand according to me is fantastic.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">The company is expected to list on stock exchanges on November 4, a day before Diwali. The IPO, which closed on October 21, was subscribed 15.17 times, and mopped up Rs 2.35 lakh crore($54 Billion) against an issue size of Rs. 15,200 crores($3.2 Billion).<br />
<br />
When it lists on the stock exchange it should open at a fairly good premium, CIL deserves to trade at a premium to global coal peers, given much lower volatility in earnings and a large headroom to raise prices in a supply-deficit environment.</div><div class="MsoNormal"><br />
</div><span class="verdana12black1a height18a"> </span><br />
<table border="0" cellpadding="0" cellspacing="0" height="100%" style="width: 592px;"><tbody>
<tr><td valign="top"><div id="ipo_catgry"><div style="color: red;"><u><b><span class="header2">COAL INDIA LIMITED</span> SUBSCRIPTION STATS:</b></u></div><br />
<table bgcolor="#969696" border="0" cellpadding="5" cellspacing="1"><tbody>
<tr> <td class="tablehead">Sr.No.</td> <td class="tablehead">Category</td> <td class="tablehead">No.of shares offered/reserved</td> <td class="tablehead">No. of shares bid for</td> <td class="tablehead">No. of times of total meant for the category</td> </tr>
<tr> <td class="t2">1</td> <td class="t0">Qualified Institutional Buyers (QIBs) </td> <td class="t1">284236398</td> <td class="t1">7019464125</td> <td class="t1">24.70</td> </tr>
<tr> <td class="t2">1(a)</td> <td class="t0">Foreign Institutional Investors (FIIs)</td> <td class="t1"><br />
</td> <td class="t1">4933872050</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">1(b)</td> <td class="t0">Domestic Financial Institutions(Banks/ Financial Institutions(FIs)/ Insurance Companies)</td> <td class="t1"><br />
</td> <td class="t1">1807527975</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">1(c)</td> <td class="t0">Mutual Funds</td> <td class="t1"><br />
</td> <td class="t1">266896250</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">1(d)</td> <td class="t0">Others</td> <td class="t1"><br />
</td> <td class="t1">11167850</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">2</td> <td class="t0">Non Institutional Investors</td> <td class="t1">85270919</td> <td class="t1">2166004875</td> <td class="t1">25.40</td> </tr>
<tr> <td class="t2">2(a)</td> <td class="t0">Corporates</td> <td class="t1"><br />
</td> <td class="t1">1384329500</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">2(b)</td> <td class="t0">Individuals (Other than RIIs)</td> <td class="t1"><br />
</td> <td class="t1">764448150</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">2(c)</td> <td class="t0">Others</td> <td class="t1"><br />
</td> <td class="t1">17227225</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">3</td> <td class="t0">Retail Individual Investors (RIIs)</td> <td class="t1">198965479</td> <td class="t1">458634025</td> <td class="t1">2.31</td> </tr>
<tr> <td class="t2">3(a)</td> <td class="t0">Cut Off</td> <td class="t1"><br />
</td> <td class="t1">392048500</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">3(b)</td> <td class="t0">Price Bids </td> <td class="t1"><br />
</td> <td class="t1">66585525</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">4</td> <td class="t0">Employee Reservation</td> <td class="t1">63163644</td> <td class="t1">6174300</td> <td class="t1">0.10</td> </tr>
<tr> <td class="t2">4(a)</td> <td class="t0">Cut Off</td> <td class="t1"><br />
</td> <td class="t1">5849500</td> <td class="t1"><br />
</td> </tr>
<tr> <td class="t2">4(b)</td> <td class="t0">Price Bids </td> <td class="t1"><br />
</td> <td class="t1">324800</td> <td class="t1"><br />
</td> </tr>
</tbody></table></div><div class="contenttext"><br />
<br />
<div style="color: red;"><u><b>How many shares will the retail investor be alloted per full application</b></u></div><br />
<span style="color: blue;">Total shares reserved for Retail Individual Investors (RIIs)</span> = <b><span style="color: #20124d;">198965479</span></b> (A)<br />
<span style="color: blue;">35% of the unsubscribed shares reserved for Employees</span> = <b style="color: #20124d;">19946271</b> (B)<br />
--------------------<br />
<span style="color: red;"> Total shares reserved for allotment to RII's</span> (A+B) <b><span style="color: magenta;"> 218911750</span></b> <b style="color: red;">(T)</b><br />
--------------------</div></td><td width="10"><br />
</td></tr>
</tbody></table><span class="verdana12black1a height18a"></span> <br />
<span style="color: blue;">No. of shares bid in RII segment</span> =<span style="color: red;"> 458634025</span> <span style="color: blue;">Total Bids<b>(TB)</b></span><br />
<span style="color: blue;">No. of shares bids at cut off price</span> =<span style="color: purple;">392048500</span> <span style="color: blue;">Cutt-off Bids</span><b><span style="color: #4c1130;">(CB</span>)</b><br />
<br />
<div style="color: red;"><u><b>Worst Case Scenario</b></u>:</div><br />
<span style="color: blue;">In this instance we calculate allotment number by taking into consideration the Total Bids received against shares reserved for RII Segment as calculated above</span> <b>(A+B)</b><br />
<br />
<span style="color: blue;">Total shares reserved including the 35% of the unsubscribed employee protion = 218911750</span><b style="color: red;">(T)</b><br />
<span style="color: blue;">Total Bids received </span>=<b style="color: blue;">458634025(TB)</b><br />
<br />
Hence = <b><span style="color: red;">T</span></b>/<b><span style="color: blue;">TB</span></b>=<b><span style="color: #660000;">0.477</span></b><br />
<span style="color: blue;">Assuming all applications were for 400 shares then</span>: <br />
<br />
<span style="color: blue;">Allotment will be </span><b style="color: blue;">400</b><span style="color: blue;"> shares</span> x <b><span style="color: #660000;">0.477</span></b>= <b><span style="color: lime;">191</span></b><span style="color: blue;"> shares will be alloted to retail investors</span>.<br />
<br />
<div style="color: red;"><u><b>Best Case Scenario</b></u> </div><br />
<div style="color: blue;">In this instance we calculate allotment number by taking into consideration the Cutt off bids received against total shares reserved for RII Segment:</div><br />
<span style="color: blue;">Total shares reserved including the 35% of the unsubscribed employee protion</span> = <b>218911750 <span style="color: red;">(T)</span></b><br />
<span style="color: blue;">Cut off Bids received</span> (CB) =<b>392048500</b> <b><span style="color: #20124d;">(CB)</span></b><br />
<br />
<span style="color: blue;">Hence</span> = <b><span style="color: red;">T</span>/<span style="color: #351c75;">CB</span></b>=<b><span style="color: #274e13;">0.558</span></b><br />
<b><span style="color: #274e13;"></span></b><br />
<span style="color: blue;">Assuming all applications under Cutt off's were for 400 shares then </span>=<br />
<br />
<br />
<span style="color: blue;">Allotment will be 400 shares</span> x <b style="color: #274e13;">0.558</b>=<b><span style="color: lime;">223</span></b> <span style="color: blue;">shares will be alloted to retail investors.</span><br />
<br />
<br />
<div style="color: blue;">In as much as the price has been fixed at the upper band the chances of getting better alotment increases.</div><div style="color: blue;"><br />
</div><div style="color: red;"><b>In my opinion each RII who submitted a full application for 400 shares may be alloted atleast 191 shares and may inch upto 223 depending on the applications submitted by those investors who applied on a fixed price basis.</b></div><br />
<br />
<div style="color: red;"><u><b>CIL Grey Market Premium:</b></u></div><br />
<div style="color: blue; text-align: justify;">Currently quoting between Rs.39-42 per share, Please note RII are allotted shares at 5% discount so RII's will be issued at Rs.232 per share.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">Current Grey market premium quoting at Rs.39-42 per share and add the retail discount of Rs.12, in net effect a retail investor's share has a total premium of atleast Rs.50 per share </div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">Thus each allottee is sitting on a profit of Rs. 10,000/-atleast per full application on a total investment of Rs.98,000/-</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">For those of you who pre-sold your allotment for Rs.4,800 to Rs.5,000/- thats a loss of Rs.5,000/- per application.</div><br />
<br />
<div style="color: red; text-align: justify;"><u><b>Listing Strategy</b>: </u><u><b>04th November 2010</b></u></div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">In my opinion, Coal India deserves to trade at a premium to global coal peers with a price target anywhere between Rs.300 to Rs.325 on listing. The coal-major has substantial headroom to increase prices in coming years and will provide a linear earnings trajectory and impressive returns on the capital employed.<u><b> </b></u></div><br />
<div style="color: blue; text-align: justify;">This is the first IPO in India which will have the listed company direct entry into Nifty 50 and Sensex 30 indices.</div><div style="color: blue; text-align: justify;">This is the first IPO for which there will be a direct entry into the derivatives (futures & options) segment</div><br />
<br />
<b style="color: #990000;">My recommendation is that if CIL lists at 275 and below then please go out there and buy (obviously subject to your own due diligence), this is a share which you can bequeath to your grand children.</b><br />
<br />
<br />
<div style="color: blue;"><b>Happy Investing</b></div><div style="color: blue;"><b><br />
</b></div><div style="color: blue;"><b><br />
</b></div><div style="color: blue;"><b>Prashant</b></div><br />
<div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><u>DISCLAIMER</u></span></b></div><div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"></span></b></div><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><div style="text-align: justify;"><u><br />
</u></div></span> <br />
<div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><u>I am NOT an investing professional. I will sometimes jump into something that appears to be good; it may or may not be. Even if it is good for me, it may not be good for you. Anything I write on this site is my opinion and should NOT be relied on or taken as investing advice. Material presented here is for informational purposes only. Before acting on anything you read on this site, you must do your own research and you must come to your own conclusion which you will ultimately be responsible for, including any loss you may incur.</u></span></b></div><b><div style="text-align: justify;"><span style="color: red;"><br />
</span></div><span style="font-family: Georgia,"Times New Roman",serif;"></span></b><b><span style="font-family: Georgia,"Times New Roman",serif;"></span></b> <br />
<div style="text-align: justify;"><b><span style="font-family: Georgia,"Times New Roman",serif;"><span style="color: red;"><u>Thank you for reading Eazeetrade. Hopefully, we can all learn something together and become better investors!</u></span> </span></b></div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-7500392368166255702010-10-24T16:51:00.000-07:002010-10-24T18:44:06.034-07:00BAJAJ HOLDINGS: LIBERAL BONUS ISSUE OR HEFTY DIVIDEND ANNOUNCEMENT PROBABILITY<div class="post-header"></div><div class="post-body entry-content"><div class="MsoNormal" style="color: blue; line-height: normal; text-align: justify;"><b><u><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">BAJAJ HOLDINGS: CMP: Rs.869.45/-</span></u></b></div><div class="MsoNormal" style="color: blue; line-height: normal; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; line-height: normal; text-align: justify;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Bajaj Holdings & Investment reported unaudited results for its quarter ended September 30, 2010 on 19th October 2010.</span></div><div class="MsoNormal" style="color: blue; line-height: normal; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; line-height: normal; text-align: justify;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Bajaj Holdings & Investments net profit surged by 97.47% and stood at Rs 590.30 crore for the quarter ended September 30, 2010 as compared to Rs 298.92 crore for the quarter ended September 30, 2009. Its total income stood at Rs 608.15 crore for the Q2 FY11, spiked up by 97.52% as compared to Rs 307.89 crore for the Q2FY10.</span></div><div class="MsoNormal" style="color: blue; line-height: normal; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; line-height: normal; margin-bottom: 0.0001pt; text-align: justify;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">On Consolidated basis, the groups net profit has expanded by 99.29% to Rs 649.45 crore for the quarter ended on September 30, 2010 as compared to Rs 325.88 crore for the corresponding quarter of the previous year. The total income has increased from Rs 210.63 crore for the quarter ended September 30, 2009 to Rs 427.41 crore for the quarter ended September 30, 2010.</span></div><div class="MsoNormal" style="color: blue; line-height: normal; margin-bottom: 0.0001pt; text-align: justify;"><br />
</div><div class="MsoListParagraphCxSpFirst" style="color: blue; line-height: normal; text-align: justify; text-indent: -18pt;"><b><u><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"> </span></u><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"> </span><u><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Immediate Triggers</span></u></b><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">.<span style="font: 7pt "Times New Roman";"> </span></span></div><ol style="color: blue;"><li><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Bajaj Holdings will be among the 23 scrips added to the F&O segment from 29 October 2010. It is most likely that operators may take its share price to Rs.1000-1100 levels post debut into the F&O segment For those of you who own the stock it’s a strong: <b>Hold your Horses, for those of you who donot have any ,I would </b></span><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"><b>recommend(obviously </b></span><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"><b>subject to your own due diligence) either a staggered investment and for aggreissive investors buy and hold. </b></span></li>
<li><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">With the</span><b><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"> </span></b><span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Q2FY11 performance of Bajaj Holdings being better than Bajaj Auto with an <b>EPS of Rs.61 against Rs.23 of Bajaj Auto</b>, I foresee either a LIBERAL BONUS announcement like Bajaj auto did a couple of months ago or a hefty dividend payout, if any of this event materialises then I am confident that Bajaj Holdings will not only touch my target price of Rs.1500 but also surpass it quite easily in 6-8 months’ time period. </span></li>
</ol><div style="color: blue;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"> </span><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"><u><b> Technical Perspectives</b></u> :</span><span style="font-family: "Times New Roman","serif";"> </span><br />
<ol start="1" type="1"><li class="MsoNormal" style="font-family: Times,"Times New Roman",serif; line-height: normal;"><span style="font-size: large;">Bajaj Holdings is trading very close to its rising trend line support which it has been respecting post it November’09 lows of Rs.465/-</span></li>
<li class="MsoNormal" style="font-family: Times,"Times New Roman",serif; line-height: normal;"><span style="font-size: large;">Also at such important trend line support it has a confluence support coming in from multiple exponential moving averages and Fibonacci numbers.</span></li>
<li class="MsoNormal" style="font-family: Times,"Times New Roman",serif; line-height: normal;"><span style="font-size: large;">Momentum oscillators are also positively placed which add weight to the positive sentiments.</span></li>
<li class="MsoNormal" style="line-height: normal;"><span style="font-size: large;"><span style="font-family: Times,"Times New Roman",serif;">Going ahead the stock has resistance at 890 and 900 levels where as strong support is seen at 850 and 825 levels.</span></span><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"></span></li>
</ol><br />
<span style="font-family: "Times New Roman","serif"; font-size: 12pt;"> Happy Investing</span><br />
<br />
</div><div style="color: blue;"><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"><br />
</span> </div><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"><span style="color: blue;"> <span style="color: red;"> <b>PRASHANT</b></span></span></span><br />
<br />
<br />
<br />
<br />
<div style="text-align: justify;"></div><div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><u>DISCLAIMER</u></span></b></div><div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"></span></b></div><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><div style="text-align: justify;"><u><br />
</u></div></span> <br />
<div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><u>I am NOT an investing professional. I will sometimes jump into something that appears to be good; it may or may not be. Even if it is good for me, it may not be good for you. Anything I write on this site is my opinion and should NOT be relied on or taken as investing advice. Material presented here is for informational purposes only. Before acting on anything you read on this site, you must do your own research and you must come to your own conclusion which you will ultimately be responsible for, including any loss you may incur.</u></span></b></div><b><div style="text-align: justify;"><span style="color: red;"><br />
</span></div><span style="font-family: Georgia,"Times New Roman",serif;"></span></b><b><span style="font-family: Georgia,"Times New Roman",serif;"></span></b> <br />
<div style="text-align: justify;"><b><span style="font-family: Georgia,"Times New Roman",serif;"><span style="color: red;"><u>Thank you for reading Eazeetrade. Hopefully, we can all learn something together and become better investors!</u></span> </span></b></div></div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-75751561095199793102010-10-21T19:33:00.000-07:002010-10-22T06:48:28.306-07:00ALL THAT GLITTERS IS NOT GOLD<div style="text-align: justify;"></div><div style="text-align: justify;"><span style="color: blue;"><span style="font-family: Georgia,"Times New Roman",serif;"><i><b>All that glitters is not gold</b></i> is a well-known saying, meaning that not everything that looks precious is precious.In my opinion Gold by itself qualifies for this adage.</span></span></div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">I was speaking with a very dear friend of mine, we discussed if it was wise to buy gold at the current ruling prices particulalry when every analyst seems to be predicting an immediate price target of Rs.30,000 per 10 grams in the next 3 months and goldman sachs predicting $5000/oz equivalent to Rs.250,000/- per 10 grams</span></div><span style="font-family: Georgia,"Times New Roman",serif;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;">Experienced investors know that no trend -- no matter how profitable -- lasts forever.</span></b></div><span style="font-family: Georgia,"Times New Roman",serif;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">The same should be true for gold. Gold has risen from below $700/oz. in November 2008 to $1,315/oz. in the beginning of October 2010. That's an +88% gain in under two years.</span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">Futures for the yellow metal are now up by an incredible 20 percent this year, putting it on course for a 10th consecutive year gain, the longest surge the metal has seen for some 90 years.</span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">And while any mention of shorting gold is enough to get a gold bug's blood boiling, one day not far from today the time will come when it's the right trade to make. </span></div><span style="font-family: Georgia,"Times New Roman",serif;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><u>Consumer sentiment</u></span></b></div><span style="font-family: Georgia,"Times New Roman",serif;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">I believe that time may have arrived to short Gold for I strongly believe the <span class="nolink">economy</span> internationally is bound to improve, jobs will be created and a brighter future is heading our way.</span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;"> The above very much reflect the effect that confidence has on the <span class="nolink">economy</span>. If things eventually look up, the average Prashant and likes will no doubt invest in risky assets that offer the chance for higher returns.</span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">Returns generated from a growing <span class="nolink">economy</span> create optimism that the future will be brighter than it is now.</span></div><div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">On the other hand, if I do not have confidence in the <span class="nolink">economy</span>, they I am more likely to consider owning gold to protect my capital. </span></div><span style="color: blue;"><div style="text-align: justify;"><br />
</div><span style="font-family: Georgia,"Times New Roman",serif;"></span></span><br />
<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">Until people have more confidence in the <span class="nolink">economy</span>, many investors will continue to hold more gold than they've typically held in the past.</span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">Gold prices tend to move opposite of consumer sentiment, So when consumer sentiment trends down, the price of gold trends up. The reverse holds true as well. </span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">In a nutshell, when you fear of a major crisis in the near future and which according to you may drive confidence down, placing some of your capital in gold makes sense. As fear drives gold higher, you can ride along.</span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">But when confidence hits its lowest point world over (it is my view that may be it cannot get worse) which it seems to have done a couple of months ago and then starts turning up, in my view it may be time to start reducing your gold holdings. Any improvement in the consumer sentiment numbers will encourage investors to sell their gold and move into assets such as equities.</span></div><span style="font-family: Georgia,"Times New Roman",serif;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;">Time to short gold?</span></b></div><span style="font-family: Georgia,"Times New Roman",serif;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">Above I have focused on how to time and when to short gold.</span></div><span style="color: blue;"><div style="text-align: justify;"><br />
</div><span style="font-family: Georgia,"Times New Roman",serif;"></span></span><br />
<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">When an asset like gold has had a large run-up on the deterioration of expectations by consumers and investors, there is bound to be a retreat, especially when investors begin to move their capital to higher risk assets and away from gold. </span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><b><span style="color: blue; font-family: Georgia,"Times New Roman",serif;"></span></b></div><div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">As consumer sentiment rises and confidence slowly returns to the <span class="nolink">economy</span>, investors holding gold will soon start selling some or all of their holdings, which will drive down the price. </span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">While it may not be part of the mainstream sentiment about gold in India, My observation is that as an investor one needs to be greedy when other are afraid and vice versa, that's the sort of bet to look for and without any emotions attached sell Gold where by you book your profits.</span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><b><u><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">Risk Factors</span></u></b></div><div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">Should rampant inflation occur, caused by out of control money printing, and initiate a full blown dollar crash, then indeed the unbelievable predictions that gold prices will soar beyond anything imaginable may indeed be possible.</span></div><span style="color: blue;"><div style="text-align: justify;"><br />
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<div style="text-align: justify;"><span style="color: blue; font-family: Georgia,"Times New Roman",serif;">Prashant</span></div><div style="text-align: justify;"><br />
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</div><div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><u>DISCLAIMER</u></span></b></div><div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><u></u></span></b></div><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><div style="text-align: justify;"><u><br />
</u></div></span><br />
<div style="text-align: justify;"><b><span style="color: red; font-family: Georgia,"Times New Roman",serif;"><u>I am NOT an investing professional. I will sometimes jump into something that appears to be good; it may or may not be. Even if it is good for me, it may not be good for you. Anything I write on this site is my opinion and should NOT be relied on or taken as investing advice. Material presented here is for informational purposes only. Before acting on anything you read on this site, you must do your own research and you must come to your own conclusion which you will ultimately be responsible for, including any loss you may incur.</u></span></b></div><b><div style="text-align: justify;"><span style="color: red;"><br />
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<div style="text-align: justify;"><b><span style="font-family: Georgia,"Times New Roman",serif;"><span style="color: red;"><u>Thank you for reading Eazeetrade. Hopefully, we can all learn something together and become better investors!</u></span> </span></b></div><b><div style="text-align: justify;"><br />
</div></b><br />
<div style="text-align: justify;"><br />
</div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-90595502771893950892010-10-14T11:48:00.000-07:002010-10-14T11:48:02.936-07:00Eazeetrade: Coal India-Black Gold-IPO Notes-Subscribe at Cut-o...<a href="http://eazeetrade.blogspot.com/2010/10/coal-india-black-gold-ipo-notes.html?spref=bl">Eazeetrade: Coal India-Black Gold-IPO Notes-Subscribe at Cut-o...</a>: " Coal India-Black Gold-IPO Notes-Subscribe at Cut-off. Price B..."Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-77198855454145284572010-10-13T16:11:00.000-07:002010-10-13T16:14:01.594-07:00Coal India-Black Gold-IPO Notes-Subscribe at Cut-off<div class="MsoListParagraphCxSpLast" style="color: purple; line-height: normal; text-align: justify; text-indent: -18pt;"><b><span style="font-family: "Arial","sans-serif";"> <span style="color: blue;"> </span><u style="color: blue;">Coal India-Black Gold-IPO Notes-Subscribe at Cut-off.</u></span></b><span style="color: blue; font-family: "Arial","sans-serif"; font-size: 12pt;"><span style="font: 7pt "Times New Roman";"> </span></span></div><div class="MsoListParagraphCxSpLast" style="color: blue; line-height: normal; text-align: justify; text-indent: -18pt;"><br />
</div><div class="MsoListParagraphCxSpLast" style="color: blue; line-height: normal; text-align: justify; text-indent: -18pt;"><span style="font-family: "Arial","sans-serif"; font-size: 12pt;"><span style="font: 7pt "Times New Roman";"> </span></span></div><ul><li><span style="font-family: "Arial","sans-serif"; font-size: 12pt;"><span style="font: 7pt "Times New Roman";"> <span style="font-family: Georgia,"Times New Roman",serif;"> </span></span></span><span style="color: blue; font-family: Georgia,"Times New Roman",serif; font-size: small;"><span class="normal">Price Band: Rs.225-245, Retail Investors and Employees will get 5% discount.<span style="font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span></li>
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</span></u></b></div><div style="color: blue; font-family: Georgia,"Times New Roman",serif;"><b><u>India’s Energy Scenario and Coal</u></b></div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; text-align: justify;"><br />
India is currently among the top three fastest growing economies of the world. As a corollary, India's energy needs too are fast expanding with its increased industrialisation and capacity addition in power generation. This is where 'coal' steps in, as the most dominant energy source in India's energy scenario.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif;"><b><u><br />
Coal India Limited at a glance</u></b><br />
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</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif;">Coal India Limited (CIL) - a Schedule 'A' 'Navratna' Public Sector Undertaking under Ministry of Coal, Government of India, has its Headquarters in Kolkata, West Bengal. CIL produces non-coking coal and coking coal of various grades for diverse applications.<br />
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As of March 31, 2010, CIL operates 471 mines in 21 major coalfields across eight states in India, including 163 open cast mines, 273 underground mines and 35 mixed mines (includes both open cast and underground mines). </div><div style="color: blue; font-family: Georgia,"Times New Roman",serif;"><br />
</div><div class="MsoNormal" style="color: blue; font-family: Georgia,"Times New Roman",serif; line-height: normal; margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 12pt;">CIL also operates 17 coal beneficiation facilities with an aggregate designed feedstock capacity of 39.40 million tons per annum. </span></div><div class="MsoNormal" style="color: blue; font-family: Georgia,"Times New Roman",serif; line-height: normal; margin-bottom: 0.0001pt; text-align: justify;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; text-align: justify;">Coal India's major consumers are the power and steel sectors. Others include cement, fertiliser, brick kilns etc.<br />
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<b><u>Reasons to apply in the IPO:</u></b></div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; text-align: justify;"><b><u><br />
</u></b></div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>CIL sits on reserves which is the largest among all its peers in the world by many times.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>CIL’s coal production has steadily grown and today is the largest coal mining company in the world.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>The aggregate production last year was 431 million tonne which is slightly higher than the aggregate production of the second and third largest coal mining companies in the world.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>At USD 12 per tonne it is one of the lowest cost coal producing company in the world.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>CIL has one of the highest total factor productivity which drives down the cost to it being one of the lowest in the world</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>Demand of coal in India is outpacing availability and supplies, particularly because of the power generation capacity addition programme that has picked up in the 11th Plan period. The coal demand is expected to increase at somewhere around 9% to 10% per annum.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>CIL is financially profitable, debt free, very large, financially sound company and this has happened by pursuing a strategy which is aimed at physical volume growth.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>So all in all CIL has a cost advantage, size advantage, reserve advantage and most importantly has a insatiable demand advantage.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>CIL registered a turnover of Rs 47,000 crore (Rs 41,000 crore) last fiscal and a net profit of Rs 9,600 crore (Rs 2,079 crore).</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>It has a cash surplus of Rs 38,000 crore and earmarked $1.5billion for overseas acquisitions.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>The current coal that CIL sells in the market is at deep discount(approx. 40-50%) to prices prevailing globally. </div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>One reason for the discounted price is CIL sell’s coal unwashed and the unwashed coal has an inconsistency in quality. The corollary to that is if CIL removes that inconsistency by getting into washing steadily, CIL should be able to achieve a price convergence. That is actually the margin growth story which CIL has.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>CIL intends to go in for washing of the thermal coal it produces in a big way. CIL are setting up as many as 20 washeries with a total capacity of 111 million tonne to wash the coal that is being produced from thier existing mines.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>Price of washed coal will be almost 50% more than what CIL realises from sale of different grades of unwashed coal under a regulated pricing regime.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>Out of its total production of over 430 million tonnes of coal, CIL currently washes a meagre 13 million tonne(mt). As per management this is expected to increase to 300 mt or 55% of total coal produced by CIL by 2016-17.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;">·<span style="font-size-adjust: none; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span>If that washing takes place, then CIL can have a 45% to 50% jump in the prices in comparision to what it realises currently.</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify; text-indent: -18pt;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify;"><span class="normal"><b>The world's largest coal company, is the best play on India's rising coal deficit, and thus is an attractive bet at the price band of Rs 225 to 245 a share. Retail investors Subscribe at cut-off price for it should trade at atleast 30% premium to its offer price.</b></span></div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify;"><br />
</div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify;"><span class="normal"><b>Happy Investing</b></span></div><div style="color: blue; font-family: Georgia,"Times New Roman",serif; margin-left: 36pt; text-align: justify;"><br />
</div><div style="margin-left: 36pt; text-align: justify;"><span class="normal" style="color: blue; font-family: Georgia,"Times New Roman",serif;"><b>Prashant</b></span><b><span style="font-family: "Arial","sans-serif";"></span></b></div><div style="text-align: justify;"><br />
</div><div class="MsoNormal" style="color: red; font-family: Georgia,"Times New Roman",serif; text-align: justify;"><u><i>Disclaimer</i></u></div><div class="MsoNormal" style="font-family: Georgia,"Times New Roman",serif; text-align: justify;"><u><br />
</u> </div><div class="MsoNormal" style="text-align: justify;"><u><b style="font-family: Georgia,"Times New Roman",serif;"><span style="color: red;">I am NOT an investing professional. I will sometimes jump into something that appears to be good; it may or may not be. Even if it is good for me, it may not be good for you. Anything I write on this site is my opinion and should NOT be relied on or taken as investing advice. Material presented here is for informational purposes only. Before acting on anything you read on this site, you must do your own research and you must come to your own conclusion which you will ultimately be responsible for, including any loss you may incur.</span><br style="color: red;" /><br style="color: red;" /><span style="color: red;"> Thank you for reading Eazeetrade. Hopefully, we can all learn something together and become better investors! </span></b></u> <b><span lang="EN-US" style="color: black;"><br />
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</div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com1tag:blogger.com,1999:blog-5236277455546434322.post-27426052149672344382010-10-12T19:47:00.000-07:002010-10-24T16:11:45.629-07:00Kohinoor Foods: India on a Platter: CMP Rs.61.50<div style="color: red;"><span style="font-size: large;"><b><u><span style="font-family: Times,"Times New Roman",serif;">Kohinoor Foods: India on a Platter: CMP Rs.61.50</span></u></b></span> </div><div style="color: red;"><br />
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</span></div><div style="color: red; text-align: justify;"><span style="font-size: small;">When Scott Price, president and CEO of Wal-Mart Asia, visited India last year, he talked about helping the country become food basket of the world and sourcing $1-billion worth of goods from here.</span></div><div style="color: red;"><br />
</div><div style="color: red; text-align: justify;"><span style="font-size: small;">Perhaps he drew inspiration from the growing presence of Indian specialty food brands in the shelves of global retailers such as Wal-Mart(USA),Tesco(UK), Ralphs, ASDA(UK),Somerfield(UK) and Safeway.</span></div><div style="color: red; text-align: justify;"><u><b><span style="font-size: small;">Food-processing- a growing market.</span></b></u></div><div style="color: red;"><br />
</div><div style="color: red; text-align: justify;"><span style="font-size: small;">India is one of the largest food producers with the industry estimated at more than $200 billion, according to a Confederation of Indian Industry study that projected it to grow to $310 billion by 2015. But India accounts for less than 1.5% of international food trade.</span></div><div style="color: red; text-align: justify;"><br />
</div><div style="color: red; text-align: justify;"><span style="font-size: small;">The ministry of food processing estimates the size of the industry at Rs 1,44,000 crore. But exports of processed food stood at just Rs 10,000 crore in 2008-09. It is estimated to be growing at around 15% over the past two-three years.</span></div><div style="color: red; text-align: justify;"><br />
</div><div style="color: red; text-align: justify;"><span style="font-size: small;">India's packaged food exports can expect dramatic growth driven by changing demographics, growing population and rapid urbanization along with increased government support. These factors will increase the demand for value added products and thus improve the prospects of food-processing industry in India.</span></div><div style="color: red; text-align: justify;"><br />
</div><div style="color: red; text-align: justify;"><span style="font-size: small;">With rapid increase in the per capita income and purchasing power along with increased urbanization, improved standards of living, there lies a large untapped opportunity to cater to 1000 million domestic consumers. It is estimated that 300 million upper and middle class consume processed food. With the convenience needs of dual income families, 200 million more consumers are expected to move to processed food by 2012. The market size for the processed foods is thus bound to increase from US $102 billion currently to US $330 billion by 2014-15 assuming a growth of 10%.</span></div><div style="color: red; text-align: justify;"><br />
</div><div style="color: red; text-align: justify;"><span style="font-size: small;"> The share of the value added products in processed foods would almost double from US $44 billion currently to US $88 billion during the same period, growing at the rate of 15%. This presents enormous opportunities for investment in processed food sector. Several global food giants and leading Indian industrial enterprises are already making their presence felt in a big way in the sector. Some of them are Nestle India, Cadbury's India ,Kelloggs, Hindustan Unilever, ITC-Agro, Conagra.</span></div><div style="color: red;"><span style="font-size: small;"><br />
</span></div><div style="color: red;"><span style="font-size: small;"><u><b>Indian Food for the International Markets</b></u></span></div><div style="color: red;"><br />
</div><div style="color: red; text-align: justify;"><span style="font-size: small;">There are many people of Asian origin in developed/developing countries and the globalization and popularity of Indian cuisine has now allowed companies from India to tap into the mainstream developed markets. Most importantly there is this huge Indian market to cater to, and then Indian food is gaining a lot of importance in many international markets. </span></div><div style="color: red; text-align: justify;"><br />
</div><div style="color: #274e13;"><u><b>KOHINOOR FOODS-Ready to Eat: A Primer</b></u></div><div style="color: #274e13;"><span style="font-size: small;"><br />
</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">Kohinoor Foods Ltd. embarked upon its journey in 1989. Since then it has been treating every milestone achieved as a stepping stone to go past another one. Today, in India and in over 60 countries, consumer's lives have been touched by not only some of the finest basmati rice brands, but also a wide assortment of food products that includes Basmati Rice, Ready to Eat products, Cook-in Sauces and Cooking Pastes to Spices, Seasonings and Frozen Food. It’s a feat that Kohinoor Foods Ltd. pulled off by spreading the authentic India flavour abroad. Thereby becoming a well-known food giant with one of the most powerful brand in its stable - Kohinoor.</span></div><div style="color: #274e13; text-align: justify;"><br />
</div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">At present, the company’s offerings are preferred by connoisseurs across the globe - from the USA, Canada, Australia, New Zealand and the UK to the Middle East and South East Asian countries. And they adorn the shelves of reputed retail chains like Metro Cash n Carry, Walmart, Reliance, Big Bazaar, Spencer's, Vishal, Shubhiksha, Hypercity, More, Nilgiris in India, TESCO, Somerfield and ASDA in the UK, Costco in Canada, Hankyu, Daimaru & Takashimaya in Japan, Coles & Woolworths in Australia, Krogers, BJs and Whole Foods in the US and Seven Eleven and Mustafa in Singapore. </span></div><div style="color: #274e13; text-align: justify;"><br />
</div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">To be a globally competitive organisation, Kohinoor Foods Ltd. has strategic bases in the US, the UK and the Middle East. The company has two 100% fully owned subsidiaries – SOL Inc., operating from New Jersey, USA that looks after the North American and Canadian markets, and Indo European Food Limited, in the UK with headquarters in London, that looks after the European markets. The joint-venture company Rich Rice Raisers Factory LLC operating from Dubai, UAE takes care of the markets in the Middle East.</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">Even in India, Kohinoor Foods Ltd. has a wide-spread presence that boasts of an extensive and unmatched distribution network with more than 200 thousand retail outlets, 100 super distributors and 600 stockists.</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">And all that is supported by a strong Quality Control culture with dedicated and fully equipped QC centres and micro-biological labs, manufacturing and processing facilities that are HACCP and ISO 9001:2000 certified, US-FDA & FSA compliant as well as Kosher certified.</span></div><div style="color: #274e13; text-align: justify;"><br />
</div><div style="color: #274e13;"><span style="font-size: small;">Kohinoor Foods Ltd. has emerged as an enterprise with very strong and dynamic fundamentals. And there's only one way things are looking - UP!</span></div><div style="color: #274e13;"><span style="font-size: small;"><br />
</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">Kohinoor Foods Ltd. is no stranger to awards and recognition. And with its huge list of accomplishments, it’s really no surprise. Incredible as it may sound - 868,500 finest basmati grains flow out every second from Kohinoor factories. If on one hand, Kohinoor Basmati Rice is the first branded food from India to be served on board Malaysian Airlines, than on the other hand, Kohinoor has an elite list of customers that includes the Royal Palaces of Brunei, Emirates and the Sultanate of Oman. That’s not all, Kohinoor Foods Ltd. can be credited with a lot of firsts in the category- </span></div><div style="color: #274e13;"><span style="font-size: small;">• First to introduce one & five kg packs in the rice category – changing the way India buys rice</span></div><div style="color: #274e13;"><span style="font-size: small;">• First to start building brand in a traditionally commoditised market</span></div><div style="color: #274e13;"><span style="font-size: small;">• First to advertise rice in the Indian market</span></div><div style="color: #274e13;"><span style="font-size: small;">• First to bring automated packaging machines and color Z series Sortex machines to the country.</span></div><div style="color: #274e13; text-align: justify;"><br />
</div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">What’s more, the company has also received many prestigious and coveted awards - the APEDA award for fourteen consecutive years, Certificate from Guinness Book of World Records for making World's Largest Biryani, The National Award for Export Excellence, the Brand Equity award and a host of others. But the recognition that’s closest to the company is the one awarded by millions of satisfied customers across the globe who vouch for the authentic Indian taste it offers.</span></div><div style="color: #274e13; text-align: justify;"><br />
</div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">After operating in the basmati rice business for almost two decades, both in the India and the International markets, Kohinoor have not only gained a leadership position for themselves, but they have also come to understand that there is a huge potential in bringing Indian Specialties in their absolute authentic form to people all over the world. Indian food with its authentic taste has fans in huge numbers at almost any corners of the globe.</span></div><div style="color: #274e13; text-align: justify;"><br />
</div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">In this context, Kohinoor Foods have so far identified 6 different categories which could help the brand bring Indian Specialties in different forms to people all over world – The Indian Basmati Rice in which the brand has been operating for last so many years. The other identified categories are Ready-to-Eat Curries, Spices, Frozen Foods, Cook-in Sauces and Cooking Pastes. All together, this portfolio of different categories of products allows the brand to come out with a huge range of dishes. </span></div><div style="color: #274e13; text-align: justify;"><br />
</div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">If you look at the brand Kohinoor is well-established in fact few years back it was selected as a super brand and it is probably the only rice brand in the country to be selected as super brand. </span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">This company has got an excellent distribution network. They have close to 150 distributors, 600 stockiest and the product is sold at over 2.5 lakh retail outlets. Besides this, this company has got distribution network in place in more than 52 countries.</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">To summarise, you have a company, which has got a strong brand. It is available at significant discount to the price at which promoters increase their stake in the month of February. In fact, promoters increase their stake at a price of Rs 78, stock is available at Rs 65.</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">So it trades at a substantial discount to its 52-week high. Numbers – quarter-on-quarter (QoQ) have been quite good and I think the potential of the segment in which the company operates ready-to-eat food as well as rice, they are all driven by India’s domestic consumption story. So you have a company, which is trading at very sensible valuations and the product have got good potential and the downside looks restricted from the levels of Rs 55. </span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">It is interesting to note that the total market capitalisation of Kohinoor is 1/5th of its annual sales and it is worthwhile to mention that MTR Foods was sold to a Norwegian company at 2.5 times its annual sales.</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;"><br />
</span></div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">Below is the annual Income statement which shows consistent growth year on year</span>.</div><div style="color: #274e13; text-align: justify;"></div><div style="color: #274e13;"><br />
</div><div style="color: #274e13;">Income Statement 2009-10 2008-09 2007-08 2006-07 2005-06</div><div style="color: #274e13;">Revenue 772.80 635.76 635.06 589.23 541.08</div><div style="color: #274e13;">Other Income 3.12 2.10 2.58 2.01</div><div style="color: #274e13;">Total Income 774.85 638.88 637.16 591.81 543.09</div><div style="color: #274e13;">Expenditure -659.11 -542.03 -552.38 -530.77 -491.35</div><div style="color: #274e13;">Interest -65.74 -53.09 -69.11 -19.82 -15.58</div><div style="color: #274e13;">PBDT 50.00 43.76 15.67 41.22 36.16</div><div style="color: #274e13;">Depreciation -10.22 -10.72 -10.39 -10.40 -8.40</div><div style="color: #274e13;">PBT 39.78 33.04 5.28 30.82 27.76</div><div style="color: #274e13;">Tax -2.49 6.17 0.04 -8.75 -6.25</div><div style="color: #274e13;">Net Profit 8.22 -10.79 5.32 22.07 21.51</div><div style="color: #274e13;">Equity 28.19 28.19 19.60 19.60 19.60</div><div style="color: #274e13;">Reserves 179.09 164.97 124.62 118.93 --</div><div style="color: #274e13;">EPS 2.92 -4.08 2.71 11.26 10.97</div><div style="color: #274e13;"><br />
</div><div style="color: magenta;"><u><b>Overview:</b></u></div><ul><li style="color: magenta;">Available at 1/5th the price to sales ratio. Mcap of 180 crores as opposed to 850crores expected sales for 2010.</li>
<li style="color: magenta;">Sunrise Indusry with huge potential for growth</li>
<li style="color: magenta;">Prime takeover target-previous history-Temptation Foods Saga</li>
<li style="color: magenta;">Previous takeover suggest that Price to Sales was 2.5 times(MTR Foods), with this being the benchmark the company may be taken over if it does happen at a valuation of atleast 1800crores</li>
<li style="color: magenta;">Superbrand status-Kohinoor available in all stores including Reliance and otehr hypermarts and in 52 countries and almost in all the big supermarkets in all the western countries.</li>
<li><span style="color: magenta;">Promoters are increasing their stake quarter on quarter and are even suggesting an open offer.</span></li>
</ul><div style="color: #274e13; font-family: Times,"Times New Roman",serif; text-align: justify;"><span style="font-size: small;">In my opinion, the food business in India is growing fast and will grow much bigger in the near future and Kohinoor has a huge business opportunity. This calls for an increase in the need for good packaging, good bottling, good bottle cap manufacturers, labels, cans, etc. We do not have enough people doing the right things when it comes to these, and these are in short supply. It is in this area that Kohinoor has a huge advantage. So that when the food business grows big, Kohinoor will be ready with all these provisions to make a good business themselves.</span></div><div style="color: #274e13; font-family: Times,"Times New Roman",serif; text-align: justify;"><br />
</div><div style="color: #274e13; text-align: justify;"><span style="font-size: small;">I recommend a buy in the stock of Kohinoor Foods from a Medium-to long-term perspective. It is apparent from the charts of the stock that it was on an intermediate-term downtrend from its September 2008 peak of Rs 130 till its July 2010 low of Rs 43. However, the stock reversed direction taking support from the significant support band between Rs 41 and Rs 43. Since then, the stock has been on a medium-term uptrend. While trending up, the stock surpassed 21 and 50-day moving average one after another and is trading well above these averages. I am bullish on the stock from a medium to long term horizon. I anticipate it to move up until it knocks my price target of Rs 130. </span></div><div style="color: #274e13; text-align: justify;"><br />
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</span></div><div style="color: red;"><span style="font-size: small;">Happy Investing</span></div><div style="color: red;"><br />
</div><div style="color: red;"><span style="font-size: small;"><b>Prashant</b></span> </div><div style="color: red;"><br />
</div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com3tag:blogger.com,1999:blog-5236277455546434322.post-85679430171903385962010-10-11T19:52:00.000-07:002011-01-31T15:22:50.548-08:00Counter Response emailed to JM Financials Re:Cairn India's open offer<div dir="ltr" style="text-align: left;" trbidi="on"><div style="color: blue;">Attention of:</div><div style="color: blue;">Lakshmi Lakshmanan</div><div style="color: blue;">Senior Analyst - Investor Relation</div><div style="color: blue;">JM Financial</div><div style="color: blue;"><br />
</div><div style="color: blue;">By Email: lakshmi.lakshmanan@jmfinancial.in</div><div style="color: blue;">Dear Lakshmanan</div><div style="color: blue;"><br />
</div><div style="color: blue;">Sub: Cairn India Limited(“Target”) Open Offer(“Offer”)</div><div style="color: blue;">Ref: Your Letter dated October 08, 2010</div><div style="color: blue;">This is in reference to your captioned letter( “Letter”)</div><div style="color: blue;"><br />
</div><div style="color: blue; text-align: justify;">At the outset, before dealing with the contents of your letter I wish to repeat, reiterate and rely on the contents of my earlier letter dated 20th September 2010 wherein I made submissions that the purpose of non-compete fee (NCF) in the present transaction is merely to reduce the cost of acquisition as Cairn Energy(CE) is not capable of “competing” with Vedanta(PAC), and also that any payment of non-compete fee is void and impermissible under S.27 of the Indian Contract Act,1872 and thus not justified, furthermore as this particular transaction causes or is likely to cause an appreciable adverse effect on competition in India it is in breach of Anti-Competitive laws. Please note that none of the statement or contentions contained in your letter are deemed to be admitted by me for want of express denials or otherwise.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">The present transaction derives its value from its production fields and exploration blocks which obviously will include all seismic information, drilling operations, which should automatically be transferred to PAC as a result of this transaction, Oil & Gas are commodities which is highly regulated by the Governments of various countries and more particularly in India, Customers buying such commodities cannot be stolen/poached, therefore there is no question of a situation where by CE can use such information to their advantage.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">It is my contention that in as much as CE through their Chairman “Mr.Bill Gammell” is on record indicating that they would continue to be invested in Cairn India (Target) as a shareholder belies its claim of negotiating and agreed to receive non-compete fee from PAC and this points towards a nexus between PAC and CE in that CE is only making life that much easier for the PAC by playing footsie with it.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;"></div><div style="color: blue; text-align: justify;">In so far as your contention that CE continuing to retain a 10-20% interest in the Target and the imposition of the non-compete restrictions are unconnected and unrelated does not hold water, the bottom line is non-compete fee and continued interest in the business is an incompatible phenomena in the business world.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">When the issue arose as to whether the non-compete was justified given the continuing association of the outgoing promoter with the target company, In “Tata Tea Case’” Hon’ble SAT observed that there was nothing on record to suggest that the continuing association cannot be terminated. Thus, the association should not bar the non-compete, which is otherwise justified”</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">In the present case CE is on record indicating that they do not intend to sell the residual stake in the next coming years, this is of particular relevance when the agreed non-compete period is only for 3 years. Furthermore if CE decides to sell its residual shareholdings at a later stage and exit completely then it would tantamount to assignment of any participating interests it may have under the Production sharing contract which may in turn prompt cancellation of the Production sharing contract itself or at the least give pre-emptive rights to ONGC. The clause under the PSC entered into by the operating consortium of oil and gas blocks with the government will be triggered when one of the members decides to quit (Cairn Energy’s Legal and Commercial Director Simon Thomson wrote to ONGC, http://www.thehindu.com/business/companies/article631925.ece) thus it seems unlikely that CE will quit as that may nullify the very object of the acquisition. ONGC would have had the right to buy Cairn’s stake (called the pre-emption or the right of first refusal) in case Cairn intends to exit, but in the Cairn-Vedanta deal, Cairn India will continue to hold the stake and operate the Rajasthan oilfields but as and when CE decides to sell all of its stake the re-emption rights will apply. While you are well within your rights to contend that the above argument as not being valid and warranted, I believe that the above argument is one with merits and in fact could be the game changer should we have a deadlock and embark our journey to the courts.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">To counter your contention that CE may have the relevant experience/knowledge and is also in possession of important crucial trade information, It is my submission that such information could only be limited to the acreage allocated to CE or the Target due to national security issues, I believe that an exploration company may not have been allowed to randomly conduct/acquire seismic survey or map any area of its choice in any part of the country drifting away from its allocated acreage.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">I am at loss to understand on how CE will be in a position to compete using the information it may have about the allocated acreages which are being acquired under the Sale Purchase Agreement(SDP) of 8th August 2010. If the assets (Acreage/Land) are owned by the PAC, how can CE compete despite being armed with the best of the information? </div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">PAC has failed to explain in both their previous responses on how possessing knowledge ,experience, or for that matter continuing to operate in the Oil and gas sector and being in possession of sessimic survey etc, can cause irreparable damage particularly in light of the fact that all underlying assets of the Target will be part of the SDP. It is my submission that in as much as all assets are being acquired, the information and knowledge will be no good as such information and knowledge was in respect of the underlying assets, in so far as the argument of CE re-entering as competition as I submitted previously the threat of competition should be relative to the size of the company being acquired and not every thread of possible competition is to be considered, for it is subject to abuse by the Acquirers and the Vendors who may collude to reduce the cost of the acquisition by short changing the minority investors which unfortunately seems to be the issue at hand.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">In the present instance, PAC contends that there is real threat of competition from CE, which if not nipped in the bud by paying the non-compete fee will cause irreparable damage to the business being acquired, sadly though there is nothing on record identifying/detailing how CE may be able to “Effectively compete” with the PAC and the Target, In as much there is <u>no real and effective threat of competition,</u> payment of non-compete fee is a mere hogwash and thus is not justified. I further submit that oil and gas sector in India and all other countries in which the Target and its associates have interests and are being acquired are severely regulated and therefore the scope for competition is as good as non-est.<br />
<br />
Furthermore paying consideration to stifle competition is a non-competitive practice which is expressly prohibited both by the Indian Contract Act and also the Anti-Competitive Act.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">I note in your response dated October 08, 2010 that you rely on the comments made by Mr.Bill Gammell to support your response at Para 4, my interpretation is that it is in total contradiction to what you are trying to ascribe, Mr.Gammell said when asked if Vedanta’s lack of experience in oil business may become a stumbling block to obtain regulator approvals as follows “. Cairn India is about its people and the knowledge resides in these people and not in Cairn Energy Plc,”. Your mention of an eventuality in para 4 has no correlation or relevance, surely you would appreciate it that Mr.Gammell is negating the idea of CE having any additional knowledge than what is already in the domain with the people(staff) and the Target.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">The additional submissions in this email coupled with my submissions of 20th September 2010, clearly outline the reasons on why I believe that CE will not/cannot compete with the Acquirer and this is an apt case where SEBI should as directed by SAT in Tata Tea case(2009) intervene, where SAT held “Supposing the fee is paid to a person who cannot compete, the Board(SEBI) may be entitled to say that it is only a device to reduce offer price” and thus no payment of NCF is justified.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue;"><b><u>Legitamacy of Non-Compete payments:</u></b></div><div style="color: blue;"><br />
</div><div style="color: blue; text-align: justify;">At the outset I wish to contend that the Takeover Regulations is in direct contravention with an act of Parliament(Indian Contract Act 1872 and S.3 of the Competition act 2002) hence invalid. As per the current case law it is doubtful if a share purchase transaction can be categorized as a sale of business. It is my submission that non-competes are not allowed under the Indian Contract act and therefore do not stand up in any court of law.</div><div style="color: blue;"><br />
</div><div style="color: blue; text-align: justify;">The present acquisition is a mere change of shares at the corporate level and is not akin to a sale of business and goodwill and thus does not fall within the purview of the exception to S.27.</div><div style="color: blue; text-align: justify;"><br />
</div><div style="color: blue; text-align: justify;">You contended that the Takeover provisions are essential for an acquirer to protect his business from competition and also that both the business and legal community supports the PAC in that regard, unfortunately this does not seem to be the consensus, in fact the Takeover Regulations Advisory Committee headed by C Achuthan submitted its report on Takeover Regulations recommending that “The consideration paid for the shares in any form to the selling shareholders and his affiliates, concurrent with the purchase of shares, whether termed as ‘control premium’ or ‘non-compete fees’ or otherwise must be added to the negotiated price per share for the purpose of determining open offer pricing”. Accordingly, the exclusion of non-compete fees from offer price has been proposed to be done away with.</div><div style="color: blue;"><br />
</div><div style="color: blue; text-align: justify;">The panel has rightly put its foot down and recommended abolition of room for chicanery that consists in camouflaging 20 per cent of the negotiated price with the promoter (Cairns Energy UK) as non-compete fee which has nothing whatsoever to do with cost of acquisition of controlling interest.</div><div style="color: blue;"><br />
</div><div style="color: blue; text-align: justify;">In view of the above, it is contended that the offer price and the non-compete amount payable are not in compliance with the Indian Contract Act and Anti-competition act and it is also submitted that in as much as the Takeover regulations are in contravention with an act of Parliament the same itself stands on weak legs thus SEBI cannot possibly allow it and be the basis of discriminating between shareholders.</div><div style="color: blue;"><br />
</div><div style="color: blue;">Kind Regards </div><div style="color: blue;"><br />
</div><div style="color: blue;">Prashant</div><div style="color: blue;"><br />
</div><div style="color: blue;">Copy to:</div><div style="color: blue;">1.Adithya.Anand@jmfinancial.in.</div><div style="color: blue;">2.ask@sebi.gov.in.</div><div style="color: blue;">3.sebi@sebi.gov.in</div><div style="color: blue;">4.Amishi.Kampani@jmfinancial.in</div><div style="color: blue;">5.Jitendra.Gupta@jmfinancial.in</div><div style="color: blue;"><br />
</div><div style="color: blue;"><br />
</div><div style="color: blue;"><br />
</div></div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-80816211496413420562010-10-10T19:17:00.000-07:002010-10-11T14:43:33.335-07:00Fortis Healthcare Ltd-A Healthy Prescription<div class="MsoNormal" style="text-align: justify;"><b><u><span lang="EN-US" style="color: black;"><span style="color: red;">Indian Healhcare: Favourite pick- Fortis Healthcare Limited</span></span></u></b></div><div class="MsoNormal" style="text-align: justify;"><b><u><span lang="EN-US" style="color: black;"><span style="text-decoration: none;"></span></span></u></b></div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;"><i><span lang="EN-US" style="color: black;"><span style="color: blue;">People will always get ill- Hospitals will make money for time to come</span>.</span></i></div><div class="MsoNormal" style="text-align: justify;"><span lang="EN-US" style="color: black;"> </span></div><div class="MsoNormal" style="color: blue; text-align: justify;">Health care is a classic defensive sector. No matter how bad the economy is, the argument goes, people still get sick. And they'll pay for medical care before they'll pay for almost anything else.</div><div class="MsoNormal" style="color: blue; text-align: justify;">So far, health care stocks are holding up better than the rest of the market and are the best defensive stocks to hold, however bad the market, economy gets Hospital stocks will make superlative profits for their shareholders.</div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 36pt; text-align: justify; text-indent: -18pt;"><span lang="EN-US" style="font-family: Symbol; font-size: 10pt; line-height: 150%;">·<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">Hospital industry is an important component of the value chain in the Indian Healthcare industry rendering services and recognized as healthcare delivery segment of the healthcare industry.</span><span lang="EN-US"></span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 36pt; text-align: justify; text-indent: -18pt;"><span lang="EN-US" style="font-family: Symbol; font-size: 10pt; line-height: 150%;">·<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN-US">India's rapid growth in the past three years has brought about a 'health transition' in terms of shifting demographics, socio-economic transformations and changes in disease patterns. </span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 36pt; text-align: justify; text-indent: -18pt;"><span lang="EN" style="font-family: Symbol; font-size: 10pt; line-height: 150%;">·<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">Healthcare, which is a US$35 billion industry in India, is expected to reach over US$75 billion by 2012 and US$150 billion by 2017. </span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 36pt; text-align: justify; text-indent: -18pt;"><span lang="EN" style="font-family: Symbol; font-size: 10pt; line-height: 150%;">·<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">The gap between the present and estimated infrastructure in the healthcare sector in India can be gauged through following indicators.</span></div><table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border: 1pt outset black; width: 670px;"><tbody>
<tr style="height: 3pt;"> <td style="background: none repeat scroll 0% 0% rgb(0, 0, 150); border: 1pt inset black; height: 3pt; padding: 5.25pt; width: 132.75pt;" width="177"><div style="text-align: justify;"><b><span lang="EN-US" style="color: white;">Particulars</span></b><span lang="EN-US"></span></div></td> <td style="background: none repeat scroll 0% 0% rgb(0, 0, 150); border: 1pt inset black; height: 3pt; padding: 5.25pt; width: 5cm;" width="189"><div style="text-align: justify;"><b><span lang="EN-US" style="color: white;">FY2008-09</span></b><span lang="EN-US"></span></div></td> <td style="background: none repeat scroll 0% 0% rgb(0, 0, 150); border: 1pt inset black; height: 3pt; padding: 5.25pt; width: 96.75pt;" width="129"><div style="text-align: justify;"><b><span lang="EN-US" style="color: white;">FY2018 (P)</span></b><span lang="EN-US"></span></div></td> <td style="background: none repeat scroll 0% 0% rgb(0, 0, 150); border: 1pt inset black; height: 3pt; padding: 5.25pt; width: 87pt;" width="116"><div style="text-align: justify;"><b><span lang="EN-US" style="color: white;">FY2028 (P)</span></b><span lang="EN-US"></span></div></td> </tr>
<tr style="height: 3.75pt;"> <td style="border: 1pt inset black; height: 3.75pt; padding: 5.25pt; width: 132.75pt;" width="177"><div style="text-align: justify;"><span lang="EN-US">Additional Beds Required</span></div></td> <td style="border: 1pt inset black; height: 3.75pt; padding: 5.25pt; width: 5cm;" width="189"><div style="text-align: justify;"><span lang="EN-US" style="color: black;">1.1 million</span><span lang="EN-US"></span></div></td> <td style="border: 1pt inset black; height: 3.75pt; padding: 5.25pt; width: 96.75pt;" width="129"><div style="text-align: justify;"><span lang="EN-US" style="color: black;">3.1 million</span><span lang="EN-US"></span></div></td> <td style="border: 1pt inset black; height: 3.75pt; padding: 5.25pt; width: 87pt;" width="116"><div style="text-align: justify;"><span lang="EN-US" style="color: black;">6 million</span></div></td> </tr>
<tr style="height: 3pt;"> <td style="border: 1pt inset black; height: 3pt; padding: 5.25pt; width: 132.75pt;" width="177"><div style="text-align: justify;"><span lang="EN-US">Bed/1,000 Population Ratio</span></div></td> <td style="border: 1pt inset black; height: 3pt; padding: 5.25pt; width: 5cm;" width="189"><div style="text-align: justify;"><span lang="EN-US" style="color: black;">0.7 to 1.7</span><span lang="EN-US"></span></div></td> <td style="border: 1pt inset black; height: 3pt; padding: 5.25pt; width: 96.75pt;" width="129"><div style="text-align: justify;"><span lang="EN-US" style="color: black;">4</span><span lang="EN-US"></span></div></td> <td style="border: 1pt inset black; height: 3pt; padding: 5.25pt; width: 87pt;" width="116"><div style="text-align: justify;"><span lang="EN-US" style="color: black;">5</span><span lang="EN-US"></span></div></td> </tr>
</tbody></table><div style="line-height: 150%; margin-bottom: 0.0001pt; text-align: justify;"><br />
</div><div style="line-height: 150%; margin: 5pt 0cm 0.0001pt 36pt; text-align: justify; text-indent: -18pt;"><span lang="EN-US" style="font-family: Symbol; font-size: 10pt; line-height: 150%;">·<span style="color: blue; font: 7pt "Times New Roman";"> </span></span><span lang="EN-US" style="color: blue;">India requires an immediate investment of US$86 billion over the next 15 years to make up for the back-log. In addition to the infrastructure gap, India is also lacking in terms of medical manpower. Currently, India is known to have approximately 6 lakh doctors and 1.60 million nurses. As per the World Health Organization (WHO) guidelines, it translates into a gap of approximately 1.40 million doctors and 2.80 million nurses.</span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 36pt; text-align: justify; text-indent: -18pt;"><span lang="EN-US" style="font-family: Symbol; font-size: 10pt; line-height: 150%;">·<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">The major growth drivers for the sectors are as under:</span><span lang="EN-US"></span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 72pt; text-align: justify; text-indent: -18pt;"><span lang="EN" style="font-family: "Courier New"; font-size: 10pt; line-height: 150%;">o<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">Growing and aging population of India </span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 72pt; text-align: justify; text-indent: -18pt;"><span lang="EN" style="font-family: "Courier New"; font-size: 10pt; line-height: 150%;">o<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">Growing urbanization</span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 72pt; text-align: justify; text-indent: -18pt;"><span lang="EN" style="font-family: "Courier New"; font-size: 10pt; line-height: 150%;">o<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">Rising income levels</span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 72pt; text-align: justify; text-indent: -18pt;"><span lang="EN" style="font-family: "Courier New"; font-size: 10pt; line-height: 150%;">o<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">Increasing burden of chronic diseases</span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 72pt; text-align: justify; text-indent: -18pt;"><span lang="EN" style="font-family: "Courier New"; font-size: 10pt; line-height: 150%;">o<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">Healthcare financing transition</span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 72pt; text-align: justify; text-indent: -18pt;"><span lang="EN" style="font-family: "Courier New"; font-size: 10pt; line-height: 150%;">o<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN">Medical value travel (medical tourism)</span></div><div style="color: blue; line-height: 150%; margin: 5pt 0cm 0.0001pt 36pt; text-align: justify; text-indent: -18pt;"><span lang="EN-US" style="font-family: Symbol; font-size: 10pt; line-height: 150%;">·<span style="font: 7pt "Times New Roman";"> </span></span><span lang="EN-US">India's cost advantage and explosive growth of private hospitals, equipped with latest technology and skilled healthcare professionals have made it a preferred destination for medical tourism.</span></div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;">Healthcare is one of India’s largest sectors, in terms of revenue and employment, and the sector is expanding rapidly. During the 1990s, Indian healthcare grew at a compound annual rate of 16%. Today the total value of the sector is more than $34 billion. This translates to $34 per capita, or roughly 6% of GDP. By 2012, India’s healthcare sector is projected to grow to nearly $40 billion.</div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;">The private sector accounts for more than 80% of total healthcare spending in India. Unless there is a decline in the combined federal and state government deficit, which currently stands at roughly 9%, the opportunity for significantly higher public health spending will be limited. </div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;"><b><u>Growing population and economy </u></b></div><div class="MsoNormal" style="color: blue; text-align: justify;"><b><u><span style="text-decoration: none;"><br />
</span></u></b></div><div class="MsoNormal" style="color: blue; text-align: justify;">One driver of growth in the healthcare sector is India’s booming population, currently 1.2 billion and increasing at a 2% annual rate. By 2030, India is expected to surpass China as the world’s most populous nation. By 2050, the population is projected to reach 1.6 billion.</div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;">This population increase is due in part to a decline in infant mortality, the result of better healthcare facilities and the government’s emphasis on eradicating diseases such as hepatitis and polio among infants. In addition, life expectancy is rapidly approaching the levels of the western world. By 2025, an estimated 189 million Indians will be at least 60 years of age—triple the number in 2004, thanks to greater affluence and better hygiene. The growing elderly population will place an enormous burden on India’s healthcare infrastructure.</div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;">The Indian economy, estimated at roughly $1 trillion, is growing in tandem with the population. Goldman Sachs predicts that the Indian economy will expand by at least 5% annually for the next 45 years and that it will be the only emerging economy to maintain such a robust pace of growth.</div><div class="MsoNormal" style="color: blue; text-align: justify;"><b><u><span style="text-decoration: none;"><br />
</span></u></b></div><div class="MsoNormal" style="color: blue; text-align: justify;"><b><u>Expanding middle class</u></b></div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;">India traditionally has been a rural, agrarian economy. Nearly three quarters of the population still lives in rural areas, and as of 2004, an estimated 27.5% of Indians were living below the national poverty line. Some 300 million people in India live on less than a dollar a day, and more than 50% of all children are malnourished.<b> </b></div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
<b> </b></div><div class="MsoNormal" style="color: blue; text-align: justify;">However, India’s thriving economy is driving urbanization and creating an expanding middle class, with more disposable income to spend on healthcare. While per capita income was $620 in 2005, over 150 million Indians have annual incomes of more than $1,000, and many who work in the business services sector earn as much as $20,000 a year.<br />
<br />
While this is a fraction of the income that their US peers earn, it is the equivalent of more than $100,000 per year when adjusted for purchasing power parity. More women are entering the workforce as well, further boosting the purchasing power of Indian households. Between 1991 and 2001, the percentage of women increased from 22% to 26% of the workforce, according to the latest Indian government census. Many of these women are highly educated: the ratio of women to men who have a college degree or higher level of education is 40:60.</div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;">Thanks to rising income, today at least 50 million Indians can afford to buy Western medicines—a market only 20% smaller than that of the UK. If the economy continues to grow faster than the economies of the developed world, and the literacy rate keeps rising, much of western and southern India will be middle class by 2020.</div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;"><b><u><span style="text-decoration: none;"></span></u></b></div><div class="MsoNormal" style="color: blue; text-align: justify;"><b><u>Rise of disease</u></b></div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;">Another factor driving the growth of India’s healthcare sector is a rise in both infectious and chronic degenerative diseases.</div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;"> While ailments such as poliomyelitis, leprosy, and neonatal tetanus will soon be eliminated, some communicable diseases once thought to be under control, such as dengue fever, viral hepatitis, tuberculosis, malaria, and pneumonia, have returned in force or have developed a stubborn resistance to drugs.</div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;">This troubling trend can be attributed in part to substandard housing, inadequate water, sewage and waste management systems, a crumbling public health infrastructure, and increased air travel.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;"><b><u>FORTIS HEALTHCARE</u></b></div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;"><span class="il"><span lang="EN-US">Fortis</span></span><span lang="EN-US"> Healthcare will definitely test your patience, but I believe subject to management acting diligently this should be a clear winner over a medium to long term period(12-36 months) and can easily ebe a 4-5bagger. The reason for my belief in FHL has been it has been hyperactive in acquiring stakes in Hospitals across India and the news just in is Fortis acquired QHA Holdings, Hongkong, it is evident from the its recent tussle to acquire Parkway Holdings with Kazanagh and now its announcement to acquire QHA Holdings that the Singh Brothers are trying to make FHL a Pan-Asia healthcare provider.<br />
<br />
Since the dismissal of the law suit by Anil Nanda against Escorts Heart Institute and Research Centre has mitigitated the legal risk hanging over its head since its IPO. The company is now free to execute its plans for growing the Escorts network and brand. <span class="il">Fortis</span> has the Largest Chain of NABH accredited hospitals in India. With the Promoters sitting on Huge Cash, the Rights Issue and the profits from the stake sale in Parkways giving some more cash, they can get a lot of Hospital Asset at distressed price and the Company is bound to be Multi Bagger in the years to come.<br />
<br />
<b><u>Background</u></b><br />
<br />
<span class="il">Fortis</span> Healthcare Limited(FHL) was incorporated in the year 1996. It was founded on the vision of creating an integrated healthcare delivery system. Based in Delhi, FHL, which acquired Escorts Heart Institute and Research Centre Limited in September 2005, has operations in Mauritius, Delhi, Jaipur, Noida, Mohali (Chandigarh), Amritsar, Faridabad, Chennai, Bangalore and Raipur. The company recently announced its first international venture in Mauritius. It currently has a network of 34 hospitals (including 11 satellite/heart command centres). These hospitals include multi specialty hospitals, as well as super-specialty centres providing tertiary and quaternary healthcare to patients in areas such as cardiac care, orthopedics, neurosciences, oncology, renal care, gastroenterology and mother and child care. The hospitals that FHL manages include <span class="il">Fortis</span> La Femme, a “boutique” style hospital that focuses on women’s health and maternity care. <br />
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<b><u>Future Plans</u></b><br />
<br />
<span class="il">Fortis</span> Healthcare intends to have 40 hospitals with 6000 beds by 2012. Two Green-field hospitals are under-construction, these are:</span></div><ul style="color: blue;" type="disc"><li class="MsoNormal" style="margin-bottom: 12pt; text-align: justify;"><span lang="EN-US">a super-speciality hospital in Shalimar Bagh, West Delhi, with specialization in cardiac care, orthopaedics, neuro-sciences, renal sciences, mother and child care and gastroenterology (first phase - 250 beds).</span></li>
<li class="MsoNormal" style="text-align: justify;"><span lang="EN-US">FIIMBS Medicity- a super-speciality hospital in Gurgaon, with a focus on trauma, oncology, mother and child care, cardiac care, orthopaedics, organ transplants and neuro-sciences (first phase -350 beds) </span></li>
</ul><div class="MsoNormal" style="color: blue; text-align: justify;">Further <span class="il">Fortis</span> Healthcare is in negotiations to provide laboratory outsourcing services to UK-based private hospital groups, which would involve clinical samples being flown to India and the results sent back by e-mail.<span lang="EN-US"><br />
<b><u><br />
</u></b>Performance wise, <span class="il">Fortis</span> has been moving from strength to strength. After the IPO and other fiascos, the company is back to what it does best - making people healthy and feel better.<br />
<br />
They are also looking to expand with overseas acquisitions as they see tremendous potential so much so that they recently acquired a strategic investment into the best know Hospital chain group in Mauritius.<br />
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All in all, the future looks pretty bright. The way that i see it, the health care business will always remain in vogue more so when Indian lifestyle is becoming more sedentary, india will be the diabetics, heart issues capital of the world in the next two years, it might seem unfair in that I am looking for profits by expecting Indians to fall sick but I think life is never treats you fair!!!!!!!!!<br />
<br />
The stock price has been rock solid between 160-175 levels and it looks like it’s forming a strong base at these levels.</span></div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;"><b><u><span lang="EN-US">Fortis acquires QHA Holdings</span></u></b></div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;"><span lang="EN-US">Fortis Global Healthcare Holdings has agreed to acquire the healthcare businesses of Hong Kong-listed QHA” for Rs.882 Crores. An agreement to this effect was reached between the two companies on October 8. The acquired businesses comprise a network of over 60 wholly-owned medical centres, over 500 affiliated clinics, over 40 dental and physiotherapy centres and a private nursing agency with a database of over 3,000 nurses</span><br />
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A must have stock that is at the cusp of strong growth..........</div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: blue; text-align: justify;"><b><u><span lang="EN-US">Happy Investing</span></u></b></div><div class="MsoNormal" style="color: blue; text-align: justify;"><br />
</div><div class="MsoNormal" style="color: red; text-align: justify;"><i><u>Disclaimer</u></i></div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;"><b><span style="color: red;">I am NOT an investing professional. I will sometimes jump into something that appears to be good; it may or may not be. Even if it is good for me, it may not be good for you. Anything I write on this site is my opinion and should NOT be relied on or taken as investing advice. Material presented here is for informational purposes only. Before acting on anything you read on this site, you must do your own research and you must come to your own conclusion which you will ultimately be responsible for, including any loss you may incur.</span><br style="color: red;" /><br style="color: red;" /><span style="color: red;"> Thank you for reading Eazeetrade. Hopefully, we can all learn something together and become better investors! </span></b> <b><span lang="EN-US" style="color: black;"><br />
</span></b></div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com1tag:blogger.com,1999:blog-5236277455546434322.post-31876268824227697822010-10-09T10:21:00.000-07:002010-10-09T10:21:12.214-07:00Bajaj Holdings-Sitting on a Cash reserve of Rs.23,000 CroreThe Bajaj Group is sitting on a cash reserve of Rs 29,000 crore, its patriarch, Mr Rahul Bajaj, said on Saturday. <br />
“The Bajaj Group is sitting on a cash reserve of Rs 29,000 crore. We are a conservative company when it comes to spending money, but we are happy with it,” its patriarch and member of the Rajya Sabha, Mr Rahul Bajaj, told reporters at an event held at th e Indian Merchants’ Chamber (IMC) here. <br />
Of this Rs 29,000 crore, <b>Bajaj Holding company has a cash reserve of Rs 23,000 crore</b>, Mr Bajaj Auto Rs 5-6 crore and Bajaj Finserv Rs 2,000 crore.Click on the link below to access the full report.<br />
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http://www.thehindubusinessline.com/businessline/blnus/02091520.htmPrashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-24663126530158892652010-10-08T17:30:00.000-07:002010-10-08T17:30:22.820-07:00Response From JM Financial dated 08 October 2010Dear Visitors<br />
<br />
Please click on the link below to access the response of JM Financial justifying Non Compete Fee, Lets all come together to fight the injustice.<br />
<br />
Kind Regards<br />
<br />
Prashant<br />
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<a href="http://issuu.com/raoonnet1/docs/jm_financial_">http://issuu.com/raoonnet1/docs/jm_financial_</a>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-6313984317223253202010-10-05T18:38:00.000-07:002010-10-28T14:05:40.675-07:00Bajaj Holdings-TREASURE TROVEWhile the stock markets are soaring and the investors are wondering at the pricey valuations of leading companies, one will be surprised to know that there is a treasure trove in the backyard and fortunately the same is trading substantially below its fair value. Here, an ‘argumentative Indian’ may intervene saying “but valuation of a company is so subjective…” Well, not in case of the Company in point , I would say. And you don’t even need to indulge into deep valuation models, profitability analysis or scenario building for finding its real worth. The investment made by the company being covered here in the shares of listed companies alone is many times more valuable than its current market capitalization. <br />
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Companies could be purely holding companies, purely investment companies or combination of both. Bajaj Holdings and Investment (BHIL) is a case in point. This is what the company says about itself: "The Company is essentially a holding and investment company focusing on earning income through dividend, interest and gain on investments held." Bajaj Holdings and Investment acts as a holding company for Bajaj Auto and Bajaj Finserv. <br />
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In fact, Bajaj Holdings and Investment is known for its mouth-watering treasure of equity shares. BHIL holds shares in the below companies: <br />
Maharashtra Scooters, Bajaj Auto, Bajaj Finserv, Allahabad Bank, Associated Cement Company, Bajaj Electricals, Bajaj Hindustan, Bharat Heavy Electricals, Bharti Airtel, Bharat Forge, Bongaingaon Refinery & Petrochem, Chennai Petroleum Corporation, Crompton Greaves, Electrosteel Castings, Force Motors, Grasim Industries, Gujarat Alkalies, Gujarat Heavy Chemicals, Hindalco Industries, Hindustan Zinc, ICICI Bank, Industrial Finance Corporation of India, Larsen & Toubro, Mahindra & Mahindra, Maruti Suzuki India, Mukand, Mysore Cements, Neyveli Lignite, Patni Computers, Raymond, Reliance Communication, Reliance Industries, Reliance Infrastructure, Shree Cements, Siemens, State Bank of India, Sail, Suzlon Energy, Tata Motors, Tata Steel<br />
<br />
In 2007-08, Bajaj Holdings & Investment Limited [(BHIL)] –erstwhile Bajaj Auto Limited [(BAL)] was demerged, whereby its manufacturing undertaking had been transferred to the new Bajaj Auto Limited and its strategic business undertaking consisting of wind farm and financial services business had been vested with Bajaj Finserv Limited.Bajaj Holdings & Investment Limited (‘BHIL’ or ‘the company’)is now essentially an investment company. The company holds 31.49% in Bajaj Auto Limited & 35.64% in Bajaj Finserv Limited, the results of which are consolidated with BHIL. <br />
<br />
BHIL is the cream company of the group and is cash rich like Tata Sons or Pilani Investments or the Birla Group having huge investments in its group companies at par values, which have now multiplied several folds by way of rights and bonus issues or convertible debentures, etc. This is quite evident with the number of shares it holds in BAL, Maharashtra Scooters, Bajaj Electricals, Bajaj Hindustan bought at nominal values.<br />
<br />
Strong Management: The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches over a wide range of industries, spanning automobiles (two‐wheelers and three‐wheelers),home appliances, lighting, iron and steel, insurance, travel and finance. The group's flagship company,Bajaj Auto, is ranked as the world's fourth largest two‐ and three‐ wheeler manufacturer and the Bajaj brand is well‐known across several countries in Latin America, Africa, Middle East, South and South East Asia.<br />
<br />
1. 9.11 cr bajaj auto shares= 14500 cr<br />
2. 5.22 cr bajaj fins shares= 2800 cr<br />
3. 2 cr icici = 2400 cr<br />
4. 1.65 cr bajaj electric = 500 cr<br />
5. 20% force motors = 300 cr<br />
6. BSE ST EXCHANGE SHARES = 220 cr<br />
7. ICRA = 80 CR<br />
8. FIXED ASSET SEC = 2200 CR<br />
9. OTHER EQ SHARES = 2500 CR<br />
10. MISC LIKE BAJAJ HIND, MAH SCOOTERS, INT, DIV ETC = 1000 CR<br />
<br />
Market price 05 October 2010 Rs 852<br />
Market Capitalization Rs 9000 crores<br />
Market value of Assets per share Rs.2650/-<br />
EPS (2009- 10) Rs 76<br />
Dividend per share-2010 Rs 30<br />
Discount of Price to Market value of Investments 60%<br />
<br />
Ownership <br />
Category %<br />
Promoter 34.55<br />
FII 9.74<br />
DII 16.77<br />
Others 38.94<br />
Total 100.00<br />
Total Shares (Lakh) 1,060.43<br />
<br />
Public" and holding more than 1% <br />
<br />
Shareholder No. of Shares Shares as % of <br />
1 LIC 7,560,851 -- 7.13 <br />
2 Jaya Hind Investments 5,805,256 -- 5.47 <br />
3 ICICI Prudential 5,176,241 -- 4.88 <br />
4 Maharashtra Scooters 3,387,036 -- 3.19 <br />
5 Sikkim Jansewa 1,829,958 -- 1.73<br />
6 ACACIA Partners 1,403,998 -- 1.32 <br />
7 Reliance Capital 1,173,599 -- 1.11 <br />
<br />
Total- 26,336,939 -- 24.84 <br />
<br />
<br />
<br />
A handful of holding and investment companies own blue-chip stocks in bulk. The schedules on investments of Bajaj Holdings and Investment provide details of equity holdings published in the annual report and runs into many pages.<br />
<br />
The performance of the company is directly related to the performance of its investments. During the year, income from investments earned by the company was Rs. 8,135 million as against Rs. 2,364 million during the previous year. The equity markets rose during the year under review. Riding upon the opportunities available, the company booked profits on some of its investments. <br />
<br />
The profit on sale of investments increased from Rs. 104 million in previous year to Rs. 5,901 million for current year. Standalone results of Profit after tax 7,713 1,960<br />
<br />
The company’s assets broadly consist of equity investments, including strategic equity investments and investments in liquid and secured instruments.<br />
<br />
With each of the underlying group companies delivering very good results, the consolidated results of Bajaj Holdings &Investment Limited have also been outstanding.<br />
<br />
The year 2009-10 has been an excellent year for the company and its associates.<br />
l Stand alone income - Rs. 8,135 million v/s Rs. 2,364 million<br />
2 Stand alone Profit After tax - Rs. 7,713 million v/s Rs. 1,960 million<br />
3 Consolidated Profit After tax - Rs. 13,626 million v/s Rs. 3,030 million<br />
<br />
The market value of all the securities it holds works out to approx Rs.27,000 cr. Thus there is hidden wealth way over its equity capital of Rs.101 cr., which is not reflected in the balance sheet. Investors are not aware of the huge wealth locked in this investment company because of which its share price is quoted at a fraction of its intrinsic value.<br />
<br />
Against a market price of Rs 852 the market value of investments that this company holds currently works out to approximately Rs 2700 per share This means that an investor is getting these investments most of them blue chip stocks for 1/3rd cost.<br />
<br />
Overview<br />
<br />
• Market value of investments of Rs 2700 per share available for Rs 852 per share.<br />
• Totally Debt free company with an attractive dividend yield at 3.56. <br />
• Dividend yield captures the downside risk of the stock Also there is no need <br />
to sell investments to pay off dividend since the dividend that it receives can <br />
be distributed directly to the shareholders.<br />
<br />
Concerns: Since the margin of safety is huge 2/3rd of its intrinsic value, there are no immediate concerns as such but being an Investment/holdings company with a significant portion of the investment in group companies the market would not give the stock a higher PE. <br />
<br />
The above demonstrates that a lot of value remains locked in BHIL, which is not fully reflected in its share price right now. And, one cannot hope to unlock the entire value in such companies in a short while. A retail investor should, however, keep looking for chronically undervalued firms or arbitrage opportunities that can generate healthy returns in the long run<br />
<br />
Recommendation: BHIL is an excellent play for the risk adverse investor who wishes to participate into the equity markets with minimum downside risk and stable dividend flow. At current price the stock can be bought for superlative returns over a long term gains <br />
<br />
I expect the stock to outperform in the medium to long term achieving its ultimate target of Rs.1500/- in a 6 to 9 month time frame.<br />
<br />
Happy Investing<br />
<br />
Prashant<br />
<br />
Disclaimer<br />
<br />
I am NOT an investing professional, instead I am the mule carrying the salt. I will sometimes jump into something that appears to be good; it may or may not be. Even if it is good for me, it may not be good for you. Anything I write on this site is my opinion and should NOT be relied on or taken as investing advice. Material presented here is for informational purposes only. Before acting on anything you read on this site, you must do your own research and you must come to your own conclusion which you will ultimately be responsible for, including any loss you may incur.<br />
<br />
Thank you for reading Eazeetrade. Hopefully, we can all learn something together and become better investors!Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com7tag:blogger.com,1999:blog-5236277455546434322.post-58796128735929030972010-09-24T11:45:00.001-07:002010-09-24T11:45:46.907-07:00Draft Complaint Letter to SEBI- Re: Cairn India:email to be sent to--- sebi@sebi.gov.inDear Sir<br />
<br />
I am an Investor of Cairn India and am aggrieved by the open offer price being offered to Minority shareholders like me,I believe that by classifying the premium being paid to Cairn Energy as Non compete fee the intention is primarily to reduce the open offer price and thus the overall acquisition price for Vedanta.<br />
<br />
That Cairn Energy would continue to stay invested in Cairn India belies its claim of having received non-compete fee from Vedanta and proves that it was only making life that much easier for the acquirer by playing footsie with it.One wonders why. Is this a huge display of naiveté?<br />
<br />
In any case, this flies in the face of non-compete fee and indeed in a way gives a lie to such a claim. It is indeed odd to find quarter being given to the one who has been paid a non-compete fee. Non-compete fee and continued interest in the business are incompatible phenomena.<br />
<br />
Apart from the chicanery involved in camouflaging a good chunk of the negotiated price as toward non-compete fee, staying put in an acquirer's company albeit in a minor capacity gives the outgoing promoter enough power to constantly breathe down the neck of the acquirer when his purported intention is to break free of him.<br />
<br />
It is my contention that in the present case non-compete fee in the context of takeover is a pure hogwash, I also at loss to explain myself on why a savvy businessman would expose himself to the potential danger of being constantly snapped at the heels by the one who has sold out. Even if the claim of non-compete agreement were to be believed, it is a tad ironical that the acquirer would not brook competition from the seller but would stoically put up with his intrusive presence inside the company. <br />
<br />
It is my contention that the Non compete fee is a mere whitewash with the intention of depriving and reducing the acquisition for VEDANTA.As a shareholder of Cairn India I oppose any preferential treatment in payment of any fee to the promoters who by the way are not even exiting.<br />
<br />
Kind RegardsPrashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-87915070166611840892010-09-21T08:20:00.000-07:002010-09-21T08:20:22.150-07:00Back to my BlogDear All<br />
<br />
It has been ages since I blogged, finally decided its time for me to do where my heart lies sharing info on stocks when no analyst covers them and selling them when they do.<br />
<br />
Happy investing <br />
<br />
PrashantPrashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-41856702878341364362010-09-21T08:16:00.000-07:002010-10-02T15:26:18.483-07:00Counter letter to JM Financial-Cairn India open offer<meta content="text/html; charset=utf-8" http-equiv="Content-Type"></meta><meta content="Word.Document" name="ProgId"></meta><meta content="Microsoft Word 11" name="Generator"></meta><meta content="Microsoft Word 11" name="Originator"></meta><link href="file:///C:%5CDOCUME%7E1%5CSUNILK%7E1%5CLOCALS%7E1%5CTemp%5Cmsohtml1%5C01%5Cclip_filelist.xml" rel="File-List"></link><o:smarttagtype name="country-region" namespaceuri="urn:schemas-microsoft-com:office:smarttags"></o:smarttagtype><o:smarttagtype name="place" namespaceuri="urn:schemas-microsoft-com:office:smarttags"></o:smarttagtype><style>
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<div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">To,<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Adithya Anand<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">JM Financial Consultants Private Limited<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">141, Makers Chambers-III Mumbai<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Dated:20<sup>th</sup> September 2010<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">By Email : </span><span class="gd"><span style="color: black;"><a href="mailto:Adithya.Anand@jmfinancial.in"><span style="color: black;">Adithya.Anand@jmfinancial.in</span></a><o:p></o:p></span></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Dear Adithya<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><b><i><u><span style="color: black;">Sub:</span></u><span style="color: black;"> Open Offer for acquisition of upto 20% of the emerging voting rcaiptal of Cairn India Limited by Vedanta Resources PLC and Twin Star Energy Holdings Ltd collectively(Acquirers) along with Sesa Goa Limited and VC Dempo & Co Ltd.<o:p></o:p></span></i></b></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><b><u><span style="color: black;">Ref: SEBI Letter dated September9,2010(Reference No.CFD/DCR/TO/SS/OW-19330/10<o:p></o:p></span></u></b></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Thank you for your email and attachment of 15<sup>th</sup> September 2010 wherein you on behalf of Vedanta PLC outlined the legitimacy and basis of payment of non-compete fee under the Takeover regulations and also the Indian contract act.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">It is my contention that <o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.5in; text-align: justify; text-indent: -0.25in;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">1.<span style="font: 7pt "Times New Roman";"> </span></span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">The decision to catalog the premium of Rs.50/- being paid to Cairn Energy “CE” as Non-Compete Fee “NCF” is without any merit as CE is no position to compete with the acquirer, and as it was rightly pointed out by Hon’ble SAT in the Tata Tea case(2009) “Supposing the fee is paid to a person who cannot compete, the Board(SEBI) may be entitled to say that it is only a device to reduce offer price”, it is my submission for various reasons outlined below that CE is not in a position to compete with the acquirer and thus no payment of NCF is justified.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.5in; text-align: justify; text-indent: -0.25in;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">2.<span style="font: 7pt "Times New Roman";"> </span></span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Despite my submissions put forward in this letter that the purpose of NCF in the present transaction is merely to reduce the cost of acquisition, in the event both SEBI and the Acquirers determine that CE can be paid NCF, at the cost of the Minority shareholders then it is my contention that:<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; margin-left: 42pt; text-align: justify; text-indent: -0.25in;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">a.<span style="font: 7pt "Times New Roman";"> </span></span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">S.27 of the Indian Contract act which is an act of Parliament disallows NCF payment unless such payment falls within the ambit of the exception, it is clear that that a regulation by SEBI cannot possibly allow it and thus be a basis of discriminating between shareholders.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 24pt; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; margin-left: 42pt; text-align: justify; text-indent: -0.25in;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">b.<span style="font: 7pt "Times New Roman";"> </span></span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Section 3 of the anticompetitive agreement also needs to be considered, given the facts involved in this particular transaction as it <i><span style="font-family: Garamond; font-style: normal;">causes or is likely to cause an appreciable adverse effect on competition in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:place></st1:country-region></span></i><i><span style="font-family: Garamond;">.</span></i><o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Before I even set out to provide a detailed response to the arguments put forward in your email of 15<sup>th</sup> September 2010, Can I put it to Acquirers that this particular acquisition kind of reeks of bad corporate governance in that the acquirer while distinguishing between minority shareholders’ and promoters has shortchanged minority investors, Why should some shareholders get extra consideration in an M&A? Or to paraphrase George Orwell: "All shareholders are equal. But are some more equal than others?" Why shouldn’t <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> follow the “all holders rule” which places all shareholders in the same position?<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Vedanta has without doubt not only upset the minority shareholders which includes behemoths like LIC and various mutual funds but also the analysts which eventually has consequences for a company's future capital-raising plans particularly when Mr.Anil Agrawal paints a very aggressive picture for Cairn India.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">I strongly believe which I will support with cogent reasons that the agreement to pay NCF to the majority shareholders alone is not justified, as it is my contention that NCF is merely being used as a route to reduce the cost of acquisition of Cairn <st1:country-region w:st="on"><st1:place w:st="on">India</st1:place></st1:country-region> through a public offer.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><b><u><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Basis for Paying Non-Compete Fee<o:p></o:p></span></u></b></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.5in; text-align: justify; text-indent: -0.25in;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">A.<span style="font: 7pt "Times New Roman";"> </span></span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Point No.1 and 1.a does not warrant a response as they may be mere facts and statements.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.5in; text-align: justify; text-indent: -0.25in;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">B.<span style="font: 7pt "Times New Roman";"> </span></span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">In relation to <b>1.b</b> it is agreed that Cairn Energy “CE” has extensive knowledge and expertise in the oil & gas sector, they may also have access to various seismic surveys, crucial trade information, but such surveys and trade information can only be in relation to all assets being acquired under the Share Purchase Deed dated 15<sup>th</sup> August 2010 “SPD” and no doubt will form part of the overall acquisition, you would appreciate it that in almost all SPD’s there are restrictive covenants whereby the seller warrants not to use trade secrets/knowledge to the detriment of the acquirer, that being said there is no logic behind the non compete fee for the value of Cairn, for it derives it value from its production fields and exploration blocks which obviously will include all seismic information, drilling operations, which should automatically be transferred to Vedanta as a result of this transaction, Oil & Gas are commodities which is highly regulated by the Governments of various countries mentioned in your email and more particularly in India, Customers buying such commodities cannot be stolen/poached, therefore there is no question of a situation where by CE can use such information to their advantage, while it may be argued that there is a spectre of competition, the threat of competition should be relative to the size of the company being acquired and not every thread of possible competition is to be considered. In as much there is no real and substantial competition payment of NCF to CE alone is not justified. <o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Furthermore Mr.Bill Gamell, Chairman of CE and Cairn India in his interview to CNBC TV18 (http://www.moneycontrol.com/news/business/not-withdrawingindia-cairn-energy_478457.html) said “What I would like to say is that Cairn Energy PLC could end up having sold only 40% and still be 20% holder or maybe in the 10-20% position. But we are very pleased to have a continuous association, we are not withdrawing from <st1:country-region w:st="on">India</st1:country-region>”, Mr.Gamell further stated “We have agreed not to compete as a company against Cairn <st1:country-region w:st="on">India</st1:country-region>’s interest in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:place></st1:country-region>. As a shareholder in Cairn <st1:country-region w:st="on"><st1:place w:st="on">India</st1:place></st1:country-region>, we continue to be very much involved and it is an association which we hope to continue over the next coming years” <o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">The above being on record it is clear that CE does not intend to sell the residual stake in the near future and it is common sense that no shareholder and particularly CE with between 10-20% valued at approximately between $1.5-3 billion depending on the ultimate stake it will hold post the transaction will do anything to jeopardize its own interests or take up a private venture with conflicting interests and, thus there is no possibility of competition to warrant a NCF.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">It is also pertinent to note that if CE decides to sell its residual shareholdings at a later stage then it would tantamount to assignment of any participating interests it may have under the Production sharing contract which may inurn prompt cancellation of the Production sharing contract itself or at the least give pre-emptive rights to ONGC. The clause under the PSC entered into by the operating consortium of oil and gas blocks with the government will be triggered when one of the members decides to quit, thus it seems unlikely that CE will quit as that may nullify the very object of the acquisition.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Further more as rightly pointed out by Mr.Bill Gamell in his interview to The Hindu on the 15<sup>th</sup> September 2010 “Cairn <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> is about its people and their expertise. The knowledge and expertise resides in these people and not in Cairn Energy Plc” hence for the reasons outlined above NCF is not justified.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">C.<span style="font: 7pt "Times New Roman";"> </span></span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">I further submit that oil and gas sector in India and all other countries in which Cairn India and associates have interests and being acquired are severely regulated and therefore the scope for competition is as good as non-est. In relation to any future NELP’s it my submission that how much ever knowledge or expertise a prospective company may have, unless it is willing to pay the top dollar exploration blocks are not allotted, further more as outlined in my response to your point B, CE has placed it on record that it does not in the near future intend to sell its residual stake this should be considered in light of the Non-compete period is only for a 3 year period and thus it defies logic when you argue that CE will pose direct competition, surely you would appreciate that even if CE decides to do something as illogical as that then it will have to compete from scratch in the process ensuring that the value of the stake they hold is diminished.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.5in; text-align: justify; text-indent: -0.25in;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">D.<span style="font: 7pt "Times New Roman";"> </span></span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">My submissions in Pt. B & C clearly outline the reasons on why I believe that CE will not/cannot compete with the Acquirer and this is an apt case where SEBI should as directed by SAT in Tata Tea case(2009) intervene, where SAT held “Supposing the fee is paid to a person who cannot compete, the Board(SEBI) may be entitled to say that it is only a device to reduce offer price”<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">In light of the above submissions it is most respectfully submitted that the proposed payment of NCF is not justified, if the acquirer still believes that it is in the interest of the minority shareholders then the acquirers should be brave enough to make it a democratic process wherein they should ask all shareholders to vote and express their opinion by a postal ballot. <o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><b><u><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Legitamacy if Non-Compete payments</span></u></b><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">:<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; margin-left: 0.25in; text-align: justify; text-indent: -9pt;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">At the outset I wish to clarify that the Takeover Regulations is in direct contravention with an act of Parliament(Indian Contract Act 1872 and S.3 of the Competition act 2002) hence invalid.<o:p></o:p></span></div><div style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Under Indian law, non-compete clauses are not a means to dissuade competition. Section 27 of the Contract Act expressly states that "every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind is to that extent void".<o:p></o:p></span></div><div style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">This stringent rule is subject to a single exception:<o:p></o:p></span></div><div style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">"<i><span style="font-family: Garamond;">One who sells the good-will of a business may agree with the buyer to refrain from carrying on a similar business within specified local limits, so long as the buyer or any person deriving title to the good-will from him, carries on a like business therein; provided that such limits appear to the court reasonable.</span></i>"<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">The Indian Contract Act restricts the enforceability of non-compete covenants unless the seller is selling the entire business along with goodwill. As per case law, it is questionable, if a share purchase transaction can be categorized as a sale of business. It is my submission that non-competes are not allowed under the Indian Contract act and therefore do not stand up in any court of law and hence they should not be allowed at all. While it is an accepted norm under the Takeover Regulations to provide non-compete fees, the position today has to be looked at little differently</span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;"> in light of the Indian Contract act and also the Competition Act 2002.<o:p></o:p></span></div><div style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">The Indian law against restraint of trade and profession is peculiar in that it is deliberately absolute unlike many other jurisdictions like the <st1:country-region w:st="on"><st1:place w:st="on">UK</st1:place></st1:country-region> which allows a reasonable restraint of trade and profession. <o:p></o:p></span></div><div style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Although SAT overruled SEBI in Tata Tea Case(2009), quoting section 27 of the Act, but instead of relying on the Indian commentary, SAT relied on the <st1:place w:st="on"><st1:country-region w:st="on">UK</st1:country-region></st1:place> commentary.<o:p></o:p></span></div><div style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">The difference in the law/interpretation meant that section 27 was not interpreted properly. In other words, on a correct interpretation of the Indian Contract Act, the SEBI regulation allowing non-compete payments itself stands on weak legs. If the law made by Parliament disallows non-compete payments, it is clear that a regulation by SEBI cannot possibly allow it and be the basis of discriminating between shareholders, and furthermore the present acquisition is a mere change of shares at the corporate level and is not akin to a sale of business and goodwill and thus does not fall within the purview of the exception to S.27, and whether the exception will apply when the seller does not completely exit the Company i.e; continues to retain stake is a matter that introduces greater complexity as it definitely does not evidence that there has been a sale of goodwill at all in order for the exception to S.27 to apply.<o:p></o:p></span></div><div style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Further more Section 3 of the Anti-Competition Act,2002 prohibits agreements which restrict the production, supply, distribution, acquisition or control of goods or provision of services, which cause or are likely to cause an appreciable adverse effect on competition within <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place><o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">When Mr.Gamell Chairman of CE and Cairn <st1:country-region w:st="on">India</st1:country-region> himself states that “Cairn <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> is about its people and their expertise. The knowledge and expertise resides in these people and not in Cairn Energy Plc," when asked if Vedanta's lack of experience in Oil and Gas business may become a stumbling block to obtain regulatory approvals and when the Indian Contract act which is an act of Parliament expressly prohibits any NCF payments then I fail to understand the rationale for accepting and agreeing to make the NCF by the Parties to the acquisition.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
</div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">In View of the above, it is contended that the offer price and the non-compete amount payable are not in compliance with the Indian Contract Act and Anti-competition act and it is also submitted that in as much as the Takeover regulations are in contravention with an act of Parliament the same itself stands on weak legs thus SEBI cannot possibly allow it and be the basis of discriminating between shareholders.<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Kind Regards<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">PRASHANT Rao<o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">Copy to <o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">1. SEBI -- <a href="mailto:Sebi@sebi.gov.in">Sebi@sebi.gov.in</a><o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;">2. Lakshmi Lakshmanan-- </span><i> </i><span class="gi">Lakshmi.Lakshmanan@jmfinancial.in</span><span style="color: black; font-family: Garamond; font-size: 14pt; line-height: 200%;"><o:p></o:p></span></div><div class="MsoNormal" style="line-height: 200%; text-align: justify;"><br />
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</div>Prashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com5tag:blogger.com,1999:blog-5236277455546434322.post-40638945364070267262007-09-13T02:47:00.001-07:002007-09-13T02:56:03.222-07:0018% ReturnsDear Guests<br /> <br />You will be pleased to note that the gamut of stocks mentioned on this board on 3rd July 2007 have on an average appreciated by 18% in the past two months, conviction pays and informed decisions can create wealth.<br /><br />I would be pleased to receive any comments and suggestions from all the guests.<br /><br />I will shortly post a detailed analysis about each stock' potential to be a Multibagger.<br /><br />Regards<br /><br />PrashantPrashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-52095824971537834652007-09-13T02:47:00.000-07:002007-09-13T02:54:35.239-07:0018% ReturnsDear Guests<br /> <br />You will be pleased to note that the gamut of stocks mentioned on this board on 3rd July 2007 have on an average appreciated by 18% in the past two months, conviction pays and informed decisions can create wealth.<br /><br />I would be pleased to receive any comments and suggestions from all the guests.<br /><br />I will shortly post a detailed analysis of why the stocks mentioned in this board will in fact become Multibaggers.<br /><br />Regards<br /><br />PrashantPrashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-53369473961122470252007-07-21T11:07:00.001-07:002007-07-21T11:07:48.886-07:00Daily Market RoundupPrashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-11733551456313352712007-07-21T10:28:00.000-07:002007-07-21T11:13:18.151-07:00Weekly Stock Market roundupPrashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0tag:blogger.com,1999:blog-5236277455546434322.post-49632252837632145412007-07-14T22:51:00.001-07:002007-07-14T22:52:47.958-07:00Forging its way ahead-Mahindra forgingsPrashanthttp://www.blogger.com/profile/08508853094843482023noreply@blogger.com0