Happy Diwali 2014! The Annual Prediction Post, and Our Scorecard

Here’s wishing you a very Happy Diwali! Here’s the eighth edition of the Capital Mind Prediction Series, which tells you that it’s darn difficult to predict anything with reasonable success. Which is probably why last year I succumbed to the idiocy of making weasel rules – that is, making just two of three elements of Brilliant but Useless Predictions.

What Happened In The Last Year

Firstly, the markets went nuts. I mean absolutely nuts. The one year return, since last Diwali, on the headline Nifty Index alone, is 27% with the Nifty moving from 6,300 to 8,000. This has been a great year for stocks.

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The Biggest Sector Moves weren’t in the Nifty, really. Smallcaps did the best – over 58% since last Diwali, but Midcaps weren’t […]

By |October 25th, 2014|Categories: Stocks|Tags: |0 Comments

The NSEL-FT Forced Merger Is Not About Piercing Limited Liability. It’s About Fraud.

Too many articles have come out decrying the order by the Government to merge FT and NSEL. They all quote the same thing – FT was just an investor and therefore it should not bear any liability greater than the amount of money they invested into it. It’s against the concept of limited liability. I would have believed this if there was no five letter word “Fraud” involved.

For instance, I think that it’s perfectly fine that Vijay Mallya can spend his personal money while Kingfisher owes lots of money to banks. Because his personal liability is different from that of the company. He is not required to pay back the company’s debt. Of course, he could be, if any of two things happen:

  • If Mallya has fraudulently embezzled Kingfisher funds or conspired with it to fraud someone else, it would not be an overreach to use this information to demand that he pay back such loans […]

By |October 23rd, 2014|Categories: FinanTech|Tags: |2 Comments

Financial Technologies to be Merged With NSEL; End of the FT Saga

The government now merges The National Spot Exchange Limited (NSEL) with its parent, Financial Technologies (FT). NSEL has been involved in a mega scam (see Capital Mind’s complete coverage) where it was unable to payout exchange trades. The scam was that the whole thing was supposed to be a commodity exchange, but instead it was used by the exchange and by certain parties to finance themselves, with lay investors buying commodities and selling them immediately back on a forward contract to lock in returns. NSEL is a subsidiary of FT.

The problem came when the government banned the “forward” part of the scheme, which unravelled the whole thing – it turned out that the commodities that people had bought (which were sold back), didn’t even exist. That they didn’t exist was because the stocks were held by the counterparties of these trades i.e. the people who were being financed. THose being financed didn’t have enough cash (or commodities) to […]

By |October 21st, 2014|Categories: FinanTech|Tags: |5 Comments

3 Things in My TV Interview Last Week: Coffee, IT and Crude Oil Hedges

I was interviewed at ET Now last week, on the morning show with Ayesha Faridi and Niraj Shah. I’ve been itching to bring you more details.

Wake Up And Smell The Coffee

Coffee prices have been going up recently, largely because of a drought in Brazil. I spoke about how Coffee is a promising sector, and like a company (CCL Products) which is in the space. Note that CCL Products is a company we own as part of the Capital Mind Premium portfolio.

Coffee Prices have slightly corrected but if the news on the drought is correct, we are going to see a continued rise in the price of coffee.

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The Crude Oil Hedge

And then I spoke of how India should […]

By |October 20th, 2014|Categories: FuelPrices, InfoTech, Stocks|Tags: |7 Comments

DLF Tanks After SEBI Bans It for 3 Years, Says Company Hid Information From IPO Investors

DLF and six of its directors have been banned from accessing the securities markets for three years. Because they lied during the IPO.

The details are fascinating. This SEBI report has phenomenal investigative details, and let me try and decode this for you:

  • DLF owned some companies as subsidiaries
  • Just before the IPO they moved the holding of these companies to the wives of key executives
  • so that these companies weren’t shown as subsidiaries
  • But DLF still controlled them (an employee was even the cheque signatory!)
  • And DLF had rights to develop the land owned by these companies
  • So much land that it was 38% of the company’s total land reserves
  • And the wives of key executives had no other sources of income (in this context, housewives)
  • So how did they pay for their stake?
  • Their husbands took personal loans. And put the money into joint accounts with their wives.
  • The wives paid for their stake. And […]
By |October 14th, 2014|Categories: DLF||7 Comments

Essar Ports and Essar Shipping To Go Private; Shares Gain Massively

Essar Group companies, Essar Ports and Essar Shipping saw a tremendous jumps in share prices today.

Essar Ports:

Essar_Ports_01

Essar Ports (BSE: 500630; NSE: ESSARPORTS) closed on Friday at Rs. 91.50. It is currently trading at Rs. 108.15. That is a massive increase of 18.20%!

Essar Shipping:

In comparison, Essar Shipping (BSE: 533704; NSE: ESSARSHPNG), which closed at Rs. 19.75 on Friday, is currently trading at Rs. 23.70; an increase of 20%.

Essar_Shipping_05

The massive jumps come on the back of confirmation from the Essar Group, that they will delist both Essar Ports and Essar Shipping from the bourses. The promoters attribute their decision to a perceived lack of investor interest in their stocks, as well as the belief that they would be in a better position to address needs of the companies whilst delisted. 

The promoters hold a combined share of 74.97% of Essar Ports. […]

By |October 13th, 2014|Categories: Stocks||2 Comments

GMR Infra’s New Power Plant Sets In; Shares Jump Over 12% In 2 Days

The shares of GMR Infrastructure (BSE: 532754; NSE: GMRINFRA) have been seeing a steady upswing since the markets re-opened yesterday, 7th October.

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The stock closed at Rs. 17.80 on the 1st of October. On the 7th, after the markets re-opened, the share was trading at an intra-day high of Rs. 20.30; a jump of 14.04%. It closed at Rs. 19.80 yesterday, a gain of 11.24% from the previous day’s close.

Why did the Share Price Rise?

This surge in the share price came on the back of news that the first 685 MW unit of the GMR Chhattisgarh Energy Limited (GCEL) thermal power plant successfully synchronized with the grid. This unit has a capacity of 685 MW.

The GCEL plant is the GMR group’s first super-critical coal-based thermal power plant and is located at Raikheda in Raipur (Chhattisgarh). Once completed, the plant would have a total capacity of 1,370 MW. Work […]

By |October 8th, 2014|Categories: Stocks||1 Comment

Cera Sanitaryware Announces Q2 Results; Net Profit Soars 48.31%, Shares At A 52-Week High

Cera Sanitaryware (BSE: 532443; NSE: CERA) today hit a 52-week high of Rs. 1848 (at 13:56 p.m.). That is a jump of 16.72% from the previous close price of Rs. 1583.25.

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Not only did the share price see a surge, there were massive volumes being traded today. A total of 47,009 shares were traded today; the highest since 5th May, 2014 when 79,870 shares exchanged hands.

Why did the share price jump so much?

Earlier today, Cera released their stand-alone financial results for Q2 2015 (period ending Sept 30, 2014). The numbers look very impressive:

CS_02

Looking at the year-on-year numbers, we see that:

  • Total Income from Operations has increased 25.72%, from Rs. 158.76 cr. to Rs. 199.60 cr;
  • Finance Costs have increased ever so slightly; a 5.59% increase year-on-year;
  • Net Income has jumped by 48.31%!

That is quite staggering. Cera saw a massive jump in Net Profit […]

By |October 7th, 2014|Categories: Stocks||0 Comments

The Coal Judgement That Took Down the Market

The Supreme Court has ordered that 214 our of 218 coal block allocations since 1993 be “quashed”. Only about 46 of these blocks were actually operational, and all those that were not operational cannot be made so (because they are now illegal).

That means the companies that got them are in trouble, for two reasons:

  • They can’t operate these blocks after March 31, 2015
  • and they have to pay a fine of Rs. 295 per tonne of coal produced till now (and from now till March 2015)

Just four blocks were spared the axe; two given to Reliance Power for their Ultra Mega Power Projects, and one each of NTPC and SAIL. The reasoning: the first two is for an Ultra Mega Power Project (UMPP) and the others are for public sector enterprises. (We protect our own!)

The Judgement Provides Scary Interim points

The judgement says that some of the reasons the defense gave to not cancel the blocks was

  • SBI has an exposure of […]
By |September 25th, 2014|Categories: Stocks||10 Comments

Supreme Court Coal Block Verdict: Is Coal India a Winner?

On Wednesday, 24th September, the Supreme Court upheld its August judgement to scrap 214 out of the 218 coal blocks that were allotted since 1993. This was widely expected, and resulted in share prices of big players in this sphere, dropping massively. The worst-hit include Jindal Steel & Power, Hindalco, Usha Martin & Monnet Ispat to name a few.

The remaining 4 blocks that were not repealed (government-run, non-Joint Venture allotments) belonged to NTPC, Steel Authority of India Ltd and 2 to the 4,000 MW Sasan Power Plant (owned by Reliance Power) in Madhya Pradesh.

The SC has given the affected companies 6 months to cease operations. Additionally, they will incur a penalty of Rs. 295/metric ton of coal extracted, which will have to be paid on or before the end of the year.

Wow. At those rates, the penalty itself will be more than Rs. 8,083 cr., based on the approximate figure of 274 million tonnes that companies have mined thus […]

By |September 25th, 2014|Categories: Stocks||0 Comments

Step 1: Convert FCCB Into Shares. Step 2: Sell Like There’s No Tomorrow (Suzlon)

Suzlon’s shares have fallen around 20% in two days (10% every day). The stock is now halfway down from the peak.

Why?

It seems that FCCB holders have converted $69 million worth bonds to shares at Rs. 15.46 per share. That’s 27.04 cr. shares more. The company earlier had just 278 cr. shares issued, so this is a 10% dilution. (to 305 cr. shares)

It appears like those FCCB holders who converted have attempted to sell in the market, leading the market to have no buyers, just sellers (lower circuit).

The new shares have been listed on September 19 (Friday) which is when they had been sold, continuously. Suzlon had moved up from 14 n May to more than 36 in mid-June, and has been on a downslide since.

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The folks who […]

By |September 22nd, 2014|Categories: Suzlon||6 Comments

Ramky Infrastructure To Sell 3 Projects: Share Price Jumps

Shares of Ramky Infrastructure (BSE: 533262; NSE: RAMKY), saw a surge in their prices today (17th September).

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The stock closed yesterday at Rs. 54.05. At 09:24 a.m. today, it touched an intra-day high of Rs. 63.60. That is a jump of 16.37%! The share was trading between a low of Rs. 56.80 and a high of Rs. 63.60. The rise in their share price comes on the back of a drop in prices during the previous trading day.

Why did it see the sudden jump?

Earlier today, rumors of The Ajay Piramal Group being in pole position to purchase 3 of Ramky’s infrastructure projects surfaced. The 3 projects in question are:

  1. Ramky Eslamex Hyderabad Ring Road;
  2. Sehore Kosmi Tollways, and
  3. NAM Expressway

Ramky entirely owns Ramky Eslamex and Sehore Kosmi, and has a 50% stake in NAM Expressway.

Having a look at Ramky’s Balance Sheet,

Ramky_02

We can expect […]

By |September 17th, 2014|Categories: Stocks||0 Comments

The Curious Case of Venus Remedies – Potential CDR?

A curious story emerged earlier today.

Venus Remedies, a pharmaceuticals company listed on the BSE and NSE, saw their shares plummet nearly 20% from yesterday’s close of Rs. 378.50 to Rs. 302.80 (as we write this). Charting the stock over the last few months:

VR_01

 And that after a stellar run saw its share price touch Rs. 381.75, a 52-week high, on the 15th of September. The spurt in their share price can be attributed to 2 major announcements:

  1. Agreement with TEVA for development and sale of a cancer drug in Canada;
  1. Agreement with Mylan to market an anti-biotic Meropenem in Europe;

Why did the share price fall then?

Earlier today (16th September), Crisil downgraded their ratings on the bank facilities of Venus Remedies down to a “D”. As per Crisil definitions,

                “Instruments with this rating are in default or are expected to be in default soon.”

Crisil expects the company to […]

By |September 16th, 2014|Categories: Stocks||2 Comments

Is Orchid Chemicals a Wilful Defaulter?

Every quarter all banks are supposed to provide a list of Wilful Defaulters to CIBIL (and other such agencies). A wilful defaulter is someone who can, but will not repay his loan. There are serious consequences of being listed as one, such as not getting access to any other loans by any financial institution, and that directors are "not fit and proper" to serve on company boards.

It turns out that a listed company, Orchid Chemicals, has been listed as a Wilful Defaulter at the end of the quarter ended Jun 30, 2014.

Here’s the CIBIL entry, from ING Vysya marking Orchid a Wilful Defaulter:

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If you click "Composition" you get:

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[…]

By |September 15th, 2014|Categories: OrchidChem, Stocks||5 Comments