Coal India Offer Rescued by LIC, Just Like The Old Times

We mentioned in the Coal India OFS analysis that we didn’t see the demand for the offer as very much and the issue might need to be rescued.

This government, like earlier ones, might be calling certain companies to come in before 3:30, such as those named Life Insurance Corporation of India. New emperor, same clothes? This day will tell.

And it turns out that fated call did happen. From Economic Times:

Life Insurance Corporation and other domestic institutions bailed out the government’s biggest disinvestment offering by picking up a substantial chunk of Coal India’s shares in the offer for sale (OFS) that concluded on Friday. The insurer is believed to have invested more than Rs 10,000 crore, helping the new government’s first major disinvestment offering sail past the finish line.

They managed to sell 22,000 cr. worth shares. 10,000 cr. out of 22,000 cr. to LIC alone? That’s a lot. And it was a […]

By |February 2nd, 2015|Categories: COALINDIA|8 Comments

Coal India’s Offer For Sale: Lack of Profit Growth Even With Monopoly Scares Us Off

Coal India has an offer for sale out today.

  • 31 cr. shares for sale on the exchanges
  • This should raise Rs. 10,000 cr.
  • If there is more demand, they will sell another 10,000 cr. worth
  • Retail investors get about 5% discount (for upto Rs. 200,000 invested)

You can buy through your broker.

So Should I Sell My House and Buy?

The Short Answer: No.

So What’s the Long Answer?

Noooooooooo.

Oh Come on.

Ok, I’ll stop messing around.

Coal India is a quasi monopoly for coal mining in India. We use a lot of coal. Not just to blacken someone’s face when they made cartoons we didn’t like, which has substantial demand and major growth potential considering just the mad people on twitter. But that is not where we use coal.

We use coal in Thermal power plants. Of which we have a lot. I don’t have time to actually count them but we have a lot. We also import coal from places like Australia. Okay, 50% of our coal imports are from […]

By |January 30th, 2015|Categories: COALINDIA|Tags: , |11 Comments

Suzlon Rids Itself of REPower, But Its Still Overburdened

Suzlon has decided to sell that big thing it bought in the past: REPower. Now named Senvion, the German acquisition was the bane of Suzlon’s existence. After it bought REPower in 2008, it couldn’t get access to the underlying technology until it had bought out all minority shareholders, which happened only in 2012. And even then, it couldn’t use the Balance Sheet strength of the much larger German company because of German laws forbidding it.

This chapter may have finally seen an end.

Suzlon finally has sold Senvion to Centerbridge Partners, LP for a sum of 1 billion Euros or about Rs. 7500 cr.. This is way lower than the amount they spent to acquire it, which was 1.5 billion Euros. (Which, at the time, was Rs. 10,000 cr.

Centerbridge is a PE fund that buys distressed assets, it seems. While Senvion was doing well, the problem was that Suzlon wasn’t – it couldn’t service the debt […]

By |January 22nd, 2015|Categories: Suzlon|9 Comments

Make Long Term Capital Gains Tax Free Only After Three Years of Holding

Equity capital gains are free if you sell shares after a year. You don’t pay long term capital gains taxes for shares sold on a stock exchange.

But if you look at other “assets”, equity is getting a great deal:

  • For gold, you have to hold for three years before you get “long term” gains, which are taxed at 20%.
  • For real estate the house has to be held for three years, and again 20% gains taxes apply (though taxes can be offset if you buy a new house)
  • For debt mutual funds you have now hold for three years before you can apply “indexation” benefits and claim long term capital gains (which are 20% of indexed gains, or 10% of unindexed gains, whichever is lower)
  • For unlisted companies, you pay 20% capital gains taxes if you sell shares after a year. (This is still one year, but the taxes are large)

Listed stocks are the only real asset class where, after just one year, you pay no taxes whatsoever.

[…]

By |January 14th, 2015|Categories: CapitalGains, Stocks|Tags: |20 Comments

Infy Results: Better than Expected, Greater Efficiency Visible

Infosys results for Dec 2014 are out, and we’re going to quickly cover them with just charts. They’ve surprised on the upside:

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EPS Growth on a Trailing Twelve Month (TTM) basis is nice at 20%, which is okay given the stock has a P/E of 19. But tht’s mostly because of earlier quarters; the Dec 2014 grew over Dec 2013 EPS by only 13%.

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Looks like they *are* getting more efficient. Thank goodness for two years of no salary hikes, I guess:

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And they’ve gotten back […]

By |January 9th, 2015|Categories: Infosys, Results, Stocks|4 Comments

Interviewed at ET Now: My take on Defense, Auto and Large Cap IT

I was on ET Now today, and I spoke of a few things that might be of interest.

1. Defence stocks are a longer term bet:

It may not come in the short term but there are two big bets here. One is that defence expenditure might come equal or more in the budget. Another thing is that they are opening up a little bit. So short-term news is there but longer term, the fact that the sector is opening up and it has not opened up like forever is probably a good sign. A lot of good things might happen.

I probably weaselled out a little here. But the sector is very interesting, with BEML, Bharat Forge, BEL and the like making for higher market cap plays. Smallcaps will

2. Crude makes Auto look good, Agri-Chems are doing well, not touching Housing Fin

Two points here:

Before 2007, we saw 30% correction once every […]

By |January 8th, 2015|Categories: Stocks|Tags: |1 Comment

Bhushan Steel Promoters Banned From Markets in SEBI’s First Financial Money Laundering Order

The SEBI Investigation on First Financial, where it found more than 150 entities involved in rigging share prices up to evade tax and launder money, has snared another victim: the promoters of the beleaguered Bhushan Steel.

After having its director arrested for attempting to bribe a bank chief, and banks finding that the company owes them 36,000 cr., the company has a new challenge.

Read: All you wanted to know about the Bhushan Steel situation.

A recent SEBI order has found many entities guilty of participating in fraudulent price rigging of share prices of a company named First Financial (whose promoters were also involved). The entities were involved in potential tax evasion and money laundering. The order names the Bhushan Steel promoters as part of those that were involved as well, says Business Standard.

We wrote about the interim order for First Financial. The order names them as an example:

It is also […]

By |December 23rd, 2014|Categories: Stocks|Tags: |1 Comment

Spicejet Grounded. A Government Rescue is Not Going to Happen.

It’s the Kingfisher thing, all over again.

An airline hasn’t paid salaries.

It hasn’t paid up its past fuel dues.

It owes airports money.

It gets booked by the DGCA for all this and more, and is told to stop booking flights more than a month in advance.

That leaves it even more short of cash, so it starts cancelling flights and returning aircraft to the lease lenders.

It then goes to the government asking for a bailout.

That’s how the Spicejet story is evolving as we speak. I was in three airports and four flights yesterday. And in Delhi and Bangalore the Spicejet monitor was a sea of red – either “Cancelled” or “Delayed”. Passengers who had bookings were livid, and in one airport gun-toting cops were required to calm everyone down.

In the midst of all this, the government gets into a quasi rescue act, asking the regulator to ease the 30 day booking window all the way […]

By |December 17th, 2014|Categories: Stocks|Tags: |8 Comments

Aban Offshore Shares Touches Fresh 10-Month Low

Shares of Aban Offshore are trading at Rs. 393.5 currently, down 2.53% from yesterday’s close of Rs. 403.70. However, the share price of Aban has been on a decline since early December itself. This current share price is the lowest since the 30th of Jan earlier this year. That makes it a new 10-month low for the share price.

Aban Offshore

Having said that, the share price has been on a downward trend since November this year, when it was at around Rs. 600. The recent fall in share prices has coincided with the fall in global oil prices.

Aban Offshore is India’s largest offshore drilling services provider, with revenues of Rs. 1018.5 cr. (for Q2 FY2015). As part of its operations, they provide exploratory and drilling services to their clients. Their clients include a who’s-who from the OnG industry, from ONGC to RIL to Shell and Petrobras.

They also operate and […]

By |December 17th, 2014|Categories: Stocks|Comments Off

Inexplicably, The Government Isn’t Selling ITC Shares It Owns, But Insiders Continue Their Selling

Surjit Bhalla has an interesting take on why the government isn’t selling ITC shares it owns through the SUUTI stake (HT @baddutt):

A suggested explanation for the Indian government (read that as politicians and IAS bureaucrats, plus others) not selling Ashoka or ITC is that they gain enormously from “kickbacks” in the form of discounted or free rooms, or discounted or free dinners, or discounted or free marriage parties. For those not knowing, more than 54% of ITC revenue is not from tobacco.

This is a great conspiracy theory but it’s a little difficult to believe because:

a) the bureaucracy can extract those favours anyway, since ITC depends on the government in too many way, being a tobacco giant, an FMCG and Agri company.

b) the revenue ITC makes from hotels is 1100 cr. out of a total revenue of Rs. 33,000 cr. Of profits, it’s even more tiny – the Hotels business makes 140 cr. out […]

By |December 10th, 2014|Categories: ITC, Stocks|Tags: |1 Comment

SpiceJet Turns Bland After News Batters its Reputation

SpiceJet has been in the news lately. Crude prices have fallen but the carrier seems to be still quite deep in the bad stuff. The airline’s stock has fallen hugely lately, and while there seemed to be a recovery of sorts, the stock again tanked 13% on Friday.

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There’s stories abound, of the airline’s problems. The DGCA (the airline regulator) has cancelled 186 slots of the airline, disallowed it from taking bookings from flights beyond a month, and asked it to pay salary dues of employees within 10 days. Spicejet also had to refute that it was put on “cash and carry” basis by AAI, which would have meant no credit period for it’s fuel needs and that the airline would need to pony up cash for fuel upfront.

They’ve also asked the airline to […]

By |December 8th, 2014|Categories: Stocks|Tags: |1 Comment

Veritas Analyst Who Authored Negative Report on IndiaBulls Arrested; Is It Time For Collective Action?

Nitin Mangal, who co-authored the Veritas report on Indiabulls, has been arrested by the Gurgaon police after he surrendered to them. Indiabulls has filed complaints against Mangal and Veritas co-author Neeraj Monga (who’s based in Canada) after their report on Indiabulls in 2012. Mangal has been arrested for six days for “questioning”, after his anticipatory bail applications were refused in the Haryana courts and later, the Supreme court.

Capital Mind had covered the story in part: Veritas-Indiabulls Fight: The Employee Welfare Trust.

Indiabulls has claimed that Monga offered, on email, to withhold the report from “larger” circulation if Indiabulls would pay $40,000 for a subscription. (Livemint) This is the basis of the case.

Indiabulls also put a public announcement to clarify matters.

According to Livemint, Veritas has counter-sued Indiabulls in Canada, alleging that Indiabulls’ actions including full page advertisements have caused Veritas to lose money after they pulled out of India.

This has huge […]

By |November 27th, 2014|Categories: IndiaBulls|4 Comments

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: |4 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:

By |October 23rd, 2014|Categories: FinanTech|Tags: |6 Comments