Biocon Rumours of Oral Insulin Deal Push Up Stock 10%

No Comments » Written on April 22nd, 2014 by
Categories: Stocks

Biocon has been rumoured to have serious developments in its oral insulin product, and in talks with a few large pharma companies to license the product. This supposedly involves a big upfront payment and some kind of investment by these companies into Biocon.

The stock is up about 10% on the news.



Biotech stocks are useful to own if you believe in their capability to develop drugs or do deals. Biocon makes “biosimilars” of insulin, and they own IP in the oral insulin space (as opposed to injected insulin which is the standard today) The result of investing in such companies is often one-shot, where the stock sputters along for a long time, but when they do a deal it gets a massive surge of income. (And the stock goes up big).

While I’ve invested in Biocon, it’s mostly been for the fact that I believe they will make such deals, not because of their biosimilar manufacturing (which is more bread-and-butter). The stock price increase, though, is just on speculation, so I’m not really confident this deal happens. In fact, the Biocon CEO, Kiran Majumdar-Shaw, just tweeted that this is “irresponsible”.


So what’s it going to be? Real news or profit-taking rumour?

Disclosure: Long the stock.

KPIT Gets Hot and Bothered about Acquisition Rumours

No Comments » Written on April 22nd, 2014 by
Categories: Stocks

So there’s some rumour abuzz about KPIT Technologies and it’s price has just gone a little berserk. In a clarification to exchanges about why its price went up suddenly, it has written:

We understand that yesterday CNBC Awaaz, a media channel, carried a news item stating that KPIT is going to be acquired by some other company. Possibly, the spurt in volumes is on account of that news. There is absolutely no substance to this news.

This is the third or the fourth time that this channel has carried such a news relating to us. Last time when they carried this news, we spoke to the news channel about this irresponsible reporting and the channel apologised to us for carrying this news. We are really surprised that the channel did the mischief again yesterday.

We are examining legal options for a suitable action against this channel. We would like to know from you whether, in such circumstances, the exchange can also proceed against the channel for such malicious and fictitious news propagation.

(HT @b50)

If this is true, then there should be an investigation into the channel’s behaviour; but the freedom of the press (whatever little we do have) ensures they won’t have to face any penalties.

It is usually strange for a company to get so antsy about a channel reporting news that is positive for the stock price. They should have just said, relax, we have nothing to say. 

The only reason they would be so ticked off is if the news was actually true. Or, worse, that they want you to think the news is true by denying it. (Massive game theory in action?)  Strangely again, there is no “sudden” spurt in price. Only some volume, but that seems to be a single day. And yesterday (21 April) the stock made a sudden jump of 5%.


In KPIT’s case, Management has sold part of their stake in Dec/Jan and FII’s own 42% of the company. It’ll be interesting to see where this goes:

Disclosure: Long the stock.

Infy Results in Charts: March 2014

No Comments » Written on April 15th, 2014 by
Categories: Infosys

Infosys results have become less relevant than they used to be. A few key things about their results, in charts.

Revenues are Down, Profits are Massively Up


Profit growth went above 26% over last year. However, revenues suck.

P/E Still at 18, Trailing Twelve Month EPS Growth at 13%

If you take the EPS of the last four quarters and add them up, and use to determine the Price to Earnings Ratio (P/E) and the Growth over last year, here’s what you get:


While TTM EPS has begun to grow again, Infy’s P/E remains high.

Employee Headcount Addition Dismal, Utilization Constant


They’ve only managed to hire 2001 people, after taking in nearly 11,000 (and nearly 9000 left). This is dismal because Infy makes money billing its employee based services.

They’ve had some top and mid management attrition recently which would probably add to their margins in the near term. However, how sustainable is that? They’ll still need to hire others to replace them (at a higher cost) and then raise salaries of the rest of the staff.

Reducing US Footprint

You can see that the US is losing it’s weight on Infy’s revenue:



It’s not been that much of a stock and moved less than 1% today. Volatility on Infy results has been high in the past, but this time it’s just gone pffffft like a balloon.


Overall, reasonable profit numbers, but they have to get their revenues going faster. From an industry perspective other companies like TCS, HCL Tech and some of the second tier players seem to be doing a better job.

Why Is The Market Going Higher Every Day?

No Comments » Written on April 14th, 2014 by
Categories: Premium, Stocks

This is a post for Capital Mind Premium members.

The mad markets are getting more mad. The Nifty made yet another all time high today and it’s almost like the market can do nothing wrong! Let’s take a quick look to understand why the market’s doing what it’s doing.

There is no single answer. Or no single correct answer.

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Top Stocks in March: It’s A Good Kind Of Madness

No Comments » Written on April 12th, 2014 by
Categories: Premium, Stocks

This is a post for Capital Mind Premium members.

It’s been a rip roaring month for the markets. While there is one day left in the month of March from a trading standpoint, Deepak is off for a holiday to Goa and therefore this month-end post comes to you over the weekend.

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Promoters Sells Big Chunk of DB Corp Shares

2 comments Written on April 10th, 2014 by
Categories: Stocks

DB Corp has just seen promoters sell big chunks of their stake. On April 9, they sold about 10% of the (unpledged) stake they owned, for about Rs. 159.6 cr.



(Note: the Total Holding and subsequent columns refer to the shareholding BEFORE this transaction)

As a total of the company’s stock, this is only about 3% of the outstanding shares. Promoters, before this transaction, owned 74.94% of the company. Now they’ll own about 72%.

DB Corp is a media company that publishes newspapers (Dainik Bhaskar, Divya Bhaskar etc.) and runs FM Radio channels.

It’s a little strange that just before the massive election madness, when media companies would earn their most revenue, that promoters would sell their stake, especially when the stock’s off the highs it made recently. And only promoter has sold about 30% of his unpledged stake.

At the same time, HDFC Infrastructure Fund has bought 10 lakh shares for Rs. 295.

Promoter sales are not usually a big deal and sometimes help them get liquidity. But the size of this deal - Rs. 160 cr. - makes one wonder why they’re selling all this much at this time. The stock closed today at Rs. 291, marginally below where the promoters sold.


Sun Pharma and Ranbaxy to Merge, Create Giant Pharma Co

2 comments Written on April 9th, 2014 by
Categories: Stocks

The big news of the week was about a mega-merger of two of India’s largest pharma companies, Sun Pharma and Ranbaxy.


Ranbaxy shareholders will get 0.8 Sun Pharma shares for each share they own. This is a stock only merger, which means no cash will be paid out.* 

* Except if you get a “fractional” holding. If you own 22 shares of Ranbaxy, you’ll get 17.6 Sun pharma shares. In India you can’t own fractionals, so they’ll give you money for the 0.6 shares, and you’ll have 17 Sun shares.

The merger will create, according to the companies, the 5th largest generic pharma company in the world. Ranbaxy has had serious issues with the FDA of late, resulting to blocking of imports from many of its plants in India including the big Toansa plant.

Ranbaxy was sold to Daiichi Sankyo by the Singh brothers in 2008, at a price of Rs. 737 per share. Since then the price has tanked, going as low as Rs. 300. This deal, with Sun Pharma prices at about Rs. 600, values Ranbaxy at Rs. 480 per share. (It trades lower today, at Rs. 453)

The deal should be completed by end-2014. Daiichi has had to give an indemnity for any FDA actions against Ranbaxy so that Sun is insulated from this exercise. This indemnity does not impact any other shareholder at this point.

In the last week, it looks like someone had a whiff of the deal. Why else would the price shoot up from the 370 mark upwards to 460 in a few days?


SEBI must investigate, and fast.

Here’s the company presentation.


Capital Mind View: This is a phenomenal deal in the pharma world, where size does matter. More doors open as you grow bigger. However there is a bigger risk with adverse FDA action against Indian companies (which could stem from lobbying by the US giants which feel threatened). Having said that the ability to both innovate and increase their generics footprint gives the combined entity a larger scope for growth.

Disclosure: We have had family investments in Ranbaxy for around 2 decades, and it’s done really well. In one sense there’s a sense of sadness that the Ranbaxy brand will be gone, but the prospects with Sun look better for the company.

SEBI Calls Financial Technologies "Not Fit And Proper" To Promote a Stock Exchange

Comments Off Written on March 20th, 2014 by
Categories: FinanTech

Finally, the ball has fallen. SEBI has found FT to be not-fit-and-proper to run a stock exchange. In an order yesterday:

  • FT isn't Fit and Proper to own shares in a stock exchange.
  • FT must sell its holdings (equities or warrants) in all stock exchanges, including MCX-SX.
  • FT can't even have voting rights if it has indirect holdings (through a subsidiary)

Remember the NSEL Crisis? Capital Mind covered it in extreme detail.  (Read our full page on all the posts)

FT owned NSEL, which was responsible for a massive Rs. 5,500 cr. scam. We've seen the whole thing in detail, and the exchange was running what was a financing scheme instead of actually trading commodities. Just 24 borrowers were on one side, while more than 12,000 investors were on the other, and the exchange , it seems, facilitated the transfer of money in one direction, as if the borrowers were "temporarily" selling commodities to the lenders, and then buying it back a few weeks later.

It has been found that exchange officials have been complicit in the process, and some of them are in jail.

The ultimate big boss of FT, Jignesh Shah, has been charged in a CBI chargesheet. Strangely, the CBI is tracking two people who were responsible for bringing the politically well connected FT group back down to earth by demanding they follow the rules in spirit and letter - CB Bhave and KM Abraham, the SEBI bigwigs. They are under investigation for "irregularities" in giving MCX-SX the licence to run a currency exchange. (Sources tell me this is being done to placate a certain very powerful person who doesn't like bad things to happen to Mr. Shah; which means the investigation into Bhave and Abraham will quietly die)

I'm very happy that FT has received what it deserved. However, the stock market loves it. Despite such an order, the stock is up to Rs. 377, and was up 5% on this news. We don't know why, and we don't really know why this stock is worth even this much. Apparently, some people continue to like a company which provides software to brokerages but isn't really "fit and proper", and they believe it will continue to sell its software. This is not going to end well.

Premium: Top Performing Stocks in 2014 To Date

2 comments Written on March 5th, 2014 by
Categories: Premium, Stocks


This is a post for Capital Mind Premium subscribers, sent on March 4, 2014.

Movers and Shakers

It's now two months into 2014, and some stocks have gone all ballistic on us while we weren't atching. Here's a quick look at the biggest and smallest of them.

Note: we have a filter; that stocks should not be in the "illiquid" category and should, in our opinion, not be a manipulated penny stock. We will still miss some gems but when gems are plentiful, we won't crib about completeness.

First, the large caps.

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