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: |5 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||0 Comments

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.

image

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.

image

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:

  • 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: |6 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: |8 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.

image

The Crude Oil Hedge

And then I spoke of how India should […]

By |October 20th, 2014|Categories: FuelPrices, InfoTech, Stocks|Tags: |12 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.

GM_01

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.

CS_01

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||Comments Off

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