I was reading about the news article covering Nandan Nilekani's farewell at Infosys after 28 years as he moves into the government.
Came across CEO Kris Gopalakrishnan's quote which I liked and sharing it
" I have known u for longer than I have not known you". :-)
Thursday, July 9, 2009
Nilekani farewell at Infosys
Thursday, July 2, 2009
Dr Reddys Laboratries
When I was enroute to office today I started reading Dr Reddys balance sheet in the car. It had a interesting piece of data that I thought of sharing.
Dr Anji Reddy the chairman writes and I quote
“ If any shareholder had purchased 100 shares during your company’s IPO in Aug 1986, plus the 60% rights issue in Aug 1989, and held on these till date, the person would be owning a total of 5760 shares at a face value of Rs 5 per share. Against a outlay of Rs 2500 ( Rs 1000 in the IPO and Rs 1500 to purchase 60 shares of the rights issue at Rs 25 per share), that investor would have earned a total of Rs 1.95 lacs of divided, including current years proposed dividend.
On 31st March your company’s share on BSE was being quoted at Rs 488.65. Thus, the value of the investors portfolio would have been Rs 28.15 lakhs”.
Now that’s a 1000 bagger in 23 years. A fixed income instrument assuming doubling every 6 years would have been grown 16 times in that period.
If only I had spent less time and money chasing girls in my teens :-). Now I know where Warren Buffet got it right by starting early.
Disclaimer: I am not recommending the Dr Reddy’s stock and I own all of 10 shares, kept just to get the balance sheet :-).
Saturday, June 27, 2009
Gwalior Chemicals - Update
I already written about the Gwalior Chemcials deal with Lanxess and the investment opportunity. As part of the process the company has sent across the notice for the postal ballot. I am enclosing a link to the same.
The management has reiterated its decision to distribute Rs 100 crores to the shareholders in this communciation.
Wednesday, June 24, 2009
To wait or not to wait
In one of my previous post Reverend put across a query to me and i quote
“Your views on Mphasis as a potential delisting candidate? An article I came across suggests that HP has no listed subsidiaries in the 170 countries it operates and makes a case for delisting. They have cited Digital (a subsidiary of Compaq) which they delisted. Happened in 2001 or so.. Your insights please?”.
It’s a interesting question and I understand the thought process that goes behind this opportunity. I have also in the past and continue to analyse similar companies.
Lets examine the structure of evaluating such a opportunity.
Mphasis was acquired by EDS which subsequently got acquired by HP globally. HP globally doesn’t have listed subsidiaries and at some point of time would probably go in for a delisting exercise for Mphasis.
The logic is fair and there is strong likelihood of this happening. The important question is when? Next month, Next year or 5 years down the line.
This is a huge uncertainty that one has to live with. Mphasis currently quotes at about 393. In the intermittent period till the delisting happens what level could the stock go down to. This is absolutely critical which leads us to the next stage.
Would I buy Mphasis without factoring in a delisting opportunity? Am I comfortable with financials, performance, industry outlook etc of Mphasis? Is there a margin of safety in the stock without the delisting?
If the answer to these questions is yes? Then it makes sense to look at the opportunity. If intrinsically one is comfortable to hold Mphasis then a possible delisting is a added bonus.
Else one needs to factor in the possible downside in the stock, the likely timeline for a corporate action and the opportunity cost with respect to the general market.
I hold a stock where there is similar logic waiting to play out. Will write on it in my subsequent posts.
On a side note Reverend, I wouldn’t see a straight delisiting exercise in Mphasis. EDS currently holds about 60%. If they were to do this I would expect them to do it 2 stages. Phase 1 do a open offer and increase their stake to either 75% or 90% based on the listing requirements and then in Phase 2 actually go thru the delisting process.
Remembered a old Rafi and Asha song on this ….
ham intezaar karenge
ham intezaar karenge tera qayaamat tak
khudaa kare ke qayaamat ho, aur tu aaye
ham intezaar karenge …
TCS - Management Stockholding
I saw some interesting piece of information in yesterdays ET in the insider trading disclosure on TCS. The top management of TCS got alloted the following number of shares by virtue of the 1:1 bonus issue. The actual holding is double of this.
Mr Ratan Tata - 761628
Phiroz Vandrewala - 50304
N Chandrashekaran - 44264
S Ramadorai - 99560
S Mahalingam - 80840
Mrs Lalitha - 60
Came as a surprise to me that Ratan Tata owns stock in TCS in a individual capacity.
Sunday, June 21, 2009
Book Review - Market Panic
I just finished reading the book “ Market Panic” by Stephen Vines. I would say more like browsed through it. The book is ok read slightly repetitive but did have a few good things.
I liked the author’s structure on the various stages of a stockmarket cycle leading to the final panic exit that most markets demonstrate at the end of the cycle.
Listing down how the author has described the various stages of the cycle
Stage I
The cycle starts with some kind of external shock the system that creates important opportunities for atleast one sector of the economy. It could be a event like a war or new inventions like the railways or more recently the rise of the internet
Stage 2
This boom then gets enlarged largely fuelled by expansion of bank credit expanding money supply ( Greenspan being a case in point).
Stage 3
With greater liquidity in the system euphoria takes over and as “Adam Smith” put overtrading. This results in greater trading volumes and higher level of speculation and leverage that builds into the system
Stage 4
As the author quotes “There is nothing so disturbing to one’s well being and judgement to see a friend get rich”. So everyone one wants to get rich. People who haven’t thought of entering the stockmarkets suddenly start investing in the markets.
Stage 5
The real danger signals starts when the stockmarket news moves from the inner pages of non financial newspapers to the front pages. I quote the author “Illustrating this point was the alarming appearance of mutual funds as a “Playboy” cover story. When stocks replace scantily clad young ladies who are well endowed on the cover, logic has clearly taken a holiday’.
Stage 6
Not only does the stockmarkets get inundated with inexperienced participants but their very presence increases demand leading to the temptation and opportunity for many new equity issues designed to capitalise on the window of opportunity for selling all manner of assets at an inflated price. This also leads creation of new derivative products allegedly aimed at sophisticated investors increasing leverage in the system and building pressure. This starts process where lenders start calling in additional margin with central bankers stepping in to deflate the bubble.
Stage 7
As the bubble grows the markets starts losing all sense of connect with the underlying assets.
Stage 8
At this stage a number of scams and dubious investments start coming out. This is interesting as a symptom if not the cause of stockmarket panics.
Stage 9
At this stage the savvy investors sense the top and start exiting from the market. Newer players are unsure and tend to stay put resulting in brakes on the rapid upward price movement. As the “greater fool” becomes difficult to find there is increasing movement from assets into cash resulting in depressing prices leading to unwinding of leveraged positions.
Stage 10
Now the market is in full retreat and there is competition to get out or the rush thru the door. This is typically led/ followed by the dramatic failure of a bank or other institutions or a particular scam.
Stage 11
This is final stage where the very assets which were darlings of the market become the object of revulsion and there is a market wide panic that builds up invariably leading to the regulator putting on cap in terms of limits or acting as a lender of last resort to bring stability and confidence to the markets
I have personally seen about three cycles and I can say that this is a fair template of how the markets move. Of course to add to it I always hear the magical four words “ This time its different” :-).
I liked the author’s structure on the various stages of a stockmarket cycle leading to the final panic exit that most markets demonstrate at the end of the cycle.
Listing down how the author has described the various stages of the cycle
Stage I
The cycle starts with some kind of external shock the system that creates important opportunities for atleast one sector of the economy. It could be a event like a war or new inventions like the railways or more recently the rise of the internet
Stage 2
This boom then gets enlarged largely fuelled by expansion of bank credit expanding money supply ( Greenspan being a case in point).
Stage 3
With greater liquidity in the system euphoria takes over and as “Adam Smith” put overtrading. This results in greater trading volumes and higher level of speculation and leverage that builds into the system
Stage 4
As the author quotes “There is nothing so disturbing to one’s well being and judgement to see a friend get rich”. So everyone one wants to get rich. People who haven’t thought of entering the stockmarkets suddenly start investing in the markets.
Stage 5
The real danger signals starts when the stockmarket news moves from the inner pages of non financial newspapers to the front pages. I quote the author “Illustrating this point was the alarming appearance of mutual funds as a “Playboy” cover story. When stocks replace scantily clad young ladies who are well endowed on the cover, logic has clearly taken a holiday’.
Stage 6
Not only does the stockmarkets get inundated with inexperienced participants but their very presence increases demand leading to the temptation and opportunity for many new equity issues designed to capitalise on the window of opportunity for selling all manner of assets at an inflated price. This also leads creation of new derivative products allegedly aimed at sophisticated investors increasing leverage in the system and building pressure. This starts process where lenders start calling in additional margin with central bankers stepping in to deflate the bubble.
Stage 7
As the bubble grows the markets starts losing all sense of connect with the underlying assets.
Stage 8
At this stage a number of scams and dubious investments start coming out. This is interesting as a symptom if not the cause of stockmarket panics.
Stage 9
At this stage the savvy investors sense the top and start exiting from the market. Newer players are unsure and tend to stay put resulting in brakes on the rapid upward price movement. As the “greater fool” becomes difficult to find there is increasing movement from assets into cash resulting in depressing prices leading to unwinding of leveraged positions.
Stage 10
Now the market is in full retreat and there is competition to get out or the rush thru the door. This is typically led/ followed by the dramatic failure of a bank or other institutions or a particular scam.
Stage 11
This is final stage where the very assets which were darlings of the market become the object of revulsion and there is a market wide panic that builds up invariably leading to the regulator putting on cap in terms of limits or acting as a lender of last resort to bring stability and confidence to the markets
I have personally seen about three cycles and I can say that this is a fair template of how the markets move. Of course to add to it I always hear the magical four words “ This time its different” :-).
Tuesday, June 16, 2009
IL&FS Investmart - Bingo :-)
I had earlier posted here on a special situation transaction covering IL&FS Investsmart and Dabur Pharma. I had just few days back put in a update on the status of this special situation transaction.
IL&FS Investsmart today came out with a announcement that its promoters HSBC are seeking to go in for a delisting :-) Whoopie. The link is enclosed here.
Atleast one leg of the transaction paid off and will hopefully deliver some good bottomline. Lets see how the market reacts to the news tomorrow. I expect the delisting to happen anywhere in the Rs 200 to Rs 250 band. The original price of the transaction was around Rs 84. Will come back with more updates on this as and when the transaction moves forward.
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