Wordsworth

Like women’s fashion, there are words and phrases which come into our daily lives at light speed and disappear equally fast. Very few stick around to become part of our long term vocabulary. I have experienced this in all facets of life over the years whether in College/Corporate world/ Indian movies or in the investing space.

I of course rue words and phrases which are dear to me disappear gradually from the popular vocabulary. For Ex the word “Zulf” was so intrinsic to Hindi romantic songs but has been gradually replaced by the crude “Baal”.

When I was in management school the word “ Paradigm” had just emerged as the new paradigm of corporate lingo and everything kept moving to newer paradigms. Paradigm though still used fairly extensively has now been replaced by a more easy to pronounce “ Plane”. We all now seem to moving onto different planes and of course try to land on the “Same Page”.

The investing world also has its fair share of words and phrases that come and go like flavours of the month. It was with much amusement that I was recollecting just about 6 – 12 months back one of the most popular pair of words that most TVanchors and pink newspapers were mouthing was “ Coupling” and “ Decoupling”. I am sure most of you have a wry smile about this one.

Readers would recollect we used to be “Coupled” one week and miraculously used to get “Decoupled” the next week and again get coupled the next week. It was like speed dating and I thought it would have been easier to track Liz Taylor’s everchanging marital status than figuring out where our markets were in their love affair with global markets.

I of course am not so sure whether we are currently coupled or decoupled though our correlation or the lack of it with the global markets remain the same.

A new phrase that I m increasingly hearing for the last 6 months and has entered the Tv anchors lingo is “Risk Aversion”. It would be interesting to see how long “ Risk Aversion” lasts or will it also disappear gradually if markets go up.

To end, a nice phrase from the English romantic poet William Wordsworth

The mind that is wise mourns less for what age takes away; than what it leaves behind.

Interesting Accounting - Jyothy Laboratories

I was listening to the current quarter concall of Jyothy Laboratories and came across some interesting accounting.

In the month of May 11, Jyothy Laboratories announced the acquisition of Henkel’s stake in its Indian subsidiary Henkel India, gaining a foothold in the detergent market. Henkel India has been losing money for sometime and Jyothy has initiated action in turning the business around. As part of the exercise Jyothy has borrowed money on its balance sheet and lent that money to Henkel to manage debt on its books.

In the current quarter Jyothy has borrowed over Rs 460 crores ( 4600 Rated Taxable Zero Coupon Non Convertible Debentures  of a face value of Rs 10 lacs) by issuing short term debentures to the bank and lent the same to Henkel India. The debenture has been issued for a period of 91 days and will be redeemable at a premium of Rs 26,801.47 per debenture.

Now comes the interesting part. Jyothy in its current quarters results has booked other income of 14.82 crores. Nearly about 12 crores of it is interest paid by Henkel India to the parent for the money that Jyothy has lent to it. It is a significant amount considering the fact that Jyothy’s PBT for the quarter is Rs 16.93 crores.

But guess what, there is no corresponding interest expense booked in Jyothy’s accounts against the income that they are booking. On the concall the management said that since it is a zero coupon debenture which is being redeemed at a premium, the company is allowed to write of the redemption premium ( which is essentially interest) from the reserve and surplus. So magically they are booking interest income in the profit and loss account and expensing it out in the balance sheet.

Not really Ujjala bright and clean I must admit 

Hungry Kya ?

Are we Indian’s more hungry than the Americans. Afterall what else can justify the following comparison

Jubliant Fooodworks ( Domino’s Franchisee) -  Dec quarter
Market Cap - 1500 crores
Sales – 117 crores
Profit - 11 crores
P/E- 30

Domino’s Pizza ( US – parent company) - Sept quarter
Market cap - 3000 crores
Sales – 1350 crores
Profit - 82 crores
P/E- 9.74

So we have the Indian company which is just a licensee of the Domino’s brand and doesn’t even own it sells at 3 times PE of the parent company.

I guess one needs to have a appetite for it. I am off on a diet.

Kalindee Rail - Kabhi Haa Kabhi Naa

I saw a innocuous piece of corporate announcement on the BSE with respect to Kalindee Rail.

Kalindee Rail Nirman (Engineers) Ltd has informed BSE that the Board of Directors of the Company at its meeting held on October 26, 2009, inter alia, has approved refund of Warrant Application money received from Promoters / Prospective Allottees.

The warrants were issued after getting a go ahead from shareholders in a special EGM held on Sept 08 2009. Just after a month on Oct 15th a announcement is made about a board meeting detailing out refunding of the warrant application money to the promoters.

I didn’t know one can get refund of warrant application money. I love this call option where u get u r option premium back if you choose to.

Nilekani farewell at Infosys

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". :-)

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 Buffett 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 :-).

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.