The tenth trading week of 2012 witnessed the first IPO listing for the year. On March 9 2012, MCX finally made its debut on the Indian bourses’, closing the day with gains of nearly 26% based on the issue price of Rs. 1032/- per share. This wasn’t of much cheer to the retail investors who ended up making between Rs 2100 to Rs 3100 on their investment of 2 lac rupees.
Data from Bulk deals sections indicates that Copthall Mauritius Investment Ltd. bought shares worth Rs. 56 crore in MCX at an average price of Rs. 1333/- per share. The seller was ICICI Emerging Sectors Fund.
Hyderabad-based Nava Bharat Ventures Ltd. also witnessed good deal activity this week. On March 9 2012, Kingfisher Capital CLO Limited (a subsidiary of Lehman Brothers Holdings) sold shares worth Rs. 60 crores in the company via bulk deals. Nearly 82% of these shares were bought by the promoters of Nava Bharat Ventures Ltd. through A N Investments Pvt Ltd, Nav Developers Limited, and Nava Bharat Ventures Employee Welfare Trust. Post this deal, Kingfisher Capital CLO Limited has cut down its stake in the company to 11.2% from 14.5%.
Other bulk deals for the week included companies like HDIL, Sintex, Core Projects and NCC.
On March 6 2012, Merill Lynch bought shares worth Rs. 25.4 crores in Mumbai-based real estate developer HDIL Limited. My earlier posts would inform that Goldman Sachs had also bought shares in HDIL Limited on Feb 14 2012. On the same date, Morgan Stanley scooped-up shares worth Rs. 14.9 crores in plastic products company Sintex Industries.
On March 7 2012, Goldman Sachs bought shares worth Rs. 18.2 crores in education service provider Core Projects, while Reliance Life Insurance Company bought shares worth Rs. 7.4 crores in infrastructure firm NCC Limited. My earlier posts would inform that Baer Capital had also bought shares worth Rs. 22 crores in NCC Limited on Feb 6 2012.
Sunday, March 11, 2012
Sunday, March 4, 2012
The week of Ambani bros
Bulk deals during the ninth trading week of 2012 belonged to the Ambani bros. Large buying from firms belonging to both Mukesh Ambani as well as Anil Ambani took place during the week.
Reliance Industries’ buyout of Analjit Singh’s stake in EIH (Oberoi Hotels) for Rs. 192 crores was the highlight deal of the week. On March 2, 2012, Reliance Industries Investment and Holding Limited bought 21.3 million shares of EIH Limited from Pivet Finances Limited and Gaylord Impex Limited (both belonging to Analjit Singh) at an average price of Rs. 90/- per share. Do recall that Mukesh came as a white knight for Bikki Oberoi in Aug 2010, buying close to 15% stake in the hotel company for Rs. 1,000 crores, to ensure that ITC did not become a threat to the current management. The deal marks the complete exit of Analjit Singh from EIH.
The younger Ambani – whose firms are usually quite active in the bulk deals section – was seen lapping up shares in Intel-backed Persistent Systems Limited. As per the data available on NSE and BSE, Reliance Capital bought a little less than one million shares of the pune-based IT firm at an average price of Rs. 305/- per share. Reliance Capital now owns 6.5% in Persistent Systems. US-based Capital Group Companies, Inc. was the seller in Persistent Systems.
Two more companies which saw some buying were: Talwalkar Fitness and ABG Shipyard. An entity named American Funds Insurance bought 2.5 lac shares in Talwalkar Fitness at an average price of Rs. 160/- while Deutsche Securities Mauritius was the buyer in ABG Shipyard, taking up 5.0 lac shares for Rs. 20.4 crores. Do remember that last week some shares of ABG Shipyard were picked up by Australia-based Macquarie Bank too.
Reliance Industries’ buyout of Analjit Singh’s stake in EIH (Oberoi Hotels) for Rs. 192 crores was the highlight deal of the week. On March 2, 2012, Reliance Industries Investment and Holding Limited bought 21.3 million shares of EIH Limited from Pivet Finances Limited and Gaylord Impex Limited (both belonging to Analjit Singh) at an average price of Rs. 90/- per share. Do recall that Mukesh came as a white knight for Bikki Oberoi in Aug 2010, buying close to 15% stake in the hotel company for Rs. 1,000 crores, to ensure that ITC did not become a threat to the current management. The deal marks the complete exit of Analjit Singh from EIH.
The younger Ambani – whose firms are usually quite active in the bulk deals section – was seen lapping up shares in Intel-backed Persistent Systems Limited. As per the data available on NSE and BSE, Reliance Capital bought a little less than one million shares of the pune-based IT firm at an average price of Rs. 305/- per share. Reliance Capital now owns 6.5% in Persistent Systems. US-based Capital Group Companies, Inc. was the seller in Persistent Systems.
Two more companies which saw some buying were: Talwalkar Fitness and ABG Shipyard. An entity named American Funds Insurance bought 2.5 lac shares in Talwalkar Fitness at an average price of Rs. 160/- while Deutsche Securities Mauritius was the buyer in ABG Shipyard, taking up 5.0 lac shares for Rs. 20.4 crores. Do remember that last week some shares of ABG Shipyard were picked up by Australia-based Macquarie Bank too.
Sunday, February 26, 2012
Mostly infrastructure firms in this week’s bulk deals
Infrastructure firm IVRCL Limited witnessed good amount of activity in the bulk deals section this week. Australia-based Macquarie Bank along with a few Indian brokerages bought shares worth Rs. 25 crores in the firm on Feb 22 2012 and Feb 24 2012. Macquarie already holds shares worth Rs. 24 crores in IVRCL, which after this would now increase to Rs. 32 crores.
The Australian bank was a big buyer in ABG Shipyard too. On Feb 24 2012, Macquarie added shares worth Rs. 12.40 crores in the company at an average price of Rs. 423/-
On Feb 23 2012, Kotak Mahindra bought 6 lac shares worth Rs. 9.60 crores in APL Apollo Tubes (formerly Bihar Tubes), a manufacturer of steel pipes. APL Apollo Tubes, which was a small player a few years back, has been growing fast; the company shot into limelight after it acquired Mumbai-based Lloyd Line Pipes in 2010.
UK-based hedge fund Spinakker continued to cut its stake in Sanghi Industries, selling shares worth Rs. 9.90 crores this week. With this, Spinakker has now sold a total of Rs. 27 crores worth shares in the cement company. A recent filing on the BSE states that Motilal Oswal has increased its stake in Sanghi to 15.78%, as a result of share pledge.
The Australian bank was a big buyer in ABG Shipyard too. On Feb 24 2012, Macquarie added shares worth Rs. 12.40 crores in the company at an average price of Rs. 423/-
On Feb 23 2012, Kotak Mahindra bought 6 lac shares worth Rs. 9.60 crores in APL Apollo Tubes (formerly Bihar Tubes), a manufacturer of steel pipes. APL Apollo Tubes, which was a small player a few years back, has been growing fast; the company shot into limelight after it acquired Mumbai-based Lloyd Line Pipes in 2010.
UK-based hedge fund Spinakker continued to cut its stake in Sanghi Industries, selling shares worth Rs. 9.90 crores this week. With this, Spinakker has now sold a total of Rs. 27 crores worth shares in the cement company. A recent filing on the BSE states that Motilal Oswal has increased its stake in Sanghi to 15.78%, as a result of share pledge.
Saturday, February 25, 2012
Should you have invested in the MCX IPO?
The initial public offering of MCX India closed yesterday. Edelweiss Capital, which was the lead manager to the issue, would be more than happy to have brought a successful close (oversubscription of 54 times) to one of the most delayed IPOs in India. Yes, this was probably the third attempt from MCX India to go public. Jignesh Shah, founder of MCX India, would be a much relieved man today. His ability to hold ground against all odds to delay the IPO is highly commendable.
Let me give you a small brief before starting this discussion. MCX or Multi Commodity Exchange is the largest commodity exchange in India. MCX allows one to trade everything from precious metals and base metals to agri commodities and likes. Based on my findings, which date about two years back, MCX handled more than 75% of all organized commodity trades in India. NCDEX, its nearest rival, was nowhere close to the business done at MCX. The situation remains the same till date. In fact, my HT Mint copy informs that it is c.87% for the MCX now. No wonder, the head honchos of MCX and NSE (of NCDEX) do not see eye to eye.
I clearly remember the year 2003. I would pass a red building built by the Silver Group in Andheri East, while traveling in a BEST bus from my uncle’s place to college. The red building housed the headquarters of MCX India. I would always wonder why I didn’t see much activity around the exchange. Coming from a small town, I carried this notion that an exchange (be it a stock exchange or a commodity exchange) would be similar to a mandi (anaj mandi or sabji mandi) with much noise and human activity. For me, an exchange was supposed to be a marketplace, full of commotion, due to a large number of buyers and sellers and the intermediaries involved. When I visited the NSE to write the derivatives exam the same year, I found that the NSE at Bandra Kurla Complex was an even calmer place. Anyway, that’s a different story, and I guess I am moving away from the topic I am trying to discuss here. The listing of MCX india.
MCX came to the market to raise Rs. 663 crores (based on the upper price band). A retail investor was allowed to bid in lots of 6 shares. Which meant that if Mr. A wanted to place his bet in the IPO, he would need to allocate Rs. 1,98,144/- and bid for 32 lots of six shares each. Lets assume, Mr. A was advised by his neighborhood broker to apply because buyers in the grey market were willing to pay Rs. 3,500/- per application, provided you transfer all the shares allocated to your demat account to them on the day of listing. Assuming that the process would take 21 days from the day of application to the day of listing, it meant a clean profit of 1.8% in 21 days or 30.7% annualized returns.
For the sake of our understanding, let us assume that Mr. A applied but does not trade his shares in the grey market. He feels that the company will have a good listing and he will exit making a higher profit. Based on the bids data pulled from the NSE, it seems that Mr. A now has chances of getting as many as eight shares against his application of 192 shares. The retail portion was oversubscribed 24.1 times. But was he better off than having sold his shares in the grey market? Let’s try and work this out.
If buyers in the grey market were willing to pay Rs. 3,500/- for a full application; they were basically quoting a premium of Rs. 438/- for one share of MCX. This is based on the assumption that the issue price would be set at the higher band of Rs. 1,032 per share. So, Mr. A would do well only if MCX manages to list above Rs. 1470/- per share.
Here pops the next question. What would be a reasonable listing price/fair price for MCX? Let me be frank here. I haven’t done much homework here but according to what I have read in the papers, MCX is already available at 18x its TTM earnings, which is at par with international exchanges like CME Group and CBOE. Considering that MCX would continue to grow at the same pace it has been historically clocking – 50% revenue growth and 22% income growth over 2009 to 2012 – its earnings could expand at anything between 22% to 50% next year. Using next years projected earnings with a P/E of 18x, MCX should command a fair value of Rs. 1260/- or at max Rs. 1550/- .
To conclude, Mr. A might manage to make at most Rs. 80/- (or a total of Rs 640/-) more than what was being promised by the buyers in grey market.
Let me give you a small brief before starting this discussion. MCX or Multi Commodity Exchange is the largest commodity exchange in India. MCX allows one to trade everything from precious metals and base metals to agri commodities and likes. Based on my findings, which date about two years back, MCX handled more than 75% of all organized commodity trades in India. NCDEX, its nearest rival, was nowhere close to the business done at MCX. The situation remains the same till date. In fact, my HT Mint copy informs that it is c.87% for the MCX now. No wonder, the head honchos of MCX and NSE (of NCDEX) do not see eye to eye.
I clearly remember the year 2003. I would pass a red building built by the Silver Group in Andheri East, while traveling in a BEST bus from my uncle’s place to college. The red building housed the headquarters of MCX India. I would always wonder why I didn’t see much activity around the exchange. Coming from a small town, I carried this notion that an exchange (be it a stock exchange or a commodity exchange) would be similar to a mandi (anaj mandi or sabji mandi) with much noise and human activity. For me, an exchange was supposed to be a marketplace, full of commotion, due to a large number of buyers and sellers and the intermediaries involved. When I visited the NSE to write the derivatives exam the same year, I found that the NSE at Bandra Kurla Complex was an even calmer place. Anyway, that’s a different story, and I guess I am moving away from the topic I am trying to discuss here. The listing of MCX india.
MCX came to the market to raise Rs. 663 crores (based on the upper price band). A retail investor was allowed to bid in lots of 6 shares. Which meant that if Mr. A wanted to place his bet in the IPO, he would need to allocate Rs. 1,98,144/- and bid for 32 lots of six shares each. Lets assume, Mr. A was advised by his neighborhood broker to apply because buyers in the grey market were willing to pay Rs. 3,500/- per application, provided you transfer all the shares allocated to your demat account to them on the day of listing. Assuming that the process would take 21 days from the day of application to the day of listing, it meant a clean profit of 1.8% in 21 days or 30.7% annualized returns.
For the sake of our understanding, let us assume that Mr. A applied but does not trade his shares in the grey market. He feels that the company will have a good listing and he will exit making a higher profit. Based on the bids data pulled from the NSE, it seems that Mr. A now has chances of getting as many as eight shares against his application of 192 shares. The retail portion was oversubscribed 24.1 times. But was he better off than having sold his shares in the grey market? Let’s try and work this out.
If buyers in the grey market were willing to pay Rs. 3,500/- for a full application; they were basically quoting a premium of Rs. 438/- for one share of MCX. This is based on the assumption that the issue price would be set at the higher band of Rs. 1,032 per share. So, Mr. A would do well only if MCX manages to list above Rs. 1470/- per share.
Here pops the next question. What would be a reasonable listing price/fair price for MCX? Let me be frank here. I haven’t done much homework here but according to what I have read in the papers, MCX is already available at 18x its TTM earnings, which is at par with international exchanges like CME Group and CBOE. Considering that MCX would continue to grow at the same pace it has been historically clocking – 50% revenue growth and 22% income growth over 2009 to 2012 – its earnings could expand at anything between 22% to 50% next year. Using next years projected earnings with a P/E of 18x, MCX should command a fair value of Rs. 1260/- or at max Rs. 1550/- .
To conclude, Mr. A might manage to make at most Rs. 80/- (or a total of Rs 640/-) more than what was being promised by the buyers in grey market.
Tuesday, February 21, 2012
Mid week update: Is New Vernon exiting Setco Automotive?
Well. I must admit I shouldn’t have written-off this Gujarat-based auto ancillary company while screening out the weekly bulk deals last week.
On Feb 17 2012, Morgan Stanley had bought 1 lac shares of Setco Automotive at an average price of Rs. 174/- from an unknown entity. Finding the deal to be worth just Rs. 1.7 crore, I deleted it from the list of candidates for discussion.
However, I again chanced to find the name in the list of bulk deals for the day, today.
On Feb 21 2012, Morgan Stanley bought an additional 3 lac shares of Setco Automotive at an average price of Rs. 174/- from an unknown entity. Apart from the promoters, New Vernon Private Equity, Ares Diversified and Reliance Mutual Fund are the other large shareholders in Setco Automotive. But who could be the seller?
I zero-in on New Vernon due to several reasons. First, Setco Automotive is doing well and the stock price has appreciated. Therefore, the promoters probably will not like to cut their stake at this time. Second, Ares Diversified does not have 4 lac shares to sell to Morgan Stanley. Third, Reliance Mutual Fund does not like to do shady deals. It always rings the bell and wants others to know that it is buying/selling into a particular company.
New Vernon makes a perfect choice because being a private equity it needs to exit investments within a limited horizon of 5-7 years; the PE firm holds much more than 4 lac shares in Setco Automotive; the stock price of Setco Automotive has appreciated well to deliver good returns; and New Vernon has offloaded stake previously.
On Feb 17 2012, Morgan Stanley had bought 1 lac shares of Setco Automotive at an average price of Rs. 174/- from an unknown entity. Finding the deal to be worth just Rs. 1.7 crore, I deleted it from the list of candidates for discussion.
However, I again chanced to find the name in the list of bulk deals for the day, today.
On Feb 21 2012, Morgan Stanley bought an additional 3 lac shares of Setco Automotive at an average price of Rs. 174/- from an unknown entity. Apart from the promoters, New Vernon Private Equity, Ares Diversified and Reliance Mutual Fund are the other large shareholders in Setco Automotive. But who could be the seller?
I zero-in on New Vernon due to several reasons. First, Setco Automotive is doing well and the stock price has appreciated. Therefore, the promoters probably will not like to cut their stake at this time. Second, Ares Diversified does not have 4 lac shares to sell to Morgan Stanley. Third, Reliance Mutual Fund does not like to do shady deals. It always rings the bell and wants others to know that it is buying/selling into a particular company.
New Vernon makes a perfect choice because being a private equity it needs to exit investments within a limited horizon of 5-7 years; the PE firm holds much more than 4 lac shares in Setco Automotive; the stock price of Setco Automotive has appreciated well to deliver good returns; and New Vernon has offloaded stake previously.
Sunday, February 19, 2012
Mumbai-based real estate firms witness buying
The Indian stock market continued its good roll during the seventh week of 2012. The BSE Sensex is now up a huge 18% year to date. Wow! Maybe, someone should check if any of the thousands of schemes run by 40+ mutual funds in the country has outperformed the index.
Let’s look at bulk deals for the week that could be of interest to fellow investors:
On Feb 14 2012, Goldman Sachs bought over two million shares in Mumbai-based realty firm HDIL at an average price of Rs. 97.80/- per share. And guess what, their investment of Rs. 21.7 crores in the firm is already worth Rs. 27.2 crores. HDIL has literally been on fire and has zoomed 130% this year.
On Feb 14 2012, Reliance Life Insurance bought shares worth Rs. 27.8 crores in Radico Khaitan at an average price of Rs.111/- per share. The seller was Venus Infosoft. The investment in 8PM whisky maker (which is available at 20 times its trailing earnings) seems to be a fundamental and safe bet for Reliance Life.
On Feb 15 2012, Tree Line Asia bought shares worth Rs. 24.7 crores in Mumbai-based Sunteck Realty at an average price of Rs. 353/- per share from Kotak Alternate Opportunities India Fund. Considering the profile of Kotak as an investor and business associations with Ajay Piramal, the buy in Sunteck Realty could be fruitful for Tree Line Asia.
On Feb 15 2012, Samruddhi Investors Services bought over ten million shares of Sanghi Industries at Rs. 17.50/- per share from Spinnaker Global Opportunity Fund. Spinnaker, a UK based hedge fund, is believed to have burnt its hands by investing in this company.
Let’s look at bulk deals for the week that could be of interest to fellow investors:
On Feb 14 2012, Goldman Sachs bought over two million shares in Mumbai-based realty firm HDIL at an average price of Rs. 97.80/- per share. And guess what, their investment of Rs. 21.7 crores in the firm is already worth Rs. 27.2 crores. HDIL has literally been on fire and has zoomed 130% this year.
On Feb 14 2012, Reliance Life Insurance bought shares worth Rs. 27.8 crores in Radico Khaitan at an average price of Rs.111/- per share. The seller was Venus Infosoft. The investment in 8PM whisky maker (which is available at 20 times its trailing earnings) seems to be a fundamental and safe bet for Reliance Life.
On Feb 15 2012, Tree Line Asia bought shares worth Rs. 24.7 crores in Mumbai-based Sunteck Realty at an average price of Rs. 353/- per share from Kotak Alternate Opportunities India Fund. Considering the profile of Kotak as an investor and business associations with Ajay Piramal, the buy in Sunteck Realty could be fruitful for Tree Line Asia.
On Feb 15 2012, Samruddhi Investors Services bought over ten million shares of Sanghi Industries at Rs. 17.50/- per share from Spinnaker Global Opportunity Fund. Spinnaker, a UK based hedge fund, is believed to have burnt its hands by investing in this company.
Sunday, February 12, 2012
Baer puts money in NCC; Infrastructure Fund of India adds more of Gati
Apologies for delay in the posts; finding time during the weekends is getting difficult due to increased workload, thanks to my middle-east clients’. However, leaving that aside, it seems that 2012 is proving to be quite a year for the stock markets. On a year to date basis, the Indian stock market index is up 15%. Good stuff..Right!
Anyway, let’s focus on the bulk deals that took place during the sixth week of 2012.
On Feb 6 2012, Baer Capital bought shares worth Rs. 22 crores in NCC Limited at an average price of Rs. 62.70/- per share. The selling entity here was Norges Bank. It is interesting to note that Rakesh Jhunjhunwala has a little more than 5% stake in this Hyderabad based infrastructure company.
On the same day, the Infrastructure Fund of India bought nearly 7 lac shares in logistics firm GATI Limited at an average price of Rs. 34/- per share. The fund bought an additional 5 lac shares in GATI Limited during the week. The stock price of GATI has moved up really well; it was up 35% during the week.
The other deal which must be mentioned about is the purchase of 20 lac shares in Shasun Pharma (at an average price of Rs. 75/- each) by star-investor Shivanand Mankekar. The sellers here were Om Kedar Investments and Privat Bank IHAG Zurich AG. The ownership of Om Kedar Investments is difficult to ascertain, but it seems that this is a shell company of Mr Mankekar himself. The stock price of Shasun Pharma was up 27% during the week.
Anyway, let’s focus on the bulk deals that took place during the sixth week of 2012.
On Feb 6 2012, Baer Capital bought shares worth Rs. 22 crores in NCC Limited at an average price of Rs. 62.70/- per share. The selling entity here was Norges Bank. It is interesting to note that Rakesh Jhunjhunwala has a little more than 5% stake in this Hyderabad based infrastructure company.
On the same day, the Infrastructure Fund of India bought nearly 7 lac shares in logistics firm GATI Limited at an average price of Rs. 34/- per share. The fund bought an additional 5 lac shares in GATI Limited during the week. The stock price of GATI has moved up really well; it was up 35% during the week.
The other deal which must be mentioned about is the purchase of 20 lac shares in Shasun Pharma (at an average price of Rs. 75/- each) by star-investor Shivanand Mankekar. The sellers here were Om Kedar Investments and Privat Bank IHAG Zurich AG. The ownership of Om Kedar Investments is difficult to ascertain, but it seems that this is a shell company of Mr Mankekar himself. The stock price of Shasun Pharma was up 27% during the week.
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