Forecasting Folly:Spanco

This post is in continuation of my forecasting folly series (see here)

I had blogged earlier about Crisil’s forecasting accomplishments (see here).

But this example is quite outrageous in its own right.

On July 28, 2011, Crisil maintained a valuation grade of 5/5 on Spanco and gave it a fair value of Rs.289 per share.Then the prevailing price of Spanco was around 130 Rs.

One year later, on June 04, 2012 , Crisil continued to maintain its valuation grade of 5/5 on Spanco and retained its fair value of Rs.289 per share.Then the prevailing price was Rs.66 per share.

Any investor could have been forgiven for thinking that this is a deal of a lifetime.You have the brilliant minds at Crisil valuing the fair price of a stock around 5x times the market price.

What followed in the next months was a complete collapse in the stock price.Now the stock is trading at 16 Rs !!

Forecasting folly, anyone ?

6 Replies to “Forecasting Folly:Spanco”

  1. Thanks for highlighting! They have an “Ask the Analyst” feature and I posed a set of queries for them. Never heard a response.

  2. CRISIL people are always eager to give 4/5,5/5 ratings.You can check their solid rating given to SHRI LAKSHMI COTSYN LTD,but market never trust them & stock fell from 150 to 39.

  3. If you look at Arshiya , you will find a similar fraud on retail Investors.Emkay Global had recommended a BUY on the stock with a target price of Rs. 172 .
    The gist of their Research is reproduced below:
    “Operational results in-line with estimates; forex loss and
    higher tax rate leads to below estimated (-7%) PAT. Conso.
    debt marginally up by Rs 750mn QoQ to Rs 24.3bn
    AIL dilutes equity by 23% through issuance of warrants to
    promoters at conversion rate of Rs 145/sh. On full conversion
    promoter holding to increase to 55.3% from pre-issue 44.9%
    5 new rakes, 2 warehouses in Mumbai FTWZ, part of rail
    sidings and phase 1 of Khurja Distripark (delayed) are
    expected to be in operations in H2FY13
    Maintain Buy with TP of Rs 172. Dilution from equity issuance
    is mitigated by expansion in rail business. At TP, AIL will
    trade at P/E, P/BV & EV/EBITA of 6.7x, 0.9x & 6.6x on FY14E
    AIL generates higher topline from 3PL business ”
    Today, the stock is Rs. 32 ! Is it not a fraud ?

Leave a Reply

Your email address will not be published. Required fields are marked *