Category: Excerpts

Categories
Excerpts

RBL Bank set to file for IPO within a week

Hat Tip: Shivam Bose

(Disclosure:I am market making in the shares of RBL Bank)

RBL Bank Ltd, a privately held lender backed by a clutch of private equity funds, is set to file its draft red herring prospectus (DRHP) with the markets regulator within a week, said three people familiar with the development.

“The bank is looking to raise Rs.1,450 through its initial public offering (IPO), of which Rs.1,100 crore will be raised to increase the capital adequacy ratio of the bank and the rest to give exit to a few private equity funds,” said the first investment banker mentioned above.

The bank has hired around nine investment banks to run the process. The IPO would help the bank comply with the Reserve Bank of India (RBI) guidelines issued last year that directed all banks to list within three years of starting business.

Over the last three years, global and local private equity and development funds have invested over Rs.1,400 crore in the bank in three tranches. Housing Development Finance Corp. Ltd (HDFC), Norwest Venture Partners, Samara Capital, Beacon Capital, Faering Capital, TVS Shriram, Cartica Capital, Ascent Capital, Aditya Birla Private Equity, IDFC’s Spice Fund and ICICI’s Emerging India Fund are among its shareholders.

The share sale will make RBL the 41st publicly traded bank in India.-from Mint
Categories
Excerpts

The case of the other Rakesh Jhunjhunwala

Shares in Surana Solar went on a tear over the past few days after it appeared from NSE data that ace investor Rakesh Jhunjhunwala had picked up 2.5 lakh shares in the firm on June 9.

But it soon turned out to be a case of a namesake of the Big Bull who had invested in the company rather than the billionnaire investor himself. This was confirmed to CNBC-TV18’s Varinder Bansal by the Big Bull himself who denied picking up any stake in the firm.

CNBC-TV18 learns that this bulk deal was brokered by Rajkot-based Sun Flower Broking and that the account bearing the name Rakesh Jhunjhunwala was opened by a Kolkata-based client of this firm. This account is not more than a month old. ADVERTISING The volumes in the Surana counter, which averaged about 1.5-2 lakh in the past two-three weeks, surged to about 75 lakh today.

Interestingly, the stock was up about 9.1 percent for most part of the day, before turning 20 percent lower, soon after CNBC-TV18 broke the news. The trade appears to be a classic pump-and-dump operation and sources said the trick may be repeated with other stocks.

–from MoneyControl
Categories
Excerpts

Mid-cap investing in India

Now, let us take a look at the list of contenders in 2007, i.e., mid-cap stocks with a market capitalization in the range of $2 to $5 billion, which had the promise to grow into large-caps by now. Out of the 73 contenders, only 14 have managed to move up the ranks to become large-caps, while 41 stocks actually slipped below the threshold of $2 billion market capitalization.

 

Stocks lose momentum for a variety of reasons. Many are able to grow spectacularly well when they start off from a small base. As size catches up, it becomes difficult to maintain the elevated rates of growth. Often constraints are imposed by the size of the business opportunity, the competitive intensity or the need to continuously reinvest cash flows. In some cases a de-rating may be caused by management action such as a bad acquisition or unrelated diversification. Or some stocks may just fall victim to cyclical swings in the economy.

 

Many mid-cap funds are launched with the marketing pitch that smaller companies will be able to compound their market caps faster. However, a look at the mid-cap indices suggests that over the last five and 10 years, the mid-cap indices in India have barely managed to outperform the frontline large-cap indices. On a risk-adjusted basis (as measured by the Sharpe ratio—a ratio used to evaluate the performance of an investment while adjusting for risk) the large-cap indices have given similar returns with lower volatility than the mid-cap indices.

 

This raises the question of whether mid-cap investing in India is more about getting the sector themes right rather than buying stocks with a view that they will secularly graduate to becoming large-caps.

 

The data quoted earlier does prove that linear extrapolation of stocks from mid-caps to large-caps is more an exception rather than a rule. If an investor is able to make early bets in themes that catch the fancy of the markets, and rotate out of them into newer themes before the old one fades out, one can make outsized returns. But this involves superior insight and great timing. And of course, if one is able to pick the secular winners from this group, the rewards are spectacular.

 

But more often than not, investors end up chasing mid-caps that are already “hot” where the odds are low that future returns will continue to sustain for the medium to long term.

 

To conclude, investors should recognize that attrition is often the rule rather than the exception when they seek to discover the giant sequoias in the stock market.-wrote Amay Hattangadi/Swanand Kelkar,Morgan Stanley Investment Management
Categories
Excerpts

Nimesh Shah:Buy in 2015 to make money in 2018

We are quite happy with the volatility. If you ask me, we always look at volatility as an opportunity. In fact we have got set of funds which only work on the benefit of volatility.

In India, historically if you see, whenever FIIs have sold for some technical reasons or problems in the West, when they have to sell India that is the best time to buy India. That is what we have always felt and it is proved historically that whenever FIIs sold if one buys there is a good chance of making money.

So, this technical correction was very good. It will remind investors also that there is risk in the market. They need to be careful when they are investing. They did need to get their asset allocation right. As a fund house we have always had this view that 2015 we expect lots of volatility to come because of international factors.

If volatility is because of international factors, invest throughout 2015 to make money in 2018. That has been our stand even four months back and that is what we have been saying even today. So, this correction to 27,000 looks very healthy to me.

We have been or are going overweight in technology. We are overweight on private banks. So, those are the sectors that we like.

Technology we have given a big call to our investors that invest in technology. Technology has corrected around 10 percent in the last one month and so with a stronger dollar and western world also doing well, technology companies are set to gain. We believe this correction in technology companies since last one week is good.

We have always been bullish on private banks. The nature of our funds are such that since we take cash position, whenever the price to book ratio of the market goes down, we go out and buy. Some of our funds are structured that way.

So, technology and banking are the sectors that we are overweight on.-said Nimesh Shah, MD& CEO,ICICI Prudential
Categories
Excerpts

Why Jim Rogers hates India

“As usual, we attracted a crowd.A local man walked up behind my fiancee Paige  and put his hand on her bottom.She spun around, and there he stood,making no attempt to disassociate himself from the offense,assuming,it seemed, that he had every right to do what he had done.

To appreciate what happened next,one must remember that in India women are the lowest of the low.To call them second class does not come close.They are treated more as property than as human beings.Out in the villages,just to take one example,women are not allowed to leave their homes without the permission of their fathers or husbands.

Paige turned on this particular man,grabbed him by the shirtfront,and started smacking him.She hit him three times.Startled and clearly horrified,he scurried off as soon as he could extricate himself.It was probably the most humiliating thing that could ever happen to the man,being beaten by a woman in public,in front of all the men and women of the village.”-wrote Jim Rogers in his book,Adventure Capitalist