Category: Excerpts

India Ratings  claims itself to be “India’s Most Respected credit rating agency committed to providing the India’s credit markets with accurate, timely and prospective credit opinions”

However their actions with respect to Ricoh India is so scandalous that Anil Singhvi wants the company to be banned:

“In Ricoh India case also, is no further than Satyam because it is all padded up. The revenues are padded up, the receivables are padded up, the inventory is padded up.

So, I have just gone through all the numbers of the September quarter and the previous quarter as well and it is identical to what Satyam was. Satyam was also completely padded up on revenue side and on receivables side.

There are only one or two points which one has to just look at it. The total borrowing two years back in March, 2014 was Rs 367 crore which went up Rs 716 crore last year, that is March, 2015. And now, it is Rs 1,300 crore. A company which does not incur a single rupee as a Capex, the loans going up from Rs 300 crore to Rs 1,300 crore. And the parent has provided Rs 500-600 crore. They have given Rs 200 crore of non-convertible debentures (NCD) and Rs 270 crore of commercial papers (CP).

And top of it, you will laugh your guts out. The rating agency, on January 22, 2016 have upgraded the rating of both the instruments, the long-term bonds and CP from A to AA minus.

And CP is a A plus. The top rating given by India rating. And January, 2016 with an outlook, stable.

First of all, and my point is very simple, look at the rating agency’s situation, in January, when this board is caught up into all the situation, grappling with the problems and having the situation that till January, 2016 there are no availability of any accounts. How did the rating agency get any accounts between April to September, if the shareholders did not have it? So, on what basis did they give an opinion?

Without having any accounts available after March 31, 2015, on what basis have they upgraded from A to AA minus? They should be first of all, according to me, India ratings should be first banned in India.

-from MoneyControl

Delighted that another one of my unlisted babies is going public soon.

RBL Bank (formerly Ratnakar Bank) is all set to launch its ₹1,100-crore initial public offer this July. The last public offer by a full-fledged bank was the ₹470-crore issue by Punjab and Sind Bank in December 2010.

The company had submitted its draft offer papers to market regulator SEBI in June 2015. According to these papers, the bank intended to raise ₹1,100 crore in fresh equity to shore up its tier 1 capital and place on the block another 1.75 crore shares held by existing investors Beacon India Private Equity fund, GPE (India) and others. 

However, SEBI kept the IPO in ‘abeyance’ for nearly a year because the bank had issued shares to over 4,500 investors in two tranches, in 2003 and 2006. Under the Companies Act of 1956, an unlisted company wasn’t allowed to allot shares to more than 49 investors. This figure was raised to 200 investors by Companies Act 2013. However, even under the new rules, RBL had breached this ‘deemed public issue’ norm of the Act. 

Optional exit

According to sources, SEBI is understood to have approved the bank’s IPO, provided the bank gives an optional exit through a refund to existing investors. The buyback process is currently underway, the source added. RBL could not be reached for comment.

In the draft red herring prospectus, as of June 19, 2015, the bank disclosed it had 11,724 shareholders, including private equity investments by CDC Group, International Finance Corporation, Norwest Venture Partners and others, all holding under 5 per cent equity each.

In the document, RBL named Kotak Investment Banking, Axis Capital, Citigroup, Morgan Stanley, HDFC Bank, ICICI Securities, IDFC Securities, IIFL Holdings and SBI Capital Markets as the merchant bankers to the issue. A processing status update by SEBI on Monday still maintained the IPO’s status as “kept in abeyance.”

RBL’s IPO comes at a time when the markets have welcomed fund-raising by companies in the lending business.-from Hindu

At some point Parvizi cottoned to the idea that he didn’t have to wait for shares to move to make money: He could make it happen himself. He got to know reporters at the Financial Times and the Daily Mail and began speaking to them frequently. If they brought up a topic, he knew there was a chance it would appear in the next day’s paper and the shares would pop, he said. By then, he was also a big enough investor that buying shares and letting the market know about it could be enough to ramp up the price.

On his third day on the stand, Parvizi was cross-examined by Financial Conduct Authority barrister Mark Ellison. The lawyer asked him how he had made money by spreading rumors. The trader gave the example of an occasion when he phoned a journalist he knew and tried to “plant the seed” that a takeover bid for Sky, then known as BSkyB, was in the offing. The idea was that the reporter would notice higher than average trading and assume something was going on, he said.

At the prosecutor’s prompting, the judge turned to Parvizi and warned him he was at risk of admitting the separate criminal offense of attempting to manipulate markets by making deliberately misleading statements.

The stock market was “the biggest casino in the world,” Parvizi said. The only offense as far as he was concerned was trading on nonpublic information, which he denied ever doing.

You had no idea about rules on dealing? Ellison asked.

“You’re making out like I’m the only liar in the stock market,” Parvizi said, looking around the room for support. “If everyone told the truth, the stock market would not move.”-from Bloomberg

Value has always been a risky strategy, particularly for those trying to run an investment business.

The drivers of mean reversion are not hugely powerful at any given time, meaning asset prices and even the underlying fundamentals can move in unexpected ways for disappointingly long periods. It is a little glib to say that without this risk, it would be difficult for asset prices to get meaningfully out of line in the first place, but the reality is that the only way you can get really exciting opportunities for mean reversion is to have misvalued assets become even more misvalued before they revert to fair value.

This is the catch-22 of value-driven investing. Your best opportunities will almost always come just at the time your clients are least interested in hearing from you, and might possibly come at the times when you are most likely to be doubting yourself.-wrote Jeremy Grantham

(Anybody wishing to buy/sell L&T Infotech shares,kindly contact me at Alpha Ideas )

Source: L&T Infotech Annual Report 2015-16