Category: Observations

Categories
Observations

Mr.Motilal Oswal bought right,sat tight and lost a bundle

One ad doing the rounds on TV is from Motilal Oswal which advises investors to follow the golden rule of investing “Buy Right,Sit Tight”

Now it is interesting to know that Mr.Motilal Oswal personally lost money along with his investors in the NSEL scam.

In today’s NSEL investor meet,Mr.Motilal Oswal made the following statements:

 

Categories
Observations

Deloitte to Indian Equity Investors:Don’t believe us

The auditor of Financial Technologies — Deloitte Haskins & Sells — has said that the company’s results for the year ending March 31, 2013 should no longer be relied upon due to the crisis at group company National Spot Exchange (NSEL).

As a result, the company is deferring the passing of three items from its 25th annual general meeting on Wednesday, it said in a release to stock exchanges on Tuesday.

The items include 2012-13 audited results, dividends and re-appointment of Deloitte Haskins & Sells as its chartered accountant.

NSEL, which contributed roughly 56% to Financial Technologies’ net profit in 2012-13, is embroiled in a crisis, where it has failed to settle trades worth Rs 5,600 crore. This has led to FT Group and its promoter Jignesh Shah facing the ire of investors, regulators and the government.

Financial Technologies said its stand-alone and consolidated results for 2012-13 will be amended with a revised auditor’s report.

“The company……will satisfy the statutory auditors of the company on stand-alone financial accounts though standalone and consolidated financial statements have been audited prior to the event occurred at NSEL,” the Financial Technologies release to BSE said.

Deloitte Haskins & Sells said it would not comment on client proprietary matters.-from BS

 

How can an audit firm withdraw its signature from audited accounts which is in the public domain since 30 May,2013?

It is clear that Deloitte feared that is could be party to a class action suit under Clause 140 and 245 of the Company Bill 2013 and hence withdrew its signatures.

The question is:Shouldn’t ICAI get its head out of its arse and take action against Deloitte.But does it have the balls?Or will it do nothing as in the case of PWC in the Satyam case?Given the track record of ICAI, I wouldn’t be holding my breath.

The message to investors in Indian equities is clear:Believe the audited accounts at your own peril.

Categories
Observations

What Swaminathan Aiyar missed about the Land Acquisition Bill

Swaminathan Aiyar wrote a great article recently on the Land Acquisition Bill.He called it a ” Luddite proposal that threatens all economic development.” But there was one aspect he missed in the article- this Bill is likely to be a vote getter and could be a game changer for the UPA Government in rural India.

Why?Because the draconian clauses of the Bill ensure that it would be very difficult to acquire land of any significant size for any industrial/developmental activity.

This will necessarily boost the bargaining power of farmers and hence farmland prices will be headed one way-UP

For some reason, this bill reminds me of this great excerpt from Yes Minister

“There are times in a politician’s life when he is obliged to take the wrong decision.Wrong economically,wrong industrially , wrong by any standards-except one.It is a curious fact that something which is wrong from every other point of view can be right politically.”

 

Categories
Observations

The gut wrenching fall of Wockhardt Ltd

Wockhardt Ltd is one of India’s leading pharma companies with annual sales of $1 Billion. Its corporate headquarters is housed in a gleaming building right next to National Stock Exchange in Mumbai.

On April 1, 2013, Wockhardt was trading at around Rs.2025 per share.Around a month later,MSCI added to its index which is a good sign for any scrip.

On 24th May, 2013,Wockhardt released the following press release to the stock exchanges:

Wockhardt Limited has informed the Exchange that the Company has received an ‘import alert’ from USFDA on one of its manufacturing unit located in Waluj near Aurangabad. The impact of the import alert on the revenues is estimated to be in the range of $100m on an annualised basis. The Company is taking all steps to address the concerns raised by USFDA and shall put all efforts to resolve the issue at the earliest.

 

All hell broke lose following this announcement.The stock kept falling and is now quoting at around 400 Rs/share !

This is around 25% of its quoted value only 4 months back !

The moral of the story:Invest in the Indian Equity Markets only if you can stomach the volatility !

Categories
Observations

The real lesson of the Indian grandmother & Indian Stocks

There was an interesting post in the WSJ about an Indian grandmother Ashalata Maheshwari.

Apparently, this lady has been investing in Indian stocks since 1954 and now her portfolio consists of around 1500 stocks worth around 4 Crore Rupees.

The author then draws the conclusion that Indian equities are a great investment and one should learn a thing or two about equity investing from the Indian granny.

What I found interesting in the article was not Ms.Maheshwari’s stock picking prowess (1500 stocks-thats the entire market) nor her holding period (apparently forever).

What was interesting was this nugget-Ms.Maheshwari bought a flat in Santacruz (a Mumbai Suburb) for Rs.80,000 in 1972 and now its worth around 5 Crores.This translates into an effective return of 17% pa-beating equity returns.

So I guess the real lesson of the Indian grandmother is that Indian realty will probably give you much better returns than Indian equities over the very long term(30-40 years).It will also save you time from reading annual reports and attending AGMs and give you more time for your grandkids !

On another note,I had the occasion to actually hear this lady’s poems in one of the AGMs.The poem was fairly memorable…because it was unforgettably atrocious !