Category: Observations

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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.”

 

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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 !

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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 !

 

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Why land is more dangerous than sea for Sheth brothers of GE Shipping

The Sheth brothers-Bharat Sheth and Ravi Sheth-are the promoters of GE Shipping.

Collectively, they own around 38 Lakh shares of Financial Technologies -around 8.24% of the company.

Today, Financial Tech crashed by an astounding 66%, a loss of Rs.356 per share due to rumours of a payment crisis at NSEL

This resulted in the Sheth brothers losing 135 Crores in a single day’s trading session.

Perhaps the oceans of the world are less stormy than India’s financial markets !

 

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Observations

Remember this the next time you watch CNBC TV 18

While researching for Investor Wisdom newsletter, I came across this interesting factoid: The TV18 group which runs the CNBC TV-18 channel owns around 1.78% of a company called Refex Refrigerants.

Apparently,this stake was bought way back in Jan 2008 (when markets were at its peak).The purchase price?A princely Rs.200 per share.

At that time, B. Sai Kumar, Group COO of TV18 Group said:“We are very happy with this partnership since we believe that Refex’s aggressive growth plans combined with our ability to reach them in an engaging way and the reach of our multi-platform media vehicle will ensure that Refex is a significant player in the fast-growing environmental friendly refrigeration market”

Fast forward, five years later, Refex is quoting at 3 Rs/share..a colossal wealth destruction of 98% of its purchase price!!And TV18 is still clinging on its shares.

So running a 24 hour news channel is no guarantee that you will make money on your investments.

Remember this the next time you watch CNBC TV18 !