Category: Observations

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Observations

A warning sign that something is rotten

While researching for my Investor Wisdom newsletter,I came across an interesting fact.

If the shareholding pattern of a company has many banks or brokerages, it implies that something rotten is happening.Banks/Brokerages become large shareholders when the company is unable to meet its debt obligations and a part of the debt is converted into equity.

Exhibit one of this phenomenon is GTL.Consider its shareholding pattern as on 31 March, 2013

Bank # of Shares %
BANK OF INDIA 5760424 3.67
ANDHRA BANK 4787185 3.05
PUNJAB NATIONAL BANK 4045570 2.58
IDBI BANK LIMITED 3317412 2.11
CANARA BANK 3296275 2.1
UNION BANK OF INDIA 2769496 1.76
DENA BANK 2741555 1.75
VIJAYA BANK 2654910 1.69
INDIAN OVERSEAS BANK 2433199 1.55
UCO BANK 1854519 1.18
BANK OF BARODA 1684550 1.07
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 1649828 1.05
INDIAN BANK 1639016 1.04

Banks altogether hold around 24.6% of the company !

Prashant made a great observation-There is not a single private bank to keep the PSU banks company !

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Observations

IDFC Capital CEO Tapasije Mishra caught with his pants down

As per news reports,

A Delhi district court has rejected the anticipatory bail plea of IDFC Capital CEO Tapasije Mishra in a case filed against him by a woman alleging sexual abuse, intimidation and breach of trust.

The complainant, a divorcee with a nine-year old son and a former air hostess with Emirates Airlines, in an FIR filed with the Vasant Kunj police station (New Delhi), had alleged that Mishra had sexual relations with her for the last three years while promising to marry her. Mishra then backtracked on his commitment, and his father (also named in the FIR) threatened the complainant with dire consequences unless she stayed away from him (Tapasije), she alleged.

In his ruling, Additional Sessions Judge Daya Prakash, said custodial interrogation of the accused was required for investigating the allegations of mental and physical torture.

 

I find it interesting that IDFC has not informed the stock exchanges of this development.Is it because they think that their CEO getting arrested is not material information?

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Observations

N Jayakumar of Prime Securities is in trouble

On Friday, ET carried a report which said

 

The National Stock Exchange, India’s largest bourse, has withheld payout to Mumbaibased stockbroker Prime Securities. Three persons familiar with the development told ET that the exchange and the capital market regulator are investigating unusual trades handled by the broker in shares of Gitanjali Gems.

Prime Securities, headed by N Jayakumar, owes more than Rs 80-100 crore to NSE in the equity derivatives segment, said a Sebi source. The exchange is, in turn, holding back payout to Prime and a few other traders and members who are believed to have dealt with Prime. The exchange authorities and Sebi are probing whether Prime was linked to any price manipulation in the spot and derivatives markets.

“There is a fear that Prime may default on its payments, which is why NSE has been holding back on payments that are due to some of Prime’s clients,” said a person. The stockbroker has moved the Securities Appellate Tribunal against NSE.

 

At the risk of stating the obvious, this implies that securities held by Prime Securities/N Jayakumar will be under pressure.

The group portfolio of significant holdings as on March 31, 2013 is as follows:

Comp Name Entity # of Shares %
Aanjaneya Lifecare Prime Broking Company (India) Ltd 1125183 8.1
EL Forge N Jayakumar 289435 1.42
Gitanjali Gems Prime Broking Company India Ltd 1702269 1.85
Greycells Education Prime Broking Company (India) Ltd 192101 3.2
Greycells Education Prime Securities Ltd 79000 1.31
Hind Tin Works N Jayakumar 237500 2.28
Hitech Plast Madhu Vadera Jayakumar 250000 1.9
Logix Microsystems Prime Securities Ltd 200696 1.66
Logix Microsystems N Jayakumar 255000 2.11
Prime Securities Prime Broking Company India 1038585 3.92

For information on significant portfolio holdings of important investors, subscribe to the Investor Wisdom Newsletter.

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Observations

Naren of ICICI Pru joins the chorus

I had blogged earlier about how the next sector to be touted will be those of export oriented companies.

Sure enough, S Naren of ICICI Pru made the following statement”We have always believed in exports as a theme.We took this call over the past two years and could
consider adding to exporters of technology, pharmaceuticals,
auto parts and textile”, he said, without naming any companies.

Watch out for more and more fund managers join the chorus.

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Observations

The drumbeat goes.. Exports,Exports,Exports

An peculiar aspect of the Indian equity market is the herd like behavior of its brokerage community.One a meme (idea) takes root it quickly spreads and soon everybody are chasing the same stocks

To illustrate, in 1999-2000 , the IT sector was the meme.All brokerages recommended IT stocks, their clients bought it,so the stocks rose which led to recommendation upgrades and so on till the bubble burst.

The same cycle played out in various sectors over the years…telecom, realty, infra and so on

Recent memes that have done well in the last one year or so are FMCGs, Private banks  etc

Now the meme that is fast gaining currency are Export Oriented Companies.

Like all memes, the underlying premise is simple and sound.Our dear Rupee has collapsed from around 45 Rs/$ to around 60 Rs/$. So export oriented companies should be raking in the moolah and laughing all the way to the bank.

Watch out as this idea spreads and becomes popular and brokerages start recommending names for this play.

How to play this game?Soros would have climbed on to the bandwagon, rode the wave up and got out before the collapse.

But then not all of us are destined to be a Soros !