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Sunday, February 17, 2008

Reliance Power to issue Bonus Shares

In a move to compensate the retail investors who burnt their fingers in the Reliance Power IPO, Anil Ambani has announced a Bonus Issue. A board meeting will be held on the 24th Feb to discuss the Bonus ratio. Will this lift the share and the rest of the market tomorrow? We'll see.

There is a buzz in the market that a tussle is going on between the estranged Ambani Bros. for the title of the richest man in India, and there are vested interests involved in pushing & pulling the Reliance Power share price. The announcement of a bonus issue could be a smart move by Anil to salvage some market cap of the ADA group companies which have taken a dent after the Reliance Power listing price fiasco. He has two more IPOs lined up and this move is to resurrect his sagging goodwill among the Indian investors after the Rel Power let down.

It remains to be seen whether we'll see the start of a pre-budget rally next week. The global markets, led by the US markets, are still in a turmoil. If there is some semblance of stability in the global markets it would help the Indian market to do its pre-budget jig.



microsoft.public.mac.virtualpc said...

He has 5 other IPO's lined up for the year ahead....its just a smart move and nothing else....

if he hadn't done this....all other ipo's would have been a big flop

Please donnt just get carried away with this.....

A share which was 17 rs for rel energy was given to retail investors for an amount of 430......

Also, if some of we had noted this fact...that all the leading foreign fund houses like UBS, ABN etc....all of them were lead managers ( total 11 i suppose) of rel power .....and the heavy selling by all these fund houses started from 19th....the day after rel power ipo closed......

can't sebi see that all the funds who were selling so heavily from 19th had a vested interested in the ipo to go through???????

Just one request to all investors...please just donnt carried away by this fact that he has bailed you out by giving bonus shares.....and see the fundamentals also.......

A P/E of 330x where as all other power companies have a P/E of 30x....excuse me ........

tis in anyway doesn't suggest that share price will not rise tmrw......!!!!!!!!!!

but at least consider a little part of fundamentals also.....not just the momentum....

we all should learn something from this January fall, that every tom dick and harry can't give unlimited returns if not backed by fundamentals...... don't waste your lessons!!!!!!!!!

happy trading!!!!


Paul said...


Is this bonus issue really going to help investors?. Doesn't the share price come down according to the bonus ratio? I suppose bonus shares are always free, then why is every news item specifically mentioning its FREE FREE. Its high time the Ambani's sit quiet for sometime and not fool investors anymore.

I have also heard that bonus issues shall be issued only after 1year of listing (according to SEBI rules). This is a pure gimmick played by A.Ambani to make something out of worthless RPower shares.

ashok kumar said...

Hi Superstar

At what price one should get out of Relinace Power. Whether wait til bonus announcement.

I hold 9500 shaares of cybermate at Rs. 11/-. should i average at cmp Rs. 9/-.



shubhankar said...

Hi Superstar,

I had bought 1000 shares of Pentamedia Graphics for 9.23 each. For the past 2 weeks or so this share is not trading and currently the price is 6.80.
I am very new to the share market and don't know what all is going behind the scene. It would be really helpful if you could throw some light on this share's future.

Real said...

Hi Superstar,

Are you on a vacation? Not replying to any of the queries for the past 2 days.

Inform us mate if you are leaving for longtime, otherwise we feel a bit orphaned in this market.

Bought 100 of JK Lakshmi again after watching on CNBC about undervalued stocks.

Navin do you know anything about JSW Holdings and Kuruturi Networks?

JSW Holdings has been on the UC for few days now, but nobody seems to know why, can I invest in this?

What about Karuturi mate? Please advise on these both, BUY or AVOID.

Thnx a lot, Mahesh

Superstar said...

Hi friends,
Reliance Power Bonus announcement does not change anything. The fundamentals of the company remain the same. After the record date of the Bonus, the price will adjust accordingly. This move has just helped to arrest the fall in the share in the short term. The ratio of bonus and other details are yet to be announced.

Hi Shubhankar,
Pentamedia does not enjoy a good reputation amongst experienced investors. The fundamentals are poor and so is the management. There was no reason to buy that stock in the first place. I would have exited that stock and purchased some good quality stock like JK Lakshmi Cement.

Hi Real,
You could say that I am on a vacation, kinda. When the market is not going anywhere and the volumes are pathetic, it does not make any sense to trade. I am just investing for the long term.

My view on Karuturi has been negative for some time and it has fallen after I replied to some query here. I don't like JSW either. Remember, I had posted a sell call on overhyped stocks like Punj Lloyd, Educomp, JP Associates, GMR Infra etc. and all of them are down. I gave a sell call on JP Associates last month when it was trading above 400 and now it is available at 252.
The point I am making here is that it is not the time to chase overhyped stocks which are being pushed by unscrupulous analysts on TV channels. It is a time to go for value stocks like JK Lakshmi.


Paul said...

Hi Superstar,

Can you please tell me why u r negative on Karuturi Networks?. Can u please tell me if u have looked at fundamentals of Karuturi before suggesting something here? Its much much better than JK Lakshmi

Superstar said...

Dear Paul,
When I had first advised a sell on Karuturi here, it was trading close to 400 levels. PN Vijay who appears regularly on TV 18 was advising a BUY at that level. Today it's at 228. And let me add here that I had myself advised a buy on Karuturi when it was around 100 levels to my clients.

You say it is much better than JK Lakshmi. How? Just because you own it, maybe? Compare the fundamentals yourself. The nine months diluted EPS of Karuturi is Rs.14 (unconfirmed) and current market price is 228. On the other hand, the nine months diluted EPS of JK LAKSHMI is Rs.35 (confirmed) and the current market price is 135.

So anyone can see which is better.


Paul said...

Hi Navin,

Confirmed nine months EPS of karuturi is 15.23 (diluted), 22.2 (basic). The company is growing at a CAGR of 50% over the last few years. EPS for 9M ending Dec-06 is 10 (basic). The company is world's largest producer of Roses. It has 11,000 hectares of land in ethiopia for producing agri products (palm oil, sugar etc). Its target is to produce 1 billion roses by 2010 from present 650mn.

Here is the list of stakeholders as of Dec-07 (Confirmed)

L B India Holdings Mauritius
Citigroup Global Markets Mau Pvt Ltd
Morgan Stanley And Co International Ltd
Quantum (M) Ltd - Fund owned by George Soros bought stake @ Rs. 213. Original Quantum fund was started in 1970 and returned 42.6% per year for 10 years! before its was discontinued because of a partner withdrawing.
Mavi Investment Fund Ltd
Emerging Star Investment Pvt Ltd

Stock markets worldwide work on future prospects of the company not just PE ratio. I agree value is important but buying a company growing at 50% YOY @ 9 PE is much better than a buying a company showing eratic earnings (PAT of JKL) @ 3 PE.

Disclosure: Since i work for a US Investment bank i am not allowed to invest in markets. hence i dont own both the stocks. Btw, do you own JK Lakshmi?

NIKHIL said...

HI Superstar,

could you please comment on Cybermate Info.

What should be the best course of action with this?

Best regards

paddy said...

Hi Superstar.,
Thanks for your reco. on J K Lakshmi cements. I picked up some shares today. I also picked up HPCL on your recommendations. Whole-hearted thanks for these super tips. I am currently focussing on infrastructure finance companies. IDFC, SREI Infra, Power Finance. All look good to me. If I were to invest for a 3-5 period time, of these three which will be your order of perference? I feel there is a good growth potential in this kind of financing. Pl. confirm.

Superstar said...

Dear Paul,
There are a lot of factual errors in your post which I'll point out. But first, let me tell you that I'm not impressed by the big names in the Stakeholders' list which you've presented. Do you have any idea how many big names were there in the QIBs which applied for the Reliance Power IPO at the price of 450? The issue had got oversubscribed 70 times in the QIB category. Yet, they were not willing to buy it even at a price of 375 on the listing day. If you dig out the list of high profile stakeholders in over-hyped stocks like JP Associates, Punj Lloyd, Reliance Energy etc., I am sure you will find bigger names than the ones you've mentioned in Karuturi's case. Yet, these stocks have plummetted to nearly half of their recent peaks, which was when I had given a sell call on them. So much for the calibre of the overpaid multinational Investment Bankers and Fund Managers.

Now let's talk about the facts in the Karuturi Vs JKLAKSHMI comparison. You have stated the nine months diluted eps of Karuturi as 15.23 and PE ratio as 9, which is totally incorrect. The correct nine months diluted EPS of Karuturi is 14.64 (source: BSE) and therefore, the projected full year eps for FY08 comes to 19.52. Thus, the PE ratio on current price of 228.25 comes to 11.69 and not 9 as you have incorrectly stated.

Now let's come to JK Lakshmi. I quote you: "I agree value is important but buying a company growing at 50% YOY @ 9 PE is much better than a buying a company showing eratic earnings (PAT of JKL) @ 3 PE." Unquote

Again, the above statement of yours is absolutely untrue. How do you say that the company is showing 'erratic' earnings when JKLAKSHMI's Net Profit for FY09 is set to grow by 50% YOY!!! The diluted EPS for FY07 was 31.10 and the projected diluted EPS for FY08 is 46.37. That means on current price of 135, JKLAKSHMI is trading at a PE of only 2.91.

So now tell me which is better? A Karuturi growing at 50% available at a PE of 11.69 OR a JKLAKSHMI growing at 50% available at a PE of just 2.91!!

Here are a few additional FACTS:
You say Karuturi intends to raise production from 650 million roses to 1 billion roses by 2010. Did you know that JKLAKSMI is well on the way to increasing its capacity from current 3.5 MT to 7.25 MT by 2010? Did you know that the company is on schedule to raise capacity to 5MT by October, 2008 itself? You say you work for a US Investment Bank. Surely, from the above given figures, you can do this much math to find out which company's production capacity is increasing more by 2010.

And here comes the disclosure from my side. Since I put my money where my mouth is, I do own JKLAKSHMI and intend to buy more at current levels.


Superstar said...

Dear Paul,

Just to add a few more points in favor of JKLAKSHMI as compared to Karuturi.

JKLAKSHMI is a much bigger company than Karuturi so it is more viable for bulk investment by institutional players. JKLAKSHMI is a notch higher than Karuturi also because while Karuturi is a B2 group company on the BSE, JKLAKSHMI is B1.

If you really work for an Investment Bank and have the power to make or influence buying decisions for your company, you would do well to purchase JKLAKSHMI CEMENT in bulk for your clients. This is a stock which you must have in your portfolio, if you are interested in investing in Indian Stocks.


NIKHIL said...

hello superstar,

saw ur posting at mmb.
it looks like u r not in great favour of cybermat now.
i could not exit at 14 levels.

shd i exit from it or hold it for sometime.
it would be great if u put across ur opinion on cybermat as nothing is heard from on this for sometime...regards


Dear Superstar & Paul,

I want to say about my observations for both stocks,

- Karuturi (Over Valued)
- JKLAXMI (Under Valued)

I am not saying who will be outperformer or underperformer?
But as an Investor to invest in JKLAXMI is 100% safer than Karuturi.

Currently, Karuturi is trading at higher price because it has big FII/institutional participation.. But I am curious to see what will be after 3-6 months?

Any little disappointments will bring down Karuturi's price substaintially. For JKLAXMI, there is not too much room for downside.

In current scenerio..
How not to loose Money in stock market? - philosophy works rather than How to make Money in stock market?

I do have JKLAXMI.. I avoid Karuturi even below 200.

There is clear defference between Speculating & Investing.
I don't blame fund manager because they are speculating on others investments.
Let me ask to PAUL - how much you bought Karuturi from your own fund?

Best Wishes,

- A time for change

Highlight of My observations & assumptions:

Karuturi Network:

Core Business : Floriculture, Food Processing, IT

QTR DEC 2007:

EQITY: 30.57 crore
EPS: 1.03 Rs.
Q-YtoY Sales Growth: 9.42 to 9.9 Crore (5%)
Q-YtoY Profit Growth: 3.55 to 3.15 (-11%)
Today's Price: 238.00 Rs
PE (Annuliased to this Qtr): 57.75 (58)
DEBT: 123 Crore

Future Assumption:

Impact on performance:

Considering Company's Major Market is International,

- USA Recession/Global Slow Down. (Major Effect)
- Rising Rupee (Major effect)

Floriculture, IT business may loose the ground
in terms of Sales & Profit margin. (Growth Saturated or Declined)

Food Processing: (Neutral Or Moderate Growth)...because Basic needs
Water, Air & Food (But depends on what types of Foods)

Risk: What About Ethopia's Political/Social problems..Ecological
worries ..See the articles?



Core Business : Cement & Cement Products

QTR DEC 2007:

EQITY: 57.09 crore
EPS: 10.70
Q-YtoY Sales Growth: 228.64 to 282.35 Crore (24%)
Q-YtoY Profit Growth: 55.06 to 61.10 (11%)
Today's Price: 136.00.
PE (Annuliased to this Qtr): 3.16
DEBT: 717.00 Crore
DEBT TO EQUITY RATIO: 12.57 (Very high)

Future Assumption:

Impact on performance:

Considering Company's Major Market is Domestic,

- USA Recession/Global Slow Down. (Not Much)
- Rising Rupee (Not Much)

In India Infrastructre activites are still intact (Inclined)..but
residential/commercial constructions may slow down. (Neutral / Declined)


Corruption_Free_India said...

Hi Navin,
I am trying to sell "T Spiritual" stock through ICICI direct but it keeps on giving me the below message
"Stock not traded on the selected exchange
Please check the exchange selected or refer to the stock list"...

Its being traded on BSE but not sure why its giving the above message...I need to sell it asap..pls let me know how i can sell it...
I am also surprised as how the stock price increased so much suddenly...

Superstar said...

Hi Corruption Free India,
You should call up the customer care department of ICICI to enquire about TSpiritual. Some sites have restrictions on certain stocks which are in a low safety category like Z category in BSE, so they don't allow trading in them.


Superstar said...

Hi mindnmoney,
Athough you are right in saying that JKLAKSHMI Cement is a much better pick than Karuturi, the figures you have posted for BOTH are wrong and OUTDATED.
In future if your comments contain such errors, mindnmoney, they will not be published here.


vivek said...

I am thinking of putting some money in the banking sector. I am thinking of PNB, Bank of Baroda or SBI. Can you suggest which of these is better or if you think there is some other bank which is better than these 3.


plifs said...

Hey super star plz advice me on NTPC i hold 500 NTPC at 208rs.
What is the future prospects of the company.
Will this scrip become bullish or no.?

Corruption_Free_India said...

Superstar...Thanks a lot for your input..Really appreciate your prompt response...
Do you recommend investing in MF for long term ? if yes can recommend 1 or 2 equity diversified MF worth investing ?

Superstar said...

Hi Venu,
You are welcome. The pref order would be PFC, Srei and IDFC.

Hi Vivek,
Out of the three, I would go with SBI. You can also look at Allahbad Bank, Syndicate Bank.

Hi Plifs,
NTPC is one of the best stocks in the Power Sector. BUT, its best may not be good enough on a relative basis. If I was in your place I would switch from NTPC to JKLAKSHMI CEMENT.

Hi Nikhil,
I had posted my comments after the last qtrly results. My view remains unchanged since then.

Hi Corruption Free India,
I do not track MFs actively and I do not think they will be able to give great gains in the next two years. If you want me to name a few that I like, then I like SBI Multicap and Birla Sunlife Top 100.


captrak said...

Hi Superstar,

It seems the flavor of next few years would be agriculture / irrigation, education, health care and fertilizer as per the views being put up and finance minister is thinking about.

What are your vews on the same and could you give some ideas as to what stocks would be good with 1/2 years perspective?



captrak said...

Hi Superstar,

I need some advice.... My portfolio seems to be reflecting the sensex and consequently i see red all around and i also know that most of us are seeing RED too..period.

My question is how do i outperform the market?? (Dumb question, i know, as all of us would want to do that!!)...the point is though the high cap/ sensex stks are at such lows that it seems better to buy as they will gain first when market rises....BUT..they keep going down even if you nibble little as they average out...low cap stocks just lay low till kingdom come...should i get into high cap stocks or good low/med cap stocks???

Secondly it is being touted that the markets will fall to Jan lows b4 it starts to rise.....that is giving me the jitters...please advise



captrak said...

Hi Superstar,

Please give your views on the above and some guidance to dunces in the market, like me..



prakash said...

Dear Super*,
Can you give your thought on OCL india . demerging is going to happen on march 5th and it got increased 40% in last 4 days . Please give me your suggestion ?

Superstar said...

Hi Captrack,
When are the sectors of Agriculture / irrigation, education, health care and fertilizer not in focus in the budget? Every year these sectors see speculative buzz around the budget time. Nothing new.

In your second question you say that your folio reflects the sensex and in the same breath you say that you want to outperform the sensex. How is this possible? LOL. You want to have your cake and eat it too? If you want to outperform the sensex then your portfolio will have to be DIFFERENT than the sensex, for starters.
You say you are getting the jitters because lot of analysts on tv are saying Jan lows will be re-tested.
A)Don't believe every word that tv analysts say. Most of the time they speak only for their or their masters' vested interests.
B)Even if the mkt has to test the lows of Jan and even make more lows, then you should be prepared for that and shift to safer stocks.

Hi Prakash,
You didn't say whether you are holding OCL or you want to buy it? If it went up 40% in 4 days, then it has corrected by 12% today. I have not gone too deep into the valuations of the demerged companies, but prior to demerger, it seemed fairly valued at 250.


chiro!!!!!!!!! said...

what is the future prospect of Nagarjuna fertilizers.?
Plz advice eme.

Superstar said...

Hi Chiro,
Sorry for the delayed response, but I'm sure I answered about Nag fert elsewhere in the blog recently. Every year fertilizer stocks go up as a pack expecting something good from the budget and post budget they fizzle out. History is repeating itself. Barring any news which comes out in the near future, fertilizer stocks are looking bearish.