The reasons for the same are quite a few: -

• The quarterly results saw the topline grow from Rs 2302 crs in Q1 of FY11 to Rs 2438 in Q1 of FY12. The growth quarter on quarter was just 5.9%. However on sequential quarter there was a drop from Q4 FY11 of Rs 2908 crs, a drop of 16.2%.
• The EBITDA margin has dropped significantly from 12.9% in Q1 of FY11 to 7.5% in Q1 of FY12. This drop is 545 basis points and is almost similar to the sequential quarter drop of 537 basis points.
• The Managing Director of the company Mr Trehan who retired from the post on 1st June 2011, but continues to remain the Vice-Chairman of the company sold 1,80,000 shares of the company on the 29th June, 30th June and the 1st of July, which the analyst community believes to be insider trading. The person concerned has offered explanations which are not being bought, as even after demitting office as Managing Director, Mr Trehan has been on road shows for the company and reiterated the guidance given by the company.
• The company has spent Rs 250 crs on purchase of an aircraft which is nonrevenue earning for the company and shareholders have not liked it as well.
• To add insult to injury, the company has been trying to defend itself and that the action of the former MD is within the rules and confirms to corporate governance.
• The new Managing Director Mr Mortimer reiterates that the earlier guidance is not maintainable, and has lowered the same which is further irking the investor community as the former MD as late as the third week/fourth week of June was talking about the same being maintained.

I believe the damage which has been done is severe, and the credibility of the company has been beaten out of shape. The aircraft which cost Rs 250 crs has seen the company lose a market cap of over Rs 3,800 crs in a space of just two days.

Daily over last one year

Over last fortnight

The severity of the fall can be seen from the charts attached above. It has been a whitewash and had it not been for some buying support from a local mutual fund, things could have been worse.

What Next?

I believe the share needs to consolidate at current levels and one needs to watch the performance of the company over the next few quarters to see what levels of profitability are sustainable. On the investor front, the new Managing Director needs to meet the investor community and do some reassuring on the governance front without being seen as defending the former MD.

The lesson to be learnt by promoters is that the investors are more aware of their rights and apparently the callous attitude of promoters towards investors needs to undergo a sea change.

Inventure Growth & Securities Limited (IGSL) is tapping the capital markets with its IPO for 70,00,000 shares in a price band of Rs 100-117. The issue opens on Wednesday the 20th of July and closes on Friday the 22nd of July 2011.

Business
Inventure Growth & Securities Limited is a financial intermediary offering a host of services under one roof. Services offered include comprehensive advisory services that are well diversified from trading services in equity cash and derivatives market, commodities and currency futures segment to financing activity, wealth management, and distribution of financial products. IGSL has direct interests in equity, debt and currency futures broking, depository activities, PMS and other activities like commodity broking, non-banking financial services, wealth management and sale of insurance products are provided through its subsidiaries.
The company has been able to withstand the tough competitive environment since the global economic downturn which was witnessed in 2009-10. The company did lose on profitability but was able to survive the onslaught of dropping business.

Objects of Issue
The objects of the issue are as follows: -

The bulk of the money is being raised for investment in the subsidiary which is a non-deposit taking NBFC registered with RBI. The proceeds would help this company take increased exposure.
Financials
The company reported gross revenues of Rs 28.36 crs in March 2009 which rose to Rs 46.27 crs in 2009-10 and fell to Rs 41.35 crs in 2010-11. The net profit on a consolidated basis after tax and minority interest was Rs 5.53 crs which increased dramatically to Rs 14.71 crs and fell equally sharply to Rs 6.21 crs.

The income from operations has dropped significantly and the present broking scenario is not very conducive. There has been substantial downsizing in a large number of brokerage houses and there have been some of these which have shut shop completely in recent times. Cash market turnover on the NSE has dropped below the 10,000 cr mark on a daily basis which till a year ago used to average over 15,000 crs on a daily basis. This drop is significant and is a cause of worry going forward.

Comparisons
The company has chosen to compare itself with companies like Arihant Capital Market, Geojit BNP Paribas, Khandwala Securities and Emkay Global Financial Services Limited. IT has not compared itself with the industry leaders like MotilalOswal or Edelweiss. MotilalOswal had revenue of Rs 589 crs and a net profit of Rs 137 crs. The company has an earnings per share of Rs 9.52 for the year ended March 2011. Edelweiss has gross revenues of Rs 1491 crs and a net profit of Rs 246.92 crs, an EPS of Rs 3.28. When such large companies which have the wherewithal to withstand the present slowdown and are available at valuations which are less than a third demanded by IGSL, I believe one has little or no choice about this issue. Very clearly the fact that the merchant banker is making his debut with this issue it appears he has got his valuation all wrong. The price band recommended is atrocious and extremely aggressive. The company has also chosen not to have any road shows in Mumbai for its IPO which is yet another way of not wanting to face the media and analysts embarrassing questions about the pricing and valuation.

Conclusion
The broking industry is passing through very tough times and consolidation of the industry is yet to happen, even though the beginning has been made. When large players and market leaders are available at valuations which are around ten times the earnings the need to subscribe for a company which is struggling and does not have the size at valuations close to four times that of the leaders simply makes no sense. There is of course the standard practice that small and midsized IPO’s receive support from “friendly intermediaries” and this may also be witnessed in this issue. I still believe it does not make sense in applying for such issues at such steep valuations. If one believes that the industry is good and one should invest, I feel a better investment would be in the shares of MotilalOswal Financial Services Limited.  

SEBI Disclaimer: – I do not intend to subscribe to the above issue.

Promoter groups which include promoters, their associates and persons acting in concert have to inform the stock exchanges of any shares that they have pledged. This has to be done each time shares are pledged/unpledged. It is not mandatory as yet to inform the name of the entity to which the shares have been pledged or unpledged. Once the shares are sold by a lender or a person to whom the shares have been pledged, the information that these were pledged shares and have been sold would appear as a declaration from the promoter or promoter group entities. The person or lender who has sold his name would appear in the bulk deals if he has sold 0.5% or more of the equity of the company on a single day. He would not be responsible for giving a declaration under SAST (substantial acquisition of shares and takeovers) regulations 1997, if he does not hold less than 5% or is included in the promoter group.

One would recall some classic cases where the promoter of Great Offshore lost control of the company to Bharti Shipyard after he was unable to repay the mark to market losses on the share. Yet another example was Orchid Chemicals where the promoter almost lost control of the company due to the sale of his pledged shares.

Let us take the example of GTL Limited. The share on Friday the 17^th of June opened at Rs 407 against the previous day’s close of Rs 406.95. The share made an intraday low of Rs 316.45 and closed at Rs 339.90. Monday the 20^th of June saw a blood bath with the share dropping to an intraday low of Rs 124.10 and closing at Rs 127.80, a loss of Rs 212.10 or 62.4%.

Monday saw huge turnover and deliveries and there is no declaration under SAST that shares have been sold. The question is whodunit? Very clearly shares have been sold for delivery as the names have appeared in bulk trades. They are not part of the promoter group and they appear in all probability to be shares that have been sold against margin calls. With no declaration forthcoming the issue becomes murkier and more intriguing. One interesting thought on the issue is these were “benami” holdings of the promoter group and therefore there has been no declaration so far. The nett loss to the share in a mere six trading sessions is down from Rs 406.95 to Rs 109.75, a loss of Rs 297.20 or 73.03%.

Group company GTL Infra has had also suffered huge losses with the stock falling from Rs 32.05 on Thursday the 16^th of June to Rs 16.05 at close on Friday the 24^th of June. Net loss is Rs 16 or 49.92%.

The third share to get affected was S Kumars Nationwide where the shares of the promoter were pledged as additional collateral to the lenders consortium IDBI when the company went in for a CDR package. As per the terms of the package, the entire shareholding of the promoters was to be pledged to the leader of the lenders consortium which in this case was IDBI. Shares of this company too got hammered and the price which was at Rs 66.90 on Thursday the 16^th of June, hit an intra day low of Rs 41.65 on Tuesday before closing at Rs 52.55 on Friday the 24^th of June. The net loss was Rs 14.35 or 21.45%.

The moot point which emerges from all of this is basically two points. The first is that all the shares involved were part of the Futures and options category and therefore easy to trade and one can carry forward the trade from day to day. Second intraday the electronic media and various chat groups etc were active in these counters and brought the price down. The markets were in a negative frame of mind and players took advantage of the same.

What can be done to minimise shareholder being hurt going forward? The name of the lender or person to whom shares are pledged be made mandatory at the time of making the pledge so that the name can be co-related. Secondly when pledged shares are sold of an entity who is labelled as a promoter, the lender or person to whom shares are pledged should give a declaration to the exchanges that he has sold such shares.

I believe these measures will go a long way in instilling some confidence on this issue of pledged shares. As far as the managements are concerned, prompt action by them and proper disclosures will always keep the transparency level high and lead to good corporate governance.

Even this time around quite a few lists of shares and companies where promoter holding is pledged are being circulated and are vulnerable going forward.

I believe one should appreciate the prompt action of the management of S Kumars Nationwide calling for an analyst call on Friday and clarifying the position for all concerned. One hopes that the management of GTL and GTL Infra does clarify the sale by various entities on Monday 20^th of June for the benefit of all concerned.

Business
Rushil is into the business of manufacturing decorative laminated sheets and plain particle boards. The company has its manufacturing facilities in Gujarat. Its present installed capacity is 30 lac sheets of decorative laminate and 13,76,000 square metres of plain particle board. The company has a brand name “VIR” under which it markets its decorative laminate and board. The business is regulated and has huge entry barriers that require the grant of licenses for the manufacture of wood based products. The Supreme Court in 2002 had come down very heavily on this sector.
The company is a cost effective producer of laminate and particle board and has been operating at capacity and also producing higher than the installed capacity. The company has a well spread dealer network involving 70 distributors and 2150 dealers across the country. The company employs 51 sales executives and has 5 marketing offices.

Objects of the issue
The objects of the issue are as follows: -

The capacity of the MDF plant would be 90,000 cubic mts and the company has been sanctioned a term loan of Rs 44 crs by Bank of Baroda for the same.

Financials
The company has been in business since 1993. In 2005 two group companies Mica Rushil Pvt Limited and Rushil High Pressure Laminates were merged with the flagship company Rushil Decor.
The company had total income of Rs 102.63 crs in the year ended March 2010 and Rs 96.62 crs in the nine month period ended December 2010. The net profit after tax was Rs 3.85 crs in March 10 and Rs 3.76 crs in nine months ended December 2010.

The net margins seem to have improved in the current nine months and the significant change that has happened is the threefold increase in inventory from Rs 92.03 lacs in the year ended March 2010 to Rs 290.14 lacs in the nine month period ended December 2010. This has significantly helped the net margins improve from 2.87% in the previous year to 3.76% and now to 3.89%.

Comparisons
The company has chosen to compare itself with Century Ply and Greenply Industries. Century Ply Industries limited reported a topline of Rs 1,429 crs for the year ended March 2011 with a net profit of Rs 189.69 crs. The net margin is 13.27%. The other company is Greenply Industries which reported sales of Rs 1,231 crs and a net profit of Rs 25.09 crs. This drop in profit was on account of closure of one of its plants. The closure apart the company is significantly bigger in size of sales and is roughly 10 times the size of Rushil.
Centuryply is available at a PE multiple based on March 11 numbers of 7.72 times while Greenply is available at a multiple of just about 16.7 times.

Risks
The company is setting up the MDF plant using Chinese machinery which has not yet been very successful in India or has yet to prove its efficacy. The MDF board industry has not been very successful in the country because of various problems, and large players like Bajaj Hindustan have had problems in stabilising production. Availability of  raw materials has always been a concern and with environment issues in the case of felling of trees, this is a serious issue.

Valuations
Rushil Decor Limited is offering shares in a price band of Rs 63-72. The company earned a net profit of Rs 385.39 lacs in the year ended March 2010. The EPS based on the pre-IPO capital 0f 87.56 lac shares is Rs 4.40. If one were to consider the current year’s profit for the nine months on an annualised basis the same would be Rs 501.21 lacs. The fully diluted equity would be 144 lac shares and the fully diluted earnings per share would be Rs 3.48. Based on the IPO price of Rs 63-72, the price earnings multiple at which the shares are being offered would work out to 18.10 times at the lower end of the price band and 20.69 times at the upper end of the price band.  

Conclusion
This is yet another issue from Ahmedabad and the merchant banker is also from Ahmedabad. The pricing of the issue is not only expensive it is substantially higher than the market leaders with whom the company has chosen to compare itself. With nothing in it for investors why should one invest in a company is the moot question. It appears merchant bankers and promoters just do not understand that issues are to be priced at levels where investors who put their hard earned money make some money, not lose it. I believe one should simply avoid this issue and resist the temptation of there being “friendly” people behind the issue.

SEBI Disclaimer: – I do not intend to apply to the above issue 

Birla Pacific Medspa Limited (BPML) is tapping the capital markets with its issue in a price range of Rs 10-11 to raise Rs 6517.50 lacs. The issue opens on Monday the 20th June and closes on Thursday the 23rd June 2011.

Business
BPML is in the business of operating med spa’s under the brand name “EVOLVE”. The company offers comprehensive treatments in the area of Cosmetic Dermatology, Cosmetic Surgery and advanced dentistry. It also offers a range of spa services- wet and dry under its wellness initiative. Under each of these heads there is a wide array of services. Botox and filler, laser hair reduction, skin tightening, skin rejuvenation, microdermabrasion, liposuction, face lift, breast augmentation and reduction, rhinoplasty, hair transplant, I-lipo, dental implants and paediatric dentistry.
The company currently operates five of its own facilities in Mumbai and has two franchisee outlets operated in Thane near Mumbai and one in Chennai. The company through its Evolve centres is positioned in the med spa platform which is a differentiator from other spa’s which offer mere external facilities like massage and facials. The one stop shop where makeover solutions and medical facilities are also provided makes the difference in the offerings. The type of facilities offered also makes the difference in the average ticket size. In a spa the same could be in the region of Rs 1500-2000 while in the case of BPML it could range from Rs 3,000 to Rs 1 lakh making the average around Rs 25,000.

Objects of the issue
The objects of the issue are as follows: -

Financials
The company began its operations by acquiring in a slump sale the business undertaking of Pachealth Medical Services Private Limited at their cosmetic, medical and dental centre at Prabhadevi. This was done in October 2008. Since then this centre was relocated and currently the company operates 5 centres in Mumbai and one franchisee operated centre in Thane. There is only one centre outside Mumbai being operated by a franchisee in Chennai.

Comparison
There are no comparable companies in this business in the listed space. In the unlisted space also one has companies which offer specialised services limited to some activities like weight reduction or beauty spa’s. VLCC is an unlisted entity which has established a chain offering limited services. There is of course a gymnasium company which is listed namely Talwalkar’s which has close to 60 outlets currently. There being no comparison and the company yet to make profits there are no comparable.
The company is into a nascent business which is yet to take off in a big way in the country simply because no one offers the facilities. There is demand and the people who can afford the same travel overseas and get the treatment done.

Valuations
The turnover in the nine months ended December 2010 is just about Rs165 lacs and there is a loss suffered by the company. The business needs to expand and set up large number of outlets to reacvh a critical mass and achieve break even. This would at the least take a couple of years before the company can open thirty or more outlets and achieve break even in the business.

Conclusion
The company is raising Rs 6517.50 lacs in a price band of Rs 10-11 to finance the setting up of 55 outlets in the next three years. The present setup is inadequate to service a company which would have a market cap of Rs 112 crs at the lower end and Rs 117 crs at the upper end of the price band. It makes sense to just stay away from the company and avoid the issue. It would be better to wait for a couple of years when the company achieves a critical mass before one thinks of investing in this business.

SEBI Disclaimer: – I do not intend to subscribe to the above issue.

Trading volumes started reducing and the IDR has become a non-event after the initial explosive volume which happened on Monday, the first day of trade after the rules were announced.

During the week, I have spoken to various people from the investment community and found out what has happened which prompted such a move from the regulator. It appears SEBI was very keen to introduce a new platform like the GDR (Global Depository Receipts) traded in Luxembourg and ADR (American depository Receipts) traded in the US, in India. Accordingly the first ever IDR was launched in May 2010 with the Standard Chartered Bank PLC. It unfortunately remained the one and only IDR ever and despite of the best efforts of all concerned, no other issuer of capital was interested in coming out with an IDR issue.

It appears the launch of the IDR was without considering the effect that the conversion would do to the issue. If one looks at the trading pattern of GDR’s in Luxembourg whenever they have traded at a discount which makes arbitrage affordable, investors have bought GDR’s and converted the same to the underlying shares and sold at a profit. This would certainly have happened in the case of the Standard Chartered Bank issue as well. Anticipating this it appears SEBI issued instructions and said that the rules are being changed one week before the mandatory period of one year from listing was to be completed.

Investors of all categories are being debarred the right to make their legitimate money and this has been curtailed by one action from the regulator. I am not sure whether this action could be challenged in a court of law or whether SAT (Securities Tribunal Appellate) is the right forum to take up this issue.

A table is enclosed showing the daily traded volumes on the two exchanged from Tuesday to Friday of this week. One can see the volumes are falling and the delivery percentage is fairly high with an overall delivery percentage of 61.34%. The volume has been reducing on a daily basis from 188 lacs on Tuesday to just a shade over 11 lacs on Friday.

I believe with the new guidelines for conversion into underlying shares only if the traded volume becomes insignificant or becomes infrequently traded is a sure way of ensuring that no future IDR’s ever happen. It is also a sure way of ensuring that the one and only IDR which is listed continue to remain listed.

The whole idea of writing about this issue is that the community needs to take up this issue. The regulation which has been enacted appears against the interest of the investing community and  appears something which has been done with a retrospective effect.

Timbor Home Limited is tapping the capital markets with its IPO for 36.9 lac shares in a price band of Rs 54-63. The issue opens on Monday the 30th of May and closes on Thursday the 2nd of June.

Business
Timbor Home Limited is in the business of manufacturing modular kitchens, readymade doors and furniture. The company has three manufacturing units located in Vatva industrial estate in Ahmedabad where stainless steel kitchen baskets and accessories are manufactured. The unit at Chagodar near Ahmedabad makes kitchen and furniture, while the unit at Umreth in Anand district does wood processing and makes wooden doors.
The company sells its products under the brand names Timbor Cucine, where modular kitchen is sold, Timbor Doors where doors and door frames are sold and Timber Home where home furniture is sold. It also has an upmarket kitchen brand IKI Kitchens where it sells hi-end kitchen solutions using Hettich hardware and accessories.
The company has 2 lac square feet of manufacturing capacity at its three units on a combined basis. The company currently operates 84 stores in 65 cities through franchisees. It has also opened two stores in Reliance Fresh outlets in Jaipur and Surat. It also has 4 company owned stores which makes the total outlet strength to be 90 stores.

Objects of the Issue
The objects of the issue are as follows: -

Financials
The company has reported sales of Rs 26.67 crs in March 2009, which have grown to Rs 51.04 crs in March 2010 and to Rs 54.83 crs in the nine months ended December 2010. The net margins have been at 4.38% in 2009, 3.48% in 2010 and have improved to 5.56% in the nine months ended December 2010. The improvement in December 2010 is on account of a change in accounting policy where no tax has been paid for the nine months. Assuming that the company paid the full tax, the net margins would have been at 3.72%.

The sundry debtors have gone up dramatically in the nine month period ending December 2010 from Rs 18.70 crs for the period ended March 2010 to Rs 37.20 crs in the nine months ended December 2010. The company has done some bulk sales and has extended credit to its franchisees for increasing market penetration which has resulted in higher debtors but they are all considered good.

Comparisons
The company has compared itself with plywood manufacturers like Greenply Industries and Archidply Industries. These companies are not comparable as the core business of these companies is selling plywood, veneer and wood products which are raw materials for furniture manufacturers. Timbor processes its own wood and saves on the margins which would accrue if the processed wood is bought from manufacturers. Its strength is in also being able to using the waste and effectively using every piece of wood. Secondly the people who sell furniture are not in the listed space or are a mere division of the listed entity. Shoppers Stop a listed entity has a division which sells furniture but it is a trader in furniture and does not manufacture the same.

Valuations
The EPS of the company on annualised basis considering the tax payment would amount to Rs 2.47 on pre-IPO capital of 110.6658 lac shares. This would amount to a price earnings multiple of 21.84 times at the lower price band of Rs 54 and 25.5 times at the upper price band of Rs 63.
If one were to consider the EPS on a fully diluted basis the same would reduce to Rs 1.85 and the price earnings multiple would increase to a band of 29.19 times at the lower band and 34.05 times at the upper band.

Conclusion
The business model is not only interesting but looks one that would pick up and become extremely popular going forward. The ultimate aim or target audience for the company is the lady who cooks sitting on the ground on a “Chula” (fireplace) using coal or wood. The opportunity is immense. It would take time to reach a level where penetration is deep and the turnover starts increasing rapidly. Seeing the opportunity and potential two large newspaper chains the Bennet Coleman group and the Bhaskar group have both entered into barter deals valuing the company substantially higher than the current valuation at which the shares are being offered. 
The company is planning to add 20 stores with the money and is raising 400 lacs for the same. Once these stores become operational it would add to the top line and bottom line significantly. It appears the company is reaching an inflexion point and is all poised to enter the next stage of growth.
I like the business model and the growth plans of the company but believe that the present size and the asking price make it difficult to recommend anybody to subscribe to the issue. Secondly being a very small issue there are concerns about liquidity once the same is listed.
I suggest skipping the issue at the present moment and relooking the issue post listing and once two more quarterly results are available. The company would certainly be on my radar as a potential performer post listing.

SEBI Disclaimer: – I do not intend to subscribe to the above issue.

Sanghvi Forging and Engineering Limited is tapping the capital markets with its IPO to raise Rs 36.9 crs in a price band of Rs 80-85. The issue has opened on Wednesday the 4th of May and is closing on Friday the 6th May for QIB’s and for bidders other than QIB’s on Monday the 9th of May.

Business
The company is in the business of manufacturing and exporting of forging products for the non-automotive sector. Sanghvi Forging has an installed capacity of 3,600 metric tons per annum for manufacturing of forged flanges and precision machined components (with single piece forging upto 4 MT) in the area of open and closed die forgings. Sanghvi manufactures these products from carbon steel, alloy steel and stainless steel conforming to international standards. The existing plant is located at GIDC Industrial Estate Waghodia at Vadodra in Gujarat.
The company began production of forgings with a capacity of 300 mtpa in 1992 and has increased the same 12 times to 3,600 as on date. The new project would see a fresh capacity of 15,000 mtpa open die forging unit (with single piece forging upto 40 MT) being added. This capability would llow the company to manufacture products like stepped shafts, bars and hollows, blocks, flanged shafts, gear blanks, shells disks etc which are generally imported. The users of these products would be the wind energy, oil and gas, steel plants, power plants, pressure vessels, petrochemical and sugar industry and of course nuclear plants.
Sanghvi Forging has obtained approvals and certification from from a number of international agencies, domestic and international clients. A large number of clients would be common from the existing lot and for the new project.

Objects of the Issue
The objects of the issue are as follows: -

Financials
The total income in the year ended March 2009 and March 2010 have been more or less constant at Rs 29.53 crs and Rs 29.11 crs respectively. In the current year in the first nine months ended December 2010, the sales have improved to Rs 29.51 crs and if one were to annualise the same we would be talking of about Rs 39 crs and a profit of Rs 4.12 crs.

The net margins have improved from 7.87% to 9.42% and further to 10.47%. This substantial improvement in margin seems sustainable and should improve further once the new project takes shape as the competition in that segment locally is hardly there.

Comparison 
The company has chosen to compare itself with Bharat Forge, M M Forgings and Ramkrishna Forging. What is important to note about Sanghvi Forging is the fact that based on current business size, turnover and profitability the price and valuation being asked for is unwarranted. The new project with a capacity of four times the existing one is being financed by bank loans from State Bank of India and Bank of Baroda to the extent of Rs 72 crs. This project is huge considering the present setup of the company and is ambitious. This project is expected to begin commercial production in May 2012 and benefits of the same would be available only in the next financial year 2012-2013. This means that the investor has to take risk of project execution and if everything goes well there would be returns for the investor when financial results for the year 2012-13 are available.

Valuations
Based on March 2010 numbers, the EPS on a pre-IPO capital of 83.51 lakh shares is Rs 3.28 while on a nine month annualised number the EPS for the current year would be Rs 4.93. If the same is to be considered on a fully diluted basis the EPS would be Rs 3.18. The price earnings multiple based on this EPS would be 25.16 at the lower end and 26.73 at the upper end of the price band.

Conclusion
Based on the present business and financials the company’s expansion plans are huge and if everything goes to plan they would have achieved something which is great. There is a good 12 month waiting period assuming everything is as per plan and schedule.  The project is ambitious and the asking price offers no scope for gains unless the project is successfully executed 12 months later. I believe investors can skip this issue as it offers no scope for appreciation in the short to medium term.

SEBI Disclaimer: – I do not intend to subscribe to the above issue.    

I had the privilege of visiting the home town of our Indian captain Mahendra Singh Dhoni in between the semi-final and the final of the world cup. I visited Ranchi to see the facilities of DB Corp at Ranchi and see what the Jharkhand launch has done to the newspaper industry in Ranchi. My passing of Dhoni’s house was a revelation which I believe I must share with all of you.

The whole world knew that ‘MAHI’ as he is fondly known as, was away in Mumbai for the final and would not be there at home. Yet at 4pm in the afternoon, when the sun must have been around 34C, there were no less than 250 people outside his house and also an OB van of some TV channel. If I may be allowed to make a comparison with the great superstar Amitabh Bacchan in his heydays used to give darshan to his fans and the maximum crowd that one saw outside his house in Juhu would be at best 500 people. This one must understand would be when the watchman outside would tell that his owner would be coming at a particular time and the “Mumbai Darshan” buses which take tourists on a tour of the city end their trip at Juhu beach.

The relevance of this incident is not to debate which of the two is greater but to make people aware how focus is now shifting. Some time ago it was all about the metro towns and now it is all about the tier2 and tier 3 towns. We are talking about semi-urban and the rural economy leading India’s sharp growth in GDP. There is a very comprehensive report brought out by one of the leading consulting firms which is known as the “Dhoni” factor. Now this fact would get further strengthened and would be a taking point in business schools going forward.

The markets saw a strong rally last week, with the BSESENSEX gaining 600 points last week. If one were to add with last week’s rally of 900 points plus means a total of 1,500 points. This certainly was a strong pullback by all standards and took care of various drivers which led to this rally. The fact that there was a range bound movement for quite some time, Foreign Institutional investor’s inflows and short covering of March futures towards expiry.

I believe markets will now look for cues from not only global markets but to a great extent from the quarterly and annual results that will be announced starting next week onwards. Looking at the “Dhoni” factor I believe to make money in this market one would have to look at the broader markets and also look at midcap and small cap companies. The narrower benchmark indices may become fairly range bound and may not offer money making opportunities going forward.

In conclusion the world cup win was a big revelation and one needs to implement the findings to be a winner going forward.

Jai Hind and hats off to MAHI! You have shown that a leader who leads from the front and is guided but a determined and disciplined coach can achieve the ultimate. Similarly if you are disciplined in the market and follow the principles you would make money even if the markets go nowhere.

The promoters offered a price of Rs 1450 based on the valuation report of the chartered accountant firm. They changed it to Rs 2250 based on the market price as the share was trading substantially higher than the earlier offered price.

One will see the price rise on the chart where the share price has moved up very sharply and doubled in the last six months from about the Rs 1250-1300 levels in October 2010 to above Rs 2650 in March 2011.

The reverse book building discovered price was Rs 2750 and the company had to choose whether it was prepared to accept a price which was Rs 500 higher than the revised price of Rs 2250 which the foreign promoters were offering. They chose to accept the same because the performance of the company has improved significantly. If one were to look at the results over the last few years, one would find that the company has made a similar net profit for the years ended December 2007, 2008 and 2009 of almost identical profits of between Rs 81 crs and Rs 84.75 crs. In the latest year ending December 2010, the net profit has almost doubled to Rs 166.37 crs. In terms of revenues, they have less than doubled from the level of Rs 980 crs in the year ended December 2007 to Rs 1687 crs in the year ended December 2010. The net margins have risen from 8.26% in December 2007 to 9.86% in December 2010.

The important point to learn is that retail investors must be careful in tendering their shares and should be prepared to bid for a reasonable price in the reverse book building process which the law allows. They should not get bullied into surrendering their shares.