Pilani Investment and Industries Corporation: Listing on BSE

October 28th, 2011 No Comments

Shares of Pilani Investment Limited listed on the BSE on Muhurat trading day and a day earlier on the NSE. These shares are listed on the Indore and Delhi stock exchanges where they were infrequently traded. The company is a holding company for the Birla group and holds shares in their group companies. The salient features of the company are given below.

Pilani Data
Share Capital (No of shares) 7908750
Promoter Holding 57.55%
Total shareholders 3294
Shareholders in 1-500 category 3045
Total Investments in  Rs crs 670.11
EPS  in Rs 55.55
PE 43.1

Name No of Shares Avg Cost Value Mkt Price Value Mkt Price Value
261011 261011 310311 310311
Grasim 4300293 142.96 614776811 2492 10716330156 2461 10583021073
Hindalco 29185398 62.92 1836331900 128.25 3743027294 208.65 6089533293
Century Tex 34220520 46.34 1585750974 313.85 10740110202 350.05 11978893026
Ultratech Cem 2457309 328.54 807328026 1128.65 2773441803 1133.8 2786096944
Tata Steel 6290149 185.71 1168179683 451.5 2840002274 620.5 3903037455
6012367394 30812911728 35340581790

The important point to note from the above is that the company has large holdings in the BK Birla and Kumarmangalam Birla groups. The top holdings which account for 97.9% of the investments in long term investments include one non Birla company namely Tata Steel which accounts for 19.4% of the holding and the balance consists of companies from the BK-Kumarmangalam group.

The total investments in long term quoted shares are Rs 614.02 crs which is valued at market prices as of 31st March 2011 at Rs 3,654.12 crs. The investments in mutual funds at cost are Rs 54.11 crs and at market prices is Rs 58.13 crs. If one were to do a rough cut NAV of the company as on 31 st March 2011 it would be Rs 4700 roughly which compared to the closing price on 26th October of Rs 2394.35 would be at a substantial discount of almost 49%. The stock market prices have fallen since 31st March 2011 and a rough cut valuation of 98% of the investments is down Rs 453 crs or 12.8%. Taking that as a benchmark the approximate NAV for the company would be in the region of Rs 4100 or thereabouts. This means that the discount to NAV has reduced and is now roughly Rs 1400 or the share is trading at 66% of its NAV.

The comparable to Pilani Investments would be Tata Investments and some smaller holding companies of other groups. These companies all trade at a discount and typically the discount is in the region of 40-45%. The investment rationale in such companies is of a long term nature and is for the dividend yield. The dividend yield in the case of Pilani Investments is roughly 1% and the company distributes about half the money received from dividends as dividend. The last dividend paid is Rs 25 per share of Rs 10 or 250%.

The call to invest or not would be a personal call depending on individual choice or preference. The share offers little or no scope for appreciation from current levels in the medium term and it may make sense to invest in a company directly where one is bullish.

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Vaswani Industries IPO: Listing day share collapses over 50%

October 25th, 2011 No Comments

 

The long delayed, controversy ridden and unique IPO from Vaswani Industries finally listed on “Dhanteras” day on the BSE and NSE. The company had issued 1 crore shares in a price band of Rs 45-49 which was subscribed with the help of friendly intermediaries. The QIB portion was undersubscribed with a mere 16% of the allocation being subscribed to while the HNI portion was subscribed 11.29 times and the retail portion 6.82 times. The overall issue was subscribed 4.16 times.

The stock listed at the BSE at Rs 33.45 on the BSE and at Rs 33.70 on the NSE. The high of the day was Rs 35.40 on the BSE and Rs 33.70 on the NSE. The low was Rs 13 on the BSE and Rs 14 on the NSE. The share closed at Rs 17.75 on the BSE and Rs 17.80 on the NSE.

Exchange Open High Low Close Net Change % Gain/loss Wt. Avg Volume Delivery Del %age
BSE 33.45 35.40 13.00 17.75 -21.45 -54.72 20.64 23446414 1448045 6.18
NSE 33.70 33.70 14.00 17.80 -21.40 -54.59 20.56 35788647 3332092 9.31
Total 59235061 4780137 8.07

The issue was open between the 29th of April and the 3rd of May. The issue was dogged with controversies of various kinds which began with withdrawal of applications by HNI’s and retail investors getting allotted higher number of shares. There was rampant grey market activity in this share and large number of application forms was procured by the company. Post this withdrawal of applications there was a complaint made to SEBI by a group of investors in Ahmedabad and the protest culminated in ransacking of the office of SEBI in Ahmedabad. The issue allotment was completed but the issue was not allowed to list. SEBI then issued some orders about the same which was challenged or contested in SAT by the company and then a very funny, unheard of, unparalleled and only of its kind ever solution was hammered out. The gist of the same was that the company would through an open offer by back 15% of shares from the original shareholders who had applied and received shares in the IPO at the issue price and the company was at liberty to reallot these shares. Post this exercise the company would issue bonus shares in the ratio of 1 share for every 4 shares held to the new shareholders who had become so through the IPO. This meant that the cost of the shares post the bonus became Rs 39.20 instead of the original Rs 49. The shares were allotted, process completed and listing done but trading not permitted. Finally after a period of almost 5 and a half months against the normal 15 days trading began in the shares of the Vaswani Industries, and it turned out to be yet another disaster.

The total traded volume was 592.35 lac shares which was 4.74 times the IPO size of 1.25 cr shares. Readers would recall that the original issue of 1 crore shares was increased post bonus to 1.25 crore shares. The delivery volume was 47.80 lac shares which was 38.24% of the IPO size. The weighted average of the day’s trade was Rs 20.64 on the BSE and Rs 20.56 on the NSE. The net loss was Rs 21.45 on the BSE or 54.72% while it was Rs 21.40 on the NSE or 54.59%.

From the price chart of the share one can see that the high and the low of the day were made within a few minutes of the open of the day’s trading itself. The share then steadied down at the upper end of the price and started drifting downward. By 12.30 pm when the stock hit Rs 17 it rallied for the the next 90 minutes to make a high of Rs 22 and then again began to fall. By the end of the day slightly more than half the IPO amount was wiped out and the point that if fundamentals are poor or non-existent, a share post listing has to sooner or later move or converge to its fair fundamental value.

Vaswani Industries Limited is one more example of an issue going wrong where the asking price was not justifiable with the fundamentals. It also created a dubious record with all that happened in SEBI and SAT and the settlement which at best could be said to be face saving. One hopes and prays that after one more debacle on listing day, retial investors learn their lesson the hard way.

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M&B Switchgear: A fit case to be investigated

October 24th, 2011 No Comments

 

Market Capitalisation per MW of solar power is Rs 127crs

The company had come out with its public issue for 50 lac shares in a price band of Rs 180-186. The company listed on Thursday the 20th of October and we saw how the share price rose from the low of the day to the high and almost trebled in the process. Today was no different where the share price rose from the low of the day of Rs 254.05 on the BSE, which incidentally was the down circuit filter for the day at around 1.30 pm and then began rising all the way to the upper circuit of Rs 381.05. The close was Rs 380.

The price movement can be very clearly seen from the above intraday chart on the BSE. The stock has moved very strongly in the last couple of hours but the volume has reduced. The delivery percentage has fallen to just about 1% of the traded volume which was 2.7 cr shares, and the delivery volume a mere 2.7 lac shares.

TIME OPEN HIGH LOW CLOSE VOLUME WTD AVG
930 350.00 350.00 297.65 326.35 868340 316.95
1000 326.35 330.00 310.80 321.00 978326 319.62
1030 321.00 344.05 320.35 322.55 1362403 333.39
1100 322.55 324.95 297.80 302.20 1325182 306.76
1130 302.20 309.00 301.60 302.85 431709 304.53
1200 302.85 320.70 285.15 317.00 1310569 298.88
1230 317.00 348.40 312.60 324.00 1994987 329.49
1300 324.00 326.50 290.00 291.70 1121987 310.72
1330 291.70 303.00 276.20 302.35 1144553 291.12
1400 302.35 348.00 290.70 330.00 1827080 318.42
1430 330.00 378.90 330.60 362.65 1548210 361.58
1500 362.65 372.90 359.40 369.90 548605 366.62
1530 369.90 382.10 368.15 382.10 435441 379.00

The above is a chart of half hourly trade on the NSE and one can see how the share has turned around from 1.30 pm. The average for the half hour had fallen to Rs 291.12 with the low for the period being 276.20 and then the price rose to touch the upper circuit of Rs 382.10.

What is M&B Switchgear?

It’s an intriguing company from the name perspective. It manufactures transformers from its factory in Indore and had revenues of Rs 34 crs for the year ended March 2011, of which roughly Rs 3.38 crs or 10% were traded sales. The net profit of this company was Rs 77.48 lacs, which means the EPS was Rs 0.39 and the asking PE for the share was a staggering 480 times.

The money raised was for the purpose of setting up 4 MW solar power project which would cost the company roughly Rs 66-68 crs. They have raised Rs 93 crs for this project. Their contribution to the company where they own 75% of the company is that they are in the process of setting up a 2 MV solar project with their resources which include a term loan of Rs 22.5 crs. It sounds quite odd that the company is raising Rs 93 crs in total for the issue where the amount that would be spent for this diversification for the total project is roughly the same and the term loan seems additional. The PE which was 480 is now 1000.

Look at the dynamics of the solar business. Moser Baer which has been there in this business doing the complete value chain where he makes the cells and the panels and is also in the power business has not made money in the last four years. Would it be fair to expect this promoter with no experience, and a market cap of Rs 760 crs or roughly Rs 127crs per MW which costs Rs 16 crs to deliver?

Dear readers I leave it at that and hope that people do not get carried away.

Wishing all a Happy Diwali and a prosperous New Year

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