IPO- Birla Cotsyn (Yash Birla Group Company) survives

IPO of the Birla Cotsyn survives now on the 8th day after opening of the issue. Issue has subscribed fully one time at 3:00 PM on the last day of the issue. (source NSE) This Public Issue creates a big hope in the Indian Primary market for its investors. Investors mood still seems tough & dicey but still hope in the market is there with this issue.
Above quoted Issue subscription figure of one time is based on the floor price band i.e. Rs. 12/- and at the cap price issue is subscribed at 1.14 times.
Lead Managers to this Issue are NEXGEN Capitals, Allbank Finance, Safron capital Advisors, Chartered Capitals

Bear’s impact on IPO of Birla Cotsyn- Yash Birla Group Company

Bear doesn’t even spare the long lasting name Birla. Yash Birla Group Company is open with Public issue these days. But market sentiments seem not to spare it at all. Although the issue price band is decided to be very marginal & lucrative for the investors i.e. revised Rs. 12 – 14 initially before revision Rs. 15 – 18 but investor’s mood is seems to be tough this time.
Issue of Equity shares was open on 30th June 2008 for raising Rs. 144.18 crores including promoters’ contribution of Rs. 36.65 crores through 100% book building process. Initially issue was supposed to close on 4th July 2008 but due to Bear’s power, issue is keeping open for another three working days till 9th July 2008 with further revision in price band to Rs. 12 – Rs 14. With this revision in the price band , if the issue is subscribed at Rs. 14 the promoters’ stake would be 34.13% post money or if issue is subscribed at Rs. 12 the Promoters would left only with 33.01% stake. Earlier which was 36.25% at the original cap price. This price revision may cost the promoters 3.25% stake in the company
Issuer Company
BCIL belongs to the Yash Birla Group (YBG) of companies and was incorporated on 24th September, 1941 by Mr. R.D. Birla under the name and style of M/s. Jamod Ginning Company Private Limited. It was renamed as M/s Birla Agro Private Limited and further changed to Birla Cotsyn (India) Pvt. Ltd and consequent to the conversion of the company into a Public Limited Company, its name has been modified to Birla Cotsyn (India) Ltd with effect from 30 May, 2006.
In order to ensure success in BCIL expansion plans, a 50:50 Joint Venture Agreement (JVA) was entered into between the YBG, through its chief promoter Mr. Yash Birla and the P.B.Bhardwaj Group (PBG) through its chief promoter Mr. P.B.Bhardwaj. The main purpose of this JV is to enable the JV partners to combine their resources and expertise and carry on the business of manufacturing, marketing and distribution of the products in India as well as other places.

India leading auto makers “Tata Motors” has acquired the Jaguar & Land Rover:

Tata motors again succeeded in cross border acquisition by acquiring Jaguar & Land Rover by beating its rival Mahindra & Mahindra. Deal is estimated to be valued between 2 – 2.5 billion USD. But till now there is no formal announcement from either the acquirer or the acquire company. Formal announcement is expected to be revealed at 5:30 pm (IST).

Secondary market fall impacts primary market as well

Recent stock market crash had impacted the Primary capital market. IPO subscription rate has fell down to a great extent. More over companies now reducing price band and offering the issues at a lower Price Earning multiples to making the issue more attractive and expecting a decent response from the public like Wockhardt Hospitals today reduced the IPO price band to Rs 225-260 per share from the earlier announced level of Rs 280-310 per share. The issue opens on Thursday and closes on February 5. Also many companies are trying to postponing their IPOs by a month or two to see the sentiments of the investors towards the Capital Market.

Reliance Power - The Overlooked Fact:

Is Reliance Power just "Reliance Power"? No.It is actually "Reliance Power Limited" - a limited company. So what does this mean for Reliance Power Limited?It means if in the rare case, the calculations of the management go wrong and the company somehow goes to insolvency, none of the shareholders will lose anything expect the value of the shares. If you are a share holder of Reliance Power and it goes into insolvency (unable to pay back debts), what do you stand to lose?Rs 430 per share.Lot of money....right?

What does Anil Ambani's AAA Project or REL lose?Both of them had got their 45% (post-IPO) stake for Rs 1000 crore each. Plus they will each subscribe to 1.6 crore shares each at Rs 450 in the IPO......which works out to be Rs 720 crore. Thus, AAA Project will be getting 101.6 crore shares of Reliance Power for Rs 1720 crore and REL will be getting 101.6 crore shares of Reliance Power for Rs 1720 crore.Little less than Rs 17 per share.This is what both the promoters are risking in this project....Rs 17 per share ; while investors will be risking Rs 450 per share.This is exactly the reason why Reliance Power was created. First, by contributing just Rs 1720 crore each to Reliance Power, the promoters have shifted all risk to investors.Second, by getting 45% stake (in REL's projects) to AAA Project for a mere Rs 1000 crore, AAA Projects (and Anil Ambani) have created wealth out of thin air. Anil Ambani's Rs 1000 crore investment will be worth Rs 100000 crore when Reliance Power lists at Rs 900.If the gamble works, the promoters (holding 90% stake in Reliance Power) will be worth billions of dollars. If the gamble doesn't work, the promoters will lose Rs 1720 crore each and investors will lose Rs 10000+ crore which they will be paying for a mere 10% stake in Reliance Power.What a way to create wealth...!!!....I don't have words to describe the brilliance of Anil Ambani's plans...

So what will I do with this IPO?

Firstly, I will subscribe to it,not because I think it is a good company or is offering great value at Rs 430, but because I am in this market to make money. The markets are in such a frenzy, nobody bothers about valuations anymore........not even QIB and other institutional investors. Everyone knows that Reliance Power will list at a premium and thus everyone will apply....valuations can wait for some other day.... .Everyone should wait till last day and apply for it. Just check the subscription levels by 11 AM on last day.

What will I do post-listing?

For bigger IPO's like Power Grid and Mundra Port, I have followed a sell-half-keep-half strategy. Assuming listing at Rs 900, for Reliance Power, I will follow sell-all-keep-none strategy.First, other companies are much cheaper.

Why should I keep a company valued at Rs 200000 crore - when another company (with similar capacity by 2013) is available at Rs 30000 crore with much smaller debt burden and Rs 10000 crore worth of investments ...........referring to Tata Power.If Reliance Power (at Rs 900) is available for Rs 200000 crore, why not buy NTPC for a similar price......Rs 225000 crore. NTPC plans to have a capacity of 66000 MW in 2017, while Reliance Power will have 28200 MW capacity in 2016.

Second, the risk is higher than other existing companies. With marginally cash flows for next 5 years and Rs 70000+ crore of debt, the risk for Reliance Power is high. Tata Power and NTPC have existing cash flows to handle expansions....Reliance Power does not.

Third and the biggest factor is....the valuation of the company doesn't make much sense. Why should Reliance Power be valued at Rs 200000 crore, when in highly optimistic scenario, it will not make more than Rs 15000 crore of profit in 2016 ? Even if it touches that figure of Rs 15000 crore, its market value in 2016 will not be much more than 225000-300000 crore. (if given a 15-20 times multiple). A fixed deposit will make more money than that in 8 years.....and that too without any risk.

Also, I got the optimistic Rs 15000 crore figure by assuming two times margins as NTPC. The fact is..... at least till 2014, Reliance Power will still be carrying most of its Rs 70000 crore debt and its interest costs will squeeze margins to a large extent.

By CS Jharna Mistry

DSE plans to revive trading platform by April 14

The Delhi Stock Exchange today said it plans to revive its trading platform by April 14 with special focus on small and medium enterprises.
"In the first board meeting held after demutalisation, the exchange appointed Pradeep Jain of Parsvnath Developers Ltd as its Chairman. We hope to revive the trading by Baisakhi (on April 14)," Delhi Stock Exchange Executive Director H S Sidhu told PTI.
The exchange will soon finalise a software vendor for putting in place the trading technology, he said, adding, it would take about 15 days.
The meeting was attended by 16 directors, including one each from Omaxe, Parsvnath and Network 18, he said.
Besides, four foreign directors were also part of the board meeting.
The exchange which stopped trading in 2003 after the new market conditions like emergence of uniform settlement system.
The exchange also went for demutualised in September last year, following the Sebi guideline which required each stock exchange to mandatorily sell brokers' 51 per cent equity to separate their trading and ownership rights of bourses. The process is called demutualisation.
Some of the foreign stake holders of the DSE include Mauritius-based Wilmette Holdings, Kuwait's Noor Financial Investment, Ikarus Industrial Petroleum Company and Kuwait Privatisation Projects Holding Company. The exchange has reserves of Rs 98 crore, bank balance of Rs 75 crore and 379 members. Currently, about 2,884 companies are listed on DSE. Of these, 1,800 are exclusively listed on the bourse, providing it Rs 2.5 crore as listing fee

Acquition by CHD Developers Limited

CHD Developers Limited has Purchased 99.99% Equity Shares from the Promoters of the following Companies and by this these companies are now the subsidiary of the Company.

• Divine Townships Private limited.
• Golden Infracon Private Limited.
• Horizon Realtech Private Limted.

By Tejasvi Dixit