Here is a link on Money Control showing views of Basant Maheshwari (The Equity Desk) for Page Industries & Hawkins Cooker. I found the views to be interesting especially on Page Industries. I have been holding back from sometime to invest in Page Industries thinking its bit expensive but here is a perspective.

We have invested in L&T Finance IPO though looking at market undertone, I suspect there may not be any listing gain. The quality of IPO looks very good so let's wait.

Recent Outlook Money edition (July 13, 2011) has a good article on zero debt stocks to buy. Argument is that in the rising interest scenario, the stocks with zero debt and good track record are good bets. The below stocks are covered. I would skip FAG bearings and SKF India as I don't think I understand the business. Gujarat Gas Co. is in the business of providing piped Natural Gas & Compact Natural Gas in Gujarat. CRISIL is of course a relatively easy business model to understand. Castrol India is into Automative & Industrial lubricants. I am not sure if I understand Castrol's business. I am not looking for Portfolio expansion so skipping these stocks for now though would have ideally liked to research on Castrol India and CRISIL.

1. Castrol India
2. CRISIL
3. FAG Bearings
4. Gujarat Gas Co.
5. SKF India

I continue my little trades. Have recently sold all quantity of Power Finance, Innoventive Industries, Eros International, MOIL, Muthoot, Punjab & Sindh Bank, Shipping Corp. & Tata Steel. Also sold a little bit of LIC Housing Finance & Yes Bank. Hope to buy some of these back at lower levels.

Regards, Rohit

Non Moving Capital

I am noticing that IPO Investments in Punjab & Sindh Bank, Shipping Corporation & MOIL are not moving anywhere. In last two weeks, Stocks have decently appreciated, in general. However, these stay more or less stay the same. We would now book losses (P&S 12%, SCI 21% & MOIL 20%) and shift the capital into Power Finance or some other stock that can move faster.

As mentioned earlier, I reinvested in Power Finance & Innoventive Trades at lower levels. These Trades are showing some profit and I am thinking to en-cash as my sense is that market undertone is still bearish.

Regards, Rohit

In & Out

Some of my IPO investments are coming in & out. Paid a very heavy price for wrong decision on Innoventive Industries :( Similarly, Muthoot Finance and Power Finance (FPO) turned out to be poor listing as well. It seems to me that Sell decisions are turning out to be more crucial at this stage than the buy decisions. What I am doing right now is to leverage the bearish undertone and use sell positions.

As an example, I had liquidated all of Innoventive Industries at about 97 on the listing day (against IPO Price of 117). Few days later I managed to buy them at 86 and again sold them at about 95. The stock is down to 91 right now.

Similarly, I managed to liquidate Muthoot Finance @ 183, bought back at 160. Missed selling them when it reached 185 and its now back to 160. Nevermind :)

Similar story with Power Finance. Sold the FPO quantity at about 194 average against 193 FPO Price. Now the stock is down to 180. I am thinking to buy back tomorrow subject to market mood. The valuations are extremely attractive too right now...at about 8 PE.

If I could afford to invest more in Stock Market, I would buy more of below stocks with investment horizon of at least 3 years. The most part of my buy recommendation is attractive valuation and solid growth foundation that already exists.

• Power Finance
• Yes Bank
• Shriram Transport
• Piramal Health
• Tata Steel
• Aditya Birla Chemicals

Yes Bank has announced the Roadmap for 2015. They would want to get to 750 Branches from 250 today. They would like to grow to 3000 ATMs, Rs. 125000 Cr. Deposits and Rs. 100,000 Cr Loan base. This is very impressive. I am tracking Yes Bank since 2004 and can say that they have proved their credibility. I do see a bit of delay in management guidance and actual execution as an example Rana Kapoor had declared the target of 225 Branches by March 2010. This actually happened somewhere end of 2010 / early 2011. However, my sense is that this is still an incredible growth with a high management pedigree and a very good quality of loan book.

I feel there is a bearish undertone in the market and in the short term lower levels could be seen. I do not watch markets very closely now a days and given my engagements at work place, I have slowed down on most of the reading as well. My sense is that in the Bulls Vs. Bear fight, at the moment Bears are having an upper hand. I have a very strong conviction that any one investing in the markets right now will be very handsomely rewarded in 3-5 years time.

Regards, Rohit

Investment Updates

I have invested in Innoventive Industries IPO on the last day. This is not usual for me as I don't find valuations attractive and quality of IPO is not gret. However, I am bit tired of watching my Capital earning sub-optimal returns. Let us see if we are lucky to make some money here. The other investment in Muthoot should certainly bring in some little profit.

I am taking a hard look at IPO investments of MOIL and Punjab and Sindh Bank. I would like to close these trade now, albeit a bit negative. Once again, reminds me to stay with the stated approach of liquidating immediately on listing. Both were kind of exception as they did not meet my target. Nevertheless...

I continue to be very busy with work, including weekend. So I am running out of bandwidth to catch up with my investment reading.

Regards, Rohit

Muthoot Finance IPO

We are applying for this IPO. My sense is that valuation are slightly expensive but looking at the potential of gold financing business, which is largely in unorganized sector at the moment, this has a very large potential to grow. We are also invested in Manappuram from last few months.

Regards, Rohit

Judging the IPO Investments

Tata Steel FPO Subscription has left some gain opportunity for those who invested. Looking at small premium and possibility of high over subscription, I decided to skip. However, the Retail category subscription of 1.6 Times and overall subscription of about 6 times means that if we had applied in full, meaning from all our 4 Accounts, we would get about 800 Shares. Looking at about Rs. 30 premium, there should be a Gross Profit of about Rs.24K and Net profit of about Rs.18K after considering cost of funds (7.75% in my case) and income tax. 3 of our accounts have ASBA so funds would earn 3.5% till the actual amount is debited from the bank. ASBA is helping. I am not looking at investing in Omkar Specility. The valuations @ 20 times look bit stretched. At this point in time, I would stay away from small size IPOs. I am not regretting my decision to skip Tata Steel FPO.

For me, IPO Investment is turning out to be judging the current state of market, looking at valuation & gray market premium, size of IPO, Investor enthusiasm and then deciding if the investment would be profitable.

Our Current Account for Loan Against Shares with ICICI Bank is ready with long term shares pledged. @ 13.5% its bit costly, but If we were to be needing more money for IPO investments, this would come handy, especially when two good IPOs come together. However, I don't see this happening for sometime in next few months given the state of stock market.

Regards, Rohit

Starting 2011

Last weekend, we visited a proposed construction site near Panvel. They have just done Bhoomi Pujan and the plans are getting a final sanction. The location is amidst good population but the area is not developed. With Airport coming near by, this is right to invest there. Once we have the final design, we will make a decision. We are likely to invest. One of the friend is also referring a Project in the outskirts of Pune. Let's see.

If I do go ahead, the surplus cash will be absorbed. We are close to opening the Loan Against Securities account with ICICI Bank so fund should not be a problem. However, with IPO Investment returns turning out so low, I am not sure if it would continue making sense.

Today, we exited from MRO Tek & Manugraph & bought more of IFCI, Aditya Birla Chemicals, Shriram Transport & entered in 3I Infotech. 

Happy New Years to All.

Regards, Rohit

Yes, I am here

I have been very busy at work so did not get time to blog!

Retail Participation in recent IPOs continues to surprise me. Retail demand in Ravi Kumar is almost same as HNI + Corporate demand. In case of Shipping Corp., Retail demand is highest. One part of the change is due to increased limit for Retail investment & other part is also effect of successful issues like Coal India. Since demand of shares keep increasing, the allotments continue to get poorer :) So making money is becoming increasingly difficult :(

I let A2Z issue go since funds are blocked. Most of the analyst feel that this IPO is over priced a bit but my sense is that this will list at a premium. Let's see. On the other IPO this week, Ravi Kumar Distilleries, I would not invest even if I had funds. I would like to stay away from stocks in the category like Liquor, Cigar etc. I am fully aware that some of my direct equity or mutual fund investment may not be always in what is called 'Ethical Businesses' but I would like to do what I can.

Punjab & Sindh IPO looks interesting. There are management comments that they would like to leave 'something on the table'. I will take a look at the numbers but most likely we will apply.

We bought LIC Housing, Yes Bank, Shriram Transport & IFCI in the recent crashes. To me, it seems that the undertone is still bearish.

Regards, Rohit

Investment Updates

Looked at some options for IPO Financing since couple of issues are over lapping. Learned about ICICI Bank's Loan against Securities scheme. Interest rate is 13.5% p.a. and is charged on a daily basis for actual number of days funds are used. They need you to have minimum Two Lakhs rupees of eligible Shares & with 50% Margin, they fund One Lakh Rupees. The shares are pledged to them & it seems this can be done on-line. The only other expense is Current Account opening - 2k for first year & 1.5k thereafter, plus of course the taxes. This seems pretty good. For a funding of a lakh for two weeks, the interest cost works out to just Rs.563. I am seriously considering to Open the Account so this funding is available on demand. Here is the link on ICICI Bank's website.


I am bit disappointed with the price band announced for Shipping Corporation FPO. But I guess this is more due to current market situations. With large issue size, decent profit should still be possible.

Another disappointing news is development on Lavasa. I am pretty impressed with the first planned city of India. We actually visited Lavasa and stayed there for 2 days to check out Real Estate Investment. We did not go ahead with Real Estate investment for different reasons but I am eagerly looking at their IPO. That said, keeping my profit orientation aside, I sincerely wish that environment concerns be addressed first & all approvals obtained.

We will be applying, but naturally, for Manganese Ore IPO in full retail quota of Two Lakhs in all our accounts.The Indexes continue to go down. So this is a cause of worry.

Regards, Rohit

The IPO Flood & My Investments

I decided not to invest in RPP Infra IPO. I am not impressed for various reasons, as I stated in my earlier post. I earlier thought of taking a punt may be for 1 full application but now that we are close to MOIL & SCI issues, with Claris Life Science in between, I am running out of funds. I will review Claris Life Science RHP and take a call.

It will be a good strategy to apply using Rs. 2 Lakhs limit. If we want to apply full limit, for both MOIL & SCI, for all in Family, we need a huge amount. I hear that Hindustan Copper plans the FPO around Dec 6. Then there is Lavasa & then there is IOC planning issue by end of Jan 11.

What this clearly means is that we need to be ready to utilize the opportunities that are coming in. So I need to review our portfolio and liquidate less profitable investments. I think its also time to sell 199 Shares of Coal India that we are still holding on. I can hold for some more upside but I think its sensible to keep funds available for IPOs, in this scenario. I know all this means a lot more churn in the portfolio and more brokerage payments, but I am OK with that ! Would have also liked to leverage my LIC Jeevan Shree policy and take a bit of loan but my wife won't allow :(

A quick review of MF Portfolio reveals that Magnum Contra & Magnum Tax Gain are not doing very well. I know both are good schemes and have done well in past but this is sort of forced ranking since the objective is to try & get best returns. Table above is a comparative rating of key MF Schemes part of our Portfolio. On the Stocks, the only possible stock I can liquidate for now is NTPC. Though its not unlocking any great liquidity, I am still going ahead !

I also decided to subscribe for Equity Masters Hidden Treasure Service. Seems like some discounted rate of Rs.2,950 for a year's service. Not sure if they would offer to all. Would get one Small cap stock recommended every month. Seems like pretty much researched. Though again, I don't know where will I get funds for investing :)

One of their report talks about MIC Electronics. I originally invested in their IPO and sold off quickly as usual. There was a stock split so its difficult to compare the price but I don't think there is a huge difference in the price. Its about Rs.35 right now & I plan to invest. So why now? I agree with the investment rationale that there is a tremendous opportunity in the LED Market. MIC has a monopoly.

LIC Housing Finance & Shriram Transport are 7 to 9 % down compared to Nov 5, Murhat Trade. So I will bye some more.

Regards, Rohit

Recent IPOs

I took a quick look at the RPP Infrastructure Prospectus. Looking at the Risk Factors, Crisil
Rating, business concentration & valuation, I am not excited to apply for
this IPO. The PE is about 21 & I would watch out for SP Tulsian's analysis
of this IPO. One thing I like about his analysis is reference to
comparative valuation of the company, that's pretty helpful. His prediction
on Bedmutha has come out accurate. The stock has been hitting lower circuit
for several session & no price for guessing that now it will trade below
its issue price.
Since the grey market for RPP indicates a premium of about 3k for a full
application, we may still apply from just one of the account. I would also
like to test out the hiked limit of Rs. Two Lakhs for investment in Retail
category, just to see how it works.
Gravita India listing turned out pretty good. So we did not hit the bulls
eye, but never mind :)
Coal India is holding at around 320 when there is this carnage happening
all around. Am very tempted to buy Coal India at this level & I can see 10%
upside potential easily when markets rebound or say two quarters down the
line. I am aware that this is richly valued currently with a price of 280
or so more appropriate keeping in mind the comparative valuation of Coal's
global peers. However, what I am hopeful is about sustainable growth. What
we sold during IPO averaged 341 so again tempted to reverse the trade &
this will ensure that some profit is booked & we retain this for long term
as well :)
Regards,
Rohit

Murhat Trading & IPO Updates

Purchased Yes Bank, LIC Housing Finance & Shriram Transport Finance during the Murhat Trading, this Diwali. It turned out bit exciting with an hour to trade and we were trying to get best price to sell our Coal India IPO stocks as well as buy these new stocks. It seemed to me that there was unusual rush by many investors and Sharekhan, ICICI Direct & Motilal Oswal sites were very slow.

Its just little few shares of LIC Housing & Shriram Transport right now. I have been watching both of this stock for sometime. In case of Shriram, about 7 years ago, I purchased a good quantity @ Rs. 20 but sold sometime later @ Rs. 30 :(

With Coal India's effect, Powergrid evoked even better response from Retail Category. Now, with 3.85 Times over subscription in Retail Category, each full application is likely to get 287 Shares. So it does not seem that profits can match the Coal India experience :(

I did not invest finally in Gravita India. This is one of the rare instance I recollect that Retail interest was much higher than FIIs :)




Regards, Rohit

IPO Trading Updates

We have now sold all our IPO Holdings in Career Point, Eros International, Techpro Systems, VA Tech Wabag & Oberoi.

During last one month, I have made some tough calls in order to efficiently utilize the Capital for maximum gains. It was difficult, for example, to choose between Career Point, Eros & Microsec Finance. I decided to go with Career Point & Eros. Came out at Break even on Eros & booked decent profit in Career Point. Similarly, skipping Ashoka Buildcon & going for Tecpro System was difficult

In case of Oberoi, almost every analyst felt that issue was priced bit high at the upper hand. Knowing Oberoi's construction quality, I sensed they deserve a little bit of premium. While the Retail quota was subscribed just about 1 time, the Institutional Investors gave a good response. While it shows a modest 10-12% Gain, the allotment for Retail was 100% & hence we could book substantial profit here. Lucky me :)

Here is the approach I normally follow for IPO Trading:

1. Study the DRHP
2. Look at Analyst's comments - Source : Money Control & The Economic Times
3. Look at Retail Inventors Enthusiasm. Source : Money Control
4. Look at Grey Market Premium. Source : http://www.premiuminvestments.in/ or http://www.smartinvestment.in/
   
5. Look at earning consistency, quality of management, peer comparison etc. Management quality is the factor I find most difficult to assess.
   
6. Look for Margin of Safety. So best to avoid issues showing Rs. 5-10 premium
   
7. Apply maximum quantity from all accounts in the Family
8. Sell at least 2/3 Quantity upon listing.

I have included a quick analysis of IPO Trading in 2010 so far. With markets inching up, this is of course not with myself alone. Every investor who has invested in last few months with a reasonable care, had made money.

I could have of course improved the realization further but as I said before, as a principle, I do not trade during office hours. That leaves me with a limited flexibility & I have no issues with that.

IPO Investment Updates

Oberoi Realty IPO is closing today. While the issue looks expensive & grey
market premium isn't great, we are still investing for one strong reason.
Being in Mumbai, I am familiar with the kind of reputation this builder
has. I found their houses to be of good quality. In fact in 2005 when we
bought our Rustomjee Ozone house, we were considering one of the Oberoi
Property nearby. Finally went ahead with Rustomjee for different reasons.

We were allotted Eros & Career Point stocks. Have sold some & will
liquidate the rest soon.

Now waiting for Wabag allotment. There is a controversy regarding numbers Wabag published in the DRHP and Wabag has given the option to retail investors to withdraw their application. I would stay put. Allotment is getting delayed by few days.

It was difficult to make decision across so many IPOs. I was highly tempted to avoid investing in say Wabag which we knew would be highly subscribed and instead invest in say Orient Green, Ramky or Electro Steel, trying to use Capital judiciously and go for small returns but more assured than investing in IPOs good but difficult to get allotment. Somehow, I held on to my core thinking and invested only for strong fundamentals. Eros has bit disappointed but still 8% on Issue price. Wabag should still give a decent return. Lets see.

Regards,
Rohit

Sent on my BlackBerry®

Current IPO Issues

I have reviewed the latest status and decided to go for Career Point & Eros International IPO. I would have liked to go for Microsec Finance IPO also however, at least 2 more good IPO Issues are just coming up and I need to judiciously deploy the funds.

Career Point has been already subscribed 26 Times since QIBs portion closed today. Retail is expected to close anything between 15 to 20 Times.

Ashoka Buildcon & VA Tech Wabag Seem like good IPOs too. For the first time, I liquidated few of the under performing stocks to divert funds for IPO. I am hoping that I will shift back to these good stocks once I sell on listing. Not excited with this as moving out and in has tax implications & transaction costs. I am however hoping that Ashoka Buildcon & VA Tech may not go beyond 10 Times the quota and allotment may not be that bad. Let's see.

Regards, Rohit

IPO Season

Many IPOs on-going & of them seems good. I am considering Eros International, Career Point, Microsec Fin & VA Tech. It seems that Companies who have approvals in place, need to ensure that IPO is launched before Sep 30 or else they will need to get the Q3 Results included - so there is this hurry of 9-10 Companies queue up.

Going by the Grey Market Premium, Eros, Career & Microsec seemed like can get about 8% Gross Profit. Does not sound great but this return is for an investment of 15 days or so. Risk of loosing principle is also not very high.

We plan to apply from all the investment accounts we have in the family. Though obviously we can't apply for all the IPO from all the Account so I now need to look at DRHP and get a deeper insights before prioritizing investments.

Regards, Rohit

Investment Updates

SKS Microfinance & Bajaj Corp. turned out to be a decent IPO investment. I am not fully out but mostly done. Gujarat Pipavav seems an interesting IPO though I am bit confused looking at the RHP at NSE Website. Crisil has rated this IPO @ 4/5 and mentioned number of positive factors, I observe from financial section that Company has consistently made losses as it seems that capacity is not yet fully operational.

On the other hand, the Grey Market indicates a premium of about 10 per share. Looking at the size and the face value, there is a good chance of large number of shares being allotted assuming that current trend of retain subscription continues.

I will take a final call after studying bit more in the IPO reviews.

Few more stocks have come in my radar after reading latest Money Today. Need some time to research before I can take a final call.

Regards, Rohit

Recent Investments

Got 119 Shares alloted in Engineers India Ltd. and swiftly got out, in line with my stand to always book Public Issue Profits. In this case, it worked out to about 16.5% before tax & interest cost.

SKS Microfinance is listing tomorrow & we had applied from all our accounts. So we have 36 * 4 i.e. 144 Shares. The gray market premium indicates about Rs. 90 + Rs. 50 was the retail discount. I plan to get out immediately as usual though it will take 2-3 days for logistics reasons. As a matter of principle, I do not trade during office hours, so I get to enter my trades only late in the night or early morning.

Yes, we applied from 3 Accounts for Bajaj Corp. as well. About 23 shares have been allotted against each application.

Regards, Rohit

IPO Season?

It seems the IPO market is getting hot again with couple of successful issues like Engineers India, SKS Microfinance & Bajaj Corp. Grey Market premiums indicate that all these issues will list at premium. Amidst my busy schedule, I did manage to apply for each of these IPOs investing aggressively.

Coal India and some more interesting IPOs are coming soon. I plan to invest aggressivley.

Regards, Rohit

My IPO Investments

Humm.. It's been copule of years that I am investing heavily in IPO. So here is my track record:

When I reflect back, here is what helped me:

1. I am a leaveraged investor. So keeping in mind the 9% pa cost of funds, in most cases I have opted to sell on listing or in next one week.
2. Since I rarely sell my long term holdings, IPO 'Investment' approach helps as I am booking profit, somewhere. Also, in most cases, it's difficult to gauge the long term potential of a script during IPO. For long term investments, I like to observe a script for few quarters and get comfortable with business, performance, management etc. and if positive, keep buying as I go along in an increasing manner.
3. Most of the good IPO scripts are bought by leading MF Schemes anyway and I am invested in most of them.
4. Whenever sentiments have changed or I have made mistake in 'investing', I have choosen immediately to book losses rather than emotionally holding on for 'recovery'. Deccan Aviation, Gangotri Textiles, Manaksia are good examples. This has helped to 'stop loss' except in case of Deccan Aviation. Also, please excuse me for Reliance Power. Just like most of the retail investor, I have now become a 'long term investor' as long as Reliance Power is concerned.

What did not help so much:

1. Most of times, I have blindly sold without recognizing even the short term potential of the stock. MIC Electronics, Allied Digital are examples. Since intention is to maximize the profits, I think I need to have a variable strategy of booking profits looking at the short term potential of the stock.
2. As an exception to above 'blindly selling' approach, there are few stocks that I decided to hold on for a 'better' price that never came my way :) Spice Telecom is a good example. I was impressed by the great Telecom story, acquisition potential, expanding user base and quarter on quarter performance improvement by most of the Telecom players. I waited for more than 6 months and finally sold the last chunk recenmtly at loss but made a small profit overall. Learning is that fundamentally Spice is not a strong stock. Financial health is weak, market leadership is not strong and top of it all, then started the great specturm confusion by our regulators.

Nevertheless, I have done some bottom fishing in the recent lows. Bought back Power Grid at 98 and Mundra at 700. I will sell these back when they are 20/30 % +.

Most importantly. I have not included Yes Bank and NTPC here. They are part of my core portfolio and Yes Bank, in particular, has been the most profitable investment I have ever made. Both Yes & NTPC, I got allotment in IPO and then started investing as I psychologically found them attractive as they were 'low priced'. From there on, I kept observing them quarter on quarter and have a reasonable holding now. No plan to sell in the foreseable future, except for forces majure reasons.

I don't plan to invest in primary market for next few months, unless the sentiments improve. By the way, I will write some other time about what's my approach while deciding whether to invest in an IPO or not.

Regards,

Rohit