On bonus issues, stock splits & buybacks

The tax treatment is different in each case

As most readers would know Reliance Power has announced a 3:5 bonus. What are the implications of a bonus issue for investors? Does it indeed increase their wealth? Is a bonus similar to a stock split? How about the tax implications? Is there potential for tax planning? Today’s article seeks to address these and related issues.

Bonus shares
Bonus shares are nothing but shares issued free of cost to the shareholders of a company. As this is essentially a book entry (reserves get capitalised), the number of total shares increase following a bonus issue, though the proportional ownership of shareholders does not change.

Also, post the bonus, the share price should fall in proportion to the bonus issue, thereby making no difference to the personal wealth of the shareholder. However, more often than not, a bonus is perceived to be a strong signal given out by the company and the consequent demand push for the shares causes the price to move up.

As far as tax is concerned, since no money is paid to acquire bonus shares, these have to be valued at nil cost while making calculations for capital gains. The originally acquired shares will continue to be valued at the price paid at the time of acquisition. An incidental tax planning benefit is that since the market price of the original shares falls on account of the bonus, there may arise an opportunity to book a notional loss on the original shares.

Stock splits
Stock splits are a relatively new phenomenon in the Indian context. It is important that investors understand the reasons that companies may split their shares and how a stock split is different from a bonus issue. In a stock split, the capital of the company remains the same, whereas in a bonus issue, the capital increases and the reserves decrease. However, in both actions (a stock split and a bonus) the net worth of the company remains unaffected.

A typical example is a 2-for-1 stock split. Say a company announces a 2-for-1 stock split. This means following the stock split, the company’s shares will start trading at half the price from the previous day. Consequently, you will own twice the number of shares you originally owned and the company, in turn, will have twice the number of shares outstanding. Consider the case of Stock X below:

The question that arises is, if there is no difference to the wealth of the investor, then why does a company announce a stock split? Well, the primary reason is to infuse additional liquidity into the shares by making them more affordable. It needs to be reiterated here that the shares only appear to be cheaper, though it makes no difference whether you buy one share for Rs3,000 or two for Rs1,500 each.

As far as the tax implications for stock splits are concerned, well, there isn’t any. A stock split, like a bonus issue, is tax neutral. However, when the shares are sold, the capital gains tax implications are different than those applicable to bonus issues. Here, the original cost of the shares also has to be reduced. For instance, in the above example, if the cost of the 100 shares at Rs150 per share was Rs 1,50,000, after the split the cost of 200 shares would be reduced to Rs75 per share, thereby keeping the total cost constant at Rs1,50,000.

Share buybacks
A share buyback is quite different from a bonus issue or a stock split. Essar Oil, Reliance, Siemens and Infosys are some examples of companies that have bought back their shares.

A buyback is essentially a financial tool in the hands of the corporate that affords flexibility in the capital structure. A buyback allows the company to sustain a higher debt-equity ratio. It is also a tool to defend against possible takeovers. Generally, companies buyback their shares when they perceive their own shares to be undervalued or when they have surplus cash for which there is no ready capital investment need.

Share buybacks also prevent dilution of earnings. In other words, a buyback programme enhances the earnings per share, or conversely, it can prevent an EPS dilution that may be caused by exercises of stock option grants, etc.

Last, but not the least, a buyback also serves as a substitute for dividend payments. This brings us to the crucial issue of tax implications of a buyback. A very important consideration is whether the amount paid on buyback is dividend or consideration for transfer of shares. If it is indeed considered to be dividend, the same will not be taxable in the hands of the investors. Also, to what extent, if at all, can the amount paid on buyback be taken as dividend? Is the entire amount paid dividend or is it only the premium paid over the face value?

In the case of Anarkali Sarabhai vs CIT (1997) 90Taxman509 (SC) had laid down the principle that redemption of shares by the company which issued the shares (in this case preference shares) will tantamount to sale of shares by the shareholders to the company.

The Finance Act 1999 has reiterated this stand to remove any confusion. Now, where any company purchases its own shares, the difference between the consideration received by the shareholder and the cost of acquisition will be deemed to be capital gains. Further, this will not be treated as dividend since the definition of dividend does not include payments made by company on purchase of its own shares.

Don't Sell Stock on False Signals

From Ken Little,
Your Guide to Stocks.
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Don't Abandon your Buy Case without a Good Reason

It is time to sell a stock when the points in your buy case have turned negative, but beware of false signals that can trick you into selling at the wrong time.

Your buy case was built to support buying the stock (see Use a Buy Case to Justify Stock Purchase.)

This written case is your reason for owning the stock. The only reason for selling the stock is if something changes the buy case. Here are some events that can fool you into selling, but may not mean your buy case has been compromised:

• Falling stock price – A drop in stock price is not necessarily a reason to sell (it may, in fact be a signal to buy). Remember that you are investing in a company and its stock may not always reflect its true value. Re-check the company’s fundamentals and if they haven’t changed, the stock is probably reacting to market conditions that are affecting all stocks or all stocks in the same sector. If the company remains a strong buy, it may be time to add more to your portfolio.
  
  
• Stock price rises – Oddly enough, investors sometimes can’t stand a good thing and sell after the stock has gone up. Stocks prices don’t necessarily operate by the laws of gravity. Just because they have gone up doesn’t mean they are doomed to come down. Some stocks keep going up for long periods, which is the idea.
  
  
• Bad news and rumors – Bad news about a stock/company can send a stock down. It might be a story about the company missing earnings or something more serious like a government investigation. Before an emotional “Oh my gosh” reaction, get facts, not rumors to assess the full impact of the news. Is this a bump in the road or a major wreck? Unless it is a serious problem, most bad news goes away quickly unless it involves criminal proceedings or a fundamental change in the company’s core business (government action eliminates a key product). Hang over bumps. If it’s truly a wreck, it is probably time to cut your losses as quickly as possible.

Knowing when not to sell is as important as knowing when to sell.

Use a Buy Case to Justify Stock Purchase

From Ken Little,
Your Guide to Stocks.
FREE Newsletter. Sign Up Now!

Buy Case Lays Out the Reasons and Research Behind Decision to Buy Stock

If you want to buy a stock, you should be able to state, in writing, the reasons. This is known in the business as a “buy case.”

A buy case is a simple, to-the-point summary of why this stock makes sense for your portfolio.

It covers five important points about the company and the stock and forces you to do your homework before investing.

If you follow this procedure or one similar to it, you’ll avoid buying (or selling) as an emotional response.

5 Points of a Stock Buy Case

Here are the five points your buy plan should cover:

• What does the company do? If you can’t explain the major business activity of the company in two or three sentences, you shouldn’t be investing in it.
  
  
• What part of the economy does this business serve and is it growing or does the company own a large share of that market? You invest in a company anticipating long-term growth. Companies that are built on fads or outdated technology are not good prospects. The technology sector is more volatile than consumer staples, but also offers more growth potential.
  
  
• Is the company riding a demographic or economic trend that has long-term implications? Companies that serve retirement needs of Baby Boomers have a 76 million plus market. Companies that define their market too narrowly limit their potential growth.
  
  
• How do you value the company using standard market ratios? Using many of the tools found at The Tools of Fundamental Analysis how does the company compare to its industry peers? How does is compare to the overall market? Why do you believe it is under valued?
  
  
• What do you see that makes you believe the company has room for sustained growth? Why do you believe the company is in a good position to grow and the stock is not priced to reflect this potential? Maybe the stock has been beat up because of some bad company news you judge to be temporary. Maybe the sector is out of favor and generally depressed. Whatever reason, you should have a reasonable answer for why the stock price is lower than it could or should be. This is your growth margin.

When you have built a convincing buy case (at a certain price), you are ready to invest.

Stock Buy Case also Good Sell Case Too

Retain the buy case and review it at least once a year or more often if the stock takes a big hit to see if any of your assumptions or conclusions have changed.

When you build a buy case before buying a stock, you force yourself to make a rational decision.

Investing on instinct is the same a guessing, sometimes you’ll be right and sometimes you’ll be wrong – not a great way to a solid financial future.

Public Offer Factors

Here are some public offer factors which are necessary to ascertain the viability of a Public offer and enables you to know if to invest or not.

* What will your invested fund be used for: Is it going to be used for development/expansion project that will yield more returns? Or is it going to be used for debt servicing?

* Indebtedness: This is very important because, if the company is highly in debt or if the financial condition of the company is not reflected in the balance sheet. It can really turn out to be a serious problem to investors since such invested fund could end up being sunk into debt payments.

* Percentage subscriptions: This is important as it speaks about the investing public's interest in the stocks of the firm, their confidence in its future performance and its performance after the IPO.

* Financial position of the firm: What is the share capital and reserve of the company. What is their authorized share capital? Do they have reserve? and how large is their reserve? Because this likely determines bonus issues and dividend declaration.

* Financial summary: This helps you to study the company's financial history and growth rate for a number of years.The financial summary includes Gross earnings, profit before tax, profit after tax, share capital, net assets, dividends, earnings per stock, and dividends per stock.

* Future prediction or forecast: This helps you to predict the company's performance. Future predictions must be computed with financial history in order to prevent exaggeration. In addition to the financial summary, forecast earnings yeild (this is what the offered stock price will yield when invested) is used to calculate future forecast.

Here are some more Public offer factors to consider:

* Subsidiaries and associated companies: For the purpose of business stabilization this enables you to know whether your investment is on a thin rope or not. Diversification is a major ingredient to the growth and security, because earnings will be generated from subsidiaries and associated companies to boost the profit margin of the parent company.

* Historical background: The history and business of the the company right from inception should be well studied. It is important to know the changes and developmental phases of the company, track records of its board of directors, how the company was started, they company's relationship with clients, clients and the society in general. This information can be obtained in business sites online.

* Board members: What is the track records of the board members? The better the track records and experience of the board members the better and more secure is your investment.

* Legal matters: You must cross check that the company does not have legal or court case that may lead to its closure, liquidation or even bankruptcy. There are known cases where litigation concerning board members, investors or even rival companies has led to the closure, liquidation or even bankruptcy of the company.

There are many other Public offer factors that you have to consider also making use of the stock market information to to ascertain the viability of a public offer.

All you want to know about DSP ML Opp

All you want to know about DSP ML Opp

Opportunities funds, powered by their fluid investment style, can target a wider range of investment opportunities to maximise growth. They have the mandate to invest across market capitalisations (large cap, small and mid cap stocks), asset classes (equities and debt instruments) and sectors. This provides the fund manager with the flexibility to invest across the spectrum of stocks and asset classes depending on the growth opportunities. The fund manager can take aggressive stock/sector bets in order to clock above-average returns.

Investors who are enamored by thematic funds (especially infrastructure funds) must not lose sight of the fact that diversified equity funds (which include opportunities funds) can make aggressive sectoral/thematic calls. More importantly, they can exit the sector/theme when valuations peak; this is something thematic funds cannot do because they are bound by their mandates to remain invested in the theme regardless of the valuations.

Equity Funds: Thematic vs Diversified

DSP ML Opportunities Fund, one of the oldest equity funds to pursue the opportunities style of fund management, is a leading fund from the diversified equity fund segment. Its impressive showing across the risk and return parameters over varying time frames and market cycles is noteworthy.

What DOF offers

DOF, an offering from DSP ML Mutual Fund is an open-ended, opportunities style fund. Launched in May 2000, the fund invests between 80 per cent -100 per cent of its corpus in equities while the rest (upto 20 per cent) can be held in debt/money market instruments. It pursues the growth style of investing by identifying companies that provide long-term capital growth opportunities from across the market and sectors.

Given its fluid investment style, the fund has an edge over regular diversified equity funds when it comes to investing aggressively in investment opportunities (most diversified equity funds can take moderate bets as opposed to the aggressive bets that opportunities funds can take). To that end, DOF is ideally suited for investors with an aggressive risk appetite.

India can sustain 9% GDP growth: PM

India Infoline News Service / Mumbai

Dr. Manmohan Singh says that the Government`s objective is to ensure that the current high growth process is as inclusive as possible, in all dimensions

Prime Minister Dr. Manmohan Singh on Thursday reiterated that the Indian economy can consistently grow at 9% in the medium term, spurred by strong growth in savings and investments. "I do believe we have unleashed the creative energy of our people and that is what is contributing to the acceleration of economic growth," he said while releasing a book Business Standard India - 2008 in New Delhi. The Prime Minister also said that the Government's objective is to ensure that the current high growth process is as inclusive as possible, in all dimensions, and it can be sustained while holding inflation under check. "It has been our endeavour to ensure that inflation does not get out of control," Dr. Singh said. He said that the Government wants to ensure long term stability of the growth process, rather than seek short term gains that may have socially and politically destabilizing consequences. "I also believe that it is our responsibility today to ensure that uncertainty in the global system does not harm our growth process," the Prime Minister said. A large continental economy like India's can sustain fairly high rates of growth based on the stable and sustained growth of the home market, even if there is turbulence in global markets, he said. Dr. Singh said that in years to come, India and China will be viewed as the new growth engines of the evolving world economy. "We are not yet there, but we will be," he added. India can certainly sustain much better domestic performance based on its own efforts and realisation of the immense potential, the Prime Minister said. But, he added a word of caution, saying that India cannot take it's success for granted. "Sustained growth is not like going to a free dinner party," he said, adding that India needs to pursue sound macro-economic policies designed to raise savings, investments and productivity. The Prime Minister said that India also needs a supportive polity. "Economists are familiar with the phrase, 'get the prices right'. The challenge before us today is to also get the politics right," he said. If we can get both politics and prices right, the Indian economy would be on surer ground for sustained growth, Dr. Singh said. "This is not just a challenge for political parties. It is equally a challenge for those who are in the business of shaping mindsets," he said.

Finally…a fine Friday

Finally…a fine Friday

India Infoline News Service / Mumbai Feb 15, 2008 18:34

The 30-share Sensex closed at 18,115 surging 348 points and NSE Nifty closed at 5,302 adding 100 points.

Finally it’s Friday and we are in positive terrain. Bulls continued the Valentine’s Day party as markets rose for third straight trading session. Also volumes picked up with Sensex and Nifty managing to sustain above crucial technical levels. Markets staged a strong come back after opening with a negative gap down. Initially it was buying in the Mid-Cap and the Small-Cap stocks that lifted the markets higher, however as the day progressed even the heavyweights caught pace with stock like RIL, ICICI Bank, SBI and Tata Steel gaining the most. Finally, the 30-share Sensex closed at 18,115 surging 348 points. It touched an intra-day high of 18,142 and a low of 17,445. The NSE Nifty closed at 5,302 adding 100 points after hitting an intra-day high of 5, 315 and a low of 4,104. Overall about 1,988 stocks advanced, 759 stocks declined while 46 stocks remained unchanged. Among the BSE 30 index 25 stocks advanced while 5 stock declined. Refinery stocks continue to be in demand as Government hiked petrol and diesel prices by Rs2 per litre and Re1 per litre respectively. IOC surged by 4.5% to Rs561, HPCL gained 3.5% to Rs309 and BPCL added 1% to Rs469. Telecom stocks also ended with gains. Report stated that DOT planned to change spectrum usage charges levied on telecom companies, to a fix percentage of revenue for each category circles. Rcom gained 0.5% to Rs612, Bharti Airtel gained 0.6% to Rs882, Idea advanced 3.5% to Rs112 and Tata Communication added 1.1% to Rs508.

IPOs seen fairly priced, returns better going forward

MUMBAI: Akin to batsmen who find it difficult to play a good line delivery on the off-stump, investors too are passing through tough times with reverse swinging markets, deceptive valuations and late stock movements. Though there is consensus among market gurus that extreme caution must be exercised while trading, not many are ready to press the panic button. As a matter of fact, this is the right time for investors (with investible money) to accumulate ‘fallen angels’ and the much pounded blue chips and hedge themselves well in futures market, experts say.

“There is money to be made in bearish and volatile markets as well. The time of entering a stock is very important in falling markets. One should start investing when stock prices have depreciated significantly,” says Park Financial Advisors’ director Swapnil Pawar, adding, “Investors should try to spot out ‘fallen angels’ in the market.

Fallen angels are stocks that have fallen 20 to 30 times as far PE (price-to-earnings) multiple is concerned.” However, a word of caution: Never try to invest in a stock trading high on thin volumes. Try the reverse — pick stocks trading on high volumes but low prices. “Seasoned investors can also try investing in index futures,” adds Mr Pawar.

According to investment experts, a high net worth individual could invest in short-term money market instruments on bad market days. However, this should be done by arriving at accurate stock exit points or setting a stop-loss and reading market sentiment. Switching from equities to short-term debt should be effected only on expert advise. Another option could be allocating a certain portion of their investments into funds investing into commodities. Generally, commodity markets do well when equities are volatile, say investment experts.

Well-informed investors could also get into option trading in times of falling markets. The advantage of buying a ‘Put option’ over shorting the asset is that risk is limited to the premium. For instance, concerns over a probable slowdown in the US has caused a loss of confidence in IT companies, causing their share prices to fall. So by purchasing put option on IT shares, investors could make money even as IT shares drop further.

How dividends in mutual funds work

January 30, 2008 12:38 IST
Last Updated: January 30, 2008 18:55 IST
For a lot of investors, dividend income means a lot. This holds true for investors in mutual funds as well as stocks. Now, investing in stocks calls for a totally different skill set. With stocks, regular dividends (in combination with other key factors like revenue and profit growth, cash flows) do speak for the company's solid fundamentals. The problem arises when investors apply the 'dividend strategy' while investing in mutual funds. To compound matters, fund houses understand this mindset well enough to make a big deal while declaring dividends so as to draw investors looking (only) for dividends.

To appreciate the point about dividends being a misleading indicator, it's important to understand how mutual funds offer a return. Mutual funds give a return by way of appreciation in the net asset value. Being market-linked, its NAV fluctuates on a daily basis; when at any point its NAV is higher than the level at which it was bought the investor has made a profit (generated a return) on his mutual fund investment.

In reality, this is the only way in which mutual funds give a return i.e. NAV appreciation. How about the dividends, doesn't that also count as a return? Not really, because the dividend can be declared only if there is an NAV appreciation.

Confused with all this? An illustration should do the trick for you. Observe what happens to the NAV of a mutual fund after it declares a dividend.

From one hand to another

Cum-dividend NAV (Rs)	15.0
Dividend (%)	20.0
Dividend (Rs)	2.0
Ex-dividend NAV (Rs)	13.0

Notice in the illustration that the cum-dividend NAV is Rs 15.0 (this is the NAV before the dividend declaration). The mutual fund declares a 20 per cent dividend. It is obvious from the illustration that the mutual fund does not declare this dividend from its own pocket; it is drawn from the NAV. So an investor who invests in the fund anticipating a dividend declaration should consider this point before hitting the invest button. After all the money for the dividend will only be deducted from his NAV; he will be richer by Rs 2 per unit (going by our illustration), and poorer by the same amount (since the ex-NAV will also fall by Rs 2). At the end of the day, the dividend-seeking investor has no doubt pocketed the dividend, only to see an erosion in his capital by a similar margin.

In our view, investing in a mutual fund for the sole purpose of pocketing easy money (by way of dividend) can be a recipe for a disaster. This is no way to invest in a mutual fund.

How not to invest in a mutual fund

There are certain points about dividends that investors must appreciate before diving into a mutual fund for the dividend lure:

1) Dividends on mutual funds are not assured. Even if a dividend looks certain in the immediate future, there is no saying whether the mutual fund will be in a position to declare another one at the same frequency and for the same amount. As explained earlier, dividends are ultimately a result of performance, there can be a dividend only if the mutual fund has performed well enough.

2) Declaring a dividend by a mutual fund cannot always be interpreted as a healthy sign. It could mean that the fund manager just does not have enough investment opportunities and would rather return the money to investors. Or worse, the fund manager probably sold some of his best stocks to generate cash for the dividends. Either ways, the dividend spells bad news for investors. We are not saying this is the case all time, but investors must divorce mutual funds from stocks as far as dividends are concerned. With stocks a dividend could underline a strong balance sheet but it does not mean the same thing for a mutual fund.

3) When you withdraw money from a mutual fund investment by way of dividend, you lose out on the benefits of compounding. For compounding to work effectively, it's important that you stay invested i.e. preserve your original investment and if possible add to it, but do not withdraw from it, unless it's an emergency.

4) On hindsight, one scenario where pursuing a 'dividend strategy' could prove intelligent is during depressed market conditions. Investors who have collected dividends during a rally in stock markets will have something to show for during a prolonged depression, while investors who had relied only on capital appreciation will wish they had redeemed a portion of their investments during the rally. Mutual fund categories like thematic and sector funds that witness more cycles (than diversified equity funds) are apt candidates for the dividend option.

While dividends may be important for a category of investors, investing in mutual funds only for the dividends is perilous. It is more important that investors focus on the mutual fund's performance, which is dictated mainly by the fund management processes and investment style of the mutual fund. A strong performance could lead to dividends in the future, but the opposite is not true.

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Want to save tax? Invest in ELSS now

For the high-income individuals, equity-linked saving schemes are a good way to save tax.

Investor: Section 80C has several instruments that qualify for the deduction of Rs 100,000 from my gross total income. Some of the important ones I know are Provident Fund, Public Provident Fund, National Saving Certificates, LIC [Get Quote] premium, ELSS of mutual funds, Pension Funds and others. Which is the best avenue?

Advisor: While it would be difficult for anyone to single out one single instrument that is best for everyone across the board, you must appreciate that the list of eligible instruments is kept wide enough to cater to different classes of investors by the income tax authorities.

For instance, someone who is risk-averse can opt for life insurance or five-year deposit with a bank. For someone keen on saving tax, even on income arising out of the instrument would prefer PF or PPF. Then, for the young and high net worth, with a good risk appetite can go for ELSS.

Investor: Tell me more about ELSS.

Advisor: ELSS is abbreviation for Equity-Linked Saving Scheme. This is one of several schemes by the mutual funds and is popular among high net worth tax payers because of their unique features

Investor: What are these unique features?

Advisor: As the name suggests, this is a scheme which predominately invests in equity shares of companies. Under the regulations, the scheme has to invest 80 per cent of its corpus in the equity shares and the balance 20 per cent can be invested in other instruments like bonds, debentures, government securities and others.

Investor: This implies that by putting my money in ELSS, I am participating in the stock markets and therefore, exposing myself to risky investment.

Advisor: Yes, you are. But the advantage here is that there is no direct participation in the stock markets or in a particular stock. So, you have a basket of stocks that have been selected by professionals.

Since these professionals or fund managers, as they are known have access to elaborate research facilities and insights into the functioning of the companies and consequently, you get the benefit of those skills which go into systematic stock selection.

Investor: Are there any other benefits?

Advisor: The other benefits come on the taxation front. If you are making an investment in of Rs 100,000 you will be entitled for a deduction equal to Rs 100,000 from your gross total income under section 80C.

In other words, someone who is in the highest income bracket of 34 per cent (30 per cent + 10 per cent +3 per cent), investing Rs 100,000 in ELSS reduces the tax liability by Rs 34,000.

Effectively, it means that you would have invested only Rs 66,000 because you are getting a benefit of Rs 34,000 on Rs 100,000. Assuming the mutual fund declares a dividend of 9 per cent, your return on Rs 66,000 would work to 13.63 per cent (9,000/66,000 � 100).

Investor: What else?

Advisor: This is not all. This dividend of Rs 9,000 on your own Rs 66,000 is totally exempt in your hands under section 10(35). In effect it is tax free return in your hands.

Investor: What are the other tax implications?

Advisor: There is yet another bonanza from ELSS awaiting you and that is: whatever capital gain that you will make on this investment after a lock in period of three years is also totally exempt from tax in your hands under section 10(38).

Investor: That is great news

Advisor: Yes. This is what makes ELSS the most attractive investment for those who have the appetite for moderate risk. However, before you rush, do select a good fund house based on its reputation and track record.

The writer is a chartered accountant. Powered by

Investing? Plan well for the next 2 years

Through much of 2006 and 2007, Indian markets traded above fair-value. We saw a fine example of reflexivity as traders profited from riding a strong uptrend and reinforced it further by taking long positions. In the past fortnight, we've seen the opposite effect. Once the sell off started, the downtrend was reinforced by margin calls.

The casual retail trader and the less committed foreign institutional investors have been blasted out in the past 10-15 sessions. So have highly-leveraged operators. Only committed investors with deep pockets and traders who are prepared to go selectively short are now left in the game.

The entire cycle of fluctuation was prompted by changes in liquidity. We now have some clarity about policy trends in US and Indian interest rates. It can be summed up thus. The United States is likely to continue cutting rates. The RBI is not, though rupee rates could soften a little anyhow.

A look at India's credit-deposit ratios and the liquidity in the banking system suggests that there is room for banks to cut commercial rates even though the RBI has chosen not to touch policy rates.

The incremental credit-deposit ratio is down to 0.65 from 0.95 a year ago. Deposits are growing at over 25 per cent and the recent market sell off is likely to bring more money back to banks. Credit is now growing at about 22-23 per cent, which is much lower than the 29-30 per cent logged in the past two fiscals.

Eventually, FII funding will also come back into the Indian market as the spread between US and Indian rates widens and the rupee strengthens. But this will be a slow process because most FIIs have taken mind-boggling losses speculating in subprime mortgages.

It's a good time to take a broad look at fundamentals. At current levels, the Nifty is valued at a price earning of 21-plus. That is still on the rich side. It means that long-term investors will be selective, even if they are optimistic about growth.

On the EPS front, the Nifty basket is likely to produce about 20 per cent growth in the second half of 2007-08. Assume first-half 2008-09 earning per share will also grow at about 20 per cent. That means a PE ratio of up to 20 or so is acceptable for the optimistic growth investor, if we assume a fair-value price earning growth PEG of 1.

The 364-Day T-Bill is currently trading at around 7.4 per cent � that translates into the equivalent of a PE ratio of about 14 in terms of earnings yield. A value investor would therefore, be seeking stocks trading at below 14 PE.

While GDP continues to grow at excellent rates, there has been a slow down in consumer demand - much of the growth is driven by investment rather than consumer demand. Auto/ two-wheeler sales are flat and home loans are slow. Manufacturing capacities are tight and capacity expansions will take a while.

We have already seen tacit recognition of changes in the consumption-investment mix as infrastructure industries have jumped while consumer-driven industries have dipped. That trend could be accentuated through 2008. In fact, we could say that the consumption driven segment of the economy is going through a cyclical downturn.

Now, quite apart from the subprime turmoil, 2008 and 2009 are likely to see violent market fluctuations because of geo-politics. A new US president must cope with a toxic legacy. It's also unlikely that the UPA will get a walkover in the next general election. Both events will cause volatility.

Whatever you buy, it makes sense to modify investment methods in this context.

You should try to use those price dips to keep adding to a core portfolio. Say, for example, pick market leaders across 10 key industries and add to these holdings whenever the price is ok.

You cannot time the market but you can put a war-chest together for specific political events that are guaranteed to cause fluctuations.

The US election, for example, will take place in November 2008. The Lok Sabha elections will be whenever. Sometime during both events, there should be a temporary crash.

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Sensex defies global weakness, gains 348 points

16 Feb, 2008, 0501 hrs IST,Ashish Rukhaiyar, TNN

Equity benchmarks ended the week on a firm note, even as the broad trend in Asia was mixed. The overnight fall in the US markets failed to affect sentiment as broad-based buying by institutional investors lifted equities to their third successive day of gains. According to market participants, some amount of short-covering also bolstered the indices on Friday. Realty, metal and oil stocks were among the day’s best performers.The 30-share Sensex gained nearly 2%, or 348.62 points, on Friday to close above the psychological 18,000-mark at 18,115.25. Incidentally, the Sensex, which last closed above the 18,000-mark on February 6, ended the day close to the intra-day high of 18,142.92. With Friday’s gains, the index has moved up by a little over 1,500 points in the past three consecutive sessions. The broader 50-share Nifty settled the day above the 5,300-mark at 5,302.90, gaining nearly 2% or 100.9 points. Interestingly, most market participants were expecting a downtrend due to the sluggishness in world markets. “Global signals were pointing towards a weak session,” says Jay Prakash Sinha, who heads institutional equities at Mangal Keshav Securities, adding that short-covering also played an important role in Friday’s gains. “Around the 5,200-level, people started going short on the Nifty, which got covered during the later part of the trading session. However, volumes are still a concern as that indicates lack of conviction,” added Mr Sinha.

RELIANCE INFRATEL(IPO)

Feb 11, 2008 04:33 pm
A subsidiary of Reliance Communication

Reliance Infratel, the telecom infrastructure unit and a subsidiary of Reliance Communications has filed its DRHP with SEBI on 4/02/08 to enter the capital market with an offer of 8.91 crore equity shares with a face value of Rs 5 each at a price to be decided through the book building process. The issue will offer 10.05% shares of Reliance Infratel to the public and the post issue holding of the promoters will be 85%.

Currently, institutional investors hold a 5% stake in the company, while the rest is held by different companies of the group. The largest shareholder is Reliance Communications Infrastructure (RCIL) at 79.71 percent. Qualified Institutional investors will be allotted 60% of the issue, non-institutional investors 10% and retail participants 30%.

Seven months ago, the company had sold a 5% stake to seven global financial investors, raising Rs 1,400 crore. The sale fetched a valuation of Rs 28,000 crores for the company. The seven investors were Fortress Capital, HSBC Principal Investments, Galleon Group, New Silk Route, GLG Partners, George Source Quantum Fund, and DA capital.

The shares are proposed to be listed on BSE & NSE.

JM Financial, JP Morgan India, ABN Amro Securities, Deutsche Equities, Enam Securities, ICICI Securities, Lehman Brothers, Macquire India and UBS Securities are acting as the book running lead managers to the IPO. HSBC Securities, Kotak Mahindra and SBI Capital are the co-book running lead managers.

The IPO is likely to hit the market by the end of the current financial year.

The company is part of the Reliance Anil Dhirubhai Ambani Group, one of India’s

leading business conglomerates with business interests in the communications, power, financial services and entertainment sectors, among others. The company was founded by Reliance Communications (RCOM), the second-largest wireless communications company in India (in terms of subscriber base) with a total of 40.96 million CDMA and GSM subscribers as at December 31, 2007 and the flagship company of the Reliance ADA Group’s communications business. Currently, the parent company, RCOM and its wholly-owned subsidiary Reliance Telecom Limited (RTL) are its network’s anchor tenants.

The company was incorporated in April , 2001 but until March 30, 2007 it was a

dormant company with no material business or assets. On March 30, 2007, pursuant to the Merger Scheme approved by the Bombay High Court, Reliance Next Generation Technology Private Limited (RNGTPL), a subsidiary of RCIL which held certain telecommunications assets was merged into the company.

The company is a leading passive telecommunication infrastructure provider in India based on the number of telecommunication towers that the company owns. ‘Passive infrastructure’ refers to wireless towers used for the purpose of hosting and assisting in the operation of active infrastructure used for transmitting telecommunication signals. The company’s business is to build, own and operate telecommunication towers and related assets at designated sites and to provide these passive telecommunication infrastructure assets on a shared basis to wireless service providers and other communication service providers under long-term contracts.

The company’s relations with RCOM is one of its key competitive strengths and it intends to leverage this relationship by expanding the tower portfolio as RCOM and RTL expand their respective wireless networks. The company’s core strategy for expansion is to roll out the company’s network with at least one anchor tenant in place for the company’s towers. The company has already built 23,434 towers and were ready for installation, as of December 31, 2007.For fiscal 2008, fiscal 2009 and fiscal 2010, RCOM and RTL have commissioned the company to develop an aggregate of 56,596 new tower sites, on which, either one or both of them will serve as the company’s anchor tenants. In addition, the company’s Master Service Agreement with both RCOM and RTL, have granted it a right of first refusal to develop new tower sites for the expansion of their respective wireless networks.

The company intends to utilize Rs 4,623.7 crore out of the issue proceeds for installation of 16,000 passive infrastructure sites (expansion) and for general corporate purposes. The geographical spread of the expansion is as follows: Metropolitan cities - Chennai, Delhi, Mumbai 1,190 towers/sites; Andhra Pradesh, Gujarat, Karnataka, Maharashtra & Tamil Nadu 10,000; Haryana, Kerala, Punjab, Rajasthan and UP 4,750 and J&K 60.

Break up of cost of items for 16,000 passive infrastructure sites:Tower structure, shelter and construction would entail an expenditure of Rs 2,371 crores; diesel generator Rs 480 crores; battery automatic voltage regulator, electrical bulk Rs1250.6 crores; air conditioners Rs 400 crores and others ( land deposit and security automation) is pegged at Rs 122.1 crores.

For the year ended march 31, 2007, Reliance Infratel posted an income of Rs 5.59 lakh and net profit was Rs 3.27 lakh as compared to an income of Rs 18,598 and net profit of Rs 4,778 for the year ended March 31, 2007. For the 9 month period ended Dec 31, 2007, the company’s income was Rs 901.96 crores and net profit of Rs 153.62 crores.

New Issues Analysis(IPO) » RURAL ELECTRIFICATION CORPORATION

Feb 13, 2008 02:49 pm
Here comes some light!

Rural Electrification Corporation is entering the capital market on 19^th February 08, with a public issue of 15.61 crore equity shares of Rs.10 each, in the band of Rs.90 to Rs.105 per share. 50% of this issue is by way of fresh issue while 50% is by way of offer for sale.

After the recent debacle of many IPOs, this is one of the mega issues, which intends to mobilize Rs.1,640 crores. It has been seen that PSU IPOs have been reasonably valued. This maybe due to the conservative approach of issuer’s officials, as also, no personal interest is involved, as sailing through the issue is more important than the valuation. This issue falls in this category.

The company is a public financial institution, engaged in the financing and promotion of transmission, distribution and generation projects throughout India. The company, all along has been financing public sector projects, but has been shifting to joint sector and private sector, in view of mega power projects, now being set up by the private sector. As at 30-09-07, total of Rs.35,050 crores has been financed by the company, of which 96.33% has been to the public sector.

For FY 07, the total income of the company was at Rs.2,933 crores with PAT of Rs.776 crores, giving an EPS of Rs.9.95 on equity of Rs.780.60 crores. First six months of FY 08 seems to be quite good with topline at Rs.1,792 crores and PAT of Rs.523 crores, which results in an annualized EPS of Rs.13.40. Even on fully diluted equity of Rs.858.66 crores, this would be close to Rs.12.20. The present book value, as at 30-09-07, is at Rs.54, which would rise to Rs.63 to Rs.64, depending on the price discovery, post IPO.

Fresh infusion of Rs.700 crores to Rs.800 crores, into the company would be EPS accretive and 82% government stake, post issue, is also an assuring feature. The funds are mobilized mainly to augment capital base to meet future capital requirement of improved business and to list the shares.

We feel that in this turmoil, when primary market is not at all comforting with any good IPO, this is a better issue, where investors can safely apply for reasonable gains.

MAN INDUSTRIES

Strong profitability in pipeline

By SP Tulsian · Man Industries is a manufacturer and worldwide exporter of large diameter Carbon Steel Line Pipes for various high pressure transmission applications for Gas, Crude Oil, Petrochemical Products and Potable Water. · The company has state of the art manufacturing facilities for LSAW (Longitudinal Submerged Arc Welded) and HSAW (Helically Submerged Arc Welded) Line Pipes and also for various types of Anti Corrosion Coating Systems with its plants located at Pithampur in M.P. and at Anjar in Gujarat. · The annual installed capacity of the company is over 5 lakh TPA, based on 32 inches inner diameter and 12 mm wall thickness. The capacity is in excess of 10 lakh TPA, based on 56 inches inner diameter and 29 mm wall thickness. · The company is the first company to manufacture 18 meter H Saw Pipe. The company has recently commenced its one more line of production at Anjar and shall be adding two more production lines in the next 6 months. · The company had recently received a single order from U.S. of U.S $ 225 million, for 257 miles of 42 inches Diameter LSAW and HSAW pipe lines and the recently commissioned production line is catering to this order. · The order in hand of the company is of close to Rs.3,000 crores and the company has bid for order of over U.S. $ one billion, in which, the company is hopeful of receiving good number of orders. · The company has recently set up its subsidiary in US and UAE as also received approval to set up an IT SEZ at Indore. · The company has recently split its shares to face value of Rs.5 and present equity of Rs.26.64 crores is held to the extent of 40.54% by the promoters, 24.24% by Mutual Fund, Banks and FIIs, 8.50% by Depository Receipt Holder and 27% by Public. · The company has been showing robust financial performance every year. For FY 07, the total income of the company was at Rs.1,133 crores with EBITDA of Rs.132 crores, resulting in an EBITDA margin of 11.65%. PBT was placed at Rs.83.95 crores while PAT was at Rs.55.30 crores, giving an EPS of Rs.10.38 (face value Rs.5). · For quarter ending December 07, total income was at Rs.414 crores with PAT of Rs.20.73 crores, resulting in an EPS of Rs.3.89 for the quarter. For 9 months ending December 07, total income was at Rs.1,090 crores with PAT of Rs.57.02 crores, giving an EPS of Rs.10.70. This exceeds whole of FY 07 performance. Based on this, FY 08, topline should be close to Rs.1,600 crores and PAT of Rs.80 crores, giving an EPS of Rs.15. · The share is presently ruling at Rs.110, which discounts historic earnings by close to 7 times. Expecting a growth of 25% for FY 09, the PE multiple works out to less than 6 times, which makes it, probably the cheapest saw pipe maker, when compared with Welspun, Jindal Saw, PSL and Maharashtra Seamless. · The share at Rs.110 qualifies an excellent buy with no downward risk and potential to rise to Rs.150 levels in the next 6 – 8 months.

CROMPTON GREAVES

An Indian multinational

By SP Tulsian A Thapar group company, Crompton Greaves (CG) is one of the largest private sector enterprises in India, engaged in the manufacture of products related to power generation, transmission, and distribution. Power is one of the fastest growing sectors of India and is expected to only grow further. And when the industry is destined to have such superlative growth, it is but natural that one of the leading power equipment manufacturing companies in this sector would also record growth exponentially. So on a macro level, the future of CG, in the backdrop of the power sector, looks immensely bright. CG's business operations consist of 22 manufacturing divisions spread across in Gujarat, Maharashtra, Goa, Madhya Pradesh and Karnataka, supported by well knitted marketing and service network through 14 branches in various states. The company has posted very good results for the third quarter ended 31st December 2007. On a standalone basis, the total income, on a y-on-y rose 13% at Rs.1014.36 crore. Despite the 10% rise in total expenditure and tax expenses more than doubling, infact it went up by a whopping 70%, the company showed a very healthy 49% rise in net profit at Rs.67.90 crore. On a nine months basis, the standalone rise has been more spectacular. Y-on-Y, total income rose 15% at Rs.3017.27 crore and the net profit surged by a whopping 72% at Rs.210.85 crore, which is more than the full year net profit of Rs.192.37 crore in FY07. On a consolidated basis, the total income of the company for Q3 ended 31st December 2007 stood at Rs.1,806.94 crore. Net profit was at Rs.82.71crore. For the nine months period, total income surged to Rs.5,127.76 crore and net profit was at Rs.263.55 crore, which is very good, when one looks at the net profit of Rs.281.74 crore posted for full year ended 31st March 2007, leaving no doubt that the CG will end the current fiscal on a much higher note. The biggest contributor to the revenue, as always, has been the power systems unit, with almost equitable revenues coming in from the consumer products and industrial systems units. Its customer list, apart from the state electricity boards, reads like a virtual list of “who’s who”, including names like Power Grid Corporation of India, Infosys, Kirloskar Brothers, Reliance Energy, Larsen & Toubro, Whirlpool (India), ABB Ltd, Mather & Platt India, BPCL and Indian Space Research Organisition, to name a few. The company’s equity capital currently stands at Rs.73.31 crore and on a face value of Rs.2 per share; the annualized EPS stands at Rs.9.60, on a consolidated basis. The company is actually comparable to giants in the electrical equipments segment, like ABB, and Bharat Bijlee. So in that context, based on the earnings, it would be no exaggeration to say that CG is an Indian multinational. The promoter’s stake in the company is at 39% while mutual funds and banks are holding 46%, with 15% being held by the public. The company is expected to end FY08 on a highly optimistic note, with net profit expected to be around Rs.400 crore, on a consolidated basis, resulting in an EPS of close to Rs.11. In November, when the indices were heated up, the stock was quoted at Rs.450 and currently, after all the sell off; the stock has come down to more accessible levels of Rs.3150. Others like Havells, Areva T&D, Emco, which are in the same sector but with much lower earnings and profitabilities, are quoted much above CG, thus presenting a great opportunity once again for those looking for great long term bargains. At the current rate of Rs.315, Crompton Greaves is undoubtedly a safe bet. Buy it for a comfortable 45-50% return over the next 12 months.

BANK OF RAJASTHAN

Looks attractive

Bank of Rajasthan has posted excellent results for the third quarter ended 31st December 2007. On a y-on-y, the total income of the bank rose 44% at Rs.309.33 crore, of which 34%, being Rs.105.92 crore came in via the treasury operations and the balance, Rs.203.33 crore from banking operations. Net profit was at Rs.42.15 crore, as against Rs.19.82 crore posted in Q3 FY07, a whopping rise of 113%. On an equity of Rs.134.46 crore, the EPS stands at Rs.3.14. The gross NPA is at 0.55% and the net NPA is at 0.33%. On 1st February 2008, the bank stated that it was raising Rs166.75 crore through preferential issue of equity shares to US-based Indus Capital Partners and New Delhi-based Max India Ltd. The bank would issue one crore shares at a price of Rs166.75 per share calculated on preferential basis to the two entities. The Bank would issue 65 lakh shares to Indus Capital Partners constituting 4.5% and 35 lakh shares to Max India Ltd constituting 2.42% of its total post-issue paid up share capital. As per RBI ownership norms, no single single entity can own more than 10% interest in a bank and due to this, the Tayals have been under presuure to reduce their stake in the bank. So in December 2007, the promoters of the Bank - Pravin Kumar Tayal and Sanjay Kumar Tayal, informed the BSE that they were reducing their stake in the bank from 43% to 33%. The offloading was being completed through preferential allotments of equity shares to a clutch of FIIs - BNP Paribas SA, an investment arm of French bank BNP Paribas, and Glassia Mauritius Ltd, an investment arm of US-based hedge fund Avenue Capital Group. They were allotted shares at a price of Rs200 per share. The biggest positive for the bank is that as per the RBI stipulation, all Indian banks must have a net worth of at least Rs300 crore. Compared to that, Bank of Rajasthan’s net worth in March 2007 was Rs426 crore. The bevy of activity in the bank, espeically with so many FIIs picking up a stake in the bank indiatces that many are stocking up their stake, in a run-up to the opening up of the banking sector to foreign investors in April 2009. Currently, this is one of the most profitable banks in the Indian banking sector, and it is little wonder then that most of the FIIs want to be prepared to hike their stake beyond 5% once they are presented with the opportunity. The bank currently has a network of 469 branches and has applied to RBI for an additional 40 branches. We had recomemended Bank of Rajasthan as a great buy in August 2007, at Rs.95. It is currently quoted at Rs.130, this is a great stock to hold in one’s portfolio. We strongly maintain our ‘buy’ recommendation as once the April 09 comes, the entire dynamics of the ban

Super hit Q3

Super hit Q3

PVR Cinemas, the movie exhibition company has posted exuberant results for the third quarter ended 31^st December 2007. Infact the results were so good, that it left everyone feeling a little bit dazed.

On a y-on-y, total revenue grew 62% at Rs.67.38 crore. Revenue from ticket sales was at Rs.43.87crore, up 52% and Income from revenue sharing was at Rs. 7.56 crore, up 66%. Revenue from Food & Beverage sales was at Rs.13.63 crore, up 53%. EBITDA doubled to Rs.15.54 crore. Net profit grew by a jaw dropping 268% during the quarter at Rs.6.11 crore.

During the quarter, the company launched a premium brand of multiplexes under the name PVR Premiere, starting with its property in New Delhi’s Select City Walk Mall. It also announced plans for five multiplexes in association with Prestige Group at their mall projects in Bangalore, Kochi, Hyderabad and Mangalore.

Like the movie business, where the fortunes of film stars, directors and producers is made or broken by a hit or flop, the fortunes of this company are also closely linked with hits and flops. Last quarter was not a big deal, as the company did not have too many hits to show while Q3 has been very good mainly on account of the hit movies, which the Hindi film industry had. The company also co-produced its first movie in Q3, Aamir Khan’s Taare Zameen Par , which has been declared as a hit. The returns from this movie will actually reflect in Q4. Expected releases during Q4 are Rama Rama Kya Hai Dramaaa, Jodha Akbar, Sarkar II, God Tussi Great Ho, Ru Ba Ru, Chal Chala Chal, Dulha Mil Gaya, Do Aur Do Paanch and Race.

The company currently operates 24 cinemas with 95 screens across 14 cities, and expects to have another 50 multiplexes operational in the next 12 months.

Focused on the future

Focused on the future

This Chennai based company has managed to show a consistent financial performance for the third quarter ended 31st December 2007. On a y-on-y basis, the total income of the company grew by 7.57% at Rs.238.86 crore. The company’s production was at 62,026 tonnes (57,425 tonnes), the equivalent of 107% capacity utilisation. Total expenditure grew by 5.07% though its interest outgo burgeoned to Rs.7.49 crore, up by 82.24%. EBIDTA was up 23% at Rs.63.19 crore. The company earned an extraordinary income from carbon credit to the tune of Rs.4.44 crore, which accrued mainly from the windmills for the period from April 2004 to July 2007. Tax outgo increased by 48%. Net profit for Q3, after all these expenses, was up by 27% at Rs.28.48 crore. On an equity of Rs.69.21 crore, on a face value of Rs.10 per share, the basic EPS stands at Rs.4.11. The company is now in the final stages of completing a mill development plan launched in 2005 at a cost of Rs.525 crore. Once this plant goes on stream, which is expected by March 2008, the total paper production capacity would increase to 2.45 lakh tonnes per annum from the present 2.30 lakh tpa. Its captive power generation capacity would go up to 81.12 MW from 61.12 MW and this is expected to make the plant self reliant in its power needs on the expanded capacity. The fruits of these expansions would start coming in only from next fiscal, which is FY09. Like all companies, one of the biggest outgo’s for the company is on the raw material front. The company has been dependent on imported pulp for some time now and to bring down this dependence, the company has been increasing the pulp wood plantations. It now has over 19,349 acres under cultivation and plans to add 12,000 acres in the current year. The company is also planning to start work on its Rs.725-crore mill expansion plan by May and this is expected to take the paper production capacity to 4 lakh tpa and this expansion, as per the company, is expected to go online by March 2010. The company plans to fund this expansion with borrowings to the tune of around Rs.500 crore and the rest will come in from the internal accruals. The reserves of the company currently stands at a healthy Rs.507.12 crore. With paper prices expected to remain buoyant and given the fact that the company is so rightly focused on its future course of action, investors would do well to stay invested.

Stock that would give 10 times gain

Lanco Infratech's net sales rose 191% to Rs 382.15 in Q3
December 2007 over Q3 December 2006.
Lanco Infratech's total order boos is Rs 12,000 crores which would
complete in 4 years. after one or two years yearly sales turnover
will be Rs 3000 to 4000 crores as minimum estimate which is 10 times
growth.
Recently, Lanco Infratech received a contract for the
construction of a 500-bedded hospital for the Rajiv Gandhi Institute
of Medical Sciences in Andhra Pradesh.
The Lanco group has experience in operating in the core
sectors of power generation, power trading, realty, engineering and
construction, information technology and manufacturing.

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IPO analysis: The black, white & 'grey' areas

IPO analysis: The black, white & 'grey' areas

Market experts have been following the IPO space over the last few days and evaluating how the recent IPOs have fared. There is one big listing slated early next week; some of these issues have struggled to get subscribed and some had to extend their timelines and lower their price points.

In an exclusive interview with CNBC-TV18, Debashis Basu, Editor of Moneylife Magazine and Jawahar Mulraj, Columnist in Equitymaster & India Representative for Institutional Investor Magazine discussed various issues related to the IPO space including the grey market premiums, role of merchant bankers and promoters etc.

Debashis Basu said there are international studies to prove that a frothy IPO market usually signifies a temporary or an intermediate market top. Analysing the role of grey market in the IPO market, Basu added, “The very fact that we are sitting here and using the term ‘grey market’ where there is a regulator and it's supposed to regulate everything open and above in full public view; this itself is an absolute complete failure of the regulatory mechanism.”

Jawahar Mulraj, Columnist in Equitymaster & India Representative for Institutional Investor Magazine opined that both - the merchant bankers and the promoters are on the same side of the coin, they want to get the best price for their issue. He feels that the investors have to look after themselves, make up their own mind and do their own study and not depend on false signals such as the grey market-listing price, which is often erroneous
and manipulated.

Rel Power listing above Rs 600 could be +ve for mkt

Rel Power listing above Rs 600 could be +ve for mkt

In an interview with CNBC-TV18, C Jayaram, Kotak Mahindra Bank said that if Reliance Power lists somewhere at Rs 600 and below, then many of those leverage positions are going to lose money and that could be negative. On the flip side, if it lists well above that could be a positive trigger for the market. Excerpts from CNBC-TV18’s exclusive interview with C Jayaram: Q: The countdown has begun for a very big listing. What’s your sense of how sentiment is towards a space like power and now what might happen to something as big as Reliance Power, just by way of interest? A: I think the mood is not entirely positive because there are a lot of investors who have borrowed money and are pretty much leveraged in terms of their applications and the sense at this point of time is that many of them would be lucky to get away with a break-even situation. So the mood is not entirely bright right now. In a sense, that could be next major cue for the market because if it lists somewhere at Rs 600 and below, then many of those leverage positions are going to lose money and that could be negative. On the flip side, if it lists well above that could be a positive trigger for the market. Disclosure: It is safe to assume that my clients and I may have an investment interest in the stocks/sectors that have been spoken about.