By adopting a resolution for 'Buy back scheme', the Indian Corporate World get authorisation to play the market. It is implemented most whimsically and NOT in the spirits of the resolution. Take the example of one taken by DLF Ltd - authorised to buy back upto 2.2 crores share & upto rs. 1100 crores subject to price limit of rs. 600/-. On the first day, the Directors bought back just 2,50,000 shares @ rs. 304/19, next week 7,55,888 @ rs. 265/58 & following week a token 5,000 shares @ rs. 210/-. Eventually, price went below rs. 200/- & they did NOT cared to mope out the balance quantity available below 1/3rd of the cut off price of rs. 600/- showing ABSOLUTE LACK OF FAITH IN THEIR OWN COMPANY !
Panacea Biotech has recently completed its buy back scheme & deserved 10 out of 10 ; they BOUGHT BACK the maximum quantity of 55,92,000 shares spending 85.76% of the authorised amount in the process.
I wish all follow this example of adopting a Resolution & carrying it out in TRUE SPIRIT unless market dynamics decide otherwise.
Monday, October 18, 2010
Saturday, October 9, 2010
Dhirubhai proposes, Motabhai disposses : Reliance (nay FARM) Enterprises
The legendary industrialist Dhirubhai used to pamper minority shareholders by way of fresh offers for subscriptions (eg., convertible bonds starting from 1st issue to the last G-series) and had distributed shares of Rupee One in an unlisted Reliance Enterprises Ltd proportionately. Subsequently, there was consolidation of Face value , open offer to buy back and a fresh issue of Optionally Cumulative Convertible Preference share of Rs. 10/- at a unheard (in those days) of premium of Rs 190/-. This was a right issue (unlike the present day fashion of preferential issue to the Promoters) and was so priced that it was largely ignored by the general public. Needless to state it was taken up to the fullest extent by the Family.
A brief review of this Company's (surprisingly renamed FARM in lieu of the default name RELIANCE - for the sake of camouflage ?) the state of finances is being made:
Capital (Comprising of Equity & yet to be converted Preference) - 13.94 crores shares of Rs. 10/-,
Fully diluated EPS of Rs. 4.28 and Fully diluated Book value of Rs. 154/- at present and Rs. 315/- as & when holders of FV 1 share pay up in full before due date of conversion.
Main business is holding 9.21 crores shares in Reliance Industries Ltd. acquired @ 176.
Somebody may say "Well, I do not understand the title of Blog".
Dhirubhai proposed , a legend was created by way of DISTRIBUTIONS , Motabhai disposses the generosity by way of NOT EVEN PAYING DIVIDENDS in spite of good cash flows;
the company admits Arrear of dividends
(Rs. 15.18 crores) while its profits was Rs. 60.17 crores in FY 2010 . It looks it will pay dividends once all minority shareholders exit the Company.
A brief review of this Company's (surprisingly renamed FARM in lieu of the default name RELIANCE - for the sake of camouflage ?) the state of finances is being made:
Capital (Comprising of Equity & yet to be converted Preference) - 13.94 crores shares of Rs. 10/-,
Fully diluated EPS of Rs. 4.28 and Fully diluated Book value of Rs. 154/- at present and Rs. 315/- as & when holders of FV 1 share pay up in full before due date of conversion.
Main business is holding 9.21 crores shares in Reliance Industries Ltd. acquired @ 176.
Somebody may say "Well, I do not understand the title of Blog".
Dhirubhai proposed , a legend was created by way of DISTRIBUTIONS , Motabhai disposses the generosity by way of NOT EVEN PAYING DIVIDENDS in spite of good cash flows;
the company admits Arrear of dividends
(Rs. 15.18 crores) while its profits was Rs. 60.17 crores in FY 2010 . It looks it will pay dividends once all minority shareholders exit the Company.
Tuesday, October 5, 2010
Maharastra Scooters : A classic story of major shareholders differing in business policy
Thanks to the associations with the Congress with family of Kamalayan Bajaj , Bajaj Auto Ltd (famous for HAMARA BAJAJ scooters) became the "Scooters King of India". Nobody else were permitted to put up a plant to compete with their nearly monopoly. At that time of the 'Licence Raj', a number of licenses were issued for joint sector projects with 26+ % stake in favour of a state industrial corporation to put up a small plant with yearly production of 25000 scooters. Maharastra Scooter got established in 1977-78 with WMDC becoming a 27% stakeholder and Bajaj being obliged to hold a just 24% stake to comply with the licence requirements.
Maharastra Scooters had best of business with peoples queing up to buy all the products just like any other manufacturers. They used to retain all the surplus (paying pittance to all shareholders which is an UNIVERSAL phenomena in India) and pile up a big portfolio of Bajaj Auto shares. As the scooters were out of fashion, the sole manufacturing were phased out in time.
The problem with Indian businessmen is that they never like to take "RETIREMENT" gracefully and so is the case of their enterprises. When an enterprises ceased to have business worth carrying on, it should be wind up and surplus being distributed. Colgate Palmolive (India), ICI India were fair in distributions of the surplus. Singh Brothers of the Ranbaxy fame had gracefully exited the business giving minor shareholders to exit thanks to open offer. And, most just love to cling the CASH FULL KITTY to their heart.
When a shareholder (with the backing of a STATE) with 27% stake can not force an equitable distribution of the accumulated wealth, one may imagine a status of a small shareholder. Neither the Parliament nor the GOI is expected to help us in such circumstances because the spell of the Captains (??) of the Industries/Business.
Maharastra Scooters had best of business with peoples queing up to buy all the products just like any other manufacturers. They used to retain all the surplus (paying pittance to all shareholders which is an UNIVERSAL phenomena in India) and pile up a big portfolio of Bajaj Auto shares. As the scooters were out of fashion, the sole manufacturing were phased out in time.
The problem with Indian businessmen is that they never like to take "RETIREMENT" gracefully and so is the case of their enterprises. When an enterprises ceased to have business worth carrying on, it should be wind up and surplus being distributed. Colgate Palmolive (India), ICI India were fair in distributions of the surplus. Singh Brothers of the Ranbaxy fame had gracefully exited the business giving minor shareholders to exit thanks to open offer. And, most just love to cling the CASH FULL KITTY to their heart.
When a shareholder (with the backing of a STATE) with 27% stake can not force an equitable distribution of the accumulated wealth, one may imagine a status of a small shareholder. Neither the Parliament nor the GOI is expected to help us in such circumstances because the spell of the Captains (??) of the Industries/Business.
Monday, October 4, 2010
Irrational funding to augment SBI Capital adequacy ratio
It is strange that the Government disregards laws meant for the public in true spirits; how can one look forward to good compliance by others of the laws of the land? Under the Indian Companies Act, it is prohibitated for a Corporate to finance or provide funds to the sharelder(s) for the acquistion of the shares. Last time, the State Bank (admitted it is NOT incorporated under this Act) augmented its Capital , the GOI issued a special bonds which was solely subscribed by the SBI and with the proceeds of this bonds, the GOI subscibed its shares of the right issue ! How can such book entries be preferred to augment the Capital once again this year also ?
If the book entries are only source of the scarce resources, there are better alternative, eg., the GOI may issue special bonds to other PSU banks and utilige the funds to subscibe the right issue of the SBI and similarly proceeds of special bonds issued to the SBI being used to subscribe the right issue of other PSU. Best choice would be an enactment to issue the GOLDEN share with absolute management control to the GOI and further issue of diluated (with less voting right) shares in such banks/insurance companies/other companies as the Parliament may approve from time to time.
How is that the RBI not taking a view in such irrational capital augmentation? It is going to harm Indian Banks standing in overseas in the long terms .
If the book entries are only source of the scarce resources, there are better alternative, eg., the GOI may issue special bonds to other PSU banks and utilige the funds to subscibe the right issue of the SBI and similarly proceeds of special bonds issued to the SBI being used to subscribe the right issue of other PSU. Best choice would be an enactment to issue the GOLDEN share with absolute management control to the GOI and further issue of diluated (with less voting right) shares in such banks/insurance companies/other companies as the Parliament may approve from time to time.
How is that the RBI not taking a view in such irrational capital augmentation? It is going to harm Indian Banks standing in overseas in the long terms .
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