Sat, 22nd July 2017

Anirudh Sethi Report


Archives of “Eye Opener – Maverick” Category

Will You Buy Magnolia or The Empire State Building ?

The residential inventory levels in most of the key cities remain at historic high levels and inventory levels as a proportion of absorption remain high in absolute levels and relative to the last few years. Absorption levels have remained muted and stagnant and have dropped significantly in Mumbai. Absorption in the Bengaluru market has been strong – this market has been an exception but given high supply, inventory levels remain high even here.

On the commercial front, absolute inventory has dropped significantly in the past two-and-a-half years, especially in Mumbai, but absorption remains low – in fact, Oberoi has been holding on to leasing its Commerz-II property due to low rentals.

Gurgaon is DLF’s key market –this region forms 65-70% of DevCo sales and about 50% of RentCo capacity. While residential resale value has been going up and inventory months have come off from its peak, absolute inventory in Gurgaon remains high at 47 msf and remains comparable to previous peak levels. Anecdotally, end-user participation remains low. The high inventory years in Gurgaon commercial segment along with muted absorption and flattish rental make the market less attractive from a new commercial development perspective. DLF is hopeful though that improving infrastructure and renegotiation of historical leases will drive rentals.

Real Estate: A Bubble As Large As The US Housing Bubble

House prices in six cities have registered double-digit increases since 2007, similar to the US, Ireland and Spain.

 Regulators across the world are beginning to realise there is a link between financial crises and real estate prices. Considering banks had a big role to play in the sub-prime crisis, regulators are now concerned about spiraling home prices in India too. While banks and home owners refuse to acknowledge that home prices are near bubble levels, data seems to suggest otherwise.

 Analysis shows some six cities have seen home prices go up in double digits since 2007, indicative of a bubble. In fact, in the second half of 2008, after the global financial crisis had begun, prices corrected in some markets but home prices in Mumbai, Kolkata and Faridabad continued to rise.

 The National Housing Bank (NHB) has been tracking home prices across 15 Indian cities since 2007. The NHB-Residex shows prices have risen in most cities over the last four years. Prices in Hyderabad and Jaipur are lower than 2007 base level. In Bangalore, prices have jumped 37 per cent in one quarter alone. The Bangalore index jumped to 101 in October-December 2010 from 74 in July-September 2010. In four years, indices have doubled in Kolkata and Chennai.

 In a report, STCI Primary Dealer has compared the increase in NHB’s Residex with that of housing indices in other bubble markets like Ireland, USA and Spain. In US, Case Shiller Index gives the price trends across 20 US cities. In January 2000, the index was at 100.59. It doubled in April 2006, marking a compounded annual growth rate (CAGR) of 12.1 per cent. The index has declined 31.4 per cent since the peak. In Ireland, too, housing prices index was around 33.6 in 1996, which peaked to 139.4 in 2006, marking a CAGR of 15.3 per cent. Prices have declined since then.

TV18-Those Who Advise Others Themselves Make No Money

After peaking at close to Rs 2000 per share, the stock of TV18 has just moved one way-downhill. This is surprising for more than a decade they have been running a business channel (popularly called the brokers channel) for the sheer number of stock brokers that they plant day in and day out, but have themselves as a business entity failed to deliver. It is surprising that inspite of all the schemes of arrangements, moving in and out of businesses and producing movies and running internet portals TV18 lost Rs 32 crore on Revenues of Rs 277 crore in FY10 or a negative EPS of Rs 2.45. The record in FY11 is slightly better with Revenues at Rs 210 in the 9 months to December 10 and after tax profits of Rs 29 crore turning in an EPS of Rs 1.59. Annualising earnings to Rs 2 per share, it still beats how this company still manages to fetch a PE of 38 and a market cap of Rs 1800 crore.
For so much wealth destruction for the shareholders and the public at large they continue to merrily propagate information considered source and hence sacred, where 9 out of 10 times that sourced info is speculative, released in market hours influencing stock price of the company in question and regularly denied. High time the authorities took notice and asked this entity from airing source based speculative information. At least if not creating value, it will save money for those who watch their channel.

Reliance Communications-A Dark Hole

Even before the Ambani brothers split up, it was a known unknown that Rcom was the Reliance Dark Hole. Some analysts had claimed as much as Rs 10000 crore had disappeared in the operations of Rcom, even before it was split up from Reliance. The fact remains that quite oblivious to the shenanigans of the BSE crowd, voice traffic across the World is becoming free of cost as VOIP takes over from the GSM and CDMA based mobile networks. Thus, unless Rcom provides and makes users pay for Data transfer the business model even with a graduation to 3G will remain a losing proposition. Take a look at the FY11 numbers of RCom. On Revenues of Rs 12000 crore, the company reported a loss of Rs 757 crore. With interest costs on money borrowed to bid for the 3G spectrum, even FY12 numbers should remain bad. And yet even after sliding from Rs 400 per share to Rs 87 now, the Rcom entity still fetches a market cap of Rs 18000 crore. How much more can the markets misprice a stock, where the management is clueless and is unaware of the changes that have taken place in the field of telecommunications. This is a dying business, remember these words.

Technically Our Target intact of Rs.75 ,61 !!-101% Manipulative stocks ,Rigged and volume created by Insiders and CC people.

Updated at 22:55/30th May/Baroda

Anantraj Industries-Will The 2G Scam Turn Into A Full Blown Money Laundering Scandal That Covers The Real Estate Space?

Anantraj Industries-Is The ADAG Group In Cahoot With Delhi Based Realtors?
If so, the 2G Scam that has gripped the citizens of this country, superior courts and the media turn into a full-blown scandal that involves Delhi based realtors who confessedly participated in laundering money let out by the ADAG group? Such serious charges would also involve the previous head of Reliance MF, who instigated and inspired, realtors like Anantraj and DBRealty to allow money to pass through for facilitating the 2G licenses. It might also become pertinent for the enforcement, revenue and sebi investigative wings to evaluate the sense in allowing corporate houses to set-up asset management companies which are then used to speculate upon insider information to which the Mutual Fund is privy. A chinese wall concept may also be in an unworkable proposition, if corporations in the private sector are allowed to set-up new banks.
A Delhi-based realtor, Amit Sarin, has told the CBI that his company, Anantraj Builders, was used to rout Rs 100 crore of Reliance ADAG to Swan Telecom to make the latter eligible to apply for 2G spectrum licence.   Read More 

India Real Estate: Can Real Estate Stocks Halve From Here?

Just spare 5 minutes pls….ASR Team

This sector is the biggest user and creator of unaccounted money in India. Artificially low circle rates, and huge registeration costs of real estate make this sector virtuously notorius. While builders milk banks and consumers, the bureaucrats at land registry milk builders, and land mafia corner parcels of land raising costs for all. A simple solution would be to take out discretion from Land Registeries, lowering registeration costs and raising circle rates exponentially to reflect price of Real Estate. This will take out the speculative element out of Real Estate-otherwise stocks will continue to face slow death.

“Despite that there being no specific mention of the realty sector (in RBI policy review) we continue to believe that the prices will soften by 10-15% before the end of this financial year,” said Pranay Vakil, chairman of Knight Frank India . “This is mainly due to volumes being low and liquidity being tight with developer. Also, the interest rates on housing loan continue to be high affecting volume of transactions in the industry.”

In its quarterly monetary policy review meet on Tuesday, the central bank hiked repo rate, at which RBI lends to banks, to 6.50%; and reverse repo, the rate banks receive for depositing funds with RBI, to 5.50%.

Interest rates that have started moving higher are impacting affordability and delaying decision making. Because of all these factors, the demand is not getting converted into sales since past two quarters. A further hike in lending rates is expected to expedite the correction process, analysts said.

Reliance A(NIL)-Comedy Of Errors Or A Man Wearing Two Hats?

Just Spare 5 minutes…………….and if possible comment !
Reliance A(NIL)-Comedy Of Errors Or A Man Wearing Two Hats?
Anil Ambani has gone to press once more, talking about an invisible bear lobby which is attacking it’s stocks and mauling them in the process. He may be right or maybe just underlining the panic that investors are facing today.
A few years ago the Ambani scions split up their father’s empire. The younger Mr. Ambani got Power, Telecom and Infra businesses. All ventures were new and hence suspect from profitability point of view.
-Reliance Natural Resources had no business model, except distribute gas from KG6.
-Reliance Communication had CDMA technology which was considered inferior to GSM tech.
-Reliance Energy had the power gen and distribution business of BSES.
-Rcap did nothing except promote the Reliance MF.
What happened since then?
-First, in an attempt to step out of the shadow of his elder brother, Anil created a separate identity as Reliance ADAG group.
-Second, in an attempt to grow he acquired Adlabs, and bid for UMPPs under the subsidiary route of Reliance Energy by creating RPower.
Unfortunately, the younger Ambani lost the claim to KG6 gas and lost the business for RNRL. In a mockery of stock markets and its regulators, RNRL instead of going for liquidation was merged with RPower.
Rcom made an attempt to go GSM, and then created a multitude of businesses by breaking into bits Adlabs into DTH/Movie business and Radio FM into Reliance Media.
RPower made a mega issue 3 years ago amounting to Rs 10000 crore at Rs 450 per share. With no project near commissioning, the stock got ripped. Claims were made and allegations made on rivals. A bonus to non promoter shareholders was made and then RNRL was merged with it.
As things stand no business of RADAG is near fruition, all have long gestation period and stocks which suited VC players should never have been listed. Reliance Energy now named Reliance Infra is offering a Buy-Back.
RADAG has decided to drop ADAG from it’s reference point and call itself a Reliance group company. Reliance Infra shares a similar sounding name with Reliance Industrial Infra-owned by his brother. So in all likelihood, instead of distancing from the other Mr. Ambani, Anil Ambani is trying to gain some leeway from his brother’s company.
The point is, should promoters be managing stock prices or be responsible in turning good corporate performance. If they cannot, then changing technology, splitting companies, changing business models, doling out bonuses, and offering buy-back will not assuage investors who are seeing their life savings go down the drain.
In the end, the two Ambani’s remain billionaires have 40-50 storied homes in Bombay, and the poor remains struggling on the Bombay City Trains. The dreams seem over for those millions.
Finally, why a buy-back of stocks why not just de-listing? And why change names? Why not just wear two hats?
ASR Research Desk /Baroda/India

Fertilisers-Afro-Asian Headwinds

Civil unrest in Egypt and Tunisia could lead to hike in nitrogen and phosphate prices. Egypt is a key supplier of Nitrogen (urea) while Tunisia is a major supplier of phosphate rock and other fertilizer products.

Positive for Urea / Nitrogen Prices

Egypt accounts for roughly 3 percent of global urea production and 8 percent of global urea exports. Supply concerns could firm up the market and help stabilize prices, which had started to soften recently. There are no reports of production being affected, however dispatches are getting affected.

Positive for DAP / Phosphate Prices

Egypt accounts for 2 percent and Tunisia accounts for roughly 4.4 percent of global phosphate rock capacity. Tunisian rock deliveries have been impacted due to rail disruptions and could impact finished phosphate fertilizer (mainly DAP) production, and Groupe Chimique Tunisien. This could further tighten what is already a very tight market. as of the end of December 2010, North American DAP inventories were 41 percent below the 5-year average.

Impact on Indian companies: Negative

Tunisia is one of key market (though much smaller than Morocco, but important) from where Indian companies source Phosphate Rock / Phosphoric acid. Supply disruptions for short term could impact utilization levels of DAP / complexes plants in India. Rising rices of DAP, Urea, Ammonia will put more pressure on margins of complex fertiliser makers. Unrest in Egypt / Tunisia is negative for Indian players for short term as the prices of key raw materials go up due to unrest, which is affecting supplies

India: A Filly Running In A Race That Ends In FY11

creditsuisseCredit Suisse India: A Filly Running In A Race That Ends In FY11 Corporate earnings forecasts for FY11 are being raised, but they remain constant for FY10. Is it not apparent that India is running sans fundamentals?   Earnings forecasts are being upgraded globally and the trend is visible in India too. However, analysis of consensus aggregates suggests that revisions are mostly for 2011 while 2010 index EPS is at the same level as it has been since February 2009. Read More