Thursday, April 22, 2010


Dear Readers,
I know there are certian readers who are not good with internet and computer and also not thaat much good with English Language.I too am making mistake of spelling and sentence but that is error I make while writing , a typing error....which is very hard to I have to go through and read whole post again and try to write the correct thing....
When I wrote to write "Valuation" in the "Search This Blog" at the top extreme right, many would have been able to retrieve this post of mine but I still feel that there are many who do not know how to explore my blog.....
I again write,try to find the BOX ,"Search This Blog" at the top right of my blog and write any stock name or anything u would like to know and click on Search and you will find whatever I have written....any stock or any topic.........

Read on that post:

Thursday, December 24, 2009

What is valuation?How is it determined?What are the parametres to determine it.
We have seen experts of stock market speaking on Valuation.
The term use are undervalued, Overvalued or valuation at par....there can be many more names for giving ......
Now , how one can come on conclusion that the stock is overvalued or undervalued.I have a big PDF file which explains how to calculate the valuations that someone send me.I have saved it in my computer but has never read it.
If one will try to find a book on how to find valuation, they will find many books and after reading investor will find it fentestic and also would talk to some other stockmarket friend about that book and even refer it to read it.
Why I didn't go through that PDF File speaking on valuation?There are reasons for me not go read it.
I am not sure whether it is still there in my computer, so please don't ask for it........
I have seen that analyst who comes on business channel, says that so and so stock is now fully valued,means very less scope of going up.So one need to sell it or bookprofit in it.
Some stock expert says it is undervalued and can be bought.
I have seen one fund house or FII's or brokerage house giving a overvalued call on certain stock and other will come out with a buy next couple of days......Now why that is happening?When one says it is overvalued why other is saying undervalued?
This gives the answer itself....there are different parametres to look at the valuations and all have different way to analyse it.One find overvalued other find undervalue....why so , because the growth one is able to see, other is not able to see.Or in other words,what one has got the firsthand information after meeting the management, other is not having that and hence one ends up saying it is overvalued and other end up saying it is undervalued........
Well, if there is not a big difference between two opinion then it is OK but when one says is totally opposite to what other say then whom to believe.
Valuation is not a constant thing.It keeps on changing,everyhour, everday , everyweek, everymonth or even everyyear.
A Co, say Aban Llyod, was overvalued in Jan 2009 and need to be sold with so big of debt and I was reading sell call from each and every house and in just one go......Crude started going up....valuation become cheap......look at the 52 week lows and 52 week high........of Aban Llyod....
Just a big order for a Co and stock become product becomes successful and stock become undervalued.....
Valuation is a constantly changing thing.A stock can remain overvalued or fullyvalued for 2-3 yrs or even 4-5 yrs and suddenly the fortune changes and stock becomes darling and everyone wants to buy it......There are innumerable example like that in Indian Stock market as well in International market.
Valuation depends on how the economy is faring, how the Cos product is doing, what are the future potential of the Cos product,what world will need, how will be the demand,will perticular co will get beniffited from that and over and above that How market is doing.......there are so much of things to be taken care of that it is impossible to say anything on valuation front at anytime unless you have firsthand report.....on any Co.
Nestle was looking costly at 1600 to Dr Vikas and now at 2500 he is asking me whether it is a buy or not.
So at 1600 Nestle was overvalued and at 2500 it is not?Well that depends on how one thinks.If someone think that product will do good and has great future , one can definately go ahead and buy it at even this rate.
There is P/E ratio to decide.People looks at P/E .....sector p/e and see if that stock has lower p/e then other peers gr.....but that is also always not a great thing to do.Market can keep certain stock undervalued for a longer period of time and one can left with that stock not moving at all for entire whole bull run.......
Valuation is also related with demand and supply.If demand is more and supply is less then the stock can soar to great highs....irrespective of earnings.....
I have seen people (read expert) selling stocks at 3-5 times return and that stock went on to give 20-30 times noone can say that a stock is overvalued or undervalued......I think it is impossible to opine on that parametres.....
Have you ever met with a stock which when you see after 3-6 months or a year and you feel ,you missed it?These thing should have happened with each and everyone.I have no doubt about it.
Now why you were not able to buy it at that time ?What was the reason at that time that you missed such a great stock and ended up with something else which may be a laggard in your portfolio?Because at that time you were not able to see what is there in that stock and hence you didn't buy and those who were able to see bought it and making hay......
If the fundmanagers , analyst and some experts are so great in telling whether a stock is overvalued or undervalued then why their clients or funds Nav is still underpeforming even with the average return of market?
If they are great teller then they should show better return then the market gives but that is not the case........Very less funds gives above average return then market and very less gives same return like market .....
What is value then?Value is brand, value is management,value is growth, Value is foreseeing when I wrote on SNL Bearing is NRB bearing managed Co .....which is showing positive bottomline.....and available at just Rs 11!Can one imagine a NRB Bearing run Co have such a less value? that is VALUE........Like I wrote on Yashraj Containeurs Ltd......great product and great clientele list and great earning .....and stock at 3-4 p/e?That is value.......and mind well, after doing all these market may not give the thumbs up to that stock...and one has to wait for longer period untill others find out.....


  1. Thanks for the info rajeev. Also thanks for your explanation on IKF tech. I am holding it since 2007 and today I am in 50% loss in that but still will hold it for long term. Lets see where my luck takes me :)

  2. Dear Rajeev,
    I would like to clarify that i am not the person you were looking for, sorry for being late in replying rather clarifying. Now just a simple question i.e. what are the likely implications of the conversion of warrants to shares? especially to the promoters of the company.
    Also request others to think please and write please...............


  3. Warrants is nothing but a call option. It is generally given out as a sweetener.
    Warrants issued by the company are dilutive.
    Sometimes companies gives out warrants to show the confidence of their future growth(by looking at the exercise price).
    Warrants are also issued to make their corresponding bond issue more attractive, and to reduce the interest rate that must be offered in order to sell the bond issue.
    Now coming to the implication to promoters:
    Before the stock prices run up and institutional investors buy through QIP etc, promoters want to make sure that they get to buy at lower prices and later cash on through these warrants.
    These warrants are embezzlements, they dilute the holdings of the common investors at a throw away price and wipe out all the profits which we had expected.
    SEBI is turning a stricter eye on company promoters who have been issued preferential warrants, saying that they will have to forfeit the upfront payment(typically 25%) made on unexercised warrants.

  4. Dear Rajeev,

    How do you compare Xl telecom and Pae.Both are in solar sector . One is doing business internationally and other one locally.

  5. TT,
    With big losses in XL Tele, I like PAE more then XL....but in the end it is your decision where to invest....

  6. Hi qsumit,
    Is issuing warrants to promoters is bad or good for retail investors. One side is that warrants are converted into shares which dilute the shares and make profits invisible and other side warrants are issued to promoters. What is the diff between these two. Which is good and which is bad.

  7. Rajeev,

    Parekh Aluminax has become a multibagger, today.
    I bought it when you recommenced at around 100. Today it reached 215 around.

  8. Hi Rajeev,

    You have given excellent insight into how to pick multibaggers. Many are trying to implement that.

    On the other hand, what should one consider in order to realize the right time to book profits on a scrip?


  9. Sumit,
    That is where I gets many times I have to write that sell 50% as soon as stock doubles.....if one is thinking of ST profit then it is he who has to decide at what return he needs to sell......

  10. Rajeev,

    In one of the comment, you wrote that you are working in US.

    Where do you live in US?

    I stay in Akron, OH, and am on Temp Work Permit.

    Asking question this out of curiosity.

    If you are not comfortable in answering this, please ignore this question.


  11. Here is a verbatim transcript of the exclusive interview with Ashok Punj of PSL LTD on CNBC-TV18. April 23rd 2010

    Q: Could you tell us about the new plant that you have commissioned in Q4? How much by way of capacity are you planning to rollout from this plant?

    A: We have completed two capex projects as of March ’10. The first and the larger was at Vizag where we added 300,000 tonne capacity. The second was at Chennai where 75,000 tonne capacity addition was done. Both of these are in the KG Basin gas landfall point and distribution network, which GAIL and Reliance are likely to be undertaking in the coming month. Our aim was to commission these projects before the start of this programme then I am happy to report that we have been able to do that.

    Q: Have you received any significant quantum or any quantum of orders at all from the two companies you mentioned?

    A: In fact tenders from GAIL are already out for Dabhol-Bangalore and to be followed in two phases by Kochi-Bangalore project. Reliance’s lines are expected to be announced in the near future. So we expect both new capacities to be fully engaged in the coming month.

    Q: What is your current order book and what can you realistically expect in the next six months?

    A: We have Rs 2,700 crore order book, consolidated global order book. The projects that I just mentioned will add to it up to a substantial number, anything over Rs 5,000 crore which is not to say that PSL expects to secure all of those orders. But because of the strategic location of our new and added capacities we expect to get a large share of these projects.

    Q: Are you concerned about the margin pressure that you are facing on account of raw material prices? Would you see a dip below 10% level on account of operating profit margins?

    A: Our industry is very vulnerable to steel price volatility. It’s not just the increase that concerns us, it’s the spiking and the volatility in prices which concerns us because we have to make provisions for these. So yes, to some extent that is the concern now and going forward in the coming month.

    Q: So it will dip below 11% margin you are saying, what do you hope to do by way of FY11 in terms of margins?

    A: It’s difficult to forecast the profitability number, particularly since the tenders haven’t been put in yet, maybe we will be able to provide for those potential increases.

  12. Prashant,
    I live in SC, near Greenville.....and I am here on Immigrant base....I have a green card....

  13. Dear Rajiv (Nakul)

    Why post by mails have been stopped. Can you please add that feature. Reason being at many a times we can not read feed read due to certain restriction of website content at networks for enterprise. Please do restore that feature.

    Any other discovery like SNL bearings in recent time...!!!

    warm regards

  14. Dear Rajeevji ,

    Just read on BSE site that Surya group is investing to acquire lands for expansion into power,cement projects through different subsidiary companies and not through Surya Roshni. What will be the impact of this news on the Surya Roshni scrip ???

  15. Dear Rajeev,
    I would like to know if everest kanto can be a multibagger stock or not. I have seached through your blog and found one mention of it. It would be very nice if you could share your views on it.
    Thanks in advance

  16. Hi Rajeev,

    Got the point.

    Honestly sorry to annoy you.


  17. Hi Rajeev,
    I am seeing "Mapmyindia" ad on ur blog. Will u be paid for this by them. Don't take it otherwise. I am just asking out of curiosity. If at all u are being paid for allowing them to display this ad then it shows how popular ur blog is. Great going.....

  18. Hi Rajeev,
    Can u pls let me know ur view on the recent development in xl telecom of issuing 50lacs warrants to promoters group for raising fund of 450crores aprox. Is this a good sign for this scrip. Pls spare some time to reply. I badly need ur feedback on this.

  19. share,
    that is a good sign for XL Tele....

  20. Hello everyone, lets discuss about one of the script 'Rishi Packers', they have a very low equity base of around 5 crores with sales around 20-30 crores, they have reduced their loss from 1.4 cr to .4 crore which is significant development during the last one year even though the sale was at the lower end, they are into production of knitted,woven and rachel bags for the Cement, Petrochemical & other Industries with clients including Grasim,ACC,DCM shriram etc... looks to be a turn around company. Lets discuss the growth and investing opportunity in this company on the blog and see what we may come up with, lets leave the last call on Rajeevji to provide his expert opinion. Lets try to analyse and put our effort to do some more research and see if we can implement what we have learned from Rajeevji by reading his updates and findings.... Rajeevji please guide us if we fail.

    Please send your response and findings.

  21. mech,
    i don't see any big negative impact on this...

  22. @Dhiraj:

    Rishi Packers

    Scrip seems to be good. With a low P/B of 0.42

    Only one flaw as I see till now, Public holds almost 54%. Promoter Holding is around 26%.

    Will continue the research.


  23. Thanks rajeev for the reply. I am weak at understanding fundamentals. I was not able to understand if warrants issued by xl tele to promoters is good or bad. It shot up 10% after this news came out but I was thinking that this could be a ploy by operators to offload their holding if at all issuing warrants are bad. You clarified my doubt.
    After IKF tech XL is second company in which I am in huge loss and there is no sign of revival in short term for both. Hoping for the best.
    Thanks a lot for the clarification.

  24. rajiv ji
    in stock market many player play with theme or current flavour of market .
    some time maximum stock under perform but some specific sector stock make high and high every day.
    Rajiv ji
    are u beleive in theme base story. if yes than what is next theme of stock market