Tuesday, January 31, 2012

R S Software Ltd........Declared Excellent Results......

I am very glad to see that R S Software Ltd has posted an excellent results.
1) Sales went up from 47 cr last year same time to 67 cr this qr.i.e is almost 50% jump in sales.
2)NP went up from 5.63 cr last year same time to 7.63 cr this qr.i.e. is again 50% jump in profit.
3)Hence EPS went from 5.28 to 9.43.....and hence for the 9 months ended EPS ends at 16.55 instead of 12.40...i.e comparing qr to qr..eps jumped almost 80%.....

Management has declared an interim devidend of 10% on good results.

Monday, January 30, 2012

R S Software Ltd.......talking about concerns...


i have few concerns about R S software...

-low promoter holding

-no competitve advantage to preserver the margin

-high dependence on few clients fr revenue e.g. visa

please clear my doubts.
I got this question from a readers ABC.I have put it on front page so that others can also read it and read my reply as well.
I have been writing time and again that please read my reply to comments but I am sure many do not do it and hence taken this oppertunity to write it here so that readers can understand how to look at things and understand the Co and how market price it.
My reply is as below:
1) All his concerns is with the market as well and that is the reason why R S Software Ltd is going cheap.R S Software is quoting at 2.5P/E.....with and eps of 20.....why?It is a debt free Co and divident paying Co .It is in Payment Gateway sector which is still in nascent stage in India then why market is not discounting high?
The reason is market has the same concerns like ABC and that is why it is not priced high.
2)Before asking any question one needs to go through the latest AR and  Co website which is easily available at bse website.Go through who the management is, who is at the helm of affairs , what experiance they have got , what is their future plan and read the risk and oppertunity discussed by the management ,etc.
Go to website and click each and every link and read  them and see whether your concerns are addressed or not.
Let me tell you all , that when I give a call here, I do everything what I have written here.What you get is  a ready stock which can give big returns if everything goes well.That will always remian in hand of the market and how Co does in future.We have to take that calculative RISK and invest in a Co which is showing promise and that is how multibaggers are picked.Take chance.......there is no sureshot way that we will end up with a multibagger every time we pick a stock.After all it is a business and one bad decision and it cost the Co very dearly.
If one wants to derisk the investment better buy TCS /Infy/Wipro......where there can be no question asked........
and now ABC's concerns:
1)-low promoter holding....In IT Cos we usually see low promoters holding.But the positive here is the CM, Ranjit Rai Jain is constantly buying from the market .This can also be seen through bse website.Click Filing and other Info tab and one can see that he is buying......
05/10/11 Rajnit Rai Jain B 15,200

29/09/11 Rajnit Rai Jain B 10,500

26/09/11 Rajnit Rai Jain B 9,600

23/09/11 Rajnit Rai Jain B 26,500

22/09/11 Rajnit Rai Jain B 38,670

I have copied paste it here so that readers can see where to look after walking through what I have written.
This is what I call baby sitting......I can't do for each and every stock.That is for readers to do.
But if CM is buying from the market, I don't have to teach what that means.
2)-no competitve advantage to preserver the margin and -high dependence on few clients fr revenue e.g. visa

For this concern ,one can get the answer while reading the latest AR which is already posted at bse site and going to Cos website.Read it throughly and try to make out what is coming up.

I again  write, read what I have written thoroughly , read each and every sentence 2-3 times.Each sentence and each para has its meaning.Read again and again.
I have often seen that readers don't understand what I am trying to say and ends up the otherway round.......and that goes for everything I write .......

Wednesday, January 25, 2012

Nalanda Capital Ups Stake In Exide To 5%; Exposure Crosses $100M

The Singapore-based PE firm, founded by former Warburg Pincus India MD, has been bottom-fishing in its portfolio firms.

Nalanda Capital has increased its holdings in Exide Industries to 5.01 per cent, according to a company disclosure to the Bombay Stock Exchange. The private equity firm, which focuses on public-listed Indian companies, already held 4.59 per cent stake as on December 31, 2011. It boosted its holding marginally in the past few weeks to 4.91 per cent and bought 0.10 per cent afresh to take the total holding to 5.01 per cent.

Nalanda Capital is estimated to have invested around Rs 40 crore ($8 million) this month to acquire the additional 0.42 per cent in Exide.
At 12:51 pm, shares of Exide Industries were trading at Rs 127.80 on the BSE, up 1.59 per cent from the previous close.
At this price, Nalanda’s existing equity stake is worth around Rs 544 crore or $106 million.
Nalanda started building its exposure in Exide, the country’s largest battery maker, around one year ago and held a little over 1 per cent as of March 31, 2011. It bought more shares in the three months ended June 30, 2011, and once again bought a chunk of shares in the last quarter.
According to VCCircle estimates, Nalanda Capital has invested a total of over Rs 510 crore ($100 million) in the company over a period of time, making Exide its biggest portfolio company in terms of exposure.
Nalanda’s heavy bet on Exide is interesting, given the level of exposure. The Singapore-based PE firm, founded by former Warburg Pincus India MD Pulak Prasad, has around $875 million under management through two funds and Exide comprises around 11.5 per cent of its total assets.
Kolkata-based Exide manufactures and sells lead acid storage batteries for automotive, industrial and submarine applications. It is the largest player in the business and much ahead of the No. 2 firm Amara Raja Batteries, which is backed by Sequoia Capital.

Nalanda Capital’s Strategy

Part of the latest investment could be to average out the high cost of acquisition per share in Exide early last year. But the latest initiative is in line with the PE firm putting fresh money in its existing portfolio companies as stock market valuations have tanked to near two-year low.
Last week, Nalanda Capital increased its stake in Ratnamani Metals and Tubes Ltd to 10.47 per cent. The firm has been building its exposure to the steel tubes and pipes maker Ratnamani since early 2010. Its holding crossed 1 per cent in the quarter ended June 2010 and it had been slowly increasing its exposure in the firm ever since.
A fortnight ago, the firm also bought an additional 0.16 per cent in Great Eastern Shipping Company. The PE firm had been building stake in Great Eastern Shipping for the past six months. It had apparently acquired 2.14 per cent stake in the shipping firm during July-September quarter and hiked it to 4.95 per cent by December 31, 2011.
Last November, Nalanda Capital had increased its holding in AIA Engineering Ltd (which manufactures and designs engineering components) to 6.3 per cent. The PE firm acquired the additional 1.2 million shares or 1.27 per cent stake for a total consideration of Rs 37.2 crore. This had taken its total exposure to the company to around Rs 200 crore.

My Comments:
Friends, Nalanda Capital an fin institution readers needs to keep a tab on.Wherever Nalanda has invested the stock has not gone down much or are faring well.
Try to find out where Nalanda has invested.One can find some in this article itself.
Nalanda has increased the stake in Exide from 1% in Mar 2011 to 5% and that reconfirms my bullishness in HBL Power and Pondy Oxide.

E-payments Soaring High: A Ringside Look At Emerging Trends

Current trends in online payments infrastructure from Techcircle's Online Payments & Loyalty Conference.

A bustling e-commerce industry in India has naturally thrown up a vast market for e-payments. Although the presence of a huge consumer base without plastic money means new modes of offline payment have cropped up, e-payment is certainly the way to go as the market matures. Techcircle’s Online Payments & Loyalty Conference, held in Delhi on January 20, brought together the who’s who of the e-payment industry in India and saw them discussing some key and defining trends in this space.

The opening session on Online Payments Infrastructure, moderated by Vijay Shekhar Sharma of the mobile Internet firm One97 Communications, brought out the current trends such as the big switch (read – credit to direct debit as a payment mode), the nascent mobile payment environment and the security issues which still prove to be a hurdle in building consumer confidence.
According to Nishanth Chandran, CEO and co-founder of EBS India (one of the biggest online payment providers), the industry has evolved over the past few years as compared to 2005 when most of the people did not understand what online payment is all about. “Today, the status has considerably changed. The bottom line is that we have to make the process as easy as possible for the consumers. Otherwise, none of it would survive,” he said.
Similar viewpoints were echoed by other panellists who emphasised that gaining customer trust was the most important factor in online shopping. “What has actually changed is that now the base of shopping for commodities is broadening. People are ready to take the risk, but they only buy from the websites they trust more,” said MN Srinivasu, co-founder and director of BillDesk.
Another big change has also taken place in the online payment space. Initially, it was a credit card-based payment system which did evolve considerably with the development of more pre-paid or direct debit options.
Vivek Nayak, COO of Avenues India, which operates the country’s largest online payment gateway through CCAvenue, said five years ago, credit cards had the lion’s share of the market in terms of payment mode but today, debit cards are taking over.
He also went on to share insights into other modes of payment – cash cards are just new entrants in the market while mobile payment gateways have failed to take off in India as of now.
“Debit cards and net banking exceeding the popularity of credit cards has got to do something with the Indian mentality of using the money that is visible in the account, rather than buying things on ‘credit’. Also, the number of bank accounts is not necessarily equal to the number of credit cards in the country and at the end of the day, convenience matters most,” said Nayak.
The panellists also discussed security issues related to online payment, which have been a bane for the industry. However, the recent initiative by the Reserve Bank of India to introduce a one-time password (OTP) has gathered mixed reviews. While merchants argue that they lose business and face flagging customer interest due to the additional step, the counter-argument notes that it is just one additional step to ensure transaction security, which in turn, will actually benefit customers.
Chandran of EBS said, “OTP is a good thing from the security point of view but it does irritate consumers. Ease of payment is what matters most and OTP adds up to the number of steps that a buyer must undergo to complete an online transaction. Also, numbers say even if one step is increased in the whole process, sales go down by 20 per cent.”
When OTP was initially introduced, the industry witnessed a dip in transactions, but consumers started to accept it as a regular thing for ensuring security, he added.
According to Nayak, the key lies in educating customers about the security aspect and how it helps the whole online payment system. Talking about the emerging trends, he added that micropayments and government payments would be the big area for e-payments in the future.

My Comments:
My dark horse here is R S Software Ltd.Debt free Co.Gives dividend.Mcap 54 cr , sales 188 cr.
Remained steady when market was down and available at P/E of 2.5.......

KPIT Cummins declares 1:1 Bonus

There can be many reasons for declaring a Bonus.
1)Management wants to make the eq capital base bigger so that they can apply for bigger orders.
2) Maangement is bullish on future.
They have been able to create a niche product which will increase the sales and hence the profitibility.
But I feel that this bonus will do no good in ST , maybe for atleast 1 yr.I may prove wrong but that is what I feel.
The reason I feel it will not do good for investors is, with doubling of eq, the earning will take a beating.The bottomline will become less.EPS will still go further down as eq will double.Unless, KPIT shows exponential growth this year , with eq base becoming bigger, eps will shrink and hence I feel for 1 yr down the line KPIT will be a laggard.With bonus people will have more shares in hands and hence the liquidity will increase.Investor will sell the bonus shares to bookprofit.
Freinds, that is what I always try to write here.Be alert and try to figure out what can be the implications of what is happening in the Co.One need to constantly track Cos where you have invested.Keep track on sectors and try to find out whether that sector is going out of favour and sell stocks and switchover.I can't keep writing for each shares what to do with it.
I may prove wrong about my view in KPIT but I feel switchover from KPIT to something else will be a better idea.Rest all depends upon individuals......

Finally CRR cut.............

Has the market made the botton?Will it not go below 4500 again?
I was constantly reading what Fin Min was speaking, what Monteksingh was saying ,what is coming out from RBI office.
The D day came and we got a CRR cut of .5 basis.I read that RBI will now think on growth in  recent past and I was not surprised to see a CRR cur at 0.5 basis.
Th repo rate has remained unchanged.That needs to get cut as well.Ofcourse, CRR cut will increase the liquidity and banks will have more money to land, to be precise Rs 32,000 cr, and that will help Infra and Auto sector and ofcourse Banking sector.
That means that banks will have Rs 32,000 cr more to lend which will go in Infra and Auto.
This week was important in the sense that the general policy was going to be declared by RBI.This week was also important because market heavy weight like Ril Ind, players call it the King, result was also going to be declared.
Ril result was not upto market expectation and RBI's CRR cut was not enough for market to applaude it.
But still market went up on Tuesday, ignoring Ril bad results and chreeing RBI CRR cut in anticipation that RBI will take further steps in future to stimulate the growth of the economy.
It is still a long way to go.There will be many ups and down in our market before it makes a clear indication that bear market is over.
Retial participation is almost negligible .I am seeing very low  Vols in trade in market.5 shares or 50 shares or 500-600 shares in counter like Jubilant Ind , India Glycols etc are very low which shows disinterest of retail participation.
And that is why I feel , it will take time for the market to move up.The consolidation phase is still not over.
When market is finding its bottom, how one can think of consolidation taking place?
Let first market make sure the bottom is made.Then let it consolidate and then let Volumn goes up and then think of any good upside.
I was reading Sudarshan Sukhani who says that once 5400 is crossed , market can touch 6400 in no time.
He may prove right and he may prove wrong.One never knows what market will do.
Let us see what is there in store for us.
But I am getting a solace when I read this sentence of RBI Governor Mr Subbarao:

"He said “the CRR is the most effective instrument for permanent liquidity injections over a sustained period of time. The reduction can also be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them.”"

Here he clrealy suggests that future rate cut will be lowering them.......so rate hike has reached the saturation point , which I have written here couple of time,and now only way is rate cut.
Rate hike has reached the peak and there will be no futher hike in rate.That is also a positive for market .

Monday, January 23, 2012

Again ..........

an explosive topic......

I am always amazed why it is so?
The reasons are as below:
All our Lords which we are told to follow are KINGS sons or King themselves....
1) Lord Rama - King's son ( Reason I took first Rama name is ,he is the first Lord, first Ramayana came and then Mahabharat)
2)Lord Krsihna - Son of King family.
3) Mahavir ( Jain Dharma)- King's son
4) Guatam Budhha- King's Son
5) Ashoka The great ( Preacher of Buodh religion) was himself a KING.
6) Chatrapati Veer Shivaji - Again Kings Son
7) Pandavas- All 5 Kings Son

and many more! Is it so that we have to follow someone coming from King's family  ?So why one have to follow them when they do not come from a simple family?

Why not Ram Krishna Paramhansa or Swami Vivekananda .Again Ram Krishna Paramhansa comes first because he was the mentor of Swami Vivekananda.

The question that arises is, why we have to follow what these people who were Kings or sons of Kings?

Why these all Lords are coming from Kingsely family and not from a poor or average family?Had anyone questioned that?Why our religious books shows someone who is coming from a King family?Whether all these people were there or not, means they really exist or not is another debatble topic but whoever wrote these books, why they showed person taking birth in King's family? And the anamoly is such that Mahavir, Guatam Buddha, Ashoka The Great , Shivaji all existed.We know that, even if we do not believe , for one second, that Lord Rama or Lord Krishna ever took birth on earth.
Then the question arises, why great people take birth in King family?

For that one have to read Rajneesh.I have read many books of Rajnesh and I think the reason he gave is valid.I would not like to go in any details about it here but if anyone wants to find it out then either he needs to read or hear Rajnesh.

Though Rajnesh is critisized for many things and I also agree with some of them, still I am great admireror of Rajnesh.
One need to read him.He is excellent.He himself was very well read person and that is why he was able to speak on various aspects of life and religion.I would suggest my readers to read him.Read just one book.You will love him.

But coming back to the topic, why we have to follow King's path?If we are suppose to follow what they did  then there are many other things that needs to follow of them .Why that needs not be followed?

I know the topic that I have raised is debatable and there can be many arguements but you can say that I like doing that. I love discussing things because that widens one's horizen of thinking.It sharpens one mind.

Well, I will not write anything more here.I have put a thought and I hope readers will ponder upon it and write whatever they think.I will love to read it.....It is a food of thought......


Thursday, January 19, 2012

India To Launch $35B Of Public Investments...........

The emergency stimulus measures are in response to widespread criticism of policy paralysis & fall in economic growth.

India is to launch a $35bn wave of public sector investment to reverse a decline in the fast-growing economy’s growth rate and return it closer to double digits, according to the prime minister’s office.

The emergency stimulus measures are in response to widespread criticism of policy paralysis in New Delhi and a dramatic fall in economic growth to 7 per cent from an earlier 9 per cent.
The government of Manmohan Singh has ordered 17 state-owned companies to use money currently held in reserve to invest in a mixture of infrastructure projects and overseas energy purchases.
“They are sitting on piles of cash,” said one official of the urgent need to trigger a mobilisation of currently “inactive” resources to boost confidence in the economy, and promote India’s energy security.
The move is also an attempt to prompt private-sector companies – which have expressed reservations about investing in the domestic market – to follow suit. But some observers have criticised the move as a throwback to the “old formula” of the 1970s when then prime minister Indira Gandhi used public infrastructure spending to boost growth.
India’s top policymakers are worried about the economy’s loss of momentum, and ebbing business confidence after a dismal year characterised by political bickering, high profile corruption scandals and an exit of foreign capital.
Companies, such as the Oil and Natural Gas Corporation, Coal India and the National Mineral Development Corporation, have signed agreements to spend as much as $35bn of their cash or bank balances over the fiscal year starting in April to expand their operations.
The sum is almost twice the $19bn foreign direct investment into India in 2011.
Among the proposed measures, Coal India, which had a successful initial public offering last year has been asked to “actively consider investment” in allied sectors such as road, railways, waterways and power to improve the transport of coal. Bharat Electronics Limited, a state-owned defence company, is considering a buy-back of equity to utilise its surplus resources.
Fast-tracked investments, mainly in the coal and oil sectors, will be monitored quarterly by Mr Singh’s own office to prevent backsliding.
Of the total, Rs400bn ($7bn) has been identified for investments overseas to buy assets like coal, gas and oil. ONGC has undertaken to spend Rs205bn in foreign investment in the coming fiscal year; Coal India has agreed to Rs60b.
The move by the Singh administration also reflects India’s determination to push for higher growth in spite of uncertainty surrounding the global economic recovery and renewed anxiety about the performance of eurozone economies.
Senior officials acknowledge that conservatism has gripped the public sector as officials fear repercussions of their decisions – as a result they have been sitting on cash piles and earning high interest rates – should they end in controversy or failure. The result is that they are not leveraging their resources to pursue faster growth.
At the same time, corruption scandals, notably in the fast-growing telecoms sector, have widened the distance between the bureaucracy and private sector as top officials fear the spread of “crony capitalism”.
The outlook for India’s economy is clouded by policy inaction, a deteriorating fiscal situation, weak balance of payments and an economic slowdown, say many economists.
“The domestic economy deserves a push that can be provided by the government,” said Madan Sabnavis, chief economist at Mumbai-based Care Ratings.
”The focus will be on project expenditure this time to provide a boost to the infrastructure sector.”
The decision to boost investments by the public sector was taken at a meeting earlier this month between 26 heads of utilities and the prime minister’s office.
“Public sector investment can provide stimulus to the economy,” said an official summary of the meeting.
Companies which hold significant cash and bank balances draw up credible investment programmes, and implement them with vigour.”

Wednesday, January 18, 2012

A dollar at Rs 32? Big Mac says so, but don’t count on it..........

By R Jagannathan

If The Economist is to be believed, the India rupee is the most undervalued currency in the world. If that’s the case, why are foreigners avoiding it like the plague? Either the index is wrong or the foreigners don’t know what they are doing.
In its latest version of the Big Mac Index, a spurious index based on the price of a McDonald’s Big Mac in various countries, the rupee is 61 percent undervalued since Big Macs (or the Indian equivalent, since they don’t sell the real Big Mac here) cost that much less here.
If this undervaluation figure is right, the rupee should be quoted realistically around Rs 32 right now when it is actually at Rs 51 to the US dollar.
The Big Mac index is based on the concept of purchasing power parity (PPP) – the purchase cost of the same item in different countries. If a given loaf of bread costs 25 cents in India and $2 in the US, a $1 income in India is worth $8 in the US, assuming one only has to buy bread.

In the Big Mac Index, a spurious index based on the price of a McDonald’s Big Mac in various countries, the rupee is 61 percent undervalued. AFP
The Economist carries this PPP analogy and uses the price of the Big Mac in various countries to check if currencies are undervalued or overvalued. Thus, if an item costs $10 in the US, and $5 in China and $1 in India, the Chinese currency is undervalued by 50 percent and the Indian one by 90 percent.
In the latest computation of the Big Mac Index published by The Economist, the Big Mac costs $4.2 in the US and $1.62 in India – making the latter 61.5 percent cheaper than the US. Ergo: the rupee is undervalued to the same extent.
Similarly, the Chinese Big Mac is worth $2.44, which is 42 percent lower than the US price. So, by definition, US trade warriors feel vindicated in their belief that China is using a weak yuan policy to export to the US.
The Swiss franc is the most overvalued currency, since the Big Mac costs $6.81 in Switzerland. That’s 62 percent overvaluation. India’s black money wizards should avoid eating too many Big Macs in Switzerland when they are depositing their ill-gotten wealth in that country.
But the Big Mac Index has come under serious criticism from economists who say that the raw PPP index needs to be at least adjusted for relative costs. When labour costs in China and India are so much below American costs, prices will reflect this reality.
In the 30 July edition, therefore, The Economist adjusted raw Big Mac prices with the country’s per capita income, and came up with completely different interpretations.
Once deflated by lower average country incomes, the Big Mac Index shows more realistic currency values. Thus, against an undervaluation of 53 percent in July this year, the adjusted index for India showed a rupee undervaluation of only 8 percent.
On 30 July, the Big Mac (which is chicken based in India against beef elsewhere) cost Rs 84 ($1.89 in terms of the dollar values then). Today, after the rupee depreciation, it is $1.62.
Since July, the rupee has actually depreciated by another 15-20 percent in nominal terms. This means the gross undervaluation must be in the region of 20-25 percent.
However, this does not tally well with the Reserve Bank’s real effective exchange rate (REER) for the rupee – a measure of how exchange rates have moved against a basket of currencies weighted by trade and adjusted for relative inflation.
Given how the rupee has moved against the US dollar and other currencies, and also given our higher rate of inflation, the Reserve Bank says that the rupee’s REER is now just 3.13 percent more (as of December 2011) than what it was in 2004-05. This means the rupee has appreciated by this small percentage in REER terms in the last seven years in real terms.
The Big Mac Index would suggest that the rupee need to appreciate another 20-25 percent to reach its ideal value.
The bottomline is this: there is no real value that one can safely assign to any currency. While fundamentals like inflation and trade deficits matter – capital flows can make all the difference.
The rupee’s real value is what the market is willing to pay for it at any point of time. As we noted recently, it will have a rough ride, never mind what the Big Mac says.

The link:

My Commnets:

After reading the above article, I can say that Rupee is hammered or let battered delibaretly for reason best known to RBI and Politicians.
Even though the auther says don't count on it,still Rupee needs to appreciate by 25%  and that is around 40 against dollar.

Tuesday, January 17, 2012

Flip side of Flipkart: Red Ink for e-tailers, RIP book shops...........

Jan 17, 2012
By Binoo K. JohnThe other reason is the huge price slash in books (a minimum of 25 percent) if you order them through portals like flipkart.com, or infibeam.com or makemeread.com. (Disclaimer: This writer has a stake in makemeread.com)

In times of recession and decline of the old order, obit writers get furiously busy, putting up the right epitaphs, analysing the causes of the big fall and blaming the universal forces that shut out another old tradition. In this group of threatened oldies is the indie bookshop which has been on the hit-list for over two years now.

So when another book shop decides to close down, in this case, Pune’s 63-year-old Manney’s (Read more here), it is a sign that the time of reckoning is almost here. Manik Mani, the owner, says the decision to close down has nothing to do with sales but that he is tired and needs a break and his daughter is not old enough to take over.

Beneath all this it is quite clear that sales would have been dropping at Manney’s just as it has been at other book shops across the country and around the world. In New Delhi, the well-known shops to have closed down are Bookworm (Connaught Place), Oxford Book shop (Connaught Place) and Book Shop (Khan Market), apart from other smaller shops.

Many such shops will put up a brave face and hold on for some more time but in another two years, book shops operating in premium markets in cities would have all closed down. Or they may remain open only by losing money. The primary reason is that rentals in prime areas will be much more than the profits made from sales of books and stationery, making it more profitable for the shop owner to rent out the space.

How does it work? How can portals discount prices to such an extent without bursting their own bottomlines or net income? How long will internet book sales boom?

Though book sales are shifting drastically to internet portals, the fact is that most portals sell books for a loss or without profit. For example, on flipkart.com, the price of Poor Economics: Rethinking Poverty and the way to end it, by Abhijit Banerjee and Ester Duflo, sells for Rs 321, an unimaginable discount of Rs 175 on the actual cost price of Rs 499 which you would have had to pay if you bought the book at Manney’s.

The reason why Manney’s has to close down can be clearly seen here.

What many people do is go to shops like Manney’s, which they have been frequenting for a long time, note down the new books, go home and order it from any of the portals. For some time now Manik Mani would have wondered why his favourite customers are not picking up anything. His shop would have become a place to browse and select, a sort of brick-and-mortal search engine for the buyer. He unknowingly offers that service free, because unlike earlier, even the ardent book lover is not going to buy much from him since he has a much cheaper option.

Yes, Manik can order some old books for you and tell you when Thomas Mann’s Magic Mountain Everyman Library edition will be available in his shop. By that time it will be available on internet book shops as well.
How does it work for Infibeam or Flipkart and Rediff or the Indiatimes store and other start ups?

Flipkart gets Poor Economics at a 35-40 percent discount from the distributors, just like Manik. Prakash Books, which is the north Indian distributor of Penguin India, will be getting all books at a 50 percent discount from Penguin or other publishers and will be passing down 10-20 percent to the retailer.

Here’s the flip side. Retailers take a 25 percent profit on sales while Flipkart or Infibeam pass them on to the customer since there is no rental or warehousing cost.

It is not that simple, though. Once you grow big like Flipkart of Infibeam, warehousing is a must. Also, staff costs go up. Since customers are not charged for delivery within India, Flipkart and Infibeam finally end up losing money on each book they sell. When Flipkart sells one copy of Poor Economics, they will be poorer by Rs 30 at least, according to this author’s calculation.

Internet stores don’t make money on book sales. Then what are they looking for?

What the big internet retailers are interested in is a big database of internet buyers who, in the future, can be targeted for various marketing strategies. An internet portal’s primary worth or valuation depends on how many customers it has and only secondly the turnover.

That is also the reason why once they get a database of half a million they will have to turn to selling electronic items on which profits are better. If they lose Rs 30 on selling one copy of Poor Economics how much will their daily losses be? How long can this be sustained?

Flipkart has enough cash reserves as of now. But if they do not get a good valuation and a buyer in the next two years, the portal will be in trouble. Its spends on multi-media advertising must also be hugely adding to its burden.

This is also the inherent drawback in taking huge venture funding. Venture capitalists are on the lookout for valuations, not sales or proper delivery of books. Nor, in this case, are they interested in the spread of the reading habit in India.

To deliver a book of less than 500 gm from Delhi to Kolkata will cost at least Rs 30 for Flipkart or Infibeam through an Indian courier company.

To cut down on costs, Flipkart has hired its own distributing staff and set up its own logistics company. When Chetan Bhagat’s new book was launched, Flipkart hired 700 personnel for distributing his books across India, according to Bhagat himself. In the long run, this is going to hurt terribly. Having your own delivery personnel will help if you are selling goods at a profit and not at a loss, as in the case of books. By present reckoning, Flipkart will have to make up for the loss in book sales by selling electronic goods and other products to which the emphasis will have to shift as the number of internet buyers swell.

So while Chetan Bhagat’s laughed his way to the bank, Flipkart must be thinking of the next venture capitalist. In other words, it is not profitable to run a virtual book shop unless you get a huge valuation and then exit as fast as possible. In this case, the book seller must be hoping that amazon.com – or someone else – will buy them out at a big valuation. But nothing of that sort has happened so far. Also, the sales figures do not match valuation expectations.

Thursday, January 12, 2012

Buffett to Republicans: if you pay, so will I..............

WASHINGTON/BOSTON (Reuters) - Warren Buffett is willing to put his money where his mouth is, if only congressional Republicans would join him.

The American billionaire investor, in the new issue of Time magazine, says he would donate $1 to paying down the national debt for every dollar donated by a Republican in Congress. The only exception is Senate Republican leader Mitch McConnell - for whom Buffett said he would go $3-to-$1.

The idea stems from a New York Times opinion piece Buffett wrote last August in which he said the rich ought to pay more taxes. It sparked an instant controversy, with some Washington conservatives calling on the 81-year-old "Oracle of Omaha" to voluntarily pay extra.

McConnell said at the time that if Buffett felt "guilty" about paying too low a tax rate, he should "send in a check." This was quickly followed by introduction of a bill to give taxpayers an option on tax forms to make voluntary donations.

"It restores my faith in human nature to think that there are people who have been around Washington all this time and are not yet so cynical as to think that can't be solved by voluntary contributions," the Buffett told Time for an article hitting newsstands on Friday.

An aide to McConnell suggested that the Berkshire Hathaway CEO should expand his matching offer to President Barack Obama and his Democrats.

"Senator McConnell says that Washington should be smaller, rather than taxes getting bigger. And since some, like President Obama and Mr. Buffett want to pay higher taxes, Congress made it possible for them to call their own bluff and send in a check," said Don Stewart, McConnell's deputy chief of staff.

"So I look forward to Mr. Buffett matching a healthy batch of checks from those who actually want to pay higher taxes, including Congressional Democrats, the President and the Democratic National Committee," he added.

The jabs over voluntary payments come as higher taxes for the wealthy and extension of payroll tax breaks for middle-class Americans are becoming increasingly contentious issues for the 2012 presidential race. Obama is trying to paint Republicans as only favoring the wealthy, while Republicans are trying to brand the president as relying on tax hikes to fund excessive spending.

Buffett said in the Time interview the United States needed a tax system that favored people who were not born investors.

"We need a tax system that takes very good care of people who just really aren't as well adapted to the market system, and to capitalism, but are nevertheless just as good citizens, and are doing things that are of use in society," he said.

Buffett, who has raised money for President Barack Obama recently, also takes swings at Republican presidential candidates Mitt Romney and Newt Gingrich in the Time interview, criticizing Gingrich's track record and Romney's ties to the private equity business.

(Reporting By Ben Berkowitz and David Lawder; Editing by Eric Walsh)

Monday, January 9, 2012

Orchid Chemicals gets $1.5 m milestone payment from Merck....

Orchid Chemicals & Pharmaceuticals has received initial USD 1.5 million in milestone payments from Merck & Co as its research programme with the pharma major for anti-infection drugs has completed a pre-clinical milestone.

Orchid and Merck had in 2008 entered into an agreement to focus on discovery, development and commercialisation of new medicines to treat bacterial and fungal infections.

As per the agreement, Orchid Chemicals is eligible to receive payments over USD 100 million upon reaching various research and development milestones. It will also receive significant royalties on worldwide net sales of any products commercialized under the agreement.

Orchid Chemicals had said on Monday that it received approval from banks to raise USD 100 million via external commercial borrowings [ECB] for redeeming USD 117 million of foreign currency convertible bonds [FCCB] due in February 2012.

Orchid Chemicals shares were trading up over 6% at Rs 132.25 on NSE in noon trade.
Link for the article:

Investors, the bumpy ride to Sensex 60,000 begins this year............

Looking at the behaviour of the domestic stock markets, and the success of fixed-rate issues like the tax-free bonds of the National Highways Authority of India (NHAI, which was a super sellout), it is easy to conclude that investors have become even more risk-averse than before.

True, but they are being so at their own risk.

The fact is, despite the current policy paralysis and general air of pessimism surrounding the India story, the medium-to-slightly longish term (5-7 years) future of Indian stocks has never been better.

In fact, in an earlier article, I had predicted that the Bombay Stock Exchange Sensex will easily hit 60,000 by 2018-20. I would like to give further evidence of the same. Let’s start with the US markets.

A recent article by Floyd Norris in The New York Times suggests that the US markets have entered a period of low growth. If the 1984-1999 period saw the S&P 500 giving a real annual return (after inflation) of over 15 percent, in the last 15 years, this is down to 3 percent. It seems the cycle starts reversing once returns top 15 percent.

Punit Paranjpe/Reuters

Says Norris: “Broadly, it appears there is a cycle that is repeating itself, in which the 15-year return tops out at more than 15 percent and then falls precipitately.”

It was the rising cycle that made investors like Warren Buffett stand out as super-achievers in the past. In a falling cycle, they won’t.

If the 15-year cycle observation holds true, what is the possibility that long-term investors will stay invested in US stocks when there are better pickings elsewhere? Especially India, where the market has fallen 23-25 percent in the year to date?

The second point relates to the dollar-rupee rate. Thanks to market pessimism, the rupee has been the worst-performing currency in the emerging markets, and has fallen 19 percent against the US dollar in 2011. The logical explanation for this is that India’s current account deficit (CAD, which is over 3 percent) and inflation rates are bad – hence the currency depreciation. But as Abheek Barua and Shivom Chakravarti point out in Business Standard, Turkey’s CAD is over 10 percent but the Turkish lira fell only marginally last year.

Clearly, the gloom in India is overdone – and the rupee will rebound this year. At the cusp of that sentiment change, foreign investors will start piling in to take double advantage – of a strengthening rupee and a rising market. The two go together.

Let’s also not forget that while the rupee is weak, domestic manufacturers get better protection, exports become more competitive, and high exchange earners get windfall profits in terms of unearned foreign exchange gains. The losers are the ones with high debts designated in dollars. If you pick companies playing in the domestic markets, with low dollar exposures, and/or high export capabilities, you have a winning portfolio on hand.

Third, there’s the interest rate cycle. Everyone and his aunt has been saying that the interest rate cycle has peaked, and the question is no longer whether the Reserve Bank will reverse its tight money policy, or cut rates, but when.

While some say the rate cut cycle could begin as early as January, even if this is postponed to March, the fact is no further increases are possible anymore.

Stock market valuations and interest rates are inversely related. If rates have peaked, stocks should be bottoming out, too. While no one can say when the actual bottoming out will occur, it is a safe bet that 2012 is probably the year. Investors, take note.

The fourth point is inflation. An elevated average inflation rate is going to be the lasting legacy of UPA’s profligacy (with NREGA and Food Security being the important wage-price spiral boosters, and fiscal looseness, necessitated by the need for greater subsidies, being the other key inflationary factor).

This means we are going to see 7-10 percent inflation for the next two or three years, and possibly slightly lower inflation after that.

When inflation rises, the rupee value of corporate profits rises as prices adjust for inflation. If the big index companies grow at 15 percent in real terms over the next six years, and inflation is at 10 percent in the next three, and five percent after that, stock prices have to rise 25 percent over the next three years and 20 percent over the years after that just to compensate.

Whatever happens, inflation itself should call for a stock price correction to Sensex levels of 50,000-60,000 over the next six years.

This is not to say that the index will not fall to 12,000 in the short run. But in the medium term there is no way we are going to lose out by investing in stocks.

In fact, if the US is going to have a 15-year downcycle, India should correspondingly have an upcycle. The upcycle that began in 2003 will last us at least till 2020.

A caveat to investors: this is not an invitation to take extraordinary risks. Every investor should stick to her or his asset allocation. If your ratio is 50:50 for risk investments and safe avenues (as mine is), stick to it. Don’t raise your equity investment to 75 percent of the portfolio.

However, it is worth remembering that at 8.2-8.3 percent, even the tax-free NHAI bonds yield a negative return after inflation. In the next few years, the biggest risk we face is our inability to take risks.

The ride will be bumpy, but by 2018, you will be sitting pretty.

Link for this article:


Tuesday, January 3, 2012

India beats China, factory activity jumps to 54.2 in Dec; highest since June


This is the link.Open and read it.

Manufacturing jumps over 50% in Dec defying IIP nos.
That is a good sign.The domestic as well as overseas demand has gone up and orders are pouring in.
Now the order of the day is some steps from RBI and government and we will be back in reckoning.
I read that Shankar Sharma has become super bullish in one of his interview in ET.
I still feel that 3900-4000 can come.It will take time for our market to make a comeback as Dec ending ,3rd qr, results are due this month and that are not going to be great with Int rate high.
Market will react on that and that is why I feel that we can see somemore downside before a Bull Market starts again.
Moreover , players will try to take the stocks more down for more distress selling from the weak hands and will try and acculamalte as much good stocks as possible.
This is not the time to sell.Stocks can still go down but then we never know the exact bottom.It can be 4200/4100/4000 or even 3900 or even 3800.
But after budget , things should look up as I feel Pranab Roy will come out with some good  measures which will help our economy.
Government has opened up direct investment in stocks from foreign investor without taking a route of MF.Now an individual investor will able to invest in Indian market directly in Indian stock market.If FDI on retial will get passed then that will be even better.
I have put a long list on the eve of the Christmas and I feel that my readers will have a look at it and decide on it.I feel that is an excellent list to look at.