Feb 27, 2009
Feb 26, 2009
It has assigned its highest rating to Reliance Communications (RCL), as the latter prepares to borrow money for expansion purposes. This rating is for a company that has a debt to equity of 0.9 times, which will increase to 1.2 times after the latest round of fund raising! RCL is already being questioned by the Enforcement Directorate for violating the foreign exchange rules. The company had reportedly parked the unutilised money (of around Rs 51 bn) from its foreign currency bond issue interest free with a wholly owned subsidiary! Further, the company has a large portion of forex loans (around 66% of total loans) in its book, which has the potential to severely hurt its profits.
The story of credit rating agencies worldwide and in India is a story of massive failure. And the result is that our entire financial system is now at risk. If the raters are not brought to task, we will always remain in a debt bubble trap.
Feb 22, 2009
C R Bhansali’s web of deceit was elaborate. He had floated 133 companies to pull in funds and suck them out. Money came easy; he was inspiring with his grandiose plans, high interest rates and entry into mutual fund and banking. CRB’s meteoric rise in the early 90s coincided with the boom in the Non-Banking Finance Company (NBFC) sector. His fall in 1996 was equally fast.
Forget investors, even credit-rating agencies didn’t see it coming. CARE, a leading agency, gave ‘AAA’ rating at a time when the company was going down.
How to become chairman of top 3 finance companies
Born in Rajasthan, raised in Kolkata, Bhansali became a dada in the financial capital — Mumbai — before he turned 40.
First came the finance company (CRB Capital Markets), after which the mutual fund (CRB Mutual Fund) and CRB Share Custodial Services followed. Then he planned to get into banking, and he almost made it.
He had a dream run from 1992 to 1996 collecting money from the public through fixed deposits, bonds and debentures. He floated around 133 subsidiaries and unlisted companies. Most of the money was transferred to these dummy companies.
The flagship company, CRB Capital Markets, went public in 1992 and raised a record Rs 176 crore in three years. In 1994 CRB Mutual Funds, through its Arihant Mangal Growth Scheme, raised Rs 230 crore. Another Rs 180 crore came through fixed deposits.
CRB Corporation Ltd raised Rs 84 core through three public issues between May 1993 and December 1995. CRB Share Custodial Services raised a further Rs 100 crore in January 1995 to set up operations.
Between 1992 and 1995, when the market was in the post-Harshad Mehta bear phase, Bhansali managed to raise close to Rs 900 crore.
Post-1995, he got a beating on the stock markets. His investments in the property market did not pay off because of the slump.
Caught in a financial trap, Bhansali tried borrowing more money from the market. ‘‘To repay the interest rate on amounts he borrowed later, Bhansali was forced to borrow once again. This went on and on, and he got stuck in a financial quicksand,’’ says a former employee, refusing to be named.
Going down, he even tried to invest in Bollywood
Bhansali made a determined effort to get out of the trap by investing in some high-risk ventures. He is believed to have even made a Hindi commercial film. Again, the gamble failed.
In the end, Bhansali was borrowing funds from banks through questionable means. All was well till December 1996. Then the Reserve Bank of India (RBI) refused banking status to CRB and contemplated action for various irregularities.
Pradip Bhavnani, President of National Association of Small Investors, says: ‘‘There was a lot of confusion about how to act against CRB, considering its NBFC status. When he started defaulting, public sector banks like the State Bank of India were the first to be hit. Had the SEBI and RBI acted fast, investors wouldn’t have lost money.’’
Bhansali spent three months in jail in 1997. He is out now but nobody knows where he lives and if they do, they are not snitching.
Feb 16, 2009
There is a lot of buzz going around a company by name Bartronics Limted. Talks are around that it will be a great company in future etc. etc.
I will not here argue the future earning potential, all I want to analyze and present some facts on share holding pattern which I obtained from company website.
The table below displays the Shareholding of the company. It should be remembered that 2 years back the Promoter holding was 58% and it has come down to 33% now and the trend shows that it is decreasing further.
In last 9 months the Promoter's share dropped from 39% to 33%.FII reduced their share from 11% to 6.6%and NRIs reduced it from 12% to 2%.
|Share holding of Bartronics Limited|
|Share holding pattern as on:||31/12/2008||30/09/2008||31/03/2008|
|No. of Shares||%age Holding||No. of Shares||%age Holding||No. of Shares||%age Holding|
Non- Promoter's Holdings
|Banks Fin. Inst. and Insurance||630472||2.18||820472||2.83||2029314||7.65|
|Private Corporate Bodies||3805403||13.13||3974525||13.72||1993327||7.51|
Why the promoters and the smart money reducing their stake in the company if its future is so good. Promoters are the first people to know about the state of the company. FIIs and wealthy NRIs too have a great access to the company information because of the research team they employ.
Why the Big guns are reducing the stake? Big Question.
Now another interesting fact. I saw a report that asked Retail Investor or the general public to buy Bartronics. If you see the retail investor holding in last 9 months it has gone up from 22% to 36%, an increase of 63%.
The small investor is buying something which Smart people are selling!! Is Retail Investor more smart that FIIs, Does small investor has more information about the company than promoters, Does small investor has more risk appetite than a wealthy NRI?This is simple case of offloading to the small investor by fooling them and adds to another everyday frauds that happen in India.
If the promoters are so sure of super growth of this company, why are they doing such a generosity on small investor by distributing its stock.Below is the table for your analysis.
Disclaimer* This article is not intended to malign the company and has been written in good faith to evoke thoughts from the small investors. Readers can read the details of pattern on company website at http://www.bartronicsindia.com/investors/fresults.html and arrive at a conclusion.
FIIS SELL $1BN INDIAN SHARES
Deccan Chronicle The Asian Age
An analysis of the newly compiled Instanex FII index shows that on the day the FIIs sell they under-perform the Nifty and when they buy they out-perform the Nifty.
It is also a well-known fact that when they buy the market is up and when they sell the market is down. Very rarely is the market up when they sell, and if it is, it could be because the Indian financial institutions drove
the market on that day.
Gautam Chand of Instanex Capital Consultants Pvt. Ltd that has compiled the index of 15 scrips, says, “For example, year-to-date (February 13) in 2009, FIIs have net sold shares worth over Rs 5,000 crores ($1.04 billion). Over this period, the Instanex FII Index has lost 1.04 percent while the Nifty has fallen just 0.36 percent, confirming the trend that when they sell they under-perform the Nifty.”
He says that investors who wish to profit from their view on FII flows into or out of listed Indian equity shares could replicate the Instanex FII Index using shares or stock futures and expect to track the trend of actual FII
flows more closely. The Instanex study shows that the pattern of FII investments over the past five years indicates that FIIs make concentrated bets with their top 15 stocks consistently accounting for close to 55
percent of the value of their 1,000+ holdings and the top 100 accounting for close to 88 percent. The top holdings do not change drastically over time, further confirming that FIIs like to add to the same stocks when they invest additional amounts.
The Instanex FII index consists of 15 stocks —Reliance, Bharti Airtel, HDFC, Infosys, ICICI Bank, Bhel, HDFC Bank, ITC, HUL, ONGC, SBI, NTPC, L&T, TCS and Sun Pharma.
Feb 15, 2009
The real estate market is dead.
People who need homes are not buying property because the buyers feel that the
prices are too high.
The developers are not selling any property because the sellers still want the
prices they had predicted in their Excel sheets - vetted by the specialist
property consultants (the equivalent of the rating agencies who approved junk
mortgage bonds as "AAA").
So there is a standstill.
The buyer and the seller are like the two cowboys in a western film each with a
gun in a holster. Poised to pull the trigger.
All things equal, the buyer should be the winner. The sellers - the real estate developers - have debt on their balance sheets. They need to pay an interest on that debt. They are not selling any properties anymore. So
how do they service that large debt? The obvious answer is that the developer
must slash the prices of the property that he wishes to sell. To a price point
where it will actually sell. Then the developer will get the cash to pay the
interest on the loan and repay the loan.
But there is nothing obvious about real estate.And there is nothing obvious about the real estate business in India.
Particularly when this is election season. And real estate has a natural tendency and a perception to be linked to politics and political funding.
There are probably tens of millions of square feet of property in various stages of readiness lying unsold and available across India.
This is ironic because there are probably buyers for all that unsold property.
Unlike the USA where most people already have a home, India is in a situation
where people do not have homes - and there are homes lying unsold across the
So there are buyers for property. But at a price that makes sense for the buyer. A price at which the buyer can afford the home. That price may be Rs 1,500 per square foot in "middle class areas" of cities like Nagpur or
Rs. 2,000 per square foot in Pune, and Rs. 3,000 per square foot in northern Bombay.
But those "willing-to-buy" prices may be pretty far away from the "wishing-to-sell" prices in the Excel sheets of the real estate developers.
Left to the market, the prices would collapse - or the banks would take over the property as the real estate developers default on loans.
Instead, we have a government that is keen on cutting rates of interest for home loans (a good idea for sure) but not forcing the developers to cut their prices! In fact, the actions of the government seem to suggest that
they are willing to rescue the developers.
So State Bank of India, a bank controlled by the government of India, announces that they wish to disburse Rs 1,500 crores of home loans at 8% every month for the next 3 months. (Note that, in a convenient coincidence, the elections will be over by then.) In a loan mela, you give away loans to people knowing you will never get the money back. In a loan chela, you follow a government directive even if economic sense tells you that you have the power the turn the terms of trade in favour of the buyer.
With no price cuts and simulating an average price of Rs 3,000 per square foot for a 1,000 square foot apartment on which SBI gives a loan of 70% of the property value, we see that SBI can help the developers clear about 21 million square feet of stock. The buyer, borrowing an average Rs 21 lakhs for a 10 year period at 8%, has an EMI of Rs. 25,478.
But, what if the developer was to blink and drop prices by, say, 30%? SBIs Rs 1,500 crore per month will then help clear 32 million square feet of property (50% more) and the EMI of the individual will collapse by -33% to Rs 16,985 because the buyer now needs a smaller loan of Rs. 14 lakhs to buy that same 1,000 square foot home.
Table 1: State Bank's loan Scheme with Reduced Property Rates
|No price cut||With price cut|
|area (sq feet)||1,000||1,000|
|total value (Rs)||3,000,000||2,000,000|
|loan given (Rs)||2,100,000||1,400,000|
|money to spend (Rs)||15,000,000,000||15,000,000,000|
|number of flats||7,143||10,714|
|total area sold (sq ft)||7,142,857||10,714,286|
|over 3 months (sq ft)||21,428,571||32,142,857||50.00%|
|Tenure||10 years||10 years|
SBI wants to act as a catalyst. They want to help kick start the economy. That is great news. But what are they - or the governments in power - acting as a catalyst for? The protection of the wealth of the developers or the increase in the wealth of the individuals? A decline in property prices would be the way to kick-start the economy. The "saving" in EMI of Rs. 8,500 per
month can be used to consume many other products. A decline in interest rates
kicks the buyer and protects the developers.
I like SBI. But it would have been a better reflection of the times if there was a headline that screamed: SBI takes over projects from defaulted developers and sells them at 30% discount to recover its loans. Now that would be a more honest reflection of the state of the real estate market.
Feb 13, 2009
(Click on image to Enlarge it)
MOST OF THE COMPANIES HAVE NOT DECLARED WHO LENDED THEM MONEY AND THE INTENTION OF USING THE MONEY SO BEWARE AND BE CAREFUL BEFORE INVESTING IN THESE COMPANIES
Feb 12, 2009
Surprisingly, most of the companies have not declared the name of the Lender with whom they have pledged the shares. God save if the lender is a mafia or a don or may be an Indian politician!
I hope none of the stocks in Your portfolio appears in this list!!!
I will keep updating the list as disclosure of pledges come each day. Keep tuned in.
(Click on image to enlarge it)
Feb 11, 2009
In the land of farmers, R K Syal presented a calculus of tree plantations and cash crop harvests.
The brochure said the company would develop the land for agro-forestry farms and after expiry of the plan period, trees and cash crops would be cut and money from the sale would be guaranteed by post-dated cheques.
Invest Rs 1 lakh and you would get Rs 2.22 crore in 25 years, promised Syal. To get to the investors, he hired 20 lakh agents of which six lakh were operative. These agents reeled in around 24 lakh investors. Taking into account collections from all the schemes as of December 31, 1997, the total amounted to Rs 22,900 crore.
GFIL floated nine lumpsum and recurring investment schemes, issued post-dated maturity cheques after accepting investment for 1 to 25 years. Forty per cent of the investors money was earmarked for ‘‘developing’’ the land and the rest was treated as security deposit.
In 1987, the company mobilised only Rs 16 lakh. By 1990, it touched Rs 3 crore. Between 1993 and 1997, the company took a quantum jump in investment — Rs 200 crore per year. By December 31, 1997, the company had mobilised phenomenon Rs 1,037 crore. According to the Punjab Vigilance Department, the total collections from investors touched Rs 3,000 crore.
They paid Rs 450 crore to their investors.
In a report prepared by Sebi’s executive director Vijay Ranjan and his RBI counterpart S Gurumurthy in 1998, the two officers highlighted that the company had paid nothing to investors out of its own income but out of the investment made by new ones.
In an investigation carried out by court officers appointed by the Mumbai High Court, the total amount of the farm income was Rs 58 lakh which works out to less that 0.2 per cent of the total amount (Rs 450 crore) paid to the investors.
A committee appointed by Mumbai High Court recommended in 1998 that GFIL and its subsidiaries stop collecting money and undergo an audit of its accounts and land holdings.
Sebi, RBI, IT dept, everybody has a complaint
This is what Sebi and RBI found when it went through the company’s accounts: Sixty per cent of the money was spent on business development or office maintenance and another huge chunk on subsidiary companies. There was barely anything left for development of land.
The Department of Company Affairs found that some companies had become subsidiaries of GFIL through purchase of a majority of shares. Syal had not bothered with the approval of the Central Government.
The Income Tax Department sniffed out a trail of bribes the company had paid buying real estate. The department says it has evidence that the palms of the registering authorities were greased while purchasing land at Jharmari for Chandigarh Extension 22 Project.
On an average, the IT department has estimated bribes at the rate of 1.27 per cent of the registered value of land at various other places. ‘‘The extent of evasion of taxes in the hands of this unorganised and unrelated class of persons is estimated to be approximately Rs 227 crore,’’ the IT department had observed.
Construction work worth hundreds of crores was allocated to ADS Builders Limited owned by Syal’s brother-in-law Hitesh Kumar Sinha. Crores were siphoned under the head construction of infrastructure. Sinha is also behind bars now.
A walk through the Golden Forest
There are no Golden Forest plantations. None in Kot Villa, Gurgaon and Rewari. Instead, Syal had been developing a golf course at Kot Villa as well as a hotel. No GFIL forests in Sirsa, Dehradun and Mussourie in Uttaranchal, Indora, Kasauli and Hamirpur areas in Himachal Pradesh.
The company’s claim of 3.90 lakh kher plants in Ropar and Hoshiarpur district were also untrue. Most of the assets in Himachal (worth Rs 46.25 crore on the records) were acquired illegally and the property was worth was far less.
The Punjab government is taking possession of the surplus land on the orders of Collector (agrarian) in Dera Bassi. The story is the same in Hoshiarpur district. Around 4,000 acres of GFIL under Patiala division was declared surplus two years ago and will be taken over by the government.
Some other states including Uttranchal have also initiated action against GFIL in connection with excess purchase of land.
In Himachal, the Syal family is facing charges of acquiring land on the basis of forged documents.
Feb 9, 2009
Finally someone has woken up. Hiranandani have been accused by MMRDA, but we have to see for how long this Real Estate Fraud Case gets dragged in this court.
Hiranandani denies land misuse charge
By S. Shanker Friday, 06 February , 2009, 10:55
In what could be the highest penalty imposed on a builder for alleged gross violation of land misuse, the Mumbai Metropolitan Region Development Authority (MMRDA) has recommended to the state urban development department that developer Niranjan Hiranandani be made to pay a penalty of Rs 2,000 crore.
The metro authority has charged the builder with constructing large apartments instead of the 40 sq m and 80 sq m flats, for which permission was accorded. The second charge is building commercial complexes in violation of the original agreement and the third, an add-on penalty component, for utilisation of transfer of development rights.
Though the developer is yet to receive a notice of levy for the amount, Hiranandani has denied the charge in totality, stating that the state agency was unaware that no development in the area had been done without obtaining the necessary permissions and sanctions of government departments.
He said development rules and notifications, since the 23-year-old Powai Area Development Scheme, comprising 92.2 hectares, was signed, had undergone changes and consequently implemented after sanctions during different periods. The MMRDA has used the current ready reckoner rates to compute the alleged violations to arrive at the penal sum of Rs 1,993 crore.
The Powai Area Development Scheme was not classified under any scheme for weaker section / lower income group of the society, he said adding that a Bombay High Court decision in 2005 stated that the development at Powai was not for any weaker section / lower income group of the society and the same does not apply to the said lands.
On increase in the size of tenements, he said the scheme came after a tripartite agreement was signed on November 19, 1986. Under the agreement, there was a condition restricting sizes of the tenements. However, the MMRDA permitted the amalgamation of tenements as per its order dated August 18, 1989.
The larger premises were constructed utilising transfer of development rights subsequently, when the TDR concept was introduced in 1991. During the period when the tripartite agreement was executed, the development by TDR was not available.
The Bombay High Court is hearing public interest litigation petitions pertaining to the project development.
The MMRDA has also recommended that all concessions extended to the builder be withdrawn, to which Hiranandani said he had not availed himself of any concessions thus far.