Mahesh

The State Of Business An unending struggle for power, paucity of skilled labour and poor infrastructure is taking a heavy toll on Indian industry - Mahesh from Bookmarklet

"Yet for all the hurdles it faces, many say Coal India is part of the problem. A senior government official says it is riddled with trade unionism and gangs who steal coal—something the private sector would resolve by sending in “the toughest son of a bitch” they could find. The boss of one smallish state-owned electricity generator details how local Coal India employees collude with middlemen to steal his fuel. He says that its local chief is “hugely compromised” by corruption." - Mahesh from Bookmarklet

"This open letter to the board of directors of Wyeth India Ltd. is not meant to be confrontational. With all humility, I wish to elaborate certain facts, though the board is well aware of these facts. Perhaps while taking this decision, it appears that these facts were not considered.   In the annual report of Wyeth India Limited for the accounting year ended 31st March 2005, it was mentioned that the introduction of product patents from 2005 presents an opportunity for the launch of patented products from the pipeline of Wyeth, U.S.A. India\'s large population and increasing health awareness should open the avenues for growth of the pharmaceutical industry. The company sees a good future based on its current portfolio and new products launch program. The Company plans to introduce new products in both Pharma and OTC segments." - Mahesh from Bookmarklet

"Energy Storage : Natural Gas is not only much cheaper than oil per unit of energy (oil would have to drop to about $30 to match current NG prices), but the supply of NG is more evenly distributed across the world than the oil supply.  The US alone has an enormous reserve of natural gas that could ensure total energy independence.  The main problem with NG is storage, which is the primary reason oil displacement is not happening rapidly.  But microporous carbon can effectively act as a sponge for natural gas, enabling safe and easy transport.  This could potentially change the entire energy map." - Mahesh from Bookmarklet

"About accounting standards, the less said the better. Companies are allowed to follow different standards if they go to a court of law. Even if they do, it should be the job of ICAI to qualify and quantify the issue. It rarely does so. The balance sheet of Tata Steel also throws up an interesting issue as far as accounting standards are considered. The notes to the accounts (page 160 of the annual report) show an ingenious accounting of the interest on ‘perpetual’ debentures. Here is an excerpt: “c) The Company has raised Rs1,500 crores through the issue of Hybrid Perpetual Securities in March 2011. These securities are perpetual in nature with no maturity or redemption and are callable only at the option of the Company. The Distribution on the securities, which may be deferred at the option of the Company under certain circumstances, is set at 11.80% p.a., with a step-up provision if the securities are not called after 10 years. As these securities are perpetual in nature and ranked... more... - Mahesh from Bookmarklet

"Roughly how much would a 13% stake in Hyderabad-based Nagarjuna Fertilisers and Chemicals cost if one were to pick it up in the market? About Rs 175 crore (based on Monday's closing price on the BSE). The company's promoters, however, are going to increase their stake by 13 percentage points by investing just Rs 30 crore." - Mahesh from Bookmarklet

"1. Create a new company completely owned by promoters and assign some value to it. Get some valuer (in this case Grant Thornton) to assign a sky high valuation. Intangibles like "trademarks", "customer contacts" suddenly get a lot of value." - Mahesh from Bookmarklet

"It would have been difficult to guess that the Kashmir American Council (KAC) headed by the Kashmir-born Fai was funded by the ISI. What was not difficult to realise however, was the KAC’s stand on Kashmir. Constantly harping on India’s atrocities in Kashmir is perfectly alright. But when in mail after mail (this columnist is on the KAC’s mailing list) deploring the human rights situation in Kashmir, there is not a mention of the Kashmiri Pandits’ exodus, you know this Council is not secular." - Mahesh from Bookmarklet

"Let me admit. I only had a passing glance at Binayak Sen news items prior to December 2010. Just another Doctor, popular among Human Rights activists & to give him credit, earned a lot of good will among the academics & left leaning journalists. Fair enough.. Everyone is entitled to have their darlings based on ideological preference." - Mahesh from Bookmarklet

"Sonia Gandhi: Sphinx who would be Pharaoh" - Mahesh from Bookmarklet

"On April 9 this year, Anna Hazare and his supporters achieved a great victory against a recalcitrant administration. A combination of fortuitous circumstances created a synergy that overwhelmed the administration. But let us be wary because the moment has passed and politicians of all hues will get together and chalk out a strategy to prevent a powerful, independent and no-nonsense Lokpal." - Mahesh from Bookmarklet

"When the basic structure of the Constitution denies the Prime Minister immunity from prosecution, how could it be argued that the office should not be brought under the scrutiny of the Lokpal?" - Mahesh from Bookmarklet

"Auditor’s has qualified its accounts on several counts raising some very serious issues as under. Incidentally, the present auditors was appointed in the last AGM only and this is theirs first year of audit. Out of total expenditure of Rs 62.46 cr, supporting vouchers for Rs 25.06 cr. (40.12% of expenses) not available. Sales of Rs 79.98 Cr as reported in the accounts are not tallying with the sales tax return filed with Sales tax authorities. The company is reconciling the same and there may be additional liabilities on account of its towards VAT. Inventory records are not maintained. (Giving serious doubt about the production reported by the Company.) Internal Control as regards purchase of fixed assets, purchase of inventory and sales of goods and services is very week and is not commensurate with the size of the Company.  Internal audit system is not commensurate with the size of the Company." - Mahesh from Bookmarklet

"The Company has come out of its Annual Report for 2009-10. The Co has posted sales of Rs 80.33 Cr and PAT of Rs 13.56 Cr and declared a dividend of 10%. The company is basically in Seeds and biocides products which are tax free under sec  10(1) of IT Act. The tax liability of the co for the year is less than 4%." - Mahesh from Bookmarklet

"The questions that arise in the mind of an investor then are – Are these stocks reaching a bubble territory or do they still have more steam left? If you have missed the bus, will an entry now make money? When will the valuation cycle reverse for these & other consumer stocks, if at all? If invested, should one exit these stocks at present moment?" - Mahesh from Bookmarklet

"We have to congratulate Mr. Ratan Tata and also appreciate his high morality, because a man spending 10,000 crores to build a house or buying one airplane for his wife shows how much selfish, narrow minded some of this big companies have become, and this 10,000 crores is=has he earned by sheding sweat it is the people mones invested in his shares. Also how come in India when 500 million people are suffering so much can he build a house like this, off copurse Reliance will tell we gave Rs. 1 crore for some CRS, but he spends 10,000 crores for himslef. Well Said Mr. Tata, all will nt be like legendary Jamnshedji." - Mahesh from Bookmarklet

"Turn on any business news channel and you will find constant updates on the net profit and sales numbers of companies. It’s results season again with companies declaring financial numbers for the quarter ending June. As on 1 August, 1,328 companies, out of the total 4,170, have come out with their financial results for the quarter just gone." - Mahesh from Bookmarklet

"$114,500,000,000,000. - US unfunded liabilities To the right you can see the pillar of cold hard $100 bills that dwarfs the WTC & Empire State Building - both at one point world's tallest buildings. If you look carefully you can see the Statue of Liberty. The 114.5 Trillion dollar super-skyscraper is the amount of money the U.S. Government knows it does not have to fully fund the Medicare, Medicare Prescription Drug Program, Social Security, Military and civil servant pensions. It is the money USA knows it will not have to pay all its bills." - Mahesh from Bookmarklet

"I’M SUPPOSED to be the risk-taking investor, throwing caution to the wind, picking good teams with great ideas and zero revenues — then backing them against all odds in the hope of a high multiple. While the stock market and private equity (PE) guys are supposed to be the cool pros, weighing decisions based on established revenues, profits, multiples and such, making safer bets." - Mahesh from Bookmarklet

"The white-collar hothouses of IIT and IIM have produced yet another pair of radicals. Meet Jaya Jha and Abhaya Agarwal, who opted out of the corporate rat race to start something out of the box." - Mahesh from Bookmarklet

"That day, Subhash learnt the power of the written word; never mind that it gave him writer’s cramps in the years to come. Starting with handwritten letters, he graduated to a manual typewriter. After a break during the Emergency, and with a handbook of addresses of Indian publications that came his way, Subhash Agrawal became a one-man army in the art and strategy of writing letters, even as he completed his studies and joined the family business." - Mahesh from Bookmarklet

"There are two events that can bring bulls back to life. One, no further tightening by the Reserve Bank of India (RBI) and another round of stimulus or quantitative easing in the US—called QE3—after the QE2 ends in June. Conversely, if the RBI does one more round of tightening and there is no QE3, markets will crack. Indeed, even if there is no tightening and QE3 is seen to be iffy, the dollar will rally and that itself will be a concern for those foreign investors who have a short-term stake in the Indian market. While we don’t suggest that you rely on the oodles of opinions and forecasts available on the Internet, as an interesting aside, John Taylor, chairman, CEO and founder of FX Concepts—one of the world’s largest hedge funds focused on currency trading—believes that QE3 won’t happen and the dollar will rally sharply." - Mahesh from Bookmarklet

"Provides a resumé of Laval University economics professor Bernard C. Beaudreau's recent book, "How the Republicans Engineered the Stock Market Crash of 1929 and the Financial Meltdown of 2008" where he argues that in both cases, the market was not to blame, rather government was. He shows how the Republican Party's attempt at raising factory utilization rates in the late 1920's with tariff policy (Smoot-Hawley Tariff Act) resulted in both the rise and fall of stock prices. Similarly, shows how their attempt to strengthen weakening product markets in the 1980's and 1990's using financial deregulation led to the Financial Meltdown of 2008." - Mahesh from Bookmarklet

"Hello people. Well, you have had to bear with me and my blog for quite some time now. I had discussed some stock ideas in various posts before. So, lemme put out an update about what happened to all those stocks. I had written about MTNL being a value trap on 21st April, 2010. The price has moved down from Rs.74 to about Rs.50. I still maintain it is a value trap. A company i will probably never look at, as an investment candidate." - Mahesh from Bookmarklet

"Along with the sugar business, KEL also has a liquid storage division. The company had announced the demerger of this division into a separate company, Kesar Terminals and Infrastructure Ltd. (KTIL), which would of course be listed. The demerger has already been sanctioned by the Mumbai High Court and all that remains is for the company to hold a Board Meeting and announce the record date and other details. The ratio for this demerger has been fixed at 7 shares of KTIL for every 10 shares held in KEL." - Mahesh from Bookmarklet

"If you are not convinced by that example, here is another one. Smith uses the real life example of Pepsi which bought back almost $5 billion of its shares in 2008. This strategy enhanced its eps (albeit in the sense of lessening an eps fall). But what would have happened had Pepsi used the same money to buy shares in Coke, which had a similar p/e ratio to Pepsi? Then the accounting treatment would have changed; instead of reducing the number of shares in issue, the investments on Pepsi's balance sheet would have grown. The eps would not have been bolstered by this approach; more significantly, the return on equity would have fallen." - Mahesh from Bookmarklet

"What needs to change? To correct this destruction of shareholder value, Smith is pressing for the following changes: 1. Management should justify share buybacks by reference to the price paid and the implied return and then compare this with alternative uses for the cash. 2. Investors and commentators should analyse share buybacks on exactly the same basis as they would if the company bought shares in another company. 3. Investors and commentators should use return on equity to analyse the effect of share buybacks, rather than the impact on earnings per share. 4. Share buybacks should be viewed with a high degree of scepticism when done by companies whose directors are incentivised by EPS growth. 5. Accounting for share buybacks should be changed so that the shares remain as part of shareholders' funds and as an equity-accounted asset on the balance sheet in calculating returns" - Mahesh from Bookmarklet

"Smith's argument is simple: by and large, most share buybacks destroy value for remaining shareholders. However, while buyback programmes are undertaken with the intention of creating shareholder value, they often have the opposite effect. How and why does this happen? The simple answer is that companies destroy value because they use shareholders' cash to buy shares trading above their intrinsic value. Alas, this destruction of value is rarely obvious, as both the cash used and the shares purchased 'disappear' from a company's balance sheet after buybacks." - Mahesh from Bookmarklet