Multibaggers for future

Clear Skies Solar has announced an investment in India to setup a solar power plant. The New York (US) based company has tied up with India’s Prayag Green Solar Power . Both the companies will be jointly developing a 2MW solar power plant in Uttar Pradesh by the end of the year. The plant entails an investment of US$8m. This is second major investment of Clear Skies Solar in India this year. Earlier in April, the company ventured with Power Cube to develop a 5MW solar power plant which is expected to become operational by early 2009. Alternative energy market in India is witnessing a lot of action. Moser Baer has won contracts to supply silicon thin film panels worth US$500m by 2012. Singapore based Environ Energy announced an investment plan amounting to US$1.27bn for a solar wafer manufacturing facility in India.

Alternate Energy space is sizzling hot amidst falling markets world over. In one of the recent deals, Morgan Stanley has reportedly picked up close to 30% stake in a Mumbai based cleantech firm. The company, Biotor Industries received INR2.4bn (US$53m) from the private equity arm of Morgan Stanley. The investment is in the form of equity and compulsorily convertible preference shares amounting to 30.4% of the post issue paid up capital of the firm. Biotor makes castor oil based products and has fully owned subsidiaries in US and Germany for marketing and distribution. It also has a contract manufacturing subsidiary and plans to set up a manufacturing unit in Gujarat. Total valuation of the firm after the deal is pegged at INR7.9bn (US$175m), ahead of Hyderabad based Roshini Biotech which was valued at INR6.8bn based on a second round investment from Goldman Sachs. While Roshini has long term plans of going public in 2011, AE biofuel’s Indian subsidiary Universal biofuels is in talk

US fed has more work to finish after the recent investment bank meltdown. A lot has already been said and written about what should have been done and what not, but as humans, financial institutions are prone to mistakes. So, the big daddy bails out AIG and other blue-chips banks going for a song is a ritual performed every 15-20 years or so. Though the price is a little too much this time, but that’s ok given the regulator’s high level of tolerance. Anyway, the latest to add in the list is the amount of liquidity required in the system. After the mayhem, banks are being inundated with lines of credit requests. These are the agreements the banks entered into when the grass was green and the meadows were lush. Again, no wonder the banks went on a spree and committed US$1.4 trillion in such arrangements. These are the short term loans for working capital, but the sheer size of the amount required is enough to make your eyes go round. The rush for short term credit is another drag on th

After the failed attempts to contain inflation even by restricting money supply, RBI is coming round to the view that foreign funds into real estate are creating an asset bubble. To avoid a hard landing as seen in US economy, RBI proposes curbs on foreign venture capital investments (FVCIs) funds. The central bank notes that this route has opened a parallel channel of investment thus opening a regulatory arbitrage window. Majority of such funds have their base in tax havens like Cayman Islands, Mauritius and Cyprus . FVCIs enjoy significant benefits which are not available to domestic VCs including full tax exemptions and minimum capital base of INR50m. Besides, FVCIs enjoys full exemption from entry and exit pricing norms which are applicable to foreign investors in form of FDI, exemption from one year lock in period for sale after IPO. All these exemptions prompted foreign funds and Indian firms to set up companies abroad (usually in tax havens), raise funds at cheaper rates and t

India based Sintex Industries Ltd has acquired a German auto component supplier. It has acquired a 90% stake in Geiger Technik GmBH for US$50m (€35.6m) . The acquisition has been done through its wholly owned Netherlands-based subsidiary Sintex Holding BV. Remaining 10% will be held by the Geiger family. Geiger produces precision plastic parts including tanks and reservoirs, piping, air ducts, cooling and fuel tank components. The company has four manufacturing plants including three in Germany and one in Poland . Geiger has a clientele including BMW, Daimler, Volkswagen, Siemens etc and its sales in 2008 are expected to be around US$165.7m (€118m). With this acquisition, Sintex has expanded its manufacturing operations in Germany which is the largest automotive market in Europe. The acquisition will assist the company to further enhance its presence in the European market. Sintex has made a number of acquisitions in Europe, US and Africa in the last year. Indian auto component sp

Indian low cost carrier (LCC) SpiceJet has secured INR3.45bn (US$80m) in investments from PE firm Wilbur Ross & Co . The company is India’s second largest budget carrier with a fleet of 17 Boeing B737 planes and 10% market share. Financial details of the deal were not disclosed but the stake is likely to be limited at 15% as any transaction involving more than 15% will trigger an open offer. The airline was in talks with Vijay Mallya’s Kingfisher Airlines which closed the negotiations citing steep valuation for the budget airline. But industry experts report that management control may be the actual reason behind the failure. Vijay Mallya has already secured the leading position in low cost model after taking control of Deccan Aviation and reasonably enough, wasn’t ready to shell out extra cash for another ‘strategic investment’. SpiceJet owners, Kansagra family and Dubai based Istithmar , on the other side were not prepared to lose management control. Apparently, cutting a deal

Private Equity (PE) firm ChrysCapital has acquired 7% stake in India’s leading auto ancillary company Amtek Auto . The investment is in the form of P-Note holding. ChrysCapital has mopped up over 9.3m shares through six bulk deals transacted at different prices on the Bombay Stock Exchange ( BSE ) and National Stock Exchange ( NSE ). Apart from ChrysCapital, Amtek Auto has many other foreign investors on the board including Warburg Pincus, Citigroup, Swiss Finance Corporation and Oppenheimer Funds . Amtek Auto is on a global investment drive, both organic and inorganic. The Gurgaon based company recently acquired UK-based gear company, Triplex Ketlon . Now, Amtek is leading the race for a controlling stake in German castings company KSM Castings for around EUR250m (around INR17bn). If the deal is successful, it will be one of the largest acquisitions by an Indian company in the automotive forging category. The proposed acquisition will consolidate its business in the mature western E

Goldman Sachs is reportedly picking up a minority stake in Hyderabad based bio-diesel company Roshini Biotech . It is learnt that Goldman Sachs is picking up a 25% stake in the company for INR1.7bn . The price being paid pegs the valuation of the plantation company at INR6.8bn. The company says that the investment will be used to expand its overseas operations. It is planning to expand its overseas operations and enter countries such as Uganda, Sri Lanka and Indonesia amongst others. Roshini Biotech has already won 25,000 acres of land from the Ugandan government to cultivate pongamia seeds. Roshini Biotech is a bio-fuel company engaged in the bio-energy value chain. It has the world’s largest plantation of non-edible feedstock with more than 40 million trees and seedlings. Pongamia Pinnata, in which the company deals, is a non-edible and drought resistant tree with high yields of crude oil that recaptures rapidly -growing greenhouse gas emissions and generates income to poor farmer

After astronomical valuations of Facebook , here comes LinkedIn . The professional networking site has received US$53m investment in fourth round of funding. The transaction involving investment from Bain Capital, Sequoia Capital, Bessemer Venture Partners and Greylock Partners values the company at US$1bn . Microsoft invested US$240m late last year in Facebook for a 1.6% stake valuating the social network at US$15bn . The high price tag attached with these deals puts all traditional valuation matrices like net profit, book value, PE ratio etc at back burner. While many analysts claimed that the deal reflected Microsoft's urge to grow its advertising business more than Facebook’s true worth, LinkedIn deal appears more balanced though still on the higher side. LinkedIn has 23 million members whereas Facebook had 50 million members at the time of the deal. Some simple back of the envelope calculations show that deal valued Facebook at a PE multiple of more than 300 and sales multip

Ahhhh…. sounds like consolation, but it’s not just retailers losing money in the market. Even the valuation experts were taken by storm in the recent bull market. Apart from the usual investment in unlisted companies with 2-3 years timeline, Private Equity (PE) players invest in some listed companies as well. These kinds of deals are known as private investment in public enterprises ( PIPE ). It not a written law in some market bible that PE firms can’t invest in listed companies, but they usually refrain from doing so and for good. Last bull market saw many PE firms charting PIPE deals at exorbitantly high valuations only to see their money vanishing in a jiffy. A market study by Venture Intelligence shows at least 33 such deals are already out of money. The impact gets magnified with additional information that PE players striked 51 PIPE deals last year. The deal book has all big names including Carlyle's investment in Allsec Technologies, Reliance Capital's in Maxwell In

Financial year 2007-2008 has ended and Indian stock markets are off the radar of global investors. Most mutual funds gave excellent returns as long as the market was in top gear and there is a clutch of funds with superb numbers even after the January crash. However, retail investor is again trapped with no solution in sight. If the situation is prompting you to think that stock markets are a perfect destination for becoming millionaire by investing billions, please stop reading this. With all sincerity and after taking a heavy beating on my own portfolio, I still believe that stocks are perfect to make serious money without sharing the same risks of running a business. World’s richest person got all his greens from investing in stocks, after all. The description should ideally lead to the conclusion that rampant and wild directionless investment albeit large size is not going to get anywhere except at the bottom of the pile. Simultaneously, it calls for a change in investment strategy

Gammon Infrastructure Projects Ltd (GIPL) listed yesterday at a price of Rs 170 and touched high of Rs 185 before closing the day at Rs 158, well below issue price of Rs 167. The closing price indicates a discount of 5.3% to issue price a price earning (P/E) ratio of 255. With this IPO, the company has made entry in 'flop IPO' hall of fame. Markets are still volatile and may break out in the negative as well (Nightmares for the retail investores as smart players have already exited the counter). Looking forward, next company to get listed in this month is Sita Shree Food Products and Titagarh Wagons . While grey market premium for Sita Shree Food Products is at Rs 6 against issue price of Rs 27-30, Titagarh Wagons appears to be good bet for long term with visible incremental earnings and reasonable (infact discounted) P/E ratio of 24. Its high time companies learn to leave some change on the table for retailers.

The news that global investment banking and brokerage firm Bear Stearns has been acquired by JPMorgan will go down the memory lane exactly the same way as we remember debacle of Barings Bank in 1995 and Societe General more recently (I believe no one remembers them). Bear Stearns was sold at a valuation of US$2 per share against market price of US$30 per share . It replicates the situation when Barings Bank was sold for a song to ING Group ( £1 to be precise….no billions here). Probably nobody reading this blog remembers Barings or Nick Leeson , but this time many investors will remember Bear Stearns. Reasoning for this is very simple, Bear Stearns sold shares in Indian markets worth Rs 265 crores in last couple of days. While the amount was not particularly large, bears made sure that Big Bear gets its due share in Indian stock market history. Sensex tumbled by approximately 1000 points. Almost all Bear Stearns shares including Madhucon Projects, Clutch Auto, Dabur Pharma, Indo t

Rural Electrification Corporation (REC) listed today at a premium amidst good market sentiments. The stock listed at Rs 126 versus an issue price of Rs 105 . The company has made an External Commercial Borrowing (ECB) application with RBI. It earlier said it plans to raise Rs 4,040 crore from ECB route. The company expects to see continued growth of 25-30% and plans to do business of Rs 1.35 lakh crore over the next 5 years.

Gammon Infrastructure Projects Ltd (GIPL) may join the list of withdrawn IPOs due to lack of subscription. GIPL is offering 11.45% of its post-issue paid up capital for a price of Rs 167 to Rs 200 per share. This translates into a range of Rs 276.385 crore to Rs 331 crore. Accordingly the company is valued in the range of Rs 2413.8 crore to Rs 2890.8 crore. These valuations are difficult to justify by any standards particularly when the stock markets are bleeding. The fact that the company is asking for a Price Earnings (PE) ratio of over 100 based on Estimated FY08 earnings is simply ridiculous. At this time, Infrastructure companies with sound financials like IVRCL Infra are available at a Trailing Twelve Month (TTM) PE ratio of 27 . It was only last month when investors saw Infra IPOs like KNR and IRB trading below their issue price. While the chips are down after the Budget and retail investors shying away from share markets, subscription of the retail portion (30%) looks a dis

Engineering & Construction (E&C) major Punj Lloyd has corrected by 40% from its high of Rs 585 to Rs 350. The stock seems to have fallen out of investor’s radar. Bad news or is it a good news in disguise??? The company needs no introduction but for starters, here is one. Punj Lloyd is an Indian E&C company catering to the hydrocarbons and civil construction sectors across India, Asia and the Middle East. Its services include laying pipelines, building roads, and constructing refineries and tankages, power plants, and other infrastructure facilities. Last year, it acquired Sembawang Engineers , which helped it scale up its expertise to upstream oil & gas, airports, jetties and tunneling. The acquisition enabled Punj Lloyd to be pre-qualified for larger and more complex project bids. For the quarter ended 31 December 2007, the company recorded exceptional one time loss of Rs 68 crores on the back of legacy orders of Sembawang Engineers. However consolidated figures were u

Gammon Infrastructure Projects Ltd (GIPL) is entering the capital market with its initial public offering of 16.55 crore equity shares of Rs 10 each in price band of Rs 167 to Rs 200 per share . The issue will constitute 11.45% of the post-issue paid up capital. The issue will open on 10 March 2008 and close on 13 March 2008. The issue has been graded by Credit Analysis & Research as CARE IPO Grade 4 , indicating above average fundamentals. GIPL is offering part payment facility to retail and non-institutional investors. The amount payable on submission of the bid cum application form is Rs 50 per equity share , with the balance to be paid by the due date. The company undertakes and develops projects such as roads, bridges, ports, hydroelectric power and biomass power projects on a Public Private Partnership (PPP) basis. GIPL plans to use the proceeds for investments in its various projects being developed by its subsidiaries in Uttar Pradesh, Maharashtra and Sikkim.

PC is going to present Union budget for the 7th time, and this time its a far cry from the good old days with share market in shambles. And it is expected to remain in the same state of inertia for the time being unless the budget is a hugely populist one. Chidambaram is notoriously famous in investor community with his share of Capital gains tax, ST tax, Service tax and 'whatelseisremaining' tax. But this time, investors can expect relief (read no new taxes) and he may infact lend a helping hand in the form of reduced income taxes, ofcourse for a helping hand in return (Congress). Whatever be the budget, India's long term growth story remains intact. So, Happy investing....

Last week registered three important events for Indian capital markets including oversubscription of REC IPO, listing of OnMobile Global and bonus declaration from Reliance Power. While nothing can be said categorically about REC, many market participants believe that the IPO could mark reversal in trend in primary market. OnMobile Global listed at a good premium and climbed further in subsequent trading sessions to touch a high of 579. Strong listing even in choppy market conditions is another proof of fundamental soundness of company. While listing of KNR Constructions & Bang Overseas was lackluster, which later fell like a pack of cards, they were not expected to be out-performer at the first place. KNR is a fairly small infrastructure company with neither broadness nor depth in operations, like IVRCL or Simplex . On the other hand OnMobile is a specialized software company with high margins. The lesson is, retail investors should come out of the mould of quick listing gains m

Indian Stock markets have witnessed an abrupt crash after a dream run in 2007. Maybe, the run up was a little too stretched and thus when FIIs decided to sell, it was all the way to bottom. It can be argued that the market was trading at all time high and one shouldn't have entered at the first place and sort of things. In hindsight, it may appear logical as well, but the bottomline is that the sensex is trading below 17,000 and majority of retail investors are in red, including the writer of this blog. And it is not just the retail investors who have lost heavily to the cheater 'Ambani', as some people call him deriving vicarious pleasure by doing so. Centurion Bank of Punjab has lost FORTUNES (mind it, all caps) to the tune of INR2.6bn (that translates to Rs 26 crore). The amount is significant as it is more than half the profits it earned in December quarter. However, the point i'm driving home is that some investors find an opportunity in flat market and do some va