Wednesday, November 23, 2016

INDIA UNDER RENOVATION

INDIA UNDER RENOVATION

The iconic BSE towers at Mumbai undergoing through some renovation activities at present

A good decision made of knowledge but not of numbers - PLATO. 

A Brief Note: Any renovation activity of any structure certainly cause some sort of inconvenience to the residents living in the structure. Incase India as a nation requires renovation , then it will certainly create major inconvenience to the people of the nation , but  Politicians and policy makers at least should have knowledge of major consequences that impacts people life , even though if they don't knew numbers .

Why Indian Markets are sliding down: At global front Brexit implementation, as the wave of protectionism pass through different continents Theresa May is stern on this, Indians are ignoring this but this will have a major impact, and consensus on Fed rate hike in December as FOMC focuses on Trumpation but not on inflation .

On domestic front: Market were exuberant running based on good monsoon on citing rural consumption all these days, but due to demonetization last 15 days rural consumption came to stand still  and urban & semi urban consumption is on single digit . People are very cautious in spending 
Rs 100. Capital Markets are anticipating same saga continuing for some more time, which will have big negative impact on 3rd quarter earnings and GDP growth.

How long the saga continues:  Hard to digest but at present RBI Printing quantity capacity for the month is 300 crores notes per month. To replace approximately 15 lacs crore rupees of existing Rs 500 and 1000 notes with new Rs 100 , 500 denominations, it will take government to at least 4 to 5 months , that's the reason RBI introduced Rs 2000 notes . Unfortunately RBI cannot outsource currency printing to increase the printing quantity capacity .So it will take 1 to 2 months to get required float of currency to resume consumption. In the meantime, earnings and GDP will take major hit in short term.

As the India’s currency renovation exercise completes in few months, let’s hope and ready to see a beautiful India soon.


Thursday, October 13, 2016

Indian Investors Don't Ignore Deutsche Bank

It’s hardly a shock…
Deutsche Bank boasted a notional derivatives exposure of €41.9 trillion (US$46.53 trillion) in its 2015 annual report. This is about 10% of the total global derivatives market, standing at roughly US$493 trillion. In comparison, the current market cap of Deutsche Bank is worth €17.46 billion. In other words, Deutsche Bank is leveraged 2,399 times. Imagine promising to buy a house for $2,399 with assets of $1!.
While a fair chunk of these derivatives are hedged (i.e. there’s a buyer and seller for each contract), what happens if one side can’t pay up during the coming times of chaos? This is exactly what happened during the US sub-prime crisis of 2008. For this reason, the IMF notes that Deutsche Bank appears to be the most important net contributor to systemic risks.
We had underestimated the importance of Deutsche Bank.  Lehman Brothers on May 31, 2008, (the last 10-Q it had filed before it went bust) showed assets on its balance sheet of $639.4 billion and stockholders' equity of $26.3 billion. By comparison, Deutsche Bank, as of June 30, 2016, has assets of €1.8 trillion and stockholders' equity of €66.5 billion. Given the size of Deutsche's balance sheet, it is three times as large as Lehman Brothers was.
Indeed, the bank is connected to everything. Will it be the first domino to fall?
Source: IMF, WealthMills.
Looking at the globally connected game of counterparty derivative contracts, if Deutsche Bank fails, everyone else should follow.  But IMF, European central Bank and politicians are proactively trying to rescue 'Deutsche Bank' as it is the symbol of European Economy to avoid any chance for financial crises.

Friday, October 07, 2016

Corporate debt in India



Here's a financial tip no one gives you. If you owe money to the banks, make sure the amount is huge. Then you won't need to worry about paying it back on time. Or, indeed, in some cases, paying it back at all.
This is not a joke. Several top business houses in India owe banks astronomical amounts and have defaulted in repayment. But instead of facing pressure to pay back these loans, companies are routinely given sweet deals: either their loans are 'restructured' in a way that allows a moratorium on interest payments, or their repayment schedule is extended generously. Here are the Top corporates with high debt levels

1 .The Reliance Group : The Anil Ambani-led Reliance Group is in the business of power, insurance, wealth management, telecommunication infrastructure and entertainment. In March 2015, the company had a debt of Rs 1.25 lakh crore on its balance sheet.The amount is equivalent to the special package announced for Bihar by Prime Minister Narendra Modi ahead of state elections in August this year.
02 .The Vedanta Group :Anil Agarwal's company is the second-most indebted company. According to Credit Suisse, the company, which is into metals and mining, had a debt of Rs 1.03 lakh crore. This is equivalent to the amount raised by the Government of India in March 2015 through its biggest-ever auction of telecom spectrum.
03. Essar Group : Managed by the Ruia Brothers (Shashi Ruia and Ravi Ruia) the company, with operations in 25 countries, owes Rs 1.01 lakh crore. That's what the Centre plans to spend on building smart cities until 2020.
04.Adani Group :Gautam Adani, the chairman of the Adani Group of companies is known for his proximity with Prime Minister Narendra Modi. His business house owes Rs 96,031 crore to the banking system. The amount is a little less than the Budget for building the bullet train network between Mumbai and Ahmadabad proposed by the government. Earlier this year, the State Bank of India reportedly approved a loan of around $1 billion (Rs 6,600 crore ) for the company's coal mine in Australia. However, after much hue and cry in the media due to the highly stressed balance sheet of the public sector bank, the approval was withdrawn.
05. Jaypee Group :Manoj Gaur-run Jaypee Group has a debt of Rs 75,163 crore on its balance sheet. Jaypee Group had a golden time during the Mayawati rule in Uttar Pradesh between 2007 and 2012. The debt is eight times the allocation for mid-day meals in 2015 that feeds 12 crore school going children in the country.
06.JSW Group :Sajjan Jindal is the chairman of JSW group and he was recently in headlines for reportedly organising the meeting between Pakistan Prime minister Nawaaz Sharif and Narendra Modi. Big connections allow you big credit lines. As per the Credit Suisse report, the group has a debt of Rs 58,171 crore. The amount is equivalent to the cost of 26 Rafale fighter aircrafts that India plans to buy from France.
07.GMR Group : Named after its promoter GM Rao, the group is known for building Delhi's T3 International Airport terminal.The group has a debt of Rs 47,976 crore on its balance sheet. The amount can be used to build to coal-based power plants with a generation capacity of 4,000 MW each - enough to provide electricity to the state of Haryana during peak summers.
08.Lanco Group :Headed By L Madhusudan Rao, the company runs solar and thermal power plants. It has a debt of Rs 47,102 crore.
09.Videocon Group :Venugopal Dhoot's company, the group once famous for making televisions, owes Rs 45,405 crore to banks. This amount can be used to 93 missions to Mars by India.
10.GVK Group :Founded by GVK Reddy, the group has interests in energy, infrastructure and hospitality sectors. The company has a debt of Rs 33,933 crore. The amount is just a little less than government's allocation under the MNREGA scheme (National Rural Employment Guarantee Act) of Rs 34,000 crore in 2015.


Thursday, October 06, 2016

Media in India

If you're not reading News papers and Financial Reports you're uninformed If you do so you're misinformed. Please check  Who owns majority of Media  in India in the below Table
                       

Monday, October 03, 2016

Confidence Factor

It's a bitterly cold day. you have lost all feeling in your nose. Your ears are hurting . You hunch your shoulders together to bury your head under the raised lapels of your greatcoat.
You turn a corner and you see a frozen pond. Can you risk taking a short cut across ? Or would it be safer to walk to the bridge half a mile down the road ?
You notice a man on the other side of the pond . He gingerly steps on to it. It holds the weight of one foot. He carefully places the other foot on the ice.
A young women behind follows his lead. As you watch, some children arrive with skates, and more adults follow them. Soon, the whole village is having a party on the ice. Each person had given the next person the confidence to join the party. The more people clamber on to the ice, the safer it feels. It's logical, isn't it? Or is it? Something makes you stop. You turn around . You walk away. Behind you , you hear the crack and the first scream .
Stock market follow the same psychology . As an increasing number of heavy bodies add themselves to the ice, human nature makes them feel that the safety factor is increasing. But the clear thinking observer realises that their added weight means the opposite is true. Each fresh body on the ice makes it more - not less- likely that the ice will crack .The global investment business today is a business exactly the same way that the street market in Mumbai or Dubai is. It is manned by salespeople, and they all have products they want you to buy .They make sure that what they sell is attractive . They tell you uplifting stories of how buyers of their services have generated wealth for themselves. They attract you to the ice. There are lots of people on it, so it must be safe .
At WealthMills we are committed for the safety and wealth creation of our clients with high ethical professional standards .

Friday, September 30, 2016

IPO ICICI Prudential Life Insurance co Ltd .

Most  investors  make  the  mistake  of  thinking  that  the  IPO  is  once-in-a-lifetime  opportunity to buy the aspired stock.  It is not!
Rather it may be the once-in-a-lifetime opportunity for the promoter and early stage investors to get the best possible valuations. And hence they leave no stone turned to make the months in the run up to the IPO look like a dream to prospective investors.
Now if you are not investing in a company for a quarter or two, the latest quarter’s performance should hardly matter.  But unfortunately that is what most investors look at. And this is why you will find most companies debuting on the bourses in their most profitable year or when the sentiments at the peak. If the profits and the sentiments do not last, it is very likely that investors may end up buying a mediocre business at an expensive price in the IPO. 
Buffett has explained that the mathematical probability of fetching a good stock at cheap valuations in its IPO is minimal. Therefore, investors hoping to become IPO millionaires have to rely on luck apart from their value investing skills.
IPOs and the Less Knowledgeable Buyers : It’s  almost  a  mathematical  impossibility  to  imagine  that,  out  of  the  thousands  of  things for sale on a given day, the most attractively priced is the one being sold by a knowledgeable seller (company insiders) to a less-knowledgeable buyer (investors).
These words of Warren Buffett explicitly manifest his unwillingness to invest in IPOs.
The billionaire passed on the opportunity to subscribe to Google's IPO in 2004, which was offered at over 52 times earnings. In addition to Buffett's general reluctance towards the business models of most internet companies, Google's early valuations clearly didn't interest him.
The  stock  returned  nearly  1400%  in  ten  years,  proving  Buffett's  intrinsic  value calculations  wrong.  But  he  didn't  compromise  on  his  margin  of  safety  criteria,  and  the legendry investor never regretted his decision.
On the ICICI Purdential life Insurance company debut on stock exchanges, just to refresh my memory. I knew the flavor of Insurance industry as a disclosure I worked with ICICI Prudential life sales team in
2004. It was the time company was growing at a ballistic pace in sales and revenue. I recollect a young chap joined as Head of sales force, he was used to keep sales missions on selling life insurance policies. The team was so much charged up and selling policies left, right and center. Top sales men were heros of the company, such highly aggressive sales practice in all regions made ICICI Prudential life Insurance company as No 1 private life Insurance company and also NO 1 in policy lapsation by 2009. About 7.70 lacs conventional policies worth Rs 25269 Cr lapsed, highest among the private life insurers by value (As per IRDA Hand book published in 2009).
Later on change of management in 2009 at top deck brought persistency and improved focus on quality of sales, off course stringent measures by IRDA helped the company to maintain quality.  ICICI group strong channel alliances helped ICICI prudential life insurance co Ltd to remain as Top private life insurer. 
Challenges in Valuing Insurance Businesses
Very  few  businesses  have  a  demonstrable  or  predictable  level  of  repeat  business  from customers. Life insurance, by its very nature, primarily sells long-term contracts with  annual  premiums  and  expectation  that  a  portion  of  those  will  get  renewed  year-on-year. Additionally, it considers life mortality assumptions to create adequate reserves for future pay-outs on account of death, maturity or surrender of policies. These challenges could impact growth as well as valuation assumptions.
The basic principles of valuation are applicable to the insurance sector too, just as they apply to other sectors. However, some unique aspects can affect how they are valued. Calculation of debt is difficult to estimate and measure. Frequent regulatory notifications and considerations too affect valuations. The regulations on channels impact distribution relationships with a potential to positively or negatively affect valuations.


I will remain positive on the growth prospects of ICICI Prudential life ltd.

Wednesday, September 28, 2016

Conquest of Investing

Let us forget about markets for a moment and consider the following: prior to our age of market economies and capitalism, some other form of ‘capitalism’ existed.
However this capitalism was not based on creating wealth through progress in all spheres of society and the production and distribution of goods and services, but through conquest (the acquisition of territories and wealth by force – so called unfriendly takeovers).
From our schooldays we all remember the incredible military achievements of conquerors such as Cyrus the Great (559-530 BC), Alexander the Great (356-323 BC), Julius Caesar (100-44 BC), Charlemagne (AD 742-814), Umar ibn al-Khattab (586-644), Genghis Khan (1167-1225), and much later, Napoleon Bonaparte (1769-1821).

Their empires were in steep bull trends for a while… but eventually (frequently after the conqueror’s death) toppled like a house of cards… the great conquerors of antiquity were the first ‘businessmen’ to make extensive use of leverage. Their armies never grew much in terms of size, but the territories they controlled expanded almost exponentially. As a result, the acquired empire grew disproportionately per unit of soldier…
But one victor after another led to euphoria, carelessness, and total misjudgement of risks. While most great military leaders were careful not to waste their armies at the beginning of their careers, they later fell victim to their own success and began to neglect the risks associated with the conquest of larger and larger territories (the acquisition of additional assets).Take, for instance, Napoleon. 
The Russian campaign of 1812 was from a risk
 point of view, a complete absurdity (it was an incredibly leveraged, high –risk low-reward transaction, typical of the terminal or climactic phase of an empire’s uptrend)…
Markets are no different from empires. They expand, rise in value, become ever-extended, and eventually collapse. In a modern market economy, conquerors are business leaders (Promoters of Businesses) , successful speculators, adventurous fund managers and leverage buyout artists.
The Army Generals are their immediate subordinates like CEOs & Board members (ambitious junior partners among hedge funds, Fund Managers, research prima donnas, etc) who are all sharing in the profits of their ‘conquerors’ and Business Media houses who makes money by telecasting these conquests . Finally the soldiers are the individual investors – usually uninformed, greedy, and displaying strong crowd behaviour [psychology] and rapid changes of sentiment.

At WealthMills we are committed to protect the interest of Investors with unbiased views on markets.