One Small Point

On the 6th December, Mr. Sunny Verma (his first name may be a noun or an adjective, you decide) tells us on behalf of a pink paper, that SEBI has tested the markets and has given it full marks. “Clean Chit” says a sub-heading…… I don’t know whether these are famous last words. How much time between now and sun(ny)-down, only Mr. Verma can tell, but SEBI has informed the Finance Ministry that there are “no untoward patterns or skewed concentrations”. He goes on to inform us that the Govt feared that promoters might be tinkering with the market to get higher returns….for themselves or for their investors, he did not say. But Mr. Anil Ambani is buying shares in Reliance Energy at Rs.1800 per share, when he could have bought those same shares for Rs.460 per share, just 3 months back. Did something happen during those 3 months, that Mr. Ambani did not know about? I thought intelligent people bought low and sold high, but Mr. Ambani wants to do the opposite. It must be his concern for his investors, as he gets set to welcome them into his now fattened co at some Rs.1900 per share, is it (I forget…?!) Look around at the mainstream media. Do you find anyone, especially the big pink papers with their huge advertising incomes from the Ambanis, telling you about this? No, they tom- tom the fact that Mr. Ambani is putting his own hard-earned money into Reliance Energy at a fantastic Rs.1800 per share. The valuation of REL has gone up because it will get its valuation from the valuation of its holding in RPL, something Mr. Ambani did not know 3 months back……Chinese Walls, y’know! Mr. Ambani is not alone, which is why it is SEBI that we are laughing at. Balrampur Chini’s promoters just bought 73 lac shares + options on another 1 lac shares for Rs.67 cr, an 8% dilution of capital on a co that has just lost nearly the same amount of money over the last 2 quarters. At the current run rate, Balrampur is losing 20% of its Net Worth every year for the next 2-3 years, but its promoters are willing to bring in money at 3 times Book Value….hardly what good investors would do, except on a moonlit summer night… So what can Mr. Vivek Saraogi see that nobody else can see? That sugar prices will go up, or that cane prices will go down, or ethanol prices will go up? Or that foreign investors are willing to wait for 3 years before profits return, in which case we should see the FII holdings go up. But when anyone can see that last year, Balrampur made peak-of-the-cycle profits at 30% RONW, it would follow that the most it can make is Rs.10 in EPS at peak prices. So why would a foreign investor take a 10% return 3 years from now, when he can get the same from a bank FD just now? Again, the Laws of Economics….do sugar prices go up when there is too much sugar, but stock prices seem to go up even as profits nosedive. Not only that, Mr.Saraogi could see all of this 3 months back, when his stock prices were at Rs.52. So why did he wait till stock prices spiked up, hit 92 and that is when he stepped in. What do you make of it, when promoters disobey the Laws of Economics? Instead of buying low and selling high, they now try and buy high……… and hope that others buy even higher. Fundamentals don’t seem to matter….libel laws don’t allow me speculate (at least in public) what might actually be happening, but the fact that my colleagues’ mother got this quiet little tip that “Balrampur Rs.150 ka ho jayega” told me all. When my mom knows something that is not somehow in the papers, then I better be careful. I can’t help but remember that Balrampur is based in Kolkata, that home of the Marwari, yes, those same people who brought an end to the KP Boom.